Teranga Gold Achieves Record Production, EBITDA, Cash Flow and Adjusted Earnings in the Third Quarter; Reaffirms 2020 Guidance

2020-11-10 / @nasdaq

 

Sabodala’s head grade increases by 28% with inclusion of high-grade Massawa ore
Wahgnion's production was 30% higher than originally planned due to excellent plant performance

(All amounts are in U.S. dollars unless otherwise stated)

TORONTO, Nov. 10, 2020 (GLOBE NEWSWIRE) -- Teranga Gold Corporation (“Teranga” or the “Company”) (TSX:TGZ; OTCQX:TGCDF) today reported financial, operating and development results for the three and nine months ended September 30, 2020.

THIRD QUARTER 2020 HIGHLIGHTS
Three months ended September 30, 2020 compared to three months ended September 30, 2019
  • 69% increase in gold production to a record 104,773 ounces
  • 169% growth in revenue to $192.6 million
  • 348% increase in gross profit to $77.0 million
  • Rise in consolidated net profit attributable to shareholders to $9.2 million, or $0.05 per share, compared to net loss attributable to shareholders of $9.7 million or $0.09 per share
  • Increase in adjusted net profit attributable to shareholders1 to $38.8 million, or $0.23 per share, compared to $2.3 million or $0.02 per share
  • EBITDA1 up 306% and adjusted EBITDA1 up 290%
  • 714% increase in operating cash flow to $75.6 million
  • Free cash flow1 grew to $37.2 million
  • Cash balance increased to $57.3 million and gold bullion inventory rose to 20,800 ounces, representing $39.2 million at quarter end gold price of $1,887 per ounce
 

“The third quarter was record-breaking for Teranga as we started mining high-grade ore at Massawa, delivered solid results at Wahgnion and realized strong gross profit, earnings and cash flow,” said Richard Young, President and Chief Executive Officer. “We expect to complete our transformation into a low-cost mid-tier producer by year end and will continue to advance our organic growth pipeline in pursuit of our third mine.”

“Following a strong quarter, we are well on track to achieve our 2020 production and cost guidance,” noted Paul Chawrun, Chief Operating Officer. “The addition of Massawa’s high-grade ore is a game changer, transforming the Sabodala-Massawa complex into a top tier gold asset.  Mining and processing of the high-grade ore commenced in the third quarter and we expect a record fourth quarter for Sabodala-Massawa.”

Mr. Chawrun added, “The Wahgnion plant continues to operate significantly above design and exploration drilling activities commenced at a variety of prospects throughout the mine license and regional properties during the quarter. There is also a considerable amount of exploration work underway at Afema in Côte d’Ivoire, where we have announced excellent initial drill results, and at Golden Hill, for which we recently announced an increase in the mineral resource.”

NEXT STEPS AND UPCOMING MILESTONES

• Sabodala-Massawa: Creating a Tier One Gold Complex

  • Resource definition drilling at several Massawa deposits (Sofia, C Zone, North Zone)
  • Resource evaluation drilling at several Massawa prospects (Samina, Tina)
  • Engineering trade-off studies in support of a definitive feasibility study to be completed in 2021
  • Complete phase 1 construction of Sabodala plant upgrades in 2021 

• Wahgnion: Extending Mine Life

  • Continue mine planning optimization as a result of the higher plant throughput
  • Ongoing exploration resource expansion programs with an aim to extend mine life

• Golden Hill: Expanding Resources at Golden Hill

  • File mine license application in December 2020
  • Continue resource expansion drill programs and advance engineering studies, metallurgical test work, baseline environmental and social assessments
  • Continue to aggressively explore with $15 million earmarked for exploration between now and end of 2021

• Afema: Rapidly Advancing Exploration Project

  • By year end, complete the $10 million drill campaign at the Woulo Woulo discovery as well as on the Niamienlessa structural trend and the Afema shear zone
  • Expand trenching and drilling to new areas of interest within the mining license and exploration permits
  • Publish initial resource estimate in the first quarter 2021

THIRD QUARTER FINANCIAL & OPERATING HIGHLIGHTS
Three and nine months ended September 30, 2020 compared to three and nine months ended September 30, 2019

  Three months ended September 30, Nine months ended September 30,
Financial Data 2020 2019 Change  2020 2019 Change 
Revenue($000s)192,569 71,468 169% 490,860 247,149 99%
Cost of sales($000s)(115,545)(54,265)113% (317,996)(183,645)73%
Gross profit($000s)77,024 17,203 348% 172,864 63,504 172%
Net profit/(loss) attributable to shareholders of Teranga($000s)9,190 (9,722)N/A  27,744 (20,022)N/A 
Per share($)0.05 (0.09)N/A  0.18 (0.19)N/A 
Adjusted net profit attributable to shareholders of Teranga1($000s)38,797 2,336 1,561% 73,281 7,451 884%
Per share1($)0.23 0.02 1,050% 0.48 0.07 586%
EBITDA1($000s)76,418 18,835 306% 195,655 80,431 143%
Adjusted EBITDA1($000s)101,371 25,982 290% 230,307 97,683 136%
Operating cash flow before changes in working capital excluding inventories($000s)74,422 (4,174)N/A  158,476 41,412 283%
Operating cash flow($000s)75,610 9,284 714% 119,625 78,139 53%
Sustaining capital expenditures (excluding deferred stripping)2($000s)14,235 2,720 423% 39,316 6,658 491%
Capitalized deferred stripping - sustaining($000s)2,570 7,196 (64%) 9,731 26,966 (64%)
Growth capital expenditures2($000s)21,302 27,352 (22%) 32,715 119,760 (73%)


  Three months ended September 30, Nine months ended September 30,
Operating Data 2020 2019 Change  2020 2019 Change 
Gold produced3(oz)104,773 61,975 69% 285,096 197,357 44%
Gold sold4,5(oz)102,571 49,946 105% 283,668 184,885 53%
Average realized price1($/oz sold)1,893 1,421 33% 1,726 1,335 29%
Cost of sales($/oz sold)1,126 1,086 4% 1,121 993 13%
Total cash costs1($/oz sold)736 746 (1%) 748 677 10%
All-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs)1,2($/oz sold)962 1,042 (8%) 1,012 853 19%
               

Consolidated Financial Performance

  • Revenue of $192.6 million was 169 percent higher than the prior year period due to a 105 percent increase in ounces sold and 33 percent increase in average realized prices1. The higher gold sales were due to the addition of Teranga's second operating mine, Wahgnion, which achieved commercial production on November 1, 2019, and Massawa, which achieved commercial production on September 1, 2020.
     
  • Gross profit of $77.0 million was 348 percent higher than the prior year period mainly due to $34.8 million contribution from Wahgnion, as well as initial mining and processing of high-grade Massawa material.
     
  • Consolidated net profit attributable to shareholders was $9.2 million ($0.05 earnings per share) for the third quarter 2020 compared to net loss attributable to shareholders of $9.7 million ($0.09 loss per share) in the prior year period. The increase was mainly due to higher gross profit of $59.8 million, partially offset by higher income tax expense of $13.1 million, higher non-cash losses from changes in fair values of derivative financial instruments of $10.5 million, and higher expensed finance costs of $6.9 million.
     
  • Adjusted net profit attributable to shareholders1 was $38.8 million ($0.23 per share) for the third quarter 2020 compared to adjusted net profit attributable to shareholders1 of $2.3 million ($0.02 per share) in the comparative period.  The increase was mainly due to higher gross profit partially offset by higher expensed finance costs.
     
  • Operating cash flows before changes in working capital, excluding inventories, increased to $74.4 million mainly due to higher revenues from an increase in gold sales and higher gold prices.
     
  • Cash flows related to operating activities increased year-over-year by $66.3 million to $75.6 million mainly due to higher revenues and a prior year build-up of inventories at Wahgnion in preparation for operations, partially offset by higher income tax, royalty payments, and higher supplier payments in the current period.
     
  • As a result of the increase in operating cash flows, third quarter free cash flows1 increased to $37.2 million.
     
  • EBITDA1 increased by 306 percent to $76.4 million from $18.8 million due to higher revenues net of mine operation expenses of $76.5 million.
     
  • Adjusted EBITDA1 increased by 290 percent to $101.4 million from $26.0 million due to higher revenues of $121.1 million, partially offset by higher mine operation expenses (excluding incremental COVID-19 costs) of $38.3 million.
     
  • Cash and cash equivalents totalled $57.3 million, an increase of $7.9 million from the second quarter 2020 balance of $49.4 million. The increase was mainly due to higher gross profit of $59.8 million, partially offset by capital expenditures of $38.4 million, debt repayments of $15.4 million, interest payments of $8.5 million, royalty and income tax payments of $16.3 million, a build-up of inventories and higher supplier payments.
     
  • On September 25, 2020, the Company and Franco-Nevada Corporation ("Franco-Nevada") finalized an amendment to the gold stream arrangement, in which the Company will deliver 783 ounces per month beginning September 1, 2020 until 105,750 ounces have been delivered to Franco-Nevada (the "Fixed Delivery Period"). At the end of the Fixed Delivery Period, any difference between total gold ounces delivered during the Fixed Delivery Period and 6 percent of production from the Company’s existing properties in Senegal (excluding Massawa) could result in a credit from or additional gold deliveries to Franco-Nevada. Subsequent to the Fixed Delivery Period, the Company is required to deliver 6 percent of production from the Company’s existing properties in Senegal (excluding Massawa).

Consolidated Operating Highlights

  • The Company began processing ore from the first of the Massawa deposits, Sofia Main, in late August 2020. Commercial production at Sofia Main was reached on September 1, 2020.
     
  • Gold production for the third quarter 2020 was a record for the Company at 104,773 ounces, 69 percent higher than prior year period.
     
  • Consolidated cost of sales per ounce was $1,126, an increase of 4 percent compared to the prior year period mainly due to lower capitalized deferred stripping costs and higher depreciation and amortization between the periods.
     
  • Consolidated total cash costs per ounce1 were $736, a decrease of 1 percent compared to the prior year period due to lower mine production costs, mostly offset by lower capitalized deferred stripping cost and higher inventory costs expensed between periods at Sabodala-Massawa.
     
  • Consolidated all-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs) per ounce1 were $962, a decrease of 8 percent mainly due to higher volume of gold sold between periods, partially offset by higher sustaining capital expenditures and higher share-based compensation expense.
     
  • The Company’s 2020 guidance was updated at mid-year to include mining and processing of high-grade ore from the first of the Massawa deposits, Sofia Main, which commenced mining activities in mid-July, as well as increases in total material movement for mining and processing at Wahgnion resulting from better than expected performance of the Wahgnion processing plant, when compared to its original design.  The Company is well on track to meet the mid-year production guidance update of between 375,000 and 400,000 ounces of gold.  Mid-year production guidance was increased from the Company's original production guidance of between 345,000 to 355,000 ounces of gold in 2020.

REVIEW OF OPERATIONS

Sabodala-Massawa Complex

  Three months ended September 30, Nine months ended September 30,
Operating Results 2020 2019 % Change  2020 2019 % Change 
Ore mined(‘000t)1,208 765 58% 3,155 1,769 78%
Waste mined - operating(‘000t)5,319 5,440 (2%) 16,980 15,615 9%
Waste mined - capitalized(‘000t)586 2,269 (74%) 2,189 7,188 (70%)
Total mined(‘000t)7,113 8,474 (16%) 22,324 24,572 (9%)
Grade mined(g/t)2.20 2.20 0% 1.84 2.39 (23%)
Ounces mined(oz)85,337 54,052 58% 186,780 135,685 38%
Strip ratio(waste/ore)4.9 10.1 (51%) 6.1 12.9 (53%)
Ore milled(‘000t)983 1,019 (4%) 3,022 3,146 (4%)
Head grade(g/t)2.23 1.74 28% 1.73 2.03 (15%)
Recovery rate(%)91.1 90.3 1% 89.1 91.1 (2%)
Gold produced6(oz)64,128 51,355 25% 149,960 186,737 (20%)
Gold sold(oz)60,214 49,946 21% 146,933 184,885 (21%)
         
Average realized price1($/oz sold)1,885 1,421 33% 1,730 1,335 30%
Cost of sales($/oz sold)1,152 1,086 6% 1,208 993 22%
Total cash costs1($/oz sold)742 746 (1%) 796 677 18%
All-in sustaining costs1,2($/oz sold)889 944 (6%) 989 859 15%
All-in sustaining costs (excluding cash/(non-cash) inventory movements and amortized advanced royalty costs)1,2($/oz sold)851 945 (10%) 1,025 772 33%
         
Mining($/t mined)2.73 2.84 (4%) 2.92 2.86 2%
Mining long haul($/t hauled)2.20 1.31 68% 1.72 1.37 26%
Milling($/t milled)11.43 11.16 2% 10.47 11.39 (8%)
G&A($/t milled)8.55 4.68 83% 6.81 4.71 45%
               

Mining

In the third quarter 2020, mining activities were focused primarily on Sofia Main, Golouma West, Kourouloulou (a small surface pit not included in reserves) and Goumbati.  Mining activities commenced at Massawa's Sofia Main starter-pit in mid-July, with ore delivered to the process plant in August. Total tonnes mined in the third quarter were 16 percent lower than the prior year period due to reduced operating hours as a result of fatigue management protocols and the deployment of shovels and excavators used in the construction of the haul road to Sofia Main, the first of the Massawa deposits to be mined.

Ore tonnes mined were 58 percent higher in the third quarter 2020 compared with the prior year period primarily due to a concentration of mining activities at low strip ratio areas in Golouma West and high volumes of ore in oxide benches at Sofia Main pit. Mined ore grades were in line with the prior year period with Golouma West delivering higher grade from the lower benches and Sofia Main delivering reasonably high grade in the first oxide benches. Reverse circulation grade control drilling at the initial mining areas of Sofia Main has shown a positive reconciliation to the reserves model with both higher tonnes at higher ore grades, resulting in higher total ounces.

Processing

Ore tonnes milled in the third quarter 2020 decreased by 4 percent compared with the prior year period mainly due to mill relining and other scheduled maintenance work.

Head grade increased by 28 percent in the third quarter 2020 mainly due to the higher grade ore feed from the Golouma West and Sofia Main pits.

Gold production increased by 25 percent to 64,128 ounces in the third quarter 2020 compared to the prior year period mainly due to higher average head grades.

Wahgnion Gold Operations

Operating Results Three months ended September 30, 2020 Nine months ended September 30, 2020
Ore mined(‘000t)1,062 2,565
Waste mined - operating(‘000t)5,073 15,061
Waste mined - capitalized(‘000t)381 855
Total mined(‘000t)6,516 18,481
Grade mined(g/t)1.38 1.66
Ounces mined(oz)47,054 136,829
Strip ratio(waste/ore)5.1 6.2
Ore milled(‘000t)833 2,639
Head grade(g/t)1.59 1.68
Recovery rate(%)95.5 94.9
Gold produced6(oz)40,645 135,136
Gold sold(oz)42,357 136,735
     
Average realized price1($/oz sold)1,903 1,722
Cost of sales($/oz sold)1,090 1,027
Total cash costs1($/oz sold)729 697
All-in sustaining costs1($/oz sold)916 848
All-in sustaining costs (excluding cash/(non-cash) inventory movements)1($/oz sold)969 830
     
Mining($/t mined)2.56 2.40
Milling($/t milled)11.06 9.86
G&A($/t milled)7.08 6.01
     

Mining

In the third quarter 2020, mining capacity consisted of an owner-operated fleet, supplemented by two mining contractor fleets. The first contractor fleet was dedicated to waste removal from Nogbele North and construction of a lift to the tailings storage facility, while the second contractor fleet has been assisting mining operations in maintaining an accelerated ore delivery schedule due to better than expected performance from the processing plant. To maintain mining production for a higher than planned plant throughput, both contractor fleets have been extended until the end of the year. 

During the third quarter 2020, mining activities were focused primarily on the Nogbele North and South pits. Total tonnes mined were 53 percent higher than originally planned mainly due to the extension of contract mining activities. Ore tonnes were 69 percent higher than anticipated mainly due to increased mining volume at depth in Nogbele North and a positive tonnage reconciliation to reserve model in this area.  Overall reconciliation to the reserves model remains positive year to date.

Processing

Ore tonnes milled in the third quarter 2020 were 0.8 million tonnes, approximately 43 percent higher than originally planned due to higher leach kinetics allowing for debottlenecking to realize higher mill throughput rates, higher mill operating time and less materials handling challenges due to the rainy season than anticipated. During the third quarter 2020, the crusher feed blend was comprised of 48 percent oxide ore and 52 percent fresh hard rock. 

Wahgnion's gold production during the third quarter 2020 was 40,645 ounces, which was 30 percent higher than originally planned due to higher throughput rates and gold recoveries slightly offset by lower overall head grade.

CONSOLIDATED FINANCIAL STATEMENTS

A copy of Teranga’s consolidated financial statements and management’s discussion & analysis for the three and nine months ended September 30, 2020 are available on the Company’s website at www.terangagold.com, on SEDAR at www.sedar.com, and on the OTC Markets’ website at www.otcmarkets.com/stock/TGCDF.

Q3 2020 CONFERENCE CALL & WEBCAST

Teranga will host a conference call and audio webcast today at 8:30 a.m. ET, during which management will review the highlights for the three and nine months ended September 30, 2020. Those wishing to listen can access the live conference call and webcast as follows:

Date & Time:     Tuesday, November 10, 2020 at 8:30 a.m. ET
   
Telephone: Toll-free +1-877-291-4570
Local or International +1-647-788-4919

Please allow 10 minutes to be connected to the conference call.
   
Webcast: Available on Teranga’s website at www.terangagold.com/Q32020
   
Replay: The conference call replay will be accessible for two weeks after the call by dialling +1-416-621-4642 or toll-free at +1-800-585-8367 and entering the conference ID 3232019.
   
Note: The slide presentation will be available for download at www.terangagold.com for simultaneous viewing during the call.
   

ENDNOTES

(1) This is a non-IFRS financial measure and does not have a standard meaning under IFRS. Please refer to the sections titled, “Non-IFRS Financial Measures” and “Reconciliation of Non-IFRS Financial Measures” in the Company's Management's Discussion and Analysis for the three and nine months ended September 30, 2020.

(2) Comparative amounts have been restated to present resettlement capital expenditures related to the Niakafiri deposit as growth capital expenditures.

(3) During the three months ended September 30, 2020, gold ounces produced from Sabodala-Massawa and Wahgnion were 64,128 ounces and 40,645 ounces, respectively (2019: 51,355 ounces and 10,620 pre-commercial production ounces, respectively). During the nine months ended September 30, 2020, gold ounces produced from Sabodala-Massawa and Wahgnion were 149,960 ounces and 135,136 ounces, respectively (2019: 186,737 ounces and 10,620 pre-commercial production ounces, respectively).

(4) During the three months ended September 30, 2020, gold ounces sold from Sabodala-Massawa and Wahgnion were 60,214 ounces and 42,357 ounces, respectively (2019: 49,946 ounces and nil, respectively). During the nine months ended September 30, 2020, gold ounces sold from Sabodala-Massawa and Wahgnion were 146,933 ounces and 136,735 ounces, respectively (2019: 184,885 ounces and nil, respectively).

(5) Excludes 2,589 gold ounces sold from Wahgnion's pre-commercial production phase for the three and nine months ended September 30, 2019.

(6) Gold produced represents change in gold in circuit inventory plus gold recovered during the period.

FORWARD-LOOKING STATEMENTS

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"), which reflects management's expectations regarding Teranga’s future growth opportunities, results of operations, performance (both operational and financial) and business prospects (including the timing and development of new deposits and the success of exploration activities) and other opportunities. Wherever possible, words such as "plans", "expects", "does not expect", "scheduled", "trends", "indications", "potential", "estimates", "predicts", "anticipate", “to establish”, "does not anticipate", "believe", "intend", "ability to" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might", "will", or are "likely" to be taken, occur or be achieved, have been used to identify such forward looking information. Specific forward-looking statements in this press release include, but are not limited to, forecasting Company-wide gold production of between 375,000 and 400,000 ounces of gold in 2020, the timeline for completing a definitive feasibility study for Sabodala-Massawa, sustaining costs, net present value, process capacity, average annual gold production, average process recoveries, anticipated mining and processing methods, proposed pre-feasibility production schedule and gold production profile, anticipated construction, anticipated mine life, expected recoveries and grades, anticipated production rates, infrastructure, future financial or operating performance of the Company and its projects, estimation of mineral resources, exploration results, opportunities for exploration, development and expansion of the Massawa Project and its potential mineralization, the future price of gold, the realization of mineral reserve estimates, costs and timing of future exploration, and the timing of the development of new deposits. Although the forward-looking information contained in this press release reflect management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, Teranga cannot be certain that actual results will be consistent with such forward-looking information. Such forward-looking statements are based upon assumptions, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments that management believe to be reasonable and relevant but that may prove to be incorrect. These assumptions include, among other things, the closing and timing of financing, the ability to obtain any requisite governmental approvals, the accuracy of mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic conditions, anticipated future estimates of free cash flow, and courses of action. Teranga cautions you not to place undue reliance upon any such forward-looking statements.

The risks and uncertainties that may affect forward-looking statements include, among others: the inherent risks involved in exploration and development of mineral properties, including government approvals and permitting, changes in economic conditions, changes in the worldwide price of gold and other key inputs, changes in mine plans and other factors, such as project execution delays, many of which are beyond the control of Teranga, and the impact of the COVID-19 pandemic on our operations, as well as other risks and uncertainties which are more fully described in Teranga's 2019 Annual Information Form dated March 30, 2020, and in other filings of Teranga with securities and regulatory authorities which are available on SEDAR 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 document 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.

ABOUT TERANGA

Teranga Gold is transitioning into a mid-tier gold producer operating long-life, low-cost mines and advancing prospective exploration properties across West Africa, one of the world’s fastest growing gold jurisdictions. The top-tier gold complex created by integrating the recently acquired high-grade Massawa project with the Company’s Sabodala mine, the successful commissioning of Wahgnion, Teranga’s second gold mine and a strong pipeline of early to advanced-stage exploration assets support the continued growth of Teranga’s reserves, production and cash flow. Through its continued success and commitment to responsible mining, Teranga creates sustainable value for all stakeholders and acts as a catalyst for social, economic, and environmental development. To learn more, visit www.terangagold.com.

CONTACT INFORMATION

Richard Young
President & CEO
T: +1 416-594-0000 | E: ryoung@terangagold.com		       Trish Moran
Vice President, IR & Corporate Communications
T: +1 416-607-4507 | E: tmoran@terangagold.com
   

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