African Barrick Gold Half Year Report for the six months ended 30 June 2014 1 LSE: ABG 25 July 2014 Results for the 6 months ended 30 June 2014 (Unaudited) Based on IFRS and expressed in US Dollars (US$) African Barrick Gold plc (“ABG’’) reports half year 2014 results “We are pleased to report strong results for H1 2014, with increased production and continued cost discipline enabling the business to return to cash generation,” said Brad Gordon, Chief Executive Officer of African Barrick Gold. “We have now delivered our seventh successive reduction in quarterly all-in sustaining costs (AISC) as we continue to drive operational improvements through the business. During H1 2014 we produced 346,581 ounces of gold, an improvement of 13% on the same period in 2013, at an AISC of US$1,118 per ounce, a reduction of 25% on the previous year. During the second quarter, we delivered the first ounces from the Bulyanhulu CIL Expansion project with development work on the Bulyanhulu Upper East zone and the Gokona underground exploration portal progressing to plan. As a result of the strong H1 2014 performance and the incorporation of the expected production from Bulyanhulu Upper East, we now expect full year gold production to be in excess of 700,000 ounces whilst continuing to target an AISC at the bottom of our guidance range of US$1,100-1,175 per ounce.” Operational Highlights Q2 gold production of 178,206 ounces, 8% higher than Q2 2013, with gold sales of 171,563 ounces Q2 AISC 1,2 of US$1,105 per ounce sold, 21% lower than Q2 2013, with cash costs 1,2 of US$749 per ounce H1 gold production of 346,581 ounces with gold sales of 330,947 ounces, 13% and 5% respectively, higher than H1 2013 H1 AISC 1,2 of US$1,118 per ounce sold and cash costs 1,2 of US$752, respectively down 25% and 14% on H1 2013 First ounces produced from the Bulyanhulu CIL Expansion project, with final commissioning due to complete in Q3 2014 Bulyanhulu Upper East and North Mara Underground projects progressing well and on schedule Continued strong results from the West Kenya Exploration Project Financial Highlights Cash position increased during Q2 2014 by US$16 million to stand at US$270 million as at 30 June 2014 H1 revenue of US$446 million, 9% below H1 2013, as the impact of a lower average realised gold price more than offset increased sales volumes H1 EBITDA 1,3 of US$132 million, 1% higher than H1 2013, due to lower cash costs H1 net earnings 1,3 of US$41 million (US10.0 cents per share) impacted by a higher non cash tax charge during Q2 2014 H1 operational cash flow increased to US$127 million (28% higher than H1 2013) H1 capital expenditure of US$115 million, 45% lower than H1 2013 due to revised mine plans and stringent capital controls Interim dividend of US1.4 cents per share declared, based on a new cash flow based metric Three months ended 30 June Six months ended 30 June (Unaudited) 2014 2013 2 2014 2013 2 Gold Production (ounces) 178,206 164,439 346,581 307,198 Gold Sold (ounces) 171,563 170,092 330,947 314,369 Cash cost (US$/ounce) 1 749 862 752 876 AISC (US$/ounce) 1 1,105 1,404 1,118 1,483 Average realised gold price (US$/ounce) 1 1,277 1,366 1,290 1,480 (in US$'000) Revenue 229,222 241,900 445,509 487,360 EBITDA 1,3 66,959 48,828 131,621 130,771 Net earnings/(loss) 3 18,412 (721,946) 40,822 (701,230) Basic earnings/(loss) per share (EPS) (cents) 3 4.5 (176.0) 10.0 (171.0) Cash generated from operating activities 76,381 41,691 127,107 99,017 Capital expenditure 4 58,964 103,347 114,744 209,056 1 These are non-IFRS measures. Refer to page 23 for definitions 2 2013 comparative amounts have been restated to exclude Tulawaka 3 EBITDA and net earnings consist of earnings from both continuing and discontinued operations 4 Excludes non-cash reclamation asset adjustments and includes finance lease purchases
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African Barrick Gold Half Year Report for the six months ended 30 June 2014
1 LSE: ABG
25 July 2014
Results for the 6 months ended 30 June 2014 (Unaudited)
Based on IFRS and expressed in US Dollars (US$)
African Barrick Gold plc (“ABG’’) reports half year 2014 results
“We are pleased to report strong results for H1 2014, with increased production and continued cost discipline enabling the
business to return to cash generation,” said Brad Gordon, Chief Executive Officer of African Barrick Gold. “We have now
delivered our seventh successive reduction in quarterly all-in sustaining costs (AISC) as we continue to drive operational
improvements through the business. During H1 2014 we produced 346,581 ounces of gold, an improvement of 13% on the same
period in 2013, at an AISC of US$1,118 per ounce, a reduction of 25% on the previous year. During the second quarter, we
delivered the first ounces from the Bulyanhulu CIL Expansion project with development work on the Bulyanhulu Upper East zone
and the Gokona underground exploration portal progressing to plan. As a result of the strong H1 2014 performance and the
incorporation of the expected production from Bulyanhulu Upper East, we now expect full year gold production to be in excess of
700,000 ounces whilst continuing to target an AISC at the bottom of our guidance range of US$1,100-1,175 per ounce.”
Operational Highlights
Q2 gold production of 178,206 ounces, 8% higher than Q2 2013, with gold sales of 171,563 ounces
Q2 AISC1,2
of US$1,105 per ounce sold, 21% lower than Q2 2013, with cash costs1,2
of US$749 per ounce
H1 gold production of 346,581 ounces with gold sales of 330,947 ounces, 13% and 5% respectively, higher than H1 2013
H1 AISC1,2
of US$1,118 per ounce sold and cash costs1,2
of US$752, respectively down 25% and 14% on H1 2013
First ounces produced from the Bulyanhulu CIL Expansion project, with final commissioning due to complete in Q3 2014
Bulyanhulu Upper East and North Mara Underground projects progressing well and on schedule
Continued strong results from the West Kenya Exploration Project
Financial Highlights
Cash position increased during Q2 2014 by US$16 million to stand at US$270 million as at 30 June 2014
H1 revenue of US$446 million, 9% below H1 2013, as the impact of a lower average realised gold price more than offset increased sales volumes
H1 EBITDA1,3
of US$132 million, 1% higher than H1 2013, due to lower cash costs
H1 net earnings1,3
of US$41 million (US10.0 cents per share) impacted by a higher non cash tax charge during Q2 2014
H1 operational cash flow increased to US$127 million (28% higher than H1 2013)
H1 capital expenditure of US$115 million, 45% lower than H1 2013 due to revised mine plans and stringent capital controls
Interim dividend of US1.4 cents per share declared, based on a new cash flow based metric
Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 20132
2014 20132
Gold Production (ounces) 178,206 164,439
346,581 307,198
Gold Sold (ounces) 171,563 170,092
330,947 314,369
Cash cost (US$/ounce)1 749 862
752 876
AISC (US$/ounce)1 1,105 1,404
1,118 1,483
Average realised gold price (US$/ounce)1 1,277 1,366
1,290 1,480
(in US$'000)
Revenue 229,222 241,900
445,509 487,360
EBITDA1,3
66,959 48,828
131,621 130,771
Net earnings/(loss)3 18,412 (721,946)
40,822 (701,230)
Basic earnings/(loss) per share (EPS) (cents)3 4.5 (176.0)
10.0 (171.0)
Cash generated from operating activities 76,381 41,691
127,107 99,017
Capital expenditure4 58,964 103,347
114,744 209,056
1 These are non-IFRS measures. Refer to page 23 for definitions
2 2013 comparative amounts have been restated to exclude Tulawaka
3
EBITDA and net earnings consist of earnings from both continuing and discontinued operations 4
Excludes non-cash reclamation asset adjustments and includes finance lease purchases
African Barrick Gold Half Year Report for the six months ended 30 June 2014
2 LSE: ABG
Operational Review
Our continued delivery on the cost saving targets set out at the start of the Operational Review is highlighted by a further
reduction in Q2 2014 AISC of 2% over Q1 2014 and an H1 2014 reduction of 25% over the previous period. Together with a
strong production profile, this enabled ABG to deliver a return to net cash flow generation during Q2 2014. We remain
committed and on track to deliver against the US$185 million cost saving target as previously set out and reflected in our AISC
guidance.
Safety
During the first half of the year, Bulyanhulu regrettably experienced one fatality. On 25 March 2014, Emmanuel Mrutu, one of
our underground employees sadly passed away as a result of injuries sustained following a fall-of-ground incident. We have
completed internal and external investigations into this tragic incident in order to mitigate any future reoccurrence. As a mark
of respect operations ceased for a 24 hour period.
During the second quarter Bulyanhulu experienced a non-operational fatality which led to two weeks of disrupted operations at
the mine. On 20 May 2014, an underground employee went missing following a night shift. All mining operations were initially
ceased and an intensive search operation was launched. On 1 June 2014, the body of the deceased was found and
investigations by the Tanzanian authorities have subsequently determined that regrettably the employee took his own life.
Ensuring the safety of all our employees is paramount, and we have continuously improved our safety performance at all of
our operations over the past few years. In this regard, we have launched a behavioural safety programme called WeCare at
each of our operations to further enhance our safety processes.
Board Changes
During the six months ended 30 June 2014, David Hodgson stepped down as Non-Executive Director of the Company. The
ABG Board now comprises eleven Directors, including seven Independent Non-Executive Directors, one Executive Director
and three nominees from Barrick Gold Corporation.
Indirect Taxes
Further progress has been made with respect to the build up of VAT, and the Company received net refunds of US$18 million
during the second quarter, bringing total net refunds for H1 2014 to approximately US$28 million. We have also continued
discussions with the Tanzanian Government on the establishment of an appropriate mechanism to safeguard the recoverability
of VAT payments over the long term. In this regard, we have submitted proposals for the establishment of an escrow account
for VAT paid on domestic goods, similar to that currently used to provide for the refunding of VAT paid on imports and are
awaiting further feedback on this proposal. As at 30 June 2014, the outstanding amount relating to the total indirect tax
receivable, not covered by the 2011 Memorandum of Settlement, stood at US$66 million, roughly US$30 million lower than 31
December 2013.
Bulyanhulu Upper East
In April 2014 the Board approved the next step in the optimisation of Bulyanhulu through the acceleration of mining from the
Upper East Zone. The Zone is expected to produce 1.7 million ounces of gold, averaging 60,000 ounces per annum over a life
in excess of 25 years at an AISC of below our target run rate for Bulyanhulu for year-end 2015 of US$900 per ounce.
Following the Board approval, the mine undertook waste development in the Zone at a capital cost of US$4.7 million in Q2
2014. As expected, the mine will commence ore development in Q3 2014 and this is expected to lead to production from the
Upper East Zone of approximately 15,000 ounces of gold in H2 2014, weighted towards the fourth quarter. ABG continues to
expect that the 2014 capital requirements for the project will be approximately US$15 million. All capital associated with the
project to date has been categorised as capitalised development and is included in the Bulyanhulu and Group AISC figures.
Bulyanhulu Deep West
We have also progressed the accelerated development of the Bulyanhulu Deep West Zone through a contractor to increase
access to higher grade ore from Q4 2014. During Q2 2014 we incurred underground development capital costs of US$4.8
million for the project and we expect to incur similar costs per quarter for the remainder of 2014. This will be categorised as
capitalised development and is included in the Bulyanhulu and Group AISC figures.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
3 LSE: ABG
Bulyanhulu CIL Expansion
During the second quarter, we progressed the commissioning of the new CIL circuit at Bulyanhulu, which will add over 40,000
ounces per annum once fully operational, and are nearing completion of the commissioning stage. Towards the end of June,
roughly 6,500 tonnes of rougher tailings were treated and pumped into the new CIL circuit, resulting in 273 ounces of gold
being produced in circuit. We expect commissioning to be complete in early Q3 2014 with the first gold pour in August and the
ramp up of production to continue throughout the third quarter. We continue to expect production of 20,000 ounces in 2014
from the project, and are investigating an option for accelerating the retreatment of the historic higher grade tailings in
preference to the rougher tailings.
Gokona Underground
The feasibility study into the potential to mine Gokona Cut 3 via an underground operation progressed well in the second
quarter and is on track to be presented to the Board for approval in Q4 2014. During Q2 2014, ABG made the final decision on
the location of the exploration portal which will provide the opportunity to develop a better understanding of the ore body,
provide initial access to ore and drilling access to the deeper extensions of the ore body. Early works towards the construction
of the portal are in progress with the first blast due in August. The total expansionary capital cost of the portal is expected to be
around US$10 million.
Interim dividend
To ensure that our dividend policy is more closely aligned with the cash generation of the business, the Board of Directors have
approved an amendment to the existing dividend policy such that rather than being based on net earnings it will now be based
on operational cash flow after sustaining capital and capitalised development but before expansion capital.
The Board believes this metric more appropriately reflects both ABG‟s and the wider market‟s focus on cash flow generation as
well as the commitment to ongoing capital returns to shareholders. The dividend payout ratio of 15%-30% and the timing of the
payment, being 1/3 of the dividend as an interim dividend and the balance as a final dividend, remain unchanged.
In line with the above change, the Board of Directors is pleased to announce the approval of an interim dividend for 2014 of
US1.4 cents per share, an increase of 40% when compared to H1 2013.
The interim dividend will be payable on 22 September 2014 to holders on record at 29 August 2014. The ex-dividend date will
be 27 August 2014. ABG will declare the interim dividend in US dollars. Unless a shareholder elects to receive dividends in US
dollars, they will be paid in pounds sterling with the US dollar amount being converted into pounds sterling at the exchange rate
prevailing at the time. The last date for receipt of currency elections will be 2 September 2014. The exchange rate for the
conversion of the interim dividend will be elected on or around 4 September 2014.
Outlook
Over the past six months we have continued to deliver a strong performance from our operating portfolio, with sustainable cost containment across each of the mines and production growth led by North Mara. As we move into the second half of the year we expect the contribution from Bulyanhulu to increase as we begin to access higher grade areas, and both the CIL Expansion and the Upper East projects begin to contribute ounces. At North Mara, we expect the head grade to drop in the second half of the year as the high grade ore from Gokona will be increasingly blended with lower grade material from Nyabirama. At Buzwagi, we expect the grade to revert to between 1.5-1.6g/t in the second half, but anticipate that throughput levels will increase.
Following the approval of the Upper East Project and the Gokona Underground portal in Q2 2014 we expect capital expenditure
for the year to be between US$255–275 million. Sustaining capital (including land purchases) is expected to be US$80-90
million, with an acceleration of spending in the second half of the year versus H1 2014. Capitalised development is expected to
total US$125-135 million as a result of the accelerated development of the Bulyanhulu Deep West Zone together with the
categorisation of the Bulyanhulu Upper East project as capitalised development. Expansionary capital is expected to amount to
US$50 million which incorporates reduced residual CIL Expansion spend and the Gokona Underground portal.
As a result of the strong performance in H1 2014 and the addition of the Upper East ounces into the 2014 plan, we are revising production guidance upwards for the year to in excess of 700,000 ounces. We maintain our guidance for cash costs of US$740 to US$790 per ounce and all-in sustaining costs of US$1,100 to US$1,175 per ounce sold, and are targeting the bottom of both these ranges.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
4 LSE: ABG
Key statistics – restated to reflect Tulawaka as a discontinued operation
Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 20133
2014 2013
3
Tonnes mined (thousands of tonnes) 10,355 15,141
19,892 29,118
Ore tonnes mined (thousands of tonnes) 2,115 1,727
3,908 3,378
Ore tonnes processed (thousands of tonnes) 1,925 2,072
3,770 3,983
Process recovery rate (percent) 89.8% 88.8%
89.5% 88.9%
Head grade (grams per tonne) 3.2 2.7
3.2 2.7
Gold production (ounces) 178,206 164,439
346,581 307,198
Gold sold (ounces) 171,563 170,092
330,947 314,369
Copper production (thousands of pounds) 3,454 3,122
6,430 5,584
Copper sold (thousands of pounds) 2,874 2,756
5,391 6,113
Cash cost per tonne milled (US$/t) 67 71
66 69
Per ounce data Average spot gold price² 1,288 1,415
1,291 1,523
Average realised gold price1 1,277 1,366
1,290 1,480
Total cash cost1 749 862
752 876
All-in sustaining cost1 1,105 1,404
1,118 1,483
Average realised copper price (US$/lb) 3.16 3.04
3.07 3.23
Financial results – restated to reflect Tulawaka as a discontinued operation
Three months ended 30 June
Six months ended 30 June
(Unaudited, in US$'000 unless otherwise stated) 2014 20133
2014 2013
3
Continuing operations: Revenue 229,222 241,900
445,509 487,360
Cost of sales (173,333) (203,348)
(332,474) (386,733)
Gross profit 55,889 38,552
113,035 100,627
Corporate administration (7,618) (9,169)
(13,975) (17,583)
Share based payments (1,593) 425
(4,917) 3,861
Exploration and evaluation costs (6,025) (4,126)
(10,995) (7,715)
Corporate social responsibility expenses (1,811) (3,077)
(4,307) (6,228)
Impairment charges - (910,989)
- (910,989)
Other charges (6,159) (12,659)
(12,782) (15,597)
Profit/(loss) before net finance expense and taxation 32,683 (901,043)
66,059 (853,624)
Finance income 280 407
630 995
Finance expense (2,102) (2,177)
(4,504) (4,696)
Profit/(loss) before taxation 30,861 (902,813)
62,185 (857,325)
Tax (expense)/credit (12,047) 198,907
(22,716) 184,648
Net profit/(loss) from continuing operations 18,814 (703,906)
39,469 (672,677)
Discontinued operations: Net (loss)/profit from discontinued operations (402) (25,722)
886 (40,741)
Net profit/(loss) for the period 18,412 (729,628)
40,355 (713,418)
Attributed to:
Owners of the parent (net earnings) 18,412 (721,946)
40,822 (701,230)
- Continuing operations 18,814 (703,906)
39,469 (672,677)
- Discontinued operations (402) (18,040)
1,353 (28,553)
Non-controlling interests - (7,682)
(467) (12,188)
- Discontinued operations - (7,682)
(467) (12,188)
1 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ”Non IFRS measures”‟ on page 23 for definitions.
2 Reflect the London PM fix price.
3 Restated for the reclassification of Tulawaka as a discontinued operation.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
5 LSE: ABG
For further information, please visit our website: www.africanbarrickgold.com or contact:
African Barrick Gold plc +44 (0) 207 129 7150
Brad Gordon, Chief Executive Officer
Andrew Wray, Chief Financial Officer
Giles Blackham, Investor Relations Manager
Bell Pottinger +44 (0) 207 861 3232
Daniel Thöle
About ABG
ABG is Tanzania‟s largest gold producer and one of the largest gold producers in Africa. We have three producing mines, all
located in Northwest Tanzania, and several exploration projects at various stages of development in Tanzania and Kenya. We
have a high-quality asset base, solid growth opportunities and a clear strategy of optimising, expanding and growing our
business.
Maintaining our licence to operate through acting responsibly in relation to our people, the environment and the communities in
which we operate is central to achieving our objectives.
ABG is a UK public company with its headquarters in London. We are listed on the Main Market of the London Stock Exchange
under the symbol ABG and have a secondary listing on the Dar es Salaam Stock Exchange. Barrick Gold Corporation is our
majority shareholder. ABG reports in US dollars in accordance with IFRS as adopted by the European Union, unless otherwise
stated in this report.
Conference call
A conference call will be held for analysts and investors on 25 July 2014 at 11:30am London time.
The access details for the conference call are as follows:
A recording of the conference call will be made available at www.africanbarrickgold.com/investors/financial-reports/2014.aspx
after the call.
FORWARD- LOOKING STATEMENTS
This report includes “forward-looking statements” that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. These
statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future
production, operations, costs, projects, and statements regarding future performance. Forward-looking statements are generally identified by the words “plans,” “expects,” “anticipates,”
“believes,” “intends,” “estimates” and other similar expressions.
All forward-looking statements involve a number of risks, uncertainties and other factors, many of which are beyond the control of ABG, which could cause actual results and developments to
differ materially from those expressed in, or implied by, the forward-looking statements contained in this report. Factors that could cause or contribute to differences between the actual results,
performance and achievements of ABG include, but are not limited to, changes or developments in political, economic or business conditions or national or local legislation or regulation in
countries in which ABG conducts - or may in the future conduct - business, industry trends, competition, fluctuations in the spot and forward price of gold or certain other commodity prices
(such as copper and diesel), currency fluctuations (including the US dollar, South African rand, Kenyan shilling and Tanzanian shilling exchange rates), ABG’s ability to successfully integrate
acquisitions, ABG’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to
process its mineral reserves successfully and in a timely manner, ABG’s ability to complete land acquisitions required to support its mining activities, operational or technical difficulties which
may occur in the context of mining activities, delays and technical challenges associated with the completion of projects, risk of trespass, theft and vandalism, changes in ABG’s business
strategy including, the ongoing implementation of operational reviews, as well as risks and hazards associated with the business of mineral exploration, development, mining and production
and risks and factors affecting the gold mining industry in general. Although ABG’s management believes that the expectations reflected in such forward-looking statements are reasonable,
ABG cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance on forward-looking statements contained in this report. Any forward-
looking statements in this report only reflect information available at the time of preparation. Subject to the requirements of the Disclosure and Transparency Rules and the Listing Rules or
applicable law, ABG explicitly disclaims any obligation or undertaking publicly to update or revise any forward-looking statements in this report, whether as a result of new information, future
events or otherwise. Nothing in this report should be construed as a profit forecast or estimate and no statement made should be interpreted to mean that ABG’s profits or earnings per share
for any future period will necessarily match or exceed the historical published profits or earnings per share of ABG.
* Includes 273 ounces of gold in circuit at the CIL Expansion Plant
Operating performance
Gold production of 50,241 ounces for the quarter was 9% lower than in Q2 2013, in spite of the 6% increase in grade driven by an increase in the availability of high grade stopes. Tonnes hoisted and throughput were both impacted by the disruption of mining operations for approximately two weeks in May as a result of the search for a missing underground employee who was subsequently found deceased as a result of a non-operational incident. Gold ounces sold of 52,044 ounces were 4% below that in Q2 2013 primarily due to the lower production base, but exceeded production for the quarter due to the sale of concentrate ounces on hand at the end of Q1 2014.
Copper production of 1.1 million pounds for the quarter was 18% lower than in Q2 2013 due to lower throughput.
Cash costs for the quarter of US$919 per ounce sold were 2% lower than the prior year of US$936, although they increased
over Q1 2014 as a result of the lower production base and an increase in operating expenses to support the ramp up of
production in the second half of the year. Against the prior year period, cash costs were positively impacted by lower general
and administration costs primarily driven by lower freight costs, aviation charges, corporate charges and consumable costs.
AISC per ounce sold for the quarter of US$1,348 was 2% lower than in Q2 2013 (US$1,375), but higher than Q1 2014 as a
result of lower production, higher cash costs and higher capitalised development costs as explained below.
During the quarter, we progressed the commissioning of the new CIL circuit at Bulyanhulu and are nearing the completion of the
commissioning stage. In late June, roughly 6,500 tonnes of rougher tails were treated and pumped into the new CIL circuit,
resulting in 273 ounces of gold being produced in circuit. We expect commissioning of this project to be complete early in Q3
with the first gold pour in August. The ramp up of production will continue throughout the third quarter. We continue to expect
production of 20,000 ounces in 2014 from the project, and are investigating an option for accelerating the retreatment of the
historic higher grade tailings in preference to the rougher tailings.
We undertook waste development in the Upper East Zone for a capital cost of US$4.7 million in Q2 2014 and will commence
ore development as expected in Q3 2014. As a result, we expect production from the Upper East Zone of approximately 15,000
ounces of gold in H2 2014, weighted towards the fourth quarter. In addition, we have progressed the development of the Deep
West Zone through a contractor to accelerate access to higher grade ore from Q4 2014, and have incurred underground
development capital costs of US$4.8 million during the quarter. ABG expects that the combined capital requirements the Upper
East Zone and Deep West Zone for 2014 will be approximately US$30 million. This is categorised as capitalised development
and is included in the Bulyanhulu and Group AISC figures.
Capital expenditure for the quarter of US$30.5 million was 38% lower than in Q2 2013 of US$49.5 million. Capital expenditure
consisted mainly of capitalised underground development costs (US$17.2 million, inclusive of US$4.7 million of Upper East and
US$4.8 million of Deep West spend) and expansionary capital investment relating to the CIL circuit (US$10.1 million).
African Barrick Gold Half Year Report for the six months ended 30 June 2014
10 LSE: ABG
Buzwagi
Key statistics
Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 2013
2014 2013
Tonnes mined Kt 5,803 8,475
11,346 17,305
Ore tonnes mined Kt 1,333 800
2,354 1,501
Ore milled Kt 1,010 1,197
1,980 2,290
Head grade g/t 1.9 1.4
1.8 1.3
Mill recovery % 91.9% 87.3%
90.3% 88.2%
Ounces produced oz 57,787 45,726
102,344 85,746
Ounces sold oz 49,479 44,556
92,442 96,367
Cash cost per tonne milled US$/t 41 39
41 39
Cash cost per ounce sold US$/oz 837 1,054
879 918
AISC per ounce sold US$/oz 1,078 1,632
1,169 1,643
Copper production Klbs 2,318 1,740
3,999 3,346
Copper sold Klbs 1,721 1,589
3,044 4,078
Breakdown of Capital Expenditure - Sustaining capital US$('000) 3,915 4,512
Production for the quarter of 70,177 ounces was 10% higher than in Q2 2013 despite the marginally lower head grade as
throughput rates exceeded the prior year period by 12%. The higher milled tonnes were due to improved mill efficiency. Gold
ounces sold for the quarter of 70,040 ounces were in line with production.
Cash costs for the quarter of US$561 per ounce sold were 18% lower than in Q2 2013 (US$684). Cash costs were positively
impacted by increased production levels, together with a 36% reduction in the international workforce and lower maintenance
costs, both a result of initiatives driven by the Operational Review. This was partially offset by lower capitalised mining costs and
higher contracted services costs given increased drilling rates and activity.
AISC per ounce sold for the quarter of US$893 was 29% lower than in Q2 2013 (US$1,266) due to the reasons outlined above,
combined with lower sustaining capital and capitalised development expenditure in combination with the increased production
base.
During the second half of the year, North Mara is expected to mill an increased number of ore tonnes sourced from the lower
grade Nyabirama pit rather than from the Gokona pit. As a result head grades for the full year are expected to revert towards the
reserve grade of the mine.
The feasibility study into the potential to mine Gokona Cut 3 via an underground operation continued to progress well during the
quarter and is on track to be presented to the Board for approval in Q4 2014. During Q2, ABG made the final decision on the
location of the exploration portal which will provide the opportunity to develop a better understanding of the ore body, initial
access to ore and drilling access to the deeper extensions of the ore body. Early works towards the construction of the portal are
in progress with the first blast due in August. The total expansionary capital cost of the portal is expected to be around US$10
million.
Capital expenditure for the quarter of US$18.7 million was 41% lower than in Q2 2013 (US$31.8 million), due to lower capitalised
development and lower sustaining capital expenditure, slightly offset by increased expansionary expenditure. Key capital
expenditure included capitalised stripping costs (US$13.1 million), investments in tailings and infrastructure (US$1.8 million) and
component costs (US$2.1 million). Expansion capital of US$1.0 million relates to exploration drilling costs relating to the Gokona
Underground feasibility study.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
12 LSE: ABG
Exploration Review
Exploration during H1 2014 continued to focus on the Tanzanian near-mine and in-mine brownfield programmes and the West
Kenya Joint Venture Greenfield programmes. Exploration expenditure for the first half of the year was approximately US$10.6
million and the full year forecast budget remains US$16.0 million. The 2014 exploration programmes have been weighted
toward H1 2014, with large diamond core programmes from surface and underground platforms at Bulyanhulu, and extensive
soil sampling, ground geophysics and Aircore drilling programmes across the West Kenya Joint Venture.
In H2 2014, we expect to complete surface drilling on Bulyanhulu Deep West and Aircore drilling in Kenya. We will assess the
results of H1 2014 programmes and design follow-up programmes to test positive results. The next phase of underground
drilling at Bulyanhulu, which is targeting the deep western extension of Reef 2, commenced in early July.
Bulyanhulu Deep West Surface Drilling
Throughout H1 2014, we have continued a programme of deep diamond drilling West of the Bulyanhulu mine, targeting
extensions of the Reef 1 and Reef 2 vein series. The holes are designed to test the extensions of the Reef 1 structure from 400
metres to 1,200 metres west of the current Bulyanhulu resource where historic drilling had shown indications of further gold
mineralisation. Additionally, holes will also intersect the Reef 2 vein series, and provide an indication of whether the Reef 2
system is mineralised up to 2 kilometres west of currently delineated underground resources.
During H1 2014, a total of 7,503 metres of diamond core has been drilled from the surface holes. The Reef 1 and Reef 2
system has been intersected in several holes during H1 2014, with better results being returned from Reef 2 in this part of the
Bulyanhulu mineralised system. Encouraging results from the programme to date include the following significant intersections:
BGMDD0054: 2.0m @10.7g/t Au from 1,174m - Reef 2 series
BGMDD0054: 0.5m @ 37.9g/t Au from 1,335m - Reef 2 series
BGMDD0054: 0.5m @ 29.6g/t Au from 1,390m - Reef 2 series
BGMDD0054W1: 1.29m @ 11.7g/t Au from 1,435m - Reef 1
BGMDD0054W2: 1.02m @ 24.2g/t Au from 1,034m – Reef 2 series
BGMDD0054W2: 4.50m @ 8.05g/t Au from 1,640m, includes 1.0m @ 23.8g/t Au - Reef 1
BGMDD0054W3: 1.1m @ 5.35g/t Au from 1,363m – Reef 2 series
BGMDD0054W3: 1.20m @ 11.5g/t Au from 1,367m - Reef 2 series
BGMDD0055W1: 0.6m @ 18.8g/t Au from 613m - Reef 2 series
BGMDD0055W2: 0.80m @ 16.2g/t Au from 944m – Reef 2 series
BGMDD0055W3: 0.79m @ 7.00g/t Au from 1,059m – Reef 1
BGMDD0056W1: 0.50m @ 94.6g/t Au from 805m - Reef 2 series
The results from these holes are potentially significant in demonstrating that gold mineralisation, particularly on the Reef 2 vein
system continues West of the mine, which would open the potential for an expansion of the footprint of Bulyanhulu on Reef 2.
The drilling programme is expected to be completed during H2 2014 with a single rig drilling a further 2,500 metres of diamond
core drilling. This programme will form an important part of our assessment of how to most effectively develop the Bulyanhulu
mine over the long term.
Bulyanhulu East Deeps Underground Drilling - Reef 2
The East Deeps drilling programme targeted down dip mineralisation of the Bulyanhulu Reef 2 system which is outside the
current resource model. The programme was drilled from several underground drill platforms and was aimed at adding high
grade gold resources on the East Zone. Drilling was completed during H1 2014 with a total of 3,058 metres of diamond core
completed from three holes, bringing the total for the programme to five holes at 5,598 metres. The results received were all
from the Reef 2 series and included the following encouraging intersections:
UX4700-405: 1.0m @ 19.0g/t Au
UX4700-407: 1.3m @ 76.7g/t Au
UX4700-408: 1.75m @ 13.6g/t Au
UX4700-410: 0.5m @ 18.4g/t Au
These intersections continue to prove continuity at depth of the mineralisation with high grade. This has the potential to add to
the mine resource in this area, with the high grade shoot remaining open at depth. This stage of the programme has been
completed and the results will be incorporated into the end of year resource calculations. Further drilling programmes are
planned in this area and will be completed as part of a larger Reef 2 underground resource expansion programme being
undertaken by the mine over the next few years.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
13 LSE: ABG
West Kenya Joint Venture Projects
Aircore drilling testing existing gold-in-soil anomalies along the Liranda Corridor on the south side of the Kakamega Dome
continued throughout H1 2014, with a total of 830 holes completed for 32,215 metres. The Aircore programme has been very
successful, with 247 holes of the 992 holes completed since the programme commenced in 2013 returning anomalous results
(>0.1g/t Au), of which 87 holes intersecting zones of >0.50g/t Au including better results during H1 2014 of:
KDAC0312: 3m @ 15.2 g/t Au from 41m and 9m @ 1.71 g/t Au from 62m
KDAC0361: 39.5m @ 0.81 g/t Au from 9m, including 6m @ 2.26 g/t Au
KDAC0376: 9m @ 2.57 g/t Au from 57m
KDAC0617: 6m @ 7.7 g/t Au incl. 3m @ 13.7 g/t Au
KDAC0832: 12m @ 2.77 g/t Au incl. 3m @ 9.11 g/t Au
KDAC0841: 15m @ 1.94 g/t Au and 6m @ 4.35 g/t Au
KDAC0858: 6m @ 22.3 g/t Au incl. 3m @ 44 g/t Au
KDAC0860: 27m @ 1.31 g/t Au incl. 15m @ 2.16g/t Au
KDAC0877: 12m @ 12.6g/t Au incl. 3m @ 46.3 g/t Au
The gold mineralisation has been intersected in a variety of rock types along the Liranda Corridor, which indicates opportunities
to test for different types and styles of gold deposits in this area. The majority of gold mineralisation intersected to date has
been within weathered (oxidised) bedrock, often associated with quartz veining, but not always the case.
The Aircore results to date are very encouraging given the current line spacing of the Aircore traverses varies between 200
metres and 800 metres and the average depth of drilling to date is relatively shallow at approximately 50 metres. Step-out and
infill traverses are being undertaken as part of the current phase of the programme before targets will be ranked for testing by
more advanced reverse circulation and diamond drilling.
In tandem with the Aircore drilling we are undertaking gradient and pole-dipole IP and Resistivity across selected gold-in-soil
anomalies throughout the Lake Zone Camp in the central and western areas of the project. A total of 147 line kilometres of
surveys have now been completed. Ten targets showing distinct resistivity and/or chargeability zones coincident with the gold-
in-soil anomalies have been delineated and will be considered as priority targets for future drilling programmes.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
14 LSE: ABG
Financial Review
The positive impact of the Operational Review and the challenging gold price environment in 2014 is reflected in the ABG
Group‟s financial results for the six months ended 30 June 2014 which also present Tulawaka as a discontinued operation:
Revenue of US$445.5 million was US$41.9 million lower than H1 2013 driven by a 13% decrease in the average realised gold price to US$1,290 per ounce sold (US$1,480 per ounce sold in the prior year period), which more than offset an increase of 16,578 ounces (5%) in sales volumes.
Cash costs decreased to US$752 per ounce sold from US$876 in H1 2013, driven by higher production, lower labour costs and contracted services.
All-in sustaining costs decreased to US$1,118 per ounce sold from US$1,483 in H1 2013 due to lower cash costs, sustaining capital expenditures and capitalised development costs.
EBITDA increased by 1% to US$131.6 million, mainly driven by lower direct mining costs achieved from the implementation of the Operational Review initiatives.
Operational cash flow of US$127.1 million was 28% higher than H1 2013, mainly due to reduced operating costs and decreased working capital investment.
The following review provides a detailed analysis of our consolidated results for the six months ended 30 June 2014 and the
main factors affecting financial performance. It should be read in conjunction with the consolidated interim financial information
and accompanying notes on pages 27 to 44, which have been prepared in accordance with International Financial Reporting
Standards as adopted for use in the European Union (IFRS).
Discontinued operation – Tulawaka
On 15 November 2013, ABG announced that an agreement was reached with STAMICO, the Tanzanian State Mining
Corporation, whereby STAMICO acquired the Tulawaka Gold Mine (“Tulawaka”) and certain exploration licenses surrounding
Tulawaka for a consideration of US$4.5 million and the grant of a 2% net smelter royalty on future production in excess of
500,000 ounces, capped at US$0.5 million. As part of the agreement, STAMICO took ownership and management of the
rehabilitation fund established as part of the closure plan for the mine, in return for the assumption of all remaining past and
future closure and rehabilitation liabilities for Tulawaka, and indemnified the other parties to the agreement in relation to these
liabilities. This resulted in a cash payment by ABG to STAMICO of the balance of the rehabilitation fund, less the transaction
consideration on completion. Tulawaka was 100% owned by the Tulawaka Joint Venture, in which ABG held a 70% economic
interest through a wholly owned subsidiary, and MDN Inc held the remaining 30% of the Joint Venture. Production at Tulawaka
ceased in Q2 2013. The transaction completed on 4 February 2014, resulting in a cash payment of US$11.6 million to
STAMICO.
The financial results of Tulawaka have been presented as discontinued operations in the consolidated interim financial
information. The comparative results in the consolidated interim income statement have been presented as if Tulawaka had
been discontinued from the start of the comparative period, effectively excluding the net result relating to Tulawaka from
individual income statement lines and aggregating it in one line called “Net profit/(loss) from discontinued operations”. Below is a
reconciliation showing Group financial performance on a line by line basis.
Six months ended 30 June 2014
Six months ended 30 June 2013
(US$‟000) (Unaudited)
Continuing operations
Discontinued operations Total
Continuing operations
Discontinued operations Total
Revenue 445,509 - 445,509
487,360 12,392 499,752
Cost of sales (332,474) - (332,474)
(386,733) (28,151) (414,884)
Gross profit 113,035 - 113,035
100,627 (15,759) 84,868
Corporate administration (13,975) - (13,975)
(17,583) (1,301) (18,884)
Share based payments (4,917) - (4,917)
3,861 114 3,975
Exploration and evaluation costs (10,995) - (10,995)
(7,715) 161 (7,554)
Corporate social responsibility expenses (4,307) (92) (4,399)
(6,228) (690) (6,918)
Impairment charges - - -
(910,989) (16,701) (927,690)
Other charges (12,782) 958 (11,824)
(15,597) (6,496) (22,093)
Profit/(loss) before net finance expense and taxation 66,059 866 66,925
(853,624) (40,672) (894,296)
Finance income 630 36 666
995 10 1,005
Finance expense (4,504) (16) (4,520)
(4,696) (79) (4,775)
Profit/(loss) before taxation 62,185 886 63,071
(857,325) (40,741) (898,066)
Tax (expense)/credit (22,716) - (22,716)
184,648 - 184,648
Net profit/(loss) for the period 39,469 886 40,355
(672,677) (40,741) (713,418)
African Barrick Gold Half Year Report for the six months ended 30 June 2014
15 LSE: ABG
The financial performance below is stated for continuing operations.
Revenue
Revenue for H1 2014 of US$445.5 million was 9% lower than in H1 2013 (US$487.4 million). Year-on-year realised gold prices
decreased by 13% to US$1,290 per ounce sold from US$1,480 in H1 2013, which more than offset the increase in sales
volumes of 16,578 ounces. The increase in sales ounces was primarily due to the higher production base.
Included in total revenue was co-product revenue of US$18.7 million for H1 2014, which decreased by 17% from the prior year
period (US$22.7 million) due to the lower copper sales volumes and a lower realised copper price. The H1 2014 average
realised copper price of US$3.07 per pound compared unfavourably to that of H1 2013 (US$3.23 per pound), and was driven by
global market factors regarding supply and demand.
Cost of sales
Cost of sales was US$332.5 million for H1 2014, representing a decrease of 14% on the prior year period (US$386.7 million).
The key aspects impacting the cost of sales for the reporting period were lower direct mining costs as a result of Operational
Review savings across labour, consumables and freight, a change in inventory credit driven by the investment in ore inventory
and build up of ounces on hand and lower depreciation and amortisation charges driven by the lower capital base employed.
The table below provides a breakdown of cost of sales:
(US$'000) Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 2013
2014 2013
Cost of Sales
Direct mining costs 122,841 141,623
238,087 268,238
Third party smelting and refining fees 5,783 3,611
9,916 7,997
Royalty expense 10,011 10,845
19,775 21,831
Depreciation and amortisation 34,698 47,269
64,696 88,667
Total 173,333 203,348
332,474 386,733
A detailed breakdown of direct mining expenses is shown in the table below:
(US$'000) Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 2013
2014 2013
Direct mining costs
Labour 32,976 39,040
67,973 80,440
Energy and fuel 33,926 35,932
66,345 70,228
Consumables 24,850 28,148
48,723 54,796
Maintenance 24,907 23,142
47,923 47,741
Contracted services 23,549 23,583
42,300 50,030
General administration costs 19,522 24,103
39,591 45,808
Capitalised mining costs (36,889) (32,325)
(74,768) (80,805)
Total direct mining costs 122,841 141,623
238,087 268,238
Direct mining costs of US$238.1 million for H1 2014 were 11% lower than H1 2013 (US$268.2 million). Individual cost
components comprised:
A 15% reduction in labour costs, mainly as a result of the lower headcount at all operating sites, specifically a 29% reduction in group international employees, driven by localisation efforts and the impact of the Operational Review.
A 6% reduction in energy and fuel expenses, driven primarily by lower diesel usage at North Mara as a result of reduced mining activity, and at Buzwagi as a result of reduced mining and processing activity.
An 11% decrease in consumable costs, primarily due to supplier price negotiations, increased mine site efficiencies and lower mining activity.
Maintenance costs of US$47.9 million were in line with prior year costs of US$47.7 million.
A 15% decrease in contracted services, mainly driven by lower mining activity at Buzwagi, and the renegotiated maintenance rates associated with maintenance and repair contracts (“MARC”) contracts at Buzwagi and North Mara.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
16 LSE: ABG
A 14% decrease in general administration costs, mainly at Bulyanhulu and North Mara driven by lower freight costs associated with inventory consumed, a decrease in the stock obsolescence provision and lower aviation charter costs driven by the Operational Review.
Capitalised direct mining costs, consisting of capitalised development costs and the change in inventory charge, is comprised as follows:
(US$'000) Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 2013
2014 2013
Capitalised direct mining costs
Capitalised development costs (30,649) (52,298)
(64,095) (95,775)
(Investment in)/ drawdown of inventory (6,240) 19,973
(10,673) 14,970
Total capitalised direct mining costs (36,889) (32,325)
(74,768) (80,805)
Capitalised development costs were 33% lower than H1 2013, driven by increased focus on mining ore at Buzwagi due to the
revised mine plan. The investment in inventory was US$25.6 million higher than in H1 2013 due to a build up of ore inventory
at Buzwagi due to lower throughput rates combined with increased gold inventory on hand driven by the timing of production
compared to sales. This was slightly offset by a drawdown of ore stockpiles at North Mara as a result of the improved
throughput rate and plant performance.
Corporate administration costs
Corporate administration expenses totalled US$18.9 million for H1 2014. A US$3.6 million decrease in general corporate
administration costs due to the impact of the Operational Review was more than offset by an increase of US$8.8 million in share
based payment expenses given the stronger share price performance. This resulted in a 38% increase on H1 2013 (US$13.7
million) as shown in the table below.
Three months ended 30 June
Six months ended 30 June
(US$'000) 2014 2013
2014 2013
(Unaudited)
Corporate administration 7,618 9,169
13,975 17,583
Share based payments 1,593 (425)
4,917 (3,861)
Total corporate administration 9,211 8,744
18,892 13,722
Exploration and evaluation costs
Exploration and evaluation costs of US$11.0 million were incurred in H1 2014, 43% higher than the US$7.7 million spent in H1
2013. The key focus areas for H1 2014 were drilling at Bulyanhulu deep central reefs 1 and 2 (US$5.5 million), and exploration
programmes at the West Kenya Joint Venture project amounting to US$3.3 million. The Bulyanhulu underground programme
has been completed in H1 2014 and the second half of the year should see decreased field activity across all projects.
Corporate social responsibility expenses
Corporate social responsibility costs incurred amounted to US$4.3 million for the six months compared to the prior year of
US$6.2 million. The main projects for H1 2014 related to Village Benefit Implementation Agreements (“VBIAs”) at North Mara
and contributions to general community projects funded from the ABG Maendeleo Fund. Other charges
Other charges amounted to US$12.8 million, 18% lower than H1 2013 (US$15.6 million). The main contributors were: (i) non-
cash foreign exchange losses mainly related to the indirect tax receivables due to the weakening of the Tanzanian shilling
(US$7.8 million), (ii) Operational Review costs, including external services and retrenchment costs of US$5.3 million, (iii) legal
costs of US$1.9 million, and (iv) ABG‟s entry into zero cost collar contracts as part of a programme to protect it against copper,
silver, rand and fuel cost market volatility. The entry into these arrangements resulted in a combined mark-to-market
revaluation gain of US$2.7 million, due to the fact that these arrangements do not qualify for hedge accounting. Refer to note 7
of the consolidated interim financial information for further details.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
17 LSE: ABG
Finance expense and income
Finance expense of US$4.5 million for H1 2014 was 4% lower than H1 2013 (US$4.7 million). The key drivers were US$1.2
million (US$1.5 million in 2013) relating to the servicing of the US$150 million undrawn revolving credit facility, and accretion
expenses relating to the discounting of the environmental reclamation liability (US$2.5 million). Other costs include bank charges
and interest on finance leases. Interest costs relating to the project financing on the CIL Bulyanhulu Expansion project are
capitalised to the cost of the asset due to the facility being directly attributable to the asset. For the six months ended 30 June
2014 US$2.0 million of borrowing costs have been capitalised to the project.
Finance income relates predominantly to interest charged on non-current receivables and interest received on money market
funds. Refer to note 8 of the consolidated interim financial information for details.
Taxation matters
The taxation charge was US$22.7 million for H1 2014, compared to a credit of US$184.6 million in H1 2013. The tax charge was
made up solely of deferred tax charges and reflects the impact of the profitability on a year-to-date basis. The effective tax rate in
H1 2014 amounted to 36.5% compared to 21.5% in H1 2013. The increase is mainly driven by the increase in taxable income,
and temporary higher tax losses for corporate and exploration entities in Q2 2014 for which deferred tax assets are not
recognised. This is expected to normalise in H2 2014.
Net earnings from continuing operations
As a result of the factors discussed above, net profit from continuing operations for H1 2014 was US$39.5 million, against the
prior year period loss of US$672.7 million. Lower impairment charges, costs of sales, and other charges contributed to the
variance. This was offset by the higher tax charge and lower revenue.
Earnings per share The earnings per share for H1 2014 amounted to US10.0 cents, an increase of US181.0 cents from the prior year period loss of US171.0 cents. The increase was driven by an increased net profit with no change in the underlying issued shares. Earnings per share from continuing operations amounted to US9.6 cents.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
18 LSE: ABG
Key financial performance indicators and reconciliations
Cash costs
Cash cost per ounce sold in H1 2014 (US$752 per ounce sold) decreased by 14% when compared to H1 2013 (US$876 per
ounce). Refer to the operating overview on page 7 and cost of sales explanations as part of the financial review for the details on
the year on year change.
The table below provides a reconciliation between cost of sales and total cash cost to calculate the cash cost per ounce sold.
(US$'000) Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 2013
2014 2013
Total cost of sales 173,333 203,348
332,474 386,733
Deduct: depreciation and amortisation (34,698) (47,269)
(64,696) (88,667)
Deduct: Co-product revenue (10,098) (9,544)
(18,744) (22,670)
Total cash cost 128,537 146,535
249,034 275,396
Total ounces sold 171,563 170,092
330,947 314,369
Cash cost per ounce 749 862
752 876
Discontinued operations - 17
- 27
Attributable cash cost per ounce 749 879
752 903
Refer to note 6 to the consolidated interim financial information for a reconciliation to all-in sustaining cost per ounce sold.
EBITDA
EBITDA for H1 2014 increased by 1% to US$131.6 million when compared to H1 2013 (US$130.8 million) as a result of the
lower cost of sales and other charges, partly offset by lower revenue and higher corporate administration costs. A reconciliation
between net profit for the period and EBITDA is presented below:
(US$‟000) Three months ended 30 June
Six months ended 30 June
(Unaudited) 2014 2013 2014 2013
Net profit/ (loss) for the period 18,412 (729,628)
40,355 (713,418)
Plus income tax expense 12,047 (198,907)
22,716 (184,648)
Plus depreciation and amortisation 34,698 47,865
64,696 97,377
Plus impairment charges/write-offs - 927,690
- 927,690
Plus finance expense 2,106 2,218
4,520 4,775
Less finance income (304) (410)
(666) (1,005)
EBITDA 66,959 48,828
131,621 130,771
African Barrick Gold Half Year Report for the six months ended 30 June 2014
19 LSE: ABG
Financial position
ABG had cash and cash equivalents on hand of US$269.6 million as at 30 June 2014 (US$320.9 million as at 30 June 2013).
The Group‟s cash and cash equivalents are with counterparties whom the Group considers to have an appropriate credit rating.
Location of credit risk is determined by physical location of the bank branch or counterparty. Investments are held mainly in
United States dollars and cash and cash equivalents in other foreign currencies are maintained for operational requirements.
During 2013, a US$142 million facility was put in place to fund the bulk of the costs of the construction of one of our key growth projects, the Bulyanhulu CIL Expansion project (“Project”). The Facility is collateralised by the Project, and has a term of seven years with a spread over Libor of 250 basis points. The seven year Facility is repayable in equal instalments over the term of the Facility, after a two year repayment holiday period. The interest rate has been fixed at 3.6% through the use of an interest rate swap. The full facility of US$142 million was drawn in 2013.
The above compliments the existing undrawn revolving credit facility of US$150 million which runs until November 2016.
The net book value of property, plant and equipment increased from US$1.28 billion in December 2013 to US$1.35 billion in
June 2014. The main capital expenditure drivers have been explained in the cash flow used in the investing activities section
below, and have been offset by depreciation charges of US$64.7 million. Refer to notes 6 and 12 to the consolidated interim
financial information for further details.
Total indirect tax receivables, net of a discount provision applied to the non-current portion, decreased from US$159.8 million as
at 31 December 2013 to US$126.6 million as at 30 June 2014. The decrease was mainly due to refunds of US$65.8 million
received during H1 2014, which was offset by a net increase in current VAT receivables of approximately US$37 million. The net
deferred tax position decreased from an asset of US$14.9 million as at 31 December 2013 to a liability of US$7.8 million. This
was mainly driven by the reduction in deferred tax assets as a result of the company making taxable income.
Net assets attributable to owners of the parent increased from US$1.93 billion in December 2013 to US$1.96 billion in June
2014. The increase reflects the current year profit attributable to owners of the parent of US$40.8 million and the payment of the
final 2013 dividend of US$8.2 million to shareholders during H1 2014.
Cash flow generation and capital management
Cash flow – continuing and discontinued operations
(US$‟000)
For the three months ended 30 June For six months ended 30 June
(Unaudited) 2014 2013 2014 2013
Cash generated from operating activities 76,381 41,691
127,107 99,017
Cash used in investing activities (50,541) (102,943)
(128,074) (208,822)
Cash (used in)/provided by financing activities (10,249) (20,263)
(11,085) 27,588
Increase/(decrease) in cash 15,591 (81,515)
(12,052) (82,217)
Foreign exchange difference on cash (89) 868
(761) 1,742
Opening cash balance 254,094 401,520
282,409 401,348
Closing cash balance 269,596 320,873
269,596 320,873
Cash flow from operating activities was US$127.1 million for H1 2014, an increase of US$28.1 million, when compared to H1
2013 (US$99.0 million). The increase primarily relates increased EBITDA, slightly offset by an investment in working capital.
The working capital investment of US$3.8 million related mainly to a decrease in trade payables of US$16.4 million due to the
timing of payments combined with an investment in gold inventory of US$14.6 million. This was offset by VAT refunds of
US$28.2 million received from the Tanzanian Government.
Cash flow used in investing activities was US$128.1 million for H1 2014, a decrease of 39% when compared to H1 2013
(US$208.8 million), driven by lower sustaining capital expenditure across all sites, lower expansion capital expenditure mainly
related to the Bulyanhulu CIL Expansion project and lower capitalised development expenditure at Buzwagi and North Mara.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
20 LSE: ABG
A breakdown of total capital and other investing capital activities for the six months ended 30 June is provided below:
(US$‟000)
For six months ended 30 June
(Unaudited) 2014 2013
Sustaining capital
20,724 58,987
Expansionary capital
26,809 53,866
Capitalised development
68,963 94,357
Total cash capital
116,496 207,210
Non-cash rehabilitation asset adjustment
14,918 (22,128)
Non-cash sustaining capital1
(1,752) 1,846
Total capital expenditure
129,662 186,928
Other investing capital
- Non-current asset movement2
(55) 1,612
-Cash flow related to the sale of Tulawaka
11,633 -
1 Total non-cash sustaining capital relates to the impact of capital accruals excluded from cash sustaining capital.
2 Non-current asset movements relates to the investment in the land acquisitions reflected as prepaid operating leases and Tanzania government receivables.
Sustaining capital
Sustaining capital expenditure included the investment in mine equipment of US$6.7 million, mainly relating to component
change outs at North Mara and Buzwagi and investment in tailings and infrastructure at North Mara (US$3.4 million), Bulyanhulu
(US$3.2 million), and Buzwagi (US$3.0 million).
Expansionary capital
Expansionary capital expenditure consisted mainly of the Bulyanhulu CIL Expansion project (US$24.9 million).
Capitalised development
Capitalised development capital includes capitalised stripping for North Mara (US$25.4 million) and Buzwagi (US$15.2 million)
and Bulyanhulu capitalised underground development of US$28.4 million.
Non-cash capital
Non-cash capital was US$13.2 million and consisted of reclamation asset adjustments (US$14.9 million) and the six months
increase in capital accruals (US$1.8 million). The reclamation adjustments were driven by lower US risk free rates driving lower
discount rates.
Other investing capital
The sale of Tulawaka to STAMICO resulted in a cash payment of the balance of the rehabilitation fund, less the transaction
consideration on completion, and amounted to US$11.6 million. During H1 2014 North Mara incurred land purchases totalling
US$5.3 million.
Cash flow used in financing activities for the six months ended 30 June 2014 was US$11.1 million, a decrease of US$38.7
million on H1 2014 (US$27.6 million inflow). The outflow primarily relates to payment of the final 2013 dividend of US$8.2 million
and finance lease payments of US$2.9 million. Dividend
The final dividend for 2013 of US2.0 cents per share was paid to shareholders during May 2014. The Board of Directors have
approved an interim dividend for 2014 of US1.4 cents per share, payable to shareholders in September 2014.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
21 LSE: ABG
Significant judgements in applying accounting policies and key sources of estimation uncertainty
Many of the amounts included in the consolidated interim financial statements require management to make judgements and/or
estimates. These judgements and estimates are continuously evaluated and are based on management‟s experience and best
knowledge of the relevant facts and circumstances, but actual results may differ from the amounts included in the consolidated
financial information included in this release. Information about such judgements and estimation is included in the accounting
policies and/or notes to the consolidated interim financial statements, and the key areas are summarised below.
Areas of judgement and key sources of estimation uncertainty that have the most significant effect on the amounts recognised in
the consolidated interim financial statements include:
Estimates of the quantities of proven and probable gold reserves;
The capitalisation of production stripping costs;
The capitalisation of exploration and evaluation expenditures;
Review of goodwill, tangible and intangible assets‟ carrying value, the determination of whether these assets are impaired
and the measurement of impairment charges or reversals;
The estimated fair values of cash generating units for impairment tests, including estimates of future costs to produce
proven and probable reserves, future commodity prices, foreign exchange rates and discount rates;
The estimated useful lives of tangible and long-lived assets and the measurement of depreciation expense;
Property, plant and equipment held under finance leases;
Recognition of a provision for environmental rehabilitation and the estimation of the rehabilitation costs and timing of
expenditure;
Whether to recognise a liability for loss contingencies and the amount of any such provision;
Whether to recognise a provision for accounts receivable and the impact of discounting the non-current element;
Recognition of deferred income tax assets, amounts recorded for uncertain tax positions, the measurement of income tax
expense and indirect taxes;
Determination of the cost incurred in the productive process of ore stockpiles, gold in process, gold doré/bullion and
concentrate, as well as the associated net realisable value and the split between the long term and short term portions;
Determination of fair value of derivative instruments; and
Determination of fair value of stock options and cash-settled share based payments.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
22 LSE: ABG
Going concern statement
The ABG Group‟s business activities, together with factors likely to affect its future development, performance and position are
set out in the operational and financial review sections of this report. The financial position of the ABG Group, its cash flows,
liquidity position and borrowing facilities are described in the preceding paragraphs of this financial review.
At 30 June 2014, the Group had cash and cash equivalents of US$269.6 million with a further US$150 million available under
the undrawn revolving credit facility which has been further extended until November 2016. Total borrowings at the end of the
year amounted to US$142 million, of which the first repayment is only repayable from 2015.
Included in other receivables are amounts due to the Group relating to indirect taxes of US$66.0 million which are expected to be
received within 12 months, but these will be offset to an extent by new claims submitted for input taxes incurred during 2014. The
refunds remain dependent on processing and payments of refunds by the Government of Tanzania.
We expect that the above, in combination with the expected operational cash flow generated during the year, will be sufficient to
cover the capital requirements and other commitments for the foreseeable future.
In assessing the ABG Group‟s going concern status the Directors have taken into account the above factors, including the
financial position of the ABG Group and in particular its significant cash position, the current gold and copper price and market
expectations for the same in the medium term, and the ABG Group‟s capital expenditure and financing plans. After making
appropriate enquiries, the Directors consider that ABG and the ABG Group as a whole has adequate resources to continue in
operational existence for the foreseeable future and that it is appropriate to adopt the going concern basis in preparing the
consolidated interim financial statements.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
23 LSE: ABG
Non-IFRS Measures
ABG has identified certain measures in this report that are not measures defined under IFRS. Non-IFRS financial measures
disclosed by management are provided as additional information to investors in order to provide them with an alternative method
for assessing ABG‟s financial condition and operating results. These measures are not in accordance with, or a substitute for,
IFRS, and may be different from or inconsistent with non-IFRS financial measures used by other companies. These measures
are explained further below.
Average realised gold price per ounce sold is a non-IFRS financial measure which excludes from gold revenue:
- Unrealised mark-to-market gains and losses on provisional pricing from copper and gold sales contracts; and - Export duties.
Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as
royalties, and production taxes, and exclude capitalised production stripping costs, inventory purchase accounting adjustments,
unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and amortisation and corporate social
responsibility charges. Cash cost is calculated net of co-product revenue. Refer to page 15 for a reconciliation to cost of sales.
The presentation of these statistics in this manner allows ABG to monitor and manage those factors that impact production costs
on a monthly basis. Cash cost per ounce sold is calculated by dividing the aggregate of these costs by gold ounces sold. Cash
costs and cash cost per ounce sold are calculated on a consistent basis for the periods presented.
All-in sustaining cost (AISC) is a non-IFRS financial measure. The measure is in accordance with the World Gold Council‟s
guidance issued in June 2013. It is calculated by taking cash cost per ounce sold and adding corporate administration costs, reclamation and remediation costs for operating mines, corporate social responsibility expenses, mine exploration and study costs, capitalised stripping and underground development costs and sustaining capital expenditure. This is then divided by the total ounces sold. A reconciliation between cash cost per ounce sold and AISC is presented below:
(Unaudited) Three months ended 30 June 2014
Three months ended 30 June 2013
(US$/oz sold) Bulyanhulu North Mara Buzwagi
ABG Group ongoing
operations
Bulyanhulu North Mara Buzwagi
ABG Group ongoing
operations
Cash cost per ounce sold 919 561 837 749
936 684 1,054 862
Corporate administration 40 36 39 45
61 35 57 54
Share based payments 2 - (4) 9
- (1) - (3)
Rehabilitation 8 19 6 12
7 31 24 21
Mine exploration 2 2 1 2
3 16 2 8
CSR expenses 2 12 9 11
5 26 3 18
Capitalised development 330 187 112 209
217 313 391 303
Sustaining capital 45 76 78 68
146 162 101 141
Total continuing operations 1,348 893 1,078 1,105
1,375 1,266 1,632 1,404
Discontinued operations
0
12
Total
1,105
1,416
(Unaudited) Six months ended 30 June 2014
Six months ended 30 June 2013
(US$/oz sold) Bulyanhulu North Mara Buzwagi
ABG Group ongoing
operations
Bulyanhulu North Mara Buzwagi
ABG Group ongoing
operations
Cash cost per ounce sold 867 584 879 752
1,033 739 918 876
Corporate administration 41 34 38 42
81 40 55 56
Share based payments 2 1 4 15
(1) (1) (1) (12)
Rehabilitation 7 19 7 12
8 34 21 23
Mine exploration 2 1 1 2
4 16 3 8
CSR expenses 4 15 14 13
5 29 4 20
Capitalised development 281 185 164 208
274 222 429 300
Sustaining capital 45 97 62 74
177 234 214 212
Total continuing operations 1,249 936 1,169 1,118
1,581 1,313 1,643 1,483
Discontinued operations
0
24
Total
1,118
1,507
AISC is intended to provide additional information on the total sustaining cost for each ounce sold, taking into account expenditure incurred in addition to direct mining costs, depreciation and selling costs.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
24 LSE: ABG
Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as
royalties, by-product credits, and production taxes, and exclude capitalised production stripping costs, inventory purchase
accounting adjustments, unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and
amortisation and corporate social responsibility charges. Cash cost is calculated net of co-product revenue. Cash costs per
tonne milled are calculated by dividing the aggregate of these costs by total tonnes milled.
EBITDA is a non-IFRS financial measure. ABG calculates EBITDA as net profit or loss for the period excluding:
- Income tax expense; - Finance expense; - Finance income; - Depreciation and amortisation; - Impairment charges of goodwill and other long-lived assets; and - Discontinued operations.
EBITDA is intended to provide additional information to investors and analysts. It does not have any standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently. EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for depreciation and amortisation and goodwill impairment
charges.
Mining statistical information
The following describes certain line items used in the ABG Group‟s discussion of key performance indicators:
- Open pit material mined – measures in tonnes the total amount of open pit ore and waste mined.
- Underground ore tonnes hoisted – measures in tonnes the total amount of underground ore mined and hoisted.
- Total tonnes mined includes open pit material plus underground ore tonnes hoisted.
- Strip ratio – measures the ratio of waste-to-ore for open pit material mined.
- Ore milled – measures in tonnes the amount of ore material processed through the mill.
- Head grade – measures the metal content of mined ore going into a mill for processing.
- Milled recovery – measures the proportion of valuable metal physically recovered in the processing of ore. It is generally
stated as a percentage of the metal recovered compared to the total metal originally present.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
25 LSE: ABG
Risk Review
We have made a number of further developments in the identification and management of our risk profile over the course of H1
2014 and where appropriate, risk ratings have been reviewed against risk management controls and other mitigating factors.
Our principal risks continue to fall within four broad categories: strategic risks, financial risks, external risks and operational
risks and, while the overall makeup of our principal risks has not significantly changed from that published in the 2013 Annual
Report, there have been changes in certain risk profiles as a result of developments in our operating environment, in particular
enhancements made to operating and planning practices, and continuing uncertainties and trends within the wider global
economy and/or the mining industry. This has resulted in the following risks being removed from those risks previously viewed
as principal risks to ABG and its operations: (i) costs and capital expenditure; (ii) utilities supply; (iii) land acquisitions; and (iv)
loss of critical processes. Further details of these risks are provided in the 2013 Annual Report. In conjunction with this, we
believe it appropriate to add a new risk as a principal risk for the remainder of 2014, this being safety risks relating to mining
operations. This is due to the fact that, despite the significant health, safety and risk management systems that ABG has in
place for its underground and surface mining operations, mining and in particular underground mining is subject to a number of
hazards and risks in the workplace, such as fall of ground relating to underlying geotechnical risks, potential fires and mobile
equipment incidents, such that safety incidents in the workplace may unfortunately occur.
As a result of the review outlined above, for the remainder of 2014 we view our principal risks as relating to the following:
Single country risk
Reserves and resources estimates
Commodity prices
Political, legal and regulatory developments
Taxation reviews
Community relations
Environmental hazards and rehabilitation
Employer, contractor and industrial relations
Security, trespass and vandalism
Organisational restructuring
Safety risks relating to mining operations
Further detail as regards the nature of the new safety risks relating to mining operations is provided above. Further detail as regards all other principal risks outlined above is provided as part of the 2013 Annual Report.
Directors’ Responsibility Statement
The Directors confirm that, to the best of their knowledge, the consolidated interim financial information has been prepared in
accordance with IAS 34 as adopted by the European Union. The interim management report includes a fair review of the
information required by Disclosure and Transparency Rule 4.2.7R and Disclosure and Transparency Rule 4.2.8R, namely:
an indication of important events that have occurred during the first six months of the financial year and their impact
on the consolidated interim financial information, and a description of the principal risks and uncertainties for the
remaining six months of the financial year; and
material related-party transactions in the first six months of the financial year and any material changes in the related
party transactions described in the last Annual Report.
The Directors of African Barrick Gold plc are listed in the African Barrick Gold plc Annual Report for 31 December 2013. A list
of current Directors is maintained on the African Barrick Gold plc website: www.africanbarrickgold.com.
Liabilities of disposal group classified as held for sale
- - 16,760
Total liabilities 494,763 479,554 504,621
Total equity and liabilities 2,453,559 2,494,660 2,431,983
The notes on pages 32-44 form an integral part of this financial information.
African Barrick Gold Half Year Report for the six months ended 30 June 2014
30 LSE: ABG
Consolidated Statement of Changes in Equity
Notes Share
capital Share
premium
Contributed surplus/Other
reserve
Cash flow
hedging reserve
Stock option
reserve
Retained earnings/
(Accumulated losses)
Total owners'
equity
Total non- controlling
interests Total equity
(US$‟000)
Balance at 31 December 2012 (Audited)
62,097 867,102 1,368,713
363
3,502 453,934
2,755,711 22,580
2,778,291
Total comprehensive income/(loss)
- - -
560
- (701,230)
(700,670) (12,188)
(712,858)
Dividends to equity holders of the Company
- - -
-
- (50,441)
(50,441) -
(50,441)
Stock option grants and valuation adjustments
- - -
-
114 -
114 -
114
Balance at 30 June 2013 (Unaudited)
62,097 867,102 1,368,713
923
3,616 (297,737)
2,004,714 10,392
2,015,106
Total comprehensive income/(loss) for the period
- - -
1,010
- (79,871)
(78,861)
(5,144)
(84,005)
Dividends to equity holders of the Company
- - -
-
- (4,101)
(4,101) -
(4,101)
Stock option grants and valuation adjustments
- - -
-
362 -
362 -
362
Balance at 31 December 2013 (Audited)
62,097 867,102 1,368,713
1,933
3,978 (381,709)
1,922,114 5,248
1,927,362
Total comprehensive (loss)/income for the period
- - -
(1,037)
- 40,822
39,785
(467)
39,318
Dividends to equity holders of the Company 12
- - -
-
- (8,202)
(8,202) -
(8,202)
Stock option grants and valuation adjustments
- - -
-
318 -
318 -
318
Balance at 30 June 2014 (Unaudited)
62,097 867,102 1,368,713
896
4,296 (349,089)
1,954,015 4,781
1,958,796
The notes on pages 32-44 form an integral part of this financial information.
African Barrick Gold results for the six months ended 30 June 2014
31 LSE: ABG
Consolidated Statement of Cash Flows
For the six months ended 30 June
For the year ended 31
December
(Unaudited) (Unaudited) (Audited)
(US$‟000) Notes 2014 2013 2013
Cash flows from operating activities
Net profit/(loss) for the period
40,355 (713,418) (798,433)
Adjustments for:
Tax expense/(credit) 9 22,716 (184,648) (187,959)
Depreciation and amortisation
64,746 90,101 141,159
Finance items
3,855 3,770 7,968
Impairment charges
- 927,690 1,061,011
Profit on disposal of property, plant and equipment
(4,113) (86) (175)
Working capital adjustments
(3,785) (25,856) (41,165)
Other non-cash items
4,730 3,067 8,181
Cash generated from operations before interest and tax
128,504 100,620 190,587
Finance income
666 1,005 1,700
Finance expenses
(2,063) (2,608) (5,172)
Income tax paid
- - -
Net cash generated by operating activities
127,107 99,017 187,115
Cash flows from investing activities
Purchase of property, plant and equipment
(116,496) (207,210) (373,101)
Investments in other assets
(83) (2,032) (8,289)
Cash flow related to the sale of Tulawaka 5 (11,633) - -
Acquisition of subsidiary, net of cash acquired
- - (588)
Other investing activities
138 420 (4,872)
Net cash used in investing activities
(128,074) (208,822) (386,850)
Cash flows from financing activities
Loans received 14 - 80,000 142,000
Dividends paid 11 (8,202) (50,441) (54,541)
Finance lease instalments
(2,883) (1,971) (5,137)
Net cash (used in)/generated by financing activities
(11,085) 27,588 82,322
Net decrease in cash and cash equivalents
(12,052) (82,217) (117,413)
Net foreign exchange difference
(761) 1,742 (1,526)
Cash and cash equivalents at 1 January
282,409 401,348 401,348
Cash and cash equivalents at period end
269,596 320,873 282,409
The notes on pages 32-44 form an integral part of this financial information.
African Barrick Gold results for the six months ended 30 June 2014
32 LSE: ABG
Notes to the Consolidated Interim Financial Information
1. GENERAL INFORMATION
African Barrick Gold plc (the “Company”) is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK. It is registered in England and Wales with registered number 7123187. The address of its registered office is 5
th Floor, No.1 Cavendish Place, W1G 0QF, United Kingdom.
Barrick Gold Corporation currently owns 63.9 percent of the shares of the Company and is the ultimate controlling party of the Group. This condensed consolidated interim financial information for the six months ended 30 June 2014 were approved for issue by the Board of Directors of the company on 24 July 2014. The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 were approved by the Board of Directors on 11 March 2014 and delivered to the Registrar of Companies. The report of the auditors‟ on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The condensed consolidated interim financial information has been reviewed, not audited. The Group‟s primary business is the mining, processing and sale of gold. The Group has three operating mines located in Tanzania. The Group also has a portfolio of exploration projects located across Tanzania and Kenya.
2. BASIS OF PREPARATION OF THE CONDENSED ANNUAL FINANCIAL STATEMENTS
The condensed consolidated interim financial information for the six months ended 30 June 2014 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, „Interim Financial Reporting‟ as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRS as adopted by the European Union. The condensed consolidated interim financial information has been prepared under the historical cost basis, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The financial information is presented in US dollars (US$) and all monetary results are rounded to the nearest thousand (US$‟000) except when otherwise indicated. Where a change in the presentational format between the prior period and the current period financial information has been made during the period, comparative figures have been restated accordingly. The following presentational changes were made during the current period:
Presentation of the results of discontinued operations due to the sale of Tulawaka mine to STAMICO, the Tanzanian State Mining Corporation. Refer to note 5 for a discussion of the transaction.
The group‟s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the group‟s annual financial statements as at 31 December 2013. There have been no changes in the risk management department or in any risk management policies since the year end. The impact of the seasonality on operations is not considered as significant on the condensed consolidated interim financial information. After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing the consolidated interim financial information. Refer page 22 for the Going Concern statement.
3. ACCOUNTING POLICIES
The accounting policies adopted are consistent with those used in the African Barrick Gold plc annual financial statements for the year ended 31 December 2013 except as described below.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
African Barrick Gold results for the six months ended 30 June 2014
33 LSE: ABG
IFRS 10, „Consolidated financial statements‟, IFRS 11, „Joint arrangements‟ and IFRS 12 „Disclosures of interests in other entities‟. The adoption of these standards has had no effect on the financial statements for earlier periods and on the interim financial statements for the period ended 30 June 2014 and is not expected to have a significant effect on the results for the financial year ending 31 December 2014.
IFRIC 21 „Levies‟. IFRIC 21 addresses the accounting for a liability to pay a levy if that liability is within the scope of IAS 37 „Provisions‟. The interpretation addresses what the obligating event is that gives rise to pay a levy, and when should a liability be recognised. The group is not currently subject to significant levies. The adoption of the interpretation has had no significant effect on the financial statements for earlier periods and on the interim financial statements for the period ended 30 June 2014. The group does not expect IFRIC 21 to have a significant effect on the results for the financial year ending 31 December 2014.
There are no other new standards, interpretations or amendments to standards issued and effective for the period which
materially impacted on the Group.
The following exchange rates to the US dollar have been applied:
As at 30 June
2014
Average six months
ended 30 June
2014
As at 30 June
2013
Average six months
ended 30 June
2013
As at 31
December 2013
Average year ended
31 December
2013
South African Rand (US$:ZAR) 10.62 10.70 9.88 9.20 10.50 9.63
Australian Dollars (US$:AUD) 1.06 1.09 1.08 0.99 1.12 1.03
UK Pound (US$:GBP) 0.58 0.60 0.66 0.65 0.60 0.64
4. ESTIMATES
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group‟s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2013, with the exception of changes in estimates that are required in determining the provision for income taxes (see note 3).
5. DISCONTINUED OPERATIONS AND DISPOSAL GROUP ASSETS AND LIABILITIES HELD FOR SALE
On 15 November 2013, ABG announced that an agreement was reached with STAMICO, the Tanzanian State Mining Corporation, whereby STAMICO would acquire the Tulawaka Gold Mine (“Tulawaka”) and certain exploration licences surrounding Tulawaka for consideration of US$4.5 million and the grant of a 2% net smelter royalty on future production in excess of 500,000 ounces, capped at US$0.5 million. On 4 February 2014, ABG announced the completion of the sale. STAMICO has taken ownership and management of the rehabilitation fund established as part of the closure plan for the mine, in return for the assumption of all remaining past and future closure and rehabilitation liabilities for Tulawaka, and has indemnified the other parties to the agreement in relation to these liabilities. The transfer was completed with a net cash payment of US$11.6 million by ABG to STAMICO for the balance of the rehabilitation fund, less the transaction consideration. This resulted in a net gain on sale of assets of US$4.1 million. After non operational costs incurred in the six months to 30 June 2014 and other closing adjustments, this resulted in a total cash outflow year to date of US$14.4 million. The financial results of Tulawaka have been presented as discontinued operations in the consolidated interim financial information. The comparative results in the consolidated interim income statement have been presented as if Tulawaka had been discontinued from the start of the comparative period.
African Barrick Gold results for the six months ended 30 June 2014
34 LSE: ABG
Below is a summary of the results of Tulawaka for the six months ended 30 June 2014 and 30 June 2013, and year ended 31
December 2013:
For the six months ended 30
June For the year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$‟000) 2014 2013 2013
Results of discontinued operations
Revenue - 12,392 13,514
Cost of sales - (28,151) (30,368)
Gross loss - (15,759) (16,854)
Corporate administration - (1,187) (1,311)
Exploration and evaluation costs - 161 -
Corporate social responsibility expenses1 (92) (690) (3,259)
Impairment charges - (16,701) (16,701)
Other charges2 958 (6,496) (19,442)
Profit/(loss) before net finance expense and taxation 866 (40,672) (57,567)
Finance income 36 10 30
Finance expense (16) (79) (116)
Profit/(loss) before taxation 886 (40,741) (57,653)
Tax expense - - -
Net profit/(loss) for the period 886 (40,741) (57,653)
1 Corporate social responsibility expenses relate to projects supported from the ABG Maendeleo Fund.
2 Other charges consist of non-operational costs incurred since the cessation of operations.
6. SEGMENT REPORTING
The Group has only one primary product produced in a single geographic location, being gold produced in Tanzania. In addition
the Group produces copper and silver as a co-product. Reportable operating segments are based on the internal reports
provided to the Chief Operating Decision Maker (“CODM”) to evaluate segment performance, decide how to allocate resources
and make other operating decisions. After applying the aggregation criteria and quantitative thresholds contained in IFRS 8, the
Group‟s reportable operating segments were determined to be: North Mara gold mine; Tulawaka gold mine; Bulyanhulu gold
mine; Buzwagi gold mine; and a separate Corporate and Exploration segment, which primarily consist of costs related to
corporate administration and exploration and evaluation activities (“Other”).
Segment results and assets include items directly attributable to the segment as well as those that can be allocated on a
reasonable basis. Segment assets consist primarily of property, plant and equipment, inventories, other assets and receivables.
Capital expenditures comprise additions to property, plant and equipment. Segment liabilities are not reported since they are not
considered by the CODM as material to segment performance. The Group has also included segment cash costs.
Segment information for the reportable operating segments of the Group for the six months ended 30 June 2014 and 30 June
2013, and year ended 31 December 2013 is set out below.
African Barrick Gold results for the six months ended 30 June 2014
1 The CODM reviews cash operating costs for the three operating mine sites separately from corporate administration costs and exploration costs. Consequently, the Group has reported these costs in this manner.
2 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ”Non IFRS measures” on page 23 for definitions.
3 Reflects 100% of ounces sold.
4 Reflects the adjustment for non-controlling interests at Tulawaka.
5 Segment carrying values are calculated as shareholders equity after adding back debt and intercompany liabilities, and subtracting cash and intercompany assets and include outside shareholder‟s interest.
6 Represents Tulawaka which has been discontinued.
7 Depreciation and amortisation includes the depreciation component of the cost of inventory sold.
8 Sustaining capital expenditure for the purposes of all-in sustaining cost per ounce sold includes land purchases which are classified as long term prepayments in the balance sheet.
African Barrick Gold results for the six months ended 30 June 2014
Capitalised during the year – interest on CIL facility (1,972) (757) (2,413)
Total 4,504 4,696 9,552
1 The unwinding of discount is calculated on the environmental rehabilitation provision.
2 Included in credit facility charges are the amortisation of the fees related to the revolving credit facility as well as the monthly interest and facility fees.
3 Restated due to the classification of Tulawaka as a discontinued operation. Refer to Note 5.
9. TAX (CREDIT)/EXPENSE
For the six months ended
30 June
For the year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$‟000) 2014 2013 Restated1 2013
Current tax:
Current tax on profits for the period - 28 -
Adjustments in respect of prior years - - 40
Total current tax - 28 40
Deferred tax: Origination and reversal of temporary differences 22,716 (184,676) (187,999)
Total deferred tax 22,716 (184,676) (187,999)
Income tax expense/(credit) 22,716 (184,648) (187,959)
1 Restated due to the classification of Tulawaka as a discontinued operation. Refer to note 5.
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follow:
For the six months ended 30 June
For the year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$‟000) 2014 2013 Restated 2013
Tax on profit/(loss) calculated at the Tanzanian tax rate of 30% 18,655 (269,420) (292,917)
Tax effects of: Prior year adjustments - - 5,572
Other non-deductible expenses 254 93 13,111
Effect of tax rates in foreign jurisdictions (426) (1,754) 1,371
Deferred tax assets not recognised 4,233 73,540 84,904
Income tax payable - (28) -
Impairment of goodwill - 12,921 -
Tax charge/(credit) 22,716 (184,648) (187,959)
African Barrick Gold results for the six months ended 30 June 2014
40 LSE: ABG
The tax rate in Tanzania is 30% (2013: 30%) and in South Africa 28% (2013: 28%).
Tax periods remain open to review by the Tanzania Revenue Authority (“TRA”) in respect of income taxes for 5 years following the date of the filling of the corporate tax return, during which time the authorities have the right to raise additional tax assessments including penalties and interest. Under certain circumstances the reviews may cover longer periods. Because a number of tax periods remain open to review by tax authorities, there is a risk that transactions that have not been challenged in the past by the authorities may be challenged by them in the future, and this may result in the raising of additional tax assessments plus penalties and interest. The Group has previously accounted for an adjustment to unrecognised tax benefits in respect of tax losses to reflect uncertainty regarding recoverability of certain tax losses. The Group makes no further provision in respect of such potential tax assessments. 10. EARNINGS/ (LOSS) PER SHARE
Basic earnings/ (loss) per share (“EPS”) is calculated by dividing the net profit/ (loss) for the period attributable to owners of the
Company by the weighted average number of Ordinary Shares in issue during the period.
Diluted earnings/ (loss) per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to
assume conversion of all dilutive potential Ordinary Shares. The Company has dilutive potential Ordinary Shares in the form of
stock options. The weighted average number of shares is adjusted for the number of shares granted assuming the exercise of
stock options.
At 30 June 2014, 30 June 2013 and 31 December 2013, (loss)/earnings per share have been calculated as follows:
For the six months ended 30 June
For the year ended
31 December
(Unaudited) (Unaudited) (Audited)
(US$‟000) 2014 2013 Restated1
2013 Restated
Earnings/(loss) Net profit/(loss) from continuing operations attributable to owners of the parent 39,469 (672,677) (740,780)
Net profit/(loss) from discontinued operations attributable to owners of the parent 1,353 (28,553) (40,321)
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499 410,085,499
Adjusted for dilutive effect of stock options 194,163 - -
Weighted average number of Ordinary Shares for diluted earnings per share 410,279,662 410,085,499 410,085,499
Earnings/(loss) per share 10.0 171.0 (190.4)
Basic and dilutive earnings/(loss) per share from continuing operations (cents) 9.6 (164.0) (180.6) Basic and dilutive earnings/(loss) per share from discontinued operations (cents) 0.4 (7.0) (9.8)
1 Restated due to the classification of Tulawaka as a discontinued operation. Refer to note 5.
11. DIVIDENDS
The final dividend declared in respect of the year ended 31 December 2013 of US$8.2 million (US2.0 cents per share) was paid
during 2014.
African Barrick Gold results for the six months ended 30 June 2014
41 LSE: ABG
12. PROPERTY PLANT AND EQUIPMENT
For the six months ended 30 June 2014 (Unaudited)
(US$‟000)
Plant and equipment
Mineral properties and mine
development costs Assets under construction¹ Total
At 1 January 2014, net of accumulated depreciation 296,299 596,166 388,206 1,280,671
Additions - - 129,662 129,662
Depreciation (28,941) (35,805) - (64,746)
Transfers between categories 44,126 62,477 (106,603) -
At 30 June 20142 311,484 622,838 411,265 1,345,587
At 1 January 2014 Cost 1,397,456 1,315,918 425,083 3,138,457
Transfers between categories 18,677 121,427 (140,104) - Reclassification to disposal group assets held for sale - (239) - (239)
At 31 December 2013 296,299 596,166 388,206 1,280,671
At 1 January 2013 Cost 1,475,374 1,250,088 210,859 2,936,321
Accumulated depreciation and impairment (530,256) (431,025) - (961,281)
Net carrying amount 945,118 819,063 210,859 1,975,040
At 31 December 2013 Cost 1,397,456 1,315,918 425,083 3,138,457
Accumulated depreciation and impairment (1,101,157) (719,752) (36,877) (1,857,786)
Net carrying amount 296,299 596,166 388,206 1,280,671
1 Assets under construction represents (a) sustaining capital expenditures incurred constructing tangible fixed assets related to operating mines and advance deposits made towards the purchase of tangible fixed assets; and (b) expansionary expenditure allocated to a project on a business combination or asset acquisition, and the subsequent costs incurred to develop the mine. Once these assets are ready for their intended use, the balance is transferred to plant and equipment, and/ or mineral properties and mine development costs.
2 The gain on disposal of assets reflected in the income statement relates to the assets disposed of in the sale of Tulawaka which were transferred to assets held for sale in the year ended 31 December 2013.
Leases
Property, plant and equipment includes assets relating to the design and construction costs of power transmission lines and
related infrastructure. At completion, ownership was transferred to TANESCO in exchange for amortised repayment in the form of
reduced electricity supply charges. No future lease payment obligations are payable under these finance leases.
Property, plant and equipment also includes emergency back-up and spinning power generators leased at Buzwagi mine under a
three year lease agreement, with an option to purchase the equipment at the end of the lease term. The lease has been classified as
a finance lease.
Property, plant and equipment further includes drill rigs leased at Buzwagi mine under a one year rent to own lease agreement. The
lease has been classified as a finance lease.
The following amounts were included in property, plant and equipment where the Group is a lessee under a finance lease:
Currency contracts: Not designated as hedges 158 3 3,666 387 (3,892)
Commodity contracts: Not designated as hedges 1,208 59 240 18 1,009
Total 1,366 3,253 5,074 1,207 (1,662)
14. BORROWINGS
During 2013, a US$142 million facility was put in place to fund the bulk of the costs of the construction of one of our key growth
projects, the Bulyanhulu CIL Expansion project (“Project”). The facility is collateralised by the Project, and has a term of seven
years with a spread over Libor of 250 basis points. The seven year facility is repayable in equal instalments over the term of the
facility, after a two year repayment holiday period. The interest rate has been fixed at 3.6% through the use of an interest rate
swap. The full facility of US$142 million was drawn in 2013. Interest incurred on the borrowings has been capitalised to the asset
(US$2.0 million).
African Barrick Gold results for the six months ended 30 June 2014
44 LSE: ABG
15. COMMITMENTS AND CONTINGENCIES
The Group is subject to various laws and regulations which, if not observed, could give rise to penalties. As at 30 June 2014, the
Group has the following commitments and/or contingencies:
a) Legal contingencies
As at 30 June 2014, the Group was a defendant in approximately 316 lawsuits. The plaintiffs are claiming damages and interest
thereon for the loss caused by the Group due to one or more of the following: unlawful eviction, termination of services, wrongful
termination of contracts of service, non-payment for services, defamation, negligence by act or omission, unpaid overtime and
public holiday compensation.
The total amounts claimed from lawsuits in which specific monetary damages are sought amounted to US$163.6 million. The
Group‟s Legal Counsel is defending the Group‟s current position, and the outcome of the lawsuits cannot presently be determined.
However, in the opinion of the Directors and Group‟s Legal Counsel, no material liabilities are expected to materialise from these
lawsuits. Consequently no provision has been set aside against the claims in the books of account.
Included in the total amounts claimed is an appeal by the TRA intended for a tax assessment of US$21.3 million in respect of the
acquisition of Tusker Gold Limited. The case was awarded in favour of ABG however, the TRA has served a notice of appeal. The
calculated tax assessment is based on the sales price of the Nyanzaga property of US$71 million multiplied by the tax rate of 30%.
Management is of the opinion that the assessment is invalid due to the fact that the acquisition was for Tusker Gold Limited, a
company incorporated in Australia. The shareholding of the Tanzanian-related entities did not change and the Tusker Gold Limited
group structure remains the same as prior to the acquisition.
Also included in the total amounts claimed is TRA claims to the value of US$41.25 million for withholding tax on historic offshore
dividend payments paid by ABG to its shareholders. In addition to the claim, there are six other withholding tax claims which have
not been quantified. These claims are made on the basis that ABG is resident in Tanzania for tax purposes. Management are of
the opinion that the claims do not have substance and that they will be successfully defended.
b) Tax-related contingencies
The TRA has issued a number of tax assessments to the Group relating to past taxation years from 2002 onwards. The Group
believes that these assessments are incorrect and has filed objections to each of them. The Group is attempting to resolve these
matters by means of discussions with the TRA or through the Tanzanian appeals process. During the year under review the Board
ruled in favour of BGML in relation to seven of ten issues raised by the TRA in final assessments for the 2000-2006 years under
review. The TRA filed a notice of intention to appeal against the ruling of the Board, while ABG has filed a counter appeal in
respect of Bulyanhulu to the Appeals Tribunal for all three items that were lost. The positions that were ruled against BGML were
sufficiently provided for in prior year results and management is of the opinion that open issues will not result in any material
liabilities to the Group.
16. RELATED PARTY BALANCES AND TRANSACTIONS
The Group has related party relationships with entities owned or controlled by Barrick Gold Corporation, which is the ultimate
controlling party of the Group.
The Company and its subsidiaries, in the ordinary course of business, enter into various sales, purchase and service
transactions and other professional services arrangements with others in the Barrick Group. These transactions are under terms
that are on normal commercial terms and conditions. These transactions are not considered to be significant.
At 30 June 2014 the Group had no loans of a funding nature due to or from related parties (30 June 2013: zero; 31 December
2013: zero).
17. SUBSEQUENT EVENTS
The Board of the Company has approved an interim dividend of US1.4 cents per share for this financial year to be paid on 22 September 2014 to shareholders on the register on 29 August 2014.
African Barrick Gold results for the six months ended 30 June 2014