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Teranga Gold Reports Third Quarter Results; On Track to Meet Full Year Production and Cost Guidance

Nov 02, 2017

(All amounts are in U.S. dollars unless otherwise stated)

TORONTO, Nov. 02, 2017 (GLOBE NEWSWIRE) -- Teranga Gold Corporation ("Teranga" or the "Company") (TSX:TGZ) today reported its financial and operating results for the third quarter ended September 30, 2017.

“It was an extremely busy quarter,” said Richard Young, President and Chief Executive Officer. “Operationally, it was solid keeping us on track to meet our annual production and cost guidance for 2017.”

Added Mr. Young, “During the third quarter we filed two technical reports. The first was for our flagship Sabodala mine and the second was for our new development project Banfora, which together resulted in a 70 percent increase in proven and probable reserves to 3.9 million ounces.  Combined with high-grade results at our most exciting exploration project, Golden Hill, we are laying the foundation for the next multi-asset, mid-tier gold miner in West Africa.”

“The Banfora Project is advancing on all fronts. In the coming weeks, we expect to mandate a lender for the Banfora project financing and to award the EPCM contract,” stated Paul Chawrun, Chief Operating Officer. “The owner’s team is being assembled and project civils and site infrastructure are scheduled to begin in the fourth quarter. Additionally, the 75,000-metre infill drilling program upgrading inferred resources is expected to be completed shortly with a reserve update anticipated in the first half of 2018.”

Third Quarter 2017 Highlights

  • Solid third quarter puts the Company on track to achieve 2017 guidance, specifically the upper end of production, lower end of per tonne costs, and the upper end of its all-in sustaining costs and all-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) per ounce1 cost metrics.

  • Increased the Company’s mineral reserves to 3.9 million ounces (mineral reserve estimates are as at June 30, 2017)
     
    • Added 400,000 ounces to Sabodala’s reserve base, bringing total reserves to 2.7 million ounces and improving the five-year production and free cash flow profile2

    • Announced initial reserves for the Banfora Project in Burkina Faso of 1.2 million ounces.

  • Completed positive Banfora feasibility study, establishing solid base case economics and outlining a path forward to reserve growth, financing and construction.

  • Following two high-grade discoveries announced in April at the Company’s Golden Hill property in Burkina Faso, early-stage drilling continues to yield high-grade, near-surface and continuation at depth of gold mineralization drill results.

 

Financial Summary   
  Three months ended September 30,Nine months ended September 30,
Financial Data 2017  2016  % Change2017  2016  % Change
Revenue($000's)  61,041   60,316 1%  203,403   213,076 (5%)
Cost of sales($000's)  (49,225)  (37,748)30%  (157,964)  (138,506)14%
Profit attributable to shareholders of Teranga($000's)  10,370   10,437 (1%)  26,173   24,395 7%

  Per share1
($)  0.10   0.13 (26%)  0.24   0.31 (21%)
EBITDA2($000's)  23,004   26,841 (14%)  68,705   82,502 (17%)
 

Operating cash flow excluding changes in working
capital other than inventories
($000's)  11,884   7,970 49%  57,902   52,049 11%
Operating cash flow($000's)  10,235   13,255 (23%)  38,927   58,356 (33%)
Sustaining capital expenditures (before deferred
stripping)
($000's)  6,469   6,426 1%  21,398   25,481 (16%)
Capitalized deferred stripping – sustaining($000's)  5,469   3,065 78%  21,773   13,669 59%
Growth capital expenditures($000's)  4,984   -  N/A  14,113   -  N/A

1  On May 8, 2017, the Company completed a five-for-one consolidation of the common shares of the Company.

2  This is a non-IFRS financial measure and does not have a standard meaning under IFRS.  Please see the Non-IFRS Performance Measures section in Management’s Discussion & Analysis for the three and nine months ended September 30, 2017 available on the Company’s website at www.terangagold.com.

  • Net income attributable to shareholders was $10.4 million for the quarter, unchanged from the prior year period, and increased by 7% to $26.2 million year-to-date.  Higher non-cash inventory costs during the quarter and year-to-date were offset by lower income taxes and hedge gains in 2017 compared to hedge losses in the 2016 year-to-date period.

  • Earnings per share of $0.10 and $0.24 for the three and nine-month periods, respectively, were negatively impacted by a year-over-year increase in the number of shares related to the acquisition of Gryphon Minerals in October 2016 and the equity offering relating to construction readiness activities for the Banfora Project (previously owned by Gryphon) in November 2016.

  • Cash flow related to operating activities, before changes in working capital excluding inventories, increased year-over-year to $11.9 million and $57.9 million, respectively, for both the quarter and year-to-date periods.  Due to an increase in working capital related to payments of higher royalties and 2016 income tax (paid in arrears) in 2017, net cash provided by operating activities decreased year-over-year to $10.2 million and $38.9 million, respectively, for both the quarter and year-to-date periods.

  • EBITDA1 for the three and nine-month periods was $23.0 million and $68.7 million, respectively. Inventory movements related to non-cash historic mining costs relating to the drawdown of the Company’s low-grade stockpiles negatively impacted year-over-year EBITDA by $8.4 million in the quarter and $17.3 million on a year-to-date basis. The volatility in inventory movement does not affect cash flow from operations.

 

Review of Operating Highlights   
  Three months ended September 30,Nine months ended September 30,
Operating Results  20172016% Change20172016% Change
 Ore mined (‘000t)  540  33163%  1,389  1,599(13%)
 Waste mined - operating (‘000t)  6,425  6,3731%  17,470  19,680(11%)
 Waste mined - capitalized (‘000t)  1,924  1,18962%  8,331  4,63780%
 Total mined (‘000t)  8,889  7,89313%  27,190  25,9165%
 Grade mined (g/t)  2.49  2.71(8%)  3.17  2.5823%
 Ounces mined (oz)  43,286  28,82650%  141,398  132,9116%
 Strip ratio (waste/ore)  15.5  22.9(33%)  18.6  15.222%
 Ore milled (‘000t)  1,051  93313%  3,145  2,9915%
 Head grade (g/t)  1.66  1.78(7%)  1.78  1.93(8%)
 Recovery rate (%)  90.5  92.6(2%)  91.6  92.9(1%)
 Gold produced1 (oz)  50,873  49,4813%  165,333  172,748(4%)
 Gold sold (oz)  47,695  45,1616%  162,134  171,129(5%)
        
 Average realized price2 ($/oz)  1,277  1,333(4%)  1,253  1,2441%
 Cost of sales per ounce ($/oz sold)  1,032  83623%  974  80920%
 Total cash costs2 ($/oz sold)  782  62026%  735  60023%
 All-in sustaining costs2 ($/oz sold)  1,092  91020%  1,061  89718%
 All-in sustaining costs (excluding cash /
(non- cash) inventory movements and
amortized advanced royalty costs)2
 ($/oz sold)  1,084  1,091(1%)  978  9196%
        
 Mining ($/t mined)  2.46  2.59(5%)  2.31  2.320%
 Mining long haul ($/t hauled)  2.96  2.796%  2.90  3.72(22%)
 Milling  ($/t milled)  10.46  11.05(5%)  11.34  10.755%
 G&A ($/t milled)  4.16  4.55(9%)  4.11  4.41(7%)
        

1  Gold produced represents change in gold in circuit inventory plus gold recovered during the period.

2  Average realized price, total cash costs per ounce, all-in sustaining costs per ounce, and all-in sustaining costs (excluding cash / (non-cash) inventory movements and amortized advanced royalty costs) per ounce are non-IFRS financial measures that do not have a standard meaning under IFRS.  Please refer to Non-IFRS Performance Measures in the Company's Third Quarter 2017 Management's Discussion and Analysis.

  • Third quarter gold production of 50,873 ounces was 3 percent higher than the prior year quarter, with 165,333 ounces of gold produced year-to-date.

  • Per tonne costs for the third quarter were within or below the low end of guidance ranges, keeping the Company on track to meet the lower end of per tonne cost guidance for 2017.

  • Third quarter per ounce costs, including cost of sales, total cash costs1, all-in sustaining costs1 and all-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1 were above the full year guidance ranges due to increased costs relating to more material mined and processed, lower grades processed, and the timing of gold sales during the quarter. With mining activities focused on the high-grade Gora and Golouma deposits for the remainder of the year, the Company expects to achieve the higher end of its 2017 all-in sustaining1 and all-in sustaining (excluding non-cash inventory movements and amortized advanced royalty costs)1 per ounce guidance ranges.

Liquidity Summary

Cash and cash equivalents totalled $73.0 million, down from the second quarter mainly due to $5.0 million in growth capital expenditures relating to the Banfora Project and a $1.5 million increase in working capital.

Available for sale securities were valued at $3.8 million at September 30, 2017.  Available for sale securities are liquid and freely trading securities listed on public stock exchanges and can be sold at the Company’s discretion.

Banfora Project Update

During the third quarter, the Company announced a positive feasibility study with a base case internal rate of return of 15%.  Since then, the Banfora Project is advancing on all fronts with the assembly of the owner’s team, project civils and site infrastructure scheduled to begin in the fourth quarter. By the end of November, the Company expects to award the EPCM contract and complete a 75,000-metre infill drill program to upgrade inferred resources. Overall, the Company anticipates achieving a conversion rate of between 25% and 50% of the inferred resources. A reserve update is expected in the first half of 2018.

Through a combination of cash on hand, marketable securities, cash flow from operations and a debt facility of $150 million, the Company believes it is in a strong position to fund Banfora. To provide greater cash flow certainty, the Company hedged half of the production at its Sabodala mine in Senegal for the next 15 months at $1,336 per ounce.  Teranga expects to sign a mandate letter for a $150 million senior project debt facility with a leading financier in November.  The financing, which is subject to due diligence, is targeted to close in the second quarter of 2018.  

Exploration Budget Update

As a result of the positive drill results at Golden Hill, Banfora and Sabodala, the Company’s exploration and reserve development budget has been increased to between $20 and $25 million from $12 to $15 million initially at the start of 2017.  More than 90% of this year’s spending is on defining initial resources and converting existing resources to reserves.

Consolidated Financial Statements

For additional details, please refer to Teranga’s interim condensed consolidated financial statements and management’s discussion & analysis for the three and nine months ended September 30, 2017.  These documents are available on the Company’s website at www.terangagold.com, SEDAR at www.sedar.com/terangagold.

Q3 2017 Conference Call & Webcast

Teranga will host a conference call/audio webcast today at 8:30 a.m. ET, during which management will review the quarter’s highlights.  Those wishing to listen can access the live conference call and webcast as follows:

Date & Time:Thursday, November 2, 2017 at 8:30 a.m. ET
Telephone:(647) 788-4919 (local or international)
(877) 291-4570 (toll-free)
Please allow 10 minutes to be connected to the conference call
Webcast:www.terangagold.com/q32017
Replay:The conference call replay will be available for two weeks after the call by dialing:
(416) 621-4642 or toll-free at (800) 585-8367 and entering the conference ID 83891790.
Note:The slide presentation will be available for download at www.terangagold.com for
simultaneous viewing during the conference call


Endnotes

(1)       Total cash costs per ounce, earnings before interest, taxes, depreciation and amortization (“EBITDA”), and average realized gold price are non-IFRS financial measures and do not have standard meanings under IFRS.  All-in sustaining costs and all-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) per ounce are non-IFRS financial measures. The comparable IFRS measure is cost of sales per ounce, which for 2017, is expected in the range of $950 - $1,025 per ounce.  Please see the Non-IFRS Performance Measures section in Management’s Discussion & Analysis for the three and nine months ended September 30, 2017 available on the Company’s website at www.terangagold.com.

(2)       The production and free cash flow targets are based on proven and probable reserves only from the Sabodala project as at June 30, 2017 as disclosed on the Company’s website at www.terangagold.com and on SEDAR at www.sedar.com. The estimated ore reserves underpinning this production target have been prepared by a qualified person or persons (see Qualified Persons Statements in the Company’s Management’s Discussion & Analysis for the three and nine months ended September 30, 2017 available on the Company’s website at www.terangagold.com).

Qualified Persons Statement

The technical information contained in this press release relating to the Sabodala open pit mineral reserve estimates is based on, and fairly represents, information compiled by Mr. Stephen Ling, P. Eng who is a member of the Professional Engineers Ontario. Mr. Ling is a full time employee of Teranga and is not "independent" within the meaning of NI 43-101.  Mr. Ling has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a "Qualified Person" under NI 43-101 Standards of Disclosure for Mineral Projects. 

The technical information contained in this press release relating to Sabodala mineral resource estimates is based on, and fairly represents, information compiled by Ms. Patti Nakai-Lajoie. Ms. Nakai-Lajoie, P. Geo., is a Member of the Association of Professional Geoscientists of Ontario. Ms. Nakai-Lajoie is a full time employee of Teranga and is not "independent" within the meaning of NI 43-101. Ms. Nakai-Lajoie has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as a "Qualified Person" under NI 43-101 Standards of Disclosure for Mineral Projects.

The technical information contained in this press release relating to the Sabodala underground ore reserves estimates is based on, and fairly represents, information compiled by Jeff Sepp, P. Eng., of Roscoe Postle Associates Inc. (RPA), who is a member of the Professional Engineers Ontario.  Mr. Sepp is “independent” within the meaning of NI 43-101. Mr. Sepp has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity he is undertaking to qualify as a “Qualified Person” under NI 43-101 Standards of Disclosure for Mineral Projects.

The technical information contained in this press release relating to the Banfora open pit mineral reserve estimates is based on, and fairly represents, information compiled by Mr. Glen Ehasoo, P. Eng., of RPA, who is a member of the Association of Professional Engineers and Geoscientists of British Columbia. Mr. Ehasoo is "independent" within the meaning of NI 43-101.  Mr. Ehasoo has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a “Qualified Person” under NI 43-101 Standards of Disclosure for Mineral Projects.

The technical information contained in this press release relating to Banfora mineral resource estimates is based on, and fairly represents, information compiled by Mr. David Ross, P.Geo., of RPA, who is a Member of the Association of Professional Geoscientists of Ontario. Mr. Ross is "independent" within the meaning of NI 43-101. Mr. Ross has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a “Qualified Person” under NI 43-101 Standards of Disclosure for Mineral Projects.

Teranga's disclosure of mineral reserve and mineral resource information is governed by NI 43-101 under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time by the CIM ("CIM Standards"). There can be no assurance that those portions of mineral resources that are not mineral reserves will ultimately be converted into mineral reserves.

Teranga confirms that it is not aware of any new information or data that materially affects the information included in the Technical Report or third quarter 2017 results, market announcements and, in the case of estimates of Mineral Resources, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed.  The Company confirms that the form and context in which the Qualified Person’s findings are presented have not been materially modified from the original market announcement.

Forward-Looking Statements

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"), which reflects management's expectations regarding Teranga's future growth, results of operations (including, without limitation, future production and capital expenditures), performance (both operational and financial) and business prospects (including the timing and development of new deposits and the success of exploration activities) and opportunities. Wherever possible, words such as “potential”, “belief”, “believe”, “expects”, “estimates”, “plans”, “anticipated”, “ability”, “intended to”, “expected to”, “objective to” and similar expressions or statements that certain actions, events or results “should”, or "will" have been used to identify such forward looking information. Forward-looking statements include, without limitation, all disclosure regarding possible events, conditions or results of operations, future economic conditions and anticipated courses of action. Although the forward-looking statements contained in this press release reflect management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, Teranga cannot be certain that actual results will be consistent with such forward looking statements. Such forward-looking statements are based upon assumptions, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments that management believe to be reasonable and relevant but that may prove to be incorrect. These assumptions include, among other things, the ability to obtain any requisite governmental approvals, the accuracy of mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic conditions, the ability to resettle the community within anticipated timeline, anticipated future estimates of free cash flow, and courses of action. Teranga cautions you not to place undue reliance upon any such forward-looking statements.

The risks and uncertainties that may affect forward-looking statements include, among others: the inherent risks involved in exploration and development of mineral properties, including government approvals and permitting, changes in economic conditions, changes in the worldwide price of gold and other key inputs, changes in mine plans and other factors, such as project execution delays, many of which are beyond the control of Teranga, as well as other risks and uncertainties which are more fully described in Teranga's Annual Information Form dated March 29, 2017, and in other filings of Teranga with securities and regulatory authorities which are available at www.sedar.com. Teranga does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Nothing in this report should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities. All references to Teranga include its subsidiaries unless the context requires otherwise.

About Teranga

Teranga is a multi-jurisdictional West African gold company focused on production and development as well as the exploration of more than 5,000km2 of land located on prospective gold belts.  Since its initial public offering in 2010, Teranga has produced more than 1.3 million ounces of gold from its operations in Senegal.  Focused on diversification and growth, the Company is advancing its Banfora development project, and is conducting extensive exploration programs in three countries: Burkina Faso, Senegal and Côte d’Ivoire.  As at June 30, 2017, Teranga has reserve base of nearly 4.0 million ounces of gold, a strong balance sheet and the financial flexibility to grow its business.

Steadfast in its commitment to set the benchmark for responsible mining, Teranga operates in accordance with the highest international standards and aims to act as a catalyst for sustainable economic, environmental, and community development as it strives to create value for all of its stakeholders.  Teranga is a member of the United Nations Global Compact and a leading member of the multi-stakeholder group responsible for the submission of the first Senegalese Extractive Industries Transparency Initiative revenue report. The Company's responsibility report is prepared in accordance with its commitments under the United Nations Global Compact and in alignment with the Global Reporting Initiative guidelines. 

Contact Information 
Richard YoungTrish Moran
President & CEOHead of Investor Relations
T: +1 416-594-0000 | E: ryoung@terangagold.com  T: +1 416-607-4507 | E: tmoran@terangagold.com

 

Source: Teranga Gold Corporation