Mr. Alan Hill reports

TERANGA GOLD CORPORATION: JUNE QUARTER REPORT

Teranga Gold Corp. has released its results for the six months ended June 30, 2014. All amounts are in U.S. dollars unless otherwise stated.

For a full explanation of financial, operating, exploration and development results, please see the interim condensed consolidated financial statements as at and for the period ended June 30, 2014, and the associated management's discussion and analysis on the company website.

• Gold production for the three months ended June 30, 2014, totalled 39,857 ounces. Total cash costs were $815 per ounce sold and all-in sustaining costs were $1,060 per ounce sold for the three months ended June 30, 2014;
• Despite the weaker second quarter, the company remains on track to meet its full-year production guidance of 220,000 to 240,000 ounces, but expects production at the lower end of the guidance range; total cash costs are expected at the higher end of the range of $650 to $700 per ounce sold, and all-in sustaining costs are now expected to average about $900 per ounce, $25 per ounce higher than the top end of the original guidance range of $800 to $875 per ounce sold;
• The company expects a strong second half of the year with higher production and lower costs resulting from higher grades mined at Sabodala, and from high-grade production from Masato;
• A non-cash inventory writedown to net realizable value of $13.4-million (four-cent loss per share) resulted in a consolidated loss attributable to shareholders of $12-million (four-cent loss per share) in second quarter 2014;
• Development of the Masato deposit, the first of the Oromin joint venture group (OJVG) deposits to be mined, is complete, with mining expected to commence in third quarter 2014;
• Technical analysis on mill optimization is expected to be completed in the third quarter;
• Heap leach testing is under way, preliminary results are expected in the third quarter and a preliminary economic analysis by year-end;
• Infill drilling of the Masato high-grade zone is complete, assays are expected shortly. Reserve development drilling of high-grade deposits continues on the OJVG mine licence;
• During the second quarter, the company closed on its offering of 36 million common shares at a price of 83 cents per share for net proceeds of $25.4-million;
• Cash balance at June 30, 2014, was $28.4-million, including restricted cash. To date, the company has made approximately $35-million of $80-million in one-time payments planned for 2014, including debt repayments, one-time costs related to its global agreement with the Republic of Senegal and acquisition-related costs to acquire the OJVG. The company remains on track to retire the balance of the debt facility outstanding by Dec. 31, 2014.

"Despite a weaker quarter at Sabodala, we are on track to meet our production guidance but at the lower end of guidance. The integration of the OJVG and the growth initiatives announced at the beginning of the year are moving forward quickly. Development of Masato, the first OJVG deposit, is complete and mining is to begin in the third quarter, two quarters postacquisition. Reserve development drilling, mill optimization and heap leach testing began in the second quarter. We expect to be announcing the results of these growth projects through the balance of the year. Higher grades at Sabodala and the addition of Masato should lead to a strong second half of the year with higher production and lower costs," said Richard Young, president and chief executive officer.

Operational highlights:

• Gold production for the three months ended June 30, 2014, was 39,857 ounces, 20 per cent lower than the same prior-year period due to lower mined and processed grade, partly offset by higher tonnes milled. Gold production for the quarter was weaker than expected due to lower mined grade during the second half of the quarter, and longer than planned downtime associated with scheduled maintenance of the crushing and milling circuits in May;
• Total cash costs for the three months ended June 30, 2014, excluding a non-cash inventory writedown to net realizable value (NRV), were $815 per ounce, compared with $642 per ounce in the same prior-year period. While total mine production costs were 9 per cent lower than the year earlier quarter, higher per-ounce costs were due to lower production and lower capitalized deferred stripping costs compared with the year earlier period;
• All-in sustaining costs for the three months ended June 30, 2014, excluding a non-cash inventory writedown to NRV, were $1,060 per ounce, 11 per cent lower than the same prior-year period. All-in sustaining costs were lower due to lower capital expenditures in the current year period;
• Total tonnes mined for the three months ended June 30, 2014, were 18 per cent lower compared with the same prior-year period. Mining activities in the current year were solely focused on lowering the benches of phase III of the Sabodala pit, which has an overall reduced stripping ratio. In the same prior-year period, mining activities were focused on completing phase II near the bottom of the Sabodala pit combined with primarily waste stripping of the upper benches of phase III;
• Total tonnes mined are expected to decline further in the second half of the year, in line with the company's plan to minimize material movement in the current gold price environment with a focus on maximizing free cash flows;
• Ore tonnes mined for the three months ended June 30, 2014, were 40 per cent higher than the same prior-year period as mining activities in the prior-year period were mainly focused on waste stripping of phase III;
• Ore tonnes and overall grade mined in the second half of the quarter were lower than planned as mining activity focused on a peripheral area of the Sabodala orebody on the upper benches of phase III. This area of the orebody has shown less continuity than in other peripheral areas previously mined. Greater variation in grade and thickness, and complexity in the geometry and continuity resulted in lower than expected grades and ore tonnage. Management changed its practices for ore recovery in these areas by increasing sampling, revising blasthole modelling and mining the ore zones at five-metre benches from the previous 10-metre bench intervals;
• In addition, access to a high-grade area of the deposit, scheduled for mining in the second quarter, was deferred into the third quarter due to bench access constraints which required a small redesign of phase III. This modification adds 1.3 million waste tonnes to the 2014 plan that was originally scheduled for mining in phase IV of the Sabodala pit in 2016;
• Mining through the balance of the year is primarily taking place in the high-grade area of the Main Flat zone. This is expected to lead to higher ore grades mined and processed in the second half of 2014. Provided grades and ore tonnes mined are on plan, the company remains on track to meet its 2014 production guidance of 220,000 to 240,000 ounces, but expects production at the lower end of the range;
• Total mining costs for the three months ended June 30, 2014, were 10 per cent lower than the same prior-year period due to decreased material movement, partly offset by higher costs for light fuel oil (LFO) and higher costs associated with the redesign of phase III and mining in five-metre benches from the previous 10 metres. Unit mining costs for the three months ended June 30, 2014, were 10 per cent higher than the same prior-year period due to fewer tonnes mined. Mining is concentrated on the lower benches of phase III of the mine plan with limited space resulting in lower productivity;
• Total mining costs for the balance of the year are expected to be approximately $7-million higher than planned due to changes in the mine plan that will result in an additional 2.6 million tonnes mined, half of which, as noted previously, is related to the redesign of phase III and the balance is related to earlier than planned access to Masato;
• The development of Masato, the first deposit from the OJVG acquisition, is complete and ready for production in the third quarter;
• Ore tonnes milled for the three months ended June 30, 2014, were 15 per cent higher than the same prior-year period due to improvements made during the first and second quarters of 2013 to reduce the frequency and duration of unscheduled operational downtime, and increase throughput in the crushing circuit to better match mill capacity. During the second quarter of 2014, scheduled maintenance of the crushing and milling circuits resulted in a net 10 days of planned and unplanned downtime in May, due to repairs to the secondary cone crusher, replacement of high-wear components in the SAG mill and repairs to the primary crusher. No major downtime is scheduled for the balance of the year;
• Processed grade for the quarter ended June 30, 2014, was 28 per cent lower than the same prior-year period, mainly due to lower ore grades;
• Total processing costs for the three months ended June 30, 2014, were 3 per cent higher than the same prior-year period, mainly due to higher mill throughput. Unit processing costs for the three months ended June 30, 2014, were 10 per cent lower than the prior-year period due to higher tonnes milled;
• Total mine site general and administrative costs for the three months ended June 30, 2014, were 7 per cent lower than the prior year mainly due to lower insurance costs. Unit general and administration costs for the three months ended June 30, 2014, were 21 per cent lower than the same prior-year period due to lower general and administrative costs, and higher tonnes milled.

Financial highlights:

• Gold revenue for the three months ended June 30, 2014, was $57.5-million, 24 per cent lower than the same prior-year period. The decrease in gold revenue was due to 20-per-cent lower production and 6-per-cent lower realized gold prices during the second quarter of 2014;
• During the second quarter of 2014, the company recorded a loss attributable to shareholders of $12-million (four-cent loss per share), compared with a profit attributable to shareholders of $7.2-million (three cents per share) in the same prior-year period. The decrease in profit and earnings per share over the prior-year quarter were primarily due to a non-cash inventory writedown to NRV totalling $13.4-million and lower revenues;
• During the three months ended June 30, 2014, the company recognized a non-cash writedown on long-term, low-grade ore stockpile inventory of $13.4-million, as a result of an increase in costs added to low-grade ore stockpiles during the quarter. Fewer ounces mined during the quarter resulted in an increase in the per-ounce cost of inventory (including applicable overhead, depreciation and amortization). Higher per-ounce inventory costs have a greater impact on low-grade stockpile values because of the higher future processing costs required to produce an ounce of gold. The non-cash writedown represents the portion of historic costs that would not be recoverable based on the company's long-term forecasts of future processing and overhead costs at a gold price of $1,237 per ounce (including the impact of the Franco-Nevada gold stream). Fluctuations in the mine plan result in wide fluctuations in the per-ounce cost of the company's long-term ore stockpiles. During periods where fewer ounces are mined, per-ounce costs rise, while during those periods when mining takes place in higher-grade areas, per-ounce costs fall. As mining takes place in higher-grade areas of Sabodala and Masato, a portion of this non-cash write-off is expected to reverse over the course of the balance of the year. Conversely, should long-term gold prices decline or future costs rise, there is a potential for further NRV adjustments;
• Cash flow used in operations was $9.8-million for the three months ended June 30, 2014, compared with cash flow provided by operations of $20.8-million in the same prior-year period. The decrease in operating cash flow compared with the prior-year quarter was due to lower revenues and higher net working capital outflows;
• Capital expenditures for the three months ended June 30, 2014, were $6.8-million compared with $26-million in the same prior-year period. The decrease in capital expenditures was mainly due to lower sustaining and development expenditures, and lower capitalized deferred stripping in the second quarter of 2014;
• During the second quarter of 2014, 44,285 ounces were sold at an average realized gold price of $1,295 per ounce. During the second quarter of 2013, 54,513 ounces were sold at an average realized price of $1,379 per ounce;
• On May 1, 2014, the company closed on its offering of 36 million common shares at a price of 83 cents per share for gross proceeds of $29.9-million, with a syndicate of underwriters. Net proceeds were $25.4-million after consideration of underwriter fees and expenses totalling approximately $1.9-million;
• The company's cash balance at June 30, 2014, was $28.4-million, including restricted cash. Cash and cash equivalents were similar to the balance reported at March 31, 2014, as the increase in cash from the proceeds of the share offering was offset by cash flow used in operations of $9.8-million, debt and interest repayments totalling $9.2-million, and capital expenditures of $6.8-million;
• For the year to date ended June 30, 2014, the company has made a total of $35-million in one-time payments. This includes $16.4-million in debt repayments, $2.1-million in payments to the Republic of Senegal and one-time payments related to the acquisition of the OJVG, including $9-million for transaction, legal and office closure costs, and $7.5-million to acquire Badr's share of the OJVG.

Outlook for 2014:

• Despite the weaker second quarter, the company remains on track to meet its 2014 annual production guidance range of 220,000 to 240,000 ounces, but expects production at the lower end of the range. Total production costs, including mining, processing, and site general and administrative expenditures are expected to be at the higher end of guidance of $155-million to $165-million due to changes in the mine plan that result in more material moved than planned. As a result, total cash costs are expected to be at the higher end of the original guidance range of $650 to $700 per ounce;
• Total exploration and evaluation expenditures for the Sabodala and OJVG mine licences, as well as the regional land package were originally expected to total approximately $10-million for 2014. However, the expenditures may increase to $12-million, for additional drilling, to expedite the conversion of resources to reserves on the mine licences;
• Administrative and corporate social responsibility (CSR) expenses are expected to be $15-million to $16-million, in line with guidance. These include corporate office costs, Dakar and regional office costs, and CSR costs, but exclude corporate depreciation, transaction costs and other non-recurring costs;
• Sustaining capitalized expenditures, including sustaining mine site expenditures, project development expenditures, capitalized deferred stripping, reserve development expenditures and payments to the Republic of Senegal were originally expected to be $28-million to $33-million. In the first half of 2014, management identified further growth opportunities (please see business and project development section for additional information), including opportunities to convert resources to reserves on the mine licences; mill optimization opportunities to increase the milling rate; and opportunities to accelerate heap leach testing and related activities. Including planned expenditures for these growth opportunities, and through optimization of existing capital projects, total capital expenditures are now expected to be approximately $33-million in 2014;
• As a result of production at the lower end of guidance and cash cost at the higher end of guidance, the company now expects all-in sustaining costs of about $900 per ounce, $25 per ounce higher than the top end of the original guidance range of $800 to $875 per ounce;
• Total depreciation and amortization for the year is expected to be between $285 and $315 per ounce sold, in line with guidance, comprising $125 to $140 per ounce sold related to depreciation on Sabodala plant, equipment and mine development assets, $40 to $45 per ounce sold related to assets acquired with the OJVG, and $120 to $130 per ounce sold for depreciation of deferred stripping assets. At the end of 2014, the balance of the deferred stripping asset related to Sabodala is expected to be approximately $30-million, which will be amortized over the mining of phase IV of the Sabodala pit.

Business and project development

Franco-Nevada gold stream:

• On Jan. 15, 2014, the company completed a gold stream transaction with Franco-Nevada Corp. The company is required to deliver to Franco-Nevada 22,500 ounces annually over the first six years followed by 6 per cent of production from the company's existing properties, including those of the OJVG, thereafter, in exchange for a deposit of $135-million. Franco-Nevada's purchase price per ounce is set at 20 per cent of the prevailing spot price of gold;
• The deposit of $135-million has been treated as deferred revenue within the statement of financial position;
• During the three months ended June 30, 2014, the company delivered 5,625 ounces of gold to Franco-Nevada. During the three months ended June 30, 2014, the company recorded revenue of $7.3-million, consisting of $1.5-million received in cash proceeds and $5.8-million recorded as a reduction of deferred revenue.

Acquisition of the OJVG:

• During the third and fourth quarters of 2013, the company issued 71,183,091 Teranga shares to acquire all of the Oromin shares (Oromin being one of the three joint venture partners holding 43.5 per cent of the OJVG) for total consideration of $37.8-million;
• On Jan. 15, 2014, the company acquired the balance of the OJVG that it did not already own from Bendon International Ltd. and Badr Investment Ltd.;
• The company acquired Bendon's 43.5-per-cent participating interest in the OJVG for cash consideration of $105-million. Badr's 13-per-cent carried interest in the OJVG was acquired for cash consideration of $7.5-million, and further contingent consideration based on higher realized gold prices and increases to OJVG reserves through 2020. For the three months ended June 30, 2014, $3.8-million of contingent consideration has been accrued based on targeted additions to OJVG reserves. The acquisitions of Bendon's and Badr's interests in the OJVG were financed by the gold stream agreement with Franco-Nevada and from the company's existing cash balance;
• The acquisition of Bendon's and Badr's interests in the OJVG increased the company's ownership to 100 per cent and consolidated the Sabodala region, increasing the size of the company's interests in the mine licence from 33 square kilometres to 246 square kilometres, more than doubling the company's reserve base and providing the company with the flexibility to integrate the OJVG satellite deposits into its existing operations. The contribution of 100 per cent of the OJVG has been reflected into Teranga's results from Jan. 15, 2014;
• Acquisition-related costs of approximately $300,000 have been expensed during the three months ended June 30, 2014, and are presented within other expenses in the consolidated statements of comprehensive income.

Golouma mine licence and extension of Sabodala mine licence:

• During the second quarter of 2014, the integration of the Golouma mine licence into an expanded Sabodala mine concession was agreed to in principle with the Senegalese Ministry of Mines, and a revised expanded Sabodala mining convention is anticipated to be executed during the third quarter. The company has all approvals required to process Golouma ore in the Sabodala mill. The Sabodala mine licence was also extended until 2022 as part of the integration of the two licence areas during the second quarter of 2014.

Municipal and provincial election in Senegal:

• In June, 2014, Senegal held municipal and provincial elections. Following the elections, the president reconstituted his cabinet with the appointment of a new prime minister and a number of new ministers in various portfolios. The ministers of mines and finance, key points of contact for the company, remained unchanged. Over all, the company believes the new prime minister and new cabinet members will continue with the president's pro-foreign investment and mining mandate. In fact, the new prime minister was previously in charge of the emerging Senegal plan, and visited Sabodala with the president in April of this year.

Base-case life of mine plan:

• During the first quarter 2014, the company filed a National Instrument 43-101 -- standards of disclosures for mineral projects technical report which included an integrated life of mine (LOM) plan for the combined operations of Sabodala and the OJVG. The integrated LOM plan has been designed to maximize free cash flow in the current gold price environment. The sequence of the pits can be optimized, as well as the sequencing of phases within the pits, based not only on grade, but also on strip ratio, ore hardness and the capital required to maximize free cash flows in different gold price environments. As a result, the integrated LOM annual production profile represents an optimized cash flow for 2014, and a balance of gold production and cash flow generated in the subsequent five years. There are opportunities to increase gold production in years 2015 to 2018 based on current reserves. With expectations for additional reserves, including infill drilling of the high-grade zone at Masato, further mine plan optimization work is required. As a result, the integrated LOM production schedule represents a base-case scenario with flexibility to improve gold production and/or cash flows in subsequent years. During the second quarter of 2014, the company's technical team commenced a review of the 2015 mine plan to identify opportunities, which may result in lower material movement, lower capital expenditures and higher free cash flows.

Mill enhancements:

• The average hourly mill throughput rate estimated when the crusher is in operation is approximately 430 tonnes per operating hour (tpoh) or 3.5 million tonnes per annum (mtpa). However, the mill has experienced periods of sustained operation where the mill throughput has exceeded 480 tpoh. These occurrences have typically been when the mill was operating when the primary and secondary crushed ore stockpile levels have been full. Analysis of plant data shows that there is a correlation between the crusher downtime and mill throughput, which in turn is directly related to the inventory level of the crushed stockpiles;
• Several engineering studies have been initiated to determine potential throughput enhancements to the current plant design, including:
  • The design and cost to install a second crushing system that would provide redundancy and near 100-per-cent availability to the crusher stockpiles;
  • The quantification of the relationship between an increase in crusher availability to the SAG and ball mill system (SABC), as well as other design enhancements within the crush and grinding system;
• Key milestones for the project are as follows:
  • Quantify SAG mill critical sizing relationships and throughput potential through testwork and simulation;
  • Determine the maximum sustained production rate and required design changes to the SABC and crushing circuit;
  • Develop a cost estimate and construction schedule;
  • Technical analysis supporting a development decision (targeted for completion in third quarter 2014);
• The company is targeting an overall 5-per-cent to 10-per-cent increase in throughput.

Heap leach project

• The LOM plan shows a significant amount of both oxide and sulphide low-grade reserves that are mined during the operating period, but not processed until the end of the mine life. There also exists significant potential along an eight-kilometre mineralized structural trend covering both mine leases to increase the known reserves with near-surface, oxidized ore;
• The potential benefit to accelerating value from this ore earlier by feeding it through a heap leach process is being evaluated. A comprehensive testwork program is in progress that will evaluate the heap leach potential for:
  • Phase I:
    • Saprolite, near-surface ore;
    • Various stages of the soft and hard oxidized transition zones;
  • Phase II:
    • Sulphide ore on the ROM stockpile;
• Previous testwork has shown that there are higher capital and operating costs to heap leaching ore as depth increases and the level of oxidation decreases. Phase I of the testwork will form the basis to determine the optimum economics for three geological zones within the oxide: saprolite, soft transition and hard transition. Phase II of the analysis will examine the leachability for the sulphide ore. However, since this is likely to include much higher capital and operating costs, the decision to proceed in this phase will be contingent on the results of the testwork carried out for phase I;
• The testwork is being completed by Klappes, Cassidy and Associates (KCA) at its facilities in Reno, Nev., which is experienced in testing and designing heap leach facilities throughout the world, including West Africa. Phase I of the program is expected to be completed in third quarter 2014, at which point engineering design can commence to determine capital costs and operating parameters as a basis for economic analysis;
• The decision to initiate testwork for phase II of the program will be based on the results of phase I;
• Key milestones for the project are as follows:
  • Complete phase I testwork, economic analysis and if warranted, initiate engineering design to prefeasibility study (PFS) level -- third quarter 2014;
  • Complete additional follow-up optimization testwork and, if warranted, initiate phase II testwork -- third quarter/fourth quarter 2014;
  • Commence preliminary economic analysis and make development decision -- fourth quarter 2014;
  • Initiate feasibility study (FS) level engineering design, initiate targeted resource drilling and environmental studies to support an environmental and social impact assessment (ESIA) submission -- 2015;
• The company is targeting potential annual heap leach production between 30,000 and 50,000 ounces commencing 2017.

Gora development:

• The Gora deposit, which hosts 290,000 ounces of proven and probable reserves at 4.74 grams per tonne will be operated as a satellite deposit to the Sabodala mine, requiring limited local infrastructure and development. Ore will be hauled to the Sabodala processing plant by a dedicated fleet of trucks and processed on a priority basis, displacing lower-grade feed as required;
• A revised environmental and social impact assessment for the Gora project was filed with the Senegalese authorities on April 1, 2014. The revised EISA is required to be validated by a technical committee, and once approved, it is then presented by that authority to a public hearing. Following the public hearing, it is anticipated that the Ministry of Environment (MOE) will issue an environmental approval for the Gora project. The technical committee meeting to validate the revised Gora EISA is scheduled for August. Assuming a successful validation hearing, management anticipates the final approval to be received by the MOE within 30 to 60 days;
• Management expects the permit process to be completed in third quarter 2014 and construction to be initiated based on the new integrated LOM plan with the OJVG by fourth quarter 2014. Initial engineering is continuing and site surveys were conducted during the second quarter of 2014 to allow for initiation of the access road construction in late 2014.

Sabodala mine licence reserve development:

• The Sabodala mine licence covers 33 square kilometres and, in addition to the mine related infrastructure, contains the Sabodala, Masato, Niakafiri, Niakafiri West, Soukhoto and Dinkokhono deposits.

Niakafiri:

• In 2013, additional surface mapping was completed at Niakafiri in conjunction with the relogging of several diamond drill holes which were incorporated into the geological model for the Niakafiri deposit. Further exploration work, including additional drilling, is targeted for the fourth quarter of this year following discussions with the Sabodala village;
• In addition to the potential expansion of hard ore reserves at Niakafiri, the company is exploring for potential softer ore that may be conducive to heap leach, with emphasis on the mineralized trend to the north and south of the current reserves at Niakafiri.

OJVG mine licence reserve development:

• The OJVG mine licence covers 213 square kilometres. As the company has integrated the OJVG geological database into a combined LOM plan, a number of areas have been revealed as potential sources for reserve additions within the mining lease. These targets have been selected based on potential for discovery and inclusion into open-pit reserves.

Masato:

• Development of the Masato deposit is complete, and is ready for mining once the geological drilling programs have been completed and analyzed. The access road construction, waste dump preparation, mine infrastructure and bench access development have been completed.

Masato geology programs

• A significant amount of geological fieldwork occurred on the Masato orebody during the second quarter 2014 to increase understanding in preparation for mining in the second half of 2014. These programs include infill diamond drill hole drilling of the high-grade zones, a gridded pattern reverse circulation grade control program, surface trenching and a condemnation drilling program for the waste dump areas.

Infill diamond drill hole drilling

During the second quarter of 2014, 22 diamond drill holes totalling approximately 2,800 metres were completed to confirm the existing interpretation and grades of the mineralization domains, upgrade resource classification of inferred resource blocks, "twin" previously drilled holes and delineate high-grade zones. Sampling and dispatch of core samples to ALS Chemex in South Africa are continuing. Assay results are expected in third quarter 2014 and will be incorporated into an updated resource model.

A total of four diamond drill holes were drilled for geotechnical data and testing. Logging is continuing and will be completed in third quarter 2014.

Surface mapping, trenching and RC grade control

A gridded RC drill program has been planned to delineate mineralization at 10-metre spacing to determine the optimal spacing of RC holes for the mine operations grade control program. A total of 98 holes totalling 6,100 metres are planned in two separate test blocks in the Masato north and south pit areas. The program was 50 per cent complete at the end of second quarter 2014, and is expected to be completed during third quarter 2014. Assay results from the first 28 holes have been received, and confirm the existing mineralization model trends and grades.

A total of 16 trenches have been planned to confirm the location and grades of near-surface mineralization. Approximately 85 per cent of the trenches in the north pit area have been excavated with 50 per cent of these having been mapped and sampled. The remaining trenching and sampling programs with the receipt of assay results are expected to be completed in third quarter 2014. Four additional trenches were excavated for a heap leach sampling program. Assay results returned to date confirm the surface location of mineralization and gold grades from adjacent drill holes.

Condemnation RAB drilling

A rotary air blast (RAB) drilling sterilization program over the planned dumps and lay-down footprint areas was completed during second quarter 2014. Approximately 80 per cent of the assay results have been received to date, of which the maximum gold value reported was 0.6 gram per tonne. There is no indication at present of economic concentrations of gold occurring in these areas.

Data from the RAB drilling program were used in conjunction with surface mapping data to produce soil isopach plans (for stripping and stock piling of top soil), and soil characteristics for geotechnical investigations.

Golouma:

• Infill drilling is planned for potential conversion of inferred resources and evaluating the mineralization potential of structural features along strike to the existing reserves. Since access has been established, drilling is expected to commence in third quarter 2014.

Kerekounda:

• Both RC and diamond drill hole drilling are planned to determine the extent of mineralization further along strike of the existing reserves. This program is expected to commence in fourth quarter 2014.

Niakafiri SE and Maki Medina:

• Both RC and diamond drill hole drilling are planned for potential conversion of inferred resources, geotechnical holes for pit wall determination and exploratory holes to the north toward the Niakafiri deposit to evaluate extension along strike. Pending results of the heap leach testwork, additional drilling to determine near-surface oxide resources, may also be evaluated. Work in these areas is expected to commence in late third quarter 2014 and continue through to the end of the year.

Regional exploration:

• The company currently has nine exploration permits encompassing approximately 1,055 square kilometres of land surrounding the Sabodala and OJVG mine licences (246-square-kilometre exploitation permits). Over the past three years, with the initiation of a regional exploration program on this significant land package, a tremendous amount of exploration data has been collected and systematically interpreted to prudently implement follow-up programs. Targets are therefore in various stages of advancement, and are then prioritized for follow-up work and drilling. Early geophysical and geochemical analysis of these areas has led to the demarcation of at least 50 anomalies, targets and prospects, and the company expects that several of these areas will ultimately be developed into minable deposits. The company has identified some key targets that despite being early stage, display significant potential. However, due to the sheer size of the land position, the process of advancing an anomaly through to a minable deposit takes time, and the company is using a systematic, disciplined approach to maximize potential for success.

Ninienko:

• An extensive mapping and a trenching program, over 1,500 metres, was conducted during second quarter 2014 at the Ninienko prospect. This work outlined a 500-metre-plus wide zone with gold mineralization occurring in flat-lying, near-surface (zero to two metres) quartz vein and felsic breccia units developed over a strike length of 1,500 metres;
• Highlights of the elevated gold values reported from these trenches include:
  • 0.5 metre at 3.96 grams per tonne, quartz feldspar breccia;
  • 1.5 metres at 7.24 grams per tonne, broken quartz feldspar breccia;
  • 0.9 metre at 7.38 grams per tonne, quartz vein;
  • 0.4 metre at 9.65 grams per tonne, quartz feldspar breccia and quartz vein;
  • one metre at 2.53 grams per tonne, quartz feldspar breccia and quartz vein;
  • one metre at 2.7 grams per tonne, quartz feldspar breccia and quartz vein;
  • 0.4 metre at 2.48 grams per tonne, quartz vein;
  • 1.2 metres at 2.45 grams per tonne, quartz feldspar breccia and quartz vein;
  • 0.8 metre at 3.27 grams per tonne, quartz vein;
  • one metre at 8.89 grams per tonne, quartz vein;
• An isopach plan of the mineralized quartz vein and felsic breccia systems is in progress, and this will be used to develop a plan for diamond drill hole and a possible RC drill program in fourth quarter 2014. Additional trenching and mapping will also be undertaken in the second half of 2014.

Soreto:

• Following up on a small five diamond drill hole program at the Soreto prospect in 2013, a program totalling 15 diamond drill holes for 2014 has commenced, with seven diamond drill holes totalling 1,500 metres completed during the second quarter 2014 with assay results pending. These were located along two fence lines placed 150 metres on either side of the 2013 fence that intersected gold values including three metres at 2.1 grams per tonne, seven metres at 1.38 grams per tonne and one metre at 12.2 grams per tonne. Several of these holes intersected shallow dipping (25 to 35 degrees) altered shear zones with felsic dike, sheared and brecciated silicified metasediments containing quartz-carbonate veins with disseminated pyrite and visible gold in places. The shear zones coincide with the major north-northeast regional shear structure with an associated six-kilometre-long geochemical soil anomaly. Sampling and dispatch of split core samples to ALS Chemex in South Africa are continuing;
• A further eight diamond drill holes totalling 2,000 metres are planned to be drilled along the current fence lines. It is expected that all the diamond drill holes will be sampled and assay results received by the end of third quarter 2014.

KC prospect:

• Approximately 3,200 metres of trenching were completed across a mineralized structural trend with intense quartz veining and brecciated felsic intrusives developed over a strike length of approximately 1,800 metres. Sampling of the trenches yielded elevated gold values in the overburden of up to 18.45 grams per tonne over 0.4 metre and 6.27 grams per tonne over 0.6 metre. The quartz vein and breccia zone yielded elevated gold values in the range of 1.95 grams per tonne over 0.3-metre true width and 1.41 grams per tonne over 0.2-metre true width with limited continuity along strike. Due to limited mineralization in the in situ rock, it was determined that follow-up drilling was not likely to produce results and resources were best allocated to higher prospective targets;
• A follow-up soil sampling and trenching program is planned in fourth quarter 2014 to evaluate a large soil anomaly (peak values of 2.64 grams per tonne and 2.38 grams per tonne) located 800 metres to the west of workings, which may account for the elevated gold anomalies identified in overburden in the trenches.

Garaboureya:

• Evaluation of the Garaboureya prospect, which shows promise through high soil geochemical anomalies and mineralization in outcropping rock, is planned later in the year. The company is working to obtain drill core from over 200 diamond drill holes previously drilled, which were exploring for iron ore deposits on the property. The drill core was not assayed for gold. Access to the drill core could help accelerate the understanding of the geology.

 
                   SECOND QUARTER FINANCIAL RESULTS
        (in thousands of U.S. dollars except where indicated)


                                          Three months            Six months
                                         ended June 30,        ended June 30,
                                       2014       2013       2014       2013

Revenue                              57,522     75,246    127,324    189,061
Profit (loss) attributable to
shareholders of Teranga             (12,018)     7,196     (8,061)    52,179
Per share                             (0.04)      0.03      (0.02)      0.21
Operating cash flow                  (9,793)    20,838      4,510     44,478
Capital expenditures                  6,846     25,990      9,556     48,166
Free cash flow(1)                   (16,639)    (5,152)    (5,046)    (3,688)
Cash and cash equivalents
(including bullion receivables
and restricted cash)                 28,381     53,536     28,381     53,536
Net debt(2)                             280     28,925        280     28,925
Total assets                        706,182    583,937    706,182    583,937
Total non-current financial
liabilities                         128,069     20,484    128,069     20,484

Notes:
(1) Free cash flow is defined as operating cash flow less capital
expenditures.
(2) Net debt is defined as total borrowings and financial derivative
liabilities less cash and cash equivalents, bullion receivables and
restricted cash.
(3) Results include the consolidation of 100 per cent of the OJVG's
operating results, cash flows and net assets from Jan. 15, 2014.

                   SECOND QUARTER OPERATING RESULTS

                                          Three months            Six months
                                         ended June 30,        ended June 30,
                                       2014       2013       2014       2013

Ore mined (000t)                        974        698      2,236      2,011
Waste mined -- operating (000t)       5,233      2,683     11,384      5,197
Waste mined -- capitalized (000t)       458      4,770        955      9,792
Total mined (000t)                    6,665      8,151     14,575     17,000
Grade mined (g/t)                      1.39       1.59       1.51       1.77
Ounces mined (oz)                    43,601     35,728    109,053    114,657
Strip ratio (waste/ore)                 5.8       10.7        5.5        7.5
Ore milled (000t)                       817        709      1,710      1,405
Head grade (g/t)                       1.69       2.36       1.86       2.83
Recovery rate (%)                      89.8       92.3       89.9       92.2
Gold produced (oz)(1)                39,857     49,661     91,947    117,962
Gold sold (oz)                       44,285     54,513     98,052    124,180
Average realized price ($/oz)         1,295      1,379      1,294      1,217
Total cash cost (including
royalties)($/oz sold)(2)                815        642        750        582
All-in sustaining
costs ($/oz sold)(2)                  1,060      1,185        925      1,024
Mining ($/t mined)                     2.90       2.64       2.85       2.62
Milling ($/t milled)                  21.29      23.77      19.68      23.13
G&A ($/t milled)                       4.92       6.25       4.88       6.21

Notes:
(1) Gold produced represents change in gold in circuit inventory plus gold 
recovered during the period.
(2) Total cash costs per ounce and all-in sustaining costs per ounce are
prior to a non-cash inventory writedown to net realizable value, and
are non-IFRS financial measures that do not have a standard meaning
under IFRS. 

Competent persons statement

The technical information contained in this document relating to the mineral reserve estimates for Sabodala, the stockpiles, Masato, Golouma and Kerekounda are based on, and fairly represents, information compiled by William Paul Chawrun, PEng, who is a member of the Professional Engineers of Ontario, which is currently included as a recognized overseas professional organization in a list promulgated by the ASX from time to time. Mr. Chawrun is a full-time employee of Teranga and is a qualified person as defined in NI 43-101 and a competent person as defined in the 2012 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Mr. Chawrun has sufficient experience relevant to the style of mineralization and type of deposit under consideration, and to the activity he is undertaking, to qualify as a competent person as defined in the 2012 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Mr. Chawrun has consented to the inclusion in this report of the matters based on his compiled information in the form and context in which it appears in this report.

The technical information contained in this document relating to the mineral reserve estimates for Gora and Niakafiri are based on, and fairly represents, information and supporting documentation prepared by Julia Martin, PEng, who is a member of the Professional Engineers of Ontario and a member of AusIMM (CP). Ms. Martin is a full-time employee with AMC Mining Consultants (Canada) Ltd., is independent of Teranga, is a qualified person as defined in NI 43-101 and a competent person as defined in the 2004 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Ms. Martin has sufficient experience relevant to the style of mineralization and type of deposit under consideration, and to the activity she is undertaking, to qualify as a competent person as defined in the 2004 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Ms. Martin is a qualified person under NI 43-101 -- standards of disclosure for mineral projects. Ms. Martin has reviewed and accepts responsibility for the mineral reserve estimates for Gora and Niakafiri disclosed in this document, and has consented to the inclusion of the matters based on her information in the form and context in which it appears in this report.

The technical information contained in this report relating to mineral resource estimates for Niakafiri, Gora, Niakafiri West, Soukhoto and Diadiako are based on, and fairly represents, information compiled by Nakai-Lajoie. Ms. Nakai-Lajoie, PGeo, is a member of the Association of Professional Geoscientists of Ontario, which is currently included as a recognized overseas professional organization in a list promulgated by the ASX from time to time. Ms. Nakai-Lajoie is a full-time employee of Teranga and is not independent within the meaning of NI 43-101. Ms. Nakai-Lajoie has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration, and to the activity which she is undertaking, to qualify as a competent person as defined in the 2004 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Ms. Nakai-Lajoie is a qualified person under NI 43-101. Ms. Nakai-Lajoie has consented to the inclusion in this report of the matters based on her compiled information in the form and context in which it appears in this report.

The technical information contained in this report relating to mineral resource estimates for Sabodala, Masato, Golouma, Kerekounda and Somigol are based on, and fairly represents, information compiled by Ms. Nakai-Lajoie.

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 standards on mineral resources and mineral reserves, adopted by the CIM council, as may be amended from time to time by the CIM. Estimates of mineral resources and mineral reserves prepared in accordance with the JORC code would not be materially different if prepared in accordance with the CIM definitions applicable under NI 43-101. There can be no assurance that those portions of mineral resources that are not mineral reserves will ultimately be converted into mineral reserves.

Second quarter conference call and webcast

The company will host a conference call and webcast on July 30, 2014, at 5:30 p.m. Eastern Time (7:30 a.m. Australian Eastern Standard Time).

Telephone numbers

Toronto:  416-340-2216

North America toll-free:  1-866-223-7781

International:  1-416-340-2216

Live webcast

The webcast can be accessed directly on the Teranga website.

The conference call replay will be available for two weeks after the call by dialling 1-905-694-9451 or toll-free 1-800-408-3053, and entering the passcode 9093856.

We seek Safe Harbor.