Teranga Gold to Acquire High-Grade Massawa Gold Project

Accelerates Repositioning as Low-Cost, Mid-Tier Producer


Massawa to transform neighbouring Sabodala
into top tier complex, and extend mine life with higher grade (1)

Disclaimer

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Non-IFRS Financial Measures

This Interactive Data Centre includes measures that do have a standard meaning under International Financial Reporting Standards (“IFRS”) to serve as supplementary information that management believes may be useful to investors to explain Teranga’s financial results. These measures are intended to provide additional information only and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Such non-IFRS measures include, “total cash costs”, “total cash costs per ounce sold”, “all-in sustaining costs” (“AISC”), “AISC (excluding cash / (non-cash) inventory movements and amortized advanced royalty costs)”, “AISC per ounce”, “AISC (excluding cash / (non-cash) inventory movements and amortized advanced royalty costs) per ounce”, “average realized gold price”, “earnings before interest, taxes, depreciation and amortization” (“EBITDA”), “free cash flow”, “adjusted net profit attributable to shareholders” and “adjusted basic earnings per share”. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently.

Beginning in the second quarter of 2013, we adopted an “all-in sustaining costs” measure consistent with the guidance issued by the World Gold Council (“WGC”) on June 27, 2013. Teranga believes that the use of all-in sustaining costs is helpful to analysts, investors and other stakeholders of Teranga in assessing its operating performance, its ability to generate free cash flow from current operations and its overall value. This measure is helpful to governments and local communities in understanding the economics of gold mining. The “all-in sustaining costs” is an extension of existing “cash cost” metrics and incorporate costs related to sustaining production.

“Total cash costs per ounce sold” is a common financial performance measure in the gold mining industry but has no standard meaning under IFRS. Teranga reports total cash costs on a sales basis. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate Teranga’s performance and ability to generate cash flow. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measure, along with sales, is considered to be a key indicator of a Company’s ability to generate operating profits and cash flow from its mining operations.

Total cash costs figures are calculated in accordance with a standard developed by The Gold Institute, which was a worldwide association of suppliers of gold and gold products and included leading North American gold producers. The Gold Institute ceased operations in 2002, but the standard is considered the accepted standard of reporting cash cost of production in North America. Adoption of the standard is voluntary and the cost measures presented may not be comparable to other similarly titled measure of other companies.

The WGC definition of all-in sustaining costs seeks to extend the definition of total cash costs by adding corporate general and administrative costs, reclamation and remediation costs (including accretion and amortization), exploration and study costs (capital and expensed), capitalized stripping costs and sustaining capital expenditures and represents the total costs of producing gold from current operations. All-in sustaining costs exclude income tax payments, interest costs, costs related to business acquisitions and items needed to normalize profits. Consequently, this measure is not representative of all of Teranga’s cash expenditures. In addition, the calculation of all-in sustaining costs and all in costs does not include depreciation expense as it does not reflect the impact of expenditures incurred in prior periods. Therefore, it is not indicative of Teranga’s overall profitability.

Teranga also expands upon the WGC definition of all-in sustaining costs by presenting an additional measure of “all-in sustaining costs (excluding cash / (non-cash) inventory movements and amortized advanced royalty costs)”. This measure excludes cash and non-cash inventory movements and amortized advanced royalty costs which management does not believe to be true cash costs and are not fully indicative of performance for the period.

“Total cash costs per ounce”, “all-in sustaining costs per ounce” and “all-in sustaining costs (excluding cash / (noncash) inventory movements and amortized advanced royalty costs)” are intended to provide additional information only and do not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. The measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures differently. The following tables reconcile these non-IFRS measures to the most directly comparable IFRS measure.

“Average realized price” is a financial measure with no standard meaning under IFRS. Management uses this measure to better understand the price realized in each reporting period for gold and silver sales. Average realized price is calculated on revenue and ounces sold to all customers, except Franco-Nevada, as gold ounces sold to Franco-Nevada is recognized in revenue at 20 percent of the prevailing gold spot price on the date of delivery and 80 percent at $1,250 per ounce. The average realized price is intended to provide additional information only and does not have any standardized definition under IFRS; it should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Other companies may calculate this measure differently.

“Earnings before interest, taxes, depreciation and amortization” (“EBITDA”) is a non-IFRS financial measure, which excludes income tax, finance costs (before accretion expense), interest income and depreciation and amortization from net profits. EBITDA is intended to provide additional information to investors and analysts and do not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. Management believes that EBITDA is a valuable indicator of our ability to generate liquidity by producing operating cash flow to: fund working capital needs, service debt obligations, and fund capital expenditures.

“Free cash flow” is a non-IFRS financial measure. Teranga calculates free cash flow as net cash flow provided by operating activities less sustaining capital expenditures. Teranga believes this to be a useful indicator of our ability generate cash for growth initiatives. Other companies may calculate this measure differently.

Starting in 2018, Teranga adopted “adjusted net profit attributable to shareholders” and “adjusted basic earnings per share” as new non-IFRS financial measures. These non-IFRS financial measures are used by management and investors to measure the underlying operating performance of Teranga. Presenting these measures from period to period is expected to help management and investors evaluate earnings trends more readily in comparison with results from prior periods.

Teranga calculates “adjusted net profit attributable to shareholders” as net profit attributable to shareholders adjusted to exclude specific items that are significant, but not reflective of the underlying operations of Teranga, including: the impact of unrealized and realized foreign exchange gains and losses, gains and losses on derivative instruments, accretion expense on long-term obligations, impairment provisions and reversals thereof, and other unusual or non-recurring items. During the second quarter of 2018, Teranga also excluded the impact of foreign exchange movements on deferred taxes and other non-cash fair value changes from adjusted net profit attributable to shareholders as management does not believe these factors to be reflective of the underlying performance of Teranga.

“Adjusted basic earnings per share” is calculated using the weighted average number of shares outstanding under the basic method of earnings per share as determined under IFRS.

Accept Decline

2.6Moz Au
Historical Mineral
Reserves(2)

3.94 g/t Au
Historical Mineral
Reserves Grade(2)

10+ Years
Mine Life

Transformational Acquisition: High-Grade Massawa Project


One of the highest-grade undeveloped open-pit gold projects in Africa(3)

Significant opportunity for operating & capital synergies and value creation(4)

Sabodala-Massawa complex anticipated to create a top tier gold asset

Pro forma Teranga to transform into a low-cost, mid-tier gold producer

Tablo and Barrick supportive of the transaction through equity investments

Current TGZ P/NAV of~0.6x compared to select African peers at ~0.9x(5)

Compelling Acquisition Rationale

 

High-Grade
Massawa
Project

  • Massawa hosts one of Africa’s highest-grade undeveloped open-pit gold projects(2)
  • Total historical mineral reserves of 2.6Moz @ 3.94 g/t Au(1)
  • Robust economics on a standalone basis as per Barrick’s July 2019 Massawa Feasibility Study 
  • After-tax NPV5% of $677 million and IRR of 41% (at $1,400/oz gold price; $1,200/oz pit shell)(5)
  • Exploration opportunity on large prospective land package
  
 

Synergies &
Value
Creation

  • Proximity of Massawa project to Sabodala‘s mill and infrastructure (~30 km) provides opportunity for capex/opex synergies(3)

    • Reduces phase 1 and phase 2 capex for standalone mill and infrastructure
    • Minimal infrastructure development anticipated to initiate mining at Massawa project and process free-milling ore at Sabodala
  • Targeting near-term higher production and lower costs at pro forma Sabodala-Massawa complex with an optimized mine schedule to be defined in technical studies 
 
 

Building the Newest
Low-Cost,
Mid-Tier
Gold Producer


  • Priority mining of higher-grade ore from Massawa project with first gold production targeted for H2 2020
  • Pro forma Teranga anticipated to transition to a low-cost, mid-tier gold producer – as a result, cash margins and free cash flows* are expected to increase commensurate with the increased production
  • Teranga will continue to progress its attractive organic pipeline, including Golden Hill – an advanced exploration project
  
 

Teranga
Re-Rate
Opportunity
 


  •  Accelerates Teranga’s repositioning as a low-cost mid-tier West African gold producer
  • The Massawa project’s historical mineral reserves base of 2.6Moz from 20.9Mt at 3.94 g/t(4) is expected to augment Sabodala’s current mineral reserves base of 2.4Moz from 55.7Mt at 1.35 g/t(6)
  • Current TGZ P/NAV of ~0.6x compared to select African peers at ~0.9x(5)

*Refer to Non-IFRS Performance Measures in the slide presentation.

Forward-Looking Statements

All information included in this presentation, including any information as to the future financial or operating performance and other statements of Teranga Gold Corporation (“Teranga”) that express management’s expectations or estimates of future performance, other than statements of historical fact, constitute forward-looking information or forward-looking statements within the meaning of applicable securities laws and are based on expectations, estimates and projections as of the date hereof. Forward-looking statements are included for the purpose of providing information about management’s current expectations and plans relating to the future. Wherever possible, words such as “plans”, “expects”, “scheduled”, “trends”, “indications”, “potential”, “estimates”, “predicts”, “anticipate”, “to establish”, “believe”, “intend”, “ability to”, or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, or are "likely" to be taken, occur or be achieved, or the negative of these words or other variations thereof, have been used to identify such forward-looking information. Specific forward-looking statements include, without limitation, all disclosure regarding future results of operations, economic conditions and anticipated courses of action. Although the forward-looking statements contained herein reflect management's current beliefs and reasonable assumptions based upon information available to management as of the date hereof, Teranga cannot be certain that actual results will be consistent with such forward-looking information. Such assumptions include, among others, 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, anticipated future estimates of free cash flow, courses of action, the anticipated impact of combining the two assets, including anticipated synergies, and the potential for the combined Sabodala-Massawa complex to become a top tier gold asset. Teranga cautions you not to place undue reliance upon any such forward-looking statements.

The economic analysis presented in the Massawa Technical Report was prepared by Barrick in respect of its feasibility study for a standalone development plan and proposed mining operation at Massawa. Readers are advised that the economic outcomes disclosed by Barrick are presented in order to provide the reader with context regarding the Massawa project as proposed to be developed by Barrick. However, readers are cautioned that as Teranga proposes to process the Massawa deposits at its existing Sabodala Project, the economic analysis presented in the Massawa Technical Report should not be considered as representing the economic outcome stemming from an integrated Sabodala-Massawa mining complex.

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. For a more comprehensive discussion of the risks faced by Teranga, and which may cause the actual financial results, performance or achievements of Teranga to be materially different from estimated future results, performance or achievements expressed or implied by forward-looking information or forward-looking statements, please refer to Teranga’s latest Annual Information Form filed with Canadian securities regulatory authorities at www.sedar.com or on Teranga’s website at www.terangagold.com. The risks described in the Annual Information Form (filed and viewable on www.sedar.com and on Teranga’s website at www.terangagold.com) are hereby incorporated by reference herein. Teranga 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 as required by applicable law. Nothing herein should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities.

This webpages is dated as of December 10, 2019. All references to Teranga include its subsidiaries unless the context requires otherwise. This presentation contains references to Teranga using the words “we”, “us”, “our” and similar words and the reader is referred to using the words “you”, “your” and similar words.

Historical Resource Estimate Massawa Gold Project

Massawa was discovered by Randgold Resources Limited, which merged with Barrick effective January 1, 2019. On July 23, 2019, Barrick voluntarily filed a technical report under National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) on the Feasibility Study of the Massawa Gold Project, Senegal (the “Massawa Feasibility Study”).  The Massawa Feasibility Study disclosed mineral resource statements as well as mineral reserve estimates as of December 31, 2018, which remain current for Barrick as of the date hereof. As the mineral resource and mineral reserve estimates pre-date Teranga’s agreement to acquire Massawa, Teranga is treating them as “historical estimates” under NI 43-101, but they remain relevant as the most recent mineral resource and reserves estimates for Massawa. Further drilling and resource modelling would be required to upgrade or verify these historical estimates as current mineral resources or reserves for the combined Sabodala-Massawa Complex and accordingly, they should be relied upon only as a historical resource and reserve estimate of Barrick, which pre-dates Teranga’s agreement to acquire Massawa. A Teranga “Qualified Person” under 43-101 has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves for the combined Sabodala-Massawa Complex and Teranga is not treating the historical estimate as current mineral resources or mineral reserves.

Third Party Information

This presentation includes market and industry data which was obtained from various publicly available sources and other sources believed by Teranga to be true. Although Teranga believes this information to be reliable, Teranga has not independently verified any of the data from third-party sources referred to in this presentation, or analyzed or verified the underlying reports relied upon or referred to by such sources, or ascertained the underlying assumptions relied upon by such sources. Teranga does not make any representation as to the accuracy of such information.

Other Notes & Disclaimers

ALL DOLLAR AMOUNTS ARE DENOMINATED IN U.S. DOLLARS UNLESS SPECIFIED OTHERWISE.NOT FOR DISTRIBUTION OR DISSEMINATION IN THE UNITED STATES OR TO A U.S. PERSON.

Endnotes

  1. The anticipated extended mine life is based on the current 13-year mine life for the standalone Sabodala Gold Project and the 10.5-year mine life of standalone Massawa project, both based on current proven and probable reserve estimates. For more information on Sabodala’s Mineral Reserves and Resources and related notes, please refer to the Company’s amended and restated annual information form for the year ended December 31, 2018 dated July 31, 2019 (“Teranga’s AIF”) available on the Company’s website at www.terangagold.com and on SEDAR at www.sedar.com. For more information on Massawa’s ore reserves and resources and related notes, please refer to Barrick Gold’s NI 43-101 technical report on the Feasibility Study of the Massawa Gold Project dated July 23, 2019 (the “Massawa Feasibility Study”) at www.barrick.com and on SEDAR at www.sedar.com. Teranga proposes to process the Massawa deposits at its existing Sabodala Project, the economic analysis presented in the Massawa Technical Report should not be considered as representing the economic outcome stemming from an integrated Sabodala-Massawa mining complex.
  2. The Massawa project’s standalone mineral reserve estimate as at December 31, 2018 at a $1,200 gold price pit shell mineral reserves. For more information regarding the Massawa project’s ore reserve and mineral resource estimates and related notes, please refer to the Massawa Feasibility Study available at www.barrick.com and on SEDAR at www.sedar.com.
  3. The highest-grade undeveloped open-pit gold reserve in Africa statement is based on publically filed data available on S&P Capital IQ as at November 15, 2019, and includes the following projects: Sanbrado project (Burkina Faso), Tulu Kapi project (Ethiopia), Passendro project (Central African Republic), Yaoure, (Côte d'Ivoire), Wa-Lawra project (Ghana), Baomahun (Sierra Leone), Block 14 (Sudan), Bombore (Burkina Faso). Other companies may calculate their respective reserves base differently.
  4. Anticipated significant capital and operating synergies include capital expenditures, mining costs, processing costs, general & administrative expenses, and timing are based on the Barrick Gold’s NI 43-101 technical report on the Feasibility Study of the Massawa Gold Project dated July 23, 2019 (the “Massawa Feasibility Study”), and Teranga’s NI 43-101 technical report for the standalone Sabodala Gold Project dated August 30, 2017 (the “Sabodala Technical Report”). Teranga believes that in a combined Sabodala-Massawa operating complex, the Massawa project phase 1 and phase 2 capital expenditures are reduced and deferred. We believe the Sabodala mill and infrastructure is capable of processing free-milling ore from the Massawa project with minimal modifications for gravity, arsenic stabilization, and oxygen addition. The Company is targeting first production of ore from the Massawa project in H2 2020, a significant improvement over the Massawa project standalone scenario where first production is scheduled for 2022 at the earliest. Sabodala’s operating costs (mining, processing and general & administrative) are lower than those outlined in the Massawa Feasibility Study. The Massawa projectis expected to be operated as satellite deposits. Subject to integrated technical studies.
  5. Based on consensus equity research estimates from Capital IQ as at December 6, 2019. Select African peers includes: B2Gold, Endeavour, Centamin, Perseus, Golden Star, Semafo, Resolute, Roxgold, and Asanko.
  6. Sabodala’s Mineral Reserve estimate as at December 31, 2018. For more information regarding Sabodala’s mineral reserves and resources and related notes, please refer to the Company’s amended and restated annual information form for the year ended December 31, 2018 dated July 31, 2019 available on the Company’s website at www.terangagold.com and SEDAR at www.sedar.com.