Afema JV

Afema Joint Venture

High profile target located at the union of two
well mineralized greenstone belts trending from Ghana.
Five major shear structures crossing the regional land package.

Disclaimer

Please note that you are about to enter a website directly or indirectly maintained by a third party (the "External Site") and that you do so at your own risk.

Teranga Gold Corporation (“Teranga”) has no control over the External Site, any data or other content contained therein or any additional linked websites. The link to the External Site is provided for convenience purposes only.

By clicking “Accept” you acknowledge and agree that neither Teranga nor the third-party provider of the External Site (the “Provider”) is responsible, or accepts or assumes any responsibility or liability whatsoever for, the content, the data or the technical operation of the External Site. Further, by entering the External Site, you also acknowledge and agree that you completely and irrevocably waive any and all rights and claims against Teranga and the Provider and further acknowledge and agree that in no event shall Teranga or the Provider, its officers, employees, directors and agents be liable for any (i) indirect, consequential, incidental, special, compensatory or punitive damages, (ii) damages for loss of income, loss of business profits, business interruption, loss of data or business information, loss of or damage to property, (iii) claims of third parties, or (iv) other pecuniary loss, arising out of or related to this disclaimer or the External Site.

By entering the External Site, you further acknowledge and agree that the disclaimer of warranties and limitations of liability set out in this disclaimer shall apply regardless of the causes, circumstances or form of action giving rise to the loss, damage, claim or liability. The waiver and release specifically includes, without limitation, any and all rights and claims pertaining to the processing of personal data, including, but not limited to, any rights under any applicable data protection statute(s).

If in any jurisdiction, any part of this disclaimer is held to be unenforceable by a court of competent jurisdiction, such part of this disclaimer shall be restricted or eliminated to the minimum extent and the remaining disclaimer shall otherwise remain in full force and effect.

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

Quick Facts

Location
Southeast Côte d’Ivoire

Land Area
Covers more than 1,400 km2 including the
Afema mine license and three exploration permits
(Ayame, Aboisso and Mafere)

Ownership
51%, earning 70%

Joint Venture Partner
Sodim Limited

Afema Mine License

The Afema mine license has a near-surface oxide and sulphide historical gold resource of 2 Moz* within an area hosting several gold mineralized structures on extensions from prolific Ghanaian gold belts.

A number of economic and technical studies have been prepared on the project prior to Teranga’s entry into the joint venture. The most recent study was issued in June 2016 by RockRidge Consulting Services Geologists and includes the following mineral resource estimate for the Afema mine license (using a cut-off grade of 0.5 g/t Au):

Indicated resources of 1.0Moz (combined)

  • Oxide: 2.7Mt at 1.26 g/t Au
  • Transitional: 1.3Mt at 1.39 g/t Au
  • Sulphide: 17.3Mt at 1.55 g/t Au

Inferred resources of 956Koz (combined)

  • Oxide: 3.0Mt at 1.26 g/t Au
  • Transitional: 0.8Mt at 1.11 g/t Au
  • Sulphide: 17.8Mt at 1.40 g/t Au

On April 25, 2019, the Company completed and submitted an economic evaluation reviewing the previously defined historical oxide resource, historical metallurgical test work, processing alternatives and baseline environmental work. Further exploration and engineering optimization test work is required in order to confirm the historical mineral resource as a current mineral resource in accordance with NI 43-101.

As a result of the conclusions reached in the economic evaluation, the Company will be executing upon a work plan designed to:

  • ·        Continue exploration at existing target areas and newly identified targets to delineate a current NI 43-101 resource;
  • ·        Continue metallurgical testing currently underway at KCA Laboratories in order to optimize heap leach design requirements; and
  • ·        Investigate alternative material treatment processes.

Highlights

  • Preliminary field exploration programs are ongoing at a series of historic and new targets throughout the Afema mine license.
  • In Q3 2018, geological and structural evaluations continued focusing on oxide mineralization expansion opportunities along the Afema Shear Zone as well as the separate and distinct Niamienlessa and Woulo Woulo structural trends.
  • Starting in Q4 2018 through Q1 2019, initial drilling commenced to evaluate numerous quality oxide-bearing structural targets. In addition, the Ml was also covered by regional airborne geophysical and stream sediment bulk leach extractable gold (BLEG) programs.
  • In Q2 and Q3 2019, geological and structural evaluations continued, as well as detailed evaluation of the magnetic and radiometric data obtained from the Airborne Survey. Additionally, a comprehensive review of all geochemical data received from BLEG survey results was undertaken. Field specific activities were limited during these most recent quarters, however, the infill and step-out soil sampling program was completed over a comprehensive set of sample grids across the mine license.

Regional Exploration

In addition to the mine license, the Afema land package comprises approximately 1,200 square kilometres of land within three Exploration Permits located along trend and within the Sefwi-Bibiani and Asankrangwa gold belts.  The Exploration Permits, Ayame, Aboisso and Mafere, include extensive strike lengths of these well-defined mineralized structures which are host to a number of high profile producing mines in adjacent Ghana.

Highlights

  • In Q3 2018, data accumulation, compilation and re-interpretation of historical information provided positive indications that would guide future exploration efforts.
  • In Q4 2018, a property-wide stream sediment sampling (BLEG) analytical program and a property-wide airborne geophysical survey (magnetic and radiometric systems) were initiated. Both of these large surveys were completed in Q1 2019.
  • In Q 2 and Q3 2019, detailed interpretations and evaluations of the recently flown magnetic and radiometric data were undertaken. A comprehensive review of all geochemical data received from the stream sediment BLEG survey results was completed with an aim to identify favorable target areas for future evaluation.

Joint Venture Terms

Under the terms of the joint venture, Teranga retains its current 51% joint venture interest through the completion of a three-year $11M exploration and community development work program, and earns into a 70% interest on the Afema mining lease through the delivery of a positive study. Teranga will sole fund and manage the exploration programs and feasibility studies.

*Note re Historic Resource: A number of economic and technical studies have been prepared on the Afema project prior to Teranga’s entry into the Afema JV with Sodim. The most recent study, which included a mineral resource estimate for the Afema mine license, was issued by RockRidge Consulting Services Geologists for and on behalf of TGL and is dated as of June 27, 2016 (the “June 2016 Historical Estimate”). The June 2016 Historical Estimate includes an Indicated oxide resource estimate of 110Koz (comprised of 2.7Mt at an average grade of 1.26 g/t Au) and Inferred oxide resources of 122Koz (comprised of 3.0Mt at an average grade of 1.26 g/t Au). In addition, it includes an Indicated transitional resource estimate of 59Koz (comprised of 1.3Mt at an average grade of 1.39 g/t Au) and an Inferred transitional resource of 28Koz (comprised of 0.8Mt at an average grade of 1.11 g/t Au). Finally, the June 2016 Historical Estimate provides a sulphide resource estimate as follows: 865Koz Indicated ounces (comprised of 17.3Mt at an average grade of 1.55 g/t Au) and 806Koz inferred ounces (comprised of 17.8Mt at an average grade of 1.40 g/t Au). This historical estimate is reported as using a cut-off grade of 0.5 g/t Au.

RockRidge further states that it reviewed the geological and grade continuity to supplement the review of data quality in order to confirm the CIM mineral resource classification categories used. As well, the June 2016 Historical Estimate states the following with respect to the basis of the mineral resource estimate:

  • mineralized volumes were received for oxide, transitional and sulphide modelled volumes;
  • gold grades were determined using ordinary kriging and Inverse distance squared interpolation (depending on data density) into a 3-dimensional block model constrained by mineralization wireframes;
  • the block models comprised sub-celled block dimensions of 5m x 5m x 1m and 5m x 5m x 2m (depending on data sampling interval);
  • mineralized wireframes were truncated to the topographic surface reflecting the mining that had previously occurred on the property;
  • gold values were investigated for outlier values and put though two statistical capping/cutting routines;
  • Datamine Studio 3 was the modelling package; and
  • relationship between geology and preliminary mining and economic factors was taken into account at all times.

Teranga considers the June 2016 Historical Estimate to be a “historical estimate” as defined under NI 43-101 and relevant as the most recent resource estimate on the Afema project. Further drilling, resource modelling and updates to key economic assumptions would be required to upgrade or verify these historical estimates as current mineral resources and accordingly they should be relied upon only as a historical resource estimate. A Qualified Person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves and Teranga is not treating the historical estimate as current mineral resources or mineral reserves.