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Teranga Gold Corporation: March Quarter Report

May 10, 2012

TORONTO, ONTARIO--(Marketwire - May 10, 2012) - Teranga Gold Corporation (TSX:TGZ)(ASX:TGZ)

For a full explanation of Operating, Financial and Exploration results please see the Interim Condensed Consolidated Financial Statements and Management's Discussion & Analysis at terangagold2014.q4web.com.

Operating Highlights

Teranga achieved record first quarter production of 41,904 ounces of gold at a total cash cost of $673 per ounce sold.

New mill and downstream plant commissioned in late April 2012 - balance of facilities expected to be completed by end of second quarter.

Exploration at the Sabodala Pit continues to confirm the potential for an expanded pit to the north and to depth - Recent drill results reveal 43 metres at 2.4 gpt and 17 metres at 1.8 gpt within the same hole.

  • Gold production for the first quarter was 41,904 ounces, 22 percent higher than the same quarter of 2011. The increase in production was mainly due to higher grade ore stockpiled at the end of December 2011 and processed in the first quarter of 2012.
      
  • Gold sold for the quarter totaled 35,268 ounces at a total cash cost of $673 per ounce sold compared to 39,490 ounces sold at a total cash cost of $639 per ounce in the same period last year. At the end of the quarter, gold in circuit and gold bullion inventory increased to 13,262 ounces, an increase of 7,000 ounces over year-end balance.

  • The new mill and downstream processing plant were commissioned in late April. All that remains is the completion of a secondary crusher and new stockpile/reclaim facilities scheduled for the end of the second quarter 2012, which will bring the mills to full capacity.

  • Total tonnes mined for the quarter were 7 percent higher compared to the same period last year due to improved productivity and efficiency in the mining operation.

  • Total tonnes milled were 6 percent lower than the year earlier period due to harder ore processed.
      
  • The Company expects similar production in the second quarter and reiterates its guidance for the year of 210,000-225,000 ounces at cash costs between $600-$650/oz.(1)   


(1)This production target is based on existing proven and probable reserves only.


"With the Mill expansion complete at the end of the second quarter, we will see a significant increase in production and reduction in our cash costs per ounce. I am particularly encouraged by the continued high grades and significant widths of mineralization seen in our recent drill results on the Mine License which we are optimistic can double our gold inventory on the Mine License alone and without the need for permitting will be additive to our production profile," said Alan R. Hill , Chairman and CEO.

Exploration at the Sabodala Pit continues to confirm the potential for an expanded pit to the north and to depth - Recent drill results reveal 43 metres at 2.4 gpt and 17 metres at 1.8 gpt within the same hole.

  • The aggressive investment in drilling during 2011 has resulted in significant advances in understanding the structural controls on gold mineralization on the Mine License ("ML"). During the first quarter, Reverse Circulation ("RC") and Diamond drilling ("DD") on the ML totalled 25,000 metres at cost of $7.1 million.

  • On the ML, a minimum of 8 drill rigs are expected to be testing targets at an estimated cost of $20 million in 2012. There are 10 drills operating at the present time (8 DD and 2 RC). Pending rig availability this number may be maintained in order to expedite reserve definition drilling and resource expansion in 2012.
      
  • There are currently 40 drill targets that have been identified on the Company's 1,465km² Regional Land Package ("RLP"), all within trucking distance of the mill. All 40 targets are expected to be drill tested in 2012-2013. A further 20 targets have been evaluated with surface sampling or trenching.
      
  • During the first quarter, the Company completed approximately 31,500 metres of Rotary Air Blast ("RAB") drilling, 26,000 metres of RC and 2,400 metres of DD drilling on the RLP.
       
  • There were 4 drill rigs on the RLP during the first quarter. RC drilling during the quarter focused on Tourokhoto, Saiensoutou, Jam, KB and testing of IP anomalies at Gora. In addition, several RAB programs where completed. RLP exploration expenditures for the first quarter totalled $8.5 million (including $1.6 million for Gora). The exploration budget for the Regional Exploration Program is estimated at $20 million for 2012.
Financial highlights
(US$000's) 3 months ended

March 31, 2012
3 months ended

March 31, 2011
Restated 1
Revenue 60,526 55,067
Cost of sales (31,905 ) (35,638 )
Gross profit 28,621 19,429
Other income 8 266
Share based compensation (1,755 ) (3,925 )
Finance costs (938 ) (929 )
Exploration and evaluation expenditures (7,176 ) (3,029 )
Administration expenses (3,349 ) (2,768 )
Net foreign exchange losses (369 ) (204 )
Realized and unrealized losses on gold hedge contracts (17,483 ) (2,704 )
Realized and unrealized gains on oil hedge contracts 615 2,043
(Loss)/Profit before tax (1,826 ) 8,179
Income tax - (12 )
(Loss)/Profit for the period (1,826 ) 8,167
Profit attributable to non-controlling interest 957 1,710
(Loss)/Profit attributable to shareholders of Teranga (2,783 ) 6,457
(1) The three months ended March 31, 2011 were restated to comply with the Company' new accounting policy for measuring and recording ore stockpile costs and calculation of units of production depreciation. The Company has also changed the presentation of the realized gains and losses on the gold and oil hedge contracts which are now classified below gross profit instead of disclosing it as part of the revenue and cost of sales.


Loss for the Period

First quarter loss was $1.8 million, compared to a profit of $8.2 million for the same quarter of 2011. The decrease in profit was due to the impact of unrealized gold hedge losses, partially offset by an increase in gross profit due to higher revenues and lower cost of sales.

Revenue

Gold revenue in the first quarter totaled $60.5 million, an increase of 10 percent or $5.5 million, compared to the same period last year. The increase was due to higher realized gold prices by 23 percent, partially offset by fewer ounces sold.

Cost of Sales
3 months ended 3 months ended
March 31, 2012 March 31, 2011
Mine production costs 32,571 24,913
Depreciation and amortization 8,946 10,506
Royalties 1,822 1,582
Rehabilitation 4 139
Inventory movements (11,438 ) (1,502 )
Total cost of sales 31,905 35,638

Cost of sales for the first quarter were $31.9 million compared to $35.6 million for the same quarter of 2011. Lower cost of sales were due to fewer ounces sold, partially offset by higher mining and processing costs.

Mine production costs totaled $32.6 million for the first quarter compared to $25 million for the same prior year period. Mine production costs increased due to higher tonnes mined as well as higher fuel, labour, reagents and blasting costs due to transitioning to a new explosives contractor in the year earlier quarter.

Depreciation and amortization for the first quarter totaled $8.9 million or $254 per ounce sold in comparison with $10.5 million or $266 per ounce sold for the same period last year. The decrease is due to fewer ounces sold in the 2012 quarter compared to the year earlier period. Depreciation and amortization expense for the remainder of 2012 is expected to decrease to approximately $200 per ounce sold due to the increase in production with the completion of the mill expansion.

Royalties for the first three months of 2012 increased to $1.8 million compared to $1.6 million in the same quarter of 2011 due to higher gold spot prices, partially offset by fewer ounces sold. Royalties are calculated based on three percent of the average spot price of gold rather than the average price realized by the Company.

Administrative Expenses

Administrative expenses for the first quarter totaled $3.3 million comparing to $2.8 million in the same prior year period. The increase in administrative expenses was due to higher employee costs, higher legal fees and costs relating to Dakar office which was established in the second quarter of 2011. Administration expense, which includes costs of the corporate and Dakar offices as well as community and social responsibility expenses are expected to total approximately $3.5 million per quarter or $14 million for 2012.

Share Based Compensation

During the first quarter a total of 1,870,000 common share options were granted to directors and employees and 278,888 share options were cancelled due to employee terminations during the same period. During the three months ended March 31, 2011 a total of 725,000 common share options were granted to employees and consultants of the Company and a total of 160,000 options were cancelled. No share options were exercised during the three months ended March 31, 2012 or 2011.

Realized and Unrealized Loss on Gold Hedge Contracts

The realized and unrealized loss on gold hedge contracts totaled $17.5 million for the first quarter compared to $2.7 million for the same prior year period. The increase in realized and unrealized losses is due to an increase in the spot price of gold from December 31, 2011 of $103 per ounce of gold. The total mark-to-market loss of the remaining 174,500 ounces of gold under gold hedge contracts recorded as a financial derivative liability increased to $147 million at quarter end as the average forward price of the remaining contracts at $826 per ounce is marked to the quarter end spot price of $1,669 per ounce.

Realized and Unrealized Gain on Oil Hedge Contracts

The realized and unrealized gain on oil hedge contracts totaled $0.6 million for the first quarter compared to $2 million for the same quarter of 2011. The higher realized and unrealized gain on oil hedge contracts is due to a decrease in financial derivative asset from the settlement of 80,000 barrels in the previous year.

The Company's oil hedge contracts are based on West Texas Intermediate spot oil prices; however site fuel costs are based on Brent crude spot oil prices. During 2011 and continuing into the first quarter of 2012, a historic gap in spot prices developed between the two exchanges, resulting in our oil hedges being less effective. The difference in the average spot prices of $15.4 per barrel for the first quarter of 2012 negatively impacted our cash cost per ounce.

Exploration and Evaluation Expenditures

Exploration and evaluation expenditures totaled $7.2 million for the first quarter of 2012 compared to $3 million in the same period last year reflecting regional exploration costs incurred during the period related to drill programs as well as target identification work underway. Exploration and evaluation expenditures for 2012 are expected to total approximately $20 million.

Review of Operating Results
Key Statistics 3 months ended

March 31, 2012
3 months ended

March 31, 2011
Restated (2)
Operating results
Ore mined ('000t ) 1,117 491
Waste mined ('000t ) 6,316 6,460
Total mined ('000t ) 7,433 6,951
Strip ratio waste/ore 5.7 13.2
Ore milled ('000t ) 573 608
Head grade (g/t ) 2.52 1.93
Recovery rate % 90.0 89.8
Gold produced (1) (oz ) 41,904 34,296
Gold sold (oz ) 35,268 39,490
Average price received $/oz 1,712 1,199
Total cash cost (incl. royalties) $/oz sold 673 639
Mining (cost/t mined) 2.5 1.7
Milling (cost/t milled) 17.2 15.3
G&A (cost/t milled) 5.6 4.7
Note (1) : Gold produced is change in gold in circuit inventory plus gold recovered during the period.
Note (2): Total cash costs per ounce sold for 3 months ended March 31, 2011 were restated to comply with the Company's new accounting policy for measuring and recording ore stockpile costs, as well as reporting total cash costs after inventory movement, in line with the Company's accounting policies and with industry standards.


Mining

Total tonnes mined for the first quarter were 7 percent higher compared to the same quarter of 2011 due to improved productivity and efficiency in the mining operation. Drilling and loading availabilities benefited from the addition of three new blast hole drill rigs and the use of two new haul trucks which arrived for the development of Gora but are being utilized in the pit prior to the commencement of Gora. The implementation of better maintenance practices resulted in improved loading and hauling efficiencies due to improved availability of the mobile equipment fleet.

Unit mining costs for the first quarter were on plan but higher compared to the same quarter of 2011 mainly due to higher fuel, blasting and labour costs during the period. The blasting costs were higher due to transitioning to a new explosives contractor in March 2011.

Milling

Mill throughput for the first quarter was 6 percent lower than the same quarter of 2011 mainly due to harder ore in 2012 compared to softer material that was available during the first quarter of 2011.

Unit processing costs for the first quarter were 13 percent higher compared to the same quarter of 2011 but lower than plan due to higher than budgeted throughput. The increase in unit processing costs over the same period last year reflects the impact of higher reagent costs as well as lower throughput rates.

General and Administration

General and administration costs of $3.2 million for the first quarter are similar to the same period last year.

NON-IFRS FINANCIAL MEASURES

The Company provides some non-IFRS measures as supplementary information that management believes may be useful to investors to explain Teranga's financial results.

3 months ended

March 31, 2012
3 months ended

March 31, 2011
Restated
Gold produced oz 41,904 34,296
Gold sold oz 35,268 39,490
Cost of sales ($'000 ) 31,905 35,638
Less: depreciation and amortization ($'000 ) (8,946 ) (10,506 )
Less: realized oil hedge gain ($'000 ) (661 ) (490 )
Add: non-cash inventory movement ($'000 ) 1,460 201
Less: other adjustments ($'000 ) (37 ) 376
Total cash cost of sales ($'000 ) 23,721 25,219
Total cash cost of sales per ounce sold U.S.$/oz 673 639

Total Cash Costs

Total cash costs for the first quarter of 2012 were $23.7 million compared to $25.2 million in the same quarter last year. Total cash costs were $673 per ounce sold in the first quarter, up 5 percent compared to $639 per ounce in the first quarter 2011. The increase in cash cost per ounce sold is due to higher operating costs and fewer ounces sold.

Outlook

With the completion of the Sabodala mill expansion, production for 2012 is expected to increase to between 210,000 to 225,000 ounces, an increase of 65 percent over 2011, while the total cash cost per ounce sold is expected to decline to between $600 to $650 per ounce in line with previous guidance. This production target is based on proven and probable reserves only.

The regional exploration budget for calendar 2012 is expected to total approximately $20 million. In total, between capitalized mine site exploration and regional exploration expenditures, the Company expects to spend approximately $40 million in calendar 2012.

Capital expenditures for 2012 are expected to total approximately $30 million, primarily for the completion of the mill expansion and additional mining equipment. In addition, $20 million has been budgeted for capitalized ML exploration costs.

Liquidity and Capital Resources

At March 31, 2012, the Company had cash and cash equivalents including restricted cash of $14.8 million. Management believes that the cash and cash equivalents on hand, together with expected future cash flows from operations and our ability to modify hedge deliveries as required from time to time, is sufficient to support the Company's minimum liquidity requirements. To provide additional financial flexibility, the Company reached an agreement with Macquarie Bank Limited to defer 28,000 ounces that were due for delivery in February until later in the year. In addition, in April the Company modified the hedge delivery contract dates in 2012 to match the anticipated production schedule while maintaining the original amount of ounces to be delivered during 2012 of 108,500 ounces. As a result, the yearend balance of ounces under contract is expected to decline to 66,000 ounces.

The deferral of scheduled first quarter deliveries into hedge contracts allowed the Company to sell all of its first quarter gold production at higher spot gold prices, allowing the Company to rebuild its cash balance. Once the mill expansion is complete and fully commissioned, the production rate is expected to rise and cash costs of production are expected to fall improving cash margins. The improved cash margins combined with expected higher production should allow the Company to increase its cash balance through the year.

However, the Company also continues to evaluate its capital structure and, in order to provide more operating flexibility, and to potentially fund capital expenditures, it is considering the merits of potentially raising some debt. Such incurrence of debt may be in the form of one or more borrowings of bank or other similar loans, or one or more issuances of debt in the capital markets. There can, however, be no assurance that the Company will be successful in raising debt on terms it consider reasonable.

The Company's total planned capital expenditures for the calendar 2012, with a focus on completion of the plant expansion at the Sabodala mine site, capitalized exploration costs, as well as construction of the new tailings disposal facility, are expected to total $50 million, with approximately $25 million to be spent for the remainder of the year.

Plant Expansion

The new mill and downstream processing plant were commissioned in late April. All that remains is the completion of a secondary crusher and new stockpile/reclaim facilities scheduled for the end of the second quarter 2012, which will bring the mills to full capacity.

Mine License Exploration

Highlights of drilling during the first quarter on the ML include the intersections of significant widths of high grade mineralization outside the Sabodala ultimate pit limit as part of the Main Flat Extension drill program which is expected to lead to an expansion of the final pit design and increased reserves. Results also included continued intersection and extension of the Masato deposit down dip 300 metres onto the ML and 1,600 metres along strike with potentially underground mineable high-grade ore, as well as extension of the Main Flat down dip to the west on southern sections at Sabodala.

The aggressive investment in drilling during 2011 has resulted in significant advances in understanding the structural controls on gold mineralization on the ML. During the first quarter of 2012, Reverse Circulation ("RC") and Diamond drilling ("DD") on the ML totalled 25,000 metres at cost of $7.1 million. A minimum of 8 drill rigs are expected to be testing targets at an estimated cost of $20 million in 2012. There are 10 drills operating on the ML at the present time (8 DD and 2 RC). Pending rig availability this number may be maintained in order to expedite reserve definition drilling and resource expansion in 2012.

Main Flat Extension ("MFE")

The MFE is one of the principal gold hosts in the Sabodala deposit.

Drilling targeting the MFE immediately adjacent to the current ultimate pit, as well as the Lower Flat Zone ("LFZ") located below and to the north of the MFE, confirms the continuation of the mineralized zone with further drilling planned. The MFE and LFZ remain open down plunge and to the northwest.

The drill program for the MFE for 2012 is designed to convert inferred resources north of the current ultimate pit to reserves; extend the MFE zone measured and indicated resource down dip to the west; additional deep drilling is required to develop the LFZ minable resource to depth; test for extensions of the LFZ to the east; and test for parallel zones beneath the Sabodala pit.

The goal of the MFE/LFZ programs is to add 500,000 to 1,000,000 ounces of gold to the open pit mineable gold inventory at an average grade between 1.5 - 2.0 gpt by mid-year 2013.(2)

During the first quarter, 9,500 metres of drilling were completed at Sabodala primarily on the MFE but also testing down dip potential of the Main Flat to the west of the current ultimate pit limit; both areas have returned good results.

The latest results from March quarter 2012 include:
Hole ID From (metres) Intersection**
SBDH158D* 325 metres 12 m @ 7.5 g/t
SBDH159D 141 metres 14 m @ 3.5 g/t
SBDH161D* 365 metres 29 m @ 3.6 g/t
SBDH162D 353 metres 11 m @ 4.2 g/t
SBDH163* 64 metres 7 m @ 2.9 g/t
123 metres 43 m @ 1.8 g/t
177 metres 19 m @ 2.5 g/t
SBDH219DD 544 metres 17 m @ 3.1 g/t
SBDH222 384 metres 25 m @ 2.0 g/t
457 metres 17 m @ 2.3 g/t
SBDH172* 255 metres 29 m @ 1.4 g/t
SBDH241 119 metres 43 m @ 2.4 g/t
* Previously released
**True widths to be determined

(2) This "exploration target" is not a Mineral Resource. While management has confidence in its projections based on exploration work done to date, the potential quantity and grade disclosed herein is conceptual in nature, and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will results in the determination of a Mineral Resource.

Corridor and Ayoub's Target Area

Drilling along the Corridor northeast of the Sabodala pit intersected mineralization along the Ayoub's portion of the target area. The system, although low grade, is continuous and shows Sabodala style alteration. The position of the Ayoub's mineralization in the Corridor lends itself to sharing stripping for including deeper MFE mineralization into the ultimate pit. In the first quarter of 2012 4,800 metres of drilling was completed, while no additional drilling is currently planned.

Masato

Drilling in 2011 confirmed a mineralized strike length of 500 metres and a dip extent of 200 metres on the ML. In the first quarter of 2012 the deposit extents have been expanded to 300 metres down dip and a strike length of 1,600 metres. The Masato deposit remains open to depth and along strike and is currently being tested in both directions by one drill.

The objectives for Masato for 2012 include in-filling the 200 metre by 500 metre zone identified in the first pass 2011 drill program in preparation for a resource estimate, further definition drilling on the high-grade pod of gold mineralization located on the north end of the deposit, as well as to locate the southern extension of Masato that strikes towards the ML. In the first quarter, 10,000 metres of drilling were completed. Assays are presently being compiled and geologic interpretation is in progress. Management expects that continued positive drilling results will lead to the defining of a resource at Masato on the ML in 2012.

Niakafiri

A drill program is planned at the Niakafiri deposit immediately below the current open pit reserve where the deposit remains open at depth. Drilling is planned to begin in the second half of 2012 pending community discussions. Expectations are to increase reserves and resources in 2012.

Niakafiri West and Soukhoto

A significant drill program is also planned across the Niakafiri West and Soukhoto deposits to both in-fill and extend the current resources that are separated by 500 metres of undrilled strike length. Gold mineralization in both deposits is hosted in multiple shallow dipping zones with more steeply dipping high-grade zones located in crossing structures. The drill program is expected to run throughout 2012 with a resource updated expected at year end. Soukhoto drilling is scheduled to begin in the second quarter.

Dinkokhono

In the first quarter, Dinkokhono, located 1 kilometre north of the Niakafiri deposit and 1 kilometre south of the Sambaya Hill anomaly on the Niakafiri shear system, received 600 metres of drilling. Previous drilling identified low-grade mineralization within the Niakafiri shear from surface to a depth of 100 metres. Re-interpretation of the Dinkokhono structural controls on gold mineralization and the discovery of the Mamasato deposit on the neighbouring property less than 1 km to the east have contributed to a new approach to drilling this target. The program is expected to test for north-west and north-east high-grade crossing structures in known mineralized zones and is intended to test for the extension of the Mamasato deposit onto the ML. Pending results and given the total meterage already drilled historically, management believes that this program could potentially add resources in the third quarter of 2012 and possibly to open pit mineable reserves at year end.

Regional Exploration

There are currently 40 drill targets that have been identified on the Company's 1,465km² Regional Land Package ("RLP"), all within trucking distance of the mill. All 40 targets are expected to be drill tested in 2012-2013. A further 20 targets have been evaluated with surface sampling or trenching.

During the first quarter, the Company completed approximately 31,500 metres of Rotary Air Blast ("RAB") drilling, 26,000 metres of RC and 2,400 metres of DD drilling. There were 4 drill rigs on the RLP during the first quarter. RC drilling during the quarter focused on Tourokhoto, Saiensoutou, Jam, KB and testing of IP anomalies at Gora. In addition, several RAB programs where completed. RLP exploration expenditures for the first quarter totalled $8.5 million (including $1.6 million for Gora). The exploration budget for the Regional Exploration Program is estimated at $20 million for 2012.

For full drill results from our regional exploration program please see the Company's website.

Gora

During the first quarter of 2012, exploration drilling in the Gora project area was limited to 14 RC-holes for 2,100 metres, which were part of a scout drill testing program of various anomalies identified from an earlier IP survey. No significant intersections where returned from this program.

Diadiako

The north-east extension of the mineralised trend was mapped out by a program of RAB drilling during the last quarter of 2011. This trend was tested by a program of fifteen RC holes for a total of 2,800 metres. The program identified a continuation of the structural system drilled during 2011 with albite-silica-pyrite alteration in mafic rock. The best gold intersections (cut off >0.2 g/t Au, Aqua Regia Digest/AAS finish) from this program were:

Hole ID From (metres) Intersection*
BSRC070 95 metres 1 m @ 1.9 g/t
BSRC072 66 metres 5 m @ 0.8 g/t
BSRC074 152 metres 1 m @ 1.0 g/t
*True widths to be determined

Toumboumba (Sabodala NW)

Toumboumba is a shear vein system hosted in the Falombou granite and has potential for a small, shallow, oxide deposit, located 10km to the north-west of the Sabodala mill. The prospect consists of 18 close north-south to north, north-east trending gold anomalous zones identified from RAB drilling during 2011.

Interpretation and geological modelling during the first quarter 2012 outlined potential for a modest, near surface oxide deposit on the main Toumboumba mineralised zone. In April 2012, a program of 10,000 metres of RC drilling on a nominal 25 metre by 25 metre grid pattern commenced. This program will evaluate the resource on the main south-western mineralized zone. The drilling to date has confirmed the presence of a shallow east dipping system of stacked veins and alteration zones hosted within the Falombou granite. High grade mineralised intervals are well correlated to quartz veins, within envelopes of silica-albite-hematite-pyrite alteration. Numerous high grade mineralized intersections have been obtained. Grades of up to 4 metres at 33.9 grams per tonne ("gpt") gold have been encountered in some holes. The Company is encouraged by these latest results and is looking forward to advancing this prospect.

Majiva Central/North (Makana Permit)

RC and DD drilling during 2011 identified three areas of mineralisation on the southern continuation of the same structure that hosts the Masato deposit to the north. These are referred to as Majiva Advanced Targets 1 to 3. At Advanced Target 1, 3D modelling and sectional volume estimates at a 0.2 gpt gold cut-off allowed the definition of an inferred resource of 45,000 ounces at a grade of 0.6 gpt gold. The mineralisation is similar to that encountered at Masato and Niakafiri, consisting of carbonate-sericite-fuchsite-quartz-pyrite altered, sheared mafic volcanic. Better grades are developed in areas of higher quartz vein content.

Tourokhoto

An RC program at Tourokhoto was completed during the first quarter 2012. A total of 50 holes for 10,000 metres were completed during this period. The results received confirmed several zones of sub-parallel mineralisation with results of up to 2 metres at 4.5 gpt gold and wider zones at lower grade. A large number of samples are still pending analysis.

Saiensoutou

A program of 14 RC holes for a total of 2,800 metres were completed over the southern portion of this prospect. The best results obtained were:

Hole ID From (metres) Intersection*
SARC0006 49 metres 9 m @ 1.5 g/t
SARC0001 42 metres 8 m @ 0.7 g/t
*True widths to be determined

The northern part of the anomaly will undergo additional RAB drilling to better define the gold bearing structures responsible for the two kilometre trend of surface gold anomalism. This will likely lead to a second RC program later in 2012.

Diegoun North ("the Donut")

Cinnamon

A program of 14 RC holes for 2,500 metres were completed testing gold anomalies identified in the bedrock by previous RAB drilling. Only some of the samples have been assayed, with one hole returning encouraging results at the >0.2 gpt gold level:

Hole ID From (metres) Intersection*
DBRC0227 1 metre 5 m @ 0.6 g/t
13 metres 10 m @ 0.3 g/t
101 metres 10 m @ 0.5 g/t
115 metres 8 m @ 1.9 g/t
*True widths to be determined

The remainder of the results are expected to become available during the coming quarter.

Jam

A further 14 RC holes for 2,700 metres and nine DD holes for 2,100 metres were completed at Jam. This program was designed to test two north-west trending structures defined in this area as well as follow up on previous anomalous RC holes with hole orientations at different angles.

The intersections relate to albite-carbonate-silica-pyrite altered felsic intrusive rocks and it is evident from the work completed to date that the Jam area is a large scale, gold-bearing, hydrothermal alteration system.

An additional 13,000 metres of RAB drilling have been completed in the Jam area. This work was designed to complete coverage over the main north east trending structural trends between Cinnamon and Jam (JC corridor) and on a second grid with north-east south-west oriented lines, to better evaluate the presence of mineralisation on north-west trends. The Company awaits final assay results for all drilling to date, to define the next step in the program.

KB

Also on the Sounkounkou permit, 8 RC holes were drilled for 1,200 metres to complete the first pass testing of the gold mineralised structure defined by RAB and trenching along the contact of a sheared gabbro and metasediments. Assays from this program are pending.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME / LOSS
For the three months ended March 31, 2012 and 2011
(Unaudited and in US$'000 except per share amounts)
3 months ended 3 months ended
March 31, 2012 March 31, 2011
Restated
Revenue 60,526 55,067
Cost of sales (31,905 ) (35,638 )
Gross profit 28,621 19,429
Other income 8 266
Share based compensation (1,755 ) (3,925 )
Finance costs (938 ) (929 )
Exploration and evaluation expenditures (7,176 ) (3,029 )
Administration expenses (3,349 ) (2,768 )
Net foreign exchange losses (369 ) (204 )
Realized and unrealized losses on gold hedge contracts (17,483 ) (2,704 )
Realized and unrealized gains on oil hedge contracts 615 2,043
(30,447 ) (11,250 )
(Loss)/profit before income tax (1,826 ) 8,179
Income tax expense - (12 )
(Loss)/profit for the period (1,826 ) 8,167
(Loss)/profit attributable to:
Shareholders (2,783 ) 6,457
Non-controlling interests 957 1,710
(Loss)/profit for the period (1,826 ) 8,167
Other comprehensive (loss)/income:
Exchange differences arising on translation of Teranga
corporate entity (63 ) 2,449
Change in fair value of available for sale financial asset, net of
tax (3,927 ) 1,538
Other comprehensive (loss)/income for the period (3,990 ) 3,987
Total comprehensive (loss)/income for the period (5,816 ) 12,154
Total comprehensive (loss)/income attributable to:
Shareholders (6,773 ) 10,444
Non-controlling interests 957 1,710
Total comprehensive (loss)/income for the period (5,816 ) 12,154
(Loss)/earnings per share from operations attributable
to the shareholders of the Company during the period
- basic (loss)/earnings per share (0.01 ) 0.03
- diluted (loss)/earnings per share (0.01 ) 0.03
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF FINANCIAL POSITION
As at March 31, 2012 and December 31, 2011
(Unaudited and in US$'000)
March 31, 2012 December 31, 2011
Restated
Current assets
Cash and cash equivalents 11,429 7,470
Short-term investments - 593
Restricted cash 3,352 3,004
Trade and other receivables 10,995 20,447
Inventories 53,692 48,365
Financial derivative assets 2,773 2,288
Other assets 3,403 12,751
Available for sale financial assets 16,313 19,800
Total current assets 101,957 114,718
Non-current assets
Inventories 40,320 31,942
Financial derivative assets - 532
Property, plant and equipment 255,085 238,510
Mine development expenditure 96,675 89,825
Intangible assets 940 1,085
Total non-current assets 393,020 361,894
Total assets 494,977 476,612
Current liabilities
Trade and other payables 47,838 43,238
Borrowings 18,215 16,468
Financial derivative liabilities 111,122 79,241
Provisions 1,996 1,954
Total current liabilities 179,171 140,901
Non-current liabilities
Financial derivative liabilities 35,920 50,318
Provisions 9,347 9,215
Borrowings 5,931 7,509
Total non-current liabilities 51,198 67,042
Total liabilities 230,369 207,943
Equity
Issued capital 305,412 305,412
Foreign currency translation reserve (998 ) (935 )
Equity-settled share based compensation reserve 14,354 12,599
Investment revaluation reserve (5,246 ) (1,319 )
Accumulated losses (46,158 ) (43,375 )
Equity attributable to shareholders 267,364 272,382
Non-controlling interests (2,756 ) (3,713 )
Total equity 264,608 268,669
Total equity and liabilities 494,977 476,612
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CHANGES IN EQUITY
For the months ended 2012 and 2011
(Unaudited and in US$'000)
3 months ended 3 months ended
March 31, 2012 March 31, 2011
Restated
Issued capital
At January 1 305,412 305,502
At March 31 305,412 305,502
Foreign currency translation reserve
At January 1 (935 ) 1,011
Exchange difference arising on translation of Teranga corporate entity (63 ) 2,449
At March 31 (998 ) 3,460
Equity-settled share based compensation reserve
At January 1 12,599 1,733
Equity-settled share based compensation reserve 1,755 4,090
At March 31 14,354 5,823
Investment revaluation reserve
At January 1 (1,319 ) (940 )
Change in fair value of available for sale financial asset (3,927 ) 1,538
At March 31 (5,246 ) 598
Accumulated losses
At January 1 (43,375 ) (34,332 )
(Loss)/profit attributable to shareholders (2,783 ) 6,457
At March 31 (46,158 ) (27,875 )
Non-controlling interests
At January 1 (3,713 ) (7,637 )
Non-controlling interest - portion of profit 957 1,710
At March 31 (2,756 ) (5,927 )
Total equity at March 31 264,608 281,581
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CASH FLOW
For the three months ended March 31, 2012 and 2011
(Unaudited and in US$'000)
3 months ended 3 months ended
March 31, 2012 March 31, 2011
Restated
Cash flows related to operating activities
(Loss)/profit for the period (1,826 ) 8,167
Depreciation 6,878 7,910
Amortization of capitalized mine development costs 2,103 2,873
Amortization of intangibles 147 144
Amortization of borrowing costs 107 79
Unwinding of discount 23 -
Share based compensation 1,755 3,925
Net change in unrealized losses/(gains) on gold hedge 17,483 (4,829 )
Net change in unrealized losses/(gains) on oil hedge 47 (1,551 )
Income tax paid - 12
Changes in working capital 2,168 3,283
Net cash provided by operating activities 28,885 20,013
Cash flows related to investing activities
Increase in restricted cash (348 ) -
Redemption of short-term investments 592 -
Purchase of short-term investments - (31,080 )
Payments for purchase of property, plant and equipment (15,491 ) (6,460 )
Payments made on mine development (8,953 ) (2,009 )
Payments for purchase of intangibles (2 ) (306 )
Net cash used in investing activities (24,202 ) (39,855 )
Cash flows related to financing activities
Proceeds from issuance of capital stock, net of issue costs - (401 )
Repayment of borrowings (2,800 ) (1,750 )
Draw down from finance lease facility, net of financing cost paid 2,862 -
Interest paid on borrowings (279 ) (197 )
Net cash used by financing activities (217 ) (2,348 )
Effect of exchange rates on cash holdings in foreign currencies (507 ) 1,030
Net increase / (decrease) in cash and cash equivalents held 3,959 (21,160 )
Cash and cash equivalents at the beginning of financial period 7,470 75,833
Cash and cash equivalents at the end of financial period 11,429 54,673
CORPORATE DIRECTORY
Directors
Alan Hill, Chairman and CEO
Richard Young, President and CFO
Christopher Lattanzi, Non-Executive Director
Oliver Lennox-King, Non-Executive Director
Alan Thomas, Non-Executive Director
Frank Wheatley, Non-Executive Director
Senior Management
Alan Hill, Chairman and CEO
Richard Young, President and CFO
Yani Roditis, Vice President, Operations
Kathy Sipos, Vice President, Investor & Stakeholder Relations
David Savarie, Vice President, General Counsel & Corporate Secretary
Macoumba Diop, General Manager and Government Relations Manager, SGO
Mark English, Operations Manager, SGO
Martin Pawlitschek, Regional Exploration Manager, SMC
Bruce Van Brunt, Business Development Manager, SGO
Registered Office
121 King Street West, Suite 2600
Toronto, Ontario, M5H 3T9, Canada
T:+1 416-594-0000
F: +1 416-594-0088
E: generalmailbox@terangagold.com
W: http://terangagold2014.q4web.com/
Senegal Office
2K Plaza
Suite B4, 1er Etage
sis la Route due Meridien President
Dakar Almadies
T: +221 338 693 181
F: +221 338 603 683
Auditor
Deloitte & Touche LLP
Share Registries
Canada: Computershare Trust Company of Canada
T: +1 800 564 6253
Australia: Computershare Investor Services Pty Ltd
T: 1 300 850 505
Stock Exchange Listings
Toronto Stock Exchange, TSX symbol: TGZ
Australian Securities Exchange, ASX symbol: TGZ

FORWARD LOOKING STATEMENTS

Certain information included in this management discussion and analysis, including any information as to the Company's strategy, projects, exploration programs, joint venture ownership positions, plans, future financial or operating performance and other statements that express management's expectations or estimates of future performance, constitute "forward-looking statements". The words "believe", "expect", "will", "intend", "anticipate", "project", "plan", "estimate", "on track" and similar expressions identify forward looking statements. Such forward- looking statements are necessarily based upon a number of estimates, assumptions, opinions and analysis made by management in light of its experience that, while considered reasonable, may turn out to be incorrect and involve known and unknown risks, uncertainties and other factors, in each case that may cause the actual financial results, performance or achievements of the Company to be materially different from the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements. Such forward-looking statements are not guarantees of future performance.

These assumptions, risks, uncertainties and other factors include, but are not limited to: assumptions regarding general business and economic conditions; conditions in financial markets and the future financial performance of the company; the impact of global liquidity and credit availability on the timing of cash flows and the values of assets and liabilities based on projected future cash flows; the supply and demand for, deliveries of, and the level and volatility of the worldwide price of gold or certain other commodities (such as silver, fuel and electricity); fluctuations in currency markets, including changes in U.S. dollar and CFA Franc interest rates; risks arising from holding derivative instruments; adverse changes in our credit rating; level of indebtedness and liquidity; ability to successfully complete announced transactions and integrate acquired assets; legislative, political or economic developments in the jurisdictions in which the Company carries on business; operating or technical difficulties in connection with mining or development activities; employee relations; availability and costs associated with mining inputs and labor; the speculative nature of exploration and development, including the risks of obtaining necessary licenses and permits and diminishing quantities or grades of reserves; changes in costs and estimates associated with our projects; the accuracy of our reserve estimates (including with respect to size, grade and recoverability) and the geological, operational and price assumptions on which these are based; contests over title to properties, particularly title to undeveloped properties; the risks involved in the exploration, development and mining business, as well as other risks and uncertainties which are more fully described in the Company's A.I.F. and in other Company filings with securities and regulatory authorities which are available at www.sedar.com. Accordingly, readers should not place undue reliance on such forward looking statements. Teranga expressly disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws.

COMPETENT PERSONS STATEMENT

The technical information in this quarterly report that relates to mineral resource estimates within the Mining License is based on information compiled by Mr. Bruce Van Brunt , who is a Fellow of the Australasian Institute of Mining and Metallurgy. Mr. Van Brunt is a full time employee of Teranga and not independent. Mr. Van Brunt has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a "Competent Person" as defined in the 2004 Edition of the "Australasian Code of Reporting of exploration Results, Mineral Resources and Ore Reserves". Mr. Van Brunt is a "Qualified Person" in accordance with National Instrument 43-101 and he consents to the inclusion of this information in the form and context in which it appears in this announcement.

The technical information in this quarterly report that relates to the exploration results and targets within the regional exploration program are based on information compiled by Mr. Martin Pawlitschek , who is a member of the Australian Institute of Geoscientists. Mr. Pawlitschek is our full time employee and is not "independent" within the meaning of National Instrument 43-101. Mr. Pawlitschek has sufficient experience relevant to the style of mineralization and type of deposit under consideration and to the activity he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr. Pawlitschek is a "Qualified Person" in accordance with NI 43-101 and he consents to the inclusion of this information in the form and context in which it appears in this offering memorandum.

Contact: Kathy Sipos
Company Name: Teranga Gold Corporation
Contact Title: Vice President of Investor & Stakeholder Relations
Phone: +1 416-594-0000
Other1: ksipos@terangagold.com
Other2: terangagold2014.q4web.com