FOCUSED
ON GROWTH
FOCUSED
2012 ANNUAL REPORT
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STRENGTH
FINANCIAL
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GROWING
RESERVES
GROWING
FOCUSED ON
message from THe eXeCUTIVe CHaIrmaN
aND THe PresIDeNT
ALAN HILL
EXECUTIVE CHAIRMAN
RICHARD YOUNG
PRESIDENT AND CEO
Dear Fellow Shareholders,
The year 2012 was a record for Teranga, full of
accomplishments, challenges as well as some changes.
We would like to first address one of the changes we
made to our Management Team. The two of us have
worked together in various roles for over two decades,
and in our current capacities at Teranga, it is a natural
progression that Richard assumes the role of President
and CEO and that Alan take on the role of Executive
Chairman. We work very well together and look forward
to a strong and continued collaboration for many years to
come. We believe that a company is only as successful
as its people, and as such, we continue to build out our
corporate and site management teams, adding new talent
and depth, that we are confident will serve us well as we
execute on our growth plans.
During a year of increased market volatility and persistent
concerns about global fiscal and economic challenges,
we remained focused on our objectives, and as such we
had a strong year. The year however, was not without its
challenges, but we are very pleased to say that with the
perseverance of our team we achieved several goals that
will help support and bolster the Company’s continued
growth. We have the only milling facility in Senegal and
the largest exploration land package in an emerging gold
district, which we believe provides us with the basis for
growth in reserves, production, earnings, cash flow and
most importantly, free cash flow as new discoveries are
made or acquired and processed through our expanded
central mill facility.
Our share price performed reasonably well in 2012
compared to our peer group. Since the start of 2013,
however, gold equities in general have fallen under
mounting scrutiny, which, combined with declining gold
prices in April, resulted in many companies reaching
new 52-week lows. Teranga has not been immune to
this trend; in fact our share price in early 2013 was
among the poorest performers. It is in this context that
we decided to review our 2012 performance and our
original objectives, and examine where we believe the
Company is going in an environment which has forced
many companies to rethink their business plans.
2012 was the Company’s best year for both production and
cash costs while we met our guidance for the year. With
the mill expansion complete and the benefit of higher grade
material, production was 214,310 ounces, up 63 percent
over the prior year, while cash costs per ounce sold were
$627, down 20 percent from 2011. Our operating results
translated into record earnings of $79.9 million or 33 cents
per share. Our health and safety record was commendable
with our lost-time-injury-frequency rate remaining far below
industry benchmarks. However, regardless of our perfor-
mance in this area, we continue to be pro-active and focus
our efforts on continual improvement.
The completion of our mill expansion to increase capacity
from an average of 2 to ~4 million tonnes per annum
(Mtpa) (averaging 3.5Mtpa of 100% hard ore and 6Mtpa
100% soft ore) was delayed by a quarter, due to issues
with suppliers meeting delivery schedules for steel and
cabling. This delay pushed commissioning into the rainy
season which presented its own set of challenges and set-
backs. We are working through the remaining challenges and
we will continue to work to improve availability, particularly
of the crushing circuit, to increase throughput. Though we
will be mining through lower grade areas of the pit in 2013,
we expect to produce between 190,000 and 210,000
ounces of gold at a cash cost of $650–$700 per ounce
benefiting from the expansion, which should result in
another profitable year.
At the time of the IPO in 2010 we had four overriding
objectives: (i) expand the mill to solidify our dominant
position on an emerging gold belt; (ii) conduct an
aggressive exploration program on the highly prospective
yet virtually unexplored land package; (iii) consolidate
the region; and (iv) eliminate the hedge book as quickly
but as prudently as possible.
With the additional capacity added in 2012, the objective
of the Mine License exploration program is to continue
to extend the life of mine at a production rate of about
200,000 ounces per year to the years 2020 to 2025,
which would result in a 10 to 15-year mine life since the
IPO in 2010. While we had targeted to reach this reserve
level by mid-2013, it will likely require another 6 to 12
months to extend the mine life to at least 2020 and beyond
at current production rates. We recognize that this is longer
than we had originally hoped, but we would like to empha-
size how profitable ounces added within the Mine License
are to earnings and free cash flow. On this note, we expect
that we will have access to drill some of our highest priority
t e r a n g a g o l d c o r p o r a t i o n
1
oUr mIssIoN
oUr VIsIoN
Our mission is to share the benefits
with all our stakeholders through re-
sponsible mining. We strive to act as a
responsible corporate citizen by build-
ing projects together with the commu-
nities and by being committed to using
best available technologies as we carry
out our actions. We aim to achieve
benefits for all parties involved, and
to contribute to the sustainability and
improved livelihoods for the communi-
ties in which we operate.
• PHase 1: BeCome a mID-TIer golD ProDUCer in Senegal with
250,000 to 350,000 ounces of annual gold production leveraging
off our existing mill and infrastructure
• Phase 2: Increase annual gold ProductIon to 400,000 to
500,000 ounces with a second mill expansion
• set the benchmark In senegal for resPonsIble mInIng, improving
the standard of living for those in the communities in which
we operate and provide the communities with the ability to
become truly independent and sustainable for decades to come,
even after the closure of our mining operations
targets on the southern portion of our Mine License, such
as Niakafiri, in the second quarter of this year, based on our
new agreement with the Government, which we are confi-
dent will add ounces to our reserve base this year.
However, with the new agreement with the Government, five
key exploration licenses have been extended by 18 months
allowing us to defer drill programs this year.
In respect of our regional exploration program, we remain
very optimistic. However, we have a great deal of land and
a lot of targets which require systematic analysis; in total
we have about 50 targets at various stages in the pipeline.
Some targets are larger than our entire Mine License, and
thus require an extensive multi-year exploration program.
We are establishing a pipeline of targets in various stages
with Gora being the most advanced to date. We plan to permit
Gora in 2013 with production expected in the first half of
2014. Gora is a smaller satellite deposit that could add
about 70,000 ounces to production annually for 4 years,
displacing some lower grade Sabodala material. Therefore,
Gora alone will take us toward our Phase I vision of grow-
ing the Company to 250,000 ounces of annual production.
While we continue to look for “the big one," today we have
about 12 priority targets, 5 of which we will be focusing on
in the near term, with the objective of making discoveries
that will ultimately translate into reserves and production.
In light of the lower gold prices in 2013, we are minimizing
regional drilling to maximize cash flows during this period.
With regard to industry consolidation in Senegal, there are
several companies that have made discoveries, but for
business reasons may decide not to build a mill, particularly
in light of the current market. While these discoveries
may not be economic on a standalone basis, they could be
very accretive to the Company as we leverage our existing
mill and infrastructure, bearing in mind that most of the
Senegalese greenstone belt is within trucking distance of
our mill. Though the Company regularly analyzes all gold
opportunities in Senegal, it would not have been prudent
to make any acquisitions until the Government addressed
certain fiscal issues thereby permitting the Company to
acquire 100 percent of an asset.
The Agreement in Principle signed in early April 2013
with the Republic of Senegal paves the way for the
Company to invest, acquire and develop its assets with
greater certainty in Senegal. This Agreement not only
provides more certainty that our discoveries may be
processed through our mill but it will also allow us to
potentially consolidate the region.
WHaT We DID IN 2012:
• Continued systematic regional exploration program –
expanding our development pipeline
• Record profits, production and cash costs – met
our 2012 guidance
• Completed the mill expansion
• Reduced our hedge book to 59,789 ounces as at
December 31, 2012
• Completed and submitted the technical study and
ESIA for the Gora satellite deposit
• Conducted an extensive drill program to the north
and to depth of the Sabodala pit
• Increased Measured and Indicated resources 34 percent
to 2.9 million ounces, while gold reserves remain similar
to 2011 net of production
• Held round table meetings to advance the Regional
Development Strategy and improve our CSR initiatives
• Continued to strengthen and enhance our culture of safety
• Added depth to our Management Team both in the
corporate office and on site
t e r a n g a g o l d c o r p o r a t i o n
2
In order to execute on our vision the Company must remain
financially strong. We ended 2012 with $45 million in cash,
cash equivalents and bullion receivables, including $5.3
million in bullion receivables.
With the turbulence in the gold market, we have reduced
discretionary expenditures in operations, exploration and
administration, as well as development and sustaining
capital. These changes mean that at a gold price of $1,400
per ounce we expect to generate free cash flow this year,
ensuring that we remain in a robust financial position. We
will continue to monitor the gold market and if gold prices
recover, then we may increase our expenditures in respect
of the development of Gora or increase exploration spend-
ing if we have success, otherwise we remain committed
to maintaining a lower level of expenditures to ensure that
we generate stronger free cash flows and strengthen our
financial position.
On April 15th, 2013 we officially eliminated our hedge
book by buying back the remaining 14,500 ounces of
forward sales contracts still outstanding, as gold prices
declined to the mid $1,300 per ounce range. The hedge
book was originally put into place as a requirement for
project financing to build Sabodala, which was paid off
in 2010.
Since the IPO we have delivered about half of our produc-
tion into these forward sales contracts at below $850 per
ounce, negatively impacting our cash margins and free
cash flows. Now with the elimination of the hedge book,
even in a lower gold price environment, our cash margins
should rise significantly. This margin expansion should go
straight to our bottom line, increasing earnings, cash flow
and free cash flow. As a result, we expect our financial
position to strengthen in 2013 and beyond. We believe
that we will have the balance sheet and free cash flow
that will enable us to execute on our growth plan while at
the same time maintaining our focus on limiting dilution
to our shareholders.
In 2012, Senegal had a successful and smooth change
in government; however, the country still faces many of
the same financial challenges as most other developing
nations in terms of generating additional revenues. The
Government also inherited several politically important
internal issues from the prior Government, which has
occupied a significant amount of their time and attention.
Nevertheless, in early April 2013 the Company signed
an Agreement in Principle with the Government securing
the basis for long-term investment and development to
increase reserves and production in Senegal with certainty.
This is a landmark agreement that benefits all of our stake-
holders, including our shareholders, employees, the local
and regional communities and the people of Senegal.
In return, we have agreed to increase our royalty rate
from 3 to 5 percent, to begin paying a portion of accrued
dividends in respect of the Government’s minority interest,
as well as a price and formula to acquire the Government’s
additional participation option in satellite deposits. We were
also able to settle several outstanding tax assessments.
t e r a n g a g o l d c o r p o r a t i o n
t e r a n g a g o l d c o r p o r a t i o n
3
3
WHAT WE DID IN THE FIRST
TRIMESTER OF 2013:
• Eliminated the hedge book
• Finalized a new $50 million mobile
equipment facility
• Signed an Agreement in Principle
with the Republic of Senegal that paves
the way for long-term investment and
development to increase reserves and
production
• Reduced discretionary expenditures to
ensure that the Company generates free
WHAT WE PLAN TO DO IN THE SECOND
AND THIRD TRIMESTER OF 2013:
• Increase reserves and future production by:
– Establishing final pit design for Sabodala
– Resuming drilling at Niakafiri on our Mine License
– Advancing promising regional targets through the pipeline
– Evaluating opportunities to acquire discoveries already
made and process them through our mill
– Permitting and beginning development of the Gora deposit
• Optimize the mill
• Formalize the Regional Development Strategy in collaboration
with the communities and other key stakeholders
cash flow at $1,400 per ounce gold
• Continue to strengthen and enhance our culture of safety
In addition to working closely with the Government, we
continue our involvement with the local communities that
surround our operations. Corporate Social Responsibility is
truly a priority for us and a very large part of our culture at
Teranga. We have made great strides this year focusing on
health and safety, education and sustainability, in addition
to helping improve public access to potable water. In sup-
porting these initiatives, we have made a true commitment
to the people of Senegal. To help us in this regard, we
have engaged rePlan, a renowned Canadian organization
to assist us in putting together a Regional Development
Strategy. Together with the local, regional and national
governments we are working to ensure that the benefits of
our project are shared, and the livelihoods of people in the
communities in which we operate are improved. We have
held many round table discussions in collaboration with
multiple stakeholders with the objective of formalizing and
implementing this strategy in 2013. This is definitely one
of the most rewarding aspects of our work and we are very
excited as we work together with the people of Senegal to
create a better future and share the benefits of responsible
mining with all of our stakeholders.
As shareholders we recognize that 2012 was another frus-
trating year in the gold equity markets, and the beginning
of 2013 has been even more disappointing. The appeal for
gold as an investment has faced recent pressure, despite
persistent concerns about the global economy, geopolitical
uncertainties and the outlook for global currencies. This
pressure on the commodity has been accompanied by a
dramatic decline in share prices for the sector.
The global necessity to stimulate economic growth and
address high unemployment, sovereign debt concerns,
geopolitical concerns, and continued civil unrest in many
regions of the world are all factors that have contributed
to an increasingly uncertain and unpredictable economic
environment. Though we may continue to see short-term
negative pressure on the gold price, global macroeconomic
indicators remain weak, reinforcing the positive long-term
outlook for gold.
With our hedge book eliminated, we are now selling all of
our production at spot gold prices, resulting in margin ex-
pansion that should go straight to our bottom line providing
us with the flexibility to grow, while limiting dilution to our
shareholders. As we continue to watch the equity markets,
we remain focused on all factors that are within our control
and more importantly to deliver on our promises. Our cur-
rent priority is to extend our reserve life while strengthening
our financial position. We believe that by delivering on our
vision and growing the Company, as we are confident that
we can, a corresponding increase in earnings, cash flow
and free cash flow should lead to a higher share price.
To conclude, we would like to thank our employees for their
continued hard work and dedication and our shareholders
who have been patient and supportive through these
tumultuous times. We are confident that Teranga has a
bright future because the Company is operating in a stable,
safe and mining friendly country that hosts one of the new
emerging gold districts. Our operations continue to run
consistently and we are building a team that can execute
on our objectives while we continue to strengthen our
balance sheet. With your on-going support, we will main-
tain our focus on the priorities we believe will make our
collective vision a reality.
Alan R. Hill
Executive Chairman
Richard S. Young
President and CEO
t e r a n g a g o l d c o r p o r a t i o n
4
FOCUSED ON
GROWING RESERVES
1.59m oz
RESERVES WITHIN
2.87m oz
OF M&I RESOURCES
• Objective of expanding reserves to 2020–
• Expect to add to reserves from the
2025 at a production rate of 200,000 oz/yr
Mine License in 2013
• Growth through our focused
• Regional Land Package ~50 targets
FINANCIAL STRENGTH
• 100% hedge free providing
margin expansion
• Building a stronger balance sheet
to self-fund exploration and project
development
exploration program
• Growth through J.V.s and acquisitions of
• Competitive cash costs among our peers
• Generating free cash flows with option
to reinvest in project development or
exploration
• Minimal sustaining capital
• No requirement to dilute shareholders
to continue operations or for organic
project development
other companies or properties initially within
Senegal but eventually in West Africa
GROWING PROFITABLE PRODUCTION
• Production to increase with development
of first satellite deposit, Gora
• Inexpensive inclusion of satellite
deposits through utilization of our
existing infrastructure
• Mill capacity expanded in 2012 with the
option to increase further as new
discoveries are made
• Agreement in Principle with Government
to put all ounces not on our Mine License
through our mill
2011
131,641 oz
2012
214,310 oz
2013
190k–210k oz est.
2014
200k–250k oz est.
WHY INVEST
OPERATING MINE/MILL
BUILDING A STRONGER
BALANCE SHEET
RECENTLY EXPANDED MILL TO ~4MTPA
• Focused on free cash flow
• Only operating gold mine and
• By maximizing margins through
mill in Senegal
elimination of hedge book
• Ability to self-fund exploration and
project development
1,200
km2
LARGE EXPLORATION
LAND PACKAGE
EXPERIENCED
MANAGEMENT TEAM
~1,200KM2 OF UNDER-EXPLORED LAND
SURROUNDING OUR EXISTING MILL
• An emerging world-class gold district with
• Extensive proven track record in
African gold mining – strong relations
with Government
>11M oz discovered over last 5 years
• Dedicated to mining responsibly and
sharing the benefits
t e r a n g a g o l d c o r p o r a t i o n
5
OPERATIONS
Sabodala is the only operating gold mine
and mill in Senegal
Mining at Sabodala is undertaken by open pit truck and shovel methods. The recently expanded
mill is capable of processing 3.5Mtpa of hard ore or almost 6.0Mtpa of soft ore. The conventional
carbon-in-leach (“CIL”) plant includes primary and secondary crushing, a SAG and two ball
mills and leach tanks to produce dore bars of gold (90% gold/10% silver). Power at Sabodala is
provided by a 36MW heavy fuel oil power station located on the mine site.
Sabodala is expected to generate significant free cash flow in the coming years as the mine and
mill are now built and sustaining capital going forward is minimal. Free cash flow will be used to
fund reserve and production growth to minimize dilution to existing shareholders.
Operating results
Tonnes mined
Ore tonnes milled
Head grade
Gold produced
Total cash cost
(incl. royalties) 1, 2
Mining (cost/t mined)
Milling (cost/t milled)
G&A (cost/t milled)
Year ending December 31
2012 Actuals
2013 Guidance Range
(‘000t)
(‘000t)
(g/t)
(oz)
$/oz sold
28,877
35,000 – 36,500
2,439
3.08
3,300 –
3,400
2.00 –
2.15
214,310
190,000 – 210,000
627
650 –
700
2.71
20.39
6.16
2.50 –
2.70
19.00 –
20.00
5.00 –
6.00
1 Total cash cost per ounce and total production cost per ounce are non-IFRS financial measures with no standard
meaning under IFRS
2 For 2013, reflects the impact of adoption of a new IFRS standard for deferred stripping
t e r a n g a g o l d c o r p o r a t i o n
6
Management’s current priority
is to extend reserves both
organically and inorganically while
strengthening the Company’s
financial position.
t e r a n g a g o l d c o r p o r a t i o n
7
ReseRves and
PRoduction GRowth
Masato
seneGaL
saBodaLa
Senegal is emerging as a significant new
gold camp, with more than 11 million
ounces of resources discovered over the
past five years.
dinKoKhono
niaKaFiRi
MINE LICENSE
The Mine License (“ML”) exploration program
is designed to extend the life of mine to the
years 2020 to 2025 at a production rate of about
200,000 ounces of gold per year.
Extending the reserve life on the ML is expected
to come from expanding the Sabodala pit at
depth and expanding the Niakafiri deposit, to the
south of the Sabodala pit, as well as, defining a
number of other promising targets on the ML.
Deposit
Sabodala
Sutuba
Niakafiri
Gora
Stockpiles
Total
Proven and Probable
Measured and Indicated
Tonnes
(Mt)
Grade
(g/t)
Au
(Moz)
Tonnes
(Mt)
Grade
(g/t)
Au
(Moz)
17.62
1.34
0.758
59.53
1.09
2.09
0.37
7.81
2.1
7.32
1.40
0.017
0.50
1.27
0.02
1.14
0.287
10.70
1.12
0.39
4.22
0.284
2.32
5.00
0.37
1.02
0.24
–
–
–
35.23
1.40
1.586
73.05
1.22
2.87
* For full disclosure on Reserves and Resources, see page 11 of the 2012 Annual Report - Financial
Statements
t e r a n g a g o l d c o r p o r a t i o n
8
(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31)(cid:31) REGIONAL LAND
PACKAGE
Development of the high grade Gora satellite
deposit is expected to provide high grade/
low-cost feed to the Sabodala plant beginning
in 2014, increasing production toward our
Phase 1 vision to produce 250,000 ounces of
gold per year.
The Regional Land Package (“RLP”) consisted
of over 100 gold anomalies at the time of the
IPO in December 2010. A systematic regional
exploration program over the past two years
has narrowed that down to 50 targets all within
trucking distance to the Sabodala mill.
Of the 50 targets now in the pipeline, 12 are
considered high priority targets that will be
drilled over the next 12 to 24 months.
Beyond the Company’s existing land position,
the Company intends to augment its organic
growth by acquiring discoveries already made
by other mining companies and processing
these through the Sabodala mill.
Massakounda
Permit
MALI
N
Heremakono
Permit
35Km from mill
EXPLORATION OPPORTUNITIES
GorA
ProSPECTS And TArGETS
SAbodAlA mill
mAJor Gold dEPoSiTS
mininG liCEnSE
ExPlorATion PErmiT
SENEGAL
Bransan Permit
Saiansoutou Permit
Dembala Berola
Permit
Mine License
Sounkounkou
Permit
Bransan South
Permit
SABODALA MILL
Sabodala West
Permit
Makana Permit
Garaboureya North
Permit
Deposit
Sabodala
Sutuba
Niakafiri
Gora
Stockpiles
Total
Proven and Probable
Measured and Indicated
Tonnes
Grade
(Mt)
(g/t)
Au
(Moz)
Tonnes
Grade
Au
(Mt)
(g/t)
(Moz)
17.62
1.34
0.758
59.53
1.09
2.09
0.37
7.81
2.1
7.32
1.40
0.017
0.50
1.27
0.02
1.14
0.287
10.70
1.12
0.39
4.22
0.284
2.32
5.00
0.37
1.02
0.24
–
–
–
35.23
1.40
1.586
73.05
1.22
2.87
t e r a n g a g o l d c o r p o r a t i o n
9
oUr PeoPle / Csr
We are committed to mining responsibly and
sharing the benefits with all of our stakeholders.
Teranga’s stakeholders are central to our
safe, stable and continued growth in Senegal.
As part of our Corporate Social Responsibility
plan we continually engage with all of our
stakeholders including our employees and
the communities in which we operate in order
to improve the lives of the people with whom
we work.
Our community development work contin-
ued in 2012 through 14 projects to improve
access to secure potable water sources
and sanitation for the local people. We also
undertook improvements to local roads and
infrastructure and continued to support the
creation of local businesses to improve the
income-generating potential of those in the
local community.
To support the local community we have
put into place several initiatives to improve
the livelihoods of the communities near our
operations. Our focus is on a grassroots
community approach with an emphasis on
health, education, water sanitation and food
security. In 2012, we continued our support
for local students at all education levels
through the building of schools, providing
books and providing bursaries, scholarships
and work experience terms to university
students. In addition, we have also continued
our support for healthcare in the region
through six separate initiatives including an
extensive anti-malaria spray program, our con-
tinuing support for a Teranga operated clinic
and the supply of a community ambulance.
We believe it is the responsibility of all modern
mining companies to ensure that their opera-
tions provide positive and sustainable social
and economic effects, and to communicate
this commitment to the communities in their
zones of influence. In this sense, this critical
self-analysis of our performance will ensure
that we always apply Best Available Technolo-
gies (BAT) and best management practices.
This means constantly reviewing our perfor-
mance, and at times readjusting our approach
for the best possible long-term results.
t e r a n g a g o l d c o r p o r a t i o n
10
We are committed to our employees and in the growth
of each individual through continuous development
and skills training, and endeavour to be the employer
of choice within Senegal. We firmly believe that our
operation can only be as successful as our people and
as such we focus on mentorship, and development of
a predominantly local workforce. It is for this reason
that of the approximately 1,000 people we employ on
site at Sabodala, over 90 percent are Senegalese with
employment opportunities preferentially offered to people
permanently residing within the Kédougou region.
t e r a n g a g o l d c o r p o r a t i o n
11
registrAr AnD trAnsFer Agent
canada: computershare
trust company of canada
100 University Avenue, 8th Floor,
Toronto, Ontario, Canada, M5J 2Y1
Tel: + 1-800-564-6253
Australia: computershare
investor services Pty Ltd.
GPO Box 2975, Melbourne
VIC 3001, Australia
Tel: + 1-300-850-505
(investors within Australia)
Tel: + 61-3-9415-4000 (investors)
sHAre cAPitAL
Common Shares
Issued and Outstanding 245,618,000
(as at March 31, 2013)
stocK excHAnge Listings
Toronto Stock Exchange
Australian Stock Exchange
Symbol: TGZ
AnnuAL Meeting
The Annual General & Special Meeting of
Shareholders will be held on Wednesday,
June 26, 2013 at 9:30am, Offices of
Stikeman Elliott LLP
Main Boardroom 53rd Floor,
199 Bay Street, Toronto, Ontario
CORPORATE INFORMATION
Directors
corPorAte HeAD oFFice
teranga gold corporation
Suite 2600-121 King Street West
Toronto, Ontario, Canada M5H 3T9
Tel: + 1-416-594-0000
Fax: + 1-416-594-0088
Email: investor@terangagold.com
www.terangagold.com
Contact:
Kathy sipos
Vice President, Investor & Stakeholder Relations
Tel: + 1-416-594-0000
Email: ksipos@terangagold.com
senegAL oFFice
2K Plaza
Suite B4, 1er Etage
Sis Route du Méridien Président
Dakar Almadies
Tel: + 221-338-693-181
Fax: + 221-338-603-683
AuDitor
ernst & Young LLP – 2013
Chartered Accountants
Toronto, Ontario, Canada
Deloitte & touche LLP – 2012
Chartered Accountants
Toronto, Ontario, Canada
soLicitorsoLicitors
stikeman elliott LLP
Toronto, Ontario, Canada
Alan r. Hill 5
Executive Chairman
richard s. Young
President and CEO
christopher r. Lattanzi 1,3,5
oliver Lennox-King 1,2,4,5
Alan r. thomas 1,2,3,4
Frank D. Wheatley 1,2,3,4
Jeffrey W. Williams *2,5
1. Audit Committee
2. Corporate Governance and
Nominating Committee
3. Compensation Committee
4. Finance Committee
5. Technical, Safety, Environmental
and Social Responsibility Committee
*Appointed April 29, 2013
senior MAnAgeMentsenior MAnMent
Alan r. Hill
Executive Chairman
richard s. Young
President and CEO
Mark english
Vice President, Sabodala Operations
Paul chawrun
Vice President, Technical Services
navin Dyal
Vice President and CFO
David savarie
Vice President, General Counsel and
Corporate Secretary
Kathy sipos
Vice President, Investor and Stakeholder Relations
Macoumba Diop
General Manager and Government Relations
Manager, SGO
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t e r a n g a g o l d c o r p o r a t i o n
12
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GROWING
FOCUSED ON
FOCUSED
2012 ANNUAL REPORT
2012 AnnuAl RepoRt
Financial
statements
inDeX
Overview of the Business
Financial and Operating Highlights
Fourth Quarter and Year-end Results
outlook 2013
Review of Financial Results
Review of Operating Results
Reserves and Resources
strategy and market Review
Growth Strategy
Mine license Reserve Development
Regional exploration
Health and Safety
Market Review
cash Flow
liquidity and capital Resources
Financial instruments
contractual Obligations and commitments
summary of Quarterly information
Risk Factors
contingent liabilities
critical accounting Policies and estimates
change in accounting Policies
adoption of new accounting standards
non-iFRs Financial measures
Outstanding share Data
transactions with Related Parties
ceO/cFO certification
Risks and Uncertainties
2
3
3
5
6
9
11
12
12
13
14
15
15
17
18
18
18
20
20
20
21
23
23
23
24
25
25
25
competent Persons statement
25
1
manaGement’s DiscUssiOn
anD analysis
For the twelve months ended December 31, 2012
This Management’s Discussion and Analysis (“MD&A”) provides a
discussion and analysis of the financial conditions and results of op-
erations to enable a reader to assess material changes in the financial
condition and results of operations as at and for the twelve months
ended December 31, 2012. The MD&A should be read in conjunc-
tion with the audited consolidated financial statements and notes
thereto (“The Audited Annual Consolidated Financial Statements”)
of Teranga Gold Corporation (“Teranga” or the “Company”) as at
and for the twelve months ended December 31, 2012. The Company’s
Audited Annual Consolidated Financial Statements and MD&A
are presented in United States dollars, unless otherwise specified,
and have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), as issued by the International Ac-
counting Standards Board (“IASB”). Additional information about
Teranga, including the Company’s Annual Information Form for the
fifteen months ended December 31, 2011, as well as all other public
filings, is available on the Company’s website at www.terangagold.
com and on the SEDAR website (www.sedar.com). The Company’s
Annual Information Form for the year ended December 31, 2012 is
expected to be filed in March 2013.
FORWaRD-lOOKinG statements
Certain information included in this management’s discussion and
analysis, including any information as to the Company’s strategy,
projects, exploration programs, joint venture ownership positions,
plans, future financial or operating performance and other state-
ments that express management’s expectations or estimates of future
performance, constitute “ forward-looking statements”. The words
“believe”, “expect”, “will”, “ intend”, ”anticipate”, “project”, “plan”,
“estimate”, “on track” and similar expressions identify forward-
looking statements. Such forward-looking statements are necessarily
based upon a number of estimates, assumptions, opinions and analysis
made by management in light of its experience that, while considered
reasonable, may turn out to be incorrect and involve known and
unknown risks, uncertainties and other factors, in each case that may
cause the actual financial results, performance or achievements of the
Company to be materially different from the Company’s estimated
future results, performance or achievements expressed or implied by
those forward-looking statements. Such forward-looking statements
are not guarantees of future performance. These assumptions, risks,
uncertainties and other factors include, but are not limited to: as-
sumptions regarding general business and economic conditions; condi-
tions in financial markets and the future financial performance of
the company; the impact of global liquidity and credit availability on
the timing of cash flows and the values of assets and liabilities based
on projected future cash flows; the supply and demand for, deliveries
of, and the level and volatility of the worldwide price of gold or certain
other commodities (such as silver, fuel and electricity); fluctuations in
currency markets, including changes in U.S. dollar and CFA Franc
interest rates; risks arising from holding derivative instruments; adverse
changes in our credit rating; level of indebtedness and liquidity; ability
to successfully complete announced transactions and integrate acquired
assets; legislative, political or economic developments in the jurisdictions
in which the Company carries on business; operating or technical dif-
ficulties in connection with mining or development activities; employee
relations; availability and costs associated with mining inputs and la-
bour; the speculative nature of exploration and development, including
the risks of obtaining necessary licenses and permits and diminishing
quantities or grades of reserves; changes in costs and estimates associated
with our projects; the accuracy of our reserve estimates (including size,
grade and recoverability) and the geological, operational and price
assumptions on which these are based; contests over title to properties,
particularly title to undeveloped properties; the risks involved in the
exploration, development and mining business, as well as other risks
and uncertainties that are more fully described in the Company’s
prospectus dated November 11, 2010 and in other Company filings
with securities and regulatory authorities, which are available at
www.sedar.com. Accordingly, readers should not place undue reli-
ance on such forward-looking statements. Teranga expressly disclaims
any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise, except in accordance with applicable securities laws.
This report is dated as of February 20, 2013. All references to the
Company include its subsidiaries unless the context requires otherwise.
The MD&A contains references to Teranga using the words “we”, “us”,
“our” and similar words and the reader is referred to using the words
“you”, “your” and similar words.
2012 AnnuAl RepoRt 2
OVeRVieW OF tHe BUsiness
Teranga is a Canadian-based gold company that operates the
Sabodala gold mine and is currently exploring 10 explora-
tion licenses covering 1,200km2 in Senegal, comprising the
regional land package, surrounding the Sabodala gold mine1.
The Sabodala gold mine, the regional land package, and
shares held in Oromin Explorations Ltd. (“Oromin”) are col-
lectively referred to as the Sabodala Gold Assets.
The Sabodala gold mine, which came into operation in 2009,
is located 650 kilometres southeast of the capital of Senegal,
Dakar within the West African Birimian geological belt in Sen-
egal where approximately 10 million ounces of gold resources
have been discovered over the past six years, and lies about
90 kilometres from major gold mines in Mali.
Management believes that the combination of the Sabodala
gold mine and mill and its regional land package, all within
trucking distance to the Sabodala mill, provides the basis
for growth in reserves and production, resulting in growth
in earnings and cash flow per share as new discoveries are
made and processed through the Sabodala mill.
Our mission is to share the benefits with all of our stake-
holders through responsible mining. We strive to act as a
responsible corporate citizen by building projects together
with the communities near our planned operations and by
committing to using best available technologies as we carry
out our actions. We aim to achieve benefits for all parties
involved, and to contribute to the sustainability and improved
livelihoods for the communities in which we operate.
Our Vision is to become a pre-eminent gold producer in West
Africa while setting the benchmark for responsible mining.
Phase 1: Become a mid-tier gold producer in Senegal with
250,000 to 350,000 ounces of annual gold production lever-
aging off the Company’s existing mill and infrastructure.
Phase 2: Increase annual gold production to 400,000 to
500,000 ounces via a mill expansion as gold inventories
increase.
Demerger from mineral Deposits limited (“mDl”)
(“Demerger”)
On November 23, 2010, Teranga completed the acquisition
of the Sabodala gold mine and a regional exploration package
by way of a Demerger from MDL. As part of the Demerger
certain assets consisting of all of the issued and outstanding
shares of Sabodala Gold (Mauritius) Limited, which holds a
90 percent interest in Sabodala Gold Operations SA (“SGO”),
the holder of the Sabodala gold mine, and a 100 percent
interest in Sabodala Mining Company SARL (“SMC”), an
exploration entity that holds the regional land package; all of
the issued and outstanding shares of SGML (Capital) Limited;
and 18,699,500 common shares of Oromin Exploration Ltd.,
originally held by MDL, were transferred to Teranga in con-
sideration for the issuance of 200,000,000 common shares
of Teranga to MDL (approximately 160,000,000 of such
common shares were then in specie distributed to MDL’s
shareholders with the remainder retained by MDL) and the
assumption of a C$50 million promissory note owing to MDL.
Following the completion of the Demerger, the C$50 million
promissory note owing to MDL was repaid by Teranga from
proceeds of the Initial Public Offering (“IPO”).
Basis of Preparation
The transfer of the Sabodala Gold Assets into the Company
is considered a transaction between entities under common
control. As such, the Company has presented its financial
results on a continuity-of-interests basis whereby the carrying
amounts of the Sabodala Gold Assets reflect those previously
reported in the financial statements of MDL. Accordingly, the
consolidated statement of comprehensive loss for the fifteen
months ended December 31, 2011 reflects the corporate
activities since incorporation of Teranga on October 1, 2010
and the operations of SGO from November 23, 2010. The
production statistics in this MD&A reflect operating results for
the 2012 and 2011 calendar years.
1 The Company’s 11th exploration permit, Sabodala North West, was not renewed by the Government in June 2012. The Company has since appealed this decision and is
awaiting a response from the Government.
teranga gold corporation / management’s discussion & analysis 3
FINANCIAL AND OPERATING HIGHLIGHTS
2012 Fourth Quarter and Year-End Results
(US$000s, except where indicated)
Three months
ended December 31
Twelve months
ended December 31
Fifteen months
ended December 31
Financial Data
Revenue
Profit/(loss) attributable to shareholders of Teranga
$ per share
Operating cash flow
Capital expenditures
Free cash flow 1
Cash and cash equivalents
Net debt 2
Operating Data
Gold produced (ounces)
Gold sold (ounces)
Average realized price ($ per ounce)
Total cash costs ($ per ounce sold) 3
Total depreciation and amortization ($ per ounce sold) 3
Total production costs ($ per ounce sold) 3
2012
2011
Current
Restated (i)
122,970
48,781
0.20
56,401
25,252
31,149
39,722
80,434
58,026
23,722
0.10
7,466
27,300
(19,834)
7,470
95,748
Three months
ended December 31
2012
2011
71,804
71,604
1,296
623
246
869
36,695
34,665
1,482
809
235
1,044
2012
Current
350,520
79,924
0.33
72,447
83,250
(10,803)
39,722
80,434
2012
214,310
207,814
1,422
627
223
850
2011
Restated (i)
236,873
(16,040)
(0.07)
5,132
76,392
(71,260)
7,470
95,748
Twelve months
ended December 31
2011
131,461
137,136
1,236
782
249
1,031
(i) The Company adopted changes to certain accounting policies effective January 1, 2012 that have been retrospectively applied to the three and fifteen months ended December 31,
2011. See “Consolidated Financial Statements for the Year Ended December 31, 2012 – Change in Accounting Policies”.
1 Free cash flow is defined as operating cash flow less capital expenditures.
2 Net debt is defined as total borrowings and total financial derivative liabilities less cash and cash equivalent.
3 Total cash costs per ounce, total depreciation and amortization per ounce and total production cost per ounce are non-IFRS financial measures with standard meaning under IFRS.
For definitions of these metrics, please see page 23 of this report.
FOURTH QUARTER FINANCIAL AND OPERATING HIGHLIGHTS
• Gold revenue for the three months ended December 31,
2012 was $123.0 million compared to $58.0 million in the
same prior-year period. The increase in gold revenue was
mainly driven by higher gold sales. Revenues exclude the
impact of realized losses on ounces delivered into forward
sales contracts, which are classified within losses on gold
hedge contracts.
• Consolidated profit for the three months ended
December 31, 2012 was $48.8 million ($0.20 per share),
or 106 percent higher than the same prior-year period.
The increase in profit and earnings per share were
primarily due to an increase in gross profit from a
112 percent increase in revenues.
• Operating cash flow for the three months ended
December 31, 2012 was $56.4 million, an increase of
$48.9 million over the same prior-year period. Operat-
ing cash flow in the fourth quarter 2012 was positively
impacted by higher gold sales.
• Capital expenditures were $25.3 million for the three
months ended December 31, 2012, $2.0 million lower than
the same prior-year period mainly due to higher expendi-
tures in 2011 related to the mill expansion, which was com-
missioned in third quarter 2012, partially offset by higher
reserve development expenditures in 2012.
• Gold production for the three months ended December 31,
2012 was 71,804 ounces, 96 percent higher than the same
prior-year period due to the processing of higher grade ore
combined with higher mill throughput as a result of the
completion of the mill expansion.
2012 AnnuAl RepoRt 4
• Gold sold for the three months ended December 31, 2012
totalled 71,604 ounces compared to 34,665 ounces sold
in the same prior-year period, an increase of 107 percent.
Ounces sold during the fourth quarter of 2012 were in line
with production for the period. At December 31, 2012, gold in
circuit and gold bullion inventory amounted to 13,221 ounces.
• Total cash costs for the three months ended December 31,
2012 were $623 per ounce sold compared to $809 per
ounce in the same prior-year period, a reduction of
23 percent. The decrease in total cash costs per ounce
was mainly due to higher gold ounces produced, partially
offset by higher mining and processing costs.
• Total production costs per ounce, comprised of total cash
costs and depreciation and amortization, were $869 per
ounce in the fourth quarter 2012 compared to $1,044 per
ounce in the same prior-year period.
• During the fourth quarter 2012, the average realized gold
price was $1,296 per ounce with 33,606 ounces delivered
into gold hedge contracts at an average price of $833 per
ounce and 37,998 ounces sold at an average spot price
of $1,705 per ounce. During the same prior-year period,
the average realized gold price was $1,482 per ounce with
7,385 ounces delivered into gold hedge contracts at $846
per ounce and 27,280 ounces sold into the spot market at
an average spot price of $1,654 per ounce.
• The gold forward sales contracts declined during the fourth
quarter 2012 to 59,789 ounces at December 31, 2012.
Forward sales contracts have declined by an additional
21,684 ounces to 38,105 ounces at January 29, 2013 and
are scheduled to be fully extinguished by June 2013. In
total, forward sales contracts outstanding have declined by
136,395 ounces since December 31, 2011.
partly offset by a non-cash impairment charge recorded in
2012, related to an available for sale financial asset.
• Operating cash flow for the twelve months ended Decem-
ber 31, 2012 was $72.4 million compared to $5.1 million
during the fifteen months ended December 31, 2011.
Operating cash flows in 2012 benefitted from an increase
in gross profit and lower regional exploration expenditures.
• Capital expenditures for 2012, excluding reserve develop-
ment expenditures, were $52.9 million, higher than the re-
vised guidance of $50 million, and $9.2 million lower than
the fifteen months ended December 31, 2011. Capitalized
reserve development costs for the year were $30.4 million,
higher than the revised guidance of $25 million, and
$16.0 million higher than the fifteen months ended
December 31, 2011. The increase over 2011 was the
result of a focus on expanding resources within the
Sabodala pit and converting resources to reserves.
• Gold production for the year was within guidance of
210,000–225,000 ounces, at 214,310 ounces, 63 percent
higher than the twelve months ended December 31, 2011
due to higher grade ore processed.
• Gold sold for the year was 207,814 ounces, an increase of
52 percent over the twelve months ended December 31,
2011. Ounces sold during 2012 were lower than produced
due to an increase in gold in circuit and gold bullion inven-
tory of 6,496 ounces to 13,221 ounces.
• Total cash costs for 2012 were within guidance of
$600–$650 per ounce, at $627 per ounce sold
compared to $782 per ounce for the twelve months
ended December 31, 2011, a reduction of 20 percent.
The decrease in cash costs was mainly due to higher
ounces produced.
Full-year Financial and Operating Highlights
• Total production costs, comprised of total cash costs and
• Gold revenue for the twelve months ended December 31,
2012 was $350.5 million compared to gold revenue of
$236.9 million for the fifteen months ended December 31,
2011. The increase in gold revenue was driven by higher
gold sales and spot gold prices. Revenues exclude the
impact of realized losses on ounces delivered into forward
sales contracts, which are classified within losses on gold
hedge contracts.
• Consolidated profit for 2012 was $79.9 million ($0.33
per share) up from a loss of $16.0 million ($0.07 loss per
share) during the fifteen months ended December 31,
2011. The increase in profit was primarily due to an in-
crease in gross profit from higher revenues, lower regional
exploration expenditures and lower gold hedge losses,
total depreciation and amortization, for the year were $850
per ounce sold, down from $1,031 per ounce sold for the
twelve months ended December 31, 2011.
• Realized gold price for 2012 was $1,422 per ounce sold
compared to $1,236 per ounce sold for the twelve months
ended December 31, 2011. The higher realized gold price
for 2012 reflects a lower percentage of gold delivered into
forward sales contracts due to the buyback of 52,105
ounces during the second quarter of 2012, as well as
higher gold prices in 2012.
teranga gold corporation / management’s discussion & analysis OUtlOOK 2013
year ended December 31
Operating results
ore mined
Waste mined
total mined
Grade mined
Strip ratio
ore milled
Head grade
Recovery rate
Gold produced
Gold sold
total cash cost (incl. royalties) 1, 2
total production cost1
Mining (cost/t mined)
Milling (cost/t milled)
G&A (cost/t milled)
mine production costs
capital expenditures
Mine site
Capitalized reserve development
Gora development costs
Mobile equipment
Site development
total Gora development costs
Capitalized deferred stripping 2
total capital expenditures
exploration (expensed)
administration expense
Hedge close-outs / deliveries
(000t)
(000t)
(000t)
(g/t)
waste/ore
(000t)
(g/t)
%
(oz)
(oz)
$/oz sold
$/oz sold
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
(oz)
5
2013
Guidance Range
4,000 – 4,500
31,000 – 32,000
35,000 – 36,500
1.40
–
1.60
7.00 –
7.75
3,300 – 3,400
2.00 –
2.15
89.0
–
91.0
190,000 – 210,000
190,000 – 210,000
650
–
700
950
– 1,000
2.50 –
2.70
19.00 – 20.00
5.00 –
6.00
170.0 – 180.0
20.0
5.0
–
–
25.0
10.0
30.0 –
35.0
15.0
45.0
–
–
20.0
50.0
35.0 –
40.0
105.0 – 125.0
10.0 – 15.0
15.0 – 20.0
2012
actuals
5,915
22,962
28,877
1.98
3.88
2,439
3.08
88.7
214,310
207,814
627
850
2.71
20.39
6.16
145.8
52.9
26.1
–
4.3
4.3
n/a
83.3
16.7
17.9
136,395
59,789
1 Total cash cost per ounce and total production cost per ounce are non- IFRS financial measures with no standard meaning under IFRS. For definitions of these metrics,
please see page 23 of this report.
2 For 2013, reflects the impact of adoption of a new IFRS standard for deferred stripping. Please see page 23 of this report.
material assumptions
Material assumptions or factors used to forecast production
and costs include:
• Gold price: $1,600 per ounce
• Exchange rates:
o $1.05USD: $1AUD
o $1USD: 0.002 West African Franc (XOF)
o $1.30USD: €1.00
• Fuel prices:
o Light fuel oil: $1.10/litre
o Heavy fuel oil: $1.05/litre
Other important assumptions include the following: Any politi-
cal events are not expected to impact operations, including
movement of people, supplies and gold shipments; grades and
recoveries will remain consistent with the life-of-mine plan to
achieve the forecast gold production; no unplanned delays in or
interruption of scheduled production from Sabodala mine; and
availability of mining equipment due to overruns on scheduled
major component replacements planned for the year.
2012 AnnuAl RepoRt 6
sensitiVity
Gold revenue
Gold total cash costs:
Gold price effect on royalties 1
Brent crude oil price
euR exchange rate
2013 assumption
Hypothetical change
impact on total
cash costs
impact on profit
$1,600/oz
$100/oz
n/a
$20M
$1,600/oz
$100/bbl
1.3:1
$100/oz
$10/bbl
10%
$3/oz
$27/oz
$47/oz
$0.6M
$4.8M
$9.7M
1 Assumes a 3% royalty payable to the Senegalese government.
ReVieW OF Financial ResUlts
(Us$000s)
Revenue
Cost of sales
exploration and evaluation expenditures
Administration expenses
Share-based compensation
Finance costs
losses on gold hedge contracts
Gains/(losses) on oil hedge contracts
net foreign exchange (losses)/gains
Impairment of available for sale financial asset
other income
Profit/(loss) before income tax
Income tax benefit
Profit/(loss) for the period
profit/(loss) attributable to non-controlling interest
Profit/(loss) attributable to shareholders of teranga
Basic earnings/(losses) per share
Revenue
twelve months
ended December 31
Fifteen months
ended December 31
2012
current
350,520
(179,323 )
171,197
(16,657)
(17,931 )
(4,694 )
(7,789)
(15,274 )
(427 )
(2,574)
(11,917)
36
93,970
115
94,085
14,161
79,924
0.33
2011
Restated (i)
236,873
(148,812)
88,061
(31,659)
(13,448 )
(12,411)
(2,946)
(47,943)
2,203
4,486
–
848
(12,809)
92
(12,717)
3,323
(16,040)
(0.07)
Gold revenue for the twelve months ended December 31,
2012 was $350.5 million compared to gold revenue of
$236.9 million for the fifteen months ended December 31,
2011. The increase in gold revenue was driven by higher gold
sales and spot gold prices. Revenues exclude the impact of
realized losses on ounces delivered into forward sales contracts,
which are classified within losses on gold hedge contracts.
cOst OF sales
(Us$000s)
Mine production costs
Depreciation and amortization
Royalties
Rehabilitation
Inventory movements
total cost of sales
twelve months
ended December 31
Fifteen months
ended December 31
2012
current
145,831
52,660
10,491
36
(29,695)
179,323
2011
Restated (i)
126,125
40,077
7,035
9
(24,434)
148,812
(i) The Company adopted changes to certain accounting policies effective January 1, 2012 that have been retrospectively applied to the three and fifteen months ended
December 31, 2011. See “Consolidated Financial Statements for the Year Ended December 31, 2012 – Change in Accounting Policies”.
teranga gold corporation / management’s discussion & analysis (Us$000s)
Revenue
Cost of sales
exploration and evaluation expenditures
Administration expenses
Share-based compensation
Finance costs
losses on gold hedge contracts
Gains/(losses) on oil hedge contracts
net foreign exchange (losses)/gains
Impairment of available for sale financial asset
other income
Profit/(loss) before income tax
Income tax benefit
Profit/(loss) for the period
profit/(loss) attributable to non-controlling interest
Profit/(loss) attributable to shareholders of teranga
Basic earnings/(losses) per share
(Us$000s)
Mine production costs
Depreciation and amortization
Royalties
Rehabilitation
Inventory movements
total cost of sales
twelve months
Fifteen months
ended December 31
ended December 31
2012
current
350,520
(179,323 )
171,197
(16,657)
(17,931 )
(4,694 )
(7,789)
(15,274 )
(427 )
(2,574)
(11,917)
36
93,970
115
94,085
14,161
79,924
0.33
2012
current
145,831
52,660
10,491
36
(29,695)
179,323
2011
Restated (i)
236,873
(148,812)
88,061
(31,659)
(13,448 )
(12,411)
(2,946)
(47,943)
2,203
4,486
–
848
(12,809)
92
(12,717)
3,323
(16,040)
(0.07)
2011
Restated (i)
126,125
40,077
7,035
9
(24,434)
148,812
twelve months
Fifteen months
ended December 31
ended December 31
7
Cost of sales for 2012 totalled $179.3 million and consists
of mine production costs, depreciation and amortization,
royalties, rehabilitation costs and inventory movement costs.
This compares with cost of sales for the fifteen months ended
2011 of $148.8 million.
Mine production costs for 2012 totalled $145.8 million
compared with $126.1 million for the fifteen months ended
December 31, 2011. Higher mine production costs were due
to higher mining and processing activity. Total mine site cash
production costs for 2013 are expected to rise by between $30
million and $35 million compared to 2012 due to an increase
in mining (up 24 percent) and processing (up 37 percent)
rates as detailed in the Review of Operating Results section
of this report. However, reported total cash costs for 2013 are
expected to rise marginally to between $650 and $700 per
ounce sold due to the adoption of a new accounting standard
for deferred stripping (IFRIC 20) that results in approximately
$75 to $100 per ounce being capitalized to deferred stripping
net of inventory movement costs.
Depreciation and amortization for the year totalled
$52.7 million compared with $40.1 million for the fifteen
months ended December 31, 2011. On a gross cost basis, de-
preciation was higher in 2012 due to higher gold sales as many
of the Company’s fixed assets are depreciated using the units
of production method of depreciation. In addition, deprecia-
tion was higher in fourth quarter 2012 with the commission-
ing of the plant expansion in third quarter 2012. Depreciation
and amortization expense for 2013 are expected to increase
to between $65 million and $70 million due to the additional
mobile equipment and added depreciation associated with the
mill expansion and deferred stripping.
Royalties for the year totalled $10.5 million, $3.5 million
higher than the fifteen months ended December 31, 2011,
mainly due to higher gold sales. Royalties are calculated based
on 3 percent of the average spot price of gold for the period
rather than the average price realized by the Company.
Inventory movements for 2012 resulted in a reduction to cost
of sales of $29.7 million compared to $24.4 million for the
15 months ended December 31, 2011, mainly due to higher
ounces mined than processed. During 2012, the Company
mined 376,185 ounces compared to 214,310 ounces pro-
duced.
exploration and evaluation
Exploration and evaluation expenditures for 2012 totalled
$16.7 million, $15.0 million lower than the fifteen months
ended December 31, 2011, reflecting regional exploration
costs incurred during the year related to drill programs as well
as target identification work. The higher costs in 2011 reflect
reserve definition drilling at the Gora deposit completed in
early 2012. Exploration and evaluation expenditures were
lower than the plan of $20 million as Management refocused
its efforts on the expansion and conversion of resources to
reserves within the Mine License in fourth quarter 2012.
Exploration expenses for 2013 are expected to decrease
compared to 2012. The largest cost item continues to be
drilling, which includes diamond (“DD”), reverse circulation
(“RC”), and rotary air blasting (“RAB”). The plans for the
regional exploration program are outlined below in “Strat-
egy and Market Review”. If a discovery is made, exploration
expenditures may rise above the planned amount.
administration
Administration expenses for 2012, which includes costs of the
corporate and Dakar offices as well as community and social
responsibility costs (“CSR”), were $17.9 million, $4.5 million
higher than the fifteen months ended December 31, 2011.
The higher costs in 2012 reflect the buildup of the corporate
office, higher legal costs and ongoing CSR activities. In 2013,
the Company expects to maintain similar levels of expenditure,
with the majority of the costs being budgeted for the Toronto
and Dakar offices relating to employee costs, which will include
the new Technical Services department, legal and accounting,
while the remainder is allocated for corporate social responsi-
bility costs.
share-Based compensation
During 2012, a total of 3,580,000 common share stock
options were granted to directors, officers, employees and
consultants, all at an exercise price of $3.00, and 4,058,055
common share stock options were cancelled. No stock op-
tions were exercised during the twelve month period ended
December 31, 2012. The estimated fair value of stock options
is amortized over the period in which the options vest which
is normally three years; however, under IFRS the accelerated
method of amortization is applied to stock-based compensa-
tion which results in about 70 percent of the cost of the stock
options being expensed in the first year of grant, 25 percent
in the second year and 5 percent in the third year. For those
options that vest on single or multiple dates, either upon issu-
ance or upon meeting milestones (the “measurement date”),
the entire fair value of the vesting options is recognized im-
mediately on the measurement date.
Of the 17,139,167 common share stock options issued and
outstanding as at December 31, 2012; 16,964,167 shares
vest over a three-year period and 175,000 shares vest
based on achievement of certain milestones. The fair value
of options that vest upon achievement of milestones will be
recognized based on our best estimate of outcome of achiev-
ing our results.
2012 AnnuAl RepoRt 8
Management continuously refines employee compensation
packages to ensure that the Company is able to hire and
retain the best employees available. In the third quarter 2012,
the Company introduced a new Fixed Bonus Plan to further
augment the Company’s compensation package to provide
improved compensation flexibility to be able to hire and retain
the best employees. The Fixed Bonus Plan Units issued un-
der this plan are not convertible into Company stock and are
simply redeemed by way of cash payment by the Company.
September 30, 2010; however, the gold hedge contracts still
remained in place. In the second quarter 2012, proceeds of
$60 million were received from Macquarie Bank Limited by
way of an amendment to the existing Project Finance Facility,
a portion of which was used to settle 52,105 ounces of hedge
contracts scheduled for delivery in 2012. This loan is repayable
on or before June 30, 2014. The obligations under the hedge
contracts are expected to be extinguished by June 2013 or
earlier if the Company chooses to accelerate deliveries.
During 2012, a total of 1,440,000 Fixed Bonus Plan Units, at
an exercise price of $3.00 per unit, were granted to employ-
ees. No Fixed Bonus Plan Units were forfeited or exercised
during the period. Fixed Bonus Plan Units granted are fair
valued at the end of each reporting period using the Black-
Scholes option pricing model.
Finance costs
Finance costs for 2012 of $7.8 million reflect interest costs
related to the outstanding bank and mobile equipment loans,
amortization of capitalized borrowing costs, political risk
insurance relating to the project finance facility and bank
charges. Finance costs were higher than the fifteen months
ended December 31, 2011 due to higher debt balances and
higher interest costs on borrowings. Finance costs for 2013
are expected to be comparable to 2012.
Gold Hedge contracts
The loss on gold hedge contracts totalled $15.3 million for
the twelve months ended December 31, 2012 resulted from
an increase in the spot price of gold from December 31, 2011
by $108 per ounce of gold. The total mark-to-market loss of
the remaining 59,789 ounces of gold under gold hedge con-
tracts recorded as a financial derivative liability decreased to
$51.5 million due to the reduction in forward sales contracts
outstanding by 114,711 ounces during 2012. The average
forward price of the remaining contracts of $803 per ounce
is marked to the year-end spot price of $1,664 per ounce. If
deliveries are not accelerated, the forward sales contracts are
expected to be extinguished by June 2013.
The hedge contracts were required as part of the project
finance facility with Macquarie Bank Limited (the “Project
Finance Facility”) that was put in place to construct the Sabo-
dala mine. The Project Finance Facility was initially repaid on
Oil Hedge contracts
The loss on oil hedge contracts totalled $0.4 million for
2012 resulted from a decrease of $7 per barrel over the
December 31, 2011 spot price of oil. The overall mark-to-
market of the remaining barrels of fuel oil outstanding at a
hedge price of $70 per barrel decreased due to the delivery
of 80,000 barrels during 2012, reducing the number of bar-
rels outstanding at year-end to 20,000 barrels. The financial
derivative asset of the remaining 20,000 barrels totalled
$0.5 million at December 31, 2012 at a spot price of
$92 per barrel.
The Company’s oil hedge contracts are based on the West
Texas Intermediate spot oil price; however, site fuel costs
are based on the Brent crude spot oil price. Our oil hedges
were less effective throughout 2012 because of a difference
between the two exchanges. The Company may consider
entering into new oil hedge contracts, if Management deems
the terms appropriate to reduce exposure to crude oil price
volatility.
net Foreign exchange Gains and losses
The Company generated foreign exchange losses of
$2.6 million for the twelve months ended December 31, 2012
primarily related to realized losses from the Sabodala gold mine
operating costs recorded in the local currency and translated
into the U.S. dollar functional currency.
impairment of available for sale Financial asset
As of June 30, 2012 Oromin’s share price traded 56 percent
lower than the share price at the date of acquisition and 52
percent lower than at the beginning of the year. As a result
of the continuous decline in the share price, the Company
recognized a non-cash impairment loss of $11.9 million on
the Oromin shares during the second quarter 2012.
teranga gold corporation / management’s discussion & analysis ReVieW OF OPeRatinG ResUlts
Operating results
ore mined
Waste mined
total mined
Grade mined
ounces mined
Strip ratio
ore milled
Head grade
Recovery rate
Gold produced 1
Gold sold
Average price received
(’000t)
(’000t)
(’000t)
(g/t)
(oz)
waste/ore
(’000t)
(g/t)
%
(oz)
(oz)
$/oz
total cash cost (incl. royalties) 2
$/oz sold
Mining (cost/t mined)
Milling (cost/t milled)
G&A (cost/t milled)
three months
ended December 31
2012
2011
2012
2,038
5,274
7,312
2.04
Restated (i)
1,715
4,736
6,451
1.50
5,915
22,962
28,877
1.98
133,549
82,710
376,185
2.6
725
3.40
90.7
71,804
71,604
1,296
623
3.1
19.9
6.4
2.8
604
2.10
89.8
36,695
34,665
1,482
809
2.5
17.3
6.2
3.9
2,439
3.08
88.7
214,310
207,814
1,422
627
2.7
20.4
6.2
9
twelve months
ended December 31
2011
Restated (i)
3,973
21,818
25,791
1.39
177,362
5.5
2,444
1.87
89.5
131,461
137,136
1,236
782
2.3
16.8
5.8
(i) The Company adopted changes to certain accounting policies effective January 1, 2012
that have been retrospectively applied to the three and fifteen months ended December
31, 2011. See “Consolidated Financial Statements for the Year Ended December 31,
2012 – Change in Accounting Policies”
1 Gold produced represents change in gold in circuit inventory plus gold recovered
during the period.
2 Cash cost per ounce is a non-IFRS financial measure with no standard meaning
under IFRS.
Total tonnes mined for the three months ended
December 31, 2012 were 13 percent higher compared to
the same prior-year period due to increased fleet capacity
and improved productivity in the mining operation.
Total tonnes mined for 2012 were 12 percent higher than
the twelve months ended December 31, 2011 and 4 percent
higher than planned. Ore tonnes mined were lower than plan
but at better grades resulting in similar ounces mined com-
pared to plan. In estimating 2011 year-end reserves, Manage-
ment lowered the capping level on high-grade intersections,
resulting in an underestimation of grade in this area of the ore
body. In addition, better dilution control in the pit led to better
grades mined than plan. Drilling and loading availabilities in
2012 benefited from the addition of three new blast hole drill
rigs, four new haul trucks, and the implementation of better
maintenance practices, resulting in improved loading and
hauling efficiencies from improved availability of the mobile
equipment fleet.
Ore tonnes mined in 2013 will primarily come from mining
of Phases 2 and 3 of the Sabodala pit. Mining rates are ex-
pected to increase in 2013 with the addition of five new haul
trucks and one shovel. Two of the new haul trucks arrived
in late 2012 and were commissioned in early January 2013,
while the balance of three trucks and the shovel are expected
to be commissioned in the second quarter of 2013. The ad-
ditional mobile equipment is expected to maintain a 200,000
ounce production level from the Sabodala Mine License.
Unit mining costs for 2012 were higher than plan and higher
compared to the prior year periods mainly due to higher fuel
consumption from longer haul distances and higher costs
for blasting consumables. Unit mining costs for 2013 are
expected to be comparable to 2012. Higher consumption of
blasting consumables enabling better fragmentation for pro-
cessing is expected to be offset by shorter hauling distances
from mining in Phase 3 which is at a higher elevation in the
Sabodala pit.
Gross mining costs are expected to increase with the ad-
ditional mobile equipment expected to be commissioned
in the first and second quarters of 2013 to facilitate higher
mining rates. During the third and fourth quarters of 2012,
the Company experienced delays in the delivery of tires,
which negatively impacted waste stripping activities in Phase
3 of the Sabodala pit. The Company has since entered into
negotiations with new tire suppliers to mitigate any further
supply disruptions. Management believes that the addition of
new suppliers should ensure that mining activities in 2013 are
not impacted; however, tire costs are increasing.
Ore tonnes milled for the three months ended December 31,
2012 were 20 percent higher than the same prior-year period
mainly due to an increase in mill capacity as a result of the
completion of the mill expansion. Mill throughput for the
fourth quarter was lower than plan due to the ramp-up and
optimization of the new crushing circuit, which was part of
the mill expansion, as well as higher than expected wear rates
in transfer chutes and feeders in the crushing circuit.
2012 AnnuAl RepoRt 10
The majority of these issues were rectified during a
comprehensive planned shutdown in January 2013.
Mill throughput for the twelve months ended December 31,
2012 was similar to the same prior year period, as an
increase in the milling capacity with the completion of the
mill expansion in the third quarter 2012 was offset by lower
throughput rates from harder ore processed in 2012 com-
pared to the softer material that was available in 2011. Com-
pared to budget, mill throughput for 2012 was approximately
20 percent lower than plan due to delays in commissioning
the crushing circuit as part of the mill expansion. Transfer
chute design upgrades and the addition of more durable
liners in the high-wear points through the plant are planned
for 2013. These changes are anticipated to help reduce the
frequency and duration of unplanned downtime allowing the
design targets to be achieved.
Unit processing costs for the twelve-month period ended
December 31, 2012 were 21 percent higher than the same
prior-year period due to processing of harder ore, which led
to higher consumption of heavy fuel oil (“HFO”) used for
power generation, higher costs and consumption of grinding
media, and higher costs for reagents, partly offset by lower
HFO prices. Unit processing costs in 2013 are expected to
decrease slightly to between $19 and $20 per tonne benefit-
ing from the expansion of the mill, but will also be negatively
impacted by higher consumption of reagents and grinding
media due to harder ore milled.
Unit general and administration costs for 2012 are compara-
ble to the same prior-year period. Unit general and admin-
istrative costs in 2013 are expected to decline with higher
tonnes processed.
Gold production for the year was within guidance of
210,000–225,000 ounces, at 214,310 ounces, 63 percent
higher than the twelve months ended December 31, 2011
due to higher grade ore processed. The mined grade in 2012
was 1.98 gpt compared to 1.39 gpt in the same prior-year
period, while processed grade in 2012 was 3.08 gpt versus
1.87 gpt during the twelve months ended 2011. As with any
open pit operation, the mining rate exceeds the processing
rate to ensure adequate ore feed at all times. As a result, the
highest grade material is processed and the lower grade ma-
terial is stockpiled for processing later in the mine life. Gold
production for 2013 is expected to total between 190,000
to 210,000 ounces.5 Higher throughput from the expansion
of the mill during 2012 is expected to partially offset lower
grades processed in 2013. Teranga has stated objectives
of reaching mid-tier producer status in the near term with
annual gold production of 250,000 to 350,000 ounces and
establishing a 200,000 ounce annual production base at
Sabodala is crucial in this growth strategy.6
5 This production target is based on proven and probable reserves only.
6 This production target is based on proven and probable reserves only.
During the year, 62,606 ounces were delivered into forward
sales contracts at an average price of $832 per ounce, repre-
senting 30 percent of gold sales for the year. 145,208 ounces
of gold were sold into the spot market at an average price of
$1,677 per ounce resulting in an average realized price for
the year of $1,422 per ounce. During the same prior-year pe-
riod, 137,136 ounces were sold at an average realized price
of $1,236 per ounce with 61,000 ounces delivered
into forward sales contracts at $846 per ounce representing
44 percent of gold sales for the period and 76,136 ounces
sold at an average spot price of $1,548 per ounce. The lower
percentage of gold sales into forward sales contracts in 2012
was due to the buyback of 52,105 ounces of forward sales
contracts due for delivery in 2012 as part of a $60 million
two-year Loan Facility with Macquarie Bank Limited. As of
December 31, 2012, 59,789 ounces remain to be delivered into
forward sales contracts at an average price of $803 per ounce.
Total cash costs for the three months ended December 31,
2012 were $44.6 million compared to $28.0 million in the
same prior-year period. Total cash costs for the three months
ended December 31, 2012 were $623 per ounce sold
compared to $809 per ounce in the same prior-year period, a
reduction of 23 percent. The decrease in total cash costs per
ounce was mainly due to higher gold ounces sold, partially
offset by higher mining and processing costs.
Total cash costs for the twelve months ended December 31,
2012 were $130.3 million or 22 percent higher than the same
prior-year period due to higher mine production costs and
higher royalties. On a per ounce sold basis for the fiscal year,
total cash costs were in line with guidance at $627 per ounce
sold compared to $782 per ounce for the twelve months
ended December 31, 2011. This reduction of 22 percent was
mainly due to higher processed grades. Beginning in 2013,
the Company will report cash costs, adjusted for the adoption
of a new mandatory IFRS standard (IFRIC 20) for capitaliza-
tion of a portion of production phase stripping costs when
certain benefits accrue to the Company from the stripping
activity. Total mine site cash production costs for 2013 are
expected to rise by between $30 million and $35 million
compared to 2012 due to an increase in mining (up 24 per-
cent) and processing (up 37 percent) rates. However, report-
ed total cash costs for 2013 are expected to rise marginally to
between $650 and $700 per ounce sold mainly due to lower
ore grades, mitigated by the adoption of IFRIC 20 that result
in approximately $75 to $100 per ounce being capitalized to
deferred stripping net of inventory movement costs.
Total production cost per ounce, including total cash costs
and depreciation and amortization, were $850 per ounce
sold compared to $1,031 per ounce for the twelve months
ended December 31, 2011, a reduction of 18 percent
primarily due to higher gold sales.
teranga gold corporation / notes to consolidated financial statements 11
ReseRVes anD ResOURces
The proven and probable mineral reserves for the Sabodala
and Niakafiri deposits were based on the Measured and Indi-
cated resources that fall within the designed pits. The bases
for the reserves are consistent with the Canadian Securities
Administrators National Instrument 43-101 (“NI 43-101”)
report. The design for the open pit limits, related phasing and
long-term planning for the Sabodala open pit were updated
from assay and drilling results as at August 20, 2012. Up-
dated resource block models were completed for Sabodala
and Gora deposits.
The updated Sabodala pit design is larger than the 2011
design. The new design uses similar geotechnical parameters
as in past designs and uses a slightly higher gold price for
the Lerchs-Grossman (“LG”) pit optimization routine to reflect
the three-year trailing average gold price. Mining phases
were designed similarly to the previous designs, where the
mine sequencing is based on accessing the high-grade MFE
through successive phases to balance waste stripping and
optimize cash flow.
The updated Gora pit design and reserve estimate was based
on the LG pit optimizer and geotechnical pit wall assumptions
similar to the Sabodala pit; however, a higher cut-off was
used to reflect the ore haul to Sabodala. Dilution and ore re-
covery estimates were based on an estimated minimum mine
width of 4 metres with separability optimized for 5 metre
benches in ore and 10 metres benches in waste.
The Niakafiri pit design remains unchanged from 2011.
The total proven and probable mineral reserves at
December 31, 2012 are set forth in Table 2 below,
and are based on a $1,500 gold price.
table 1:
Resources estimate
Sabodala
Sutuba
niakafiri
Gora
total
measured
indicated
measured and indicated
tonnes
(Mt)
Grade
(g/t)
28.06
1.24
–
0.30
0.49
28.85
–
1.74
5.27
1.32
au
(Moz)
1.12
–
0.02
0.08
1.22
tonnes
(Mt)
Grade
(g/t)
31.47
0.50
10.50
1.84
44.31
0.96
1.27
1.10
4.93
1.16
au
(Moz)
0.97
0.02
0.37
0.29
1.65
tonnes
(Mt)
Grade
(g/t)
59.53
0.50
10.70
2.32
73.05
1.09
1.27
1.12
5.00
1.22
au
(Moz)
2.09
0.02
0.39
0.37
2.87
inferred mineral Resources
tonnes (mt)
Grade (g/t)
au (moz
)
Sabodala
Niakafiri
Niakafiri West
Soukhoto
Gora
Diadiako
Majiva
Masato
total
table 2:
Reserves estimate
Sabodala
Sutuba
niakafiri
Gora
Stockpiles
total
12.36
7.20
7.10
0.60
0.21
2.90
2.60
19.18
52.15
0.87
0.88
0.82
1.32
3.38
1.27
0.64
1.15
1.00
0.35
0.21
0.19
0.02
0.02
0.12
0.05
0.71
1.67
Proven
Probable
Proven and Probable
tonnes
(Mt)
Grade
(g/t)
au
(Moz)
tonnes
(Mt)
Grade
(g/t)
au
(Moz)
1.5
0.315
11.07
1.24
0.443
6.55
–
0.23
0.57
7.32
14.67
–
1.69
4.07
1.02
1.36
–
0.013
0.074
0.24
0.642
0.37
7.58
1.53
–
1.40
0.017
1.12
0.274
4.27
0.21
–
–
20.56
1.43
0.944
35.23
tonnes
(Mt)
17.62
0.37
7.81
2.1
7.32
Grade
(g/t)
1.34
1.40
au
(Moz)
0.758
0.017
1.14
0.287
4.22
0.284
1.02
1.40
0.24
1.586
1 CIM definitions were used for Mineral Reserves.
2 Mineral Reserve cutoff grades for Niakafiri are 0.35 g/t Au for oxide and 0.50 g/t Au
for fresh.
4 Gold price of US$1,500 per ounce used.
5 Proven include stockpiles, which total 7.32 Mt at 1.02 g/t Au for 0.24 Mozs.
6 Sum of individual amounts may not equal the total due to rounding.
3 Mineral Reserve cutoff grade for Sabodala, Sutuba and Gora is 0.50 g/t Au.
2012 AnnuAl RepoRt
12
The technical information contained in this Report relating to the mineral reserve
estimates within the Sabodala, Sutuba, Niakafiri and Gora deposits and the Stockpiles
is based on information compiled by Julia Martin, P.Eng., MAusIMM (CP), a full-time
employee with AMC Mining Consultants (Canada) Ltd., is independent of Teranga,
is a “qualified person” as defined in NI 43-101 and a “competent person” as defined
in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves”. Ms. Martin has sufficient experience relevant to
the style of mineralization and type of deposit under consideration and to the activity
she is undertaking to qualify as a Competent Person as defined in the 2004 Edition of
the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves”. Ms. Martin has reviewed and accepts responsibility for the reserve estimates
disclosed above. Ms. Martin has consented to the inclusion in the report of the matters
based on her information in the form and context in which it appears in this Report.
The technical information contained in this Report relating to the mineral resources
is based on information compiled by Ms. Patti Nakai-Lajoie, who is a Member of the
Association of Professional Geoscientists of Ontario. Ms. Patti Nakai-Lajoie is full-
time employee of Teranga and is not “ independent” within the meaning of National
Instrument 43-101. Ms. Patti Nakai-Lajoie has sufficient experience relevant to the
style of mineralization and type of deposit under consideration and to the activity she
is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the
“Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves”. Ms. Patti Nakai-Lajoie is a “Qualified Person” under National Instrument
43-101 Standards of Disclosure for Mineral Projects and she consents to the inclusion in
the report of the matters based on her information in the form and context in which it
appears in this Report.
The technical information contained in this Report relating to exploration results
is based on information compiled by Mr. Martin Pawlitschek, who is a Member of
the Australian Institute of Geoscientists. Mr. Pawlitschek is a consultant of Teranga
and is not “ independent” within the meaning of National Instrument 43-101. Mr.
Pawlitschek has sufficient experience relevant to the style of mineralization and
type of deposit under consideration and to the activity he is undertaking to qualify
as a Competent Person as defined in the 2004 Edition of the “Australasian Code
for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr.
Pawlitschek is a “Qualified Person” in accordance with NI 43-101 and he consents
to the inclusion in the report of the matters based on his information in the form and
context in which it appears in this Report.
stRateGy anD maRKet ReVieW
GROWtH stRateGy
The Company has outlined a two-stage growth plan.
Phase 1: Become a mid-tier gold producer in Senegal with
250,000 to 350,000 ounces of annual gold production lever-
aging off the Company’s existing mill and infrastructure.
Phase 2: Increase annual gold production to 400,000 to
500,000 ounces via a mill expansion as gold inventories
increase.
The Company’s objective is to increase reserves and produc-
tion, which in turn should increase earnings and cash flow
per share, through both internal exploration discoveries and
strategic acquisitions. The Company has and will continue to
devote significant resources to exploring its land package with
a view of leveraging the existing mill and infrastructure, which
was recently expanded from a nominal capacity of 2 million
tonnes per annum (“Mtpa”) to approximately 4Mtpa. The
Company expects to produce between 190,000 to 210,000
ounces in 2013, confirming the 200,000 ounce production
base crucial to the Company’s growth trajectory.4
In the third quarter of 2012, the Company added depth
to its management team to focus on growth. Alan Hill was
appointed Executive Chairman, formerly Chairman and
Chief Executive Officer, and Richard Young was appointed
President and Chief Executive Officer, formerly President
and Chief Financial Officer. Mark English was also promoted
to Vice President, Sabodala Operations, formerly Manager,
Sabodala Gold Operations. In addition, Navin Dyal and Paul
Chawrun were appointed Vice President and Chief Financial
Officer and Vice President, Technical Services, respectively.
A Technical Services team has been established at the corpo-
rate office in Toronto to focus on optimizing strategic growth
initiatives and to provide technical support to our operations.
Technical support for the growth initiatives includes resource
modelling for existing mine licence (“ML”) prospects including
the Sabodala pit, strategic optimization of the regional land
package, engineering support for potential project develop-
ment, evaluating merger and acquisition (“M&A”) targets and
corporate reporting for resources and reserves.
Technical support for our existing operations includes engi-
neering and geology for the development of the Gora project,
continual improvement initiatives at our operations and tech-
nical support for site-specific projects.
Gora Development
At the Gora deposit, a combination of receipt of final assays,
re-modelling and application of geo-statistics resulted in
an increase in the Measured and Indicated Resources to
374,000 ounces of gold at 5.0 gpt. Technical and environ-
mental work continued during 2012 and has progressed to
initiate the permitting process in the first quarter of 2013.
Gora is planned to be operated as a satellite to the Sabo-
dala mine with limited local infrastructure and development.
Ore will be hauled to the Sabodala processing plant by a
dedicated fleet of trucks and processed on a priority basis,
displacing Sabodala feed as required.
Mining by open pit methods will produce approximately
500,000 tonnes of ore per year for four years, with a grade
ranging from 2.8 gpt to 4.9 gpt with an average mined feed
grade of 4.22 gpt gold, for a total mineral reserve of 285,000
ounces of gold.5 Metallurgical testing has revealed that Gora
ore has similar properties to the Sabodala ore body and
therefore blending will not impact overall gold recovery.
A series of environmental and pre-development technical
studies as well as local consultation have been undertaken to
support the development proposal.
4 This production target is based on proven and probable reserves only. Based on existing proven and probable reserves, this annual production rate would equate to an
approximate 8-year mine life.
5 This production target is based on existing proven and probable reserves only.
teranga gold corporation / management’s discussion & analysis
13
The project capital cost is estimated to be $45 million to
$50 million. The primary cost is the purchase of the mobile
equipment fleet, which will be utilized as part of Teranga’s
long-term mine plan upon completion of Gora. Additional
costs include installation of the required infrastructure and
project execution costs.
Total cash costs for Gora are estimated to average $675 to
$700 per ounce sold on a life-of-mine basis. The Project
economics based on the proposed operating scenario and
a discount rate of 5 percent return an after-tax net present
value (“NPV 5 percent”) of $105 million and an internal rate
return (“IRR”) of 69 percent.6
mine license (“ml”) ReseRVe
DeVelOPment
The Sabodala Mine License covers 33km2 and, in addition
to the mine-related infrastructure, contains the Sabodala,
Masato, Niakafiri, Niakafiri West, Soukhoto and Dinkokhono
deposits.
Total reserves as of December 31, 2012 on the ML were
33.13 million tonnes at 1.22 gpt totalling 1.30 million ounces,
a decrease of 235,000 ounces or 15 percent. Since the
updated reserves reflect drill assay results through August
2012, all drill results after August 20, 2012 will be included in
an updated reserve in 2013.
As at August 20, 2012, Measured and Indicated Resources
at Sabodala increased by approximately 0.7 million ounces
to 2.1 million ounces, a 43 percent increase over Measured
and Indicated Resources as at December 31, 2011, before
production.
Drilling in 2012 successfully extended the Masato mineralized
limits to the south and down dip onto Teranga’s ML defining
approximately 700,000 ounces of Inferred Resource.
The overall objective of the ML exploration program is to
extend the life of mine, at a production rate of approximately
200,000 ounces per year at grades between 1.5 and 2.0
gpt, to the year 2020 to 2025, which would result in a 10 to
15 year mine life since the IPO in 2010.7 While we had tar-
geted to reach this reserve level by mid-2013, based on our
exploration results in 2012 and the plan to drill more of our
high-potential areas on the ML in 2013, it will likely require at
least another year to extend the mine life to at least 2020 and
beyond at current production rates.
In 2012, we drilled 104,400 metres at a cost of $26 million
on the ML. The original ML budget was $20 million for 2012
but was expanded during the year to follow up on positive drill
results at Sabodala.
sabodala – main Flat extension (“mFe”) / lower
Flat Zone (“lFZ”)
The Sabodala pit optimization work completed in the first
quarter of 2012, based on the high-grade drill results from
the fourth quarter of 2011, defined a projected pit shell that
included the LFZ at depth. More than 75,000 metres of drill-
ing was completed at Sabodala in 2012 to define this section
of the ore body.
Drilling targeted the MFE immediately adjacent to the
current ultimate pit, as well as the LFZ located below and to
the north of the MFE, confirming the continuation of these
zones. The targeted zones are positioned between 250
metres and 450 metres below the surface. The MFE and
LFZ remain open down plunge and to the northwest.
The MFE down dip to the SW and SE of the existing open pit
operations at Sabodala was also successfully drilled in 2012.
These targets range from 60 metres to 250 metres below the
surface and are open down dip.
Drilling is currently underway from within the pit to test the
MFE as it dips to the north and in more shallow areas along
the perimeter to the west and east of the current pit. If the
mineralization in the extended areas of the known MFE is not
sufficient to support the economics of a larger pit, a separate
underground analysis will be undertaken in 2013 on the LFZ
where a majority of the increase in Measured and Indicated
Resources were defined in the September 1, 2012 update.
Waste dump condemnation drilling to the SE of the Sabodala
open pit encountered a zone of mineralization within the
general trend of the NW Shear projected to the SE near to
the base of Sambaya Hill. Drilling late in the year targeted this
area and results are pending.
The 2013 drill program for Sabodala is expected to be com-
pleted in the first quarter of 2013. At that time Management
will assess the economics of both a larger open pit as well as
evaluate an underground development option in the LFZ.
Conversion of a large portion of these resources to open pit
reserves will likely require higher gold prices as the orientation
of both the MFE and LFZ appear to be more steeply dipping
than originally anticipated, negatively affecting the economics
of an enlarged pit shell.
niakafiri
Expectations are to increase reserves and resources in 2013
at Niakafiri. A drill program is planned at the Niakafiri deposit
immediately below the current open pit reserve to further
delineate mineralization at depth, where the deposit remains
open at 200 metres. In addition, drilling will target the area
6 Gold price assumed is $1,500 per ounce.
7 This exploration target is not a Mineral Resource. The potential quality and grade is conceptual in nature and there has been insufficient exploration to define a Mineral
Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource.
2012 AnnuAl RepoRt 14
immediately to the north where the remainder of the resource
has been defined, and pending positive results, potentially
expand the Niakafiri reserves estimate to include this area.
Drilling is planned to begin in the second quarter 2013 pend-
ing community discussions.
niakafiri West and soukhoto
Gold mineralization at Soukhoto and Niakafiri West is
hosted in multiple shallow dipping zones with more steeply
dipping high-grade zones located in crossing structures.
The Soukhoto and Niakafiri West targets are positioned
from 30 metres to 200 metres below surface. Niakafiri
West remains open to depth.
masato
The Masato deposit outcrops on the neighbouring Oromin Joint
Venture Group (“OJVG”) property to the east of the ML ap-
proximately 2 kilometres from the Sabodala mill. The OJVG has
defined an open pit mineable reserve at Masato. The deposit
has a strike length of over 2 kilometres. Gold is hosted in a
shear zone that strikes north and sits immediately east of the
Teranga/OJVG property boundary in the main deposit area.
Dinkokhono
The Dinkokhono deposit is part of the Niakafiri Shear system
located about 1 kilometre north of the Niakafiri deposit. Some
of the mineralization defined by earlier drilling is included in
the Inferred Resource reported from Niakafiri. Drilling in 2012
was intended to infill previous drilling and test for crossing
structures, however, this was deferred to 2013.
mamasato
Drilling in 2012 established the continuation of the Mama-
sato deposit located directly across the boundary on the
OJVG property onto the Sabodala ML. Gold mineralization is
contained in veins with variable strike orientations. Additional
drilling is planned to delineate this potential resource in 2013.
ReGiOnal eXPlORatiOn
We continue to methodically explore our large regional land
package (RLP) and are in the process of systematically building a
pipeline of prospects. Unlike other West African nations, Senegal
is a relative newcomer to gold mining and exploration and we
look forward to discovering world-class deposits and establishing
Senegal as a regional mining leader.
We currently have 10 exploration permits encompassing
approximately 1,200km2 of land surrounding the Sabodala
ML (33km2 exploitation permit).8 Over the past 24 months,
with the initiation of a regional exploration program on this
significant land package, a tremendous amount of explora-
tion data has been systematically collected and interpreted to
prudently implement follow-up programs. Targets are therefore
in various stages of advancement and are then prioritized for
follow-up work and drilling. Early geophysical and geochemi-
cal analysis of these areas has led to the demarcation of at
least 40 anomalies, targets and prospects and we expect
that several of these areas will ultimately be developed into
mineable deposits. Through 2012 we were able to identify
some key targets that, though early stage, display significant
potential. However, due to the sheer size of the land position,
the process of advancing an anomaly through to a deposit
takes time as it is imperative that work is done systematically.
During 2012 we completed 62,500 metres of RAB drilling,
42,300 metres of RC and 2,400 metres of diamond drilling
on 25 of our anomalies and targets, at a cost of $20 million.
Highlights from the 2012 drilling program are:
• The discovery of a new prospect at Tourokhoto-Marougou
with a minimum strike length of 1,200 metres.
• Identification of significant mineralization from RAB drilling
at Saiensoutou extending for at least 1,400 metres in strike
length.
A 4,500 metre program of infill RC drilling commenced at
Marougou in the fourth quarter of which 2,900 metres were
completed at the end of the year. The program was designed
to infill drill on 200 metre spaced lines to establish the
continuity of the mineralization discovered earlier in the year.
The remainder of the program will be completed in the first
quarter of 2013.
On the non-drilling front significant developments on key
targets include:
• Receipt of assays for detailed termite mound sampling
over the Soreto and Diabougou prospects. This work
highlighted that the artisanal mine workings in the area
that extend for over one kilometre in strike length are part
of a four kilometres long gold anomaly coincident with a
northeast trending shear system.
• Receipt of multi-element geochemistry for detailed termite
mound sampling over the Nienyenko prospect. This work
highlighted an extensive alteration-related multi-element
footprint centred on the known gold anomalies and miner-
alization previously identified in trenches, thus significantly
enlarging the potential size of the prospect.
• First pass data collection was completed at Garaboureya,
consisting of termite mound geochemistry, mapping, rock
chip sampling and acquisition of high-resolution aeromag-
netics. This data resulted in the delineation of a significant
gold anomaly coincident with a permissive structural set-
ting. Interpretation work is continuing to define the drilling
testing program on this target for 2013.
8 The Company’s 11th exploration permit, Sabodala North West, was not renewed by the Government in June 2012. The Company has since appealed this decision and is
awaiting a response from the Government.
teranga gold corporation / management’s discussion & analysis 15
The price of gold is the largest factor in determining our profit-
ability and cash flow from operations. During 2012, the average
market price of gold was $1,669 per ounce, with gold trading
between a range of $1,540 and $1,792 per ounce based on
the London PM Fix gold price. This compares to an average
of $1,572 per ounce during 2011, with a low of $1,319 and a
high of $1,895 per ounce.
The price of gold is subject to volatile price movements over
short periods of time and is affected by numerous industry
and macroeconomic factors that are beyond our control
including, but not limited to, currency exchange rate fluctua-
tions and the relative strength of the U.S. dollar, the supply of
and demand for gold and macroeconomic factors such as the
level of interest rates and inflation expectations. In 2012, due
to a continuation of concerns over global economic growth,
geopolitical issues, sovereign debt and deficit levels, and
continuing accommodative monetary policies put in place by
many of the world’s central banks, particularly those in the
major economies including the U.S., Japan, China and the
European Union, gold has continued to attract investor inter-
est through its role as a safe haven investment, store of value
and alternative to fiat currency.
Gold prices also continue to be influenced by trends in
global mine production and the impact of central bank
activities with a growing number of banks showing interest
in gold as a reserve asset. Central banks, which had previ-
ously been net sellers of gold for several years until they be-
came net buyers in 2010, continued to increase purchases,
which were up more than 17 percent in 2012 compared to
2011. This was primarily driven by very low sales by signa-
tories to the Central Bank Gold Agreement (“CBGA”). As of
December 31, 2012 the CBGA had sold only 5 tonnes of gold
below the annual average of 385 tonnes over the 2000–2009
period, and continued buying by central banks outside of
the Central Bank Gold Agreement in order to diversify their
foreign exchange holdings.9
While the gold market is affected by fundamental global eco-
nomic changes, we are also aware that the market is strongly
impacted by expectations, both positive and negative. We
appreciate that institutional commentary can affect such
expectations. As such, the priority of Teranga is to execute on
our short- and near-term goals, effective management of the
Sabodala operations and exploration programs to increase
production and reserves, which should translate into growth
in earnings and cash flow per share.
The program for 2013 has been budgeted and will focus on
fast-tracking work on our current priority targets at Nienyenko,
Soreto, Diabougou, Tourokhoto-Marougou and Saiensoutou.
Other targets will be followed up as work progresses on the
RLP. A minimum budget of $20 million is allocated for the
combined exploration programs on the RLP and ML. Addition-
al funding is available and will be allocated on a priority basis
for prospects with clear potential for reserves definition.
Beyond the current RLP, the Company is focused on acquir-
ing additional exploration licenses in Senegal. The Company
also expects to augment its internal growth by strategic
acquisitions of companies or assets including operating assets
that have growth potential or attractive exploration packages
initially in Senegal but ultimately elsewhere in West Africa.
HealtH anD saFety
Health and safety is a constant and overriding priority at Sabo-
dala. It truly comes first in all regards and everyone is continu-
ously reminded to consider safety first. Each daily meeting
begins with a safety report, and every site report whether it
is daily, weekly, monthly or yearly begins with safety. We are
emphatic about keeping health and safety top of mind. The
Operational Health and Safety (“OHS”) program has under-
gone a complete review in 2012. OHS management plans have
been completed to address the four key areas of the business:
Administration, Operations, Exploration and Construction.
A strong focus was placed on proactive, people-based safety
management systems and the guidance documentation to
achieve this has been completed. As Teranga continues to
develop the occupational health and safety programs there
will be a strong focus for these programs to penetrate into
the workforce.
maRKet ReVieW – imPact OF Key
ecOnOmic tRenD
Gold Price ($/oz)
London PM Fix
$1,850
$1,800
$1,750
$1,700
$1,650
$1,600
$1,550
$1,500
2
1
-
n
a
J
2
1
-
r
a
M
2
1
-
y
a
M
2
1
-
l
u
J
2
1
-
p
e
S
2
1
-
v
o
N
Source: http://www.lbma.org.uk
9 Source: Thomson Reuters GFMS
2012 AnnuAl RepoRt
16
$135
$125
$115
$105
$95
$85
$75
$65
Crude Oil Prices
WTI vs. Brent (USD/bbl)
1
1
-
n
a
J
1
1
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p
A
1
1
-
l
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J
1
1
-
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c
O
2
1
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2
1
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p
A
2
1
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2
1
-
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c
O
WTI
WTI '11/12 avg
Brent
Brent '11/12 avg
WTI Oil Hedge Contract
Source: http://www.eia.gov/
Fuel costs for power generation and operation of the mobile
fleet are the single largest cost to the Sabodala mine. Fuel
purchased to operate the power plant and mobile equipment
fleet totalled $46 million in 2012 or approximately 35 percent
of operating costs.
The Sabodala operation is located in remote southeastern
Senegal and it is necessary to generate our own power. Six,
6 megawatt Warstila (diesel generator engines) provide power
for the operations. In 2012, the operations consumed approxi-
mately 20 million litres of HFO. This equates to approximately
$0.21/kWh, which is less than the cost of grid electricity in
industrialized Senegal.
Sabodala consumes Brent crude oil and we forecast that in
2013 we will expend approximately 50 million litres of oil.
The Company hedged a portion of its exposure to fuel costs
by hedging its exposure to crude oil prices. The Company
hedged 20,000 barrels of oil per quarter through March 31,
2013. Management may enter into further oil hedge contracts
should the price and terms be deemed acceptable.
The spot WTI crude oil price has moved above the hedge
contract price, which has been favourable for Teranga. How-
ever, since establishing the hedge contract, a wider price gap
has emerged between WTI and Brent, with 2012 year-end
Brent and WTI prices at approximately $110 per barrel and
$92 per barrel, respectively. This has meant that the hedge
contracts have been less effective as Sabodala consumes
Brent crude oil rather than WTI crude oil.
2012 EUR/USD Exchange Rate
0.84
0.82
0.80
0.78
0.76
0.74
0.72
0.70
2
1
-
n
a
J
2
1
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r
a
M
2
1
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a
M
2
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1
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2
1
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o
N
Source: http://www.oanda.com/
A portion of operating costs and capital expenditures of
Sabodala gold mine operations are denominated in currencies
other than U.S. dollars. Historical accounts payables records
demonstrate that the Company has an approximate
75 percent EUR exposure via West African CFA Franc, which
is pegged with the EUR and also directly with the EUR.
Throughout 2012, the Euro currency experienced continued
volatility due to the ongoing debt crisis. The year opened with
credit downgrades to several of the key players in debt crisis
while Spain and Cyprus became the fourth and fifth Eurozone
countries requesting a bailout. Anti-austerity protests across
Europe took place, demonstrating that Eurozone stability
measures were not widely supported. During September of
2012, the European Central Bank announced an unlimited
sterilization bond-buying program whereby the central bank
purchased bonds, but concurrently took money out of circula-
tion to control the money supply. Being the primary backer
to many of the stabilization measures, Germany was often
resistant to the measures. However, a September German
court ruled in favour of supporting the European Stability
Mechanism, renewing confidence in the Eurozone’s ability to
recover from the crisis.
Generally, as the U.S. dollar strengthens, the EUR and other
currencies weaken, and as the U.S. dollar weakens, the EUR
currency strengthens. All of the Company’s production comes
from its operations in Senegal therefore costs will continue
to be exposed to foreign exchange rate movements. The
Company continues to monitor currency exposure on an
ongoing basis and will implement a hedging strategy if
deemed appropriate.
teranga gold corporation / management’s discussion & analysis
casH FlOW
cash Flow
(US$000s)
operating
Investing
Financing
effect on exchange rates on holdings
Change in cash and cash equivalents during period
cash and cash equivalents – beginning of period
cash and cash equivalents – end of period
1 Cash and cash equivalents exclude restricted cash and cash held investments of longer than 90 days.
17
twelve months
ended December 31
Fifteen months
ended December 31
2012
72,447
(79,458)
39,678
(415)
32,252
7,470
39,722
2011
5,132
(113,522)
115,262
598
7,470
–
7,470
Operating cash Flow
Operating cash flow for the twelve months ended December 31, 2012 was $72.4 million compared to $5.1 million in the fifteen
months ended December 31, 2011. Operating cash flows in 2012 benefitted from higher gross profit, as a result of higher sales.
investing cash Flow
caPital eXPenDitURes
(US$000s)
Mine site capital expenditures
Capitalized reserve development
Development capital
total capital expenditures
Net cash used in investing activities for the twelve months
ended December 31, 2012 was $79.5 million, compared to
$113.5 million in the fifteen month ended December 31, 2011.
The decrease reflects lower mine site capital expenditures due
to completion of the mill expansion, offset by higher capital-
ized reserved development on the ML and higher development
capital for Gora. The amounts presented in the fifteen-month
period includes the repayment of the C$50 million promis-
sory note due to MDL from proceeds of the IPO, net of cash
received on acquisition of the Sabodala Gold Assets.
Capital expenditures for 2013, including capitalized deferred
stripping, are expected to total between $105 million and
$125 million. It is estimated that $20 million to $25 million
will be spent on capital expenditures at Sabodala, which
mostly relate to mobile equipment to expand the mining rate,
a new tailings storage facility, new airstrip and community rela-
tions projects. The cost to construct the Gora satellite deposit is
estimated between $45 million and $50 million, including $30
million to $35 million for mobile equipment and $15 million to
$20 million to construct a road to the Sabodala mill and site
development costs. The timing of expenditures at Gora is de-
pendent on the timing of receipt of permits. The Environmental
Impact Assessment and Technical Study for the Gora deposit
are expected to be submitted in first quarter 2013 for review by
the Government of Senegal.
twelve months
ended December 31
Fifteen months
ended December 31
2012
52,875
26,086
4,289
83,250
2011
62,033
14,359
–
76,392
The capitalized mine reserve development budget for 2013 is
expected to total $5 million to $10 million. This budget includes
the continuation of the resource expansion and conversion
program on the Mine Licence. Capitalized deferred stripping
costs are expected to be between $35 million and $40 million
related to waste stripping activities capitalized within the Sabo-
dala pit under a new accounting standard under International
Financial Reporting Standards (“IFRS”). For a description of
this new standard, please see page 23 of this Report.
Financing cash Flow
Net cash provided by financing activities for the twelve
months ended December 31, 2012 was $39.7 million
compared to net cash provided by financing activities of
$115.3 million in the fifteen months ended December 31,
2011. Net cash provided by financing activities in 2012
included the drawdown of the loan facility of $60 million
received at the end of the second quarter 2012, partially
offset by repayments of the finance lease facility of
$16.8 million. Financing cash flows in 2011 includes
proceeds from the IPO, net of issuance costs, partially offset
by repayments of the finance lease facility of $10.8 million.
2012 AnnuAl RepoRt 18
LIQUIDITY AND CAPITAL RESOURCES
FINANCIAL INSTRUMENTS
The Company manages its exposure to financial risks –
including liquidity risk, credit risk, currency risk, market risk,
interest rate risk and price risk – through a risk mitigation
strategy. Teranga does not acquire or issue derivative finan-
cial instruments for trading or speculation.
A condition of the Project Finance Facility provided by
Macquarie Bank Limited was the establishment of gold
forward sales contracts and oil energy swaps to manage
exposure to commodity price risk.
Following a restructure late in 2008, a total of 399,000 ounces
of gold was committed forward for delivery between May 2009
and August 2013 at an average delivery price of $826 per
ounce. Deliveries into the hedge position of 339,211 ounces
have reduced the hedge balance to 59,789 ounces at
December 31, 2012 and 38,105 ounces at January 29, 2013.
The mark-to-market at the reporting date spot price of
$1,664 per ounce was in a loss position of $51.5 million.
The Company has a hedge agreement with respect to the oil
price in order to manage its exposure to commodity risk. The
Company hedged 80,000 barrels per annum for four years
commencing April 1, 2009 at a flat forward price of $70 per
barrel. At December 31, 2012, the remaining 20,000 barrels
were hedged with a mark-to-market gain of $0.5 million at the
reporting date spot price of $92 per barrel.
CONTRACTUAL OBLIGATIONS
AND COMMITMENTS
Working Capital Requirements
The Company’s working capital requirements primarily relate
to the mining costs of extracting ore from the Sabodala gold
mine and then the costs involved in processing the ore to
remove the gold, before the gold itself is sold.
The Company’s liquidity continues to improve, even as it extin-
guishes its hedge book, with $39.7 million in cash, and cash
equivalents in addition to 6,409 ounces in bullion inventory at
December 31, 2012. The gold forward sales contracts declined
during 2012 to 59,789 ounces as at December 31, 2012.
Forward sales contracts have declined by an additional 21,684
ounces to 38,105 ounces at January 29, 2013 and are sched-
uled to be fully extinguished by June 2013. In total, forward
sales contracts outstanding have declined by 136,395 ounces
since December 31, 2011. Management believes that the
higher cash balance, extinguishment of the hedge book and
200,000 ounces of production level at Sabodala are expected
to be sufficient to support the Company’s minimum operating
requirements without the need for additional equity financing.
During the fourth quarter 2012, the Company purchased
additional mining equipment to increase the mining rate in
the Sabodala pit in the amount of $13.4 million, of which ap-
proximately $6 million was spent in 2012. The equipment is
intended to be financed by a new equipment lease facility with
Macquarie Bank Limited (“Macquarie”), which is expected to be
finalized in the first quarter of 2013. The new facility is expected
to provide $50 million of equipment financing and will be used
to refinance the existing Société Générale lease facility at a mar-
gin significantly lower than the current bank loan.
In addition, the Company continues to review the merits of
various debt facilities to provide additional flexibility to execute
its growth strategy. Such incurrence of debt may be in the form
of one or more borrowings of bank or other similar loans. There
can, however, be no assurance that the Company will find the
terms on such debt reasonable and therefore may not put a new
facility in place.
The Company has counterparty risk relating to advances provid-
ed to suppliers as well as to receivables from the sale of gold bul-
lion. The cash and cash equivalents are invested in short-term
Term Deposits issued by Canadian banks and in sovereign debt.
The Company has adopted a strategy to minimize its credit risk
by substantially investing in sovereign debt issued by Canadian
Agencies, Provinces and the Federal Government of Canada. A
minimal cash amount is held with the Senegal banks.
Off Balance Sheet Arrangements
The Company has no off balance sheet arrangements.
teranga gold corporation / management’s discussion & analysis 19
As at December 31, 2012, the Company had the following payments due on contractual obligations and commitments:
Contractual Obligation and Commitments
Mining fleet lease facility 1
2-Year loan facility 2
Exploration commitments 3
Government of Senegal payments 4
Plant expansion5
Mining equipment supply contract 6
Total
Payments Due by Period (US$ Millions)
Total
< 1 year
1–3 years
4–5 years
>5 years
10.5
60.0
27.6
5.1
0.6
7.3
10.5
–
2.3
5.1
0.6
7.3
–
60.0
25.3
–
–
–
111.1
25.8
85.3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 In 2010, an amended facility was concluded with a new limit of $27.8 million to pro-
vide for the acquisition of additional mining equipment associated with the Sabodala
expansion ($15.1 million) and the re-gearing of existing equipment ($2.2 million).
During the year ended December 31, 2011, the Company finalized the expansion
of the mobile equipment loan with Société Générale by an additional $12.8 million.
The amended facility contains a quarterly repayment schedule concluding with the
final payment on September 30, 2013. The facility is currently drawn down to
$10.5 million.
2 Reflects a 2-Year Loan Facility concluded with Macquarie in June 2012. The Loan
Facility bears interest of LIBOR plus a margin of 10 percent and shall be repaid on or
before June 30, 2014.
3 Reflects the exploration permits, licenses and drilling contracts committed to by
the Company.
4 Comprises $4.0 million, to which an annual interest rate of 6 percent applies, payable to
the Government of Senegal relating to the historical cost of acquiring the Mine License.
Subsequent to year-end, full payment was made to the Government of Senegal.
5 Represents amounts to be paid for the Sabodala mill expansion over the next
12 months.
6 During the third quarter of 2012, the Company finalized a contract to purchase
additional mining equipment. The equipment is intended to be financed by a new
equipment lease facility with Macquarie, which is expected to be finalized during the
first quarter of 2013.
Sabodala Operating Commitments
The Company faces the following operating commitments in
respect of the Sabodala gold operation:
Pursuant to the Company’s Mining Concession, a royalty of
3 percent is payable to the Government of Senegal based on
the value of gold shipments, evaluated at the spot price on
the shipment date.
$425,000 per annum is payable for social development of lo-
cal authorities in the surrounding Tambacounda region during
the term of the Mining Concession.
$30,000 per year is payable for logistical support of the ter-
ritorial administration of the region from date of notification of
the Mining Concession.
$200,000 per year of production is payable for training of
Directorate of Mines and Geology officers and Mines Ministry.
$4.0 million plus interest is payable to the Government of
Senegal pursuant to terms included in the Sabodala Mining
Licence at date of grant. The Company paid this amount
along with the accrued interest subsequent to year-end.
2012 AnnuAl RepoRt
20
sUmmaRy OF QUaRteRly inFORmatiOn
2012
Q3
Q2
Q1
Q4
2011
Q3
Q2
Q1
calendar Quarters
Operating results
ore mined
Waste mined
total mined
ore processed
Gold produced
Gold sold
(’000t)
(’000t)
(’000t)
(’000t)
(oz)
(oz)
Q4
2,038
5,274
7,312
725
655
6,242
6,897
650
2,105
5,130
7,235
491
1,117
6,316
7,433
573
71,804
55,107
45,495
41,904
71,604
62,439
38,503
35,268
Average price received
($/oz)
1,296
1,290
1,608
Cash cost
($/oz sold)
623
594
645
1,712
673
Financial Results (Us$000)
1,715
4,736
6,451
604
36,695
34,665
1,482
809
1,008
5,085
6,093
582
27,082
27,575
1,174
928
759
5,538
6,297
650
491
6,459
6,950
608
33,388
34,296
35,407
39,490
1,083
802
1,199
639
Revenue
Cost of sales
profit/(loss)
attributable to
teranga shareholders
operating cash flow
($000)
122,970
105,014
62,010
($000)
63,302
51,033
33,083
60,526
31,905
58,026
25,755
46,678
33,133
54,066
55,067
38,517
35,638
($000)
($000)
48,781
21,336
12,590
(2,783)
27,733
(24,808)
(14,413)
6,457
56,401
150
(12,989)
28,885
7,466
(12,025)
(9,821)
20,013
profit/(loss) per share
$
0.20
0.09
0.05
(0.01)
0.10
(0.10)
(0.06)
0.03
Our quarterly operating results in 2012 reflect the investment
made in the Sabodala mine to increase the amount of material
mined and processed.
The increase in the quarterly mining rates in 2012 reflect the
investment in four haul trucks, three drills and implementation
of better maintenance practices.
The higher quarterly processing rate in the final two quarters of
2012 reflects the benefit of the completion of the mill expan-
sion in the third quarter of 2012, partially offset by harder
ore in 2012 compared to 2011, which negatively impacted
throughput rates.
Higher gold production reflects the impact of better grades as
mining in the higher grade area of Phase 2 began in the fourth
quarter of 2011 and continued throughout 2012.
Average realized price varied with the percentage of gold sales
into forward sales contracts that varied on a quarter-by-quarter
basis, as well as, fluctuations in the spot price of gold.
Cash costs declined as gold sales increased. Higher mining
and processing costs were more than offset by higher grade
material processed, resulting in lower total cash costs per
ounce.
Our financial results for the last eight quarters, particularly for
2012, reflect a trend of increasing gold production and sales,
which has translated into increasing revenues, profits and
earnings per share, and operating cash flow.
RisK FactORs
Teranga believes that there are some risk factors that can have
a material effect on the profitability, future cash flow, earnings,
results of operations, stated reserves and financial condition
of the Company. If any event arising from these risks occurs,
the Company’s business, prospects, financial condition, results
of operations or cash flows could be adversely affected, the
trading price of Teranga’s common shares could decline and
all or part of any investment may be lost. Additional risks and
uncertainties not currently known to the Company, or that
are currently deemed immaterial, may also materially and ad-
versely affect the Company’s business operations, prospects,
financial condition, results of operations or cash flows.
Please see Teranga’s current Annual Information Form (“AIF”)
for the year ended December 31, 2011 for additional risk factors
that should be considered by anyone considering investing in
Teranga. The 2012 AIF is expected to be filed in March 2013.
cOntinGent liaBilities
The Company confirmed directly or via its holding subsidiaries
that it will continue to provide financial support to its subsidiar-
ies to enable them to meet their obligations as they fall due for a
period of not less than 12 months.
Subsequent to year-end in January 2013, Sabodala Mining Com-
pany SARL (“SMC”) received a tax assessment from the
Senegalese tax authorities claiming withholding tax of ap-
teranga gold corporation / management’s discussion & analysis 21
proximately $6 million on payments made to foreign provid-
ers. We have reviewed the assessment with our legal counsel
and are confident that they are primarily without merit. This
matter is still being reviewed and considered with the Tax
authorities in Senegal and Teranga is committed to paying
all taxes deemed legitimately due. SMC responded to the tax
assessment in February 2013 challenging all of it except for
approximately $50,000 relating to withholding taxes on pay-
ments made in 2008.
In December 2012, Sabodala Gold Operations SA (“SGO”)
received a tax assessment from the Senegalese tax authori-
ties claiming withholding taxes of approximately $6 million on
amounts considered as distributions, contribution of land built
properties, withholding tax on salaries and withholding tax on
payments made to foreign providers. SGO responded to the
tax assessment including evidence supporting treatment of
withholding taxes in accordance with the General Tax Code
in Senegal. We have reviewed the assessment with our legal
counsel and are confident that they are without merit and that
these issues will be resolved with no or an immaterial amount of
tax due.
During the year 2011, SGO received a tax assessment from
the Senegalese tax authorities claiming withholding taxes of
approximately $24 million relating to interest paid to SGML
Capital under the Mining Fleet Lease facility, director’s fees and
services rendered by offshore companies. SGO responded to
the tax assessment including evidence supporting treatment of
withholding taxes in accordance with the General Tax Code in
Senegal. In January 2012 the tax assessment was re-confirmed
by the Senegalese tax authorities. We have reviewed the alleged
breaches identified by the Senegalese tax authorities with our
legal counsel and are confident that they are without merit
and that these issues will be resolved with no or an immaterial
amount of tax due. As a result, in February 2012 SGO filed a
notice to refer the tax assessment to arbitration in accordance
with Senegalese laws. The arbitration ruling is appealable to
the International Chamber of Commerce of Paris. To date, Sen-
egalese authorities have failed to respond to our requests for a
resolution on this matter.
In January 2012 the Official Journal of the Republic of Senegal
issued notice of a new financial act that would impose a 5
percent “contribution” on the sale of products from mines and
quarries. In April 2012, SGO received an official request by the
tax authorities in Senegal, followed by a follow-up request in
May 2012, for payment of 5 percent of gold sales completed in
March pursuant to this new financial act. SGO has challenged
the assessment under this new 5 percent tax citing the fiscal
stability provisions included in its Sabodala Mining Convention,
based on the opinions received from both national and inter-
national counsel. In fourth quarter 2012, the Government of
Senegal issued a second assessment relating to gold sales dur-
ing the second quarter. Should this issue not be resolved with
the Government of Senegal, we can appeal the Government’s
decision to apply the tax to the International Chamber of Com-
merce of Paris pursuant to our rights under our Sabodala Min-
ing Convention. During the third quarter 2012, the Government
of Senegal began enforcement measures against all mining
companies impacted by this new tax on mining products. As of
the date of this report, the Government of Senegal has collect-
ed a total of $850,000 from the Company in partial satisfaction
of amounts assessed to June 30, 2012. The potential impact to
the Company’s earnings and total cash costs is approximately
$11.6 million and $60 per ounce of gold sold, respectively, for
the twelve months ended December 31, 2012. The Company’s
Consolidated Statement of Comprehensive Income/(Loss) do
not reflect this potential impact as Management believes that
the special contribution tax should not apply to SGO given the
fiscal stability provision in its Mining Convention. The Company
continues to challenge the validity of the application of this tax
to Sabodala Gold Operations given fiscal stability protections in
its Mining Convention and anticipates that a resolution of the
matter will be reached with the Government in due course.
It is Management’s intention to work with the Senegalese
authorities in order to find a mutually agreeable solution that
respects our overall fiscal stability rights included in our Mining
Convention. Teranga’s vision is to grow its business in Senegal
with the Government. The Company plans to work with the
Government to help address some of Senegal’s immediate
financial needs.
cRitical accOUntinG POlicies
anD estimates
The following are critical judgments that management has
made in the process of applying accounting policies that have
the most significant effect on the amounts recognized in the
financial statements:
Fair Value of Derivative Financial Instruments
Management assesses the fair value of the Company’s financial
derivatives in accordance with the accounting policy stated in
Note 4 to the Annual Consolidated Financial Statements. Fair
values have been determined based on well-established valu-
ation models and market conditions existing at the reporting
date. These calculations require the use of estimates and as-
sumptions. Changes in assumptions concerning interest rates,
gold prices and volatilities could have a significant impact on
comprehensive income due to the change in the fair value
attributed to the Company’s financial derivatives. When these
assumptions change or become known in the future, such
differences will impact asset and liability carrying values in the
period in which they change or become known.
2012 AnnuAl RepoRt 22
Ore Reserves
Management makes estimates of the Company’s ore reserves
based upon information compiled by Competent Persons as
defined in accordance with the Canadian Code for Reporting
Mineral Resources and Ore Reserves and Qualified Persons
as defined in NI 43-101, which is similar to the Australian
standards. The estimated quantities of economically recover-
able reserves are based upon interpretations of geological
models and require assumptions to be made regarding
factors such as estimates of short- and long-term exchange
rates, estimates of short- and long-term commodity prices,
future capital requirements and future operating perfor-
mance. Changes in reported reserve estimates can impact
the carrying value of property, plant and equipment, provision
for rehabilitation obligations, the recognition of deferred tax
assets, as well as the amount of depreciation and amortiza-
tion charged to the income statement.
Units of Production
Management makes estimates of recoverable reserves in
determining the depreciation and amortization of mine assets.
This results in a depreciation/amortization charge propor-
tional to the depletion of the anticipated remaining life of mine
production. Each item’s life, which is assessed annually, has
regard to both its physical life limitations and to present as-
sessments of economically recoverable reserves of the mine
property at which the asset is located. The calculations require
the use of estimates and assumption, including the amount of
recoverable reserve and estimates of future capital expendi-
ture. The Company’s units of production calculation is based
on life of mine gold production. As the Company updated its
estimate regarding the expected units of production over the
life of the mine, amortization under the units of production
basis will change. Recoverable reserves increased at the be-
ginning of 2012, resulting in a decrease in units of production
amortization for the year.
Mine Rehabilitation Provision
Management assesses the Company’s mine rehabilitation
provision annually. Significant estimates and assumptions are
made in determining the provisions for mine rehabilitation as
there are numerous factors that will affect the ultimate liability
payable. These factors include estimates of the extent and
cost of rehabilitation activities, technological changes, regula-
tory change, cost increases, and changes in discount rates.
Those uncertainties may result in future actual expenditures
differing from the amounts currently provided. The provision
at the balance date represents management’s best estimate
of the present value of the future rehabilitation costs required.
Changes to estimated future costs are recognized in the state-
ment of financial position by adjusting the rehabilitation asset
and liability.
Impairment of Assets
Management assesses each cash generating unit at each
reporting period to determine whether any indication of impair-
ment exists. Where an indicator of impairment exists, a formal
estimate of the recoverable amount is made that is considered
to be the higher of the fair value less costs to sell and value
in use. These assessments require the use of estimates and
assumptions such as long-term commodity prices, discount
rates, future capital requirements, exploration potential and
operating performance. Fair value is determined as the amount
that would be obtained from the sale of the asset in an arm’s
length transaction between knowledgeable and willing parties.
Fair value for mineral assets is generally determined as the
present value of estimated future cash flows arising from the
continued use of the asset, which includes estimates such as
the cost of future expansion plans and eventual disposal, using
assumptions that an independent market participant may take
into account. Cash flows are discounted by an appropriate
discount rate to determine the net present value. Management
has assessed its cash generating units as being all sources
of mill feed through a central mill, which is the lowest level for
which cash flows are largely independent of other assets.
Production Start Date
Management assesses the stage of each mine development
project to determine when a mine moves into the production
stage. The criteria used to assess the start date of a mine are
determined based on the unique nature of each mine develop-
ment project. The Company considers various relevant criteria
to assess when the mine is substantially complete, ready for its
intended use and moves into the production phase. Some of
the criteria include, but are not limited to, the following:
• the level of capital expenditure compared to construction
cost estimates;
• completion of a reasonable period of testing of the mine
plant and equipment;
• ability to produce metal in saleable form; and
• ability to sustain ongoing production of metal.
When a mine development project moves into the production
stage, the capitalization of certain mine construction costs
ceases and costs are either regarded as inventory or ex-
pensed, except for capitalizable costs related to mining asset
additions or improvements, underground mine development
or mineable reserve development. It is also at this point that
depreciation/amortization commences.
Fair Value of Stock Options
Management assesses the fair value of stock options granted
in accordance with the accounting policy stated in Note 4(q) to
teranga gold corporation / management’s discussion & analysis 23
the Company’s Annual Consolidated Financial Statements. The
fair value of the options granted is measured using the Black-
Scholes model, taking into account the terms and conditions
upon which the options are granted. The calculation requires
the use of estimates and assumptions. As there were no
historical data available for determination of the fair value of the
stock options granted, the Company developed its assumptions
based on information available in the mining industry using
comparable companies operating in the gold sector.
Functional Currency
The functional currency of each of Company’s entities is mea-
sured using the currency of the primary economic environ-
ment in which that entity operates. The functional currency
of the corporate office is Canadian dollars and the functional
currency of all other entities within the group is U.S. dollars.
Functional currency of each entity was determined based on
the currency that mainly influences sales prices for goods
and services, labour, material and other costs.
The Company’s corporate entity changed its functional
currency from the Canadian dollar to the United States dol-
lar as of January 1, 2012. Per IAS 21, an entity’s functional
currency should reflect the underlying transactions, events,
and conditions relevant to the entity. Based on management’s
evaluation taking into consideration the currency of the main
sources of income, intercompany charges, significant capital
projects, source of funding of expenditures, the currency in
which cash and cash deposits are maintained as well as the
currency of corporate office expenditures, the functional cur-
rency of the corporate entity is determined to be the United
States dollar. The change in functional currency has been
accounted for prospectively.
cHanGe in accOUntinG POlicies
Inventory Valuation
Effective January 1, 2012 the Company changed its method
of measuring and recording the cost of stockpile, gold in
circuit and gold bullion inventory. The new policy measures
and records the costs associated with stockpile, gold in circuit
and gold bullion inventory based on recovered ounces of gold.
Under the previous policy, stockpile, gold in circuit and gold
bullion costs were measured and recorded based on tonnes.
The new policy better matches revenue and expenses as
compared to the former policy because it attaches higher costs
to the higher grade ore and charges more costs to the income
statement during periods that higher grade ore is processed
and sold. Management believes that the change in account-
ing policy for inventory valuation better matches the income
statement and provides a more reliable measurement of the
stockpile, gold in circuit and gold bullion inventory.
The change in accounting policy has been applied retro-
actively as it is shown in Note 4 to the Company’s Annual
Consolidated Financial Statements.
Depreciation
In line with the change in the method of measuring and
recording inventory, the Company changed its accounting
policy regarding units of production depreciation as of Janu-
ary 1, 2012. Under the previous method, units of produc-
tion fixed assets were amortized over life of mine tonnes
processed. The new policy is based on recovered ounces of
gold. Management believes that the change in accounting
policy for units of production depreciation better matches
revenue and costs.
The change in accounting policy has been applied retro-
actively as it is shown in Note 4 to the Company’s Annual
Consolidated Financial Statements.
aDOPtiOn OF neW accOUntinG
stanDaRDs
stripping costs in the Production Phase
of a surface mine
In October 2011, the IASB issued IFRIC 20 Stripping Costs
in the Production Phase of a Surface Mine. IFRIC 20 pro-
vides guidance on the accounting for the costs of stripping
activity in the production phase of surface mining when
two benefits accrue to the entity from the stripping activity:
useable ore that can be used to produce inventory and
improved access to further quantities of material that will be
mined in future periods. IFRIC 20 must be applied starting
January 1, 2013 with early adoption permitted. The Com-
pany has performed a preliminary assessment of the impact
of adopting IFRIC 20 on its consolidated financial statements
indicating that we will capitalize waste stripping costs, which
are not permitted under our current accounting policy.
Based on our analysis, we expect that our restated 2012
financial statements will show an increase in property, plant
and equipment, a decrease in inventory and an increase
in profit. The quantum of these changes is currently under
review in preparation of our first quarter 2013 report.
nOn-iFRs Financial measURes
The Company provides some non-IFRS measures as supple-
mentary information that management believes may be useful
to investors to explain Teranga’s financial results. “Average real-
ized price” is a financial measure with no standard meaning
under IFRS. Management uses this measure to better under-
stand the price realized in each reporting period for gold and
2012 AnnuAl RepoRt 24
silver sales. Average realized price excludes from revenues
unrealized gains and losses on non-hedge derivative con-
tracts. The average realized price is intended to provide ad-
ditional information only and does not have any standardized
definition under IFRS; it should not be considered in isolation
or as a substitute for measures of performance prepared in
accordance with IFRS. Other companies may calculate this
measure differently.
“Total cash cost per ounce sold” is a common financial
performance measure in the gold mining industry but has no
standard meaning under IFRS. The Company reports total
cash costs on a sales basis. We believe that, in addition to
conventional measures prepared in accordance with IFRS, cer-
tain investors use this information to evaluate the Company’s
performance and ability to generate cash flow. Accordingly, it
is intended to provide additional information and should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. The measure,
along with sales, is considered to be a key indicator of a
Company’s ability to generate operating earnings and cash flow
from its mining operations.
Total cash costs figures are calculated in accordance with a
standard developed by The Gold Institute, which was a world-
wide association of suppliers of gold and gold products and in-
cluded leading North American gold producers. The Gold Insti-
tute ceased operations in 2002, but the standard is considered
the accepted standard of reporting cash cost of production
in North America. Adoption of the standard is voluntary and
the cost measures presented may not be comparable to other
similarly titled measures of other companies.
“Total depreciation and amortization per ounce sold” is a
common financial performance measure in the gold mining
industry but has no standard meaning under IFRS. It is
intended to provide additional information and should not
be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS.
Total cash costs per ounce sold and total depreciation per
ounce sold are calculated as follows:
three months
ended December 31
twelve months
ended December 31
2012
2011
2012
2011
Restated (i)
Restated (i)
Gold produced
Gold sold
Cost of sales 1
less: depreciation and amortization
less: realized oil hedge gain
Add: non-cash inventory movement
less: other adjustments
total cash costs
total cash costs per ounce sold
Depreciation and amortization
non-cash inventory movement
total depreciation and amortization
total depreciation and amortization
per ounce sold
total production costs per ounce sold
oz
oz
($000)
($000)
($000)
($000)
($000)
($000)
$/oz
($000)
($000)
($000)
$/oz
$/oz
71,804
71,604
63,302
(17,953)
(365)
346
(689)
44,642
623
17,953
(346)
17,607
246
869
36,695
34,665
25,755
(8,676)
(481)
516
10,924
28,038
809
8,676
(516)
8,160
235
1,044
214,310
131,461
207,814
137,136
179,323
133,043
(52,660)
(35,035)
(1,936)
(2,009)
6,377
902
(816)
10,331
130,288
107,232
627
782
52,660
35,035
(6,377)
(902)
46,283
34,133
223
850
249
1,031
(i) The Company adopted changes to certain accounting policies effective January 1, 2012 that have been retrospectively applied to the three and fifteen months ended December 31,
2011. See “Consolidated Financial Statements for the Year Ended December 31, 2012 – Change in Accounting Policies”.
1 Total cash costs per ounce sold for each quarter of 2011 were restated to comply with the Company’s new accounting policies for measuring and recording ore stockpile costs, and
reporting total cash costs after inventory movement, in line with the Company’s accounting policies and industry standards.
OUtstanDinG sHaRe Data
The Company’s fully diluted share capital as at the report date was:
Ordinary shares
Stock options granted at an exercise price of $3.00 per option
Fully diluted share capital
Outstanding
245,618,000
17,139,167
262,757,167
teranga gold corporation / management’s discussion & analysis
25
tRansactiOns WitH RelateD PaRties
equity interests in Related Parties
Details of percentages of ordinary shares held in subsidiaries
are disclosed in Note 39 to the Company’s Annual Consoli-
dated Financial Statements.
transactions with Key management Personnel
Details of key management personnel compensation are
disclosed in Note 38 to the Company’s Annual Consolidated
Financial Statements.
No loans were made to directors or director-related entities
during the year.
transactions with Other Related Parties
There was zero balance outstanding to related parties as at
December 31, 2012.
shareholdings
Teranga’s 90 percent shareholding in SGO, the company
operating the Sabodala gold mine, is held 89.5 percent
through Mauritius holding company Sabodala Gold Mauritius
Limited (“SGML”), and the remaining 0.5 percent by individu-
als nominated by SGML to be at the Board of Directors in
order to meet the minimum shareholding requirements under
Senegalese law. On death or resignation, a share individually
held would be transferred to another representative of SGML
or added to its current 89.5 percent shareholding according
to the circumstances at the time.
ceO/cFO ceRtiFicatiOn
The Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) are responsible for establishing and
maintaining disclosure controls and procedures (“DC&P”)
and internal control over financial reporting (“ICFR”), as those
terms are defined in National Instrument 52-109 Certification
of Disclosure in Issuers’ Annual and Interim Filings, for the
Company.
The Company’s CEO and CFO certify that, as at December 31,
2012, the Company’s DC&P have been designed to provide
reasonable assurance that material information relating to the
Company is made known to them by others, particularly dur-
ing the period in which the interim filings are being prepared;
and information required to be disclosed by the Company
in its annual filings, interim filings or other reports filed or
submitted by it under securities legislation is recorded,
processed, summarized and reported within the time periods
specified in securities legislation. They also certify that the
Company’s ICFR has been designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with the issuer’s GAAP. The control framework
the Company’s CEO and CFO used to design the Company’s
ICFR is COSO. There is no material weakness relating to the
design of ICFR. There is no limitation on scope of design as
described in paragraph 3.3 of NI 52-109.
An evaluation of the effectiveness of the design and operation
of our disclosure controls and procedures was conducted
as of December 31, 2012 by the Company’s management
under the supervision of the CEO and the CFO. Based on this
evaluation, the CEO and the CFO have concluded that, as of
December 31, 2012, the Company’s DC&P are effective to
ensure that information required to be disclosed in reports
that we file or submit under Canadian securities legislation is
summarized and reported within the time periods specified
therein. The Company’s management, under the supervision
of the CEO and the CFO, has evaluated the effectiveness of
its internal control over financial reporting. Based on this
evaluation, management has concluded that internal control
over financial reporting was effective as of December 31,
2012. There is no limitation on scope of design as described
in paragraph 5.3 of NI 52-109. There has been no change
in the Company’s ICFR that occurred during the year ended
December 31, 2012 that has materially affected, or is reason-
ably likely to materially affect, the Company’s ICFR.
RisKs anD UnceRtainties
The Company is subject to various financial and operational
risks and uncertainties that could have a significant impact
on profitability and levels of operating cash flow. These risks
and uncertainties include, but are not limited to: fluctuations
in metal prices (principally the price of gold), capital and op-
erating cost estimates, borrowing risks, production estimates,
need for additional financing, uncertainty in the estimation of
mineral reserves and mineral resources, the inherent danger
of mining, infrastructure risk, hedging activities, insured and
uninsured risks, environmental risks and regulations, govern-
ment regulation, ability to obtain and renew licenses and
permits, foreign operations risks, title to properties, competi-
tion, dependence on key personnel, currency, repatriation of
earnings and stock exchange price fluctuations.
cOmPetent PeRsOns statement
The technical information contained in this Report relating to
the mineral reserve estimates within the Sabodala, Sutuba,
Niakafiri and Gora deposits and the Stockpiles, is based on
information compiled by Julia Martin, P.Eng., MAusIMM (CP),
a full-time employee with AMC Mining Consultants (Canada)
Ltd., independent of Teranga, a “qualified person” as defined
2012 AnnuAl RepoRt 26
in NI 43-101 and a “competent person” as defined in the
2004 Edition of the “Australasian Code for Reporting of Ex-
ploration Results, Mineral Resources and Ore Reserves”. Ms.
Martin has sufficient experience relevant to the style of min-
eralization and type of deposit under consideration and to the
activity she is undertaking to qualify as a Competent Person
as defined in the 2004 Edition of the “Australasian Code for
Reporting of Exploration Results, Mineral Resources and Ore
Reserves”. Ms. Martin has reviewed and accepts responsibil-
ity for the reserve estimates disclosed above.
Ms. Martin has consented to the inclusion in the Report of
the matters based on her information in the form and context
in which it appears in this Report.
The technical information contained in this Report relating to
the mineral resources is based on information compiled by
Ms. Patti Nakai-Lajoie, who is a Member of the Association of
Professional Geoscientists of Ontario. Ms. Patti Nakai-Lajoie
is a full-time employee of Teranga and is not “independent”
within the meaning of National Instrument 43-101. Ms. Patti
Nakai-Lajoie has sufficient experience relevant to the style of
mineralization and type of deposit under consideration and to
the activity she is undertaking to qualify as a Competent Per-
son as defined in the 2004 Edition of the “Australasian Code
for Reporting of Exploration Results, Mineral Resources and
Ore Reserves”. Ms. Patti Nakai-Lajoie is a “Qualified Person”
under National Instrument 43-101 Standards of Disclosure
for Mineral Projects and she consents to the inclusion in the
Report of the matters based on her information in the form
and context in which it appears in this Report.
The technical information contained in this Report relating
to exploration results is based on information compiled by
Mr. Martin Pawlitschek, who is a Member of the Australian
Institute of Geoscientists. Mr. Pawlitschek is a consultant
of Teranga and is not “independent” within the meaning of
National Instrument 43-101. Mr. Pawlitschek has sufficient
experience relevant to the style of mineralization and type of
deposit under consideration and to the activity is undertak-
ing to qualify as a Competent Person as defined in the 2004
Edition of the “Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves”. Mr. Pawl-
itschek is a “Qualified Person” in accordance with NI 43-101
and he consents to the inclusion in the Report of the matters
based on his information in the form and context in which it
appears in this Report.
teranga gold corporation / management’s discussion & analysis 27
manaGement’s ResPOnsiBility
FOR Financial RePORtinG
The accompanying consolidated financial statements of the Company have been prepared by management in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board. Manage-
ment acknowledges responsibility for the preparation and presentation of the consolidated financial statements, including
responsibility for significant accounting judgments and estimates and, where relevant, the choice of accounting principles.
Management maintains an appropriate system of internal controls to provide reasonable assurance that transactions are
authorized, assets safeguarded, and proper records maintained.
The Audit Committee of the Board of Directors has met with the Company’s independent auditors to review the scope and
results of the annual audit and to review the consolidated financial statements and related financial reporting matters prior
to submitting the consolidated financial statements to the Board for approval.
The Company’s independent auditors, Deloitte & Touche LLP, have conducted an audit in accordance with generally ac-
cepted auditing standards, and their report follows.
alan Hill
Executive Chairman
and CEO
Richard young
President and
Chief Executive Officer
navin Dyal
Vice President and
Chief Financial Officer
2012 AnnuAl RepoRt
28 TERANGA GOLD CORPORATION
inDePenDant aUDitOR’s
RePORt
To the Shareholders of Teranga Gold Corporation
We have audited the accompanying consolidated financial statements of Teranga Gold Corporation, which comprise the
consolidated statements of financial position as at December 31, 2012 and December 31, 2011, and the consolidated
statements of comprehensive income/(loss), consolidated statements of changes in equity and consolidated statements of
cash flows for the year ended December 21, 2012 and the fifteen months ended December 31, 2011, and a summary of
significant accounting policies and other explanatory information
management’s Responsibility for the consolidated Financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in ac-
cordance with International Financial Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply
with ethical requirements and plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assess-
ments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appro-
priateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Teranga
Gold Corporation as at December 31, 2012 and December 31, 2011, and its financial performance and its cash flows for
the year ended December 21, 2012 and the fifteen months ended December 31, 2011in accordance with International
Financial Reporting Standards.
Chartered Professional Accountants
Chartered Accountants
Licensed Public Accountants
February 20, 2013
cOnsOliDateD statement OF cOmPReHensiVe incOme / (lOss)
For the 12 months ended December 31, 2012 and 15 months ended December 31, 2011
(in US$000’s except for share and per share amounts)
29
Revenue
Cost of sales
Gross profit
Exploration and evaluation expenditures
Administration expenses
Share-based compensation
Finance costs
Losses on gold hedge contracts
(Losses)/Gains on oil hedge contracts
Net foreign exchange (losses)/gains
Impairment of available for sale financial asset
Other income
Profit/(loss) before income tax
Income tax benefit
Profit/(loss) for the period
Profit/(Loss) attributable to:
Shareholders
Non-controlling interests
Profit/(loss) for the period
Other comprehensive income/(loss):
Exchange differences arising on translation of Teranga
corporate entity
Change in fair value of available for sale financial asset,
net of tax
Other comprehensive income/(loss) for the period
note
8
9
10
36
11
25
8
12
26
25
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
(note 5 )
350,520
(179,323 )
171,197
(16,657 )
(17,931 )
(4,694 )
(7,789 )
(15,274 )
(427 )
(2,574 )
(11,917 )
36
(77,227 )
93,970
115
94,085
79,924
14,161
94,085
(63 )
6,775
6,712
236,873
(148,812 )
88,061
(31,659 )
(13,448 )
(12,411 )
(2,946 )
(47,943 )
2,203
4,486
–
848
(100,870 )
(12,809 )
92
(12,717 )
(16,040 )
3,323
(12,717 )
(935 )
(1,319 )
(2,254 )
total comprehensive income/(loss) for the period
100,797
(14,971 )
Total comprehensive income/(loss) attributable to:
Shareholders
Non-controlling interests
total comprehensive income/(loss) for the period
earnings/(losses) per share from operations attributable
to the shareholders of the company during the period
– basic earnings/(losses) per share
– diluted earnings/(losses) per share
27
27
The accompanying notes are an integral part of these consolidated financial statements
86,636
14,161
100,797
0.33
0.33
(18,294 )
3,323
(14,971 )
(0.07 )
(0.07 )
2012 AnnuAl RepoRt
30 TERANGA GOLD CORPORATION / CONSOLIDATED FINANCIAL STATEMENTS
cOnsOliDateD statements OF Financial POsitiOn
December 31, 2012
(in US$000’s except for share and per share amounts)
note
as at December 31,
2012
as at December 31,
2011
(note 5 )
current assets
Cash and cash equivalents
Short-term investments
Restricted cash
Trade and other receivables
Inventories
Financial derivative assets
Other assets
Available for sale financial assets
total current assets
non-current assets
Inventories
Financial derivative assets
Property, plant and equipment
Mine development expenditures
Intangible assets
total non-current assets
total assets
current liabilities
Trade and other payables
Borrowings
Financial derivative liabilities
Provisions
total current liabilities
non-current liabilities
Financial derivative liabilities
Provisions
Borrowings
total non-current liabilities
total liabilities
equity
Issued capital
Foreign currency translation reserve
Equity-settled share-based compensation reserve
Investment revaluation reserve
Accumulated income/(loss)
equity attributable to shareholders
Non-controlling interests
total equity
total equity and liabilities
34
13
14
15
16
25
14
15
17
18
19
20
21
22
23
22
23
21
24
26
39,722
–
–
6,482
82,474
456
12,896
15,010
7,470
593
3,004
20,447
48,365
2,288
12,751
19,800
157,040
114,718
40,659
–
241,838
109,060
1,859
393,416
550,456
44,823
10,415
51,548
1,940
108,726
–
10,312
58,193
68,505
177,231
305,412
(998)
16,358
5,456
36,549
362,777
10,448
373,225
550,456
31,942
532
238,510
89,825
1,085
361,894
476,612
43,238
16,468
79,241
1,954
140,901
50,318
9,215
7,509
67,042
207,943
305,412
(935)
12,599
(1,319)
(43,375)
272,382
(3,713)
268,669
476,612
The accompanying notes are an integral part of these consolidated financial statements
Approved by the Board of Directors
alan Hill
Executive Chairman
alan thomas
Non-Executive Director
cOnsOliDateD statement OF cHanGes in eQUity
For the 12 months ended December 31, 2012 and 15 months ended December 31, 2011
(US$000’s)
twelve months ended
December 31, 2012
issued capital
At January 1, 2012 / October 1, 2010
Shares issued on incorporation of the Company
Shares issued on the acquisition of the Sabodala gold mine
and a regional exploration package
Shares issued from public and private offerings
Less: Share issue costs
At December 31
Foreign currency translation reserve
At January 1, 2012 / October 1, 2010
note
24
24
24
Exchange difference arising on translation of Teranga corporate entity
26
At December 31
equity-settled share-based compensation reserve
At January 1, 2012 / October 1, 2010
Equity-settled share-based compensation reserve
At December 31
investment revaluation reserve
At January 1, 2012 / October 1, 2010
Impairment of available for sale financial asset
Change in fair value of available for sale financial asset, net of tax
25
At December 31
accumulated income/(loss)
At January 1, 2012 / October 1, 2010
Profit/(Loss) attributable to shareholders
Impact of change in accounting policy
At December 31
non-controlling interest
At January 1, 2012 / October 1, 2010
5
Non-controlling interest arising from Demerger – November 23, 2010
Non-controlling interest – portion of profit for the period
At December 31
total shareholders’ equity at December 31
The accompanying notes are an integral part of these consolidated financial statements
31
Fifteen months ended
December 31, 2011
(note 5)
–
186,665
135,005
(16,258 )
305,412
–
(935 )
(935 )
–
12,599
12,599
–
–
(1,319 )
(1,319 )
–
(16,040 )
(27,335 )
(43,375 )
–
(7,036 )
3,323
(3,713 )
268,669
305,412
–
–
–
–
305,412
(935 )
(63 )
(998 )
12,599
3,759
16,358
(1,319 )
1,319
5,456
5,456
(43,375 )
79,924
–
36,549
(3,713 )
–
14,161
10,448
373,225
2012 AnnuAl RepoRt 32 TERANGA GOLD CORPORATION / CONSOLIDATED FINANCIAL STATEMENTS
cOnsOliDateD statement OF casH FlOWs
For the 12 months ended December 31, 2012 and 15 months ended December 31, 2011
(US$000’s)
twelve months ended
December 31, 2012
note
Fifteen months ended
December 31, 2011
)
(note 5
17
18
19
11
23
36
25
34
17
18
19
cash flows related to operating activities
Profit/(Loss) for the period
Depreciation of property, plant and equipment
Depreciation of capitalized mine development costs
Amortization of intangibles
Amortization of borrowing costs
Unwinding of discount
Share-based compensation
Net change in losses on gold hedge
Net change in losses on oil hedge
Buyback of gold hedge sales contracts
Income tax paid
Mine restoration and rehabilitation provision
Deferred income tax benefit on reversal of temporary differences
Impairment of available for sale financial asset
Profit on disposal of property, plant and equipment
Changes in working capital
net cash provided by operating activities
cash flows related to investing activities
Decrease/(Increase) in restricted cash
Redemption of short-term investments
Expenditures for property, plant and equipment
Expenditures for mine development
Acquisition of intangibles
Proceeds on disposal of property, plant and equipment
Payment for acquisition of Sabodala gold mine and regional land package
net of cash acquired
net cash used in investing activities
cash flows related to financing activities
Proceeds from issuance of capital stock, net of issue costs
Loan facility, net of borrowing cost paid
Repayment of borrowings
Drawdown from finance lease facility, net of financing cost paid
Interest paid on borrowings
net cash provided by financing activities
Effect of exchange rates on cash holdings in foreign currencies
net increase in cash and cash equivalents held
cash and cash equivalents at the beginning of period
cash and cash equivalents at the end of period
The accompanying notes are an integral part of these consolidated financial statements
94,085
41,999
11,142
650
877
53
3,759
(39,010 )
2,364
(39,000 )
–
–
–
11,917
(131 )
(16,256 )
72,449
3,004
593
(51,451 )
(30,377 )
(1,424 )
195
–
(79,460 )
–
57,695
(16,799 )
2,857
(4,075 )
39,678
(415 )
32,252
7,470
39,722
(12,717 )
29,541
10,200
490
328
47
12,411
(1,789 )
113
–
(638 )
425
(231 )
–
–
(33,048 )
5,132
(3,004 )
181
(60,825 )
(14,359 )
(1,208 )
–
(34,307 )
(113,522 )
118,747
–
(10,849 )
9,612
(2,248 )
115,262
598
7,470
–
7,470
33
nOtes tO cOnsOliDateD Financial statements
As at and for the 12 months ended December 31, 2012 and 15 months ended December 31, 2011
(in US$000’s except for share and per share amounts)
1. GeneRal inFORmatiOn
Teranga Gold Corporation (“Teranga” or the “Company”) is
a Canadian-based gold company listed on the Toronto Stock
Exchange (TSX: TGZ) and the Australian Stock Exchange
(ASX: TGZ). Teranga is principally engaged in the production
and sale of gold, as well as related activities such as explora-
tion and mine development. The Company was incorporated
in Canada on October 1, 2010.
Teranga was created to acquire the Sabodala gold mine and
a large regional exploration land package, located in Senegal,
West Africa, along with shares held in Oromin Explorations
Ltd. (“Oromin”) from Mineral Deposits Limited (“MDL”),
collectively referred to as the Sabodala Gold Assets. The
Sabodala gold mine, which came into operation in 2009, is
located 650 kilometres southeast of the capital, Dakar within
the West African Birimian geological belt in Senegal, and
about 90 kilometres from major gold mines in Mali.
The address of its principal office is 121 King Street West,
Suite 2600, Toronto, Ontario, Canada M5H 3T9.
2. DemeRGeR FROm mineRal
DePOsits limiteD (“Demerger”)
On November 23, 2010, Teranga completed the acquisi-
tion of the Sabodala Gold Assets by a way of Demerger from
MDL. As part of the Demerger certain assets consisting of
all of the issued and outstanding shares of Sabodala Gold
(Mauritius) Limited (“SGML”), which holds a 90% interest in
the Sabodala Gold Operations SA (“SGO”), the holder of the
Sabodala gold mine, and a 100% interest in the Sabodala
Mining Company SARL (“SMC”), an exploration entity that
holds the regional land package; all of the issued and out-
standing shares of SGML (Capital) Limited; and 18,699,500
common shares of Oromin Exploration Ltd., originally held
by MDL; were transferred to Teranga in consideration for
the issuance of 200,000,000 common shares of Teranga to
MDL (approximately 160,000,000 of such common shares
were then in specie distributed to MDL’s shareholders) and
the assumption of a C$50 million promissory note owing to
MDL. As the transaction was a common control transaction,
the Company has elected to apply the “pooling of interest”
method to account for the Demerger (see Note 4).
twelve months ended
December 31, 2012
note
Fifteen months ended
December 31, 2011
(note 5
)
cash flows related to operating activities
Profit/(Loss) for the period
Depreciation of property, plant and equipment
Depreciation of capitalized mine development costs
Amortization of intangibles
Amortization of borrowing costs
Unwinding of discount
Share-based compensation
Net change in losses on gold hedge
Net change in losses on oil hedge
Buyback of gold hedge sales contracts
Income tax paid
Mine restoration and rehabilitation provision
Impairment of available for sale financial asset
Profit on disposal of property, plant and equipment
Changes in working capital
net cash provided by operating activities
cash flows related to investing activities
Decrease/(Increase) in restricted cash
Redemption of short-term investments
Expenditures for property, plant and equipment
Expenditures for mine development
Acquisition of intangibles
Deferred income tax benefit on reversal of temporary differences
17
18
19
11
23
36
25
34
17
18
19
Proceeds on disposal of property, plant and equipment
Payment for acquisition of Sabodala gold mine and regional land package
net of cash acquired
net cash used in investing activities
cash flows related to financing activities
Proceeds from issuance of capital stock, net of issue costs
Loan facility, net of borrowing cost paid
Repayment of borrowings
Drawdown from finance lease facility, net of financing cost paid
Interest paid on borrowings
net cash provided by financing activities
Effect of exchange rates on cash holdings in foreign currencies
net increase in cash and cash equivalents held
cash and cash equivalents at the beginning of period
cash and cash equivalents at the end of period
The accompanying notes are an integral part of these consolidated financial statements
94,085
41,999
11,142
650
877
53
3,759
(39,010 )
2,364
(39,000 )
–
–
–
11,917
(131 )
(16,256 )
72,449
3,004
593
(51,451 )
(30,377 )
(1,424 )
195
(79,460 )
–
–
57,695
(16,799 )
2,857
(4,075 )
39,678
(415 )
32,252
7,470
39,722
(12,717 )
29,541
10,200
490
328
47
12,411
(1,789 )
113
–
(638 )
425
(231 )
–
–
(33,048 )
5,132
(3,004 )
181
(60,825 )
(14,359 )
(1,208 )
–
(34,307 )
(113,522 )
118,747
–
(10,849 )
9,612
(2,248 )
115,262
598
7,470
–
7,470
2012 AnnuAl RepoRt
34
The table below represents the costs of assets and liabilities acquired by Teranga from MDL by way of Demerger:
as at
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Financial derivative assets
Other assets
Available for sale financial asset
total current assets
non-current assets
Inventories
Mine development expenditure
Financial derivative assets
Intangible assets
Capitalized mine convention costs
Property, plant and equipment
total non-current assets
total assets
current liabilities
Trade and other payables
Borrowings
Financial derivative liabilities
Current tax liabilities
Provisions
total current liabilities
non-current liabilities
Trade and other payables
Financial derivative liabilities
Deferred tax liabilities
Provisions
Borrowings
total non-current liabilities
total liabilities
Non-controlling interest
net assets
november 23, 2010
Restatement 1
november 23, 2010
Restated
14,924
238,089
82,842
1,074
2,688
21,109
–
–
(12,267 )
–
–
–
360,726
(12,267 )
6,514
112,710
1,859
367
10,133
209,023
340,606
701,332
256,910
8,630
37,078
518
1,696
304,832
1,657
94,270
231
2,284
16,256
114,698
419,530
1,563
283,365
–
–
–
–
–
8,427
8,427
(3,840 )
–
–
–
–
–
–
–
–
–
–
–
–
–
384
(3,456 )
14,924
238,089
70,575
1,074
2,688
21,109
348,459
6,514
112,710
1,859
367
10,133
217,450
349,033
697,492
256,910
8,630
37,078
518
1,696
304,832
1,657
94,270
231
2,284
16,256
114,698
419,530
1,947
279,909
Reconciliation of the value of shares issued on the acquisition of the Sabodala gold mine and a regional exploration package:
as at
Net assets acquired
Less deferred compensation (C$50 million)
Value of shares issued on acquisition
november 23, 2010
Restatement 1
november 23, 2010
Restated
283,365
(49,231)
234,134
(3,456 )
–
(3,456 )
279,909
(49,231 )
230,678
1 During the preparation of the consolidated financial statements for the fifteen months ended December 31, 2011, the Company identified two changes required relating to the net
assets acquired as part of the Demerger from MDL on November 23, 2010. Property, plant and equipment was understated by $8.4 million related to accelerated depreciation of
mobile equipment in excess of the Company’s policy. Stockpile inventory was overstated by a total of $12.3 million due to accelerated depreciation related to mobile equipment and
costs assigned to inventory in excess of net realizable value.
teranga gold corporation / notes to consolidated financial statements as at
current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Financial derivative assets
Available for sale financial asset
total current assets
non-current assets
Inventories
Mine development expenditure
Financial derivative assets
Intangible assets
Capitalized mine convention costs
Property, plant and equipment
total non-current assets
total assets
current liabilities
Trade and other payables
Borrowings
Financial derivative liabilities
Current tax liabilities
Provisions
total current liabilities
non-current liabilities
Trade and other payables
Financial derivative liabilities
Deferred tax liabilities
Provisions
Borrowings
total non-current liabilities
total liabilities
Non-controlling interest
net assets
november 23, 2010
Restatement 1
november 23, 2010
360,726
(12,267 )
14,924
238,089
82,842
1,074
2,688
21,109
6,514
112,710
1,859
367
10,133
209,023
340,606
701,332
256,910
8,630
37,078
518
1,696
304,832
1,657
94,270
231
2,284
16,256
114,698
419,530
1,563
283,365
283,365
(49,231)
234,134
(12,267 )
8,427
8,427
(3,840 )
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
384
(3,456 )
(3,456 )
–
(3,456 )
Restated
14,924
238,089
70,575
1,074
2,688
21,109
348,459
6,514
112,710
1,859
367
10,133
217,450
349,033
697,492
256,910
8,630
37,078
518
1,696
304,832
1,657
94,270
231
2,284
16,256
114,698
419,530
1,947
279,909
Restated
279,909
(49,231 )
230,678
Reconciliation of the value of shares issued on the acquisition of the Sabodala gold mine and a regional exploration package:
november 23, 2010
Restatement 1
november 23, 2010
as at
Net assets acquired
Less deferred compensation (C$50 million)
Value of shares issued on acquisition
1 During the preparation of the consolidated financial statements for the fifteen months ended December 31, 2011, the Company identified two changes required relating to the net
assets acquired as part of the Demerger from MDL on November 23, 2010. Property, plant and equipment was understated by $8.4 million related to accelerated depreciation of
mobile equipment in excess of the Company’s policy. Stockpile inventory was overstated by a total of $12.3 million due to accelerated depreciation related to mobile equipment and
costs assigned to inventory in excess of net realizable value.
35
(e) Functional and Presentation currency
The functional currency of each of the Company’s entities is
measured using the currency of the primary economic environ-
ment in which that entity operates. The functional currency of
all entities within the group is the United States dollar. The con-
solidated financial statements are presented in United States
dollars, which is the Company’s presentation currency.
The Company’s corporate entity changed its functional cur-
rency from the Canadian dollar to the United States dollar as of
January 1, 2012. Per IAS 21, the effects of changes in foreign
exchange rates, an entity’s functional currency should reflect
the underlying transactions, events and conditions relevant
to the entity. Based on management’s evaluation taking into
consideration the currency of the main sources of income,
intercompany charges, significant capital projects, source of
funding of expenditures, the currency in which cash and cash
deposits are maintained as well as the currency of corporate
office expenditures, management determined the functional
currency of the corporate entity to be the United States dollar.
The change in functional currency has been accounted for
prospectively.
(f) critical accounting Judgments and Key sources
of estimation Uncertainty
The preparation of consolidated financial statements in con-
formity with IFRS requires management to make judgments,
estimates and assumptions that affect the reported amount
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amount of expenses and other income during the
period. These judgments, estimates and assumptions are
based on management’s best knowledge of the relevant facts
and circumstances, having regard to prior experience. While
management believes that these judgments, estimates and
assumptions are reasonable, actual results may differ from the
amounts included in the consolidated financial statements.
Judgments made by management in the application of IFRS
that have significant effects on the consolidated financial state-
ments and estimates with a significant risk of material adjust-
ments, where applicable, are contained in the relevant notes to
the financial statements. Refer to Note 7 for critical judgments
in applying the entity’s accounting policies, and key sources of
estimation uncertainty.
The restated net assets as at November 23, 2010 reflect a total
decrease of $3.5 million after adjusting the non-controlling
interest with a corresponding adjustment to the Company’s
share capital.
3. Basis OF PRePaRatiOn
(a) statement of compliance
These consolidated financial statements have been prepared
in accordance with International Financial Reporting Stan-
dards (“IFRS”) as issued by the International Accounting
Standards Board (“IASB”).
The consolidated financial statements comprise the financial
statements of the Company and its subsidiaries.
(b) Basis of Presentation
The consolidated financial statements have been presented in
United States dollars unless otherwise stated. The consoli-
dated financial statements have been prepared on the basis
of historical cost, except for equity settled and cash settled
share-based payments that are fair valued at the date of grant
and certain other financial assets and liabilities that are mea-
sured at fair value.
(c) change of Fiscal year
On May 10, 2011, the Board of Directors passed a
resolution setting the financial year-end of the Company at
December 31st. The Board felt this change would better
synchronize its financial reporting with that of comparable
companies within the mining sector as well as better align its
financial reporting with its business planning cycle. The con-
solidated financial statements for the current year are for the
twelve-month period ended December 31, 2012, and for the
fifteen-month period ended December 31, 2011 for the com-
parative period. The amounts presented in the consolidated
financial statements are not entirely comparable.
(d) change in Presentation of Gains and losses
on Hedge contracts
The Company has changed the presentation of gains and
losses on gold and oil hedge contracts effective January 1,
2012. Realized gains and losses on gold hedge contracts
are disclosed as losses on gold hedge contracts below gross
profit; previously they were included in revenue. Gains and
losses on oil hedge contracts are classified as gains and
losses on oil hedge contracts below gross profit; previously
they were included in cost of sales.
2012 AnnuAl RepoRt 36
4. siGniFicant accOUntinG POlicies
fair value are reported at the exchange rate at the date when
fair values were determined.
(a) Basis of consolidation
The consolidated financial statements are prepared by con-
solidating the financial statements of Teranga Gold Corporation
and its subsidiaries: Teranga Gold (B.V.I.) Corporation, Teranga
Gold (USA) Corporation, Sabodala Gold (Mauritius) Limited,
and SGML (Capital) Limited and its subsidiaries as defined in
IAS 27 “Consolidated and Separate Financial Statements”.
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured
based on the fair values at the date of acquisition of assets and
liabilities incurred or assumed, and equity instruments issued
by the Company in exchange for control of the acquiree. The
goodwill arising, if any, is measured as the excess of the sum of
the consideration transferred, the amount of any non-control-
ling interests in the acquiree and the fair value of the acquirer’s
previously held equity interest in the acquiree (if any) over the
net identifiable assets acquired and the liabilities assumed. If
the cost of acquisition is less than the fair value of the net as-
sets of the subsidiary acquired, the difference is recognized in
the statement of comprehensive income/(loss).
The consolidated financial statements include the informa-
tion and results of each subsidiary from the date on which the
Company obtains control and until such time as the Company
ceases to control such entity.
In preparing the consolidated financial statements, all inter-
company balances and transactions between entities in the
Company, including any unrealized profits or losses, have been
eliminated.
Non-controlling interests in the net assets (excluding goodwill)
of consolidated subsidiaries are identified separately from the
Company’s equity therein. Non-controlling interests consist of
the amount of those interests at the date of the original busi-
ness combination and the non-controlling interests’ share of
changes in equity since the date of the combination.
Total comprehensive loss is attributed to non-controlling inter-
ests even if this results in the non-controlling interests having a
deficit balance.
(b) Foreign currency transactions
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at
the period-end exchange rate. Non-monetary items measured
at historical cost continue to be carried at the exchange rate at
the date of the transaction. Non-monetary items measured at
Exchange differences are recognized in profit or loss in the
period in which they arise except for exchange differences on
monetary items receivable from or payable to a foreign opera-
tion for which settlement is neither planned nor likely to occur
in the foreseeable future which form part of the net investment
in a foreign operation and which are recognized in a foreign
currency translation reserve within equity and recognized in
profit or loss on disposal of the net investment.
(c) cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash, which are
subject to an insignificant risk of changes in value and have a
maturity of 90 days or less at the date of acquisition.
When applicable, bank overdrafts are shown within borrow-
ings in current liabilities in the consolidated statement of
financial position.
(d) short-term investments
Short-term investments represent investments in guaranteed
investment certificates with maturity dates of more than 90
days. Short-term investments are carried at amortized cost.
(e) inventories
Gold bullion, gold in circuit and ore in stockpiles are physi-
cally measured or estimated and valued at the lower of cost
and net realizable value. Cost represents the weighted aver-
age cost and includes direct costs and an appropriate portion
of fixed and variable production overhead costs, including
depreciation and amortization, incurred in converting materi-
als into finished goods.
By-product metals inventory on hand obtained as a result of
the production process to extract gold are valued at the lower
of cost and net realizable value.
Materials and supplies are valued at the lower of cost and net
realizable value. Any provision for obsolescence is determined
by reference to specific inventory items identified. A regular
and ongoing review is undertaken to establish the extent of
surplus items and a provision is made for any potential loss
upon disposal.
Net realizable value is the estimated selling price in the ordi-
nary course of business, less estimated costs of completion
and applicable variable selling expenses.
teranga gold corporation / notes to consolidated financial statements 37
(f) Property, Plant and equipment
(g) leased assets
Property, plant and equipment are measured on the cost basis
less depreciation and impairment losses.
The cost of property, plant and equipment constructed by
the Company includes the cost of materials, direct labour and
borrowing costs where appropriate. Assets under construction
and assets purchased that are not ready for use are capitalized
under capital work in progress.
Subsequent costs are included in the asset’s carrying amount
or recognized as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with
the item will flow to the Company and the cost of the item can
be measured reliably. All other repairs and maintenance are
charged to the statement of comprehensive income/(loss) dur-
ing the financial period in which they are incurred.
Depreciation
The depreciable amount of property, plant and equipment is
depreciated over their useful lives of the asset commencing from
the time the asset is held ready for use. The Company uses the
units-of-production (“UOP”) method when depreciating mining
assets, which results in a depreciation charge based on the
recovered ounces of gold. Mining assets include buildings and
property improvements and plant and equipment.
Depreciation is calculated using the following method:
class of Property,
Plant and equipment
Buildings and property
improvements
method
years
UOP
Plant and equipment
UOP/Straight line
5.0–8.0 years
Office furniture and equipment
Straight line
3.0–6.7 years
Motor vehicles
Straight line
5.0 years
Plant equipment under
finance lease
Straight line
5.0–7.0 years
The assets’ residual values, depreciation method and useful lives
are reviewed and adjusted, if appropriate, at each reporting date.
Capital work in progress is not depreciated.
The gain or loss arising upon disposal or retirement of an item
of property, plant and equipment is determined as the differ-
ence between the sales proceeds and the carrying amount of
the asset and is recognized in the statement of comprehensive
income/(loss).
Assets Under Finance Lease
Assets held under finance leases are depreciated over their
expected useful lives on the same basis as owned assets.
Leases are classified as finance leases when the terms of the
lease transfer substantially all the risks and rewards incidental
to ownership of the leased asset to the lessee. All other leases
are classified as operating leases.
Finance leases are capitalized at the lease’s commencement at
the lower of the fair value of the leased property and the pres-
ent value of the minimum lease payments. The corresponding
liability to the lessor is included in the statement of financial
position as a finance lease obligation.
Lease payments are allocated between the liability and finance
charges so as to achieve a constant rate of interest on the
finance balance outstanding. Finance charges are charged
directly against income, unless they are directly attributable to
qualifying assets, in which case they are capitalized in accor-
dance with the Company’s general policy on borrowing costs.
Refer to Note 4(k).
Operating lease payments are recognized as an expense on a
straight-line basis over the lease term, except where another
systematic basis is more representative of the time pattern in
which economic benefits from the leased asset are consumed.
(h) mine Development
Mine development expenditures are recognized at cost less
accumulated amortization and any impairment losses. Where
commercial production in an area of interest has commenced,
the associated costs are amortized over the estimated eco-
nomic life of the mine on a UOP basis.
(i) intangible assets
Intangible assets are recorded at cost less accumulated amor-
tization and any impairment losses. Amortization is charged
on a straight-line basis over their estimated useful lives. The
estimated useful life and amortization method is reviewed at
the end of each annual reporting period with any changes in
these accounting estimates being accounted for on a prospec-
tive basis.
(j) impairment of long-lived assets
At each reporting date, the Company reviews the carrying
amounts of its long-lived assets to determine whether there is
any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the
impairment loss, if any. The recoverable amount is the higher
of the fair value less costs to sell and the value in use. Where
the asset does not generate cash flows that are independent
2012 AnnuAl RepoRt 38
from other assets, the Company estimates the recoverable
amount of the cash generating unit to which the asset belongs.
Where a reasonable and consistent basis of allocation can
be identified, corporate assets are also allocated to individual
cash-generating units or otherwise they are allocated to the
smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
If the recoverable amount of an asset or cash-generating unit
is estimated to be less than its carrying amount, the carrying
amount of the asset or cash-generating unit is reduced to its
recoverable amount. An impairment loss is recognized immedi-
ately in the statement of comprehensive income/(loss).
Where an impairment loss subsequently reverses, the carrying
amount of the asset or cash generating unit is increased to
the revised estimate of its recoverable amount but only to the
extent that the increased carrying amount does not exceed
the carrying amount that would have been determined had
no impairment loss been recognized for the asset or cash
generating unit in prior years. A reversal of an impairment loss
is recognized immediately in the statement of comprehensive
income/(loss).
(k) Borrowing costs
Borrowing costs directly attributable to the acquisition,
construction or production of assets that necessarily take a
substantial period of time to prepare for their intended use or
sale, are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognized in the statement
of comprehensive income/(loss) in the period in which they
are incurred.
(l) employee Benefits
A liability is recognized for benefits accruing to employees in
respect of wages and salaries, annual leave and long-term ser-
vice leave when it is probable that settlement will be required
and they are capable of being measured reliably.
Liabilities recognized in respect of employee benefits expected
to be settled within twelve months are measured at their nomi-
nal values using the remuneration rate expected to apply at the
time of settlement.
Liabilities recognized in respect of employee benefits that are
not expected to be settled within twelve months are measured
as the present value of the estimated future cash outflows to
be made by the Company in respect of services provided by
employees up to the reporting date.
(m) Provisions
Provisions are recognized when the Company has a present
obligation, legal or constructive, as a result of past events for
which it is probable that the Company will be required to settle
the obligation and a reliable estimate can be made of the
amount of the obligation.
The amount recognized as a provision is the best estimate of
the consideration required to settle the present obligation at
reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured us-
ing the cash flows estimated to settle the present obligation, its
carrying value is the present value of those cash flows.
(n) Restoration and Rehabilitation
A provision for restoration and rehabilitation is recognized
when there is a present obligation as a result of exploration,
development and production activities undertaken, that it is
probable that an outflow of economic benefits will be required
to settle the obligation, and the amount of the provision can be
measured reliably. The estimated future obligations include the
costs of removing facilities, abandoning sites and restoring the
affected areas.
The provision for future restoration costs is the best estimate
of the present value of the expenditure required to settle the
restoration obligation at the reporting date, based on current
legal or constructive obligation. Future restoration costs are re-
viewed each reporting period and any changes in the estimate
are reflected in the present value of the restoration provision at
each reporting date.
(o) income tax
Current Income Tax
Current income tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the taxable
profit or tax loss for the period. Current income tax is calcu-
lated on the basis of the law enacted or substantively enacted
at the reporting date in the countries where the Company’s
subsidiaries operate and generate taxable income.
Deferred Income Tax
Deferred income tax is recognized, in accordance with the
liability method, on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts in
the consolidated financial statements. The tax base of an asset
or liability is the amount attributed to that asset or liability for
tax purposes.
Deferred tax liabilities are recognized for all taxable temporary
differences. Deferred tax assets are recognized only to the
extent that it is probable that future taxable profit will be available
teranga gold corporation / notes to consolidated financial statements
39
against which the temporary differences can be utilized. Howev-
er, the deferred income tax is not accounted for if it arises from
initial recognition of an asset or liability in a transaction other
than a business combination that at the time of the transaction
affects neither the accounting nor the taxable profit or loss.
Deferred income tax is determined using tax rates (and laws)
that have been enacted or substantively enacted by the report-
ing date and expected to apply when the related deferred
income tax asset is realized or the deferred income tax liability
is settled.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Company intends to settle its current tax assets and liabilities
on a net basis.
(p) Financial instruments
Investments are recognized and de-recognized on the trade
date where the purchase or sale of an investment is under a
contract whose terms require delivery of the investment within
the timeframe established by the market concerned, and are
initially measured at fair value, net of transaction costs except
for those financial assets classified as fair value through com-
prehensive income/(loss).
Fair Value Through Profit or Loss
Upon disposal of an investment, the difference in the net dis-
posal proceeds and the carrying amount is charged or credited
to the statement of comprehensive income/(loss).
Loans and Receivables
Trade and other receivables, loans, cash and cash equiva-
lents, short-term investments and other receivables that have
fixed or determinable payments that are not quoted in an
active market are classified as “loans and receivables”. Loans
and receivables are measured at amortized cost using the
effective interest method less impairment.
Interest income is recognized by applying the effective
interest method.
Available For Sale Financial Assets
Certain shares held by the Company are classified as being
available-for-sale and are stated at fair value. Gains and losses
arising from changes in fair value are recognized directly in the
investment revaluation reserve with the exception of impair-
ment losses, interest calculated using the effective interest
method and foreign exchange gains and losses on monetary
assets; all of which are recognized directly in profit or loss.
Where the investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously recognized in
the investment revaluation reserve is included in profit or loss
for the period.
Effective Interest Method
The effective interest method is a method of calculating the
amortized cost of a financial asset and of allocating interest
income over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash receipts
(including fees on points paid or received that form an integral
part of the effective interest rate, transaction costs and other
premiums or discounts) through the expected life of the finan-
cial asset or, where appropriate, a shorter period.
Impairment of Financial Assets
Financial assets are assessed for indicators of impairment at
each reporting date. Financial assets are impaired where there
is objective evidence of impairment as a result of one or more
events that occurred after the initial recognition of the financial
asset and that event has an impact on the estimated future
cash flows of the financial asset that can be reliably estimated.
For financial assets carried at amortized cost, the amount of
the impairment is the difference between the asset’s carrying
amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
The carrying amount of financial assets including uncol-
lectible trade receivables is reduced by the impairment loss
through the use of an allowance account. Subsequent recov-
eries of amounts previously written off are credited against
the allowance account. Changes in the carrying amount of
the allowance account are recognized in profit or loss.
With the exception of available-for-sale equity instruments,
if, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively
to an event occurring after the impairment was recognized,
the previously recognized impairment loss is reversed through
profit or loss to the extent the carrying amount of the invest-
ment at the date the impairment is reversed does not exceed
what the amortized cost would have been had the impairment
not been recognized.
In respect of available-for-sale equity instruments, any
subsequent increase in fair value after an impairment loss is
recognized directly in Other comprehensive income/(loss).
De-recognition of Financial Assets
The Company de-recognizes a financial asset only when the
contractual rights to the cash flows from the asset expire, or it
transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity.
The Company enters into a variety of derivative financial
instruments to manage its exposure to gold and oil price risk,
including gold forward contracts and oil hedge contracts.
2012 AnnuAl RepoRt 40
Derivative Financial Instruments
Derivatives are initially recognized at fair value at the date a
derivative contract is entered into and are subsequently remea-
sured to their fair value at each reporting date. The resulting
gain or loss is recognized in the statement of comprehensive
income/(loss) immediately as the Company does not apply
hedge accounting.
The fair value of derivatives is presented as a non-current asset
or a non-current liability, if the remaining maturity of the instru-
ment is more than twelve months and it is not expected to be
realized or settled within twelve months and as a current asset
or liability when the remaining maturity of the instrument is less
than twelve months.
Debt and Equity Instruments
Debt and equity instruments are classified as either liabilities or
as equity in accordance with the substance of the contrac-
tual arrangement. An equity instrument is any contract that
evidences a residual interest in the assets of an entity after
deducting all of its liabilities. Equity instruments issued by the
Company are recorded at the proceeds received, net of direct
issue costs.
Financial Guarantee Contract Liabilities
Financial guarantee contract liabilities are measured initially at
their fair values and subsequently at the higher of:
• the amount of the obligation under the contract, as deter-
mined under IAS 37 “Provisions, Contingent Liabilities and
Contingent Assets”; and
• the amount initially recognized less, where appropriate,
cumulative amortization in accordance with the revenue
recognition policies described in Note 4(s).
Financial Liabilities
Financial liabilities are classified as either financial liabilities “at
fair value through profit or loss” or other financial liabilities.
Other Financial Liabilities
Other financial liabilities, including borrowings, are initially mea-
sured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at am-
ortized cost using the effective interest method, with interest
expense recognized on an effective yield basis.
The effective interest method is a method of calculating the
amortized cost of a financial liability and of allocating interest
expense over the relevant period. The effective interest rate is
the rate that exactly discounts estimated future cash payments
through the expected life of the financial liability or, where
appropriate, a shorter period.
(q) share-Based Payment
The Company operates an equity-settled, share-based com-
pensation plan for remuneration of its management, directors,
employees and consultants.
The fair value of the options granted is measured using the
Black-Scholes model, taking into account the terms and condi-
tions upon which the options are granted. The fair value of the
options is adjusted by the estimate of the number of options
that are expected to vest as a result of non-market conditions
and is expensed over the vesting period using an accelerated
method of amortization.
Share-based compensation relating to stock options is charged
to the statement of comprehensive income/(loss).
(r) Fixed Bonus Plan Units
The Company operates a cash-settled, share-based compen-
sation plan for remuneration of its management, directors,
employees and consultants.
The fair value of the Fixed Bonus Plan Units (“Units”) granted
is measured using the Black-Scholes model, taking into ac-
count the terms and conditions upon which the Units are
granted. The fair value of the Units is adjusted by the estimate
of the number of Units that are expected to vest as a result of
non-market conditions and is expensed over the vesting period
using an accelerated method of amortization.
Share-based compensation relating to the Fixed Bonus Plan
is charged to the statement of comprehensive income/(loss)
and re-valued at the end of each reporting period based on the
period-end share price.
(s) Revenue Recognition
Gold and Silver Bullion Sales
Revenue is recognized when persuasive evidence exists that all
of the following criteria are met:
• the significant risks and rewards of ownership of the product
have been transferred to the buyer;
• neither continuing managerial involvement to the degree
usually associated with ownership, nor effective control over
the gold or silver sold, has been retained;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefit associated with the
sale will flow to the Company; and
• the costs incurred or to be incurred in respect of the sale
can be measured reliably.
teranga gold corporation / notes to consolidated financial statements 41
Interest Income
Interest income is recognized on a time proportionate basis
taking into account the effective yield on the financial assets.
(t) exploration and evaluation
Exploration and evaluation expenditures in relation to each
separate area of interest are expensed in the consolidated
statement of comprehensive income/(loss) until the determina-
tion of the technical feasibility and the commercial viability of
the project.
The technical feasibility and commercial viability of extracting a
mineral resource is considered to be determinable when proven
reserves are determined to exist, the rights of tenure are current
and it is considered probable that the costs will be recouped
through successful development and exploitation of the area, or
alternatively by sale of the property. Once the technical feasibili-
ty study is completed, subsequent exploration and development
expenses are capitalized as mine development expenditures.
Upon reaching commercial production, these capitalized costs
will be transferred from mine development expenditures to
producing properties on the consolidated statement of financial
position and will be amortized using the units-of-production
method over the estimated ore reserves.
Exploration and evaluation assets comprise of costs incurred to
secure the mining concession, acquisition of rights to explore,
studies, exploratory drilling, trenching and sampling and associ-
ated activities and an allocation of depreciation and amortiza-
tion of assets used in exploration and evaluation activities.
General and administrative costs are only included in explora-
tion and evaluation costs where they are related directly to the
operational activities in a particular area of interest.
(u) earnings Per share
Basic earnings per share are determined by dividing the profit/
(loss) attributable to equity holders of the Company by the
weighted average number of ordinary common shares out-
standing during the financial period.
Diluted earnings per share is calculated by adjusting the weight-
ed average number of common shares outstanding to assume
conversion of all dilutive potential common shares.
(v) Joint Venture arrangements
Interests in jointly controlled assets in which the Company is a
venturer and has joint control are included in the consolidated
financial statements by recognizing the Company’s share of
jointly controlled assets (classified according to their nature), the
share of liabilities incurred (including those incurred jointly with
other venturers) and the Company’s share of expenses incurred
by or in respect of each joint venture.
The Company’s interests in assets where the Company does
not have joint control are accounted for in accordance with the
substance of the Company’s interest. Where such arrange-
ments give rise to an undivided interest in the individual assets
and liabilities of the joint venture, the Company recognizes its
undivided interest in each asset and liability and classifies and
presents those items according to their nature.
(w) Government Royalties
Royalties are accrued and charged against earnings when
the liability from production of the gold arises. Royalties
are separately reported as expenses and not included
within revenue.
5. cHanGe in accOUntinG POlicies
(a) exploration and evaluation expenditures expensed
Effective October 1, 2010, exploration and evaluation expendi-
tures in relation to each separate area of interest are expensed
as exploration costs in the consolidated statement of compre-
hensive income/(loss) until the determination of the technical
feasibility and the commercial viability of the project. Under
MDL’s previous policy, exploration and evaluation expenditures
were recognized as an exploration and evaluation asset in the
year in which they were incurred and assessed for impair-
ment.
As a result of the change in the accounting policy, all explora-
tion costs, including concession costs, in the total amount of
$27.3 million existing before October 1, 2010 and capital-
ized to exploration assets were de-recognized and expensed
through retained earnings. Management believes that the
change in the accounting policy results in reliable and more
relevant information. Had these exploration and evaluation
expenditures been capitalized in the consolidated statement of
financial position as at December 31, 2011, the impact on the
basic and diluted EPS would have been a reduction of the loss
per share of 15 cents.
(b) inventory Valuation
Effective January 1, 2012, the Company changed the method
of measuring and recording the cost of ore in stockpiles, gold
in circuit and gold bullion inventory. The new policy mea-
sures and records the costs associated with ore in stockpiles,
gold in circuit and gold bullion inventory based on recovered
ounces of gold. Under the previous policy, ore in stockpiles,
gold in circuit and gold bullion costs were measured and
recorded based on tonnes processed. The new policy better
2012 AnnuAl RepoRt 42
matches revenue and expenses as compared to the former
policy because it attaches higher costs to the higher grade
ore and charges more costs to the statements of compre-
hensive income/(loss) during periods that higher grade ore is
processed and sold. Management believes that the change in
accounting policy for inventory valuation better matches the
statements of comprehensive income/(loss) and provides a
more reliable measurement of ore in stockpiles, gold in circuit
and gold bullion inventory.
The change in accounting policy has been applied retro-
actively with restatement reducing the value of inventory
acquired on November 23, 2010 by $22.7 million and
increasing the value of inventory as at December 31, 2011 by
$5.2 million.
(c) Depreciation Based on Unit of Production
In line with the change in the method of measuring and
recording inventory, the Company changed its accounting
policy regarding units-of-production depreciation effective
January 1, 2012. Under the previous method, units-of-
production property, plant and equipment were amortized
over the life of mine tonnes processed. Under the new policy,
depreciation is based on recovered ounces of gold. Manage-
ment believes that the change in accounting policy better
matches revenue and costs.
The change in accounting policy has been applied retroac-
tively with restatement reducing the value of property, plant
and equipment and mine development expenditures acquired
on November 23, 2010 by $16.7 million and $9.8 million,
respectively. The value of property, plant and equipment
and mine development expenditures as at December 31,
2011 were further reduced by $1.3 million and $0.8 million,
respectively.
The impact of the change in accounting policies on the value
of net assets acquired as at November 23, 2010, the state-
ment of financial position as at December 31, 2011, the state-
ment of comprehensive income/(loss) for the fifteen months
ended December 31, 2011 and the statement of cash flows
as at December 31, 2011 is set out below:
imPact On net assets acQUiReD On nOVemBeR 23, 2010
november 23, 2010
as previously reported
impact of change in
accounting policies
november 23, 2010
Restated
current assets
Inventories
total current assets
non-current assets
Property, plant and equipment
Mine development expenditure
total non-current assets
total assets
Non-controlling interest
net assets
70,575
348,459
217,450
112,710
349,033
697,492
(1,947 )
279,909
(22,652 )
(22,652 )
(16,683 )
(9,767 )
(26,450 )
(49,102 )
(5,089 )
(44,013 )
47,923
325,807
200,767
102,943
322,583
648,390
(7,036 )
235,896
Net assets acquired
Less deferred compensation (C$50 million)
Value of shares issued on acquisition
november 23, 2010
as previously reported
impact of change in
accounting policies
november 23, 2010
Restated
279,909
(49,231 )
230,678
(44,013 )
–
(44,013 )
235,896
(49,231 )
186,665
teranga gold corporation / notes to consolidated financial statements imPact On statement OF Financial POsitiOn
December 31, 2011
as previously reported
impact of change in
accounting policies
December 31, 2011
Restated
43
current assets
Inventories
total current assets
non-current assets
Inventories
Property, plant and equipment
Mine development expenditure
total non-current assets
total assets
equity
Issued capital
Accumulated losses
equity attributable to shareholders
Non-controlling interests
total equity
total equity and liabilities
46,927
113,280
50,786
256,539
100,359
409,301
522,581
349,425
(46,208 )
313,562
1,076
314,638
522,581
1,438
1,438
(18,844 )
(18,029 )
(10,534 )
(47,407 )
(45,969 )
(44,013 )
2,833
(41,180 )
(4,789 )
(45,969 )
(45,969 )
48,365
114,718
31,942
238,510
89,825
361,894
476,612
305,412
(43,375)
272,382
(3,713)
268,669
476,612
imPact On statement OF cOmPReHensiVe incOme/(lOss)
Fifteen months ended
December 31, 2011
as previously reported
impact of change in
accounting policies
(note 4)
Restatement (i)
Reclassifications
(note 2)
Fifteen months ended
December 31, 2011
Restated
Revenue
Cost of sales
Gross profit
Administration expenses
Net change in realized and
unrealized gains/(losses) on
gold hedge contracts
Net change in realized and
unrealized gains on oil hedge
contracts
Profit before income tax
Profit for the period
total comprehensive income
for the period
Profit attributable to:
Shareholders
Non-controlling interests
Profit for the period
total comprehensive profit attributable to:
Shareholders
Non-controlling interests
187,141
(151,033 )
36,108
(12,043 )
1,789
(113 )
(52,049 )
(15,941 )
(15,849 )
(2,418 )
(2,418 )
5,550
5,550
–
(2,418 )
(2,418 )
–
5,550
5,550
(18,103 )
(2,418 )
5,550
(18,872)
3,023
(15,849)
(21,126)
3,023
(2,193)
(225)
(2,418)
(2,193)
(225)
5,025
525
5,550
5,025
525
49,732
(911 )
48,821
(1,405 )
236,873
(148,812)
88,061
(13,448)
(49,732 )
(47,943)
2,316
(48,821 )
–
–
–
–
2,203
(100,870)
(12,809)
(12,717)
(14,971)
(16,040)
3,323
(12,717)
–
(18,294)
3,323
(i) In addition to the impact of the change in accounting policies and reclassifications, the consolidated statements of comprehensive income/(loss) for the year ended December 31, 2011
has been adjusted to reflect the impact of an adjustment recorded at the end of 2011 regarding the depreciation of mobile equipment.
current assets
Inventories
total current assets
non-current assets
Property, plant and equipment
Mine development expenditure
total non-current assets
total assets
Non-controlling interest
net assets
Net assets acquired
Less deferred compensation (C$50 million)
Value of shares issued on acquisition
november 23, 2010
as previously reported
impact of change in
accounting policies
november 23, 2010
Restated
70,575
348,459
217,450
112,710
349,033
697,492
(1,947 )
279,909
279,909
(49,231 )
230,678
(22,652 )
(22,652 )
(16,683 )
(9,767 )
(26,450 )
(49,102 )
(5,089 )
(44,013 )
(44,013 )
–
(44,013 )
47,923
325,807
200,767
102,943
322,583
648,390
(7,036 )
235,896
Restated
235,896
(49,231 )
186,665
november 23, 2010
as previously reported
impact of change in
accounting policies
november 23, 2010
2012 AnnuAl RepoRt 44
imPact On statement OF casH FlOWs
cash flows related to operating activities
Profit/(Loss) for the period
Depreciation
Amortization of capitalized mine development costs
Changes in working capital
net cash provided by operating activities
cash flows related to financing activities
Interest paid on borrowings
net cash used by financing activities
6. FUtURe accOUntinG POlicies
iFRs 9 – Financial instruments
IFRS 9, “Financial instruments” (IFRS 9) was issued by the
IASB in November 2009 and will replace IAS 39, “Financial
Instruments: Recognition and Measurement” (IAS 39). IFRS 9
replaces the multiple rules in IAS 39 with a single approach to
determine whether a financial asset is measured at amortized
cost or fair value and a new mixed measurement model for
debt instruments having only two categories: amortized cost
and fair value. The approach in IFRS 9 is based on how an
entity manages its financial instruments in the context of its
business model and the contractual cash flow character-
istics of the financial assets. This standard also requires a
single impairment method to be used, replacing the multiple
impairment methods in IAS 39. IFRS 9 is effective for annual
periods beginning on or after January 1, 2015. The Company
is currently evaluating the impact of IFRS 9 on its consolidated
financial statements.
iFRs 10 – consolidated Financial statements
IFRS 10, “Consolidated financial statements” (IFRS 10) was
issued by the IASB in May 2011 and will replace SIC 12,
“Consolidation – Special purpose entities” and parts of IAS 27,
“Consolidated and separate financial statements”. Under the
existing IFRS, consolidation is required when an entity has the
power to govern the financial and operating policies of an entity
so as to obtain benefits from its activities. IFRS 10 establishes
principles for the presentation and preparation of consolidated
financial statements when an entity controls one or more
other entities. This standard (i) requires an entity that controls
one or more other entities to present consolidated financial
statements; (ii) defines the principle of control, and establishes
control as the basis for consolidation; (iii) sets out how to apply
the principle of control to identify whether an investor controls
an investee and therefore must consolidate the investee; and
Fifteen months ended
December 31, 2011
as previously reported
impact of change
in accounting
policies
Fifteen months ended
December 31, 2011
Restated
(15,849 )
28,195
9,433
(29,120 )
3,815
(931 )
116,579
3,132
1,346
767
(3,928 )
1,317
(1,317 )
(1,317 )
(12,717)
29,541
10,200
(33,048)
5,132
(2,248)
115,262
(iv) sets out the accounting requirements for the preparation of
consolidated financial statements. IFRS 10 is effective for an-
nual periods beginning on or after January 1, 2013. The Com-
pany has evaluated the impact of IFRS 10 and has determined
there is no impact on its consolidated financial statements.
iFRs 11 – Joint arrangements
IFRS 11, “Joint arrangements” (IFRS 11) was issued by the
IASB in May 2011 and will supersede IAS 31, “Interest in
joint ventures” and SIC 13, “Jointly controlled entities – Non-
monetary contributions by venturers” by removing the option
to account for joint ventures using proportionate consolidation
and requiring equity accounting. Venturers will transition the
accounting for joint ventures from the proportionate consolida-
tion method to the equity method by aggregating the carrying
values of the proportionately consolidated assets and liabilities
into a single line item on their financial statements. In addition,
IFRS 11 will require joint arrangements to be classified as ei-
ther joint operations or joint ventures. The structure of the joint
arrangement will no longer be the most significant factor when
classifying the joint arrangement as either a joint operation or a
joint venture. IFRS 11 is effective for annual periods beginning
on or after January 1, 2013. The Company has evaluated the
impact of IFRS 11 and has determined there is no impact on
its consolidated financial statements.
iFRs 12 – Disclosure of interests in Other entities
IFRS 12, “Disclosure of interests in other entities” (IFRS
12) was issued by the IASB in May 2011. IFRS 12 requires
enhanced disclosure of information about involvement with
consolidated and unconsolidated entities, including structured
entities commonly referred to as special purpose vehicles, or
variable interest entities. IFRS 12 is effective for annual periods
beginning on or after January 1, 2013. The Company has
evaluated the impact of IFRS 12 and will apply the new disclo-
sure requirements for its consolidated financial statements for
the first quarter of 2013.
teranga gold corporation / notes to consolidated financial statements cash flows related to operating activities
Profit/(Loss) for the period
Depreciation
Amortization of capitalized mine development costs
Changes in working capital
net cash provided by operating activities
cash flows related to financing activities
Interest paid on borrowings
net cash used by financing activities
Fifteen months ended
impact of change
Fifteen months ended
December 31, 2011
as previously reported
in accounting
December 31, 2011
policies
Restated
(15,849 )
28,195
9,433
(29,120 )
3,815
(931 )
116,579
3,132
1,346
767
(3,928 )
1,317
(1,317 )
(1,317 )
(12,717)
29,541
10,200
(33,048)
5,132
(2,248)
115,262
45
iFRs 13 – Fair Value measurement
IFRS 13, “Fair value measurement” (IFRS 13) was issued by the
IASB in May 2011. This standard clarifies the definition of fair
value, required disclosures for fair value measurement, and sets
out a single framework for measuring fair value. IFRS 13 provides
guidance on fair value in a single standard, replacing the existing
guidance on measuring and disclosing fair value, which is dis-
persed among several standards. IFRS 13 is effective for annual
periods beginning on or after January 1, 2013. The Company has
evaluated the impact of IFRS 13 and has determined there is no
impact on its consolidated financial statements.
ias 19 – employee Benefits
IAS 19, “Employee benefits” (IAS 19) was re-issued by the
IASB in June 2011, which results in significant changes in
accounting for defined benefit pension plans. There are also a
number of other changes, including modification to the timing
of recognition for termination benefits, the classification of
short-term employee benefits and disclosures of defined benefit
plans. Furthermore, the IASB sought to provide more targeted
disclosure requirements that would highlight the relevant risks
of defined benefit plans. IAS 19 must be applied starting Janu-
ary 1, 2013 with early adoption permitted. The Company has
evaluated the impact of IAS 19 and has determined there is no
impact on its consolidated financial statements.
iFRic 20 – stripping costs in the Production
Phase of a surface mine
In October 2011, the IASB issued IFRIC 20 Stripping Costs in
the Production Phase of a Surface Mine. IFRIC 20 provides
guidance on the accounting for the costs of stripping activity
in the production phase of surface mining when two benefits
accrue to the entity from the stripping activity: useable ore
that can be used to produce inventory and improved access
to further quantities of material that will be mined in future
periods. IFRIC 20 must be applied starting January 1, 2013
with early adoption permitted. The Company has performed
a preliminary assessment of the impact of adopting IFRIC 20
on its consolidated financial statements indicating that we will
capitalize waste stripping costs, which are not permitted under
our current accounting policy.
ias 27 – separate Financial statements
IAS 27, “Separate financial statements” (IAS 27) was re-issued
by the IASB in May 2011 to only prescribe the accounting and
disclosure requirements for investments in subsidiaries, joint
ventures and associates when an entity prepares separate fi-
nancial statements. The consolidation guidance is now included
in IFRS 10. The amendments to IAS 27 are effective for annual
periods beginning on or after January 1, 2013. The Company
has evaluated the impact of IAS 27 and has determined there is
no impact on its consolidated financial statements.
ias 28 – investments in associates and
Joint Ventures
IAS 28, “Investments in associates and joint ventures”
(IAS 28) was re-issued by the IASB in May 2011. IAS 28
continues to prescribe the accounting for investments in as-
sociates, but is now the only source of guidance describing
the application of the equity method. The amended IAS 28 will
be applied by all entities that have an ownership interest with
joint control of, or significant influence over, an investee. The
amendments to IAS 28 are effective for annual periods begin-
ning on or after January 1, 2013. The Company has evaluated
the impact of IAS 28 and has determined there is no impact
on its consolidated financial statements.
7. cRitical accOUntinG JUDGments
anD Key sOURces OF estimatiOn
UnceRtainty
The following are critical judgments and estimations that man-
agement has made in the process of applying the Company’s
accounting policies and that have the most significant effect
on the amounts recognized in the consolidated financial state-
ments and that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
within the next financial year:
Ore Reserves
Management estimates its ore reserves based upon information
compiled by Competent Persons with the Australasian Code
for Reporting of Exploration Results, Mineral Resources and
Ore Reserves and Qualified Persons as defined in NI 43-101,
which is similar to the Australasian standards. The estimated
quantities of economically recoverable reserves are based upon
interpretations of geological models and require assumptions
to be made regarding factors such as estimates of short- and
long-term exchange rates, estimates of short- and long-term
commodity prices, future capital requirements and future
operating performance. Changes in reported reserve estimates
can impact the carrying value of property, plant and equipment,
mine development expenditures, provision for mine restoration
and rehabilitation, the recognition of deferred tax assets, as well
as the amount of depreciation and amortization charged to the
statement of comprehensive income/(loss).
2012 AnnuAl RepoRt 46
Functional Currency
The functional currency of each of the Company’s entities is
measured using the currency of the primary economic environ-
ment in which that entity operates. The functional currency of
all entities within the group is the United States dollar, which
was determined based on the currency that mainly influences
sales prices for goods and services, labour, material and other
costs and the currency in which funds from financing activities
are generated.
Units of Production
Management estimates recovered ounces of gold in determin-
ing the depreciation and amortization of mining assets. This
results in a depreciation/amortization charge proportional to
the recovery of the anticipated ounces of gold. The life of the
asset is assessed annually and considers its physical life limi-
tations and present assessments of economically recoverable
reserves of the mine property at which the asset is located.
The calculations require the use of estimates and assump-
tions, including the amount of recoverable ounces of gold.
The Company’s units of production calculations are based
on recovered ounces of gold.
Mine Restoration and Rehabilitation Provision
Management assesses its mine restoration and rehabilitation
provision each reporting period. Significant estimates and
assumptions are made in determining the provision for mine
rehabilitation as there are numerous factors that will affect the
ultimate liability payable. These factors include estimates of
the extent, the timing and the cost of rehabilitation activities,
technological changes, regulatory change, cost increases, and
changes in discount rates. Those uncertainties may result in ac-
tual expenditures differing from the amounts currently provided.
The provision at the reporting date represents management’s
best estimate of the present value of the future rehabilitation
costs required. Changes to estimated future costs are recog-
nized in the statement of financial position by adjusting the
rehabilitation asset and liability.
Impairment of Assets
Management assesses each cash-generating unit each report-
ing period to determine whether any indication of impairment
exists. Where an indicator of impairment exists, a formal esti-
mate of the recoverable amount is made, which is considered
to be the higher of the fair value less costs to sell and value in
use. These assessments require the use of estimates and as-
sumptions such as long-term commodity prices, discount rates,
future capital requirements, and operating performance. Fair
value is determined as the amount that would be obtained from
the sale of the asset in an arm’s length transaction between
knowledgeable and willing parties. Fair value for mineral as-
sets is generally determined as the present value of estimated
future cash flows arising from the continued use of the asset.
Cash flows are discounted by an appropriate discount rate to
determine the net present value. Management has assessed its
cash generating units as being all sources of mill feed through
a central mill, which is the lowest level for which cash flows are
largely independent of other assets.
Production Start Date
Management assesses the stage of each mine development
project to determine when a mine moves into the production
stage. The criteria used to assess the start date of a mine are
determined based on the unique nature of each mine develop-
ment project. The Company considers various relevant criteria
to assess when the mine is substantially complete, ready for its
intended use and moves into the production phase. Some of
the criteria include, but are not limited to, the following:
• completion of a reasonable period of testing of the mine plant
and equipment;
• ability to produce metal in saleable form; and
• ability to sustain ongoing production of metal.
When a mine development project moves into the production
stage, the capitalization of certain mine construction costs
ceases and costs are either regarded as inventory or expensed,
except for capitalizable costs related to mining asset additions
or improvements, underground mine development or mineable
reserve development. It is also at this point that depreciation/
depletion commences.
Fair Value of Derivative Financial Instruments
Management assesses the fair value of Teranga’s financial
derivatives in accordance with the accounting policy stated in
Note 4(p) to the consolidated financial statements. Fair values
have been determined based on well-established valuation
models and market conditions existing at the reporting date.
These calculations require the use of estimates and assump-
tions. Changes in assumptions concerning interest rates, gold
prices and volatilities could have a significant impact on the
fair valuation attributed to the Company’s financial derivatives.
When these assumptions change or become known in the
future, such differences will impact asset and liability carrying
values in the period in which they change or become known.
Fair Value of Stock Options
Management assesses the fair value of stock options granted in
accordance with the accounting policy stated in Note 4(q) to the
consolidated financial statements. The fair value of the options
granted is measured using the Black-Scholes model, taking into
account the terms and conditions upon which the options are
granted. The calculation requires the use of estimates and as-
sumptions. Due to lack of sufficient historical information for the
Company, volatility was determined using the existing historical
volatility information of the Company’s share price combined with
the industry average for comparable-size mining companies.
teranga gold corporation / notes to consolidated financial statements 47
Fair Value of Fixed Bonus Plan Units
Management assesses the fair value of Units granted in ac-
cordance with the accounting policy stated in Note 4(r) to the
consolidated financial statements. The fair value of the Units
granted is measured using the Black-Scholes model, taking
into account the terms and conditions upon which the Units
are granted. The calculation requires the use of estimates
and assumptions. Due to lack of sufficient historical informa-
tion for the Company, volatility was determined using the
existing historical volatility information of the Company’s share
price combined with the industry average for comparable-size
mining companies.
8. ReVenUe
Gold sales at spot price
Silver sales
total revenue
Interest income from bank deposits
and short-term investments
total other income
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
349,871
649
350,520
36
36
236,232
641
236,873
848
848
For the year ended December 31, 2012, 207,814 ounces of
gold were sold at an average price of $1,634 per ounce and
for the fifteen months ended December 31, 2011, 153,728
ounces of gold were sold at an average price of $1,537 per
ounce. Revenue excludes the impact of gold hedges as
losses on ounces delivered into gold hedge contracts are
classified within losses on gold hedge contracts.
Including the impact of gold hedge losses, for the year ended
December 31, 2012, 207,814 ounces of gold were sold at an
average realized price of $1,422 per ounce, including 62,606
ounces that were delivered into gold hedge contracts at $832
per ounce, representing 30 percent of gold sales for the year,
and 145,208 ounces were sold into the spot market at an
average price of $1,677 per ounce.
Including the impact of gold hedge losses, for the fifteen
months ended December 31, 2011, 153,728 ounces of gold
were sold at an average realized price of $1,213 per ounce,
including 72,000 ounces delivered into gold hedge contracts
at $846 per ounce, representing 47 percent of gold sales for
the period, and 81,728 ounces of gold were sold into the spot
market at an average price of $1,537 per ounce.
9. cOst OF sales
Mine production costs
Depreciation and amortization
Royalties
Rehabilitation
Inventory movements
total cost of sales
10. aDministRatiOn eXPenses
Corporate office
Dakar office
Social community
Professional and consulting fees
Legal and other
total administration expenses
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
145,831
52,660
10,491
36
(29,695 )
179,323
126,125
40,077
7,035
9
(24,434)
148,812
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
9,719
754
1,558
1,912
3,988
17,931
7,658
1,064
1,405
1,820
1,501
13,448
2012 AnnuAl RepoRt 48
11. Finance cOsts
Interest on borrowings
Amortization of capitalized borrowing costs
Unwinding of discount
Political risk insurance
Stocking fee
Financial advisory services
Bank charges
total finance costs
12. incOme taX
Current income tax expense
Deferred income tax benefit on reversal of
temporary differences
total income tax benefit
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
4,516
877
53
898
578
427
440
7,789
1,317
328
47
1,131
–
–
123
2,946
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
(115 )
–
(115 )
139
(231)
(92)
The Company’s income tax benefit differs from the amount computed by applying the combined Canadian federal and provincial
income tax rates to loss before income taxes as a result of the following:
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
26.5%
24,902
1,244
(37,528 )
–
11,267
–
(115 )
28.8%
(4,591)
–
–
–
4,499
–
(92)
Deferred income tax liabilities have not been recognized for
the withholding tax and other taxes that would be payable on
the unremitted earnings of certain subsidiaries. Such amounts
are permanently re-invested. Unremitted earnings totalled
$147,137,000 at December 31, 2012.
Statutory tax rates
Income tax benefit computed at statutory rates
Non-deductible items
Income not subject to tax
Difference between deferred and current rate
Unrecognized deferred tax assets
Other
income tax benefit
Deferred income tax assets are recognized for tax loss
carry-forwards, property, plant and equipment and the
share issuance costs to the extent that the realization of the
related tax benefit through future taxable profits is probable.
The Company did not recognize deferred income tax assets
of $9,071,000 in respect of non-capital losses, property,
plant and equipment and share issuance costs amounting
to $34,230,000 that can be carried forward against future
taxable income, and 808,000 in respect of capital loss
amounting to $6,099,000 that can be carried forward against
future taxable capital gains. The non-capital losses, property,
plant and equipment and share issuance costs amounting to
$34,230,000 will expire in the years 2030 to 2032, and the
capital losses have no expiry date.
teranga gold corporation / notes to consolidated financial statements 49
13. tRaDe anD OtHeR ReceiVaBles
current
Trade receivable 1
Other receivables 2
total trade and other receivables
December 31, 2012
December 31, 2011
5,268
1,214
6,482
17,120
3,327
20,447
1 Trade receivable relates to gold and silver shipments made prior to period-end that were settled after year-end.
2 Other receivables primarily include receivables from suppliers for services, materials and utilities used at the Sabodala gold mine that the Company provides to them.
Also included are receivables from the settlement of oil hedge contracts.
14. inVentORies
current
Gold bullion
Gold in circuit
Ore stockpile
total gold inventories
Diesel fuel
Materials and supplies
Goods in transit
total other inventories
total current inventories
non-current
Ore stockpile
total inventories
December 31, 2012
December 31, 2011
4,615
9,193
30,736
44,544
3,242
30,703
3,985
37,930
82,474
40,659
123,133
2,509
2,970
18,087
23,566
1,371
21,687
1,741
24,799
48,365
31,942
80,307
15. Financial DeRiVatiVe assets
current
December 31, 2012
December 31, 2011
Oil hedge contracts
non-current
Oil hedge contracts
total financial derivative assets
456
–
456
2,288
532
2,820
The Company has a hedge agreement with respect to the oil
price in order to manage its exposure to commodity risk. The
Company hedged 80,000 barrels per annum for four years
commencing April 1, 2009 at a flat forward price of $70 per
barrel (West Texas Intermediate price). At December 31, 2012,
the remaining 20,000 barrels hedged have a mark-to-market
value of $0.5 million at the reporting date spot price of $92 per
barrel. At December 31, 2011, 100,000 barrels were hedged
with a market value of $2.8 million at price of $99 per barrel.
16. OtHeR assets
current
Prepayments 1
Security deposit 2
total other assets
December 31, 2012
December 31, 2011
11,396
1,500
12,896
11,251
1,500
12,751
1 As at December 31, 2012, prepayments include $6.1 million of advances for the new mining fleet, $4.3 million of advances to vendors and contractors and $1.0 million
for insurance. As at December 2011, prepayments include $7.9 million of advances for the new mining fleet, $3.4 million to other vendors and contractors and $0.8 million
for insurance.
2 The security deposit represents a security for payment under the mining fleet and maintenance contract.
2012 AnnuAl RepoRt 50
17. PROPeRty, Plant anD eQUiPment
Buildings &
property
improvement
Plant and
equipment
Office furniture
and equipment
motor
vehicles
equipment
under finance lease
capital work
in progress
total
(note 4)
cost
Balance at October 1, 2010
–
–
–
–
–
–
–
Property, plant and equipment arising
from Demerger – Nov 23, 2010
Additions
Capitalized mine rehabilitation
30,838
172,424
575
1,774
25,787
26,344
257,742
–
–
–
6,459
–
–
–
–
–
–
60,825
60,825
–
6,459
Transfer
1,378
11,514
704
707
16,308
(30,611 )
–
Balance at December 31, 2011
32,216
190,397
1,279
2,481
42,095
56,558
325,026
Additions
Capitalized mine rehabilitation
–
109
(748 )
–
12,237
85,922
525
–
(227 )
832
45,282
45,282
–
–
322
(99,838 )
109
(975)
–
Disposals
Transfer
Balance at December 31, 2012
44,453
275,680
1,804
3,086
42,417
2,002
369,442
accumulated depreciation
Balance at October 1, 2010
Accumulated depreciation arising from
Demerger – Nov 23, 2010
Impact on accumulated depreciation
arising from Demerger (Note 5)
Impact on accumulated depreciation
regarding fiscal year 2011 (Note 5)
–
–
–
–
–
–
–
4,102
25,853
399
913
9,025
–
40,292
Depreciation expense
2,701
15,973
272
466
8,783
2,750
13,933
216
1,130
–
–
–
–
–
–
–
–
–
16,683
1,346
28,195
Balance at December 31, 2011 (note 3)
9,769
56,889
671
1,379
17,808
–
86,516
Disposals
(719 )
Depreciation expense
4,635
27,843
340
(192 )
648
8,533
(911)
41,999
Balance at December 31, 2012
14,404
84,013
1,011
1,835
26,341
–
127,604
net book value
Balance at December 31, 2011
22,447
133,508
608
1,102
24,287
56,558
238,510
Balance at December 31, 2012
30,049
191,667
793
1,251
16,076
2,002
241,838
Additions made to property, plant and equipment during
the year ended December 31, 2012 relate mainly to the mill
expansion and additional mining equipment acquired.
Effective January 1, 2012, the Company has updated its
estimate regarding the expected life of mine based on the
proven and probable reserves at December 31, 2011 resulting
in $6.1 million lower depreciation cost for property, plant and
equipment depreciated using the unit-of-production method
for the year ended December 31, 2012.
Depreciation of property, plant and equipment of
$42 million and $30 million was expensed as cost of sales
for the twelve and fifteen months ended December 31, 2012
and 2011, respectively.
The Company has property, plant and equipment that
are fully amortized but still in use with a gross book value of
$2.6 million.
teranga gold corporation / notes to consolidated financial statements
18. mine DeVelOPment eXPenDitURe
amount (note 4)
51
cost
Balance at October 1, 2010
Mine development expenditure arising from Demerger – November 23, 2010
Change in accounting policy 1
Expenditures incurred during the period
Balance at December 31, 2011
Expenditures incurred during the period
Balance at December 31, 2012
accumulated depreciation
Balance at October 1, 2010
Accumulated depreciation arising from Demerger – November 23, 2010
Impact on depreciation expense arising from Demerger (Note 2)
Impact on depreciation expense for fiscal year 2011 (Note 2)
Depreciation expense
Balance at December 31, 2011
Depreciation expense
Balance at December 31, 2012
carrying amount
at December 31, 2011
Balance at December 31, 2012
–
127,336
(17,277)
14,359
124,418
30,377
154,795
–
14,626
9,767
767
9,433
34,593
11,142
45,735
89,825
109,060
1 Change in accounting policy effective October 1, 2010.
Mine development expenditures represent development costs in
relation to the Sabodala gold mine and Gora satellite deposit.
The capitalized mine development expenditures incurred dur-
ing 2012 include $3.0 million relating to the Gora project that
was advanced from the exploration stage to the development
stage effective January 1, 2012 after technical feasibility and
commercial viability studies had been completed.
Effective January 1, 2012, the Company has updated its
estimate regarding the expected life of mine based on the
proven and probable reserves at December 31, 2011 result-
ing in $6.5 million lower depreciation cost for mine develop-
ment expenditure for the year ended December 31, 2012.
Depreciation of capitalized mine development of $11.1 million
and $9.4 million were expensed as cost of sales for the twelve
and fifteen months ended December 31, 2012 and 2011,
respectively.
2012 AnnuAl RepoRt
52
19. intanGiBle assets
Intangible assets represent intangible computer software. Amortization expense is included in
the consolidated statement of comprehensive income/(loss) under administration expenses.
cost
Balance at October 1, 2010
Intangible assets arising from Demerger – November 23, 2010
Additions
Balance at December 31, 2011
Additions
Balance at December 31, 2012
accumulated amortization
Balance at October 1, 2010
Accumulated amortization arising from Demerger – November 23, 2010
Amortization expense
Balance at December 31, 2011
Amortization expense
Balance at December 31, 2012
carrying amount
at December 31, 2011
at December 31, 2012
20. tRaDe anD OtHeR PayaBles
current
Unsecured liabilities:
Trade payables 1
Sundry creditors and accrued expenses
Government royalties 2
Amounts payable to Government of Senegal 3
total trade and other payables
amount
–
707
1,208
1,915
1,424
3,339
–
340
490
830
650
1,480
1,085
1,859
December 31, 2012
December 31, 2011
16,446
12,370
10,927
5,080
44,823
18,860
13,733
5,887
4,758
43,238
1 Trade payables comprise obligations by the Company to suppliers of goods and services to
the Company. Terms are generally 30 days.
2 Government royalties are payable annually based on the mine head value of the gold
3 $4 million to which an annual interest rate of 6% applies is payable to the Government
of Senegal relating to the historical cost of acquiring the Mine Licence. The balance was
paid to the Government of Senegal in January 2013.
and related substances produced.
21. BORROWinGs
current
Finance lease liabilities
Borrowing costs
total current borrowings
non-current
Loan facility
Finance lease liabilities
Borrowing costs
total non-current borrowings
total borrowings
December 31, 2012
December 31, 2011
10,506
(91)
10,415
60,000
–
(1,807)
58,193
68,608
16,799
(331)
16,468
–
7,573
(64)
7,509
23,977
teranga gold corporation / notes to consolidated financial statements 53
property in Senegal and a pledge over all SGO’s assets in Sen-
egal; (ix) an assignment by way of security of SGO’s interest in
project documents including the Sabodala mining concession
and the mining convention; and (x) a pledge agreement in
respect of balances of local banking accounts held by SGO in
Senegal.
Société Générale Equipment Lease Facility
During the year ended December 31, 2011, the Company ex-
panded the mobile equipment finance lease loan with Société
Générale by an additional $12.8 million. The facility contains
a quarterly repayment schedule concluding with the final pay-
ment on September 30, 2013. The facility is fully drawn down
to $10.5 million and repayable in 2013.
The security package includes: (i) a guarantee issued by SGO
to Société Générale of up to $50,000,000; (ii) a share mort-
gage over all shares in SGML Capital held by Teranga; and (iii)
a fixed and floating charge over all the assets of SGML Capital.
December 31, 2012
December 31, 2011
51,548
129,559
51,548
–
51,548
79,241
50,318
129,559
During the second quarter of 2012, the Company bought
back certain “out of the money” gold forward sales contracts
scheduled for delivery in 2012 totalling 52,105 ounces.
Macquarie Loan Facility
During the second quarter of 2012, the Company entered
into a $60 million 2-year loan facility with Macquarie Bank
Limited by way of an amendment to its existing Facility Agree-
ment. The loan facility bears interest of LIBOR plus a margin
of 10 percent and shall be repaid on or before June 30, 2014.
All of the obligations under the loan facility continue due to the
gold hedging contracts and oil hedge currently outstanding.
The security package includes: (i) a fixed and floating charge in
respect of all assets of Teranga BVI; (ii) a share mortgage in re-
spect of all shares held by Teranga in Teranga BVI; (iii) a share
mortgage over Teranga’s shares in SGML; (iv) a share pledge
over shares in SGO held by SGML and nominated directors
of Teranga and over shares in SMC held by SGML; (v) a fixed
and floating charge over all assets of SGML (other than SGML’s
shares in SMC); (vi) a fixed and floating charge over all SGML’s
assets located outside of Mauritius; (vii) a fixed and floating
charge over all assets of SGO held outside of Senegal; (viii) a
mortgage of the Sabodala mining concession and certain real
22. Financial DeRiVatiVe liaBilities
Gold hedge contracts
Disclosed as:
Current
Non-current
total financial derivative liabilities
At December 31, 2012, the hedge position comprised 59,789
ounces of forward sales at an average price of $803 per ounce.
At December 31, 2012, the mark-to-market gold hedge
position at the year-end spot price of $1,664 per ounce was
in a liability position of $51.5 million. At December 31, 2011,
the hedge position comprised 174,500 ounce of forward
sales at an average $826 per ounce. At December 31, 2011,
the mark-to-market gold hedge position at the period-end
spot price of $1,566 per ounce was in a liability position of
$129.6 million.
Accumulated amortization arising from Demerger – November 23, 2010
Balance at October 1, 2010
Intangible assets arising from Demerger – November 23, 2010
cost
Additions
Additions
Balance at December 31, 2011
Balance at December 31, 2012
accumulated amortization
Balance at October 1, 2010
Amortization expense
Balance at December 31, 2011
Amortization expense
Balance at December 31, 2012
carrying amount
at December 31, 2011
at December 31, 2012
current
Unsecured liabilities:
Trade payables 1
Sundry creditors and accrued expenses
Government royalties 2
Amounts payable to Government of Senegal 3
total trade and other payables
current
Finance lease liabilities
Borrowing costs
total current borrowings
non-current
Loan facility
Finance lease liabilities
Borrowing costs
total non-current borrowings
total borrowings
amount
–
707
1,208
1,915
1,424
3,339
–
340
490
830
650
1,480
1,085
1,859
18,860
13,733
5,887
4,758
43,238
16,799
(331)
16,468
–
7,573
(64)
7,509
23,977
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
16,446
12,370
10,927
5,080
44,823
10,506
(91)
10,415
60,000
–
(1,807)
58,193
68,608
2012 AnnuAl RepoRt 54
23. PROVisiOns
current
Employee benefits 1
total current provisions
non-current
Mine restoration and rehabilitation 2
Cash settled share-based compensation 3
total non-current provisions
total provisions
1 The provisions for employee benefits include $1.4 million accrued vacation and
$0.5 million long service leave entitlements for December 31, 2012. The provision for
December 31, 2011 included $1.6 million accrued vacation and $0.4 million long
service leave entitlements.
2 Mine restoration and rehabilitation provision represents a constructive obligation to
rehabilitate the Sabodala gold mine based on the mining concession. The majority of
the reclamation activities will occur at the completion of active mining and processing
(expected completion is 2019) but a limited amount of concurrent rehabilitation will
occur throughout the mine life.
transfer of provision from Demerger – november 23, 2010
Additional provisions recognized
Capitalized mine rehabilitation
Unwinding of discount
Balance at December 31, 2011
Capitalized mine rehabilitation
Unwinding of discount
Balance at December 31, 2012
24. issUeD caPital
common shares issued and outstanding
Balance at October 1, 2010
Shares issued on incorporation of the Company
Shares issued from initial public offering
Less: Share issue costs
Shares issued on Demerger (Note 2)
Balance at December 31, 2011
Balance at December 31, 2012
December 31, 2012
December 31, 2011
1,940
1,940
9,377
935
10,312
12,252
1,954
1,954
9,215
–
9,215
11,169
3 The provision for cash settled share-based compensation represents the amortization
of the fair value of the Fixed Bonus Plan Units. Details of the Fixed Bonus Plan are
disclosed in Note 36(b).
amount
2,284
425
6,459
47
9,215
109
53
9,377
amount
(note 4)
–
–
135,005
(16,258)
186,665
305,412
305,412
number of shares
–
100
45,617,900
–
200,000,000
245,618,000
245,618,000
On November 23, 2010, Teranga completed the acquisition
of the Sabodala gold mine and a regional exploration package
by way of Demerger from MDL. As part of the Demerger, all of
the issued and outstanding shares of Sabodala Gold (Mauri-
tius) Limited, which holds a 90% interest in the Sabodala Gold
Operations SA (“SGO”), which owns the Sabodala gold mine,
and a 100% interest in the Sabodala Mining Company SARL,
an exploration entity, all of the issued and outstanding shares
of SGML (Capital) Limited and 18,699,500 common shares of
Oromin, originally held by MDL, were transferred to Teranga
in consideration for the issuance of 200,000,000 common
shares to MDL and C$50 million in satisfaction of a promis-
sory note owing to MDL.
On December 7, 2010 the Company completed initial
public offerings in Canada and Australia. In Canada, after
the exercise of the over-allotment option, a total of 36,617,900
common shares were issued for gross proceeds of
AUS$109.9 million. In Australia, 9,000,000 common shares
were issued for gross proceeds of A$26.7 million. The share is-
suance costs related to the public offerings were $16.3 million.
teranga gold corporation / notes to consolidated financial statements current
Employee benefits 1
total current provisions
non-current
Mine restoration and rehabilitation 2
Cash settled share-based compensation 3
total non-current provisions
total provisions
December 31, 2012
December 31, 2011
1,940
1,940
9,377
935
10,312
12,252
1,954
1,954
9,215
–
9,215
11,169
common shares issued and outstanding
Balance at October 1, 2010
Shares issued on incorporation of the Company
Shares issued from initial public offering
Less: Share issue costs
Shares issued on Demerger (Note 2)
Balance at December 31, 2011
Balance at December 31, 2012
number of shares
–
100
–
45,617,900
200,000,000
245,618,000
245,618,000
amount
(note 4)
–
–
135,005
(16,258)
186,665
305,412
305,412
55
The Company is authorized to issue an unlimited number
of Common Shares with no par value. Holders of Common
Shares are entitled to one vote for each Common Share on
all matters to be voted on by shareholders at meetings of
the Company’s shareholders. All dividends that the Board of
Directors may declare shall be declared and paid in equal
amounts per share on all Common Shares at the time out-
standing. There are no pre-emptive, redemption or conver-
sion rights attached to the Common Shares. All Common
Shares, when issued, are and will be issued as fully paid and
non-assessable shares without liability for further calls or to
assessment.
25. aVailaBle FOR sale Financial assets
As part of the acquisition of the Sabodala gold mine and
regional land package by way of Demerger from MDL,
Teranga acquired 18,699,500 common shares of Oromin
Exploration Limited (“OLE”), classified as available for sale in
accordance with IAS 39 “Financial Instruments: Recognition
and Measurement”.
At the end of the second quarter of 2012, OLE shares traded
56 percent lower than the share price at the date of acquisi-
tion and 50 percent lower than at the beginning of 2012. As
a result of the significant and prolonged decline in the share
price, the Company recognized a non-cash impairment loss of
$11.9 million on the OLE shares.
In the third and fourth quarters of 2012, OLE shares appreci-
ated in value and gains of $3.4 million and $2.1 million, respec-
tively, were recorded in Other Comprehensive Income/(Loss).
For the twelve months ended December 31, 2012, a gain of
$6.8 million, net of tax of $nil was recognized in Other Com-
prehensive Income/(Loss) for the change in fair value of avail-
able for sale financial assets, which includes the reclassifica-
tion of $5.2 million to impairment of available for sale financial
assets. For the fifteen months ended December 31, 2011, a
loss of $1.3 million, net of tax of $nil was recognized.
The following table outlines the change in fair value of the
investment in OLE:
Balance at October 1, 2010
Acquisition of OLE arising from Demerger – November 23, 2010
Change in fair value during the period
Foreign exchange gain
Balance at December 31, 2011
Change in fair value of available for sale financial assets during period
Foreign exchange gain
Balance at march 31, 2012
Change in fair value of available for sale financial assets during period
Foreign exchange loss
Balance at June 30, 2012
Change in fair value of available for sale financial assets during period
Foreign exchange gain
Balance at september 30, 2012
Change in fair value of available for sale financial assets during period
Foreign exchange loss
Balance at December 31, 2012
amount
–
21,109
(1,319 )
10
19,800
(3,927)
440
16,313
(6,671)
(339)
9,303
3,407
405
13,115
2,049
(154)
15,010
2012 AnnuAl RepoRt 56
26. ReseRVe
The foreign currency translation reserve represents historical
exchange differences of $0.9 million, which arose upon trans-
lation from the functional currency of the Company’s corporate
entity into U.S. dollars during 2011, which were recorded
directly to the foreign currency translation reserve within the
consolidated statement of changes in equity. The remaining
balance of $0.1 million represents foreign exchange difference
resulting from the change of functional currency from Cana-
dian to U.S. dollars as at January 1, 2012.
27. eaRninGs/(lOss) PeR sHaRe
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
Basic EPS/(LPS) (US$)
Diluted EPS/(LPS) (US$)
Basic EPS/(LPS):
Net profit/(loss) used in the calculation of basic EPS/(LPS)
Weighted average number of common shares for the purposes of basic EPS/
(LPS) (’000)
Weighted average number of common shares for the purpose of diluted EPS/
(LPS) (’000)
0.33
0.33
79,924
245,618
245,618
(0.07)
(0.07)
(16,040)
245,618
245,618
The determination of weighted average number of common shares for the purpose of diluted EPS/(LPS) excludes 17 million and
18 million shares relating to share options that were anti-dilutive for the periods ended December 31, 2012 and 2011, respectively.
28. DiViDenDs
During the twelve and fifteen months ended December 31, 2012 and 2011, respectively, no dividends were paid.
29. cOmmitments FOR eXPenDitURe
(a) capital expenditure commitments
Sabodala Gold Mine – expansion
Additional mining equipment
total payments due within one year
(b) exploration commitments
The Company has committed to spend a total of $2.3 million
over the next year in respect of the Sabodala regional
exploration program.
(c) sabodala Operating commitments
The Company has the following operating commitments in
respect of the Sabodala gold operation:
• Pursuant to the Company’s Mining Concession, a royalty of
3% is payable to the Government of Senegal based on the
value of gold shipments, evaluated at the spot price on the
shipment date.
as at December 31, 2012
600
7,300
7,900
• $425,000 per annum on social development of local
authorities in the surrounding Tambacounda region
during the term of the Mining Concession.
• $30,000 per year for logistical support of the territorial
administration of the region from date of notification of
the Mining Concession.
• $200,000 per year on training of Directorate of Mines
and Geology officers and Mines Ministry.
(d) letter of credit
As at December 31, 2012, SGO had a letter of credit of
$1.5 million outstanding as a requirement by a third party
supplier for purchases made by the Company.
teranga gold corporation / notes to consolidated financial statements
Basic EPS/(LPS) (US$)
Diluted EPS/(LPS) (US$)
Basic EPS/(LPS):
(LPS) (’000)
(LPS) (’000)
Net profit/(loss) used in the calculation of basic EPS/(LPS)
Weighted average number of common shares for the purposes of basic EPS/
Weighted average number of common shares for the purpose of diluted EPS/
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
0.33
0.33
79,924
245,618
245,618
(0.07)
(0.07)
(16,040)
245,618
245,618
57
30. leases
(a) Operating lease commitments
The Company has entered into an agreement to lease prem-
ises until February 28, 2019. The annual rent of premises
consists of minimum rent plus realty taxes, maintenance
and utilities. In accordance with the lease agreement the
amount of $387,000 is payable within a year, and remaining
$2,062,000 is payable from 2014 to 2019.
During the period ended December 31, 2011, the Company
entered into an agreement to lease an office space in Dakar,
Senegal expiring April 30, 2014 with an option to renew for
an additional three years. In accordance with the lease agree-
ment the amount of $109,000 is payable within a year and
remaining $36,000 is payable in 2014.
The Company recognized $0.5 million and $0.4 million as
rental expense in the statement of comprehensive income/
(loss) for the twelve and fifteen months ended December 31,
2012 and 2011, respectively.
(b) Finance lease liabilities
December 31, 2012
December 31, 2011
minimum future
lease payments
Present value of
minimum future
lease payments
minimum future
lease payments
Present value of
minimum future
lease payments
No later than one year
Later than one year and not later than five years
total finanace lease liabilities
Included in the financial statements as:
Current
Non-current
10,506
–
10,506
10,506
–
10,415
–
10,415
10,415
–
16,799
7,573
24,372
16,799
7,573
16,468
7,509
23,977
16,468
7,509
The finance loan relates to the Mining Fleet Sublease with a remaining lease term of nine months expiring September 2013. Mini-
mum future lease payments consist of three payments over the term of the loan. Interest is calculated at LIBOR plus a margin paid
quarterly in arrears. Due to the variable nature of the interest repayments the table above excludes all future interest amounts.
31. cOntinGent liaBilities
The Company confirmed directly or via its holding subsidiaries
that it will continue to provide financial support to its subsid-
iaries to enable them to meet their obligations as they fall due
for a period of not less than 12 months.
Subsequent to year-end in January 2013, Sabodala Mining
Company SARL (“SMC”) received a tax assessment from the
Senegalese tax authorities of approximately $6 million (includ-
ing penalties) claiming withholding tax on payments made
to foreign service providers. We have reviewed the assess-
ment with our legal counsel and are confident that they are
primarily without merit. This matter is still being reviewed and
considered with the Tax authorities in Senegal and Teranga is
committed to paying all taxes deemed legitimately due. SMC
responded to the tax assessment in February 2013 chal-
lenging all of it except for approximately $50,000 relating to
withholding taxes on payments made in 2008.
In December 2012, Sabodala Gold Operations SA (“SGO”)
received a tax assessment from the Senegalese tax authori-
ties claiming withholding taxes of approximately $6 million on
amounts considered as distributions, contribution of land built
properties, withholding tax on salaries, withholding tax on
payments made to foreign providers and special contributions
on mining products. SGO responded to the tax assessment
including evidence supporting treatment of withholding taxes
in accordance with the General Tax Code in Senegal. We
have reviewed the assessment with our legal counsel and are
confident that they are without merit and that these issues will
be resolved with no or an immaterial amount of tax due.
In January 2012, the Official Journal of the Republic of Sen-
egal issued notice of a new financial act that would impose a
5 percent “contribution” on the sale of products from mines
and quarries. In April SGO received an official request by the
2012 AnnuAl RepoRt 58
tax authorities in Senegal, followed by a follow-up request in
May for payment of 5 percent of gold sales completed in March
pursuant to this new financial act. SGO has challenged the as-
sessment under this new 5 percent tax citing the fiscal stability
provisions included in its Sabodala Mining Convention, based
on the opinions received from both national and international
counsel. During the fourth quarter of 2012, the Government
of Senegal issued a second assessment relating to gold sales
during the second quarter. Should this issue not be resolved
with the Government of Senegal, we can appeal the govern-
ment’s decision to apply the tax to the International Chamber of
Commerce of Paris pursuant to our rights under our Sabodala
Mining Convention. During 2012, the Government of Senegal
began enforcement measures against all mining companies
impacted by this new tax on mining products. The Government
of Senegal has collected a total of $850,000 from the Company
in partial satisfaction of amounts assessed to June 30, 2012.
The potential impact to the Company’s earnings and total cash
costs per ounce is approximately $11.6 million and $60 per
ounce of gold sold, respectively, for the year ended December
31, 2012. The Company’s Consolidated Statement of Compre-
hensive Income/(Loss) does not reflect this potential impact as
management believes that the special contribution tax should
not apply to SGO given the fiscal stability provision in its mining
convention. The Company continues to challenge the validity of
the application of this tax to Sabodala Gold Operations given fis-
cal stability protections in its Mining Convention and anticipates
that a resolution of the matter will be reached with the Govern-
ment in due course.
During the year 2011, SGO received a tax assessment from
the Senegalese tax authorities claiming withholding taxes of
approximately $24 million relating to interest paid to SGML
Capital under the Mining Fleet Lease facility, directors’ fees and
services rendered by offshore companies. SGO responded to
the tax assessment including evidence supporting treatment of
withholding taxes in accordance with the General Tax Code in
Senegal. In January 2012 the tax assessment was re-confirmed
by the Senegalese tax authorities. We have reviewed the alleged
breaches identified by the Senegalese tax authorities with our
legal counsel and are confident that they are without merit
and that these issues will be resolved with no or an immaterial
amount of tax due. As a result, in February 2012 SGO filed a
notice to refer the tax assessment to arbitration in accordance
with Senegalese laws. The arbitration ruling is appealable to
the International Chamber of Commerce of Paris. To date, Sen-
egalese authorities have failed to respond to our requests for a
resolution on this matter.
32. eXPlORatiOn licenses anD JOintly cOntROlleD OPeRatiOns anD assets
The Company has exploration licenses and is a venturer in the following jointly controlled operations and assets:
name of Venture
Dembala Berola
Massakounda
Senegal Nominees JV – Bransan
NAFPEC JV – Makana
AXMIN JV – Sabodala NW 1
AXMIN JV - Heremakono
AXMIN JV - Sounkounkou
Bransan Sud
Sabodala Ouest
Saiansoutou
Garaboureya North
1 The permit for AXMIN JV – Sabodala NW expired and the Company has applied for an extension.
exploration commitments and contingent liabilities
Exploration commitments and contingent liabilities are disclosed in Note 29.
Principal activity
interest 2012 %
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
Gold exploration
100
100
70
80
80
80
80
100
100
100
75
teranga gold corporation / notes to consolidated financial statements
33. cOntROlleD entities
controlled entities consolidated
Teranga Gold B.V.I. 1
Teranga Gold (USA) Corporation
Sabodala Gold (Mauritius) Limited 2
SGML (Capital) Limited
Subsidiaries of Sabodala Gold (Mauritius) limited:
Sabodala Mining Company SARL 2
Sabodala Gold Operations SA 3
59
country of
incorporation
Percentage owned
2012
B.V.I.
USA
Mauritius
Mauritius
Senegal
Senegal
100
100
100
100
100
90
1 Teranga Gold (B.V.I.) Corporation, a wholly owned subsidiary of Teranga Gold
Corporation, was incorporated under the BVI Business Companies Act, 2004 on
November 10, 2010. In connection with the Demerger Arrangement and pursuant to
a deed of assignment of debt among Teranga Gold Corporation, Teranga Gold (B.V.I)
Corporation, MDL Gold Limited, Sabodala Gold (Mauritius) Limited and Sabodala
Gold Operations SA dated November 23, 2010, Teranga Gold (B.V.I.) Corporation
took assignment of an inter-corporate receivable of $234,300,000 owed by Sabodala
Gold Operations SA to Sabodala Gold (Mauritius) Limited as assigned to MDL Gold
Limited in consideration for 1,000,000 ordinary shares of Teranga Gold (B.V.I.)
Corporation registered in the name of Teranga Gold Corporation.
2 Pursuant to the Uniform Act (OHADA) governing the Company’s “SA” Senegalese
subsidiaries, the Board of Directors must have at least three and no more than 12
directors (other than in particular circumstances). Members of the Board do not have to
be shareholders; however, no more than one-third of the members of the Board may be
non-shareholders.
Teranga is the majority (90%) shareholder of SGO through its wholly owned subsidiary
Sabodala Gold (Mauritius) Limited. A sufficient number of directors representing
SGML (the Mauritius holding company) were elected to the Board of Directors of
SGO, in addition to the two resident directors with executive responsibility, to ensure
adequate representation at all Board meetings, the minority shareholder (Republic of
Senegal) being entitled to two Board seats, one representing the State and the other
being held by a non-shareholder Senegalese public servant. To meet the requisite
shareholder requirement for the Board of Directors of SGO, five of the current Board
members (4 of which are also directors of SGML) were issued one share each for a total
of 0.5% in SGO with the other 89.5% issued to and held by the Mauritian parent
SGML. On death or resignation, a share individually held would be transferred to
another representative of SGML or added to its current 89.5% shareholding according
to the circumstances at the time.
3 Under the terms of the SGO project finance facility, SGML and SGO have pledged
their shares in favour of Macquarie Bank Limited as security.
34. casH FlOW inFORmatiOn
(a) Reconciliation of cash and cash equivalents
Cash at the end of the reporting period as shown in the statement of cash flows is reconciled to items in the statement of
financial position as follows:
Cash at bank
Short-term investments with maturity less than 90 days
total cash and cash equivalents
December 31, 2012
December 31, 2011
39,722
–
39,722
5,780
1,690
7,470
2012 AnnuAl RepoRt 60
(b) Reconciliation of change in Working capital
changes in working capital
Decrease/(increase) in trade and other receivables
Decrease/(increase) in other assets
Increase in inventories
Increase in trade and other payables
Increase in provisions
net increase in working capital
(c) cash Balances Restricted For Use
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
13,965
5,915
(42,826)
5,660
1,030
(16,256)
(18,707)
(10,062)
(25,869)
21,332
258
(33,048)
During the second quarter of 2012, the Company amended its existing Facility Agreement with Macquarie Bank Limited. As
part of the amendment, Macquarie Bank Limited has agreed to recognize Project Completion as occurring and to remove the
requirement to hold the restricted cash. As at December 31, 2012, the Company had no restrictions on cash balances (2011 –
$3.0 million).
35. Financial instRUments
The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:
(a) capital Risk management
The Company’s objectives when managing its capital are to safe-
guard the Company’s ability to continue as a going concern while
maximizing the return to stakeholders through optimization of the
debt and equity balance.
The capital structure of the Company consists of cash and cash
equivalents, debt, and equity attributable to equity holders of the
parent, comprising issued capital, reserves and accumulated
losses. The Company is not subject to any externally imposed
capital requirements.
Management believes that the cash and cash equivalents at
December 31, 2012, together with expected future cash flows
from operations is sufficient to support the Company’s liquidity
requirements.
The leverage ratio as at December 31, 2012 was as follows:
Borrowings
Cash and cash equivalents
Short-term investments
net cash
equity attributable to the shareholders
net cash to equity ratio
December 31, 2012
December 31, 2011
(68,608)
39,722
–
(28,886)
362,777
–8%
(23,977)
7,470
593
(15,914)
272,382
–6%
teranga gold corporation / notes to consolidated financial statements changes in working capital
Decrease/(increase) in trade and other receivables
Decrease/(increase) in other assets
Increase in inventories
Increase in trade and other payables
Increase in provisions
net increase in working capital
13,965
5,915
(42,826)
5,660
1,030
(16,256)
(18,707)
(10,062)
(25,869)
21,332
258
(33,048)
Borrowings
Cash and cash equivalents
Short-term investments
net cash
equity attributable to the shareholders
net cash to equity ratio
December 31, 2012
December 31, 2011
(68,608)
39,722
–
(28,886)
362,777
–8%
(23,977)
7,470
593
(15,914)
272,382
–6%
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
As at December 31, 2012 and 2011, the Company’s financial instruments consisted of cash and cash equivalents, restricted
cash, trade and other receivables, trade and other payables, borrowings and derivative financial assets and liabilities.
(b) categories of Financial instruments
The following table illustrates the classification of the Company’s financial instruments within the fair value hierarchy as at
December 31, 2012 and December 31, 2011:
December 31, 2012
December 31, 2011
61
Financial assets:
Loans and receivables
Cash and cash equivalents
Restricted cash
Short-term investments
Trade and other receivable
Assets at fair value through profit or loss
Financial derivative assets
Available-for-sale
Available-for-sale financial assets
Financial liabilities:
Other financial liabilities at amortized cost
Borrowings
Trade and other payables
Liabilities at fair value through profit and loss
Financial derivative liabilities
(c) commodity market Risk
39,722
–
–
6,482
456
15,010
68,608
44,823
51,548
7,470
3,004
593
20,447
2,820
19,800
23,977
43,238
129,559
Market risk represents the potential loss that can be caused by
a change in the market value of financial instruments. The Com-
pany’s exposure to market risk is determined by a number of
factors, including foreign exchange rates and commodity prices.
The Company is exposed to movements in the gold price. As
part of the risk management policy the Company has entered
into gold forward sales contracts and oil hedge contracts to
reduce exposure to unpredictable market fluctuations. The
Company has elected not to apply hedge accounting for these
instruments.
Derivative Financial instruments
Financial derivative assets:
Oil hedge contracts
Disclosed as:
Current
Non-current
Financial derivative liabilities:
Gold flat forward contracts
Disclosed as:
Current
Non-current
December 31, 2012
December 31, 2011
456
456
–
2,820
2,288
532
51,548
129,559
51,548
–
79,241
50,318
2012 AnnuAl RepoRt 62
Gold Forward contracts and
Oil Hedge contracts
December 31, 2012
Gold Forward contracts
December 31, 2012
Oil Hedge contracts
Ounces
Us$/Ounce
Fair Value
BBl
Us$/BBl
Fair Value
Within 1 year
Between 1 and 2 years
total
59,789
–
59,789
803
–
803
51,548
20,000
–
–
51,548
20,000
70
–
70
456
–
456
December 31, 2011
Gold Forward contracts
Ounces
$/Ounce
Fair Value
Within 1 year
Between 1 and 2 years
total
108,500
66,000
174,500
837
807
826
79,241
50,318
129,559
100,000
BBl
80,000
20,000
December 31, 2011
Oil Hedge contracts
$/BBl
Fair Value
70
70
70
2,288
532
2,820
At December 31, 2012, the gold spot price was $1,644 per ounce and the oil price was $92 per barrel.
As the Company has elected not to adopt hedge accounting, movements in the fair value of these contracts are accounted for
through the statement of comprehensive income/(loss).
Sensitivity Analysis
The following table summarizes the sensitivity of financial assets and financial liabilities held at reporting date to movement in gold
and oil commodity rates, with all other variables held constant. A 10% movement for gold and oil rates represents management’s
assessment of the reasonably possible change.
Gold forward contracts
Profit or loss
Other equity
Oil hedge contracts
Profit or loss
Other equity
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Financial assets
Financial liabilities
–
–
186
–
–
–
978
–
9,934
27,289
–
–
–
–
–
–
teranga gold corporation / notes to consolidated financial statements
63
(d) Foreign currency Risk management
The Company has certain financial instruments denominated
in CFA Franc, EUR, CAD, AUD and other currencies. Conse-
quently, the Company is exposed to the risk that the exchange
rate of the USD relative to the CFA Franc, CAD, AUD, EUR and
other currencies may change in a manner that has a material
effect on the reported values of the Company’s assets and li-
abilities, which are denominated in the CFA Franc, EUR, CAD,
AUD and other currencies.
The carrying amounts of the Company’s foreign currency
denominated monetary assets and monetary liabilities that are
denominated in a currency other than the functional currency
are as follows:
CAD
CFA Franc (XOF)
AUD
EUR
Other
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Financial assets
Financial liabilities
483
2,349
213
1,486
250
2,627
4,494
837
189
963
2,398
30,672
898
3,714
118
2,204
23,118
3,809
6,357
1,449
Foreign Currency Sensitivity Analysis
The Company is mainly exposed to CFA Franc, CAD, AUD
and EUR. Ten percent represents management’s assessment
of the reasonably possible change in foreign exchange rates.
Sensitivity analysis includes only outstanding foreign currency
denominated monetary items and adjusts their translation at
period-end for a 10% change in the functional currency rates.
A negative number indicates a decrease in profit or equity
where the functional currency strengthens 10% against the
relevant currency for financial assets and where the functional
currency weakens against the relevant currency for financial
liabilities. For a 10% weakening of USD against the relevant
currency for financial assets and a 10% strengthening for
financial liabilities, there would be an equal and opposite
impact on net assets and the balances would be positive.
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
Financial assets
Financial liabilities
cFa Franc (XOF) impact
Profit or loss
Other equity
eUR impact
Profit or loss
Other equity
caD impact
Profit or loss
Other equity
aUD impact
Profit or loss
Other equity
235
–
149
–
48
–
21
–
449
–
19
–
263
–
84
–
3,067
–
371
–
240
–
90
–
2,312
–
636
–
220
–
381
–
Foreign Currency Exchange Contracts
The Company has not entered into forward exchange contracts to buy or sell specified amounts of foreign currencies in the
future at stipulated exchange rates.
2012 AnnuAl RepoRt 64
(e) interest Rate Risk management
Interest rate risk is the risk that the value of a financial instru-
ment will fluctuate because of changes in the market interest
rates. The Company has exposure to interest rate risk relating
to its bank balances and external borrowings.
The following table illustrates the classification of the Com-
pany’s financial instruments which are exposed to interest rate
risk as at December 31, 2012 and 2011.
December 31, 2012
December 31, 2011
Financial assets
Cash and cash equivalents
Short-term investments
Restricted cash
total
Financial liabilities
Borrowings
total
39,722
–
–
39,722
68,608
(28,886)
7,470
593
3,004
11,067
23,977
(12,910)
The Company’s interest rate on its borrowings is calculated at LIBOR plus 3 percent, 4.25 percent or 10 percent margin.
Interest Rate Sensitivity Analysis
If interest rates had been higher or lower by 50 basis points and all other variables were held constant, the profit and net assets
would increase or decrease by:
Profit or loss
Other equity
Financial assets
Financial liabilities
December 31, 2012
December 31, 2011
December 31, 2012
December 31, 2011
131
–
279
–
312
–
107
–
(f) credit Risk management
The Company’s credit risk is primarily attributable to cash,
cash equivalents and derivative financial instruments. The
Company does not have any significant credit risk exposure as
cash and cash equivalents are held with Canadian banks. The
Company has adopted a strategy to minimize its credit risk by
substantially investing in sovereign debt issued by Canadian
Agencies, Provinces and the Federal Governments of Canada.
The Company does not have significant credit risk exposure
on accounts receivable as all gold sales are executed through
Macquarie Bank, a AAA-rated bank. Gold production is either
delivered into forward sales contracts with Macquarie or sold
(g) liquidity Risk management
into the spot market and deposited into the Company’s
bank account.
The Company is exposed to the credit risk of Senegal and
France banks that disburse cash on behalf of its Senegal
subsidiaries. The Company manages its Senegal and France
bank credit risk by centralizing custody, control and manage-
ment of its surplus cash resources in Canada at the corporate
office and only transferring money to its subsidiary based on
immediate cash requirements, thereby mitigating exposure to
Senegal banks.
Liquidity risk is the risk that the Company will not be able to
meet its obligations as they fall due. The Company monitors its
risk of a shortage using projected cash flows and by monitor-
ing the maturity of both its financial assets and liabilities.
Cash flow forecasting is performed in the operating entity of
the group and combined by the Company’s finance group.
The Company’s finance group monitors the liquidity require-
ments to ensure it has sufficient cash to meet operational
needs while maintaining sufficient headroom in its proceeds
account so that the Company does not breach any of its cov-
enants. Surplus cash held by the Corporate office is invested
in short-term investments issued by Canadian bank and in
sovereign debt issued by Canadian Agencies, Provinces and
the Federal Governments of Canada.
teranga gold corporation / notes to consolidated financial statements Financial assets
Cash and cash equivalents
Short-term investments
Restricted cash
total
Financial liabilities
Borrowings
total
December 31, 2012
December 31, 2011
39,722
–
–
39,722
68,608
(28,886)
7,470
593
3,004
11,067
23,977
(12,910)
65
Liquidity Tables
The following tables detail the Company’s remaining contractual maturity for its financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be re-
quired to pay. The table includes both interest and principal cash flows.
Weighted
average effective
interest rate %
Due on demand
Due one to
three months
Due between
three months
to one year
Due one
to five years
Financial liabilities
December 31, 2012
Non–interest bearing
Variable interest rate instruments
Variable interest rate instruments
Fixed interest rate instruments
Variable interest rate instruments
Derivatives 1
total
December 31, 2011
Non–interest bearing
Variable interest rate instruments
Fixed interest rate instruments
Derivatives 1
total
Financial assets
December 31, 2012
Non–interest bearing
Derivatives 2
total
December 31, 2011
Non–interest bearing
Derivatives 2
total
1 Expected to be settled through delivery of gold.
2 Expected to be settled in cash on a net basis.
–
3.31 %
4.46 %
6.00 %
10.31 %
–
–
3.37 %
6.00 %
–
30,121
–
–
3,776
–
–
33,897
33,742
–
–
–
33,742
–
2,400
2,133
–
–
15,702
20,235
–
2,800
2,707
–
5,507
10,927
1,706
4,266
–
–
35,846
52,745
5,887
13,999
902
79,241
100,029
–
–
–
–
60,000
–
60,000
–
7,573
–
50,318
57,891
Weighted
average effective
interest rate %
Due on demand
Due one to
three months
Due between
three months
to one year
Due one
to five years
–
–
–
–
6,482
–
6,482
20,447
–
20,447
–
456
456
–
584
584
–
–
–
–
1,704
1,704
–
–
–
–
532
532
Management considers that the Company has adequate current assets and forecasted cash flow from operations to manage
liquidity risks arising from settlement of current and non-current liabilities.
2012 AnnuAl RepoRt 66
(h) Fair Value of Financial instruments
The fair values of financial assets and financial liabilities are
determined as follows:
• the fair value of financial assets and financial liabilities with
standard terms and conditions and traded on active liquid
markets are determined with reference to quoted market
prices; and
• the fair value of derivative instruments are calculated using
quoted prices and option pricing models.
Management considers that the carrying amounts of financial
assets and financial liabilities recorded at amortized cost in
the financial statements approximate their fair value for the
Company, as they represent short-term trade amounts.
Fair Value Hierarchy
The Company values instruments carried at fair value
using quoted market prices, where available. Quoted market
prices represent a Level 1 valuation. When quoted market
prices are not available, the Company maximizes the use of
observable inputs within valuation models. When all significant
inputs are observable, the valuation is classified as Level 2.
Valuations that require the significant use of unobservable
inputs are considered Level 3.
The following table outlines financial assets and liabilities
measured at fair value in the consolidated financial statements
and the level of the inputs used to determine those fair values
in the context of the hierarchy as defined above:
December 31, 2012
Available for sale financial assets
Derivative financial assets
total
December 31, 2011
Available for sale financial assets
Derivative financial assets
total
December 31, 2012
Derivative financial liabilities
total
December 31, 2011
Derivative financial liabilities
total
level 1
level 2
level 3
total
Financial assets
15,010
–
15,010
19,800
–
19,800
–
456
456
–
2,820
2,820
–
–
–
–
–
–
15,010
456
15,466
19,800
2,820
22,620
level 1
level 2
level 3
total
Financial liabilities
–
–
–
–
51,548
51,548
129,559
129,559
–
–
–
–
51,548
51,548
129,559
129,559
teranga gold corporation / notes to consolidated financial statements 67
36. sHaRe-BaseD cOmPensatiOn
During the third quarter of 2012, the Company introduced a
new Fixed Bonus Plan as an alternative to the Company’s exist-
ing share-based compensation program. Directors, officers,
employees and consultants are entitled to receive either stock
options under the current Stock Option Plan or Fixed Bonus
Plan Units under the new Fixed Bonus Plan.
The share-based compensation expense for the twelve and
fifteen months ended December 31, 2012 and 2011 totalled
$4.7 million and $12.4 million, respectively.
(a) incentive stock Option Plan
The Incentive Stock Option Plan (the “Plan”) authorizes the Di-
rectors to grant options to purchase shares of the Company to
directors, officers, employees and consultants of the Company
and its subsidiaries. The exercise price of the options is deter-
mined by the Board of Directors at the date of grant but in no
event shall be less than the five-day weighted average closing
price of the common shares as reported on TSX for the period
ended on the business day immediately preceding the day on
which the option was granted.
The vesting of options is determined by the Board of Directors
at the date of grant. The term of options granted under the
Plan is at the discretion of the Board of Directors, provided that
such term cannot exceed ten years from the date the option
is granted.
Each employee share option is convertible into one ordinary
share of Teranga on exercise. No amounts are paid or payable
by the recipient on receipt of the option. The options carry
neither rights to dividends nor voting rights. Options may be
exercised at any time from the date of vesting to the date of
their expiry subject to the terms of the plan.
During the twelve and fifteen months ended December 31,
2012 and 2011, a total of 3,580,000 and 17,980,000
common share options respectively were granted to directors
and employees. During the twelve and fifteen months ended
December 31, 2012 and 2011, a total of 4,058,055 and
362,778 options were forfeited, respectively. No stock options
were exercised during the twelve and fifteen months ended
December 31, 2012 and 2011.
The following stock options were outstanding as at
December 31, 2012:
Option series
number
Grant date
expiry date
exercise price
(c$)
FV at grant date
(c$)
Granted on November 26, 2010
Granted on December 3, 2010
Granted on February 9, 2011
Granted on April 27, 2011
Granted on June 14, 2011
Granted on August 13, 2011
8,513,334
2,225,000
725,000
113,889
455,000
370,000
Granted on December 20, 2011
1,792,778
Granted on February 24, 2012
Granted on February 24, 2012
Granted on June 5, 2012
Granted on September 27, 2012
Granted on October 9, 2012
Granted on October 31, 2012
Granted on October 31, 2012
Granted on December 3, 2012
934,166
300,000
50,000
600,000
600,000
80,000
180,000
200,000
26-Nov-10
03-Dec-10
09-Feb-11
27-Apr-11
14-Jun-11
13-Aug-11
20-Dec-11
24-Feb-12
24-Feb-12
05-Jun-12
27-Sep-12
09-Oct-12
31-Oct-12
31-Oct-12
03-Dec-12
26-Nov-20
03-Dec-20
09-Feb-21
27-Apr-21
14-Jun-21
13-Aug-21
20-Dec-21
24-Feb-22
24-Feb-22
05-Jun-22
27-Sep-22
06-Oct-22
31-Oct-22
31-Oct-22
03-Dec-22
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
3.00
1.19
1.19
0.99
0.80
0.94
0.82
0.61
0.37
1.26
0.17
0.93
1.01
0.52
0.18
0.61
As at December 31, 2012, approximately 7.4 million (2011 –
7 million) options were available for issuance under the Plan.
The estimated fair value of share options is amortized over the
period in which the options vest, which is normally three years.
For those options that vest on single or multiple dates, either
on issuance or on meeting milestones (the “measurement
date”), the entire fair value of the vesting options is recognized
immediately on the measurement date.
Of the 17,139,167 common share options issued 16,964,167
vest evenly over a three-year period and 175,000 vest based
on achievement of certain milestones. The fair value of options
that vest upon achievement of milestones will be recognized
based on our best estimate of outcome of achieving our results.
As at December 31, 2012 all outstanding share options have a
contractual life of ten years.
2012 AnnuAl RepoRt 68 TERANGA GOLD CORPORATION / NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Stock Options Granted
The fair value at the grant date was calculated using Black-Scholes option pricing model with the following assumptions:
Grant date share price
Exercise price
Range of risk-free interest rate
Volatility of the expected market price of share
Expected life of options
Dividend yield
Forfeiture rate
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
C$2.10–C$2.58
C$3.00
0.99%–1.43%
43.70%–61.62%
1.25–5.00
0%
0%–30%
C$2.14–C$3.00
C$3.00
1.01%–2.22%
53%
3.44
0%
6.39%
Due to lack of sufficient historical information for the Company,
volatility was determined using the existing historical volatility
information of the Company’s share price combined with the
industry average for comparable-size mining companies.
Movements in Shares Options During the Period
The following reconciles the share options outstanding at the beginning and end of the period:
number of options
Weighted average
exercise price
Balance at beginning of the period – October 1, 2010
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Balance at end of the period – December 31, 2011
Granted during the period
Forfeited during the period
Exercised during the period
Expired during the period
Balance at end of the period – December 31, 2012
Number of options exercisable – December 31, 2011
Number of options exercisable – December 31, 2012
–
17,980,000
(362,778)
–
–
17,617,222
3,580,000
(4,058,055)
–
–
17,139,167
5,133,604
10,736,662
–
C$3.00
C$3.00
–
–
c$3.00
C$3.00
C$3.00
–
–
c$3.00
(b) Fixed Bonus Plan
The Fixed Bonus Plan authorizes the directors to grant Fixed
Bonus Plan Units (“Units”) to officers and employees of the
Company and its subsidiaries in lieu of participating in the
Stock Option Plan. Each Unit entitles the holder upon exercise
to receive a cash payment equal to the closing price of a com-
mon share of Teranga on the Toronto Stock Exchange (“TSX”)
on the business day prior to the date of exercise, less the
exercise price. Units may be exercised at any time from the
date of vesting to the date of their expiry subject to the terms
of the plan. Units are not transferable or assignable.
The exercise price of each Unit is determined by the Board of
Directors at the date of grant but in no event shall be less than
the five-day weighted average closing price of the common
shares as reported on TSX for the period ended on the busi-
ness day immediately preceding the day on which the option
was granted.
The vesting of the Units is determined by the Board of Direc-
tors at the date of grant. The term of Units granted under the
Fixed Bonus Plan is at the discretion of the Board of Directors,
provided that such term cannot exceed ten years from the
date that the Units are granted.
The Fixed Bonus Plan was introduced during the third quarter
of 2012. As at December 31, 2012 a total of 1,440,000 Units
were granted to employees. During 2012, no Units were for-
feited or exercised.
As at December 31, 2012, there were 1,440,000 Units
outstanding that were granted on August 8, 2012 with
Grant date share price
Exercise price
Range of risk-free interest rate
Expected life of options
Dividend yield
Forfeiture rate
Volatility of the expected market price of share
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
C$2.10–C$2.58
C$3.00
0.99%–1.43%
43.70%–61.62%
1.25–5.00
0%
0%–30%
C$2.14–C$3.00
C$3.00
1.01%–2.22%
53%
3.44
0%
6.39%
69
expiry dates ranging from November 24, 2020 through to
February 24, 2022. The Units each have an exercise price
of C$3.00 and have fair values at December 31, 2012 in
the range of C$0.23 to C$1.03 per Unit.
The estimated fair values of the Units are amortized
over the period in which the Units vest. Of the 1,440,000
Units issued, 50% vested upon issuance, 25% vested on
December 31, 2012 and 25% vest on December 31, 2013.
Fair Value of Units Granted
The fair value was calculated using the Black-Scholes pricing model with the following assumptions:
Share price at the end of the period
Exercise price
Range of risk-free interest rate
Volatility of the expected market price of share
Expected life of options
Dividend yield
Forfeiture rate
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
$2.26
C$3.00
1.13%–1.38%
43.70%–61.62%
1.25–5.00
0%
6%–30%
–
–
–
–
–
–
–
Due to lack of sufficient historical information for the Company, volatility was determined using the existing historical volatility
information of the Company’s share price combined with the industry average for comparable-size mining companies.
37. seGment RePORtinG
The Company has one reportable operating segment under IFRS 8, “Operating Segments” relating to the gold activity.
Geographical information
The Company operates in two geographical areas, predominantly in Senegal (West Africa) and Mauritius.
The following table discloses the Company’s revenue by geographical location:
twelve months ended
December 31, 2012
Fifteen months ended
December 31, 2011
Republic of Senegal – revenue from gold and silver sales
350,520
Republic of Senegal – Other revenue
Mauritius
Canada
total
31
–
5
350,556
The following is an analysis of the Company’s non-current assets by geographical location:
236,873
39
–
809
237,721
Republic of Senegal
Mauritius
Canada
total
December 31, 2012
December 31, 2011
(note 4)
391,638
–
1,778
393,416
356,731
4,088
1,075
361,894
information about major customers
Gold sales revenue from one customer for the twelve and fifteen months ended December 31, 2012 and 2011 were
$351 million and $237 million, respectively.
2012 AnnuAl RepoRt
70 TERANGA GOLD CORPORATION / NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
38. Key manaGement PeRsOnnel cOmPensatiOn
The Company considers key members of management to
include the Executive Chairman, President and CEO, Non-exec-
utive Directors, Vice Presidents and the General Manager and
Government Relations Manager of SGO.
The remuneration of the key members of management
includes 15 members during the twelve months ended
December 31, 2012 and 13 members during the fifteen
months ended December 31, 2011. The remuneration during
the twelve and fifteen months ended December 31, 2012 and
2011 is as follows:
short term benefits
salary and
Fees
non-cash
Benefits
cash
Bonus
cash settled share based
payments – value vested
during the period
equity settled share
based payments – value
vested during the period
Options
Options
total
For the twelve months ended
December 31, 2012
Compensation
3,556
68
1,152
898
2,684
8,358
For fifteen months ended
December 31, 2011
Compensation
3,567
21
435
–
8,729
12,752
39. RelateD PaRty tRansactiOns
40. aPPROVal OF tHe cOnsOliDateD
(a) equity interests in Related Parties
Financial statements
Details of percentages of ordinary shares held in subsidiaries
are disclosed in Note 33.
These consolidated financial statements were approved by the
Board of Directors on February 20, 2013.
(b) transactions with Key management Personnel
Details of key management personnel compensation are
disclosed in Note 38.
No loans were made to directors or director-related entities
during the period.
(c) transactions with Other Related Parties
The Company has no payable to or receivable from other
related parties as at December 31, 2012 and 2011.
71
asX listinG ReQUiRements
• adopting measures for receiving feedback from
stakeholders; and
corporate Governance statement
The Board of Directors (the “Board”) of Teranga Gold
Corporation (“Teranga” or the “Company”) is committed to
adhering to the highest possible standards in its corporate
governance practices. The Board has approved Corporate
Governance Guidelines which, together with the Board
Mandate (as set out below), the position descriptions for the
Chairman of the Board and for the Chief Executive Officer,
and the charters of the committees of the Board, provide the
general framework for the governance of Teranga. The Board
believes that these guidelines will continue to evolve in order
to comply with all applicable regulatory and stock exchange
requirements relating to corporate governance and will be
modified as circumstances warrant.
This report describes the corporate governance principles that
the Company adheres to in accomplishing its business objec-
tives. Governance information on Teranga is available on the
Company’s website at: www.terangagold.com.
PRinciPle 1: lay sOliD FOUnDatiOn FOR
manaGement anD OVeRsiGHt
Board Mandate
The Board is elected by the shareholders of Teranga and is
responsible for the stewardship of Teranga and has adopted
a formal written mandate setting out the Board’s stewardship
responsibilities, including:
• adopting a strategic planning process;
• understanding and monitoring the political, cultural, legal
and business environments in which Teranga operates;
• risk identification and ensuring that procedures are in place
for the management of those risks;
• review and approve annual operating plans and budgets;
• corporate social responsibility, ethics and integrity;
• succession planning, including the appointment, training
and supervision of management;
• delegations and general approval guidelines for
management;
• monitoring financial reporting and management;
• monitoring internal control and management
information systems;
• corporate disclosure and communications;
• adopting key corporate policies designed to ensure that
Teranga, its directors, officers and employees comply with
all applicable laws, rules and regulations and conduct their
business ethically and with honesty and integrity.
Day-to-day management
The Board delegates responsibility for the day to day manage-
ment of Teranga’s business and affairs to Teranga’s senior
officers and supervises such senior officers appropriately.
Committees of the Board
The Board has determined that there should be five stand-
ing Board committees: (i) Audit Committee; (ii) Corporate
Governance and Nominating Committee; (iii) Compensation
Committee; (iv) Finance Committee; and (v) Technical, Safety,
Environment and Social Responsibility Committee. The Board
will change the Board committee structure and authorize and
appoint other committees as it considers appropriate.
The Board may from time time, delegate certain matters it is
responsible for to Board committees. The Board however,
retains its oversight function and ultimate responsibility for
these matters and all delegated responsibilities.
The Corporate Governance and Nominating Committee
reviews the adequacy of the Board Mandate on an annual
basis and recommends any proposed changes to the Board
for consideration. The Board has delegated responsibility
to this Committee for developing Teranga’s approach to
corporate governance, including recommending modifications
to these Corporate Governance Guidelines for consideration
by the Board.
Committee Charters
The Board approves written charters for each committee of
the Board setting forth the purpose, authority, duties and
responsibilities of each committee, as set forth further below.
The Charter for each committee is available on the Company’s
website at: www.terangagold.com.
The Board has determined that all committees will be com-
prised entirely of directors determined by the Board to be in-
dependent, except for the Technical, Safety, Environment and
Social Responsibility Committee which will be comprised of a
majority of independent directors. In addition, all members of
the Audit Committee will be financially literate and if required
by applicable laws, rules and regulations, at least one member
will be a financial expert. Membership and independence of all
committee members will be publicly disclosed.
2012 AnnuAl RepoRt 72 TERANGA GOLD CORPORATION
After receipt of recommendations from the Corporate Gov-
ernance and Nominating Committee, the Board appoints
members of the committees annually, and as necessary to
fill vacancies, and appoints the chairman of each committee.
Members of the committees will hold office at the pleasure of
the Board.
Committee Responsibilities
The responsibilities of the Audit Committee include assisting
the Board in fulfilling its oversight responsibilities with respect
to: (a) financial reporting and disclosure requirements; (b) en-
suring that an effective risk management and financial control
framework has been implemented and tested by management
of Teranga; and (c) external and internal audit processes.
The responsibilities of the Corporate Governance and
Nominating Committee include assisting the Board in fulfilling
its oversight responsibilities with respect to: (a) developing
corporate governance guidelines and principles for Teranga;
(b) identifying individuals qualified to be nominated as mem-
bers of the Board; (c) the structure and composition of Board
committees; and (d) evaluating the performance and effective-
ness of the Board.
The responsibilities of the Compensation Committee include
assisting the Board in fulfilling its oversight responsibilities
with respect to: (a) the establishment of key human resources
and compensation policies, including all incentive and equity
based compensation plans; (b) the performance evaluation
of the Chief Executive Officer and the Chief Financial Officer,
and determination of the compensation for the Chief Executive
Officer, the Chief Financial Officer and other senior executives
of Teranga; (c) succession planning, including the appoint-
ment, training and evaluation of senior management; and (d)
compensation of directors.
The responsibilities of the Finance Committee include assisting
the Board in fulfilling its oversight responsibilities with respect
to: (a) Teranga’s financial policies and strategies, including
capital structure; (b) Teranga’s financial risk management
practices; and (c) proposed issues of securities and utilization
of financial instruments.
The responsibilities of the Technical, Safety, Environment and
Social Responsibility Committee include assisting the Board in
fulfilling its oversight responsibilities with respect to: (a) techni-
cal matters relating to exploration, development, permitting,
construction and operation of Teranga’s mining activities; (b)
resources and reserves on Teranga’s mineral resource proper-
ties; (c) material technical commercial arrangements regard-
ing EPCM activities; (d) operating and production plans for
proposed and existing operating mines; (e) due diligence in the
development, implementation and monitoring of systems and
programs for management, and compliance with applicable
law related to health, safety, environment and social responsi-
bility; (f) ensuring Teranga implements best-in-class property
development and operating practices; (g) monitoring safety,
environment and social responsibility performance; and (h)
monitoring compliance with applicable laws related to safety,
environment and social responsibility.
Management Performance and Compensation
The Compensation Committee conducts an annual review
of the performance objectives for the Chief Executive Officer,
the Chief Financial Officer and the senior executives and,
in the Committee’s discretion, presents its conclusions
and recommends any compensation changes to the Board
for consideration.
PRinciPle 2: stRUctURe tHe BOaRD
tO aDD ValUe
Election by Shareholders
The members of the Board are selected each year by the
shareholders of Teranga at the annual general meeting of
shareholders. The Board proposes individual nominees to
the shareholders for election to the Board at each such
meeting. Between annual meetings of shareholders, the
Board may appoint directors to serve until the next such
meeting in accordance with Teranga’s articles and by-laws.
Selection of Chairman of the Board
The Chairman of the Board is appointed by the Board after
considering the recommendation of the Corporate Governance
and Nominating Committee. The Board adopts and performs
an annual review of the position description for the Chairman
of the Board.
Role of Chairman and CEO
The roles of each of the Chairman and the CEO of Teranga
are held by two different individuals. The Board has taken
the view that given the stage of development of the Company
and the unique skill set of the Chairman, it is important that
the Chairman be an active member of the executive team and
therefore, a non-independent member of the Board.
Independence; Lead Director
The Board is comprised of a majority of independent directors.
The independent directors select an independent director
to carry out the functions of a lead director. If Teranga has a
non-executive Chairman of the Board, then the role of the lead
director is filled by the non-executive Chairman of the Board.
The lead director or non-executive Chairman of the Board
Chairs regular meetings of the independent directors and
assumes other responsibilities that the independent directors
as a whole have designated.
The primary responsibility of the lead director is to seek to
ensure that appropriate structures and procedures are in place
so that the board of directors may function independently and
to lead the process by which the independent directors seek to
ensure that the board of directors represents and protects the
interests of all shareholders. In addition, the lead independent
director reviews, comments and is given the opportunity to set
agendas for meetings of the Board (full board or independent
directors only), oversee the information made available to
directors by management and manages requests from or
other issues that independent directors may have.
Director Selection Criteria
The Corporate Governance and Nominating Committee is
required under its charter to annually review the characteris-
tics, qualities, skills and experience which form the criteria for
candidates to be considered for nomination to the Board. The
objective of this review will be to maintain the composition of
the Board in a way that provides, in the judgment of the Board,
the best mix of skills and experience to provide for the overall
stewardship of Teranga. All directors are required to possess
fundamental qualities of intelligence, honesty, integrity, ethi-
cal behavior, fairness and responsibility and be committed
to representing the long-term interests of the shareholders.
They must also have a genuine interest in Teranga, the ability
to be objective at all times about what is in the best interests
of Teranga, have independent opinions on all issues and be
both willing and able to state them in a constructive manner
and be able to devote sufficient time to discharge their duties
and responsibilities effectively. The Committee is mandated to
identify qualified candidates for nomination as directors and to
make recommendations to the Board. Directors are encour-
aged to identify potential candidates.
Board Size
The Board has the ability to increase or decrease its size within
the limits set out in Teranga’s articles and by-laws. The Board
will determine its size with regard to the best interests of Teran-
ga. The Board believes that the size of the Board should be
sufficient to provide a diversity of expertise and opinions and
to allow effective committee organization, yet small enough to
enable efficient meetings and decision-making and maximize
full Board attendance. The Board will review its size if a change
is recommended by the Committee.
Term Limits for Directors
The Board has determined that fixed term limits for direc-
tors should not be established. The Board is of the view that
such a policy would have the effect of forcing directors off the
Board who have developed, over a period of service, increased
insight into Teranga and who, therefore, can be expected to
provide an increasing contribution to the Board. At the same
time, the Board recognizes the value of some turnover in Board
membership to provide fresh ideas and views, and the Corpo-
rate Governance and Nominating Committee is mandated to
annually consider recommending changes to the composition
of the Board.
Director Compensation
The Board has determined that the directors should be com-
pensated in a form and amount that is appropriate and which
is customary for comparative companies, having regard to
such matters as time commitment, responsibility and trends
in director compensation. The Compensation Committee is
mandated to review the compensation of the directors on an
annual basis. All compensation paid to directors will be pub-
licly disclosed.
Attendance at Meetings
Directors are expected to attend all Board and committee
meetings either in person or by conference call. A director
will notify the Chairman of the Board or of a committee or the
Corporate Secretary if the director will not be able to attend
or participate in a meeting. Teranga will publicly disclose the
Directors’ attendance record on an annual basis.
Assessment of Board and Committee Performance
The Corporate Governance and Nominating Committee is man-
dated to undertake an annual assessment of the overall perfor-
mance and effectiveness of the Board and each committee of
the Board and report on such assessments to the Board. The
purpose of the assessments is to ensure the continued effec-
tiveness of the Board in discharging its duties and responsibili-
ties and to contribute to a process of continuing improvement.
PRinciPle 3: PROmOte etHical anD
ResPOnsiBle DecisiOn maKinG
The Company has implemented a set of core values designed
to act as guidelines for the standards of integrity and perfor-
mance for the Board, Management, employees, and other
members of the Company. The Company’s vision and values
are disclosed on the Company’s website.
Employees are responsible for their conduct which is expected
to comply with Company policies and procedures includ-
ing those related to health & safety, social & environmental,
equal opportunity, human rights, disclosure and trading in
Company securities. Induction programs and on-going training
are required for each employee and contractor to ensure they
are aware and kept up to date of acceptable behaviour and
Company policies.
74 TERANGA GOLD CORPORATION
Procedures are in place to record and publicly report each
Director’s shareholdings in the Company.
The Company Secretary is responsible for investigating any
reports of unethical practices and reporting the outcomes to
the Chairman and the CEO or to the Board, as appropriate.
The Company has created a formal Code of Conduct and
Ethics which described the Company’s values, and can be
found in the Corporate Governance section of the Company’s
website. All details describing, prescribing and underpinning
ethical conduct are contained in the values and key policies
outlined therein.
In summary, Teranga’s Code of Conduct includes an equal op-
portunity requirement mandating that “all employees are to be
recruited, and to pursue their careers, free from any form of
unwanted discrimination” and that “Teranga shall not discrimi-
nate on the basis of age, color, creed, disability, ethnic origin,
gender, marital status, national origin, political belief, race,
religion or sexual orientation, unless required for occupational
reasons as permitted by law.”
Diversity
Teranga does not have a separate diversity policy, nor does
it currently provide statistics on gender diversity within its
workforce, or its executive team. The identity of all Board
members is disclosed within this Annual Report.
With respect to Teranga’s current organization:
• of the 8 senior executives of Teranga, 1 is female;
• within the Corporate office, excluding executive officers,
approximately 75% of staff are female; and
• within the general workforce in Senegal, approximately 6%
of employees, including expatriate personnel, and contrac-
tors are female.
Further details of Teranga’s workforce both in its head office
and on-site in Senegal can be found on page 13 of the 2013
Responsibility Report available on the Company’s website.
Teranga will be considering the adoption of a diversity policy
with its Corporate Governance and Nominating Committee this
year. Teranga has not yet set specific measurable objectives
for achieving gender diversity as further research and study is
required in this regard given the nature, location and require-
ments of our mining operations abroad. Once the Corporate
Governance Committee and Nominating Committee has
investigated the necessity of a diversity policy, as well as what
may be appropriate measurable objectives, it shall update
the market in this regard and will provide reporting against
such measures in its future Annual Reports. While paramount
importance is given to identifying the right candidate for each
key role within the Company, Teranga recognizes the impor-
tance of gender diversity and as such is focused on recruiting
women into all available roles.
PRinciPle 4: saFeGUaRD inteGRity
in Financial RePORtinG
The primary function of the audit committee of the Board (the
“Audit Committee”) is to assist the Board in fulfilling its finan-
cial reporting and controls responsibilities to Shareholders
Information with respect to the Audit Committee is contained
in the Company’s Annual Information Form.
Composition of the Audit Committee
The Audit Committee of the Company is currently comprised
of four independent members. All members of the Audit Com-
mittee are financially literate in that they have the ability to
read and understand a set of financial statements that are of
the same breadth and level of complexity of accounting issues
as can be reasonably expected to be raised by the Company’s
financial statements.
Relevant Education and Experience
For summary details regarding the relevant education and
experience of each member of the Audit Committee relevant
to the performance of his duties as a member of the Audit
Committee, please refer to the Corporate Governance page of
the Company’s website: www.terangagold.com.
Audit Committee Oversight
At no time since the commencement of the Company’s most
recently completed financial year did the Board decline to
adopt a recommendation of the Audit Committee to nominate
or compensate an external auditor. The Audit Committee is
chaired by an independent director who is not the chairman of
the Board.
PRinciPle 5: maKe timely anD BalanceD
DisclOsURe
Teranga’s Corporate Disclosure Policy is included on its web-
site (under the tab “About Teranga – Corporate Governance”)
and sets out a policy that is consistent with the recommenda-
tions included under Principal 5.
PRinciPle 6: ResPect tHe RiGHts
OF sHaReHOlDeRs
The Company regularly engages with its shareholders and con-
ducts regular analyst briefings. These activities are supported
by the publication of the Annual Report, Quarterly Reports
both financial and operational, public announcements and the
75
posting of all press releases (TSX and ASX) on the Company
website immediately after their public disclosure. Shareholders
can elect to receive email notification of announcements by
requesting addition to the Company’s mailing list.
As per the Audit Committee Charter, specifically under Sec-
tion 4.2 thereof, the Audit Committee is charged with review-
ing and making recommendations to the Board regarding
Teranga’s risk management policies and procedures;
Shareholders are encouraged to attend the Annual General
Meeting and to listen to regular conference calls which are
scheduled and disclosed publicly. Replays of conference
calls are available for a limited time. Details of suck replays are
outlined on the original conference call scheduling announce-
ment. The external auditor attends the Annual General Meet-
ing and is available to answer questions in relation to the audit
of the financial statements.
The Board recognizes the importance of managing the risks
associated with Teranga’ business operations and has defined
a set of processes to effectively manage risk within the busi-
ness. They include (but are not limited to) processes to:
• identify risks relevant to the business to determine what can
happen, when and how;
• assess identified risks to determine their potential severity
Teranga does not have a distinct communications policy
but its Corporate Disclosure Policy (available on the Company
website) does address the matters recommended under
Principal 6 with respect to promoting effective communication
with shareholders and the effective use of electronic
communication.
PRinciPle 7: RecOGnise anD manaGe RisK
The Board will adopt a strategic planning processes to
establish objectives and goals for Teranga’s business and
will review, approve and modify as appropriate the strategies
proposed by senior management to achieve such objectives
and goals. The Board will review and approve, at least on
an annual basis, a strategic plan which takes into account,
among other things, the opportunities and risks of Teranga’s
business and affairs.
The Board, in conjunction with management, will identify the
principal risks of Teranga’s business and oversee manage-
ment’s implementation of appropriate systems to effectively
monitor, manage and mitigate the impact of such risks.
Pursuant to its duty to oversee the implementation of effective
risk management policies and procedures, the Board will
delegate to the Compensation Committee the responsibility for
assessing and implementing risk management policies and
procedures directly connected to Teranga’s compensation
practices. Similarly, the Board will delegate the responsibility
of assessing and implementing risk management policies and
procedures directly connected to environmental risk manage-
ment to the Technical, Safety, Environmental and Social
Responsibility Committee. The Board will work in conjunction
with each Committee, respectively, to oversee the implemen-
tation of such policies and procedures.
Under applicable securities laws, Teranga’s CEO and CFO are
required to certify, on a quarterly basis, on the design and
effectiveness of disclosure controls and procedures as well as
internal controls over financial reporting, and to indicate any
identified weaknesses;
and impact on the business;
• evaluate risks;
• treatment plans for risks deemed unacceptable to
the business;
• communicate risk management activities and processes
to employees; and
• monitor and review risks, risk mitigation strategies
and actions as well as the risk management processes
and system.
PRinciPle 8: RemUneRate FaiRly
anD ResPOnsiBly
Teranga operates in the international gold mining industry,
which is a highly competitive market for executives and
Teranga has designed its compensation program to ensure
it is able to both attract and retain qualified and experienced
executives with the skills and experience required to execute
its strategy.
Composition of the Compensation Committee
The Compensation Committee is comprised of three indepen-
dent directors and while the Board determines its members,
the CEO is not involved in the selection process for this
committee. The chair of the Compensation Committee is a
non-executive independent director.
Role of the Compensation Committee
The Compensation Committee is established by the Board to
assist the Board in fulfilling its oversight responsibilities relat-
ing to compensation. The Compensation Committee helps
to ensure that Teranga has a compensation program that will
attract, retain, motivate and reward its executive officers for
their performance and contribution to achieving Teranga’s
long term strategy.
2012 AnnuAl RepoRt 76 TERANGA GOLD CORPORATION
The Board of Teranga established a Compensation Committee
on incorporation. Accordingly, the Compensation Committee
has been in place for the entire 2012 fiscal year.
The Compensation Committee’s primary responsibilities
include:
Compensation Philosophy, Policies and Practices – ensure
compensation philosophy, policies and practices for
the directors, the Chief Executive Officer (“CEO”) and the
executive officers:
• properly reflect their respective duties and responsibilities;
• are competitive in attracting, retaining and motivating
people of the highest quality;
• align the interests of the directors, the CEO and the
executive officers with shareholders as a whole;
• are based on established corporate and individual
performance objectives; and
• do not encourage the taking of inappropriate or
excessive risks.
Evaluation of Performance – annually review and evaluate the
performance of the CEO and the executive officers and, in
light of pre-established performance objectives, report its
conclusions to the Board;
Performance Objectives – annually review the performance
objectives for the CEO and the executive officers and, in the
Committee’s discretion, recommend any changes to the Board
for consideration;
Chief Executive Officer Compensation – annually review the
compensation for the CEO and, in the Committee’s discretion,
recommend any changes to the Board for consideration;
Executive Officers Compensation – annually review the CEO’s
recommendations for the executive officers’ compensation
and, in the Committee’s discretion, recommend any changes
to the Board for consideration;
Succession Planning – annually review Teranga’s succession
plan for the CEO and the executive officers, including appoint-
ment, training and evaluation;
Directors’ Compensation – annually review directors’ compen-
sation and, in the Committee’s discretion, recommend any
changes to the Board for consideration;
Mitigation of Compensation Risk – annually consider the
risks associated with Teranga’s compensation policies and
practices, and ensure appropriate risk mitigation measures
are adopted.
Role of the Chief Executive Officer
The CEO’s role in executive compensation matters includes
making recommendations to the Compensation Committee re-
garding the Company’s annual business plan and objectives,
which provide the basis for establishing both corporate and in-
dividual performance goals for all executive officers. The CEO
reviews the performance of the other executive officers, and
also makes recommendations with respect to adjustments
in base salary, awarding of annual performance incentives,
and awarding of long-term equity incentives to such executive
officers. The CEO is not involved in the selection process for
the Compensation Committee, or in making recommendations
with respect to his own compensation package.
The Compensation Committee reviews the basis for the rec-
ommendations of the CEO and, prior to making its recommen-
dations to the Board, exercises its sole discretion in making
any modifications to such recommendations.
Compensation Philosophy
The objective of Teranga’s compensation program is to attract,
retain, motivate and reward its executive officers for their per-
formance and contribution to executing Teranga’s long-term
strategy to maximize shareholder value. Teranga’s compensa-
tion policy revolves around a pay for performance philosophy
whereby fixed elements of pay, such as salary, are positioned
at market median levels for the comparator group, while short
and longer term incentives are structured to provide above-
market total compensation for high levels of corporate and
personal performance. The Compensation Committee be-
lieves it is necessary to adopt this compensation philosophy in
order to attract and retain qualified executive officers with the
skills and experience necessary to execute Teranga’s strategy.
The Board seeks to compensate Teranga’s executive officers
by combining short and long-term cash and equity incentives.
It also seeks to reward the achievement of corporate and indi-
vidual performance objectives, and to align executive officers’
incentives with shareholder value creation. The Board also
seeks to set company performance goals that reach across
all business areas and to tie individual goals to the area of the
executive officer’s primary responsibility.
At this point the Compensation Committee does not anticipate
making any significant changes to its compensation philoso-
phy, policies and practices for the 2013 financial year, but
expects to review best practice developments in this regard
to ensure that current practices do not create undue risk to
Teranga and to continue to ensure the alignment of compen-
sation packages with the objective of enhancing shareholder
value through an increased share price.
77
Management Performance and Compensation
The Compensation Committee conducts an annual review of
the performance objectives for the Company’s executive man-
agement group. Compensation changes may be recommended
to the Board, at the Committee’s discretion, based upon an
executive officer’s success in meeting or exceeding indi-
vidual performance goals, as well as contributing to achieving
Company performance goals. The Committee also conducts
an independent review of current market standards regarding
executive compensation, as well as an assessment of Teranga’s
executive compensation relative to peer industry participants.
The Company’s executive compensation program is designed
to be competitive with those offered by publicly traded mining
companies comparable to Teranga in terms of size, assets,
production and region of operation.
Further detailed information on director and executive man-
agement compensation for the 2012 financial year will be
disclosed in the Company’s Management Information Circular
to be filed with the TSX and ASX prior to June 1, 2013.
asX listing Rule 4.10 – additional Disclosure
TGZ Top 20 Shareholders as at 31 March 2013
Rank
shareholder
number of shares
% of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Mineral Deposits Limited
National Nominees Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Canaccord Genuity Corp
J P Morgan Nominees Australia Limited
State Street Trust
Royal Bank Of Canada
Zero Nominees Pty Ltd
CIBC: CIBC Mellon Gss
J P Morgan Nominees Australia Limited
Haywood Securities
RBC Investor Services (Toronto)
Citibank CDA - Client
Ubs Nominees Pty Ltd
NBCN Inc.
BNP Paribas Noms Pty Ltd
CIBC World Markets Inc
BMO Nesbitt Burns Inc
TD Waterhouse Canada Inc
total top Holders Balance
total Remaining Holders Balance
total securities on issue
Distribution Schedule of CDI holders - as at 28 March 2013
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – 9,999,999,999
TOTAL
39,999,838
27,301,079
25,843,068
24,040,105
18,308,680
15,690,350
15,068,951
8,159,128
6,562,892
5,695,475
5,611,760
4,159,951
3,004,648
2,184,831
2,127,463
2,105,745
1,946,940
1,916,629
1,407,265
1,301,580
212,436,378
33,181,622
245,618,000
16.29
11.12
10.52
9.79
7.45
6.39
6.14
3.32
2.67
2.32
2.28
1.69
1.22
0.89
0.87
0.86
0.79
0.78
0.57
0.53
86.49
13.51
100.00
total Holders
Units
% of issue capital
1,133
799
287
330
35
2,584
412,231
1,926,969
2,113,300
9,046,014
159,118,292
172,616,806
0.24%
1.12%
1.22%
5.24%
92.18%
100%
2012 AnnuAl RepoRt 78 TERANGA GOLD CORPORATION
Unmarketable Parcels of securities, escrow and On-the-market Buyback
As at March 28, 2013, there were 674 security holders with an unmarketable parcel of securities (less than $500 based on a
market price of $1.08 per unit) totaling 92,121 units.
There are not currently any class of securities the subject of escrow.
There is no current on-the-market buy-back.
substantial shareholders
As at the date of the Annual Report, there were 7 substantial shareholders of Teranga.
The details of those shareholders are as follows:
name
Mineral Deposits Limited
National Nominees Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Canaccord Genuity Corp
J P Morgan Nominees Australia Limited
State Street Trust
total
number Of securities
39,999,838
27,301,079
25,843,068
24,040,105
18,308,680
15,690,350
15,068,951
%
16.29
11.12
10.52
9.79
7.45
6.39
6.14
166,252,071
67.69
share classes and Voting Rights
(a) the options were issued within 3 years of the date of admis-
There is only a single share class being common shares
and CDIs of Teranga Gold Corporation. The total amount of
outstanding common shares of Teranga Gold Corporation is
245,618,000.
As detailed in the Annual Report, Teranga is authorized to is-
sue an unlimited number of common shares with no par value.
Holders of common shares are entitled to one vote for each
common share on all matters to be voted on by shareholders
at meetings of Teranga’s shareholders. All dividends which
the board of directors may declare shall be declared and
paid in equal amounts per share on all common shares at the
time outstanding. There are no pre-emptive, redemption or
conversion rights attaching to the common shares. All common
shares, when issued, are and will be issued as fully paid and
non-assessable shares without liability for further calls or to
assessment.
issuance of Options to Directors
On 30 November 2010, Teranga received its conditional
listing approval from ASX which was subject to a number of
conditions (“Listing Conditions”). Teranga received a waiver
from ASX Listing Rule 10.14 to the extent necessary to permit
Teranga to issue options to Messrs’ Hill, Young, Lennox-King,
Lattanzi, Thomas and Wheatley pursuant to the terms and
conditions contained in Teranga’s incentive stock option plan
summarized in its IPO prospectus on the condition that:
sion to the official list of ASX; and
(b) details of any options that are subsequently issues are
published in each annual report of Teranga relevant to
the period in which they are issued.
The following options were issued during the fiscal period
which need disclosure pursuant to the Listing Conditions:
Date Of issue
number Of Options
(at $3.00)
n/a
n/a
24/02/2012
24/02/2012
24/02/2012
24/02/2012
0
0
75,000
75,000
75,000
75,000
name
Mr. Alan Hill
Mr. Richard Young
Mr. Alan Thomas
Mr. Chris Lattanzi
Mr. Frank Wheatley
Mr. Oliver Lennox-King
corporate status
Teranga Gold Corporation (ACN 146 848 508) (Teranga) is
a company incorporated under the laws of Canada, with
members’ liability limited.
not subject to chapters 6, 6a, 6B and 6c of the
corporations act 2001 (cth)
Teranga is not subject to chapters 6, 6A, 6B and 6C of
the Australian Corporations Act 2001 dealing with the
acquisition of shares in Teranga in relation to substantial
holdings and takeovers.
2012 ANNUAL REPORT
79
Canadian rules also provide an early warning system to notify
the market of significant accumulation of securities. Under
the system an acquirer must issue a press release and file
a report with provincial securities commission under the
initial acquisition (whether from market purchases, treasury
or otherwise) of 10% or more of the share capital of a public
company and thereafter upon acquisition of an additional 2%.
The above is only a short summary of certain takeover bid
and related requirements and reference must be made to
applicable Canadian corporate and securities legislation,
including the requirements of the Toronto Stock Exchange, for
further details of takeover bid provisions and other regulated
transactions such as insider bids, related party transactions
and private placements, among others.
share Registries
canada: computershare trust company of canada
Computershare Trust Company of Canada, 100 University
Avenue, 8th Floor, Toronto, Ontario, Canada, M5J 2Y1
T: +1 800 564 6253
australia: computershare investor services Pty ltd
The Registrar, Computershare Investor Services Pty Limited,
GPO Box 2975, Melbourne VIC 3001, Australia
T: 1 300 850 505
limitations on the acquisition of teranga securities
imposed by canada
In Canada, acquisitions of securities by takeover bid are regu-
lated by provincial securities legislation. Generally, under this
legislation, an offer to acquire securities from a shareholder
resident in a Canadian province which will result in the offeror
(including joint actors) holding 20% or more of the issued
share capital of the company constitutes a takeover bid.
Subject to limited exceptions, (for example the purchase at not
more than a market price of up to 5% of outstanding shares
over 12 months, private offers to no more than 5 persons at
no greater than 115% of market price and purchases from
treasury) an offeror must:
(a) provide shareholders with a takeover bid circular
describing the terms of the offer and if securities of the
offeror form part of the consideration, including prospectus
level disclosure about the offeror and its business’;
(b) keep the bid open for at least 35 days; and
(c) deliver the circular and extend the offer to each
shareholder of the company, with the ultimate purchase
of shares being pro rata amongst those shareholders who
have tendered their shares under the bid. Rules also
provide an early warning system to notify the market of
significant accumulations of securities.
Under federal corporate law, if a takeover bid is accepted by
the holders of not less than 90% of the outstanding shares
(excluding shares held at the date of the bid by or on behalf of
the offeror) the offeror is entitled and the remaining sharehold-
ers can require the offeror to acquire the remaining shares
either on the same terms of the takeover bid or at fair market
value, as elected by the shareholder.
80 TERANGA GOLD CORPORATION
cORPORate DiRectORy
Directors
alan Hill
Executive Chairman
Richard young
President and CEO
christopher lattanzi
Non-Executive Director
Oliver lennox-King
Non-Executive Director
alan thomas
Non-Executive Director
Frank Wheatley
Non-Executive Director
Jeff Williams
Non-Executive Director
Registered Office
Suite 2600-121 King Street West
Toronto, Ontario, Canada M5H 3T9
Tel: + 1-416-594-0000
Fax: + 1-416-594-0088
Email: investor@terangagold.com
www.terangagold.com
senegal Office
2K Plaza
Suite B4, 1er Etage
Sis Route du Méridien Président
Dakar Almadies
Tel: + 221-338-693-181
Fax: + 221-338-603-683
auditor
senior management
Deloitte & Touche LLP
alan Hill
Executive Chairman
Richard young
President and CEO
mark english
Vice President, Sabodala Operations
Paul chawrun
Vice President, Technical Services
navin Dyal
Vice President and CFO
David savarie
Vice President, General Counsel
and Corporate Secretary
Kathy sipos
Vice President, Investor and
Stakeholder Relations
macoumba Diop
General Manager and Government
Relations Manager, SGO
share Registries
canada: computershare trust
company of canada
Tel: + 1-800-564-6253
australia: computershare investor
services Pty ltd.
Tel: + 1-300-850-505
stock exchange listings
Toronto Stock Exchange,
TSX symbol: TGZ
Australian Securities Exchange,
ASX symbol: TGZ
For further information please contact:
Kathy Sipos, Vice President, Investor
and Stakeholder Relations:
Tel: +1 416 594 0000
Email: ksipos@terangagold.com
© Copyright 2013 Teranga Gold Corporation Design and Typesetting: Clear Space, clearspace.ca Printing: Exodus Graphics Corp.
teranga Gold corporation
Suite 2600-121 King Street West
Toronto, Ontario, Canada M5H 3T9
Tel: + 1-416-594-0000
Fax: + 1-416-594-0088
Email: investor@terangagold.com
www.terangagold.com