Teranga Gold Corporation Annual Report 2017

FY2017 Annual Report · Teranga Gold Corporation
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www.terangagold.com

ANNUAL REPORT

Letter to Shareholders  

Management’s Discussion and Analysis 

Management’s Responsibility for Financial Reporting 

Independent Auditors’ Report  

Consolidated Financial Statements 

Notes to the Consolidated Financial Statements 

Corporate Directory 

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This  annual  report  contains  certain  statements  that  constitute  forward-looking 
information.  Please  refer  to  the  cautionary  note  regarding  Forward-Looking 
Statements on page 4(cid:20). All amounts are in U.S. dollars unless otherwise stated.

THE NEXT

Multi-Asset Mid-Tier  
West African Gold Producer

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201(cid:24)(cid:1)Annual Report  2

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2017 Annual Report  3

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201(cid:24)(cid:1)Annual Report  4

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(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)

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2017 Annual Report  5

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(cid:76)(cid:81)(cid:3) (cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:68)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:38)(cid:68)(cid:83)(cid:76)(cid:87)(cid:68)(cid:79)(cid:3) (cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)
(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:29)(cid:3) (cid:37)(cid:72)(cid:86)(cid:87)(cid:3) (cid:40)(cid:54)(cid:42)(cid:16)(cid:53)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3) (cid:48)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3) (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3) (cid:58)(cid:72)(cid:86)(cid:87)(cid:3)
(cid:36)(cid:73)(cid:85)(cid:76)(cid:70)(cid:68)(cid:3)(cid:36)(cid:90)(cid:68)(cid:85)(cid:71)(cid:17)

(cid:36)(cid:86)(cid:3)(cid:90)(cid:72)(cid:3)(cid:68)(cid:71)(cid:89)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:21)(cid:19)(cid:20)(cid:27)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:72)(cid:92)(cid:82)(cid:81)(cid:71)(cid:15)(cid:3)(cid:90)(cid:72)(cid:3)(cid:79)(cid:82)(cid:82)(cid:78)(cid:3)
(cid:73)(cid:82)(cid:85)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3) (cid:87)(cid:82)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:68)(cid:70)(cid:75)(cid:76)(cid:72)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3) (cid:90)(cid:76)(cid:87)(cid:75)(cid:3) (cid:92)(cid:82)(cid:88)(cid:17)(cid:3) (cid:58)(cid:72)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:86)(cid:75)(cid:68)(cid:85)(cid:83)(cid:79)(cid:92)(cid:3)
(cid:73)(cid:82)(cid:70)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:89)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:85)(cid:72)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)
(cid:82)(cid:88)(cid:85)(cid:3) (cid:86)(cid:87)(cid:68)(cid:78)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3) (cid:3) (cid:60)(cid:82)(cid:88)(cid:3) (cid:68)(cid:85)(cid:72)(cid:3) (cid:78)(cid:72)(cid:92)(cid:3) (cid:87)(cid:82)(cid:3) (cid:82)(cid:88)(cid:85)(cid:3) (cid:86)(cid:88)(cid:70)(cid:70)(cid:72)(cid:86)(cid:86)(cid:15)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:90)(cid:72)(cid:3)
(cid:68)(cid:83)(cid:83)(cid:85)(cid:72)(cid:70)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:92)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:73)(cid:76)(cid:71)(cid:72)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)

ALAN R. HILL

(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)

RICHARD YOUNG

(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:9)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)

201(cid:24)(cid:1)Annual Report  6

201(cid:25)(cid:1)
OUTLOOK

(cid:51)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:16)(cid:3)(cid:54)(cid:68)(cid:69)(cid:82)(cid:71)(cid:68)(cid:79)(cid:68)

(cid:135) (cid:42)(cid:82)(cid:79)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)

(cid:21)(cid:20)(cid:19)(cid:16)(cid:21)(cid:21)(cid:24)(cid:78)(cid:82)(cid:93)

(cid:135) (cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:88)(cid:72)(cid:71)(cid:3)(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)

(cid:39)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:16)(cid:3)(cid:58)(cid:68)(cid:75)(cid:74)(cid:81)(cid:76)(cid:82)(cid:81)

(cid:135) (cid:38)(cid:79)(cid:82)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)

(cid:135) (cid:38)(cid:82)(cid:80)(cid:80)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:87)

(cid:70)(cid:82)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)

(cid:135) (cid:36)(cid:81)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:86)

(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:3)(cid:88)(cid:83)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:80)(cid:76)(cid:71)(cid:16)(cid:92)(cid:72)(cid:68)(cid:85)

(cid:135) (cid:56)(cid:83)(cid:71)(cid:68)(cid:87)(cid:72)(cid:3)(cid:49)(cid:44)(cid:3)(cid:23)(cid:22)(cid:16)(cid:20)(cid:19)(cid:20)(cid:3)(cid:87)(cid:72)(cid:70)(cid:75)(cid:81)(cid:76)(cid:70)(cid:68)(cid:79)

(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)

(cid:40)(cid:91)(cid:83)(cid:79)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)

(cid:135) (cid:42)(cid:82)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:43)(cid:76)(cid:79)(cid:79)(cid:3)(cid:11)(cid:37)(cid:88)(cid:85)(cid:78)(cid:76)(cid:81)(cid:68)(cid:3)(cid:41)(cid:68)(cid:86)(cid:82)(cid:12)
(cid:16) (cid:68)(cid:81)(cid:81)(cid:82)(cid:88)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:86)(cid:82)(cid:88)(cid:85)(cid:70)(cid:72)
(cid:69)(cid:92)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)

(cid:135) (cid:42)(cid:88)(cid:76)(cid:87)(cid:85)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:73)(cid:72)(cid:80)(cid:68)

(cid:11)(cid:38)(cid:123)(cid:87)(cid:72)(cid:3)(cid:71)(cid:182)(cid:44)(cid:89)(cid:82)(cid:76)(cid:85)(cid:72)(cid:12)(cid:3)(cid:16)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)
(cid:85)(cid:72)(cid:74)(cid:88)(cid:79)(cid:68)(cid:85)(cid:3)(cid:71)(cid:85)(cid:76)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:83)(cid:71)(cid:68)(cid:87)(cid:72)(cid:86)

2017 Annual Report  7

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016

This Management’s Discussion and Analysis (“MD&A”) provides a discussion and analysis of the financial 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, 2017  and  2016.    This MD&A  should  be  read  in 
conjunction with  the  audited consolidated  financial  statements  and  notes  thereto  (“Statements”)  of  Teranga  Gold 
Corporation (“Teranga” or the “Company”) as at and for the twelve months ended December 31, 2017 and 2016. The 
Company’s Statements and MD&A are presented in United States dollars, unless otherwise specified, and have been 
prepared  in  accordance  with  International  Financial  Reporting  Standards  (“IFRS”),  as  issued  by  the  International 
Accounting  Standards  Board  (“IASB”). Additional  information  about  Teranga,  including  the  Company’s  Annual 
Information  Form  for  the  year ended  December  31,  2016,  as  well  as  all  other  public  filings,  are available  on  the 
Company’s website (www.terangagold.com) and on the SEDAR website (www.sedar.com).  

This report is dated as of February 23, 2018. All references to the Company include its subsidiaries unless the context
requires otherwise.  On May 2, 2017, the Company completed a five-for-one share consolidation.  All share and per
share amounts in this MD&A reflect the effect of the consolidation.

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 multi-jurisdictional West African gold company focused on production and development as well as the
exploration of more than 6,400 km2 of land located on prospective gold belts.  Since its initial public offering in 2010,
Teranga  has  produced  more  than  1.4  million  ounces  of  gold  from  its  operations  in Senegal,  which  as  of June  30,
2017 had  a  reserve  base  of  2.7  million  ounces  of  gold1.    Focused  on  diversification and  growth,  the  Company  is
advancing  its  Wahgnion Gold  Project (formerly  referred  to  as  the  Banfora  Gold  Project), as  well  as  carrying  out
extensive  exploration  programs  in  three  West  African  countries:   Burkina  Faso, Côte  d’Ivoire and  Senegal.   The
Company has nearly 4.0 million ounces of gold reserves1 from its combined Sabodala Gold operations and Wahgnion
Gold Project. Teranga applies a rigorous capital allocation framework for its investment decisions to execute on its
growth strategy relying on a combination of cash on the balance sheet, free cash flow from operations and debt.

Steadfast in its commitment to set the benchmark for responsible mining, Teranga operates in accordance with the
highest international standards and aims to act as a catalyst for sustainable economic, environmental, and community
development as it strives to create value for all of its stakeholders.  Teranga is a member of the United Nations Global
Compact and a leading member of the multi-stakeholder group responsible for the submission of the first Senegalese
Extractive Industries Transparency Initiative revenue report.

VISION 

Our vision is to become a multi-jurisdictional West African gold producer with a portfolio of assets offering diversified
production, strong operating margins and long-term sustainable free cash flows.

MISSION 

Our  mission  is  to  create  value  through  responsible  mining  for  all  of  our  stakeholders  by  setting  the  benchmark  for
corporate social responsibility.

1 Refer to the Company’s website www.terangagold.com for further details.

2017 Annual Report  8

Management‘s Discussion and Analysis December 31, 2017

STRATEGY

Our  strategy  is  to  maximize  shareholder  value  by  increasing  sustainable long-term  free  cash  flows  through
diversification and growth while remaining fiscally conservative through the commodity cycle.  To achieve our strategic
objectives, we are focused on i) optimizing our flagship Sabodala operation; ii) building our Wahgnion Gold Project on-
time  and  on-budget;  iii)  unlocking  additional  value  in  Burkina  Faso,  Senegal  and  Côte  d’Ivoire  through  resource
conversion drill  programs  and  exploration;  and  iv)  maintaining  financial  flexibility  to  fund  our  future  growth  plans
responsibly.

FINANCIAL AND OPERATING HIGHLIGHTS

Financial Data

Revenue

Cost of sales

Profit / (loss) attributable to shareholders of Teranga 

Per share

EBITDA1
Operating cash flow excluding changes in working
 capital other than inventories

Operating cash flow

Sustaining capital expenditures (before deferred stripping)

Capitalized deferred stripping - sustaining

Growth capital expenditures

($000's)

($000's)

($000's)

($)

($000's)

($000's)

($000's)

($000's)

($000's)

($000's)

Three months ended December 31,

Twelve months ended December 31,

2017

88,280

2016

55,774

(64,149)

(43,022)

5,758

0.05

26,630

24,708

32,452

3,985

7,655

10,509

(1,286)

(0.01)

17,553

(1,842)

(13,627)

7,531

4,822

1,641

Change

2017

2016

Change

58%

49%

N/A

N/A

52%

N/A

N/A

(47%)

59%

540%

291,683

268,850

(222,113)

(181,528)

31,932

0.30

95,335

82,610

71,379

25,382

29,428

24,623

23,109

0.28

99,173

49,142

44,729

33,011

18,492

1,641

8%

22%

38%

8%

(4%)

68%

60%

(23%)

59%

1400%

Three months ended December 31,

Twelve months ended December 31,

Operating Data

Gold Produced

Gold Sold
Average realized gold price1

Cost of sales per ounce 
Total cash costs1

All-in sustaining costs (excluding cash / (non-cash) 
 inventory movements and amortized advanced royalty
 costs)1

(oz)

(oz)

($ per oz)

($ per oz sold)

($ per oz sold)

2017

67,934

68,944

1,279

930

689

2016

43,987

46,523

1,197

925

704

Change

54%

48%

7%

1%

(2%)

($ per oz sold)

860

1,163

(26%)

2017

233,267

231,078

1,261

961

721

943

2016

Change

216,735

217,652

1,234

834

622

8%

6%

2%

15%

16%

971

(3%)

1 This is a non-IFRS financial measure and does not have a standard meaning under IFRS.  Please refer to Non-IFRS Performance Measures at the end of this MD&A.

FOURTH QUARTER AND YEAR TO DATE HIGHLIGHTS

Financial Highlights

(cid:120) Gold revenue increased by 58 percent and 8 percent for the quarter and year respectively, compared to the prior
year. The increases for both the quarter and year are due to a combination of higher sales volume and higher
average realized gold prices.

(cid:120)

(cid:120)

(cid:120)

Consolidated net income attributable to shareholders was $5.8 million ($0.05 per share) for the quarter and $31.9
million ($0.30 per share) for the year.  This was in comparison to a net loss of $1.3 million ($0.01 loss per share)
in the prior year quarter and net income of $23.1 million ($0.28 per share) in the prior year.  During the current
quarter and year, higher revenues were partially reduced by higher cost of sales and expenses.

EBITDA1 for the fourth quarter was $26.6 million and $95.3 million for the year compared to $17.6 million in the
prior year quarter and $99.2 million in the prior year.  The increase during the quarter was primarily attributable to
higher revenues.  EBITDA1 for the year was comparable to the prior year as increases in revenue were offset by
increases in cost of sales and expenses.

Cash flows from operating activities increased to $32.5 million during the quarter, compared to cash outflows of
$13.6 million in the prior year period.  In the prior year quarter, lower operating cash flows were primarily due to
$17.2 million in royalty payments and $6.7 million in spending on Gryphon Minerals Limited (“Gryphon”) acquisition

1 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A.

2017 Annual Report  9

Management‘s Discussion and Analysis December 31, 2017

costs.  In the full year period, Teranga generated operating cash flows of $71.4 million, compared to $44.7 million
in 2016 due to higher revenues, partly offset by an increase in working capital related to payments of 2016 income
taxes (paid in arrears) in 2017.

(cid:120)

As at December 31, 2017, Teranga had cash and cash equivalents of $87.7 million, an increase of $14.7 million
from the third quarter.  The increase was attributable to the increase in revenues partially reduced by higher cost
of sales resulting from higher production.

(cid:120) On September 11, 2017, the Company entered into forward gold sales contracts for a total of 131,000 ounces of
gold with settlements commencing October 2017 through December 2018 at a gold price of $1,336 per ounce.
During the fourth quarter, the Company subsequently amended these contracts to defer quarterly settlements by
a quarter, and as a result, the contracts extend through the first quarter of 2019.
In January 2018, the Company
entered into additional forward gold sales contracts for a total of 56,500 ounces at a gold price of $1,350 per ounce, 
with various settlement dates between April 2019 to September 2019.  As a result, the company now has forward
gold sales contracts totaling 187,500 ounces of gold with settlement dates between January 2018 and September
2019, at prices between $1,336 per ounce to $1,350 per ounce, which are anticipated to represent less than 50
percent of production over that period.  A key component of the financing plan for the Wahgnion Gold Project is
the anticipated cash flows from Sabodala over the course of the construction period.  The execution of the forward
gold sales contracts provides greater cash flow certainty from Sabodala through to September 2019.

Operating Highlights

(cid:120)

(cid:120)

(cid:120)

Teranga  finished  the  2017  fiscal  year  with  a  strong  fourth quarter.   Gold  production  of  67,934 ounces was  54
percent higher than the prior year quarter.  The higher fourth quarter production contributed to the Company setting 
a new annual production record with 233,267 ounces of gold produced in 2017, which exceeded the upper end of
its 2017 production guidance.

Cost of sales of $930 per ounce and $961 per ounce for the quarter and year, respectively, were at the low end of
our 2017 guidance range.

Total cash costs of $689 per ounce and $721 per ounce for the quarter and year, respectively, has resulted in the
Company meeting the lower end of our 2017 guidance.  Additionally, all-in sustaining costs, excluding cash / (non-
cash) inventory movements and amortized advanced royalty costs, were $860 per ounce and $943 per ounce for
the quarter and year, respectively, and were well within our 2017 guidance range.

Growth Highlights

(cid:120)

Following a competitive selection process, Teranga executed a project finance mandate with a leading institution
which will further fund the development of the Wahgnion Gold Project in Burkina Faso.  In February 2018, technical
due diligence was completed following site visits.  Legal due diligence is ongoing and is expected to be completed
in the coming weeks, after which Teranga anticipates receiving a commitment letter for a senior project debt facility
(the “Facility”) for net new financing of $150 million.  The Company anticipates closing the Facility in the second
quarter 2018.

(cid:120) On August 30, 2017, the Company filed an updated National Instrument 43-101 Standards of Disclosure for Mine
Projects (“NI 43-101”) technical report for Sabodala (“Sabodala Technical Report”) reflecting an increase in gold
reserves  by  more  than  400,000  ounces  to  a  total  of  2.7  million  ounces  as  at  June  30,  2017  and  improved
Sabodala’s  five-year production  and  operating  cash  flow profile.    Between  2018  and  2022,  Sabodala’s  gold
production  is  expected  to  increase  by  20  percent  from  the  prior  NI  43-101 estimate,  to  more  than  one  million
ounces1 and generate a total of $230 million in free cash flow2.  The increase in production was attributable to new
reserves at Niakafiri, as well as an improved mine plan profile.

1 This  production  target  is  based  on  proven  and  probable  reserves  only  from  the  Sabodala  Gold  operations.  The  estimated  ore
reserves underpinning this production target have been prepared by a qualified person or persons (see Qualified Persons section).

2 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A. This
Sabodala free cash flow is an estimate that is based on the updated life of mine plan and reserve estimate for the Sabodala Project,
as set out in the Technical Report of Teranga for the Sabodala Project, Senegal, West Africa, dated August 30, 2017.  See in particular
Section 21 of the Sabodala Technical Report – Capital and Operating Costs.

2017 Annual Report  10

Management‘s Discussion and Analysis December 31, 2017

(cid:120) On  October  20,  2017,  the  Company  filed the  first  NI  43-101  technical  report  for  the Wahgnion Gold  Project  in
Burkina  Faso,  which  was  completed  by  Roscoe  Postle  Associates  Inc.  (“Wahgnion  Technical  Report”).    This
positive feasibility study underpinning the Wahgnion Technical Report was based on initial gold reserves of 1.2
million ounces, which generates a 15 percent internal rate of return at $1,250 per ounce of gold.  The Wahgnion
Gold Project has been advancing on all fronts since the announcement of the feasibility study results.  The owner’s
construction management team has been assembled and project civils and site infrastructure have commenced.
Plant construction has been awarded to Lycopodium Ltd. (“Lycopodium”) with an engineering, procurement and
construction management based arrangement.  Resettlement negotiations are also nearing completion. A reserve
update based on an extensive 73,000 metre infill drilling campaign completed in late 2017 is expected in mid-2018.

(cid:120)

In November 2017, the Company announced positive drill results at the Ma Prospect as well as the addition of the
Jackhammer Hill Prospect.  Combined with the Peksou and Nahiri Prospects, the Company now has four centrally-
located, advanced exploration prospects on the Golden Hill property in Burkina Faso.  The Company is rapidly
advancing this project to evaluate the potential scale and grades leading towards an initial resource in 2018.

(cid:120) On December 13, 2017, the Company entered into a memorandum of understanding with Sodim Limited (“Sodim”), 
a private investment company, to acquire a controlling interest in the exploration and development of the Afema
land package in Côte d’Ivoire (“Afema”).  The Afema land package is located in southwest Côte d’Ivoire and covers 
more than 1,400 km2, consisting of the Afema mining license and three exploration permits – Ayame, Mafere and
Aboisso.  Under the terms of the memorandum of understanding, the Company maintains its 51 percent interest
in the Afema mining lease and Afema permits through the completion of a three-year $11.0 million exploration and 
community relations work program, increasing its interest to 70 percent on the Afema mining license through the
delivery  of  a  positive  economic  evaluation  of  potential mining  on  the  Afema  land  package  and  Teranga’s
commitment to fund its 70 percent interest in the project through construction. On January 25, 2018 the amended
Afema mining convention was signed and delivered by the Ministry of Mines of Côte d’Ivoire.  The Company is
currently  working  towards  a  definitive  agreement between  Sodim  and  Teranga  for  the  Afema  land  package.
Pursuant to the Company’s joint venture agreement with Miminvest SA (“Miminvest”), a 3 percent royalty is payable 
to Miminvest in connection with Teranga’s share of production or product emanating from the Afema mining lease
as the land package was considered an exploration property.

(cid:120) On  December  15,  2017,  the  Company  commenced  trading  in  the  United  States  on  the  OTC  Markets  Group
(“OTCQX”) market.  The new platform enables the Company to broaden its exposure to U.S. retail and institutional
shareholders and provide U.S. shareholders with timely news and information to help them better analyze, value
and trade our securities.

2017 Annual Report  11

Management‘s Discussion and Analysis December 31, 2017

Outlook 2018 

The following table outlines the Company’s estimated 2018 summary production and cost guidance:

Year Ended December 31

Operating Results 
Ore mined 
Waste mined 
Total mined 
Grade mined
Strip ratio
Ore milled 
Head grade 
Recovery rate
Gold produced A

Cost of sales per ounce sold 
Total cash cost per ounce sold B
All-in sustaining costs C
Cash / (non-cash) inventory movements and amortized
advanced royalty costs C
All-in sustaining costs (excluding cash / (non-cash) inventory 
movements and amortized advanced royalty costs) C

Mining

Mining long haul

Milling 

General and Administration

Mine Production Costs

2017
Original Guidance

2,000 – 2,500
35,000 – 37,000
37,000 – 39,500
2.50 – 3.00
15.5 – 17.5
4,000 – 4,300
1.70 – 1.90
90.0 – 91.5
205,000 – 225,000

950 – 1,025
725 – 775
1,000 – 1,075

(100)

(‘000t)
(‘000t)
(‘000t)
(g/t)
waste/ore
(‘000t)
(g/t)
%
(oz)

$/oz sold
$/oz sold
$/oz sold

$/oz sold

$/oz sold

900 – 975

($/t mined)

($/t hauled)

($/t milled)

($/t milled)

2.25 – 2.50

2.50 – 3.50

11.00 – 12.00

4.25 – 4.50

$ millions

155.0 – 165.0

Corporate Administration Expense 

$ millions

10.0 – 11.0

Regional Administration Costs 

$ millions

3.0

Community Social Responsibility Expense 

$ millions

3.5 – 4.0

Exploration and Evaluation D

Sabodala Capital Expenditures 

Mine site sustaining
Site development costs E

Total Sabodala Capital Expenditures F 

Growth Capital Expenditures (Wahgnion)

Feasibility study 
Construction readiness / early works G

Total Growth Capital Expenditures 

$ millions

20.0 – 25.0

$ millions
$ millions

$ millions

$ millions
$ millions

$ millions

10.0 – 15.0
2.0

12.0 – 17.0

3.0
5.0 – 8.0

8.0 – 11.0

2017
Actual

2,101
35,385
37,486
3.48
16.8
4,221
1.87
92.1
233,267

961
721
1,024

(81)

943

2.36

2.97

11.34

4.26

161.2

10.7

2.0

2.9

24.9

10.7
8.6

19.3

2.4
15.8

18.2

2018
Guidance

2,000 – 2,500
35,000 – 37,000
37,000 – 39,500
2.50 – 3.00
16.5 – 18.5
4,200 – 4,400
1.70 – 1.90
90.0 – 91.5
210,000 – 225,000

950 – 1,025
700 – 750
1,000 – 1,075

(50)

950 – 1,025

2.25 – 2.50

2.50 – 3.50

11.00 – 12.50

4.25 – 4.50

162.0 – 172.0

11.0 – 13.0

~2.0

4.0 – 5.0

~15.0

10.0 – 15.0
10.0 – 15.0

20.0 – 30.0

N/A
~30.0

~30.0

Notes to Guidance Table Above:
A. 22,500 ounces of gold production are to be sold to Franco-Nevada Corporation at 20% of the spot gold price.

B. Total cash cost per ounce sold is a non-IFRS financial measure and does not have a standard meaning under IFRS.
C. All-in sustaining costs per ounce is a non-IFRS financial measure and does not have a standard meaning under IFRS. All-in sustaining costs
per ounce sold include total cash costs per ounce, administration expenses, share based compensation and sustaining capital expenditures as
defined by the World Gold Council.  All-in sustaining costs also include cash / (non-cash) inventory movements and non-cash amortization of
advanced royalties.
D. Exploration and evaluation costs includes both Expensed Exploration, primarily attributable to exploration work on exploration permits, and
Capitalized Reserve Development, which is work performed on Mine Licenses.  For a breakdown of this spend for 2018, please see the
Exploration section of this MD&A. 

E. Site development costs for 2018 include village relocation costs for the Sabodala village.

F. Excludes capitalized deferred stripping costs, included in mine production costs.
G. Construction readiness / early works expenditures for 2018 includes anticipated expenditures for the construction of the Wahgnion Gold Project
prior to completion of a debt facility agreement.
This forecast financial information is based on the following material assumptions for 2018: gold price: $1,250 per ounce; light fuel oil price 
$0.87/L; heavy fuel oil price $0.50/L; Euro:USD exchange rate of 1:1.17

Other important assumptions: 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.

2017 Annual Report  12

Management‘s Discussion and Analysis December 31, 2017

2018 Guidance Analysis

The Company’s mine plan for Sabodala is designed to maximize free cash flows1 for 2018.  Free cash flows from our
Sabodala mine will be used to fund the Company’s growth strategy, including construction of the Company’s second
mine, Wahgnion.  Mining activities during 2018 will continue to focus on the higher grade and higher strip ratio deposits
at Golouma West, Kerekounda, Golouma South and Gora.  Golouma South and Gora will complete mining activities
during the first half of 2018.  The completion of Gora will be followed by closure and rehabilitation activities. Mining
activities will recommence at Sabodala Phase 4, the last phase of Sabodala, during the second quarter 2018.  Total
tonnes mined are expected to be similar to the 37.5 million tonnes mined (excluding 2.6 million capitalized pre-stripping
tonnes) in 2017 at between 37.0 and 39.5 million tonnes in 2018.  Ore tonnes and grade mined are expected to be
similar to 2017.

Mill  throughput  is  expected  to  increase  with  the  operation  of  the  second  primary  crusher  and  ongoing  optimization
activities at the SAG and ball mill circuit to between 4.2 and 4.4 million tonnes, compared to 4.2 million tonnes in 2017.
Mill grades are expected to be similar to 2017 at between 1.7 and 1.9 grams per tonne as higher grade material is
supplemented with lower grade stockpiled material.

The Company expects to produce between 210,000 and 225,000 ounces of gold in 2018.  The quarterly production
profile is expected to be reasonably consistent throughout the year.  The Company has built up a high-grade stockpile
to support quarterly and annual production targets.

Total production costs at Sabodala are expected to be in the range of $162 to $172 million in 2018, which exceeds the
prior year due to a stronger Euro relative to the U.S. dollar combined with higher fuel costs.

Overall, our 2018 cash flows are in line with the Sabodala Technical Report, other than slightly higher fuel prices and
the impact of a stronger Euro relative to the U.S. dollar more than offset by higher anticipated production.

Administrative  costs  are  expected  to  increase  by  up  to  $2  million  to  a  range  of  $11  to  $13  million  reflecting  the
Company’s expansion beyond Senegal to Burkina Faso and Côte d’Ivoire and strengthening of the Canadian dollar
compared to the U.S. dollar, as most of the Company’s administration costs are denominated in Canadian dollars.  In
addition, regional office costs, including the Dakar and Ouagadougou offices, are expected to total approximately $2
million, similar to 2017.

Corporate social responsibility costs are expected to rise by up to $1 million to between $4 and $5 million reflecting
activities deferred from 2017 to 2018.

The Company’s exploration and evaluation budget has been reduced to approximately $15 million for 2018, reflecting
a greater emphasis on exploration of Golden Hill, Afema and Guitry toward delineating maiden resources and away
from resource conversion programs at the Sabodala mine and the Wahgnion Gold Project.  For additional details on
our 2018 program, please see the Exploration section.

Sustaining capital expenditures in 2018 for the Sabodala mine are expected to be similar to 2017 at between $10 and
$15 million,  as  well  as  an  additional $10 to $15  million  required to  commence  relocation  of  the  Sabodala  village.
Sustaining capital expenditures exclude capitalized deferred stripping costs included in total production costs.  This
amount is similar to the Sabodala Technical Report, however a decision to accelerate the relocation of the Sabodala
village has been made  to provide earlier access to Niakafiri, resulting in higher overall capital expenditures at Sabodala. 
Growth capital expenditures includes construction readiness / early works capital for the Wahgnion Gold Project.  In
total, approximately $30 million is expected to be spent in 2018 on construction readiness / early works activities and
project construction costs prior to finalization of the debt facility (see Liquidity and Capital Resources section for more
details).

1 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A.

2017 Annual Report  13

Management‘s Discussion and Analysis December 31, 2017

Cost of sales are expected to be in the range of $950 to $1,025 per ounce.  Total cash costs are expected to be in the 
range of $700 to $750 per ounce1.

All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) are expected 
to be between $950 to $1,025 per ounce1.

Sensitivity

Gold revenue

Gold price effect on royalties

HFO price

LFO price

EUR exchange rate

REVIEW OF OPERATING RESULTS

Operating Results 

Ore mined

Waste mined - operating

Waste mined - capitalized

Total mined

Grade mined

Ounces mined

Strip ratio

Ore milled

Head grade

Recovery rate
 Gold produced1

Gold sold

 Average realized price2

 Cost of sales per ounce
 Total cash costs2
 All-in sustaining costs2
 All-in sustaining costs (excluding cash / (non- 
  cash) inventory movements and amortized 
  advanced royalty costs)2

(‘000t)

(‘000t)

(‘000t)

(‘000t)

(g/t)

(oz)

(waste/ore)

(‘000t)

(g/t)

(%)

(oz)

(oz)

($/oz)

($/oz sold)

($/oz sold)

($/oz sold)

2018

Hypothetical

Impact on total

Impact on

Assumption

Change

cash costs

cash flow 

$1,250/oz 

$1,250/oz 

$0.50/litre 

$0.87/litre 

1.17:1 

$100/oz

$100/oz 

$0.10/litre 

$0.10/litre 

10%

n/a 

$5/oz 

$15/oz 

$9/oz 

$35/oz

$20.7M 

$1.2M 

$3.3M 

$2.1M 

$7.9M

Three months ended December 31,

Twelve months ended December 31,

2017

712 

6,773 

2,813 

           10,298 

4.10 

2016

% Change

2016

% Change

533 

7,506 

1,689 

9,728 

2.89 

2017

2,101 

34%

2,132 

(10%)

           23,520 

           27,186 

67%            11,865 

6,326 

6%            37,486 

           35,644 

42%

3.48 

2.66 

           93,865 

           49,483 

90%           235,262            182,394 

13.5 

1,077 

2.11 

93.1 

17.3 

1,034 

1.45 

91.5 

(22%)

4%

45%

2%

16.8 

4,221 

1.87 

92.1 

15.7 

4,025 

1.81 

92.6 

           67,934 

           43,987 

54%           233,267            216,735 

           68,944 

           46,523 

48%           231,078            217,652 

1,279 

930 

689 

938 

1,197 

925 

704 

1,049 

7%

1%

(2%)

(11%)

1,261 

961 

721 

1,024 

1,234 

834 

622 

929 

(1%)

(13%)

88%

5%

31%

29%

7%

5%

3%

(1%)

8%

6%

2%

15%

16%

10%

($/oz sold)

860 

1,163 

(26%)

943 

971 

(3%)

Mining

Mining long haul

Milling

G&A 

($/t mined)

($/t hauled)

($/t milled)

($/t milled)

2.46 

3.16 

11.36 

4.70 

2.38 

2.78 

10.55 

4.61 

3%

14%

8%

2%

2.36 

2.97 

11.34 

4.26 

2.33 

3.41 

10.70 

4.46 

1%

(13%)

6%

(4%)

1 Gold produced represents change in gold in circuit inventory plus gold recovered during the period.
2 Average realized price, total cash costs per ounce, all-in sustaining costs per ounce, and all-in sustaining costs (excluding cash / (non-cash) inventory movements and amortized 
advanced royalty costs) per ounce 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 MD&A.

1 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A.

2017 Annual Report  14

Management‘s Discussion and Analysis December 31, 2017

Three months ended December 31, 2017

Twelve months ended December 31, 2017

Ore mined

(‘000t)

Waste mined - operating

(‘000t)

Waste mined - capitalized

(‘000t)

Total mined

Grade mined

Ounces mined

(‘000t)

(g/t)

(oz)

Golouma 
West 

187

2,972

1,003

4,162

2.16

13,006

Golouma 

South Kerekounda

Gora

295

2,896

127

110

-

                 -

3,191

6.39

60,587

237

2.86

11,664

103

795

1,810

2,708

2.60

8,608

Total

712

6,773

2,813

10,298

4.10

93,865

Golouma 
West

384

861 

5,757

7,002

2.10

Gora

698

11,778

2,387

14,863

5.14

25,914

115,398

Golouma

 South Kerekounda

668

2,598

-

3,266

3.02

64,772

351

8,283

3,721

12,355

2.59

29,178

Ore mined

Waste mined - operating

Waste mined - capitalized

Total mined

Grade mined

Ounces mined

(‘000t)

(‘000t)

(‘000t)

(‘000t)

(g/t)

(oz)

Three months ended December 31, 2016

Twelve months ended December 31, 2016

Gora

171

3,576

1,689

5,436

3.15

17,301

Golouma 

South Kerekounda

258

3,283

104

647

-

                 -

3,541

3.15

26,160

751

1.80

6,022

Total

533

7,506

1,689

9,728

2.89

Masato

455

166

-

621

1.16

49,483

16,969

Gora

747

14,000

6,326

21,073

2.83

67,948

Golouma 

South Kerekounda

826

12,373

104

647

-

                 -

13,199

3.44

91,455

751

1.80

6,022

Total

2,101

23,520

11,865

37,486

3.48

235,262

Total

2,132

27,186

6,326

35,644

2.66

182,394

Total mined (as above)

Capitalized pre-stripping 

Total mined (including pre-strip tonnes)

(‘000t)

(‘000t)

(‘000t)

Three months ended December 31,

Twelve months ended December 31,

2017

10,298

-

10,298

2016

9,728

723

10,451

% Change

6%

(100%)

(1%)

2017

37,486

2,604

40,090

2016

35,644

1,779

37,423

% Change

5%

46%

7%

Operating results for the three months ended December 31, 2017

Mining

For  the  three  months  ended  December  31,  2017  mining  activities  were  focused  on four  deposits: Gora  Phase  3,
Golouma West, Golouma South and Kerekounda.

Total tonnes mined for the period increased by 6 percent from the prior year period mainly due to favourable digging
conditions at Gora and Kerekounda.  During the current year period, ore tonnes mined and ore grades were 34 and 42
percent  higher,  respectively, compared  to  the  prior  year  period mainly  due  to increased mining  rates in high  grade
areas of Gora Phase 3.  This resulted in almost 94,000 ounces mined during the fourth quarter 2017, a record for the
Company, and 90 percent higher than the prior year period.  In the prior year period, mining activities were focused on
Gora Phases 2 and 3, Golouma South, as well as the early stages of mining operations at Kerekounda.

As part of our ongoing grade control processes and conservative resource modelling near surface, during the last 18
months  through  to  June  30,  2017,  total  ore  tonnes  mined  at  all  deposits  were  19  percent  higher  than  the  reserve
models, resulting in a 20 percent positive variance in total mined ounces, as reflected in the Sabodala Technical Report
issued during the third quarter.  This trend continued during the second half of 2017 resulting in production exceeding
the higher end of the Company’s guidance range.

Processing

Ore tonnes milled for the fourth quarter were 4 percent higher than the prior year period, representing a new record for
the Company.  Throughput rates benefited from operation of the second primary crusher commissioned in August 2016
ramping up to full capacity by the beginning of 2017, and optimization of the SAG and ball mill circuit in 2017.

Head grade for the fourth quarter was 45 percent higher than the prior year period due to the increased proportion of
high-grade ore from Gora, Golouma (South & West) and Kerekounda in the mill feed. In the prior year, mill feed was
sourced from lower grade stockpiles, supplemented with high grade feed from Golouma South, Gora and Kerekounda.

Gold production in the fourth quarter was 54 percent higher than the prior year period, which is mainly attributable to
higher head grade.

Costs – site operations

Total  mining  costs  for  the  fourth  quarter  were  $25.4  million,  10  percent  higher  than  the  prior  year  period  mainly
attributable to a 6 percent increase in material movement, higher fuel prices and unfavorable currency movements.  On
a unit cost basis, mining costs for the fourth quarter were 3 percent higher than the prior year period due to an increase

2017 Annual Report  15

Management‘s Discussion and Analysis December 31, 2017

in material movement partially offsetting the higher costs.  Total long-haul costs for the fourth quarter were $1.7 million,
$0.6 million higher than the prior year period mainly due to an increase in ore tonnes hauled from satellite deposits in(cid:3)
the current year period.

Total processing costs for the fourth quarter were $12.2 million, 12 percent higher than the prior year period due to(cid:3)
higher throughput, higher fuel prices and unfavourable currency movements. Accordingly, unit processing costs for(cid:3)
the fourth quarter were 8 percent higher than the prior year period with higher throughput partially offsetting higher(cid:3)
costs.

Total mine site general and administrative costs for the fourth quarter totaled $5.1 million, 6 percent higher than the(cid:3)
prior year period mainly due to higher labour costs.  However, on a unit basis, general and administrative costs only(cid:3)
increased by 2 percent over the prior year period mainly due to higher tonnes milled.

Total cash costs1 decreased by 2 percent to $689 per ounce for the fourth quarter compared to the prior year period.(cid:3)
Total cost of sales of $930 per ounce for the fourth quarter was in line with the prior year period. Higher amortization(cid:3)
of deferred stripping assets was offset by lower total cash costs.

All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)(cid:20) of $860 per(cid:3)
ounce were 26 percent lower than the prior year period mainly due to the increase in the volume of gold ounces sold,(cid:3)
partially offset by higher mine production costs.

Operating results for the twelve months ended December 31, 2017

Gold production in 2017 was a record 233,267 ounces, exceeding the higher end of the Company’s full year production(cid:3)
guidance range of 205,000 to 225,000 ounces. Gold production increased by 8 percent compared to the prior year.

Mining

Total tonnes mined for the full year were 5 percent higher than the prior year.  Mining activities were focused on four(cid:3)
deposits: Gora, Kerekounda, Golouma South and pre-stripping leading to production at Golouma West.  Including pre-
stripping waste tonnes capitalized, total tonnes mined were 7 percent higher than the prior year period.  Higher tonnes(cid:3)
mined were mainly due to improved shovel productivity in the oxide zones at Golouma West and Kerekounda, as well(cid:3)
as  higher  equipment  availability  and  utilization  rates  for  the  mining  fleet  in  2017. 
In  the  prior  year  period, mining(cid:3)
activities were mainly focused on the lower benches of the Masato deposit, completed during the first quarter of 2016,(cid:3)
the Gora and Golouma South deposits, which were active throughout the year, and Kerekounda, which commenced(cid:3)
mining activities in December.

Ore tonnes mined for the full year were similar to the prior year period, while ore grades mined were 31 percent higher,(cid:3)
mainly due to an increase in tonnes and grade from the Gora deposit.

Processing

Ore tonnes milled for the full year were 5 percent higher than the prior year mainly due to operation of the second(cid:3)
primary crusher and a continuous focus to optimize the crushing and grinding circuit despite a higher proportion of hard(cid:3)
ore in the mill feed in 2017 compared to the prior year.  Mill throughput for 2017 represents the highest in Company(cid:3)
history.

Head grade for the full year was 3 percent higher than the previous year due to higher proportion of high grade ore(cid:3)
from Gora, Golouma (South & West) and Kerekounda in the mill feed in the current year.

1 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A

(cid:3)2017 Annual Report 16

Management‘s Discussion and Analysis December 31, 2017

Costs – site operations

Total mining costs for the full year were $88.3 million, 6 percent higher than the prior year mainly due to a 5 percent 
increase  in material  movement,  higher  fuel  prices and unfavourable currency  movements. On  a  unit basis,  mining 
costs for 2017 were similar to the prior year.  Total long-haul costs for the full year were $6.2 million, $2.2 million higher 
than the prior year, mainly due to an increase in ore tonnes hauled from satellite deposits in the current year.

Total processing costs for the full year were $47.9 million, 11 percent higher than the prior year predominantly due to 
a 5 percent increase in throughput, higher fuel prices and unfavourable currency movements. This also caused an 
increase to unit processing costs by 6 percent compared to the prior year.

Total mine site general and administrative costs for the full year were $18.0 million, which were comparable to the prior 
year.  On a unit basis, mine site general and administrative costs decreased by 4 percent over the prior year due to an 
increase in tonnes milled.

Total cash costs1 for the year were $721 per ounce, below the low end of the Company’s guidance range of $725 -
$775 per ounce but 16 percent higher than the prior year, due to higher production costs and higher inventory movement 
expense, partly offset by higher capitalized stripping costs. 

Cost of sales in 2017 were $961 per ounce, at the low-end of the Company’s guidance range of $950 to $1,025 per 
ounce, and 15 percent higher than the prior year mainly due to higher total cash costs and amortization of deferred 
stripping assets, slightly offset by higher capitalized stripping costs and a higher volume of gold sold. 

All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1 in 2017 were 
$943 per ounce, within the Company’s guidance range of $900 to $975 per ounce and 3 percent lower than the prior 
year mainly due to lower sustaining capital costs and higher gold ounces sold, slightly offset by higher production costs. 

REVIEW OF FINANCIAL RESULTS

(US$000's)

 Revenue 

Three months ended December 31,

Twelve months ended December 31,

2017

2016

% Change

2017

2016

% Change

           88,280 

           55,774 

58%           291,683            268,850 

8%

 Mine operation expenses 

          (48,166)           (33,465)

44%          (168,689)          (137,486)

 Depreciation and amortization 

          (15,983)             (9,557)

67%           (53,424)           (44,042)

Cost of sales

Gross profit

          (64,149)           (43,022)

49%          (222,113)          (181,528)

           24,131 

           12,752 

89%            69,570 

           87,322 

 Exploration and evaluation expenditures 

            (5,928)             (1,101)

438%           (12,373)             (4,760)

 Administration expenses 

            (3,941)             (3,557)

11%           (10,702)             (8,973)

 Corporate social responsibility expenses

               (615)                (779)

(21%)             (2,906)             (3,613)

 Share-based compensation 

               (935)

                538 

N/A             (2,580)             (4,405)

 Finance costs 

            (1,241)                (908)

37%             (3,907)             (4,363)

 Net foreign exchange (losses) / gains 

               (491)

                314 

N/A             (4,632)             (2,589)

 Other (expenses) / income

 Profit before income tax 

 Income tax expense

 Net profit / (loss) 

            (1,612)                (188)

757%              4,496              (7,401)

             9,368 

             7,071 

32%            36,966 

           51,218 

            (3,410)             (8,563)

(60%)             (2,436)           (23,327)

             5,958              (1,492)

N/A            34,530 

           27,891 

 (Profit) / loss attributable to non-controlling interests 

               (200)

                206 

N/A             (2,598)             (4,782)

 Profit / (loss) attributable to shareholders of Teranga 

             5,758              (1,286)

N/A            31,932 

           23,109 

 Basic earnings / (loss) per share

               0.05                (0.01)

N/A                0.30                 0.28 

23%

21%

22%

(20%)

160%

19%

(20%)

(41%)

(10%)

79%

N/A

(28%)

(90%)

24%

(46%)

38%

7%

1 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A.

2017 Annual Report  17

Management‘s Discussion and Analysis December 31, 2017

2017

44,742

5,895

689

51,326

(7,655)

4,495

(3,160)

10,016

20,746

(4,333)

(430)

(4,763)

(US$000's)

Mine operation expenses

Mine production costs

Royalties

Regional administration costs

Capitalized deferred stripping

Inventory movements

Three months ended December 31,

Twelve months ended December 31,

2016

% Change

2017

2016

% Change

39,923

3,276

699

43,898

(4,775)

(5,658)

12%

80%

(1%)

17%

60%

N/A

(10,433)

(70%)

161,155

148,624

19,180

1,996

182,331

(29,428)

15,786

(13,642)

16,904

2,105

167,633

(18,492)

(11,655)

(30,147)

8%

13%

(5%)

9%

59%

N/A

(55%)

23%

Total mine operation expenses

           48,166 

           33,465 

44%           168,689            137,486 

(US$000's)

Three months ended December 31,

Twelve months ended December 31,

Depreciation and amortization expenses

2017

2016

% Change

2017

2016

% Change

Depreciation and amortization - property, plant and 
equipment and mine development expenditures

Depreciation and amortization - deferred stripping 
assets

Inventory movements - depreciation

Capitalized deferred stripping - depreciation

Total depreciation and amortization expenses

           15,983 

10,730

8,309

29%

39,152

36,579

7%

1,683

9,992

(60)

(375)

(435)

9,557

495%

108%

7122%

15%

995%

22,555

61,707

(6,306)

(1,977)

(8,283)

3,408

39,987

5,566

(1,511)

4,055

67%            53,424 

           44,042 

562%

54%

N/A

31%

N/A

21%

Financial Results for the three months ended December 31, 2017

Revenue 

Revenue for the three months ended December 31, 2017 increased 58 percent compared to the prior year period due
to a 48 percent increase in ounces sold and a 7 percent increase in average realized gold prices.

Spot price per ounce of gold

Average

Low

High

Average Realized

Mine Operation Expenses

Three months ended December 31,

2017

$1,276

$1,241

$1,303

$1,279

2016

$1,221

$1,126

$1,313

$1,197

% Change

4%

10%

(1%)

7%

For  the three  months  ended  December,  2017,  mine  operation  expenses,  before  capitalized  deferred  stripping  and
inventory movements, increased by 17 percent over the prior year period to $51.3 million primarily due to an increase
in material mined and processed, unfavourable currency movements and higher fuel prices during the current quarter.

The amount of mining costs capitalized as deferred stripping costs will fluctuate from period to period depending on
whether the Company is mining above or below the life of phase strip ratio in a particular pit.  During the fourth quarter,
the Company mined above the life of phase strip ratios at the Kerekounda and Golouma West deposits.  In the prior
year period, the Company mined above the life of phase strip ratio at the Gora deposit.  As a result, 2.8 million tonnes,
or $7.7 million of deferred stripping costs were capitalized in the current period, compared to only 1.7 million tonnes, or
$4.8 million capitalized in the prior year period.  Capitalized costs are amortized to expense as the deposit is mined.

The largest component of inventory movement costs relates to changes in ore stockpiles.  Normally increases in the
number of ounces in stockpiles results in a reduction of operating costs as mining costs are capitalized to inventory on
the balance sheet while decreases to ore in stockpiles, as stockpiled ore is processed, increase operating costs as
historic  costs  are  expensed to  the  income  statement. However,  increases  and  decreases  to  the  dollar  value  of
stockpiles on the balance sheet is impacted by changes to the Company’s mine plan and capitalized deferred stripping
costs.

Inventory  movements  for the  three  months  ended  December  31,  2017  resulted  in  an  increase  to  mine  operation
expenses of $4.5 million compared to a decrease to mine operation expenses of $5.7 million in the prior year period.
During the current year period, the Company increased operating costs despite an increase in the number of ounces

2017 Annual Report  18

Management‘s Discussion and Analysis December 31, 2017

in stockpiles.  This was mainly due to a record number of ounces mined combined with higher deferred stripping cost 
during the current quarter, which resulted in a decrease in the dollar value of stockpiles on the balance sheet.
In the 
prior year period, the higher per ounce cost additions to the stockpile increased the overall value of stockpile even 
though there was no movement in stockpiled gold ounces.

Depreciation and amortization expenses

Total depreciation and amortization expense for the three months ended December 31, 2017 was $16.0 million, $6.4
million  higher  than  the  prior  year  period.    The  increase  was  mainly  due  to  higher  depreciation  and  amortization  of 
deferred stripping assets attributed to Gora, Kerekounda and Golouma West.  In the prior year period, only Gora’s 
deferred stripping asset was being amortized.  

Depreciation related to inventory movements for the three months ended December 31, 2017 decreased by $4.3 million.
The  decrease  was  a  result  of a  net  increase  in  stockpile  gold  ounces.    The  prior  year  period  had  marginal  net 
movements of  gold  ounces  in  stockpile  inventory  and  lower  non-cash  depreciation  as  a  result  of only depreciating 
Gora’s deferred stripping asset. 

Exploration and evaluation

Exploration and evaluation expenditures for the three months ended December 31, 2017 were $5.9 million, $4.8 million 
higher than the prior year period.  Refer to the Exploration section for additional details.

Administration expense

Administration expense for the three months ended December 31, 2017 was $3.9 million compared to $3.6 million in 
the prior year period.  The higher costs were due largely to increased personnel costs due to the growth of the Company 
beyond our Sabodala Gold operations in Senegal and other miscellaneous corporate support costs.

Corporate social responsibility expenses

Corporate social responsibility expenses for the three months ended December 31, 2017 were $0.6 million, $0.2 million 
lower  than  the  prior  year  period. This  variance  was  a  result  of  differences  in  the  timing  of  program  expenditures 
between the comparative periods.

Share-based compensation

Share-based compensation expense for the three months ended December 31, 2017 was $0.9 million, $1.5 million 
higher than the prior year period mainly due to a 7 percent increase in the Company’s share price in the current year 
period compared to a 30 percent decrease in the Company’s share price in the prior year period.  The increase in the 
Company’s  share  price  increased  the  expense  charge  for  both  restricted  share  units  and  fixed  bonus  units  for  the 
current year period.

Finance costs 

Finance costs for the three months ended December 31, 2017 were $1.2 million, an increase of $0.3 million compared 
to the prior year period.  The increase is mainly due to an increase in bank charges.

Net foreign exchange losses

Net foreign exchange losses of $0.5 million were realized by the Company in the three months ended December 31,
2017 compared to a net foreign exchange gain of $0.3 million in the prior year period.  The variance was due to realized 
and unrealized foreign exchange losses recorded during the quarter as the Euro appreciated relative to the U.S. dollar
compared to a depreciation of the Euro relative to the U.S. dollar in the prior year period.

Other income/expenses

Other expenses for the three months ended December 31, 2017 were $1.6 million compared with $0.2 million in the 
prior year period.  The increased expense was due to the forward gold sales contracts that the Company entered into 
in September 2017. Based on the mark-to-market value of these contracts as at December 31, 2017, a hedge loss of 
$3.5 million was recognized.  The loss on forward gold sales contracts in the current year period was partially offset by 
a $2.5 million gain on sale of all of the Company’s shareholdings in Tawana Resources.  In the prior year period, a gain
on forward gold sales contracts of $0.5 million was recognized.

2017 Annual Report  19

Management‘s Discussion and Analysis December 31, 2017

Income tax expense

The Company records a current income tax expense on taxable income earned in Senegal at a rate of 25 percent.
Current income tax is calculated using local tax rates on taxable income, which is estimated in accordance with local
statutory requirements and is denominated in the Senegalese currency (CFA Franc).  The tax basis of all assets and
non-current intercompany loans are recorded using historical exchange rates and translated to the functional currency
using the period end exchange rate, and as a result, the Company’s deferred tax balances will fluctuate due to changes
in foreign exchange rates.  Current income taxes are also affected by changes in foreign exchange rates as unrealized
foreign  exchange  gains  as  well  as  losses,  recorded  in  the  local  financial  statements,  are  taxable  /  deductible  for
purposes  of calculating  income  tax  in  Senegal.    The  Company  also  has  a  number  of  development  and  exploration
projects in Burkina Faso and Côte d’lvoire, which currently don’t generate any profit subject to income tax.

For  the  three  months  ended  December  31,  2017,  the  Company  recorded  income  taxes  expense  of  $3.4  million,
comprised of current income tax expense of $3.7 million and a recovery of deferred income taxes of $0.3 million.  In
the prior year period, income tax expense of $8.6 million was comprised of current income tax expense of $6.3 million
and deferred income tax expense of $2.3 million.  Current income tax expense was lower during the quarter due to
changes in foreign exchange rates resulting in higher foreign exchange losses, which reduced income subject to income 
tax.

Net profit

Consolidated net profit attributable to shareholders for the three months ended December 31, 2017 was $5.8 million
($0.05 per share), compared to a consolidated net loss of $1.3 million ($0.01 loss per share) in the prior year period.
The increase is attributable to higher revenue in the current year period as a result of more gold ounces sold and a
higher average realized gold price. Net profit was also positively impacted by a decrease in income tax expense of
$5.2 million, when compared to the prior year period.

Financial Results for the twelve months ended December 31, 2017

Revenue

Revenue for the twelve months ended December 31, 2017 increased by 8 percent over the prior year mainly due to
increased sales volume.

Spot price per ounce of gold

Average

Low

High

Average Realized

Mine Operation Expenses

Twelve months ended December 31,

2017

$1,257

$1,151

$1,346

$1,261

2016

$1,251

$1,077

$1,366

$1,234

% Change

1%

7%

(1%)

2%

For the twelve months ended December 31, 2017, mine operation expenses, before capitalized deferred stripping and
inventory  movements,  increased  by  9 percent  over  the  prior  year  to  $182.3  million, primarily  due  to  an  increase  in
material mined and processed, unfavourable currency movements and higher fuel prices.

The amount of mining costs capitalized as deferred stripping costs will fluctuate from period to period depending on
whether the Company is mining above or below the life of phase strip ratio in a particular pit.  The Company mined
above the life of phase strip ratios at the following three deposits:  Kerekounda, Gora, and Golouma West in the current
In the prior year, the Company mined above the life of phase strip ratio at one deposit, Gora.  As a result, 11.9
year.
million tonnes, or $29.4 million of deferred stripping costs were capitalized in the current period, compared to only 6.3
million tonnes, or $18.5 million capitalized in the prior year period.  Costs capitalized are amortized to expense as the
deposit is mined.

The largest component of inventory movement costs relates to changes in ore stockpiles.  Normally, increases in the
number of ounces in stockpiles results in a reduction of operating costs as mining costs are capitalized to inventory on
the balance sheet while decreases to ore in stockpiles, as stockpiled ore is processed, increase operating costs as
historic  costs  are  amortized  to  the  income  statement.    However,  increases  and  decreases  to  the  dollar  value  of
stockpiles on the balance sheet is impacted by changes to the Company’s mine plan and capitalized deferred stripping
costs.

2017 Annual Report  20

Management‘s Discussion and Analysis December 31, 2017

Inventory movements for the year ended December 31, 2017 resulted in an increase to mine operation expenses of
$15.8 million compared to a decrease of $11.7 million in the prior year period.  During both the current and prior year
periods, the Company had a similar decrease in ounces in inventory as stockpiled ore was processed.  Changes to the
mine plan as the Company moved from lower grade, lower strip ratio deposits to higher grade, higher strip ratio deposits 
has  resulted  in  the mining cost  per  ounce  rising,  particularly  in  2016,  which  resulted  in  an  increase in the  value  of
stockpiles in 2016 despite the fact that the number of ounces declined.

Depreciation and amortization expenses

Total depreciation and amortization expense for the twelve months ended December 31, 2017 was $53.4 million, $9.4
million higher than the prior year. Depreciation and amortization expense for property, plant, and equipment and mine
development  expenditures remained  consistent  between  the  comparative  years.    Depreciation  and  amortization  of
deferred stripping assets increased by $19.1 million mainly related to amortization of previously capitalized deferred
stripping costs at Gora and Kerekounda, as well as the incremental impact of Golouma West going into production in
August 2017, while depreciation related to inventory movements decreased by $11.9 million.

Exploration and evaluation

Exploration and evaluation expenditures for the twelve months ended December 31, 2017 were $12.4 million, $7.6
million higher than the prior year. Refer to the Exploration section for additional details.

Administration expense

Administration expense for the twelve months ended December 31, 2017 was $10.7 million, $1.7 million higher than
the prior year. The higher costs were primarily due to increased personnel costs related to the growth of the Company
beyond our Sabodala Gold operations in Senegal and other miscellaneous corporate support costs.

Share-based compensation

Share-based compensation expense for the twelve months ended December 31, 2017 was $2.6 million, $1.8 million
lower than the prior year due to a decline in the Company’s share price during the current year compared to an increase
in share price in the prior year.

The Company continues to grant Deferred Share Units (“DSUs”) to non-executive directors and Restricted Share Units
(“RSUs”) and stock options to employees to allow participation in the long-term success of the Company and to promote 
alignment of interests between directors, employees and shareholders. The following table summarizes share-based
awards to directors and employees of the Company:

Number of Options

Weighted Average Exercise Price

Balance as at December 31, 2016

Exercised

Granted1

Forfeited

Balance as at December 31, 2017

3,789,106

(2,763)

891,488

(223,340)

4,454,491

C$10.48

C$3.33

C$4.16

C$10.91

C$9.20

1 The exercise price of new common share stock options granted during the period was determined using a volume weighted average trading price of the 
Company’s shares for the 5-day period ending on the grant date.

The following table summarizes RSU’s, DSU’s and fixed bonus plan units:

RSUs

DSUs

Fixed Bonus Plan Units

Twelve months ended December 31, 2017

As of December 31, 2017

Grant Units

856,460

180,000

- 

Grant Price1

C$3.00-$4.20

C$4.18

- 

Outstanding

Total Vested2

1,606,201

563,998

359,500

1,040,323

518,988

342,781

1 Grant price determined using a volume weighted average trading price of the Company’s shares for the 5-day period ended on the grant date.

2 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.  RSUs vest over a three year period, with 50 percent of the award vesting upon achievement of two 
predetermined operational criteria, and 50 percent vesting with the passage of time.  Both DSUs and RSUs and are payable in cas h.  The Company used the 
December 31, 2017 closing post-consolidation share price of C$2.99 to value the vested DSUs and RSUs.

2017 Annual Report  21

Management‘s Discussion and Analysis December 31, 2017

Of the 4,454,491 common share stock options issued and outstanding as at December 31, 2017, 3,488,194 are vested
and the  remaining  966,297 vest over  a  three-year  period. The  fair  value  of  options  that vest  upon  achievement  of
milestones  will  be  recognized  based  on  management’s assessment  of  the  likelihood of  reaching  those  milestones.
Under IFRS, the graded method of amortization is applied to new grants of stock options and fixed bonus plan units,
which results in approximately 91 percent of the cost of the stock options and fixed bonus plan units recorded in the
first twelve months from the grant date.

Finance costs 

Finance costs for the twelve months ended December 31, 2017 were $3.9 million, $0.5 million lower than the prior year
period due to a decrease in bank charges and deferred financing costs on borrowings.

Net foreign exchange losses

Net foreign exchange losses of $4.6 million and $2.6 million were realized by the Company in the twelve months ended
December 31, 2017 and 2016 respectively.  This was due to realized and unrealized foreign exchange losses recorded
as the Euro appreciated relative to the US dollar. Net foreign exchange losses were greater in 2017 due to higher
foreign currency expenditures.

Other income/expenses 

Other income for the twelve months ended December 31, 2017 was $4.5 million compared with other expenses of $7.4
million in the prior year.  Other income in the current year included a $2.5 million gain on sale of all of the Company’s
Tawana Resources shareholdings,  gains  of  $1.8 million  on  gold  forward  sales  contracts,  a  $1.2  million  milestone
payment received pursuant to an option agreement with Algold Resources Ltd, and income earned on cash balances.
This was in part offset by $1.2 million in business taxes.  Other expenses in the prior year period included $2.2 million
in losses on forward gold sales contracts, $1.7 million in Gryphon acquisition related costs, $1.3 million for business
taxes, $1.0 million related to registration fees to merge the Sabodala and Golouma mining concessions as part of the
acquisition of the Oromin Joint Venture Group, as well as, miscellaneous non-recurring costs incurred during the period.

Income tax expense

For  the  twelve  months  ended  December  31,  2017,  the  Company  recorded  income  taxes  expense  of  $2.4  million,
comprised of current income tax expense of $6.9 million and a recovery of deferred income taxes of $4.5 million.  In
the prior year period, income tax expense of $23.3 million was comprised of current income tax expense of $19.9 million
and deferred income tax expense of $3.4 million.  Current income tax expense was lower during the twelve months
due to changes in foreign exchange rates resulting in higher foreign exchange losses, which reduced income subject
to income tax.

Net profit

Consolidated net profit attributable to shareholders for the twelve months ended December 31, 2017 was $31.9 million
($0.30 per share), compared to consolidated net profit of $23.1 million ($0.28 per share) in the prior year period.  This
was mainly a result of lower income taxes in the current year.  Lower non-cash inventory charges and lower capitalized
deferred stripping costs also contributed to the increase in the current year net profit and earnings per share compared
to the prior year.

2017 Annual Report  22

FINANCIAL CONDITION REVIEW

Summary Balance Sheet

Balance Sheet

Cash and cash equivalents

Trade and other receivables

Inventories

Deferred tax assets

Available for sale financial assets
Other assets1

Total assets

Trade and other payables

Borrowings

Provisions

Deferred revenue
Other liabilities2

Total liabilities

Total equity

Management‘s Discussion and Analysis December 31, 2017

As at December 31, 2017

As at December 31, 2016

                                       87,671                                         95,188 

                                        5,484 

                                        9,882 

                                     160,662                                       171,232 

                                       26,491                                         21,966 

                                           964 

                                        1,171 

                                     534,960                                       512,753 

                                     816,232                                       812,192 

                                       54,165                                         47,409 

                                       14,307                                         13,844 

                                       34,303                                         34,473 

                                       46,209                                         68,815 

                                       17,693                                         30,718 

                                     166,677                                       195,259 

                                     649,555                                       616,933 

1  Includes Property, Plant and Equipment; Mine Development Expenditures; Other Current Assets and Other Non-current Assets.

2  Includes Current Income Tax Liabilities; Deferred Income Tax Liabilities and Other Non-Current Liabilities.

Balance Sheet Review

Cash

The Company’s cash balance at December 31, 2017 was $87.7 million, $7.5 million lower than the balance at the start 
of the year.  Refer to the Liquidity and Cash Flow sections below for further details.

Trade and Other Receivables 

The trade and other receivables balance of $5.5 million includes $4.4 million in VAT recoverable.  In February 2016, 
the Company received an exemption for the payment and collection of refundable VAT in Senegal. This exemption is 
governed by an amendment to our Senegalese mining convention and expires on May 2, 2022.

Inventories

Inventories  decreased  by  $10.6 million  to  $160.7 million  as  at  December  31,  2017.    The  decrease  was  primarily 
attributable to a net drawdown on low-grade stockpile inventories during the year.

Other Assets

Other  assets  increased  by  $22.2 million  to  $535.0 million  as  at  December  31,  2017.    The  increase  was  largely 
attributable to additions to capitalized mine development expenditures of $64.6 million and additions to property, plant 
and equipment (net of disposals) of $20.9 million during the year, less combined depreciation expense of $61.8 million.

Available for Sale Financial Assets

The Company holds marketable securities.  During the fourth quarter of 2017, the Company disposed of all 13,505,000 
shares it held in Tawana Resources for net cash proceeds of $4.0 million.  As at December 31, 2017, the Company’s 
remaining securities were valued at $1.0 million, compared to $1.2 million as at December 31, 2016.

Deferred Revenue

During the twelve months ended December 31, 2017, the Company delivered 22,500 ounces of gold to Franco-Nevada 
and recorded revenue of $28.3 million, consisting of $5.7 million received in cash proceeds and $22.6 million recorded 
as a reduction of deferred revenue.

2017 Annual Report  23

Management‘s Discussion and Analysis December 31, 2017

Other Liabilities

Other  liabilities  decreased  by  $13.4  million  to  $17.7  million  as  at  December  31,  2017.    The  decrease  was  largely
attributable  to  a  reduction  of  taxes  payable  of  $12.2 million,  which  was  settled  partially  in  cash  and  through  the
redemption of VAT certificates.

2016 Comparative Figures

Certain previously reported Teranga consolidated balance sheet line items as at December 31, 2016 were updated to
reflect adjusted final estimates of the fair value of identifiable assets acquired and liabilities assumed related to the
October 13, 2016 acquisition of Gryphon.  As a result of new information obtained about the facts and circumstances
that  existed  as  of  the  Gryphon  acquisition date,  the  following  adjustments  were  recorded  to  both the adjusted  final
purchase price allocation and the December 31, 2016 balance sheet as previously reported:

(cid:120) mine development decreased by $2.8 million;
deferred tax assets increased by $2.2 million;
(cid:120)
deferred tax liabilities decreased $0.8 million; and
(cid:120)
other non-current assets decreased by $0.2 million.
(cid:120)

REVIEW OF QUARTERLY FINANCIAL RESULTS

(US$000's, except where indicated)

2017

2016

Revenue

88,280

61,041

72,040

70,322

55,764

60,316

73,562

79,198

Q4 2017

Q3 2017

Q2 2017

Q1 2017

Q4 2016

Q3 2016

Q2 2016

Q1 2016

Average realized gold price ($/oz)1

Cost of sales

Net earnings / (loss)

Net earnings / (loss) per share

1,279

64,149

5,758

0.05

1,277

49,225

10,370

0.10

Operating cash flow

32,452

10,235

1,260

1,226

54,281

54,458

9,640

0.09

7,434

5,592

0.05

1,197

43,022

(1,286)

(0.01)

1,333

37,748

10,437

0.13

1,261

1,169

48,227

52,531

6,146

0.08

7,812

0.10

21,258

(13,627)

13,255

20,958

24,143

1   Average realized gold price is a non-IFRS financial measure that does not have a standard meaning under IFRS.  Please refer to Non-IFRS Performance 

Measures at the end of this MD&A.

Our revenues over the last several quarters reflect the variation in quarterly production and fluctuations in gold price.
Cost of sales are driven by production volumes and are also influenced by fuel costs, foreign currency movements,
operational  efficiencies and  inventory  movements. The  largest  component  of  inventory  movement  costs  relates  to
changes in ore stockpiles.  Increases in the number of ounces in stockpiles results in a reduction of operating costs as
mining costs are capitalized to inventory on the balance sheet while decreases to ore in stockpiles, as stockpiled ore
is processed, increase operating costs as historic costs are amortized to the income statement.  Operating cash flow
levels fluctuate depending on the price of gold and production levels each quarter.

Operating cash flows during the fourth quarter 2016 were negative mainly due to royalty payments of $17.2 million
made during the quarter. Previously, royalties related to the prior year were paid in the third quarter of the following
year.  The Company has now moved to paying royalties one quarter in arrears.

BUSINESS AND PROJECT DEVELOPMENT 

Wahgnion Gold Project Update

Reserve Update

The Company anticipates an improvement in the Wahgnion Gold Project’s economics following completion of the infill
drill  program  designed  to convert  inferred  resources  to  indicated resources and  then  potentially  to  reserves.
Approximately 73,000 metres of drilling were completed in the fourth quarter and a reserves update is expected in mid-
2018.  The infill drill program targeted inferred resources located adjacent to the current reserve pits.  The Company
anticipates achieving a conversion rate of between 25 percent and 50 percent of the inferred resources based on the
location of the infill drilling within or adjacent to existing wire framed domains of primarily inferred mineralization and lie
within the existing resource or reserve pit shells of current reserve models.

The current gold reserves base of approximately 1.2 million ounces is derived from four deposits (Nogbele, Fourkoura,
Samavogo, and Stinger) within the Wahgnion mine license.  Beyond the initial four deposits included in the feasibility

2017 Annual Report  24

Management‘s Discussion and Analysis December 31, 2017

study,  Teranga  has  initiated  a  multi-year  exploration  program  on  over  a  dozen  other  priority  targets  on  its  regional
exploration land package, all within trucking distance of the proposed mill site.

Construction and Development Update

The  project  construction  will  be  managed  through  an  owner’s  team  with  responsibility  for  delivering  the  site
infrastructure, tailings, mine site services and initiation of mine operations.  Plant construction has been awarded to
Lycopodium  with  an  engineering,  procurement  and  construction  management  based  arrangement.    Early  works
construction has begun at the Wahgnion site with initial bulk civil works for the permanent camp, mine services and
plant areas in progress.  Key large vendor packages have been awarded and detailed engineering has been initiated.
Plant construction on site has been scheduled to begin early in the second quarter, with subsequent preparation for
the early works to be completed in support.  First gold pour is expected by the end of 2019.

Afema

On December 7, 2017, the Company entered into a memorandum of understanding with Sodim, a private investment
company,  to  acquire  a  controlling  interest  in  the  exploration  and  development  of  the  Afema  land  package  in  Côte
d’Ivoire.  The Afema land package is located in southwest Côte d’Ivoire and covers more than 1,400 km2, consisting
of the Afema mining license and three exploration permits – Ayame, Mafere and Aboisso.

Under the terms of the memorandum of understanding, the Company maintains its 51 percent interest in the Afema
mining  lease  and  Afema  permits  through  the  completion  of  a  three-year  $11.0  million  exploration  and  community
relations  work  program, increasing  its  interest  to  70  percent  on  the  Afema mining  license  through  the  delivery  of a
positive economic evaluation of potential mining on the Afema land package and Teranga’s commitment to fund its 70
percent interest in the project through construction.  On January 25, 2018 the amended Afema mining convention was
signed and delivered by the Ministry of Mines of Côte d’Ivoire.  The Company is currently working towards a definitive
agreement  between  Sodim  and  Teranga  for  the  Afema  land  package. Pursuant  to  the  Company’s  joint  venture
agreement with Miminvest, a 3 percent royalty is payable to Miminvest in connection with Teranga’s share of production
or product emanating from the Afema mining lease as the land package was considered an exploration property.

Management is currently assessing previous work within the original Afema mine license.  This includes review of the
baseline environmental test work to support an environmental impact assessment and the supporting engineering for
various  processing  options.    Once  review  of  the  existing  work  has  been  completed,  management  will  determine
potential for future CIM compliant resources through exploration and resource delineation programs.

EXPLORATION 

During  2017,  the  Company  received  encouraging  drill  results  from  the  Golden  Hill  Project  in  Burkina  Faso  and
completed the infill drill program at the Wahgnion Gold Project in Burkina Faso.  The majority of the Company’s $24.9
million  global  exploration  expenditures  for  2017  focused on  conversion  of  resources  to  reserves  and  towards
establishing new resources.

Burkina Faso 

Wahgnion Mine License Reserve Development 

Nogbele Deposit, Stinger Deposit, Samavogo Deposit, Fourkoura Deposit

Drilling activities during 2017 were focused on the four reserve deposits: Nogbele, Stinger, Samavogo and Fourkoura
comprising  the  Wahgnion  Gold  Project  NI  43-101  compliant  resources  and  reserves  estimate,  as  outlined  in  the
technical report dated October 20, 2017.

The drilling campaign was designed to upgrade resources classified as inferred to indicated for the potential conversion
to reserves.  Management believes there is a reasonable basis for such anticipated conversion, given drilling is taking
place within (or near to) existing wire-framed domains of primarily inferred mineralization and lie within the existing
resource or reserve pit shells of the current resource models.  At present, drill spacing is too widely spaced to classify
these resources as indicated, thus are not included as part of the reserves estimate.  As such, this program primarily
provides infill drilling at a closer spacing.  This campaign was completed during the fourth quarter with an overall total
of 1,666 holes (73,000 metres) being drilled.

The Company has budgeted $0.5 million in 2018 toward an updated reserve estimate for the Wahgnion Gold Project,
incorporating all results of this drill program for all four deposits, which is expected mid-year 2018.

2017 Annual Report  25

Management‘s Discussion and Analysis December 31, 2017

Wahgnion Regional Exploration

No regional exploration was undertaken during the fourth quarter. The Company has budgeted $1.0 million for 2018
surface  mapping,  trenching  and  potentially  initial  drilling  programs  across previously  identified structural  trends  and
geochemically anomalous areas. 

Golden Hill Property

During 2017, the Company spent $6.5 million on an exploration program at the Golden Hill property drilling the Ma, 
Jackhammer  Hill,  Peksou,  Nahiri and  C-Zone  Prospects  that  are  all  located  within  approximately  5  kilometres  of  a 
central point.  

The Company issued several news releases through 2017 announcing exploration-drilling results from the Golden Hill 
Property. Complete tables of available drill hole results including those from the various components comprising all 
five prospect areas can be found on the Company’s website at www.terangagold.com under “Exploration”.

The Company has budgeted $8 million for the 2018 exploration program at Golden Hill to move the five current prospects 
into an initial resource by year end and to expand our exploration program to initiate exploration on more than a half 
dozen other targets in close proximity.

Gourma Property

The Company spent $0.5 million on an initial field program at the Gourma Property that led to a six-hole drill program.  
Early results were favourable on this early stage property. 

The Company has budgeted $0.5 million for the 2018 exploration program at Gourma, consisting primarily of auger 
sampling, across previously identified structural trends and geochemically anomalous areas.

Senegal 

Sabodala Mine Lease Reserve Development 

The Niakafiri deposit area, located within 5 kilometres of the Sabodala plant, has recently had a Resource and Reserve 
estimation  update  which  incorporated  results available  as  of  April  2017, announced  as  a  component  of  an  overall 
Sabodala  Gold  Operations  resource  and  reserve  update  in  a  Company  news  release  dated  July  19,  2017.  
Subsequently,  the  Company  completed  a  revised  NI  43-101  technical  report  dated  August  30,  2017  with  an 
accompanying news release.   

Niakafiri  remains  a  highly-prospective  area  on  our  mine  license.    As  a  result  of  Niakafiri‘s  encouraging  results,  the 
Company has re-designed mine sequencing with a view to bringing forward the development of the Niakafiri deposit, 
which is expected to increase near term production and cash flows.  Community resettlement activities are ongoing 
alongside  the  drilling  evaluation  program,  with  community  site  selection  activities  and  household  and  land  survey 
activities  in  progress.    As  the  village  relocation  progresses,  we  expect  to  be  able  to  complete  the  drill  program  at 
Niakafiri.

There are plans to continue drilling at both Niakafiri and elsewhere on the mining license over the next several years 
with the objective to further increase resources and subsequent reserves.

Senegal Regional Exploration1

During the fourth quarter 2017, the Company received the results from the property-wide stream sediment bulk leach 
extractable  gold sampling  (“BLEG”)  program  completed  earlier  in  the  year.    Initial  interpretation  of  these  results 

1 Applications seeking the consolidation and renewal of Teranga’s regional exploration package in Senegal were filed with the Ministry 
of  Mines in  late  December 2016. Working  with the  Department  of  Mines  and  Geology, our  proposal sought  two  new  exploration 
permits, replacing the prior eight permits held directly or indirectly by Sabodala Mining Company, covering a materially reduced land
area of approximately 650 kilometres from a prior 1,000 kilometres. We anticipate formal approval of these new permits in the near 
term from the Senegalese Ministry of Mines.

2017 Annual Report  26

Management‘s Discussion and Analysis December 31, 2017

suggests that five prospective areas within the regional exploration properties and one prospective area within the mine 
license (outside of currently known deposits) warrant follow-up evaluations based on moderate and highly anomalous(cid:3)
drainage  basin  results.    No  exploration  work  is  planned  for  the  regional exploration  ground  in  2018,  however,  field(cid:3)
programs designed to assess anomalous areas identified from the BLEG program will continue over the next several(cid:3)
years. Applications for renewal and extension of the Company’s regional land package, after relinquishment of up(cid:3)
to(cid:3)a third of the total land area, were submitted in the fourth quarter of 2017 and approvals are anticipated in due course(cid:17)

Côte d’Ivoire Exploration Highlights

The Company holds, by way of an exploration agreement, five greenfield exploration tenements totaling nearly(cid:3)
1,838(cid:3)km2 in Côte d’Ivoire.
Including Afema, the Company has budgeted $3.5 million for 2018 exploration activities(cid:3)
in Côte(cid:3)d’Ivoire.

Guitry Property

At the Guitry Property, we have outlined a large gold-in-soil geochemical anomaly.  The Company is planning for a(cid:3)
4,000 metre reverse circulation drill program in the first quarter 2018. A series of multi-hole profiles will test across(cid:3)
the(cid:3)central core area of the large gold-in-soil geochemical anomaly. A follow-up program will be designed based(cid:3)
on the(cid:3)initial drill results.

Sangaredougou Property

field exploration program at our newest permit

the Sangaredougou Property, was(cid:3)
Our initial
completed(cid:3) during the fourth quarter. The Sangaredougou Property is contiguous to the Guitry Property. This(cid:3)
program consisted(cid:3) of soil sampling over a regional grid that, in part, overlays an area of old artisanal workings.(cid:3)
Results from the soil-sampling program are pending.

in Cote d’Ivoire,

HEALTH AND SAFETY

Health  and  safety  remains  the principal  priority  at  Sabodala  and  all  personnel  are  part  of  extensive  campaigns  to(cid:3)
integrate a safety awareness culture as part of their daily activities. Safety is the first topic of all meetings and(cid:3)
site(cid:3) reports, whether they are on a daily, weekly, monthly or annual basis. The Company’s operational health and(cid:3)
safety(cid:3) program focuses on proactive, people-based safety management using a documented systematic approach.(cid:3)
In 2016,(cid:3) there was a focus on pro-active reporting through a documented task observation process and(cid:3)
departmental self-inspections on site. During 2017,
fatality. After a thorough(cid:3)
investigation, the focus(cid:3) remains on safe workplace behaviour through quality reporting, close out of incidents and(cid:3)
In  addition,  a  consequence management program was  rolled  out  late(cid:3)
corrective actions within an(cid:3)allocated period.
in 2017 to ensure a culture(cid:3) where all employees assume responsibility for their own safety and the safety of their(cid:3)
colleagues.

the Company incurred its first

The focus for 2018 will be on advanced supervisor safety training as part of the frontline leadership program, coupled(cid:3)
with core refresher safety training for all teams. There will also be an improved reward and recognition program(cid:3)
aimed(cid:3)at promoting the message “Safety our Responsibility” and ensuring that it is maintained and understood by all.

CORPORATE SOCIAL RESPONSIBILITY

Teranga’s award-winning Corporate Social Responsibility (“CSR”) program continues to set a high standard for(cid:3)
socially responsible  mining,  with  strong  emphasis  on  long-term  economic  and  social  development  partnerships(cid:3)
with the(cid:3) communities around its mine. Teranga is replicating this successful sustainability framework in Burkina(cid:3)
Faso with the(cid:3)development of the Wahgnion Gold Project.

Senegal

In 2017, Teranga continued its emphasis on capacity building and benefits sharing within its Senegalese(cid:3)
regional(cid:3)communities.  At  Gora,  the  community  fund  management  committee  continued  to  perform  in  partnership(cid:3)
with local(cid:3) leaders from six villages to oversee the funding and execution of community programs. Created by(cid:3)
Teranga,  this(cid:3) project-specific  fund  was  established  to  support  alternative  livelihoods,  employment  generation and(cid:3)
other long-term(cid:3)benefits for the Gora communities, which previously relied on artisanal mining activity.
In 2017, the(cid:3)
fund supported the(cid:3)provision of a modern 63-seat bus, the donation of several peanut mills to targeted communities,(cid:3)
the rehabilitation of(cid:3)the Djegoune market garden and the construction and equipment of a hen house in Diakhaling.(cid:3)
In total, $1.4 million(cid:3)were committed through the Social and Gora fund in 2017.

Teranga also continued its partnership with SODEFITEX,
in its support of(cid:3) 500(cid:3)
cotton farmers as part of the large-scale cotton textile industry “White Gold for Life” program launched by(cid:3)Teranga in(cid:3)

in-country textile producer,

the largest

2017 Annual Report 27

Management‘s Discussion and Analysis December 31, 2017

partnership with the government and local companies.  Teranga continued to sponsor Foundation Paul Gerin Lajoie for
the vocational training.  The funding will enable the foundation to provide toolkits to 52 young women and men in the
regions  of  Tambacounda  and  Kédougou that  completed  the  training  program  and  have  obtained  the  required
professional certification.  Local procurement investments continued in connection with several mining consumables
and services contracts tendered within the Kédougou region, and additional training to 12 regional companies focused
on capacity building within and beyond the mining industry.

At Sabodala, community resettlement activities are ongoing alongside the Niakafiri drilling program with the support of
an  international  consultancy  specialized  in  managing  displacement  (ERM  Group,  Inc.).    Community  site  selection
activities and household and land survey team activities were completed, with all structures inclusive of 599 households 
including  142  one-person  (renter)  households  having  been  surveyed.    Community  compensation  negotiations  are
underway,  and  the  resettlement  team  has  launched  the  permitting  process  and  housing  construction  readiness
activities.

Burkina Faso

In 2017, Teranga continued to progress resettlement planning activities in conjunction with the phased resettlement of
430 households within the Wahgnion Gold Project with the support of ERM.  Activities included an update of household
and  land  surveys,  extensive  negotiations  with  affected  communities  through  the  agreed-upon  forums,  and  the
development  and  approval  of  a  livelihood  restoration  plan  and  compensation  framework.  Several  livelihood  pilots
projects  were  also  initiated,  including  irrigated  garden  and  cassava  cultivation.  These  projects  will  continue  to  be
expanded upon in 2018.

Teranga also launched several community investment initiatives in 2017, including the provision of 10 boreholes to the
community, donation of grain mills to women’s groups, and financial and in-kind support for community events.

In  2018,  resettlement  activities  will  include  the  first  land  take  by  the  Project  and  the  first  physical  relocation  of
households.    A  community  development  framework  encompassing  social  investment,  local  recruitment,  local
procurement,  influx  management,  and  stakeholder  engagement  will  also  be  developed  in  2018  in  alignment  with
Teranga’s corporate CSR strategy.

MARKET REVIEW – IMPACT OF KEY ECONOMIC TRENDS

Gold Price

The price of gold is the largest factor in determining our profitability and cash flow from operations. During 2017, the
average London PM fix price of gold was $1,257 per ounce, with gold trading between a range of $1,151 and $1,346
per ounce.  This compares to an average of $1,251 during 2016, with a low of $1,077 per ounce and a high of $1,366
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.  In late 2017 and 2018, the Company entered into gold
forward contracts to provide greater certainty of cash flows from the Company’s Sabodala mine as we look to develop
our next mine in Burkina Faso.

On December 13, 2017, the U.S. Federal Reserve raised its benchmark interest rate by a quarter of a percentage point,
to a range of 1.25 percent to 1.5 percent.  This marked the third interest rate increase in 2017 and for the fifth time
since the 2008 to 2009 financial crisis.  It is expected that the U.S. Federal Reserve will continue its gradual policy
normalization, with polls anticipating three interest rate increases in 2018.  Should the U.S. Federal Reserve continue
monetary policy tightening in 2018, a softening of gold prices may result.  Fears that the U.S. will pull out of the North
American Free Trade Agreement has benefitted gold prices and is expected to continue to do so in 2018.  Additionally,
2017 was the first year in almost ten years where global mine production decreased from the prior year period.  This
reduction may continue in 2018 as lower output is expected from China and a number of South American producers.
A reduction in the global gold supply is expected to have a positive impact on gold prices in 2018.

Overall, Teranga anticipates the gold price will remain at, or slightly above, current spot prices in the near-term and are
bullish over the medium to long-term based on supply and demand fundamentals.

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  of  maximizing  shareholder  value

2017 Annual Report  28

Management‘s Discussion and Analysis December 31, 2017

through  effective  management  of  our  Sabodala  Gold  Mine  and  prudent  capital  allocation  in  connection  with  our
development and exploration programs.

Oil Price

Fuel costs related to 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 totaled approximately $35.2 million in
2017 or approximately 20 percent of gross mine production costs.

The Sabodala operation is located in remote, southeastern Senegal and it is necessary to generate our own power.
Six,  6-megawatt  Wartsila  generator  engines  provide  power  for  the  operations. 
In  2017,  operations  consumed
approximately 32 million litres of heavy fuel oil (“HFO”).  This equated to cost of approximately $0.136 per kilowatt hour,
which is less than the cost of grid electricity in industrialized Senegal.  Sabodala’s mobile fleet runs on light fuel oil
(“LFO”) and the operations consumed approximately 23.4 million litres of LFO in 2017.  We source our HFO and LFO
from an international fuel supplier with a local distribution network in Senegal.

Our  main benchmark  for  fuel prices is  Brent crude  oil,  which  increased  by 18 percent  in 2017.  Both  crude oil  and
natural gas prices varied significantly during the year and oil prices are forecasted to trade higher in 2018.  Overall,
demand growth for crude looks to be firm while supply has remained tight as the organization for oil producing countries’
recent  supply  cuts  were  lower  than  expected.    Geopolitical  tensions  in  Iran,  the  Middle  East  and  Venezuela  could
provide a risk premium to oil price as they present the possibility of supply disruptions.

The government in Senegal sets prices for various types of fuels consumed in the country, and they review these prices
every 4 weeks.  Price stabilization levies are applied in times of low market prices.  In December 2015, the Company
successfully negotiated the removal of these levies, which were inflating our prices in Senegal relative to market oil
prices by 20 to 30 percent.

The Company does not have any oil hedges in place.  Management may consider entering into oil hedge contracts
should the price and terms be deemed advantageous.

Currency

A  significant  portion  of  operating  costs  and  capital  expenditures  of  the  Sabodala  Gold  Mine’s  operations  are
denominated in currencies other than U.S. dollars.  Historical accounts payable records demonstrate that the Company 
has between 40 and 50 percent Euro currency exposure via the West African CFA Franc, which is pegged directly to
the Euro currency.  Overall, financial markets have suffered from a series of global political events in 2017 but the Euro
currency has strengthened significantly over the US dollar, increasing from 1.05 to over 1.20.

Two major events are expected to dominate the Eurozone currency bloc in 2018 including the Italian general election
in  May,  and  developments  around  the  European  Central  Bank’s  quantitative  easing  scheme.  That  said,  the  Euro
currency is expected to outperform the U.S. dollar in the near term.  All of the Company’s current production comes
from its operation in Senegal, therefore costs will continue to be exposed to foreign exchange rate movements.  The
Company  monitors currency exposure  on  an ongoing basis.    The  Company  had  previously  hedged a  portion  of  its
exposure to the Euro using forward contracts, and currently does not have any currency hedges in place.  With the
Company’s  projects  in  Burkina  Faso  and  Côte  d'Ivoire,  the  Company’s  operating  costs  and  capital  will  also  have
portions denominated in currencies other than the U.S. dollar.  Management will regularly assess currency exposures
and may consider entering into hedge programs should the price and terms be acceptable.

2017 Annual Report  29

Management‘s Discussion and Analysis December 31, 2017

Liquidity and Cash Flow

Cash Flow

(US$000's)

Cash Flow 

Operating activities excluding changes in working capital
other than inventories

Changes in non-cash working capital other than inventories

Operating

Investing

Financing 
Effect of exchange rates on cash holdings in foreign 
currencies

Change in cash and cash equivalents during the period

Cash and cash equivalents - beginning of period

Cash and cash equivalents - end of period

Sources and Uses of Cash

Three months ended December 31, Twelve months ended December 31,

2017

2016

2017

2016

24,708

7,744

32,452

(18,159)

(289)

707

14,711

72,960

87,671

(1,842)

(11,785)

(13,627)

(5,673)

55,566

1,051

37,317

57,871

95,188

82,610

(11,231)

71,379

(75,836)

(3,808)

748

(7,517)

95,188

87,671

49,142

(4,413)

44,729

(48,129)

54,276

(124)

50,752

44,436

95,188

Cash Flow - Sources and Uses (US$000's)

Sabodala

Corporate

Wahgnion

Exploration 

Consolidated 
Cash Flow

   Three months ended December 31, 2017

           42,279              (4,440)             (3,362)             (2,025)

           32,452 

          (11,515)

3,873              (9,996)

(521)

(8)

(18,159)

(93)

(10)

-

-

(8,946)

(2,570)

-

-

-

1

-

(289)

(289)

634

                        -

(4,526)

-

                        -

(5,470)

(513)

                        -

(14)

3,990

-

-

73

-

-

-

                        -

                        -

                        -

                  -

                        -

-

-

(289)

-

                  -

707

           31,109 

(494)

(13,358)             (2,546)

           14,711 

   Operating

   Investing

- Expenditures for mine development - sustaining

- Expenditures for property, plant and equipment -

sustaining

     - Expenditures for mine development - growth

      - Expenditures for property, plant and equipment -

growth

- Expenditures for investing in shares

- Expenditures for intangibles

- Proceeds from sale of available for sale financial

assets

   Financing

- Interest paid on borrowings

    Effect of exchange rates on cash holdings in     
      foreign currencies 

 Change in cash and cash equivalents during the 
   period 

2017 Annual Report  30

Management‘s Discussion and Analysis December 31, 2017

   Year ended December 31, 2017

Cash Flow - Sources and Uses (US$000's)

Sabodala

Corporate

Wahgnion

Exploration 

Consolidated 
Cash Flow

   Operating

   Investing

           97,871            (14,398)             (4,564)             (7,530)

           71,379 

          (54,167)

2,982            (24,110)

- Expenditures for mine development - sustaining

             (43,425)

(337)

- Expenditures for property, plant and equipment -

sustaining

             (10,519)

(202)

-

-

(541)

(28)

(75,836)

                        -

- Expenditures for mine development - growth

      - Expenditures for property, plant and equipment -

growth

- Expenditures for investing in shares

- Proceeds from sale of available for sale financial

assets

- Expenditures for intangibles

Financing

- Proceeds on stock  options exercised

- Dividend payment to the Government of

Senegal

     - Interest paid on borrowings

    Effect of exchange rates on cash holdings in 
      foreign currencies 

 Change in cash and cash equivalents during the 
   period 

-

-

-

-

(223)

            (3,815)

-

(2,700)

(1,115)

                        -

             (17,199)

-

                        -

(6,911)

(513)

(393)

3,990

(76)

7

7

-

-

-

-

-

-

-

                        -

                        -

                        -

                  -             (3,808)

                        -

                        -

                        -

-

-

581

167

-

                  -

748

           40,470            (11,242)           (28,674)             (8,071)             (7,517)

During the three and twelve months ended December 31, 2017, Sabodala generated net cash of $31.1 million and
$40.5  million,  respectively.   The  funds  generated  from  Sabodala,  which  in  addition  to  the  Company’s  existing cash
balances were used to support the corporate offices, advance construction readiness and early works activities at the
Wahgnion Gold Project, and further our exploration programs.

Operating Cash Flow

(US$000's)

Three months ended December 31, Twelve months ended December 31,

Changes in working capital other than inventory

Decrease / (Increase) in trade and other receivables

Decrease / (Increase) in other assets

Increase / (decrease) in trade payables and other

(Decrease) / Increase in provisions

Increase / (decrease) in current income taxes payable 

Net change in working capital other than inventory

2017

97

2,132

1,852

(3)

3,666

7,744

2016

4,360

(728)

(21,789)

48

6,324

(11,785)

2017

(1,769)

2,978

(5,128)

(88)

(7,224)

(11,231)

2016

(715)

6,224

(22,171)

(568)

12,817

(4,413)

Cash provided by operations before net changes in working capital other than inventories for the three months ended
December 31, 2017 increased to $24.7 million compared to a $1.8 million cash outflow in the prior year quarter.  Net
cash provided by operating activities, after changes in working capital, increased to $32.5 million compared to a cash
outflow of $13.6 million in the prior year quarter.  The increases in operating cash flows were primarily due to a $32.5
million  increase  in  gold  sales  and  a  $14.1  million  decrease  in  cash  royalties  paid due  to  the  timing  of  payments
compared to the prior year period.

Cash provided by operations before net changes in working capital other than inventories for the year ended December
31, 2017 increased to $82.6 million compared to $49.1 million in the prior year period.  Net cash provided by operating
activities, after changes in working capital, increased to $71.4 million compared to $44.7 million in the prior year period.
The increase in operating cash flows were primarily due to a $22.8 million increase in gold sales.

2017 Annual Report  31

Management‘s Discussion and Analysis December 31, 2017

Investing Cash Flow

(US$000's)

Investing Activities

Sustaining Capital (Sabodala)

Mine site capital expenditure - sustaining

Mine site capital expenditure - project

Development capital

Capitalized reserve development (mine site exploration)

Sustaining Capital Expenditures, before Deferred
 Stripping 

Capitalized deferred stripping

Total Sustaining Capital Expenditures

Growth Capital

Feasibility

Reserve development

Construction readiness

Early works

Total Growth Capital Expenditures

Gryphon Minerals Limited opening balance sheet cash balance

Investment in available for sale financial assets

Proceeds from available for sale financial assets

Investing Activities

Three months ended December 31, Twelve months ended December 31,

2017

2,552

135

333

965

3,985

7,655

11,640

340

2,440

2,484

5,245

10,509

-

-

(3,990)

18,159

2016

2,444

362

1,802

2,923

7,531

4,822

12,353

325

337

979

-

1,641

(8,321)

                         -

-

5,673

2017

2016

10,660

705

7,904

6,113

25,382

29,428

54,810

2,446

6,417

10,409

5,351

24,623

-

393

(3,990)

75,836

7,361

11,188

7,324

7,138

33,011

18,492

51,503

325

337

979

-

1,641

(8,321)

3,306

-

48,129

Net cash used in investing activities for the three months ended December 31, 2017 was $18.2 million, $12.5 million
higher than the prior year period, mainly due to expenditures for the Wahgnion Gold Project and higher capitalized
deferred stripping costs at Sabodala.

Net cash used in investing activities for the twelve months ended December 31, 2017 were $75.8 million, $27.7 million
higher  than  the  prior  year  period,  mainly  due  to  higher  capitalized  deferred  stripping  costs  related  to  activities  at
Sabodala and development expenditures related to the Wahgnion Gold Project.

Financing Cash Flow

Net cash flow used in financing activities in the three months ended December 31, 2017 was $0.3 million, and was
related to interest and financing costs paid on borrowings.

Net cash flow used in financing activities for the twelve month ended December 31, 2017 was $3.8 million compared
to  a  cash  inflow  of  $54.3  million  in  the  prior  year.    Financing  activities  in  the  current  year includes  a  $2.7  million
prepayment of dividends to the Republic of Senegal related to the recommencement of drilling activities at the Niakafiri
deposit.   Financing  activities  in  the prior  year  included $55.9  million  in net  proceeds  from  a  November  2016  equity
offering.

LIQUIDITY AND CAPITAL RESOURCES OUTLOOK

We require sufficient liquidity and capital resources to not only run our existing operations but to also execute on our
growth strategy, which includes i) optimizing our Sabodala operation; ii) building the Wahgnion Gold Project on time
and on budget; and iii) carrying out targeted reserve/resource and exploration drill programs in Burkina Faso, Senegal
and Côte D’Ivoire through resource conversion drill programs and exploration.

(i) Optimizing Our Sabodala Operation

Our ability to generate free cash flow from operations is a function of our ability to execute on our mine plan
at  Sabodala  and  the  price  of  gold.    At  the  Sabodala  mine,  the  mine  plan  was  re-sequenced  to  bring  the
development of the Niakafiri open pit deposit forward and to defer underground development.  This will require
the relocation of the Sabodala village.  Overall, these changes are expected to increase the amount of free
cash flow generated over the next 5 years.

(ii) Building the Wahgnion Gold Project On-Time and On Budget

The Teranga board approved construction of the Wahgnion Gold Project, subject to completion of its financing

2017 Annual Report  32

Management‘s Discussion and Analysis December 31, 2017

plan.    In  total  approximately  $30 million  is  expected  to  be  spent  on  construction  readiness /  early  works
activities and project construction costs prior to finalization of the anticipated senior project debt facility.

(iii) Targeted Exploration Programs

Based on the success of the exploration programs in Burkina Faso and Senegal the reserve development and
exploration budget for 2018 is expected to be approximately $15 million.

We believe  we  are  in  a  strong  position to execute  on  the Company’s  growth  strategy  with  the  following  sources  of
liquidity:

i.

Cash Balance. As at December 31, 2017, we had a consolidated cash balance of $87.7 million.

ii. Available for Sale Securities.  As at December 31, 2017, we had available for sale securities with a market

value of $1.0 million.

iii. Cash  Flows  from  Sabodala (unhedged). Using  a  $1,250  per  ounce  gold  price,  we  expect  Sabodala  to
generate $88 million in free cash flows1 over 2018 and 2019 and $230 million in free cash flows1 between
2018 and 2022.

iv. Sabodala Gold Hedges.  The Company entered into forward gold sales contracts which provide greater cash
flow certainty from Sabodala through to September 30, 2019.  Using a gold price assumption of $1,250 per
ounce,  this  hedge  program  provides  $17.0  million  in  additional  free  cash flow  from  Sabodala  through  to
September 30, 2019.

v. Wahgnion  Financing.  In  November  2017,  following  a  competitive  selection  process,  Teranga  executed  a
project finance mandate with a leading lending institution (the “Institution”) targeting a new financing facility of
$150 million, which will further fund the development of the Company’s Wahgnion Gold Project.  In February
2018, technical due diligence was completed following site visits in both Senegal and Burkina Faso.  Legal
due diligence is ongoing and is expected to be completed in the coming weeks, after which the Company
anticipates receiving a commitment letter from the Institution, confirming the terms and amount of the Facility,
with a targeted financial close in the second quarter 2018.  Proceeds of this Facility will, in part, repay the $15
million drawn under the Société Générale Revolver Facility of $30 million.  Additional details, will be made
available once the commitment letter has been received by the Company.

In addition to the sources of liquidity noted above, we may also source additional funding in the form of equity.  Our
objective is to have a financing plan in place, which eliminates, or at least minimizes the requirement for issuing equity.
With the anticipated completion of the Facility in the second quarter, combined with cash on hand and cash flow from
ongoing  operations,  we  believe  we  have sufficient  financial  resources  to  bring  the  Wahgnion Gold  Project into
production.  If external equity funding is subsequently required, these funds will be used to support our current and
longer-term growth projects and our exploration initiatives.  Our cornerstone investor, Mr. David Mimran, retains pre-
emptive participation rights to maintain his current 21.5 percent ownership position in any future potential equity raise.

Although we have been successful in the past in financing our activities, there is no certainty that any required additional 
financing will be successfully completed.

1 This is a non-IFRS performance measure.  Please refer to the reconciliation of non-IFRS measures at the end of this MD&A.

2017 Annual Report  33

Management‘s Discussion and Analysis December 31, 2017

(US$000's)

Anticipated Sources & Uses 2018/2019 

Cash Balance1
Sabodala Free Cash Flow2
Gold Forward Sales ($1,350 per ounce)3
Debt Facility (based on project finance facility mandate)4
Equipment Facility (based on indicative term sheets)5

Total Anticipated Sources

Wahgnion Pre-production Capital6
Wahgnion Pre-production Operating Costs7

Corporate Overhead
Repayment of Revolver Facility8
Consolidated Minimum Cash9

Total Anticipated Uses

Other Considerations10

88

88

17

165

10

368

232

19

20

15

20

306

62

1 Teranga’s consolidated cash and cash equivalents as of December 31, 2017 was $87.7 million

2 This Sabodala free cash flow is an estimate that is based on the updated life of mine plan and reserve estimate for the Sabodala project, as set
out in the Technical Report of Teranga for the Sabodala Project, Senegal, West Africa, dated August 30, 2017 (the “Sabodala Technical Report”).
See in particular Section 21 of the Sabodala Technical Report - Capital and Operating Costs. 

3 The Company executed forward gold sales contracts totaling 187,500 ounces of gold commencing January 1, 2018 through September 30,
2019, at an average price of $1,340 per ounce of gold. The forward gold sales contracts can be settled at the option of Teranga in either cash or by
physical delivery of gold. As part of this forward gold sales program, 25,000 ounces of gold previously due for settlement during the fourth quarter
of 2017, was rolled over to now settle during the first quarter 2019. The Company has scheduled 26,500 ounces of gold for settlement in each of
the four quarters of 2018 as well as second quarter 2019. Lastly, the Company has scheduled 30,000 ounces for settlement during the third
quarter 2019. The incremental free cash flow benefit to Teranga is calculated by multiplying the total ounces under the forward sales program of
187,500 ounces of gold by the difference between the hedge price of $1,336 per ounce and the Company’s long-term gold price assumption of
$1,250 per ounce. 

4 Teranga is working towards the completion of a net new $150 million secured project development facility which is subject to the completion of
all necessary regulatory approvals and the finalization of the facility and security documentation with a targeted financial close in the second
quarter 2018.

5 There is no guarantee Teranga will be able to negotiate and enter into an equipment finance facility for $10 million in respect of the Wahgnion
Project on terms that are acceptable to us.  Any such equipment finance facility, if entered into, could be more or less than this amount.
6 See the Wahgnion Feasibility Study. Wahgnion pre-production capital costs of $232 million are an estimate only and excludes $12 million in
estimated construction readiness activities expected to be spent prior to major construction. Actual Wahgnion pre-production capital costs could
be greater or less than this amount.

7 See the Wahgnion Feasibility Study. 

8 Proceeds from the debt facility will be used, in part, to repay amounts owing under the Revolver Facility with Société Generale. The Revolver
Facility will subsequently be terminated.
9 Consolidated minimum cash represents the minimum amount of cash or working capital that the Company considers as appropriate to conduct
day-to-day operations. 

10 Other considerations (uses) is an estimate of potential other uses of the Company’s cash during the period, including, but not limited to,
acquisition costs to acquire an interest in the Afema project, discretionary exploration expenditures, financing costs and any cost overrun or
minimum cash requirements that might be contained in any completed debt financing agreement. Actual amounts may total more or less than the
aggregate amount specified. 

OFF-BALANCE SHEET ARRANGEMENTS 

The Company has no off-balance sheet arrangements.

2017 Annual Report  34

Management‘s Discussion and Analysis December 31, 2017

FINANCIAL INSTRUMENTS 

The Company manages its exposure to financial risks, including liquidity risk, credit risk, currency risk, market risk,
interest rate risk and price risk through a risk mitigation strategy.  The Company generally does not acquire or issue
derivative financial instruments for trading or speculation.

On September 11, 2017, the Company entered into forward gold sales contracts with Macquarie Bank Limited for a
total of 131,000 ounces of gold at a price of $1,336 per ounce with revised quarterly settlements from March 29, 2018
to March 26, 2019.  The Company anticipates settling 26,500 ounces in each quarter of 2018 and 25,000 ounces in
the first quarter of 2019.  Of the 26,500 ounces to be settled by March 29, 2018, 16,125 ounces were settled in early
2018.

In early January 2018, the Company entered into deliverable forwards with Macquarie for a total of 22,000 ounces of
gold at prices of $1,321 and $1,323 per ounce with monthly settlements in January through to April 2018.  On January
16, 2018, the Company entered into additional forward gold sales contracts with Macquarie for a total of 56,500 ounces
of gold at a price of $1,350 per ounce with monthly settlements between April to September 2019.

As a result, the Company has hedged about 50 percent of anticipated production over the next seven quarters at gold
prices above $1,320 per ounce to provide improved revenue certainty during construction of the Wahgnion Gold Project. 

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

As at December 31, 2017, the Company had the following payments due on contractual obligations and commitments:

Payments Due By Period (US$ millions)

Revolving Line of Credit (i)
Franco-Nevada gold stream (ii)
Purchase obligations for supplies and services (iii)
Sustaining capital commitments (iv )
Growth capital commitments (v )
Afema Investment (v i)

Total

Total

< 1 year

1-3 years

4-5 years

>5 years

15.0

46.2

2.2

1.3

27.1

18.5

110.3

-

22.5

2.2

1.3

27.1

7.5

60.6

15.0

23.7

-

-

                    -

                    -

-

-

-

                    -

                    -

                    -

-

-

-

11.0

49.7

-

-

                    -

                    -

(i) In 2015, the Company secured a $30.0 million Revolver Facility of which $15.0 million was drawn at December 31, 2017.

(ii) On January 15, 2014, the Company completed a gold stream transaction with Franco-Nevada Corporation. 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 assumes a gold price of $1,250 per ounce.

(iii) Purchase obligations for supplies and services - includes commitments related to maintenance and explosives services contracts.

(iv ) Sustaining capital commitments - purchase obligations for capital expenditures at Sabodala, which include only those items where binding
commitments have been entered into.
(v ) Growth capital commitments - purchase obligations for capital expenditures at the Wahgnion Gold Project, which include only those items where
binding commitments have been entered into.

(v i) On December 7, 2017, the Company entered into a memorandum of understanding with Sodim for the exploration and development of the Afema
land package in Côte d'Ivoire, for total cash consideration of $10.0 million, payable over four instalments. The first payment of $2.5 million was paid in 
January 2018; a second payment of $2.5 million will be due upon the execution of the final agreement and the receipt of
the amended convention
and exploration permits from the government; a third payment of $2.5 million will be payable January 2019; and, a fourth payment of $2.5 million
upon delivery of a confirmation study or updated feasibility study with Teranga’s confirmation of its decision to proceed with the Afema Gold Project.
Under the terms of the memorandum of understanding, the Company maintains its 51 percent interest in the Afema mining lease and Afema permits
through the completion of a three-year $11.0 million exploration and community relations work program, increasing its interest to 70 percent on the
Afema mining license through the delivery of a positive economic evaluation of potential mining on the Afema land package and Teranga's
commitment to fund its 70 percent interest in the project through construction. Pursuant to the Company’s existing joint venture agreement with
Miminvest SA, a 3 percent royalty is payable to Miminvest in connection with Teranga’s share of production or product emanating from the Afema
mining lease as the land package was considered an exploration property.

2017 Annual Report  35

Management‘s Discussion and Analysis December 31, 2017

SABODALA  GOLD  OPERATIONS  (“SGO”),  SABODALA  MINING  COMPANY  (“SMC”), WAHGNION  GOLD 
OPERATIONS  SA  (“WGO”) AND  THE  OROMIN  JOINT  VENTURE  GROUP  LTD.  (“OJVG”)  OPERATING 
COMMITMENTS

The Company has the following operating commitments in respect of the SGO, SMC, WGO and the OJVG:

(cid:120)

(cid:120)

(cid:120)

(cid:120)

(cid:120)

Pursuant  to  the  Company’s  Senegal  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.    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 Senegal Mining Concession, $1.5 million is payable in 2018, and $1.2 million annually 
thereafter  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.

In addition to the Company’s corporate social responsibility spending, Teranga has agreed to establish a social 
development fund which includes making a payment of $15.0 million to the Republic of Senegal at the end of the 
mine operational life. As at December 31, 2017 $7.8 million was accrued which is the discounted value of the 
$15.0 million future payment.

$350 thousand is payable annually for training of Directorate of Mines and Geology officers and Mines Ministry 
and $30 thousand is payable annually for logistical support of the territorial administration of the region for SGO.  

(cid:120) On May 1, 2016 SGO entered into a commitment with local communities around its Gora deposit to provide annual 
social assistance funding. An amount of $400 thousand is payable in 2018 and $200 thousand annually thereafter, 
until 2021.

(cid:120)

(cid:120)

(cid:120)

$250 thousand is payable annually, until 2019, to the Ministry of Environment pursuant to a forestry protocol with 
the Government of Senegal.

Pursuant to the Company’s Burkina Faso Mining Concession, a sliding net smelter royalty of 3 to 5 percent of gold 
sales, based on the daily spot price of gold, is payable to the government of Burkina Faso. 

In addition, pursuant to the 2015 Burkina Faso Mining Code, 1 percent of monthly turnover (before tax) is to be 
contributed to the mining fund for local development. 

CONTINGENT LIABILITIES

Outstanding tax assessments

In April 2016, the Company receiv.ed a withdrawal of the 2011 tax assessment for all but $1.0 million, which remains 
in dispute.  No amounts were accrued relating to this matter.

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 twelve-month gold price for each ounce of new reserve 
beyond December 31, 2012 on the Sabodala mine license.  As at December 31, 2017 $2.1 million was accrued as a 
current liability. 

2017 Annual Report  36

Management‘s Discussion and Analysis December 31, 2017

CRITICAL ACCOUNTING POLICIES AND ESTIMATES 

The  following  are  critical  judgments  and  estimations  that  management  has made  in  the  process  of  applying  the 
Company’s  accounting  policies.    These  judgments  and  estimations  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. 

Ore reserves

Management  estimates  its  ore  reserves  based  upon  information  compiled  by  qualified  persons  as  defined  in 
accordance with NI 43-101 requirements. 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 
consolidated statements of comprehensive income.

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:

(cid:120)

(cid:120)

(cid:120)

completion of a reasonable period of testing of the mine plant and equipment;

ability to produce metal in saleable form; and

ability to sustain ongoing production of metal.

When a mine development project moves into the production stage, the capitalization of certain mine construction costs 
ceases and costs are either regarded as inventory or expensed, except for capitalizable costs related to mining asset 
additions or improvements or mineable reserve development.  It is also at this point that depreciation commences.

Stripping Costs in the production phase of a surface mine

Management  assesses  the  costs  associated  with  stripping  activities  in  the  production  phase  of  surface  mining.  
Deferred stripping is defined as 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 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:

(cid:120)

(cid:120)

(cid:120)

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 is deferred to asset, the cost or revalued amount will be amortized 
on a units-of-production basis in the subsequent period. 

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 contained ounces of gold milled. Mining 
assets include buildings and property improvements, and plant and equipment.

The  Company  uses  the  straight-line  method  when  depreciating  office  furniture  and  equipment,  motor  vehicles  and 
mobile equipment.

2017 Annual Report  37

Management‘s Discussion and Analysis December 31, 2017

Depreciation for each class of property, plant, and equipment is calculated using the following method: 

Class of Property, Plant and Equipm ent

Buildings and property improvements

Plant and equipment

Office furniture and equipment

Motor vehicles

Mobile equipment

Method

UOP

UOP

Straight-line

Straight-line

Straight-line

Years

n/a

n/a

3 - 8 years

5 years

5 – 8 years

The assets’ residual values, depreciation method and useful lives are reviewed and adjusted, if appropriate, at each 
reporting date. Capital work in progress is not depreciated. 

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 non-current assets

Non-current assets are tested for impairment if there is an indicator of impairment.  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. 
Impairment  assessments  are  conducted  at  the  level  of  cash  generating  units 
(“CGUs”).  A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent 
of the cash inflows from other assets or groups of assets.  The Company classifies our Sabodala Gold Mine, Wahgnion 
Gold Project and exploration projects as separate CGUs.

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. This requires 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.   

Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will 
only be resolved when one or more future events not wholly within the Company’s control occur or fail to occur.  The 
assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome 
of future events.  In assessing loss contingencies related to legal proceedings that are pending against us or unasserted 
claims,  that  may  result  in  such  proceedings  or  regulatory  or  government  actions  that  may  negatively  impact  the 
Company’s business or operations, the Company with assistance from its legal counsel evaluates the perceived merits 
of any legal proceedings or unasserted claims or actions as well as the perceived merits of the nature and amount of 
relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent liability or 
assessing the impact on the carrying value of assets. Contingent assets are not recognized in the consolidated financial 
statements. 

2017 Annual Report  38

Management‘s Discussion and Analysis December 31, 2017

Determination of purchase price allocation

Business  combinations  require  the  Company  to  determine  the  identifiable  assets  and  liabilities acquired  and  the
allocation  of  the  purchase  consideration  based  on the  fair  value  of  these assets  and  liabilities.    This  requires
management to make judgements and estimates to determine the fair value, including the amount of mineral reserves
and  resources  acquired,  future  metal  prices,  future  operating  costs,  capital  expenditure  requirements  and  discount
rates.

NON-IFRS FINANCIAL MEASURES

The Company provides some non-IFRS financial 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 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 is 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.    This  measure  is  helpful  to
governments and local communities in understanding the economics of gold mining.  The “all-in sustaining costs” is an
extension of existing “cash cost” metrics and incorporate costs related to sustaining production.

“Total cash 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.  All-in sustaining 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.

The Company also expands upon the WGC definition of all-in sustaining costs by presenting an additional measure of
“all-in  sustaining  costs  (excluding  cash  /  (non-cash)  inventory  movements  and  amortized  advanced  royalty  costs)”.
This  measure  excludes  cash  and  non-cash  inventory  movements  and  amortized  advanced  royalty  costs  which
management does not believe to be true cash costs and are not fully indicative of performance for the period.

“Total cash costs per ounce”, “all-in sustaining costs per ounce” and “all-in sustaining costs (excluding cash / (non-
cash) inventory movements and amortized advanced royalty costs)” are intended to provide additional information only
and do not have any standardized definition under IFRS and should not be considered in isolation or as a substitute for
measures  of  performance  prepared  in  accordance  with  IFRS.  These measures  are  not  necessarily  indicative  of
operating  profit  or  cash  flow  from  operations  as  determined  under  IFRS.  Other  companies  may  calculate  these
measures differently.  The following tables reconcile these non-IFRS measures to the most directly comparable IFRS
measure.

In this MD&A, the Company has amended its “total cash costs per ounce” and “all in sustaining costs per ounce” figures
from those previously disclosed in prior periods, by removing adjustments which management does not believe to be
significant.

“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

2017 Annual Report  39

Management‘s Discussion and Analysis December 31, 2017

intended to provide additional information only and does not have any standardized definition under IFRS; it should not
be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.  Other
companies may calculate this measure differently.

“Earnings before interest, taxes, depreciation and amortization” (“EBITDA”) is a non-IFRS financial measure, which
excludes income tax, finance costs (before unwinding of discounts), interest income, depreciation and amortization,
and non-cash impairment charges from net earnings.  EBITDA is intended to provide additional information to investors
and analysts and do not have any standardized definition under IFRS and should not be considered in isolation or as
a substitute for measures of performance prepared in accordance with IFRS.  Management believes that EBITDA is a
valuable indicator of our ability to generate liquidity by producing operating cash flow to: fund working capital needs,
service debt obligations, and fund capital expenditures.

“Free cash flow” is a non-IFRS financial measure.  The Company calculates free cash flow as net cash flow provided
by operating activities less sustaining capital expenditures.  The Company believes this to be a useful indicator of our
ability generate cash for growth initiatives.  Other companies may calculate this measure differently.

2017 Annual Report  40

Management‘s Discussion and Analysis December 31, 2017

RECONCILIATION OF NON-IFRS MEASURES 

1. The reconciliation cash costs per ounce, cost of sales per ounce, all-in sustaining costs, and all-in sustaining costs 

(excluding cash / (non-cash) inventory movements and amortized advanced royalty costs) follows below.

(US$000's, except where indicated)

Three months ended December 31, Twelve months ended December 31,

Gold produced1 (oz)

Gold sold (oz)

Cash costs per ounce sold

Mine operation expenses

2017

2016

2017

2016

                  67,934 

                  43,987                   233,267                   216,735 

                  68,944 

                  46,523                   231,078                   217,652 

                  48,166 

                  33,465                   168,689                   137,486 

Less: Regional administration costs

                      (689)                       (699)                    (1,996)                    (2,105)

Total cash costs

                  47,477 

                  32,766                   166,693                   135,381 

Total cash costs per ounce sold 

                       689                         704                         721                         622 

Cost of sales per ounce sold

Cost of sales

                  64,149 

                  43,022                   222,113                   181,528 

Total cost of sales per ounce sold 

                       930                         925                         961                         834 

All-in sustaining costs

Total cash costs
Administration expenses2

Share-based compensation

Capitalized deferred stripping

                  47,477 

                  32,766                   166,693                   135,381 

                    4,600 

                    4,236 

                  12,580 

                  10,991 

                       935                        (538)

                    2,580 

                    4,405 

                    7,655 

                    4,822 

                  29,428 

                  18,492 

Capitalized reserve development

                       965 

                    2,923 

                    6,113 

                    7,138 

Mine site sustaining capital

All-in sustaining costs

                    3,006 

                    4,608 

                  19,256 

                  25,874 

                  64,638 

                  48,817                   236,650                   202,281 

All-in sustaining costs per ounce sold

                       938 

                    1,049 

                    1,024                         929 

All-in sustaining costs (excluding cash / (non-cash) 
  inventory movements and amortized advanced
  royalty costs) 

All-in sustaining costs

                  64,638 

                  48,817                   236,650                   202,281 

Amortization of advanced royalties

                      (867)                       (357)                    (3,003)                    (2,557)

Inventory movements - cash

                   (4,495)

                    5,658                   (15,786)

                  11,655 

All-in sustaining costs (excluding cash / (non-cash) 
  inventory movements and amortized advanced 
  royalty costs) 

All-in sustaining costs (excluding cash / (non-cash) 
  inventory movements and amortized advanced 
  royalty costs) per ounce

                  59,276 

                  54,118                   217,861                   211,379 

                       860 

                    1,163                         943                         971 

1 Gold produced represents change in gold in circuit inventory plus gold recovered during the period.
2 Administration expenses include regional administration costs and exclude Corporate depreciation.

2. Free cash flow is a non-IFRS performance measure that does not have a standard meaning under IFRS.  Teranga 

defines free cash flow net cash flow provided by operating activities less sustaining capital expenditures.

3. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as follows:

2017 Annual Report  41

Management‘s Discussion and Analysis December 31, 2017

(US$000's)

 Profit / (loss) for the period 

Add: finance costs

Less: finance income

Adjust: income tax expense

Add: depreciation and amortization

Three months ended December 31, Twelve months ended December 31,

2017

5,958

863

(44)

3,410

16,443

2016

(1,492)

551

(25)

8,563

9,956

2017

34,530

3,042

(192)

2,436

55,519

2016

27,891

2,366

(51)

23,327

45,640

 Earnings before interest, taxes, depreciation and 
 amortization 

26,630

17,553

95,335

99,173

OUTSTANDING SHARE DATA

At December 31, 2017 the Company had 107,343,902 outstanding shares.

TRANSACTIONS WITH RELATED PARTIES

During  the  three  and year ended  December  31,  2017,  there  were  transactions  totaling  $0.1 million between  the
Company and director-related entities.

The Company has an exploration agreement with Miminvest, a related party, to identify and acquire gold exploration
stage mining opportunities in Côte d'Ivoire.  Miminvest is a company established to invest in gold and natural resources 
in West Africa and is controlled by the Mimran family and Mr. David Mimran, a director and the largest shareholder of
Teranga.  Miminvest holds five existing exploration permits, representing 1,838 km2 in Côte d'Ivoire.

Under the terms of the exploration agreement, a separate entity was created and is owned and funded by Teranga.
Miminvest transferred its permits into the entity and in exchange retains a net smelter royalty interest of 3 percent and
will provide ongoing in-country strategic advice.  Furthermore, the entity will pursue additional exploration projects in
Côte d'Ivoire outside of the existing Miminvest permits.  In 2017, Teranga paid Miminvest $0.5 million for all direct and
reasonable costs associated with exploration work related to permits transferred in 2016.

SHAREHOLDINGS

Teranga’s  90  percent  shareholding  in  SGO,  the  company  operating  the  Sabodala  gold  mine,  is  held  89.5  percent
through a Mauritius holding company, Sabodala Gold Mauritius Limited (“SGML”), and the remaining 0.5 percent by
individuals nominated by SGML to be on the board of directors in order to meet the minimum shareholding requirements 
under  Senegalese  law.  Upon  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.

SHARE CAPITAL

On May 2, 2017, the shareholders of the Company approved a five-for-one consolidation of the common shares of the
Company.  The common shares began trading on a consolidated basis on the Toronto Stock Exchange and Australian
Securities  Exchange  on  May  8,  2017.    All  references  to  share  and  per  share  amounts  in  this MD&A have  been
retroactively restated to give effect to this share consolidation, unless otherwise stated.

After a cost benefit analysis, management deemed that it was in the best interests of its shareholders to delist from the
Australian  Securities  Exchange  (“ASX”).    The  Company  concluded  that  the  ongoing  administration and compliance
costs  required  to  maintain  a  secondary  listing  on  the  ASX  outweighed  the  benefits.    On  September  14,  2017,  the
Company was removed from the official list of the Australian Securities Exchange at the close of trading.  Teranga’s
common shares continue to be listed on the Toronto Stock Exchange.

On December 15, 2017, the Company commenced trading in the United States on the OTCQX market under the symbol 
TGCDF.  The new platform enables the Company to broaden our exposure to U.S. retail and institutional shareholders
and  provide  U.S.  shareholders  with timely  news  and  information  to  help  them  better  analyze,  value  and  trade  our
securities.

2017 Annual Report  42

Management‘s Discussion and Analysis December 31, 2017

CEO/CFO CERTIFICATION

The Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) are responsible for establishing
and maintaining disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as
those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings,
for the Company.

The Company’s CEO and CFO certify that, as at December 31, 2017, 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 reporting and the preparation of financial statements for external purposes in accordance with the issuer’s
GAAP.

The  control  framework  the  Company’s  CEO  and  CFO  used  to  design  the  Company’s  ICFR  is  The  Committee  of
Sponsoring Organizations of the Treadway Commission (“COSO”) framework issued on May 14, 2013.  There is no
material weakness relating to the design of ICFR.  In 2017, the Company has included the scope of the design of ICFR
and DC&P to include the controls, policies and procedures of the entities acquired as part of the Gryphon Minerals
Limited acquisition on October 13, 2016. There have been no other material changes in the Company’s design of the
ICFR that occurred during the twelve months ended December 31, 2017 which has materially affected, or is reasonably 
likely to materially affect the Company’s ICFR.

RISKS AND UNCERTAINTIES

The Company identified a number of risk factors to which it is subject to in its Annual Information Form dated March
29,  2017  and filed  for  the  year  ended  December  31,  2016. 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, production estimates,
need  for  additional  financing, uncertainty  in  the  estimation  of  mineral  reserves  and  mineral  resources,  the  inherent
danger of  mining,  infrastructure  risk,  insured  and  uninsured  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,  adverse  changes  to  taxation  laws,  West  African
political risks, risk of a disease outbreak impacting our West African workforce and stock exchange price fluctuations.

FORWARD LOOKING STATEMENTS

This MD&A contains certain statements that constitute forward-looking information within the meaning of applicable 
securities laws ("forward-looking statements"), which reflects management's expectations regarding Teranga's future 
growth  opportunities,  results  of  operations,  performance  (both  operational  and  financial)  and  business  prospects 
(including the timing and development of new deposits and the success of exploration activities) and other opportunities.
Wherever possible, words such as “plans”, “expects”, “does not expect”, “scheduled”, “trends”, “indications”, “potential”, 
“estimates”,  “predicts”,  “anticipate”,  “to  establish”  or  “does  not  anticipate”,  “believe”,  “intend”,  “ability  to” and  similar 
expressions or statements that certain actions, events or results “may”, “could”, “would”, “might”, “will”, or are "likely" to 
be taken, occur or be achieved, have been used to identify such forward looking information.  Specific forward-looking 
statements include, without limitation, all disclosure regarding possible events, conditions or results of operations, future 
economic  conditions  and  anticipated  courses  of  action.  Although  the  forward-looking  statements  contained  in  this 
MD&A reflect  management's  current  beliefs  based  upon  information  currently  available  to  management  and  based 
upon what management believes to be reasonable assumptions, Teranga cannot be certain that actual results will be 
consistent  with  such  forward-looking  information. Such  forward-looking  statements  are  based  upon  assumptions, 
opinions and analysis made by management in light of its experience, current conditions and its expectations of future 
developments  that  management  believe  to  be  reasonable  and  relevant  but  that  may  prove  to  be  incorrect.    These 
assumptions include, among other things, the ability to obtain any requisite governmental approvals, the accuracy of 
mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic 
conditions, anticipated future estimates of free cash flow, and courses of action. Teranga cautions you not to place 
undue reliance upon any such forward-looking statements.

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 

2017 Annual Report  43

Management‘s Discussion and Analysis December 31, 2017

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 Teranga's Annual Information Form dated March 30, 2017, and in other 
filings of Teranga with securities and regulatory authorities which are available at www.sedar.com. Teranga does not 
undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, 
projections, beliefs and opinions change.  Nothing in this MD&A should be construed as either an offer to sell or a 
solicitation  to  buy  or  sell  Teranga  securities.  All references  to  Teranga  include  its  subsidiaries  unless  the  context 
requires otherwise.

QUALIFIED PERSONS STATEMENT

The technical information contained in this MD&A relating to the Sabodala open pit mineral reserve estimates is based 
on,  and  fairly  represents,  information  compiled  by  Mr.  Stephen  Ling,  P.  Eng  who  is  a  member  of  the  Professional 
Engineers Ontario.  Mr. Ling is a full time employee of Teranga and is not "independent" within the meaning of NI 43-
101. Mr.  Ling  has  sufficient  experience  which  is  relevant  to  the  style  of  mineralisation  and  type  of  deposit  under
consideration and to the activity which he is undertaking to qualify as a "Qualified Person" under NI 43-101 Standards
of Disclosure for Mineral Projects.  Mr. Ling has consented to the inclusion in this MD&A of the matters based on his
compiled information in the form and context in which it appears in this MD&A.

The technical information contained in this MD&A relating to Sabodala mineral resource estimates is based on, and 
fairly  represents,  information  compiled  by  Ms.  Patti  Nakai-Lajoie.    Ms.  Nakai-Lajoie,  P.  Geo.,  is  a  Member  of  the 
Association of Professional Geoscientists of Ontario.  Ms. Nakai-Lajoie is a full time employee of Teranga and is not 
"independent" within the meaning of NI 43-101.  Ms. Nakai-Lajoie has sufficient experience which is relevant to the 
style of mineralisation and type of deposit under consideration and to the activity which she is undertaking to qualify as 
a "Qualified Person" under NI 43-101 Standards of Disclosure for Mineral Projects.  Ms. Nakai-Lajoie has consented 
to  the inclusion  in  this  MD&A  of  the  matters  based  on  her compiled  information in the  form  and context  in  which  it 
appears in this MD&A.

The technical information contained in this MD&A relating to the Sabodala underground ore reserves estimates is based 
on, and fairly represents, information compiled by Jeff Sepp, P. Eng., of Roscoe Postle Associates Inc. (“RPA”), who 
is a member of the Professional Engineers Ontario.  Mr. Sepp is “independent” within the meaning of NI 43-101.  Mr. 
Sepp has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration 
and to the activity he is undertaking to qualify as a “Qualified Person” under NI 43-101 Standards of Disclosure for 
Mineral  Projects.  Mr.  Sepp  has  consented  to  the  inclusion  in  this  MD&A  of  the  matters  based  on  his  compiled 
information in the form and context in which it appears in this MD&A.

The technical information contained in this MD&A relating to the Wahgnion open pit mineral reserve estimates is based 
on,  and  fairly  represents,  information  compiled  by  Mr.  Glen Ehasoo,  P.  Eng.,  of  RPA,  who  is  a  member  of  the 
Association of Professional Engineers and Geoscientists of British Columbia.  Mr. Ehasoo is  "independent" within the 
meaning of NI 43-101.  Mr. Ehasoo has sufficient experience which is relevant to the style of mineralisation and type 
of deposit under consideration and to the activity which he is undertaking to qualify as a “Qualified Person” under NI 
43-101 Standards of Disclosure for Mineral Projects.  Mr. Ehasoo has consented to the inclusion in this MD&A of the
matters based on his compiled information in the form and context in which it appears in this MD&A.

The technical information contained in this MD&A relating to Wahgnion mineral resource estimates is based on, and 
fairly  represents,  information compiled by  Mr.  David  Ross, P.Geo., of  RPA,  who  is a  Member  of  the  Association  of 
Professional  Geoscientists  of  Ontario.  Mr.  Ross  is  "independent"  within  the  meaning  of  NI  43-101.    Mr.  Ross  has 
sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the 
activity which he is undertaking to qualify as a “Qualified Person” under NI 43-101 Standards of Disclosure for Mineral 
Projects.  Mr. Ross has consented to the inclusion in this MD&A of the matters based on his compiled information in 
the form and context in which it appears in this MD&A.

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 NI 43-101.  Mr. Mann has sufficient experience which is relevant 
to  the style  of  mineralisation and type of deposit  under  consideration  and  to  the  activity  which he  is  undertaking  to 
qualify  as  a  “Qualified  Person”  as  under  NI  43-101  Standards  of  Disclosure  for  Mineral  Projects.  The  technical 
information  contained  in  this  MD&A  relating  to  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 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 MD&A of the matters based on his compiled information in the form and 
context in which it appears in this MD&A.

2017 Annual Report  44

Management‘s Discussion and Analysis December 31, 2017

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"). 
There can be no assurance that those portions of mineral resources that are not mineral reserves will ultimately be 
converted into mineral reserves. 

Teranga confirms that it is not aware of any new information or data that materially affects the information included in 
the technical reports for the Sabodala Project (August 30, 2017) and the Wahgnion Project (October 20, 2017) pursuant 
to National  Instrument  43-101  - Standards  of  Disclosure  for  Mineral  Projects  (the  “Technical  Reports”),  or year  end 
2017 results, market announcements and, in the case of estimates of Mineral Resources, that all material assumptions 
and technical parameters underpinning the estimates in the relevant market announcements concerning the Technical 
Reports continue to apply and have not materially changed.   

2017 Annual Report  45

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Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the years ended Decem ber 31, 

2017

291,683

(168,689)

(53,424)

(222,113)

69,570

(12,373)

(10,702)

(2,906)

(2,580)

(3,907)

(4,632)

4,496

(32,604)

36,966

(2,436)

34,530

31,932

2,598

34,530

2,455

(2,764)

(309)

34,221

31,623

2,598

34,221

0.30

0.30

2016

268,850

(137,486)

(44,042)

(181,528)

87,322

(4,760)

(8,973)

(3,613)

(4,405)

(4,363)

(2,589)

(7,401)

(36,104)

51,218

(23,327)

27,891

23,109

4,782

27,891

(250)

-

(250)

27,641

22,859

4,782

27,641

0.28

0.28

Note

7

8

9

10

11

12

13

14

Revenue

Mine operation expenses

Depreciation and amortization

Cost of sales

Gross profit

Exploration and evaluation expenditures

Administration expenses

Corporate social responsibility expenses

Share-based compensation

Finance costs

Net foreign exchange losses

Other income/(expenses)

Profit before income tax

Income tax expense

Net profit

Net profit attributable to:

Shareholders

Non-controlling interests

Net profit for the year

Other comprehensive income for the year

Change in fair value of available for sale financial 

assets, net of tax

Reclassification to income, net of tax

Other com prehensive loss for the year

Total com prehensive incom e for the year

Total comprehensive income attributable to:

Shareholders

Non-controlling interests

Total com prehensive incom e for the year

Earnings per share from  operations attributable to the 
shareholders of the Com pany during the year

- basic earnings per share

- diluted earnings per share

2b, 27

2b, 27

The accompanying notes are an integral part of these consolidated financial statements

2017 Annual Report  48

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

Note

15

16

17

18

16

19

20

21

18

22

24

25

23

24

25

22

26

Current assets

Cash and cash equivalents

Trade and other receivables

Inventories

Available for sale financial assets

Other current assets

Total current assets

Non-current assets
Inventories

Property, plant and equipment

Mine development expenditures

Deferred income tax assets

Other non-current assets

Total non-current assets

Total assets

Current liabilities

Trade and other payables

Current income tax liabilities

Deferred revenue

Provisions

Total current liabilities

Non-current liabilities

Borrow ings

Deferred revenue

Provisions

Other non-current liabilities

Total non-current liabilities

Total liabilities

Equity

Issued capital

Foreign currency translation reserve

Other components of equity

Retained earnings
Equity attributable to shareholders

Non-controlling interests

Total equity

Total equity and liabilities

2017

87,671

5,484

57,024

964

9,686

160,829 

103,638

184,011

336,823

26,491

4,440

655,403 

816,232 

54,165

7,634

24,206

4,919

90,924 

14,307

22,003

29,384

10,059

75,753 

166,677 

496,333

(998)

18,299

122,835
636,469 

13,086

649,555 

816,232 

2016 (i)

95,188

9,882

49,987

1,171

8,330

164,558 

121,245

185,399

311,676

21,966

7,348

647,634 

812,192 

47,409

19,834

21,353

4,979

93,575 

13,844

47,462

29,494

10,884

101,684 

195,259 

496,326

(998)

17,514

90,903
603,745 

13,188

616,933 

812,192 

The accompanying notes are an integral part of these consolidated financial statements
(i) As set out in Note 6, certain previously reported December 31, 2016 consolidated balance sheet line items have been updated to
reflect adjusted final estimates of fair value related to the October 13, 2016 acquisition of Gryphon Minerals Limited (‘‘Gryphon’’).

Approved by the Board of Directors

Alan Hill
Director

Alan Thomas
Director

2017 Annual Report  49

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the years ended Decem ber 31, 

Note

26

34

26

2017

496,326

                                                 - 

                                                 - 

7

496,333

(998)

(998)

17,514

1,094

                                                 - 

Issued capital

Beginning of year

Shares issued from public and private offerings 

Issued on exercise of stock options

Less: Share issue costs 

End of year

Foreign currency translation reserve

Beginning of year

End of year

Other com ponents of equity

Beginning of year

Equity-settled share-based compensation expense

Value of compensation cost associated w ith exercised options
Investment revaluation reserve on change in fair value 
    of available for sale financial assets, net of tax

End of year

Retained earnings

Beginning of year

Profit attributable to shareholders

End of year

Non-controlling interest 

Beginning of year

Non-controlling interest - portion of profit for the year

(309)                                            (250)

18,299

90,903

31,932

122,835

13,188

2,598

2016

385,174

112,788

198

(1,834)

496,326

(998)

(998)

16,905

918

(59)

17,514

67,794

23,109

90,903

9,394

4,782

(988)

Non-controlling interest - acquisition of Gryphon

6

                                                 - 

Dividend payment to the Government of Senegal

(2,700)                                                  - 

End of year

Total equity as at Decem ber 31

13,086

649,555

13,188

616,933

The accompanying notes are an integral part of these consolidated financial statements

2017 Annual Report  50

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flow s related to operating activities

Net profit for the year
Depreciation of property, plant and equipment
Depreciation of capitalized mine development costs
Inventory movements - non-cash
Capitalized deferred stripping - non-cash
Amortization of advanced royalties
Unrealized gains on derivative instruments
Amortization of intangibles
Amortization of deferred financing costs
Unw inding of discounts                                                       
Share-based compensation
Deferred gold revenue recognized
Deferred income tax (expense)/recovery
Gain on sale of available for sale financial asset
Loss on disposal of property, plant and equipment
Interest on borrow ings
Decrease/(Increase) in inventories 
Cash flow s related to operating activities before changes
  in w orking capital excluding inventories                                  
Changes in w orking capital other than
  inventories
Net cash provided by operating activities

Note

19
20
9
9

12
34
24
14
13

32a

Cash flow s related to investing activities
Expenditures for property, plant and equipment 
Expenditures for mine development 
Acquisition of intangibles
Investment in Gryphon Minerals Limited common shares
Investment in available for sale financial assets
Proceeds from sale of available for sale financial assets
Net cash from Gryphon acquisition
Net cash used in investing activities

Cash flow s related to financing activities
Net proceeds from equity offering
Proceeds from stock options exercised
Financing cost paid
Dividend payment to the Government of Senegal
Interest paid on borrow ings
Net cash (used in)/provided by financing activities

Effect of exchange rates on cash holdings in 
  foreign currencies

Net (decrease)/increase in cash and cash 
  equivalents  

Cash and cash equivalents at the beginning of year

Cash and cash equivalents at the end of year

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

For the years ended Decem ber 31, 

2017

2016

27,891
34,530
21,103
23,165
19,159
39,492
5,566
(6,306)
(1,511)
(1,977)
3,003
2,557
(1,832)                                              - 
220
80
463
690
865
975
2,580
4,405
(22,606)
(22,530)
3,365
(4,525)
(2,469)                                              - 
32
1,131                                     (1,307)
(11,333)

16,876

                                             - 

82,610

(11,231)
71,379

49,142

(4,413)
44,729

(17,965)
                                  (18,145)
(34,532)
                                  (60,989)
(647)
                                       (299)
                                             - 
(3,306)
                                       (393)                                              - 
                                      3,990                                               - 
8,321
(48,129)

-
(75,836)

26
26

23

                                             - 
7
                                             - 

55,890
139
(296)
(2,700)                                              - 
(1,457)
(1,115)
54,276
(3,808)

748

(124)

(7,517)

95,188

87,671

50,752

44,436

95,188

Taxes paid in cash

                                    15,202                                        8,688 

The accompanying notes are an integral part of these consolidated financial statements

2017 Annual Report  51

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

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 in the United States on the OTCQX market (OTCQX: TGCDF). On September 14, 
2017, the Company voluntarily delisted from the Australian Securities 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 in Senegal and is developing its second mine, the Wahgnion Gold Project 
(formerly known as the Banfora Gold Project) in Burkina Faso.  In addition, the Company has a number of early to 
advanced stage exploration properties in Burkina Faso, Côte d’Ivoire and Senegal.

The address of the Company’s principal office is 77 King Street West, Suite 2110, Toronto, Ontario, Canada, M5K 2A1.

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 22, 2018.

Certain comparative amounts 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 
certain financial assets and liabilities that are measured at fair value as disclosed elsewhere in the notes to the financial 
statements. The consolidated financial statements have been prepared based on the Company’s accounting policies 
set out in Note 3.

On May 2, 2017, the shareholders of the Company approved a five-for-one consolidation of the common shares of the 
Company.  The  common shares  began  trading  on  a  consolidated  basis  on  the  TSX  and ASX  on  May  8,  2017.  The 
Company’s common shares ceased trading on the ASX on September 14, 2017. All references to share and per share 
amounts  in  these  consolidated  financial  statements  have  been  retroactively  restated  to  give  effect  to  the share 
consolidation unless otherwise stated. 

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 also 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 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 

2017 Annual Report  52

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

notes to the financial statements. Refer to Note 5 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 31 for a
listing of the Company’s material controlled subsidiaries.

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 
business 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. Business Combination

The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of 
the fair values at the acquisition date, the day on which the Company obtains control, of the assets transferred to the 
Company, the liabilities assumed by the Company to former owners of the acquiree and the equity interests issued by 
the  Company  in  exchange  for control  over  the  acquiree.  The  Company  accounts  for  acquisition-related  costs  as 
expenses in the periods in which the costs are incurred and the services are received. 

At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognized at their fair value, 
except as follows:

(cid:23) Deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognized 
and  measured  in  accordance  with  International  Accounting  Standards  (“IAS”)  12  Income  Taxes  and  IAS  19 
Employee Benefits, respectively. 

(cid:23) Assets or disposal groups that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held 

for Sale and Discontinued Operations are measured in accordance with that standard. 

(cid:23) Liabilities or equity instruments related to share-based remuneration of the acquiree or share-based remuneration 
of the Company entered into to replace such arrangements of the acquiree are measured in accordance with IFRS 
2 Share-based Payment.

In cases where the sum of the consideration transferred, the amount of non-controlling interest in the acquiree and the 
fair value of equity interests in the acquiree held previously by the Company exceeds the net value of identifiable assets 
and  liabilities at  the  acquisition  date,  goodwill  is  measured  at  the  excess  amount. A  gain  is  recorded  through  the 
consolidated statements of income if the cost of the acquisition is less than the fair values of the identifiable net assets 
acquired.  

c. 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.

2017 Annual Report  53

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

d. 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.

e.

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  overhead  costs,  depreciation  and  amortization on  property,  plant  and  equipment used  in  the  production
process and depreciation and amortization of capitalized stripping costs. As ore is removed from inventory, 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.

f.

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 contained ounces of gold milled. Mining 
assets include buildings and property improvements, and plant and equipment.

The  Company  uses  the  straight-line  method  when depreciating office  furniture and  equipment,  motor  vehicles  and
mobile equipment.

Depreciation for each class of property, plant, and equipment is calculated using the following method:

Class of Property, Plant and Equipm ent

Buildings and property improvements

Plant and equipment

Office furniture and equipment

Motor vehicles

Mobile equipment

2017 Annual Report  54

Method

UOP

UOP

Straight-line

Straight-line

Straight-line

Years

n/a

n/a

3 - 8 years

5 years

5 – 8 years

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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. 

g. 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 statements  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 (i.e. the technical feasibility and commercial viability of 
extracting a mineral resource is considered to have occurred), 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 related to these 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.

h. 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:

(cid:23) it is probable that the future economic benefit (improved access to the ore body) associated with the stripping 

activity will flow to the entity;

(cid:23) the entity can identify the component of the ore body (mining phases) for which access has been improved; and

(cid:23) the costs relating to the stripping activity associated with that component can be measured reliably.

Once  the  cost  associated  with  the  stripping  activity  is  capitalized as  an  asset, the  cost  or  revalued  amount  will  be 
amortized on a units-of-production basis in the subsequent period.  

i.

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.

j.

Impairment of Long-lived Assets

At each reporting date, the Company reviews the carrying amounts of its long-lived assets to determine whether there 
is any indication that those assets have incurred an impairment loss or if there is a reversal of existing impairment loss.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the 
impairment loss, if any. The recoverable amount is the higher of the fair value less costs of disposal and the value in 
use. Where the asset does not generate cash inflows that are independent from other assets, the Company estimates 
the recoverable amount of the Cash Generating Unit (“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 
2017 Annual Report  55

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

prior  years.  A  reversal  of  an  impairment  loss  is  recognized  immediately  in  net  profit  within  the statement  of 
comprehensive income.

k. Borrowing Costs

Borrowing costs  directly  attributable  to  the  acquisition,  construction  or  production  of  assets  that  necessarily  take  a 
substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such 
time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized in net profit within the statement of comprehensive income in the period in 
which they are incurred.

l.

Employee Benefits

A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and long-
term 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 are measured using the remuneration rate expected to apply at 
the time of settlement.

m. 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 24 for further details.

n. 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.  

o. 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.

p.

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.

2017 Annual Report  56

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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.

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.

q. 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.

(cid:23) 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.

(cid:23) 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.

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.

2017 Annual Report  57

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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.

r. Available for sale Investments

Investments may be classified as an available for sale investment based on their highly liquid nature and because such 
marketable  securities  represent  the  investment  of  cash  that  is  available  for  current  operations. Changes  in  market 
value, excluding other-than-temporary impairments, are recorded through other comprehensive income.

s. 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 consolidated  statements 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 

2017 Annual Report  58

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

on the consolidated statements of financial position, except for the portion that will vest within twelve months which is
recorded within current liabilities. The remaining unamortized expense for the award is recorded on a straight-line basis 
over the remaining vesting period and is recorded within share-based compensation on the consolidated 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 
consolidated statements of comprehensive income.

Fixed Bonus Plan Units (FBUs)

The Company operates a cash-settled, share-based compensation plan for certain management and employees.

The fair value of the FBUs 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.

Share-based  compensation  relating  to  the  Fixed  Bonus  Plan  is  charged  to  the  consolidated  statements  of 
comprehensive income and revalued at the end of each reporting period based on the Black-Scholes valuation.

t. Revenue

Gold and silver bullion sales

Revenue is recognized when persuasive evidence exists that all of the following criteria are met:

(cid:23) the shipment has been made;

(cid:23) the significant risks and rewards of ownership of the product have been transferred to the buyer;

(cid:23) neither continuing managerial involvement to the degree usually associated with ownership, nor effective control 

over the gold or silver sold, has been retained;

(cid:23) the amount of revenue can be measured reliably;

(cid:23) it is probable that the economic benefits associated with the sale will flow to the Company; and 

(cid:23) 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 consolidated statements of comprehensive income.

u. Royalties

Royalties

Royalties, whether paid to the Government of Senegal or to third party interests, are based on gold and silver sales 
and  the  liability  is  accrued  as  revenues  are  recognized.  Royalties  are  separately  reported  as  expenses  and  not 
deducted from revenue.

2017 Annual Report  59

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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 former Oromin Joint Venture Group (“OJVG”) and Gora properties are subject 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  twelve  months  and  the  remaining 
amount is recorded within other non-current assets. The advanced royalty balance will be expensed through net profit 
based on actual production from the properties.

v. 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 common shares outstanding during the financial period.

Diluted earnings or loss per share is calculated by dividing the profit or loss attributable to equity holders of the parent 
by the weighted average number of shares that would be issued on conversion of all the dilutive potential shares into 
ordinary shares. The dilutive effect of stock options is determined using the treasury stock method.

4. NEW STANDARDS AND INTERPRETATIONS 

At  the  date of  these  consolidated  financial  statements,  certain  new  standards,  amendments  and interpretations  to 
existing standards have been published but are not yet effective, and have not been early adopted by the Company.

Management anticipates that all of the pronouncements will be adopted in the Company's accounting policies for the 
first period beginning after the effective date of the pronouncement. Information on new standards, amendments and
interpretations that are expected to be relevant to the Company's consolidated financial statements is provided below.
Certain other new standards and interpretations have been issued but are not expected to have a material impact on
the Company's consolidated financial statements.

IFRS 9, Financial Instruments (“IFRS 9”)

In November 2009 and October 2010, the IASB issued the first phase of IFRS 9, Financial Instruments. In November 
2013, the IASB issued a new general hedge accounting standard, which forms part of IFRS 9. The final version of IFRS 
9 was issued in July 2014 and includes a third measurement category for financial assets (fair value through other 
comprehensive income) and a single, forward-looking ‘expected loss’ impairment model. The adoption date for IFRS 9 
is January 1, 2018. The Company has evaluated the impact of IFRS 9 on its consolidated financial statements and 
concludes there will be minimal impact on the consolidated financial statements.

IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)

In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which covers principles that an entity 
shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty 
of revenue and cash flows arising from a contract with a customer. In September 2015, the IASB deferred the effective 
date of the standard to annual reporting periods beginning on or after January 1, 2018, with earlier application permitted. 
The Company did not early adopt IFRS 15. In 2017, the Company has advanced its assessment of the impact on its
consolidated financial statements. The current assessment is as follows:

(cid:120)

(cid:120)

For normal gold sales, no material changes are expected in respect of timing and amount of revenue currently 
recognized by the Company. 
The  Company  has  determined  that  the  Franco-Nevada  Corporation’s  (“Franco-Nevada”)  gold  streaming 
arrangement (refer to Note 24 for further details), falls within the scope of IFRS 15 as it constitutes a contract 
with a customer to deliver an uncertain quantity of ounces in the future. The upfront payment constitutes a 
contract liability whereby the performance obligations are in the form of future deliveries of refined ounces 
under the streaming agreement.

Under  the  Franco-Nevada  gold  streaming  arrangement,  the  Company  is  required  to  deliver  ounces  of  production 
annually commencing in 2014 from the Company’s existing properties in Senegal, thereafter, in exchange for an up-
front deposit of $135 million. As the total amount paid up-front by Franco-Nevada for the future deliveries (the promised 
consideration) differs from the stand-alone selling price of the product purchased (i.e. the expected forward price as 
applied to total anticipated future deliveries), the Company concluded that this arrangement provided the entity with a 
significant benefit of financing and therefore contains a significant financing component (“SFC”) as defined under IFRS 
15. The consideration transferred, in this case the contract liability, should be adjusted for the effects of a SFC, and its 

2017 Annual Report  60

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

effects  should  be  accounted  for  separately.  In  order  to  estimate  the  effect  of  the  SFC,  Teranga  has  determined  a
discount  rate  of  approximately  9  percent  based  on  management’s  best  estimates  of  information  available  at  the
inception  of  the  streaming  arrangement  related  to  the  anticipated  future  deliveries,  and  the  forward  prices  for  gold
(estimated at $1,250/oz). This discount rate is not subsequently changed for changes in timing, price or quantities of
deliveries, and is applied to the contract liability to reflect the effects of financing in each period.

Deliveries due in connection with the up-front deposit are recorded in revenue based on the forward prices originally
established at the time of entering into the contract (i.e. $1,250/oz), being the estimated stand-alone selling price of the
deliveries as determined at contract inception (after separating the SFC). The outstanding contract liability will accrue
interest  at  the  discount  rate  determined,  reflecting  the  cost  of  financing.  Changes  in  quantity  and  timing  of  future
deliveries due under the arrangement affect the consideration transferred in exchange for each ounce delivered, and
constitute the resolution of uncertain events. The remaining contract liability is determined using the revised production
profile combined with the original estimated discount rate, and original estimated forward prices. Such changes result
in an adjustment to revenue recorded on satisfied performance obligations via a ‘cumulative catch-up’, recorded as
revenue or a reversal of revenue in the period of change in estimate, and corresponding adjustment to the contract
liability remaining.

The Company intends to use the modified retrospective method of applying IFRS 15. This method requires the standard 
to be applied to contracts that are initiated after the effective date and contracts that have remaining obligations as of
the effective date. Under the modified retrospective method, the financial statements are retrospectively adjusted but
the  cumulative  impact  is  recognized  at  the  date  of  initial  application  (January  1, 2018  for  calendar  year  ends).
Comparatives periods are not restated. Upon the adoption of IFRS 15, the Company preliminarily estimates that it will
record  the  following  cumulative  impact  effective  January  1,  2018  (these  results  are  preliminary  and  are  subject  to
change):

(cid:120)
(cid:120)

Increase to Contract Liability of $45 million
Decrease to Retained Earnings of $45 million

The  Company  expects  that  upon  application  of  the  standard  in  the  next  reporting  period,  revenue  arising  from  the
streaming arrangement will change due to being recorded in reference to anticipated stand-alone selling prices as at
the time of entering the agreement.  Additionally, the impact of the financing component will be recorded separately as
an interest expense in the Company’s statement of comprehensive income.

IFRS 16, Leases (“IFRS 16”)

In  January  2016,  the  IASB  issued  IFRS  16  which  supersedes  IAS  17  Leases  and  related  interpretations. The  new
standard provides a single lessee accounting model which eliminates the distinction between operating and finance
leases, by requiring lessees to recognize assets and liabilities for all leases unless the underlying asset has a low value
or the lease term is twelve months or less. Lessor accounting remains largely unchanged and the distinction between
operating and  finance  leases is  retained.   The  Company  does  not  anticipate  early  adoption  and  plans  to adopt  the
standard on its effective date of January 1, 2019. The Company is currently evaluating the impact of adopting IFRS 16
in its consolidated financial statements in future periods.

5. CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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:

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. 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 consolidated
statements of comprehensive income.

2017 Annual Report  61

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

Units-of-production

Management estimates  recoverable  proven  and  probable  mineral  reserves in  determining  the  depreciation  and 
amortization of mining assets, including buildings and property improvements and certain plant and equipment. This 
results in a depreciation/amortization charge proportional to the recovery of the anticipated ounces of gold. The life of 
the  asset is  assessed annually  and  considers its  physical  life  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 proven and probable mineral reserves. The Company’s units-
of-production calculations are based on contained ounces of gold milled.

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 non-current assets

Non-current assets are tested for impairment if there is an indicator of impairment. 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 inflows 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:

(cid:23) completion of a reasonable period of testing of the mine plant and equipment;

(cid:23) ability to produce metal in saleable form; and

(cid:23) ability to sustain ongoing production of metal.

When a mine development project moves into the production stage, the capitalization of certain mine construction costs 
ceases and costs are either regarded as inventory or expensed, except for capitalizable costs related to mining asset 
additions  or  improvements  or  mineable  reserve  development.  It  is  also  at  this  point  that  depreciation/amortization 
commences.

Stripping costs in the production phase of a surface mine

Management  assesses  the  costs  associated  with  stripping  activities in  the  production  phase  of  surface  mining.  
Deferred stripping is defined as 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.  

2017 Annual Report  62

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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. This requires management to 
make estimates of future taxable profit or loss, and if actual results are significantly different than its estimates, the 
ability to realize any deferred tax assets or discharge deferred tax liabilities on the Company’s consolidated statement 
of financial position could be impacted.

Contingencies

Contingencies can be either possible assets or possible liabilities arising from past events which, by their nature, will 
only be resolved when one or more future events not wholly within the Company’s control occur or fail to occur. The 
assessment of such contingencies inherently involves the exercise of significant judgment and estimates of the outcome 
of future events. In assessing loss contingencies related to legal proceedings that are pending against the Company
or unasserted claims, that may result in such proceedings or regulatory or government actions that may negatively 
impact  the  Company’s business  or  operations,  the  Company  with  assistance  from  its  legal  counsel  evaluates  the 
perceived merits of any legal proceedings or unasserted claims or actions as well as the perceived merits of the nature 
and amount of relief sought or expected to be sought, when determining the amount, if any, to recognize as a contingent 
liability  or  assessing  the  impact  on  the  carrying  value  of  assets.  Contingent  assets  are  not  recognized  in  the 
consolidated financial statements. 

Determination of purchase price allocation

Business  combinations  require  the  Company  to  determine  the  identifiable  asset  and  liability  in  fair  values  and  the 
allocation of the purchase consideration over the fair value of the assets and liabilities. This requires management to 
make judgements and estimates to determine the fair value, including the amount of mineral reserves and resources 
acquired, future metal prices, future operating costs, capital expenditure requirements and discount rates.  

6. BUSINESS COMBINATION

Acquisition of Gryphon 

On October 13, 2016, Teranga completed the acquisition (the “Acquisition”) of Gryphon Minerals Limited, by way of a 
scheme of arrangement (the “Scheme”) under the Australian Corporations Act 2001 (Cth).   

Pursuant to the Scheme, shareholders of Gryphon received an aggregate of 14,127,770 Teranga common shares or 
chess depository interests (CDIs) listed on the ASX (based on their election) on the basis of 0.0338 Teranga common 
share or CDI for each Gryphon common share not already held by the Company. Each share was valued at C$5.16.

Gryphon’s key asset is the 90 percent-owned Wahgnion Gold Project located in Burkina Faso, West Africa.

Management determined that the acquisition of Gryphon was a business combination in accordance within the definition 
in IFRS 3, Business Combinations, and has accounted for the transaction in accordance with this standard. Accordingly, 
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 Gryphon’s identifiable assets and liabilities. Expected future cash flows were based on estimates of projected 
future revenues, production costs and capital expenditures. The finalization of the purchase price allocation has been 
completed. Refer to the table below for details. 

The following table presents the purchase price and the final allocation of the purchase price to the assets and liabilities 
acquired. No goodwill has been recognized in the final purchase price allocation.

2017 Annual Report  63

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

Purchase Cost

Shares issued to Gryphon shareholders
Replacement share appreciation rights ("SARs") to Gryphon

employees

Total Acquisition Cost

Fair value of previously held  interest

Cash acquired with Gryphon

Consideration, net of cash acquired

55,064

19

55,083

3,366

58,449

(8,321)

50,128

Summary of Final Purchase Price Allocation

Preliminary (i)

Adjustments

Adjusted Final

Assets

Current assets

Non-current assets (excluding mine development)

Mine development costs

Total assets

Liabilities

Current liabilities

Non-current liabilities

Total liabilities

Net assets acquired, before non-controlling interest

Non-controlling interest

Net assets acquired

8,878

2,687

54,074

65,639

7,343

835

8,178

57,461

988

58,449

-

2,010

(2,845)

(835)

-

(835)

(835)

-

-

-

8,878

4,697

51,229

64,804

7,343

-

7,343

57,461

988

58,449

(i)

Preliminary estimates of the fair value of assets acquired and liabilities assumed are presented as reported in the Company’s
2016 annual audited consolidated financial statements.

7. REVENUE

Gold sales - spot price

Silver sales

Total Revenue

For the years ended December 31, 

2017

291,335

348

291,683

2016

268,515

335

268,850

For  the  year  ended  December  31,  2017, 231,078  ounces  of  gold  were  sold  including  22,500 ounces  delivered  to
Franco-Nevada at an average realized price of $1,261 per ounce (2016: 217,652 ounces were sold, including 22,500
ounces delivered to Franco-Nevada at an average price of $1,234 per ounce).

The Company realized cash proceeds from the sale of gold to Franco-Nevada equivalent to 20 percent of the spot gold
price. Refer to Note 24 for further details.

The Company delivered all of its production to three customers in 2017 and in 2016 as follows:

Customer 1

Customer 2

Customer 3

Total Revenue

2017 Annual Report  64

For the years ended December 31, 

2017

149,976

113,449

28,258

291,683

2016

198,368

42,320

28,162

268,850

8. MINE OPERATION EXPENSES

Mine production costs
Royalties(i)
Regional administration costs

Capitalized deferred stripping

Inventory movements

Total Mine Operation Expenses

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

For the years ended Decem ber 31, 

2017

161,155

19,180

1,996

(29,428)

15,786

168,689

2016

148,624

16,904

2,105

(18,492)

(11,655)

137,486

(i)

Includes $1.6 million (2016: $1.0 million) of royalties to Axmin Inc. on account of their 1.5 percent net smelter royalty on the
Gora deposit.

9. DEPRECIATION AND AMORTIZATION

Depreciation and amortization - property, plant and equipment and
mine development expenditures

Depreciation and amortization - deferred stripping assets

Inventory movements - depreciation

Capitalized deferred stripping - depreciation

Total Depreciation and Am ortization

10. EXPLORATION AND EVALUATION EXPENDITURES

For the years ended Decem ber 31, 

2017

39,152

22,555

(6,306)

(1,977)

53,424

2016

36,579

3,408

5,566

(1,511)

44,042

Included in exploration and evaluation expenditures is $2 million capitalized in prior years related to smaller exploration
properties that the Company does not intend to pursue in the near to medium term.

11. ADMINISTRATION EXPENSES

Corporate office

Audit fees

Legal and other

Depreciation

Total Adm inistration Expenses

12. FINANCE COSTS

Interest and deferred financing costs on borrow ings

Unw inding of discounts

Stocking fees

Bank charges

Other

Total Finance Costs

For the years ended Decem ber 31, 

2017

8,855

301

1,428

118

10,702

2016

7,418

380

1,088

87

8,973

For the years ended Decem ber 31, 

2017

1,594

865

761

620

67

3,907

2016

1,997

975

712

516

163

4,363

2017 Annual Report  65

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

13. OTHER (INCOME)/EXPENSES

Acquisition (i)
(Gains)/losses on derivative instruments (ii)

Business process consulting
Government of Senegal payments (iii)(iv )
Business and other taxes (v )

Perth office
Option Agreement - Milestone Payment (v i)
Gain on sale of available for sale financial asset (v ii)

Interest income and other income

Total Other (Income) / Expenses 

For the years ended December 31, 

2017

2016

                                        52                                     1,652 

                                  (1,832)                                    2,155 

                                        -

                                      886 

                                     (569)                                    1,033 

                                   1,152 

                                   1,339 

                                      543                                        407 

                                  (1,150)

                                        -

                                  (2,469)

                                        -

                                     (223)                                        (71)

                                  (4,496)                                    7,401 

(i)
(ii)

(iii)

(iv)

(v)
(vi)

(vii)

Includes costs for legal, advisory and consulting related to the acquisition of Gryphon Minerals Limited.
On September 11, 2017, the Company entered into forward gold sales contracts with Macquarie Bank Limited for a total of 
131,000 ounces of gold at a price of $1,336 per ounce. During the fourth quarter, the Company amended these contracts 
to defer quarterly settlements by a quarter, and as a result, the contracts extend through the first quarter of 2019. The
Company anticipates settling 26,500 ounces in each quarter of 2018 and 25,000 ounces in the first quarter of 2019.
During the third quarter of 2017, a present value adjustment related to the social development fund was recorded to reflect 
a change in the expected payment date from 2029 to 2031. 
During the first quarter of 2016, the Company paid $1.0 million in prescribed fees (land registry and notary), related to the 
OJVG acquisition, to register its expanded Sabodala mining license area granted in July of 2015 which incorporated the 
Gora deposit area (45 km2), the former Sabodala mining license area (33 km2), and the Golouma mining license area (212
km).
Senegalese business taxes which are calculated based on the gross value of fixed assets of the preceding year.  
On  October  28,  2015,  Gryphon  entered  into  an  option  agreement  with  a  subsidiary  of  Algold  Resources  Ltd  (“Algold”). 
Pursuant to the agreement, subject to certain milestones being met, a payment of C$1.5 million ($1.2 million) was due either 
in cash or Algold shares to Gryphon or its successor. During the second quarter 2017, the required milestones were met 
and the Company recorded the income. During the third quarter 2017, the Company recorded the receipt of payment in the 
form of 7,349,339 Algold shares. 
Refer to Note 17 for further details.

14.

INCOME TAX EXPENSE

The Company records a current income tax expense on taxable income earned in Senegal at a rate of 25 percent.  
Current income tax is calculated using local tax rates on taxable income, which is estimated in accordance with local 
statutory requirements and is denominated in the Senegalese currency (CFA Franc).  The tax basis of all assets and 
non-current intercompany loans are recorded using historical exchange rates and translated to the functional currency 
using the period end exchange rate, and as a result, the Company’s deferred tax balances will fluctuate due to changes 
in foreign exchange rates.  Current income taxes are also affected by changes in foreign exchange rates as unrealized 
foreign  exchange  gains  as  well  as  losses,  recorded  in  the  local  financial  statements,  are  taxable  /  deductible for 
purposes  of calculating  income  tax  in  Senegal.    The  Company  also  has  a  number  of  development  and  exploration 
projects in Burkina Faso and Côte d’lvoire, which currently do not generate any profit subject to income tax. For the 
year  ended  December  31, 2017,  the  Company  recorded  income  tax  expense  of  $2.4 million,  comprised  of  current 
income tax expense of $6.9 million and a deferred income tax recovery of $4.5 million (2016: $23.3 million expense, 
comprised of current income tax expense of $19.9 million and a deferred income tax expense of $3.4 million).

For the years ended December 31, 

2017

2016

                                   6,962 

                                 19,962 

                                  (4,526)                                    3,365 

                                   2,436 

                                 23,327 

Current income tax expense

Deferred tax (recovery) / expense

Total income tax expense

2017 Annual Report  66

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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:

Income before income taxes

Statutory tax rates

For the years ended December 31, 

2017

2016

                                 36,966 

                                 51,218 

26.5%

26.5%

Income tax expense (recovery) computed at statutory tax rates

                                   9,796 

                                 13,573 

Impact of foreign tax rates

Non-deductible items

Adjustment for prior years

Foreign tax credits

Change in foreign exchange rates

Unrecognized deferred tax assets

Provision for income taxes

15. TRADE AND OTHER RECEIVABLES

Current
Trade receivables (i)
Value added tax ("VAT") recoverable (ii)
Other receivables (iii)

Total Trade and Other Receivables

                                      808                                     1,071 

                                      888                                     1,302 

                                     (667)                                       268 

                                       (64)                                        (66)

                                (13,745)                                    1,323 

                                   5,420 

                                   5,856 

                                   2,436 

                                 23,327 

As at December 31, 2017

As at December 31, 2016

                                              -

                                            426 

                                         4,378                                           7,819 

                                         1,106                                           1,637 

                                         5,484                                           9,882 

(i)
(ii)

(iii)

Trade receivables relate to gold and silver shipments made prior to year-end that were settled after year end.
Value added tax (“VAT”) is levied at a rate of 18 percent on supply of goods and services and is recoverable on the majority 
of  purchases  in  Senegal.  Non-recoverable  value  added  tax  is  expensed  to  net  profit.  In  February  2016,  the  Company 
received an exemption for the payment and collection of refundable VAT. This exemption is governed by an amendment to 
the Company’s mining convention and expires on May 2, 2022. The balance at end of December 31, 2017 primarily relates
to VAT amounts paid prior to May 2017. On December 20, 2017, the Company received construction phase exoneration 
from VAT taxes for the Wahgnion Gold Project from the Burkinabe government.
Other receivables primarily include receivables from suppliers for services, materials and utilities used at the Sabodala Gold 
Mine, a $0.1 million receivable related to the sale of exploration rights (2016: $0.1 million) and $0.1 million of Canadian 
sales tax refunds as at December 31, 2017 (2016: $0.1 million). 

16.

INVENTORIES

Current

Gold bullion

Gold in circuit

Ore stockpile

Total gold inventories

Diesel fuel

Materials and supplies

Goods in transit

Total other inventories

Total current inventories

Non-current

Ore stockpile

Total Inventories

As at Decem ber 31, 2017

As at Decem ber 31, 2016

                                         2,929 

                                         1,563 

                                         5,451 

                                         5,600 

                                       16,356 

                                         9,452 

                                       24,736 

                                       16,615 

                                         1,891 

                                         1,509 

                                       28,581 

                                       29,978 

                                         1,816 

                                         1,885 

                                       32,288 

                                       33,372 

                                       57,024 

                                       49,987 

                                     103,638 

                                     121,245 

                                     160,662 

                                     171,232 

2017 Annual Report  67

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

17. AVAILABLE FOR SALE FINANCIAL ASSETS

Balance at January 1, 2016

Marketable securities acquired

Change in fair value of marketable securities during year

Foreign exchange loss

Balance at December 31, 2016

Marketable securities acquired

Change in fair value of marketable securities during the year

Marketable securities disposed

Foreign exchange gain

Balance at December 31, 2017

                                                        - 

Amount

1,481

(247)

(63)

1,171

1,583

2,178

(4,245)

277

964

The Company holds marketable securities that are classified as available for sale financial assets and are revalued to 
prevailing market prices at each period end. Unrealized gains and losses from changes in fair value are accounted for 
in  other  comprehensive  income.  During  the  third  quarter  of  2017,  the  Company  received  7,349,339  Algold  shares 
pursuant to an option agreement. During the fourth quarter of 2017, the Company disposed of all 13,505,000 shares it 
held in Tawana Resources NL for net cash proceeds of $4.0 million. A gain of $2.5 million was recorded within Other 
(Income)/Expense upon disposition.

18. OTHER ASSETS

Current
Prepayments (i)
Advanced royalty (ii)
Derivative assets (iii)
VAT certificates held (iv)
Total Other Current Assets

Non-current
Advanced royalty (ii)
Intangible assets
Derivative assets (iii)
Total Other Non-Current Assets

Total Other Assets

As at Decem ber 31, 2017

As at Decem ber 31, 2016

                                         4,086 

                                         3,110 

                                         2,857 

                                         1,659 

                                         2,702 
                                                 - 

                                         1,084 

                                         2,518 

9,686

8,330

                                         3,451 

                                         6,609 

                                            816 

                                            173 

                                            739 
                                                 - 

4,440

14,126

7,348

15,678

(i)

(ii)

(iii)
(iv)

As at December 31, 2017, prepayments include $2.9 million (2016: $2.7 million) of advances to vendors and contractors 
and $1.2 million for insurance (2016: $0.4 million). 
As at December 31, 2017, the Company has recorded $2.9 million in other current assets and $3.5 million in other non-
current assets as advanced royalty payments to the Government of Senegal. In total, the Company had recorded $10.0 
million in royalties related to the OJVG in 2014 and $4.2 million in royalties related to the Gora deposit in the first quarter of 
2015. The advanced  royalties  are  expensed  to  net  profit  based  on  actual  production  from  the  former  OJVG  and  Gora
deposits. During the year ended December 31, 2017, the Company expensed $3.0 million as amortization of OJVG and 
Gora advanced royalties (2016: $2.6 million). The advanced royalty recorded within other current assets is based on the 
expected production from the OJVG and Gora deposits over the next year and the remaining balance is recorded within 
other non-current assets. Refer to Note 22 for further details.
Refer to Note 13(ii) for further details.
In Senegal, VAT certificates are liquid and convertible into cash at local banks or may be issued directly to the Company’s 
suppliers to reduce future VAT collections or other taxes payable by the Company.

2017 Annual Report  68

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

19. PROPERTY, PLANT AND EQUIPMENT

Sabodala and Corporate

Wahgnion

Buildings and 
Property 
Improvements

Plant and 
Equipment

Office Furniture 
and Equipment

Motor 
Vehicles

Mobile 
Equipment

Capital Work 
in Progress

 Property, Plant 
and Equipment(i)

 Construction 
in Progress

Total 

Cost

Balance as at January 1, 2016

                  51,103 

          276,454                 2,478 

             3,819 

            85,646              16,611 

                         -

                    -

          436,111 

Acquisition of Gryphon

                         -

                  -

                    -

                  -

                  -

                  -

                      984 

                    -

                984 

Additions

Disposals

                         14                  724 

                    34                    -

                  -

            17,146 

                        16 

                    -

            17,934 

                         -

                  -

                    -

               (117)                (173)                   -

                       (43)                     -

               (333)

Transfer to Mine Development Expenditures

                         -

                  -

                    -

                  -

                  -

            (5,786)

                         -

                    -

            (5,786)

Transfer

                   (4,068)             17,656                    253 

             3,552 

             6,649 

           (24,042)

                         -

                    -

                  -

Balance as at December 31, 2016

                  47,049 

          294,834                 2,765 

             7,254 

            92,122               3,929 

                      957 

                    -

          448,910 

Additions

Disposals

Transfer

                         94                  701 

                    42                    -

                  -

            11,506 

                    2,215                 7,271              21,829 

                         -

                  -

                    -

                 (34)                (780)                   -

                     (123)                     -

               (937)

                    3,014 

             6,760 

                  198 

                646 

             1,847 

           (12,465)

                         -

                    -

                  -

Balance as at December 31, 2017

                  50,157 

          302,295                 3,005 

             7,866 

            93,189               2,970 

                    3,049                 7,271            469,802 

Accumulated Depreciation

Balance as at January 1, 2016

                  26,449 

          147,795                 2,010 

             2,716 

            63,715                    -

                         -

                    -

          242,685 

Disposals

                         -

                  -

                    -

                 (84)                (173)                   -

                       (20)                     -

               (277)

Depreciation expense

                    1,886 

            10,131                    267 

                964 

             7,723 

                  -

                      132 

                    -

            21,103 

Balance as at December 31, 2016

                  28,335 

          157,926                 2,277 

             3,596 

            71,265                    -

                      112 

                    -

          263,511 

Disposals

                         -

                  -

                    -

                 (34)                (780)                   -

                       (71)                     -

               (885)

Depreciation expense

                    2,081 

            12,018                    291 

             1,090 

             6,899 

                  -

                      786 

                    -

            23,165 

Balance as at December 31, 2017

                  30,416 

          169,944                 2,568 

             4,652 

            77,384                    -

                      827 

                    -

          285,791 

Net book value 

Balance as at December 31, 2016

                  18,714 

          136,908                    488 

             3,658 

            20,857               3,929 

                      845 

                    -

          185,399 

Balance as at December 31, 2017

                  19,741 

          132,351                    437 

             3,214 

            15,805               2,970 

                    2,222                 7,271            184,011 

(i)

Wahgnion Property, Plant and Equipment includes all buildings, office furniture, plant and equipment, mobile equipment, 
and motor vehicles at the Wahgnion Gold Project.

Additions made to property, plant and equipment during the year ended December 31, 2017 relate primarily to additional 
mining  and  milling  equipment acquired  for  Sabadola and  construction  readiness  and  early  works  programs for 
Wahgnion.

Depreciation of property, plant and equipment was $23.2 million for the year ended December 31, 2017 (2016: $21.1
million).

20. MINE DEVELOPMENT EXPENDITURES

Sabodala Reserve 
and developm ent 
costs

Sabodala Deferred 
stripping assets

Gryphon (i)

Total

Cost

Balance as at January 1, 2016

Acquisition of Gryphon

Additions incurred during the year

Transfer from Property, Plant and Equipment

Balance as at Decem ber 31, 2016

Additions incurred during the year

                        304,749                          105,750                                  - 
                                   - 
                                   - 

                       51,228                         51,228 

                     410,499 

                          15,406                            20,002                           1,367                         36,775 
                            5,786                                     - 
                        325,941                          125,752                         52,595                       504,288 

                         5,786 

                                - 

                          14,318                            31,405                         18,916                         64,639 

Balance as at Decem ber 31, 2017

                        340,259                          157,157                         71,511                       568,927 

Accum ulated depreciation

Balance as at January 1, 2016

Depreciation expense

Balance as at Decem ber 31, 2016

Depreciation expense

Balance as at Decem ber 31, 2017

Carrying am ounts

Balance as at Decem ber 31, 2016

Balance as at Decem ber 31, 2017

                        109,974                            63,479                                  - 
                          15,751                              3,408                                  - 
                        125,725                            66,887                                  - 
                          16,937                            22,555                                  - 
                        142,662                            89,442                                  - 

                     173,453 

                       19,159 

                     192,612 

                       39,492 

                     232,104 

                        200,216                            58,865                         52,595                       311,676 

                        197,597                            67,715                         71,511                       336,823 

2017 Annual Report  69

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

Capitalized m ine developm ent additions
Deferred stripping costs
Capitalized mine development - Golouma South
Capitalized mine development - Golouma West
Capitalized mine development - Kerekounda
Capitalized reserve development - Sustaining (Sabodala)
Capitalized mine development - Grow th (Wahgnion) (ii)
Other
Total Capitalized Mine Developm ent Additions

As at Decem ber 31, 2017

As at Decem ber 31, 2016

                          31,405 
                               130 
                            7,740 
                                   - 
                            5,799 
                          18,916 
                               649 
                          64,639 

                       20,002 
                         2,296 
                                - 
                         3,035 
                         8,441 
                         1,367 
                         1,634 
                       36,775 

(i)
(ii)

Gryphon includes mine licenses and joint ventures from the Gryphon acquisition in 2016.
Capitalized development costs include reserve development, feasibility studies and construction readiness expenditures 
related to the Wahgnion Gold Project

Mine development expenditures are related to the Sabodala Gold Mine in Senegal and the Wahgnion Gold Project in 
Burkina Faso.

Depreciation  of  capitalized  mine  development  of  $39.5 million  was  expensed  as  cost  of  sales  for the year  ended 
December 31, 2017 (2016: $19.2 million).

21. DEFERRED INCOME TAX ASSETS/(LIABILITIES)

The  deferred  income  tax  assets  (liabilities)  balance  reported  on  the  balance  sheet  and  relating  to  Sabodala  Gold 
Operations is comprised of the following:

Deferred tax assets

Unrealized foreign exchange

                                         9,742                                         20,173 

Mining and property plant and equipment

                                       12,984 

                                              -

As at December 31, 2017

As at December 31, 2016

Other 

Deferred tax liabilities

                                            230                                                -

Mining and property, plant, and equipment

                                              -

                                            (21)

Other

Net deferred tax assets

                                              -

                                            (67)

                                       22,956 

                                       20,085 

The  deferred  income  tax  assets (liabilities) balance  reported  on  the  balance  sheet  and  relating  to  Wahgnion Gold 
Project is comprised of the following:

As at December 31, 2017

As at December 31, 2016

Deferred tax assets

Unrealized foreign exchange

                                            154                                                -

Mining and property plant and equipment

                                         3,381                                           1,907 

Deferred tax liabilities

Mining and property plant and equipment

                                              -

                                            (26)

Deferred income tax assets

                                         3,535                                           1,881 

Unrecognized Deferred Tax Assets

Deferred income tax assets such as tax loss carry-forwards, property, plant and equipment, share issuance costs and 
transaction costs are recognized as assets to the extent that the realization of the related tax benefit through future 
taxable profits is probable.

2017 Annual Report  70

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

For the years ended December 31

2017

2016

Deferred income tax assets not recognized

Share issuance and transaction costs

                                            464                                              710 

Loss carry forwards 

                                       21,474 

                                       19,121 

Property, plant and equipment

                                            892                                              809 

Other

                                         1,889                                           1,588 

Deferred income tax assets not recognized

                                       24,719 

                                       22,228 

Deferred  income  tax  liabilities  have  not  been  recognized  for  the  withholding  tax  and  other  taxes  on  the  unremitted 
earnings of certain subsidiaries as these amounts will not be distributed in the foreseeable future. Unremitted earnings 
totaled $439,608 at December 31, 2017.

As at December  31, 2017, the tax losses not recognized by the Company and their associated expiry dates are as 
follows:

Tax losses - gross

Canada

Mauritius

Ivory Coast

Australia

22. TRADE AND OTHER PAYABLES

Expiry Date

2017

2016

For the years ended December 31, 

 2030 - 2036                               76,112 

                             69,035 

 2017 - 2022                                    337                                 1,973 

2022                                      1 

                                     5 

2018                                4,152                                 1,764 

                             80,602 

                             72,777 

Current
Trade payables (i)

Sundry creditors and accrued expenses 
Government royalties (ii)
Amounts payable to the Republic of Senegal (iii) (iv )(v ii)
Contingent consideration (v i)

As at December 31, 2017

As at December 31, 2016

                                       20,623 

                                       14,593 

                                       17,152 

                                       17,618 

                                         4,462                                           2,637 

                                       11,294 

                                       11,927 

                                            634                                              634 

Total Current Trade and Other Payables

                                       54,165 

                                       47,409 

Non-Current
Amounts payable to the Republic of Senegal (v )
Contingent Consideration (v i)

                                         7,762                                           7,954 

                                         2,297                                           2,930 

Total Other Non-Current Liabilities

                                       10,059 

                                       10,884 

Total Trade and Other Payables

                                       64,224 

                                       58,293 

(i)

(ii)

(iii)

Trade payables are comprised of obligations by the Company to suppliers of goods and services. Terms are generally 30 
to 60 days.
Government royalties are accrued based on the mine head value of the gold and related substances produced at a rate of 
5 percent of sales, which was 2,443 million XOF (2016: 1,640 million XOF). During the fourth quarter of 2016, the Company 
transitioned to the payment of government royalties one quarter in arrears. For the year ended December 31, 2017, royalty 
payments totalling $13.4 million for the last quarter of 2016 and the first nine months of 2017 were made to the Republic of 
Senegal (2016: $21.0 million paid for 2015 and the first nine months of 2016 royalties).
A reserve payment is payable to the Republic of Senegal based on $6.50 for each ounce of new reserves until December 
31, 2012. As at December 31, 2017, $2.1 million remains accrued as a current liability.

2017 Annual Report  71

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

(iv)

(v)

(vi)

(vii)

The Company has agreed to advance accrued dividends to the Republic of Senegal in relation to its interest in Sabodala 
Gold Operations. For the year ended December 31, 2017, $7.8 million has been accrued based on net sales revenue for 
each of the twelve months ended December 31, 2013 and December 31, 2014. No additional amounts are owing beyond 
2014.   
The  Company  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 of the Sabodala Gold Mine. It is recorded at its net present value of 
$7.8 million.   
The Company acquired Badr Investment Ltd.’s 13 percent carried interest in the former OJVG for cash consideration of 
$7.5 million and further contingent consideration which will be based on realized gold prices and increases to the former 
OJVG’s mining reserves through 2020, of which $3.8 million was accrued upon finalization of the purchase price allocation 
in 2014. As at December 31, 2017, $0.6 million has been recorded as a current liability and $2.3 million has been recorded 
as a non-current liability and is recorded at its net present value (2016: $0.6 million in current liabilities and $2.9 million in 
non-current liabilities). 
Pursuant to the completion of the acquisition of the OJVG in 2014, 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 
former OJVG. As at December 31, 2017, $1.4 million remains outstanding and has been accrued as a current liability.   

23. BORROWINGS

Revolving credit facility

Deferred financing costs

Total Borrowings

As at December 31, 2017

As at December 31, 2016

                                       15,000 

                                       15,000 

                                           (693)                                         (1,156)

                                       14,307 

                                       13,844 

a. Senior Secured Revolving Credit Facility

In  June  2016,  the  Company  completed  an  extension  of  its  $30.0  million  Revolver  Facility  with  Société  Générale 
(“Revolver Facility”). The Revolver Facility matures on September 30, 2019, with the available amount decreasing to 
$15.0  million on June  30, 2018.  The  Revolver Facility carries  an  interest  rate of  LIBOR  plus  4.65  percent  with  any 
unused facility amounts subject to a commitment fee of 1.6 percent.  As at December 31, 2017, $15.0 million was drawn 
on the Revolver Facility (2016: $15.0 million).

The  Revolver  Facility  is  subject  to covenants  that  require  the  Company  to maintain  a  current  ratio  of  not  less than 
1.10:1; total debt to EBITDA of not greater than 2:1; historic debt coverage ratio of greater than 2.5:1 and a tangible 
net worth of not less than $300 million. The Company was compliant with all covenants during the year.

24. DEFERRED REVENUE

Balance as at January 1, 2016

Amortization of deferred revenue

Balance as at December 31, 2016

Amortization of deferred revenue

Balance as at December 31, 2017

Current

Non-Current

Total Deferred Revenue

Amount

                                       91,345 

                                      (22,530)

                                       68,815 

                                      (22,606)

                                       46,209 

As at December 31, 2017

As at December 31, 2016

                                       24,206 

                                       21,353 

                                       22,003 

                                       47,462 

46,209                                        68,815 

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 in Senegal, thereafter, in exchange for a deposit of $135 million.  

For ounces of gold delivered to Franco-Nevada under the streaming transaction, Franco-Nevada pays the Company
cash at the prevailing spot price of gold at the date of delivery on 20 percent of the ounces delivered. For the remaining 
80  percent  of  the  ounces  delivered  to  Franco-Nevada,  the  deferred  revenue  balance  is drawn  down  based  on  the 

2017 Annual Report  72

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

prevailing spot price for gold. Once the deferred revenue has been drawn down to $nil, the Company will record sales 
of 20 percent of spot price, equal to the cash payments, for 6 percent of ounces produced. 

For accounting purposes, the agreement is considered a contract for the future delivery of gold ounces at the contracted 
price. The up-front $135 million payment is accounted for as a prepayment of yet-to-be delivered ounces under the 
contract and is recorded as deferred revenue.

During the year ended December 31, 2017, the Company delivered 22,500 ounces of gold to Franco-Nevada (2016: 
22,500 ounces) and recorded revenue of $28.3 million, consisting of $5.7 million received in cash proceeds and $22.6
million recorded as a reduction of deferred revenue. (2016: revenue of $28.1 million, consisting of $5.2 million received 
in cash proceeds, $0.4 million in accounts receivable, and $22.5 million recorded as a reduction of deferred revenue). 

25. PROVISIONS

Current
Employee benefits (i)
Cash settled share-based compensation (iii)
Total Current Provisions

Non-Current
Mine restoration and rehabilitation (ii)
Employee benefits (i)
Cash settled share-based compensation (iii)
Total Non-Current Provisions

Total Provisions

As at Decem ber 31, 2017

As at Decem ber 31, 2016

                                         2,289 

                                         2,227 

                                         2,630 

                                         2,752 

                                         4,919 

                                         4,979 

                                       27,510 

                                       27,414 

                                            872 

                                            891 

                                         1,002 

                                         1,189 

                                       29,384 

                                       29,494 

                                       34,303 

                                       34,473 

(i)

(ii)

(iii)

The  current  provisions  for  employee  benefits  include  $1.1 million  accrued  vacation  and  $1.2 million  long  service  leave 
entitlements for the period ended December 31, 2017 (2016 - $1.2 million and $1.0 million). The non-current provisions for 
employee benefits include $0.9 million accrued vacation (2016 - $0.9 million). 
The rehabilitation provision represents the present value of rehabilitation costs relating to the Sabodala Gold Mine which 
are  expected  to  be  incurred  up  to 2031.  The  provision  has  been  recorded  based  on  estimates  and  assumptions  which 
management believe are a reasonable basis to estimate future liability. The estimates are reviewed regularly to take into 
account  any material  changes  to the  rehabilitation  work  required. Actual  rehabilitation costs  will  ultimately  depend  upon 
future market prices for the necessary rehabilitation work required that will reflect market conditions at the relevant time.
The discount rate used in the calculation of the provision as at December 31, 2017 was 0.9 percent based on German and 
French 15-year bond yield rate (2016: 0.8 percent).
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. Refer to Note 34 for further details.

26.

ISSUED CAPITAL

Balance as at January 1, 2016

Issued to Gryphon shareholders  

Private placement issuance - October 13

Equity offering issuance - November 21

Num ber of shares

Am ount 

                         78,400,218                               385,174 

                         14,127,770                                 55,064 

                           1,934,325                                   7,541 

                           6,931,000                                 27,108 

Private placement issuance - November 21

                           5,900,000                                 23,075 

Stock options exercised

Less: Share issue costs 

Balance as at Decem ber 31, 2016

                                49,462                                      198 

                                       -

                               (1,834)

                       107,342,775                               496,326 

Cancellation of fractional shares as a result of share consolidation                                  (1,636)                                          - 

Stock options exercised

Balance as at Decem ber 31, 2017

                                  2,763                                          7 

                       107,343,902                               496,333 

2017 Annual Report  73

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

The Company completed a five-for-one share consolidation on May 8, 2017. All figures above are presented on a post
consolidation basis. Refer to Note 2(b) for further details.

On  October  13,  2016,  Tablo exercised  its  pre-emptive  participation  right,  pursuant  to  a  Voting  and  Investor  Rights 
Agreement with Teranga dated October 14, 2015, to subscribe for 1,934,325 Teranga common shares (the “Private 
Placement”).  The issuance price to Tablo was C$5.161 per share, being the 5-day volume weighted average price of 
Teranga common shares as of close of business on October 12, 2016.  The Teranga common shares issued to Tablo 
were subject to a customary four month hold period.

On November 21, 2016, the Company completed a previously announced equity offering (the “Offering”) to a syndicate 
of underwriters on a bought deal basis to purchase 6,500,000 common shares, with an additional 431,000 common 
shares  from  a  partially  exercised  over-allotment  option,  at  a  price  of  C$5.25 per  share  for  gross  proceeds  of 
approximately C$36.4 million.  Concurrently, the Company completed a non-brokered private placement with Tablo, to 
purchase 5,900,000 shares at the same price of C$5.25 per share for gross proceeds of approximately C$31.0 million. 
Net  proceeds  were  C$64.9  million  ($48.4  million) after  consideration  of  underwriter  fees  and  expenses  totaling 
approximately C$2.5 million ($1.8 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.

Capital Risk Management

The Company manages its capital with the following objectives:

(cid:120)

Ensure sufficient financial flexibility to achieve both short and long-term business objectives including 
funding of future growth and development and exploration opportunities

(cid:120) Maintain an optimal capital structure to maximize shareholder return through maximising long-term free cash 

flows
Safeguarding the Company’s ability to continue as a going concern.

(cid:120)

Through the ongoing management of its capital, the Company will make adjustments to the structure of its capital based 
on changing economic, industry, and business conditions in the jurisdictions in which it operates in an effort to meet its 
objectives. In doing so, the Company may issue new shares or debt, buy back issued shares, or pay off any outstanding 
debt. The capital structure is reviewed by management and the Board of Directors on an ongoing basis.

The Company considers its capital to be:

(cid:120)

Equity, comprising share capital, stock options, contributed surplus and accumulated earnings, which at 
December 31, 2017 totalled $649,555 (2016: $616,933)

27. EARNINGS PER SHARE (EPS)

Basic EPS (US$)

Diluted EPS (US$)

Basic EPS:

For the years ended Decem ber 31, 

2017

2016

                                     0.30 

                                     0.28 

                                     0.30 

                                     0.28 

Net profit used in the calculation of basic EPS
Weighted average number of common shares for the purposes 
of basic EPS (‘000)

Effect of dilutive share options ('000)
Weighted average number of common shares outstanding  for 
the purpose of diluted EPS (‘000)

                                 31,932 

                                 23,109 

                               107,345 

                                 83,336 

                                        78 

                                      405 

                               107,423 

                                 83,741 

2017 Annual Report  74

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

The determination of weighted average number of common shares for the purpose of diluted EPS excludes 3.1 million 
and 2.3 million shares relating to share options that were anti-dilutive for the years ended December 31, 2017 and
December 31, 2016, respectively.

28. COMMITMENTS FOR EXPENDITURES

As at December 31, 2017, the Company had the following payments due on contractual obligations and commitments: 

Paym ents Due By Period (US$ m illions)

Revolving Line of Credit (i)
Franco-Nevada gold stream (ii)
Purchase obligations for supplies and services (iii)
Sustaining capital commitments (iv)
Grow th capital commitments (v)
Afema Investment (vi)

Total

< 1 year

1-3 years

4-5 years

>5 years

                 15.0 

                    -

                 15.0 

                    -

                    -

                 46.2                   22.5                   23.7 

                    -

                    -

                   2.2                     2.2 

                    -

                    -

                    -

                   1.3                     1.3 

                    -

                    -

                    -

                 27.1                   27.1 

                    -

                    -

                    -

                 18.5                     7.5                   11.0 

                    -

                    -

Total

               110.3                   60.6                   49.7 

                    -

                    -

(i)
(ii)

(iii)

(iv)

(v)

(vi)

In 2015, the Company secured a $30 million Revolver Facility of which $15 million was drawn at December 31, 2017.
On January 15, 2014, the Company completed a gold stream transaction with Franco-Nevada Corporation. 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 million. The commitment 
estimate assumes a gold price of $1,250 per ounce.  
Purchase obligations for supplies and services - includes commitments related to maintenance and explosives services 
contracts.
Sustaining capital commitments - purchase obligations for capital expenditures at Sabodala, which include only those items 
where binding commitments have been entered into.
Growth capital commitments - purchase obligations for capital expenditures at the Wahgnion Gold Project, which include 
only those items where binding commitments have been entered into.
On  December  7,  2017, the  Company  entered  into  a memorandum of  understanding  with  Sodim for  the  exploration  and 
development of the Afema land package in Côte d'Ivoire, for total cash consideration of $10.0 million, payable over four 
instalments. The first payment of $2.5 million was paid in January 2018; a second payment of $2.5 million will be due upon 
the  execution  of  the  final  agreement  and  the  receipt  of  the  amended  convention  and  exploration  permits  from  the 
government;  a  third  payment  of  $2.5  million  will  be  payable  January  2019;  and,  a  fourth  payment  of  $2.5  million  upon 
delivery of a confirmation study or updated feasibility study with Teranga’s confirmation of its decision to proceed with the 
Afema Gold Project.  Under the terms of the memorandum of understanding, the Company maintains its 51 percent interest 
in  the  Afema  mining  lease  and  Afema  permits  through  the  completion  of  a  three-year  $11.0  million  exploration  and 
community relations work program, increasing its interest to 70 percent on the Afema mining license through the delivery of 
a positive economic evaluation of potential mining on the Afema land package and Teranga’s commitment to fund its 70 
percent  interest  in  the  project  through  construction.  Pursuant  to  the  Company’s  existing  joint  venture  agreement  with 
Miminvest  SA,  a  3  percent  royalty  is  payable  to  Miminvest  in connection  with  Teranga’s  share  of  production  or  product 
emanating from the Afema mining lease as the land package was considered an exploration property.  

SABODALA  GOLD  OPERATIONS  (“SGO”),  SABODALA  MINING  COMPANY  (“SMC”),  WAHGNION  GOLD 
OPERATIONS  SA  (“WGO”)  AND  THE  OROMIN  JOINT  VENTURE  GROUP  LTD.  (“OJVG”)  OPERATING 
COMMITMENTS

The Company has the following operating commitments in respect of the SGO, SMC, WGO and the OJVG:

(cid:120)

(cid:120)

Pursuant  to  the  Company’s  Senegal  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 

2017 Annual Report  75

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

specified  ministries  of  the  Republic  of  Senegal.  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.

(cid:120)

(cid:120)

(cid:120)

Pursuant to the Company’s Senegal Mining Concession, $1.5 million is payable in 2018, and $1.2 million annually 
thereafter  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.

In addition to the Company’s corporate social responsibility spending, Teranga has agreed to establish a social 
development fund which includes making a payment of $15.0 million to the Republic of Senegal at the end of the 
mine operational life. As at December 31, 2017 $7.8 million was accrued which is the discounted value of the $15.0 
million future payment.

$350 thousand is payable annually for training of Directorate of Mines and Geology officers and Mines Ministry 
and $30 thousand is payable annually for logistical support of the territorial administration of the region for SGO.  

(cid:120) On May 1, 2016 SGO entered into a commitment with local communities around its Gora deposit to provide annual 
social assistance funding. An amount of $400 thousand is payable in 2018 and $200 thousand annually thereafter, 
until 2021.

(cid:120)

(cid:120)

(cid:120)

$250 thousand is payable annually, until 2019, to the Ministry of Environment pursuant to a forestry protocol with 
the Government of Senegal. 

Pursuant to the Company’s Burkina Faso Mining Concession, a sliding net smelter royalty of 3 to 5 percent of gold 
sales, based on the daily spot price of gold, is payable to the government of Burkina Faso. 

In addition, pursuant to the 2015 Burkina Faso Mining Code, 1 percent of monthly turnover (before tax) is to be 
contributed to the mining fund for local development.

29. CONTINGENT LIABILITIES

Outstanding tax assessments

In April 2016, the Company received a withdrawal of the 2011 tax assessment for all but $1.0 million, which remains in 
dispute. No amounts were accrued relating to this matter.

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 twelve-month gold price for each ounce of new reserve 
beyond December 31, 2012 on the Sabodala mine license. As at December 31, 2017 $2.1 was accrued as a current 
liability. 

2017 Annual Report  76

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

30. EXPLORATION LICENSES AND JOINTLY CONTROLLED OPERATIONS AND ASSETS

The Company has exploration licenses and is a joint venturer in the following jointly controlled operations and assets:

Name of venture

Principal activity

Sabodala Mining Company
Bransan (New) (i)
Sounkounkou (New) (i)(ii)

Boss Gold Sarl (iii)
Boutouanou (iv )
Diabatou (iv )
Foutouri 

Kankandi 

Tyara 

Tyabo 

Boss Minerals Sarl (iii)
Baniri

Intiedougou

Mougue

Gryphon Minerals Burkina Faso Sarl (v)
Dierisso

Nianka

Nogbele

Zeguedougou

Teranga Exploration (Ivory Coast) Sarl (vi)

Dianra

Guitry 

Mahapleu 

Tissalé 

Sangaredougou 

Gold Exploration

Gold Exploration

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration - Jointly Controlled

Gold Exploration

Gold Exploration

Gold Exploration

Gold Exploration

Gold Exploration

Gold Exploration

Gold Exploration

Gold Exploration

Gold Exploration

Interest
2017
%

100

100

51

51

51

51

51

51

51

51

51

100

100

100

100

100

100

100

100

100

(i)

(ii)

(iii)

(iv)

(v)
(vi)

Sabodala Mining Company has received confirmation from Senegal’s Ministry of Industry and Mines that its application has 
been received and is in process of formal approval.
The joint venture partner of the exploration permit has elected a 1.5 percent net smelter royalty on all currently identified 
targets  within  the  original  Sounkounkou  permit  and  including  the  Gora  project  in  exchange  for  its  fully  participatory  20 
percent interest. The joint venture partner retains a 20 percent participatory right for any new exploration targets identified 
or to elect the royalty.
Interests in Boss Gold Sarl and Boss Minerals Sarl were inherited as part of the acquisition of Gryphon on October 13, 
2016. Teranga is the operator of the ventures and has the right to earn a further 19 percent interest upon delivery of a 
bankable feasibility study regarding a potential deposit within any of the permits comprising the joint ventures. In addition,
upon attaining a 70 percent equity interest, Teranga has the option to acquire a further 10 percent interest upon payment 
of  AUD $2.5  million  dollars  within  sixty days  of  delivery  of  the  relevant  feasibility  study. Within  sixty  days  of  Teranga's 
decision, Boss Resources Limited (the venture's 49 percent shareholder) must participate on a pro-rata basis for all costs 
associated with the development of the project or default to 1.5 percent net smelter royalty interest.
As at December 31, 2017, 4 out of the 6 exploration permits held by Boss Gold Sarl were current. Boss Gold Sarl has filed 
applications with the relevant Burkinabe authorities to renew the expired permits. 
Sanembaore Sarl holds a one percent net smelter royalty on Wahgnion production.
A 3 percent net smelter royalty is owing to Miminvest SA pursuant to the terms of an existing agreement.

2017 Annual Report  77

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

31. CONTROLLED ENTITIES

The significant mining and exploration entities of Teranga are listed below.

Country of Incorporation

Percentage owned

2017

Controlled entities consolidated

Teranga Gold B.V.I. Corporation

Sabodala Gold (Mauritius) Limited

Teranga Gold (Ivory Coast) Corporation

Teranga Gold (Australia) Pty Ltd. (formerly Gryphon Minerals Ltd)

Subsidiaries of Sabodala Gold (Mauritius) Limited:

Sabodala Mining Company SARL

Sabodala Gold Operations SA

British Virgin Islands

Mauritius

Canada

Australia

Senegal

Senegal

Subsidiaries of Teranga Gold B.V.I. Corporation:

Oromin Joint Venture Group Limited

British Virgin Islands

Subsidiaries of Teranga Gold (Australia) Pty Ltd.

Gryphon Minerals Burkina Faso Pty Ltd.

Gryphon Minerals West Africa Pty Ltd.

Boss Minerals Pty Ltd.

Askia Gold Pty Ltd.

Subsidiary of Gryphon Minerals Burkina Faso Pty Ltd.

Loumana Holdings Ltd.

Australia

Australia

Australia

Australia

Mauritius

Subsidiary of Gryphon Minerals West Africa Pty Ltd.

Gryphon Minerals Burkina Faso Sarl

Burkina Faso

Subsidiary of Boss Minerals Pty Ltd

Boss Minerals Sarl

Subsidiary of Askia Gold Pty Ltd.

Boss Gold Sarl

Subsidiary of Loumana Holdings Ltd.

Wahgnion Gold Operations SA

Burkina Faso

Burkina Faso

Burkina Faso

Subsidiary of Teranga Gold (Ivory Coast) Corporation

Teranga Exploration (Ivory Coast) Sarl

Ivory Coast

100.0

100.0

100.0

100.0

100.0

90.0

56.5

100.0

100.0

51.0

51.0

100.0

100.0

100.0

100.0

89.8

100.0

2017 Annual Report  78

32. CASH FLOW INFORMATION

a. Change in working capital

Changes in w orking capital other than inventory

Increase in trade and other receivables

Decrease in other assets

Decrease in trade payables and other

Decrease in provisions 

(Decrease)/Increase in current income taxes payable

Net Change in Working Capital Other Than Inventory

b. Cash balance subject to liquidity covenant

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

For the years ended Decem ber 31, 

2017

(1,769)

2,978

(5,128)

(88)

(7,224)

(11,231)

2016

(715)

6,224

(22,171)

(568)

12,817

(4,413)

As part of the streaming transaction with Franco-Nevada, the Company is required to maintain a minimum consolidated 
cash balance of $15.0 million.

33. FINANCIAL INSTRUMENTS

The Company’s risk exposures and the impact on the Company’s financial instruments are summarized below:

a. Categories of financial instruments

As  at  December 31,  2017 and  2016,  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, as at December 31, 2017 and 
2016:

Financial assets:

Cash and cash equivalents

Loans and receivables 

    Trade and other receivables

    Financial derivative assets

Other assets

As at Decem ber 31, 2017

As at Decem ber 31, 2016

87,671 

5,484

95,188 

9,882

1,832                                               -

    Available-for-sale financial assets

964                                         1,171 

Financial liabilities:

Other financial liabilities at amortized cost

    Trade and other payables 

    Current income tax liabilities

    Borrow ings 

67,856

7,634

14,307

62,234

19,834

13,844

The Company’s financial assets (excluding those acquired in the Gryphon acquisition and Côte d'Ivoire assets) have 
been pledged as collateral for the Senior Secured Revolving Credit Facility.

b. 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. 

2017 Annual Report  79

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

The  Company  may,  at  its  discretion,  use  forward  or  derivative  contracts  to  manage  its  exposure  to  changes  in
commodity prices.

c. 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.

To mitigate foreign exchange risk, the Company may consider options to manage its exposures in the future. No foreign 
exchange contracts were entered into in 2017.

The carrying amounts of the Company’s foreign currency denominated monetary assets and liabilities are as follows:

CFA Franc (XOF)

EUR

CAD

AUD

Other

Financial Assets

Financial Liabilities

December 31, 2017

December 31, 2016

December 31, 2017

December 31, 2016

19,894

562

4,391

431

-

8,646

11,149

3,248

402

1

56,222

967

6,198

990

41

59,745

709

6,272

2,485

27

Foreign currency sensitivity analysis 

The Company is mainly exposed to CFA Franc, EUR, CAD and AUD.  Based on the Company’s currency exposures
relating  to  foreign  currency  denominated  monetary  items,  a  10 percent appreciation  of  the  US  dollar  against  the
applicable foreign currencies would have resulted in the following gains/(losses) at December 31, 2017:  

Financial Assets

Financial Liabilities

As at December 31, 
2017

As at December 31, 
2016

As at December 31, 
2017

As at December 31, 
2016

10% Strengthening of 
     functional currency

CFA Franc (XOF) Impact

Gain or (loss)

EUR Impact

Gain or (loss)

CAD Impact

Gain or (loss)

AUD Impact

Gain or (loss)

(1,989)

(865)

5,622

5,975

(56)

(1,115)

(439)

(43)

(325)

(40)

97

620

99

71

627

249

d.

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 Company ensures that there is sufficient available capital to meet its short-term business requirements, taking into
account  its  anticipated  cash  flows  from  operations  and  its  holdings  of  cash  and  cash  equivalents.  The  Company
evaluates on an ongoing basis opportunities to hedge its interest rate exposure on its long-term debt.

The following table illustrates the classification of the Company’s financial instruments which are exposed to interest
rate risk as at December 31, 2017 and 2016:

2017 Annual Report  80

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

As at Decem ber 31, 2017

As at Decem ber 31, 2016

                                        87,671                                          95,188 

                                        14,307                                          13,844 

Financial assets

Cash and cash equivalents

Financial liabilities

Borrow ings

The Company’s interest rate on its borrowings is calculated at LIBOR plus 4.65 percent margin on the Senior Secured 
Revolving Credit 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:

Financial Assets

Financial Liabilities

As at Decem ber 
31, 2017

As at Decem ber 
31, 2016

As at Decem ber 
31, 2017

As at Decem ber 
31, 2016

Profit or (loss)

                            419                              331 

                            (75)                             (75)

e. 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 gold sales are executed with 
either AAA rated banking institutions or established gold metal merchants with access to significant credit lines. Gold 
production is sold into the spot market.

The Company is exposed to the credit risk of Senegalese and French banks that disburse cash on behalf of its Senegal 
subsidiaries. The Company manages its Senegalese and French 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 Senegalese banks. The Company’s current balances 
held in Burkina Faso and Côte d'Ivoire are not currently significant.

f.

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 accounts 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. 

2017 Annual Report  81

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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.

Weighted average 
effective interest rate 
%

Due on demand

Due one to three
months

Due between three 
months to one year

Due one to five 
years

Due over five 
years

Financial Liabilities

December 31, 2017

Non-interest bearing

Variable interest rate instruments

Fixed interest rate instruments

Fixed interest rate instruments

Fixed interest rate instruments

Total

December 31, 2016

Non-interest bearing

Variable interest rate instruments

Fixed interest rate instruments

Fixed interest rate instruments

Fixed interest rate instruments

Total

 - 

5.92%

3.08%

7.50%

5.00%

 - 

5.51%

3.08%

7.50%

5.00%

39,182

-

-

                         -

12,096

-

7,793

15,000

-

-

-

                           -

-

                          -

2,093

-

-

1,850

-

-

634

                         -

-

-

2,508

                          -

41,275

634

12,096

25,301

34,491

-

-

                         -

22,471

-

7,793

15,000

634

                         -

-

-

3,207

                          -

36,341

634

22,471

26,000

-

15,000

15,000

-

-

-

15,000

15,000

-

                           -

-

                          -

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.

g. Fair value of financial instruments

The  Company’s  trade  and  other  receivables,  and  trade  and  other  payables  are  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:

Financial assets

Financial derivative assets

Financial liabilities

Borrow ings

As at Decem ber 31, 2017

As at Decem ber 31, 2016

 Carrying am ount 

 Fair value 

 Carrying am ount 

Fair value

1,832

1,832

-

                             -

14,307

13,732

13,844

12,914

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.

2017 Annual Report  82

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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:

Financial Assets

Cash and cash equivalents

Available-for-sale financial assets

Financial derivative assets

Total

Financial Liabilities

Borrow ings

             As at Decem ber 31, 2017

            As at Decem ber 31, 2016

 Level 1 

 Level 2 

 Level 3 

 Level 1 

 Level 2 

 Level 3 

              87,671 

                      -

                      -

              95,188 

                      -

                    -

964
                      -

                      -

                      -

                1,832 

                      -

1,171
                      -

                      -

                    -

                      -

                    -

              88,635                  1,832 

                      -

              96,359 

                      -

                    -

                      -

14,307

                      -

                      -

13,844

                    -

Cash settled share-based compensation

                3,511 

                      -

                   121                  3,777 

                      -

                 164 

Total

                3,511 

14,307

121                 3,777 

13,844

164

34. SHARE BASED COMPENSATION

The  share-based  compensation  expense  for  the  year  ended  December  31,  2017 totaled  $2.6 million  (2016:  $4.4
million).

On May 8, 2017, the incentive stock option plan was amended and restated effective immediately to adjust the number 
of common shares available for grant thereunder to reflect the five-for-one consolidation of the Company’s issued and 
outstanding shares (refer to Note 2(b) for further details). The following tables and numbers of stock options, FBUs, 
RSUs, and DSUs have been retroactively restated to reflect the change. 

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 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 common share of Teranga on exercise. No amounts are paid or 
payable  by  the  recipient  upon  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.

The following reconciled the share options outstanding at the beginning and end of the year:

Balance as at January 1, 2016

Granted during the year

Forfeited during the year

Exercised during the year

Balance as at December 31, 2016

Granted during the year

Forfeited during the year
Exercised during the year(i)

Balance as at December 31, 2017

Number of options exercisable - December 31, 2016

Number of options exercisable - December 31, 2017

Number of options

Weighted average 
exercise price

3,107,833

828,364

(97,629)

(49,462)

3,789,106

891,488

(223,340)

(2,763)

4,454,491

2,944,279

3,488,194

C$12.07

C$3.39

C$4.65

C$3.23

C$10.48

C$4.16

C$10.91

C$3.33

C$9.20

2017 Annual Report  83

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

(i)

The weighted average share price at the time of the option exercises was C$4.50.

During the years ended December 31, 2017 and 2016, a total of 891,488 and 828,364 common share stock options,
respectively, were granted to officers and employees. The exercise price of new stock options granted were determined
using a volume weighted average trading price of the Company’s shares for the 5-day period ended on the grant date.

The following stock options were outstanding as at December 31, 2017:

Option series

Num ber

Grant date

Expiry date Exercise price (C$)

Granted on November 26, 2010

Granted on December 3, 2010

Granted on February 9, 2011

Granted on April 27, 2011

Granted on June 14, 2011

Granted on August 13, 2011

Granted on December 20, 2011

Granted on February 24, 2012

Granted on February 24, 2012

Granted on June 5, 2012

Granted on September 27, 2012

Granted on October 9, 2012

Granted on October 31, 2012

Granted on October 31, 2012

Granted on December 3, 2012

Granted on June 3, 2013

Granted on May 1, 2014

Granted on March 31, 2015

Granted on March 31, 2015

Granted on March 31, 2016

Granted on August 2, 2016

Granted on September 12, 2016

Granted on March 7, 2017

Granted on March 29, 2017

Granted on June 16, 2017

Granted on July 17, 2017

Granted on September 11, 2017

1,064,000

240,000

85,000

5,000

16,000

72,000

209,000

100,000

29,000

10,000

120,000

120,000

16,000

20,000

40,000

24,000

10,000

450,000

218,501

698,547

18,225

4,606

464,997

407,991

3,000

5,000

3,624

26-Nov-10

03-Dec-10

09-Feb-11

27-Apr-11

14-Jun-11

13-Aug-11

20-Dec-11

24-Feb-12

24-Feb-12

05-Jun-12

27-Sep-12

09-Oct-12

31-Oct-12

31-Oct-12

03-Dec-12

03-Jun-13

01-May-14

31-Mar-15

31-Mar-15

31-Mar-16

02-Aug-16

12-Sep-16

07-Mar-17

29-Mar-17

16-Jun-17

17-Jul-17

11-Sep-17

26-Nov-20

03-Dec-20

09-Feb-21

27-Apr-21

14-Jun-21

13-Aug-21

20-Dec-21

24-Feb-22

24-Feb-22

05-Jun-22

27-Sep-22

06-Oct-22

31-Oct-22

31-Oct-22

03-Dec-22

03-Jun-23

01-May-24

31-Mar-20

31-Mar-20

31-Mar-21

11-Aug-21

12-Sep-21

07-Mar-22

29-Mar-22

16-Jun-22

17-Jul-22

11-Sep-22

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

3.20

3.20

3.33

5.34

6.28

4.20

4.15

3.34

3.43

3.34

FV at grant 
date (C$)

5.95

5.95

4.95

4.00

4.70

4.10

3.05

1.83

6.32

0.85

4.65

5.05

2.60

0.90

3.05

0.20

0.50

1.75

1.50

1.75

3.20

2.85

1.50-1.90

1.75-2.10

1.36-1.57

1.46-1.69

1.32-1.53

As at December 31, 2017, approximately 6.3 million (2016: 6.9 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 4,454,491 common share stock options issued and outstanding as at December 31, 2017, 3,488,194 are vested
and 966,297 vest over a three-year period. The fair value of options that vest upon achievement of milestones will be
recognized based on management’s assessment of the likelihood of reaching those milestones. As at December 31,
2017, the weighted average remaining contractual term of outstanding stock options exercisable was 3.3 years.

As at December 31, 2017, 2,180,000 and 2,274,491 share options had a contractual life of ten years and five years at
issuance, respectively.

2017 Annual Report  84

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

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:

Grant date share price

Weighted average fair value of aw ards
Exercise price(i)
Range of risk-free interest rates
Volatility of the expected market price of share(ii)
Expected life of options (years)

Dividend yield

Forfeiture rate

For the years ended Decem ber 31,

2017

C$3.12-C$4.15

C$1.81

C$3.12-C$4.20

0.82% - 1.61%

64% - 69%

2.8 - 3.8

0%

3%-14%

2016

C$3.65-C$6.35

$1.81

C$3.33-$6.28

0.52%-0.60%

67%-71%

3.0

0%

5%

(i)

(ii)

Represents the 5-day volume-weighted average price of the Company's shares on the Toronto Stock Exchange for the
period ending on the grant date.
Volatility was determined using the 3-year average historical volatility of the Company’s share price.

b. Fixed Bonus Plan

The Fixed Bonus Plan authorizes the Directors to grant Fixed Bonus Plan Units (“Units”) to officers and employees of
the Company and its subsidiaries in lieu of participating in the Stock Option Plan. Each Unit entitles the holder upon
exercise  to  receive  a  cash  payment  equal  to  the  closing  price  of  a  common  share  of  Teranga  on  the  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, 2017, there were 359,500 Units outstanding that were granted on August 8, 2012, March 31, 2015,
and March 31, 2016 with expiry dates ranging from March 31, 2020 through to February 24, 2022. Of the 359,500 Units
outstanding as at December 31, 2017, 272,000 Units have an exercise price of C$3.00, 60,000 Units have exercise
price of C$0.64 and 27,500 Units have an exercise price of C$0.67. The total outstanding Units have fair values of
C$0.44  per  Unit  at  December  31,  2017.  The  total  fair  value  of  the  Units  at  December  31,  2017  was $0.1  million
(December 31, 2016: $0.2 million).

The  estimated fair  values of  the  Units  are  amortized  over  the  period  in  which  the  Units vest.  Of  the  359,500 Units
issued, 342,781 Units were vested at December 31, 2017 with the remaining Units to be fully vested by March 31,
2019.

2017 Annual Report  85

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

Fair value of Units granted

The fair value of units granted was calculated using Black-Scholes option pricing model with the following assumptions:

Share price at the end of the period

Weighted average fair value of vested awards
Exercise price(i)

Range of risk-free interest rates
Volatility of the expected market price of share(ii)

Expected life of options (years)

Dividend yield

Forfeiture rate

For the years ended December 31,

2017

C$2.99

C$0.44

C$3.20-C$15.00

1.67%-1.79%

64%

2.0-4.0

0%

5%-50%

2016

C$4.10

C$0.70

C$3.20-C$15.00

0.73%-1.11%

65%

2.0-4.0

0%

5%-50%

(i)

(ii)

Represents the 5-day volume-weighted average price of the Company's shares on the Toronto Stock Exchange for the
period ending on the grant date.
Volatility was determined using the 3-year average historical volatility of the Company’s share price.

c. RSUs

The Company introduced a 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 twelve months of 2017, 856,460 RSUs were granted at a price of C$4.14 per unit and 102,293 RSUs were
forfeited (2016: 6,140,338 RSUs granted, 1,029,223 forfeited).  As of December 31, 2017 a total of 1,606,201 RSU’s
were outstanding of which 1,040,323 units were vested. As at December 31, 2017, $1.4 million of current RSU liability
and $0.9 million of non-current RSU liability have been recorded in the consolidated financial statement of financial
position (2016: $1.7 million and $1.0 million in current and non-current RSU liability respectively).

d. DSUs

The Company introduced a 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 180,000 DSUs during the year ended December 31, 2017 at a price of C$4.18 per unit.  Of the
563,998 DSUs outstanding at December 31, 2017, 518,988 DSUs were vested and no units were cancelled. As at
December 31, 2017, $1.2 million of current DSU liability has been recorded in the consolidated financial statement of
financial position (2016: $1.1 million).

35. SEGMENT INFORMATION

Teranga’s Chief Operating Decision Maker (“CODM”), reviews the operating results, assesses the performance and
makes capital allocation decisions at the following levels: Sabadola Gold Mine in Senegal; Corporate entities; Wahgnion
Gold Project in Burkina Faso; and exploration projects in Senegal, Burkina Faso and Côte d'Ivoire. The following table
provides the Company’s operating results and summary asset information by segment.

2017 Annual Report  86

The Company’s operating revenues are solely attributable to the Sabadola Gold operations in Senegal.

Year ended December 31, 2017

Sabodala

Corporate Wahgnion Exploration

Revenue 

291,683

-

                  - 

Operating (expenses)/income

          (10,325)           (10,790)

653          (12,142)         (32,604)

Profit/(loss) before income tax

Income tax (expense)/recovery

Net profit/(loss)

           59,245            (10,790)

653          (12,142)

         36,966 

(4,074)

-

1,638

-

(2,436)

           55,171            (10,790)

           2,291           (12,142)

         34,530 

Revenue 

268,850

-

                  - 

Year ended December 31, 2016

Sabodala

Corporate Wahgnion Exploration

Mine operation expenses

Depreciation and amortization

Cost of sales

Gross profit

Exploration and evaluation expenditures

Administration expenses

Corporate social responsibility expenses

Share-based compensation

Finance costs

Net foreign exchange (losses)/gains

Other income

Mine operation expenses

Depreciation and amortization

Cost of sales

Gross profit

Exploration and evaluation expenditures

Administration expenses

Corporate social responsibility expenses

Share-based compensation

Finance costs

Net foreign exchange (losses)/gains

Other expenses

Operating expenses

Profit/(loss) before income tax

Income tax expense

Net profit/(loss)

-

-

-

-

-

-

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

(168,689)

(53,424)

        (222,113)

           69,570 

-

-

-

-

                  - 

                  - 

                  - 

                  - 

Total

291,683

(168,689)

(53,424)

-        (222,113)

-

         69,570

-

-

(2,564)

-

(3,352)

(4,473)

64

                    - 

(10,702)

(342)

(2,580)

(554)

(243)

3,631

-

(12,373)

-                    - 

-                    - 

-                    - 

(1)

(147)

801

-

231

-

(12,373)

(10,702)

(2,906)

(2,580)

(3,907)

(4,632)

4,496

Total

268,850

(137,486)

(44,042)

-        (181,528)

-

         87,322

(137,486)

(44,042)

        (181,528)

           87,322 

-

-

-

-

                  - 

                  - 

                  - 

                  - 

-

-

(2,559)

-

(3,267)

(2,383)

(4,532)

                    - 

(8,973)

(1,054)

(4,405)

(1,096)

30

(2,479)

          (12,741)           (17,977)

           74,581            (17,977)

(22,976)

-

           51,605            (17,977)

(202)

(390)

(592)

(592)

(351)

(943)

-

(4,760)

-                    - 

-                    - 

-                    - 

-                    - 

(34)

-

(4,760)

(8,973)

(3,613)

(4,405)

(4,363)

(2,589)

(7,401)

(4,794)         (36,104)

(4,794)

         51,218 

-

(23,327)

(4,794)

         27,891 

2017 Annual Report  87

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

Selected non-current asset balances are detailed below:

Property, plant and equipment

Mine development expenditures

Total non-current assets

Property, plant and equipment

Mine development expenditure

Total non-current assets

As at Decem ber 31, 2017

Sabodala Corporate Wahgnion

Exploration

171,358

260,132

562,231

3,125

5,116

8,501

8,869

71,511

83,914

659

64

757

          As at December 31, 2016

Sabodala

Corporate Wahgnion

Exploration

180,496

254,553

583,470

3,120

4,464

7,694

845

52,595

55,324

938

64

1,146

Total

184,011

336,823

655,403

Total

185,399 

311,676 

647,634 

36. KEY MANAGEMENT PERSONNEL COMPENSATION

The Company considers key members of management to include the President and CEO and officers.

The remuneration of the key members of management includes 6 members during the year ended December 31, 2017
and 6 members during the year ended December 31, 2016. The remuneration during the years ended December 31,
2017 and 2016 is as follows:

Salary and 
Fees

Short term  benefits
Non-Cash 
Benefits

Cash Bonus (i)

Cash settled share 
based paym ents - 
value vested during 
the period

Equity settled share 
based paym ents - 
value vested during 
the period

RSUs

Options

Total

For the year ended 
Decem ber 31, 2017

Compensation
For the year ended 
Decem ber 31, 2016

Compensation

1,852 

1,586 

14

13

768

71

1,028 

502            4,164 

956

312            2,938 

(i)

The amount is based on the cash payment made during the year and relate to the prior year.

37. RELATED PARTY TRANSACTIONS

a. Transactions with key management personnel

During the year ended December 31, 2017, there were transactions totaling $0.1 million between the Company and
director-related entities.

b. Exploration agreement with Miminvest SA

In 2017, Teranga paid Miminvest $0.5 million for all direct and reasonable costs associated with exploration work related 
to permits transferred in 2016.

Miminvest is a company established to invest in gold and natural resources in West Africa and is controlled by the
Mimran family and Mr. David Mimran, a director and the largest shareholder of Teranga.

2017 Annual Report  88

Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2017
(in $000’s of United States dollars, except per share amounts)

38. SUBSEQUENT EVENTS

Gold contracts

The following table shows the presold ounces of gold and forward gold sales contracts the Company entered into in
January 2018:

Settlem ent Dates

Total Ounces

Settlem ent Price

Pre-sold ounces

January - March 2018

Deliverable forw ard

January - March 2018

Forw ard contract

April - Sept, 2019

18,000

22,000

56,500

$1,320-$1,321

$1,321-$1,323

$1,350

2017 Annual Report  89

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(cid:55)(cid:72)(cid:79)(cid:29)(cid:3)(cid:14)(cid:3)(cid:21)(cid:21)(cid:20)(cid:16)(cid:22)(cid:22)(cid:27)(cid:16)(cid:25)(cid:23)(cid:21)(cid:16)(cid:24)(cid:21)(cid:24)(cid:3)(cid:3)
(cid:41)(cid:68)(cid:91)(cid:29)(cid:3)(cid:14)(cid:3)(cid:21)(cid:21)(cid:23)(cid:16)(cid:22)(cid:22)(cid:27)(cid:16)(cid:25)(cid:23)(cid:21)(cid:16)(cid:24)(cid:21)(cid:25)(cid:3)

(cid:50)(cid:88)(cid:68)(cid:74)(cid:68)(cid:71)(cid:82)(cid:88)(cid:74)(cid:82)(cid:88)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:3)
(cid:36)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:42)(cid:113)(cid:85)(cid:68)(cid:85)(cid:71)(cid:3)(cid:46)(cid:68)(cid:81)(cid:74)(cid:82)(cid:3)(cid:50)(cid:88)(cid:72)(cid:71)(cid:85)(cid:68)(cid:82)(cid:74)(cid:82)(cid:3)
(cid:50)(cid:88)(cid:68)(cid:74)(cid:68)(cid:3)(cid:21)(cid:19)(cid:19)(cid:19)(cid:3)
(cid:19)(cid:20)(cid:3)(cid:37)(cid:51)(cid:3)(cid:20)(cid:22)(cid:22)(cid:23)(cid:3)
(cid:50)(cid:88)(cid:68)(cid:74)(cid:68)(cid:71)(cid:82)(cid:88)(cid:74)(cid:82)(cid:88)(cid:15)(cid:3)(cid:37)(cid:88)(cid:85)(cid:78)(cid:76)(cid:81)(cid:68)(cid:3)(cid:41)(cid:68)(cid:86)(cid:82)(cid:3)
(cid:55)(cid:72)(cid:79)(cid:29)(cid:3)(cid:14)(cid:3)(cid:21)(cid:21)(cid:25)(cid:16)(cid:21)(cid:24)(cid:22)(cid:26)(cid:16)(cid:24)(cid:20)(cid:28)(cid:28)(cid:3)

(cid:36)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:3)
(cid:40)(cid:85)(cid:81)(cid:86)(cid:87)(cid:3)(cid:9)(cid:3)(cid:60)(cid:82)(cid:88)(cid:81)(cid:74)(cid:3)(cid:47)(cid:47)(cid:51)(cid:3)
(cid:38)(cid:75)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:36)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:68)(cid:81)(cid:87)(cid:86)(cid:3)
(cid:55)(cid:82)(cid:85)(cid:82)(cid:81)(cid:87)(cid:82)(cid:15)(cid:3)(cid:50)(cid:81)(cid:87)(cid:68)(cid:85)(cid:76)(cid:82)(cid:15)(cid:3)(cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:68)(cid:3)

(cid:47)(cid:72)(cid:74)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:88)(cid:81)(cid:86)(cid:72)(cid:79)(cid:3)
(cid:54)(cid:87)(cid:76)(cid:78)(cid:72)(cid:80)(cid:68)(cid:81)(cid:3)(cid:40)(cid:79)(cid:79)(cid:76)(cid:82)(cid:87)(cid:87)(cid:3)(cid:47)(cid:47)(cid:51)(cid:3)
(cid:55)(cid:82)(cid:85)(cid:82)(cid:81)(cid:87)(cid:82)(cid:15)(cid:3)(cid:50)(cid:81)(cid:87)(cid:68)(cid:85)(cid:76)(cid:82)(cid:15)(cid:3)(cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:68)(cid:3)

(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:55)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:72)(cid:85)(cid:3)(cid:36)(cid:74)(cid:72)(cid:81)(cid:87)(cid:3)
(cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:68)(cid:29)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:88)(cid:87)(cid:72)(cid:85)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:68)(cid:3)
(cid:20)(cid:19)(cid:19)(cid:3)(cid:56)(cid:81)(cid:76)(cid:89)(cid:72)(cid:85)(cid:86)(cid:76)(cid:87)(cid:92)(cid:3)(cid:36)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:15)(cid:3)(cid:27)(cid:87)(cid:75)(cid:3)(cid:41)(cid:79)(cid:82)(cid:82)(cid:85)(cid:3)
(cid:55)(cid:82)(cid:85)(cid:82)(cid:81)(cid:87)(cid:82)(cid:15)(cid:3)(cid:50)(cid:81)(cid:87)(cid:68)(cid:85)(cid:76)(cid:82)(cid:15)(cid:3)(cid:38)(cid:68)(cid:81)(cid:68)(cid:71)(cid:68)(cid:3)(cid:48)(cid:24)(cid:45)(cid:3)(cid:21)(cid:60)(cid:20)(cid:3)
(cid:55)(cid:72)(cid:79)(cid:29)(cid:3)(cid:14)(cid:3)(cid:20)(cid:16)(cid:27)(cid:19)(cid:19)(cid:16)(cid:24)(cid:25)(cid:23)(cid:16)(cid:25)(cid:21)(cid:24)(cid:22)(cid:3)

(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:47)(cid:76)(cid:86)(cid:87)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)
(cid:55)(cid:82)(cid:85)(cid:82)(cid:81)(cid:87)(cid:82)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:29)(cid:3)(cid:55)(cid:42)(cid:61)(cid:3)
(cid:50)(cid:55)(cid:38)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:86)(cid:3)(cid:42)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:5)(cid:50)(cid:55)(cid:38)(cid:52)(cid:59)(cid:5)(cid:3)(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:29)(cid:3)(cid:55)(cid:42)(cid:38)(cid:39)(cid:41)(cid:3)

(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:44)(cid:86)(cid:86)(cid:88)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:50)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)
(cid:20)(cid:19)(cid:26)(cid:15)(cid:22)(cid:23)(cid:22)(cid:15)(cid:28)(cid:19)(cid:21)(cid:3)(cid:11)(cid:68)(cid:86)(cid:3)(cid:68)(cid:87)(cid:3)(cid:39)(cid:72)(cid:70)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:12)(cid:3)

CORPORATE DIRECTORY  

(cid:37)(cid:50)(cid:36)(cid:53)(cid:39)(cid:3)(cid:50)(cid:41)(cid:3)(cid:39)(cid:44)(cid:53)(cid:40)(cid:38)(cid:55)(cid:50)(cid:53)(cid:54)(cid:3)(cid:3)

(cid:36)(cid:79)(cid:68)(cid:81)(cid:3)(cid:53)(cid:17)(cid:3)(cid:43)(cid:76)(cid:79)(cid:79)(cid:3)
(cid:38)(cid:75)(cid:68)(cid:76)(cid:85)(cid:80)(cid:68)(cid:81)(cid:3)

(cid:53)(cid:76)(cid:70)(cid:75)(cid:68)(cid:85)(cid:71)(cid:3)(cid:60)(cid:82)(cid:88)(cid:81)(cid:74)(cid:3)
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)

(cid:58)(cid:76)(cid:79)(cid:79)(cid:76)(cid:68)(cid:80)(cid:3)(cid:37)(cid:76)(cid:74)(cid:74)(cid:68)(cid:85)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:45)(cid:72)(cid:81)(cid:71)(cid:68)(cid:92)(cid:76)(cid:3)(cid:41)(cid:85)(cid:68)(cid:93)(cid:72)(cid:85)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:40)(cid:71)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:42)(cid:82)(cid:79)(cid:71)(cid:72)(cid:81)(cid:69)(cid:72)(cid:85)(cid:74)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:38)(cid:75)(cid:85)(cid:76)(cid:86)(cid:87)(cid:82)(cid:83)(cid:75)(cid:72)(cid:85)(cid:3)(cid:53)(cid:17)(cid:3)(cid:47)(cid:68)(cid:87)(cid:87)(cid:68)(cid:81)(cid:93)(cid:76)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:39)(cid:68)(cid:89)(cid:76)(cid:71)(cid:3)(cid:48)(cid:76)(cid:80)(cid:85)(cid:68)(cid:81)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:36)(cid:79)(cid:68)(cid:81)(cid:3)(cid:53)(cid:17)(cid:3)(cid:55)(cid:75)(cid:82)(cid:80)(cid:68)(cid:86)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:41)(cid:85)(cid:68)(cid:81)(cid:78)(cid:3)(cid:39)(cid:17)(cid:3)(cid:58)(cid:75)(cid:72)(cid:68)(cid:87)(cid:79)(cid:72)(cid:92)(cid:3)
(cid:49)(cid:82)(cid:81)(cid:16)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:3)

(cid:54)(cid:40)(cid:49)(cid:44)(cid:50)(cid:53)(cid:3)(cid:48)(cid:36)(cid:49)(cid:36)(cid:42)(cid:40)(cid:48)(cid:40)(cid:49)(cid:55)(cid:3)

(cid:53)(cid:76)(cid:70)(cid:75)(cid:68)(cid:85)(cid:71)(cid:3)(cid:60)(cid:82)(cid:88)(cid:81)(cid:74)(cid:3)
(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)

(cid:51)(cid:68)(cid:88)(cid:79)(cid:3)(cid:38)(cid:75)(cid:68)(cid:90)(cid:85)(cid:88)(cid:81)(cid:3)
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)

(cid:49)(cid:68)(cid:89)(cid:76)(cid:81)(cid:3)(cid:39)(cid:92)(cid:68)(cid:79)(cid:3)
(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)

(cid:39)(cid:68)(cid:89)(cid:76)(cid:71)(cid:3)(cid:54)(cid:68)(cid:89)(cid:68)(cid:85)(cid:76)(cid:72)(cid:3)
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:88)(cid:81)(cid:86)(cid:72)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:85)(cid:72)(cid:87)(cid:68)(cid:85)(cid:92)(cid:3)

(cid:54)(cid:72)(cid:83)(cid:68)(cid:81)(cid:87)(cid:68)(cid:3)(cid:39)(cid:82)(cid:85)(cid:85)(cid:76)(cid:3)
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:78)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)
(cid:39)(cid:72)(cid:89)(cid:72)(cid:79)(cid:82)(cid:83)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)

(cid:39)(cid:68)(cid:89)(cid:76)(cid:71)(cid:3)(cid:48)(cid:68)(cid:79)(cid:79)(cid:82)(cid:3)
(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:40)(cid:91)(cid:83)(cid:79)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)

(cid:55)(cid:85)(cid:76)(cid:86)(cid:75)(cid:3)(cid:48)(cid:82)(cid:85)(cid:68)(cid:81)(cid:3)
(cid:43)(cid:72)(cid:68)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)

2017 Annual Report (cid:28)(cid:19)

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ANNUAL REPORT