ACACIA MINING PLC
21 July 2017
Results for the six months ended 30 June 2017 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
Acacia Mining plc ("Acacia'') reports 2017 interim results
"The first half has posed significant challenges to our operations in Tanzania
following the introduction of the concentrate export ban in March and I am
pleased with how we have performed in light of this", said Brad Gordon, Chief
Executive Officer of Acacia Mining. "It is a complex and fluid situation which
has led to a significant reduction in our cash balance to US$176 million from
US$318 million, as a result of being unable to realise US$175 million of
revenue during the half together with a US$51 million VAT outflow. We continue
to take steps to preserve long-term shareholder value and have served
Arbitration notices for our Bulyanhulu and Buzwagi mines and will work to
achieve a negotiated resolution, which is the preferable outcome for all
parties. In spite of the challenges we faced, we delivered the highest H1
production in the history of the Company, with gold production of 428,203
ounces. AISC for the first six months was US$893 per ounce sold, 5% lower than
H1 2016, and if we had been able to sell all of the concentrate produced, AISC
would have been approximately US$800 per ounce. As a result of the impact of
the ban we are now targeting the lower end of the production guidance range of
850-900,000 ounces for 2017, but due to strong cost discipline we are leaving
AISC guidance unchanged."
Operational Highlights
* H1 Total Recordable Injury Frequency Rate (TRIFR) of 0.40, 49% lower than
H1 2016
* H1 gold production of 428,203 ounces, 4% higher than H1 2016, with gold
sales of 312,438 ounces
* H1 AISC1 of US$893 per ounce sold, 5% below H1 2016 and H1 cash costs1 of
US$577/oz sold,10% lower than H1 2016
+ H1 AISC, assuming sales matched production, would have been US$800/oz,
which includes a US$18/oz share based payment revaluation credit
resulting from the fall in the share price year to date
* Q2 gold production of 208,533 ounces, 6% lower than Q2 2016
* Q2 gold sales of 127,694 ounces, which includes a reversal of advanced
sales of 18,204 ounces of concentrate from Q1 2017
* Q2 AISC1 of US$835/oz sold, 10% below Q2 2016 and Q2 cash costs1 of US$577/
oz sold, 3% lower than Q2 2016
Financial Highlights
* Financial performance was significantly impacted by the ongoing ban on
exporting concentrate which resulted in approximately US$175m of lost
revenue in the period
* H1 Revenue of US$391.7 million, 22% lower than H1 2016
* H1 EBITDA1 of US$161.4 million, 13% down from H1 2016
* H1 Net earnings of US$62.5 million, equating to US15.3 cents per share
* Cash on hand of US$175.9 million as at 30 June 2017, with net cash of
US$90.7 million
* As a result of the negative cash flow, no interim dividend has been
declared, in-line with the cash flow based dividend policy
Three months ended 30 June Six months ended 30
June
(Unaudited) 2017 2016 2017 2016
Gold production (ounces) 208,533 221,815 428,203 412,025
Gold sold (ounces) 127,694 216,782 312,438 400,963
Cash cost (US$/ounce)1 577 595 577 640
AISC (US$/ounce)1 835 926 893 941
Net average realised gold price (US$/ 1,255 1,258 1,235 1,209
ounce)1
(in US$'000)
Revenue 157,763 284,038 391,664 504,947
EBITDA 1 79,222 119,332 161,415 184,882
Adjusted EBITDA1 83,199 114,088 166,219 180,499
Net earnings/(loss) 35,716 46,282 62,543 (6,128)
Basic earnings/(loss) per share (EPS) 8.7 11.3 15.3 (1.5)
(cents)
Adjusted net earnings1 38,500 40,659 65,906 58,767
Adjusted net earnings per share (AEPS) 9.4 9.9 16.1 14.3
(cents)1
Cash generated from operating (23,909) 104,864 1,315 157,096
activities
Capital expenditure2 45,628 49,142 92,456 85,172
Cash balance 175,886 284,357 175,886 284,357
Total borrowings 85,200 113,600 85,200 113,600
1 These are non-IFRS measures. Refer to page 28 for definitions 2
Excludes non-cash capital adjustments (reclamation asset adjustments) and
include finance lease purchases and land purchases recognised as long term
prepayments
Other Developments
Export of metallic mineral concentrates
As previously announced, on 3 March 2017, the Ministry of Energy and Minerals
of the Tanzanian Government announced a general ban on the export of metallic
mineral concentrates following a directive made by the President of the United
Republic of Tanzania in order to promote the creation of a domestic smelting
industry. Following the directive we ceased all exports of our gold/copper
concentrate ("concentrate") including the 277 containers that had been approved
for export prior to the ban which are located in Dar es Salaam at both the port
and a staging warehouse.
The prevention of exports impacts Bulyanhulu and Buzwagi which produce gold in
both doré and in concentrate form due to the mineralogy of the ore. North Mara
is unaffected due to 100% of its production being doré. In the first half of
2017, concentrate accounted for 36% of group level production, with 64% of
Buzwagi production and 46% of Bulyanhulu production respectively being
concentrate.
Acacia has been exporting concentrate from Bulyanhulu since 2001 and from
Buzwagi since 2010 and has fully declared all associated gold, copper and
silver revenue. Whilst the proportion of gold in the concentrate is less than
0.02% it represents approximately 90% of the value of the concentrate, with
copper representing approximately 10% of the value and silver less than 1%.
Bulyanhulu and Buzwagi are permitted under their agreements signed with the
Government of Tanzania to sell their concentrate products to overseas customers
and to export the concentrate in containers, and have been in full compliance
with these laws and their export permits.
During the second quarter two Presidential Committees announced their findings
following investigations into the technical and economic aspects of the
historic exports of gold/copper concentrates. Acacia fully refutes the
implausible findings of both committees, which claim that Acacia and its
predecessor companies have historically significantly under-declared the
contents of exports of concentrate which has led to an under-declaration of
taxes of tens of billions of dollars. Following the Committees' announcements,
the Government commenced various investigations into the allegations of
undeclared revenue and unpaid taxes. Acacia is fully co-operating with these
investigations and has provided extensive documentation and information to the
investigating authorities. In addition, employees in Tanzania have been and
continue to be interviewed by Government agencies as part of this process.
Acacia re-iterates that it has declared everything of commercial value that it
has produced since it started operating in Tanzania and has paid all
appropriate royalties and taxes on all of the payable minerals that it has
produced. In addition, Acacia's consolidated accounts and each local company's
accounts are annually audited to an international standard in accordance with
IFRS. Acacia has requested copies of the two Presidential Committees' reports
and called for independent verification of the reported results, but to date
has not received a response.
As reported at the end of Q1 2017, included in the concentrate shipments
retained in Dar es Salaam were approximately 18,200 ounces of gold for which we
received advance payment. As mentioned, there was the possibility that the
advanced payment would have to be refunded as these shipments did not leave
Tanzania within the contractual period. During Q2 2017, we repaid approximately
US$22 million, being the full advance payment received, and have subsequently
reversed the sale. Should the ban be lifted, these ounces can be sold again
immediately as all royalties have been paid and export permits were previously
granted.
We have continued to operate at Bulyanhulu and Buzwagi during the first half
and continue to stockpile concentrate at each of the sites. This has resulted
in the build-up of approximately 127,000 ounces of gold contained in unsold
concentrate. In addition, we have approximately 8.3 million pounds of copper
and 107,000 ounces of silver contained in the unsold concentrate. If the
concentrate had been sold, net revenue and cashflow would have increased by
approximately US$163 million. AISC was impacted on a unit cost basis by the
concentrate ban, and had we sold all of the ounces produced, AISC for the half
year would have been approximately US$800 per ounce, and before the impact of
the share based payment revaluation credit would have been approximately US$818
per ounce.
In June, the Government of Tanzania and Barrick Gold Corporation ("Barrick")
agreed to commence discussions with the aim of resolving the current situation.
Whilst these discussions are yet to commence, we understand that they will do
so in the near future and that both sides will seek to achieve a timely
resolution to the dispute. At this stage, Acacia is not participating directly
in the discussions. Any potential resolution that might be identified as a
result of the discussions will be subject to approval by Acacia, and the
Company is working with Barrick to support such discussions.
Acacia's preferred outcome remains for a negotiated settlement with the
Government, and whilst we see a route to achieving this we believe that it
makes sense to continue operations at all three of our mines despite the losses
we are incurring, predominantly at Bulyanhulu. However, given the scale of the
cash outflows at Bulyanhulu we do not believe that this situation is
sustainable at that operation beyond the end of the current quarter. In the
event a decision was made to move Bulyanhulu to temporary care and maintenance,
Acacia estimates that it would incur approximately US$30 million of upfront
costs to retrench employees and end contracts in addition to the natural
unwinding of around two months' worth of accounts payable with minimal gold
production over the same period. Going forward, monthly costs of US$2-3 million
would be incurred to maintain the mine in good standing ahead of a future
re-start, when the mine would then benefit from the initial build-up of
accounts payable.
Update on legislative changes in Tanzania
On 29th June, three new Parliamentary bills, which recommended significant
changes to the legal and regulatory framework governing the natural resources
sector as a whole in Tanzania, were published under a certificate of urgency
which led to the extension of the Parliamentary session. Post period end, these
bills were enacted by the Tanzanian Parliament and published in the Country's
official Government Gazette of new legislation. All of the legislation is now
in force and some of the terms within the acts are being applied by Tanzanian
authorities.
The Natural Wealth and Resources (Permanent Sovereignty) Act, No 5 of 2017, the
Natural Wealth and Resources Contracts (Review and Re-Negotiation of
Unconscionable Terms) Act, No 6 of 2017 and the Written Laws (Miscellaneous
Amendments) Act, No 7 of 2017, purport to make a number of changes to the
operating environment for Tanzania's extractive industries. These changes
include, among others:
* the right for the Government of Tanzania (GoT) to renegotiate existing
mineral development agreements at its discretion;
* the provision to the GoT of a non-dilutable, free-carried interest of no
less than 16% in all mining projects;
* the right for the GoT to acquire up to 50% of any mining asset commensurate
with the value of tax benefits provided to the owner of that asset by the
GoT;
* removal of the refund of input VAT incurred on production of raw minerals
for export;
* an increase in the rate of royalties from 4% to 6% on revenues from gold,
copper, silver and platinum group metals;
* requirements for local beneficiation and procurement;
* constraints on the use of off-shore bank accounts; and
* a GoT lien over materials extracted from mining operations.
For a more detailed reading of the legislative provisions included in the new
laws, please see http://www.parliament.go.tz/bills-list.
This legislation is in addition to the recent amendments introduced to the
Finance Act, which require mining companies to pay a 1% clearance fee
calculated by reference to the gross value of minerals to the Government in
order to obtain clearance for export ("Clearing Fee"). It is Acacia's belief
that a number of the changes contained within the laws will require
supplementary regulations over the coming months to set out the proposed
practical implementation of the new laws. At this stage, Acacia is not aware of
this process having commenced.
Acacia continues to monitor the impact of the new legislation in light of its
Mineral Development Agreements ("MDAs") with the Government of Tanzania.
However, to minimise further disruptions to our operations we will, in the
interim, satisfy the requirements imposed as regards the increased royalty rate
applicable to metallic minerals such as gold, copper and silver of 6%
(increased from 4%), in addition to the recently imposed 1% clearing fee on
exports. These payments are being made under protest, without prejudice to our
legal rights under the MDAs.
Filing of Notice of Arbitration
Subsequent to period end Acacia announced that it served Notices of Arbitration
in Tanzania on behalf of Bulyanhulu Gold Mine Limited ("BGML"), the owner of
the Bulyanhulu mine, and Pangea Minerals Limited ("PML"), the owner of the
Buzwagi mine. These Notices refer the current disputes between the Government
of Tanzania and each of BGML and PML to arbitration. This is in accordance with
the dispute resolution processes agreed by the Government of Tanzania in its
MDAs with BGML and PML.
The serving of the Notices was necessary to protect the Company, and is
currently with the Government to respond, but Acacia remains of the view that a
negotiated resolution is the preferred outcome to the current disputes and the
Company will continue to work to achieve this.
Minimum local shareholding and listing requirements for mining companies
During the latest Tanzanian Parliamentary session, the legislation impacting
the ability for foreign investors to buy shares in initial public offers was
amended, which significantly broadens the potential investor base for future
offerings. At this stage, other than Acacia's existing cross listing on the Dar
es Salaam Stock Exchange ("DSE"), no companies in either the Mining or
Telecommunications sectors have successfully completed a listing on the DSE.
Acacia supports the attempt to build capital markets in Tanzania and the
promotion of local ownership and we have engaged with the Capital Markets and
Security Authority (CMSA), the DSE, the Ministry of Energy and Minerals and all
other relevant authorities in Tanzania with a view to finding a route forward
that is both beneficial and practical for all stakeholders.
Contribution to Tanzania
In the first half of 2017, Acacia has paid a total of US$53 million of taxes
and royalties. This is made up of provisional corporate tax payments year of
US$17.3 million, royalties of US$18.6 million, payroll taxes of US$11.5 million
and other taxes of US$5.6 million. In addition, we have also paid US$10 million
in tax deposits which is recognised as part of other assets. If the gold/copper
concentrate produced since March was sold during the first half then
approximately a further US$7 million would have been paid in royalties. We have
also paid local service levies due on H2 2016 revenues of US$1.6 million during
the first half and are due to pay a further US$1.2 million in July for H1 2017.
These amounts are 300% higher than the requirements set out in our MDAs. The
provisional corporate tax payments have been offset against the indirect tax
receivable under the existing Memorandum of Settlement ("MOS") entered into
with the Tanzanian Government.
Over the last 6 months, Acacia's Sustainable Communities (SC) team continued to
focus on delivering community benefits despite the uncertainties in the
operating environment. The focus for the first half of the year was to begin
and/or complete key infrastructural projects which we had committed to the
communities and also to begin the roll out of the new SC strategy by building
some of the foundations for implementation.
By end of June 2017, through the Maendeleo Fund, we implemented 6 social
infrastructure projects with a total value of approximately US$1 million at the
3 mines sites - some of which began at the end of 2016. The key projects per
site include:
* Bulyanhulu: Constructed additional classrooms at Lwabakanga Primary School
which has almost 600 students
* Buzwagi: Completed the construction of the 2.5km Mwime Chapulwa gravel road
to benefit the Mwendakulima, Mwime and Chapulwa villages with a population
of over 13,500 people.
* North Mara: Completion of the Kerende and Nyamwaga Health Centres which
will benefit a population of about 25,000 people in 6 villages.
An additional 10 infrastructural development projects are currently underway
across all our sites with a value of US$940,000 which include school
infrastructure, water supply, sanitation and maintenance of community roads.
Other development projects in the last 6 months include continuing our support
to 2,700 students with uniforms and books under the CanEducate partnership;
supporting sports through coaching clinics in partnership with Sunderland
Football Club and provision of reconstructive surgery for 36 burns and cleft
lip and palate patients through our partnership with Rafiki Medical Missions.
In addition, Acacia, in partnership with TANESCO, has invested US$2.5 million
to construct a STATCOM centre at Bulyanhulu that will enhance the quality of
power supply in the area. The investment will greatly improve the stability of
the electricity at the Bulyanhulu and Buzwagi mines and will reduce our
reliance on self-generated diesel power. Residents in the Shinyanga and Geita
districts around the mines will also benefit from improved quality power supply
resulting from the commissioning of the STATCOM in July 2017.
During the reporting period, we shared our SC strategy with some of our key
partners including government officials, development partners and other
interested parties to increase awareness of the strategy. A database is under
design to allow us to effectively monitor and evaluate our development efforts
and it is expected to be completed in Q3 2017. Our future development projects
will be informed by research and a consulting firm has been contracted to do an
assessment of opportunities for development in the agricultural and small
business sectors around our mine sites. Results from this study are expected in
Q4 2017 and will be used to plan 2018 development initiatives. This study is in
addition to the education scoping study which was completed in January 2017.
Indirect Taxation update
During the second quarter, Acacia incurred a further US$23 million of VAT
outflows and received no VAT refunds, which together with the outflow in Q1
2017 has led to a total VAT outflow in the first half of 2017 of US$51 million.
The audit of all VAT claims dating back to 2014 undertaken by the Tanzanian
Revenue Authority and the Ministry of Finance is ongoing, with the focus now
shifted to the suppliers to which our VAT claims relate, to determine whether
the corresponding output VAT on their side has been declared. We believe that
all VAT registered businesses are subject to this audit. As a result, our total
indirect tax receivables has increased to approximately US$165 million during
the quarter, of which approximately US$21 million of this is covered by the
MOS, following the total offset of North Mara corporate tax mentioned above.
Approximately US$7 million of the receivable is identified as a long term
receivable, with the balance short term.
As disclosed above, the new legislation included an Amendment to the VAT Act
2015 so that no input tax credit can be claimed for the exportation of raw
minerals, with effect from 20 July 2017. Whilst we are seeking further clarity
on the application of the Amendment to the VAT Act 2015, we expect that we will
continue to incur outflows related to VAT, notwithstanding exemptions that
apply under the MDAs.
Board Changes
As previously reported, Peter Tomsett stepped down from the Acacia Board of
Directors following the 2017 Annual General Meeting. Post period end,
Ambassador (retd) Juma Mwapachu retired from the Board after six years of
service as his term of appointment expired. Following these changes, the Acacia
Board comprise 7 members, including 4 Independent Non-Executive Directors, two
Non-Executive Directors and one Executive Director. Acacia continues to assess
the ongoing composition of the Board and will announce a replacement Senior
Independent Director in due course.
Acacia would like to thank Peter and the Ambassador for their valuable
commitment and support to the Company during their tenure on the Board and wish
them all the best for the future.
Dividend
Acacia has a cash flow based dividend policy where we aim to pay a dividend of
between 15-30% of our operational cash flow after sustaining capital and
capitalised development but before expansion capital and financing costs. As a
result of the inability to export concentrates Acacia has experienced negative
free cash flow in the first half of 2017 and due to the level of uncertainty
over full year cash flow expectations, the Board of Directors has not
recommended the payment of an interim dividend.
International Employee Work Permits
During the second quarter Acacia, and a number of its key contractors,
experienced difficulty when applying for work and residence permits (as both
are required to work in country) for international workers. This has had a
particular impact on our underground development contractor at both Bulyanhulu
and North Mara and led to a reduction in development metres as a result of the
reduction in available staff. Together with the contractor, Acacia is working
to resolve this issue with the Tanzanian Ministry of Labour, but expects full
year development metres at both Bulyanhulu and North Mara to be behind plan.
Outlook
Our three mines continue to produce and sell gold doré whilst stockpiling gold/
copper concentrate. As mentioned above, as at 30 June 2017 we have
approximately 127,000 ounces of gold, 8.3 million pounds of copper and 107,000
ounces of silver contained within unsold concentrate. We reiterate our group
production guidance range of between 850,000-900,000 ounces, although are now
targeting the lower end of this range. This is a result of full year
expectations at Bulyanhulu being approximately 10% lower than previously
planned due to lower underground productivities. Despite this, we continue to
expect full year group all-in sustaining costs of between US$880 - US$920 per
ounce and cash cost per ounce of between US$580 - US$620 per ounce. Our cost
guidance is inclusive of the payment of the higher royalties and clearing fee,
which are currently being paid under protest. In light of ongoing developments
in Tanzania we continue to assess our capital expenditure and now expect this
to be between US$180-200 million for the year as we defer non-essential spend.
We continue to review broader spending across the business to ensure that we
manage cash outflows whilst we are unable to export 100% of our production.
Key Statistics Three months ended Six months ended
30 June 30 June
(Unaudited) 2017 2016 2017 2016
Tonnes mined (thousands of tonnes) 8,558 9,939 18,039 19,346
Ore tonnes mined (thousands of tonnes) 3,996 2,244 7,212 4,689
Ore tonnes processed (thousands of tonnes) 2,440 2,412 4,860 4,900
Process recovery rate exc. tailings reclaim 93.0% 89.6% 93.2% 92.6%
(percent)
Head grade exc. tailings reclaim (grams per 3.3 3.7 3.4 3.2
tonne)
Process recovery rate inc. tailings reclaim 89.3% 88.9% 89.6% 87.7%
(percent)
Head grade inc. tailings reclaim (grams per 3.0 3.2 3.1 3.0
tonne)
Gold production (ounces) 208,533 221,815 428,203 412,025
Gold sold (ounces) 127,694 216,782 312,438 400,963
Copper production (thousands of pounds) 4,409 4,624 9,065 8,427
Copper sold (thousands of pounds) 3 (1,183) 4,403 1,304 8,084
Cash cost per tonne milled exc. tailings reclaim 34 62 43 60
(US$/t)1
Cash cost per tonne milled inc. tailings reclaim 30 54 37 52
(US$/t)1
Per ounce data
Average spot gold price2 1,257 1,260 1,238 1,221
Net average realised gold price1 1,255 1,258 1,235 1,209
Total cash cost1 577 595 577 640
All-in sustaining cost1 835 926 893 941
Average realised copper price (US$/lb) 2.56 2.16 2.99 2.13
Financial results
Three months ended 30 June Six months ended 30
June
(Unaudited, in US$'000 unless 2017 2016 2017 2016
otherwise stated)
Revenue 157,763 284,038 391,664 504,947
Cost of sales (94,571) (183,539) (243,967) (355,439)
Gross profit 63,192 100,499 147,697 149,508
Corporate administration (5,878) (4,469) (12,520) (9,771)
Share based payments 18,209 (15,697) 7,785 (19,635)
Exploration and evaluation costs (9,372) (5,199) (16,150) (11,150)
Corporate social responsibility (1,544) (1,744) (3,739) (4,614)
expenses
Other (charges)/ income (8,802) 2,776 (19,617) 2,168
Profit before net finance expense 55,805 76,166 103,456 106,506
and taxation
Finance income 946 197 1,543 490
Finance expense (3,216) (2,514) (5,454) (5,380)
Profit before taxation 53,535 73,849 99,545 101,616
Tax expense (17,819) (27,567) (37,002) (107,744)
Net profit/(loss) for the period 35,716 46,282 62,543 (6,128)
1 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non IFRS measures" on page 28 for definitions.
2 Reflect the London PM fix price.
3 Negative sales quantities relate to the reversal of sales recorded during Q1
2017.
For further information, please visit our website: http://www.acaciamining.com/
or contact:
Acacia Mining plc +44 (0) 207 129 7150
Brad Gordon, Chief Executive Officer
Andrew Wray, Chief Financial Officer
Giles Blackham, Investor Relations Manager
Camarco +44 (0) 20 3757 4980
Gordon Poole / Billy Clegg / Nick Hennis
About Acacia Mining plc
Acacia Mining plc (LSE:ACA) is Tanzania's largest gold miner and one of the
largest producers of gold in Africa. We have three producing mines, all located
in north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of
exploration projects in Tanzania, Kenya, Burkina Faso and Mali.
Our approach is focused on strengthening our core pillars; our business, our
people and our relationships, whilst continuing to invest in our future. Our
ambition is to create a leading African Company.
Acacia is a UK public company headquartered in London. We are listed on the
Main Market of the London Stock Exchange with a secondary listing on the Dar es
Salaam Stock Exchange. Barrick Gold Corporation is our majority shareholder.
Acacia reports in US dollars and in accordance with IFRS as adopted by the
European Union, unless otherwise stated in this report.
Conference call
A presentation will be held for analysts and investors on 21 July 2017 at Noon
London time.
For those unable to attend, an audio webcast of the presentation will be
available on our website http://www.acaciamining.com/. For those who wish to
ask questions, the access details for the conference call are as follows:
Participant dial in +44 20 3059 8125 / +1 724 928 9460
Password: Acacia
FORWARD- LOOKING STATEMENTS
This report includes "forward-looking statements" that express or imply
expectations of future events or results. Forward-looking statements are
statements that are not historical facts. These statements include, without
limitation, financial projections and estimates and their underlying
assumptions, statements regarding plans, objectives and expectations with
respect to future production, operations, costs, projects, and statements
regarding future performance. Forward-looking statements are generally
identified by the words "plans," "expects," "anticipates," "believes,"
"intends," "estimates" and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and
other factors, many of which are beyond the control of Acacia, which could
cause actual results and developments to differ materially from those expressed
in, or implied by, the forward-looking statements contained in this report.
Factors that could cause or contribute to differences between the actual
results, performance and achievements of Acacia include, but are not limited
to, changes or developments in political, economic or business conditions or
national or local legislation or regulation in countries in which Acacia
conducts - or may in the future conduct - business, industry trends,
competition, fluctuations in the spot and forward price of gold or certain
other commodity prices (such as copper and diesel), currency fluctuations
(including the US dollar, South African rand, Kenyan shilling and Tanzanian
shilling exchange rates), Acacia's ability to successfully integrate
acquisitions, Acacia's ability to recover its reserves or develop new reserves,
including its ability to convert its resources into reserves and its mineral
potential into resources or reserves, and to process its mineral reserves
successfully and in a timely manner, Acacia's ability to complete land
acquisitions required to support its mining activities, operational or
technical difficulties which may occur in the context of mining activities,
delays and technical challenges associated with the completion of projects,
risk of trespass, theft and vandalism, changes in Acacia's business strategy
including, the ongoing implementation of operational reviews, as well as risks
and hazards associated with the business of mineral exploration, development,
mining and production and risks and factors affecting the gold mining industry
in general. Although Acacia's management believes that the expectations
reflected in such forward-looking statements are reasonable, Acacia cannot give
assurances that such statements will prove to be correct. Accordingly,
investors should not place reliance on forward-looking statements contained in
this report.
Any forward-looking statements in this report only reflect information
available at the time of preparation. Save as required under the Market Abuse
Regulation or otherwise under applicable law, Acacia explicitly disclaims any
obligation or undertaking publicly to update or revise any forward-looking
statements in this report, whether as a result of new information, future
events or otherwise. Nothing in this report should be construed as a profit
forecast or estimate and no statement made should be interpreted to mean that
Acacia's profits or earnings per share for any future period will necessarily
match or exceed the historical published profits or earnings per share of
Acacia.
LSE: ACA
TABLE OF CONTENTS
Interim Operating Review 9
Exploration Review 15
Financial Review 21
Significant judgements in applying accounting policies and key sources of 27
estimation uncertainty
Non-IFRS measures 28
Risk Review 32
Condensed Financial Information:
- Consolidated Income Statement and Consolidated Statement of Comprehensive 36/37
Income
- Consolidated Balance Sheet 38
- Consolidated Statement of Changes in Equity 39
- Consolidated Statement of Cash Flows 40
- Notes to the Condensed Financial Information 41
Operating Review
Half Year Review
Despite the uncertainty caused by the operating environment in Tanzania, Acacia
has continued to record impressive safety results, with a H1 Total Recordable
Injury Frequency Rate (TRIFR) of 0.40, which is 49% lower than the
corresponding period in 2016. This performance is coupled with a decrease in
the Injury Severity Rate and the number of High Potential Incidents recorded as
compared to the corresponding period in 2016. The site management team
continues to engage and communicate regularly with the workforce on the
situation in Tanzania and to conduct audits and inspections of all workplaces.
All operations maintain excellent house-keeping and empower and encourage the
workforce to stop work if the need requires.
Acacia delivered first half production of 428,203, an increase of 4% year on
year, while AISC of US$893 per ounce sold and cash cost of US$577 per ounce
sold were 5% and 10% respectively lower than H1 2016. As a result of the ban on
the export of gold/copper concentrate, sales ounces trailed production by
approximately 115,000 ounces. For reference purposes, if H1 sales ounces
equalled H1 production, AISC would have been approximately US$800 per ounce and
cash costs would have been approximately US$569 per ounce.
North Mara achieved production of 179,578 ounces for the first half, up 3% from
H1 2016. This was a result of 2% higher head grade driven by the preferential
processing of higher grade stockpile ore from the Nyabirama pit; as well as
continued high grades from the Gokona underground mine albeit slightly lower on
average than H1 2016, combined with a 1% improvement in recoveries. Gold ounces
sold of 178,130 ounces were 5% higher than the comparative period and broadly
in line with production. Ore tonnes from underground mining were 50% higher in
the first half, due to Gokona underground development being at a more advanced
stage with access to more stopes compared to H1 2016. AISC of US$736 per ounce
sold was 2% higher than H1 2016 (US$720) primarily due to slightly higher cash
costs, higher capitalised development costs and higher sustaining capital
expenditure offset by the impact of increased sales volumes.
At Buzwagi, gold production of 126,084 ounces was 57% higher than H1 2016, and
in line with expectations. This was mainly due to a 50% increase in head grade
driven by higher grade ore mined from the main ore zone at the bottom of the
open pit in H1 2017. AISC per ounce sold of US$770 was 31% lower than in H1
2016, mainly driven by the increased production base, lower cash cost and lower
sustaining capital expenditure, partly offset by the impact of lower sales
volumes on individual cost items.
Bulyanhulu produced 122,542 gold ounces, 22% lower than the same period in
2016. This was due to a 25% decrease in ounces produced from underground mining
over H1 2016, mainly driven by a 16% decrease in throughput due to lower ore
tonnes mined, together with a 12% decrease in head grade, mainly due to the
impact of mine sequencing. AISC per ounce sold for the first half of US$1,340
was 38% higher than H1 2016 (US$970) driven by the impact of lower sales ounces
on individual cost items, higher cash costs and higher capitalised development
costs, slightly offset by lower sustaining capital spend.
Total tonnes mined during the first half amounted to 18.0 million tonnes, 7%
lower than H1 2016, mainly as a result of a 48% decrease in total waste tonnes
mined at Buzwagi as the open pit will conclude later this year. Ore tonnes
mined of 7.2 million tonnes were 54% higher than H1 2016 driven predominantly
by increased ore tonnes from Buzwagi as a result of improved access to ore
zones in the final stage of the open pit in H1 2017.
Ore tonnes processed amounted to 4.9 million tonnes, slightly lower than H1
2016. Lower run of mine tonnes at Bulyanhulu and lower throughput at North Mara
was partly offset by higher reprocessed tailing throughput at Bulyanhulu.
Head grade for the period (excluding tailings retreatment) of 3.4g/t was 6%
higher than in H1 2016 (3.2g/t) primarily driven by a 50% higher head grade at
Buzwagi as a result of higher grade ore mined.
Cash costs of US$577 per ounce sold for the year to date were 10% lower than in
H1 2016, primarily due to:
* Higher production base (US$23/oz);
* Increased investment in ore stockpiles, mainly at Buzwagi (US$33/oz);
* Lower consumable costs (US$18/oz) mainly driven by improved consumable unit
costing and usage optimisation;
* Increased capitalised mining, mainly driven by increased capitalised
stripping at North Mara relating to the Nyabirama Cut 4 cutback (US$17/oz);
and
* Lower sales related costs due to lower sales volumes caused by the
concentrate ban (US$34/oz)
This was offset by
* Lower co-product revenue in the form of copper concentrates (US$46/oz); and
* Increased contracted services costs mainly relating to development and
drilling contracts (US$23/oz).
Included in cost of sales and ultimately cash cost for the first half, is a
credit of approximately US$63.6 million (US$204/oz) relating to the build-up in
finished gold inventory due to concentrate sales delays, which largely offsets
the impact of the reduction in sales ounces in the cash cost per ounce sold
calculation.
All-in sustaining cost of US$893 per ounce sold for the first half was 5% lower
than H1 2016, despite the lag in sales against production. This was driven by
the lower cash costs (US$64/oz) as well as a credit relating to share based
payment revaluation driven by the approximate 33% reduction in the Acacia share
price (US$25/oz), partly offset by the impact of lower sales volumes on
individual cost items (US$85/oz) and higher capitalised development costs at
both North Mara and Bulyanhulu (US$16/oz).
If our sales ounces equalled production, AISC for the first half would have
been approximately US$800 per ounce sold, compared to US$916 per ounce sold on
the same basis in H1 2016, a decrease of 13%, and excluding the impact of
non-cash share based payment revaluation credits would have been approximately
US$819.
Cash from operating activities of US$1.3 million compared negatively to the
inflow of US$157.1 from H1 2016. The inability to export our concentrate has
had a negative impact on operating cash flow of approximately US$163 million.
Working capital outflows mainly relating to increases in supplies inventory and
indirect tax receivables further impacted cash generated from operating
activities.
Capital expenditure amounted to US$92.5 million compared to US$85.2 million in
H1 2016. Capital expenditure primarily comprised of capitalised development and
stripping (US$64.3 million), investment in mobile equipment and component
change-outs at both North Mara and Bulyanhulu (US$6.6 million), investment in
fixed equipment and mining infrastructure mainly at Bulyanhulu (US$4.6
million), and land purchases at North Mara (US$1.2 million).
Second Quarter Review
Acacia recorded 5 Lost Time Injuries during the quarter with 3 at Bulyanhulu, 1
at North Mara and 1 with Discovery in Kenya, a decrease of 37% on the same
period in 2016. Two of the injured were Acacia employees, whilst three were
contractor employees. Of the 9 Medically Treated Incidents in Q2 2017, all were
contractor employees, which is a focal point in Q3 2017. Q2 Total Recordable
Injury Frequency Rate (TRIFR) of 0.51 was 38% lower than the corresponding
period in 2016.
Production for Q2 2017 amounted to 208,533 ounces, a decrease of 6% on the same
period in 2016.
North Mara produced 83,110 ounces in Q2 2017, 17% lower than in Q2 2016 and a
13% decrease from Q1 2017, driven by lower head grades compared to Q2 2016,
mainly as a result of lower mine grades year on year. Total open pit tonnes
mined decreased by 5% from Q2 2016 driven by lower waste mined in the Nyabirama
pit while total ore tonnes mined increased by 18% compared to the same period.
Ore tonnes from underground mining of 162kt were 91% higher in Q2 2017, due to
Gokona underground development being at an advanced stage with access to more
stopes compared to Q2 2016. Cash cost per ounce sold of US$476 was 25% higher
than in Q2 2016, primarily driven by the lower production base, lower
capitalised development costs mainly due to lower waste stripping at the
Nyabirama pit and higher direct mining costs driven by higher labour, fuel and
consumables cost. AISC of US$758 per ounce sold was 7% higher than in Q2 2016
due to a lower production base and higher cash costs, partly offset by lower
capitalised development costs and a decrease in sustaining capital expenditure.
At Buzwagi, gold production for the quarter of 66,228 ounces was 53% higher
than Q2 2016, and 11% ahead of Q1 2017. Total tonnes mined decreased by 22%
from Q2 2016 while ore tonnes mined were more than double compared to the prior
quarter due to the focus of mining at the bottom of the pit which contains more
ore tonnes. Cash cost per ounce sold of US$705 was 26% lower than Q2 2016
mainly due to lower direct mining costs driven by lower consumable and external
services costs, lower sales related costs due to lower sales volumes combined
with the impact of the higher production base partly offset by lower co-product
revenue. AISC of US$762 per ounce sold was 25% lower than Q2 2016, primarily
due to lower cash cost combined with a credit relating to share based payment
valuations, partially offset by the effect of lower sales volumes on the
individual cost items.
Bulyanhulu produced 59,196 ounces, 25% lower than the same period in Q2 2016
and 6% lower than Q1 2017. Ounces produced from underground mining amounted to
50,340 ounces, a 28% decrease on Q2 2016 mainly due to lower ore tonnes
received from underground combined with a 10% decrease in grade, while ounces
produced from the reprocessing of tailings amounted to 8,856 ounces, an
increase of 6%. Lower mining tonnes of 203,000 tonnes were mainly due to lower
productivities as well as inaccessibility of certain stopes. AISC amounted to
US$1,558 per ounce sold for the quarter, 63% higher than in Q2 2016 and 3%
lower than Q1 2016, mainly driven by the lower production base and the effect
of lower sales volumes on the individual cost items combined with higher cash
costs for the quarter.
Total tonnes mined during the quarter amounted to 8.6 million tonnes, 14% lower
than Q2 2016 while total ore tonnes mined of 4.0 million tonnes exceeded the
comparative period by 78%. This was mainly due to increased ore tonnes from
North Mara and Buzwagi.
Total tonnes processed amounted to 2.4 million tonnes, broadly in line with Q2
2016, with head grade for the quarter (excluding tailings retreatment) of 3.3g/
t was 11% lower than Q2 2016 (3.7g/t) due to lower grades at North Mara and
Bulyanhulu.
Capital expenditure for the quarter amounted to US$45.6 million compared to
US$49.1 million in Q2 2016, a decrease of 7%. Capital expenditure primarily
comprised capitalised development (US$30.5 million), expansion capital relating
to capitalised drilling at North Mara (US$3.5 million), investment in fixed
equipment and mining infrastructure (US$5.4 million) and investment in mobile
equipment and component change-out costs (US$4.0 million).
Mine Site Review
Bulyanhulu
Key statistics
Three months ended 30 Six months ended 30
June June
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 59,196 78,643 122,542 157,069
Ounces sold oz 27,409 78,271 81,214 150,719
Cash cost per ounce sold1 US$/oz 813 662 795 661
AISC per ounce sold1 US$/oz 1,558 958 1,340 970
Copper production Klbs 1,313 1,710 2,811 3,527
Copper sold2 Klbs (357) 1,574 599 3,154
Run-of-mine:
Underground ore tonnes hoisted Kt 204 236 409 479
Ore milled Kt 202 250 423 502
Head grade g/t 8.6 9.6 8.5 9.7
Mill recovery % 89.9% 90.8% 90.7% 89.3%
Ounces produced oz 50,340 70,307 104,596 140,083
Cash cost per tonne milled1 US$/t 91 185 133 180
Reprocessed tailings:
Ore milled Kt 410 402 823 780
Head grade g/t 1.4 1.4 1.4 1.5
Mill recovery % 46.9% 45.6% 47.2% 45.9%
Ounces produced oz 8,856 8,336 17,946 16,986
Capital Expenditure
- Sustaining capital US$ 4,387 4,421 8,599 11,506
('000)
- Capitalised development US$ 14,984 15,270 31,054 28,438
('000)
- Expansionary capital US$ 504 559 982 753
('000)
19,875 20,250 40,635 40,697
- Non-cash reclamation asset US$ (851) 5,723 191 9,937
adjustments ('000)
Total capital expenditure US$ 19,024 25,973 40,826 50,634
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 28 for definitions.
2Negative sales quantities relate to the reversal of sales recorded during Q1
2017.
Operating performance
Gold production for the first half of 122,542 ounces was 22% lower than the
same period in 2016. This was due to a 25% decrease in ounces produced from
underground mining over H1 2016, driven by a 16% decrease in throughput and a
12% reduction in head grade During H1 2017, we increasingly experienced lower
underground productivities which impacted both tonnes mined and head grades.
Whilst we expect improvement on both measures in the second half, full year
output is expected to be approximately 10% lower than previously planned.
Production from the reprocessing of tailings saw an increase of 6% against H1
2016 due to an increase in throughput and recoveries, which was partially
offset by slightly lower grades.
Production during the quarter comprised of 24,911 ounces of gold in concentrate
and 34,285 ounces of gold in doré, amounting to a total of 55,699 ounces of
gold in concentrate and 66,843 ounces of gold in doré for the first half of
2017.
Gold sold for the year to date amounted to 81,214 ounces, 46% lower than H1
2016 and 34% lower than production, mainly as a result of the inability to
export concentrate from early March combined with the lower production base.
Sales ounces for the quarter also included a negative sales adjustment of 7,480
ounces due to reversals made for concentrate shipments previously sold but
subsequently reversed due to the concentrate not being able to leave port.
Copper production of 2.8 million pounds for the year to date compared
negatively to the comparative period by 20%, mainly as a result of lower copper
grades. Copper sold was 81% lower than H1 2016, primarily due to the lack of
exports of concentrate combined with lower copper production. Negative copper
sales pounds for the quarter in the main relate to 342,273 pounds of copper
concentrate, previously recorded as sales, but subsequently reversed due to the
current export ban on mineral concentrates.
Cash costs of US$795 per ounce sold were 20% higher than H1 2016 (US$661),
mainly due to the lower production base (US$189/oz), increased contracted
services costs (US$76/oz) driven by increased mine development costs and lower
co-product revenue (US$67/oz). This was partly offset by lower sales related
costs due to lower sales volumes (US$92/oz), lower consumable costs due to
optimised usage and improved unit costs (US$35/oz) and lower maintenance costs
(US$34/oz).
AISC per ounce sold for the first half of US$1,340 was 38% higher than H1 2016
(US$970) driven by the impact of lower sales ounces on individual cost items
($264/oz), higher cash cost as explained above (US$134/oz) and higher
capitalised development costs ($32/oz), slightly offset by lower sustaining
capital spend ($36/oz). Should we have been able to sell all ounces produced,
AISC would have been approximately US$1,140 per ounce.
Capital expenditure for the first half before reclamation adjustments amounted
to US$40.6 million, slightly lower than H1 2016 (US$40.7 million). This is the
result of lower sustaining capital expenditure offset by higher capitalised
development. Capital expenditure mainly consisted of capitalised underground
development costs (US$31.1 million), investment in mobile equipment and
component change-outs (US$2.9 million) and investment in fixed equipment and
mining infrastructure including the West fan upgrade and underground
ventilation raise boring (US$2.9 million).
Buzwagi
Key statistics
Three months ended 30 Six months ended
June 30 June
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 66,228 43,156 126,084 80,219
Ounces sold oz 15,895 42,971 53,094 80,404
Cash cost per ounce sold1 US$/oz 705 948 697 1,052
AISC per ounce sold1 US$/oz 762 1,019 770 1,124
Copper production Klbs 3,095 2,915 6,253 4,900
Copper sold2 Klbs (826) 2,829 705 4,929
Mining information:
Tonnes mined Kt 4,297 5,497 9,564 11,423
Ore tonnes mined Kt 2,898 1,302 4,951 2,605
Processing information:
Ore milled Kt 1,119 1,054 2,195 2,182
Head grade g/t 1.9 1.3 1.8 1.2
Mill recovery % 96.6% 94.8% 96,7% 94.6%
Cash cost per tonne milled1 US$/t 10 39 17 39
Capital Expenditure
- Sustaining capital US$ 724 1,081 865 2,231
('000)
- Capitalised development US$ - - - -
('000)
724 1,081 865 2,231
- Non-cash reclamation asset US$ 79 1,586 (1) 3,007
adjustments ('000)
Total capital expenditure US$ 803 2,667 864 5,238
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to "Non-IFRS measures" on page 28 for definitions.
2Negative sales quantities relate to the reversal of sales recorded during Q1
2017.
Operating performance
Gold production for the first half of 126,084 ounces was 57% higher than the
comparative period in 2016 mainly due to a 50% increase in grade as a result of
higher grade ore mined from the main ore zone at the bottom of the stage 3 pit
in H1 2017 compared to the focus on waste movement in the first half of 2016 in
order to mine the stage 3 pushback. This was further assisted by a 2% increase
in mill recoveries due to improved mill availability and improved milling
rates.
Production during the quarter was comprised of 40,210 ounces of gold in
concentrate and 26,027 ounces of gold in doré, amounting to a total of 80,202
ounces gold in concentrate and 45,882 ounces gold in doré for the first half of
the year.
Gold sold for the year to date amounted to 53,094 ounces, 34% lower than H1
2016 and 58% lower than production, a direct result of the inability to export
concentrate from early March 2017 slightly offset by a higher production base
compared to the comparative period. Sales ounces for the quarter also included
a negative sales adjustment of 10,724 ounces due to reversals made for
concentrate shipments previously sold but subsequently reversed due to the
concentrate not being able to leave port.
Copper production of 6.3 million pounds for the year to date was 28% higher
than the comparative period mainly due to increased copper grades. Copper sold
was 86% lower than H1 2016, primarily due to the lack of mineral concentrate
exports. Negative copper sales pounds for the quarter in the main relate to
781,423 pounds of copper concentrate, previously recorded as sales, but
subsequently reversed due to the current export ban on mineral concentrates.
Total tonnes mined of 9.6 million tonnes were 16% lower than H1 2016, primarily
due to the focus of mining at the bottom of the pit in H1 which contains more
ore tonnes compared to waste movement during H1 2016 resulting in 90% higher
ore tonnes mined during the first half of 2017.
Cash costs for the first half of US$697 per ounce sold were significantly lower
than H1 2016 (US$1,052/oz), primarily driven by the impact of the higher
production base (US$315/oz), lower sales related cost due to lower sales
volumes (US$88/oz), lower consumable spend due to lower unit costs and
optimisation of usage (US$115/oz). This was partly offset by lower co-product
revenue in the form of copper concentrates (US$177/oz). As a result of the
significant inventory credit resulting from the lack of sales, cash cost per
tonne milled of US$17 per tonne was significantly lower than the previous
period.
AISC per ounce sold of US$770 was 31% lower than the H1 2016. This was mainly
driven by lower cash costs as explained above (US$354/oz). Should we have been
able to sell all ounces produced, AISC would have been approximately US$589 per
ounce.
Capital expenditure before reclamation adjustments of US$0.9 million was 61%
lower than H1 2016 (US$2.2 million). Capital expenditure for the year to date
consisted of the corrosion treatment of the process plant and investment in
tailings storage facility.
North Mara
Key statistics
Three months ended 30 Six months ended 30
June June
(Unaudited) 2017 2016 2017 2016
Key operational information:
Ounces produced oz 83,110 100,016 179,578 174,737
Ounces sold oz 84,390 95,540 178,130 169,840
Cash cost per ounce sold1 US$/oz 476 382 441 427
AISC per ounce sold1 US$/oz 758 707 736 720
Open pit:
Tonnes mined Kt 3,896 4,120 7,750 7,234
Ore tonnes mined Kt 733 620 1,536 1,395
Mine grade g/t 1.7 2.1 1.8 1.8
Underground:
Ore tonnes trammed Kt 162 85 316 210
Mine grade g/t 8.4 13.8 9.0 11.9
Processing information:
Ore milled Kt 709 705 1,419 1,436
Head grade g/t 4.0 4.8 4.3 4.1
Mill recovery % 92.3% 92.3% 92.5% 91.4%
Cash cost per tonne milled1 US$/t 57 52 55 50
Capital Expenditure
- Sustaining capital2 US$ 5,921 7,703 12,177 10,081
('000)
- Capitalised development US$ 15,485 19,396 33,282 31,051
('000)
- Expansionary capital US$ 2,953 372 4,489 458
('000)
24,359 27,471 49,948 41,590
- Non-cash reclamation asset US$ (180) 3,075 (56) 6,252
adjustments ('000)
Total capital expenditure US$ 24,179 30,546 49,892 47,842
('000)
1These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non-IFRS measures" on page 28 for definitions.
2 Includes land purchases recognised as long term prepayments
Operating performance
Gold production for the first half of 179,578 ounces was slightly higher than
in H1 2016. This was a result of 5% higher head grade driven by the
preferential processing of higher grade ore from the Nyabirama pit as well as
continued high grades from the Gokona underground mine, combined with a 1%
improvement in recoveries. Gold ounces sold for the year of 178,130 ounces were
5% higher than the comparative period and broadly in line with production.
Ore tonnes from underground mining were 50% higher in the first half, due to
Gokona underground development providing access to more stopes compared to H1
2016. Cemented Aggregate Fill (CAF) continues to be placed in primary stopes,
though further work is required on the plant to ensure that forecast fill
volumes can be maintained.
Cash costs of US$441 per ounce sold were 3% higher than H1 2016 (US$427/oz),
mainly driven by higher direct mining costs due to increased labour, fuel and
consumable costs (US$52/oz), partly offset by higher capitalised development
cost (US$23/oz) and the higher production base (US$9/oz).
AISC of US$736 per ounce sold was 2% higher than H1 2016 (US$720/oz) primarily
due to higher cash costs (US$14/oz), higher capitalised development costs
(US$13/oz) and higher sustaining capital expenditure (US$12/oz) offset by the
impact of increased sales volumes (US$14/oz).
Capital expenditure for the year before reclamation adjustments of US$49.9
million was 20% higher than in H1 2016 (US$41.6 million). Key capital
expenditure include capitalised stripping costs (US$25.9 million), capitalised
underground development costs (US$7.4 million), capitalised drilling
expenditure (US$4.5 million) and investment in mobile equipment and component
change-outs (US$3.7 million). In addition, US$1.2 million was spent on land
acquisitions primarily around the Nyabirama open pit. Land acquisition costs
are included in capital expenditure above as they are included in AISC but are
treated as long term prepayments on the balance sheet.
Exploration Review
Brownfield Exploration
Tanzania
Significant brownfield programmes and budgets were approved for 2017 for North
Mara to undertake surface and underground drilling activities at Gokona,
Nyabirama, and Nyabigena. Underground drilling also continues on the Reef 2
series at Bulyanhulu to increase confidence in the resources and reserves in
the Reef 2 Central area.
North Mara
Gokona Underground
A total of 55 holes for 7,593 metres of extension and infill drilling were
completed at Gokona underground during H1 2017. Significant drilling activity
during H1 was focused on delineating the western extension of the "Golden
Banana" (East Zone) lode mineralisation between the Gokona Fault and the
completed Gokona open pit. Several wide and high grade intercepts were returned
from this drill programme extending the previously modelled mineralisation
including:
* UGKD00320 33.0m @ 38.2 g/t Au from 36m
* UGKD00321 31.0m @ 14.7 g/t Au from 31m
* UGKD00323 24.8m @ 133.5 g/t Au from 35m
* UKGC_00299 29.1m @ 10.1g/t Au from 83m
* UGKD_00303 26.0m @ 40.8g/t Au from 110m
* UKGC_00308 23.0m @ 42.7g/t Au from 121m
Additionally, several high grade intercepts were returned adjacent to the
Gokona Fault on the east side of the fault extending the previously modelled
mineralisation in this area, including:
* UGKD_00113* 10.0m @ 10.4 g/t Au from 32m
* UKGC_00251* 25.0m @ 7.00g/t Au from 36m
* UGKD_00107* 24.0m @ 12.5g/t Au from 31m
* UKGC_00262* 19.4m @ 64.7g/t Au from 37m incl. 2m @ 453g/t Au from 45m
* UKGC_00260* 9.0m @ 59.9g/t Au from 46m incl. 3m @ 204g/t Au from 49m
Note: * delineates results previously released in Q1 report
In the second half of 2017, underground diamond core drilling will continue to
test the deeper fault offset extension of the Gokona East mineralisation, test
continuity of higher grade mineralisation beneath the existing open pit and
immediately west of the Gokona Fault, commence drilling of the Gokona Central
area below the open pit, and continue grade control drilling of Gokona West.
The results from this drilling will be incorporated as part of the updating of
the Mineral Resource Model in order to deliver increased confidence, additional
mining areas in the upper part of the deposit; and confirm and define targets
for on-going extensional diamond drilling. The planned programme will comprise
of approximately 75,000 metres of drilling over the next two years, with
approximately 45,000 metres to be drilled in 2017.
Nyabirama
The second stage of the surface diamond core drilling programme adjacent to the
Nyabirama pit was completed in March, and a subsequent programme of infill
drilling to approximately 50m drill spacing commenced and was ongoing at the
end of H1 2017. A total of 22 holes for 12,985 metres were completed during H1
2017. This drilling has been successful in delineating the down-dip and
down-plunge extension of higher grade quartz-vein lode structures to a vertical
depth of approximately 950m below surface and approximately 800m down-plunge to
the south-west of the current open pit.
Better results received during H1 included:
* NBD0147 3.0m @ 5.1 g/t Au from 397m, and
4.0m @ 9.1 g/t Au from 428m
* NBD0149A 3.0m @ 66.6 g/t Au from 873m incl. 1m @ 198g/t Au from
874m, and
5.0m @ 4.8 g/t Au from 890m
* NBD0152 6.0m @ 51.9 g/t Au from 592m incl. 1m @ 280g/t Au from
594m
* NBD0154 5.0m @ 4.5 g/t Au from 511m,
4.0m @ 4.6g/t Au from 537m, and
3.0m @ 6.5g/t Au from 546m
* NBD0157 4.0m @ 10.8g/t Au from 264m,
4.0m @ 26.7g/t Au from 325m, and
7.0m @ 9.50g/t Au from 464m
* NBD0158 11.5m @ 26.5g/t Au from 272m
* NBD0160 4.0m @ 4.30g/t Au from 149m, and
3.0m @ 13.1g/t Au from 230m
The results of the infill programme will be incorporated into a Mineral
Resource model to form the basis for further study on a potential underground
development to further test the system and enable underground production by the
time of the completion of the open pit in 2021.
Nyabigena
A total of 8 holes for 3,955 metres of the planned programme of approximately
10,000m of surface diamond core drilling were completed during the first half
of 2017 at Nyabigena. This programme was designed to test the continuity of
mineralisation and structural framework below the existing open pit. Initial
results returned broad zones of low grade gold mineralisation with narrow
restricted higher grade zones, but also confirmed some of the interpreted
structural offsets. The programme was suspended in the latter part of H1 to
focus on surface drilling in higher priority areas and reduce overall site
expenditure. The drilling results will be incorporated into an updated
geological model and Mineral Resource estimate in due course.
Bulyanhulu
Reef 2 Central
Underground diamond core drilling in H1 2017 was primarily focused on infill
drilling of Reef 2 to increase the level of confidence in the Mineral Resource,
and testing the Reef 1 structure in areas where limited to no historic drill
testing has been undertaken. A total of 117 underground diamond drill core
holes were completed for 30,412 metres during H1 2017, testing both the Reef 1
and Reef 2 structures.
In order to increase the understanding of the Reef 2 series of veins, tighter
spaced definition drilling (50m x 50m grid) commenced in 2016 from existing
underground development platforms in the "Reef 2m Central" area. The drilling
coverage tested an area of approximately 570m vertical and 600m in strike
length.
Based on the results received to date the Reef 2m Central vein is displaying
good continuity and has extended the mineralisation a further 100m vertically,
and a further 150m in strike. There is a notable average grade increase of
approximately 25% for the drilled area. Implications from all the drilling to
date is that the overall tonnes in the resource may go down slightly but there
is an overall grade increase and subsequent ounce increase.
Definition drilling will continue in H2 2017 across the Reef 2m Central in
order to define the economic limits along strike and confirming the lower
vertical limit. Better results during the period, all true width, include:
* UX3980- 744 3.99m @ 54.0g/t Au
* UX3980- 734 5.22m @ 17.1g/t Au
* UX3980- 769 3.44m @ 23.7g/t Au
* UX3980- 729 2.86m @ 23.1g/t Au
* UX4130- 322 3.16m @ 36.6g/t Au
* UX4130- 324 3.80m @ 15.8g/t Au
Greenfield Exploration
Kenya
West Kenya Project
During H1 2017, we announced the maiden NI 43-101 compliant Inferred Mineral
Resource Estimate (MRE) on the Liranda Corridor, within our West Kenya Project.
The Inferred MRE of 3.46 million tonnes at 12.1 grams per tonne for 1.31
million ounces is primarily located on three main zones of mineralisation at
the Acacia prospect. The gold mineralisation at Acacia is associated with shear
zones ranging in width from 0.5 metres to 10 metres (averaging 3 metres true
width, dependent on the zone), hosted by a mafic volcanic sequence. The strike
lengths of the explored sections of the main mineralised zones at Acacia vary
between 200m and 600m and the resource is currently defined down to a vertical
depth of 750m with the structures open down plunge.
In addition, we identified mineralised zones on the Bushiangala prospect,
approximately one kilometre away from the Acacia prospect, but at this stage
this material remains unclassified due to drill density and the need to further
understand the controls on the mineralisation and its continuity. Recent
results from the Bushiangala prospect include: 3.0m @ 14.0 g/t Au from 386m,
1.0m @ 18.4 g/t Au from 389m and 5.0m @ 4.13 g/t Au from 304m. Based on the
work undertaken up to February 2017, the current scale of the mineralisation at
Bushiangala is between 0.60Mt and 1.60Mt at a grade between 6.0g/t Au and 10.0g
/t Au, for a metal target of between 190,000 ounces and 300,000 ounces of
contained gold. A key element of the 2017 drilling programmes at Bushiangala is
to both move this existing target mineralisation into the Inferred Resource
category and to expand the scale of the targeted mineralisation.
During H1 2017, a total of 68 diamond holes were completed or were underway at
period end for 33,420 metres, with seven diamond core drill rigs drilling on
various prospects. Current drilling on the Acacia prospect is targeting a
significant expansion to the resource through testing up and down plunge
extensions, as well as, infill drilling in areas of structural complexity and
areas that previously returned lower grade results.
Drilling during H1 continued to intersect significant high grade results,
however at the end of June we had approximately 23 holes with assays pending
due to the need to send samples to South Africa rather than to Tanzania, due to
impact of the current export ban. As a result, the majority of the results
received during the period are from the first quarter, although visible gold
has been seen in 8 of the 23 holes with assays pending. Better results received
during H1 are:
* LCD0128* - 4.0m @ 33.9g/t Au from 302m, 4.2m @ 19.0g/t Au from 552m, and
2.5m @ 76.7g/t Au from 577m,
* LCD0130* - 3.1m @ 14.1 g/t Au from 197m,
* LCD0132* - 1.3m @ 65.6g/t Au from 301m and 4.7m @ 14.0g/t Au
from 446.5m,
* LCD0133* - 0.5m @ 97.2g/t Au from 585.5m and 3.3m @ 10.9g/t Au from 753.7m,
* LCD0135* - 3.3m @ 33.0g/t Au from 664.9m and 0.5m @ 25.0g/t Au from 687m,
* LCD0138* - 1.0m @ 26.0g/t Au from 200m and 2m @ 22.6g/t Au from 214m,
* LCD0146* - 2.5m @ 28.5g/t Au from 270.7m,
* LCD0150* - 1.8m @ 7.56g/t Au from 457.2m and 6.0m @ 6.40g/t Au from 558m,
* LCD0152* - 6.8m @ 12.7g/t Au from 211.7m,
* LCD0155 - 1.0m @ 18.4g/t Au from 389m and 1.0m @ 9.44 g/t Au from 399.2m,
* LCD0156 - 3.0m @ 9.32g/t Au from 1067.9m,
* LCD0160 - 3.0m @ 14.0g/t Au from 386m.
Note: * - holes reported during Q1 2017
The current drill programme consists of approximately 48,000 metres of diamond
core drilling, planned to be completed during Q3 2017, with the objective of
increasing the Acacia Prospect Inferred resource, producing an initial Inferred
resource on the Bushiangala Prospect, and testing nearby prospects east of the
Acacia Prospect, namely the Shigokho and Shibunane Prospects. We are targeting
a significant increase in the resource to 2 million ounces prior to the end of
2017. We also plan to commence a scoping study looking at the potential for an
underground mining operation during H2 2017.
Burkina Faso
During H1 2017 we continued to explore our properties in the highly prospective
Houndé Belt in southwest Burkina Faso. Acacia currently has four joint ventures
and an interest in over ~2,700km2 of prospective greenstone belt. Acacia
manages all of the joint ventures. A major component of H1 2017 work
programmes, apart from drilling, was to review the structural architecture of
land holding and complete a target generation exercise using airborne
aeromagnetic and radiometric data and ground IP geophysical data where
available; these target generation layers are now being used with our surface
geochemical data layers to develop priority drilling targets, and to date we
have delineated more than 65 targets warranting follow-up by either mapping or
reconnaissance drilling.
South Houndé Joint Venture - current ownership 50%, next stage earn-in to 70%
At the South Houndé JV project we continued field-based exploration activities
focused both on resource extensions to the Tankoro Resource and regional
exploration programmes searching for new discoveries. Acacia has taken over
management of the South Houndé JV and all field activities as of 1st January.
During H1 2017 work continued to focus on the Tankoro Resource area (MM and MC
Zones), the Tankoro Corridor prospects (Tankoro SW, Guy, Phantom and Phantom
East) and regional targets (Ouangoro, Tyikoro, Poyo/Werienkera and Bini West).
A total of 462 Aircore (AC) holes were drilled for a total of 26,957 metres and
18 RC/Diamond holes were drilled for a total of 5,740m. In addition to this,
rock chips (180) and termite mound (97) samples were collected on regional
targets.
Tankoro - MM and MC Zones
During H1 we continued a programme of drilling to test the down-plunge
extensions of higher grade gold mineralisation related interpreted cross
structures at the MM and MC Zones within the Tankoro resource. A "results
based" phased strategy has been adopted "cycling" the rig between the
Chewbacca, Yoda, Anakine and Jabba zones within the MM and MC parallel
mineralised zones. All holes drilled to date have intersected the targeted
porphyries and cross structures, however, in the majority of cases the
high-grade shoots are either lower grade than expected, or of shorter strike
extend that expected. The best potential at this stage appears to be depth
extensions on the MC Zone where drilling has identified multiple mineralised
porphyries and gold mineralisation in the surrounding intercalated sediments.
Better results from MM and MC Zone included:
* FRC1070 - 11.35m @ 3.50g/t Au from 397.5m including 6.5m @ 5.02g/t Au
* FRC1071 - 4.1m @ 3.35g/t Au from 511.6m including 1.5m @ 8.28g/t Au
* FRC1072 - 3.65m @ 3.01g/t Au from 533.2m including 1.1m @ 7.38g/t Au
* FRC1075 - 6.86m @ 6.83g/t Au from 173.15m including 2m @ 18.8g/t Au, and
3.35m @ 8.17g/t Au from 236.5m
* FRC1076 - 3.2m @ 22.5g/t Au from 231m
The current phase of diamond core and RC drilling continues to target
interpreted high grade domains associated with cross-structures and is applying
the learnings from the initial holes. Results from more recent drilling are
pending and expected to be received during early H2 2017.
Tankoro Corridor - Phantom, Phantom East, Guy and Southwest Extensions
RC and diamond core drilling on the Tankoro Corridor targeting the northeast
extension of the mineralised system at the Phantom and Phantom East prospects
was ongoing at the end of H1, with potential mineralised zones, associated with
sericite-pyrite-arsenopyrite alteration, observed in holes from both prospects.
We also completed a single diamond hole at the Guy Prospect, with the hole
cutting approximately 40m of sericite-carbonate+/-sulphide alteration and
varying intensity of quartz veining. In the far south west of the Tankoro
Corridor we also commenced a programme of regional Aircore drilling following
up large areas of gold-in-soil geochemistry associated with IP chargeability
anomalies. At the end of the period, assay results for the various Tankoro
Corridor programmes were still pending due to a backlog of more than one month
in the Burkina Faso assay lab. Results are expected to be received throughout
Q3 2017.
Ouangoro Anomaly
Aircore drilling commenced at the beginning of February on the Ouagoro Anomaly
with the plan to drill 19 regional 1km spaced traverses across a 15-20
kilometre x 4 kilometre zone of semi-continuous gold-in-soil anomalism along
several interpreted NNE-trending linear geophysical features. To date 10
traverses have been drilled for 11,490 metres, with results for first eight
traverses being received at period-end. Positive results have been returned
from all traverses including better results of:
* 20m @ 0.67g/t Au from 28m (including 2m @ 3.09g/t Au),
* 8m @ 0.86g/t from surface (including 2m @ 2.32g/t Au),
* 18m @ 0.61g/t Au from 6m (including 4m @ 1.69g/t Au),
* 2m @ 1.80g/t Au from 22m,
* 6m @ 1.04g/t Au from 78m,
* 4m @ 1.34g/t Au from 30m,
* 12m @ 1.73g/t Au from 42m
Gold mineralisation and anomalism in drill chips, and observed in artisanal
workings, is typically associated with quartz veins in sheared siltstone and
sandstone units intruded by interpreted quartz-feldspar porphyries, with
fresher drill chips show carbonate and silica-sericite alteration. Regionally
the anomalous gold zones intersected in Aircore drilling occur on interpreted
020-trending shear zones. It is anticipated that infill Aircore drilling (200m
and 400m spaced lines) will be completed as phase 2 of the programme during H2
2017 and H1 2018, once all results are received and interpreted.
Central Houndé Joint Venture - current ownership 51%, next stage earn-in to 80%
Surface geochemical sampling undertaken over the past 24 months has identified
several very encouraging zones of gold anomalism coincident with the
interpreted NE-trending Legue-Bongui structural corridor, including an 8km x
2km anomalous gold zone. Additional interpretative work has identified 35
targets associated with mapped alteration, artisanal sites, mineralised rock
chips and/or pathfinder geochemistry (arsenic, molybdenum etc) warranting
follow-up.
Work during the H1 included mapping and lithological sampling, infill soil
sampling, multi-element analysis, RC drilling and a structural interpretation
using all available datasets. During the half, a total of 596 soil samples and
43 rock chips were collected. During the mapping a number of west-north west
trending mineralised structures were identified in the Legue NW Corridor, and
rock chips taken along these structures returned a number of significant
results. In total 21 of 49 rock chip samples returned assays >0.1g/t up to
77.4g/t gold, including assays of 5.95g/t, 19.1g/t, 28.1g/t, 62.8g/t and 77.4g/
t. The anomalous rock chip samples are associated with shear mafic volcanic
rocks and boudinaged quartz vein zones. RC drilling in the Legue NW Corridor to
test these anomalous rock chip zones commenced early June and at the end of H1
a total of 9 RC holes for a total of 1,421 metres had been completed. Once all
results have been received and this phase of the drilling programme has been
completed we will assess what is required for phase 2 of the programme.
Pinarello & Konkolikan Joint Venture (Canyon Resources Limited) - current
ownership 75%, potential to earn 100%
Surface geochemical sampling undertaken over the past 2 years has identified
several very encouraging zones of gold anomalism coincident with the
interpreted structural corridors, magnetic features and surface IP geophysical
anomalies. During the quarter we completed a structural targeting exercise,
reviewed the surface gold anomalies from soil sampling, and undertook
multi-element geochemical analysis, using a portable XRF, of all samples from
the regional soil sampling programmes. As a result of this targeting exercise
we delineated 28 targets across the Pinarello project area, and we commenced
field validation, geological mapping and further surface sampling programmes on
priority target areas.
We continue to follow up the previous season's surface geochemical and Aircore
drilling programs at Pinarello. A total of 421 Aircore holes for an aggregate
of 23,089 metres were completed on the Tankoro Corridor SW extension, Gaghny,
Tangalobe, Dafala and Dopala prospects. More significant results from 2016 /
2017 Aircore drilling campaigns were followed up with 37 RC holes for an
aggregate of 5,803 metres. While not all results are available yet, results
received to date are mixed with only a small number of significant gold
intercepts warranting further follow-up.
Results from Aircore drilling along the Tangaloble and Tankoro Corridors is
considered positive with better results of: 3m @ 0.77g/t from 29m; 3m @ 0.72g/t
Au from 5m; 4m @ 1.64g/t Au from 49m; 2m @ 6.0g/t Au from 57m; 6.0m @ 1.18 g/t
Au from 14.0m, including 2.0m @ 3.09 g/t Au from 14.0m; 4m @ 0.68g/t Au from
20m, and 8m @ 0.52g/t Au from 14m mostly associated with quartz veins, oxidised
sulphides and haematite.
Results from RC drilling at Gaghny and Tangalobe returned a number of anomalous
intercepts associated with sericite-fuchsite-carbonate altered sediments and
quartz veins-sericite-heamatite altered sediments respectively. Better
intercepts include: 2.0m @ 0.61g/t Au from 99m and 1m @ 3.07g/t Au from 106m;
1m @ 3.24 g/t Au from 92m; 13.0m @ 1.06 g/t Au from 136m and 5.0 m @ 0.68 g/t
Au from 141m; 1m @ 4.85 g/t Au from 1m and 10m @ 0.44 g/t Au from 52m.
Acacia has now earned 75% equity in the project and we have therefore entered
the contributory/dilution phase of the JV agreement. Canyon Resources, our
joint venture partner has elected to dilute, and the current programmes will
increase Acacia's equity to approximately 89%. Programmes for H2 2017 include
RC drilling, Aircore drilling, geological mapping, prospect reviews, further
infill soil sampling and trenching.
Frontier JV - earning 100% through option payments
Regional regolith and geological mapping has been completed for both licences.
A regional 800m x 400m reconnaissance BLEG soil sampling programme, combined
with termite mound, rock chip and quartz lag sampling programmes has been
completed. This work has identified a number of significant large scale
gold-in-soil anomalies (soils up to 3g/t Au). A 200m x 200m infill commenced
but has yet to be completed. A total of 6,035 soil, 44 rock chip and 1,043
termite samples were collected during H1 2017. In addition to this a detailed
structural magnetic interpretation and targeting exercise has been completed.
This interpretation integrated geological and regolith mapping, Landsat, Aster
and recently acquired high resolution airborne magnetic and radiometric data. A
number of high quality targets have been selected for reconnaissance Aircore
drilling. During H2 2017 work will comprise data collation and interpretation,
infill soils sampling, multi-element work and reconnaissance Aircore drilling
of high priority coincident geochemical and structural/magnetic targets.
Mali
In Mali we continued to delineate surface gold-in-soil anomalies, already
defined in late 2016, through mapping and surface IP geophysical surveys, and
commenced drilling programmes on the resultant targets. At the same time, we
continued to build our land position in the Senegal-Mali Shear Zone (SMSZ) with
a the grant of a further two land packages, one under joint venture (Bou Bou)
and the other 100% Acacia (Gourbassi), Acacia now holds 5 exploration permits
covering 191km2 on the SMSZ.
Tintinba - Bane Project - earning 95% through option payments
The Tintinba-Bane Project consists of three permits covering approximately
150km2. These properties are located within the Kénéiba Inlier of Western Mali,
along the world class Senegal-Mali-Shear-Zone (SMSZ), which hosts more than 50
million ounces of gold endowment. During the half, a ground-based gradient
array induced polarisation geophysical survey was completed (31 line km) and
interpreted. Results from IP, soils, drilling and mapped and interpreted
geology have been used to refine existing and define new targets for drill
testing. At least 25 targets with co-incident IP chargeability, resistivity,
and surface gold-in-soil anomalism have been identified.
RC drilling commenced in mid-March 2017 aimed at testing around 18 targets in
total with single drill fences to test for gold mineralisation and to
understand the geology and alteration of each target in order to rank these
targets moving forward. A total of 54 RC holes for 7,260 metres and 2 diamond
drill holes for 206 metres were drilled. Drilling to date can be considered
very positive as 5 of the 9 gold anomalies where results have been received
have returned positive gold. Assay results are still pending for a number of
drill traverses, but better higher grade results returned to date include; 4m @
18.7g/t and 4m @ 5.62g/t, and regionally significant drill results returning
broad zones of gold anomalism include; 13m @ 1.11g/t, 15m @ 0.50g/t, 13m @
0.50g/t, 25m @ 0.45g/t including 7m @ 1.01g/t, 17m @ 0.71g/t and 19m @ 0.55g/t.
Given the discovery history of several >3Moz deposits in the SMSZ, these
results and the associated alteration on essentially single RC fences, across
large-scale gold-in-soil anomalies can be considered very significant and
warrant follow-up drilling.
Bourdala JV - earning 100% through option payments
The Boudala JV is a joint venture with a local company over the Bou Bou licence
located approximately 15km from the centroid of the Tintinba JV further to the
south. The property is located within the central portion of the
Kedougou-Kenieba Inlier and just to the east of the highly prospective
Senegal-Mali Shear Zone. Acacia can earn up to 100% of the project through a
series of staged payments over a period of 36 months.
During H1 2017, six RC holes for 800 metres were completed across the Boubou
Artisanal Prospect on the Bourdala JV licence. These returned highly anomalous
results including: BORC005: 64m @ 0.23g/t from 10m, BORC004: 26m @ 0.31g/t from
72m and 26m @ 0.58g/t from 104m. These results are encouraging given that the
results occur in consecutive holes on the drill traverse and define a 50 metre
wide zone of gold anomalism, within a 2km long artisanal site, and hole BORC005
ended in mineralisation.
Gourbassi Est - 100%
During H1 2017, the Gourbassi Est convention was signed and arête for the
licence was received. The licence is located immediately west of the Tintinba/
Bane Project in the central Senegal Mali Shear Zone area of the
Kedougou-Kenieba Inlier. The property is located to the west of the SMSZ in an
area dominated by footway splays to the SMSZ. The programme for H2 2017 is to
review the historic data and complete mapping and surface sampling programmes.
Dependent on results of this first pass work we would complete RC and/or
diamond core drilling during H1 2017.
Tanzania
Nyanzaga Joint Venture
During the period, OreCorp Limited published the results of the Pre-Feasibility
Study ("PFS") on the Nyanzaga Project. The PFS, led by Lycopodium Minerals Pty
Ltd of Perth, Western Australia, delivered an optimal development scenario of a
4Mtpa concurrent open pit ("OP") and underground ("UG") operation for
pre-production capital costs estimate of US$287M, which includes a US$33M
contingency. The concurrent mining schedule significantly reduced the low grade
stockpiling scenario considered in the Scoping Study and increased the OP
contained ounces and life of mine ("LOM") average mineralised material grade
processed from 1.9 g/t gold in the Scoping Study to 2.0 g/t (+5%). Based on the
PFS, the Project is expected to deliver an average gold production of 213koz
per annum over a 12 year LOM, peaking at 249koz in Year 3 and totalling
approximately 2.56Moz of gold produced over the LOM. The AISC and AIC are
estimated to be US$838/oz and US$858/oz respectively over the LOM. Acacia and
OreCorp have agreed the scope of the Definitive Feasibility Study ("DFS") and
this commenced in the second quarter.
OreCorp and Acacia continue to review and seek advice on the impact of the new
legislation in Tanzania on the Nyanzaga Project. OreCorp has published an
analysis of their preliminary view of the impact of the legislation which can
be found on their website (www.orecorp.com.au) and indicates that the
legislation may potentially have an adverse effect on the Nyanzaga Project. We
note that regulations, which will assist the understanding of the
implementation of the legislation, are not yet available and will be reviewed
once they are.
Financial Review
The impact of the gold/copper concentrate export ban is evident in our
financial performance, and most notably in cash flow generation. However, in an
effort to minimising the impact, we have further increased our focus on cost
control and capital allocation. The key aspects of our financial performance
over the first half of 2017 is summarised below, and should be read in
conjunction with the consolidated condensed interim financial information:
* Revenue of US$391.7 million was US$113.3 million lower than H1 2016 driven
by the 22% decrease in sales volumes mainly as a result of our inability to
sell gold/copper concentrate which deferred approximately US$175 million in
gross revenue.
* Cash costs decreased to US$577 per ounce sold in the first half of 2017
from US$640 per ounce sold in H1 2016, driven by the higher production
base, lower sales related costs, higher capitalisation of development costs
and lower consumables costs, partly offset by lower co-product revenue and
increased contracted services costs.
* AISC at US$893 per ounce sold was 5% lower than in H1 2016 (US$941 per
ounce sold), mainly due to lower cash costs and non-cash share based
payment revaluation credits, partly offset by lower sales volumes despite
the higher production base.
* As a result of the above and in combination with higher exploration
charges, EBITDA decreased by 13% to US$161.4 million.
* Lower tax expense of US$37.0 million compared to the prior year expense of
US$107.7 million. The current year charge is driven by year to date
profitability mainly from North Mara, while the prior year expense included
the recognition of US$70 million of tax provisions relating to prior year
tax disputes.
* As a result of the above, net earnings amounted to US$62.5 million,
compared to a loss of US$6.1 million in H1 2016.
* Adjusted net earnings of US$65.9 million were US$7.1 million higher than H1
2016. Adjusted earnings per share amounted to US16.1 cents, up from US14.3
cents in H1 2016.
+ Operational cash flow of US$1.3 million decreased from H1 2016,
primarily as a result lower revenue as discussed above, unfavourable
working capital outflows due to a build-up of gold inventory and
supplies, an increase in indirect taxes receivable, and payments of
US$26.7 million relating to prepaid and provisional corporate tax.
The following review provides a detailed analysis of our consolidated results
for 6 months ended 30 June 2017 and the main factors affecting financial
performance. It should be read in conjunction with the unaudited consolidated
financial information and accompanying notes on pages 36 to 58, which have been
prepared in accordance with International Financial Reporting Standards as
adopted for use in the European Union ("IFRS").
Revenue
Revenue for H1 2017 of US$391.7 million was US$113.3 million lower than H1 2016
due to a 22% decrease in gold sales volumes from Bulyanhulu and Buzwagi (88,525
ounces) offset by a 5% increase in sales ounces from North Mara and a 2%
increase in the average net realised gold price from US$1,209 per ounce sold in
H1 2016 to US$1,235 in H1 2017.
The decrease in revenue during the first half of 2017 was primarily driven by
the ban on export of mineral concentrates which also resulted in a negative
sales adjustment of 18,204 ounces, approximately US$22.0 million in revenues,
due to reversals made for concentrate shipments sold in Q1 2017 due to the
concentrate not being able to leave port.
The net realised gold price for the year to date of US$1,235/oz was US$3/oz
lower than the average market price of US$1,238/oz due to the timing of sales.
There were no realised losses related to gold hedges during H1 2017.
Included in total revenue is co-product revenue of US$5.8 million for the 2017
year to date, 71% lower than the prior period (US$20.3 million), this as a
result of the lack of concentrate sales from early March 2017. The 2017 half
year average realised copper price of US$2.99 per pound compared favourably to
that of H1 2016 (US$2.13 per pound), and was mainly driven by the higher market
price for copper. The benefit of a higher copper price is however not reflected
in H1 2017 revenues due to a 83% decrease in copper sales volumes. Included in
co-product revenue is a negative sales adjustment of 1.1 million copper pounds,
approximately US$3.0 million in revenues, due to reversals made for concentrate
shipments sold in Q1 2017 but subsequently reversed due to the concentrate not
being able to leave port.
The impact of the ban during the first half of the year has meant that we have
approximately 127,000 ounces of gold contained in unsold concentrate. In
addition, we have approximately 8.3 million pounds of copper and 107,000 ounces
of silver contained in unsold concentrate. If these have been sold, gross
revenue and cashflow would have increased by approximately US$175 million.
Cost of sales
Cost of sales was US$244.0 million for H1 2016, representing a decrease of 31%
on the prior year period (US$355.4 million). The key aspects impacting the cost
of sales for the year include an 32% reduction in direct mining costs,
primarily driven by higher capitalised mining costs including a credit of
approximately US$63.3 million relating to a build-up of finished gold ounces,
combined with lower depreciation and amortisation costs as a result of the
lower production base at Bulyanhulu, lower sales related cost due to lower
sales volumes and minimal realised losses on economic hedges due to majority of
options reaching their settlement date during 2016.
The table below provides a breakdown of cost of sales:
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2017 2016 2017 2016
Cost of Sales
Direct mining costs 61,527 118,535 160,310 234,436
Third party smelting and refining 1,417 6,782 6,738 13,639
fees
Realised losses on economic hedges 170 2,539 278 6,454
Royalty expense 8,040 12,517 18,682 22,534
Depreciation and amortisation* 23,417 43,166 57,959 78,376
Total 94,571 183,539 243,967 355,439
* Depreciation and amortisation includes credits relating to the depreciation
component of the cost of inventory build-up of US$12.8 million for Q2 2017 (Q2
2016: US$0.9 million) and US$15.8 million for H1 2017 (H1 2016: US$5.7
million).
A detailed breakdown of direct mining expenses is shown in the table below:
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2017 2016 2017 2016
Direct mining costs
Labour 23,859 21,728 47,261 43,789
Energy and fuel 21,161 21,387 44,604 41,875
Consumables 22,262 26,482 47,168 52,939
Maintenance 26,357 27,494 52,123 53,735
Contracted services 33,483 33,829 69,497 62,383
General administration costs 21,788 22,362 42,309 43,085
Gross direct mining costs 148,910 153,282 302,962 297,806
Capitalised mining costs (87,383) (34,747) (142,652) (63,370)
Total direct mining costs 61,527 118,535 160,310 234,436
Gross direct mining costs of US$303.0 million for H1 2017 were 2% higher than
H1 2016 (US$297.8 million). The overall increase was driven by the following:
* An 11% increase in contracted services mainly at Bulyanhulu due to higher
costs associated to underground drilling combined with higher underground
metres drilled, increased service cost for power generation and contractors
employed as part of various mine projects;
* An 8% increase in labour cost, mainly as a result of production bonuses
paid out at North Mara and Buzwagi; and
* A 7% increase in energy and fuel expenses driven by higher tonnes mined at
North Mara resulting in higher costs relating to fuel and lubricants.
This was offset by:
* A 11% decrease in consumables costs mainly at Buzwagi due to lower reagents
and chemicals costs as a result of lower cyanide usage, lower grinding
media costs driven by the optimised usage of grinding balls, lower
explosives costs driven by improved blasting practice combined with lower
processing consumables used at Bulyanhulu driven by lower tonnes processed
as well as efficient usage of reagents; and
* A 3% decrease in maintenance costs mainly at Bulyanhulu due to reduced
maintenance activity and changes to the maintenance schedules showing
continued benefits from planned maintenance activities.
Capitalised direct mining costs, consisting of capitalised development costs
and investment in inventory is made up as follows:
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2017 2016 2017 2016
Capitalised direct mining
costs
Capitalised development (25,962) (30,210) (56,530) (51,369)
costs
Investment in inventory (61,420) (4,537) (86,122) (12,001)
Total capitalised direct (87,382) (34,747) (142,652) (63,370)
mining costs
Capitalised development costs were 125% higher than H1 2016, primarily driven
by a build-up of concentrates in gold ounces at Bulyanhulu and Buzwagi
resulting in an investment in inventory of US$86.1 million. The increase in
capitalised development cost mainly relate to higher gross direct mining cost
at North Mara resulting in 10% higher capitalised development during H1 2017.
Central costs
Total central costs amounted to US$4.7 million for H1 2017, a 84% decrease on
H1 2016 (US$29.4 million) mainly driven by a non-cash share based payment
revaluation credit as a result of the lower share price and share price
performance compared to 2016, specifically when compared to our peers and the
global mining index, impacting on the valuation of future share-based payment
liabilities to employees. Acacia's share price decreased by approximately 31%
compared to December 2016. This was partly offset by a 28% increase in
corporate administration costs as a result of higher legal and consulting fees
paid, slightly offset by lower labour cost across all offices during H1 2017.
Three months ended 30 June Six months ended 30
(US$'000) June
(Unaudited) 2017 2016 2017 2016
Corporate administration 5,878 4,469 12,520 9,771
Share-based payments (18,209) 15,697 (7,785) 19,635
Total central costs 12,331 20,166 4,735 29,406
Exploration and evaluation costs
Exploration and evaluation costs of US$16.2 million were incurred in H1 2017,
45% higher than the US$11.2 million spent in H1 2016. The key focus areas for
the half year were greenfield exploration programmes in West Kenya amounting to
US$8.0 million and greenfield exploration programmes in West Africa amounting
to US$7.2 million.
Corporate social responsibility expenses
Corporate social responsibility costs incurred for H1 2017 amounted to US$3.7
million compared to the prior year of US$4.6 million. Corporate social
responsibility overheads and central initiatives in H1 2017 amounted to US$2.3
million and was higher compared to US$2.1 million in H1 2016. General community
projects funded from the Acacia Maendeleo Fund amounted to US$1.4 million,
which was US$1.2 million lower than in H1 2016, driven by the timing of
projects starting.
Other charges
Other charges in H1 2017 amounted to US$19.6 million, compared to an income of
US$2.2 million in H1 2016. The main contributors include foreign exchange
losses of US$4.6 million, legal costs of US$4.6 million mainly relating to
legal representation on historical court cases, retrenchment costs of US$3.3
million and Acacia's ongoing programme of zero cost collar contracts to
mitigate the negative impact of copper, rand and fuel market volatility, which
resulted in a mark-to-market revaluation loss of US$2.4 million (as these
arrangements do not qualify for hedge accounting these unrealised gains are
recorded through profit and loss). The charges were partly offset by income of
US$1.8 million generated through the sale of a mineral royalty previously held
by Acacia.
Finance expense and income
Finance expense of US$5.5 million for H1 2017 was in line with H1 2016 (US$5.4
million). The key components were borrowing costs relating to the Bulyanhulu
CIL facility (US$1.6 million) which were lower than the prior year due to a
lower outstanding facility following repayments, lower accretion expenses of
US$1.7 million relating to the discounting of the environmental reclamation
liability and US$1.5 million relating to the servicing of the US$150 million
undrawn revolving credit facility. Other costs include bank charges and
interest on finance leases.
Finance income relates predominantly to interest charged on non-current
receivables and interest received on money market funds. Refer to note 8 of the
condensed financial information for details.
Taxation matters
The total income tax charge was US$37.0 million compared to the prior year
expense of US$107.7 million. The current tax charge of US$31.8 million (H1
2016: US$64.4 million) was predominantly made up of current year income tax for
North Mara, driven by year to date profitability, in combination with deferred
tax charges of US$5.2 million (2016: US$43.3 million) which reflects movements
in temporary differences. The tax expense for H1 2016 of US$107.7 million
included US$69.9 million relating to tax provisions raised for historical tax
disputes. The effective tax rate in H1 2017 amounted to 37% compared to 106% in
H1 2016.
During H1 2017, we made provisional corporate tax payments of US$17.3 million
relating to North Mara, which is based on the pro rata portion of North Mara's
expected full year profitability. These provisional corporate tax payments have
been offset against the indirect tax receivable covered under the Memorandum of
Settlement entered into with the Tanzanian Government in 2011, and as a result,
were not paid in cash. In addition, during H1 2017 we have also made a prepaid
tax payment of US$9.5 million relating to a advance payment on a dispute raised
on claimed historical North Mara taxes, which was paid in cash.
Net earnings and earnings per share
As a result of the factors discussed above, net earnings for H1 2017 were
US$62.5 million, against the prior year loss of US$6.1 million.
Earnings per share for H1 2017 amounted to US15.3 cents, an increase of US16.8
cents from the prior year loss per share of US1.5 cents. The increase was
driven by the higher earnings, with no change in the underlying issued shares.
Adjusted net earnings and adjusted earnings per share
Adjusted net earnings for the first half was US$65.9 million compared to
US$58.8 million in H1 2016. Net earnings in the periods as described above have
been adjusted for the impact of items such as prior year tax provisions,
discounting of indirect tax receivables, restructuring costs, insurance
proceeds as well as legal settlements. Refer to page 30 for reconciliation
between net profit and adjusted net earnings.
Adjusted earnings per share for H1 2017 amounted to US16.1 cents, an increase
of US1.8 cents from H1 2016 adjusted earnings per share of US14.3 cents.
Financial position
Acacia had cash and cash equivalents on hand of US$175.9 million as at 30 June
2017 (US$317.8 million as at 31 December 2016). The Group's cash and cash
equivalents are with counterparties whom the Group considers to have an
appropriate credit rating. Location of credit risk is determined by physical
location of the bank branch or counterparty. Investments are held mainly in
United States dollars, with cash and cash equivalents in other foreign
currencies maintained for operational requirements.
During 2013, a US$142 million facility ("Facility") was put in place to fund
the bulk of the costs of the construction of the Bulyanhulu tailings
retreatment project ("Project"). The Facility is collateralised by the Project,
and has a term of seven years with a spread over Libor of 250 basis points. The
seven year Facility is repayable in equal instalments (bi-annual) over the term
of the Facility, after a two year repayment holiday period. The interest rate
has been fixed at 3.6% through the use of an interest rate swap. The full
facility of US$142 million was drawn in 2013. During 2017, the 4th repayment
amounting to US$14.2 million in total was made. At 30 June 2017, the
outstanding capital balance is US$85.2 million (30 June 2016: US$113.6
million).
The above complements the existing undrawn revolving credit facility of US$150
million, which runs until November 2019.
The net book value of property, plant and equipment increased from US$1.41
billion as at 30 June 2016 to US$1.47 billion as at 30 June 2017. The main
capital expenditure drivers have been explained above, and have been offset by
depreciation charges of US$69.7 million. Refer to note 12 to the condensed
financial information for further details.
The current portion of inventories increased from US$195.7 million as at 30
June 2016 to US$280.7 million as at 30 June 2017. This was mainly due to an
increase of US$83.6 million relating to finished goods. Total gold ounces on
hand of 138,113 ounces as at 30 June 2017 comprised 126,931 ounces of gold in
concentrate and 11,202 ounces of gold in doré.
Total indirect tax receivables increased from US$136.4 million as at 31
December 2016 to US$165.5 million as at 30 June 2017. The increase was mainly
due to no VAT refunds received as a result of ongoing audits by the Tanzanian
Revenue Authority on submitted VAT returns. Our gross increase in receivables,
before the corporate tax prepayment offset, amounted to approximately US$47
million. This was partly offset by corporate tax prepayments of US$17.3 million
and revaluation losses with the net increase in receivables being US$29.1
million.
The net deferred tax position was a liability of US$156.8 million as at 30 June
2016 compared to the liability of US$152.1 million as at 31 December 2016. This
was mainly as a result of temporary difference at Buzwagi during the current
period.
Net assets increased from US$1.86 billion as at 31 December 2016 to US$1.90
billion as at 30 June 2017. The increase reflects the current year income of
US$62.5 million and the payment of the final 2016 dividend of US$34.4 million.
Cash flow generation and capital management
Cash flow
(US$000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2017 2016 2017 2016
Cash (used in)/ generated from (23,909) 104,864 1,315 157,096
operating activities
Cash used in investing (47,250) (46,347) (94,786) (80,272)
activities
Cash used in financing (34,447) (11,490) (48,585) (25,690)
activities
(Decrease)/ increase in cash (105,606) 47,027 (142,056) 51,134
Foreign exchange difference on 50 (99) 151 (45)
cash
Opening cash balance 281,442 237,429 317,791 233,268
Closing cash balance 175,886 284,357 175,886 284,357
Cash flow from operating activities was US$1.3 million for H1 2017, a decrease
of US$155.8 million from H1 2016 (US$157.1 million). The decrease relates to
unfavourable working capital outflows of US$159.7 million compared to outflows
of US$16.3 million in H1 2016, provisional income tax paid of US$17.3 million
and a US$9.5 million corporate tax dispute deposit included in other current
assets, compared to total tax payments of US$10 million in H1 2016 combined
with the impact of lower operating profit mainly due to lost margins on lower
gold sales volumes (US$10.7 million). This was offset by the impact of lower
non-cash expenses of US$8.2 million which include unrealised gains on
derivatives of US$2.4 million and foreign exchange differences of US$4.6
million.
The working capital outflow relates to a net increase in inventories on hand of
US$113.2 million driven by the higher production base and lower sales volumes,
and a net increase in indirect tax receivables on a cash basis of approximately
US$30.0 million.
Cash flow used in investing activities was US$94.8 million for H1 2017, an
increase of 18% when compared to H1 2016 (US$80.3 million), driven by higher
capitalised development at both North Mara and Bulyanhulu, partly offset by
lower sustaining capital expenditure at Bulyanhulu and Buzwagi.
A breakdown of total capital and other investing capital activities for 2017 is
provided below:
(US$'000) Six months ended 30 June
(Unaudited) 2017 2016
Sustaining capital (30,204) (21,906)
Capitalised development (64,337) (59,489)
Expansionary capital (5,523) (1,211)
Total cash capital (100,064) (82,606)
Non-current asset movement1 5,278 2,334
Cash used in investing activities (94,786) (80,272)
Capital expenditure reconciliation:
Total cash capital 100,064 82,606
Land purchases 1,247 2,824
Movement in capital accruals (8,855) (258)
Capital expenditure 92,456 85,172
Land purchases classified as long term (1,247) (2,824)
prepayments
Non-cash rehabilitation asset 134 19,196
adjustment
Total capital expenditure per segment 91,343 101,544
note
1 Non-current asset movements relates to the movement in Tanzania government
receivables, other long term assets and the sale of a mineral royalty.
Sustaining capital
Sustaining capital expenditure includes investment in mobile equipment and
component change-outs (US$6.6 million), investment in fixed equipment and
mining infrastructure including the West fan upgrade and underground
ventilation raise boring at Bulyanhulu (US$9.7 million) and other sustaining
capital expenditure across sites of US$13.9 million. During the first half,
capital accruals from December 2016 of US$8.9 million were paid.
Capitalised development
Capitalised development includes North Mara capitalised stripping costs
(US$25.9 million) and capitalised underground development (US$7.4 million) and
Bulyanhulu capitalised underground development costs (US$31.1 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of capitalised expansion
drilling at North Mara (US$4.5 million) and Bulyanhulu (US$1.0 million).
Non-cash capital
Non-cash capital was a negative US$8.8 million and consisted mainly of a
decrease in capital accruals (US$8.9 million) and reclamation asset adjustments
(US$0.1 million). The reclamation adjustments were driven by changes in US risk
free rates driving changes in discount rates and closure costs assumptions.
Other investing capital
During H1 2017 North Mara incurred land purchases totalling US$1.2 million (H1
2016: US$2.8 million).
Cash flow used in financing activities for H1 2017 of US$48.6 million, an
increase of US$22.9 million from US$25.7 million in H1 2016. The outflow
relates to payment of the final 2016 dividend of US$34.4 million and the
payment of the 4th instalment of the borrowings related to the Bulyanhulu CIL
facility totalling US$14.2 million.
Dividend
The final 2016 dividend of US8.4 cents per share was paid to shareholders on 25
May 2017. The Board of Directors have not recommended an interim dividend for
2017 as a result of the negative free cashflow generation over H1 2017, in line
with our dividend policy.
Significant judgements in applying accounting policies and key sources of
estimation uncertainty
Many of the amounts included in the condensed consolidated financial
information require management to make judgements and/or estimates. These
judgements and estimates are continuously evaluated and are based on
management's experience and best knowledge of the relevant facts and
circumstances, but actual results may differ from the amounts included in the
condensed consolidated financial information included in this release.
Information about such judgements and estimation is included in the accounting
policies and/or notes to the consolidated financial statements, and the key
areas are summarised below.
Areas of judgement and key sources of estimation uncertainty that have the most
significant effect on the amounts recognised in the condensed consolidated
financial statements include:
* Estimates of the quantities of proven and probable gold and copper
reserves;
* Estimates included within the life-of-mine planning such as the timing and
viability of processing of long term stockpiles;
* The capitalisation of production stripping costs;
* The capitalisation of exploration and evaluation expenditures;
* Review of goodwill, tangible and intangible assets' carrying value, the
determination of whether a trigger for an impairment review exist, whether
these assets are impaired and the measurement of impairment charges or
reversals, and also includes the judgement of reversal of any previously
recorded impairment charges;
* The estimated fair values of cash generating units for impairment tests,
including estimates of future costs to produce proven and probable
reserves, future commodity prices, foreign exchange rates and discount
rates;
* The estimated useful lives of tangible and long-lived assets and the
measurement of depreciation expense;
* Recognition of a provision for environmental rehabilitation and the
estimation of the rehabilitation costs and timing of expenditure;
* Whether to recognise a liability for loss contingencies and the amount of
any such provision;
* Whether to recognise a provision for accounts receivable, and in particular
the indirect tax receivables from the Tanzanian Government, a provision for
obsolescence on consumables inventory and the impact of discounting the
non-current element of the indirect tax receivable;
* Recognition of deferred income tax assets, amounts recorded for uncertain
tax positions, the measurement of income tax expense and indirect taxes;
* Determination of the cost incurred in the productive process of ore
stockpiles, gold in process, gold doré/bullion and concentrate, as well as
the associated net realisable value and the split between the long term and
short term portions;
* Determination of fair value of derivative instruments; and
* Determination of fair value of share options and cash-settled share-based
payments.
Non-IFRS Measures
Acacia has identified certain measures in this report that are not measures
defined under IFRS. Non-IFRS financial measures disclosed by management are
provided as additional information to investors in order to provide them with
an alternative method for assessing Acacia's financial condition and operating
results, and reflects more relevant measures for the industry in which Acacia
operates. These measures are not in accordance with, or a substitute for, IFRS,
and may be different from or inconsistent with non-IFRS financial measures used
by other companies. These measures are explained further below.
Net average realised gold price per ounce sold is a non-IFRS financial measure
which excludes from gold revenue:
- Unrealised gains and losses on non-hedge derivative contracts; and
- Export duties
It also includes realised gains and losses on gold hedge contracts reported as
part of cost of sales.
Net average realised gold price per ounce sold have been calculated as follow:
(US$000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2017 2016 2017 2016
Gold revenue 160,231 272,728 385,859 484,614
Less: Realised gold hedge losses - - - -
Net gold revenue 160,231 272,728 385,859 484,614
Gold sold (ounces) 127,694 216,782 312,438 400,963
Net average realised gold price 1,255 1,258 1,235 1,209
(US$/ounce)
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, and production taxes,
and exclude capitalised production stripping costs, inventory purchase
accounting adjustments, unrealised gains/losses from non-hedge currency and
commodity contracts, depreciation and amortisation and corporate social
responsibility charges. Cash cost is calculated net of co-product revenue. Cash
cost per ounce sold is calculated by dividing the aggregate of these costs by
total ounces sold.
The presentation of these statistics in this manner allows Acacia to monitor
and manage those factors that impact production costs on a monthly basis. Cash
costs and cash cost per ounce sold are calculated on a consistent basis for the
periods presented.
The table below provides a reconciliation between cost of sales and total cash
cost to calculate the cash cost per ounce sold.
Three months ended 30 Six months ended 30
(US$'000) June June
(Unaudited) 2017 2016 2017 2016
Total cost of sales 94,571 183,539 243,967 355,439
Deduct: depreciation and (23,417) (43,166) (57,959) (78,376)
amortisation*
Deduct: Co-product revenue 2,468 (11,309) (5,805) (20,333)
Total cash cost 73,622 129,064 180,203 256,730
Total ounces sold 127,694 216,782 312,438 400,963
Total cash cost per ounce 577 595 577 640
sold
* Depreciation and amortisation includes the depreciation component of the cost
of inventory sold
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is
in accordance with the World Gold Council's guidance issued in June 2013. It is
calculated by taking cash cost per ounce sold and adding corporate
administration costs, share-based payments, reclamation and remediation costs
for operating mines, corporate social responsibility expenses, mine exploration
and study costs, realised gains and/or losses on operating hedges, capitalised
stripping and underground development costs and sustaining capital expenditure.
This is then divided by the total ounces sold. A reconciliation between cash
cost per ounce sold and AISC for the key business segments is presented below:
(Unaudited) Three months ended 30 June 2017 Three months ended 30 June 2016
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per 813 476 705 577 662 382 948 595
ounce sold
Corporate 44 21 81 46 16 17 23 21
administration
Share based (38) (13) (78) (143) 15 8 14 72
payments
Rehabilitation 23 10 11 13 8 9 2 7
CSR expenses 9 10 (3) 12 7 7 6 8
Capitalised 547 184 - 239 195 203 - 160
development
Sustaining capital 160 70 46 91 55 81 26 63
Total AISC 1,558 758 762 835 958 707 1,019 926
* The group total includes a credit of US$95/oz of unallocated corporate
related costs in Q2 2017, and a cost of US$66/oz in Q2 2016.
(Unaudited) Six months ended 30 June 2017 Six months ended 30 June 2016
(US$/oz sold) Bulyanhulu North Buzwagi Group* Bulyanhulu North Buzwagi Group*
Mara Mara
Cash cost per ounce 795 441 697 577 661 427 1,052 640
sold
Corporate 36 23 48 40 21 24 25 24
administration
Share based payments (4) (2) (6) (25) 11 7 11 49
Rehabilitation 16 10 7 11 7 9 3 7
CSR expenses 8 8 7 12 5 11 7 12
Capitalised 382 187 - 206 189 183 0 148
development
Sustaining capital 107 69 17 72 76 59 26 61
Total AISC 1,340 736 770 893 970 720 1,124 941
* The group total includes a credit of US$5/oz of unallocated corporate related
costs in H1 2017, and a cost of US$46/oz in H1 2016.
AISC is intended to provide additional information on the total sustaining cost
for each ounce sold, taking into account expenditure incurred in addition to
direct mining costs and selling costs.
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include
all costs absorbed into inventory, as well as royalties, co-product credits,
and production taxes, and exclude capitalised production stripping costs,
inventory purchase accounting adjustments, unrealised gains/losses from
non-hedge currency and commodity contracts, depreciation and amortisation and
corporate social responsibility charges. Cash cost is calculated net of
co-product revenue. Cash cost per tonne milled is calculated by dividing the
aggregate of these costs by total tonnes milled.
EBITDA is a non-IFRS financial measure. Acacia calculates EBITDA as net profit
or loss for the period excluding:
* Income tax expense;
* Finance expense;
* Finance income;
* Depreciation and amortisation; and
* Impairment charges of goodwill and other long-lived assets.
EBITDA is intended to provide additional information to investors and analysts.
It does not have any standardised meaning prescribed by IFRS and should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with IFRS. EBITDA excludes the impact of cash costs of financing
activities and taxes, and the effects of changes in operating working capital
balances, and therefore is not necessarily indicative of operating profit or
cash flow from operations as determined under IFRS. Other companies may
calculate EBITDA differently.
A reconciliation between net profit for the period and EBITDA is presented
below:
(US$000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2017 2016 2017 2016
Net profit/(loss) for the period 35,716 46,282 62,543 (6,128)
Plus income tax expense/(credit) 17,819 27,567 37,002 107,744
Plus depreciation and amortisation 23,417 43,166 57,959 78,376
Plus finance expense 3,216 2,514 5,454 5,380
Less finance income (946) (197) (1,543) (490)
EBITDA 79,222 119,332 161,415 184,882
*Depreciation and amortisation includes the depreciation component of the cost
of inventory sold.
Adjusted EBITDA is a non-IFRS financial measure. It is calculated by excluding
one-off costs or credits relating to non-routine transactions from EBITDA. It
excludes other credits and charges that, individually or in aggregate, if of a
similar type, are of a nature or size that requires explanation in order to
provide additional insight into the underlying business performance. EBITDA is
adjusted for items (a) to (c) as contained in the reconciliation to adjusted
net earnings below.
EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for
depreciation and amortisation and goodwill impairment charges.
Adjusted net earnings is a non-IFRS financial measure. It is calculated by
excluding certain costs or credits relating to non-routine transactions from
net profit attributed to owners of the parent. It includes other credit and
charges that, individually or in aggregate, if of a similar type, are of a
nature or size that requires explanation in order to provide additional insight
into the underlying business performance.
Adjusted net earnings and adjusted earnings per share have been calculated as
follows:
(US$000) Three months ended 30 June Six months ended 30
June
(Unaudited) 2017 2016 2017 2016
Net earnings/(loss) 35,716 46,282 62,543 (6,128)
Adjusted for:
Restructuring cost (a) 2,477 1,264 3,304 2,125
Discounting of indirect taxes (b) - (6,508) - (6,508)
One-off legal settlements (c) 1,500 - 1,500 -
Prior year tax positions - - - 69,916
recognised 1
Tax impact of the above (1,193) (379) (1,441) (638)
Adjusted net earnings 38,500 40,659 65,906 58,767
1 For the Six months ended 30 June 2016, US$69.9 million represents a provision
raised for the implied impact of an adverse tax ruling made by the Tanzanian
Court of Appeal with respect to historical tax assessments of Bulyanhulu. As
reported in Q1 2016, the impact of the ruling was calculated for Bulyanhulu and
extrapolated to North Mara and Tulawaka as well and covers results up to the
end of 2015. On a site basis, US$35.1 million was raised for Bulyanhulu,
US$30.4 million for North Mara and US$4.4 million for Tulawaka.
Adjusted net earnings per share is a non-IFRS financial measure and is
calculated by dividing adjusted net earnings by the weighted average number of
Ordinary Shares in issue.
Free cash flow is a non-IFRS measure and represents the change in cash and cash
equivalents in a given period.
Net cash is a non-IFRS measure. It is calculated by deducting total borrowings
from cash and cash equivalents.
Mining statistical information
The following describes certain line items used in the Acacia Group's
discussion of key performance indicators:
* Open pit material mined - measures in tonnes the total amount of open pit
ore and waste mined.
* Underground ore tonnes hoisted - measures in tonnes the total amount of
underground ore mined and hoisted.
* Underground ore tonnes trammed - measures in tonnes the total amount of
underground ore mined and trammed.
* Total tonnes mined includes open pit material plus underground ore tonnes
hoisted.
* Strip ratio - measures the ratio of waste?to?ore for open pit material
mined.
* Ore milled - measures in tonnes the amount of ore material processed
through the mill.
* Head grade - measures the metal content of mined ore going into a mill for
processing.
* Milled recovery - measures the proportion of valuable metal physically
recovered in the processing of ore. It is generally stated as a percentage
of the metal recovered compared to the total metal originally present.
Risk Review
We have made a number of further developments in the identification and
management of our risk profile over the course of H1 2017. Where appropriate,
risk ratings have been reviewed against risk management controls and other
mitigating factors. Our principal risks continue to fall within four broad
categories: strategic risks, financial risks, external risks and operational
risks. Whilst the overall makeup of our principal risks has not significantly
changed from that published in the 2016 Annual Report, there have been changes
in certain risk profiles. Developments such as the ban on the export of gold/
copper concentrate and the recent enacting of Tanzanian legislation relating to
the legal and regulatory framework governing the natural resources sector have
resulted in increases to the impact rating of certain risks.
As a result of our mid-year assessment, at this stage we believe it appropriate
to include a new risk as a principal risk for the remainder of 2017 relating to
cyber security. The likelihood of this risk has increased in the light of the
increase in cybersecurity related incidents on a global level and the potential
impact that a cyber security incident could have on the availability and
integrity of our information technology infrastructure.
As a result of the risk review outlined above, we view our principal risks for
the remainder of 2017 as relating to the following:
• Political, legal and regulatory developments
• Security, trespass and vandalism
• Single country risk
• Implementation of enhanced operational systems
• Safety risks relating to mining operations
• Equipment effectiveness
• Environmental hazards and rehabilitation
• Continuity of power supply
• Significant changes to commodity prices
• Cyber security
Further details as regards our Principal Risks and Uncertainties and risk
assessments conducted in respect thereof will be provided as part of the 2017
Annual Report and Accounts.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, the condensed
consolidated interim financial information has been prepared in accordance with
IAS 34 as adopted by the European Union. The half-year management report
includes a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R, namely:
* an indication of important events that have occurred during the first six
months of the financial year and their impact on the condensed consolidated
interim financial information, and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
* material related-party transactions in the first six months of the
financial year and any material changes in the related party transactions
described in the last Annual Report.
The Directors of Acacia Mining plc are listed in the Acacia Mining plc Annual
Report for 31 December 2016, save for Mr Peter Tomsett and Ambassador Juma
Mwapachu. A list of current Directors is maintained on the Acacia Mining plc
Group website: www.acaciamining.com.
On behalf of the Board
Brad Gordon, Chief Executive Officer Kelvin Dushnisky, Chairman
Independent review report to Acacia Mining plc
Report on the condensed consolidated interim financial information
Our conclusion
We have reviewed Acacia Mining plc's condensed consolidated interim financial
information (the "interim financial statements") in the interim results of
Acacia Mining plc for the 6 month period ended 30 June 2017. Based on our
review, nothing has come to our attention that causes us to believe that the
interim financial statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Emphasis of Matter - Impact of mineral concentrate export ban and legislative
changes in Tanzania
In forming our conclusion on the interim financial statements, which is not
modified, we have considered the adequacy of the disclosures made in note 2 to
the Interim financial statements and additional commentary within the Interim
announcement concerning the ongoing mineral concentrate export ban and
legislative changes in Tanzania. With regards to a potential negotiated
settlement of the matter, it is too early to reliably estimate how a resolution
could impact the Group's financial position, assets, liabilities and future
cash flows. As a consequence, these conditions, along with the other matters
explained in note 2 to the interim financial statements, indicate the existence
of a material uncertainty which may cast significant doubt about the company's
ability to continue as a going concern. The interim financial statements do not
include the adjustments that would result if the company was unable to continue
as a going concern.
What we have reviewed
The interim financial statements comprise:
* the consolidated balance sheet as at 30 June 2017;
* the consolidated income statement and consolidated statement of
comprehensive income for the period then ended;
* the consolidated statement of cash flows for the period then ended;
* the consolidated statement of changes in equity for the period then ended;
and
* the explanatory notes to the interim financial statements.
The interim financial statements included in the interim results have been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 2 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full annual
financial statements of the Group is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, is the
responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the interim results in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the interim results based on our review. This report, including
the conclusion, has been prepared for and only for the company for the purpose
of complying with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information
Performed by the Independent Auditor of the Entity' issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.
We have read the other information contained in the interim results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
21 July 2017
a. The maintenance and integrity of the Acacia Mining plc website is the
responsibility of the directors; the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the
interim financial statements since they were initially presented on the
website.
b. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Condensed Financial Information
Consolidated income statement
For the six months ended For the year
30 June ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$'000) Notes 2017 2016 2016
Revenue 391,664 504,947 1,053,532
Cost of sales (243,967) (355,439) (727,080)
Gross profit 147,697 149,508 326,452
Corporate administration (12,520) (9,771) (21,895)
Share-based payments 7,785 (19,635) (29,929)
Exploration and evaluation costs (16,150) (11,150) (24,020)
Corporate social responsibility expenses (3,739) (4,614) (10,665)
Other (charges)/income 7 (19,617) 2,168 11,649
Profit/ (loss) before net finance expense 103,456 106,506 251,592
and taxation
Finance income 8 1,543 490 1,512
Finance expense 8 (5,454) (5,380) (11,047)
Profit/ (loss) before taxation 99,545 101,616 242,057
Tax expense 9 (37,002) (107,744) (147,113)
Net (loss)/ profit for the period 62,543 (6,128) 94,944
(Loss)/ earnings per share (cents):
Basic (loss)/ earnings per share (cents) 10 15.3 (1.5) 23.2
Diluted (loss)/ earnings per share (cents) 10 15.2 (1.5) 23.1
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated statement of comprehensive income
For the six months ended For the year
30 June ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Net (loss)/ profit for the period 62,543 (6,128) 94,944
Other comprehensive income:
Items that may be subsequently reclassified
to profit or loss:
Changes in fair value of cash flow hedges 52 (1,226) 7
Total comprehensive (loss)/ income for the 62,595 (7,354) 94,951
period
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated balance sheet As at As at As at
30 June 30 June 31
(Unaudited) (Unaudited) December
(Audited)
(US$'000) Notes 2017 2016 2016
ASSETS
Non-current assets
Goodwill and intangible assets 216,190 211,190 216,190
Property, plant and equipment 12 1,465,309 1,414,194 1,443,176
Deferred tax assets 3,208 11,416 8,431
Non-current portion of inventory 14 115,775 87,050 98,936
Derivative financial instruments 13 770 129 821
Other assets 58,474 118,197 63,297
1,859,726 1,842,176 1,830,851
Current assets
Inventories 14 280,692 195,657 184,313
Trade and other receivables 12,039 20,119 18,830
Derivative financial instruments 13 601 9 1,343
Other current assets 15 190,868 86,230 149,518
Cash and cash equivalents 175,886 284,357 317,791
660,086 586,372 671,795
Total assets 2,519,812 2,428,548 2,502,646
EQUITY AND LIABILITIES
Share capital and share premium 929,199 929,199 929,199
Other reserves 961,912 839,505 933,696
Total owners' equity 1,891,111 1,768,704 1,862,895
Total equity 1,891,111 1,768,704 1,862,895
Non-current liabilities
Borrowings 16 56,800 85,200 71,000
Deferred tax liabilities 148,341 138,751 148,390
Derivative financial instruments 13 1,068 588 30
Provisions 147,314 147,676 145,722
Other non-current liabilities 4,778 10,063 15,699
358,301 382,278 380,841
Current liabilities
Trade and other payables 228,942 211,852 222,543
Borrowings 16 28,400 28,400 28,400
Derivative financial instruments 13 1,114 10,973 584
Provisions 9,336 1,566 7,235
Other current liabilities 2,608 24,775 148
270,400 277,566 258,910
Total liabilities 628,701 659,844 639,751
Total equity and liabilities 2,519,812 2,428,548 2,502,646
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated statement of changes in equity
Notes Share Share Other Cash flow
capital premium distributable hedging
reserve reserve
(US$'000)
Balance at 31 December 2015 62,097 867,102 1,368,713 552
(Audited)
Total comprehensive loss for the - - - (1,226)
period
Dividends to equity holders of the - - - -
Company
Share option grants - - - -
Balance at 30 June 2016 (Unaudited) 62,097 867,102 1,368,713 (674)
Total comprehensive income for the - - - 1,233
period
Share option grants - - - -
Dividends to equity holders of the - - - -
Company
Balance at 31 December 2016 62,097 867,102 1,368,713 559
(Audited)
Total comprehensive loss for the - - - 52
period
Dividends to equity holders of the 11 - - - -
Company
Share option grants
Balance at 30 June 2017 (Unaudited) 62,097 867,102 1,368,713 611
Share Accumulated Total Total non- Total
option losses owners' controlling equity
reserve equity interests
(US$'000)
Balance at 31 December 2015 3,876 (514,841) 1,787,499 - 1,787,499
(Audited)
Total comprehensive loss for the - (6,128) (7,354) - (7,354)
period
Dividends to equity holders of the - (11,490) (11,490) - (11,490)
Company
Share option grants 49 - 49 - 49
Balance at 30 June 2016 3,925 (532,459) 1,768,704 - 1,768,704
(Unaudited)
Total comprehensive income for the - 101,072 102,305 - 102,305
period
Share option grants 28 - 28 - 28
Dividends to equity holders of the - (8,142) (8,142) - (8,142)
Company
Balance at 31 December 2016 3,953 (439,529) 1,862,895 - 1,862,895
(Audited)
Total comprehensive loss for the - 62,543 62,595 - 62,595
period
Dividends to equity holders of the - (34,385) (34,385) - (34,385)
Company
Share option grants 6 6 6
Balance at 30 June 2017 3,959 (411,371) 1,891,111 - 1,891,111
(Unaudited)
The notes on pages 41 to 58 are an integral part of this financial information.
Consolidated statement of cash flows
For the six months For the
ended year ended
30 June 31 December
(US$'000) Notes (Unaudited) (Unaudited) (Audited)
2017 2016 2016
Cash flows from operating activities
Net (loss)/ profit for the period 62,543 (6,128) 94,944
Adjustments for:
Tax expense 37,002 107,744 147,113
Depreciation and amortisation 69,722 79,367 156,301
Finance items 3,911 4,890 9,535
Sale of mineral royalty (1,753) - -
Loss/ (profit) on disposal of property, plant - 136 (289)
and equipment
Working capital adjustments 17 (159,697) (16,306) (58,497)
Other non-cash items 17 (8,209) (8,952) (23,850)
Cash generated from operations before interest 3,519 160,751 325,257
and tax
Finance income 1,543 490 1,512
Finance expenses (3,747) (4,145) (8,793)
Net cash generated by operating activities 1,315 157,096 317,976
Cash flows used in investing activities
Purchase of property, plant and equipment (100,064) (82,606) (193,643)
Movement in other assets 3,746 2,529 6,952
Proceeds from sale of mineral royalty 1,753 - -
Acquired mineral interest - - (5,000)
Other investing activities (221) (195) 6,528
Net cash used in investing activities (94,786) (80,272) (185,163)
Cash flows used in financing activities
Loans paid (14,200) (14,200) (28,400)
Dividends paid (34,385) (11,490) (19,632)
Net cash used in financing activities (48,585) (25,690) (48,032)
Net increase/ (decrease) in cash and cash (142,056) 51,134 84,781
equivalents
Net foreign exchange difference 151 (45) (258)
Cash and cash equivalents at the beginning of the 317,791 233,268 233,268
period
Cash and cash equivalents at the end of the 175,886 284,357 317,791
period
The notes on pages 41 to 58 are an integral part of this financial information.
Notes to the condensed financial information
1. General Information
Acacia Mining plc, formerly African Barrick Gold plc (the "Company", "Acacia"
or collectively with its subsidiaries the "Group") was incorporated on 12
January 2010 and re-registered as a public limited company on 12 March 2010
under the Companies Act 2006. It is registered in England and Wales with
registered number 7123187.
On 24 March 2010 the Company's shares were admitted to the Official List of the
United Kingdom Listing Authority ("UKLA") and to trading on the Main Market of
the London Stock Exchange, hereafter referred to as the Initial Public Offering
("IPO"). The address of its registered office is No.1 Cavendish Place, London,
W1G 0QF.
Barrick Gold Corporation ("Barrick") currently owns approximately 63.9% of the
shares of the Company and is the ultimate parent and controlling party of the
Group. The financial statements of Barrick can be obtained from
www.barrick.com.
The condensed consolidated interim financial information for the six months
ended 30 June 2017 was approved for issue by the Board of Directors of the
Company on 21 July 2017. Statutory accounts for the year ended 31 December 2016
were approved by the Board of Directors on 7 March 2017 and delivered to the
Registrar of Companies. The report of the auditors' on those accounts was
unqualified, did not contain an emphasis of matter paragraph and did not
contain any statement under section 498 of the Companies Act 2006. The
condensed consolidated interim financial information has been reviewed, not
audited. The condensed consolidated interim financial information does not
comprise statutory accounts within the meaning of section 434 of the Companies
Act 2008.
The Group's primary business is the mining, processing and sale of gold. The
Group has three operating mines located in Tanzania. The Group also has a
portfolio of exploration projects located across Africa.
2. Basis of Preparation of the condensed interim financial information
The condensed consolidated interim financial information for the six months
ended 30 June 2017 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim
Financial Reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 31 December 2016, which have
been prepared in accordance with IFRS as adopted by the European Union. The
condensed consolidated interim financial information has been prepared under
the historical cost basis, as modified by the revaluation of financial assets
and financial liabilities (including derivative instruments) at fair value
through profit or loss. The financial information is presented in US dollars
(US$) and all monetary results are rounded to the nearest thousand (US$'000)
except when otherwise indicated.
Acacia Group's business activities, together with factors likely to affect its
future development, performance and position, are set out in the operational
and financial review sections of this interim results release. The financial
position of the Acacia Group, its cash flows, liquidity position and borrowing
facilities are described in the operating and financial review sections of this
interim results release.
At 30 June 2017, the Group had cash and cash equivalents of US$176 million with
a further US$150 million available under the undrawn revolving credit facility
which remains in place until November 2019. Total borrowings at the end of the
period amounted to US$85 million, of which US$28 million will be paid in the
next 12 months. Included in other current assets are amounts due to the Group
relating to indirect taxes of US$165 million which are expected to be received
or recovered within 12 months. The refunds remain dependent on processing and
payments of refunds by the Government of Tanzania. Furthermore, included in
working capital is finished gold contained in concentrate of approximately
127,000 ounces, approximately 8.3 million pounds of copper contained in
concentrate and approximately 107,000 ounces of silver contained in
concentrate. These contained metals are in a condition to be sold, and will
deliver revenue, net of government royalties, of approximately US$163 million.
As set out in the other developments section on pages 2 to 5 and further
explained in the operating and financial review sections, the current operating
environment in Tanzania is challenging and there are several uncertainties in
our operating environment. In March 2017, the Government of Tanzania issued a
ban on the export of all gold/ copper concentrate and this ban remains in
place. This has resulted in the stockpiled concentrate material referred to
above. Currently, it is not clear how long this ban will remain in place. In
addition, and as set out in the same paragraphs in the other developments
section on pages 2 to 5 the Government of Tanzania has also announced some
significant changes to the laws impacting the extractive industry in late June
2017, which have subsequently been passed in early July 2017.
The Directors are of the opinion that these developments and current
circumstances represent ongoing challenges in terms of cash flow generation and
continued uninterrupted operation of the Bulyanhulu and Buzwagi mines. Our
third mine, North Mara, continues to perform well and to generate free cash
flow.
As explained in the other developments section, the Group has served notices of
Arbitration relating to its Bulyanhulu and Buzwagi mines under their respective
Mineral Development Agreements. In addition, we also believe that our Mineral
Development Agreements protect us from the legislative changes proposed.
Notwithstanding these developments, we continue to believe that a negotiated
settlement of these differences with the Tanzanian Government remains in the
best interests of all parties and we look forward to discussions commencing in
the near future. As negotiations are yet to commence the impact of a settlement
on the Group's financial position, assets, liabilities and future cash flows is
uncertain. At the same time, management has instituted measures to limit
unnecessary expenditure and preserve cash, and are considering a range of
options to limit the impact of the above factors; amongst others to consider
halting operations at the affected mines should it be needed.
In assessing the Acacia Group's going concern status the Directors have taken
into account the impact of the ban on ongoing operations as well as the
following factors and assumptions; the significant current cash position, the
latest mine plans and a range of scenarios around the various options under
these circumstances, including the impact of an extended concentrate export ban
or the impact of halting the affected mines for a period of time, the current
gold and copper prices and market expectations for the same in the medium term,
and Acacia Group's capital expenditure and financing plans. In addition the
Directors have assumed that the Group will repay its borrowing obligations in
accordance with the current terms of its agreement, and that undrawn facilities
continue to be available. After making appropriate enquiries and considering
the uncertainties described above, the Directors consider that it is
appropriate to adopt the going concern basis in preparing the condensed
consolidated interim financial information however have concluded that the
combination of these circumstances represents a material uncertainty that may
cast significant doubt on the Group's ability to continue as a going concern
should the assumptions referred to above prove not to be correct.
3. Accounting Policies
The accounting policies adopted are consistent with those used in the Acacia
Mining plc annual financial statements for the year ended 31 December 2016.
There are no new standards, interpretations or amendments to standards issued
and effective for the period which materially impacted on the Group. The
following exchange rates to the US dollar have been applied:
As at Average As at Average As at Average
30 June six months 30 June six months 31 year ended
2016 ended 2016 ended December 31
30 June 30 June 2016 December
2016 2016 2016
South African rand 13.09 13.20 14.78 15.40 13.70 14.66
(US$:ZAR)
Tanzanian shilling 2,230 2,224 2,179 2,179 2,173 2,177
(US$:TZS)
Australian dollars 1.30 1.33 1.35 1.36 1.38 1.34
(US$:AUD)
UK pound (US$:GBP) 0.59 0.79 0.76 0.70 0.81 0.74
4. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets and liabilities, income and
expense. Actual results may differ from these estimates. In preparing these
condensed consolidated interim financial statements, the significant judgements
made by management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that applied to the
consolidated financial statements for the year ended 31 December 2016.
5. Segment Reporting
The Group has only one primary product produced in a single geographic
location, being gold produced in Tanzania. In addition the Group produces
copper and silver as a co-product. Reportable operating segments are based on
the internal reports provided to the Chief Operating Decision Maker ("CODM") to
evaluate segment performance, decide how to allocate resources and make other
operating decisions. After applying the aggregation criteria and quantitative
thresholds contained in IFRS 8, the Group's reportable operating segments were
determined to be: North Mara gold mine; Bulyanhulu gold mine; Buzwagi gold
mine; a separate Corporate and Exploration segment, which primarily consists of
costs related to other charges and corporate social responsibility expenses.
Segment results and carrying values include items directly attributable to the
segment as well as those that can be allocated on a reasonable basis. Segment
carrying values are disclosed and calculated as shareholders equity after
adding back debt and intercompany liabilities, and subtracting cash and
intercompany assets. Capital expenditures comprise of additions to property,
plant and equipment. The Group has also included segment cash costs and all-in
sustaining cost per ounce sold.
Segment information for the reportable operating segments of the Group for the
periods ended 30 June 2017, 30 June 2016 and 31 December 2016 is set out below.
For the six months ended 30 June 2017
(Unaudited) North Mara Bulyanhulu Buzwagi Other Total
(US$'000,except per ounce
amounts)
Gold revenue 220,217 100,023 65,619 - 385,859
Co-product revenue 653 2,760 2,392 - 5,805
Total segment revenue 220,870 102,783 68,011 - 391,664
Segment cash operating cost1 (79,251) (67,344) (39,413) 0 (186,008)
Corporate administration and (4,181) (2,937) (2,559) (18,992) (28,669)
exploration
Other charges and corporate (3,843) (902) (6,099) (4,728) (15,572)
social responsibility expenses
EBITDA2 133,595 31,600 19,940 (23,720) 161,415
Depreciation and amortisation4 (29,009) (26,940) (1,777) (233) (57,959)
EBIT2 104,586 4,660 18,163 (23,953) 103,456
Finance income 1,543
Finance expense (5,454)
Profit before taxation 99,545
Tax expense (37,002)
Net profit for the period 62,543
Capital expenditure:
Sustaining 10,930 8,599 865 957 21,351
Expansionary 4,489 982 - 51 5,522
Capitalised development 33,282 31,054 - - 64,336
48,701 40,635 865 1,008 91,209
Non-cash capital expenditure
adjustments
Reclamation asset adjustment (56) 191 (1) - 134
Other non-cash capital - - - (1) (1)
expenditure
Total capital expenditure 48,645 40,826 864 1,007 91,342
Segmental cash operating cost 79,251 67,344 39,413 - 186,008
Deduct: co-product revenue (654) (2,760) (2,392) - (5,806)
Total cash costs 78,597 64,584 37,021 - 180,202
Sold ounces 178,130 81,214 53,094 - 312,438
Cash cost per ounce sold2 441 795 697 577
Corporate administration 23 36 48 9 40
charges
Share-based payments (2) (4) (6) (22) (25)
Rehabilitation - accretion and 10 16 7 - 11
depreciation
Corporate social responsibility 8 8 7 4 12
expenses
Capitalised stripping/ UG 187 382 - - 206
development
Sustaining capital expenditure 69 107 17 3 72
All-in sustaining cost per 736 1,340 770 (6) 893
ounce sold2
Segment carrying value3 294,744 1,281,208 142,280 97,233 1,815,465
For the six months ended 30 June 2016
(Unaudited) North Mara Bulyanhulu Buzwagi Other Total
(US$'000,except per ounce
amounts)
Gold revenue 203,788 182,872 97,954 - 484,614
Co-product revenue 366 8,188 11,779 - 20,333
Total segment revenue 204,154 191,060 109,733 - 504,947
Segment cash operating cost1 (72,895) (107,842) (96,326) - (277,063)
Corporate administration and (5,443) (6,273) (2,847) (25,993) (40,556)
exploration
Other charges and corporate 3,158 (2,651) (1,725) (1,228) (2,446)
social responsibility expenses
EBITDA2 128,974 74,294 8,835 (27,221) 184,882
Depreciation and amortisation4 (29,346) (41,107) (6,869) (1,054) (78,376)
EBIT2 99,628 33,187 1,966 (28,275) 106,506
Finance income 490
Finance expense (5,380)
Profit before taxation 101,616
Tax expense (107,744)
Net loss for the period (6,128)
Capital expenditure:
Sustaining 7,257 11,506 2,231 654 21,648
Expansionary 458 753 - - 1,211
Capitalised development 31,051 28,438 - - 59,489
38,766 40,697 2,231 654 82,348
Non-cash capital expenditure
adjustments
Reclamation asset adjustment 6,252 9,937 3,007 - 19,196
Total capital expenditure 45,018 50,634 5,238 654 101,544
Segmental cash operating cost 72,895 107,842 96,326 277,063
Deduct: co-product revenue (366) (8,188) (11,779) (20,333)
Total cash costs 72,529 99,654 84,547 256,730
Sold ounces 169,840 150,719 80,404 400,963
Cash cost per ounce sold2 427 661 1,052 640
Corporate administration 24 21 25 24
charges
Share-based payments 7 11 11 49
Rehabilitation - accretion and 9 7 3 7
depreciation
Corporate social responsibility 11 5 7 12
expenses
Capitalised stripping/ UG 183 189 - 148
development
Sustaining capital expenditure 59 76 26 61
All-in sustaining cost per 720 970 1,124 941
ounce sold2
Segment carrying value3 262,260 1,214,729 71,676 62,764 1,611,429
For the year ended 31 December 2016
(Audited) North Mara Bulyanhulu Buzwagi Other Total
(US$'000,except per ounce
amounts)
Gold revenue 468,340 345,481 200,648 - 1,014,469
Co-product revenue 953 15,447 22,663 - 39,063
Total segment revenue 469,293 360,928 223,311 - 1,053,532
Segment cash operating cost1 (155,344) (217,226) (188,896) - (561,466)
Corporate administration and (8,251) (9,507) (4,176) (23,191) (45,915)
exploration
Other charges and corporate (2,918) (3,960) (3,011) (20,874) (30,763)
social responsibility expenses
EBITDA2 302,780 130,235 27,228 (44,855) 415,388
Impairment charges - - - - -
Depreciation and amortisation4 (67,472) (82,022) (12,668) (1,634) (163,796)
EBIT2 235,308 48,213 14,560 (46,489) 251,592
Finance income 1,512
Finance expense (11,047)
Loss before taxation 242,057
Tax expense (147,113)
Net profit for the year 94,944
Capital expenditure:
Sustaining 23,558 20,231 3,582 1,416 48,787
Expansionary 2,399 1,262 - - 3,661
Capitalised development 75,609 63,082 - - 138,691
101,566 84,575 3,582 1,416 191,139
Non-cash capital expenditure
adjustments
Reclamation asset adjustment 6,703 10,728 4,524 - 21,955
Total capital expenditure 108,269 95,303 8,106 1,416 213,094
Segmental cash operating cost 155,344 217,226 188,896 561,466
Deduct: co-product revenue (953) (15,447) (22,663) (39,063)
Total cash costs 154,391 201,779 166,233 522,403
Sold ounces 376,255 279,286 161,202 816,743
Cash cost per ounce sold2 410 722 1,031 640
Corporate administration 21 21 26 27
charges
Share-based payments 2 2 3 37
Rehabilitation - accretion and 9 7 3 7
depreciation
Corporate social responsibility 15 6 10 13
expenses
Capitalised stripping/ UG 201 226 - 170
development
Sustaining capital expenditure 75 74 22 64
All-in sustaining cost per 733 1,058 1,095 958
ounce sold2
Segment carrying value3 246,175 1,231,793 97,243 82,710 1,657,921
1 The CODM reviews cash operating costs for the three operating mine sites
separately from corporate administration costs and exploration costs.
Consequently, the Group has reported these costs in this manner.
2 These are non-IFRS financial performance measures with no standard meaning
under IFRS. Refer to 'Non IFRS measures' on page 28 for definitions.
3 Segment carrying values are calculated as shareholders equity after adding
back debt and intercompany liabilities, and subtracting cash and intercompany
assets and include outside shareholders' interests.
4 Depreciation and amortisation includes the depreciation component of the
cost of inventory sold.
6. Impairment Assessment
In accordance with IAS 36 "Impairment of assets" and IAS 38 "Intangible Assets"
a review for impairment of goodwill is undertaken annually, or at any time an
indicator of impairment is considered to exist, and in accordance with IAS 16
"Property, plant and equipment" a review for impairment of long-lived assets is
undertaken at any time an indicator of impairment is considered to exist.
As previously reported, and as discussed in the other developments and
operating and finance reviews of this interim financial results release, the
Government of Tanzania announced a ban on the export of gold/copper concentrate
in March 2017. Subsequently, during the second quarter two Presidential
Committees reported their findings following investigations into the technical
and economic aspects of the historic exports of gold/copper concentrates.
Acacia fully refutes the implausible findings of both committees which claim
that Acacia and its predecessor companies have historically significantly
under-declared the contents of exports of concentrate which has led to an
under-declaration of taxes running into the tens of billions of dollars. Acacia
re-iterates that it has declared everything of commercial value that it has
produced since it started operating in Tanzania and has paid all appropriate
royalties and taxes on all of the payable minerals that it has produced.
Discussions to find a mutually beneficial solution to these issues are expected
to start early in Q3 2017.
The above has had a negative impact on the operating environment of Acacia and
the three mines it operates in Tanzania. These changes, in combination with the
ban imposed and proposed legislative changes have been identified by management
as potential triggers for an impairment assessment.
As a result of the above, a review for impairment of the affected cash
generating units ("CGU") has been performed. The review compared the
recoverable amount of assets for the CGU to the carrying value of the CGU's
including goodwill. The recoverable amount of an asset is assessed by reference
to the higher of value in use ("VIU"), being the net present value ("NPV") of
future cash flows expected to be generated by the asset, and fair value less
costs to dispose ("FVLCD"). The FVLCD of a CGU is based on an estimate of the
amount that the Group may obtain in a sale transaction on an arm's length
basis. There is no active market for the Group's CGU's. Consequently, FVLCD is
derived using discounted cash flow techniques (NPV of expected future cash
flows of a CGU), which incorporate market participant assumptions. Cost to
dispose is based on management's best estimates of future selling costs at the
time of calculating FVLCD. Costs attributable to the disposal of a CGU are not
considered significant. The expected future cash flows utilised in the NPV
model are derived from estimates of projected future revenues, future cash
costs of production and capital expenditures contained in the life-of-mine
("LOM") plan for each CGU. The Group's LOM plans reflect proven and probable
reserves, assume limited resource conversion, and are based on detailed
research, analysis and modelling to optimise the internal rate of return for
each CGU.
The discount rate applied to calculate the present value is based upon the real
weighted average cost of capital applicable to the CGU. The discount rate
reflects equity risk premiums over the risk-free rate, the impact of the
remaining economic life of the CGU and the risks associated with the relevant
cash flows based on the country in which the CGU is located. These risk
adjustments are based on observed equity risk premiums, historical country risk
premiums and average credit default swap spreads for the period.
The key economic assumptions used in the reviews during 2017 and 2016 were:
For the 6 months For the year ended
ended 31 December
30 June
2017 2016
Gold price per ounce (2017) US$1,200 US$1,200
Gold price per ounce(Long US$1,200 US$1,200
term)
Copper price per pound US$2.50 US$2.25
South African Rand (US$:ZAR) 14 14
Tanzanian Shilling (US$:TZS) 2,100 2,150
Long-term oil price per US$60 US$60
barrel
Discount rate 5% 5%
NPV multiples 1 1
Our assessment took into account the impact of the current ban on the export of
gold/ copper concentrate as well as the increased royalty rate and export
clearing fees announced in June 2017 on cash flows generated by each affected
CGU.
As a result of the impairment assessment performed, no impairment charge was
recorded for the six months ended 30 June 2017.
For purposes of testing for impairment of long-lived assets, we have assessed
whether a reasonably possible change in any of the key assumptions used to
estimate the recoverable value for CGUs would result in an impairment charge.
Management's view is that the recoverable values are most sensitive to changes
in the assumptions around gold prices and discount rates. As a result,
sensitivity calculations were performed for these for each of the CGUs. The
sensitivity analysis is based on a decrease in the long term gold price of
US$100 per ounce, and an increase in the discount rate of 1%.
Neither of the reasonably possible changes set out above would result in an
impairment. This sensitivity analysis also does not take into account any of
management's mitigation factors should these changes occur.
Our review assumed that negotiations around resolving the current in-country
matters are resolved. Should this not be the case, a carrying value assessment
review will be performed again, and this might or might not result in the
recognition of impairment losses.
7. Other Charges
For the six months ended 30 For the
June year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Other expenses
Operational Review costs (including 3,304 2,125 7,689
restructuring cost)
Foreign exchange losses 4,583 - -
Disallowed indirect taxes 615 938 1,447
Unrealised non-hedge derivative losses 2,431 - -
Legal costs 4,601 667 2,641
One off legal settlements 1,500 - -
Government levies and charges 535 - -
Loss on disposal of property, plant and - 136 -
equipment
Other 3,801 2,782 4,259
Total 21,370 6,648 16,036
Other income
Discounting of indirect tax receivables - (6,508) (9,719)
Profit on disposal of property, plant and - - (289)
equipment
Unrealised non-hedge derivative gains - (1,352) (13,031)
Insurance proceeds - - (3,455)
Foreign exchange gains - (956) (1,137)
Sale of mineral royalty (1,753) - -
Other - - (54)
Total (1,753) (8,816) (27,685)
Total other income/(charges) 19,617 (2,168) (11,649)
8. Finance Income and Expenses
a)Finance income
For the six months ended 30 For the
June year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Interest on time deposits 1,443 403 1,236
Other 100 87 276
Total 1,543 490 1,512
b) Finance expense
For the six months ended 30 For the
June year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Unwinding of discount1 1,708 1,235 2,254
Revolving credit facility charges2 1,151 1,087 2,279
Interest on CIL facility 1,573 1,896 3,956
Interest on finance leases 200 199 -
Bank charges 319 604 701
Other 503 359 1,857
Total 5,454 5,380 11,047
1. The unwinding of discount is calculated on the environmental rehabilitation
provision.
2. Included in credit facility charges are the amortisation of the fees
related to the revolving credit facility as well as the monthly interest
and facility fees.
9. Tax Expense
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Current tax:
Current tax on profits for the period 31,793 27,843 54,508
Adjustments in respect of prior years1 0 36,6041 36,697
Total current tax 31,793 64,447 91,205
Deferred tax:
Origination and reversal of temporary 5,209 43,2972 55,908
differences2
Total deferred tax 5,209 43,297 55,908
Income tax expense 37,002 107,744 147,113
1 Included in this amount for 2016 is a provision for uncertain tax positions
of US$32.3 million relating to North Mara, and US$4.4 million relating to
Tulawaka, following an adverse tax ruling as reported in Q1 2016.
2 Included in this amount for 2016 is a provision for uncertain tax positions
of US$35.0 million relating to Bulyanhulu following an adverse tax ruling, as
reported in Q1 2016.
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average tax rate applicable to the profits
of the consolidated entities as follows:
For the six months ended For the year
30 June ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Profit/(loss) before tax 99,545 101,616 242,057
Tax calculated at domestic tax rates applicable 30,519 28,481 73,373
to profits in the respective countries
Tax effects of:
Expenses not deductible for tax purposes 57 463 247
Tax losses for which no deferred income tax asset 6,426 7,100 76,592
was recognised3
Adjustments to unrecognised tax benefits carried - 69,916 -
forward4
Prior year adjustments - 1,784 (3,099)
Tax charge 37,002 107,744 147,113
3 The reconciliation includes an amount of US$69.9 million for 2016 relating to
an increase in the amount of unrecognised tax liabilities carried forward. The
adjustment reflects uncertainty regarding recoverability of certain tax losses,
and gives rise to an increased deferred tax charge.
Tax periods remain open to review by the Tanzanian Revenue Authority (TRA) in
respect of income taxes for five years following the date of the filing of the
corporate tax return, during which time the authorities have the right to raise
additional tax assessments including penalties and interest. Under certain
circumstances the reviews may cover longer periods. Because a number of tax
periods remain open to review by tax authorities, there is a risk that
transactions that have not been challenged in the past by the authorities may
be challenged by them in the future, and this may result in the raising of
additional tax assessments plus penalties and interest.
10. (Loss)/ earnings Per Share (EPS)
Basic EPS is calculated by dividing the net (loss)/ profit for the period
attributable to owners of the Company by the weighted average number of
Ordinary Shares in issue during the year.
Diluted earnings per share is calculated by adjusting the weighted average
number of Ordinary Shares outstanding to assume conversion of all dilutive
potential Ordinary Shares. The Company has dilutive potential Ordinary Shares
in the form of stock options. The weighted average number of shares is adjusted
for the number of shares granted assuming the exercise of stock options.
At 30 June 2017, 30 June 2016 and 31 December 2016, (loss)/ earnings per share
have been calculated as follows:
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
(Loss)/ earnings
Net (loss)/ profit attributable to owners of the parent 62,543 (6,128) 94,944
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499 410,085,499
Adjusted for dilutive effect of stock options 382,474 277,889 355,514
Weighted average number of Ordinary Shares for diluted 410,467,973 410,363,388 410,441,013
earnings per share
(Loss)/ earnings per share
Basic (loss)/ earnings per share (cents) 15.3 (1.5) 23.2
Dilutive (loss)/ earnings per share (cents) 15.2 (1.5) 23.1
11. Dividends
The final dividend declared in respect of the year ended 31 December 2016 of
US$34.4 million (US0.8 cents per share) was paid during May 2017. No 2017
interim dividend has been declared based on the Group's year-to-date negative
free cash flow.
12. Property, Plant and Equipment
For the six months ended 30 June Plant and Mineral Assets under Total
2017 (Unaudited) equipment properties and construction
(US$'000) mine ¹
development
costs
At 1 January 2017, net of 553,993 842,019 47,164 1,443,176
accumulated depreciation and
impairment
Additions - - 91,209 91,209
Non-cash reclamation asset - - 134 134
adjustments
Foreign currency translation 512 - - 512
adjustments
Disposals/write-downs - - - -
Depreciation (37,854) (31,868) - (69,722)
Transfers between categories 21,373 74,511 (95,884) -
At 30 June 2017 538,024 884,662 42,623 1,465,309
At 1 January 2017
Cost 1,914,522 1,777,277 47,164 3,738,963
Accumulated depreciation and (1,360,529) (935,258) - (2,295,787)
impairment
Net carrying amount 553,993 842,019 47,164 1,443,176
At 30 June 2017
Cost 1,936,407 1,851,788 42,623 3,830,818
Accumulated depreciation and (1,398,383) (967,126) - (2,365,509)
impairment
Net carrying amount 538,024 884,662 42,623 1,465,309
For the six months ended 30 June Plant and Mineral Assets Total
2016 (Unaudited) equipment properties and under
(US$'000) mine construction
development ¹
costs
At 1 January 2016, net of 572,877 761,592 56,244 1,390,713
accumulated depreciation and
impairment
Additions - - 82,348 82,348
Non-cash reclamation asset - - 19,196 19,196
adjustments
Foreign currency translation 1,441 - - 1,441
adjustments
Disposals/write-downs (137) - - (137)
Depreciation (49,362) (30,005) - (79,367)
Transfers between categories 41,169 60,801 (101,970) -
At 30 June 2016 565,988 792,388 55,818 1,414,194
At 1 January 2016
Cost 1,845,234 1,636,413 56,244 3,537,891
Accumulated depreciation and (1,272,357) (874,821) - (2,147,178)
impairment
Net carrying amount 572,877 761,592 56,244 1,390,713
At 30 June 2016
Cost 1,887,676 1,697,214 55,818 3,640,708
Accumulated depreciation and (1,321,688) (904,826) - (2,226,514)
impairment
Net carrying amount 565,988 792,388 55,818 1,414,194
For the year ended 31 December 2016 Plant and Mineral Assets under Total
(Audited) equipment properties construction
(US$'000) and mine ¹
development
costs
At 1 January 2016, net of 572,877 761,592 56,244 1,390,713
accumulated depreciation and
impairment
Additions - - 191,139 191,139
Non-cash reclamation asset - - 21,955 21,955
adjustments
Foreign currency translation 2,203 - - 2,203
adjustments
Disposals/write-downs (6,533) - - (6,533)
Depreciation (95,864) (60,437) - (156,301)
Transfers between categories 81,310 140,864 (222,174) -
At 31 December 2016 553,993 842,019 47,164 1,443,176
At 1 January 2016
Cost 1,845,234 1,636,413 56,244 3,537,891
Accumulated depreciation and (1,272,357) (874,821) - (2,147,178)
impairment
Net carrying amount 572,877 761,592 56,244 1,390,713
At 31 December 2016
Cost 1,914,522 1,777,277 47,164 3,738,963
Accumulated depreciation and (1,360,529) (935,258) - (2,295,787)
impairment
Net carrying amount 553,993 842,019 47,164 1,443,176
1 Assets under construction represents (a) sustaining capital expenditures
incurred constructing property, plant and equipment related to operating mines
and advance deposits made towards the purchase of property, plant and
equipment; and (b) expansionary expenditure allocated to a project on a
business combination or asset acquisition, and the subsequent costs incurred to
develop the mine. Once these assets are ready for their intended use, the
balance is transferred to plant and equipment and/or mineral properties and
mine development costs.
Leases
Property, plant and equipment includes assets relating to the design and
construction costs of power transmission lines and related infrastructure. At
completion, ownership was transferred to TANESCO in exchange for amortised
repayment in the form of reduced electricity supply charges. No future lease
payment obligations are payable under these finance leases.
Property, plant and equipment also includes five drill rigs purchased under
short-term finance leases.
The following amounts were included in property, plant and equipment where the
Group is a lessee under a finance lease:
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Cost - capitalised finance leases 51,618 51,617 51,617
Accumulated depreciation and (42,050) (36,392) (40,925)
impairment
Net carrying amount 9,568 15,225 10,692
13. Derivative Financial Instruments
The table below analyses financial instruments carried at fair value, by
valuation method. The Group has derivative financial instruments in the form of
economic and cash flow hedging contracts which are all defined as level two
instruments as they are valued using inputs other than quoted prices that are
observable for the assets or liabilities. The following tables present the
group's assets and liabilities that are measured at fair value at 30 June 2017,
30 June 2016 and 31 December 2016.
Assets Liabilities
Current Non-current Current Non-current
(US$'000)
For the six months ended 30 June 2017
(Unaudited)
Interest contracts: Designated as cash 528 611 518 -
flow hedges
Commodity contracts - Fuel: Not designated 73 159 596 1,068
as hedges
Total 601 770 1,114 1,068
Assets Liabilities
Current Non-current Current Non-current
(US$'000)
For the six months ended 30 June 2016
(Unaudited)
Interest contracts: Designated as cash - - 434 320
flow hedges
Currency contracts: Not designated as - - 6,761 -
hedges
Commodity contracts - Fuel: Not designated 9 129 3,778 268
as hedges
Total 9 129 10,973 588
Assets Liabilities
Current Non-current Current Non-current
(US$'000)
For the year ended 31 December 2016
(Audited)
Interest contracts: Designated as 33 255 73 - 215
cash flow hedges
Commodity contracts - Fuel: Not 1,310 566 511 30 1,335
designated as hedges
Total 1,343 821 584 30 1,550
14. Inventories
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Raw materials
Ore in stockpiles 14,041 17,733 8,270
Mine operating supplies 154,859 145,936 143,609
Work in process 10,807 14,632 10,534
Finished products
Gold doré/bullion 7,084 5,424 8,692
Gold, copper and silver concentrate 93,901 11,932 13,208
Total current portion of inventory 280,692 195,657 184,313
Non-current ore in stockpiles¹ 115,775 87,050 98,936
Total 396,467 282,707 283,249
15. Other Current Assets
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$'000) 2017 2016 2016
Other current assets:
Current portion of indirect tax 157,936 50,787 128,423
receivables
Other receivables and advance 32,932 35,443 21,095
payments1
Total 190,868 86,230 149,518
1 Other receivables and advance payments relate to prepayments for insurance
and income taxes offset against outstanding refunds for VAT and fuel levies and
current amounts receivable from the NSSF of US$2.3 million (2016: US$5.0
million).
16. Borrowings
During 2013, a US$142 million facility was put in place to fund the bulk of the
costs of the construction of one of Acacia's key growth projects, the
Bulyanhulu CIL Expansion project ("Project"). The Facility is collateralised by
the Project, has a term of seven years with a spread over Libor of 250 basis
points. In common with borrowing agreements of this nature the facility
includes various covenants as well as a material adverse effect clauses. The
interest rate has been fixed at 3.6% through the use of an interest rate swap.
The 7 year Facility is repayable in equal $14.2 million bi-annual instalments
over the term of the Facility, after a two year repayment holiday period. The
full facility of US$142 million was drawn at the end of 2013. The first
principal payment of US$14.2 million was paid in H2 2015 and regular repayments
have been made each half year. As at 30 June 2017 the balance owing was US$85.2
million (2016: US$99.4 million) all covenants have been complied with. Interest
accrued to the value of US$0.6 million (2016: US$0.6 million) was included in
accounts payable at the end of the period. Interest incurred on the borrowings
as well as hedging losses on the interest rate swap for the period ended 30
June 2017 was US$1.2 million (2016: US$4.0 million).
17. Cash flow - other items
a) Operating cash flows - other items
Movements relating to working capital items
For the six months ended For the
30 June year
ended
31
December
(Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016 2016
Indirect and corporate taxes1 (51,047) (13,015) (59,100)
Increase in current indirect tax receivable (33,747) (3,015) (18,224)
Prepaid corporate tax - (10,000) (20,000)
Income tax paid (17,300) - (20,876)
Other current assets 6,519 4,512 695
Trade receivables 6,931 (5,756) (4,472)
Inventories2 (113,217) (7,770) (8,312)
Other liabilities (7,626) (3,027) 33,582
Share based payments3 (834) 19,635 (35,966)
Trade and other payables4 795 (10,905) 15,931
Other working capital items5 (1,218) 20 (855)
Total (159,697) (16,306) (58,497)
1 During the year, we have made US$17.3 million (US$20 million 2016) corporate
tax provisional payments. This has been funded through an offset against
current indirect taxes that was due for refund.
2 The inventory adjustment includes the movement in current as well as the
non-current portion of inventory.
3 During the year, share based payments of US$0.8 million was made.
4 The trade and other payables adjustment exclude statutory liabilities in the
form of income tax payable.
5 Other working capital items include exchange losses associated with working
capital.
Other non-cash items
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016 2016
Adjustments for non-cash income statement items:
Foreign exchange (gains)/losses 4,734 (1,070) (1,463)
Discounting of indirect tax receivables - (6,508) (9,719)
Provisions settled 2,101 (11) (8)
Unrealised gain on derivatives 2,431 (1,352) (13,031)
Stock option expense 6 49 77
Provisional tax offsets (17,300) - -
Other non-cash items (30) (105) 36
Exchange loss on revaluation of cash balances (151) 45 258
Total (8,209) (8,952) (23,850)
b) Investing cash flows - other items
For the six months ended For the year
30 June ended
31 December
(Unaudited) (Unaudited) (Audited)
(in thousands of United States dollars) 2017 2016 2016
Proceeds on sale of property, plant and - 40 6,713
equipment
Other long-term receivables 29 (125) (10)
Rehabilitation expenditure (250) (110) (175)
18. Commitments and Contingencies
The Group is subject to various laws and regulations which, if not observed,
could give rise to penalties. As at 30 June 2017, the Group has the following
commitments and/ or contingencies.
a) Legal contingencies
As at 30 June 2017, the Group was a defendant in a number of lawsuits. The
plaintiffs are claiming damages and interest thereon for the loss caused by the
Group due to one or more of the following: unlawful eviction, termination of
services and/or, non-payment for services, defamation, negligence by act or
omission in failing to provide a safe working environment, unpaid overtime,
public holiday compensation and various other commercial/project disputes.
The Group's Legal Counsel is defending the Group's current position, and the
outcome of the lawsuits cannot presently be determined. However, in the opinion
of the Directors and Group's Legal Counsel, no material liabilities are
expected to materialise from these lawsuits that have not already been provided
for.
* An adjudication claim for US$115 million by Bismark Hotel Limited relating
to an alleged breach of contract under an Option Agreement signed in 1995.
The claim relates to an application for a prospecting licence with no
attributable reserves, resources or value. We are waiting for the
adjudicators to fix a hearing date. Management are of the opinion that the
claim is without merit and that it will be successfully defended.
* An arbitration award of US$4 million, relating to a historical arbitration
between North Mara Gold Mine Limited (NMGML) and Diamond Motors Limited
(DML) in respect of an alleged breach of contract claim in relation to the
interpretation of periodic rate review requirements and other
provisions of drilling services contracts. NMGML counterclaimed against the
amount and raised a provision of US$6.2 million reflecting the view of
NMGML as to the proper interpretation and application of the rate review
clauses of the contracts. An arbitral tribunal decided in favour of NMGML
on the material grounds of the claim on 10 August 2015, with an award
of US$4 million for unpaid rates to DML for the period up to
September 2013. The Tribunal found that the subsequent period fell to be
determined by negotiation of the parties pursuant to the contractual terms
and should be calculated based on the tribunal's judgment. After the Award
was issued, DML: (i) sought to challenge the Award in the Commercial Court;
and (ii) filed a winding up application against NMGML based on unpaid rates
for 2014 and 2015. NMGML petitioned the High Court to stay the winding up
petition, given that the underlying debt and alleged indebtedness for 2014/
2015 must be determined by arbitration. The stay was rejected on the basis
that winding up procedures cannot be determined by arbitration. This
decision is on appeal. DML recently applied to strike out the appeal on the
basis that the record on appeal was not timely filed. We will be opposing
this application, which may not be heard by the Court of Appeal for some
months. We are currently assessing options available to determine the
amount payable to DML for 2014/2015 in order to reach an agreement on this
and to have all Court proceedings set aside. The hearing for the
application to wind up North Mara has yet to be scheduled. Payment has been
made for the Arbitration award (US$4 million) and we continue to carry a
provision of US$2.2 million as provisioned for the first arbitration.
* A contractual dispute between various Acacia operating companies and
Petrolube/ISA to the value of US$35.1 million. The Acacia entities
terminated contractual supply relationships for: (i) the provision of
hoses, fittings and assembly services to operating entities by ISA on
Notice of 5 July 2016; and (ii) the provision of lubricants and associated
services by Petrolube to operating entities on 5 July 2016, in each case
pursuant to the express termination without cause provisions in the
agreement, and following retendering of relevant services and as a result
of various breaches of contract relating to the provision of Petrolube/ISA
services (including issues relating to reliability of prior supplies and
quality of products) and various other breaches of contract by Petrolube/
ISA. The termination of the Petrolube/ISA contracts resulted in Petrolube
/ ISA commencing proceedings and procedural applications in the High Court
of Tanzania. This was undertaken despite the contracts providing for
arbitration as the principal dispute resolution mechanism. Petrolube /ISA's
ultimate objective was to have the termination of the agreements set aside
on the basis of unlawful termination and to recover various damages limbs,
including loss of profits, and other general damages (US$ 56,080,878.46 -
Petrolube Claim and US$ 24,868,942.64 ISA Claim). We have challenged all
elements of these Court proceedings and have also challenged the
jurisdiction of the Court together with an application for a stay of
proceedings, given that the contracts require all disputes to be referred
to arbitration following principal to principal dispute discussions. We
have also filed petitions to stay these amended plaints (again, on the
basis of the contractual dispute resolution process) and are waiting for
these to be determined. In conjunction with these court proceedings,
however, we have commenced separate arbitration proceedings in accordance
with the dispute resolution procedures under the relevant contracts.
* A claim for compensation against NMGML in relation to the destruction of an
office building and stone crusher machine. The damage to the property was
caused by the Tanzanian Police Force. The claim has been re-filed in the
High Court and awaits scheduling. Management expects to be able to
defend the claim successfully as the damage of the property was caused
by the Tanzanian Police Force; therefore no provision has been made.
b) Tax-related contingencies
The TRA has issued a number of tax assessments to the Group related to past
taxation years from 2002-onwards. The Group believes that the majority of these
assessments are incorrect and has filed objections and appeals accordingly in
an attempt to resolve these matters by means of discussions with the TRA or
through the Tanzanian appeals process. These include the following:
* A TRA assessment of US$21.3 million in respect of Tusker Gold Limited. The
tax assessment is based on the sales price of the Nyanzaga property of
US$71 million multiplied by the tax rate of 30%. Management is of the view
that the assessment is invalid due to the fact that the acquisition is for
Tusker Gold Limited, a company incorporated in Australia. The shareholding
of the Tanzanian related entities did not change and the Tusker Gold
Limited group structure remains the same as prior to the acquisition. The
case was decided in favour of Acacia however the TRA appealed that
decision. The tax tribunal upheld the decision in favour of Acacia however
the TRA has appealed to the Court of Appeal. We are awaiting a hearing date
to be set.
* A TRA assessment to the value of US$41.3 million for withholding tax on
certain historic offshore dividend payments paid by Acacia Mining plc to
its shareholders in 2010 to 2013 arguing that these were sourced from
within Tanzania. Acacia is appealing this assessment on the substantive
grounds that, as an English incorporated company, it is not resident in
Tanzania for taxation purposes. The appeal is currently pending at the
Court of Appeal.
* Further TRA assessments issued to Acacia Mining plc in January 2016 to the
value of US$500.7 million, based on an allegation that Acacia is resident
in Tanzania for corporate and dividend withholding tax purposes. The
corporate tax assessments have been levied on certain Group net profits
before tax. We are in the process of appealing these assessments at the TRA
Board level. Acacia's substantive grounds of appeal are, again, based on
the correct interpretation of Tanzanian permanent establishment principles
and law, relevant to a non-resident English incorporated company.
* In addition, in Q1 2016 we received a judgement from the Court of Appeal
regarding a long standing dispute over tax calculations at Bulyanhulu from
2000-2006. The Court of Appeal was reviewing seven issues initially raised
by the TRA in 2012 regarding certain historic tax loss carry forwards and
ruled in favour of Bulyanhulu by the Tax Appeals Board in 2013. The TRA
appealed against this ruling and in 2014 the Tax Tribunal reversed the
decision for all seven issues. Acacia appealed against this judgement and
in March 2016 the Court of Appeal found in favour of the TRA in five of the
seven issues. The legal route in Tanzania has now been exhausted; however
we are considering our options for the next steps. The Court of Appeal
ruling does not have a short term cash flow impact but means that
Bulyanhulu will be in a tax payable situation approximately one year
earlier than previously expected. Acacia is yet to receive a revised tax
assessment following the judgement, but has raised further tax provisions
of US$69.9 million in order to address the direct impact of the ruling on
Bulyanhulu's tax loss carry forwards and the potential impact this may have
on the applicability of certain capital deductions for other years and our
other mines. The additional tax provisions raised are US$35.1 million
relating to Bulyanhulu, US$30.4 million relating to North Mara and US$4.4
million relating to Tulawaka and were all raised in H1 2016. Total
provisions for uncertain tax positions now amount to US$128 million.
19. Related party balances and transactions
The Group has related party relationships with entities owned or controlled by
Barrick Gold Corporation, which is the ultimate controlling party of the Group.
The Company and its subsidiaries, in the ordinary course of business, enter
into various sales, purchase and service transactions and other professional
services arrangements with others in the Barrick Group. These transactions are
under terms that are on normal commercial terms and conditions. These
transactions are not considered to be significant.
At 30 June 2017 the Group had no loans of a funding nature due to or from
related parties (30 June 2016: zero; 31 December 2016: zero).
ACACIA MINING : 2017 Interim Results
July 21, 2017 at 07:02 am
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