20Annual Report
18
TABLE OF CONTENTS
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
3
8
54
55
57
61
100
This annual report contains certain statements that constitute forward-looking
information. Please refer to the cautionary note regarding Forward-Looking
Statements on page 52. All amounts are in U.S. dollars unless otherwise stated.
BUILDING
a multi-asset
mid-tier gold producer
in West Africa
Annual Report 2018 1
2018 ACHIEVEMENTS
Sabodala Gold Operations
Delivered 245,230 ounces of gold, exceeding production
guidance at an all-in sustaining cost
(excluding non-cash inventory movements and amortized
advanced royalty costs) of $940 per ounce(1)
Generated net cash flow of almost $50 million(2)
Wahgnion Gold Operations
Filed an updated NI 43-101 Technical Report
Increased gold reserves by 450,000 ounces, extending
the mine life to 13 years and improving the initial 5-year
operating profile
Advanced construction on schedule and on budget
Golden Hill Advanced Exploration Project
Acquired the remaining interest from joint venture
partner, increasing ownership to 100%
Entered into an earn-in agreement for the adjacent
property contiguous to the north
Aggressive exploration program which produced good
drill results in preparation for an initial mineral resource
estimate (released February 2019)
Côte d’Ivoire Early Stage Exploration
Good progress advancing Miminvest properties
Commenced technical work at Afema properties
(1)
This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS
financial measures at the end of the MD&A.
(2) Net cash flow is free cash flow net of financing activities. Free cash flow is a non-
IFRS financial measure, please refer to the reconciliation of non-IFRS financial
measures at the end of the MD&A.
2 Annual Report 2018
LETTER TO SHAREHOLDERS
As we move ahead, focused on achieving our vision, it is important
to remember both our achievements and the people behind them.
2018 was long on accomplishments. We delivered on our annual
performance metrics while also making great progress towards
achieving our vision of becoming a multi-asset mid-tier gold
producer in West Africa.
Sabodala: Cumulative Gold Production Surpasses 1.6 Million Ounces
Sabodala, our flagship mine, achieved its third consecutive year of record gold
production with per ounce cost metrics well below forecast. As a result, Sabodala
generated net cash flow of almost $50 million(1). The strong operating and financial
results were due to our team’s commitment to productivity and ongoing performance
improvements.
Sabodala continues to successfully replace reserves and extend its mine life. In
2010, Sabodala had gold mineral reserves of 1.46 million ounces. Since that
time, after producing 1.66 million ounces of gold, Sabodala still has a significant
measured and indicated mineral resource of over 4 million ounces(2), over half of which
is gold mineral reserves(2).
Sabodala is a long life asset with potential for further growth. One of the
best opportunities we have with respect to Sabodala’s resource base is the
conversion of resources at Niakafiri, our largest deposit on the mine license.
Currently, we are relocating the village that sits atop Niakafiri. The resettlement is
well underway and the new village infrastructure is taking shape. Once complete, in
the first half of 2020, we will be in a position to resume the Niakafiri drill program.
With a mine life currently in excess of 10 years remaining, Sabodala’s performance
and free cash flow will continue to be fundamental to the pursuit of our growth strategy.
Wahgnion: Second Gold Mine on Track for First Pour in 2019
In early 2018, we completed the financing and commenced major construction of our
second gold mine, Wahgnion. To date, construction of Wahgnion, located in the
southwestern portion of Burkina Faso, is on budget and running ahead of schedule. The
majority of construction risks are behind us and therefore our focus has shifted
to operations readiness. Our original estimate for completion was the end of 2019,
however, we are currently a quarter ahead of schedule and the mine plan is being
revised to accommodate an earlier than planned commissioning of the plant.
We announced construction of Wahgnion when it had an initial mineral reserve base of
1.16 million ounces. In 2018, following an infill drill program, Wahgnion’s
mineral reserves increased by almost 40% to 1.61 million ounces(3).
(1)
(2)
(3)
Net cash flow is free cash flow net of financing activities. Free cash flow is a non-IFRS financial measure, please refer to
the reconciliation of non-IFRS financial measures at the end of the MD&A.
Reference is to Measured and Indicated Mineral Resources only, exclusive of Inferred Mineral Resources. Please refer to
pages 28-29 in the Company's Annual Information Form dated March 29, 2019 for the current full resource and reserve
statements.
Please refer to pages 28-29 in the Company’s Annual Information Form dated March 29, 2019 for the current full
reserve statement on the Wahgnion Gold Operations.
Annual Report 2018 3
Much like Sabodala, we believe that Wahgnion has the makings of a long life gold mine.
As part of our ongoing goal to further extend Wahgnion’s 13-year mine life and optimize
the mine plan, we will conduct a multi-year drilling program concentrating on previously
identified exploration targets, which are within trucking distance of the plant.
The addition of Wahgnion to Teranga’s production assets will improve our production
profile and diversify our operating and country risk. Wahgnion is expected to increase
our consolidated production by 50% and double free cash flow. This free cash flow
will be instrumental in funding the next phase of our growth pipeline.
Golden Hill: Potentially Our Third Gold Mine
As part of the Gryphon acquisition in 2016, which brought us Wahgnion, we also acquired
51% of a property called Golden Hill, situated in the heart of the Houndé belt in
Burkina Faso. Little drilling had been completed previously on Golden Hill, however,
we were excited about
immediately
commenced an exploration program.
the prolific potential of
the area and
The drill program included approximately 650 drill holes totaling more than
70,000 metres. There were numerous encouraging exploration updates throughout
2017 and 2018 and it did not take long to see the potential of Golden Hill. With
an eye to the future, we acquired the remaining interest from our joint venture partner
and increased our ownership to 100%.
Additionally, to leverage off of what we believe will be our next mine, we also
acquired an earn-in on an adjacent property to the north. What attracted us to this
property is the geology, the structure and the mineralization. It is very similar to what
we have been seeing on our Golden Hill permits. The proximity of the property is
also attractive – it is within trucking distance of a potential mill location at Golden Hill.
Golden Hill has advanced at rapid speed. After only 18 months of drilling, we have
an early-stage initial mineral resource estimate that provides a solid base at good grade
for us to build on. Next steps include further drilling as well as internal technical work.
The goal this year is to move the Golden Hill project into the feasibility stage of
development.
With continued exploration success, we believe that Golden Hill could ultimately be
Teranga’s third producing gold mine.
Côte d’Ivoire: Exploring the Underexplored
Our organic growth pipeline also includes two joint ventures with permits covering
2,600 km2 of land in Côte d’Ivoire. With over one-third of the Birimian Greenstone Belt
falling within the country’s borders, Côte d’Ivoire has significant potential for discoveries.
Our land packages straddle well-known shear zones and trends and we are excited about
the potential of this underexplored region. Results from our early-stage exploration
programs in Côte d’Ivoire are promising and we look forward to updating you on our
progress.
4 Annual Report 2018
Sharing the Benefits of Responsible Mining: Making Change Happen
While we are miners at heart, sharing the benefits of responsible mining is in our DNA.
Our ultimate goal is to leave a positive legacy that will continue to benefit and shape the
future of local communities. In Senegal, after ten years of working in collaboration with
the local communities, the Sabodala region is now one of the healthiest in the country
with health clinics, widespread anti-malaria spray programs, access to potable water, and
greater food security that will benefit generations to come.
With the advent of our second mine, we have expanded our CSR focus to include the
communities surrounding Wahgnion in Burkina Faso. Together with ERM, a leading
global provider of environmental, health, safety, risk, and social consulting services, we
are hard at work advancing livelihood restoration programs with 180 hectares acquired
and allocated for farming, a 10-hectare cassava plantation, cattle drinking facilities
developed to support husbandry and income generation programs developed specifically
for 800 women.
Teranga is striving to make a positive material difference in the local communities and
countries in which it operates.
Focused on Creating Value for Shareholders
Teranga’s share price was recognized as one of the top 50 best performing stocks on the
OTCQX in 2018. Despite a significant decline in the price of gold in the second half of
the year, Teranga’s shares ended the year up 35%, outperforming our West African peer
group, the major gold indices, and the price of gold.
Clearly, Teranga has come a long way in a short time and investors are beginning to take
notice. Three years ago, we were a single asset producer in one country. Today, not only
are we on the verge of having two producing assets, we also have a robust organic pipeline
of gold exploration projects in three countries. Teranga’s pipeline has the potential to
support our goal of achieving mid-tier status in the next five years. Teranga offers
investors a unique combination of value and growth and
is a compelling
investment opportunity.
Gratitude to Our Employees and Partners
At the outset of this letter, we highlighted the importance of remembering the
people who are instrumental to our success. We would like to express our deepest
appreciation to all of our employees, contractors, suppliers and business partners, as
well as, our host governments and the Government of Canada. On behalf of the Board
and management team, we thank our fellow shareholders for their ongoing support
and confidence as we continue to execute on our vision of becoming a multi-asset
mid-tier gold producer in West Africa.
ALAN HILL
Chairman
RICHARD YOUNG
President & Chief Executive Officer
Annual Report 2018 5
2019 GOALS
Sabodala Gold Operations
•
•
Produce 215,000 to 230,000 ounces of gold at an
all-in sustaining cost (excluding non-cash inventory
movements and amortized advanced royalty costs) of
$825 - $900 per ounce(1)
Ongoing resettlement of the village atop the Niakafiri
deposit
Wahgnion Gold Operations
•
•
Achieve first gold pour on time and on budget
Produce 30,000 to 40,000 ounces of gold at an
all-in sustaining cost (excluding non-cash inventory
movements and amortized advanced royalty costs) of
$750 - $825 per ounce(1)
Golden Hill Advanced Exploration Project
•
•
•
Complete initial mineral resource estimate
(released February 2019)
Complete preliminary technical and economic
assessments
Advance to feasibility stage of development
Côte d’Ivoire Early Stage Exploration
•
(1)
Continue advancing Miminvest and Afema properties
This is a non-IFRS financial measure. All-in sustaining costs per ounce sold calculated at the mine site level
includes only total cash costs per ounce and sustaining capital expenditures. All-in sustaining costs for
Sabodala includes sustaining capital expenditures but excludes growth capital related to the Sabodala village
resettlement. Corporate administration and share-based compensation expense are separate and are not
allocated to the mine site level costs. All-in sustaining costs also includes non-cash inventory movements
and non-cash amortization of advanced royalties. Please refer to the reconciliation of non-IFRS financial
measures at the end of the MD&A.
6 Annual Report 2018
Page 7
Job Number: 590180
Dashed Line=Trim Solid Line=Bleed Allowance
Output Date: Mar_29_2019
Management‘s Discussion and Analysis
December 31, 2018
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2018 AND 2017
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 three and twelve months ended December 31, 2018 and 2017. 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, 2018 and 2017. The
Company’s Statements and MD&A are presented in United States dollars (“USD”), 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, 2017, as well as all other public filings, is available on the Company’s
website at www.terangagold.com and on the SEDAR website (www.sedar.com).
This report is dated as of February 22, 2019. 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 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 approximately 6,400 km2 of land located on prospective gold belts. Since its initial public offering in
2010, Teranga has produced more than 1.6 million ounces of gold from its Sabodala operation in Senegal. Focused on
diversification and growth, the Company is advancing construction of its second mine, Wahgnion Gold Operations
(“Wahgnion”), which is located in Burkina Faso, as well as carrying out exploration programs in three West African
countries: Burkina Faso, Côte d’Ivoire and Senegal. The Company had more than 4.0 million ounces of gold reserves1
as of June 30, 2018. Teranga applies a rigorous capital allocation framework for its investment decisions and is focused
on funding future organic growth plans responsibly.
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.
MISSION
Our mission is to create value through responsible mining for all of our stakeholders by setting the benchmark for
corporate social responsibility.
VISION
Our vision is to become a multi-asset mid-tier West African gold producer with a portfolio of assets offering diversified
production, strong operating margins and long-term sustainable free cash flows.
1 Refer to the Company’s website at www.terangagold.com for further details.
8 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
STRATEGY
Our strategy is to maximize shareholder value by increasing long-term sustainable 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) maximizing free cash flow from our flagship Sabodala operation; (ii) increasing production with the
completion of Wahgnion by the end of 2019; (iii) progressing Golden Hill, our most advanced exploration project, towards
feasibility; (iv) unlocking additional value through resource conversion drill programs and exploration in Burkina Faso,
Senegal and Côte d’Ivoire; and (v) funding our future growth plans responsibly.
FINANCIAL AND OPERATING HIGHLIGHTS
Financial Data
Revenue
Cost of sales
Gross profit
Net (loss)/profit attributable to shareholders of Teranga
Per share
Adjusted net profit attributable to shareholders of Teranga1
Per share1
EBITDA 1
Operating cash flow before changes in w orking capital
excluding inventories
Operating cash flow
Sustaining capital expenditures (excluding deferred stripping)
Capitalized deferred stripping - sustaining
Grow th capital expenditures
Cash and cash equivalents, as at
Operating Data
Gold Produced
Gold Sold
Average realized gold price1
Cost of sales per ounce
Total cash costs1
All-in sustaining costs (excluding non-cash inventory
movements and amortized advanced royalty costs)1
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2018
2017
Change
2018
2017
Change
($000s)
($000s)
($000s)
($000s)
($)
($000s)
($)
($000s)
($000s)
($000s)
($000s)
($000s)
($000s)
($000s)
76,140
88,280
(14%)
312,628
291,683
(59,374)
(64,149)
(7%)
(230,517)
(222,113)
16,766
24,131
(31%)
82,111
69,570
(10,639)
5,758
(0.10)
0.05
1,229
8,717
0.01
0.08
12,516
26,630
25,384
41,784
24,708
32,452
5,727
3,985
13,526
7,655
N/A
N/A
(86%)
(86%)
(53%)
3%
29%
44%
77%
11,794
31,932
0.11
0.30
18,075
30,106
0.17
0.28
111,855
95,335
96,649
82,610
92,060
71,379
18,846
25,382
45,978
29,428
53,174
10,509
406%
137,334
24,623
46,615
87,671
7%
4%
18%
(63%)
(63%)
(40%)
(40%)
17%
17%
29%
(26%)
56%
458%
(47%)
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2018
2017
Change
2018
2017
Change
(oz)
(oz)
59,442
67,934
61,696
68,944
($ per oz)
1,232
1,279
($ per oz sold)
($ per oz sold)
962
692
930
689
(13%)
(11%)
(4%)
3%
1%
245,230
233,267
246,073
231,078
1,271
1,261
937
660
961
721
($ per oz sold)
998
860
16%
940
943
5%
6%
1%
(3%)
(8%)
(0%)
1 This is a no n-IFRS financial measure and do es no t have a standard meaning under IFRS. P lease refer to No n-IFRS Financial M easures at the end o f this M D&A .
FOURTH QUARTER HIGHLIGHTS
Financial Highlights
•
•
•
•
•
Revenue of $76.1 million was 14 percent lower than the prior year period due to lower ounces sold and lower
average realized prices.
Gross profit of $16.8 million was 31 percent lower than the prior year period due to lower revenues and higher
depreciation and amortization expenses.
Net loss attributable to shareholders was $10.6 million ($0.10 loss per share) for the fourth quarter compared to
net profit of $5.8 million ($0.05 per share) in the prior year period. The decrease was primarily attributable to
lower gross profit of $7.4 million, higher net losses on forward gold sales contracts of $3.7 million and higher non-
cash accretion expense of $1.7 million mainly as a result of the adoption of IFRS 15.
Adjusted net profit attributable to shareholders1 was $1.2 million ($0.01 per share) for the fourth quarter compared
to $8.7 million ($0.08 per share) in the prior year period. The decrease was mainly due to lower gross profit.
Adjusted net profit attributable to shareholders1 excludes gains or losses on gold forward sales contracts, accretion
expense, net foreign exchange losses, the impact of foreign exchange movements on deferred taxes and other non-
cash fair value changes.
In October, the Golden Hill portion of the secured development finance facility with Taurus Funds Management Pty
Ltd. (the “Taurus Facility”) was increased by an additional $10 million in order to fund the acquisition of the
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
Annual Report 2018 9
Management‘s Discussion and Analysis
December 31, 2018
remaining 49 percent interest in the Golden Hill and Gourma exploration projects, in Burkina Faso, from Boss
Resources Limited (“Boss Resources”).
•
•
Cash flow related to operating activities, before changes in working capital excluding inventories, increased 3
percent year-over-year to $25.4 million.
Cash and cash equivalents totalled $46.6 million, a decrease of $33.1 million from the third quarter 2018 balance
of $79.7 million, as construction activities continued to ramp up during the quarter at the Company’s second mine,
Wahgnion.
Operating Highlights
•
•
•
•
Teranga finished 2018 with a solid production in the fourth quarter. Gold production for the fourth quarter totalled
59,442 ounces, which was 13 percent lower than the prior year period. The Company reported recorded gold
production of 245,230 ounces for 2018, exceeding the high end of its increased production guidance range of
235,000 to 240,000 ounces for the year and achieved its third consecutive year of record production.
Cost of sales per ounce were $962 and $937 for the quarter and year, respectively, with full year cost of sales below
the lower end of the Company’s 2018 guidance range.
Total cash costs per ounce1 for both the quarter and year were below the lower end of the Company’s 2018 guidance.
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1 per ounce
were $998 and $940 for the quarter and year, respectively, with full year costs falling below the lower end of the
full year guidance range, mainly due to higher grades mined and processed.
Total ounces mined over the last 18 months ended December 31, 2018 were approximately 26 percent better than
the reserves model due to solid grade control processes and conservative resource modelling.
Growth Highlights
•
•
•
•
At Wahgnion, first gold pour is well on track for the fourth quarter 2019. Front-end engineering and detailed design
was completed in the fourth quarter. Steel fabrication was completed and has largely been delivered to site. Plant
construction is on schedule, concrete pours are nearing completion, structural steel installation have commenced
and the leach tanks have been installed.
During the fourth quarter, the Company completed its acquisition of the remaining 49 percent interest in the Golden
Hill and Gourma exploration projects from Boss Resources for AUD10 million ($7.2 million). Teranga now owns a
100 percent interest in each of the Golden Hill and Gourma exploration projects.
During the fourth quarter, the Company released an updated National Instrument 43-101 Standards of Disclosure
for Mineral Projects Technical Report (“NI 43-101”) for the Wahgnion project reflecting the previously announced
results of an updated mineral reserve estimate and feasibility study for Wahgnion. Open-pit reserves increased by
almost 40 percent, or 450,000 ounces of gold, following a 33 percent increase in mineral resources announced in
the second quarter 2018. The first five years production forecast was improved and Wahgnion’s mine life was
extended from 9 years to 13 years.
Teranga’s exploration program at the Golden Hill property in Burkina Faso, the Company’s most advanced exploration
project, continues to generate very good grade drill results at a number of prospects. The Company released an
initial resource estimate for the Golden Hill’s most advanced prospects on February 21, 2019.
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
10 Annual Report 2018
OUTLOOK 2019
The following table outlines the Company’s performance compared to the 2018 summary production and cost guidance:
Year Ended December 31, 2018
Management‘s Discussion and Analysis
December 31, 2018
Sabodala Operating Results
Total mined
Grade mined
Strip ratio
Ore milled
Head grade
Recovery rate
Gold produced A
Cost of sales per ounce sold
Total cash costs per ounce sold B
All-in sustaining costs C
Non-cash inventory movements and amortized advanced royalty costs C
All-in sustaining costs (excluding non-cash inventory movements and amortized
advanced royalty costs) C
Mining
Mining long haul
Milling
General and Administration
Mine Production Costs
Sabodala Capital Expenditures
Sustaining capital
Site development costs D
Total Sabodala Capital Expenditures E
Growth Capital Expenditures
Wahgnion early works F
Wahgnion construction G
Total Growth Capital Expenditures
Corporate and Other
Corporate administration expense
Regional administration costs
Community social responsibility expense
Exploration and evaluation H
2018
Actual
37,268
3.62
18.4
4,069
2.03
92.3
245,230
937
660
1,006
(66)
940
2.57
2.59
12.95
5.30
175.2
9.6
9.2
18.8
29.2
107.6
136.8
13.6
1.9
3.7
14.7
Third quarter 2018
Guidance
37,000 – 39,500
2.50 – 3.00
16.5 – 18.5
4,200 – 4,400
1.70 – 1.90
90.0 – 91.5
235,000 –
240 000
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
10.0 – 15.0
10.0 – 15.0
20.0 – 30.0
~30.0
140.0 – 160.0
170.0 – 190.0
11.0 – 13.0
~2.0
4.0 – 5.0
~15.0
(‘000t)
(g/t)
waste/ore
(‘000t)
(g/t)
%
(oz)
$/oz sold
$/oz sold
$/oz sold
$/oz sold
$/oz sold
($/t mined)
($/t hauled)
($/t milled)
($/t milled)
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
Notes to Guidance Table Above:
A. 22,500 ounces of Sabodala gold production was to be sold to Franco-Nevada Corporation (“Franco-Nevada”) at 20% of the spot gold price.
B. Total cash costs 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 presented in this table is calculated at the asset level and as such includes only total cash costs per ounce and sustaining capital
expenditures. Corporate administration and share-based compensation expense is presented separately in this table and is not allocated to the
individual assets. All-in sustaining costs also include non-cash inventory movements and non-cash amortization of advanced royalties.
D. Site development costs include village resettlement costs for the Sabodala village.
E. Excludes capitalized deferred stripping costs, included in mine production costs.
F. Early works expenditures for 2018 included anticipated expenditures for the construction of Wahgnion prior to initial drawdown under the
Taurus Facility which was executed in May 2018.
G. Wahgnion construction expenditures included anticipated expenditures for Wahgnion post completion of the Taurus Facility.
H. Exploration and evaluation costs included both expensed exploration, primarily attributable to exploration work on exploration permits, and
capitalized reserve development, which is work performed on mine licenses.
This forecast financial information was based on the following material assumptions for the remainder of 2018: gold price: $1,250 per ounce;
light fuel oil price $0.87/L; heavy fuel oil price $0.60/L; Euro:USD exchange rate of 1:1.17.
Other important assumptions: any political events were not expected to impact operations, including movement of people, supplies and gold
shipments; grades and recoveries was expected to remain consistent with the life-of-mine plan to achieve the forecast gold production; and no
unplanned delays in or interruption of scheduled production.
Annual Report 2018 11
Management‘s Discussion and Analysis
December 31, 2018
The following table outlines the Company’s estimated 2019 summary production and cost guidance:
2019
Guidance
37,000 – 39,500
3,000 – 3,500
1.50 – 2.00
9.5 – 12.0
4,100 – 4,300
1.80 – 2.00
89.0 – 91.0
215,000 – 230,000
1,050 – 1,125
725 – 775
900 – 975
(75)
825 – 900
(‘000t)
(‘000t)
(g/t)
waste/ore
(‘000t)
(g/t)
%
(oz)
$/oz sold
$/oz sold
$/oz sold
$/oz sold
$/oz sold
($/t mined)
($/t hauled)
2.50 – 2.75
1.50 – 2.00
($/t milled)
12.00 – 13.00
($/t milled)
4.50 – 5.00
$ millions
165 – 180
$ millions
$ millions
$ millions
10 – 15
15 – 20
25 – 35
(‘000t)
(‘000t)
(g/t)
(‘000t)
(g/t)
%
(oz)
$/oz sold
$/oz sold
$/oz sold
$/oz sold
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
$ millions
6,800 – 7,200
500 – 650
1.80 – 2.00
500 – 650
1.80 – 2.00
~ 90.0
30,000 – 40,000
1,175 – 1,250
1,050 – 1,125
(300)
750 - 825
115 – 120
~ 30
145 – 150
13 – 14
3.5 – 4.5
2 – 3
4 - 5
5 – 15
Sabodala Operating Results
Total mined
Ore mined
Grade mined
Strip ratio
Ore milled
Head grade
Recovery rate
Gold produced A
Cost of sales per ounce sold
Total cash costs per ounce sold B
All-in sustaining costs C
Non-cash inventory movements and amortized advanced royalty costs C
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) C
Mining
Mining long haul
Milling
General and administration
Mine Production Costs
Capital Expenditures
Sustaining Capital F
Resettlement Capital
Total Capital Expenditures
Wahgnion Operating Results
Total mined
Ore mined
Grade mined
Ore milled
Head grade
Recovery rate
Gold produced A
Cost of sales per ounce sold
All-in sustaining costs C
Non-cash inventory movements and amortized advanced royalty costs C
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) C
Wahgnion Capital Expenditures
Construction
Pre-Operating Costs
Total Wahgnion Capital Expenditures
Corporate and Other
Corporate administration expense
Share-based compensation expense D
Regional administration costs
Community social responsibility expense
Exploration and evaluation E
12 Annual Report 2018
Consolidated
Gold produced
Management‘s Discussion and Analysis
December 31, 2018
(oz)
245,000 – 270,000
Cost of sales per ounce sold
All-in sustaining costs C
Non-cash inventory movements and amortized advanced royalty costs C
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs) C
$/oz sold
$/oz sold
$/oz sold
$/oz sold
1,050 – 1,125
1,000 – 1,100
(100)
900 – 1,000
Notes to Guidance Table Above:
A. 22,500 ounces of Sabodala gold production are to be sold to Franco-Nevada at 20% of the spot gold price. All Wahgnion gold production is
subject to a gold offtake payment agreement with Taurus Funds (“Offtake Agreement”) (see Financial Instruments section for more details).
B. Total cash costs 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 calculated at the mine site level includes only total cash costs per ounce and sustaining capital expenditures. All-in sustaining
costs for Sabodala includes sustaining capital expenditures but excludes growth capital related to the Sabodala village resettlement. Corporate
administration and share-based compensation expense are presented separately in this table and are not allocated to the mine site level costs.
All-in sustaining costs presented on a consolidated basis includes corporate administration and share-based compensation expense. All-in
sustaining costs also includes non-cash inventory movements and non-cash amortization of advanced royalties.
D. Share-based compensation expense assumes a constant share price of C$4.00 per Teranga share.
E. 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.
F. Excludes capitalized deferred stripping costs, included in mine production costs.
This forecast financial information is based on the following material assumptions for the remainder of 2019: gold price: $1,250 per ounce;
Brent Crude Oil: $62 per barrel; Euro:USD exchange rate of 1:1.15.
Other important assumptions: any political events are not expected to impact operations, including movement of people, supplies and gold
shipments; grades and recoveries is expected to remain consistent with the life-of-mine plan to achieve the forecast gold production; and no
unplanned delays in or interruption of scheduled production.
2019 Guidance Analysis
Estimates of future production, cost of sales, cash costs1, all-in sustaining costs1 and all-in sustaining costs
(excluding non-cash inventory movements and amortized advanced royalty costs)1 are based on mine plans that reflect
the expected method by which we will mine reserves at each site. Actual gold production and associated costs may
vary from these estimates due to a number of operational and non-operational risk factors. Since the Wahgnion
project is presently in the construction stage and is not expected to start commissioning until later this year,
guidance for annual plant throughput and gold production in 2019 is subject to standard risk factors associated with
project construction and start up challenges experienced with a new operating mine.
Sabodala
The Company’s mine plan for Sabodala is designed to maximize free cash flows1. Free cash flows1 from our Sabodala
mine will be used to fund the Company’s growth strategy, including funding through to completion of construction of
the Company’s second mine, Wahgnion. At Sabodala, mining activities during 2019 will include mining of five deposits:
Golouma West, Sabodala Phase 4, Kerekounda, Maki Medina and Koulouqwinde. Golouma West will be mined
throughout 2019 and will comprise approximately 50 percent of total tonnes mined and more than 75 percent of
total ounces mined. Sabodala Phase 4 will start out the year mining at higher elevations at high-strip ratios before
reaching the lower benches and lower-strip ratios towards the end of the year. The high-grade Kerekounda and
Koulouqwinde deposits will complete mining activities in the first half of 2019 while the Maki Medina deposit
is scheduled to commence mining activities during the fourth quarter. Total tonnes mined are expected to be similar
to the 37.3 million tonnes mined in 2018 at between 37.0 and 39.5 million tonnes in 2019. Ore tonnes mined will
be almost twice as much compared to 2018 but at lower ore grades due to completion of mining activities at Gora in
2018.
Mill throughput is expected to increase slightly with ongoing optimization activities at the semi-autogenous
grinding (“SAG”) and ball mill circuit to between 4.1 and 4.3 million tonnes, compared to 4.1 million tonnes in
2018. Mill grades are expected to be slightly lower than 2018 at between 1.80 and 2.00 grams per tonne as higher
grade material is supplemented with lower grade stockpiled material.
Gold production at Sabodala is expected to be between 215,000 and 230,000 ounces, with slightly higher production
during the first quarter compared to the remaining three quarters. Gold production at Sabodala is anticipated to be
approximately 10 percent lower than 2018 as the Company looks to maintain a balance between providing cash
flow
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
Annual Report 2018 13
Management‘s Discussion and Analysis
December 31, 2018
necessary to complete Wahgnion’s development, while also retaining a high-grade stockpile to support quarterly and
annual production targets, as has been done in recent years.
Total production costs at Sabodala are expected to be in the range of $165 to $180 million in 2019, similar to 2018.
Sustaining capital expenditures in 2019 for the Sabodala mine are expected to be similar to 2018 at between $10 and
$15 million, as well as an additional $15 to $20 million required to continue relocation and construction activities of
the Sabodala village. Sustaining capital expenditures exclude capitalized deferred stripping costs included in total
production costs.
Cost of sales are expected to be in the range of $1,050 to $1,125 per ounce. Total cash costs1 are expected to be in
the range of $725 to $775 per ounce.
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1 for Sabodala,
which exclude allocations of corporate administration and share-based compensation expense, are expected to be
between $825 to $900 per ounce, similar to 2018.
Wahgnion
The Wahgnion development project is progressing well and is being managed by an owner’s management team with
responsibility for delivering site infrastructure, which includes tailings, mine site services, and initiation of mine
operations. Mining activities have been ongoing since August 2018, with material sourced from the Nangolo and
Nogbele North pits. The early start of the mining production has provided construction material for the tailings storage
facility, allow the Nangolo pit to be used as a water storage starting in mid-2019, and build-up of an ore stockpile for
the start of production.
Management is preparing the commissioning schedule for plant production ramp-up to nameplate capacity after
mechanical completion. With the project well on track, management is preparing a new mine plan for 2019 to mine
more material than planned in last year’s technical report to accommodate an earlier than planned commissioning of
the plant. Based on current progress of construction, production ramp up through the fourth quarter 2019 is expected
to exceed the original estimate in last year’s technical report.
Assuming an earlier commissioning of the plant and a ramp up in production exceeding original estimates, gold
production at Wahgnion is anticipated to commence during the fourth quarter with gold production expected to range
from 30,000 to 40,000 ounces for 2019. Cost of sales are expected to be between $1,175 and $1,250 per ounce and
all-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1, excluding
allocations of corporate overhead and share-based compensation expense, are expected to be between $750 and $825
per ounce.
The remaining construction capital to be spent at Wahgnion is anticipated to be $115 to $120 million. Total
construction capital for the project remains largely in line with the estimates outlined in the feasibility study, other than
some unfavourable variances for fuel and foreign exchange, which are moderately impacting equipment, labour and
material costs. The majority of the project contingency remains unused.
Operating cost of mining, and other costs incurred prior to commencement of production is estimated to be approximately
$30 million. The increase to pre-production operating costs from the feasibility study is due to costs related to staffing
for operations prior to commencement of production and operating activities ahead of full commissioning.
Corporate and Other
Administrative costs for 2019 are expected to be in the range of $13 to $14 million, similar to 2018. Most of the
Company’s administration costs are denominated in Canadian dollars. Share-based compensation expense is expected
to be in the range of $3.5 and $4.5 million. The actual amount expensed is dependent on movements in the Company’s
share price.
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
14 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Regional office costs, including the Dakar, Ouagadougou and Abidjan offices, are expected to total approximately $2.0
to $3.0 million, slightly higher than in 2018, mainly due to higher expensed Ouagadougou office costs, which in 2018
had been capitalized as part of Wahgnion’s development costs.
Corporate social responsibility costs are expected to increase by up to $0.5 million to between $4.0 and $5.0 million
reflecting activities deferred from 2018 to 2019.
The Company’s exploration and evaluation budget is expected to be in the range of $5 to $15 million for 2019, and is
considered discretionary in order to preserve cash flow to complete the development of Wahgnion, should it be required.
Consolidated
With the anticipated commencement of production operations at Wahgnion, consolidated gold production is expected to
be higher than 2018 at between 245,000 and 270,000 ounces at consolidated cost of sales between $1,050 and
$1,125 per ounce and all-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty
costs)1 between $900 and $1,000 per ounce, which includes administration and share-based compensation expense.
Sensitivity
2019
Hypothetical
Impact on all-in
Impact on
Assumption
Change
sustaining costs
cash flow
Gold revenue
Gold price effect on royalties
Fuel cost based on Brent oil price
EUR exchange rate
$1,250/oz
$1,250/oz
$62/bbl
1.15:1
$100/oz
$100/oz
10%
10%
n/a
$6/oz
$18/oz
$37/oz
$22.5M
$1.3M
$4.6M
$9.1M
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
Annual Report 2018 15
Management‘s Discussion and Analysis
December 31, 2018
REVIEW OF OPERATING RESULTS
Sabodala Gold Operations
Operating Results
Ore mined
Waste mined - operating
Waste mined - capitalized
Total mined
Grade mined
Ounces mined
Strip ratio
Ore milled
Head grade
Recovery rate
Gold produced1
Gold sold
Average realized price2
Cost of sales per ounce
Total cash costs2
All-in sustaining costs2
All-in sustaining costs (excluding non-cash inventory
movements and amortized advanced royalty costs)2
Mining
Mining long haul
Milling
G&A
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2017
% Change
2018
2017
% Change
(‘000t)
(‘000t)
(‘000t)
(‘000t)
(g/t)
(oz)
(w aste/ore)
(‘000t)
(g/t)
(%)
(oz)
(oz)
2018
532
5,110
5,298
712
6,773
2,813
10,940
10,298
2.22
4.10
37,832
93,865
19.6
1,028
1.95
92.0
13.5
1,077
2.11
93.1
59,442
67,934
61,696
68,944
($/oz)
1,232
($/oz sold)
($/oz sold)
($/oz sold)
962
692
1,105
1,279
930
689
938
($/oz sold)
998
860
($/t mined)
($/t hauled)
($/t milled)
($/t milled)
2.27
1.44
13.36
6.18
2.46
3.16
11.36
4.70
(25%)
(25%)
88%
6%
(46%)
(60%)
45%
(5%)
(7%)
(1%)
(13%)
(11%)
(4%)
3%
1%
18%
16%
(8%)
(54%)
18%
31%
1,921
18,893
16,454
37,268
3.62
2,101
23,520
11,865
37,486
3.48
223,349
235,262
18.4
4,069
2.03
92.3
16.8
4,221
1.87
92.1
245,230
233,267
246,073
231,078
1,271
1,261
937
660
961
721
1,006
1,024
940
943
2.57
2.59
12.95
5.30
2.36
2.97
11.34
4.26
(9%)
(20%)
39%
(1%)
4%
(5%)
10%
(4%)
9%
0%
5%
6%
1%
(3%)
(8%)
(2%)
(0%)
9%
(13%)
14%
24%
1 Go ld pro duced represents change in go ld in circuit invento ry plus go ld reco vered during the perio d.
2 A verage realized price, to tal cash co sts per o unce, all-in sustaining co sts per o unce, and all-in sustaining co sts (excluding no n-cash invento ry mo vements and amo rtized advanced ro yalty co sts) per
o unce are no n-IFRS financial measures that do no t have a standard meaning under IFRS. P lease refer to No n-IFRS Financial M easures at the end o f this M D&A .
Three months ended December 31, 2018
Golouma
West Kerekounda Sabodala
Koulouqwinde
Total
Golouma
West
Ore mined
(‘000t)
282
70
100
80
532
945
Gora
344
Waste mined - operating
(‘000t)
2,724
733
1,060
593
5,110
8,818
1,677
Waste mined - capitalized
(‘000t)
1,070
-
4,228
-
5,298
8,158
-
Twelve months ended December 31, 2018
Golouma
South Kerekounda Sabodala
Koulouqwinde
Total
72
17
-
380
100
80
1,921
6,728
1,060
593
18,893
-
8,296
-
16,454
Total mined
Grade mined
Ounces mined
(‘000t)
4,076
803
5,388
673
10,940
17,921
2,021
89
7,108
9,456
673
37,268
(g/t)
(oz)
1.95
17,721
5.33
11,991
0.77
2,461
2.20
5,659
2.22
37,832
2.21
8.05
67,157 89,044
2.98
6,888
4.27
52,140
0.77
2,461
2.20
5,659
3.62
223,349
Ore mined
Waste mined - operating
Waste mined - capitalized
Total mined
Grade mined
Ounces mined
(‘000t)
(‘000t)
(‘000t)
(‘000t)
(g/t)
(oz)
Goloum a
West
187
2,972
1,003
4,162
2.16
Three m onths ended Decem ber 31, 2017
Goloum a
Gora
South Kerekounda
103
Total
712
Goloum a
West
384
Tw elve m onths ended Decem ber 31, 2017
Goloum a
Gora
698
South Kerekounda
Total
668
351
2,101
795
6,773
861
11,778
2,598
8,283
23,520
-
-
1,810
2,813
5,757
2,387
-
3,721
11,865
3,191
6.39
237
2.86
2,708
10,298
7,002
14,863
3,266
12,355
37,486
2.60
4.10
2.10
5.14
3.02
2.59
3.48
295
2,896
127
110
13,006
60,587
11,664
8,608
93,865
25,914
115,398
64,772
29,178
235,262
Total mined (as above)
Capitalized pre-stripping
Total mined (including pre-strip tonnes)
(‘000t)
(‘000t)
(‘000t)
10,940
10,298
-
-
10,940
10,298
6%
N/A
6%
37,268
37,486
(1%)
-
2,604
(100%)
37,268
40,090
(7%)
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2018
2017
% Change
2018
2017
% Change
16 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Operating results for the three months ended December 31, 2018
Mining
In the three months ended December 31, 2018, mining activities were focused primarily on Sabodala Phase 4, Golouma
West, Kerekounda and Koulouqwinde. In the three months ended December 31, 2017, mining activities were focused
on Golouma West, Gora Phase 3, Kerekounda and Golouma South. Total tonnes mined in the fourth quarter 2018 were
6 percent higher than the prior year comparative period, representing a new record, due primarily to a ramp up at
Sabodala Phase 4 with the application of two shovels under favourable mining conditions, improved productivity at
Golouma West and the increased usage of excavators in mining.
Ore tonnes mined were 25 percent lower in the fourth quarter 2018 compared with the fourth quarter 2017 due primarily
to the completion of mining activities at Gora Phase 3 in July 2018, a reduced mining rate at depth at Kerekounda and
a high strip ratio during the early stages of Sabodala Phase 4. Mined ore grades were 46 percent lower in the fourth
quarter 2018 compared with the fourth quarter 2017 due primarily to the completion of the relatively high grade Gora
and Golouma South pits in the third and second quarters, respectively.
Total ounces mined over the 18 months ended December 31, 2018 were approximately 26 percent higher than estimated
in the reserves models due to ongoing dilution control, ore recovery processes and conservative resource modelling.
Processing
Ore tonnes milled decreased by 5 percent in the fourth quarter 2018 compared with the prior year period due primarily
to the completion of a significant crushing circuit maintenance program and a higher proportion of harder rock in the
mill feed in the current year period.
Head grade decreased by 7 percent in the fourth quarter 2018 compared with the prior year period due primarily to a
lower proportion of high grade ore sourced from Gora, partially offset by higher grade ore sourced from Kerekounda at
depth.
Gold production decreased by 13 percent to 59,442 ounces in the fourth quarter 2018 compared with the prior year
period due primarily to lower average head grades, ore tonnes milled and recovery rates.
Costs – site operations
Total mining costs (excluding long haul costs) decreased by 3 percent to $24.8 million in the fourth quarter 2018
compared with the prior year period due primarily to favourable mining conditions resulting in reduced fleet maintenance
costs, favourable currency movements and lower explosives costs due to a reduction in blasted tonnes. Accordingly,
lower total mining costs (excluding long haul costs) combined with a 6 percent increase in tonnes mined during the
fourth quarter 2018 resulted in an 8 percent decrease in unit costs compared with the prior year period. Total long haul
costs decreased by 64 percent to $0.6 million in the fourth quarter 2018 compared with the prior year period due
primarily to the completion of mining at the Gora satellite deposit.
Total processing costs increased by 12 percent to $13.7 million in the fourth quarter 2018 compared with the prior year
period due primarily to the impact of higher fuel prices and the completion of power station and crushing circuit
maintenance programs during the fourth quarter 2018. Accordingly, on a unit cost basis, processing costs increased by
18 percent in the fourth quarter 2018 compared with the prior year period due to higher total processing costs and a 5
percent decrease in tonnes milled.
Total mine site general and administrative costs increased by 26 percent to $6.4 million in the fourth quarter 2018
compared with the prior year period due primarily to non-cash supplies inventory obsolescence provision recorded during
the quarter partially offset by favourable currency movements and lower consulting costs. On a unit cost basis, mine
site general and administrative costs increased by 31 percent in the fourth quarter 2018 compared with the prior year
period due to a 5 percent decrease in tonnes milled and higher total general and administrative costs.
Total cost of sales per ounce sold increased by 3 percent to $962 per ounce in the fourth quarter 2018 compared with
the prior year period due primarily to an 11 percent decrease in the volume of gold ounces sold and higher depreciation
and amortization expense, mostly offset by lower mine operation expenses.
Annual Report 2018 17
Management‘s Discussion and Analysis
December 31, 2018
Total cash costs1 for the fourth quarter 2018 were $692 per ounce, an increase of 1 percent compared with the prior
year period due primarily to higher mine production costs and net inventory movements, and a decrease in the volume
of gold ounces sold partially offset by higher capitalized deferred stripping costs and lower royalties.
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1 for the fourth
quarter 2018 were $998 per ounce, an increase of 16 percent compared with the prior year period. The increase was
due primarily to an 11 percent decrease in gold ounces sold.
Operating results for the twelve months ended December 31, 2018
Gold production in 2018 was a record 245,230 ounces, exceeding the high end of the Company’s increased full year
production guidance range of 235,000 to 240,000 ounces. Gold production increased by 5 percent in 2018 compared
with the prior year.
Mining
In the twelve months ended December 31, 2018, mining activities were focused primarily on Golouma West, Sabodala
Phase 4, Kerekounda, the final benches of Gora Phase 3 and Koulouqwinde. In the comparative twelve months ended
December 31, 2017, mining activities were focused on Gora, Kerekounda, Golouma West and Golouma South. Excluding
pre-stripping tonnes, total tonnes mined in 2018 were 1 percent lower than the prior year. Including 2.6 million tonnes
of pre-stripping waste capitalized in 2017 at Golouma West, total tonnes mined decreased by 7 percent in 2018
compared with the prior year.
Despite the increase in mining activities in the fourth quarter 2018, due to a focus on higher productivity areas within
the Sabodala and Golouma West pits, total tonnes mined for the full year 2018 decreased compared with the prior year.
The lower material movement was due to: i) lower mechanical availability for the shovels than expected during the first
nine months of 2018; ii) during the first half of the year, mining activities were focused on narrower benches near the
bottom of the Gora Phase 3 and Golouma South pits, which required the use of smaller equipment, resulting in lower
shovel productivity; and iii) during the third quarter, mining activities were impacted by difficult ground conditions
resulting from a significant increase in rainfall relative to the same prior year period.
Ore tonnes mined were 9 percent lower in 2018 compared with 2017 in large part due to lower material movement
during 2018. Mined ore grades were 4 percent higher in 2018 compared with 2017 due primarily to the final high
grade benches at Gora Phase 3 and positive grade reconciliations at Golouma West and Kerekounda.
Processing
Ore tonnes milled decreased by 4 percent in 2018 compared with the prior year due primarily to a higher proportion of
hard rock in the mill feed and the impact of increased rainfall on the crushing circuit during the third quarter 2018.
Head grade increased by 9 percent in 2018 compared with the prior year due primarily to a greater proportion of high
grade ore sourced from Kerekounda and Gora.
Gold production increased by 5 percent to a record 245,230 ounces in 2018 compared with the prior year due primarily
to higher average head grades and recovery rates, partially offset by lower ore tonnes milled during the year.
Costs – site operations
Total mining costs (excluding long haul costs) increased by 8 percent to $95.9 million in 2018 compared with the prior
year due primarily to the capitalization of $6.7 million in pre-production stage mining costs associated with the Golouma
West pit in 2017. Also negatively impacting total mining costs were lower shovel productivity in the narrow lower
benches of Gora Phase 3 in 2018, higher fuel costs and the impact of unfavourable currency movements compared to
the prior year period. Accordingly, higher total mining costs (excluding long haul costs) combined with a 1 percent
decrease in tonnes mined during 2018 resulted in a 9 percent increase in unit costs compared with the prior year. Total
long haul costs decreased by 16 percent to $4.7 million in 2018 compared with the prior year due primarily to the
completion of mining at the Gora satellite deposit.
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
18 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Total processing costs increased by 10 percent to $52.7 million in 2018 compared with the prior year due primarily to
the impact of higher fuel prices, unfavourable currency movements and increased power consumption resulting from the
processing of harder ore. Accordingly, on a unit cost basis, processing costs increased by 14 percent in 2018 compared
with the prior year due to higher total processing costs and a 4 percent decrease in tonnes milled in 2018.
Total mine site general and administrative costs increased by 17 percent to $21.6 million in 2018 compared with the
prior year due primarily to unfavourable currency movements, higher surface taxes payable on the Company’s operating
pits in 2018 and a non-cash supplies inventory obsolescence provision. Accordingly, on a unit cost basis, mine site
general and administrative costs increased by 24 percent in 2018 compared with the prior year due to higher total
general and administrative costs and a 4 percent decrease in tonnes milled.
Total cost of sales per ounce sold decreased by 3 percent to $937 per ounce in 2018 compared with the prior year due
primarily to a 6 percent increase in the volume of gold ounces sold and lower mine operation expenses, partially offset
by higher depreciation and amortization expense.
Total cash costs1 for 2018 were $660 per ounce, a decrease of 8 percent compared with the prior year due primarily to
an increase in the volume of gold ounces sold, an increase in capitalized deferred stripping costs and a decrease in net
inventory movements, partially offset by higher mine production costs.
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1 for 2018 were
$940 per ounce, a slight decrease compared with the prior year. The decrease was due primarily to an increase in the
volume of gold ounces sold and lower mine operation expenses between years, mostly offset by higher capitalized
deferred stripping costs, administrative and share-based compensation expenses.
REVIEW OF FINANCIAL RESULTS
(US$000s)
Revenue
Mine operation expenses
Depreciation and amortization
Cost of sales
Gross profit
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2018
2017
% Change
2018
2017
% Change
76,140 88,280
(14%)
312,628 291,683
7%
(43,216) (48,166)
(10%) (164,349) (168,689)
(16,158) (15,983)
1% (66,168) (53,424)
(59,374) (64,149)
(7%) (230,517) (222,113)
16,766 24,131
(31%)
82,111 69,570
Exploration and evaluation expenditures
(4,544) (5,928)
(23%) (13,160) (12,373)
Administration expenses
(4,594) (3,941)
17% (13,618) (10,702)
Corporate social responsibility expenses
(1,028) (615)
67% (3,700) (2,906)
Share-based compensation
Finance costs
Net foreign exchange gains/(losses)
Other (expense)/income
(Loss)/profit before incom e tax
Income tax expense
Net (loss)/profit for the period
(1,158) (935)
24% (4,851) (2,580)
(3,772) (1,241)
204% (15,783) (3,907)
262 (491)
N/A (2,680) (4,632)
(8,040) (1,612)
399% 8,458 4,496
(6,108)
9,368
N/A 36,777 36,966
(4,140) (3,410)
21% (23,312) (2,436)
(10,248)
5,958
N/A 13,465 34,530
Net profit attributable to non-controlling interests
(391) (200)
96% (1,671) (2,598)
Net (loss)/profit attributable to shareholders of Teranga
(10,639)
5,758
N/A 11,794 31,932
Basic (loss)/earnings per share
(0.10)
0.05
N/A 0.11 0.30
(US$000s)
Mine operation expenses
Mine production costs
Royalties
Regional administration costs
Capitalized deferred stripping
Inventory movements
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2018
2017
% Change
2018
2017
% Change
45,562 44,742
2% 175,179 161,155
4,590 5,895
(22%)
19,809 19,180
508 689
(26%)
1,868 1,996
50,660 51,326
(1%)
196,856 182,331
(13,526) (7,655)
77% (45,978) (29,428)
6,082 4,495
35% 13,471 15,786
(7,444) (3,160)
136% (32,507) (13,642)
Total m ine operation expenses
43,216 48,166
(10%)
164,349 168,689
(3%)
24%
4%
18%
6%
27%
27%
88%
304%
(42%)
88%
(1%)
857%
(61%)
(36%)
(63%)
(63%)
9%
3%
(6%)
8%
56%
(15%)
138%
(3%)
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
Annual Report 2018 19
Management‘s Discussion and Analysis
December 31, 2018
(US$000s)
Depreciation and am ortization expenses
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 expenses
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
2018
2017
% Change
2018
2017
% Change
9,380
10,730
(13%)
43,264
39,152
5,159
14,539
10,016
20,746
2,369
(4,333)
(750)
(430)
1,619
(4,763)
16,158
15,983
(48%)
(30%)
N/A
74%
N/A
1%
27,118
22,555
70,382
61,707
(1,486)
(6,306)
(2,728)
(1,977)
(4,214)
(8,283)
66,168
53,424
11%
20%
14%
(76%)
38%
(49%)
24%
Financial Results for the three months ended December 31, 2018
Revenue
Revenue for the three months ended December 31, 2018 decreased by 14 percent over the prior year period due to an
11 percent decrease in ounces sold and a 4 percent decrease in average realized prices compared to the prior year
period.
Spot price per ounce of gold
Average
Low
High
Average Realized
Mine Operation Expenses
Three m onths ended Decem ber 31,
2018
$1,226
$1,186
$1,279
$1,232
2017
% Change
$1,276
$1,241
$1,303
$1,279
(4%)
(4%)
(2%)
(4%)
For the three months ended December 31, 2018, mine operation expenses, before capitalized deferred stripping and
inventory movements, decreased by 1 percent over the prior year period to $50.7 million primarily due lower royalties
expense from lower gold sales, a decrease in hauling costs due to completion of mining at Gora and favourable currency
movements. The decrease was partially offset by higher fuel prices, major planned maintenance of the processing plant
and supplies inventory obsolescence provision.
The amount of mining costs capitalized as deferred stripping costs will fluctuate from period to period depending on
whether mining is above or below the life-of-phase strip ratio in a particular pit. During the fourth quarter, mining
activities were above the life-of-phase strip ratios at the Golouma West and Sabodala deposits resulting in 5.3 million
tonnes, or $13.5 million of deferred stripping costs, being capitalized in the current period. In the prior year period,
mining activities were above the life-of-phase strip ratio at the Kerekounda and Golouma West deposits resulting in 2.8
million tonnes, or $7.7 million of deferred stripping costs, being 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. 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.
Inventory movements in the fourth quarter resulted in an increase to mine operation expenses of $6.1 million compared
to $4.5 million in the prior year period, as a result of the drawdown and processing of low grade ore stockpiles during
the periods.
20 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Depreciation and amortization expenses
Total depreciation and amortization expense for the fourth quarter was $16.2 million, or $0.2 million higher than the
prior year period. Depreciation and amortization expense for property, plant and equipment and mine development
expenditures decreased due to lower gold ounces produced during the quarter. Depreciation and amortization of deferred
stripping assets decreased by $4.9 million mainly due to the end of mining activities at Gora partially offset by an
increase in gold ounces mined from the Golouma West and Kerekounda pits compared to the prior year period.
Depreciation related to inventory movements resulted in an increase of $2.4 million, as a result of a decrease of
stockpiled ounces in inventory. In the prior year period, depreciation related to inventory movements resulted in a
decrease of $4.3 million due to a build-up of stockpiled ounces in inventory.
Exploration and evaluation
Exploration and evaluation expenditures for the fourth quarter were $4.5 million, $1.4 million lower than the prior year
period. Refer to the Exploration section for additional details.
Administration expense
Administration expense for the fourth quarter was $4.6 million, $0.7 million higher than the prior year period. Higher
administration expense in the current period is mainly due to increased personnel costs due to the growth of the Company
beyond the Sabodala Gold operations in Senegal, and other miscellaneous corporate support costs.
Share-based compensation
Share-based compensation expense for the fourth quarter was $1.2 million, $0.2 million higher than the prior year
period due to an increase in the Company’s share price during the current quarter.
Finance costs
Finance costs for the fourth quarter were $3.8 million, $2.5 million higher than the prior year period mainly due to a
$2.1 million non-cash accretion expense related to the gold stream liability from the streaming arrangement with Franco-
Nevada Corporation (“Franco-Nevada”) as a result of adopting IFRS 15 prospectively in 2018. As a consequence of the
adoption of IFRS 15, the Company will continue to record non-cash accretion expense at a rate of approximately 9
percent on the gold stream liability for as long as the gold stream liability remains outstanding. For additional details,
please see the Critical Accounting Policies and Estimates section of this MD&A. During the fourth quarter 2018, the
Company expensed $1.0 million of interest and amortization of deferred financing costs related to the Taurus Facility.
An additional $3.2 million of interest and amortization of deferred financing costs related to the Taurus Facility directly
attributable to the development of Wahgnion has been capitalized.
Net foreign exchange gains/(losses)
Net foreign exchange gains of $0.3 million were recorded during the fourth quarter 2018 compared to net foreign
exchange losses of $0.5 million in the period year period. The increase was due to strengthening of the US dollar against
the Euro compared to weakening of the US dollar against the Euro in the prior year period.
Other expenses
Other expenses for the fourth quarter was $8.0 million compared to $1.6 million in the prior year period. The increase
in other expenses was mainly due to unrealized losses on forward gold sales contracts of $9.9 million due to the increase
in gold prices during the fourth quarter 2018, partially offset by realized gains on forward gold sales contracts of $2.8
million compared to unrealized losses of $3.5 million in the prior year period. The prior year period also included a
$2.5 million gain on sale of marketable securities.
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 accordance with local statutory requirements, are taxable / deductible for
Annual Report 2018 21
Management‘s Discussion and Analysis
December 31, 2018
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.
Effective January 1, 2018, Teranga’s West African entities in Senegal, Burkina Faso and Côte d’Ivoire converted to new
accounting standards under the Organization for the Harmonization of Business Law in Africa (“SYSCOHADA”). The
new SYSCOHADA standards bring West African accounting standards and principles in greater alignment to IFRS. As a
result, certain transitional changes impacted current and deferred income taxes for the three and twelve months ended
December 31, 2018.
For the three months ended December 31, 2018, the Company recorded income tax expense of $4.1 million, comprised
of current income tax expense of $0.5 million and a deferred income tax expense of $3.6 million. In the prior year
period, the Company recorded income tax expense of $3.4 million, comprised of current income taxes expense of $3.7
million net of a recovery of deferred income tax of $0.3 million. Lower current income tax expense in the current quarter
was mainly due to higher depreciation expense resulting from the conversion to SYSCOHADA. The higher depreciation
costs resulted in lower net asset values leading to higher deferred taxes in the current period.
Net (loss)/profit
Consolidated net loss attributable to shareholders was $10.6 million ($0.10 loss per share) for the fourth quarter 2018
compared to net profit of $5.8 million ($0.05 per share) in the prior year period. The decrease was primarily attributable
to lower gross profits of $7.4 million as a result of lower gold sales, higher losses on gold forward sales contracts of $3.7
million, non-cash accretion expense of $2.1 million as a result of the adoption of IFRS 15, higher interest and deferred
financing costs of $0.6 million as a result of the Taurus Facility partially offset by decrease in exploration expenses of
$1.4 million.
Adjusted net profit attributable to shareholders1 was $1.2 million ($0.01 per share) for the fourth quarter 2018
compared to $8.7 million ($0.08 per share) in the prior year period. The decrease was mainly due to lower gross profit,
as a result of lower gold sales. Adjusted net profit attributable to shareholders1 excludes gains and losses on gold forward
sales contracts, accretion expense, net foreign exchange gains/(losses), the impact of foreign exchange movements on
deferred taxes and other non-cash fair value changes.
Financial Results for the twelve months ended December 31, 2018
Revenue
Revenue for the twelve months ended December 31, 2018 increased by 7 percent over the prior year period due to a 6
percent increase in ounces sold and 1 percent higher average realized prices compared to the prior year period.
Spot price per ounce of gold
Average
Low
High
Average Realized
Mine operation expenses
Tw elve m onths ended Decem ber 31,
2018
$1,268
$1,178
$1,355
$1,271
2017
% Change
$1,257
$1,151
$1,346
$1,261
1%
2%
1%
1%
For the twelve months ended December 31, 2018, mine operation expenses, before capitalized deferred stripping and
inventory movements, increased by 8 percent over the prior year period to $196.9 million, primarily due to unfavourable
currency movements, higher fuel prices and capitalization of pre-production stage mining costs associated with the
Golouma West pit in the first nine months of 2017.
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
22 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
The amount of mining costs capitalized as deferred stripping costs will fluctuate from period to period depending on
whether mining is above or below the life-of-phase strip ratio in a particular pit. During the year, mining activities were
above the life-of-phase strip ratios at the Sabodala and Golouma West deposits resulting in 16.5 million tonnes, or
$46.0 million of deferred stripping costs being capitalized in the current period. In the prior year period, mining
activities were above the life-of-phase strip ratio at the Kerekounda, Gora and Golouma West deposits resulting in 11.9
million tonnes or $29.4 million of deferred stripping costs being capitalized in the prior year period. The increase in
unit mining costs further increased the value of capitalized deferred stripping costs compared to the prior year period.
Costs capitalized are amortized to the income statement as the deposit is mined.
Inventory movements in the twelve months ended December 31, 2018 resulted in an increase to mine operation
expenses of $13.5 million compared to $15.8 million in the prior year period. The decrease in inventory movements
compared to the prior year period was primarily due to a decrease in net drawdowns of stockpiled ounces as stockpiled
ore was processed.
Depreciation and amortization expenses
Total depreciation and amortization expense for the twelve months ended December 31, 2018 was $66.2 million, $12.7
million higher than the prior year period. Depreciation and amortization expense of property, plant, and equipment and
mine development expenditures increased, as a result of a higher asset depreciation base and more ounces produced.
Depreciation and amortization of deferred stripping assets increased by $4.6 million mainly related to the incremental
impact of Golouma West going into production in September 2017 and higher gold ounces mined from Kerekounda,
partially offset by a decrease in amortization of previously capitalized deferred stripping costs at Gora and Golouma
South as mining activities decreased in these pits compared to the prior year period. Depreciation related to inventory
movements decreased by $4.8 million as a result of higher unit amortization and a decrease in drawdown of stockpiled
ounces in inventory in 2018 compared to the prior year period.
Exploration and evaluation
Exploration and evaluation expenditures for the twelve months ended December 31, 2018 were $13.2 million, $0.8
million higher than the prior year period. Refer to the Exploration section for additional details.
Administration expense
Administration expense for the twelve months ended December 31, 2018 was $13.6 million, $2.9 million higher than
the prior year period. Higher administration expense in the current period was mainly due to increased personnel costs
due to the growth of the Company beyond the Sabodala Gold operations in Senegal and other miscellaneous corporate
support costs, as well as the reversal of an over-accrual in the prior year period.
Share-based compensation
Share-based compensation expense for the twelve months ended December 31, 2018 was $4.9 million, $2.3 million
higher than the prior year period due to an increase in the Company’s share price during 2018 compared to a decrease
in the Company’s share price in the prior year period.
The Company granted 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.
Annual Report 2018 23
Management‘s Discussion and Analysis
December 31, 2018
The following table summarizes RSU’s, DSU’s and fixed bonus plan units:
RSUs
DSUs
Fixed Bonus Plan Units
Tw elve m onths ended Decem ber 31, 2018
As of Decem ber 31, 2018
Grant Units
Grant Price 1
Outstanding
Total Vested2
821,000
193,000
-
C$4.19
C$4.19
-
1,467,014
756,998
323,500
969,665
676,581
322,732
1 Grant price determined using a vo lume weighted average trading price o f the Co mpany’ s shares fo r the 5-day perio d ended o n the grant date.
2Directo rs have the o ptio n to elect to receive their Directo r co mpensatio n in the fo rm o f DSUs. These DSUs vest as they are granted. A ll remaining DSUs that are granted vest
o n the first anniversary o f the grant date. RSUs will generally vest as to 50 percent in thirds o ver a three-year perio d and as to the o ther 50 percent, in thirds upo n satisfactio n o f
annual pro ductio n and co st targets, except fo r RSUs granted o n M arch 29, 2018 and future grants, which vest as to 25 percent in thirds o ver a three-year perio d, 50 percent in
thirds upo n satisfactio n o f annual pro ductio n and co sts targets and 25 percent in thirds upo n satisfactio n o f matching the average perfo rmance o f the VanEck Vecto rs Junio r
Go ld M iners ETF (“ GDXJ” ). B o th DSUs and RSUs and are payable in cash. The Co mpany used the December 31, 2018 clo sing share price o f C$ 4.03 to value the vested DSUs
and RSUs.
The following table summarizes stock option awards to employees of the Company:
Balance as at December 31, 2017
Exercised
Granted 1
Forfeited
Balance as at December 31, 2018
Num ber of Options Weighted Average
Exercise Price
4,454,491
(242,867)
1,321,000
(324,738)
5,207,886
C$9.20
C$3.25
C$4.22
C$6.34
C$8.39
1 The exercise price o f new co mmo n share sto ck o ptio ns granted during the perio d was determined using a vo lume weighted average trading price o f the Co mpany’ s shares fo r
the 5-day perio d immediately preceding the day o n which the o ptio n is granted.
Of the 5,207,886 common share stock options issued and outstanding as at December 31, 2018, 3,704,864 are vested
and 315,022 vest over a three-year period, and 1,188,000 vest over a four-year period. Under IFRS, the graded method
of amortization is applied to new grants of stock options and fixed bonus plan units, which results in approximately 52
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, 2018 were $15.8 million, $11.9 million higher than the prior
year period mainly due to a $9.0 million adjustment to record non-cash accretion expense of the gold stream liability
from the Franco-Nevada streaming arrangement as a result of adopting IFRS 15 prospectively in 2018, an increase in
bank charges of $1.3 million and additional borrowing costs of $1.8 million as a result of the Taurus Facility.
During the twelve months ended December 31, 2018, interest incurred and amortization of deferred financing costs
related to the Taurus Facility recorded as expense were $2.3 million. An additional $7.1 million of interest incurred
and amortization of deferred financing costs related to the Taurus Facility directly attributable to the development of
Wahgnion has been capitalized.
As a result of the adoption of IFRS 15, the Company continues to record non-cash accretion expense at a rate of
approximately 9 percent on the gold stream liability for so long as the gold stream liability remains outstanding. For
additional details, please see the Critical Accounting Policies and Estimates section of this MD&A.
Net foreign exchange losses
Net foreign exchange losses of $2.7 million were recorded in 2018 by the Company compared to $4.6 million in the
period year period. The decrease was mainly due to larger movements during the prior year period between the US dollar
and the Euro compared to the current year.
Other income
Other income for the twelve months ended December 31, 2018 was $8.5 million compared to $4.5 million in the prior
year period. The increase in other income was mainly due to gains on forward gold sales contracts of $7.5 million and
a decrease in the fair value of the share warrant liability of $1.1 million in 2018. The prior year period also included a
$1.2 million milestone payment received pursuant to an option agreement with Algold Resources Ltd and $2.5 million
gain on sale of marketable securities.
24 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
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 accordance with local statutory requirements, 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 twelve months ended December 31, 2018, the Company recorded income tax expense of $23.3 million,
comprised of current income tax expense of $13.0 million and deferred income tax expense of $10.3 million. In the
prior year period, an income tax expense of $2.4 million was comprised of a current income tax expense of $6.9 million
and a recovery of deferred income taxes of $4.5 million. Higher current income tax expense in the current period was
mainly due to higher profit subject to tax combined with realized and unrealized foreign exchange gains, due to movement
of the US dollar against the local currency, partially offset by higher depreciation as a result of conversion to
SYSCOHADA. Higher deferred income tax expense was mainly due to unrealized foreign exchange gains recognized in
the current period for tax purposes as well as lower net book value of assets as a result of higher depreciation. In the
prior year period, unrealized foreign exchange losses lowered both current and deferred taxes.
Net profit
Consolidated net profit attributable to shareholders was $11.8 million ($0.11 per share) for the twelve months ended
December 31, 2018 compared to $31.9 million ($0.30 per share) in the prior year period. The decrease was primarily
attributable to an increase in income tax expense of $20.9 million, as an increase in gross profit of $12.5 million from
higher revenues and gains on gold forward sales contracts of $7.5 million was partially offset by non-cash accretion
expense of $8.9 million, from the adoption of IFRS 15, and marginally higher expenses.
Adjusted net profit attributable to shareholders1 was $18.1 million ($0.17 per share) for 2018 compared to $30.1
million ($0.28 per share) in the prior year period. The decrease was mainly attributable to higher income tax expense
and finance costs, partially offset by higher gross profits as a result of higher revenues. Adjusted net profit attributable
to shareholders1 excludes gains and losses on gold forward sales contracts, accretion expense, net foreign exchange
losses, the impact of foreign exchange movements on deferred taxes and other non-cash fair value changes.
1 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
Annual Report 2018 25
Management‘s Discussion and Analysis
December 31, 2018
FINANCIAL CONDITION REVIEW
Summary Balance Sheet
Balance Sheet
Cash and cash equivalents
Trade and other receivables
Inventories
Deferred tax assets
Marketable securities
Other assets1
Total assets
Trade and other payables
Borrow ings
Provisions
Gold stream liability
Gold offtake payment liability
Share w arrant liability
Current income tax liabilities
Other liabilities
Total liabilities
Total equity
As at Decem ber 31, 2018
As at Decem ber 31, 2017
46,615 87,671
9,079 5,484
151,713 160,662
16,196 26,491
324 964
715,960 534,960
939,887 816,232
75,094 54,165
87,097 14,307
42,568 34,303
88,762 46,209
13,699
-
1,969
-
13,124 7,634
10,447 10,059
332,760 166,677
607,127 649,555
1 Includes P ro perty, P lant and Equipment, Other Current A ssets and Other No n-Current A ssets.
Balance Sheet Review
Cash
The Company’s cash balance at December 31, 2018 was $46.6 million, $41.1 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 $9.1 million includes $2.8 million and $3.0 million in Senegalese and
Burkinabe value added tax (“VAT”) recoverable, respectively.
In February 2016, the Company received an exemption for the payment and collection of refundable Senegalese VAT.
This exemption is governed by an amendment to the Company’s mining convention and expires on May 2, 2022. The
Senegalese VAT receivable at the end of December 31, 2018 primarily relates to Senegalese VAT amounts paid prior to
May 2017.
Burkinabe VAT represents amounts paid within 24 months prior to commencement of operations at Wahgnion. On
December 20, 2017, the Company received an exoneration from Burkinabe VAT directly related to mining services during
the construction phase from the Burkinabe government on Wahgnion.
Other Assets
Other assets increased by $181.0 million to $716.0 million as at December 31, 2018. The increase was largely
attributable to additions to property, plant and equipment of $251.7 million, mainly a result of the Company’s on-going
construction of Wahgnion and $14.4 million from the acquisition of the Afema project, partially offset by depreciation
expense of $72.1 million, and an increase in gold hedge derivative assets of $2.6 million.
26 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Borrowings
Borrowings increased by $72.8 million to $87.1 million as at December 31, 2018. The increase was attributable to a
$112.2 million drawdown of the Taurus Facility, net of $25.1 million of deferred financing costs. The balance at
December 31, 2017 consisted of the $15.0 million under a revolving credit facility with Société Générale S.A. (“Revolver
Facility”), net of $0.7 million in deferred financing costs. In May 2018, the Revolver Facility was repaid and the
associated deferred financing costs were recorded as expenses of the current period (see Liquidity and Capital Resources
Outlook section for more details).
As at Decem ber 31, 2018
As at Decem ber 31, 2017
Revolver credit facility
Principal outstanding
Deferred financing costs
Total Revolver Credit Facility
Secured developm ent finance facility
Principal outstanding
Deferred financing costs
Total Secured Developm ent Finance Facility
Total Borrow ings
Deferred financing costs detail:
Financing costs
Fair value of gold offtake payment liability
Share w arrants issued
Accumulated amortization of deferred financing costs
Total deferred financing costs
Gold Stream Liability
-
-
-
112,200
(25,103)
87,097
87,097
15,000
(693)
14,307
-
-
-
14,307
As at Decem ber 31, 2018
As at Decem ber 31, 2017
12,278
14,015
3,105
(4,295)
25,103
2,321
-
-
(1,628)
693
During the twelve months ended December 31, 2018, the Company delivered 22,500 ounces of gold to Franco-Nevada
and recorded revenue of $28.2 million, consisting of $5.7 million received in cash proceeds and $22.5 million recorded
as a reduction of gold stream liability. As a result of adopting IFRS 15, a cumulative adjustment to re-measure the gold
stream liability of $56.1 million was recognized on January 1, 2018 with a corresponding decrease in opening retained
earnings. The adoption of IFRS 15 also resulted in a non-cash $9.0 million expense during the twelve months ended
December 31, 2018 related to the accretion of the gold stream liability from the passage of time.
Gold Offtake Payment Liability
In conjunction with the Taurus Facility, the Company entered into the Offtake Agreement on May 31, 2018 (see Financial
Instruments section for more details). The balance of $13.7 million at December 31, 2018 represents the fair value of
the Offtake Agreement at the end of the reporting period. The Company has estimated the fair value of the Offtake
Agreement using a discounted cash flow model based on Wahgnion’s life of mine production up to the first 1,075,000
ounces of gold, a discount rate of 9.0 percent and the average spread between gold spot price per ounce and the lowest
gold price per ounce during the preceding eight days for each trading day in the past ten-year period. Amounts owing
to Taurus Funds will be settled in cash; Taurus Funds does not take physical delivery of gold ounces sold at any time.
Annual Report 2018 27
Management‘s Discussion and Analysis
December 31, 2018
Share Warrant Liability
In conjunction with the Taurus Facility, the Company granted two million units of unlisted four-year share warrants to
Taurus Funds on April 16, 2018. Each warrant allows the holder to acquire one common share of the Company at an
exercise price of C$5.22 (see Financial Instruments section for more details). At December 31, 2018, the share warrants
have been fair valued at $2.0 million, using the Black-Scholes option pricing model.
Current income tax liabilities
Current income tax liabilities increased by $5.5 million to $13.1 million as at December 31, 2018. The increase was
largely attributable to a provision for current income tax payable of $13.0 million, which was partially offset by $7.5
million settlement of prior year’s tax payable in cash and redemption of VAT certificates.
In November 2018, Sabodala received qualified status under an “export free enterprise” investment program in Senegal,
which provides certain benefits to Sabodala, including lower rates for customs duties, business taxes and potentially
lower income tax rates provided Sabodala continues to export more than 80 percent of its gold production. This status
is valid until October 2021.
REVIEW OF QUARTERLY FINANCIAL RESULTS
(US$000s, except w here indicated)
2018
2017
Q4 2018
Q3 2018
Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017
Revenue
76,140
64,196
86,050
86,242
88,280
61,041
72,040
70,322
Average realized gold price ($/oz)1
1,232
1,209
1,301
1,326
1,279
1,277
1,260
1,226
Cost of sales
Net profit / (loss)
59,374
51,676
59,997
59,470
64,149
49,225
54,281
54,458
(10,639) 7,866
11,586
2,981
5,758
10,370
9,640
5,592
Net earnings / (loss) per share2
(0.10) 0.07
0.11
0.03
0.05
0.10
0.09
0.05
Operating cash flow
41,784
17,371
19,181
13,719
32,452
10,235
7,434
21,258
1 A verage realized go ld price is a no n-IFRS financial measure that do es no t have a standard meaning under IFRS. P lease refer to No n-IFRS P erfo rmance
M easures at the end o f this M D&A .
2 On M ay 8, 2017, the Co mpany co mpleted a five-fo r-o ne co nso lidatio n o f co mmo n shares o f the Co mpany.
Our revenues over the last several quarters reflect the variation in quarterly production and fluctuations in gold price.
Cost of sales were driven by production volumes and were also influenced by fuel costs, foreign currency movements
and operational efficiencies. Operating cash flow levels fluctuate depending on the price of gold and production levels
each quarter. The decrease in revenue during the third quarters 2018 and 2017 were primarily related to the rainy
season in West Africa, which typically has a negative impact on processing throughput rates due to the necessity of
processing a higher proportion of harder rock.
Net loss recorded during the fourth quarter 2018 was mainly due to net losses on gold forward sales contracts of $7.1
million.
Higher operating cash flows in the fourth quarter 2017 were mainly due to higher gold ounces sold. The decrease in
operating cash flows in the second quarter 2017 was mainly due to the timing of income tax payments related to 2016.
BUSINESS AND PROJECT DEVELOPMENT
Wahgnion Gold Project
Resource and Reserve Update
The Company improved the Wahgnion’s economics following completion of the infill drill program designed to convert
inferred resources to indicated resources and reserves. Based on drill results from a 73,000 metre infill drill program
completed in 2017, the updated combined measured and indicated mineral resource is now 50.5 million tonnes at a
grade of 1.51 g/t for 2.44 million contained ounces of gold.
The updated gold reserves are 31.1 million tonnes at a grade of 1.61 g/t for 1.6 million ounces and is derived from four
deposits (Nogbele, Fourkoura, Samavogo, and Stinger) within the Wahgnion mine license. The updated mineral reserve
estimate and feasibility study represents an increase of approximately 40 percent in gold reserves compared to the
previous study. The update also extends the mine life from 9 to 13 years and improves the first five-year production
and cost profiles.
28 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Teranga released an updated mineral reserve estimate and feasibility study for the Wahgnion development project on
October 31, 2018.
Construction and Development Update
First gold pour is well on track for the fourth quarter 2019, in line with the NI 43-101 technical report released on
October 31, 2018. Total construction capital remains largely in line with the estimates outlined in the feasibility study,
other than some unfavourable variances for fuel and foreign exchange, which are moderately impacting equipment,
labour and material costs. The majority of the project contingency remains unused. Construction is being managed by
an owner’s management team with responsibility for delivering site infrastructure, which includes tailings, mine site
services, and initiation of mine operations. Lycopodium Limited is responsible for the plant construction under the
engineering, procurement, and construction management (“EPCM”) arrangement.
Key project achievements are:
• Over 2.5 million hours worked without a lost time incident.
• Development is on schedule with approximately $132 million spent to date of a total commitment value of
$209 million, representing approximately 82 percent of total project costs.
•
•
•
•
•
•
•
•
The project is at peak construction with over 1,700 workers on site (including local casual labour). As the
project schedule nears the final phases of construction and commissioning, planning focus has shifted to
operations readiness that includes the final stages operations personnel hiring and promoting existing staff,
including placing priority on key positions post construction.
Engineering and drafting was completed in the fourth quarter and all civil, structural and mechanical drawings
have been issued for construction.
Steel fabrication was completed and has been largely delivered to site.
Plant construction is on schedule with delivery of most process equipment already on site (including generator
sets, the SAG and ball mills), concrete pours are nearing completion, structural steel installation have
commenced and all carbon-in-leach tanks are installed.
Construction of the tailings storage facility has neared completion. The outer embankments have been
completed, liner installation is approximately 35 percent complete and construction of the internal decant
access ramp will commence when fresh rock is available in the second quarter 2019.
The main camp area and essential services are now complete, with near completion of the mine services areas,
site infrastructure and administration buildings.
Power station concrete work is over 80 percent complete, the generator sets have been installed and structural
steel has commenced for the pipe racks, building frame and fuel storage facilities.
Construction of resettlement sites continued through the quarter with completion of multiple dwellings and
successful resettlement of families. Construction remains ongoing in two separate settlement areas; completion
of the first area is expected in the first quarter 2019 while completion of the second area is expected to be
completed in the second quarter 2019.
Management is preparing the commissioning schedule for plant production ramp-up to nameplate capacity after
mechanical completion. With the project well on track, management is preparing a new mine plan for 2019 to mine
more material than planned in last year’s technical report to accommodate an earlier than planned commissioning of
the plant. Based on current progress of construction, production ramp up through the fourth quarter 2019 is expected
to exceed the original estimate in last year’s technical report.
Afema Project
The Afema project is located in southeast Côte d’Ivoire and covers more than 1,400 km2, consisting of the Afema mining
license (“Afema ML”) and three exploration permits – Ayame, Mafere and Aboisso (collectively, the “Afema Permits”).
On January 25, 2018, the Company, Sodim Limited (“Sodim”) and the Government of Côte d’Ivoire concluded an
amendment to the existing mining convention applicable to the Afema ML (“Amended Convention”). Pursuant to the
Amended Convention, and the Government of Côte d’Ivoire’s agreement to extend initial construction timelines under
the initial convention, the Company, as operator of the Afema project, must deliver an economic evaluation on an initial
Afema project within 15 months of the Amended Convention (“Economic Evaluation”). Upon delivery of the Economic
Evaluation, the Company and Sodim have up to 12 months to commence construction and up to 36 months to deliver
initial production.
Annual Report 2018 29
Management‘s Discussion and Analysis
December 31, 2018
On March 22, 2018, the Company entered into an agreement with Sodim to acquire the Afema ML and Afema Permits.
Under the terms of the agreement, the Company maintains its interest in the Afema ML 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 ML through the delivery of a confirmation study, feasibility study or updated feasibility study
on the Afema project and Teranga’s commitment to fund its 70 percent interest in the proposed project through
construction. Upon reaching this point, Sodim can either elect to either (i) maintain its 30 percent equity interest on a
fully participatory basis, (ii) maintain a 5 percent interest on a free carry basis, or (iii) receive a 3 percent net smelter
returns royalty on the Afema project. As at December 31, 2018, the Company was on track in meeting its commitments
under the work program to retain its 51 percent interest and continues to work towards the completion of an economic
and technical study of a project within the Afema ML.
Teranga expects to solely fund and manage the exploration programs and technical studies under the Afema project.
Management is in the process of assessing previous work within the original Afema ML, including an update of the
previously defined oxide resources, analysis of the historical metallurgical test work and an initial review of the baseline
environmental work. Management expects a determination of potential for future Canadian Institute of Mining and
Metallurgy compliant resources through a resource delineation program and a potential processing solution for the oxide
ore during 2019.
Agreement with ACC Resources Limited
In 2018, the Company signed an agreement with ACC Resources Limited and ACC Ressources Sarl to establish a shared
exploration entity within the Dossi permit area in Burkina Faso. Teranga will endeavour to determine the technical and
economic viability of processing ore identified and anticipated to be identified from target areas leveraging the
anticipated infrastructure to be developed in connection with the positive completion of a feasibility study for its adjacent
Golden Hill exploration and development project in Burkina Faso. The Dossi permit is contiguous with the northernmost
part of the three Golden Hill exploration permits.
EXPLORATION
Exploration highlights during fourth quarter 2018 included the Company announcing more encouraging drill results from
Golden Hill in Burkina Faso and continuing the advancement of both the Afema ML and Afema Permits in Côte d’Ivoire.
Burkina Faso
Wahgnion Mine License Reserve Development
The second phase of grade control drilling at the Nogbele deposit was initiated in December 2018 with 128 reverse
circulation holes comprising 3,867 metres completed during the fourth quarter of 2018. Nogbele grade control drilling
will continue into early 2019.
Very positive milestones were attained in 2018 including the revised resource estimate which resulted in a 33 percent
increase in measured and indicated resources to the current estimate of 2.44 Mozs (50.5 MTonnes grading 1.51 g/t Au)
and the subsequent 40 percent increase in the Wahgnion gold reserves to the current estimate of 1.61 Mozs (31.07
MTonnes grading 1.61 g/t Au).
The Company announced the increase in gold reserves for Wahgnion and released an updated NI 43-101 technical
report reflecting a revised resource estimation, updated gold reserves, as well as a new mine plan for Wahgnion on
October 31, 2018. For further details, please refer to the Teranga Gold Corporation news releases dated September
24, 2018 and October 31, 2018.
Golden Hill Property
During the fourth quarter 2018, the Company continued the advanced exploration program at Golden Hill with further
diamond core and reverse circulation drilling at the Ma Main and Ma North prospects. A total of 47 diamond core holes
comprising 6,639 metres were completed at the Ma Main (30 holes totalling 4,227 metres) and Ma North prospects
(17 holes totalling 2,412 metres). In addition, the Company completed 14 reverse circulation holes comprising 1,866
metres at the Ma Main prospect.
In addition, during the fourth quarter, the Company announced positive drilling results at the Ma Main, Ma North and
Jackhammer Hill prospects. For further details, please refer to the Teranga Gold Corporation news release dated
December 4, 2018.
Drilling activity continued at a very rapid pace in 2018 with a total of 303 diamond core holes (38,485 metres) and 52
reverse circulation holes (5,263 metres) completed at a number of advanced prospects at Golden Hill. Positive results
from the advanced exploration drilling program completed thus far at nine Golden Hill prospects has enabled release of
30 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
an initial resource estimate for the project’s most advanced prospects. On February 21, 2019, the Company announced
an early-stage initial resource estimate for Golden Hill (effective November 30, 2018) comprised of 6.4 million tonnes
at a grade of 2.02 g/t in the indicated category for 415,000 ounces and 11.95 million tonnes grading at 1.68 g/t in
the inferred category for 644,000 ounces of gold.
During the year, the Company issued a total of seven news releases outlining results from the positive drilling campaign
at Golden Hill. A cumulative table of all available drill results, comprising all drilled prospect areas, is located on the
Company’s website at www.terangagold.com under “Exploration”.
Côte d’Ivoire
In addition to its interest in the Afema project (inclusive of a 1,400 km2 land package comprised of the Afema ML and
Afema Permits), the Company holds, by way of an exploration agreement, three greenfield exploration tenements totalling
nearly 1,200 km2 in Côte d’Ivoire.
Afema ML Property
During the fourth quarter 2018, the Company continued with geological and structural evaluations focusing on oxide-
mineralization expansion opportunities along the Afema Shear Zone as well as both the separate and distinct
Niamienlessa and Woulo Woulo structural trends. Preliminary field exploration programs continued at a series of historic
and new target areas throughout the Afema ML.
Initial drilling began in the fourth quarter with 12 reverse circulation holes totalling 453 metres completed at the Aniuri
and Asupiri prospects and 19 mechanical trenches (1,056 metres) were excavated, mapped and sampled.
In addition, the stream sediment bulk leach extractable gold (“BLEG”) sampling program was initiated across the Afema
ML.
The 2018 exploration program has achieved many of its goals including data accumulation, revised resource estimation,
preliminary metallurgical evaluation, initiation of excavator trenching and reverse circulation resource-focused drilling.
Afema Regional Properties (Ayame, Mafere, Aboisso)
During the fourth quarter 2018, the Company initiated a property-wide stream sediment BLEG sampling program to
cover all three exploration permits.
Guitry Property
The primary exploration target at the Guitry property is an extensive gold-in-soil geochemical anomaly covering an
approximate 3 kilometre by 7 kilometre area. Results from the first ever drill program at Guitry, designed to evaluate
the central 1,000 metre strike extent within the extensive gold-in-soil anomaly, included: 24 metres grading 2.02 g/t
Au (GUAC008), 4 metres grading 5.80 g/t Au (GUAC015) and 20 metres grading 6.37 g/t Au (GUAC018).
The Company initiated a mechanical trenching program late in the fourth quarter of 2018. Completion of the mechanical
trenching program, with plans to follow-up favourable results with reverse circulation and diamond core drilling, will be
undertaken in 2019.
Sangaredougou Property
In the fourth quarter 2018, the Company completed a ground magnetics geophysical survey, an infill and step-out soil
sampling program and started a hand-pitting program within the current geochemically anomalous gold-in-soil trends.
The Company plans further hand-pitting, mechanical trenching and follow-up drilling in 2019.
Dianra Property
During the fourth quarter 2018, a series of hand pits were excavated across a favourable northeast to southwest trending
structural zone hosting a high priority gold-in-soil geochemical anomaly with an approximate 6 kilometre strike length.
The Company plans a mechanical trenching exploration program and follow-up drilling in 2019.
Annual Report 2018 31
Management‘s Discussion and Analysis
December 31, 2018
HEALTH AND SAFETY
Sabodala
Health and safety remains the principal priority at Sabodala and all personnel are involved on the extensive campaigns
to integrate a safety awareness culture as part of their daily activities. Safety is the first topic of all meetings and site
reports, whether they are on a daily, weekly, monthly or annual basis. The Company’s operational health and safety
program focuses on proactive, people-based safety management using a documented systematic approach. Furthermore,
advanced supervisor safety training was started along with supervisor forums to assist supervisors on key skills to become
an effective leader. The Company also initiated a wellness program to raise awareness on issues impacting health and
well-being, including the health benefits of physical activity, healthy eating, smoking cessation, responsible alcohol use
and positive mental health.
In 2019, the focus will be consequence management training and appointing risk champions to manage risk changes.
The ergonomic and occupational hygiene program is expected to be initiated by the second quarter 2019 and safety
representative development continues to move forward.
Wahgnion
Wahgnion continues to uphold Teranga’s reputation for safety performance and the belief that safety is our responsibility.
During 2018, Wahgnion had reached multiple milestones without incurring a single Lost Time Injury (“LTI”). During
the fourth quarter 2018, Wahgnion achieved 2 million hours free of LTIs and has continued to surpass this milestone
into 2019.
As construction activities wind down and operational activities ramp up through the latter part of 2019, safe work
education of the operational team will be a primary focus.
CORPORATE SOCIAL RESPONSIBILITY
Teranga’s Corporate Social Responsibility (“CSR”) program continues to set a high standard for socially responsible
mining. As a proud supporter and participant in the 2030 United Nations Sustainable Development Goals program,
Teranga specifically focuses on four areas: eradicating hunger, providing quality education, creating good jobs and
economic growth and consummating partnerships for goals.
Senegal
Community Relations
In 2018, Teranga continued its community investment program working with the funding of numerous projects in and
around the Sabodala mine site, spending a total of $1.2 million on social programs during the year. Major highlights of
the Sabodala community investment program include the following:
•
•
•
•
Food and Income Generation: developed a new market garden in Khossanto, a community located 20 km from
the Sabodala mine, donated eight sets of equipment for agricultural transformation (mills, grinders, and
peelers) as part of the program’s focus on female empowerment, and drilled numerous bore holes for cattle
drinking points.
Education: constructed three classrooms and provided funding of 90 bursary programs for children to attend
high school.
Hygiene and Sanitation: constructed two maternity wards, drilled several boreholes to provide access to clean
water for local communities and, in collaboration with a regional organization, initiated a program to finance
free medical treatment in the Sabodala village and the regional capital city of Kedougou. Through this initiative,
more than 1,200 people consulted with a doctor and benefitted from treatment and medication.
Sport and Culture: financed the pilgrimage of 18 village chiefs and Imams of the communities around Sabodala
to Mecca.
The Gora fund, designed to assist the local communities in developing new sustainable economic activities, was active
throughout the year including funding the purchase of a bus to provide transportation throughout the region, and the
provision of grain mills for the women. The Gora fund will continue to support the local communities over the next
several years well beyond the closure of the Gora pit in the third quarter of 2018.
32 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Sabodala Village Resettlement
In 2018, resettlement activities ramped up significantly, with the support of the international consultancy firm, ERM
Group, Inc. (“ERM”). During the year, negotiations with the communities led to an agreement on housing design,
resettlement site locations and compensation. Construction of the new resettlement site began during the second half
of 2018 and as community buildings are nearing completion, construction of private residences has begun. The
Sabodala village resettlement is expected to be completed by mid-2020.
Currently the Sabodala village sits atop Niakafiri, the largest deposit on the Sabodala mine license. Once the resettlement
is complete in mid-2020, the Company will resume infill drilling and mining activities at the Niakafiri deposit.
Burkina Faso
Community Relations
Teranga is taking its strong social program in Senegal and replicating its approach in Burkina Faso, the home of its soon
to be second mine, Wahgnion.
In 2018, we expanded the Wahgnion community relations program and strengthened our relationships with the local
communities and administration. We also created and implemented the Wahgnion community relations framework,
which provides a roadmap for the long-term success of our social programs in Burkina Faso. This framework includes
formal plans relating to stakeholder engagement, local employment, local procurement, social investment and social
closure guidelines.
As part of the framework process, Teranga implemented a local pre-selection committee for unskilled labor, composed
of community representatives, which have recruited more than 550 people for the Wahgnion project. In addition, the
Company signed an agreement to fund a commune development plan, a government planning document on socio-
economic development of the area. This plan will be entirely funded by Teranga and is expected to be completed in late
2019. It will define the priorities of the commune for the next five years and establish the foundation for Teranga’s
community investment priorities in the area.
In 2018, Teranga contributed $120,000 to finance school equipment, a community ambulance, road rehabilitation
efforts, as well as, a number of smaller community initiatives. In 2019, Teranga will continue to pursue community
investments and will be retaining a local consultant to perform a local procurement study to identify the key opportunities
in the area.
Wahgnion Area Resettlement
In 2018, Wahgnion area resettlement activities ramped up with the support of ERM. All elements of resettlement
compensation including housing design, new relocation sites and compensation were negotiated concurrently with all
affected communities. The framework for all villages to be resettled, irrespective of timing of relocation, has been agreed
upon. The first two resettlement sites, Songha (51 households) and Zievogo (43 households), are under construction,
with 17 households resettled. All community buildings and private residences are expected to be completed by mid-
2019. Additional communities will be resettled over the course of the next five years, in advance of mining activities in
those areas.
Livelihood restoration activities are well underway with the payment of financial compensations for the first lands
acquired, the replacement of 150 hectares of land and several accompanying programs, including financial literacy
training. Other initiatives include new crop projects, such as cassava farming, transformation of agricultural products
for women (such as cassava flour) and market gardening. The construction of the first communal irrigated plot is
underway and should be ready for the 2019 agricultural season. In 2019, relocation activities will advance in accordance
with the mine plan.
Golden Hill
At Golden Hill, Teranga’s advanced exploration project about 250 km east of Wahgnion, the Company will increase the
scope of its community relations activities with a full-time recruit and launch stakeholder engagement activities.
Annual Report 2018 33
Management‘s Discussion and Analysis
December 31, 2018
Côte d’Ivoire
Community Relations
In 2018, we began our community development activities in Côte d’Ivoire. On the Afema project, a consultant was
retained to perform a social assessment of the area and the needs for community investment. Several community
investment projects were completed, including the funding of health supplies to support local clinics. Furthermore, a
number of cultural events were sponsored.
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 2018, the
average London PM fix price of gold was $1,268 per ounce, with gold trading between a range of $1,178 and $1,355
per ounce. This compares to an average of $1,257 during 2017, with a low of $1,151 per ounce and a high of $1,346
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, the relative strength of the U.S. dollar, the supply of and demand for gold and macroeconomic factors such
as the level of interest rates and inflation expectations. The Company has entered into gold forward contracts to provide
greater certainty of cash flows from the Company’s Sabodala mine as construction activities at Wahgnion continues.
On December 19, 2018, the U.S. Federal Reserve raised its benchmark interest rate by a quarter of a percentage point,
to a range of 2.25 percent to 2.50 percent. This marked the fourth interest rate increase in 2018 and for the ninth
time since the 2008 to 2009 financial crisis. The U.S. Federal Reserve has raised rates with steady regularity as the
U.S. economy has remained strong.
A mix of factors, including a global economic slowdown, a trade war between the U.S. and China, mild inflation, and
volatile stock markets has led the U.S. Federal Reserve to consider slowing its rate increases in 2019 to avoid weakening
the economy. It is expected that the U.S. Federal Reserve will adjust its rate policy to the latest economic data and be
more flexible. After the two rate increases that the U.S. Federal Reserve now envisions for 2019, it foresees one final
increase by 2020, which would raise the benchmark rate to 3.1 percent. By 2021, four U.S. Federal Reserve officials
envision reversing course and decreasing rates to help stimulate the economy. Gold prices has benefitted from the
macroeconomic and geopolitical developments late in 2018, with gold prices gaining 5 percent in December to end
2018 at $1,281 per ounce.
Overall, we anticipate 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 expectations for U.S. monetary policy.
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, our priority is to execute on our strategy of maximizing shareholder value through effective
management of our Sabodala gold mine, completion of the Wahgnion 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 $38.9 million in 2018 or
approximately 24 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 operations. In 2018, operations consumed approximately 32
million litres of heavy fuel oil (“HFO”). This equated to a cost of approximately $0.164 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 21.2 million litres of LFO in 2018. 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. The average Brent crude price was $71 per barrel in 2018, reaching
a high of $86 per barrel and dropping to below $55 per barrel. Worldwide crude oil prices are expected to average $61
per barrel in 2019 according to the Short-term Energy Outlook by the U.S. Energy Information Administration while
banks see Brent crude prices averaging $68 to $73 per barrel in 2019. The key drivers behind the anticipated increase
34 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
are the Organization of the Petroleum Exporting Countries, Russia and other producers launching new production cuts
that aim to remove 1.2 million barrels of crude oil per day from worldwide markets, as well as production cuts in Canada
due to deficiencies in storage and distribution infrastructure. Pipeline bottlenecks are also impacting U.S. crude oil
production growth. New pipelines expected in the second half of 2019 is expected to bring oil from the Permian Basin
to markets putting downward pressure on crude oil prices. The biggest factor to crude oil prices remains a trade war
between the U.S. and China. An economic slowdown in China could also have a negative impact on energy markets as
Asia drives global oil consumption.
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.
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 Sabodala has approximately
40 to 50 percent Euro currency exposure via the West African CFA Franc, which is pegged directly to the Euro currency.
Overall, the Euro weakened from to 1.25 to 1.13 against the USD as the U.S. Federal Reserve raised interest rates
despite the European Central Bank winding down its quantitative easing policy, and the U.S. economy stayed firm
despite stock market volatility towards the end of 2018. Furthermore, European economic indicators indicate a weak
growth outlook in Eurozone economic activity.
All the Company’s operations are located in West Africa where the CFA Franc is the local currency used. As a result,
costs will continue to be exposed to foreign exchange rate movements. We monitor currency exposure on an ongoing
basis. We had previously hedged a portion of its exposure to the Euro using forward contracts, however we currently do
not have any currency hedges in place. We will regularly assess currency exposures and may consider entering into
hedge programs should the price and terms be acceptable.
LIQUIDITY AND CASH FLOW
Cash Flow
(US$000s)
Cash Flow
Operating activities before changes in w orking capital
excluding inventories
Changes in non-cash w orking capital excluding 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
Three m onths ended Decem ber 31, Tw elve m onths ended Decem ber 31,
2018
2017
2018
2017
25,384
16,400
41,784
(79,726)
6,709
(1,901)
(33,134)
79,749
46,615
24,708
7,744
32,452
96,649
(4,589)
92,060
(18,159)
(215,296)
(289)
80,140
707
14,711
72,960
87,671
2,040
(41,056)
87,671
46,615
82,610
(11,231)
71,379
(75,836)
(3,808)
748
(7,517)
95,188
87,671
(US$000s)
Three m onths ended Decem ber 31, Tw elve m onths ended Decem ber 31,
Changes in w orking capital excluding inventory
(Increase)/decrease in trade and other receivables
(Increase)/decrease in other assets
Increase/(decrease) in trade payables and other
(Decrease)/increase in provisions
Increase/(decrease) in current income taxes payable
Net change in w orking capital excluding inventory
2018
(195)
(890)
17,098
(85)
472
16,400
2017
97
2,132
1,852
(3)
3,666
7,744
2018
(5,367)
741
(7,372)
106
7,303
(4,589)
2017
(1,769)
2,978
(5,128)
(88)
(7,224)
(11,231)
Annual Report 2018 35
Management‘s Discussion and Analysis
December 31, 2018
Sources and Uses of Cash
Cash Flow - Details (US$000's)
Sabodala
Corporate
Wahgnion
Exploration
Consolidated
Cash Flow
Three m onths ended Decem ber 31, 2018
600
9,707 (3,535)
41,784
Operating
Investing
35,012
(19,253)
- Expenditures for mine development - sustaining
(16,291)
- Expenditures for property, plant and equipment -
sustaining
(2,962)
- Expenditures for mine development - growth
- Expenditures for property, plant and equipment -
growth
- Acquisition of intangibles
- Investment in Boss Gold and Boss Minerals
Financing
- Proceeds from drawdown of borrowings
- Financing costs paid
- Interest paid on borrowings
Effect of exchange rates on cash holdings in
foreign currencies
Change in cash and cash equivalents during the
period
-
-
-
-
-
-
-
-
(53,231) (7,242) (79,726)
-
-
(8,041)
(45,133)
(57)
-
-
-
-
-
-
(7,242)
- -
6,709
-
-
-
-
-
-
-
(1,901)
576
80 (2,557)
16,335
7,389 (46,081) (10,777) (33,134)
Cash Flow - Details (US$000's)
Sabodala
Corporate
Wahgnion
Exploration
Consolidated
Cash Flow
Three m onths ended Decem ber 31, 2017
Operating
Investing
42,279 (4,440) (3,362)
(2,025)
32,452
(11,515)
3,873 (9,996)
- Expenditures for mine development - sustaining
(8,946)
- Expenditures for property, plant and equipment -
(2,570)
-
-
1
-
(289)
(289)
-
634
73
-
-
(4,526)
(18,159)
(521)
(8)
-
-
(5,470)
(513)
-
-
-
-
-
-
-
-
-
-
(289)
707
31,109
(494)
(13,358) (2,546)
14,711
-
-
-
-
-
-
-
6,709
10,000
(869)
(2,422)
(93)
(10)
-
-
(14)
3,990
-
sustaining
- Expenditures for mine development - growth
- Expenditures for property, plant and equipment -
growth
- Expenditures for intangibles
- Proceeds from sale of marketable securities
Financing
- Interest paid on borrowings
Effect of exchange rates on cash holdings in
foreign currencies
Change in cash and cash equivalents during the
period
36 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Cash Flow - Details (US$000's)
Sabodala
Corporate
Wahgnion
Exploration
Consolidated
Cash Flow
Operating
Investing
105,720 (8,129)
9,424 (14,955)
92,060
(63,966) (1,171) (137,300) (12,859) (215,296)
Tw elve m onths ended Decem ber 31, 2018
- Expenditures for mine development - sustaining
(54,572)
(552)
-
-
- Expenditures for property, plant and equipment -
sustaining
(9,312)
(293)
-
-
- Expenditures for mine development - growth
-
- (23,138)
-
- Expenditures for property, plant and equipment -
growth
-
- (113,837)
(454)
- Investment in marketable securities
- (77)
-
-
- Expenditures for intangibles
- Investment in Afema Project
- Cash from in Afema Project
(82)
(249)
(325)
-
-
-
- (5,303)
-
-
-
140
- Investment in Boss Gold and Boss Minerals
-
-
- (7,242)
Financing
(301)
80,441
- - 80,140
- Proceeds from drawdown of borrowings
-
112,200
-
-
- Repayment of borrowings
- Financing costs paid
- (15,000)
-
-
- (12,278)
-
-
- Proceeds from stock options exercised
-
609
-
-
- Interest paid on borrowings
(301)
(5,090)
-
-
Effect of exchange rates on cash holdings in
foreign currencies
Change in cash and cash equivalents during the
year
3,926
514 (2,400)
- 2,040
45,379
71,655 (130,276) (27,814) (41,056)
Cash Flow - Details (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) (541) (75,836)
Tw elve m onths ended Decem ber 31, 2017
- Expenditures for mine development - sustaining
(43,425)
(337)
- (28)
- Expenditures for property, plant and equipment -
sustaining
(10,519)
(202)
-
-
- Expenditures for mine development - growth
-
- (17,199)
-
- Expenditures for property, plant and equipment -
growth
-
- (6,911)
(513)
- Investment in marketable securities
- (393)
-
-
- Expenditures for intangibles
(223)
(76)
-
-
- Proceeds from sale of marketable securities
-
3,990
-
-
Financing
(3,815)
7
- - (3,808)
- Proceeds from stock options exercised
-
7
-
-
- Dividend payment to the Government of Senegal
(2,700)
-
-
-
- Interest paid on borrowings
(1,115)
-
-
-
Effect of exchange rates on cash holdings in
foreign currencies
Change in cash and cash equivalents during the
year
581
167
-
-
748
40,470 (11,242) (28,674) (8,071) (7,517)
During the three and twelve months ended December 31, 2018, Sabodala generated net cash of $16.3 million and
$45.4 million, respectively, compared to $31.1 million and $40.5 million in the comparative periods, respectively. The
Company expects Sabodala to continue to generate free cash flow, which is expected to be used to fund expenditures of
the corporate office, the Company’s exploration budget for 2019 and, together with funds available under the Taurus
Facility, contribute towards the development of Wahgnion. Higher cash used in the exploration segment during the
current year was mainly due to $7.2 million paid to acquire the remaining 49 percent interest in the Golden Hill and
Gourma projects in the fourth quarter of 2018, $5.3 million paid to acquire a 51 percent interest in the Afema project
in the first quarter of 2018, with the remainder primarily for exploration at Golden Hill.
Annual Report 2018 37
Management‘s Discussion and Analysis
December 31, 2018
Operating Cash Flow
Cash provided by operations for the three months ended December 31, 2018 increased to $25.4 million before net
changes in working capital other than inventories, compared to $24.7 million in the prior year quarter. Net cash provided
by operating activities, after changes in working capital, increased to $41.8 million compared to $32.5 million in the
prior year quarter. The increase in operating cash flow was primarily due to decreased payments to suppliers partially
offset by lower revenues compared to the prior year period.
Cash provided by operations for the twelve months ended December 31, 2018 increased to $96.6 million before net
changes in working capital other than inventories, compared to $82.6 million in the prior year period. Net cash provided
by operating activities, after changes in working capital, increased to $92.1 million compared to $71.4 million in the
prior year period. The increase in operating cash flow was primarily due to higher revenues and lower income taxes paid
of $9.3 million partially offset by higher royalties paid and increased payments to suppliers.
Investing Cash Flow
(US$000s)
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
Grow th Capital
Feasibility
Reserve development
Construction readiness
Early w orks
Construction
Capitalized Wahgnion operational costs
Total Grow th Capital Expenditures
Acquisition of intangibles
Investment in marketable securities
Proceeds from sale of marketable securities
Investment in Boss Gold and Boss Minerals
Investment in Afema Project
Cash aquired from Afema Project
Investing Activities
Three m onths ended Decem ber 31, Tw elve m onths ended Decem ber 31,
2018
2017
2018
2017
2,952
10
3,212
(447)
5,727
13,526
19,253
-
-
-
-
50,622
2,552
53,174
57
-
-
7,242
-
-
79,726
2,552
135
333
965
3,985
7,655
11,640
340
2,440
2,484
5,245
-
-
9,230
371
8,236
1,009
18,846
45,978
64,824
-
543
-
29,158
97,198
10,435
10,660
705
7,904
6,113
25,382
29,428
54,810
2,446
6,417
10,409
5,351
-
-
10,509
137,334
24,623
-
-
(3,990)
-
-
-
18,159
656
77
-
7,242
5,303
(140)
215,296
-
393
(3,990)
-
-
-
75,836
Net cash used in investing activities for the three months ended December 31, 2018 was $79.7 million, $61.6 million
higher than the prior year period, mainly due to expenditures for Wahgnion, capitalized deferred stripping costs related
to Golouma West and Sabodala and acquisition of the remaining 49 percent interest in the Golden Hill and Gourma
projects. The prior year period included $4.0 million received from the disposal of marketable securities.
Net cash used in investing activities for the twelve months ended December 31, 2018 was $215.3 million, $139.5
million higher than the prior year period, mainly due to expenditures for Wahgnion, acquisition of the remaining 49
percent interest in the Golden Hill and Gourma projects, acquisition of the Afema project, and capitalized deferred
stripping costs related to Golouma West and Sabodala partially offset by lower sustaining capital expenditures. The prior
year period included $4.0 million received from the disposal of marketable securities.
Financing Cash Flow
Net cash flow from financing activities in the three months ended December 31, 2018 was $6.7 million and included
the drawdown of $10.0 million from the amended Taurus Facility to fund the acquisition of the remaining 49 percent
interest in the Golden Hill and Gourma projects and $3.3 million of interest and commitments fees paid related to the
Taurus Facility.
38 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Net cash flow from financing activities in the twelve months ended December 31, 2018 was $80.1 million and included
the total drawdowns of $112.2 million from the Taurus Facility, repayment of the $15.0 million Revolver Facility and
financing and interest costs paid of $17.7 million mainly related to the Taurus Facility.
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) maximizing free cash flow from our flagship Sabodala operation; (ii) increasing
production with the completion of Wahgnion by the end of 2019; (iii) progressing Golden Hill, our most advanced
exploration project, towards feasibility; (iv) unlocking additional value through resource conversion drill programs and
exploration in Burkina Faso, Senegal and Côte d’Ivoire; and (v) funding our future growth plans responsibly.
(i) Optimizing Our Sabodala Operation
Our ability to generate free cash flow from operations as forecast is a function of our ability to execute on our
mine plan at Sabodala and the price of gold. At Sabodala, the mine plan was re-sequenced in 2017 to bring
the development of the Niakafiri open pit deposit forward and to defer underground development. The
resettlement of the Sabodala village is in progress. Overall, these changes are expected to increase the amount
of free cash flow generated over the next 5 years.
(ii)
Increasing Production Through The Timely Completion of Wahgnion On Budget
In 2017, Teranga’s board approved construction of Wahgnion. With the Taurus Facility in place, the Company
commenced major construction activities earlier in the year, with the goal of reaching first gold pour by the end
of 2019. During the fourth quarter, the Company spent $53 million on construction related activities. Since
commencement of the Wahgnion project, Teranga has invested approximately $142 million in construction
expenditures at the Wahgnion project.
(iii) Targeted Exploration Programs
Based on the success of the exploration programs in Burkina Faso and Senegal, the reserve development and
exploration budget for 2019 is expected to be approximately $5-15 million. Furthermore, the Taurus Facility
includes $25 million to be used towards future advancement of a feasibility study for Golden Hill. The Company
has also invested in exploration projects in the region with the recent acquisitions of the Afema project in Côte
d’Ivoire, the Dossi permit area located adjacent to the Golden Hill property in Burkina Faso, and the remaining
49 percent interest in the Golden Hill and Gourma exploration projects in Burkina Faso.
We have the following sources of liquidity:
i.
Cash Balance. As at December 31, 2018, we had a consolidated cash balance of $46.6 million.
ii. Cash Flows from Sabodala (unhedged). Using a $1,250 per ounce gold price, we expect Sabodala to generate
$88 million1 in free cash flows2 over 2018 and 2019, and $230 million1 in free cash flows2 between 2018
and 2022 (exclusive of Sabodala Gold Hedges below).
iii. Sabodala Gold Hedges. During the third quarter of 2017 and first quarter of 2018, the Company entered into
forward gold sales contracts for about 50 percent of anticipated production over seven quarters at an average
gold price of $1,340 per ounce. Using a gold price assumption of $1,250 per ounce, this hedge program
provides $17.03 million in additional free cash flow2 to the amount noted above for Sabodala from January
2018 through to September 2019.
1 The 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.
2 This is a non-IFRS financial measure. Please refer to the reconciliation of non-IFRS financial measures at the end of this MD&A.
3 The Company executed forward gold sales contracts totalling 187,500 ounces of gold commencing January 1, 2018 through December 31, 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 settled 26,500 ounces of gold in each of the four quarters of 2018 as well as scheduled 26,500
ounces of gold for settlement in the 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.
Annual Report 2018 39
Management‘s Discussion and Analysis
December 31, 2018
iv. Wahgnion Financing. On April 16, 2018, the Company concluded an agreement with various funds managed by
Taurus Funds in respect of the Taurus Facility1. The Taurus Facility included the following:
•
•
•
$165 million to be used towards funding the development of Wahgnion and to repay all of the Company’s
current outstanding bank debt, totalling $15 million drawn on its Revolver Facility (“Wahgnion Tranche”);
$25 million to be used toward future advancement of a feasibility study for Golden Hill (“Golden Hill
Tranche”); and
$10 million equipment lease facility carve out for which the Company received a Commitment Letter from
Caterpillar Financial Services Corporation (“CAT”) on August 23, 2018. The equipment lease facility with
CAT was subsequently increased to $12.5 million. The Company expects to execute the equipment lease
facility agreement by the end of the first quarter 2019.
In October 2018, the Golden Hill Tranche of the Taurus Facility was increased by an additional $10 million to
fund the acquisition of the remaining 49 percent interest in the Golden Hill and Gourma projects from Boss
Resources. With Wahgnion well on schedule, and potentially being ahead of schedule, the Company has, in
principle, agreed with Taurus Funds an amendment to the Taurus Facility whereby the Golden Hill Tranche will
be temporarily repurposed and available for Wahgnion’s development costs. Drawdowns, if any, under the
Golden Hill Tranche are to be repaid no later than September 30, 2019, at which point the Golden Hill Tranche
reverts back to its original purpose. The Company expects to execute the amendment to the Taurus Facility by
the end of the first quarter 2019. In connection with this amendment, the Company plans to issue to Taurus
Funds an aggregate of 150,000 units of unlisted four-year warrants to acquire Teranga’s common shares at an
exercise price that is the greater of: (i) Teranga’s volume-weighted average share price (“VWAP”) on the Toronto
Stock Exchange (“TSX”) for the five trading days prior to the date of execution of the amendment to the Taurus
Facility; and (ii) 120 percent of the Teranga’s VWAP on the TSX for the 20 trading days prior to the date of
execution of the amendment to the Taurus Facility. Additional warrants will be issued only upon drawdown of
the repurposed Golden Hill Tranche.
All drawdowns of funds under the Taurus Facility are subject to satisfaction of customary conditions precedent,
including a funding ratio of Wahgnion project costs funded by the Company as compared to project costs funded
by the Taurus Facility. In the event that the Company is unable to meet its share of project costs under this
funding ratio, the Company would be required to procure additional funds through: (i) the temporary repurpose
of the Golden Hill Tranche; (ii) equity; (iii) subordinated financial indebtedness; or (iv) any other equity
instrument approved by Taurus Funds. Should the Company be unsuccessful in drawing down on some or all
of the funds, planned development activities may be postponed or cancelled. On May 7, 2018, the Company
satisfied all conditions precedent for its first drawdown under the Taurus Facility. The first drawdown under
the Wahgnion Tranche was $70 million, $15 million of which was used to repay the Revolver Facility. On
September 5, 2018, the Company completed a second drawdown under the Wahgnion Tranche of $32.2
million. On October 2, 2018, the Company drew down $10 million under the Golden Hill Tranche. As at
December 31, 2018, the Company is in compliance with all covenants under the Taurus Facility. On February
20, 2019, the Company completed a third drawdown under the Wahgnion Tranche of $34.6 million.
v.
External Financing. As results from ongoing exploration programs in Côte d’Ivoire, including the economic
evaluation of the Afema project, and/or other growth opportunities that become available, the Company may
consider an external financing to supplement cash flow from operations as required. This external financing
may be in the form of external equity or subordinated indebtedness. There is no assurance that a financing
alternative chosen by management will be available to the Company, on favourable terms or at all.
The Company’s liquidity is impacted by several macro-economic factors, which include, but are not limited to, gold
market prices, interest rates, foreign exchange rates and corporate tax policies in the jurisdictions we operate. Other
contributing factors to our liquidity include the cost of inputs to our Wahgnion capital project and operating requirements
for our Sabodala mine.
1 For material terms of the Taurus Facility, refer to March 12, 2018 new release at www.terangagold.com.
40 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
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.
As at December 31, 2018, the Company has outstanding forward gold sales contracts with Macquarie for a total of
81,500 ounces of gold at an average gold price of approximately $1,347 per ounce, settling 25,000 ounces settling in
first quarter 2019, 26,500 ounces settling in second quarter 2019 and finally 30,000 ounces settling in third quarter
2019. As a result, the Company has hedged about 50 percent of anticipated Sabodala production over the next three
quarters at gold prices averaging approximately $1,347 per ounce to provide improved revenue certainty during
construction of Wahgnion.
In conjunction with the Taurus Facility, the Company granted two million unlisted four-year share warrants to Taurus
Funds on April 16, 2018. Each warrant allows the holder to acquire one common share of the Company at an exercise
price of C$5.22. As the currency of the exercise price of the warrants is different from the Company’s functional
currency, the share warrants have been classified as a derivative financial liability for accounting purposes. As a result,
the share warrants are recorded at fair value at the end of each reporting period. Upon exercise, the warrant liability will
be reclassified to share capital. Should the warrants expire unexercised, the associated warrant liability will be recorded
as other income in the consolidated statements of comprehensive income. There is no circumstance under which the
Company would be required to pay any cash upon exercise or expiry of the warrants. At December 31, 2018, the share
warrants have been fair valued at $2.0 million, using the Black-Scholes option pricing model.
In conjunction with the Taurus Facility, the Company entered into the Offtake Agreement with Taurus Funds on May 31,
2018. Under the terms of the Offtake Agreement, Taurus Funds is entitled to an amount, in cash, equal to the difference
between the actual spot sales price per ounce and the lowest a.m. and p.m. London Bullion Market Association gold
price per ounce during the eight business days preceding the sale date for all Wahgnion gold ounces produced and sold,
up to 1,075,000 ounces. Sales proceeds received by Teranga will be reduced by any amounts owed to Taurus Funds
under the Offtake Agreement. Taurus Funds does not take actual delivery of gold ounces sold at any time.
The Offtake Agreement was classified as a derivative financial liability as the amount due to Taurus Funds is variable
and determined based on the price spread between the spot price of gold on the date of sale and the lowest spot price
of gold over periods of time in the future. As a result, the gold offtake payment liability is recorded at fair value at the
end of each reporting period. The Company has estimated the fair value of the Offtake Agreement using a discounted
cash flow model based on the Wahgnion life of mine production up to the first 1,075,000 ounces of gold. As at May
31, 2018, the estimated fair value of the Offtake Agreement was $14.0 million, which was recognized as a deferred
financing cost. As at December 31, 2018, the estimated fair value was $13.7 million.
Annual Report 2018 41
Management‘s Discussion and Analysis
December 31, 2018
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
As at December 31, 2018, the Company had the following payments due on contractual obligations and commitments:
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:
•
•
•
•
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, $1.2 million is payable annually for community projects
and infrastructure to support local communities surrounding the Company’s operations and social development of
local authorities in the surrounding Kedougou region.
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, 2018, $8.1 million was accrued which is the discounted value of the
$15.0 million future payment.
42 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
•
•
•
•
•
$0.4 million is payable annually for training of Senegalese Directorate of Mines and Geology officers and Mines
Ministry and $30,000 is payable annually for logistical support of the territorial administration of the region for
SGO.
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 $0.2 million is payable for each year of operations. Any amounts not paid
is carried forward to future years.
$0.3 million 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.
Offtake Obligation
•
Under the Offtake Agreement, Taurus Funds is entitled to an amount, in cash, equal to the difference between the
actual spot sales price per ounce and the lowest a.m. and p.m. London Bullion Market Association gold price per
ounce during the eight business days preceding the sale date for all Wahgnion gold ounces produced and sold, up
to 1,075,000 ounces.
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, 2018, $1.9 million was accrued as a current
liability.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
New standards, interpretations and amendments thereof, adopted by the Company in the current year
Adoption of 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 (“FVOCI”)) and a single, forward-looking expected loss impairment model. The adoption date for
IFRS 9 was January 1, 2018.
Upon adoption, investments in publicly traded equity securities held by the Company have been classified as
FVOCI. These investments are recorded at fair value and changes in the fair value of these investments are recognized
permanently in other comprehensive income.
The following table shows the original measurement categories under IAS 39, Financial Instruments: Recognition and
Measurement, and the new measurement categories under IFRS 9 as at January 1, 2018, for each class of the
Company’s financial assets and financial liabilities.
Annual Report 2018 43
Management‘s Discussion and Analysis
December 31, 2018
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial derivative assets
Marketable securities
Financial liabilities
Trade and other payables
Borrow ings
Gold offtake payment liability
Share w arrant liability
Measurem ent Category(i)
IAS 39
IFRS 9
Loans and receivables
Loans and receivables
Amortized costs
Amortized costs
Fair value through profit or loss
Fair value through profit or loss
Available for sale assets
FVOCI
Amortized costs
Amortized costs
n/a
n/a
Amortized costs
Amortized costs
Fair value through profit or loss
Fair value through profit or loss
(i) There were no adjustments to the carrying amounts of the financial instruments as a result of the change in classification from IAS
39 to IFRS 9.
Adoption of IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
The Company adopted IFRS 15 as at January 1, 2018 on a modified retrospective basis in accordance with the
transitional provisions of IFRS 15. Results for reporting periods beginning after January 1, 2018 are presented under
IFRS 15, while prior reporting period amounts have not been restated and continue to be reported under IAS 18 –
Revenue.
The Company has determined that the gold streaming arrangement with Franco-Nevada falls within the scope of IFRS
15 as it constitutes a contract with a customer to deliver an uncertain quantity of gold ounces in the future. The upfront
payment constitutes a gold stream liability whereby the performance obligation is 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 in exchange for an up-front deposit of $135
million. Under the arrangement, 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 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.
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 gold stream liability, should be adjusted for the effects of a SFC, and its
effects should be accounted for separately. In order to estimate the effect of the SFC, the Company 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 per ounce). This discount rate is not subsequently changed for changes in timing, price or quantities of
deliveries, and is applied to the gold stream 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 per ounce), being the estimated stand-alone selling
price of the deliveries as determined at contract inception (after separating the SFC). The outstanding gold stream
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 and the remaining gold stream liability is remeasured using
the revised production profile combined with the original estimated discount rate, and original estimated forward prices.
A re-measurement of the remaining gold stream liability will result in a cumulative catch-up adjustment to revenue
recorded on satisfied performance obligations and will be recorded as either revenue or a reversal of revenue in the
period of the change in the remaining gold stream liability.
44 Annual Report 2018
The effect of initially applying IFRS 15 resulted in the following cumulative adjustment as at January 1, 2018:
Management‘s Discussion and Analysis
December 31, 2018
•
•
Increase to gold stream liability of $56.1 million
Decrease to retained earnings of $56.1 million
Future accounting policies not yet adopted
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-on-balance sheet 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. At the commencement date of a lease, a lessee will recognize a liability to
make lease payments and an asset representing the right to use the underlying asset during the lease term (i.e. the right-
of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the
depreciation expense on the right-of-use asset. Lessor accounting remains largely unchanged and the distinction
between operating and finance leases is retained.
The Company has adopted the standard on its effective date of January 1, 2019 based on a modified retrospective
approach. The cumulative impact of adoption will be recognized as at January 1, 2019 and comparatives will not be
restated. The Company will elect to use the exemptions proposed by the standard on lease contracts for which the lease
terms ends within twelve months as of the date of initial application and lease contracts for which the underlying asset
is of low-value. The Company has certain minor camp accommodation and storage leases that are considered as low-
value.
In 2018, the Company progressed in implementation of IFRS 16. This work consisted of reviewing contracts, aggregating
data to support the evaluation of the accounting impacts and performing preliminary calculations of the impact to the
financial statements. At this stage, the Company expects the main impacts of IFRS 16 will relate to office leases and
mobile fleet contracts. Based on the work completed to date, the Company estimates that it will record the following
cumulative impact to the financial statements, effective January 1, 2019 (these results are preliminary and are subject
to change):
•
•
Increase to Property, Plant and Equipment (right-of-use assets) of $5.0 million - $6.0 million
Increase to Lease Liabilities of $5.0 million - $6.0 million
Upon implementation of IFRS 16, the main impacts are expected to be as follows:
•
•
•
•
Assets and liabilities will increase as some leases currently classified as operating leases will be recognized on
the balance sheet.
There will be a reduction in mine operation or administration expenses and an increase in finance costs as
operating lease costs are replaced with depreciation and lease interest expense.
The classification between cash flow from operating activities and cash flow from financing activities will
change.
Commonly used financial ratios and performance metrics for the Company, using existing definitions, will be
impacted including net debt, EBITDA, and operating cash flows.
The amounts recognized as assets and liabilities under IFRS 16 are subject to the following judgements, assumptions
and estimates:
•
•
•
Judgement as to whether the contracts contain leases as defined under the new standard;
Assumptions used to calculate the discount rate; and
Estimation of the lease term.
Annual Report 2018 45
Management‘s Discussion and Analysis
December 31, 2018
IFRIC 23, Uncertainty over Income Tax Treatments
In June 2017, the IASB issued the International Financial Reporting Interpretations Committee Interpretation 23
(“IFRIC 23”) which clarifies application of the recognition and measurement requirement in IAS 12, Income Taxes.
IFRIC 23 explains how to recognize and measure deferred and current income tax assets and liabilities where there is
uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where there is
uncertainty over whether that treatment will be accepted by a tax authority. IFRIC 23 applies to all aspects of income
tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss, the tax
bases of assets and liabilities, tax losses and credits and tax rates. IFRIC 23 is effective for annual reporting periods
beginning on or after January 1, 2019. The Company is currently evaluating the impact of applying IFRIC 23 to the
consolidated financial statements. The Company will apply IFRIC 23 from its effective date.
Accounting 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 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.
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.
46 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Production start date
Management assesses the stage of each mine development project to determine when a mine moves into the production
stage. The criteria used to assess the start date of a mine are determined based on the unique nature of each mine
development project. The Company considers various relevant criteria to assess when the mine is substantially complete,
ready for its intended use and moves into the production phase. Some of the criteria include, but are not limited to, the
following:
•
•
•
completion of a reasonable period of testing of the mine plant and equipment;
ability to produce metal in saleable form; and
ability to sustain ongoing production of metal.
When a mine development project moves into the production stage, the capitalization of certain mine construction costs
ceases and costs are either regarded as inventory or expensed, except for capitalizable costs related to mining asset
additions or 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.
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.
Annual Report 2018 47
Management‘s Discussion and Analysis
December 31, 2018
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 costs 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
profits and cash flow from its mining operations.
Total cash costs figures are calculated in accordance with a standard developed by The Gold Institute, which was a
worldwide association of suppliers of gold and gold products and included leading North American gold producers. The
Gold Institute ceased operations in 2002, but the standard is considered the accepted standard of reporting cash cost
of production in North America. Adoption of the standard is voluntary and the cost measures presented may not be
comparable to other similarly titled measure of other companies.
The WGC definition of all-in sustaining costs seeks to extend the definition of total cash costs by adding corporate
general and administrative costs, reclamation and remediation costs (including accretion and amortization), exploration
and study costs (capital and expensed), capitalized stripping costs and sustaining capital expenditures and represents
the total costs of producing gold from current operations. All-in sustaining costs exclude income tax payments, interest
costs, costs related to business acquisitions and items needed to normalize profits. Consequently, this measure is not
representative of all of 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. The measures are not necessarily indicative of operating
profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures
differently. The following tables reconcile these non-IFRS financial measures to the most directly comparable IFRS
measure.
“Average realized price” is a financial measure with no standard meaning under IFRS. Management uses this measure
to better understand the price realized in each reporting period for gold and silver sales. Average realized price is
calculated on revenue and ounces sold to all customers, except Franco-Nevada, as gold ounces sold to Franco-Nevada
is recognized in revenue at 20 percent of the prevailing gold spot price on the date of delivery and 80 percent at $1,250
per ounce. The average realized price is intended to provide additional information only and does not have any
standardized definition under IFRS; it should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. Other companies may calculate this measure differently.
“Earnings before interest, taxes, depreciation and amortization” (“EBITDA”) is a non-IFRS financial measure, which
excludes income tax, finance costs (before accretion expense), interest income and depreciation and amortization from
net profits. EBITDA is intended to provide additional information to investors and analysts and do not have any
standardized definition under IFRS and should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with IFRS. Management believes that EBITDA is a valuable indicator of our ability
to generate liquidity by producing operating cash flow to: fund working capital needs, service debt obligations, and fund
capital expenditures.
“Free cash flow” is a non-IFRS financial measure. 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.
48 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Starting in 2018, the Company adopted “adjusted net profit attributable to shareholders” and “adjusted basic earnings
per share” as new non-IFRS financial measures. These non-IFRS financial measures are used by management and
investors to measure the underlying operating performance of the Company. Presenting these measures from period to
period is expected to help management and investors evaluate earnings trends more readily in comparison with results
from prior periods.
The Company calculates “adjusted net profit attributable to shareholders” as net (loss)/profit attributable to shareholders
adjusted to exclude specific items that are significant, but not reflective of the underlying operations of the Company,
including: the impact of unrealized and realized foreign exchange gains and losses, gains and losses on derivative
instruments, accretion expense on long-term obligations, impairment provisions and reversals thereof, and other unusual
or non-recurring items. Commencing the second quarter 2018, the Company also excluded the impact of foreign
exchange movements on deferred taxes and other non-cash fair value changes from adjusted net profit attributable to
shareholders as management does not believe these factors to be reflective of the underlying performance of the
Company.
“Adjusted basic earnings per share” is calculated using the weighted average number of shares outstanding under the
basic method of earnings per share as determined under IFRS.
RECONCILIATION OF NON-IFRS FINANCIAL MEASURES
1. The reconciliation cash costs per ounce, cost of sales per ounce, all-in sustaining costs, and all-in sustaining costs
(excluding non-cash inventory movements and amortized advanced royalty costs) follows below:
(US$000s, except w here indicated)
Three m onths ended Decem ber 31,
Tw elve m onths ended Decem ber 31,
Gold produced1 (oz)
Gold sold (oz)
Cash costs per ounce sold
Mine operation expenses
Less: Regional administration costs
Total cash costs
Total cash costs per ounce sold
Cost of sales per ounce sold
Cost of sales
2018
2017
2018
2017
59,442 67,934 245,230 233,267
61,696 68,944 246,073 231,078
43,216 48,166 164,349 168,689
(508) (689) (1,868) (1,996)
42,708 47,477 162,481 166,693
692 689 660 721
59,374 64,149 230,517 222,113
Total cost of sales per ounce sold
962 930 937 961
All-in sustaining costs
Total cash costs
Administration expenses2
Share-based compensation
Capitalized deferred stripping
Capitalized reserve development
Mine site sustaining capital
All-in sustaining costs
42,708 47,477 162,481 166,693
5,048 4,600 15,290 12,580
1,158 935 4,851 2,580
13,526 7,655 45,978 29,428
(447)
965 1,009 6,113
6,174 3,006 17,837 19,256
68,167 64,638 247,446 236,650
All-in sustaining costs per ounce sold
1,105 938 1,006 1,024
All-in sustaining costs (excluding non-cash inventory m ovem ents
and am ortized advanced royalty costs)
All-in sustaining costs
Amortization of advanced royalties
Inventory movements - non-cash
All-in sustaining costs (excluding non-cash inventory m ovem ents
and am ortized advanced royalty costs)
All-in sustaining costs (excluding non-cash inventory m ovem ents
and am ortized advanced royalty costs) per ounce
1 Go ld pro duced represents change in go ld in circuit invento ry plus go ld reco vered during the perio d.
2 A dministratio n expenses include regio nal administratio n co sts and exclude co rpo rate depreciation.
68,167 64,638 247,446 236,650
(515) (867) (2,745) (3,003)
(6,082) (4,495) (13,471) (15,786)
61,570 59,276 231,230 217,861
998 860 940 943
2. Free cash flow is a non-IFRS financial measure that does not have a standard meaning under IFRS. Teranga defines
free cash flow as net cash flow provided by operating activities less sustaining capital expenditures.
3. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is calculated as follows:
Annual Report 2018 49
Management‘s Discussion and Analysis
December 31, 2018
(US$000s)
Net (loss)/profit for the period
Add: finance costs (before accretion expense)
Less: finance income
Adjust: income tax expense
Add: depreciation and amortization
Earnings before interest, taxes, depreciation and
am ortization
Three m onths ended Decem ber 31, Tw elve m onths ended Decem ber 31,
2018
(10,248)
1,700
(38)
4,140
16,962
2017
5,958
863
(44)
3,410
16,443
2018
13,465
6,060
(74)
23,312
69,092
2017
34,530
3,042
(192)
2,436
55,519
12,516
26,630
111,855
95,335
4. Adjusted net profit and adjusted basic net earnings per share are calculated as follows:
(US$000s)
Net (loss)/profit attributable to shareholders
Adjustments (net of tax) for:
Loss/(gains) on derivative instruments
Accretion expense
Acquisition
Net foreign exchange losses
Impact of foreign exchange on deferred taxes
Change in fair value of share w arrant liability
Change in fair value of gold offtake payment liability
Adjusted net profit attributable to shareholders
Basic (loss)/earnings per share
Adjusted basic earnings per share
OUTSTANDING SHARE DATA
Three m onths ended Decem ber 31, Tw elve m onths ended Decem ber 31,
2017
31,932
2018
(10,639)
2018
11,794
2017
5,758
7,149
2,077
-
422
1,847
137
236
1,229
(0.10)
0.01
3,488
340
-
497
(1,366)
-
-
8,717
0.05
0.08
(9,299)
9,646
-
3,008
4,379
(1,136)
(317)
18,075
0.11
0.17
(1,832)
778
52
4,536
(5,360)
-
-
30,106
0.30
0.28
At December 31, 2018, the Company had 107,586,769 outstanding shares.
TRANSACTIONS WITH RELATED PARTIES
During the year ended December 31, 2018, there were transactions totaling $50 thousand between the Company and
an entity controlled by Alan R. Hill, the Company’s Chairman, for consulting services.
The Company has an exploration agreement with Miminvest SA (“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
is expected to provide ongoing in-country strategic advice. Furthermore, the entity will pursue additional exploration
projects in Côte d'Ivoire outside of the existing Miminvest permits.
SHAREHOLDINGS
Teranga’s 90 percent shareholding in SGO, the company operating the Sabodala gold mine, is held 89.5 percent through
a Mauritian 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. On death or resignation, a share individually held would be transferred to another representative of
SGML or added to its current 89.5 percent shareholding according to the circumstances at the time.
Teranga’s 90 percent shareholding in Wahgnion Gold Operations SA, the company developing Wahgnion, is held 89.8
percent through a Mauritian holding company, Loumana Holdings Ltd. (“Loumana”), and the remaining 0.2 percent by
individuals nominated by Loumana to be on the board of directors in order to meet the minimum shareholding
requirements under Burkinabe law. On death or resignation, a share individually held would be transferred to another
representative of Loumana or added to its current 89.8 percent shareholding according to the circumstances at the time.
50 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
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, 2018, 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. There has been no change in the Company’s design of the ICFR that occurred during the
three and twelve months ended December 31, 2018, which has materially affected, or is reasonably likely to materially
affect the Company’s ICFR.
The Company has limited the scope of the design of ICFR and DC&P to exclude the controls, policies and procedures of
the entities acquired as part of the Afema project acquisition. The balance sheet and operating results of the entities
are included in the consolidated financial statements of Teranga for the three and twelve months ended December 31,
2018, following the acquisition on March 22, 2018. The scope limitation is in accordance with Section 3.3 of NI 52-
109, Certification of Disclosure in Issuer’s Annual and Interim Filings, which allows an issuer to limit its design of ICFR
and DC&P to exclude the controls, policies and procedures of a company acquired not more than 365 days before the
end of the financial period to which the certificate relates. Summary financial information of the Afema project in the
consolidated financial statements were as follows:
(US$000's)
Current assets - as at December 31, 2018
Non-current assets - as at December 31, 2018
Current liabilities - as at December 31, 2018
Net loss - three months ended December 31, 2018
Net loss - tw elve months ended December 31, 2018
RISKS AND UNCERTAINTIES
676
14,414
(1,259)
1,044
1,794
The Company identified a number of risk factors to which it is subject to in its Annual Information Form dated March
29, 2018 and filed for the year ended December 31, 2017. 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, war or other forms of civil unrest, economic, social or political instability, terrorism, hostage taking, risk of a
disease outbreak impacting our West African workforce and stock exchange price fluctuations.
Annual Report 2018 51
Management‘s Discussion and Analysis
December 31, 2018
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, results of operations (including, without limitation, future production and capital expenditures), performance
(both operational and financial) and business prospects (including the timing and development of new deposits and the
success of exploration activities) and opportunities. Wherever possible, words such as “objective to”, “likely”, “intend
to”, “potential”, “belief”, “believe”, “expects”, “estimates”, “plans”, “anticipated”, “ability” and similar expressions
or statements that certain actions, events or results “should”, or "will" have been used to identify such forward-looking
information. Specific forward-looking statements in this MD&A include forecasting 2019 gold production, cost guidance
and anticipated timing for first gold pour and ramp up to nameplate production at Wahgnion. 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, such forward-looking statements are based upon assumptions,
opinions and analysis that management believes 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, the ability to resettle the community within anticipated timeline, 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 are more fully described in Teranga's Annual
Information Form dated March 29, 2018, 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 and Wahgnion 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, Wahgnion and Golden Hill’s 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.
52 Annual Report 2018
Management‘s Discussion and Analysis
December 31, 2018
Teranga's Burkina Faso exploration programs were managed by Peter Mann, FAusIMM. Mr. Mann was 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 mineralization and type of deposit under consideration and to the activity which he is
undertaking to qualify as a "Qualified Person" under NI 43-101. 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 RC and diamond core samples are assayed at the BIGS Global Laboratory in Ouagadougou, Burkina
Faso. 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.
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 31, 2018) pursuant
to National Instrument 43-101 - Standards of Disclosure for Mineral Projects (the “Technical Reports”), or fourth quarter
2018 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.
Annual Report 2018 53
MANAGEMENT’S RESPONSIBILITY
FOR FINANCIAL REPORTING
The accompanying consolidated financial statements of the Company have been prepared by management in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Management acknowledges responsibility for the preparation and presentation of the consolidated financial statements,
including responsibility for significant accounting judgments and estimates and, where relevant, the choice of accounting
principles. Management maintains an appropriate system of internal controls to provide reasonable assurance that
transactions are authorized, assets safeguarded, and proper records maintained.
The Audit Committee of the Board of Directors has met with the Company’s independent auditors to review the scope
and results of the annual audit and to review the consolidated financial statements and related financial reporting matters
prior to submitting the consolidated financial statements to the Board for approval.
The Company’s independent auditors, Ernst & Young LLP, have conducted an audit in accordance with generally
accepted auditing standards, and their report follows.
RICHARD YOUNG
President and Chief Executive Officer
NAVIN DYAL
Chief Financial Officer
54 Annual Report 2018
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Teranga Gold Corporation
We have audited the consolidated financial statements of Teranga Gold Corporation and its subsidiaries (the “Group”),
which comprise the consolidated statements of financial position as at December 31, 2018 and 2017, and the
consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated
statements of cash flows for the years then ended, and notes to the consolidated financial statements, including a
summary of significant accounting policies.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
consolidated financial position of the Group as at December 31, 2018 and 2017, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with International Financial
Reporting Standards (“IFRS”).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Other Information
Management is responsible for the other information. The other information comprises:
• Management’s Discussion and Analysis for the year ended December 31, 2018
•
The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual
Report
Our opinion on the consolidated financial statements does not cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information,
and in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
We obtained Management’s Discussion & Analysis to the date of this auditor’s report. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact in this auditor’s report. We have nothing to report in this regard.
The Annual Report is expected to be made available to us after the date of the auditor’s report. If based on the work we
will perform on this other information, we conclude there is a material misstatement of other information, we are required
to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Annual Report 2018 55
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible
for the direction, supervision and performance of the group audit. We remain solely responsible for our audit
opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
The engagement partner on the audit resulting in this independent auditor’s report is Don Linsdell.
(signed) Ernst & Young LLP
Ernst & Young LLP
Chartered Professional Accountants
Licensed Public Accountants
February 21, 2019
Toronto, Canada
56 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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
Profit before income tax
Income tax expense
Net profit for the year
Net profit attributable to:
Shareholders
Non-controlling interests
Net profit for the year
Note
7
8
9
For the years ended December 31,
2018
2017
312,628
291,683
(164,349) (168,689)
(66,168) (53,424)
(230,517) (222,113)
82,111
69,570
(13,160) (12,373)
10
(13,618) (10,702)
34
11
(3,700) (2,906)
(4,851) (2,580)
(15,783) (3,907)
(2,680) (4,632)
12
8,458 4,496
(45,334) (32,604)
36,777
36,966
13
(23,312) (2,436)
13,465
34,530
11,794
31,932
1,671 2,598
13,465
34,530
Other comprehensive (loss) /income for the year
Change in fair value of marketable securities, net of tax
(717)
2,455
Reclassification to income, net of tax
Other comprehensive loss for the year
Total comprehensive income for the year
Total comprehensive income attributable to:
Shareholders
Non-controlling interests
- (2,764)
(717) (309)
12,748
34,221
11,077
31,623
1,671 2,598
Total comprehensive income for the year
12,748
34,221
Earnings per share from operations attributable to the shareholders
of the Company during the year
- basic earnings per share
- diluted earnings per share
27
27
0.11 0.30
0.11 0.30
The accompanying notes are an integral part of these consolidated financial statements
Annual Report 2018 57
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Marketable securities
Other current assets
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Deferred income tax assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current income tax liabilities
Gold stream liability
Provisions
Total current liabilities
Non-current liabilities
Borrowings
Gold offtake payment liability
Share warrant liability
Gold stream liability
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
Note
14
15
16
17
15
18
19
17
20
24
25
21
22
23
24
25
20
26
2018
46,615
9,079
65,608
324
10,945
132,571
86,105
700,464
16,196
4,551
807,316
939,887
75,094
13,124
14,860
7,240
110,318
87,097
13,699
1,969
73,902
35,328
10,447
222,442
332,760
497,257
(998)
5,800
78,533
580,592
26,535
607,127
939,887
2017
87,671
5,484
57,024
964
9,686
160,829
103,638
520,834
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
The accompanying notes are an integral part of these consolidated financial statements
Approved by the Board of Directors
ALAN HILL
Director
ALAN THOMAS
Director
58 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Issued capital
Beginning of year
Exercise of stock options
End of year
Foreign currency translation reserve
Beginning of year
End of year
Other components of equity
Beginning of year
Equity-settled share-based compensation expense
Investment revaluation reserve on change in fair value of
marketable securities, net of tax
Acquisition of non-controlling interest in Boss Gold and
Boss Minerals
End of year
Retained earnings
Beginning of year
Adjustment due to IFRS 15
Profit attributable to shareholders
End of year
Non-controlling interests
Beginning of year
Acquisition of Afema
Non-controlling interest - portion of profit for the year
Acquisition of non-controlling interest in Boss Gold and
Boss Minerals
Note
2018
2017
For the years ended December 31,
496,333
496,326
34
924
7
497,257
496,333
(998)
(998)
(998)
(998)
18,299
17,514
790
1,094
(717)
(309)
6b
(12,572)
-
5,800
18,299
122,835
90,903
24
(56,096)
-
11,794
31,932
78,533
122,835
13,086
13,188
6,448
-
1,671
2,598
5,330
-
6a
6b
Dividend payment to the Government of Senegal
-
(2,700)
End of year
Total equity as at December 31
26,535
13,086
607,127
649,555
The accompanying notes are an integral part of these consolidated financial statements
Annual Report 2018 59
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Note
18
18
9
9
11
34
24
13
12
12
12
32
6b
21
21
Cash flows related to operating activities
Net profit for the year
Add (deduct) items not affecting cash:
Depreciation of property, plant and equipment
Depreciation of capitalized mine development costs
Inventory movements - depreciation
Capitalized deferred stripping - depreciation
Amortization of advanced royalties
Unrealized gains on derivative instruments
Amortization of intangibles
Amortization of deferred financing costs
Accretion expenses
Share-based compensation
Amortization of gold stream liability
Deferred income tax expense/(recovery)
Gain on sale of marketable securities
Unrealized gains on revaluation of share warrant liability
Unrealized gains on revaluation of gold offtake payment liability
Interest on borrowings
Decrease in inventories
Cash flows related to operating activities before changes
in working capital excluding inventories
Changes in working capital excluding inventories
Net cash provided by operating activities
Cash flows related to investing activities
Expenditures for property, plant and equipment
Expenditures for mine development
Expenditures for intangibles
Acquisition of non-controlling interest in Afema Project
Cash acquired from Afema
Investment in marketable securities
Investment in Boss Gold and Boss Minerals
Proceeds from sale of marketable securities
Net cash used in investing activities
Cash flows related to financing activities
Drawdown of finance facility
Repayment of borrowings
Financing costs paid
Proceeds from stock options exercised
Interest paid on borrowings
Dividend payment to the Government of Senegal
Net cash provided by (used in) financing activities
Effect of exchange rates on cash holdings in foreign currencies
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
Taxes paid in Cash
The accompanying notes are an integral part of these consolidated financial statements
60 Annual Report 2018
For the years ended December 31,
2018
13,465
27,475
44,605
(1,486)
(2,728)
2,746
(2,553)
396
1,893
9,723
4,851
(22,500)
10,295
-
(1,136)
(317)
1,485
10,435
96,649
(4,589)
92,060
(123,896)
(78,262)
(656)
(5,303)
140
(77)
(7,242)
-
(215,296)
112,200
(15,000)
(12,278)
609
(5,391)
-
80,140
2,040
(41,056)
87,671
46,615
5,942
2017
34,530
23,165
39,492
(6,306)
(1,977)
3,003
(1,832)
220
463
865
2,580
(22,606)
(4,525)
(2,469)
-
-
1,131
16,876
82,610
(11,231)
71,379
(18,145)
(60,989)
(299)
-
-
(393)
-
3,990
(75,836)
-
-
-
7
(1,115)
(2,700)
(3,808)
748
(7,517)
95,188
87,671
15,202
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(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).
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 21, 2019.
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.
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
Annual Report 2018 61
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(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”.
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:
•
•
•
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.
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.
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.
62 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(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.
Where 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. Proceeds from sales of gold produced
prior to achieving commercial production is recognized as revenues in the income statement.
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.
Capitalized mining costs relating to a pit are depreciated on a UOP basis over the pit-specific proven and probable gold
reserves. 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.
Annual Report 2018 63
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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.
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.
Capitalized exploration and evaluation expenditures costs will be amortized using the UOP method over the estimated
proven and probable reserves once the asset is in a location and condition necessary for it to be capable of operating in
a manner intended the Company.
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:
•
•
•
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 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.
64 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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 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. Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive, as a result of past events
for which it is probable that the Company will be required to settle the obligation and a reliable estimate can be made
of the amount of the obligation.
The amount recognized as a provision is the best estimate of the present value of the consideration required to settle
the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.
n. Restoration and Rehabilitation
A provision for restoration and rehabilitation is recognized when there is a present obligation as a result of exploration,
development and production activities undertaken, it is probable that an outflow of economic benefits will be required
to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations
include the costs of removing facilities, abandoning sites and restoring the affected areas.
The provision for future restoration costs is the best estimate of the present value of the expenditure required to settle
the restoration obligation at the reporting date, based on current legal or constructive obligation. Future restoration costs
are reviewed at each reporting period and any changes in the estimate are reflected in the present value of the restoration
provision at each reporting date.
Annual Report 2018 65
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
o.
Income Tax
Current income tax
Current income tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the
taxable profit or tax loss for the period. Current income tax is calculated on the basis of the law enacted or substantively
enacted at the reporting date in the countries where the Company’s subsidiaries operate and generate taxable income.
Deferred income tax
Deferred income tax is recognized, in accordance with the liability method, on temporary differences arising between
the tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements. The tax base
of an asset or liability is the amount attributed to that asset or liability for tax purposes.
Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized only to
the extent that it is probable that future taxable profit will be available against which the temporary differences can be
utilized. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in
a transaction other than a business combination that at the time of the transaction affects neither the accounting nor
the taxable profit or loss.
Deferred income tax is determined using tax rates and laws that have been enacted or substantively enacted by the
reporting date and expected to apply when the related deferred income tax asset is realized or the deferred income tax
liability is settled.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and liabilities on a net basis.
p. Financial Instruments
On January 1, 2018, the Company adopted IFRS 9 Financial Instruments (“IFRS 9”), which replaced IAS 39 Financial
Instruments: Recognition and Measurement” (“IAS 39”), on a retrospective basis using certain available transitional
provisions. In accordance with the transitional provisions, the comparative information for prior periods have not been
restated and the information presented for 2017 reflects the requirements of IAS 39 rather than IFRS 9.
The nature and effect of the changes to IFRS 9 are as follows:
Financial Instrument Classification and Measurement
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities.
The adoption of IFRS 9 did not have a significant effect on the Company’s accounting policies related to financial
liabilities.
IFRS 9 provides a revised model for the classification and measurement of financial assets that eliminates the previous
categories of financial assets under IAS 39 of “available-for-sale”, “held-to-maturity”, or “loans and receivables.” Under
IFRS 9, on initial recognition, a financial asset is classified as and measured at: amortized cost, fair value through profit
and loss (“FVTPL”), or fair value through other comprehensive income (“FVOCI”). The revised model for classifying
financial assets results in classification according to their contractual cash flow characteristics and the business models
under which they are held.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated as
FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest
on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, an irrevocable election is available to measure
the investment at FVOCI whereby changes in the investment’s fair value (realized and unrealized) will be recognized
66 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
permanently in other comprehensive income with no reclassification to profit or loss. The election is available on an
investment-by-investment basis.
All financial assets not classified as amortized cost or FVOCI are classified as and measured at FVTPL. This includes all
derivative assets. On initial recognition, a financial asset that otherwise meets the requirements to be measured at
amortized cost or FVOCI may be irrevocably designated as FVTPL if doing so eliminates or significantly reduces an
accounting mismatch that would otherwise arise.
Under IFRS 9, the Company has classified and measured its financial assets as described below:
•
•
•
•
Cash and cash equivalents, restricted cash and short-term investments are classified as and measured at
amortized cost. Previously under IAS 39, these assets were classified and measured at amortized cost.
Trade receivables and certain other assets are classified as and measured at amortized cost. Previously under
IAS 39, these assets were classified as loans and receivables and measured at amortized cost.
Long-term investments in equity securities, where the Company cannot exert significant influence, are
designated as financial assets at FVOCI and are measured at fair value. Previously under IAS 39, the
investments were classified as available-for-sale and measured at FVOCI. On transition to IFRS 9, the Company
continues to designate its long-term investments as FVOCI.
Trade payables, accrued liabilities and long-term debt are classified as and measured at amortized cost.
• Derivative assets and liabilities include derivative financial instruments that do not qualify as hedges, or are
not designated as hedges, and are classified as FVTPL.
The adoption of IFRS 9 did not result in a change in the carrying values of any of the Company’s financial instruments
on the transition date.
Impairment of Financial Assets
IFRS 9 replaced the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ (“ECL”) model. The new impairment
model applies to financial assets classified as and measured at amortized cost, contract assets and investments in debt
instruments measured at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized
earlier than under IAS 39. The adoption of the ECL model under IFRS 9 did not have an impact on the carrying values
of any of the Company’s financial assets on the transition date.
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.
q. Marketable Securities
Investments may be classified as a marketable security based on their highly liquid nature and because such 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.
Annual Report 2018 67
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
r. 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 revalued based on the period end share price with a corresponding charge to share-
based compensation expense. RSUs that vest based on the achievement of performance conditions are revalued based
on the current best estimate of the outcome of the performance condition at the reporting period. The cost of the award
is recorded on a straight-line basis over the vesting period and is recorded within non-current liabilities on the
consolidated statements of financial position, except for the portion that will vest within twelve months which 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 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 FBUs are granted. The fair value of the FBUs is adjusted by the estimate of
the number of FBUs 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 FBUs is charged to the consolidated statements of comprehensive income
and revalued at the end of each reporting period based on the Black-Scholes valuation.
68 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
s. Revenue
Gold and silver bullion sales
Revenue is recognized when persuasive evidence exists that all of the following criteria are met:
•
•
•
•
•
•
the shipment has been made;
the significant risks and rewards of ownership of the product have been transferred to the buyer;
neither continuing managerial involvement to the degree usually associated with ownership, nor effective
control over the gold or silver sold, has been retained;
the amount of revenue can be measured reliably;
it is probable that the economic benefits associated with the sale will flow to the Company; and
the costs incurred or to be incurred in respect of the sale can be measured reliably.
Gold streaming arrangement
Effective January 1, 2018, the Company adopted IFRS 15 and applied the standard on the gold streaming arrangement
with Franco-Nevada Corporation. Refer to Notes 4 and 24 for further details.
Interest income
Interest income is recognized in other expenses within the consolidated statements of comprehensive income.
t. Royalties
Royalties
Royalties, whether paid to the government of a country in which Teranga operates 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.
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.
u. Earnings per Share
Basic earnings per share is determined by dividing the profit or loss attributable to equity holders of the Company by the
weighted average number of 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.
Annual Report 2018 69
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
4. NEW STANDARDS AND INTERPRETATIONS
a. New standards, interpretations and amendments thereof, adopted by the Company in the current year
IFRS 9, Financial Instruments
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 (FVOCI) and a single, forward-
looking expected loss impairment model. The adoption date for IFRS 9 was January 1, 2018.
Upon adoption, investments in publicly traded equity securities held by the Company have been classified as
FVOCI. These investments are recorded at fair value and changes in the fair value of these investments are recognized
permanently in other comprehensive income.
The following table shows the original measurement categories under IAS 39 and the new measurement categories under
IFRS 9 as at January 1, 2018, for each class of the Company’s financial assets and financial liabilities.
Financial Assets
Cash and cash equivalents
Trade and other receivables
Financial derivative assets
Marketable securities
Financial liabilities
Trade and other payables
Borrowings
Gold offtake payment liability
Share warrant liability
Measurement Category(i)
IAS 39
IFRS 9
Loans and receivables
Loans and receivables
FVTPL
Available for sale assets
Amortized costs
Amortized costs
n/a
n/a
Amortized costs
Amortized costs
FVTPL
FVOCI
Amortized costs
Amortized costs
FVTPL
FVTPL
(i)
There were no adjustments to the carrying amounts of the financial instruments as a result of the change in classification
from IAS 39 to IFRS 9.
IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
The Company adopted IFRS 15 as at January 1, 2018 on a modified retrospective basis in accordance with the
transitional provisions of IFRS 15. Results for reporting periods beginning after January 1, 2018 are presented under
IFRS 15, while prior reporting period amounts have not been restated and continue to be reported under IAS 18 –
Revenue.
The Company has determined that the gold streaming arrangement with Franco-Nevada Corporation (“Franco-Nevada”)
falls within the scope of IFRS 15 as it constitutes a contract with a customer to deliver an uncertain quantity of gold
ounces in the future. The upfront payment constitutes a gold stream liability whereby the performance obligation is 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 in exchange for an up-front deposit of $135
million. Under the arrangement, 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 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.
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.
70 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
The consideration transferred, in this case the gold stream liability, should be adjusted for the effects of a SFC, and its
effects should be accounted for separately. In order to estimate the effect of the SFC, the Company 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 per ounce). This discount rate is not subsequently changed for changes in timing, price or quantities of
deliveries, and is applied to the gold stream 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 per ounce), being the estimated stand-alone selling
price of the deliveries as determined at contract inception (after separating the SFC). The outstanding gold stream
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 and the remaining gold stream liability is remeasured using
the revised production profile combined with the original estimated discount rate, and original estimated forward prices.
A re-measurement of the remaining gold stream liability will result in a cumulative catch-up adjustment to revenue
recorded on satisfied performance obligations and will be recorded as either revenue or a reversal of revenue in the
period of the change in the remaining gold stream liability.
The effect of initially applying IFRS 15 resulted in the following cumulative adjustment as at January 1, 2018:
•
Increase to gold stream liability of $56.1 million
• Decrease to retained earnings of $56.1 million
b. Future accounting policies not yet adopted
IFRS 16, Leases (“IFRS 16”)
In January 2016, the IASB issued IFRS 16 Leases which superseded IAS 17 Leases and related interpretations. The
new standard provides a single-on-balance sheet 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. At the commencement date of a lease, a lessee will recognize a liability to
make lease payments and an asset representing the right to use the underlying asset during the lease term (i.e. the right-
of-use asset). Lessees will be required to separately recognize the interest expense on the lease liability and the
depreciation expense on the right-of-use asset. Lessor accounting remains largely unchanged and the distinction
between operating and finance leases is retained.
The Company has adopted the standard on its effective date of January 1, 2019 based on a modified retrospective
approach. The cumulative impact of adoption will be recognized as at January 1, 2019 and comparatives will not be
restated. The Company will elect to use the exemptions proposed by the standard on lease contracts for which the lease
terms ends within twelve months as of the date of initial application and lease contracts for which the underlying asset
is of low-value. The Company has certain minor camp accommodation and storage leases that are considered as low-
value.
In 2018, the Company progressed in the implementation of IFRS 16. This work consisted of reviewing contracts,
aggregating data to support the evaluation of the accounting impacts and performing preliminary calculations of the
impact to the financial statements. At this stage, the Company expects the main impacts of IFRS 16 will relate to office
leases and mobile fleet contracts. Based on the work completed to date, the Company estimates that it will record the
following cumulative impact to the financial statements, effective January 1, 2019 (these results are preliminary and
are subject to change):
•
•
Increase to Property, Plant and Equipment (right-of-use assets) of $5.0 million - $6.0 million
Increase to Lease Liabilities of $5.0 million - $6.0 million
Upon implementation of IFRS 16, the main impacts are expected to be as follows:
•
•
Assets and liabilities will increase as some leases currently classified as operating leases will be recognized on
the balance sheet.
There will be a reduction in mine operation or administration expenses and an increase in finance costs as
operating lease costs are replaced with depreciation and lease interest expense.
Annual Report 2018 71
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
•
•
The classification between cash flow from operating activities and cash flow from financing activities will
change.
Commonly used financial ratios and performance metrics for the Company, using existing definitions, will be
impacted including net debt, EBITDA, and operating cash flows.
The amounts recognized as assets and liabilities under IFRS 16 are subject to the following judgements, assumptions
and estimates:
•
•
•
Judgement as to whether the contracts contain leases as defined under the new standard;
Assumptions used to calculate the discount rate; and
Estimation of the lease term.
IFRIC 23, Uncertainty over Income Tax Treatments (“IFRIC 23”)
In June 2017, the IASB issued the International Financial Reporting Interpretations Committee Interpretation 23
(“IFRIC 23”) which clarifies application of the recognition and measurement requirement in IAS 12 Income Taxes (“IAS
12”). IFRIC 23 explains how to recognize and measure deferred and current income tax assets and liabilities where
there is uncertainty over a tax treatment. An uncertain tax treatment is any tax treatment applied by an entity where
there is uncertainty over whether that treatment will be accepted by a tax authority. IFRIC 23 applies to all aspects of
income tax accounting where there is an uncertainty regarding the treatment of an item, including taxable profit or loss,
the tax bases of assets and liabilities, tax losses and credits and tax rates. IFRIC 23 is effective for annual reporting
periods beginning on or after January 1, 2019. The Company is currently evaluating the impact of applying IFRIC 23 to
the consolidated financial statements. The Company will apply IFRIC 23 from its effective date.
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.
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
72 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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:
•
•
•
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/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.
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.
Annual Report 2018 73
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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 ACQUISITION
a. Acquisition of Afema
On March 22, 2018, the Company entered in to an agreement with Sodim Limited (“Sodim”), the owner of all of the
issued and outstanding shares of Taurus Gold Afema Holdings Limited (“Afema”), and acquired 51 percent of Afema,
which owns an interest in the Afema Gold project through the 90 percent controlled Afema Gold SA, for an initial cash
consideration of $5.0 million, with an additional $2.5 million to be paid in 2019.
Pursuant to the agreement, a further $2.5 million is payable upon the delivery of a confirmation study, feasibility study
or updated feasibility study which shall include anticipated pre-production capital expenditures and the Company’s
written confirmation of its decision to proceed with the development of any Afema Project. Upon this, the Company’s
participating interest will increase to 70 percent and Sodim can elect to maintain its 30 percent equity interest on a fully
participatory basis or convert it to a 5 percent equity interest on a free carrying basis or to a 3 percent net smelter royalty
on the Afema project.
Management has determined that the acquisition of Afema, along with its mining license and exploration permits, was a
purchase of assets and assumption of liabilities and did not qualify as a business combination under IFRS 3, Business
Combinations. The value assigned to the assets acquired and liabilities assumed were based upon the fair value of
consideration given at the date of acquisition and transaction costs were capitalized as part of the purchase consideration.
The Company has elected to measure the non-controlling interests as their proportionate share of the fair value of net
identifiable assets acquired and liabilities assumed.
Consideration for the acquisition was $7.8 million.
b. Acquisition of Boss Gold and Boss Minerals
On October 2, 2018, the Company completed its acquisition of the remaining 49 percent interest in the Golden Hill and
and Gourma exploration projects, owned by Boss Minerals Sarl (“Boss Minerals”) and Boss Gold Sarl (“Boss Gold”)
(together, the “Boss Entities”), respectively, from Boss Resources Limited (“Boss Resources”) for total consideration of
AUD 10 million (US$7.2 million). Upon closing, Teranga owned 100 percent interest in each of the Golden Hill and
Gourma exploration projects.
Changes in the Company’s ownership in subsidiaries that do not result in a loss of control are recorded as equity
transactions. As a result of the acquisition of the remaining 49 percent interest in the Boss Entities, a debit of $12.6
million was recognized directly in equity, which was the sum of the consideration paid of $7.2 million and a $5.4 million
deficit representing Boss Resources’ 49 percent non-controlling interest which was derecognized on October 2, 2018.
7. REVENUE
Gold sales - spot price (i)
Silver sales
Gold stream arrangement (ii)
Revenue(iii)
For the years ended December 31,
2018
289,794
334
22,500
312,628
2017
291,335
348
-
291,683
(i)
(ii)
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 realized revenues from the drawdown of the gold stream liability to Franco-Nevada equivalent to 80 percent of
$1,250 per ounce of gold. Refer to Note 24 for further details.
74 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
(iii)
If IFRS 15 had not been adopted for 2018, revenue for the year ended December 31, 2018 would have been $313.0 million.
Refer to Notes 4 and 24 for further details.
For the year ended December 31, 2018, 223,573 ounces of gold were sold at an average price of $1,271 per ounce,
excluding 22,500 ounces delivered to Franco-Nevada (2017: 208,578 ounces of gold were sold at an average realized
price of $1,261 per ounce, excluding 22,500 ounces delivered to Franco-Nevada).
The Company made sales to customers in 2018 and in 2017 as follows:
Customer 1
Customer 2
Customer 3
Customer 4
Total Revenue
8. MINE OPERATION EXPENSES
Mine production costs
Royalties(i)
Regional administration costs
Capitalized deferred stripping
Inventory movements
For the years ended December 31,
2018
2017
145,266 149,976
137,925 113,449
28,207 28,258
1,230
-
312,628 291,683
For the years ended December 31,
2018
2017
175,179 161,155
19,809 19,180
1,868 1,996
(45,978) (29,428)
13,471 15,786
Total Mine Operation Expenses
164,349
168,689
(i)
Includes royalties to Axmin Inc. on account of their 1.5 percent net smelter royalty on the Gora deposit. During the year
ended December 31, 2018, the Company incurred $1.5 million of Axmin royalties (2017: $1.6 million).
9. DEPRECIATION AND AMORTIZATION
Depreciation and amortization - property, plant and equipment
and mine development expenditures
43,264 39,152
Depreciation and amortization - deferred stripping assets
27,118 22,555
Inventory movements - depreciation
(1,486) (6,306)
Capitalized deferred stripping - depreciation
(2,728) (1,977)
Total Depreciation and Amortization
66,168 53,424
For the years ended December 31,
2018
2017
10. ADMINISTRATION EXPENSES
Corporate office
Legal and other
Audit fees
Depreciation
For the years ended December 31,
2018
2017
11,090 8,855
1,865
1,428
467
301
196
118
Total Administration Expenses
13,618 10,702
Annual Report 2018 75
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
11. FINANCE COSTS
Accretion expense (i)
Interest and deferred financing costs on borrowings
Stocking fees
Bank charges
Other
Total Finance Costs(i)
For the years ended December 31,
2018
9,723
3,388
741
1,931
-
15,783
2017
865
1,594
761
620
67
3,907
(i)
For the year ended December 31, 2018, the amount includes $9.0 million of accretion expense on the gold stream liability
(2017: $nil). If IFRS 15 had not been adopted prospectively for 2018, total finance costs for year ended December 31,
2018 would have been $6.8 million. Refer to Notes 4 and 24 for further details.
12. OTHER (INCOME)/EXPENSES
Unrealized gains on derivative instruments (i)
Realized gains on derivative instruments (i)
Change in fair value of share warrant liability (ii)
Change in fair value of gold offtake payment
liability (iii)
Government of Senegal payments (iv )
Business and other taxes (v )
Option Agreement - Milestone Payment (v i)
Gain on sale of marketable securities (v ii)
Interest income and other expense
Total Other Income
For the years ended December 31,
2018
(2,553)
(6,746)
(1,136)
(317)
-
1,315
-
-
979
(8,458)
2017
(1,832)
-
-
-
(569)
1,152
(1,150)
(2,469)
372
(4,496)
(i)
(ii)
(iii)
(iv)
(v)
(vi)
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 2017, 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.
In 2018, an additional 56,500 ounces of forward contracts at a price of $1,350 per ounce were entered into and remained
outstanding as at December 31, 2018. A total of 106,000 ounces of gold had been settled in 2018 under these contracts.
Refer to Note 23 for further details.
Refer to Note 22 for further details
During 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.
Senegalese business taxes which are calculated based on the gross value of fixed assets of the preceding year.
During the second quarter 2017, the required milestones from an option agreement with Algold Resources Ltd (“Algold”)
were met and the Company recorded income of C$1.5 million ($1.2 million) and received 7,349,339 Algold shares.
(vii)
Refer to Note 16 for further details.
13. 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.
76 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
Effective January 1, 2018, Teranga’s West African entities in Senegal, Burkina Faso and Côte d’Ivoire converted to new
accounting standards under the Organization for the Harmonization of Business Law in Africa (“SYSCOHADA”). The
new SYSCOHADA standards bring West African accounting standards and principles in greater alignment to IFRS. As a
result, certain of transitional changes impacted current and deferred income taxes for the year ended December 31,
2018.
For the year ended December 31, 2018, the Company recorded income tax expense of $23.3 million, comprised of
current income tax expense of $13.0 million and a deferred income tax expense of $10.3 million (2017: $2.4 million
expense, comprised of current income tax expense of $6.9 million and a deferred income tax recovery of $4.5 million).
For the years ended December 31
2018
2017
Current tax expense
13,017
6,962
Deferred tax expense / (recovery)
10,295
(4,526)
23,312
2,436
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
36,761
36,966
26.5%
26.5%
Income tax expense computed at statutory tax rates
9,742 9,796
For the years ended December 31
2018
2017
Impact of foreign tax rates
Non-deductible items
Adjustment for prior years
Tax credits
Change in foreign exchange rates
Unrecognized deferred tax assets
Provision for income taxes
14. TRADE AND OTHER RECEIVABLES
Current
Value added tax ("VAT") recoverable (i)
Other receivables (ii)
Total Trade and Other Receivables
2,478 808
3,153 888
(102) (667)
(64) (64)
4,251 (13,745)
3,854 5,420
23,312
2,436
As at December 31, 2018
As at December 31, 2017
5,874 4,378
3,205 1,106
9,079 5,484
(i)
(ii)
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 and Burkina Faso. Non-recoverable VAT is expensed to net profit. In February 2016, the Company received an
exemption for the payment and collection of refundable VAT from government of Senegal. This exemption is governed by an
amendment to our mining convention and expires on May 2, 2022. The balance at the end of December 31, 2018 primarily
relates to VAT amounts paid prior to May 2017 in Senegal, and VAT amounts paid within 24 months prior to commencement
of operations at Wahgnion in Burkina Faso. On December 20, 2017, the Company received exoneration from VAT directly
related to mining services during the construction phase from the Burkinabe government for the Wahgnion Gold Project.
Other receivables primarily include: $1.8 million receivables from suppliers for services, materials and utilities used at the
Sabodala Gold Mine and Wahgnion Gold Operations, a $0.1 million receivable related to the sale of exploration rights (2017:
$0.1 million), $0.8 million of sales tax refunds as at December 31, 2018 (2017: $0.1 million) and a receivable from Sodim
of $0.5 million (2017: $nil).
Annual Report 2018 77
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
15. 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, 2018 (i)
As at Decem ber 31, 2017
2,704
3,885
26,801
33,390
2,014
29,526
678
32,218
65,608
86,105
151,713
2,929
5,451
16,356
24,736
1,891
28,581
1,816
32,288
57,024
103,638
160,662
(i)
2018 balances includes the following related to the Wahgnion Gold Project: $2.4 million of current ore stockpile, $0.3
million of other inventory and $0.7 million of non-current ore stockpile.
16. MARKETABLE SECURITIES
Balance at January 1, 2017
Marketable securities acquired
Change in fair value of marketable securities during the year
Marketable securities disposed
Foreign exchange gain
Balance at December 31, 2017
Marketable securities acquired
Change in fair value of marketable securities during the year
Foreign exchange loss
Balance as at December 31, 2018
Amount
1,171
1,583
2,178
(4,245)
277
964
77
(662)
(55)
324
The Company holds publicly traded equity securities that are classified as marketable securities 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 first quarter of 2018, the Company purchased 1,000,000 Sarama Resources
Ltd. shares. 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. In 2017, a gain of $2.5 million was recorded within Other
(Income)/Expense upon disposition.
78 Annual Report 2018
17. OTHER ASSETS
Current
Prepayments (i)
Advanced royalty (ii)
Derivative assets (iii)
VAT certificates held (iv )
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
As at December 31, 2018
As at December 31, 2017
5,043 4,086
1,184 2,857
4,385 1,659
333 1,084
Total Other Current Assets
10,945 9,686
Non-current
Advanced royalty (ii)
2,378 3,451
Prepayments for non-current assets
1,226
-
Intangible assets
Derivative assets (iii)
947 816
- 173
Total Other Non-Current Assets
4,551 4,440
Total Other Assets
15,496
14,126
(i)
(ii)
(iii)
(iv)
As at December 31, 2018, prepayments include advances to vendors and contractors in Senegal of $2.7 million and $1.4
million in Burkina Faso (2017: $2.9 million Senegal) and $0.9 million for insurance (2017: $1.2 million).
As at December 31, 2018, there is $1.2 million in other current assets and $2.4 million in other non-current assets as
advanced royalty payments to the Government of Senegal. In total, the Company had recorded $10.0 million related to the
Oromin Joint Venture Group (“OJVG”) in 2014 and $4.2 million 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, 2018, the Company expensed $2.7 million, as amortization of the OJVG and Gora advanced
royalties (2017: $3.0 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 12(i) for further details.
VAT certificates are highly 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.
18. PROPERTY, PLANT AND EQUIPMENT
Land, building, plant and equipment
Sabodala and
Corporate
Wahgnion
Wahgnion
Construction in
Progress
Mine development
costs subject to
depreciation
Mine development
costs not yet subject to
depreciation(i)(iii)(iv)
Total
Cost
Balance as at January 1, 2017
447,953 957
-
451,693 52,595 953,198
Additions
Disposals
12,343
2,215
7,271
45,723 18,916
86,468
(814) (123)
-
-
- (937)
Balance as at December 31, 2017
459,482
3,049
7,271
497,416 71,511 1,038,729
Additions
Disposals
9,854
14,146 128,249
60,052 39,421 251,722
(57)
-
-
-
- (57)
Balance as at December 31, 2018
469,279
17,195 135,520
557,468 110,932 1,290,394
Accumulated depreciation
Balance as at January 1, 2017
263,399 112
-
192,612
- 456,123
Depreciation expense
Disposals
22,379 786
-
39,492
- 62,657
(814) (71)
-
-
- (885)
Balance as at December 31, 2017
284,964 827
-
232,104
- 517,895
Depreciation expense
Disposals
25,876
1,599
-
44,605
- 72,080
(45)
-
-
-
- (45)
Balance as at December 31, 2018
310,795
2,426
-
276,709
- 589,930
Net book value
Balance as at December 31, 2017(ii)
Balance as at December 31, 2018(ii)
174,518
2,222
7,271
265,312 71,511 520,834
158,484
14,769 135,520
280,759 110,932 700,464
Annual Report 2018 79
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
(i)
(ii)
(iii)
(iv)
Mine development costs not yet subject to depreciation includes mine licenses and costs associated with the Afema
acquisition in the first quarter of 2018.
Balance as at December 31, 2018 includes $150.3 million (2017: $9.5 million) of construction and $96.5 million (2017:
$71.5 million) of mine development costs associated with Wahgnion, $438.1 million (2017: $438.3 million) of costs
associated with Sabodala, $14.4 million (2017: $nil) of costs associated with Afema and $1.1 million (2017: $1.5 million)
of cost associated with other projects.
Total borrowing costs capitalized as a component of mine development as at December 31, 2018 was $3.1 million (2017 –
$nil).
As the Wahgnion Gold project is currently under construction, development expenditures are not currently subject to
depreciation.
Year ended
December 31, 2018
Year ended
December 31, 2017
Capitalized mine development additions
Deferred stripping costs
Capitalized mine development - Golouma South
Capitalized mine development - Golouma West
Capitalized mine development - Niakafiri
Capitalized reserve development - Sustaining (Sabodala)
Capitalized mine development - Growth (Wahgnion) (i)
Capitalized mining license - Afema
Other
Total Capitalized Mine Development Additions
48,824
-
-
8,817
647
25,060
14,361
1,764
99,473
31,405
130
7,408
332
5,799
18,916
-
649
64,639
(i)
Capitalized development costs include reserve development, feasibility studies, construction readiness and early works
expenditures related to the Wahgnion Gold Project.
Depreciation of property, plant and equipment for the year ended December 31, 2018 was $27.5 million (2017: $23.2
million). Depreciation of capitalized mine development for the year ended December 31, 2018 was $44.6 million and
was expensed as cost of sales (2017: $39.5 million).
19. 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
Mining and property, plant, and equipment
Other
Net deferred tax assets
2018
9,049
4,417
286
13,752
2017
9,742
12,984
230
22,956
The deferred income tax assets (liabilities) balance reported on the balance sheet and relating to Wahgnion Gold Project
is comprised of the following:
Deferred tax assets
Unrealized foreign exchange
Mining and property, plant, and equipment
Deferred tax assets
Unrecognized Deferred Tax Assets
2018
237
2,207
2,444
2017
154
3,381
3,535
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.
80 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
For the years ended December 31
2018
2017
Deferred income tax assets not recognized
Share issuance and transaction costs
286 464
Loss carry forwards
21,738
21,474
Property, plant and equipment
1,051 892
Other
2,206 1,889
Deferred income tax assets not recognized
25,280
24,719
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 $499,305 at December 31, 2018.
As at December 31, 2018, the tax losses not recognized by the Company and their associated expiry dates are as follows:
Tax losses - gross
Canada
Mauritius
Côte d’lvoire
Australia
20. TRADE AND OTHER PAYABLES
Current
Trade payables (i)
Sundry creditors and accrued expenses
Government royalties (ii)
Amounts payable to the Republic of Senegal (iii) (iv )
Contingent consideration (v i)
Expiry Date
2018
2017
For the years ended December 31
2030 - 2038
81,606
76,112
2019 - 2023
220 337
2022
- 1
Indefinite
225 4,152
82,051
80,602
As at December 31, 2018
As at December 31, 2017
26,427
20,623
34,317
17,152
3,930 4,462
9,886
11,294
534 634
Total Current Trade and Other Payables
75,094
54,165
Non-Current
Amounts payable to the Republic of Senegal (v )
Contingent consideration (v i)
Total Other Non-Current Liabilities
Total Trade and Other Payables
8,150 7,762
2,297 2,297
10,447
10,059
85,541
64,224
(i)
(ii)
(iii)
(iv)
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 2,256 million XOF (2017: 2,443 million XOF). For the year ended December 31, 2018, royalty
payments totalling $16.0 million relating to the fourth quarter 2017 and the first nine months of 2018 were made to the
Republic of Senegal (2017: $13.4 million paid relating to fourth quarter 2016 and the first nine months of 2017).
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, 2018, $2.1 million remains accrued as a current liability.
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, 2018, $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.
(v)
The Company agreed to establish a social development fund which involves making a payment of $15.0 million to the
Annual Report 2018 81
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
Republic of Senegal at the end of the operational life. It is recorded at its net present value of $8.2 million. The change in
the period is solely due to the accretion of the liability.
(vi)
The Company acquired Badr Investment Ltd’s (“Badr”) 13 percent carried interest in the OJVG for cash consideration of
$7.5 million and further contingent consideration which will be based on realized gold prices and increases to the former
OJVG’s mining reserves through 2020, of which $3.8 million was accrued upon finalization of the purchase price allocation
in 2014. In June 2018, the Company made an advance payment of $0.1 million to Badr. As at December 31, 2018, $0.5
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 (2017: $0.6 million in current liabilities and $2.3 million in non-current liabilities).
21. BORROWINGS
Principal outstanding
Deferred financing costs
Total Revolver Credit Facility
Secured development finance facility
Principal outstanding
Deferred financing costs
Total Secured Development Finance Facility
Total Borrowings
Deferred financing costs detail:
Financing costs
Fair value of gold offtake payment liability - Note 22
Share warrants issued - Note 23
Accumulated amortization of deferred financing costs
a.
Revolver Credit Facility
As at December 31, 2018
As at December 31, 2017
-
-
-
112,200
(25,103)
87,097
87,097
15,000
(693)
14,307
-
-
-
14,307
As at December 31, 2018
As at December 31, 2017
12,278
14,015
3,105
(4,295)
25,103
2,321
-
-
(1,628)
693
In June 2016, the Company completed an extension of its $30.0 million revolver facility with Société Générale S.A.
(“Revolver Facility”). The Revolver Facility was expected to mature on September 30, 2019, with the available amount
decreasing to $15.0 million on June 30, 2018. The Revolver Facility carried an interest rate of LIBOR plus 4.65 percent
with any unused facility amounts subject to a commitment fee of 1.6 percent.
In May 2018, the Revolver Facility was repaid in full and terminated. Unamortized deferred financing cost of $0.5
million were written off upon extinguishment of the Revolver Facility.
b. Secured Development Finance Facility
On April 16, 2018, the Company entered into a secured development finance facility (“Facility”) with Taurus Funds.
The Facility consists of two tranches to fund the development and advancement of the Company’s projects in Burkina
Faso. The first tranche consists of $165 million to be used to fund the development of the Wahgnion Gold Project
(“Wahgnion Tranche”) and to repay all of the Company’s outstanding debt drawn on the Revolver Facility. The second
tranche consists of $25 million to be used towards the advancement of a feasibility study for the Golden Hill Project
(“Golden Hill Tranche”). The Golden Hill Tranche was increased by an additional $10 million to $35 million in October
2018 (see Note 6b). All subsequent drawdowns on the Golden Hill Tranche are subject to meeting conditions precedent.
Both tranches bear an interest rate of 8.75 percent per annum on the drawn amount, paid quarterly in arrears. Early
repayment is permitted at any time without penalty. Principal repayments on the Wahgnion Tranche are due quarterly
commencing on March 31, 2020 with the balance due on December 31, 2022. The principal repayment of the Golden
Hill Tranche is due on December 31, 2022. A commitment fee of 2.5 percent on undrawn balances is due quarterly in
arrears.
As part of the Facility, the Company granted 2 million share warrants to Taurus Funds on April 16, 2018. Each warrant
allows the holder to acquire common shares of the Company at an exercise price of C$5.22. The fair value of these
warrants on the date of grant was $3.1 million and was recognized as a deferred financing cost (Note 23).
82 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
As at December 31, 2018, $102.2 million was drawn on the Wahgnion Tranche and $10 million was drawn on the
Golden Hill Tranche.
22. GOLD OFFTAKE PAYMENT LIABILITY
In conjunction with the Facility, the Company entered into a gold offtake payment agreement with Taurus Funds (“Gold
Offtake Agreement”) on May 31, 2018. Under the terms of the Gold Offtake Agreement, Taurus Funds is entitled to an
amount equal to the difference between the actual spot sales price per ounce and the lowest a.m. and p.m. London
Bullion Market Association gold price per ounce during the eight business days preceding the sale date for gold ounces
produced and sold from the Wahgnion Gold Project, up to 1,075,000 ounces. Sales proceeds received by Teranga will
be reduced by any amounts owed to Taurus Funds under the Gold Offtake Agreement. Taurus Funds does not take
physical delivery of gold ounces.
The Company has the option to terminate the agreement by paying Taurus Funds the net present value (applying an
8.75 percent annual discount rate, and assuming gold deliveries on a straight line basis for the first 9.5 years of mine
life commences from the date of first production) of $20 per ounce multiplied by the number of outstanding gold ounces
remaining under the Gold Offtake Agreement.
The Gold Offtake Agreement was classified as a derivative financial liability as the amount due to Taurus Funds is
variable and determined based on the price spread between the spot price of gold on the date of sale and the lowest
spot price of gold over periods of time in the future. As a result, the gold offtake payment liability is recorded at fair
value at the end of each reporting period. The Company has estimated the fair value of the gold offtake payment liability
using a discounted cash flow model based on the Wahgnion Gold Project’s life-of-mine production. Key inputs used in
the discounted cash flow model at each period were:
Number of gold ounces outstanding
Maximum per ounce price spread betw een spot gold price and
low est price of the 8 preceding days
Discount rate
As at Decem ber 31, 2018
On inception date
1,075,000
1,075,000
20.0
20.0
9.0%
9.2%
As at May 31, 2018, the estimated fair value of the gold offtake payment liability was $14.0 million and was recognized
as a deferred financing cost (Note 21). As at December 31, 2018, the estimated fair value was $13.7 million.
23. SHARE WARRANT LIABILITY
The Company granted 2 million share warrants to Taurus Funds on April 16, 2018. Each warrant allows the holder to
acquire one common share of the Company at an exercise price of C$5.22, with an expiry date of April 15, 2022.
The currency of the exercise price of the warrants is different from the Company’s functional currency and as a result
the share warrants have been classified as a derivative financial liability. Changes in fair value of the financial liability
are recognized as other income (expense) at the end of each reporting period. Upon exercise, the warrant liability will be
reclassified to share capital. Should the warrants expire unexercised, the associated warrant liability will be recorded as
other income in the consolidated statements of comprehensive income. There is no circumstance under which the
Company would be required to pay any cash upon exercise or expiry of the warrants.
A reconciliation of the change in the fair values of the share warrant liability is presented below:
Balance as at December 31, 2017
Granted during the year
Number of warrants
Share warrant liability
- -
2,000,000 3,105
Change in fair value of share warrant liability
- (1,136)
Balance as at December 31, 2018
2,000,000 1,969
Annual Report 2018 83
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
Fair value of warrants were calculated using the Black-Scholes option pricing model with the following assumptions:
Valuation date share price
Weighted average fair value of share warrants
Exercise price
Risk-free interest rate
Expected share market volatility (i)
Expected life of warrants (years)
Dividend yield
Number of warrants exercisable
As at December 31, 2018
As at grant date
C$4.03
C$1.34
C$5.22
1.85%
57%
3.3
0%
C$4.49
C$1.95
C$5.22
1.90%
61%
4.0
0%
2,000,000
2,000,000
(i)
Volatility was determined using historical volatility, based on the expected life of the warrants, of the Company’s share price.
24. GOLD STREAM LIABILITY
On January 15, 2014, the Company completed a streaming transaction with Franco-Nevada. The Company is required
to deliver 22,500 ounces of gold annually 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 accounting purposes, the agreement is considered a contract for the future delivery of gold ounces at the contracted
price. The up-front payment of $135 million payment is accounted for as a prepayment of undelivered ounces under the
contract and is recorded as a gold stream liability.
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 gold stream liability balance is drawn down based on the
contracted price under IFRS 15. The gold stream liability is revalued based on estimates of expected deliveries from
priced at $1,250 per ounce of gold. Any future changes in timing, quantities and gold price assumptions will result in
an update to the liability balance.
During the year ended December 31, 2018, the Company delivered 22,500 ounces of gold to Franco-Nevada (2017:
22,500 ounces) and recorded revenue of $28.2 million, consisting of $5.7 million received in cash proceeds and $22.5
million recorded as a reduction of gold stream liability (2017: revenue of $28.3 million, consisting of $5.7 million
received in cash proceeds and $22.6 million recorded as a reduction of gold stream liability).
As part of the gold streaming transaction with Franco-Nevada, the Company is required to maintain a minimum
consolidated cash balance of $15.0 million.
Amount
68,815
(22,606)
46,209
56,096
8,957
(22,500)
88,762
Balance as at January 1, 2017
Amortization of gold stream liability
Balance as at December 31, 2017
Cumulative adjustment due to IFRS 15(ii)
Accretion of gold stream liability
Amortization of gold stream liability
Balance as at December 31, 2018(i)
84 Annual Report 2018
Current
Non-Current
Total Gold stream liability(i)
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
As at Decem ber 31, 2018
As at Decem ber 31, 2017
14,860
24,206
73,902
22,003
88,762
46,209
(i)
(ii)
If IFRS 15 had not been adopted, the current gold stream liability and the total gold stream liability as at December 31,
2018 would both have been $23.4 million. Refer to Note 4a for further details.
Refer to Note 4a.
25. PROVISIONS
Current
Mine restoration and rehabilitation (i)
Employee benefits (ii)
Cash settled share-based compensation (iii)
As at December 31, 2018
As at December 31, 2017
370
-
2,815 2,289
4,055 2,630
Total Current Provisions
7,240 4,919
Non-Current
Mine restoration and rehabilitation (i)
Employee benefits (ii)
Cash settled share-based compensation (iii)
Total Non-Current Provisions
Total Provisions
33,735
27,510
798 872
795 1,002
35,328
29,384
42,568
34,303
(i)
(ii)
(iii)
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 and the Wahgnion Gold Project which are expected to be incurred up to 2033. The non-
current provision includes $27.5 million for Sabodala Gold Mine and $6.2 million for the Wahgnion Gold Project (2017:
$27.5 million Sabodala Gold Mine). The provision has been recorded based on estimates and assumptions which
management believe are a reasonable basis to estimate the 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 current provisions for employee benefits include $1.1 million accrued vacation and $1.7 million long service leave
entitlements for the period ended December 31, 2018 (2017: $1.1 million and $1.2 million). The non-current provisions
for employee benefits include $0.8 million of accrued vacation (2017: $0.9 million).
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, 2017
107,342,775 496,326
Cancellation of fractional shares as a result of share consolidation
(1,636)
-
Number of shares
Amount
Stock options exercised
Balance as at December 31, 2017
Stock options exercised
Balance as at December 31, 2018
2,763
7
107,343,902 496,333
242,867 924
107,586,769 497,257
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.
Annual Report 2018 85
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
Capital Risk Management
The Company manages its capital with the following objectives:
•
Ensure sufficient financial flexibility to achieve both short and long-term business objectives including funding
of future growth and development and exploration opportunities.
• 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.
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 equity, comprising share capital, stock options, contributed surplus and
accumulated earnings, which at December 31, 2018 totalled $607,127 (2017: $649,555)
27. EARNINGS PER SHARE (EPS)
Basic EPS
Diluted EPS
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)
For years ended December 31,
2018
0.11
0.11
11,794
107,425
234
107,659
2017
0.30
0.30
31,932
107,345
78
107,423
The determination of weighted average number of common shares for the purpose of diluted EPS excludes 3.0 million
and 3.1 million shares relating to share options that were anti-dilutive for the years ended December 31, 2018 and
December 31, 2017, respectively.
86 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
28. COMMITMENTS FOR EXPENDITURES
As at December 31, 2018, the Company had the following payments due on contractual obligations and commitments:
Paym ents Due By Period (US$ m illions)
Total
< 1 year
1-3 years
4-5 years
>5 years
Debt (i)
112.2
- 112.2
-
-
Franco-Nevada gold stream (ii)
137.9 22.5 38.1 18.6 58.7
Purchase obligations for supplies and services (iii)
2.4 2.4
-
-
-
Sustaining capital commitments (iv)
Grow th capital commitments (v)
Afema Investment (vi)
5.0 3.1 1.9
-
-
69.5 69.5
-
-
-
11.2 5.2 6.0
-
-
Operating lease commitments
7.6 2.5 2.5 0.9 1.7
Total
(i)
(ii)
(iii)
(iv)
(v)
(vi)
345.8 105.2 160.7 19.5 60.4
On April 16, 2018, the Company entered into the Taurus Facility. As at December 31, 2018, $102.2 million was drawn on
the Wahgnion Tranche and $10 million was drawn on the Golden Hill Tranche.
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 in Senegal, thereafter, in exchange for a deposit of $135.0 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. During 2018, two payments totalling $5.0 million was paid. The third instalment of $2.5 million will be paid
in 2019. A fourth payment of $2.5 million will be payable upon delivery of a confirmation study or updated feasibility study
with Teranga’s confirmation of its decision to proceed with the Afema project. Under the terms of the memorandum of
understanding, the Company maintains its 51 percent interest in the Afema mine license 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 mine 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:
•
•
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.
Annual Report 2018 87
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
•
•
•
•
•
•
•
Pursuant to the Company’s Senegal Mining Concession, $1.2 million is payable annually for community projects
and infrastructure to support local communities surrounding the Company’s operations and social development of
local authorities in the surrounding Kedougou region.
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, 2018, $8.1 million was accrued which is the discounted value of the
$15.0 million future payment.
$0.4 million is payable annually for training of Senegalese 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.
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 $0.2 million is payable for each year of operations. Any amounts not paid
is carried forward to future years.
$0.3 million 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.
Offtake obligation
•
Under the Offtake Agreement, Taurus Funds is entitled to an amount, in cash, equal to the difference between the
actual spot sales price per ounce and the lowest a.m. and p.m. London Bullion Market Association gold price per
ounce during the eight business days preceding the sale date for all Wahgnion gold ounces produced and sold, up
to 1,075,000 ounces.
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.
The Company operates in various countries in West Africa and may be subject to assessments by the regulatory authorities
in each of those countries, which can be complex and subject to interpretation. Assessments may relate to matters such
as income and other taxes, duties and other matters. The Company exercises informed judgment to interpret the
provisions of applicable laws and regulations as well as their application and administration by regulatory authorities to
reasonably determine and pay the amounts due. From time to time, the Company may undergo a review by the regulatory
authorities and in connection with such reviews, disputes may arise with respect to the Company’s interpretations about
the amounts due and paid.
As at December 31, 2018, the Company did not have any material provisions for tax assessments. The Company believes
the ultimate resolution of any assessments will not have a material adverse effect on the financial position of the
Company.
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, 2018, $1.9 million was accrued as a current
liability.
88 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(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 or is a joint venturer in the following jointly controlled operations and assets:
Name of venture
Principal activity
Sabodala Mining Company Sarl
Bransan(i)
Sounkounkou(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 II
Nianka II
Nogbele II
Zeguedougou II
Nogbele Sud
Teranga Exploration (Ivory Coast) Sarl (vi)
Dianra
Guitry
Mahapleu
Tiassalé
Sangaredougou
Taurus Gold CI Sarl (vii)(viii)
Aboisso
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration
Gold Exploration - Jointly Controlled
Gold Exploration - Jointly Controlled
Gold Exploration - Jointly Controlled
Interest
2018
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
51
51
51
Ayame
Mafere
(i)
(ii)
(iii)
(iv)
The decrees evidencing issuance of these exploration permits were delivered to Sabodala Mining Company Sarl from Senegal’s
Ministry of Mines and Geology on April 20, 2018.
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.
On October 2, 2018, the Company concluded a transaction to acquire the outstanding interest in both the Golden Hill and
Gourma properties, resulting in Teranga’s 100 percent ownership in these properties (see Note 6b).
As at December 31, 2018, 4 out of the 6 exploration permits held by Boss Gold Sarl were current. An application to the
Burkina Faso Minister of Mines for an exceptional renewal of the expired permits was filed by Boss Gold Sarl on April 30,
2018.
(v)
Sanembaore Sarl holds a 1 percent net smelter royalty on Banfora production.
Annual Report 2018 89
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
(vi)
(vii)
A 3 percent net smelter royalty is owing to Miminvest SA (“Miminvest”) pursuant to the terms of a joint venture agreement.
A 1 percent net smelter royalty is owing to an Ivorian State controlled entity, SODEMI, pursuant to a mining development
agreement. An additional net smelter royalty of 3 percent is applicable only with respect to Teranga's equity ownership
interest in the Taurus Gold CI Sarl permits under the terms of the agreement with Miminvest. Pursuant to its agreement with
Sodim Limited dated March 22, 2018, Teranga also retains a right to acquire a 70 percent interest in all of the
aforementioned permits upon delivery of a technical study confirming Teranga's commitment to move forward with the
development of a mine on any of these permits.
(viii)
Interest in Taurus Gold CI Sarl was inherited as part of the acquisition of Taurus Gold Afema Holdings Ltd. on January 8,
2018.
31. CONTROLLED ENTITIES
The significant mining and exploration entities of Teranga that have non-controlling interests are listed below.
Sabodala Gold Operations SA
Wahgnion Gold Operations SA
Afema Gold SA
Taurus Gold CI Sarl
32. CASH FLOW INFORMATION
Changes in working capital excluding inventory
Increase in trade and other receivables
Decrease in other assets
Decrease in trade payables and other
Increase/(Decrease) in provisions
Increase/(Decrease) in current income taxes payable
Net Change in Working Capital Excluding Inventory
33. FINANCIAL INSTRUMENTS
Country of Incorporation
Effective Percentage
Ownership Owned
2018
Senegal
Burkina Faso
Côte d’lvoire
Côte d’lvoire
90.0
89.8
51.0
51.0
For the years ended December 31,
2018
(5,367)
741
(7,372)
106
7,303
(4,589)
2017
(1,769)
2,978
(5,128)
(88)
(7,224)
(11,231)
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, 2018 and 2017, the Company’s financial instruments consisted of cash and cash equivalents, trade
and other receivables, marketable securities, derivative financial instruments, trade and other payables, borrowings and
share warrants.
90 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
The following table illustrates the classification of the Company’s financial instruments, as at December 31, 2018 and
2017:
As at December 31, 2018
As at December 31, 2017
Financial assets:
Cash and cash equivalents
Measured at amortized cost
Trade and other receivables
Measured at fair value through profit or loss
Financial derivative assets
Measured at fair value through other comprehensive income
Marketable securities
Financial liabilities:
Measured at amortized cost
Trade and other payables
Current income tax liabilities
Borrowings
Measured at fair value through profit or loss
Gold offtake payment liability
Share warrant liability
46,615
9,079
4,385
324
90,391
13,124
87,097
13,699
1,969
87,671
5,484
1,832
964
67,856
7,634
14,307
-
-
Sabodala’s and Teranga’s financial assets, excluding those related to the Wahgnion and Afema related entities, have
been pledged as collateral for the gold stream arrangement with Franco-Nevada. The Company’s Wahgnion related
entities’ assets have been pledged as collateral for the finance Facility with Taurus Funds.
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.
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 2018.
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, 2018
December 31, 2017
December 31, 2018
December 31, 2017
25,352
378
1,123
60
1
19,894
562
4,391
431
-
44,873
2,726
10,119
107
596
56,222
967
6,198
990
41
Annual Report 2018 91
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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, 2018:
Financial Assets
Financial Liabilities
As at December 31,
2018
As at December 31,
2017
As at December 31,
2018
As at December 31,
2017
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)
(2,535)
(1,989)
4,487
5,622
(38)
(56)
273
(112)
(439)
1,012
(6)
(43)
11
97
620
99
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 following table illustrates the classification of the Company’s financial instruments which are exposed to interest
rate risk as at December 31, 2018 and 2017:
Financial assets
Cash and cash equivalents
Financial liabilities
Borrow ings
As at of Decem ber 31, 2018 As at of Decem ber 31, 2017
46,615
87,671
87,097
14,307
The Company’s interest rate on its borrowing is calculated at 8.75 percent margin on the Facility with Taurus Funds.
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 December 31,
2018
As at December 31,
2017
As at December 31,
2018
As at December 31,
2017
Profit or (loss)
391
419
(374)
(75)
92 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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 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, including government entities, 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.
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, 2018
Non-interest bearing
Fixed interest rate instruments
Fixed interest rate instruments
Fixed interest rate instruments
Total
December 31, 2017
Non-interest bearing
Variable interest rate instruments
Fixed interest rate instruments
Fixed interest rate instruments
Fixed interest rate instruments
Total
-
8.75%
3.08%
7.50%
-
5.92%
3.08%
7.50%
5.00%
60,745 3,930 12,649 7,793 -
-
- - 112,200
-
2,093
- - - -
-
- 534
2,298 -
62,838 3,930 13,183 122,291
-
39,182 - 12,096 7,793 -
-
- - 15,000
-
2,093
- - - -
-
634
- 2,508 -
-
- - - 15,000
41,275 634
12,096 25,301
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 marketable securities 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.
93 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
Financial instruments carried at amortized cost on the consolidated statement of financial position are as follows:
Financial assets
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
As at December 31, 2018
As at December 31, 2017
Carrying amount
Fair value
Carrying amount
Fair value
9,079 9,079 5,484 5,484
90,391
90,391
67,856
67,856
104,217
138,067
14,307
13,732
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.
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
Marketable securities
Financial derivative assets
Total
Financial Liabilities
Gold offtake payment liability
Share warrant liability
As at December 31, 2018
As at December 31, 2017
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
46,615
- - 87,671
- -
324
- -
964
- -
- 4,385
- - 1,832
-
46,939
4,385
- 88,635 1,832
-
- 13,699
- - - -
- 1,969
- - - -
Cash settled share-based compensation
4,725
-
125
3,511
-
121
Total
4,725
15,668
125 3,511
- 121
34. SHARE BASED COMPENSATION
The share-based compensation expense for the year ended December 31, 2018 totaled $4.9 million (2017: $2.6
million).
a.
Incentive Stock Option Plan
The Incentive Stock Option Plan (the “Plan”) authorizes the Directors to grant options to purchase shares of the Company
to directors, officers, employees and consultants of the Company and its subsidiaries.
The 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.
94 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
The following reconciles the share options outstanding at the beginning and end of the year:
Balance as at January 1, 2017
Granted during the period
Forfeited during the period
Exercised during the period(i)
Balance as at December 31, 2017
Granted during the period
Forfeited during the period
Exercised during the period(ii)
Balance as at December 31, 2018
Number of options exercisable - December 31, 2017
Number of options exercisable - December 31, 2018
Number of options
3,789,106
891,488
(223,340)
(2,763)
4,454,491
1,321,000
(324,738)
(242,867)
5,207,886
3,488,194
3,704,864
Weighted average
exercise price
C$10.48
C$4.16
C$10.91
C$3.33
C$9.20
C$4.22
C$6.34
C$3.25
C$8.39
(i)
(ii)
The weighted average share price at the time of the option exercises was C$4.50.
The weighted average share price at the time of the options exercised was C$5.19.
The following stock options were outstanding as at December 31, 2018:
Option series
Number
Grant date
Expiry date
Exercise price (C$)
Granted on November 26, 2010
Granted on December 3, 2010
Granted on February 9, 2011
Granted on April 27, 2011
Granted on 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 December 3, 2012
Granted on June 3, 2013
Granted on March 31, 2015
Granted on March 31, 2015
Granted on March 31, 2016
Granted on August 2, 2016
Granted on March 7, 2017
Granted on March 29, 2017
Granted on July 17, 2017
Granted on March 29, 2018
Granted on April 26, 2018
Granted on May 7, 2018
Granted on May 17, 2018
Granted on June 21, 2018
Granted of September 4, 2018
Granted of September 17, 2018
Granted of November 1, 2018
1,064,000
240,000
85,000
5,000
72,000
209,000
64,000
45,000
10,000
120,000
120,000
16,000
40,000
24,000
390,000
125,223
586,164
18,225
441,665
339,609
5,000
1,127,000
20,000
6,000
10,000
10,000
8,000
3,000
4,000
26-Nov-10
03-Dec-10
09-Feb-11
27-Apr-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
03-Dec-12
03-Jun-13
31-Mar-15
31-Mar-15
31-Mar-16
02-Aug-16
07-Mar-17
29-Mar-17
17-Jul-17
29-Mar-18
26-Apr-18
07-May-18
17-May-18
21-Jun-18
04-Sep-18
17-Sep-18
01-Nov-18
26-Nov-20
03-Dec-20
09-Feb-21
27-Apr-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
03-Dec-22
03-Jun-23
31-Mar-20
31-Mar-20
31-Mar-21
11-Aug-21
07-Mar-22
29-Mar-22
17-Jul-22
29-Mar-24
26-Apr-24
07-May-24
17-May-24
21-Jun-24
04-Sep-24
17-Sep-24
01-Nov-24
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
4.20
4.15
3.43
4.19
4.78
5.01
5.26
5.33
3.88
3.90
3.61
FV at grant
date (C$)
5.95
5.95
4.95
4.00
4.10
3.05
1.83
6.32
0.85
4.65
5.05
2.60
3.05
0.20
1.75
1.50
1.75
3.20
1.50-1.90
1.75-2.10
1.46-1.69
1.86-2.37
2.12-2.73
2.24-2.80
2.34-2.94
2.20-2.84
1.47-1.81
1.48-1.82
1.71-1.97
Annual Report 2018 95
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
As at December 31, 2018, approximately 6.1 million (2017: 6.3 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 was three years,
except for the options granted on March 29, 2018 and future grants, which vest over four 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 5,207,886 common share stock options issued and outstanding as at December 31, 2018, 3,704,864 are vested
and 315,022 vest over a three-year period, and 1,188,000 vest over a four-year period. As at December 31, 2018, the
weighted average remaining contractual term of outstanding stock options exercisable was 2.3 years.
As at December 31, 2018, 2,114,000, 1,905,886 and 1,188,000 share options had a contractual life of ten, five and
six years at issuance, respectively.
Fair value of stock options granted
The grant date fair value of options granted during the nine months ended December 31, 2018 was calculated using
the Black-Scholes option pricing model with the following assumptions:
For the years ended December 31,
Grant date share price
Weighted average fair value of awards
Exercise price(i)
Range of risk-free interest rates
Expected share market price volatility(ii)
Expected life of options (years)
Dividend yield
Forfeiture rate
2018
C$3.64- C$5.37
C$2.25
C$3.61- C$5.33
1.88%-2.40%
56%-65%
3.3-5.0
0%
3%-14%
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%
(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 for the historical grants
up to December 31, 2017 and 4-year average historical volatility of the Company’s share price for the options granted on
March 29, 2018 and future grants.
b. Fixed Bonus Plan
The Fixed Bonus Plan authorizes the directors to grant Fixed Bonus Plan Units (“FBUs”) to officers and employees of
the Company and its subsidiaries in lieu of participating in the Stock Option Plan. Each FBU 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. FBUs may be exercised at any time from the date of vesting to
the date of their expiry subject to the terms of the plan. FBUs are not transferable or assignable.
The exercise price of each FBU 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 FBU was granted.
The vesting of the FBUs is determined by the board of directors at the date of grant. The term of FBUs granted under
the plan is at the discretion of the board of directors, provided that such term cannot exceed ten years from the date
that the FBUs are granted.
As at December 31, 2018, there were 323,500 FBUs 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
323,500 FBUs outstanding as at December 31, 2018, 236,000 FBUs have an exercise price of C$15.00, 60,000
FBUs have an exercise price of C$3.20 and 27,500 FBUs have an exercise price of C$3.33. The total outstanding FBUs
96 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
have fair values of C$0.53 per FBU at December 31, 2018. The total fair value of the FBUs at December 31, 2018 was
$0.1 million (December 31, 2017: $0.1 million).
The estimated fair values of the FBUs are amortized over the period in which the FBUs vest. Of the 323,500 FBUs
outstanding, 322,732 FBUs were vested at December 31, 2018 with the remaining FBUs to be fully vested by March
31, 2019.
Fair value of FBUs granted
The FBUs were revalued 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
Expected share market price volatility(ii)
Expected life of FBUs (years)
Dividend yield
Forfeiture rate
For the years ended December 31,
2018
C$4.03
C$0.53
C$3.20-C$15.00
1.86%
62%
1.2-3.2
0%
5%-50%
2017
C$2.99
C$0.44
C$3.20-C$15.00
1.51%-1.79%
64%
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. Restricted Stock Units
The Company introduced a RSU plan for employees in 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, except for the RSUs granted on March 29, 2018 and
future grants, which vest as to 25 percent in thirds over a three-year period, 50 percent in thirds upon satisfaction of
annual production and costs targets and 25 percent in thirds upon satisfaction of matching the average performance of
the VanEck Vectors Junior Gold Miners ETF (“GDXJ”).
During the twelve months of 2018, 821,000 RSUs were granted at a price of C$4.19 per unit and 211,866 RSUs were
forfeited (2017: 856,460 RSUs granted, 102,293 forfeited). As of December 31, 2018, a total of 1,467,014 RSU’s
were outstanding of which 969,665 units were vested. As at December 31, 2018, $2.0 million of current RSU liability
and $0.7 million of non-current RSU liability have been recorded in the consolidated financial statement of financial
position (2017: $1.4 million and $0.9 million in current and non-current RSU liability respectively).
d. Deferred Stock Units
The Company introduced a DSU Plan for non-executive directors in 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 193,000 DSUs during the year ended December 31, 2018 at a price of C$4.19 per unit. Of the
756,998 DSUs outstanding at December 31, 2018, 676,581 DSUs were vested and no units were cancelled. As at
December 31, 2018, $2.1 million of current DSU liability has been recorded in the consolidated financial statement of
financial position (2017: $1.2 million).
Annual Report 2018 97
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(in $000’s of United States dollars, except per share amounts)
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: Sabodala gold mine in Senegal; Corporate entities; Wahgnion Gold
Project in Burkina Faso; and exploration projects in Senegal, Burkina Faso, and Côte d'Ivoire (including Afema). The
following table provides the Company’s operating results and summary asset information by segment.
The Company’s operating revenues are solely attributable to the Sabodala Gold operations in Senegal.
Revenue
Mine operation expenses
Depreciation and amortization
Cost of sales
Gross profit
Year ended December 31, 2018
Sabodala
Corporate
Wahgnion
Exploration
Total
312,628
- -
-
312,628
(164,349)
- -
- (164,349)
(66,168)
- -
- (66,168)
(230,517)
- -
- (230,517)
82,111
- -
- 82,111
Exploration and evaluation expenditures
-
- - (13,160) (13,160)
Administration expenses
- (13,618) -
- (13,618)
Corporate social responsibility expenses
(3,386) (314) -
- (3,700)
Share-based compensation
Finance costs
- (4,851) -
- (4,851)
(3,648) (9,680) (2,224) (231) (15,783)
Net foreign exchange (losses)/gains
(2,205) (301) (427)
253 (2,680)
Other (expenses)/income
Operating expenses
(2,083)
9,917
624
- 8,458
(11,322) (18,847) (2,027) (13,138) (45,334)
Profit/(losses) before income tax
70,789 (18,847) (2,027) (13,138)
36,777
Income tax expense
Net profit /(loss)
(22,222)
- (1,090)
- (23,312)
48,567 (18,847) (3,117) (13,138)
13,465
Revenue
Mine operation expenses
Depreciation and amortization
Cost of sales
Gross profit
Year ended December 31, 2017
Sabodala
Corporate Wahgnion Exploration
Total
291,683 - - - 291,683
(168,689)
- - - (168,689)
(53,424)
- - - (53,424)
(222,113)
- - - (222,113)
69,570 - - -
69,570
Exploration and evaluation expenditures
- - - (12,373) (12,373)
Administration expenses
- (10,702)
- - (10,702)
Corporate social responsibility expenses
(2,564) (342)
- - (2,906)
Share-based compensation
Finance costs
- (2,580)
- - (2,580)
(3,352) (554) (1)
- (3,907)
Net foreign exchange (losses)/gains
(4,473) (243) (147)
231 (4,632)
Other income
64 3,631 801 -
4,496
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
98 Annual Report 2018
Consolidated Financial Statements of Teranga Gold Corporation
December 31, 2018
(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 expenditure
Total non-current assets
Property, plant and equipment
Mine development expenditure
Total non-current assets
As at December 31, 2018
Sabodala
Corporate Wahgnion
Exploration
157,063
278,390
537,526
349 150,018
-
98,833
612 254,097
1,343
14,432
15,784
Total
308,773
391,691
807,316
As at December 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
Total
184,011
336,823
655,403
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 years ended December 31, 2018
and 2017. The remuneration during the years ended December 31, 2018 and 2017 is as follows:
Salary and
Fees
Short term benefits
Non-Cash
Benefits
Cash Bonus (i)
Cash settled share
based payments -
value vested during
the period
Equity settled share
based payments -
value vested during
the period
RSUs
Options
Total
1,777
13
1,030
825
348
3,993
1,852
14
768
1,028
502
4,164
For the year ended
December 31, 2018
Compensation
For the year ended
December 31, 2017
Compensation
(i)
These amounts are based on cash payments 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, 2018, there were transactions totaling $50 thousand between the Company and
an entity controlled by Alan R. Hill, the Company’s Chairman, for consulting services.
b. Exploration Agreement with Miminvest
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.
Annual Report 2018 99
CORPORATE DIRECTORY
Board of Directors
Alan R. Hill
Richard Young
William Biggar
Jendayi Frazer
Edward Goldenberg
Christopher R. Lattanzi
David Mimran
Alan R. Thomas
Frank D. Wheatley
Senior Management
Richard Young
Paul Chawrun
Navin Dyal
David Savarie
David Mallo
Leily Omoumi
Trish Moran
Registered Office
Chairman
President and CEO
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
President and CEO
Chief Operating Officer
Chief Financial Officer
Vice President, General Counsel & Corporate Secretary
Vice President, Exploration
Vice President, Corporate Development*
Head of Investor Relations
77 King Street West, TD North Tower
Suite 2110, P.O. Box 128
Toronto, Ontario, Canada M5K 1H1
T: +1 416-594-0000 F: +1 416-594-0088
E: investor@terangagold.com
www.terangagold.com
Senegal Office
2K Plaza Suite B4, 1er Etage
Sis Route du Méridien Président, Almadies
BP 38385 Dakar Yoff
T: +221 338 642 525
F: +224 338 642 526
Ouagadougou Office
Avenue Gérard Kango Ouedraogo
Ouaga 2000
01 BP 1334
Ouagadougou, Burkina Faso
T: +226 2537 5199
Auditor
Ernst & Young LLP
Chartered Accountants
Toronto, Ontario, Canada
Legal Counsel
Stikeman Elliot LLP
Toronto, Ontario, Canada
Share Registry
Computershare Trust Company of Canada
T: +1 800 564 6253
Stock Exchange Listing
Toronto Stock Exchange: TGZ
OTC Markets Group “OTCQX” Market: TGCDF
100 Annual Report 2018
*Effective March 2019
8151_Teranga_Gold_2018_AR_Cover_Wrap.indd 4
2019-03-27 6:19 PM
BUILDING
a multi-asset
mid-tier gold producer
in West Africa
Annual Report 2018 1
www.terangagold.com