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VALUE
COMMITTED
2014 RESPONSIBILITY REPORT
2014 ANNUAL REPORT
EMERGING MID-TIER GOLD
PRODUCER POSITIONED FOR
LONG-TERM GROWTH
Teranga Gold is a Canadian-based gold mining company
which operates the Sabodala Gold mine, the only gold
mine and mill in Senegal, West Africa. The Company is
focused on continued growth through high return organic
growth initiatives on its 246km2 mine license and highly
prospective 1,055km2 regional exploration package –
situated on an emerging gold belt.
2014 Overview
Letter to Shareholders
2
3
5 Mining in Senegal
2014 Highlights
6
7
Corporate Social Responsibility
9 Management’s Discussion & Analysis
Financial Statements & Notes
44
Corporate Directory
93
2014 WAS A
SUCCESSFUL YEAR
It finished up on a high note with a robust fourth quarter,
reflecting significantly higher production and lower costs.
Despite fluctuating gold prices, we generated higher free
cash flow, which in turn was used to pay down debt and
strengthen our balance sheet. One of Teranga’s key
objectives is to invest in organic growth initiatives to
increase sustainable free cash flows. Our existing mill
and related infrastructure, together with our large mine
license and regional land package, which we believe has
significant exploration upside, gives us organic growth
opportunities that most companies just do not have today.
2 0 1 4 A N N U A L R E P O R T
2
MESSAGE
FROM THE
CHAIRMAN AND THE
PRESIDENT & CEO
A Successful Year
During 2014, we made significant progress in executing against our key
objectives, namely to maximize free cash flow and profitability, to strengthen
our balance sheet and to grow organically.
A TRANSFORMATIONAL ACQUISITION
The year began with our acquisition of the Oromin Joint Venture Group
(“OJVG”). This was a transformational acquisition for Teranga Gold. Not
only did we double our reserve base to 2.8 million ounces, we greatly
enhanced our organic growth profile by more than doubling our resource
base to more than 6 million ounces as a result of a sevenfold expansion
of our mine license area.
The OJVG acquisition was, in part, made possible by Franco-Nevada Corpo-
ration, which provided us with funding of US$135 million pursuant to a
stream transaction. Franco-Nevada’s investment is testament to its belief
in Teranga’s long-term free cash flow and growth potential.
The first significant operational step taken following the OJVG acquisition
was the development of Masato, the largest of the OJVG deposits. In less
than six months, our team had the new deposit operating at full production.
As a result, Masato was a driving force behind our strong fourth quarter
performance and was instrumental in making 2014 a record year in terms
of annual mill throughput of more than 3.6 million tonnes. Nearly one-third
of this, or one million tonnes, was processed in the last three months of
the year at less than $14 per tonne, an improvement of more than 40% in
just 24 months. Cash costs and all-in sustaining costs each improved by
16% year-over year, as we reduced input costs and increased efficiency.
Additionally, 2014 marked our third consecutive year
of positive earnings per share and our second year of
positive free cash flow. Last year’s free cash flow of
$189 per ounce of gold, which is in line with some
of the leading senior gold producers, was used to
strengthen our balance sheet. With zero borrowings
currently, we are one of the few companies in the
industry to be completely debt-free.
FOCUSED ON GROWTH
Teranga has a three-phase growth strategy in Senegal.
Phase one concentrates on near-term growth initiatives
such as converting resources to reserves on our mine
license, optimizing mill throughput, and implementing
heap leaching to increase production from current
levels by approximately 50% to 250,000 to 300,000
ounces per year. The second mid-term growth phase
is all about new exploration discoveries to increase
production above our Phase 1 target either on our
mine license, regional land package, or an in-country
joint venture or acquisition that can be exploited as
satellite feed through an expansion of our existing mill
and infrastructure.
Phase three is our long-term plan to add a second
processing facility in Senegal. In order to construct a
3
2014 ANNUAL REPORT second processing facility, we would need to make an exploration discovery
of significant size on our regional land package to justify the economics of
a new facility. The economics of a new standalone facility could be further
enhanced through a joint venture or acquisition of an existing discovery in
Senegal. While we are committing only modest amounts of capital to this
exploration strategy, by its very nature, phase three requires significant
capital and therefore we are being very systematic with our approach.
As a result of our acquisition of the OJVG properties, Teranga has a large
mine license encompassing 246 km2 around our mill in Senegal. Based on
the sheer number of exploration opportunities, we believe it will take five
years to fully explore the current targets that have been identified to date.
There are two different systems to explore on our mine license, including a
high-grade system to provide mill feed, and a lower grade system with high-
grade inclusions that are well oxidized, providing mill and heap leach feed.
We have identified mineral resources on fifteen separate targets and an
additional ten targets that show mineralization but no resource has been
calculated yet. In total, we have 6.1 million ounces of Measured and
Indicated resources and more than 2 million ounces of Inferred resources
on our mine license alone. On top of this we have a highly prospective
1,055 km2 exploration land package. Clearly, we are just beginning to
scratch the surface of potential future growth.
Following our success with Masato, we have turned our attention to other
prospective OJVG targets to convert resources to reserves on some of our
high-grade deposits and to make new discoveries that have the potential
to significantly move the production needle. Early exploration results on
targets north of Masato are encouraging, and assay results are expected
in the spring of 2015.
Subsequent to year-end, we announced receipt of the environmental permits
required to proceed with the development of our high-grade Gora deposit.
Work has begun on a 25 km road from our mill at Sabodala to the Gora
deposit. Gora is the first satellite deposit to be discovered on our regional
land package, which is a key focus area of our three-phase growth plan
in Senegal. Production at Gora is expected to be between 50,000 and
75,000 ounces per year with average feed grades ranging from 4 to 6 grams
per tonne over its estimated four-year life. We expect to be processing ore
from Gora through our mill by the fourth quarter of 2015.
Concurrent with our exploration mandate, we are evaluating other opportu-
nities for organic growth, such as heap leaching. We have had success with
the technical testing and believe that the economics of heap leaching oxide
material will work. Following the completion of the run of mine stockpile
testing and a pre-feasibility study to determine the engineering and eco-
nomic parameters, we will assess the potential for moving forward with
this project.
COMMITTED TO RESPONSIBLE MINING
Our three-phase growth plan in Senegal would not be possible without our
commitment to corporate social responsibility. Everyone at Teranga, from
the board to senior management to every employee, is committed to mining
responsibly. To ensure a systematic approach, last year
we conducted an 18-month multi-stakeholder consul-
tation process. Based on the results, we established
the Teranga Development Strategy, which focuses on
three priority areas for long-term development in the
region in which we operate: (i) sustainable economic
activities; (ii) agriculture and food security; and (iii)
youth and training.
Building partnerships to deliver on these three areas
was a major tenet for the year. It is important to man-
agement and the board to share our success with our
host communities. Accordingly in 2014, Teranga en-
tered into partnerships with the Government of Canada,
Canadian and international non-government organiza-
tions, and other parties to help share the benefits of
responsible mining. One of our newest initiatives is the
renewal of the cotton industry, a seed to shelf program.
The goal is to reinvigorate the once active cotton indus-
try in the region, as well as the various processes in the
value chain, to produce clothing made in Senegal.
A BRIGHT FUTURE
Teranga’s future is bright. We are stronger than ever
with three cornerstones: our mill, which is the only one
in Senegal, our large mine license and our regional land
package. We have a large, long life reserve and resource
base on an emerging gold belt, low all-in sustaining
costs, attractive free cash flow and profitability, a
strong debt-free balance sheet and an attractive organic
growth profile.
The 2015 year is off to a great start with positive explo-
ration results and a robust outlook. Our forecast is for
production of between 200,000 and 230,000 ounces,
lower cash costs, and all-in sustaining costs that are
slightly higher than last year due to the cost of develop-
ing Gora, but still lower relative to our peer group. It
will be an exciting year.
The strong foundation on which we stand today is a
result of successful execution and the support of the
Government of Senegal, the communities in which
we operate, our business partners and of course our
employees. On behalf of the board, we would like to
thank everyone.
2 0 1 4 A N N U A L R E P O R T
4
Alan R. Hill
Chairman
Richard Young
Richard Young
President
& Chief Executive Officer
MINING IN SENEGAL
Senegal is a mining-friendly jurisdiction governed by
a safe, stable democracy. The government of Senegal
recognizes mining as a key pillar for the country’s
economic growth and presents attractive royalty and
ownership structures to support expansion of the sector.
As the only gold mine in Senegal, with the potential for
world-class discoveries similar to the +5 million ounce
deposits that have been found on the same geographical
gold belt across the border in Mali, Teranga recognizes
the potential for long-term organic and inorganic growth
in Senegal.
AFRICA
SENEGAL
SABODALA GOLD MINE
2 0 1 4 A N N U A L R E P O R T
5
2014 HIGHLIGHTS
Operations
Produced 211,823 gold ounces, the second highest
production total in Company history
Completed the transformative acquisition of the neighbouring
Oromin Joint Venture Group, more than doubling reserves
and resources and granting tremendous operating flexibility
with now six pits to mine rather than three
Commenced production at Masato, the first and the largest
of the Oromin Joint Venture Group deposits to be developed
Commenced development of the high-grade Gora
satellite deposit
Reduced input costs and improved operating efficiencies
through increased mine productivity and mill throughout
Financial
Lowered our all-in sustaining cost to $865 per ounce,
a 28% improvement since 2012
Strengthened our balance sheet with an increased cash
balance of $35.8 million
Generated record free cash flow of $39 million through
higher production, lower all-in sustaining costs and
greater profitability
Eliminated $77 million in debt during the year and
became completely debt-free as of mid-February 2015
CSR
Achieved zero lost time injuries ending the year with
474 consecutive days worked without a Lost Time Injury
Launch of the Teranga Development Strategy where 78
action items for regional development were presented
to local multi-level stakeholders following an 18-month
collaborative planning process
Expanded our community income-generating program
introducing the sixth market garden and additional
demonstration and pilot farms, all key initiatives to
support our priority for food security in the region
Became a signatory of the United Nations Global Compact in
support of its 10 principles surrounding human rights, labour,
environment and anti-corruption formalizing our commitment
to international principles of sustainable development
Exploration
Increased Proven and Probable open pit reserves at Masato
by 72,000 ounces
Multi-year reserve development program underway at
Niakafiri and Golouma on our mine license, and five out of
more than 50 targets identified on our regional land package
Encouraging exploration results on mine license targets
6
2014 ANNUAL REPORT COMMITTED TO
MINING RESPONSIBLY
Our long-term vision to become a mid-tier gold producer
in Senegal depends on our ability to deliver sustainable
value for our stakeholders and to conduct ourselves in
accordance with the highest ethical standards. Our
mission to share the benefits of responsible mining with
all of our stakeholders underpins our commitment to go
above and beyond industry standards and to set the
benchmark for responsible mining in Senegal.
2 0 1 4 A N N U A L R E P O R T
7
THE SIX PILLARS
OF OUR CSR STRATEGY
CORPORATE
GOVERNANCE
ECONOMIC
CONTRIBUTION
OUR
EMPLOYEES
HEALTH &
SAFETY
ENVIRONMENT
COMMUNITY
Committed to
Best Practices
in Corporate
Governance
In 2014, Teranga put an emphasis on
further integrating its CSR strategy into
all of its activities at every level of the
organization and to incorporate its
commitments to CSR and good governance.
The creation of a CSR Board committee
chaired by a new member of the Board,
appointed in March 2014.
Became a signatory of the United
Nations Global Compact in support of
its 10 principles surrounding human
rights, labour, environment and anti-
corruption formalizing our commitment
with international principles of
sustainable development.
Zero Lost Time
Injuries
Teranga is dedicated to excellence in
safety. We aim to maintain Occupational
Health and Safety indicators at levels that
surpass global benchmarking standards
and we are committed to creating and
sustaining a healthy and safe work
environment for all of our stakeholders.
The continued success of our safety
performance is a testament to the high
standards in which our mine and
employees operate.
Achieved zero lost time injuries in
2014 with 474 consecutive days
worked without a lost time injury.
Bringing Positive
Economic
Contributions
to Senegal
Teranga’s presence in Senegal brings
positive economic opportunities to
the communities around our mine
and the country at large. The economic
contributions of our operations are
a catalyst for sustainable long-term
development in our host communities
and in the region where we operate.
As of 2014, Teranga has contributed
more than $450 million to the
economy of Senegal over a three-year
period through local procurement,
wages, government payments, and
CSR contributions.
80% of total goods and services were
purchased from Senegalese suppliers.
Nationalizing
Our Workforce
Our people are at the heart of Teranga’s
success. We invest significantly in our
workforce to create a culture that fosters
our Company values and remain committed
to localizing our workforce from the
communities surrounding our operations.
Successfully integrated approximately
90 percent of the OJVG workforce
following the acquisition.
91 percent of the workforce is
Senegalese and for the first time,
half of our workforce is comprised
of local residents from the regions
surrounding the Sabodala operations.
32 new training programs were
implemented in 2014 with more than
1,000 people trained during the year.
Caring for the
Environment
Investing in the
Community
Teranga is committed to the highest
standards of environmental management.
Our environmental policy reflects our
commitment to reducing and mitigating
our impact on all areas affected by our
activities.
Planted a tree nursery to support
our ongoing environmental
rehabilitation efforts.
4% increase in recycled water used
by the process plant, where a total
of 59.4% of the process plant water
intake is recycled water.
15% increase in energy efficiency
over 3 years.
A main objective of our community
investment program is to provide
surrounding communities with
sustainable infrastructure, projects
and tools that will improve their
livelihood throughout and beyond the
life of mine. In 2014 we continued to
lay the foundation for community-based
entrepreneurship by expanding our
market garden program, a key income
generating and food security initiative
for local communities.
Three of the six market gardens fully
running in 2014 generated 73.3 tons
of produce for the benefit of six villages.
The construction of a potable water
supply system for two nearby villages.
8
2014 ANNUAL REPORT
FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 2014 AND 2013
the
the audited consolidated
This Management’s Discussion and Analysis (“MD&A”)
financial
provides a discussion and analysis of
conditions and results of operations 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, 2014 and 2013. The MD&A should be read in
conjunction with
financial
statements and notes thereto (“Statements”) of Teranga
Gold Corporation (“Teranga” or the “Company”) as at and for
the twelve months ended December 31, 2014 and 2013. The
Company’s Statements and MD&A are presented in United
States dollars, unless otherwise specified, and have been
prepared
International Financial
Reporting Standards (“IFRS”), as issued by the International
(“IASB”). Additional
Accounting Standards Board
information about Teranga, including the Company’s Annual
Information Form for the year ended December 31, 2013, 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).
in accordance with
This report is dated as of February 18, 2015. 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.
OVERVIEW OF THE BUSINESS
Teranga is a Canadian-based gold company which operates
the Sabodala gold mine and is currently exploring 9
licenses covering 1,055km2
exploration
in Senegal,
comprising the regional land package, surrounding the
Sabodala gold mine.
Our vision has three growth phases:
Phase 1 is our near-term plan and is focused on organically
growing our production by potentially 50 percent from
current levels to between 250,000 and 350,000 ounces of
annual gold production.
requires
incremental capital as it leverages off of our existing mill and
infrastructure and focuses on increasing production through
initiatives such as mill optimization and heap leaching, and
adding reserves on the mine license to improve operating
flexibility with high-grade mill feed and low-grade heap leach
feed.
first phase
This
is our medium-term plan which envisions
Phase 2
production rising above our Phase 1 target
through
exploration success either on our mine license, regional land
package, or an in-country joint venture or acquisition that
can be exploited as satellite feed through an expansion of
our existing mill and infrastructure.
Phase 3 is our long term plan to add a second processing
facility in Senegal. In order to construct a second processing
facility in Senegal, we would need to make an exploration
discovery of significant size on our regional land package to
justify the economics of a new facility rather than utilizing our
existing mill and infrastructure. The economics of a new
standalone facility could be further enhanced through a joint
venture or acquisition of an existing discovery in Senegal.
While we are committing only modest amounts of capital to
this exploration strategy, by its very nature, phase 3 requires
therefore we are being very
significant capital and
systematic with our approach.
Over the past several years more than twelve million ounces
of measured and indicated resources have been identified
within the south eastern Senegal region, including the
Massawa, Boto, Golouma, Makabingui and Mako projects,
along with the Company’s own Sabodala gold mine. On
October 4, 2013, Teranga completed the acquisition of
Oromin Exploration Ltd. (“Oromin”). Oromin held a 43.5
percent participating interest in the Oromin Joint Venture
Group (“OJVG”). The OJVG held a fully participating 90
percent interest in Societe des Mines de Golouma S.A.
(“Somigol”), an operating company under the laws of
Senegal, and the remaining 10 percent carried interest is
held by the Government of Senegal.
On January 15, 2014, the Company acquired the balance of
the OJVG that it did not already own. The Company
acquired Bendon
International Ltd.’s (“Bendon”) 43.5
percent participating interest and Badr Investment Ltd.’s
(“Badr”) 13 percent carried interest.
The acquisition of Bendon and Badr’s interests in the OJVG
increased Teranga’s ownership
to 100 percent and
consolidates the Sabodala region, increasing the size of
Teranga’s mine license land holding from 33km2 to 246km2
by combining the two permitted mine licenses and more than
doubling the Company’s reserve base.
The OJVG holds a 15 year renewable mining lease
contiguous to the Sabodala mine license. This transaction
has resulted in capital and operating cost synergies as the
OJVG license area and its various satellite deposits have
been integrated into Sabodala’s mine plan, utilizing the
Sabodala mill and related infrastructure.
FINANCIAL AND OPERATING HIGHLIGHTS
Fourth Quarter Financial and Operating Highlights
Gold production during the fourth quarter of 2014
increased by 47 percent and 36 percent versus the third
quarter of 2014 and the fourth quarter of 2013,
respectively. Production was higher in the last three
months of 2014 due to higher processed grade and
improved mill throughput. Production was slightly lower
than fourth quarter guidance primarily due to marginally
lower recovery rates than planned.
During the fourth quarter of 2014, 63,711 ounces were
sold at an average realized gold price of $1,199 per
ounce. During the fourth quarter of 2013, 46,561
ounces were sold at an average realized price of $1,249
per ounce.
Lower total cash costs per ounce for the three months
ended December 31, 2014, excluding the reversal of
non-cash inventory write-downs to net realizable value
(“NRV”), were mainly due
lower mining and
processing costs and higher gold production in the
current year quarter.
to
All-in sustaining costs for the three months ended
December 31, 2014, excluding the reversal of non-cash
inventory write-downs to NRV, were lower due to a
decline
expenditures.
in
total cash costs and
lower capital
The decrease in depreciation and amortization expense
per ounce compared to the prior year quarter was due
to higher production during the current year quarter.
Gold revenue increased compared to the same prior
year period due to higher gold sales volumes, partially
offset by lower realized gold prices during the fourth
quarter of 2014.
The increases in profit and earnings per share over the
prior year quarter were primarily due to higher revenues
in the current year quarter, and a reversal of non-cash
inventory write-down to NRV totaling $16.0 million
recorded in the second and third quarters of 2014.
The increase in cash flow provided by operations
compared to the prior year quarter was primarily due to
higher gold sales.
Capital expenditures for the three months ended
December 31, 2014 were similar to capital expenditures
recorded in the same prior year period.
(US$000's, except where indicated)Operating Data20142013201420132012Gold Produced (ounces) 71,278 52,368 211,823 207,204 214,310 Gold Sold (ounces) 63,711 46,561 206,336 208,406 207,814 Average realized gold price1 1,199 1,249 1,259 1,246 1,422 Total cash costs ($ per ounce sold)2 598 711 710 641 556 All-in sustaining costs ($ per ounce sold)2 711 850 865 1,033 1,200 Total depreciation and amortization ($ per ounce sold)2,3 240 329 298 306 228 Financial Data2014 2013201420132012Revenue 76,553 58,302 260,588 297,927 350,520 Profit (loss) attributable to shareholders of Teranga3 27,693 (2,420) 17,776 50,280 93,655 Per share3 0.08 (0.01) 0.05 0.19 0.38 Operating cash flow 30,677 13,137 49,009 74,307 104,982 Capital expenditures 4,105 3,725 18,913 69,056 115,785 Free cash flow4 26,572 20,412 39,096 16,251 (10,803)Cash and cash equivalents (including bullion receivables and restricted cash) 35,810 42,301 44,974 Net cash (debt)5 31,864 (32,068) (75,182)Total assets3 726,323 628,643 565,715 Total non-current liabilities 128,112 29,241 68,505 5 Net cash (debt) is defined as total borrowings and financial derivative liabilities less cash and cash equivalents, bullion receivables and restricted cash.4 Free cash flow is defined as operating cash flow (excluding one-time transaction costs related to the acquisition of the OJVG) less capital expenditures.1 For the year ended December 31, 2013, includes the impact of 45,289 ounces delivered into gold hedge contacts at an average price of $806 per ounce.Year ended December 31Year ended December 313 The Company has reassessed the accounting for deferred stripping assets to include amortization of equipment directly related to deferred stripping activity. The impact of this adjustment has been applied retrospectively from January 1, 2012.2 Total cash costs per ounce, all-in sustaining costs per ounce and total depreciation and amortization per ounce are prior to adjustments to net realizable value and are non-IFRS financial measures that do not have a standard meaning under IFRS. Please refer to Non-IFRS Performance Measures at the end of this report.Three months ended December 31Three months ended December 31Note: Results include the consolidation of 100% of the OJVG's operating results, cash flows and net assets from January 15, 2014.
As expected, the Company retired the outstanding
$15.0 million balance of its loan facility with Macquarie
Bank Limited ("Loan Facility") on December 31, 2014.
The Company began 2014 with $60.0 million
outstanding under the Loan Facility, of which $30.0
million was repaid on January 15, 2014 with the
completion of the streaming agreement with Franco-
Nevada Corporation (“Franco-Nevada”) as part of the
acquisition of the OJVG. The balance of $30.0 million
was repaid in three quarterly $5.0 million installments,
with the final outstanding balance of $15.0 million paid
on December 31, 2014. The Company ended the year
with $35.8 million in cash and cash equivalents, an
increase of $7.8 million over the third quarter cash and
cash equivalents balance (including restricted cash).
For the twelve months ended December 31, 2014, the
Company made a total of $63.0 million in one-time
payments. This
in debt
repayments (including the final payment for the $60.0
includes $42.8 million
million Loan Facility), $3.7 million in payments to the
Republic of Senegal and one-time payments related to
the acquisition of the OJVG, including $9.0 million for
transaction, legal and office closure costs and $7.5
million to acquire Badr’s share of the OJVG. The one-
time payments described herein, excludes $30.0 million
in debt retired in the first quarter 2014 as part of the
Franco-Nevada transaction.
Subsequent to the year ended December 31, 2014, the
Company fully repaid the outstanding balance of its
finance
facility with Macquarie Bank Limited
(“Equipment Facility”), resulting in the Company being
debt free. Notwithstanding, the Company is working to
put a standby facility in place to provide additional
financial flexibility to ensure sufficient liquidity is
maintained by the Company.
OUTLOOK 2015
2015 Guidance Analysis
The Company’s mine plans are designed to maximize free
cash flow. In 2015, the Company expects to generate free
cash flow at $1,200 per ounce gold after funding its organic
growth initiatives. Mining activity in 2015 will continue in the
Masato pit, as well as completing phase 3 of the Sabodala
pit. Development of Gora is expected to be complete during
the third quarter, with mining expected by late in the third
quarter and production from Gora commencing in the fourth
quarter of the year.
The Company expects to produce between 200,000 and
230,000 ounces of gold in 2015. The quarterly production
profile in 2015 is expected to look similar to the 2014
quarterly production profile with higher production in the
fourth quarter once Gora ore is processed through the
mill. In total, the second half of 2015 is expected to account
for approximately 55 percent of total gold production as Gora
comes into production. The Gora development schedule is
aggressive but Management believes it is achievable. The
2014 Actuals2015 Guidance RangeOperating Results Ore mined(‘000t) 6,174 6,500 - 7,500 Waste mined - operating(‘000t) 21,179 ~19,500 Waste mined - capitalized(‘000t) 1,969 2,500 - 3,500 Total mined(‘000t) 29,321 28,500 - 30,500 Grade mined(g/t) 1.54 1.40 - 1.60 Strip ratio(waste/ore) 3.7 3.00 - 3.50 Ore milled(‘000t) 3,622 3,600 - 3,800 Head grade(g/t) 2.03 2.00 - 2.20 Recovery rate% 89.7 90.0 - 91.0 Gold produced1(oz) 211,823 200,000 - 230,000 Total cash cost (incl. royalties)2$/oz sold 710 650 - 700 All-in sustaining costs2,3$/oz sold 865 900 - 975 Total depreciation and amortization2$/oz sold 298 260 - 275 Mining($/t mined) 2.83 2.75 - 2.90 Mining long haul (cost/t hauled)($/t milled) - 5.00 - 6.00 Milling ($/t milled) 17.15 15.50 - 17.50 G&A ($/t milled) 4.61 5.25 - 5.75 Gold sold to Franco-Nevada1(oz) 20,625 24,375 Exploration and evaluation expense (Regional Land Package)($ millions) 2.8 1.0 - 2.0 Administration expenses and Social community costs (excluding depreciation)($ millions) 14.8 15.0 - 16.0 Mine production costs($ millions) 162.4 155.0 - 165.0 Capitalized deferred stripping($ millions) 6.0 8.0 - 10.0 Net mine production costs($ millions) 156.4 147.0 - 155.0 Capital expenditures Mine site sustaining($ millions) 5.0 6.0 - 8.0 Capitalized reserve development (Mine License)($ millions) 4.0 6.0 - 8.0 Project development costs (Gora/Kerekounda) Mill optimization($ millions) - 5.0 - 6.0 Development($ millions) 3.9 16.5 - 17.5 Mobile equipment and other($ millions) - 7.5 - 8.5 Total project development costs($ millions) 3.9 29.0 - 32.0 Capitalized deferred stripping($ millions) 6.0 8.0 - 10.0 Total capital expenditures($ millions) 18.9 49.0 - 58.0 Key assumptions: Gold spot price/ounce - US$1,200, Light fuel oil - US$0.95/litre, Heavy fuel oil - US$0.76/litre, US/Euro exchange rate - $1.20, USD/CAD exchange rate - $0.85.Other important assumptions include: any political 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; and no unplanned delays in or interruption of scheduled production.Year ended December 312 Total cash costs per ounce, all-in sustaining costs per ounce and total depreciation and amortization per ounce are non-IFRS financial measures and do not have a standard meaning under IFRS. Please refer to Non-IFRS Performance Measures at the end of this report.3 All-in sustaining costs per ounce sold include total cash costs per ounce, administration expenses (excluding Corporate depreciation expense and social community costs not related to current operations), capitalized deferred stripping, capitalized reserve development and mine site & development capital expenditures as defined by the World Gold Council.1 22,500 ounces of production are to be sold to Franco Nevada at 20% of the spot gold price. Due to the timing of shipment schedules near year end, the delivery of 1,875 ounces of gold for the month of December was not received by Franco-Nevada until early January 2015. The transaction with Franco-Nevada permits for the delivery of payable gold for up to five business days following a month end.
delay in the Gora permitting process has delayed road
construction which was to start at the beginning of the year
but began on February 14th. The delay in the start date of
road construction may negatively impact the timing of
commencement of mining at Gora resulting in production at
the lower end of our 2015 production guidance range. The
final phase in the ESIA process, a public hearing to
announce the outcome of the technical and public enquiry
processes occurred on February 18th. Environmental
approval and the occupational haul road permit are now
expected in the ordinary course and are not expected to
impact a fourth quarter production commencement for the
Gora deposit.
total $6.0
to $8.0 million.
Sustaining capital expenditures for the mine site are
expected to be between $6.0 and $8.0 million, capitalized
deferred stripping costs are expected to total $8.0 to $10.0
million and reserve development expenditures are expected
Project development
to
expenditures for growth initiatives including the cost to
develop the Gora and Kerekounda deposits and costs to
optimize the mill are expected to total $29.0 to $32.0 million.
Of
total capital
expenditures for 2015, $5.0 to $6.0 million relating to the mill
optimization may be deferred pending the Company’s
upcoming exploration and heap leach results to ensure the
best allocation of capital for the Company.
to $58.0 million
total $49.0
the
in
The Company’s tax exempt status ends on May 2, 2015.
From this point forward, the Company will be subject to a 25
percent income tax rate as well as customs duties and non-
refundable value-added tax on certain expenditures. Any
income tax incurred in 2015 will not be paid until 2016 and
the other taxes are built into our unit cost guidance.
Total cash costs per ounce for 2015 are expected to be
between $650 and $700 per ounce, in line with 2014. All-in
sustaining costs are expected to be between $900 and $975
per ounce, higher than 2014 due to an increase in
development spending on new deposits and expansion of
the mill of approximately $125 per ounce.
for
light
in costs
the decline
Total mine production costs for 2015 are expected to fall in
the range of $147.0 to $155.0 million, similar to 2014 (net of
capitalized deferred stripping). The increase in taxes and
duties for consumables of about $5.5 million is expected to
be offset by
fuel oil
(“LFO”), heavy fuel oil (“HFO”) and weaker local and Euro
denominated costs relative to the US dollar. A $0.10
variance from the current HFO/LFO assumptions would
result in approximately a $5.0 million change to mine
production costs or about $20 per ounce. A 10 percent
variance
the current Euro/USD exchange rate
assumption would result in approximately a $9.0 million
change to mine production costs or about $40 per ounce.
The Government of Senegal sets the price of petroleum
products monthly. In late December 2014, these prices were
reduced on average 15 percent, the first reduction in 2014.
The Company’s 2015 assumptions for LFO and HFO reflect
these most recent price reductions and do not reflect any
potential further reductions that the Government of Senegal
may choose to enact.
from
Administrative and corporate social responsibility (“CSR”)
costs relate to the corporate office, the Dakar and regional
office and the Company’s corporate social responsibility
initiatives, and exclude corporate depreciation, transaction
costs and other non-recurring costs. For 2015, these costs
are estimated to be between $15.0 million and $16.0 million,
including approximately $3.5 million for CSR activities.
Sensitivity
Total depreciation and amortization for the year is expected
to be between $260 and $275 per ounce sold, $215 to $225
per ounce sold of which is related to depreciation on plant,
equipment and mine development assets, and $45 to $50
per ounce of which is for depreciation of deferred stripping
assets.
In 2015, the majority of the capital to be spent on the
Company’s exploration program will be focused on organic
growth through (i) the conversion of resources to reserves;
and (ii) extensions of existing deposits along strike on the
Sabodala and OJVG mine licenses. As well, a modest
amount of capital has been budgeted for the continuation of
a systematic regional exploration program designed to
identify high-grade satellite and standalone deposits.
The Company identified a number of risk factors to which it
is subject in its revised Annual Information Form filed for the
year ended December 31, 2013. These various financial and
operational risks and uncertainties continue to be relevant to
an understanding of our business, and could have a
significant impact on profitability and levels of operating cash
flow. Refer to Risks and Uncertainties at the end of this
report for additional risks.
2015HypotheticalImpact on totalImpact onAssumptionChangecash costsprofit (pre-tax)Gold revenue $1,200/oz $100/oz n/a $21.9M Gold total cash costs Gold price effect on royalties $1,200/oz $100/oz $5/oz $1.2M HFO price $0.76/litre $0.10/litre $13/oz $3.0M LFO price $0.95/litre $0.10/litre $8/oz $1.8M EUR exchange rate 1.20:1 10% $39/oz $8.9M
REVIEW OF OPERATING RESULTS
Mining
Total tonnes mined for the three months ended December
31, 2014 were 4 percent lower year-over-year. Mining
activities in the current period were mainly focused on the
upper benches of Masato and the lower benches of phase 3
of the Sabodala pit, while in the same prior year period,
mining was focused on the upper benches of phase 3 of the
Sabodala pit which resulted in shorter ore and waste haul
distances.
Access to the lowest benches of phase 3 of the Sabodala
pit, which was originally scheduled for mining during the
fourth quarter 2014, have been deferred into 2015 due to
bench access constraints. In total, approximately 10,300
high-grade ounces (91,000 tonnes at over 3.5 gpt) originally
part of the 2014 mine plan are expected to be mined and
processed during first and second quarters of 2015. As a
result of this deferral, gold production in 2014 was impacted
by about an approximately net 8,000 ounces for the year as
Operating Results 2014201320142013Ore mined(‘000t) 2,666 1,993 6,174 4,540 Waste mined - operating(‘000t) 5,594 6,655 21,178 15,172 Waste mined - capitalized(‘000t) 490 420 1,969 15,066 Total mined(‘000t) 8,750 9,068 29,321 34,778 Grade mined(g/t) 1.47 1.61 1.54 1.62 Ounces mined(oz) 126,334 103,340 305,192 236,718 Strip ratiowaste/ore 2.3 3.6 3.7 6.7 Ore milled(‘000t) 1,009 860 3,622 3,152 Head grade(g/t) 2.44 2.11 2.03 2.24 Recovery rate% 90.1 89.7 89.7 91.4 Gold produced1(oz) 71,278 52,368 211,823 207,204 Gold sold(oz) 63,711 46,561 206,336 208,406 Average realized price$/oz 1,199 1,249 1,259 1,246 Total cash cost (incl. royalties)2$/oz sold 598 711 710 641 All-in sustaining costs2$/oz sold 711 850 865 1,033 Mining($/t mined) 2.58 2.65 2.83 2.59 Milling ($/t milled) 13.91 17.96 17.15 20.15 G&A ($/t milled) 4.27 4.84 4.61 5.38 2 Total cash costs per ounce and all-in sustaining costs per ounce are prior to non-cash inventory write-downs to net realizable value and are non-IFRS financial measures that do not have a standard meaning under IFRS. Please refer to Non-IFRS Performance Measures at the end of this report.1 Gold produced represents change in gold in circuit inventory plus gold recovered during the period.Year ended December 31Three months ended December 31Three months ended December 31, 2014MasatoSabodalaTotalOre mined(‘000t) 1,788 878 2,666 Waste mined - operating(‘000t) 3,789 1,805 5,594 Waste mined - capitalized(‘000t) 490 - 490 Total mined(‘000t) 6,067 2,683 8,750 Grade mined(g/t) 1.28 1.86 1.47 Ounces mined(oz) 73,875 52,459 126,334 Year ended December 31, 2014MasatoSabodalaTotalOre mined(‘000t) 2,003 4,171 6,174 Waste mined - operating(‘000t) 4,392 16,786 21,178 Waste mined - capitalized(‘000t) 490 1,479 1,969 Total mined(‘000t) 6,885 22,436 29,321 Grade mined(g/t) 1.27 1.66 1.54 Ounces mined(oz) 82,017 223,175 305,192
this high-grade material was displaced by low-grade feed to
the mill.
sourced from phase 3 of the Sabodala pit containing harder
ore.
Total tonnes mined for the year ended December 31, 2014
were 16 percent lower compared to the same prior year
period. Mining activities in the current year were initially
focused on the lower benches of phase 3 of the Sabodala
pit. Commencing in September, mining began on schedule
at Masato, the first of the OJVG deposits to be developed.
Total tonnes mined in 2014 were about 4 million tonnes
higher than the original plan, mainly due to a redesign of
phase 3 of the Sabodala pit as a result of mining in a
peripheral area to the ore body which added 1.3 million
waste tonnes that was originally scheduled for mining in
phase 4 of the Sabodala pit in 2016; combined with higher
tonnes mined at Masato due to better grade and ore tonnes
than originally expected. In the prior year, mining activities
were mainly focused on the upper benches of phase 3 of the
Sabodala pit.
Ore grades mined for the year ended December 31, 2014
were 5 percent lower than the prior year due to lower ore
grades mined at Masato, combined with lower than
expected ore grades in a peripheral area of the Sabodala pit
mined during the second quarter 2014. Management took
steps to improve grade control including the hiring of a new
mine manager and senior mine personal, additional
leadership in the production geology department, improved
blasthole sampling and statistical controls,
increased
Reverse Circulation (“RC”) infill drilling and reducing to 5
metre benches when necessary. The changes in the mine
department made during the year in terms of people and
procedures resulted in much improved grade control during
the fourth quarter. Mining at Masato included 371,000
tonnes at 2.41 gpt and mining at Sabodala included 353,000
tonnes at 3.16 gpt, both reconciling well to the reserve
models.
to
Total mining costs for the three months ended December 31,
2014 were 6 percent lower than the same prior year period
mainly due
lower material movement and higher
productivity at Masato due to mining softer material. Unit
mining costs for the three months ended December 31, 2014
were $2.58 per tonne, a decrease of 3 percent compared to
the same prior year period.
Total mining costs for the year ended December 31, 2014
were 8 percent lower than the same prior year period due to
decreased material movement. However, unit mining costs
for the year ended December 31, 2014 were 9 percent
higher than the same prior year period due to fewer tonnes
mined. In 2014, mining was mainly concentrated on the
lower benches of phase 3 of the Sabodala mine pit with
limited space resulting in lower productivity and higher costs,
which was partially offset by higher productivity at Masato
from mining softer material.
Processing
Ore tonnes milled for the three and twelve months ended
December 31, 2014 were 17 and 15 percent higher than the
same prior year periods. The Company set a quarterly
record for total tonnes milled during the fourth quarter of
2014. As anticipated, the introduction of softer oxide ore
from Masato has had a positive impact on crushing and
milling rates. In the same prior year period, mill feed was
Processed grade for the three months ended December 31,
2014 was 16 percent higher than the same prior year period.
Mill feed during the fourth quarter 2014 included significant
high grade ore that was sourced from the upper benches of
Masato and the lower benches of the Sabodala pit. In the
prior year period, mill feed was sourced from phase 3 of the
Sabodala pit at grades closer to average reserve grade.
Processed grade for the year ended December 31, 2014
was 9 percent lower than the same prior year period, as mill
feed for the first nine months of 2014 was sourced from ore
from phase 3 of the Sabodala pit at grades closer to average
reserve grade. In the prior year, mill feed was primarily
sourced from phase 3 of the Sabodala pit at higher grades.
During the third quarter of 2014, the Company experienced
a discrepancy of approximately 5,000 ounces between the
predicted gold production based on the daily production
report assays and reconciled gold poured and gold in circuit
production at quarter end. Management concluded its
investigation of the source of the discrepancy during the
fourth quarter 2014. Based on the final assessment, it was
determined this discrepancy was caused by a high bias of
approximately 10 percent in the assays during the third
quarter. The high bias was caused by degradation in the
gold calibration standard due to poor storage of the solutions
employed by the independent lab. The bias was corrected
in October 2014 and steps have been taken by the
independent lab to improve quality control including changes
to their senior personnel, retraining of their local technical
staff, duplicate testing conducted by their lab in Mali and
more senior level oversight to ensure quality and adherence
to standard practices.
Reconciliation of the metallurgical accounting for the fourth
quarter 2014 with daily production was within acceptable
standards, as has been the case on average for the duration
of operations for the Sabodala mill.
the
Gold production during the fourth quarter of 2014 increased
by 47 percent and 36 percent versus the third quarter of
2014 and
fourth quarter of 2013, respectively.
Production was higher in the last three months of 2014 due
to higher processed grade and improved mill throughput.
Production was slightly lower than fourth quarter guidance
primarily due to marginally lower recovery rates than
planned.
Gold production for the year increased marginally from the
year earlier to 211,823 ounces and was the second highest
production total in Company history. However, production
fell short of the revised guidance estimate of 215,000
ounces primarily due to lower than planned recovery rates
in the fourth quarter.
Total processing costs for the three and twelve months
ended December 31, 2014 were 9 percent and 2 percent
lower than the same prior year periods, mainly due to timing
of maintenance activities and lower consumption of grinding
media with the softer ore from Masato.
Unit processing costs for the three and twelve months ended
December 31, 2014 were 23 percent and 15 percent lower
than the prior year periods due to lower total processing
costs and higher tonnes milled.
General and administrative – site operations
Total mine site general and administrative costs for the three
and twelve months ended December 31, 2014 were 1
percent and 5 percent lower than the prior year periods
mainly due to lower insurance premiums.
Unit general and administration costs for the three and
twelve months ended December 31, 2014 were 12 percent
and 14 percent
the prior year periods,
than
respectively, due to lower general and administrative costs
and higher tonnes milled.
lower
Costs per ounce
Total cash costs per ounce for the three months ended
December 31, 2014, excluding the reversal of non-cash
inventory write-downs to NRV, totalled $598 per ounce
compared to $711 per ounce in the same prior year quarter
mainly due to lower mining and processing costs and higher
gold production in the current year quarter.
Total cash costs per ounce for the year ended December 31,
2014 of $710 per ounce were marginally above the higher
end of guidance of $650 to $700 per ounce. This compares
to $641 per ounce in 2013. The increase in total cash costs
was mainly due to lower capitalized deferred stripping, partly
offset by lower mining and processing costs compared to the
prior year.
All-in sustaining costs for the three months ended December
31, 2014, excluding the reversal of non-cash inventory write-
downs to NRV, totalled $711 per ounce, compared to $850
per ounce in the prior year. All-in sustaining costs were
lower due to a decline in total cash costs and lower capital
expenditures.
All-in sustaining costs per ounce for the year ended
December 31, 2014 were $865 per ounce, within the original
guidance range of $800 to $875 per ounce and 16 percent
lower than the prior year. Lower all-in sustaining costs were
mainly due to lower capital expenditures in the current year
period.
ALL-IN SUSTAINING COSTS PER OUNCE
Beginning in the second quarter of 2013, the Company
adopted an “all-in sustaining costs” measure and “all-in
costs” measure consistent with the guidance issued by the
World Gold Council (“WGC”) on June 27, 2013. For
additional information, please refer to Non-IFRS Financial
Measures.
REVIEW OF FINANCIAL RESULTS
(US$000's, except where indicated) Financial Results2014201320142013 Revenue 76,553 58,302 260,588 297,927 Cost of sales1,2 (37,738) (48,526) (207,984) (193,434) Gross Profit 38,815 9,776 52,604 104,493 Exploration and evaluation expenditures (373) (1,043) (2,772) (5,405) Administration expenses (4,404) (3,191) (15,621) (14,717) Share based compensation 75 (136) (911) (813) Finance costs (2,080) (3,150) (9,484) (12,148) Gains on gold hedge contracts - - - 5,308 Gains on oil hedge contracts - - - 31 Net foreign exchange gains (losses) 671 (449) 2,013 (1,233) Gain (loss) on available for sale financial asset - - - (4,003) Other income (expense) 15 (3,410) (1,982) (11,843) Profit (loss) before income tax 32,719 (1,603) 23,847 59,670 Income tax expense (1,536) - (1,536) - Profit (loss) for the period 31,183 (1,603) 22,311 59,670 Profit attributable to non-controlling interest (3,490) (817) (4,535) (9,390) Profit (loss) attributable to shareholders of Teranga 27,693 (2,420) 17,776 50,280 Basic earnings (loss) per share 0.08 (0.01) 0.05 0.19 Note: Results include the consolidation of 100% of the OJVG's operating results, cash flows and net assets from January 15, 2014.2 The Company has reassessed the accounting for deferred stripping assets to include amortization of equipment directly related to deferred stripping activity. The impact of this adjustment has been applied retrospectively from January 1, 2012.1 Includes a non-cash inventory reversal of a writedown to net realizable value of $16.0 million during the three months ended December 31, 2014 (nil net write-down to net realizable value during the year ended December 31, 2014).Three months ended December 31Year ended December 31
Revenue
Gold revenue for the three months ended December 31,
2014 was $76.6 million compared to gold revenue of $58.3
million for the same prior year period. The increase in gold
revenue was due to 37 percent higher gold sales volume,
partially offset by 4 percent lower realized gold prices during
the fourth quarter of 2014.
Cost of sales
Gold revenue for the twelve months ended December 31,
2014 was $260.6 million compared to gold revenue of
$297.9 million for the same prior year period. The decrease
in gold revenue was mainly due to lower spot gold prices in
the current year.
For the three and twelve months ended December 31, 2014,
mine production costs, before capitalized deferred stripping,
were $41.1 million and $162.4 million, respectively,
compared to $43.6 million and $170.8 million in the same
prior year periods. Lower mine production costs in 2014
were due to lower mining costs from lower material
movement and lower processing costs (please see Review
of Operating Results section for additional information).
Depreciation and amortization for the three and twelve
months ended December 31, 2014 totaled $19.2 million and
$69.5 million, respectively, compared to $27.9 million and
$78.5 million in the same prior year periods. Lower
depreciation on property, plant and equipment and mine
development expenditures were partially offset by higher
depreciation of deferred stripping balances in the current
year. Approximately 80 percent of the Company’s fixed
assets are depreciated using the units of production method
of depreciation. Units of production depreciation rates
decreased in 2014 with the acquisition of the OJVG which
increased the reserve base and as a result, the per ounce
units of production depreciation rate.
For the three months ended December 31, 2014, royalties
were $4.2 million, $1.3 million higher than the prior year
period mainly due to higher revenues in the current quarter.
For the twelve months ended December 31, 2014, royalties
of $12.9 million were $1.8 million lower than the prior year
period due to lower sales revenue in the current year.
Inventory movements for the three and twelve months
ended December 31, 2014 resulted in a decrease to cost of
sales of $9.7 million and $30.2 million, respectively,
compared to a decrease to cost of sales of $24.5 million and
$23.2 million for the same prior year periods. For the twelve
months ended December 31, 2014, higher costs were
absorbed into inventory as a result of the net addition to ore
stockpiles of approximately 52,000 ounces of recoverable
gold. In total, the Company now has over 250,000 ounces of
recoverable gold in ore stockpiles. In the same prior year
periods, higher costs were absorbed into inventory mainly
as a result of higher mine production costs.
During the three months ended December 31, 2014, the
Company recorded a $16.0 million reversal of the non-cash
write-down on long-term low-grade ore stockpile inventory
that had been previously recorded during the second and
third quarters of 2014, as adjusted for a mill discrepancy
encountered during the third quarter 2014 (please refer to
Review of Annual Operating Results section) and the impact
(US$000's)Cost of Sales2014201320142013Mine production costs - gross 41,123 43,555 162,410 170,752 Capitalized deferred stripping (1,266) (1,444) (5,976) (43,264)Capitalized deferred stripping - non-cash1 189 137 (658) (4,124) 40,046 42,248 155,776 123,364 Depreciation and amortization - deferred stripping assets1 7,205 12,639 28,911 17,850 Depreciation and amortization - property, plant & equipment and mine development expenditures 11,988 15,263 40,605 60,683 Royalties 3,843 2,890 12,486 14,755 Advanced royalty payment 391 - 440 - Rehabilitation - - - 6 Inventory movements (5,802) (11,945) (22,145) (8,552)Inventory movements - non-cash1 (3,907) (12,569) (8,089) (14,672) (9,709) (24,514) (30,234) (23,224)Total cost of sales before adjustments to net realizable value 53,764 48,526 207,984 193,434 Adjustments to net realizable value1 (10,865) - - - Adjustments to net realizable value - depreciation1 (5,161) - - - (16,026) - - - Total cost of sales 37,738 48,526 207,984 193,434 Three months ended December 31Year ended December 311 The Company has reassessed the accounting for deferred stripping assets to include amortization of equipment directly related to deferred stripping activity. The impact of this adjustment has been applied retrospectively from January 1, 2012.
of a change in the accounting for deferred stripping costs
(please refer to Critical Accounting Policies and Estimates,
Stripping Costs in the production phase of a surface mine).
Higher ore grades and ounces mined during the fourth
quarter resulted in a decrease in the per ounce ending cost
of low-grade ore stockpiles (including applicable overhead,
depreciation and amortization).
The adjustment recorded in the fourth quarter fully reverses
the previously recorded non-cash write-down, which had
been the result of an increase in costs added to low-grade
ore stockpiles earlier in the year. Lower ore grades mined
during the first and second quarters resulted in an increase
in the per ounce cost of inventory (including applicable
overhead, depreciation and amortization). Higher per ounce
inventory costs have a greater impact on low-grade stockpile
values because of the higher future processing costs
required to produce an ounce of gold. The non-cash write-
down represented the portion of historic costs that would not
be recoverable based on the Company’s long-term forecasts
of future processing and overhead costs at a gold price of
$1,300 per ounce. Fluctuations in the mine plan result in
wide fluctuations in the per ounce cost of our long-term ore
stockpiles. During periods where fewer ounces are mined,
per ounce costs rise, while during those periods when more
ounces are mined, per ounce costs fall. Should long-term
gold prices decline or future costs rise, there is a potential
for further NRV adjustments.
Exploration and evaluation
Exploration and evaluation expenditures for the three
months ended December 31, 2014 totaled $0.4 million, $0.7
million lower than the same prior year period and for the
twelve months ended December 31, 2014 totaled $2.8
million, compared to $5.4 million in the prior year period.
Lower exploration expense in the current year reflects a
higher mix of lower cost trenching to delineate exploration
targets. Higher cost drilling has been minimized in this lower
gold price environment. A systematic and disciplined
screening process is being employed by the Company’s
exploration team to optimize the potential for success in
exploring the many high-potential anomalies located within
the Company’s Regional Land Package. Please see
Regional Exploration section for additional information.
Administration and corporate social responsibility costs
Administration costs for the three and twelve months ended
December 31, 2014 were $3.3 million and $13.1 million,
respectively, compared to $2.9 million and $13.0 million in
the same prior year periods. Higher costs in 2014 reflect
higher corporate office costs and higher professional and
consulting costs, partially offset by lower depreciation
expense for IT infrastructure and Dakar office costs.
Corporate social responsibility costs were $1.1 million and
$2.5 million for the three and twelve months ended
December 31, 2014, respectively, compared to $0.3 million
and $1.7 million in the same prior year periods. Higher costs
in 2014 reflect higher social commitments related to the
acquisition of the OJVG. Total Administration and corporate
social responsibility costs for the three and twelve months
ended December 31, 2014 totaled $4.4 million and $15.6
million, respectively, compared to $3.2 million and $14.7
million in the same prior year periods.
Share based compensation
During the three months ended December 31, 2014, no
common share stock options were granted, 1,539,444
common share stock options were cancelled and no stock
options were exercised. During the twelve months ended
December 31, 2014, 130,000 common share stock options
were granted, 2,397,361 common share stock options were
cancelled and no stock options were exercised.
Of the 21,470,489 common share stock options issued and
outstanding as at December 31, 2014, 13,548,889 vest over
a three-year period, 7,746,600 are already vested and
175,000 vests 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.
interests
alignment
In order to allow non-executive directors and employees to
participate in the long-term success of the Company and to
between
of
promote
directors/employees and shareholders,
the Company
introduced a new Deferred Share Unit Plan (“DSU Plan”) for
non-executive directors and a new Restricted Share Unit
Plan (“RSU Plan”) for employees during the second quarter
2014. DSUs represent a right for a non-executive director to
receive an amount of cash (subject to withholdings), on
ceasing to be a director of the Company, equal to the
product of (i) the number of DSUs held, and (ii) the volume
weighted average trading price of the Company’s shares for
the five trading days prior to such date. For employees,
RSUs are not convertible into Company stock and simply
represent a right to receive an amount of cash (subject to
withholdings), on vesting, equal to the product of i) the
number of RSUs held, and ii) the volume weighted average
trading price of the Company’s shares for the five trading
days prior to such date. RSUs will generally vest as to 50
percent in thirds over a three year period and as to the other
50 percent, in thirds based on the Company’s achievement
of performance-based criteria.
During the twelve months ended December 31, 2014, the
Company granted 2,343,487 RSUs at a price of C$0.72 per
unit. At December 31, 2014 there were no units vested,
436,532 units were forfeited and 298,884 units were
cancelled. The Company granted 545,000 DSUs during the
twelve months ended December 31, 2014 at a price of
C$0.72 per unit. At December 31, 2014 there were no units
vested and no units were cancelled.
were realized on payments denominated in the local
currency made during the year, and were the result of a 13
percent depreciation in the local currency relative to the US
dollar from the start of the year. In the same prior year
periods, foreign exchange losses were realized from the
Sabodala gold mine operating costs recorded in the local
currency and translated into the US dollar functional
currency.
Finance costs
Loss on available for sale financial assets
reflect
interest costs
Finance costs
the
outstanding bank and mobile equipment loans, amortization
of capitalized deferred
financing costs, political risk
insurance relating to the Loan Facility, accretion expense
related to unwinding the discount for certain liabilities
recorded at a discount, and bank charges.
related
to
Finance costs for the three and twelve months ended
December 31, 2014 decreased to $2.1 million and $9.5
million, compared to $3.2 million and $12.1 million in the
prior year periods. Finance costs were lower than the prior
year periods primarily due to lower interest on borrowings as
a result of the repayment of $30.0 million under the Loan
Facility in first quarter 2014 along with a further $42.8 million
in scheduled debt repayments through the course of 2014,
partially offset by higher accretion expense related to
unwinding the discount for certain liabilities recorded at a
discount.
Gold hedge contracts
For the three and twelve months ended December 31, 2014,
there were no forward sales contracts outstanding.
In early 2013, the Company bought back the remaining “out
of the money” gold forward sales contracts at a cost of $8.6
million and 45,289 ounces were also delivered into forward
sales contracts at an average price of $806 per ounce. The
gain on gold hedge contracts totaled $5.3 million for the
twelve months ended December 31, 2013, resulting from a
decrease in the spot price of gold from December 31, 2012.
Oil hedge contracts
For the three and twelve months ended December 31, 2014,
there were no oil hedge contracts outstanding since the oil
hedge contracts were completed at March 31, 2013. The
gain on settlement of oil hedge contracts totaled $31
thousand for the quarter ended March 31, 2013 and resulted
from an increase in the spot oil price over December 31,
2012.
Net foreign exchange gains and losses
The Company generated foreign exchange gains of $0.7
million and $2.0 million for the three and twelve months
ended December 31, 2014, respectively, compared to $0.4
million and $1.2 million of foreign exchange losses in the
same prior year periods. In 2014, foreign exchange gains
For the three and twelve months ended December 31, 2014,
there were no losses recognized on available for sale
financial assets. For the twelve months ended December 31,
2013, a non-cash impairment loss of $4.0 million was
recognized on the Oromin shares based on further declines
in Oromin’s share price, relative to a previous impairment
loss that was recorded as at December 31, 2012.
Other income (expense)
Other income was $15 thousand for the three months ended
December 31, 2014 and other expense was $2.0 million for
the twelve months ended December 31, 2014, respectively,
compared to other expenses of $3.4 million and $11.9
million for the same prior year periods. The expenses in
2014 relate to costs associated with the acquisitions of the
OJVG. The prior year period expenses related to costs
associated with the acquisition of Oromin, financial advisory
services and non-recurring legal and other expenses.
Income tax expense
Income tax expense for the three and twelve months ended
December 31, 2014 was $1.5 million compared to nil in the
prior year periods. In the current year, the Company
recognized deferred income tax liabilities related to the
reversal of temporary differences in respect of deferred
stripping costs, leased property, plant and equipment, social
fund payments and tax assessment payments.
Net profit
Consolidated profit for the three months ended December
31, 2014 was $27.7 million ($0.08 per share), compared to
a consolidated loss of in the prior year quarter of $2.4 million
($0.01 loss per share). The increase in profit in the current
year quarter were primarily due to higher revenues and a
reversal of non-cash inventory write-down to NRV totaling
$16.0 million recorded in the second and third quarters of
2014.
Consolidated profit for the twelve months ended December
31, 2014 was $17.8 million ($0.05 per share), compared to
profit of $50.3 million ($0.19 per share) in the prior year. The
decrease in profit in the current year was primarily due to
lower revenue, higher cost of sales, partially offset by lower
transaction costs related to the acquisition of the OJVG.
REVIEW OF QUARTERLY FINANCIAL RESULTS
The Company’s revenues over the last several quarters
reflect a trend of spot gold prices that have fluctuated around
recent low levels in the current metal commodity cycle while
operating costs have largely remained stable. This has
translated into fluctuating net earnings and operating cash
flow levels depending on the gold realized prices and
production levels each quarter.
The net loss recorded in fourth quarter 2013 was mainly due
to transaction costs related to the acquisitions of Oromin and
the OJVG, while the net losses recorded in second and third
quarter 2014 were primarily due to a non-cash inventory
write-down to net realizable value totaling $16.0 million.
to Critical Accounting Policies and Estimates,
Refer
BUSINESS AND PROJECT DEVELOPMENT
Franco-Nevada Gold Stream
On January 15, 2014, the Company completed a gold
stream transaction with Franco-Nevada. The Company is
required to deliver to Franco-Nevada 22,500 ounces
annually over the first six years followed by 6 percent of
production
the Company’s existing properties,
including those of the OJVG, thereafter, in exchange for a
deposit of $135.0 million. Franco-Nevada’s purchase price
per ounce is set at 20 percent of the prevailing spot price of
gold.
from
The deposit of $135.0 million has been treated as deferred
revenue within the statement of financial position.
Acquisition of the OJVG
During the third and fourth quarters of 2013, the Company
issued 71,183,091 Teranga shares to acquire all of the
Oromin shares (Oromin being one of the three joint venture
partners holding 43.5 percent of the OJVG) for total
consideration of $37.8 million.
On January 15, 2014, the Company acquired the balance of
the OJVG that it did not already own from Bendon and Badr.
The Company acquired Bendon’s 43.5 percent participating
interest in the OJVG for cash consideration of $105.0 million.
Badr’s 13 percent carried interest in the OJVG was acquired
for cash consideration of $7.5 million and further contingent
consideration that will be based on higher realized gold
prices and increases to OJVG reserves through 2020. Upon
finalization of the allocation of the purchase price, $3.8
Stripping Costs in the production phase of a surface mine
for further details. These write-downs were fully reversed in
fourth quarter 2014 leading to higher net earnings.
Operating cash flows trended lower during certain quarters
as a result of transaction costs related to the acquisition of
the OJVG. Operating cash flows during 2014 also reflect the
impact of delivering a portion of quarterly gold production to
Franco-Nevada at 20 percent of gold spot prices. Operating
cash flows during the first and second quarters of 2013
included a use of cash to buy-back-back the remaining “out
of the money” gold forward sales contracts and the delivery
of 45,289 ounces into the hedge book at $806 per ounce.
million of contingent consideration was accrued as a non-
current liability based on targeted additions to OJVG
reserves. The acquisitions of Bendon’s and Badr’s interest
in the OJVG were funded by the gold stream agreement with
Franco-Nevada and from the Company’s existing cash
balance.
The acquisition of Bendon’s and Badr’s interests in the
OJVG increased the Company’s ownership to 100 percent
and consolidated the Sabodala region, increasing the size
of the Company’s interests in mine license from 33km2 to
246km2, more than doubling the Company’s reserve base
and providing the Company with the flexibility to integrate
the OJVG satellite deposits into its existing operations. The
contribution of 100 percent of the OJVG has been reflected
into Teranga’s results from January 15, 2014.
Acquisition related costs of approximately $1.5 million have
been expensed during the year ended December 31, 2014,
and are presented within other expenses in the consolidated
statements of comprehensive income.
Reserves and Resources
Mineral Resources at December 31, 2014 are presented in
Table 1. Total open pit Proven and Probable Mineral
Reserves at December 31, 2014 are set forth in Table 2. The
reported Mineral Resources are inclusive of the Mineral
Reserves.
The Proven and Probable Mineral Reserves were based on
the Measured and Indicated Resources that fall within the
(US$000's, except where indicated)Q4 2014Q3 2014Q2 2014Q1 2014Q4 2013Q3 2013Q2 2013Q1 2013Revenue 76,553 56,711 57,522 69,802 58,302 50,564 75,246 113,815 Average realized gold price ($/oz) 1,199 1,269 1,295 1,293 1,249 1,339 1,379 1,090 Cost of sales1 37,738 52,358 62,819 55,069 48,526 36,825 52,334 55,748 Net earnings (loss)1 27,693 (1,524) (12,543) 4,151 (2,420) 49 7,467 45,184 Net earnings (loss) per share ($)1 0.08 (0.00) (0.04) 0.01 (0.01) 0.00 0.03 0.18 Operating cash flow 30,677 13,822 (9,793) 14,303 13,137 16,692 20,838 23,640 201320141 The Company has reassessed the accounting for deferred stripping assets to include amortization of equipment directly related to deferred stripping activity. The impact of this adjustment has been applied retrospectively from January 1, 2012.
designed open pits. The basis for the resources and
reserves
the Canadian Securities
Administrators National Instrument 43-101 Standards for
Disclosure for Mineral Projects (“NI 43-101”) regulations.
is consistent with
The Sabodala pit design, which remains unchanged and is
consistent with the Mineral Reserves reported previously, is
based on a $1,000 per ounce gold price pit shell for Phase
4. A re-evaluation of the final pit limits of Sabodala Phase 4
will be completed prior to mining and will use updated
economic parameters at that time. Currently, the plan to
mine Phase 4 in Sabodala is estimated to begin in 2016.
The Niakafiri and Gora pit designs remain unchanged from
December 2012.
The Masato pit design has been updated and is based on
an updated resource model, using a $1,200 gold price with
mine operating costs reflecting current conditions.
remain
The Golouma and Kerekounda pit designs
unchanged from December 2013. Resource models are
expected to be updated based on drill programs recently
completed, with subsequent pit designs and revised
reserves estimates expected later in 2015. These have
been based on a $1,250 per ounce pit shell, however, when
comparing to adjusted cut-off grades to match current
operating costs, minimal adjustments were required to
match a $1,200 per ounce pit shell.
Masato Resource model update
Drill hole assays and surface trenching results from the 2014
advanced exploration program were incorporated into an
updated Masato mineral resource model during the fourth
quarter 2014. A total of 2,900 metres in 22 diamond drill
holes (“DDH”) and 6,000 metres in 98 reverse circulation
(“RC”) holes were completed in 2014.
DDH drilling confirmed the interpretation of mineralized
zones and infilled gaps to upgrade resource classification of
Inferred Resources.
RC holes were drilled at 10 metre spacing in 2 separate test
block areas in oxide ore to test the continuity of portions of
the high-grade sub-domains. Results confirm the nature of
high grade mineralization in these areas, as well as overall
shallower dipping zones than was previously interpreted.
Due to the complex nature of mineralization, a total of 11
mineralization models were generated following non-linear
trending structures. Mineral resources were estimated using
locally varying anisotropies respecting local trends. Oxide
densities were revised to reflect the gradational density
difference associated with increasing depth from surface.
Fresh rock densities were revised and averaged for
mineralized and non-mineralized areas.
A comparison of the reserve model against actual mined in
2014 indicates 2 percent higher tonnes, 5 percent higher
grade and 8 percent higher ounces mined. This can be
attributed to a shallower higher grade mineralization trend in
oxides in areas delineated with wider spaced drilling.
Overall, 72,000 ounces were added at Masato during 2014
including 16,000 ounces in the high-grade test blocks drilled.
Due to the complexity of the high grade zones revealed from
the 10 metre test block areas, extension of high grade
intercepts will need to be continually updated as mining
advances with 10 metre spacing from the RC grade control
process. As a result, the high grade added in the updated
model was in the near surface areas in Phase 1 where 10
metre spacing drilling occurred.
Notes for Table 1: Mineral Resources Summary:
1)
2)
3)
4)
5)
6)
7)
8)
CIM definitions were followed for Mineral Resources.
Mineral Resource cut-off grades for Sabodala, Masato, Golouma, Kerekounda and Somigol Other are 0.2 g/t Au for oxide and 0.35 g/t Au for fresh.
Mineral Resource cut-off grades for Niakafiri are 0.3 g/t Au for oxide and 0.5 g/t Au for fresh.
Mineral Resource cut-off grade for Gora is 0.5 g/t Au for oxide and fresh.
Mineral Resource cut-off grade for Niakafiri West and Soukhoto is 0.3 g/t Au for oxide and fresh.
Mineral Resource cut-off grade for Diadiako is 0.2 g/t Au for oxide and fresh.
Measured Resources include stockpiles which total 11.30 Mt at 0.82 g/t Au for 0.30 Mozs.
High grade assays were capped at grades ranging from 10 g/t to 30 g/t Au at Sabodala, 20 g/t to 70 g/t Au at Gora, from 4 g/t to 25 g/t Au at Masato, from 5 g/t to 70 g/t for Golouma, from 11 g/t to 50 g/t at Kerekounda,
and from 0.8 g/t to 110 g/t at Somigol Other.
The figures above are “Total” Mineral Resources and include Mineral Reserves.
Neither underground Mineral Resources nor Mineral Reserves have been generated by the Company, therefore global Mineral Resources have been reported at the determined cut-off grades. A detailed underground
analysis will be undertaken to follow-up on the underground resource potential; however, this is not a priority in the near term.
Sum of individual amounts may not equal due to rounding.
9)
10)
11)
For clarity, the mineral Resource estimates disclosed above with respect to Niakafiri, Gora and ML Other (which includes
Niakafiri, Niakafiri West, Soukhoto and Diadiako) were prepared and first disclosed under the JORC Code 2004. It has not
been updated since to comply with JORC Code 2012 on the basis that the information has not materially changed since it was
last reported. Refer to Teranga Gold Corporation’s ASX Quarterly December 31, 2013 report filed on January 30, 2014 for
further details. All material assumptions and technical parameters previously disclosed continue to be applicable and have not
materially changed. See Competent Person Statements on pages 33 and 34 for further details.
Table 1: Mineral Resources SummaryTonnesGradeAuTonnesGradeAuTonnesGradeAuArea(Mt)(g/t)(Moz)(Mt)(g/t)(Moz)(Mt)(g/t)(Moz)Sabodala23.731.210.9219.551.230.7743.281.221.70Gora0.495.270.081.844.930.292.325.000.37Niakafiri0.301.740.0210.501.100.3710.701.120.39ML OtherSubtotal Sabodala24.521.301.0231.891.401.4356.411.362.46Masato1.550.960.0550.261.041.6751.811.031.72Golouma12.042.691.0412.042.691.04Kerekounda2.203.770.272.203.770.27Somigol Other18.720.930.5618.720.930.56Subtotal Somigol1.550.960.0583.221.333.5484.771.323.59Total26.071.281.07115.111.354.97141.181.336.05TonnesAuAuArea(Mt)(g/t)(Moz)Sabodala18.420.930.55Gora0.213.380.02Niakafiri7.200.880.21ML Other10.600.970.33Subtotal Sabodala36.430.941.11 Masato19.181.150.71Golouma2.462.010.16Kerekounda0.344.210.05Somigol Other12.870.840.35Subtotal Somigol34.861.131.26Total71.291.032.37MeasuredIndicatedMeasured and IndicatedInferred Resources
Notes for Table 2: Mineral Reserves Summary:
1.
2.
3.
4.
5.
6.
7.
8.
CIM definitions were followed for Mineral Reserves.
Mineral Reserve cut off grades for Sabodala are 0.40 g/t Au for oxide and 0.5 g/t Au for fresh based on a $1,250/oz gold price and metallurgical recoveries between 90 percent and 93 percent.
Mineral Reserve cut off grades for Niakafiri are 0.35 g/t Au for oxide and 0.5 g/t Au for fresh based on a $1,350/oz gold price and metallurgical recoveries between 90 percent and 92 percent.
Mineral Reserve cut off grade for Gora is 0.76 g/t Au for oxide and fresh based on $1,200/oz gold price and metallurgical recovery of 95 percent.
Mineral Reserve cut off grades for Masato are 0.4 g/t Au for oxide and 0.5 g/t for fresh based on $1,200/oz gold price and metallurgical between 90 percent and 93 percent.
Mineral reserve cut off grades for Golouma and Kerekounda are 0.4 g/t Au for oxide and 0.5 g/t for fresh based on $1,250/oz gold price and metallurgical between 90 percent and 93 percent.
Sum of individual amounts may not equal due to rounding.
The Niakafiri deposit is adjacent to the Sabodala village and relocation of at least some portion of the village will be required which will necessitate a negotiated resettlement program with the affected community
members.
The Gora deposit is intended to be merged into the Sabodala mining license which the State of Senegal has agreed to in principal subject to completion and receipt of an approved environmental and social impact
assessment which is ongoing.
There are no other known political, legal or environmental risks that could materially affect the potential development of the identified mineral resources or mineral reserves other than as already set out in the
Company’s Annual Information Form dated March 31, 2014 (revised April 24, 2014). Refer to RISK FACTORS beginning on page 60.
9.
10.
For clarity, the mineral Reserve estimates disclosed above with respect to Niakafiri and Gora was prepared and first disclosed
under the JORC Code 2004. It has not been updated since to comply with JORC Code 2012 on the basis that the information
has not materially changed since it was last reported. Refer to Teranga Gold Corporation’s ASX Quarterly December 31, 2013
report filed on January 30, 2014 for further details. All material assumptions and technical parameters previously disclosed
continue to be applicable and have not materially changed. See Competent Person Statements on pages 33 and 34 for further
details.
Masato Development and OJVG Integration
Development of the Masato deposit is complete and mining
commenced during the third quarter of 2014. First ore
delivery was completed in third quarter 2014, with a gradual
ramping up of production rates throughout fourth quarter
2014. The heavily oxidized upper ore zones did not create
significant materials handling issues in the plant and the total
blend of oxide with fresh Sabodala ore was increased
throughout fourth quarter 2014. The gold recovery from
Masato met expectations, demonstrated by the metallurgical
accounting for the year as well as results from an individual
bulk test in the plant. The softer oxidized ore from Masato
provided for an increase in mill throughput and lower overall
plant unit operating costs.
Base-Case Life of Mine
During the first quarter 2014, the Company filed a National
Instrument – Standards of Disclosures for Mineral Projects
(“NI 43-101”) technical report which included an integrated
life of mine (“LOM”) plan for the combined operations of
Sabodala and the OJVG. The integrated LOM plan had been
designed to maximize free cash flow in the prevailing gold
price environment. The sequence of the pits can be
optimized, as well as the sequencing of phases within the
pits, based not only on grade, but also on strip ratio, ore
hardness, and the capital required to maximize free cash
flows in different gold price environments. As a result, the
integrated LOM annual production profile represented an
optimized cash flow for 2014 and a balance of gold
production and cash flow generated in the subsequent five
years. Based on the current reserve base on $1,200 per
ounce gold the Company has the flexibility to reduce
material movement and capital costs which reduces
production by about 5 percent but expects to generate free
cash flow over the period 2015-2017.2 At the same time, as
gold prices increase, the Company has the ability to
increase material movement and gold production. One of the
strategic alternatives available to the Company, should
materially lower gold prices arise, is to supplement higher
grade feed to the mill with low-grade ore stockpiles on hand
thus significantly reducing or eliminating material movement
costs.
With expectations for additional reserves based on drilling in
Niakafiri, Masato, Golouma, Kerekounda and
further
discoveries on the land acquired from the OJVG, further
2 This forecast financial information is based on the following material assumptions: Gold
price: $1,200 per ounce; average annual gold production (2015-2017) of approximately
240,000 ounces; and total mine production costs assumed for the 2015 Outlook. The
production guidance is based on existing proven and probable reserves only from both
the Sabodala mining license and OJVG mining license as disclosed in Table 2 on page
17 of this Report.
Table 2: Mineral Reserves Summary TonnesGradeAuTonnesGradeAuTonnesGradeAuArea(Mt)(g/t)(Moz)(Mt)(g/t)(Moz)(Mt)(g/t)(Moz)Sabodala1.981.520.102.481.480.124.451.500.21Gora0.484.660.071.354.790.211.834.760.28Niakafiri0.231.690.017.581.120.277.811.140.29Stockpiles11.300.820.3011.300.820.30Subtotal Sabodala13.991.070.4811.411.630.6025.401.321.09Masato26.931.130.9826.931.130.98Golouma6.472.240.466.472.240.46Kerekounda0.883.260.090.883.260.09Subtotal Somigol 34.281.391.5334.281.391.53Total13.991.070.4845.691.452.1259.681.362.62ProvenProbableProven and Probable
mine plan optimization work will continue. As a result, the
integrated LOM production schedule represents a “base
case” scenario with flexibility to improve cash flows in
subsequent years.
Mill Enhancements
A study to quantify and optimize the relationship between an
increase in crusher availability to the SAG and Ball Mill
system, as well as other design enhancements within the
crushing and grinding system was completed during the
third quarter 2014.
Improvements to the SAG mill as part of sustaining capital
include adjustments made
liners along with
installation of a discharge head and trommel screen to
improve throughput. Increased throughput in the ball mills
will result from new gear boxes which will increase power to
the ball mills thereby increasing throughput.
to mill
The largest capital component of the mill upgrade will
consist of adding a second primary jaw crusher to operate in
parallel with the existing unit. This will (i) increase availability
to the live storage for the mill circuit, and (ii) provide the
ability to reduce the top size primary crusher feed. Basic
engineering was initiated in the fourth quarter of 2014 to
finalize design, layout, material quantities, procurement
packages and an execution plan for construction.
from
is expected
improvement
realized earlier on
The parallel crusher construction
to be
operational over a span of approximately 18 months, with
continual
the
sustaining capital initiatives. The Company has budgeted
approximately $6.0 million in 2015, however, detailed
engineering is ongoing to determine the final cost estimate.
A decision to proceed to construction will depend on the
Company’s upcoming exploration and heap leach results to
ensure the best allocation of capital for the Company.
Simulations have demonstrated that production potential
exists beyond 480 tonnes per operating hour with these new
configurations once commissioning has been completed
after installation.
Heap Leach Project
The LOM plan shows a significant amount of both oxide and
sulphide low grade reserves that are mined during the
operating period but not processed until the end of the mine
life. There also exists significant potential along an 8km
mineralized structural trend covering both mine leases to
increase the known reserves with near surface, oxidized ore.
The potential benefit to accelerating value from this ore
earlier by feeding it through a heap leach process was
evaluated during 2014. Phase 1 of the testwork (various
stages of the soft and hard oxidized transition zones) has
been completed. Based on positive results of this testwork,
Phase 2 (analysis of hard ore on the ROM stockpile) has
been initiated.
The ongoing testwork is being completed by Klappes,
Cassidy and Associates at their facilities in Reno, Nevada,
who are experienced in testing and designing heap leach
facilities throughout the world, including West Africa.
Key milestones for the project are as follows:
Complete Phase 1 testwork, economic analysis and
initiate engineering design to pre-feasibility study
(“PFS”) level – completed fourth quarter of 2014;
Complete additional follow up optimization testwork
and, initiate Phase 2 testwork on the ROM stockpiles –
ongoing through to first half of 2015;
Initiate design concepts and proceed with PFS level
engineering design study – initiated in first quarter of
2015; and
Initiate advanced level engineering design, initiate
targeted resource drilling and environmental studies to
support an environmental and
impact
assessment (“ESIA”) submission – second half of 2015.
social
The Company is encouraged by the Phase 1 test results.
Key variables (recovery rates, agglomeration and cyanide
consumption of the oxide ore zones) are in line with the
Company’s initial expectations.
The hard transition oxide ore, (representing approximately
40 percent) is being tested at a top size of 12.5 mm crush
with 8 kg/t of cement addition that passed percolation tests
representing a lift height to 16 metres. Preliminary results
from the column leach tests indicate an average recovery of
approximately 75 to 80 percent. The optimal cyanide
consumption versus maximum leach will be determined in
the PFS and is expected to be in the range of 0.5-0.7 kg/t
cyanide consumption after approximately 40 to 70 days of
leach time.
testwork
Additional
the saprolite ore
(representing approximately 10 percent) and for several bulk
samples representing ~11Mt of low grade ROM stockpile.
is ongoing
for
The Company is targeting production from heap leach
commencing in 2017, with the quantities and scale of
operation to be defined upon the completion of Phase 2 and
completion of drilling of potential low-grade heap leach
material on the combined mine licenses. At this point, the
Company anticipates that heap leach could account for an
incremental 10 to 20 percent of annual production once fully
operational.
Gora Development
The high-grade Gora deposit will be operated as a satellite
deposit to the Sabodala mine, requiring 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 lower grade feed as
required.
Technical approval of the Gora ESIA was completed in the
fall of 2014 and the public enquiry process was completed
in late January 2015. As a result, the Company received
approval to begin access road construction in mid-February
2015. The final phase in the ESIA process, a public hearing
to announce the outcome of the technical and public enquiry
processes, occurred on February 18th. Environmental
approval and the occupational haul road permit are now
expected in the ordinary course.
Due to excess equipment available from the lower material
movement rates, mine operations has initiated construction
with a complement of contractors required to complete the
road during the second quarter of 2015. Infrastructure to
support mine operations, a small water retention structure
and pit preparations are expected to commence during the
second quarter 2015 with ore to be stockpiled and delivered
to the plant by a contractor in the fourth quarter 2015.
Sabodala Mine License Reserve Development
The Sabodala combined mine license covers 246km2. In
addition to the mine related infrastructure, it contains the
Sabodala, Masato, Niakafiri, Niakafiri West, Soukhoto and
Dinkokhono deposits on the former Sabodala 33km2 license
area, and the Masato, Golouma and Kerekounda deposits
on the OJVG mine license area of 213km2. As we have
integrated the OJVG geological database into a combined
LOM plan, a number of areas have been revealed as
potential sources for reserve additions within the mining
lease. These targets have been selected based on potential
for discovery and inclusion into open pit reserves.
In total, the combined mine license includes 5.7 million
ounces of Measured and Indicated Resources and a further
2.35 million ounces of Inferred Resources.3 A significant
multiyear reserve development program is under way to add
high-grade mill feed and low-grade heap leach feed to the
open pit reserve base, which should allow the Company to
further increase production toward its phase 1 organic
growth target of 250,000 to 350,000 ounces of annual
production. In addition, exploration programs are underway
on the combined mine license to make new discoveries that
may further enhance both the phase 1 and phase 2 organic
growth targets.
Niakafiri
In 2013, further surface mapping was completed at Niakafiri
in conjunction with the re-logging of several DDH, which
were incorporated into the geological model for the Niakafiri
deposit. Further exploration work, including additional
drilling, is targeted for 2015 following discussions with the
Sabodala village.
In addition to the potential expansion of hard ore reserves at
Niakafiri, the Company is exploring for potential softer ore
that may be conducive to heap leach, with emphasis on the
mineralized trend to the north and south of the current
reserves at Niakafiri.
Masato
An advanced exploration program began at Masato during
the second quarter of 2014 and continued into the third
quarter 2014 to inter alia test the continuity of portions of the
high-grade sub-domains, which were removed from the
Masato reserve base after the acquisition of OJVG in 2014.
The overall program consisted of drilling and trenching to
confirm interpretation of domains and high-grade sub-
domains, infill gaps and upgrading Inferred Resources,
determining optimal RC grade control drill spacing and
obtaining additional geotechnical data for pit slope analysis.
Overall, the program confirms the Company’s interpretation
3 Analysis to determine underground potential for a portion of the reported resources is
planned to be completed by the Company this year
of the resource model and provides additional confidence in
the nature of the high-grade mineralization within the
deposit.
Surface trenching and RC drilling revealed additional ore
zones not modelled in the supergene enriched laterite ore
near surface during mining of the uppermost benches in the
third quarter 2014. RC drilling in advance of mining in 10
metre spacing of the ore zones will be ongoing as part of a
comprehensive grade control program for mine operations.
All drill hole assay data for the 2014 Masato exploration
program, including drill hole locations and a location map,
are
at
www.terangagold.com under “Exploration”.
the Company’s website
available
on
Golouma NW Extension
Infill drilling was undertaken for potential conversion of
inferred resources outside of the existing pit limits to the
northwest of the current Golouma orebody to evaluate the
mineralization potential of structural features along strike to
the existing reserves. By the end of the fourth quarter of
2014, 26 diamond drill holes, totaling 3,100 metres were
completed. Encouraging gold values were reported from
several holes. The presence of two gold mineralized shear
structures (north south shear and northwest shear) within
metavolcanic units located to the north and northwest of the
existing reserves has been confirmed, with continued
mineralization to the north where these features intersect.
An updated resource model and subsequent reserves
evaluation will be completed based on the drilling completed
in the fourth quarter of 2014. Additional drilling is ongoing to
test mineralization potential to the north and infill drilling
along the northwest shear.
Masato Northeast
Detailed mapping and trenching (4,300 metres) were
completed on the Masato Northeast prospect which is
situated 1km northeast along strike of the Masato deposit.
The prospect overlies a sequence of mafic volcanics within
which there is a 2.5 km long structural splay off the main
Masato structural trend. Trenching has defined a north-
northeast trending shear zone with distinctive quartz-
results
carbonate-sericite alteration
received to date indicate elevated gold values are developed
along the length of the shear structure. A 10-hole DDH
drilling program is ongoing to test the gold mineralized zones
at depth in sections of the shear. Additional drilling in
addition to this program is expected to continue through the
first half of 2015, with potential for a yearlong campaign
pending initial results.
features. Assay
Kerekounda
An 11-hole, 1,200 metres DDH drilling program was
completed in the fourth quarter 2014 with the aim of
determining the extent of mineralization further along strike
of the existing reserves to the south of the existing reserves
pit. Assay results are awaited and pending results, an
updated
evaluation will be completed in the first half of 2015.
resource model with subsequent
reserves
Niakafiri SE and Maki Medina
Both RC and DDH drilling is planned for potential conversion
of inferred resources, geotechnical holes for pit wall
determination and exploratory holes to the north toward the
Niakafiri deposit
to evaluate extension along strike.
Additional drilling to determine near surface oxide resources
will also be evaluated. Due to the positive results for the
heap leach tests, work in these areas is expected to
commence in the first quarter 2015, but may be deferred
later into 2015 to coincide with drilling near Sabodala village
on the Niakafiri reserves.
Regional Exploration
this significant
The Company currently has 9 exploration permits
encompassing approximately 1,055km² of land surrounding
the Sabodala and OJVG mine licenses (246km2 exploitation
permits). Over the past four years, with the initiation of a
regional exploration program on
land
package, a tremendous amount of exploration data has
been systematically collected and interpreted to implement
methodical and cost-effective follow-up programs. Targets
are in various stages of advancement and are prioritized for
follow-up work and drilling. Early geophysical and
geochemical analysis of these areas has led to the
demarcation of at least 50 anomalies, targets and prospects
and the Company expects that several of these areas will
ultimately be developed into mineable deposits. The
Company has identified 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 mineable deposit takes time using a
disciplined screening process to maximize the potential for
success.
regional scale structural trend, which is host to other gold
deposits in the region. The shear zones are characterized
by quartz-carbonate alteration zones 10-20 metres in width
with quartz veining and gossan development. These zones
and other gold soil anomalies will be tested by a trenching
program in 2015. A DDH program will follow later in 2015.
Soreto
Following up on a small 5-hole DDH program at the Soreto
prospect in 2013, a 15-hole DDH program for 2014 was
primarily completed during the fourth quarter of 2014, with
the remainder during early 2015. These were located along
two fence lines placed 150 metres on either side of the 2013
fence that intersected reasonable gold values. At least three
continuous shear zones were intercepted along strike.
These featured west dipping (25 - 35º) altered shear zones
with
felsic dyke, sheared and brecciated silicified
metasediments containing quartz-carbonate veins with
disseminated pyrite and visible gold in places. The shear
zones coincide with the major north-northeast regional shear
structure with an associated 6km long geochemical soil
anomaly and when projected to surface, align with the
surface workings from artisanal mining.
Further infill drilling (13 DDHs) was undertaken in the fourth
quarter 2014 to further extend these mineralized shear
zones along strike and infill drill to 50 metre spacing between
the fence lines. The Company is awaiting assay results from
the infill drilling program.
Gora Northeast Extension and Zone ABC
Trenching and mapping programs are being planned for the
first quarter of 2015 to investigate potential gold mineralized
extensions of the Gora gold deposit into the Zone ABC
prospect, which has significant gold soil anomalies co-
incident with regional structural trends.
Ninienko
KD Prospect
An extensive mapping and trenching program covering
1,500 metres which was conducted during the second and
third quarters of 2014 at the Ninienko prospect, is ongoing.
This work outlined a 500 metre-plus wide zone with gold
mineralization occurring in flat-lying, near surface (0-2
metres) quartz vein and felsic breccia units developed over
a strike length of 1,500 metres.
An isopach plan of the mineralized quartz vein and felsic
breccia systems is in progress, and will be used to develop
a plan for DDH and a possible RC drill program. Due to the
limitation of surface trenching and mapping used to develop
the flat lying mineralized zone at surface, additional
trenching and mapping will also be undertaken
in
prospective zones near to the area to expand on the
currently defined zone and
further develop an
understanding of the source of mineralization zones for
potential drill targets at depth.
to
A detailed geochemical soil sampling program commenced
in the fourth quarter of 2014 to follow up and test co-incident
gold-molybdenum-copper and
anomalies
identified by an earlier regional termite mound sampling
program. The sampling program has led to the discovery of
two separate shear zones both following the north-northeast
potassium
Mapping and outcrop sampling programs were undertaken
on KD during the fourth quarter 2014. The programs are
investigating and following gold in soil anomalies identified
in regional termite mound sampling surveys. The anomalies
coincide with northeast and northwest trending regional
scale structures. Rock chip sampling of outcrop within a
northwest trending shear zone in metasediments yielded a
number of elevated gold values including 40 gpt and 83 gpt
gold. Trenching programs to follow up on these anomalies
have been planned for the first quarter 2015.
KC Prospect
Approximately 3,200 metres of trenching was completed
across a mineralized structural trend with intense quartz
veining and brecciated felsic intrusives developed over a
strike length of approximately 1,800 metres. Sampling of the
trenches yielded elevated gold values in the overburden of
up to 18.45 gpt over 0.4 metres and 6.27 gpt over 0.6
metres. The quartz vein and breccia zone yielded elevated
gold values in the range of 1.95 gpt over 0.3 metres true
width and 1.41 gpt over 0.2 metres true width with limited
continuity along strike. Due to limited mineralization in the in
situ rock, it was determined that follow up drilling was not
likely to produce results and resources were best allocated
to higher prospective targets.
A follow-up soil sampling and trenching program is planned
in first quarter 2015 to evaluate a large soil anomaly (peak
values of 2.64 gpt and 2.38 gpt) located 800 metres to the
west of workings which may account for the elevated gold
anomalies identified in overburden in the trenches. A limited
trenching program to test a coincident IP resistivity and
chargeability high in the eastern portion of the prospect will
also be undertaken in the first quarter of 2015.
Renewal of Heremakono Exploration Permit
The Heremakono exploration permit is host to a series of
exploration targets, most notably Ninienko, Soreto, and
Soreto North. This permit was originally awarded in October
of 2005 and, absent an extraordinary request for an
extension, would have expired in October 2014. A lack of
safe and secure access to certain exploration permits was
an issue raised with the Government of Senegal and the
State agreed to grant extraordinary extensions upon the
expiry of their customary 9 year terms to address the
Company’s concerns. During the fourth quarter 2014, the
renewal of this significant exploration permit was granted,
extending its term to October 25, 2016.
Health and Safety
Health and safety remains a constant and overriding priority
at Sabodala. It comes first in all regards and everyone is
continuously reminded to consider safety first. Each daily
meeting begins with a safety report and every site report
whether it is daily, weekly, monthly or annually begins with
safety. The Company is emphatic about keeping health and
safety top of mind. The Operational Health and Safety
(OHS) program matured in 2014, pivotal to the yearly results
were the intensive training and rigorous application of the
OHS management plans. The focus is still placed on
proactive, people-based safety management which uses a
documented systematic approach. In 2014, focus was
placed on management of change and vertical integration of
prevention tools. In 2015, Management will focus efforts on
improving loss prevention and controls and integrating these
into the daily life of all who conduct their task at the
operations.
Creating and sustaining a healthy and safe work
environment for all stakeholders is never compromised. The
Company incurred zero lost time injuries (“LTI”) in 2014. As
of year-end, the Company achieved 474 consecutive days
without an LTI.
In 2014, the deadly Ebola Virus reemerged in West Africa.
The Sabodala Management team recognized the risk of
being ill prepared to identify, manage and confine the deadly
virus. Due to Sabodala’s proximity to the highly affected
region, Management prepared an identification and reaction
plan by the end of first quarter 2014, which lead to training
of site medical team and establishing open channels of
communication with relevant authorities in the region. The
Sabodala operations have been actively involved with the
Ebola Private Sector Mobilization Group (EPSMG) since its
include an
inception. Currently, Management’s plans
escalation matrix, reaction planning and crisis management
situations, should there be any possibility of the virus
affecting Sabodala’s operations. With the exception of one
case of ebola in Senegal confirmed in August 2014, Senegal
is currently ebola free.
Corporate Social Responsibility
A key component of the Company’s vision is to set the
benchmark for responsible gold mining in Senegal. As the
first gold mine in Senegal, Teranga has a unique opportunity
to set the industry standard for socially responsible mining
in the country and to maximize the economic and social
development outcomes for the communities around its mine
and across the country.
in 2014 was
the
A significant CSR achievement
implementation of the Teranga Development Strategy
(“TDS”). The TDS is the result of an 18-month collaborative
process between Teranga, the communities, and local,
regional and national governments, as well as with other
major stakeholders in the near-mine area. The TDS
proposes 78 actions for the Company to promote regional
development and to deliver immediate and long-term
benefits in three priority areas: sustainable economic
growth, agriculture and food security, and youth and training.
We work hard to understand the needs of all stakeholders in
our area of influence and to ensure that our activities are
complementary where appropriate and leading where
necessary.
is
foundation
focused on providing communities with
Teranga
infrastructure paired with sustainable projects and tools that
will surpass the life of mine. The Company continued to lay
the
for community-based entrepreneurship
through its market garden program, a key initiative for
income generation and food security. About 450 local
women are involved in the program which introduced the
sixth market garden earlier in 2014. Three of the gardens
are fully matured and grew 72 tons of produce during the
year for the benefit of six villages.
The agriculture and food security program expanded to 17
pilot and demonstration farms, 16 individual poultry farms
and 13 grain mills. New techniques continue to be
introduced to enhance local agricultural production. In
addition, Teranga continually participates in the extension
and rehabilitation of water infrastructure and during 2014,
completed a water supply system providing potable water to
two nearby villages.
to provide access
to better education
In 2014, the Company broadened its skill development
program
for
Senegalese nationals. This included funding bursaries for
students in the regional capital of Kedougou to attend
international schools, supporting Kedougou students
studying in the Country’s capital, Dakar, and providing
internships and onsite training programs. The Company also
refurbished school facilities in nearby villages and donated
educational materials to the elementary schools of Sabodala
Village benefitting 1,846 students. The skill development
and education of Senegalese nationals is part of Teranga’s
long-term development plan for the region.
The Company’s annual health promotion initiative continued
with anti-malaria spray programs in the villages around the
mine site as well as a vaccination program in the local
communities. In addition, the Company financed the
construction of a health post in the Diakhaling village and
supported
the departmental hospital of Saraya by
establishing a connection to the national electricity grid.
Teranga’s CSR performance is fully reported in its 2013
annual Responsibility Report which
in
accordance with the Global Reporting Initiative (“GRI”) G4
Guidelines, and is accessible on the Company’s website at
to
www.terangagold.com.
responsible mining defines the Company and drives its way
of doing business.
is prepared
commitment
Teranga’s
Market Review – Impact of Key Economic Trends
Gold Price ($/oz)
London PM Fix
$1,500
$1,400
$1,300
$1,200
$1,100
$1,000
London PM Fix
Average 2014
Source: Thomson Reuters
The price of gold is the largest factor in determining our
profitability and cash flow from operations. During 2014, the
average London PM Fix price of gold was $1,266 per ounce,
with gold trading between a range of $1,142 and $1,385 per
ounce. This compares to an average of $1,411 per ounce
during 2013, with a low of $1,192 per ounce and a high of
$1,694 per ounce.
The price of gold is subject to volatile price movements over
short periods of time and is affected by numerous industry
and macro-economic factors that are beyond our control
including, but not limited to, currency exchange rate
fluctuations 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.
The 2014 year marked another turbulent year for gold
prices. The ebb and flow of factors affecting gold prices
included the continued reduction of Exchange Traded Fund
(ETF) holdings, the US Federal Reserve winding down its
Quantitative Easing (QE) program, and the strengthening of
the US economy, which in turn drove the US dollar to multi-
year highs against other currencies. All these factors played
a role in the volatility that gold prices saw during 2014, with
gold breaking long-term support levels at various times but
ending the year almost flat compared to the prior year.
Consumer demand for gold for jewelry, bars and coins was
weaker in 2014 than 2013. The Chinese demand declined
as a result of an anti-corruption clampdown in China, which
hurt purchases of luxury goods. In India, a 2013 ruling that
mandated at least 20 percent of imported gold be exported
was in effect until November, 2014, when the Reserve Bank
of India unexpectedly removed this requirement. Lower gold
prices and scrapping of import rules have contributed to a
healthy demand for jewelry in India, which overtook China
as the number one consumer of the metal in 2014. India
currently imposes a 10 percent customs duty on imported
gold, but the jewelry industry in India has asked the
government there to cut the duty to 2 percent to help reduce
smuggling of the metal into India. Such reduction could have
a positive impact on physical gold demand.
While the gold market is affected by fundamental global
economic 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 strategy with effective management of the
Sabodala operations and exploration programs.
Crude Oil Prices 2014
WTI vs. Brent ($/bbl)
$130
$110
$90
$70
$50
WTI
Brent
WTI Average 2014
Brent Average 2014
Source: Thomson Reuters
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
in 2014 or
totaled approximately $50 million
approximately 30 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 Wartsila (diesel generator engines) provide
power for the operations. In 2014, the operations consumed
approximately 29 million litres of HFO. This equates to
approximately $0.22/kwhr, which is less than the cost of grid
electricity in industrialized Senegal. Sabodala’s mobile fleet
runs on LFO and we consumed approximately 20 million
litres of LFO in 2014. We source our HFO and LFO from an
international fuel supplier with a local distribution network in
Senegal. For 2015, we are forecasting HFO and LFO
consumption in the same range as 2014.
Our main benchmark for fuel prices is the Brent crude oil,
which dropped by almost 48 percent in 2014. Slowing
economic growth in China, Europe and emerging markets,
coupled with excess global oil supply and a decision by
Saudi Arabia to cut prices for its biggest customers,
contributed
lows.
Additionally, OPEC members have not cut their production
to support crude oil prices, thus prolonging the period crude
oil prices are expected to remain low.
to driving oil prices
to multi-year
The government in Senegal prices various types of fuels
consumed in the country, and they review these prices every
4 weeks. We have started to see the benefit of lower crude
oil prices translate into lower HFO and LFO prices in
Senegal only late in 2014.
The Company had previously hedged a portion of its
exposure to fuel costs using crude oil forward contracts, and
currently doesn’t have any oil hedges in place. Management
may enter into further oil hedge contracts should the price
and terms be deemed acceptable.
FINANCIAL CONDITION REVIEW
SUMMARY BALANCE SHEET
2014 EUR/USD Exchange Rate
$1.50
$1.45
$1.40
$1.35
$1.30
$1.25
$1.20
EUR/USD
2014 Average
Source: Thomson Reuters
A significant portion of operating costs and capital
expenditures of Sabodala gold mine operations are
denominated in currencies other than US dollars. Historical
accounts payables records demonstrate that the Company
has between 40 and 50 percent Euro currency exposure via
West African CFA Franc, which is pegged directly with the
Euro currency.
The Euro currency declined 12 percent against the US dollar
in 2014. With oil prices declining, European economic
growth bleak and investors bullish on the relative strength of
the US economy, a flight away from the Euro started taking
shape in the second half of 2014. Generally, as the US dollar
strengthens, the Euro currency and other currencies
weaken, and vice versa. A decline in the Euro has a positive
impact on our US dollar reported site costs, holding other
variables constant.
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.
Balance Sheet Review
Cash
The Company’s cash balance at December 31, 2014 was
$35.8 million, similar to the start of the year. Cash and cash
equivalents were higher than the balance reported at
September 30, 2014, as cash flow provided by operations of
$30.7 million was partly offset by debt and interest
repayments totaling $18.7 million and capital expenditures
of $4.1 million.
Other assets
Total other assets increased by $75.8 million to $531.3
million or 17 percent, compared to December 31, 2013. The
increase
in mine development
increase
expenditures and goodwill due to the acquisition of Bendon’s
and Badr’s interest in the OJVG.
reflects an
Borrowings
During the first quarter of 2013, the Company entered into a
$50.0 million Equipment Facility with Macquarie. The
proceeds were put towards additional equipment for the
Sabodala pit. During the fourth quarter of 2013, the
Company cancelled the undrawn commitment from the
Equipment Facility. At December 31, 2014, $4.2 million
remained outstanding and was fully repaid subsequent to
year-end.
On January 15, 2014, the Company amended its existing
$60.0 million Loan Facility with Macquarie and retired half of
the balance of $30.0 million. The outstanding balance was
fully repaid by December 31, 2014 and the $15.0 million
restricted cash requirement was removed. A minimum
liquidity financial covenant of $15.0 million is required as part
of the streaming transaction with Franco-Nevada.
Deferred revenue
In connection with the gold stream transaction with Franco-
Nevada, the Company received $135.0 million on January
15, 2014, which was recorded as deferred revenue.
(US$000's)Balance Sheet20142013Cash and cash equivalents1 35,810 34,961 Trade and other receivables 1,562 7,999 Inventories 157,696 130,202 Other assets 531,255 455,481 Total assets 726,323 628,643 Trade and other payables 53,909 56,891 Borrowings 3,946 74,369 Other liabilities 152,573 27,046 Total liabilities 210,428 158,306 Total equity 515,895 470,337 1 Includes restricted cash of nil at December 31, 2014 (December 31, 2013 - $20.0 million).Year ended December 31
During the year ended December 31, 2014, the Company
delivered 20,625 ounces of gold to Franco-Nevada and
recorded revenue of $26.3 million, consisting of $5.3 million
received in cash proceeds and $21.0 million recorded as a
reduction of deferred revenue. The Company is required to
deliver to Franco-Nevada 22,500 ounces annually for the
first six years followed by 6 percent of production from the
Company’s existing properties. Due to the timing of
shipment schedules near year end, the delivery of 1,875
ounces of gold for the month of December was not received
by Franco-Nevada until early January 2015. As a result, this
delivery could not be recognized for accounting purposes for
the year ended December 31, 2014. The transaction with
Franco-Nevada permits for the delivery of payable gold for
up to five business days following a month end.
Liquidity and Cash Flow
Cash Flow
Operating Cash Flow
For the year ended December 31, 2014, operating cash
provided $49.0 million compared to $74.3 million in the prior
year. The decrease was primarily due to lower revenues,
including the impact of delivering a portion of current period
production to Franco-Nevada at 20 percent of gold spot
prices. For the year ended December 31, 2013, operating
cash flow included a use of cash to buy-back-back the
remaining “out of the money” gold forward sales contracts
and the delivery of 45,289 ounces into the hedge book at
$806 per ounce.
Investing Cash Flow
Net cash used in investing activities for the year ended
December 31, 2014 was $111.4 million compared to $89.0
million in the prior year. The increase in cash flow used in
investing activities was due to the acquisition of the OJVG
of $112.5 million, partially offset by lower sustaining and
development capital expenditures and lower capitalized
deferred stripping costs in the current year, as well as a
$20.0 million decrease in the restricted cash balance.
Financing Cash Flow
Net cash provided by financing activities for the year ended
December 31, 2014 was $83.3 million compared to net cash
(US$000's)Cash Flow 20142013 Operating 49,009 74,307 Investing (111,413) (89,018) Financing 83,252 (10,481) Effect on exchange rates on holdings in foreign currencies 1 431 Change in cash and cash equivalents during year 20,849 (24,761)Cash and cash equivalents - beginning of year 14,961 39,722 Cash and cash equivalents - end of year 35,810 14,961 Year ended December 31(US$000's)Changes in working capital20142013Decrease/(increase) in trade and other receivables 6,915 (1,613)Decrease/(increase) in other assets 147 1,108 (Decrease)/increase in trade and other payables (8,048) 5,505 Increase/(decrease) in provisions 1,225 (188)Net change in working capital 239 4,812 Year ended December 31(US$000's)Capital Expenditures20142013Mine site & development capital (8,916) (22,268)Capitalized reserve development (4,021) (3,524)Capitalized deferred stripping (5,976) (43,264)Total Capital Expenditures (18,913) (69,056)Acquisition of the OJVG (112,500) - Decrease in restricted cash 20,000 (20,000)Other - 38 Investing activities (111,413) (89,018)Year ended December 31
used by financing activities of $10.5 million in the prior year.
Financing cash flows in 2014 include proceeds of $135.0
million received from the Franco-Nevada gold stream
transaction and net proceeds of $25.4 million from the equity
offering, partially offset by the repayment of borrowings of
$72.8 million and interest paid on borrowings of $3.3 million.
Financing cash flows in 2013 include proceeds of $12.8
million received from the Equipment Facility, partially offset
by the repayment of borrowings of $12.3 million, interest
paid on borrowings of $7.1 million and advance dividends
paid to the Republic of Senegal of $2.7 million.
Liquidity and Capital Resources Outlook
On May 1, 2014, the Company entered into an agreement
with a syndicate of underwriters to purchase 36,000,000
common shares, on a bought deal basis, at a price of C$0.83
per share for gross proceeds of approximately C$29.9
million. Net proceeds were $25.4 million after consideration
of underwriter fees and expenses totaling approximately
$1.9 million.
The Company’s cash position at December 31, 2014 was
$35.8 million. For 2014, the Company had identified
approximately $80.0 million in one-time payments, including
the retirement of $42.8 million of $47.0 million combined
balance outstanding under the Loan Facility and the
Equipment Facility, $8.0 million in advance dividends, $9.0
million in remaining legal and office closure costs related to
the acquisition of the OJVG, $7.5 million to acquire Badr’s
share of the OJVG and $15.0 million in government
payments.
For the year ended December 31, 2014, the Company has
made a total of $63.0 million in one-time payments. This
includes $42.8 million in debt repayments (including the final
payment for the $60.0 million Macquarie Loan Facility), $3.7
million in payments to the Republic of Senegal and one-time
payments related to the acquisition of the OJVG, including
$9.0 million for transaction, legal and office closure costs
and $7.5 million to acquire Badr’s share of the OJVG.
Approximately $23.0 million in one-time payments to the
Republic of Senegal, are now expected to be paid over 2015
and 2016. The one-time payments described herein,
excludes $30.0 million in debt retired in the first quarter 2014
as part of the Franco-Nevada transaction.
The key factors impacting our financial position and the
Company’s liquidity include the following:
The Company’s ability to generate free cash flow from
operating activities (please refer to the 2015 Outlook on
page 6);
Expected capital expenditure requirements (please
refer to the 2015 Outlook on page 6); and
The gold price.
Using a $1,200 per ounce gold price, the Company expects
to generate free cash flow in 2015. Notwithstanding, the
Company’s cash position is highly dependent on the key
factors noted above, and while the Company expects it will
generate sufficient free cash flow from operations to fund its
growth initiatives, it is working to put a standby facility in
place for general corporate purposes and working capital
needs. As well, the Company may explore other value
preservation alternatives that provide additional financial
flexibility, to ensure sufficient liquidity is maintained by the
Company.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
FINANCIAL INSTRUMENTS
its exposure
financial
The Company manages
risks, including liquidity risk, credit risk, currency risk, market
risk, interest rate risk and price risk through a risk mitigation
strategy. The Company generally does not acquire or issue
derivative financial instruments for trading or speculation.
to
The Company had established gold forward sales contracts
and oil energy swaps to manage exposure to commodity
price risk as a condition of the Project Finance Facility
provided by Macquarie Bank Limited
In 2013, the Company bought back the remaining "out of the
money" gold forward sales contracts at a cost of $8.6 million,
delivered 45,289 ounces into the hedge book at $806 per
ounce and the oil hedge contracts were completed at March
31, 2013.
CONTRACTUAL OBLIGATIONS AND COMMITTMENTS
As at December 31, 2014, the Company had the following payments due on contractual obligations and commitments:
Sabodala Gold Operations (“SGO”), Sabodala Mining
Company (“SMC”) and the OJVG (“OJVG”) Operating
Commitments
The Company has the following operating commitments in
respect of the SGO, SMC and the OJVG:
Pursuant to the Company’s Mining Concession, a royalty of
5 percent is payable to the Republic of Senegal based on
the value of gold shipments, evaluated at the spot price on
the shipment date for SGO.
Pursuant to the completion of the acquisition of the OJVG,
the Company is required to make initial payments totaling
$10.0 million related to the waiver of the right for the
Republic of Senegal to acquire an additional equity interest
in the exploration licenses converted to mine licenses when
the ore is processed through the Sabodala mill. The initial
payment is to be used to finance social projects in the mine
site region, which are determined by the Republic of
Senegal and will be paid either directly to suppliers for the
completion of specific projects or to specified ministries of
the Republic of Senegal. During the year ended December
31, 2014, $1.5 million was paid and the remaining $8.5
million has been accrued and is expected to be paid through
2015 and 2016. An additional payment will become payable
when the actual cumulative production from the OJVG, net
of mining royalties, multiplied by the Company’s weighted
average gold prices, multiplied by 1 percent, exceeds the
initial payments.
Pursuant to the Company’s Mining Concession, $1.2 million
is payable annually
for community projects and
infrastructure to support local communities surrounding the
Company’s operations and social development of local
authorities in the surrounding Kedougou region.
$200 thousand is payable annually for training of Directorate
of Mines and Geology officers and Mines Ministry, $150
thousand per year is payable for training of the Mines
Administration personnel and logistical support of the
Ministry of Mines technical services for the OJVG and $30
thousand is payable annually for logistical support of the
territorial administration of the region for SGO.
$250 thousand is payable annually for a forestry protocol to
the Ministry of Environment for the period of 5 years. As the
protocol was signed on April 2, 2014, the prorated payment
for 2014 amounted to $187.5 thousand.
$925 thousand is payable annually for additional reserves
until 2016 ($3.7 million in total for the period from 2013 to
2016).
$112 thousand is payable annually as institutional support
for the exploration licenses.
Payments Due By Period (US$ millions)Total< 1 year1-3 years4-5 years>5 yearsMining Fleet Lease Facility1 4.2 4.2 - - - Franco-Nevada gold stream2 114.0 21.8 65.4 26.8 - Exploration commitments3 14.2 2.8 11.4 - - Government of Senegal payments4 31.5 13.0 3.5 - 15.0 Total 164.0 41.8 80.4 26.8 15.0 1 During the first quarter of 2013, the Company entered into a $50.0 million finance lease facility with Macquarie. During the fourth quarter of 2013, the Company cancelled the undrawn commitment from the facility. The facility bears interest of LIBOR plus 7.5 percent and will be fully repaid in the second quarter of 2015.4 Refer to Contingent Liabilities - Government of Senegal payments for further details. Excludes royalty payments and OJVG additional waiver payment which are included within Operating Commitments.3 Reflects the exploration permits, licenses and drilling contracts committed to by the Company. The “exploration commitments” only represent the amounts the Company is required to spend to remain eligible for the renewal of permits beyond the current validity period. The Company may elect to allow certain permits to expire and are not required to spend the “committed” amount per respective permit. The Company will not incur any penalties for not meeting the financial requirement for additional validity period tenure. The Garaboureya commitment of $1.0 million assumes the existing permit will be extended upon expiry in third quarter 2015.2 On January 15, 2014, the Company completed a gold stream transaction with Franco-Nevada. The Company is required to deliver 22,500 ounces annually over the first six years followed by 6 percent of production from the Company’s existing properties, including those of the OJVG, thereafter, in exchange for a deposit of $135.0 million. The commitment estimate includes a gold price assumption of $1,250 per ounce.
CONTINGENT LIABILITIES
Government of Senegal payments
Royalty payments
Settled and Outstanding Tax Assessments
Government royalties are payable annually and are accrued
based on the mine head value of the gold and related
substances produced at a rate of 5 percent of sales. During
the second quarter of 2014, a payment of $14.3 million for
2013 royalties were paid to the Republic of Senegal and
during the fourth quarter a payment of $0.8 million was made
for the remaining portion of 2012 royalties.
Reserve payment
A reserve payment is payable to the Republic of Senegal,
calculated on the basis of $6.50 for each ounce of new
reserves until December 31, 2012 and 1 percent of the
trailing 12 month gold price for each ounce of new reserve
beyond December 31, 2012 on the Sabodala mine license.
Social development fund payment
The Company has agreed to establish a social development
fund which involves making a payment of $15.0 million to the
Republic of Senegal at the end of the mine operational life.
As at December 31, 2014, the Company has recorded $9.9
million which is the discounted value of the $15.0 million
future payment.
Accrued dividends
In connection with the Global Agreement signed with the
Republic of Senegal in 2013, the Company has agreed to
advance approximately $13.2 million of accrued dividends in
respect of its 10 percent minority interest between 2013 and
2015. In 2013, the Company made a payment of $2.7 million
with a further payment of $2.7 million required once drilling
activities recommence at Niakafiri, expected in 2015. As at
December 31, 2014, $7.8 million has been accrued based
on net sales revenue and is expected to be paid over 2015
and 2016.
During the second quarter of 2013, the Company made a
payment of $1.2 million in partial settlement of the SGO tax
assessment received in December 2012. During the second
quarter of 2014, a payment of $1.2 million was made in final
settlement.
the SGO 2011
Approximately $18.0 million of
tax
assessment of approximately $24.0 million has been
resolved and approximately $6.0 million remains in dispute.
We believe that the remaining amount in dispute is without
merit and that these issues will be resolved with no amount
or an immaterial amount of tax being due.
During the second quarter of 2013, the Company made a
payment of $1.4 million in full settlement of the SMC tax
assessment received in January 2013.
from
the Senegalese
In January 2015, SGO received a tax assessment for $3.0
million
tax authorities claiming
withholding tax on interest and fees paid to an offshore bank.
The Company believes that the amount in dispute is without
merit and that the issue will be resolved with no or an
immaterial amount of tax due.
CRITICAL ACCOUNTING POLICIES AND
ESTIMATES
Certain accounting estimates have been identified as being
“critical” to the presentation of our financial condition and
results of operations because they require us to make
subjective and/or complex judgments about matters that are
inherently uncertain; or there is a reasonable likelihood that
materially different amounts could be reported under
different conditions or using different assumptions and
estimates. The following is a summary of significant updates
to these estimates.
Gora project advanced royalty payment
Ore reserves
is required
The Company
to make a payment of
approximately $4.2 million related to the waiver of the right
for the Republic of Senegal to acquire an additional equity
interest in the Gora project. The payment is expected to be
made upon receipt of all required approvals authorizing the
processing of all Gora project ore through the Sabodala
plant which is expected in 2015.
Management makes estimates of the Company’s ore
reserves based upon information compiled by qualified
persons as defined in accordance with the Canadian
Instrument 43-101
Securities Administrators’ National
Standards for Disclosure for Mineral Projects requirements,
which is similar to the Australasian standards. The estimated
quantities of economically recoverable reserves are based
(US$000's)Contingent liabilitiesAccrued liabilitiesGovernment of Senegal paymentsRoyalty payments - 14,291 - 12,296 Reserve payment - 925 - 1,850 SGO 2012 tax assessment - 1,200 - - Social development fund payment - - - 15,000 Accrued dividend payment - - 2,700 7,769 Gora project advanced royalty payment - - 4,200 - OJVG Advanced royalty payment 532 1,534 - 8,466 532 17,950 6,900 45,381 Year ended December 31, 2014Three months ended December 31, 2014Cash payments madeAs at December 31, 2014As at December 31, 2014
to be made regarding
upon interpretations of geological models and require
assumptions
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, provision for rehabilitation
obligations, the recognition of deferred tax assets, as well as
the amount of depreciation and amortization charged to the
income statement.
Units of Production (“UOP”)
Management makes estimates of recoverable reserves in
determining the depreciation and amortization of mine
assets. This results in a depreciation/amortization charge
proportional 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 assessments of economically recoverable
reserves of the mine property at which the asset is located.
The calculations require
the use of estimates and
assumptions, including the amount of recoverable reserve
and estimates of future capital expenditure. The Company’s
UOP calculation is based on life of mine gold production. As
the Company updates its estimate regarding the expected
UOP over the life of the mine amortization under the UOP
basis will change. The Company uses the UOP method
when depreciating mining assets which results in a
depreciation charge based on the recovered ounces of gold.
Straight Line Depreciation
The Company uses
depreciating other equipment, office
vehicles and finance lease equipment.
the straight
line method when
furniture, motor
Mine Restoration and Rehabilitation Provision
factors
the provisions
in determining
liability payable. These
Management assesses the Company’s mine rehabilitation
provision annually. Significant estimates and assumptions
are made
for mine
rehabilitation as there are numerous factors that will affect
the ultimate
include
estimates of the extent and cost of rehabilitation activities,
technological changes, regulatory 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 statement of
financial position by adjusting the rehabilitation asset
and liability.
Impairment of Goodwill and Non-Current Assets
Goodwill and non-current assets are tested for impairment if
there is an indicator of impairment, in the case of goodwill,
annually in November. Where an indicator of impairment
exists, a formal estimate 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. This assessment requires the
use of estimates and assumptions such as long-term
commodity prices, discount
capital
operating
requirements,
future
and
exploration
potential
rates,
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 unit 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
development 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:
level of capital expenditure compared
the
construction cost estimates;
to
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.
the
When a mine development project moves
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 or mineable
reserve development.
that
depreciation/amortization commences.
is also at
this point
into
It
Functional Currency
The functional currency of each of Company’s entities is
measured using the currency of the primary economic
environment in which that entity operates. The functional
currency of all of the 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.
Stripping Costs in the Production Phase of a Surface
Mine
Management assesses the costs associated with the
stripping activity in the production phase of surface mining.
The excess waste material moved above the average strip
ratio to provide access to further quantities of ore that will be
future periods, which are estimated by
mined
management.
in
The Company reassessed its accounting for its deferred
stripping asset. The Company had not previously included
amortization of this equipment in its calculations relate to
deferred strip activity. The Company determined that the
amortization of equipment directly related to the deferred
stripping activity should be included as part of the deferred
stripping asset.
As a result, the Company has corrected retrospectively for
the impact of this adjustment. The impact on December 31,
2012 balances was an increase to mine development
expenditures of $1.7 million, a decrease to inventory of $0.5
million and an increase to retained earnings of $1.2 million
for the year ended December 31, 2012.
The impact on the non-cash inventory write-down to NRV
previously recorded in second and third quarter 2014 was a
further write-down of $0.3 million and $2.7 million,
respectively.
Fair Value of Stock Options
Management assesses the fair value of stock options
granted in accordance with the Company’s accounting
policy stated in 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,
its assumptions based on
the Company developed
information available
industry using
the mining
in
comparable companies operating in the gold sector.
Share-based Payment
The Company grants cash-settled awards in the form of
RSUs and DSUs to certain employees, officers and directors
of the Company.
RSUs
Under the Company’s RSU plan, each RSU granted has a
value equal to one Teranga common share. A portion of the
RSUs vest equally over a three year period and are settled
in cash upon vesting. The RSU plan also includes a portion
of RSUs that vest equally based on the Company’s
achievement of performance-based criteria over a three
year period.
RSUs are measured at fair value using the market value of
the underlying shares at the date of the grant of the award.
At each reporting period the awards are re-valued based on
the period end share price with a corresponding charge to
share based compensation expense. The cost of the award
is recorded on a straight line basis over the vesting period
and is recorded within liabilities on the balance sheet. The
expense for the award is recorded on a straight line basis
over the vesting period and is recorded within share based
compensation on
the consolidated statements of
comprehensive income (loss).
DSUs
Under the Company’s DSU plan, each DSU granted has a
value equal to one Teranga common share. Directors have
the option to elect to receive their Director compensation in
the form of DSUs. These DSUs vest as they are granted. All
remaining DSUs
first
anniversary of the grant date.
that are granted vest on
the
DSUs are measured at fair value using the market value of
the underlying shares at the date of the grant of the award.
At each reporting period the awards are re-valued based on
the period end share price with a corresponding charge to
share based compensation expense. The cost of the award
is recorded on a straight line basis over the vesting period
and is recorded within liabilities on the balance sheet. The
expense for the award is recorded on a straight line basis
over the vesting period and is recorded within share based
compensation on
the consolidated statements of
comprehensive income (loss).
Taxes
Management is required to make estimations regarding the
tax basis of assets and liabilities and related income tax
assets and liabilities and the measurement of income tax
expense and indirect taxes. A number of these estimates
require management to make estimates of future taxable
profit or loss, and if actual results are significantly different
than our estimates, the ability to realize any deferred tax
liabilities on our
assets or discharge deferred
consolidated statement of financial position could be
impacted.
tax
Acquisition of the OJVG
The Company determined that the transactions to acquire
the balance of the OJVG it did not already own represent a
single business combination with Teranga as the acquirer.
From January 15, 2014, 100 percent of OJVG’s results were
consolidated into the Company’s operating results, cash
flows and net assets.
In accordance with the acquisition method of accounting, the
acquisition cost has been allocated to the underlying assets
acquired and liabilities assumed, based upon their estimated
fair values at the date of acquisition. The Company used a
discounted cash flow model to determine the fair value of the
OJVG. Expected future cash flows were based on estimates
of projected future revenues, expected future production
costs and capital expenditures. The Company finalized the
purchase price during the third quarter of 2014. The excess
of the acquisition cost over the net identifiable assets
acquired, including consideration of non-controlling interest,
represents goodwill.
Goodwill arose on these acquisitions principally due to the
ability to create operational synergies. The Company has
the ability to optimize the ounces that are processed through
the mill due to the close proximity of the OJVG pits to the
Sabodala mill. The acquisitions will benefit from leveraging
off of the existing built mill and infrastructure.
NON-IFRS FINANCIAL MEASURES
The Company provides some non-IFRS measures as
supplementary information that management believes may
be useful to investors to explain the Company’s financial
results.
Beginning in the second quarter of 2013, we adopted an “all-
in sustaining costs” measure and an “all-in costs” measure
consistent with the guidance issued by the World Gold
Council (“WGC”) on June 27, 2013. The Company believes
that the use of all-in sustaining costs and all-in costs will be
helpful to analysts, investors and other stakeholders of the
Company in assessing its operating performance, its ability
to generate free cash flow from current operations and its
overall value. These new measures will also be helpful to
governments and local communities in understanding the
economics of gold mining. The “all-in sustaining costs” is an
extension of existing “cash cost” metrics and incorporate
costs related to sustaining production. The “all-in costs”
includes additional costs which reflect the varying costs of
producing gold over the life-cycle of a mine.
“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,
certain 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
worldwide association of suppliers of gold and gold products
and included leading North American gold producers. The
Gold Institute ceased operations in 2002, but the standard is
considered the accepted standard of reporting cash cost of
production in North America. Adoption of the standard is
voluntary and the cost measures presented may not be
comparable to other similarly titled measure of other
companies.
The WGC definition of all-in sustaining costs seeks to extend
the definition of total cash costs by adding corporate general
and administrative costs, reclamation and remediation costs
(including accretion and amortization), exploration and study
costs (capital and expensed), capitalized stripping costs and
sustaining capital expenditures and represents the total
costs of producing gold from current operations. The WGC
definition of all-in costs adds to all-in sustaining costs
including capital expenditures attributable to projects or
mine expansions, exploration and study costs attributable to
growth projects, and community and permitting costs not
related to current operations. Both all-in sustaining and all-
in costs exclude income tax payments, interest costs, costs
related to business acquisitions and items needed to
normalize earnings. Consequently, this measure is not
representative of all of the Company’s cash expenditures. In
addition, the calculation of all-in sustaining costs and all-in
costs does not include depreciation expense as it does not
reflect the impact of expenditures incurred in prior periods.
Therefore, it is not indicative of the Company’s overall
profitability.
“Total cash costs”, “all-in sustaining costs” and “all-in costs”
are intended to provide additional information only and do
not have any standardized definition under IFRS and should
not be considered in isolation or as a substitute for measures
of performance prepared in accordance with IFRS. The
measures are not necessarily indicative of operating profit or
cash flow from operations as determined under IFRS. Other
companies may calculate these measures differently. The
following tables reconcile these non-GAAP measures to the
most directly comparable IFRS measure.
“Average realized price” is a financial measure with no
standard meaning under IFRS. Management uses this
measure to better understand the price realized in each
reporting period for gold and silver sales. Average realized
price excludes from revenues unrealized gains and losses
on non-hedge derivative contracts. The average realized
price is intended to provide additional information only and
does not have any standardized definition under IFRS; it
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with
IFRS. Other companies may calculate
this measure
differently.
“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, all-in sustaining costs per ounce sold, all-in costs per ounce sold and total
depreciation per ounce sold are calculated as follows:
(US$000's, except where indicated)Cash costs per ounce sold2014201320142013Gold produced1 71,278 52,368 211,823 207,204 Gold sold 63,711 46,561 206,336 208,406 Cash costs per ounce soldCost of sales2 37,739 48,526 207,984 193,434 Less: depreciation and amortization2 (19,193) (27,902) (69,516) (78,533)Less: realized oil hedge gain - - - (487)Add: non-cash inventory movement2 3,907 12,569 8,089 14,672 Add: non-cash capitalized deferred stripping2 (188) (138) 658 4,124 Less: inventory reversal (write-down) to net realizable value2 16,026 - - - Less: other adjustments (172) 41 (763) 358 Total cash costs 38,119 33,097 146,453 133,568 Total cash costs per ounce sold 598 711 710 641 All-in sustaining costsTotal cash costs 38,119 33,097 146,453 133,568 Administration expenses3 3,094 2,753 13,165 12,650 Capitalized deferred stripping 1,266 1,444 5,977 43,264 Capitalized reserve development 1,496 529 4,020 3,524 Mine site capital 1,343 1,752 8,919 22,267 All-in sustaining costs 45,318 39,575 178,534 215,274 All-in sustaining costs per ounce sold 711 850 865 1,033 All-in costsAll-in sustaining costs 45,316 39,575 178,535 215,274 Social community costs not related to current operations 1,061 311 2,543 1,763 Exploration and evaluation expenditures 373 1,043 2,772 5,405 All-in costs 46,750 40,929 183,850 222,442 All-in costs per ounce sold 734 879 891 1,067 Depreciation and amortization2 19,193 26,702 69,516 77,902 Non - cash inventory movement2 (3,907) (12,569) (8,089) (14,673)Total depreciation and amortization 15,286 15,333 61,427 63,860 Total depreciation and amortization per ounce sold2 240 329 298 306 3 Administration expenses include share based compensation and exclude Corporate depreciation expense and social community costs not related to current operations.2 The Company has reassessed the accounting for deferred stripping assets to include amortization of equipment directly related to deferred stripping activity. The impact of this adjustment has been applied retrospectively from January 1, 2012.Three months ended December 31Year ended December 311 Gold produced represents change in gold in circuit inventory plus gold recovered during the period.
OUTSTANDING SHARE DATA
The Company’s fully diluted share capital as at the report
date was:
TRANSACTIONS WITH RELATED PARTIES
During the year ended December 31, 2014, there were
transactions totaling $137 thousand between the Company
and a director-related entity.
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 individuals 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.
The Company bought 100 percent of Oromin in 2013, which
holds a 43.5 percent participating interest in the OJVG.
During the first quarter of 2014, the Company acquired the
remaining interests in the OJVG that it did not already own.
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 December 31,
2014, 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
during 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 have been designed to
provide reasonable assurance regarding the reliability of
financial
financial
statements for external purposes in accordance with the
issuer’s GAAP.
the preparation of
reporting and
The control framework the Company’s CEO and CFO used
to design the Company’s ICFR is The Committee of
Sponsoring Organizations of the Treadway Commission
(“COSO”) framework established in 1992. There is no
material weakness relating to the design of ICFR. There has
been no change in the Company’s design of the ICFR that
occurred during the year ended December 31, 2014 which
has materially affected, or is reasonably likely to materially
affect the Company’s ICFR.
The Company had previously limited the scope of the design
of ICFR and DC&P to exclude the controls, policies and
procedures of the OJVG and the Dakar office of the OJVG.
The scope limitation allows an issuer to limit its design of
ICFR and DC&P to exclude the controls, policies and
procedures of a company acquired for a maximum of 365
days. Over the last year, the controls, policies and
procedures of the OJVG have been in the process of being
integrated into the Sabodala operations and were completed
during the fourth quarter of 2014. The operating and
financial results of the OJVG entity in Senegal are also out
of scope as they are an immaterial component of the
consolidation process. As a result, for the immaterial nature
of these operating results, the Company has removed this
scope limitation from the year ended December 31, 2014
Certification of Disclosure in Issuer’s Annual and Interim
Filings.
RISKS AND UNCERTAINTIES
The Company identified a number of risk factors to which it
is subject to in its Annual Information Form filed for the year
ended December 31, 2013. These various financial and
operational risks and uncertainties continue to be relevant to
an understanding of our business, and 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 operating cost estimates, borrowing risks,
financing,
production estimates, need
uncertainty in the estimation of mineral reserves and mineral
resources, the inherent danger of mining, infrastructure risk,
hedging activities,
risks,
environmental risks and regulations, government regulation,
ability to obtain and renew licenses and permits, foreign
operations risks, title to properties, competition, dependence
on key personnel, currency, repatriation of earnings and
stock exchange price fluctuations.
for additional
uninsured
insured
and
FORWARD LOOKING STATEMENTS
OutstandingFebruary 18, 2015Ordinary shares316,801,091Equity issuance136,000,000352,801,091Stock options granted at an exercise price of $3.00 per option13,723,889Stock options granted at exercise prices in the range of $1.09-$2.17 per option27,746,600Fully diluted share capital374,271,5802 Options expired on February 6, 2015.1 36,000,000 ordinary shares were issued upon closing of the equity offering on May 1, 2014.
its expectations of
future developments
laws (“forward-looking statements”).
forward-looking statements.
include, without
This document contains certain statements that constitute
forward-looking information within the meaning of applicable
securities
Such
forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause the
actual results, performance or achievements of Teranga, or
developments in Teranga’s business or in its industry, to
differ materially from the anticipated results, performance,
achievements or developments expressed or implied by
Forward-looking
such
limitation, all disclosure
statements
regarding possible events, conditions or
results of
operations, future economic conditions and courses of
action, the proposed plans with respect to mine plan,
anticipated 2015 results and consolidation of the Sabodala
Gold Project and OJVG Golouma Gold Project, mineral
reserve and mineral resource estimates, anticipated life of
mine operating and financial results, the approval of the
Gora ESIA and permitting and
the completion of
construction related thereto. Such statements are based
upon assumptions, opinions and analysis made by
management in light of its experience, current conditions
and
that
management believe to be reasonable and relevant. These
assumptions include, among other things, the ability to
obtain any requisite Senegalese governmental approvals,
the accuracy of mineral reserve and mineral resource
estimates, gold price, exchange rates, fuel and energy
costs, future economic conditions and courses of action.
Teranga cautions you not to place undue reliance upon any
such forward-looking statements, which speak only as of the
date they are made. The risks and uncertainties that may
affect forward-looking statements include, among others:
the inherent risks involved in exploration and development
of mineral properties, including government approvals and
permitting, changes in economic conditions, changes in the
worldwide price of gold and other key inputs, changes in
mine plans and other factors, such as project execution
delays, many of which are beyond the control of Teranga, as
well as other risks and uncertainties which are more fully
described in the Company’s Annual Information Form dated
March 31, 2014, and in other company filings with securities
and
regulatory authorities which are available at
Teranga does not undertake any
www.sedar.com.
obligation to update forward-looking statements should
assumptions related to these plans, estimates, projections,
beliefs and opinions change. Nothing in this report should
be construed as either an offer to sell or a solicitation to buy
or sell Teranga securities.
COMPETENT PERSON STATEMENTS
The technical information contained in this document
relating to the mineral reserve estimates for Sabodala, the
stockpiles, Masato, Golouma and Kerekounda is based on,
and fairly represents, information compiled by Mr. William
Paul Chawrun, P. Eng who is a member of the Professional
Engineers Ontario, which is currently included as a
"Recognized Overseas Professional Organization" in a list
promulgated by the ASX from time to time. Mr. Chawrun is
a full-time employee of Teranga and is a "qualified person"
as defined in NI 43-101 and a "competent person" as defined
in the 2012 Edition of the "Australasian Code for Reporting
of Exploration Results, Mineral Resources and Ore
Reserves". Mr. Chawrun 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 2012 Edition of the
"Australasian Code for Reporting of Exploration Results,
Mineral Resources and Ore Reserves". Mr. Chawrun has
consented to the inclusion in this Report of the matters
based on his compiled information in the form and context in
which it appears in this Report.
the “Australasian Code
The technical information contained in this document
relating to the mineral reserve estimates for Gora and
Niakafiri is based on, and fairly represents, information and
supporting documentation prepared by Julia Martin, P.Eng.
who is a member of the Professional Engineers of Ontario
and a Member of AusIMM (CP). Ms. Martin is 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
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 is a “Qualified
Person” under National Instrument 43-101 Standards of
Disclosure for Mineral Projects. Ms. Martin has reviewed
and accepts responsibility for the Mineral Reserve estimates
for Gora and Niakafiri disclosed in this document and has
consented to the inclusion of the matters based on her
information in the form and context in which it appears in this
Report
included as a
The technical information contained in this document
relating to mineral resource estimates for Niakafiri, Gora,
Niakafiri West, Soukhoto, and Diadiako is based on, and
fairly represents, information compiled by Ms. Nakai-
Lajoie. Ms. Patti Nakai-Lajoie, P. Geo., is a Member of the
Association of Professional Geoscientists of Ontario, which
is currently
"Recognized Overseas
Professional Organization" in a list promulgated by the ASX
from time to time. Ms. Nakai-Lajoie is a full time employee
of Teranga and is not "independent" within the meaning of
National Instrument 43-101. Ms. Nakai-Lajoie has sufficient
experience which is relevant to the style of mineralization
and type of deposit under consideration and to the activity
which 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. Nakai-Lajoie is a "Qualified Person"
under National Instrument 43-101 Standards of Disclosure
for Mineral Projects. Ms. Nakai-Lajoie has consented to the
inclusion in this Report of the matters based on her compiled
information in the form and context in which it appears in this
Report.
The technical information contained in this document
relating to mineral resource estimates for Sabodala, Masato,
Golouma, Kerekounda, and Somigol Other are based on,
and fairly represents, information compiled by Ms. Nakai-
Teranga's disclosure of mineral reserve and mineral
resource information is governed by NI 43-101 under the
guidelines set out in the Canadian Institute of Mining,
Metallurgy and Petroleum (the "CIM") Standards on Mineral
Resources and Mineral Reserves, adopted by the CIM
Council, as may be amended from time to time by the CIM
("CIM Standards"). CIM definitions of the terms "mineral
reserve", "proven mineral reserve", "probable mineral
reserve", "mineral resource", "measured mineral resource",
"inferred mineral
resource" and
"indicated mineral
resource", are substantially similar to the JORC Code
corresponding definitions of the terms "ore reserve", "proved
ore reserve", "probable ore reserve", "mineral resource",
"measured mineral resource", "indicated mineral resource"
and "inferred mineral resource", respectively. Estimates of
mineral resources and mineral reserves prepared
in
accordance with the JORC Code would not be materially
different if prepared in accordance with the CIM definitions
applicable under NI 43-101. There can be no assurance that
those portions of mineral resources that are not mineral
reserves will ultimately be converted into mineral reserves.
included as a
Lajoie. Ms. Patti Nakai-Lajoie, P. Geo., is a Member of the
Association of Professional Geoscientists of Ontario, which
is currently
"Recognized Overseas
Professional Organization" in a list promulgated by the ASX
from time to time. Ms. Nakai-Lajoie is a full time employee
of Teranga and is not "independent" within the meaning of
National Instrument 43-101. Ms. Nakai-Lajoie has sufficient
experience which is relevant to the style of mineralization
and type of deposit under consideration and to the activity
which she is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and
Ore Reserves". Ms. Nakai-Lajoie is a "Qualified Person"
under National Instrument 43-101 Standards of Disclosure
for Mineral Projects. Ms. Nakai-Lajoie has consented to the
inclusion in this Report of the matters based on her compiled
information in the form and context in which it appears in this
Report.
Teranga's exploration programs are being managed by
Peter Mann, FAusIMM. Mr. Mann is a full time employee of
Teranga and is not "independent" within the meaning of
National
Instrument 43-101. Mr. Mann has sufficient
experience which is relevant to the style of mineralization
and type of deposit under consideration and to the activity
which he is undertaking to qualify as a Competent Person
as defined in the 2012 Edition of the "Australasian Code for
Reporting of Exploration Results, Mineral Resources and
Ore Reserves". Mr. Mann is a "Qualified Person" under
National Instrument 43-101 Standards of Disclosure for
Mineral Projects. The technical information contained in this
annual report relating exploration results are based on, and
fairly represents, information compiled by Mr. Mann. Mr.
Mann has verified and approved the data disclosed in this
release, including the sampling, analytical and test data
underlying the information. The RC samples are prepared at
site and assayed in the SGS laboratory located at the site.
Analysis for diamond drilling is sent for fire assay analysis at
ALS Johannesburg, South Africa. Mr. Mann has consented
to the inclusion in this annual report of the matters based on
his compiled information in the form and context in which it
appears herein.
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. Management 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, Ernst & Young LLP, have conducted an audit in accordance with generally
accepted auditing standards, and their report follows.
Richard Young Navin Dyal
President and Chief Executive Officer Vice President and Chief Financial Officer
To the Shareholders of Teranga Gold Corporation
We have audited the accompanying consolidated financial statements of Teranga Gold Corporation, which comprise
the consolidated statement of financial position as at December 31, 2014 and 2013, and the consolidated statements
of comprehensive income, changes in equity and cash flows for the years then ended, 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
accordance 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.
Auditors’ 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 audit 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 auditors’ 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 assessments, the auditors consider 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 appropriateness 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 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, 2014 and 2013 and its financial performance and its cash flows for the
years then ended in accordance with International Financial Reporting Standards.
February 18, 2015
Toronto, Canada
Chartered Accountants
Licensed Public Accountants
A member firm of Ernst & Young Global Limited
FINANCIAL
STATEMENTS
& NOTES
2014 ANNUAL REPORT
2 0 1 4 A N N U A L R E P O R T
4 4
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
DECEMBER 31, 2014
(in $000’s of United States dollars, except per share amounts)
20142013Note(Restated) note 3yRevenue 8 260,588 297,927 Cost of sales9 (207,984) (193,434)Gross profit 52,604 104,493 Exploration and evaluation expenditures (2,772) (5,405)Administration and corporate social responsibility expenses10 (15,621) (14,717)Share-based compensation32 (911) (813)Finance costs11 (9,484) (12,148)Gains on gold hedge contracts - 5,308 Gains on oil hedge contracts - 31 Net foreign exchange gains/(losses) 2,013 (1,233)Loss on available for sale financial asset - (4,003)Other expenses12 (1,982) (11,843) (28,757) (44,823)Profit before income tax 23,847 59,670 Income tax expense13 (1,536) - Net profit 22,311 59,670 Profit attributable to:Shareholders 17,776 50,280 Non-controlling interests 4,535 9,390 Net profit for the year 22,311 59,670 Other comprehensive income/(loss):Items that may be reclassified subsequently to profit/(loss) for the year Change in fair value of available for sale financial asset, net of tax (1) (6,418) Reclassification to income, net of tax - 962 Other comprehensive loss for the year (1) (5,456)Total comprehensive income for the year 22,310 54,214 Total comprehensive income attributable to:Shareholders 17,775 44,824 Non-controlling interests 4,535 9,390 Total comprehensive income for the year 22,310 54,214 Earnings per share from operations attributable to the shareholders of the Company during the year - basic earnings per share25 0.05 0.19 - diluted earnings per share25 0.05 0.19 The accompanying notes are an integral part of these consolidated financial statementsFor the years ended December 31
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 2014
(in $000’s of United States dollars, except per share amounts)
Approved by the Board of Directors
Alan R. Hill
Chairman
Alan R. Thomas
Director
As at December 31, 2014As at December 31, 2013(Restated) note 3yCurrent assetsCash and cash equivalents30b35,810 14,961 Restricted cash30b - 20,000 Trade and other receivables141,562 7,999 Inventories1566,639 67,121 Other current assets168,995 5,762 Total current assets113,006 115,843 Non-current assetsInventories1591,057 63,081 Equity accounted investment 7a - 47,627 Property, plant and equipment17198,433 219,540 Mine development expenditures18260,719 181,605 Other non-current assets167,917 947 Goodwill7b55,191 - Total non-current assets613,317 512,800 Total assets726,323 628,643 Current liabilitiesTrade and other payables1953,909 56,891 Borrowings203,946 70,423 Deferred revenue2121,814 - Provisions222,647 1,751 Total current liabilities82,316 129,065 Non-current liabilitiesBorrowings20 - 3,946 Deferred revenue2192,184 - Provisions2215,993 14,336 Deferred income tax liabilities231,536 - Other non-current liabilities1918,399 10,959 Total non-current liabilities128,112 29,241 Total liabilities210,428 158,306 EquityIssued capital24367,837 342,470 Foreign currency translation reserve(998)(998)Other components of equity16,255 15,776 Retained earnings118,337 100,561 Equity attributable to shareholders501,431 457,809 Non-controlling interests14,464 12,528 Total equity515,895 470,337 Total equity and liabilities726,323 628,643 The accompanying notes are an integral part of these consolidated financial statementsNote
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
DECEMBER 31, 2014
(in $000’s of United States dollars, except per share amounts)
20142013(Restated) Note 3yIssued capitalBeginning of year342,470 305,412 Shares issued from public and private offerings 2427,274 37,264 Less: Share issue costs 24(1,907) (206) End of year367,837 342,470 Foreign currency translation reserveBeginning of year(998) (998) End of year(998) (998) Other components of equityBeginning of year15,776 21,814 Equity-settled share-based compensation reserve480 1,605 Investment revaluation reserve on change in fair value of available for sale financial asset, net of taxStock options to Oromin Explorations Ltd. ("Oromin") employees 32a- 585 Acquisition of non-controlling interest in Oromin7a- (2,772) End of year16,255 15,776 Retained earningsBeginning of year100,561 50,281 Profit attributable to shareholders17,776 50,280 End of year118,337 100,561 Non-controlling interest Beginning of year12,528 11,974 Non-controlling interest - portion of profit for the year4,535 9,390 Dividends accrued(2,599) (8,836) End of year14,464 12,528 Total shareholders' equity as at December 31515,895 470,337 The accompanying notes are an integral part of these consolidated financial statementsNoteFor the years ended December 31(1) (5,456)
CONSOLIDATED STATEMENTS OF CASH FLOWS
DECEMBER 31, 2014
(in $000’s of United States dollars, except per share amounts)
20142013Note(Restated) note 3yCash flows related to operating activitiesNet profit for the year22,311 59,670 Depreciation of property, plant and equipment1725,806 48,185 Depreciation of capitalized mine development costs1844,062 30,722 Inventory movements - non-cash9(8,089) (14,672) Capitalized deferred stripping - non-cash9(658) (4,124) Amortization of intangibles714 1,021 Amortization of deferred financing costs3,275 3,120 Unwinding of discounts111,132 156 Share-based compensation32911 813 Deferred gold revenue recognized21(21,002) - Net change in gains on gold forward sales contracts- (42,955) Net change in losses on oil contracts- 456 Buyback of gold forward sales contracts8- (8,593) Loss on available for sale financial asset- 4,003 Loss on disposal of property, plant and equipment1 102 Increase in inventories(19,693) (8,409) Changes in working capital other than inventories30a239 4,812 Net cash provided by operating activities49,009 74,307 Cash flows related to investing activitiesDecrease/(increase) in restricted cash30b20,000 (20,000) Acquisition of Oromin Joint Venture Group ("OJVG")7(112,500) - Expenditures for property, plant and equipment(3,567) (17,344) Expenditures for mine development(15,346) (51,603) Acquisition of intangibles- (109) Proceeds on disposal of property, plant and equipment- 38 Net cash used in investing activities(111,413) (89,018) Cash flows related to financing activitiesNet proceeds from equity offering25,367 - Proceeds from Franco-Nevada gold stream 21135,000 - Repayment of borrowings20(72,775) (12,282) Drawdown from equipment finance facility, net of financing costs paid- 12,755 Financing costs paid(1,000) (1,200) Interest paid on borrowings20(3,340) (7,054) Dividend payment to government of Senegal- (2,700) Net cash provided by / (used in) financing activities83,252 (10,481) Effect of exchange rates on cash holdings in foreign currencies1 431 Net increase / (decrease) in cash and cash equivalents 20,849 (24,761) Cash and cash equivalents at the beginning of year14,961 39,722 Cash and cash equivalents at the end of year35,810 14,961 The accompanying notes are an integral part of these consolidated financial statementsFor the years ended December 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014
(in $000’s of United States dollars, except 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 exploration and mine development.
Teranga operates the Sabodala gold mine and is currently exploring nine exploration licenses covering 1,055km 2 in
Senegal, comprising the regional land package that is surrounding the Company’s Sabodala gold mine.
On October 4, 2013, Teranga completed the acquisition of Oromin Explorations Ltd. (“Oromin”). Oromin held a 43.5
percent participating interest in the Oromin Joint Venture Group (“OJVG”), which holds 90 percent interest in Societe
des Mines de Golouma S.A. (“Somigol”).
On January 15, 2014, the Company acquired the balance of the OJVG that it did not already own by acquiring
Bendon International Ltd.’s (“Bendon”) 43.5 percent participating interest and Badr Investment Ltd.’s (“Badr”) 13
percent carried interest.
The acquisition of Bendon’s and Badr’s interests in the OJVG increased Teranga’s ownership to 100 percent and
consolidates the Sabodala region, increasing the size of Teranga’s mine license land holding from 33km2 to 246km2
and more than doubling the Company’s reserve base by combining the two permitted mine licenses.
The OJVG holds a 15 year renewable mining lease in respect of the Golouma Gold Concession, which is located
contiguous to the Sabodala mine license.
The address of the Company’s principal office is 121 King street West, Suite 2600, Toronto, Ontario, Canada M5H
3T9.
2. BASIS OF PREPARATION
a. Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements comprise the financial statements of the Company and its subsidiaries and
were approved by the Board of Directors on February 18, 2015.
Certain comparatives have been restated to conform to the current year’s presentation.
b. Basis of presentation
All amounts in the consolidated financial statements and notes thereto are presented in United States dollars unless
otherwise stated. The consolidated financial statements have been prepared on the basis of historical cost, except for
equity settled share based payments that are fair valued at the date of grant and cash settled share based payments
that are fair valued at the date of grant and each period end and certain other financial assets and liabilities that are
measured at fair value.
c. Functional and presentation currency
The functional currency of each of the Company’s entities is measured using the currency of the primary economic
environment in which that entity operates. The functional currency of all entities within the group is the United States
dollar, which is the Company’s presentation currency.
d. Critical accounting judgments and key sources of estimation uncertainty
The preparation of consolidated financial statements in conformity with IFRS requires management to make
judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts 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
statements and estimates with a significant risk of material adjustments, where applicable, are contained in the
relevant notes to the financial statements. Refer to Note 6 for critical judgments in applying the entity’s accounting
policies, and key sources of estimation uncertainty.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Consolidation
The consolidated financial statements are prepared by consolidating the financial statements of Teranga Gold
Corporation and its subsidiaries as defined in IFRS 10 “Consolidated Financial Statements”. Refer to note 29.
The consolidated financial statements include the information 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 group, 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 fair value of net assets acquired at the
date of the original business combination and the non-controlling interests’ share of changes in equity since the date
of the combination.
Total comprehensive profit/(loss) is attributed to non-controlling interests 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 fair value are reported at the exchange rate at the date when fair values were
determined.
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 remaining maturity of 90 days or less at the date of acquisition.
When applicable, bank overdrafts are shown within borrowings in current liabilities in the consolidated statement of
financial position.
d.
Inventories
Gold bullion, gold in circuit and ore in stockpiles are physically measured or estimated and valued at the lower of cost
and net realizable value. Cost represents the weighted average cost and includes direct costs and an appropriate
portion of fixed and variable production overhead costs, including depreciation and amortization on property, plant
and equipment used in the production process and depreciation and amortization on capitalized stripping costs
incurred in converting materials into finished goods. As ore is removed from processing, costs are relieved based on
the average cost per ounce in the stockpile.
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.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of
completion, if any, and applicable costs to sell.
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.
e. Property, Plant and Equipment
Property, plant and equipment are measured on the historical cost basis less accumulated depreciation and
impairment losses, if any.
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 net profit within the statement of
comprehensive income during 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 respective asset is 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.
The Company uses the straight-line method when depreciating other equipment, office furniture, motor vehicles and
finance lease equipment.
Depreciation for each class of property, plant, and equipment is calculated using the following method:
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.
Assets under finance lease
Assets held under finance leases are depreciated over their expected useful lives on the same basis as similar
owned assets.
f. Leased 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 present 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 lease balance outstanding. Finance charges are charged directly against income, unless they are
directly attributable to qualifying assets, in which case they are capitalized in accordance with the Company’s general
policy on borrowing costs. Refer to Note 3(j).
Operating lease payments are recognized as an expense on a straight-line basis over the lease term.
g.
Intangible Assets
Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. 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 prospective basis.
h. Goodwill
Under the acquisition method of accounting, the costs of business combinations are allocated to the assets acquired
and liabilities assumed based on the estimated fair value at the date of acquisition. The excess of the fair value of
consideration paid over the fair value of the identifiable net assets acquired is recorded as goodwill, which is assigned
to the cash-generating unit (“CGU”) or group of CGUs that are expected to benefit from the synergies of the business
combination.
Goodwill is tested for impairment annually effective on November 1st unless there is an indication that goodwill is
impaired and, if there is such an indication, goodwill will be tested for impairment at that time. For the purposes of
impairment testing, goodwill is allocated to the Company’s CGUs. The recoverable amount of a CGU is the higher of
Value in Use (“VIU”) and Fair Value Less Costs of Disposal (“FVLCD”). A goodwill impairment charge is recognized
for any excess of the carrying amount of the unit over its recoverable amount. Goodwill impairment charges are not
reversible.
Class of Property, Plant and EquipmentMethodYearsBuildings and property improvementsUOPn/aPlant and equipmentUOP/Straight-line5.0 - 8.0 yearsOffice furniture and equipmentStraight-line3.0 - 6.7 yearsMotor vehiclesStraight-line5.0 yearsPlant equipment under finance leaseStraight-line5.0 - 8.0 years
i.
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 FVLCD and the VIU. Where the asset does not generate cash flows that are independent
from other assets, the Company estimates the recoverable amount of the CGU to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual CGU
or otherwise they are allocated to the smallest group of CGUs for which a reasonable and consistent allocation basis
can be identified.
If the recoverable amount of an asset or CGU is estimated to be less than its carrying amount, the carrying amount of
the asset or CGU is reduced to its recoverable amount. An impairment loss is recognized immediately in net profit
within the statement of comprehensive income.
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU 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 CGU
in prior years. A reversal of an impairment loss is recognized immediately in net profit within the statement of
comprehensive income.
j. 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 net profit within the statement of comprehensive income in the period in
which they are incurred.
k. Employee Benefits
A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and long-
term service 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
using the remuneration rate expected to apply at the time of settlement.
Liabilities recognized in respect of employee benefits which 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.
l. Deferred Revenue
Deferred revenue consists of payments received by the Company for future commitments to deliver payable gold at
contracted prices. As deliveries are made, the Company will record a portion of the deferred revenue as sales. Refer
to Note 21.
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 present value of the consideration required to settle
the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
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, 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 reviewed at 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 calculated 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 basis 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 against which the temporary differences can be
utilized. However, 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
reporting date and expected to apply when the related deferred income tax asset is realized or the deferred income
tax liability is settled. As at December 31, 2014, the Company has performed an exercise on determining the taxable
temporary differences of various expenditures recorded since the Company’s tax exempt status ends on May 2, 2015
in Senegal. From this point forward, the Company will be subject to a 25 percent income tax rate as well as customs
duties and non-refundable value-added tax on certain expenditures.
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 derecognized 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 profit and loss.
Fair value through profit or loss
Upon disposal of an investment, the difference in the net disposal proceeds and the carrying amount is charged or
credited to net profit within the statement of comprehensive income.
Loans and receivables
Trade and other receivables and loans 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 rate method less impairment.
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:
significant or prolonged impairment 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.
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 have 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 uncollectible trade receivables is reduced by the impairment loss
through the use of an allowance account. Subsequent recoveries 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 investment 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.
Derecognition of financial assets
The Company derecognizes 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.
Derivative financial instruments
Derivatives are initially recognized at fair value at the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The resulting gain or loss is recognized in net profit within the
statement of comprehensive income 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 instrument 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
contractual 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 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 measured at fair value, net of transaction costs. Other
financial liabilities are subsequently measured at amortized cost using the effective interest rate method, with interest
expense recognized on an effective yield basis.
q. Share-based Payments
Stock option plan
The Company operates an equity-settled, share-based compensation plan for remuneration of its directors,
management and employees.
The fair value of the options granted is measured using the Black-Scholes option pricing model, taking into account
the terms and conditions 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 net profit within the statement of comprehensive
income.
Restricted share units (RSUs)
The Company grants cash-settled awards in the form of RSUs to officers and certain employees of the Company.
Under the Company’s RSU plan, each RSU granted has a value equal to the value of one Teranga common share.
A portion of the RSUs vest equally over a three-year period and are settled in cash upon vesting. The RSU plan also
includes a portion of RSUs that vest equally based on the Company’s achievement of performance-based criteria
over a three-year period.
RSUs are measured at fair value using the market value of the underlying shares at the date of the award grant. At
each reporting period, the awards are re-valued based on the period-end share price with a corresponding charge to
share-based compensation expense. RSUs that vest based on the achievement of performance conditions are
revalued based on the current best estimate of the outcome of the performance condition at the reporting period. The
cost of the award is recorded on a straight-line basis over the vesting period and is recorded within non-current
liabilities on the consolidated statements of financial position, except for the portion that will vest within twelve months
which are recorded within current liabilities. The expense for the award is recorded on a straight-line basis over the
vesting period and is recorded within share-based compensation on the statements of comprehensive income.
Deferred share units (DSUs)
The Company grants cash-settled awards in the form of DSUs to directors of the Company.
Under the Company’s DSU plan, each DSU granted has a value equal to the value of one Teranga common share.
Directors have the option to elect to receive their Director compensation in the form of DSUs. These DSUs vest as
they are granted. All remaining DSUs that are granted vest on the first anniversary of the grant date.
DSUs are measured at fair value using the market value of the underlying shares at the date of the grant of the
award. At each reporting period, the awards are revalued based on the period-end share price with a corresponding
charge to share-based compensation expense. The cost of the award is recorded on a straight-line basis over the
vesting period and is recorded within current liabilities on the consolidated statements of financial position. The
expense for the award is recorded on a straight-line basis over the vesting period and is recorded within share-based
compensation on the statements of comprehensive income.
r. Fixed Bonus Plan Units
The Company operates a cash-settled, share-based compensation plan for certain management and employees.
The fair value of the Fixed Bonus Plan Units (“Units”) granted is measured using the Black-Scholes option pricing
model, taking into consideration 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 statements of comprehensive income
and revalued at the end of each reporting period based on the period end share price.
s. Revenue
Gold and silver bullion sales
Revenue is recognized when persuasive evidence exists that all of the following criteria are met:
the shipment has been made;
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 benefits 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.
Interest income
Interest income is recognized in other expenses within the statement of comprehensive income.
t. Exploration and Evaluation Expenditures and Mine Development Expenditures
Exploration and evaluation expenditures in relation to each separate area of interest are expensed in net profit within
the consolidated statement of comprehensive income. Upon the determination of the technical feasibility and
commercial viability of a project, further costs to develop the asset are recognized as mine development
expenditures.
The development phase is determined to have commenced when the technical feasibility and commercial viability of
extracting a mineral resource is considered to be determinable, when proven and probable 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.
Mine development expenditure assets comprise of costs incurred to secure the mining concession, acquisition of
rights to explore, studies, exploratory drilling, trenching and sampling and associated activities and an allocation of
depreciation and amortization of assets used in exploration and evaluation activities. General and administrative
costs are only included in exploration and evaluation costs where they are related directly to the operational activities
in a particular area of interest. Upon reaching commercial production, these capitalized costs will be amortized using
the units-of-production method over the estimated proven and probable reserves.
u. Earnings per Share
Basic earnings per share is determined by dividing the profit or loss attributable to equity holders of the Company by
the weighted average number of ordinary common shares outstanding during the financial period.
Diluted earnings or loss per share is calculated by dividing the profit or loss attributable to ordinary equity holders of
the parent by the weighted average number of ordinary shares that would be issued on conversion of all the dilutive
potential ordinary shares into ordinary shares. The dilutive effect of stock options is determined using the treasury
stock method.
v. Joint Arrangements
A joint arrangement is defined as one over which two or more parties have joint control, which is the contractually
agreed sharing of control over an arrangement. This exists only when the decisions about the relevant activities
(being those that significantly affect the returns of the arrangement) require the unanimous consent of the parties
sharing control. There are two types of joint arrangements, joint operations and joint ventures.
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to
the assets and obligations for the liabilities, relating to the arrangement. In relation to the Company’s interests in joint
operations, the Company recognizes its 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.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint venture. The Company applies the equity method of accounting for its interest in the joint
venture.
w. Government Royalties
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 deducted from revenue.
Advanced royalties
The Company is required to make payments related to the waiver of the right for the Republic of Senegal to acquire
an additional equity interest in the exploration licenses converted to mine licenses when the ore is processed through
the Sabodala mill. The OJVG and Gora properties are subjected to advanced royalties. The initial payment is
accrued as a current and non-current liability and the advanced royalty is recorded within other current assets based
on expected production from the properties over the next year and the remaining is recorded within other non-current
assets. The advanced royalty balance will be recorded within and expensed through net profit based on actual
production from the properties.
x. Non-controlling Interest
Non-controlling interests represent the fair value of net assets in subsidiaries that are not held by the Company and
are presented in the equity section of the consolidated statement of financial position. Net Profit for the period that is
attributable to non-controlling interests is calculated based on the ownership of the minority shareholders in the
subsidiary.
y. Deferred Stripping Activity
The cost of stripping activity in the production phase of surface mining will be recognized as an asset, only if, all of
the following are met:
it is probable that the future economic benefit (improved access to the ore body) associated with the stripping
activity will flow to the entity;
the entity can identify the component of the ore body (mining phases)for which access has been improved; and
the costs relating to the stripping activity associated with that component can be measured reliably.
Once the cost associated with the stripping activity are deferred to asset, the cost or revalued amount will be
amortized on a units of production basis in the subsequent period.
In 2014, the Company reassessed its accounting for its deferred stripping asset. The Company determined that the
amortization of equipment directly related to the deferred stripping activity should be included as part of the deferred
stripping asset. The Company had not previously included amortization of this equipment in its calculations related to
deferred strip assets.
As a result, the Company has adjusted retrospectively for the impact of this change in accounting treatment. The
impact on December 31, 2012 balances was an increase to mine development expenditures of $1.7 million, a
decrease to inventory of $0.5 million and an increase to retained earnings of $1.2 million for the year ended
December 31, 2012.
The impact of this change on December 31, 2013 balances are described in the following tables:
Impact on Consolidated Statement of Financial Position
Impact on Consolidated Statement of Comprehensive Income
As previously reportedRestatedCurrent assetsInventories67,432 (311)67,121 Total current assets116,154 (311)115,843 Non-current assetsInventories63,740 (659)63,081 Property, plant and equipment (i)222,487 (2,947)219,540 Mine development expenditures(i)173,444 8,161 181,605 Total non-current assets508,245 4,555 512,800 Total assets624,399 4,244 628,643 EquityRetained earnings96,741 3,820 100,561 Equity attributable to shareholders453,989 3,820 457,809 Non-controlling interests12,104 424 12,528 Total equity466,093 4,244 470,337 Total equity and liabilities624,399 4,244 628,643 As at December 31, 2013Impact of change in accounting treatment(i) A reclassification of $2,947 was made from property, plant and equipment to mine development expendituresAs previously reportedRestatedCost of sales (196,505) 3,071 (193,434)Gross profit 101,422 3,071 104,493 Profit before income tax 56,599 3,071 59,670 Income tax benefit - - Net profit 56,599 3,071 59,670 Profit attributable to:Shareholders 47,516 2,764 50,280 Non-controlling interests 9,083 307 9,390 Net Profit for the year 56,599 3,071 59,670 Total comprehensive income for the year 51,143 3,071 54,214 Total comprehensive income attributable to:Shareholders 42,060 2,764 44,824 Non-controlling interests 9,083 307 9,390 Total comprehensive income for the year 51,143 3,071 54,214 - basic earnings per share 0.18 0.01 0.19 - diluted earnings per share 0.18 0.01 0.19 For the year ended December 31, 2013Impact of change in accounting treatment
Impact on Consolidated Statement of Cash Flows
4. NEW ACCOUNTING STANDARDS ADOPTED
a.
IFRIC 21 - Levies
In May 2013, the IASB issued IFRIC Interpretation 21, Levies, which was developed by the IFRS Interpretations
Committee (the “Committee”). The interpretation clarifies that an entity recognizes a liability for a levy when the
activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is
accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the
relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no
liability should be recognized before the specified minimum threshold is reached.
The interpretation is applicable for annual periods beginning on or after January 1, 2014. The Company has
evaluated the impact of IFRIC 21 and has determined that there was no impact on its consolidated financial
statements.
b.
IFRS 15 – Revenue from Contracts with Customers
IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from
contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which
an entity expects to be entitled in exchange for transferring goods or services to a customer.
The principles in IFRS 15 provide a more structured approach to measuring and recognizing revenue.
The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements
under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after
January 1, 2017 with early adoption permitted. The Company is currently assessing the impact of IFRS 15 and plans
to adopt the new standard on the required effective date.
5. NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
a.
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 characteristics of the financial assets. This standard also requires a single impairment method
to be used, replacing the multiple impairment methods in IAS 39. In July 2013, the IASB tentatively decided to defer
the mandatory effective date of IFRS 9. On July 24, 2014, the IASB issued the final version of IFRS 9 with an
effective adoption date of January 1, 2018, with early adoption permitted. The Company is currently evaluating the
impact of IFRS 9 on its consolidated financial statements.
6. CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are critical judgments and estimations that management 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 statements and that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year:
As previously reportedImpact of changes in accounting treatmentRestatedCash flows related to operating activitiesNet Profit for the year56,599 3,071 59,670 Depreciation of capitalized mine development costs30,091 631 30,722 Inventory movements - non-cash(15,094) 422 (14,672) Capitalized deferred stripping - non-cash- (4,124) (4,124) Net cash provided by operating activities74,307 - 74,307 Net decrease in cash and cash equivalents(24,761) - (24,761) Cash and cash equivalents at the beginning of year39,722 - 39,722 Cash and cash equivalents at the end of year14,961 - 14,961 For the year ended December 31, 2013
Ore reserves
Management estimates its ore reserves based upon information compiled by qualified persons as defined in
accordance with the Canadian Securities Administrators’ National Instrument 43-101 Standards for Disclosure for
Mineral Projects requirements, 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 net profit within the statement of comprehensive income.
Functional currency
The functional currency of each of the Company’s entities is determined based on using the currency of the primary
economic environment 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 determining the depreciation and amortization of mining assets,
including buildings and property
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 limitations 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
assumptions, including the amount of recoverable ounces of gold. The Company’s units of production calculations
are based on recovered ounces of gold.
improvements and certain plant and equipment.
This results
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 actual 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 recognized in the statement of financial position by adjusting the
rehabilitation asset and liability.
Impairment of goodwill and non-current assets
Goodwill and non-current assets are tested for impairment if there is an indicator of impairment and, in the case of
goodwill, annually in November. Where an indicator of impairment exists, a formal estimate 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 assumptions 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 assets 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 CGUs 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 development 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
that
depreciation/amortization commences.
improvements or mineable
reserve development.
is also at
this point
It
Stripping costs in the production phase of a surface mine
Management assesses the costs associated with the stripping activity in the production phase of surface mining. The
excess waste material moved above the average strip ratio to provide access to further quantities of ore that will be
mined in future periods, which are estimated by management. The Company reevaluated its accounting treatment to
include amortization of equipment directly related to the deferred stripping activity as part of the deferred stripping
asset effective January 1, 2012.
Taxes
Management is required to make estimations regarding the tax basis of assets and liabilities and related income tax
assets and liabilities and the measurement of income tax expense and indirect taxes. A number of these estimates
require management to make estimates of future taxable profit or loss, and if actual results are significantly different
than our estimates, the ability to realize any deferred tax assets or discharge deferred tax liabilities on our
consolidated statement of financial position could be impacted.
7. ACQUISITION
a. Acquisition of Oromin
On August 6, 2013, the Company acquired 78,985,388 common shares of Oromin (Oromin being one of the three
joint venture partners of the OJVG holding a 43.5 percent interest) for total consideration paid of $24.1 million.
Together with the 18,699,500 Oromin shares owned by the Company and a further 2,091,013 shares obtained, this
represented a total of 99,775,901 Oromin shares or approximately 72.6 percent of the outstanding Oromin shares.
Upon acquisition of control, the Company consolidated the identifiable assets and liabilities of Oromin.
On October 4, 2013, the Company completed the acquisition of all of the remaining issued and outstanding common
shares of Oromin for total consideration of $13.8 million.
In 2013, the Company issued 71,183,091 shares to acquire all of the Oromin shares for consideration of $37.8
million. The following tables present the purchase price and the final allocation of the purchase price to the assets
acquired and liabilities assumed.
b. Acquisition of the OJVG
On January 15, 2014, the Company acquired the balance of the OJVG that it did not already own from Bendon and
Badr.
Purchase Cost - August 6, 2013Shares issued to Oromin shareholders 23,487 Replacement stock options issued to Oromin employees 585 Total Acquisition Cost 24,072 Fair value of previously held interest 5,131 29,203 Cash acquired with Oromin (367)Consideration, net of cash acquired 28,836 Summary of Final Purchase Price AllocationAssetsCurrent assets 545 Investment in OJVG 47,059 Total assets 47,604 LiabilitiesCurrent liabilities 4,009 Borrowings 3,387 Total liabilities 7,396 Net assets acquired, before non-controlling interest 40,208 Non-controlling interest (11,005)Net assets acquired 29,203 Purchase Cost - October 4, 2013Fair value of shares issued to Oromin shareholders 13,777 Carrying value of additional interest in Oromin 11,005 Difference recognized within shareholders' equity 2,772
The Company acquired Bendon’s 43.5 percent participating interest in the OJVG for cash consideration of $105.0
million. Badr’s 13 percent carried interest in the OJVG was acquired for cash consideration of $7.5 million and further
contingent consideration that will be based on realized gold prices and increases to the OJVG’s mineral reserves
through 2020. Upon finalization of the allocation of the purchase price, $3.8 million of contingent consideration was
accrued as a non-current liability based on management’s best estimate of future additions to the OJVG’s mineral
reserves.
The Company determined that the combined transactions represented a single business combination with Teranga
as the acquirer. From January 15, 2014, 100 percent of the OJVG’s results were consolidated into the Company’s
operating results, cash flows and net assets.
In accordance with business combination accounting, the acquisition cost has been allocated to the underlying assets
acquired and liabilities assumed, based upon their estimated fair values at the date of acquisition. The Company
used a discounted cash flow model to determine the fair value of the OJVG’s identifiable assets and liabilities.
Expected future cash flows were based on estimates of projected future revenue, expected future production costs
and capital expenditures. The Company finalized the purchase price allocation during the third quarter of 2014.
Goodwill principally reflects the ability to create operational synergies. The acquisition will benefit from the use of the
existing mill and infrastructure. In addition, the Company has the ability to optimize the phasing of the mining and
processing of its existing reserves and the OJVG reserves due to the close proximity of the OJVG pits to the
Sabodala mill.
As at November 1, 2014, the carrying value of the Company’s single CGU includes $55.2 million of goodwill based on
the annual impairment test date. The recoverable amount for the CGU was determined based on a FVLCD
calculation using a discounted cash flow model. The cash flow projections are derived from the Company’s life of
mine model and cover the remaining expected mine life and were discounted using a 7.5 percent discount rate.
As a result of this analysis, the recoverable amount of the Company’s CGU exceeds the carrying value and thus no
impairment charge has been recorded in the current year.
Sensitivities
As long-term gold prices lower than $1,236 per ounce, an impairment of the goodwill would exist.
Purchase price allocation
The following tables present the purchase price and the final allocation of the purchase price to the net identifiable
assets acquired and liabilities assumed.
Since the date of acquisition, the OJVG has recorded $41.3 million of revenue and a net profit of $20.8 million was
included in the statement of comprehensive income for the year ended December 31, 2014. Oromin has recorded an
equity investment loss of $0.6 million for the year ended December 31, 2014 as a result of remeasuring to fair value
the equity interest in OJVG prior to the OJVG acquisition date.
InputAssumption in modelBreakevenLong term gold price 1,300 1,236 Consideration transferred - Acquisition of OJVGTotal acquisition cost - Bendon 105,000 Total acquisition cost - Badr 11,314 Fair value of existing 43.5% interest in OJVG - Oromin 47,059 Consideration transferred 163,373 Cash acquired with OJVG (32)Consideration, net of cash acquired 163,341 Summary of Final Purchase Price AllocationTotal consideration 163,373AssetsCurrent assets 127 Mine development expenditures 109,207 Total assets 109,334 LiabilitiesCurrent liabilities 1,152 Total liabilities 1,152 Net identifiable assets acquired 108,182 Goodwill 55,191
8. REVENUE
For the year ended December 31, 2014, 206,336 ounces of gold were sold at an average price of $1,259 per ounce.
During the year ended December 31, 2014, the Company delivered 20,625 ounces of gold to Franco-Nevada
Corporation (“Franco-Nevada”). The Company realized cash proceeds from the sale of these ounces equivalent to 20
percent of the spot gold price. Refer to Note 21.
Revenue for 2013 is recorded at the prevailing spot gold price at the date of delivery. Hedge gains (losses), related
to the gold price movement during the period, were classified within gains (losses) on gold hedge contracts on the
statement of comprehensive income.
For the year ended December 31, 2013, 208,406 ounces of gold were sold at an average realized price of $1,246 per
ounce, including 45,289 ounces that were delivered into gold hedge contracts at $806 per ounce, representing 22
percent of gold sales for the year, and 163,117 ounces were sold into the spot market at an average price of $1,368
per ounce. The average gold price sold in 2013 was $1,427 per ounce.
During the second quarter of 2013, the Company bought back the remaining 14,500 ounces “out of the money” gold
forward sales contracts at a cost of $8.6 million.
The Company delivered all of its gold to two customers (2013: one customer): $233.6 million and $26.3 million for the
year ended December 31, 2014 (2013: $297.3 million).
9. COST OF SALES
10. ADMINISTRATION AND CORPORATE SOCIAL RESPONSIBILITY EXPENSES
20142013Gold sales - spot price259,859 297,326 Silver sales729 601 Total revenue 260,588 297,927 For the years ended December 3120142013Mine production costs162,410 170,752 Capitalized deferred stripping (5,976) (43,264)Capitalized deferred stripping - non-cash (658) (4,124)Depreciation and amortization - deferred stripping assets 28,911 17,850 Depreciation and amortization - property, plant and equipmentand mine development expendituresRoyalties 12,486 14,755 Amortization of advanced royalties 440 - Rehabilitation - 6 Inventory movements - cash (22,145) (8,552)Inventory movements - non-cash (8,089) (14,672)Total cost of sales 207,984 193,434 40,605 60,683 For the years ended December 3120142013Corporate office8,247 7,712 Dakar office 1,012 1,189 Audit fees 379 451 Legal and other 2,615 2,466 Depreciation 825 1,136 Total administration expenses 13,078 12,954 Corporate social responsibility expenses 2,543 1,763 Total administration and corporate social responsibility expenses 15,621 14,717 For the years ended December 31
11. FINANCE COSTS
12. OTHER EXPENSES
(i)
(ii)
Includes costs for legal, advisory and consulting.
Includes non-recurring legal and other costs.
13. INCOME TAX EXPENSE
The Company's provision for income taxes differs from the amount computed by applying the combined Canadian
federal and provincial income tax rates to income before income taxes as a result of the following:
Deferred income tax assets are recognized for tax loss carry-forwards, property, plant and equipment, share issuance
costs and transaction 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 $14,259 in respect of non-capital losses,
property, plant and equipment, share issuance costs and transaction costs in Canada amounting to $53,807 that can
be carried forward and applied against future taxable income. The non-capital losses, property, plant and equipment,
share issuance costs and transaction costs amounting to $53,807 will expire in the years 2030 to 2034.
Deferred income tax liabilities have not been recognized for the withholding tax and other taxes that would be on the
unremitted earnings of certain subsidiaries. Such amounts are permanently reinvested. Unremitted earnings totalled
$276,522 at December 31, 2014.
20142013Interest on borrowings3,572 7,331 Amortization of deferred financing costs 3,275 3,120 Unwinding of discounts 1,132 156 Political risk insurance 195 570 Stocking fees 819 626 Bank charges 305 345 Other 186 - Total finance costs 9,484 12,148 For the years ended December 3120142013Acquisition and related costs (i)2,065 11,020 Other (ii) - 927 Share of income from equity investment in OJVG - (52)Interest income (83) (52)Total other (income)/expenses 1,982 11,843 For the years ended December 3120142013Deferred income tax expense on reversal of temporary differences 1,536 - Total income tax expense 1,536 - For the years ended December 3120142013Statutory tax rates26.5%26.5%Income tax expense computed at statutory tax rates 6,320 14,999 Non-deductible items 316 4,260 Income not subject to tax (9,413) (24,069)Unrecognized deferred tax assets 4,313 4,810 Provision for income taxes 1,536 - For the years ended December 31
14. TRADE AND OTHER RECEIVABLES
(i)
(ii)
Trade receivables relate to gold and silver shipments made prior to year end that were settled after year end.
Other receivables primarily include receivables from suppliers for services, materials and utilities used at the Sabodala gold mine and $0.5
million of Canadian sales tax refunds as at December 31, 2014 (2013: $0.2 million).
15. INVENTORIES
16. OTHER ASSETS
(i)
(ii)
(iii)
As at December 31, 2014, prepayments include $3.0 million (2013 - $2.9 million) of advances to vendors and contractors, $1.3 million for
insurance (2013 - $1.4 million) and deferred financing costs for a standby facility. Refer to Note 36d.
The security deposit represents a security for payment under the maintenance contract.
During the third quarter of 2014, the Company commenced production from the OJVG and in accordance with the Global Agreement
between the Company and the Republic of Senegal, the Company recorded a $10.0 million advanced royalty payment to the Government
of Senegal related to the waiver of the Government's right to acquire an additional equity interest in the exploration licenses converted to
mine licenses when the ore is processed through the Sabodala mill. The advanced royalty has been recorded within other current assets
based on expected production from the OJVG over the next year and the remaining balance is recorded within other non-current assets.
The advanced royalty balance will be expensed to net profit based on actual production from the OJVG. Refer to Notes 19 and 26.
As at December 31, 2014As at December 31, 2013CurrentTrade receivables (i) 16 7,376 Other receivables (ii) 1,546 623 Total trade and other receivables 1,562 7,999 As at December 31, 2014As at December 31, 2013CurrentGold bullion 6,025 7,107 Gold in circuit 7,088 4,965 Ore stockpile 18,463 17,262 Total gold inventories 31,576 29,334 Diesel fuel 2,535 3,136 Materials and supplies 31,178 31,737 Goods in transit 1,350 2,914 Total other inventories 35,063 37,787 Total current inventories 66,639 67,121 Non-currentOre stockpile 91,057 63,081 Total inventories 157,696 130,202 As at December 31, 2014As at December 31, 2013CurrentPrepayments (i) 5,607 4,256 Security deposit (ii) 1,500 1,500 Advanced royalty (iii) 1,885 - Available for sale financial assets 3 6 Total other current assets8,995 5,762 Non-currentAdvanced royalty payment (iii) 7,675 - Intangible assets 242 947 Total other non-current assets7,917 947 Total other assets16,912 6,709
17. PROPERTY, PLANT AND EQUIPMENT
Additions made to property, plant and equipment during the year ended December 31, 2014 relate mainly to
additional mining and milling equipment acquired.
Depreciation of property, plant and equipment of $25.8 million was primarily expensed as cost of sales for the year
ended December 31, 2014 (2013: $48.2 million).
18. MINE DEVELOPMENT EXPENDITURES
Buildings and property improvementsPlant and equipmentOffice furniture and equipmentMotor vehiclesMobile equipmentCapital work in progressTotal CostBalance as at January 1, 2013 44,453 275,680 1,804 3,086 42,417 8,062 375,502 Additions - - - - - 15,154 15,154 Rehabilitation asset - 4,694 - - - - 4,694 Disposals - (15) (4) (246) (501) - (766)Other - 118 - - - - 118 Transfer 582 17,549 391 191 - (18,713) - Balance as at December 31, 2013 45,035 298,026 2,191 3,031 41,916 4,503 394,702 Additions - - - - - 3,661 3,661 Rehabilitation asset - 1,390 - - - - 1,390 Disposals - - (5) - - - (5)Other - (351) - - - - (351)Transfer - 3,392 45 - - (3,437) - Balance as at December 31, 2014 45,035 302,457 2,231 3,031 41,916 4,727 399,397 Accumulated depreciationBalance as at January 1, 2013 14,404 84,013 1,011 1,835 26,341 - 127,604 Disposals - (3) (2) (220) (402) - (627)Depreciation expense 4,812 34,435 435 386 8,117 - 48,185 Balance as at December 31, 2013 19,216 118,445 1,444 2,001 34,056 - 175,162 Disposals - - (4) - - - (4)Depreciation expense 2,230 19,479 358 339 3,400 - 25,806 Balance as at December 31, 2014 21,446 137,924 1,798 2,340 37,456 - 200,964 Net book value Balance as at December 31, 2013 25,819 179,581 747 1,030 7,860 4,503 219,540 Balance as at December 31, 2014 23,589 164,533 433 691 4,460 4,727 198,433 Amount CostBalance as at January 1, 2013 190,602 Additions incurred during the year 71,996 Balance as at December 31, 2013 262,598 Acquisition of OJVG 109,207 Additions incurred during the year 13,969 Balance as at December 31, 2014 385,774 Accumulated depreciationBalance as at January 1, 2013 50,271 Depreciation expense 30,722 Balance as at December 31, 2013 80,993 Depreciation expense 44,062 Balance as at December 31, 2014 125,055 Carrying amountBalance as at December 31, 2013 181,605 Balance as at December 31, 2014 260,719
Mine development expenditures represent development costs in relation to the Sabodala gold mine, Gora satellite
deposit and development costs for the Masato deposit.
Acquisition of the OJVG represents the fair value of the mine development expenditures acquired through the
acquisition of Oromin and the remaining interests in the OJVG.
The Gora and Masato projects were advanced from the exploration stage to the development stage effective January
1, 2012 and January 15, 2014, respectively, after technical feasibility and commercial viability studies had been
completed, or in the case of Masato, at the effective date of the acquisition. The Masato project was advanced to the
production stage in September 2014.
Depreciation of capitalized mine development costs of $44.1 million was expensed as cost of sales for the year
ended December 31, 2014 (2013: $30.7 million).
As at December 31, 2014As at December 31, 2013Capitalized mine development additionsDeferred stripping costs 6,634 47,388 Capitalized mine development - Gora 255 491 Capitalized mine development - Masato & Goluma 3,383 - Other capitalized reserve development 419 3,511 Payments to the Republic of Senegal - 16,609 Other 3,278 3,997 Total capitalized mine development additions 13,969 71,996 Total costAccumulated depreciationCarrying amountDevelopment and exploration costs 179,402 (57,445) 121,957 Deferred stripping asset 83,196 (23,548) 59,648 Total mine development expenditures incurred 262,598 (80,993) 181,605 As at December 31, 2013Total costAccumulated depreciationCarrying amountDevelopment and exploration costs 186,738 (63,823) 122,915 Acquisition of OJVG 109,207 (8,773) 100,434 Deferred stripping asset 89,829 (52,459) 37,370 Total mine development expenditures incurred 385,774 (125,055) 260,719 As at December 31, 2014
19. TRADE AND OTHER PAYABLES
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
Trade payables comprise of obligations by the Company to suppliers of goods and services. Terms are generally 30 to 60 days.
Government royalties are payable annually based on the mine head value of the gold and related substances produced at a rate of 5
percent of sales.
A reserve payment is payable to the Republic of Senegal, calculated on the basis of $6.50 for each ounce of new reserves until December
31, 2012 which was calculated as $3.7 million. One payment of $0.9 million was made in 2013 and an additional payment of $0.9 million
was made in 2014. As at December 31, 2014, $0.9 million remains accrued as a current liability and the final payment of $0.9 million has
been accrued as a non-current liability and is recorded at its net present value.
During 2014, a payment of $1.2 million was made in full settlement of the Sabodala Gold Operations SA (“SGO”) 2012 tax assessment.
Refer to Note 27 for further details.
The Company has agreed to advance accrued dividends to the Republic of Senegal in relation to its interest in SGO. For the year ended
December 31, 2014, $7.8 million has been accrued based on net sales revenue (2013: $5.2 million). Refer to Note 27 for further details.
The Company has agreed to establish a social development fund which involves making a payment of $15.0 million to the Republic of
Senegal at the end of the operational life, which has been accrued at its net present value.
The Company acquired Badr’s 13 percent carried interest in the OJVG for cash consideration of $7.5 million and further contingent
consideration which will be based on realized gold prices and increases to the OJVG’s mining reserves through 2020, of which $3.8 million
was accrued upon finalization of the purchase price allocation (December 31, 2014: 4.0 million has been accrued based on its net present
value).
During the third quarter of 2014, the Company commenced production from the OJVG and in accordance with the Global Agreement
between the Company and the Republic of Senegal, the Company is required to make initial payments totalling $10.0 million related to the
waiver of the right for the Republic of Senegal to acquire an additional equity interest in the Somigol project. As at December 31, 2014,
$1.5 million was paid and the remaining $8.5 million has been accrued as a current liability of $5.0 million and a non-current liability of $3.5
million. Refer to Note 26 for further details.
20. BORROWINGS
a. Macquarie Loan Facility
On January 15, 2014, the Company amended its existing $60.0 million loan facility agreement with Macquarie Bank
Limited (“Loan Facility”) and retired half of the balance of $30.0 million. The outstanding balance was fully repaid by
December 31, 2014.
b. Macquarie Equipment Finance Facility
During the first quarter of 2013, the Company entered into a $50.0 million equipment finance facility with Macquarie
Bank Limited (“Equipment Facility”). The proceeds were put towards additional equipment for the Sabodala pit.
As at December 31, 2014As at December 31, 2013CurrentTrade payables (i) 19,436 21,410 Sundry creditors and accrued expenses 8,493 11,865 Government royalties (ii) 12,296 16,296 Amounts payable to Republic of Senegal (iii) (iv) (v)(viii) 13,684 7,320 Total current trade and other payables 53,909 56,891 Non-CurrentAmounts payable to Republic of Senegal (iii) (vi)(viii) 14,311 10,959 Contingent liabilities (vii) 4,088 - Total other non-current liabilities 18,399 10,959 Total trade and other payables 72,308 67,850 As at December 31, 2014As at December 31, 2013CurrentLoan facility - 60,000 Equipment finance facility 4,192 12,775 Deferred financing costs (246) (2,352)Total current borrowings 3,946 70,423 Non-CurrentEquipment finance facility - 4,192 Deferred financing costs - (246)Total non-current borrowings - 3,946 Total borrowings 3,946 74,369
During the fourth quarter of 2013, the Company cancelled the undrawn commitment from the Equipment Facility. At
December 31, 2014, $4.2 million remained. Subsequent to the year ended December 31, 2014, the Company fully
repaid the outstanding balance of its Equipment Facility.
21. DEFERRED REVENUE
On January 15, 2014, the Company completed a streaming transaction with Franco-Nevada. The Company is
required to deliver 22,500 ounces annually of gold over the first six years followed by 6 percent of production from the
Company’s existing properties, including those of the OJVG, thereafter, in exchange for a deposit of $135.0 million.
For ounces of gold delivered to Franco-Nevada under the streaming transaction, Franco-Nevada will pay in cash the
prevailing spot price of gold at the date of delivery at 20 percent of the ounces. For the remaining 80 percent of the
ounces delivered to Franco-Nevada, the deferred revenue balance will be drawn down based on the prevailing spot
price for gold. Once the deferred revenue has been drawn down to nil, the Company will only receive the 20 percent
cash payment referred to above for the 6 percent of ounces produced.
The initial term of the contract is 40 years and the deposit bears no interest. For accounting purposes, the agreement
is considered a contract for the future delivery of gold ounces at the contracted price. The up-front $135.0 million
payment is accounted for as a prepayment of yet-to-be delivered ounces under the contract and are recorded as
deferred revenue.
During the year ended December 31, 2014, the Company delivered 20,625 ounces of gold to Franco-Nevada and
recorded revenue of $26.3 million, consisting of $5.3 million received in cash proceeds and $21.0 million recorded as
a reduction of deferred revenue. Due to the timing of shipment schedules near year end, the delivery of 1,875
ounces of gold for the month of December 2014 was not received by Franco-Nevada until early January 2015. As a
result, 1,875 ounces delivered in 2015 could not be recognized for accounting purposes for the year ended
December 31, 2014. The transaction with Franco-Nevada permits for the delivery of payable gold to be deferred up
to five business days following the month end.
AmountBalance as at January 1, 2014 - Deposit received 135,000 Amortization of deferred revenue (21,002)Balance as at December 31, 2014 113,998 As at December 31, 2014As at December 31, 2013Current 21,814 - Non-Current 92,184 - Total deferred revenue113,998 -
22. PROVISIONS
(i)
(ii)
(iii)
The provisions for employee benefits include $1.7 million accrued vacation and $0.7 million long service leave entitlements for the year
ended December 31, 2014 (2013 - $1.2 million and $0.6 million).
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 (which as at December
31, 2014 was estimated based on the Sabodala pit mine closure in 2019 and Masato pit mine closure in 2023) but a limited amount of
concurrent rehabilitation will occur throughout the mine life.
The provision for cash settled share-based compensation represents the amortization of the fair value of the fixed bonus plan units and the
amortization of the fair value of the RSUs and DSUs. Please see Note 32 for further details.
23. DEFERRED INCOME TAX LIABILITIES
24. ISSUED CAPITAL
On May 1, 2014, the Company closed on an offering of 36,000,000 common shares at a price of C$0.83 per share for
gross proceeds of C$29.9 million. Net proceeds were $25.4 million after consideration of underwriter fees and
expenses totaling approximately $1.9 million.
In 2013, the Company completed the acquisition of all of the issued and outstanding common shares of Oromin that it
did not already own. The Company issued 71,183,091 Teranga shares to acquire all of the Oromin shares for
consideration of $37.3 million.
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 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 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.
As at December 31, 2014As at December 31, 2013CurrentEmployee benefits (i) 2,365 1,751 Cash settled share-based compensation (iii) 282 - Total current provisions 2,647 1,751 Non-CurrentMine restoration and rehabilitation (ii) 15,726 14,227 Cash settled share-based compensation (iii) 267 109 Total non-current provisions 15,993 14,336 Total provisions 18,640 16,087 AmountDeferred tax assets - Deferred tax liabilitiesDeferred stripping costs (1,089)Rehabilitation accrual - Leased equipment (124)Social fund, tax payments (323)Net deferred tax liabilities (1,536)Number of sharesAmount Balance as at January 1, 2013 245,618,000 305,412 Issued to Oromin shareholders 71,183,091 37,264 Less: Share issue costs - (206)Balance as at January 1, 2014 316,801,091 342,470 Equity offering issuance 36,000,000 27,274 Less: Share issue costs - (1,907)Balance as at December 31, 2014 352,801,091 367,837
25. EARNINGS PER SHARE (EPS)
The determination of weighted average number of common shares for the purpose of diluted EPS excludes 21.5
million and 23.7 million shares relating to share options that were anti-dilutive for the years ended December 31,
2014 and December 31, 2013, respectively.
26. COMMITMENTS FOR EXPENDITURES
a. Capital Expenditure Commitments
The Company has committed to spend a total of $100 thousand over the next year in respect of the mining
equipment supply contract.
b. Sabodala Gold Operations (“SGO”), Sabodala Mining Company (“SMC”) and the OJVG
Operating Commitments
The Company has the following operating commitments in respect of the SGO, SMC and the OJVG:
Pursuant to the Company’s Mining Concession, a royalty of 5 percent is payable to the Republic of Senegal
based on the value of gold shipments, evaluated at the spot price on the shipment date.
Pursuant to the completion of the acquisition of the OJVG, the Company is required to make initial payments
totalling $10.0 million related to the waiver of the right for the Republic of Senegal to acquire an additional
equity interest in the OJVG. The initial payment is to be used to finance social projects in the mine site region,
which are determined by the Republic of Senegal and will be paid either directly to suppliers for the
completion of specific projects or to specified ministries of the Republic of Senegal. During the year ended
December 31, 2014, $1.5 million was paid and the remaining $8.5 million has been accrued and is expected
to be paid through 2015 and 2016. An additional payment will be payable when the actual cumulative
production from the OJVG, net of mining royalties, multiplied by the Company’s weighted average gold
prices, multiplied by 1 percent, exceeds the initial payments. The additional payment will be based on the
calculated amount exceeding the initial payment.
Pursuant to the Company’s Mining Concession, $1.2 million is payable annually for community projects and
infrastructure to support local communities surrounding the Company’s operations and social development of
local authorities in the surrounding Kedougou region.
$30 thousand is payable annually for logistical support of the territorial administration of the region for SGO,
$200 thousand is payable annually for training of Directorate of Mines and Geology officers and Mines
Ministry, and $150 thousand is payable annually for training of the Mines Administration personnel and
logistical support of the Ministry of Mines technical services.
$250 thousand is payable annually for a forestry protocol to the Ministry of Environment for a period of five
years. As the protocol was signed on April 2, 2014, the prorated payment for 2014 amounted to $187.5
thousand.
$925 thousand is payable annually for additional reserves until 2016 ($3.7 million in total for the period from
2013 to 2016).
$112 thousand is payable annually as institutional support for the exploration licenses.
20142013Basic EPS (US$) 0.05 0.19 Diluted EPS (US$) 0.05 0.19 Basic EPS:Net profit used in the calculation of basic EPS 17,776 50,280 Weighted average number of common shares for the purposes of basic EPS (‘000) 340,867 270,705 Weighted average number of common shares outstanding for the purpose of diluted EPS (‘000) 340,867 270,705 For the years ended December 31
27. CONTINGENT LIABILITIES
During the second quarter of 2013, the Company signed a definitive global agreement with the Republic of Senegal.
A component of the agreement relates to the settlement of outstanding tax assessments and special contribution
payments.
a. Settled and outstanding tax assessments
During the second quarter of 2013, the Company made a payment of $1.2 million in partial settlement of the SGO tax
assessment received in December 2012. During the second quarter of 2014, a payment of $1.2 million was made in
final settlement.
Approximately $18.0 million of the original SGO 2011 tax assessment of approximately $24.0 million has been
resolved and approximately $6.0 million remains in dispute. The Company believes that the remaining amount in
dispute is without merit and that these issues will be resolved with no amount or an immaterial amount of tax being
due.
During the second quarter of 2013, the Company made a payment of $1.4 million in full settlement of the SMC tax
assessment received in January 2013.
In January 2015, SGO received a tax assessment for $3.0 million from the Senegalese tax authorities claiming
withholding tax on interest and fees paid to an offshore bank. The Company believes that the amount in dispute is
without merit and that the issue will be resolved with no or an immaterial amount of tax due.
b. Government Payments
In connection with the Global Agreement signed with the Republic of Senegal in 2013, the Company has agreed to
advance approximately $13.2 million of accrued dividends in respect of its 10 percent minority interest between 2013
and 2015. In 2013, the Company made a payment of $2.7 million with a further payment of $2.7 million required once
drilling activities recommence at Niakafiri, now expected in 2015. As at December 31, 2014, $7.8 million has been
accrued based on net sales revenue and is expected to be paid over 2015 and 2016.
The Company is required to make a payment of approximately $4.2 million related to the waiver of the right for the
Republic of Senegal to acquire an additional equity interest in the Gora project. The payment is expected to be made
upon receipt of all required approvals authorizing the processing of all Gora project ore through the Sabodala plant
which is expected now in 2015.
28. EXPLORATION LICENSES AND JOINTLY CONTROLLED OPERATIONS AND ASSETS
The Company has exploration licenses and is an investee in the following jointly controlled operations and assets:
(i)
The joint venture partner of the exploration license has elected to take a 1.5% net smelter royalty on the Gora project in exchange for its
fully participatory 20 percent interest.
Exploration commitments and contingent liabilities
Exploration commitments and contingent liabilities are disclosed in Notes 26 and 27.
InterestName of venturePrincipal activity2014%Dembala BerolaGold exploration100MassakoundaGold exploration100Bransan Gold exploration100AXMIN - HeremakonoGold exploration80 (i)AXMIN - SounkounkouGold exploration80 (i)Bransan SudGold exploration100Sabodala OuestGold exploration100SaiansoutouGold exploration100Garaboureya NorthGold exploration75
29. CONTROLLED ENTITIES
(i)
The Company is in the process of reviewing its existing corporate structure and investigating opportunities for simplification and tax
synergies. The reorganization is expected to be implemented during the first half of 2015.
30. CASH FLOW INFORMATION
a. Change in working capital
b. Cash balance restricted for use
During the third quarter of 2013, the Company amended its existing $60.0 million Loan Facility to extend the final
repayment date by one year to June 30, 2015. The Company was required to maintain a restricted cash balance of
up to $20.0 million.
On January 15, 2014, the Company amended its existing $60.0 million Loan Facility agreement with Macquarie Bank
Limited and retired half of the balance of $30.0 million. The outstanding balance was fully repaid by December 31,
2014 and the $15.0 million restricted cash requirement was removed. A minimum liquidity financial covenant of $15.0
million is required as part of the streaming transaction with Franco-Nevada. Refer to Note 21.
Percentage owned2014Controlled entities consolidatedBritish Virgin Islands 100 Mauritius 100 SGML (Capital) LimitedMauritius 100 Oromin Explorations LimitedCanada 100 Sabodala Holding LimitedBritish Virgin Islands 100 Senegal 100 Senegal 90 British Virgin Islands 100 British Virgin Islands 43.5 Senegal 90 British Virgin Islands 56.5 Oromin Joint Venture Group Limited (i) Sabodala Gold Operations SASubsidiaries of Teranga Gold B.V.I. Corporation:Country of Incorporation Teranga Gold B.V.I. Corporation Sabodala Gold (Mauritius) LimitedSubsidiaries of Sabodala Gold (Mauritius) Limited: Sabodala Mining Company SARLSubsidiaries of Oromin Explorations Limited: Sabodala Holding Limited (i) Societe des Mines de Golouma S.A. (i) Oromin Joint Venture Group Limited (i)Net change in working capital other than inventory20142013Changes in working capital other than inventoryDecrease/(increase) in trade and other receivables6,915 (1,613) Decrease in other assets147 1,108 (Decrease)/increase in trade and other payables(8,048) 5,505 Increase/(decrease) in provisions1,225 (188) Net change in working capital other than inventory239 4,812 For the years ended December 31
31. 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 safeguard 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 income. The Company is not subject to
any externally imposed capital requirements. Notwithstanding, the Company’s cash position is highly dependent on
the gold price, and while the Company expects it will generate sufficient free cash flow from operations to fund its
growth initiatives, the Company may explore value preservation alternatives that will provide additional financial
flexibility to ensure sufficient liquidity is maintained by the Company.
The leverage ratio as at December 31, 2014 was as follows:
b. Categories of financial instruments
As at December 31, 2014 and 2013, the Company’s financial instruments consisted of cash and cash equivalents,
trade and other receivables, trade and other payables and borrowings.
The following table illustrates the classification of the Company’s financial instruments, other than cash and cash
equivalents, as at December 31, 2014 and 2013:
c. Commodity market risk
Market risk represents the potential loss that can be caused by a change in the market value of financial instruments.
The Company’s exposure to market risk is determined by a number of factors, including foreign exchange rates and
commodity prices. The Company is also exposed to movements in the gold price.
d. Foreign currency risk management
The Company has certain financial instruments denominated in CFA Franc, EUR, CAD, AUD and other currencies.
Consequently, the Company is exposed to the risk that the exchange rate of the USD relative to the CFA Franc,
EUR, CAD, AUD and other currencies may change in a manner which has a material effect on the reported values of
the Company’s assets and liabilities which are denominated in the CFA Franc, EUR, CAD, AUD and other currencies.
Borrowings (3,946) (74,369)Cash and cash equivalents 35,810 14,961 Restricted cash - 20,000 Net cash / (debt) 31,864 (39,408) Equity attributable to shareholders 501,431 457,809 Net cash / (debt) to equity ratio6%(9%)As at of December 31, 2014As at of December 31, 2013Financial assets:Loans and receivables Restricted cash - 20,000 Trade and other receivables1,5627,999Financial liabilities:Other financial liabilities at amortized cost Trade and other payables 72,85767,959 Borrowings 3,94674,369As at of December 31, 2014As at December 31, 2013
The carrying amounts of the Company’s foreign currency denominated monetary assets and liabilities are as follows:
Foreign currency sensitivity analysis
The Company is mainly exposed to CFA Franc, EUR, CAD and AUD. 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 year end for a 10 percent
change in the functional currency rates. A negative number indicates a decrease in profit or equity where the
functional currency strengthens by 10 percent against the relevant currency for monetary assets and where the
functional currency weakens against the relevant currency for monetary liabilities. For a 10 percent weakening of the
USD against the relevant currency for monetary assets and a 10 percent strengthening for monetary liabilities, there
would be an equal and opposite impact on net assets and the balances would be positive.
e.
Interest rate risk management
Interest rate risk is the risk that the value of a financial instrument 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 Company’s financial instruments which are exposed to interest
rate risk as at December 31, 2014 and 2013:
December 31, 2014December 31, 2013December 31, 2014December 31, 2013CFA Franc (XOF) 6,422 9,054 47,498 43,366 EUR 7,687 1,209 1,184 2,872 CAD 1,043 704 1,027 6,138 AUD 298 199 270 371 Other 176 224 763 336 Financial AssetsFinancial LiabilitiesAs at December 31, 2014As at December 31, 2013As at December 31, 2014As at December 31, 201310% StrengtheningCFA Franc (XOF) ImpactGain or loss (642) (905) 4,750 4,337 EUR ImpactGain or loss (769) (121) 118 287 CAD ImpactGain or loss (104) (70) 103 614 AUD ImpactGain or loss (30) (20) 27 37 10% WeakeningCFA Franc (XOF) ImpactGain or loss 642 905 (4,750) (4,337)EUR ImpactGain or loss 769 121 (118) (287)CAD ImpactGain or loss 104 70 (103) (614)AUD ImpactGain or loss 30 20 (27) (37)Financial AssetsFinancial Liabilities
The Company’s interest rate on its borrowings is calculated at LIBOR plus 7.5 percent margin on the Equipment
Facility.
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:
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 in low risk
jurisdictions. The Company has adopted a strategy to minimize its credit risk by substantially investing in sovereign
debt issued by Canadian government agencies, Canadian Provinces and the Federal Government of Canada.
The Company does not have significant credit risk exposure on accounts receivable as all gold sales are executed
through Macquarie Bank, an AAA rated bank. Gold production is sold into the spot market and proceeds from the
sale are 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
management of its surplus cash resources at the corporate office and only transferring money to its subsidiary based
on immediate cash requirements, thereby mitigating exposure to Senegal banks.
g. Liquidity risk management
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 monitoring 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 requirements 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 covenants. Surplus cash held by the Corporate office is invested in short-term investments issued
by Canadian banks and in sovereign debt issued by Canadian Agencies, Provinces and the Federal Governments of
Canada.
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 will be required to pay. The table includes both interest and principal cash flows.
Financial assetsCash and cash equivalents 35,810 14,961 Restricted cash - 20,000 Total 35,810 34,961 Financial liabilitiesBorrowings 3,946 74,369 Total 31,864 (39,408)As at of December 31, 2014As at of December 31, 2013As at December 31, 2014As at December 31, 2013As at December 31, 2014As at December 31, 2013Profit or loss 151 203 112 391 Financial AssetsFinancial Liabilities
Management considers that the Company has adequate current assets and forecasted cash flow from operations to
manage liquidity risk arising from settlement of current and non-current liabilities
h. Fair value of financial instruments
The Company’s trade and other receivables, and trade and other payables are substantially carried at amortized cost,
which approximates fair value. Cash and cash equivalents and available-for-sale financial assets are measured at
fair value. Borrowings are based on discounted future cash flows using discount rates that reflect current market
conditions for this financial instrument with similar terms and risks. Such fair value estimates are not necessarily
indicative of the amounts the Company might pay or receive in actual market transactions. Potential transaction
costs have also not been considered in estimating fair value.
Financial instruments carried at amortized cost on the consolidated statement of financial position are as follows:
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction
between market participants at the measurement date. The fair value hierarchy establishes three levels to classify
the inputs to valuation techniques used to measure fair value.
The Company values financial instruments carried at fair value using quoted market prices, where available. Quoted
market prices (unadjusted) in active markets represent a Level 1 valuation. When quoted market prices in active
markets 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 fair value hierarchy gives the highest priority to Level 1 inputs and
the lowest priority to Level 3 inputs.
Weighted average effective interest rate %Due on demandDue one to three monthsDue between three months to one yearDue one to five yearsFinancial LiabilitiesDecember 31, 2014Non-interest bearing - 27,927 - 17,262 11,306 Variable interest rate instruments7.77% - 3,194 998 - Fixed interest rate instruments3.08% - - 925 925 Fixed interest rate instruments7.50% - - - 4,474 Total 27,927 3,194 19,185 16,705 December 31, 2013Non-interest bearing - 33,273 1,200 16,296 5,195 Variable interest rate instruments7.77% - 3,194 9,581 4,192 Fixed interest rate instruments3.08% - - 925 1,750 Variable interest rate instruments9.13% 60,000 - - - Total 93,273 4,394 26,802 11,137 Weighted average effective interest rate %Due on demandDue one to three monthsDue between three months to one yearDue one to five yearsFinancial AssetsDecember 31, 2014Non-interest bearing - 1,562 - - - Total 1,562 - - - December 31, 2013Non-interest bearing - 7,999 - - - Total 7,999 - - - Carrying amount Fair value Carrying amount Fair valueFinancial liabilitiesBorrowings 4,192 4,100 76,967 71,207 As at December 31, 2014As at December 31, 2013
The following table outlines financial assets and liabilities measured at fair value in the consolidated statement of
financial position and the level of the inputs used to determine those fair values in the context of the hierarchy as
defined above:
32. SHARE BASED COMPENSATION
The share-based compensation expense for the year ended December 31, 2014 totaled $0.9 million (2013: $0.8
million).
a.
Incentive Stock Option Plan
The Incentive Stock Option Plan (the “Plan”) authorizes the Directors 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 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 ending 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 years ended December 31, 2014 and 2013, a total of 130,000 and 820,000 common share options,
respectively, were granted to directors and employees.
During the years ended December 31, 2014 and 2013, a total of 2,397,361 and 2,132,917 options were forfeited,
respectively. No stock options were exercised during the years ended December 31, 2014 and 2013. As at
December 31, 2014, there were 20,057,774 and 1,412,715 outstanding options vested and unvested, respectively.
In connection with the acquisition of Oromin in 2013, Teranga issued 7,911,600 replacement stock options. These
options expired on February 6, 2015 with no options exercised prior to expiry.
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Financial AssetsCash and cash equivalents 35,810 - - 14,961 - - Restricted cash - - - 20,000 - - Total 35,810 - - 34,961 - - Financial LiabilitiesBorrowings3,946 - 74,369 - Total- 3,946 - - 74,369 - As at December 31, 2014As at December 31, 2013
The following stock options were outstanding as at December 31, 2014:
As part of the Oromin acquisition, 7,911,600 replacement stock options were issued which vested immediately. The remaining 7,746,600 outstanding
options at December 31, 2014 expired on February 6, 2015.
As at December 31, 2014, approximately 13.8 million (2013: 15.9 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 which 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 21,470,489 common share stock options issued and outstanding as at December 31, 2014, 13,548,889 vest
over a three-year period, 7,746,600 vested immediately 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 the best
estimate of outcome of achieving our results.
As at December 31, 2014, 13,723,889 share options had a contractual life of ten years at issuance and 7,746,600
share options issued in connection with the acquisition of Oromin have a remaining contractual life of 1 month and
expired on February 6, 2015.
Option seriesNumberGrant dateExpiry dateExercise price (C$)Share price at grant date (C$)Granted on November 26, 20106,120,00026-Nov-1026-Nov-203.001.19Granted on December 3, 20101,200,00003-Dec-1003-Dec-203.001.19Granted on February 9, 2011675,00009-Feb-1109-Feb-213.000.99Granted on April 27, 201125,00027-Apr-1127-Apr-213.000.80Granted on June 14, 2011455,00014-Jun-1114-Jun-213.000.94Granted on August 13, 2011360,00013-Aug-1113-Aug-213.000.82Granted on December 20, 20111,475,00020-Dec-1120-Dec-213.000.61Granted on February 24, 2012703,33324-Feb-1224-Feb-223.000.37Granted on February 24, 2012225,00024-Feb-1224-Feb-223.001.26Granted on June 5, 201250,00005-Jun-1205-Jun-223.000.17Granted on September 27, 2012600,00027-Sep-1227-Sep-223.000.93Granted on October 9, 2012600,00009-Oct-1206-Oct-223.001.01Granted on October 31, 201280,00031-Oct-1231-Oct-223.000.52Granted on October 31, 2012165,55631-Oct-1231-Oct-223.000.18Granted on December 3, 2012200,00003-Dec-1203-Dec-223.000.61Granted on February 23, 2013350,00023-Feb-1323-Feb-233.000.42Granted on May 14, 2013190,00014-May-1314-May-233.000.82Granted on June 3, 2013120,00003-Jun-1303-Jun-233.000.71Granted on May 1, 201450,00001-May-1401-May-243.000.68Granted on June 4, 201480,00004-Jun-1404-Jun-243.000.60Granted on August 6, 2013573,60006-Aug-1306-Feb-151.09*Granted on August 6, 20134,437,60006-Aug-1306-Feb-151.54*Granted on August 6, 20132,735,40006-Aug-1306-Feb-152.17*
Fair value of stock options granted
The fair value at the grant date was calculated using the Black-Scholes option pricing model with the following
assumptions:
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 share options during the year
The following reconciled the share options outstanding at the beginning and end of the year:
There were no options exercised during the years ended December 31, 2014 and December 31, 2013.
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 Stock Option Plan. Each Unit entitles the holder upon
exercise to receive a cash payment equal to the closing price of a common 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 the TSX for the period
ended on the business day immediately preceding the day on which the option was granted.
The vesting of the Units is determined by the Board of Directors 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.
As at December 31, 2014, a total of 1,360,000 Units were outstanding (2013: 1,440,000 units). During the year
ended December 31, 2014, 80,000 Units were forfeited.
As at December 31, 2014, there were 1,360,000 Units outstanding that were granted on August 8, 2012 with 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, 2014 in the range of C$0.01 to C$0.09 per Unit. The total fair value of
the Units at December 31, 2014 is $0.1 million (December 31, 2013: $0.1 million).
20142013Grant date share priceC$0.60-C$0.68C$0.71-C$1.44Weighted average fair value of awardsC$0.05C$0.05Exercise priceC$3.00C$3.00Range of risk-free interest rate1.05%-1.28%1.04%-1.20%Volatility of the expected market price of share67.28%-68.30%67.28%-68.30%Expected life of options (years)2.0-3.52.0-3.5Dividend yield0%0%Forfeiture rate5%-50%5%-50%For the years ended December 31Number of optionsWeighted average exercise priceBalance as at January 1, 201317,139,167C$3.00Granted during the year820,000C$3.00Replacement stock options issued to Oromin employees on change of control7,911,600C$1.09-C$2.17Forfeited during the year(2,132,917) C$3.00Balance as at December 31, 201323,737,850C$2.58Granted during the year130,000 C$3.00Forfeited during the year(2,397,361) C$2.83-C$3.00Balance as at December 31, 201421,470,489C$2.54Number of options exercisable - December 31, 201320,640,532 Number of options exercisable - December 31, 201420,057,774
The estimated fair values of the Units were amortized over the period in which the Units vest. Of the 1,360,000 Units
issued, 50 percent vested upon issuance, 25 percent vested on December 31, 2012 and 25 percent vested on
December 31, 2013.
Fair value of Units granted
The fair value of units granted was calculated using Black-Scholes option pricing model with the following
assumptions:
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.
c. RSUs
The Company introduced a new RSU Plan for employees during the second quarter of 2014. RSUs are not
convertible into Company stock and simply represent a right to receive an amount of cash (subject to withholdings),
on vesting, equal to the product of i) the number of RSUs held, and ii) the volume weighted average trading price of
the Company’s shares for the five trading days prior to such date. RSUs will generally vest as to 50 percent in thirds
over a three-year period and as to the other 50 percent, in thirds upon satisfaction of annual production and cost
targets.
During the year ended December 31, 2014, the Company granted 2,343,487 RSUs, no units vested, 436,532 units
were forfeited and 298,884 units were cancelled. At December 31, 2014, $0.1 million of current RSU liability and
$0.2 million of non-current RSU liability have been recorded in the consolidated financial statement of financial
position.
d. DSUs
The Company introduced a new DSU Plan for non-executive directors during the second quarter of 2014. DSUs
represent a right for a non-executive director to receive an amount of cash (subject to withholdings), on ceasing to be
a director of the Company, equal to the product of (i) the number of DSUs held, and (ii) the volume weighted average
trading price of the Company’s shares for the five trading days prior to such date.
The Company granted 545,000 DSUs during the year ended December 31, 2014 and there were no units vested and
no units were cancelled. At December 31, 2014, $0.2 million of current DSU liability has been recorded in the
consolidated financial statement of financial position.
33. SEGMENT REPORTING
The Company has one reportable operating segment under IFRS 8 Operating Segments.
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:
20142013Share price at the end of the periodC$0.49C$0.53Weighted average fair value of awardsC$0.01-C$0.09C$0.01-C$0.11Exercise priceC$3.00C$3.00Range of risk-free interest rate1.00%-1.34%1.12%-1.895%Volatility of the expected market price of share66.71%-68.3%66.71%-68.3%Expected life of options (years)2.0-5.02.0-5.0Dividend yield0%0%Forfeiture rate5%-50%5%-50%For the years ended December 3120142013Republic of Senegal – revenue from gold and silver sales 234,335 297,927 Republic of Senegal – interest income 53 51 British Virgin Islands 26,253 - Canada 30 1 Total 260,671 297,979 For the years ended December 31
The following is an analysis of the Company’s non-current assets by geographical location:
34. KEY MANAGEMENT PERSONNEL COMPENSATION
The Company considers key members of management to include the Executive Chairman, President and CEO, Vice
Presidents and the General Manager, SGO & Vice President, Development Senegal.
The remuneration of the key members of management includes 7 members during the year ended December 31,
2014 as well as 1 member until May 2014 and 8 members during the year ended December 31, 2013. The
remuneration during the years ended December 31, 2014 and 2013 is as follows:
35. RELATED PARTY TRANSACTIONS
During the year ended December 31, 2014, there were transactions of $0.1 million between the Company and a
director-related entity (2013 - $0.3 million).
36. SUBSEQUENT EVENT
a. Tax Assessment
In January 2015, SGO received a tax assessment from the Senegalese tax authorities claiming withholding tax on
interest paid to an offshore bank of approximately $3.0 million. The Company believes that the amount in dispute is
without merit and that the issue will be resolved with no or an immaterial amount of tax due.
b. Gold Hedge
On January 23, 2015, the Company entered into a gold hedge with Macquarie Bank Limited to deliver 5,000 ounces
of gold on each of February 26, 2015, March 12, 2015 and March 26, 2015 for the set price of $1,297 per ounce.
c. Repayment of Macquarie Lease Facility
Subsequent to the year ended December 31, 2014, the Company fully repaid the outstanding balance of its
Macquarie Equipment Facility, resulting in the Company being debt free.
d. Standby Facility
The Company is working to put a standby facility in place to provide additional financial flexibility to ensure sufficient
liquidity is maintained by the Company.
Republic of Senegal 556,245 461,078 Mauritius - - Canada 57,072 51,722 Total 613,317 512,800 As at December 31, 2014As at December 31, 2013Cash settled share based payments - value vested during the periodEquity settled share based payments - value vested during the periodSalary and FeesNon-Cash BenefitsCash BonusOptionsOptionsTotalFor the year ended December 31, 2014Compensation 2,681 132 403 91 287 3,594 For the year ended December 31, 2013Compensation 2,839 267 - 108 1,110 4,324 Short term benefits
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
objectives. This statement is of corporate governance
practises current as of the date thereof. Governance
information on Teranga is available on the Company’s
website at: www.terangagold.com.
PRINCIPLE 1: LAY SOLID FOUNDATIONS 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
the Board's
stewardship responsibilities, including:
formal written mandate setting out
• 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 measures
stakeholders; and
for
receiving
feedback
from
• 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
management 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 six standing
Board committees: (i) Audit Committee; (ii) Corporate
Governance and Nominating Committee; (iii) Compensation
Committee; (iv) Finance Committee; (v) Technical, Safety,
and Environment Committee; and (vi) Corporate 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 to time delegates certain matters
it is responsible for to Board committees. The Board
its oversight
however,
function and ultimate
responsibility
these matters and all delegated
responsibilities.
retains
for
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
recommending
modifications to these Corporate Governance Guidelines for
consideration by the Board.
governance,
including
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.
risk management practices; and (c) proposed issues of
securities and utilization of financial instruments.
for
independent, except
The Board has determined that all committees will be
comprised entirely of directors determined by the Board to
the Corporate Social
be
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.
After receipt of recommendations from the Corporate
Governance 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
to:
(a)
The responsibilities of the Audit Committee include assisting
the Board in fulfilling its oversight responsibilities with
reporting and disclosure
respect
requirements;
risk
management and financial control framework has been
implemented and tested by management of Teranga; and
(c) external and internal audit processes.
that an effective
(b) ensuring
financial
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 members of the Board; (c) the structure and
composition of Board committees; and (d) evaluating the
performance and effectiveness 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 appointment, 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
financial policies and
with respect
strategies, including capital structure; (b) Teranga’s financial
to: (a) Teranga’s
responsibilities of
The
the Technical, Safety and
Environment Committee include assisting the Board in
fulfilling its oversight responsibilities with respect to: (a)
technical matters relating to exploration, development,
permitting, construction and operation of Teranga’s mining
activities; (b) resources and reserves on Teranga’s mineral
resource properties; (c) material technical commercial
arrangements regarding 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 responsibility; (f) ensuring Teranga
implements best-in-class property development
and
operating practices; (g) monitoring safety, environment and
(h) monitoring
social
compliance with applicable
to safety,
laws
environment and social responsibility.
responsibility performance; and
related
The responsibilities of the Corporate Social Responsibility
Committee is to assist the Board in the development,
implementation and monitoring of systems and programs for
management, and compliance with applicable law related to
corporate social responsibility, monitoring corporate social
responsibility performance, and monitoring compliance with
applicable laws related to corporate 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.
Diversity
While the Board of Directors has not adopted a specific
diversity policy at this time it has approved amendments to
both its Corporate Governance Guidelines as well as
Corporate Governance and Nominating Committee (the
“Committee”) Charter to address the importance of the
identification and nomination of women directors, as well as
other
appropriate
representation of diversity of background and perspective at
the Board level.
characteristics,
ensure
an
to
The Corporate Governance Guidelines as well as the
Committee Charter have been expanded to confirm and
highlight the importance Teranga places on maintaining an
appropriate level of diversity. While the primary objectives
of the Committee are to ensure consideration of individuals
who are highly qualified, based on their talents, experience,
functional expertise and personal skills, character and
qualities, the Committee will balance these objectives with
the need to identify and promote individuals who are
reflective of diversity for nomination for election to the
Board. In particular, the Committee will consider the level of
representation of women and other diverse candidates on
the Board when making recommendations for nominees to
the Board.
As noted above, the Board has expanded its governance
disclosure to confirm and reflect the importance of a
diversity of perspectives and backgrounds within
its
executive management team, paying specific attention to
the representation of women. The Company has always
maintained at least one woman within its relatively small
executive management
to
maintaining
level of representation and
expanding upon it depending on the suitability. The Board
and management recognize the value brought by a diversity
of perspectives and background within the management
team and have made specific amendments
its
governance practices to ensure the level of women’s
representation is a key factor when the composition of the
executive management team is being considered.
this minimum
is committed
team and
to
Given an established Board and executive management
team in place with representation of women at both levels
Teranga has not adopted any specific targets with respect
to the representation of women. However it will continue to
promote its objectives through the initiatives set out in its
Corporate Governance Guidelines with a view to identifying
and fostering the development of a suitable pool of
candidates for nomination or appointment over time. The
Committee Charter has also been amended to require an
annual review of succession plans for the Chairman, CEO
and the executive management team of the Company
specifically taking into account the level of women and other
diverse candidates in each of these roles.
With respect to Teranga’s current organization:
of the 7 members of the Board of Directors, one is
female
within the Corporate office, excluding executive
officers, approximately 75% of staff are female;
and
within the general workforce in Senegal,
approximately 10% of employees, including
expatriate personnel and contractors are female.
The identity of all Board members is disclosed within this
Annual Report. Further details of Teranga’s workforce both
in its head office and on-site in Senegal can be found in the
Our People section of the 2014 Responsibility Report
available on the Company’s website.
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
The Chairman of the Board is appointed by the Board after
considering
the Corporate
recommendation of
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.
that
the board of directors may
The primary responsibility of the lead director is to seek to
ensure that appropriate structures and procedures are in
place so
function
independently and to lead the process by which the
independent directors seek to ensure that the board of
directors represents and protects
interests of all
shareholders. In addition, the lead independent director
reviews, comments and is given the opportunity to set
(full board or
agendas
independent directors only), oversee the information made
to directors by management and manages
available
for meetings of
the Board
the
requests from or other issues that independent directors
may have.
Director Selection Criteria
review
its charter
to annually
The Corporate Governance and Nominating Committee is
the
required under
characteristics, 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, ethical 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
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
encouraged to identify potential candidates.
to discharge
time
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 Teranga. 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
insight
increased
The Board has determined that fixed term limits for directors
should not be established at this time. 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
into Teranga and who,
of service,
therefore, can be expected
to provide an increasing
contribution to the Board. Teranga is entering only its fifth
year of operations and believes the continuity of the five (5)
directors who have been members of the Board since
Teranga’s
initial public offering (Mssrs Hill, Lattanzi,
Thomas, Wheatley and Young) is a resource to the
Company as it continues to work towards executing on its
vision of expansion and consolidation in Senegal through a
prudent allocation of capital. The Board does not believe
that an arbitrary term limit for Board members is the most
effective way of ensuring overall Board effectiveness. At
the same time, the Board recognizes the value of some
turnover in Board membership to provide fresh ideas and
views, and the Corporate 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
compensated 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 publicly 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
mandated to undertake an annual assessment of the overall
performance 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 effectiveness of the Board in discharging its
duties and responsibilities 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 performance 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
including
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
those related
contractor to ensure they are aware and kept up to date of
acceptable behaviour and Company policies.
Audit Committee Oversight
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.
in
The Company has created a formal Code of Conduct and
Ethics which described the Company’s values, and can be
found
the
Company’s website. All details describing, prescribing and
underpinning ethical conduct are contained in the values
and key policies outlined therein.
the Corporate Governance section of
In summary, Teranga’s Code of Conduct includes an equal
opportunity 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
discriminate 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.”
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
to
financial
Shareholders
the Audit
to
Committee
the Company’s Annual
Information Form.
Information with
reporting and
responsibilities
is contained
controls
respect
in
the Company
Composition of the Audit Committee
The Audit Committee of
is currently
comprised of four independent members. All members of
the Audit Committee 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
financial
statements.
the Company’s
raised by
to be
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.
At no time since the commencement of the Company’s most
recently completed financial year did the Board decline to
adopt a recommendation of
to
nominate or compensate an external auditor. The Audit
Committee is chaired by an independent director who is not
the chairman of the Board.
the Audit Committee
PRINCIPLE 5: MAKE TIMELY AND BALANCED
DISCLOSURE
Teranga’s Corporate Disclosure Policy is included on its
website (on the “Corporate Governance” page under the
section titled "Teranga”) and sets out a policy that is
consistent with
included under
Principal 5.
recommendations
the
PRINCIPLE 6: RESPECT THE RIGHTS OF
SHAREHOLDERS
both
The Company regularly engages with its shareholders and
conducts regular analyst briefings. These activities are
supported by the publication of the Annual Report, Quarterly
Reports
public
announcements and the 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.
operational,
financial
and
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 such replays
are outlined on the original conference call scheduling
announcement. The external auditor attends the Annual
General Meeting and is available to answer questions in
relation to the audit of the financial statements.
Teranga does not have a distinct communications policy but
its Corporate Disclosure Policy (available on the Company
website) does address the matters recommended under
to promoting effective
Principal 6 with
communication with shareholders and the effective use of
electronic communication.
respect
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.
PRINCIPLE 8: REMUNERATE FAIRLY AND
RESPONSIBLY
for assessing and
The Board, in conjunction with management, will identify the
principal
risks of Teranga’s business and oversee
management’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
risk
responsibility
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
the
Technical, Safety, and Environmental and Committee. The
Board will work in conjunction with each Committee,
respectively, to oversee the implementation of such policies
and procedures.
to environmental risk management
implementing
to
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;
As per the Audit Committee Charter, specifically under
Section 4.2 thereof, the Audit Committee is charged with
reviewing and making recommendations to the Board
regarding Teranga’s
risk management policies and
procedures;
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 business. 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 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.
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
is comprised of
The Compensation Committee
three
independent directors and while the Board determines its
members, the CEO is not involved in the selection process
for
the Compensation
Committee is a non-executive independent director.
this committee. The chair of
Role of the Compensation Committee
The Compensation Committee is established by the Board
to assist the Board in fulfilling its oversight responsibilities
relating 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.
The Board of Teranga established a Compensation
Committee on incorporation. Accordingly, the Compensation
Committee has been in place for the entire 2013 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
the Committee’s
discretion, recommend any changes to the Board for
consideration;
the CEO and,
for
in
Executive Officers Compensation – annually review the
for
CEO’s
the executive officers’
compensation and,
the Committee’s discretion,
recommend any changes to the Board for consideration;
recommendations
in
Succession Planning – annually
review Teranga’s
succession plan for the CEO and the executive officers,
including appointment, training and evaluation;
Directors’ Compensation – annually
compensation and,
recommend any changes to the Board for consideration;
review directors’
the Committee’s discretion,
in
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
the Company’s annual business plan and
regarding
objectives, which provide the basis for establishing both
corporate and individual 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
recommendations of the CEO and, prior to making its
recommendations 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 performance and contribution to executing Teranga’s
long-term strategy
to maximize shareholder value.
Teranga’s compensation 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
term
incentives are structured to provide above-market total
compensation for high levels of corporate and personal
performance. The Compensation Committee believes 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.
longer
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 individual 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.
to
At this point the Compensation Committee does not
anticipate making any significant changes
its
compensation philosophy, policies and practices for the
2015 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 compensation packages with the
through an
objective of enhancing shareholder value
increased share price.
Management Performance and Compensation
The Compensation Committee conducts an annual review
of the performance objectives for the Company’s executive
management 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
individual 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
management compensation for the 2014 financial year will
be disclosed in the Company’s Management Information
Circular to be filed with the TSX and ASX prior to April 4,
2015.
Substantial Shareholders
As at December 31, 2014 there was one substantial shareholder of Teranga beyond 5%. The details are as follows:
Shareholder
Van Eck Associates Corporation
Number of Shares
20,853,276
% of Issued Capital
5.91
Distribution Schedule of Common Shares and CDI holders (as at March 15, 2015)
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 - 9,999,999,999
Rounding
Total
Total
Holders
1,008
693
226
256
32
CDIs
Units
347,353
1,715,973
1,660,580
6,925,843
57,716,926
2,215
68,366,675
% of Issued
Capital
0.51
2.51
2.43
10.13
84.42
0.00
100.00
Common Shares
Total
Holders
17
15
12
16
10
Units
5,354
42,479
84,231
523,939
352,145,087
70
352,801,090
% of Issued
Capital
0.00
0.01
0.02
0.15
99.81
0.01
100.00
Distribution Schedule of outstanding options (as at March 29, 2015)(1)
Range
0 - 50,000
50,001 - 100,000
100,001 - 250,000
250,001 - 500,000
500,001 - 1,000,000
1,000,001 - 1,500,000
1,500,001 - 2,000,000
2,000,001 - 2,500,000
Total
Total
Holders
16
13
8
5
3
2
1
1
49
Options
Options
602,500
1,173,611
1,481,111
1,965,000
1,780,000
2,200,000
2,000,000
2,200,000
13,402,222
% of Options
Outstanding
4.50
8.76
11.05
14.66
13.28
16.42
14.92
16.42
100.00
(1) As of the date hereof, 13,402,222 incentive stock options (“Options”) are outstanding to the Company’s directors,
officers, employees, and consultants. Total Options outstanding represent approximately 4% of Issued Capital on a
fully diluted basis and are held by 49 option holders. No individual held more than 20% of these unquoted equity
securities.
Unmarketable Parcels of Securities, Escrow and On-market Buyback
As at March 15, 2015, there were 956 CDI holders with an unmarketable parcel of securities (less than $500 based on
a market price of $0.57 per unit) totalling 298,401 units.
There are not currently any class of securities the subject of escrow. There is no current on-market buy-back.
TGZ Top 20 Holders of CDIs as at March 15, 2015:
Rank Holder
Number of CDIs
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Citicorp Nominees Pty Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Zero Nominees Pty Ltd
J P Morgan Nominees Australia Limited
RBC Investor Services Australia Nominees Pty Limited
UBS Wealth Management Australia Nominees Pty Ltd
Mr Anthony Platt
Warbont Nominees Pty Ltd
Toad Facilities Pty Ltd
Mr Jeffrey Williams + Mrs Rosalyn Williams
P G Howarth Pty Ltd
RBC Securities Nominees Pty Limited
Mrs Penelope Margaret Ackland + Mr Martin Clyde Ackland
Senegal Nominees Surl
Mrs Penelope Jane Bligh
Gecko Resources Pty Ltd
Uob Kay Hian (Hong Kong) Limited
Javelin Minerals Inc
Mr James Peter Karlson
Total Top 20 Holders Balance
Total Remaining Holders Balance
Total CDIs on Issue
TGZ Top 20 Holders of Common Shares as at March 15, 2015:
Rank Shareholder
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
CDS & Co
Chess Depositary Nominee Pty Limited
Cede & Co
Kingsdale Shareholder Services Inc Tr Unexchanged
Oromin Explorations
Taif Telecom Trading Sarl
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