Sabodala-Massawa

Sabodala-Massawa

The largest producing gold mine in Senegal, West Africa.
Currently integrating the high-grade Massawa gold project which transforms Sabodala
into a top-tier gold asset with low costs, long-life reserves, and strong cash flows.
Base case pre-feasibility study highlights for the combined mine plan released July 2020;
technical report to be filed August 2020.

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

4.82Moz
Proven & Probable
Gold Reserves(1)

6.89Moz
Measured & Indicated
Gold Resources(1)

16.5-Year
Mine Life

Quick Facts: Sabodala-Massawa

Location
Located in southeast Senegal near Mali border 650 km east of Dakar (capital city)

Land Area
611 km2 combined mine license(2)  
915 km2 combined exploration land package(2)

Geology
West African Birimian Greenstone Belt

First Gold Pour
2009

Gold Produced Since IPO
~2Moz Au

Number of Employees
1,452 (2019)

Ownership
90% Teranga/
10% Government of
Senegal free carried interest

Mining License
Sabodala expires January 2025 (renewable for successive 5-year terms). Massawa expires 2040.  

Mining Method
Multiple deposits feeding into central mill; owner-operated conventional truck and shovel open-pit mining

Plant
+4.0 Mtpa carbon-in-leach
(1.2 Mtpa BIOX® extension planned)

Recovery
~90%

Power
36 megawatt low speed heavy fuel generators

Government Royalty
5%

Proven Track Record

2020

1H Key Highlight
Acquired the neighbouring high-grade Massawa gold project from Barrick Gold

Gold Reserves
4.8Moz

Gold Resources
6.9Moz

Production Guidance
225,000 - 235,000 oz

2019

Key Highlight
Exceeded the high end of production guidance for the fourth consecutive year

Sustainability
Successfully implemented the Resettlement Action Plan for the GKK satellite deposit

Gold Reserves
2.4Moz

Gold Resources
4.1Moz

Production
241,276 oz

2018

Key Highlight
Commenced construction of resettlement village for Niakafiri deposit

Sustainability
Successfully implemented the Resettlement Action Plan for Niakafiri deposit

Gold Reserves
2.7Moz

Gold Resources
4.4Moz

Production
245,230 oz

2017

Key Highlight
Received approvals required to commence drilling at Niakafiri deposit

Sustainability
Honoured with several awards including PDAC Environmental & Social Responsibility Award, UN Global Compact Award & Corporate Knights Future 40

Gold Reserves
2.7Moz

Gold Resources
4.4Moz

Production
233,267 oz

2016

Key Highlight
Completed second mill expansion, increasing capacity to 4.3-4.5Mt

Sustainability
Started the Gora community investment fund to mitigate the loss of illegal artisanal mining with long-term solutions

Gold Reserves
2.6Moz

Gold Resources
3.7Moz

Production
216,735 oz

2015

Key Highlight
Initiated mill expansion project to add secondary crusher

Sustainability
Submitted the first Senegalese Extractive Industries Transparency Initiative report to improve in-country transparency of industry revenues

Gold Reserves
2.6Moz

Gold Resources
4.4Moz

Production
182,282 oz

2014

Key Highlight
Acquired remaining stake in Oromin Joint Venture Group

Sustainability
Launched regional development strategy setting out long-term priorities and areas of development

Gold Reserves
2.6Moz

Gold Resources
6.1Moz

Production
211,823 oz

2013

Key Highlight
Acquired 43.5% of Oromin Joint Venture Group

Sustainability
Established long-term fiscal and investment agreement with Government of Senegal

Gold Reserves
2.8Moz

Gold Resources
6.2Moz

Production
207,204 oz

2012

Key Highlight
Completed mill expansion

Sustainability
Began reporting according to Global Reporting Initiative standards & implemented ISO 14001 compliant environmental management system

Gold Reserves
1.6Moz

Gold Resources
2.9Moz

Production 214,310 oz

2011

Key Highlight

Commenced mill expansion to double milling capacity

Sustainability

Launched corporate social responsibility program

Gold Reserves
1.7Moz

Gold Resources
2.1Moz

Production
131,641 oz

2010

Key Highlight
Teranga acquired Sabodala gold mine and completed IPO

Sustainability
Established vision to set the benchmark for responsible mining in the Senegal

Gold Reserves
1.46Moz

Gold Resources
2.3Moz

Production
16,267 oz

Integrating the Adjacent Massawa Gold Project

In March 2020, Teranga completed the acquisition of the Massawa gold project – one of the highest-grade undeveloped open pit gold projects in Africa, located within 30 kilometres of Sabodala’s mill. Results from a NI 43-101 compliant preliminary feasibility study incorporating a base case combined mine plan demonstrate that combining the two assets creates a top-tier mine with a long-life reserve base, low-costs, and strong cash flows. A preliminary feasibility study is expected to be filed on or before August 31, 2020. 

Technical work, trade-off studies, and exploration drilling will continue to further de-risk and improve project economics in support of a definitive feasibility study and mineral resource and reserves update anticipated in 2021. Mining operations have commenced and the processing of Massawa free-milling high-grade ore through Sabodala’s existing plant is expected in Q4 2020.

Mining and Processing

Sabodala operates a multiple open pit central mill operation carried out by owner-operated conventional truck and shovel. The existing mine operating fleet currently used at Sabodala will also be used for the combined Sabodala-Massawa deposits, applying an integrated mine sequencing plan to optimize the combined reserves base.

The Sabodala mill is Senegal's first industrial gold processing facility and, to this day, it remains the largest gold operation in the country. It includes an efficient carbon-in-leach (CIL) processing plant using a conventional flowsheet. With a mill capacity of up to 4.5 Mtpa, the plant operates at nearly double its initial capacity following two expansions in 2012 and 2016. Plant modifications are currently in progress, with a target completion in 2021, to further increase production capability and efficiencies for processing Massawa’s high-grade oxide ore.

Based on the results of the Sabodala-Massawa preliminary feasibility study, a separate refractory ore treatment (ROT) plant using bacterial oxidation (or BIOX technology) is expected to be installed parallel to the existing plant to create a second processing stream. The ROT design would increase capacity by 1.2 Mtpa and allow for the processing of Massawa's refractory ore, which expected to begin in 2023.

For further information on Sabodala's current mining and mineral processing activities, please refer the NI 43-101 technical report for Sabodala filed in August 2019.  For further information on the anticipated plant modifications and the processing of Massawa ore, please refer to the Sabodala-Massawa preliminary feasibility study press release dated July 26, 2020. 

First 5-Year Life of Mine Profile(4)

2021 to 2025

384koz

Average Annual
Gold Production(3)

$671/oz

Average Annual
All-in Sustaining Costs(6)

$1.07B

Total Net
Cash Flow(5)

Life of Mine Profile(4)

2020 to 2036

260koz

Average Annual
Gold Production(3)

$749/oz

Average Annual
All-in Sustaining Costs(6)

$2.21B

Total Net  
Cash Flow(5)

Annual Gold Production (oz Au)

Proven and Probable Reserves(1) (Moz)

Graph includes years for which there was a reserve update.

(1) Sabodala-Massawa's Mineral Reserve and Mineral Resource estimates as at December 31, 2019. For more information regarding Sabodala’s Mineral Reserves and Resources and related notes, please refer to the press release titled, "Teranga Gold Announces Positive Pre-Feasibility Study Results for Top-Tier Sabodala-Massawa Gold Complex" dated July 26, 2020 and accessible on the Company’s website and on SEDAR at www.sedar.comA NI 43-101 compliant technical report for the Sabodala-Massawa Project will be filed on the Company’s website and on SEDAR on or before August 31, 2020. 

(2) The combined mine license includes both the Sabodala mine license of 291 km2 and the Massawa mine license of 320 km2​, both of which are subject to separate terms. The combined exploration permit includes both the Sabodala exploration land package of 629 km2 and the Massawa exploration land package of 286 km2, both of which are subject to separate terms.

(3) This production target is based on proven and probable reserves only from the Sabodala-Massawa Project as of December 31, 2019. The estimated reserves underpinning this production target have been prepared by a competent and qualified person or persons as defined under NI 43-101. For more information regarding Sabodala-Massawa's Mineral Reserves and Resources and related notes, please refer to the press release titled, "Teranga Gold Announces Positive Pre-Feasibility Study Results for Top-Tier Sabodala-Massawa Gold Complex" dated July 26, 2020 and accessible on the Company’s website and on SEDAR at www.sedar.com.

(4) Sabodala-Massawa Life of Mine assumptions include: Gold Price $1,600 per ounce; Heavy Fuel Oil (HFO): $0.35 per litre; Light Fuel Oil (LFO): $0.65 per litre; Euro to USD Exchange Rate: 1.10:1

(5) Total net cash flow is after minority interest and is an estimate that is based on the updated life of mine plan and reserve estimate for the Sabodala-Massawa project as a results of the preliminary feasibility study, as set out in the press release titled, "Teranga Gold Announces Positive Pre-Feasibility Study Results for Top-Tier Sabodala-Massawa Gold Complex" dated July 26, 2020. See in particular Table F - Life of Mine Cash Flows in the press release. A NI 43-101 compliant technical report for the Sabodala-Massawa Project will be filed on the Company’s website and on SEDAR at www.sedar.com on or before August 31, 2020.  

(6) This is a non-IFRS financial measure and does not have a standard meaning under IFRS. Please refer to the section regarding Non-IFRS Performance Measures within the website’s Legal Disclaimer by clicking here.