Teranga is a Canadian-based gold company which operates the Sabodala gold mine, the only gold mine and mill in Senegal, and is currently exploring nine exploration permits encompassing approximately 1,055km² of land surrounding the 33km² Sabodala Mine License and the 212km² Oromin Joint Venture Group ("OJVG") Mine License.
The Sabodala gold mine, which came into operation in 2009, is located 650 kilometres southeast of the capital of Senegal, Dakar within the West African Birimian geological belt in Senegal where approximately 11 million ounces of gold resources have been discovered over the past six years, and lies about 90 kilometres from major gold mines in Mali.
With the transformative acquisition of the OJVG, owner of the Golouma Gold Project, as of December 31, 2013, total proven and probable open pit reserves were 2.81 million ounces of gold included in measured and indicated open pit resources of 6.19 million ounces of gold and inferred open pit mineral resources of 2.64 million ounces of gold.
The OJVG Golouma Gold Project encompasses approximately 212.6km² of land in the Tambacounda region of south-eastern Senegal and with the addition of OJVG's 1.45 million ounces of open pit reserves to Teranga's existing mineral reserves, Teranga is expected to reach its growth objective of 250,000 to 350,000 ounces of gold production leveraging off of its existing mill and infrastructure and moving forward on its vision of becoming a pre-eminent gold producer in Senegal.
Teranga means hospitality and friendliness in Wolof, the main local language of Senegal. The Company wanted a name that would reflect its actions and vision of becoming the benchmark for responsible gold mining in the country.
- Produce ~250koz per year at the lowest (best) quartile All-In Sustaining Costs (AISC)
- Leverage existing infrastructure by:
- Optimization of the Sabodala mine plan for grade, ore hardness, trucking distance, and capital requirements
- Optimization of the existing mill
- Incremental growth in production from potential heap leach operations
- Potential further mill expansion
Disciplined Allocation of Capital:
- Only in Senegal and only gold
- Only commit capital to new projects which provide quick payback and have an IRR greater than our risk adjusted cost of capital
Acquisition of the Oromin Joint Venture Group (OJVG)
On October 4, 2013, the Company completed the acquisition of all of the issued and outstanding common shares of Oromin Explorations Ltd. ("Oromin") that it did not already own (Oromin being one of the three joint venture partners holding 43.5% of the OJVG).
In total, the Company issued 71,183,091 Teranga shares to acquire all of the Oromin shares for net consideration of $37.8 million, including the fair value of Oromin stock options replaced by 7,911,600 Teranga stock options. As a result, Teranga’s total number of issued and outstanding shares increased to 316,801,091.
On January 15, 2014, the Company completed the transaction announced on December 12, 2013 to acquire the balance of the OJVG that it did not already own. The Company acquired Bendon’s 43.5% participating stake in the OJVG for $105.0 million financed through a stream transaction with Franco-Nevada. The stream agreement requires Teranga to deliver 22,500 ounces annually over the first six years followed by 6% of production thereafter. Franco-Nevada’s purchase price per ounce is set at 20% of the spot price of gold.
The Company also acquired Badr’s 13% carried interest for $7.5 million and further contingent consideration based on higher realized gold prices and increases to OJVG reserves through 2020.
The acquisition of Bendon and Badr’s interests in the OJVG increases Teranga’s ownership to 100% and consolidates the Sabodala region, increasing the size of Teranga’s interests in mine license from 33km2 to 241km2 and more than doubling the Company’s reserve base after taking into account the 1.45 million of probable open pit reserves of the OJVG identified in its NI 43-101 Technical Report.
 See the OJVG Golouma Gold Project – Updated Feasibility Report, January 31, 2013, available at www.sedar.com.
Oromin Technical Integration:
The acquisition of Oromin in August 2013 provided access to the OJVG technical data. Since then, management has been evaluating and integrating the geological and technical databases to develop updated resources and reserves to establish a combined life of mine (LOM) plan that will be supported by a NI 43-101 compliant technical report, targeted for March 2014.
The ongoing technical work for the OJVG integrated mine plan has included:
A comprehensive review of the Golouma, Masato and Kerekounda ore bodies including re-logging and re-assay of key drill intercepts, QA/QC checks and detailed interpretation to update these resource models;
Economic Lerchs-Grossman (LG) pit optimization and detailed pit designs to reflect the current gold price;
Preliminary Life of Mine (LOM) mine planning schedules for optimized cash flow analysis, detailed dilution analysis, pit designs, mine operating and capital estimates;
An updated tailings deposition and water balance model;
Ongoing analysis of the metallurgical test results for ore characterization studies of select areas within the Masato and Golouma ore bodies to increase understanding from Feasibility Study level and optimize feed and gold recovery to the Sabodala mill; and
Environmental and social impact reviews for a reduced footprint using the Sabodala operations.
In addition to development of an integrated LOM, the OJVG technical team was engaged with the Teranga technical teams both at site in Senegal and the corporate offices.
Agreement with the Republic of Senegal
The Company signed a definitive global agreement (“Agreement”) with the Republic of Senegal in late May 2013, which was the execution of the long-term comprehensive Agreement in Principle signed in April with the Republic of Senegal. The Agreement includes amendments to the Company's 90 percent held Sabodala Mining Convention, certain of its exploration permits, and also includes a financial settlement agreement that addresses most of the outstanding tax assessments (associated with the years 2007 through 2010) as well as future royalty and other payments to the Republic of Senegal. Collectively, the definitive documentation constitutes a global agreement that sets out a predictable and stable fiscal operating environment for the Company's future investment in exploration, acquisitions and development to increase reserves and production in Senegal.
The Republic of Senegal has agreed to support the Company in its plan for further development, notably:
- Setting a price and formula to allow for the acquisition of the Republic's additional participation option on deposits not on the Company's Mine License and to incorporate these into the Company's existing Mining Convention and fiscal regime;
- Supporting drilling of the Niakafiri deposit on the Mine License;
- Extending the term of our renewable Mine License by five years to 2022 and extending five key exploration licences by a further 18 months beyond current expiry periods;
- Working with the Company to ensure full access to exploration targets currently occupied by artisanal miners; and
- Resolving the Special Contribution Tax of 5% by increasing the royalty rate from 3 to 5%, and prepaying dividends, that are otherwise payable under our mining convention, based on expected performance over the period 2013 to 2015.
The Company has agreed to the following:
- To increase the royalty rate on sales from 3% to 5% effective January 1, 2013;
- During the second quarter of 2013, the Company made a payment of $2.7 million related to accrued dividends to the Republic of Senegal in respect of its existing 10% minority interest. A payment of $2.7 million will be required once drilling activities recommence at Niakafiri. The Company has also agreed to advance a further $8.0 million of accrued dividends to be paid in 2014 and 2015, based on a gold price of $1,600 per ounce.
- The Company is required to make a payment of approximately $4.2 million related to the waiver of the right for the Republic of Senegal to acquire an additional interest in the Gora project. The payment is expected to be made upon receipt of all required approvals authorizing the processing of all ore through the Sabodala plant.
- The Company has agreed to establish a social development fund targeted at $15.0 million, payable to the Republic of Senegal at the end of the mine life.
The senior corporate, exploration and operating team have explored, discovered, built and operated gold mines in Africa, as well as North and South America and Australia for several large mining companies. Together this team brings the necessary experience, values and ethics to successfully achieve its goal: to create value for all its stakeholders through responsible mining.
Senegal passed a new Mining Code in late 2003. Since that time it has become clear that with the discoveries already made in such a short time – over 11 million ounces of gold resources – the West African Birimian geological belt in Senegal is developing into a world-class gold district for which Teranga holds a significant land position on the belt.
The Company currently has 9 exploration permits encompassing approximately 1,055km² of land surrounding the Sabodala Mine License.
Teranga continues to methodically explore the large Regional Land Package (RLP) and is in the process of systematically building a pipeline of prospects. Unlike other West African nations, Senegal is a relative newcomer to gold mining and exploration and the Company looks forward to discovering world-class deposits and establishing Senegal as a regional mining leader.
Teranga Gold Corporation is listed on the Toronto Stock Exchange (TSX:TGZ) and the Australian Securities Exchange (ASX:TGZ) .