Mr. Richard Young reports
TERANGA GOLD'S FOURTH QUARTER MARKS STRONG END TO A SUCCESSFUL YEAR
Teranga Gold Corp. has released its fourth quarter and year-end 2014 operating results for Australian Securities Exchange purposes.
(All amounts are in U.S. dollars unless otherwise stated.)
"Two thousand fourteen was a successful year, and I am pleased to say that it finished up on a high note, with a robust fourth quarter, reflecting significantly higher production and lower costs," stated Richard Young, president and chief executive officer of Teranga. "Despite lower gold prices in 2014, we generated higher free cash flow, which in turn was used to pay down debt and strengthen our balance sheet."
Mr. Young also stated: "One of our key objectives is to invest in organic growth initiatives to increase our production and mine life. Our existing mill and related infrastructure, together with our large mine licence and regional land package, which we believe has significant exploration upside, gives us organic growth opportunities that most companies just do not have today."
KEY HIGHLIGHTS
(in U.S. dollars)
Three months ended Year ended
Dec. 31, Dec. 31,
2014 2013 2014 2013
Gold production
(ounces) 71,278 52,368 211,823 207,204
Total cash costs
per ounce
sold $598 $711 $710 $641
All-in sustaining
costs per ounce
sold 711 850 865 1,033
Highlights:
- Cash balance at Dec. 31, 2014, increased by $7.8-million to $35.8-million from third quarter of 2014.
- The company retired the outstanding balance of its loan facility on
Dec. 31, 2014.
- Proven and probable open-pit reserves at Masato increased by 72,000
ounces.
- The company has encouraging exploration results on mine licence targets.
- Environmental permits for the Gora project, the first satellite deposit
to be developed, are expected in mid-February. Planned production will
commence early fourth quarter 2015.
- The company expects to generate positive free cash flow in 2015 based on
2015 production in the range of 200,000 to 230,000 ounces at total
cash costs of $650 to $700 per ounce and all-in sustaining costs
(including all new project development costs) of $900 to $975 per
ounce.
Operational overview
Sabodala gold operation
Fourth quarter 2014:
- Gold production during the fourth quarter of 2014 increased by 47
per cent and 36 per cent versus the third quarter of 2014 and the fourth
quarter of 2013, respectively. Production was higher in the last three
months of 2014 due to higher processed grade and improved mill
throughput. Production was slightly lower than fourth quarter guidance
primarily due to marginally lower recovery rates than planned.
- Total cash costs per ounce for the three months ended Dec. 31, 2014,
excluding the reversal of non-cash inventory writedowns to net
realizable value, totalled $598 per ounce compared with $711 per
ounce in the same prior-year quarter mainly due to lower mining and
processing costs and higher gold production in the current-year quarter.
- All-in sustaining costs for the three months ended Dec. 31, 2014,
excluding the reversal of non-cash inventory writedowns to NRV,
totalled $711 per ounce, compared with $850 per ounce in the prior year.
All-in sustaining costs were lower due to a decline in total cash costs
and lower capital expenditures.
- Total tonnes mined for the three months ended Dec. 31, 2014, were 4
per cent lower year over year. Mining activities in the current period
were mainly focused on the upper benches of Masato and the lower benches
of phase 3 of the Sabodala pit, while in the same prior-year period,
mining was focused on the upper benches of phase 3 of the Sabodala pit,
which resulted in shorter ore-and-waste-haul distances.
- The changes in the mine department made during the year in terms of
people and procedures resulted in much improved grade control during the
fourth quarter. Mining at Masato included 371,000 tonnes at 2.41 grams per tonne, and
mining at Sabodala included 353,000 tonnes at 3.16 gpt, both reconciling
well to the reserve models.
- Total mining costs for the three months ended Dec. 31, 2014, were 6
per cent lower than the same prior-year period mainly due to lower
material movement and higher productivity at Masato due to mining softer
material. Unit mining costs for the three months ended Dec. 31, 2014,
were $2.58 per tonne, a decrease of 2 per cent compared with the same prior-year period.
- Ore tonnes milled for the three months ended Dec. 31, 2014, were 17
per cent higher than the same prior-year period. The company set a
quarterly record for total tonnes milled during the fourth quarter of
2014. As anticipated, the introduction of softer oxide ore from Masato
has had a positive impact on crushing and milling rates. In the same
prior-year period, mill feed was sourced from phase 3 of the Sabodala
pit containing harder ore.
- Processed grade for the three months ended Dec. 31, 2014, was 16
per cent higher than the same prior-year period. Mill feed during the
fourth quarter 2014 included significant high-grade ore that was sourced
from the upper benches of Masato and the lower benches of the Sabodala
pit. While in the prior-year period, mill feed was sourced from phase 3
of the Sabodala pit at grades closer to average reserve grade.
- Total processing costs for the three months ended Dec. 31, 2014, were
9 per cent lower than the same prior-year period, mainly due to timing of
maintenance activities and lower consumption of grinding media, with the
softer ore from Masato. Unit processing costs for the three months ended
Dec. 31, 2014, were 23 per cent lower than the prior-year period due
to lower total processing costs and higher tonnes milled.
- During the third quarter of 2014, the company experienced a discrepancy
of approximately 5,000 ounces between the predicted gold production
based on the daily production report assays and reconciled gold poured
and gold-in-circuit production at quarter-end. Management concluded its
investigation of the source of the discrepancy during the fourth quarter
2014. Based on the final assessment, it was determined that this discrepancy
was caused by a high bias of approximately 10 per cent in the assays
during the third quarter by the independent assay lab on site. The high
bias was caused by degradation in the gold calibration standard due to
poor storage of the solutions employed by the independent lab. The bias
was corrected in October, 2014, and steps have been taken by the
independent lab to improve quality control, including changes to its
senior personnel, retraining of its local technical staff, duplicate
testing conducted by their lab in Mali, and more senior level oversight
to ensure quality and adherence to standard practices.
- Reconciliation of the metallurgical accounting for the fourth quarter
2014 with daily production was within acceptable standards, as has been
the case on average for the duration of operations for the Sabodala
mill.
Full-year 2014:
- Gold production for the year increased marginally from the year earlier
to 211,823 ounces and was the second-highest production total in company
history. However, production fell short of the revised guidance estimate
of 215,000 ounces primarily due to lower-than-planned recovery rates in
the fourth quarter.
- Total cash costs per ounce for the year ended Dec. 31, 2014, of $710
per ounce were at the higher end of guidance of $650 to $700 per ounce.
This compares with $641 per ounce in 2013. The increase in total cash
costs was mainly due to lower capitalized deferred stripping, partly
offset by lower mining and processing costs compared with the prior year.
- All-in sustaining costs per ounce for the year ended Dec. 31, 2014,
were $865 per ounce, within the original guidance range of $800 to $875
per ounce and 16 per cent lower than the prior year. Lower all-in
sustaining costs were mainly due to lower capital expenditures in the
current-year period.
PRODUCTION STATISTICS
December, September, June, March, December,
2014, 2014, 2014, 2014, 2013,
quarter quarter quarter quarter quarter
Ore mined (000t) 2,666 1,272 974 1,262 1,993
Waste mined --
operating (000t) 5,594 4,201 5,233 6,151 6,655
Waste mined --
capitalized (000t) 490 524 458 497 420
Total mined (000t) 8,750 5,997 6,665 7,910 9,068
Grade mined (g/t) 1.47 1.71 1.39 1.61 1.61
Ounces mined (oz) 126,334 69,805 43,601 65,452 103,340
Strip ratio waste/ore 2.3 3.7 5.8 5.3 3.6
Ore processed (000t) 1,009 903 817 893 860
Head grade (g/t) 2.44 1.89 1.69 2.01 2.11
Gold recovery (%) 90% 89% 90% 90% 90%
Gold
produced (oz) 71,278 48,598 39,857 52,090 52,368
Gold sold (oz) 63,711 44,573 44,285 53,767 46,561
Average price
received $/oz $1,199 $1,269 $1,295 $1,293 $1,249
Total cash
costs per
ounce
sold
(including
royalties) $/oz 598 781 815 696 711
All-in
sustaining
costs per
ounce
sold
(including
royalties) $/oz 711 954 1,060 813 850
Mining ($/t mined) 2.58 3.12 2.90 2.81 2.65
Milling ($/t milled) 13.91 15.96 21.29 18.20 17.96
G&A ($/t milled) 4.27 4.46 4.92 4.85 4.84
Outlook for 2015
The attached outlook for 2015 table outlines the company's estimated 2015 summary production and cost guidance.
OUTLOOK FOR 2015
Year ended Dec. 31
Actual in 2014 Guidance range for 2015
Operating results
Ore mined (000t) 6,174 6,500-7,500
Waste mined -- operating (000t) 21,179 approx. 19,500
Waste mined -- capitalized (000t) 1,969 2,500-3,500
Total mined (000t) 29,321 28,500-30,500
Grade mined (g/t) 1.54 1.40-1.60
Strip ratio (waste/ore) 3.7 3.00-3.50
Ore milled (000t) 3,622 3,600-3,800
Head grade (g/t) 2.03 2.00-2.20
Recovery rate % 89.7 90.0-91.0
Gold produced (oz) 211,823 200,000-230,000
Total cash cost (incl.
royalties) $/oz sold $710 $650-$700
All-in sustaining
costs $/oz sold 865 900-975
Mining ($/t mined) 2.83 2.75-2.90
Mining long haul (cost/t
hauled) ($/t milled) -- 5.00-6.00
Milling ($/t milled) 17.15 15.50-17.50
G&A ($/t milled) 4.61 5.25-5.75
Gold sold to Franco-
Nevada (oz) 20,625 24,375
Exploration and evaluation
expense (regional land
package) ($ millions) 2.8 1.0-2.0
Administration expenses and
social community costs
(excluding depreciation) ($ millions) 14.8 15.0-16.0
Mine production costs ($ millions) 161.3 155.0-165.0
Capitalized deferred
stripping ($ millions) 6.0 8.0-10.0
Net mine production costs ($ millions) 155.3 147.0-155.0
Capital expenditures
Mine site sustaining ($ millions) 5.0 6.0-8.0
Capitalized reserve
development (mine licence) ($ millions) 4.0 6.0-8.0
Project development costs
(Gora/Kerekounda)
Mill optimization ($ millions) -- 5.0-6.0
Development ($ millions) 3.9 16.5-17.5
Mobile equipment and other ($ millions) -- 7.5-8.5
Total project development
costs ($ millions) 3.9 29.0-32.0
Capitalized deferred
stripping ($ millions) 6.0 8.0-10.0
Total capital expenditures ($ millions) 18.9 49.0-58.0
The company's mine plans are designed to maximize free cash flow. In 2015, the company expects to generate free cash flow at $1,200 per ounce gold even after financing its organic growth initiatives. Mining activity in 2015 will continue in the Masato pit, as well as completing phase 3 of the Sabodala pit. Development of Gora is expected to be complete during the third quarter, with mining expected by late in the third quarter and production from Gora commencing in the fourth quarter of the year.
The company expects to produce between 200,000 and 230,000 ounces of gold in 2015. The quarterly production profile in 2015 is expected to look similar to the 2014 quarterly production profile with higher production in the fourth quarter once Gora ore is processed through the mill. In total, the second half of 2015 is expected to account for approximately 55 per cent of total gold production as Gora comes into production. The Gora development schedule is aggressive, but management believes it is achievable. The delay in the Gora permitting process has delayed road construction, which was to start at the beginning of the year, but is now expected to begin in early February. Any further delays are likely to impact the timing of commencement of mining at Gora, resulting in production at the lower end of the 2015 production guidance range.
The company's tax-exempt status ends on May 2, 2015. From this point forward, the company will be subject to a 25-per-cent income tax rate, as well as customs duties and non-refundable value-added tax on certain expenditures. Any income tax incurred in 2015 will not be paid until 2016, and the other taxes are built into the unit cost guidance.
Total mine production costs for 2015 are expected to fall in the range of $147.0-million to $155.0-million, similar to 2014 (net of capitalized deferred stripping). The increase in taxes and duties for consumables of about $5.5-million is expected to be offset by the decline in costs for light fuel oil, heavy fuel oil and weaker local and euro-denominated costs relative to the U.S. dollar. A 10-cent variance from the current HFO/LFO assumptions would result in approximately a $5.0-million change to mine production costs. A 10-per-cent variance from the current euro/U.S.-dollar exchange rate assumption would result in approximately a $9.0-million change to mine production costs. The government of Senegal sets the price of petroleum products monthly. In late December, 2014, these prices were reduced on average 15 per cent, the first reduction in 2014. The company's 2015 assumptions for LFO and HFO reflect these most recent price reductions and do not reflect any potential further reductions that the government of Senegal may choose to enact.
Administrative expenses and social community costs relate to the corporate office, the Dakar and regional office, and the company's corporate social responsibility initiatives, and exclude corporate depreciation, transaction costs and other non-recurring costs. For 2015, these costs are estimated to be between $15.0-million and $16.0-million, including approximately $3.5-million for corporate social responsibility activities.
Sustaining capital expenditures for the mine site are expected to be between $6.0-million and $8.0-million, capitalized deferred stripping costs are expected to total $8.0-million to $10.0-million, and reserve development expenditures are expected to total $6.0-million to $8.0-million. Project development expenditures for growth initiatives, including the cost to develop the Gora and Kerekounda deposits and costs to optimize the mill, are expected to total $29.0-million to $32.0-million.
Total cash costs per ounce for 2015 are expected to be between $650 and $700 per ounce, in line with 2014. All-in sustaining costs are expected to be between $900 and $975 per ounce, higher than 2014, due to an increase in development spending on new deposits and expansion of the mill of approximately $125 per ounce.
In 2015, the majority of the capital to be spent on the company's exploration program will be focused on organic growth through: (i) the conversion of resources to reserves; and (ii) extensions of existing deposits along strike on the Sabodala and OJVG mine licences. As well, a modest amount of capital has been budgeted for the continuation of a systematic regional exploration program designed to identify high-grade satellite and stand-alone deposits.
Finance
At Dec. 31, 2014:
- Cash and cash equivalents: $35.8-million;
- Loan facility (balance outstanding): nil;
- Equipment facility (balance outstanding): $4.2-million.
In January, 2015, the company entered into forward gold sales contracts with Macquarie Bank Ltd. with maturities ending in February and March, 2015. In total, 15,000 ounces of gold were sold forward at a gold price of $1,297 per ounce.
Management change
Kathy Sipos, vice-president, investor and stakeholder relations, has left the company to pursue a career change. As an integral part of the Teranga team since the initial public offering, Ms. Sipos was instrumental in the development of the investor relations program and established the company's CSR platform, including the development of the Teranga development strategy.
The TDS sets out Teranga's plan to ensure its actions and investments are oriented toward the long term and sustainable development of the region surrounding our Sabodala gold operation. It further underscores the company's commitment to a companywide culture of CSR. Under Ms. Sipos's leadership, the TDS has provided the foundation for a number of innovative partnerships with government agencies and several international and local non-government organizations to provide a range of programs in education, skills training, agriculture, and health and education for the benefit of the communities and region in which the company operates.
Richard Young, president and chief executive officer, and Khalid Elhaj, director of corporate development and investor relations, will be assuming Ms. Sipos's investor relations responsibilities, while the CSR team will oversee programs until a replacement is found.
Business and project development
Reserves and resources
Total open-pit proven and probable mineral reserves are as at Dec. 31, 2014. The reported mineral resources are inclusive of the mineral reserves.
The proven and probable mineral reserves were based on the measured and indicated resources that fall within the designed open pits. The basis for the resources and reserves is consistent with the Canadian Securities Administrators National Instrument 43-101 (standards for disclosure for mineral projects) regulations.
The Sabodala pit design, which remains unchanged and is consistent with the mineral reserves reported previously, is based on a $1,000-per-ounce-gold-price pit shell for phase 4. A re-evaluation of the final pit limits of Sabodala (phase 4) will be completed prior to mining and will use updated economic limits at that time. Currently, the plan to mine phase 4 in Sabodala is estimated to begin in 2016.
The Niakafiri and Gora pit designs remain unchanged from December, 2012.
The Masato pit design has been updated and is based on an updated resource model, using a $1,200 gold price with mine operating costs reflecting current conditions.
The Golouma and Kerekounda pit designs remain unchanged from December, 2013. Resource models are expected to be updated based on drill programs recently completed, with subsequent pit designs and revised reserves estimates expected later in 2015. These have been based on a $1,250-per-ounce pit shell; however, when comparing with adjusted cut-off grades to match current operating costs, minimal adjustments were required to match a $1,200-per-ounce pit shell.
Masato resource model update
Drill hole assays and surface trenching results from the 2014 advanced exploration program were incorporated into an updated Masato mineral resource model during the fourth quarter 2014. A total of 2,900 metres in 22 diamond drill holes and 6,000 metres in 98 reverse circulation holes was completed in 2014.
DDH confirmed the interpretation of mineralized zones and infilled gaps to upgrade resource classification of inferred resources.
RC holes were drilled at 10-metre spacing in two separate test block areas in oxide ore to test the continuity of portions of the high-grade subdomains. Results confirm the nature of high-grade mineralization in these areas, as well as overall shallower dipping zones than was previously interpreted.
Due to the complex nature of mineralization, a total of 11 mineralization models were generated following non-linear-trending structures. Mineral resources were estimated using locally varying anisotropies respecting local trends. Oxide densities were revised to reflect the gradational density difference associated with increasing depth from surface. Fresh rock densities were revised and averaged for mineralized and non-mineralized areas.
A comparison of the reserve model against actual mined in 2014 indicates 2-per-cent-higher tonnes, 5-per-cent-higher grade and 8-per-cent-higher ounces mined. This can be attributed to a shallower higher-grade mineralization trend in oxides in areas delineated with wider-spaced drilling.
Over all, 72,000 ounces were added at Masato during 2014, including 16,000 ounces in the high-grade test blocks drilled. Due to the complexity of the high-grade zones revealed from the 10-metre test block areas, extension of high-grade intercepts will need to be continually updated as mining advances with 10-metre spacing from the RC grade control process. As a result, the high grade added in the updated model was in the near-surface areas in phase 1, where 10-metre-spacing drilling occurred.
MINERALS RESOURCES SUMMARY
Measured and
Measured Indicated indicated
Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au
(Mt) (g/t) (Moz) (Mt) (g/t) (Moz) (Mt) (g/t) (Moz)
Sabodala 23.73 1.21 0.92 19.55 1.23 0.77 43.28 1.22 1.70
Gora 0.49 5.27 0.08 1.84 4.93 0.29 2.32 5.00 0.37
Niakafiri 0.30 1.74 0.02 10.50 1.10 0.37 10.70 1.12 0.39
ML other
Subtotal Sabodala 24.52 1.30 1.02 31.89 1.40 1.43 56.41 1.36 2.46
Masato 1.55 0.96 0.05 50.26 1.04 1.67 51.81 1.03 1.72
Golouma 12.04 2.69 1.04 12.04 2.69 1.04
Kerekounda 2.20 3.77 0.27 2.20 3.77 0.27
Somigol other 18.72 0.93 0.56 18.72 0.93 0.56
Subtotal Somigol 1.55 0.96 0.05 83.22 1.33 3.54 84.77 1.32 3.59
Total 26.07 1.28 1.07 115.11 1.35 4.97 141.18 1.33 6.05
Inferred
Area Tonnes Au Au
(Mt) (g/t) (Moz)
Sabodala 18.42 0.93 0.55
Gora 0.21 3.38 0.02
Niakafiri 7.20 0.88 0.21
ML other 10.60 0.97 0.33
Subtotal Sabodala 36.43 0.94 1.11
Masato 19.18 1.15 0.71
Golouma 2.46 2.01 0.16
Kerekounda 0.34 4.21 0.05
Somigol other 12.87 0.84 0.35
Subtotal Somigol 34.86 1.13 1.26
Total 71.29 1.03 2.37
For clarity, the resource estimates disclosed herein with respect to Niakafiri, Gora and ML other (which includes Niakafiri, Niakafiri West, Soukhoto and Diadiako) were prepared and first disclosed under the Joint Ore Reserves Committee code 2004. See competent person statements for further details. It has not been updated since, to comply with JORC code 2012 on the basis that the information has not materially changed since it was last reported. All material assumptions and technical limits previously disclosed continue to be applicable and have not materially changed. Refer to the Teranga Gold Australian Securities Exchange quarterly Dec. 31, 2013, report filed on Jan. 30, 2014.
MINERAL RESERVES SUMMARY
Proven Probable Proven and probable
Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au
(Mt) (g/t) (Moz) (Mt) (g/t) (Moz) (Mt) (g/t) (Moz)
Sabodala 1.98 1.52 0.10 2.48 1.48 0.12 4.45 1.50 0.21
Gora 0.48 4.66 0.07 1.35 4.79 0.21 1.83 4.76 0.28
Niakafiri 0.23 1.69 0.01 7.58 1.12 0.27 7.81 1.14 0.29
Stockpiles 11.30 0.82 0.30 11.30 0.82 0.30
Subtotal Sabodala 13.99 1.07 0.48 11.41 1.63 0.60 25.40 1.32 1.09
Masato 26.93 1.13 0.98 26.93 1.13 0.98
Golouma 6.47 2.24 0.46 6.47 2.24 0.46
Kerekounda 0.88 3.26 0.09 0.88 3.26 0.09
Subtotal Somigol 34.28 1.39 1.53 34.28 1.39 1.53
Total 13.99 1.07 0.48 45.69 1.45 2.12 59.68 1.36 2.62
For clarity, the reserve estimates disclosed herein with respect to Niakafiri and Gora were prepared and first disclosed under the JORC code 2004. See competent person statements for further details. It has not been updated since, to comply with JORC code 2012 on the basis that the information has not materially changed since it was last reported. All material assumptions and technical limits previously disclosed continue to be applicable and have not materially changed. Refer to Teranga Gold ASX quarterly Dec. 31, 2013, report filed on Jan. 30, 2014.
Masato development and OJVG integration
Development of the Masato deposit is complete, and mining commenced during the third quarter of 2014. First ore delivery was completed in third quarter 2014, with a gradual ramping up of production rates throughout fourth quarter 2014. The heavily oxidized upper ore zones did not create significant material-handling issues in the plant, and the total blend of oxide with fresh Sabodala ore was increased throughout fourth quarter 2014. The gold recovery from Masato met expectations, demonstrated by the metallurgical accounting for the year, as well as results from an individual bulk test in the plant. The softer oxidized ore from Masato provided for an increase in mill throughput and lower overall plant unit operating costs.
Base-case life of mine
During the first quarter 2014, the company filed a National Instrument (standards of disclosures for mineral projects) technical report, which included an integrated life-of-mine plan for the combined operations of Sabodala and the OJVG. The integrated LOM plan had been designed to maximize free cash flow in the prevailing gold price environment. The sequence of the pits can be optimized, as well as the sequencing of phases within the pits, based not only on grade, but also on strip ratio, ore hardness and the capital required to maximize free cash flows in different gold price environments. As a result, the integrated LOM annual production profile represented an optimized cash flow for 2014 and a balance of gold production and cash flow generated in the subsequent five years. Based on the current reserve base of $1,200 per ounce gold, the company has the flexibility to reduce material movement and capital costs, which flexibility reduces production by about 5 per cent, but the company expects to generate free cash flow over the period 2015 to 2017. At the same time, as gold prices increase, the company has the ability to increase material movement and gold production. One of the alternatives available to the company, should materially lower gold prices arise, is to supplement feed to the mill with low-grade ore stockpiles on hand, thus significantly reducing or eliminating material movement costs.
With expectations for additional reserves based on drilling in Niakafiri, Masato, Golouma, Kerekounda and further discoveries on the land acquired from the OJVG, further mine plan optimization work will continue. As a result, the integrated LOM production schedule represents a base-case scenario with flexibility to improve cash flows in subsequent years.
Mill enhancements
A study to quantify and optimize the relationship between an increase in crusher availability to the SAG and ball mill system, as well as other design enhancements within the crushing and grinding system, was completed during the third quarter 2014.
Improvements to the SAG mill as part of sustaining capital include adjustments made to mill-liners, along with installation of a discharge head and trommel screen, to improve throughput. Increased throughput in the ball mills will result from new gear boxes which will increase power to the ball mills thereby increasing throughput.
The largest capital component of the mill upgrade will consist of adding a second primary jaw crusher to operate in parallel with the existing unit. This will: (i) increase availability to the live storage for the mill circuit, and (ii) provide the ability to reduce the top-size primary crusher feed. Basic engineering was initiated in the fourth quarter of 2014 to finalize design, layout, material quantities, procurement packages and an execution plan for construction.
The parallel crusher construction is expected to be operational over a span of approximately 18 months, with continual improvement realized earlier on from the sustaining capital initiatives. The company has budgeted approximately $6.0-million in 2015; however, detailed engineering is continuing to determine the final cost estimate. A decision to proceed to construction will depend on the prevailing gold price environment, the company's available cash flow and heap leach results. Simulations have demonstrated that production potential exists beyond 480 tonnes per operating hour with these new configurations once commissioning has been completed after installation.
Heap leach project
The LOM plan shows a significant amount of both oxide and sulphide low-grade reserves that are mined during the operating period, but not processed until the end of the mine life. There also exists significant potential along an 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, was evaluated during 2014. Phase 1 of the testwork (various stages of the soft and hard oxidized transition zones) has been completed. Based on positive results of this testwork, phase 2 (analysis of sulphide ore on the ROM stockpile) has been initiated.
The continuing testwork is being completed by Klappes, Cassidy and Associates at its facilities in Reno, Nev., which is experienced in testing and designing heap leach facilities throughout the world, including West Africa.
Key milestones for the project are as follows:
- Complete phase 1 testwork, economic analysis and initiate engineering
design to prefeasibility study level -- completed in fourth quarter
of 2014;
- Complete additional follow-up optimization testwork and initiate phase
2 testwork on the run-of-mine stockpiles -- continuing through to first half of
2015;
- Initiate design concepts and proceed with prefeasibility-study-level engineering design
study -- initiated in first quarter of 2015;
- Initiate advanced-level engineering design and initiate targeted resource
drilling and environmental studies to support an environmental and
social impact assessment submission -- second half of 2015.
The company is encouraged by the phase 1 test results. Key variables (recovery rates, agglomeration and cyanide consumption of the oxide ore zones) are in line with the company's initial expectations.
The hard transition oxide ore (representing approximately 40 per cent) is being tested at a top size of 12.5-millimetre crush with eight kilograms per tonne of cement addition that passed percolation tests representing a lift height to 16 metres. Preliminary results from the column leach tests indicate an average recovery of approximately 75 to 80 per cent. The optimal cyanide consumption versus maximum leach will be determined in the PFS and is expected to be in the range of 0.5- to 0.7-kilogram-per-tonne cyanide consumption after approximately 40 to 70 days of leach time.
Additional testwork is continuing for the saprolite ore (representing approximately 10 per cent) and for several bulk samples representing approximately 11 million tonnes of low-grade ROM stockpile.
The company is targeting production from heap leach, commencing in 2017, with the quantities and scale of operation to be defined upon the completion of phase 2 and completion of drilling of potential low-grade heap leach material on the combined mine licences. At this point, the company anticipates that heap leach could account for an incremental 10 to 20 per cent of annual production once fully operational.
Gora development
The high-grade Gora deposit will be operated as a satellite deposit to the Sabodala mine, requiring limited local infrastructure and development. Ore will be hauled to the Sabodala processing plant by a dedicated fleet of trucks and processed on a priority basis, displacing lower-grade feed as required.
The environmental approval for the Gora project, the final phase of the permitting process, has now received validation by both the technical and public enquiry committees charged with its review. The final step in the process is a public hearing to inform local stakeholders of this prevalidated project. The public hearing is currently scheduled for early February. The company expects to receive the environmental certificate for the Gora project from the Ministry of Environment in mid-February.
Planning and engineering for the access road are continuing with initial centre-line construction expected to commence in early February. Due to excess equipment available from the lower-material movement rates, mine operations will initiate construction with a complement of contractors required to complete the road during the second quarter of 2015. Infrastructure to support mine operations, a small water retention structure and pit preparations are expected to commence during the second quarter 2015, with ore to be stockpiled and delivered to the plant by a contractor in the fourth quarter 2015.
Sabodala and OJVG mine licence reserve development
The Sabodala combined mine licence covers 246 square kilometres. In addition to the mine-related infrastructure, it contains the Sabodala, Masato, Niakafiri, Niakafiri West, Soukhoto and Dinkokhono deposits on the former Sabodala 33-square-kilometre licence area, and the Masato, Golouma and Kerekounda deposits on the OJVG mine licence area of 213 square kilometres. As the company has integrated the OJVG geological database into a combined LOM plan, a number of areas has been revealed as potential sources for reserve additions within the mining lease. These targets have been selected, based on potential for discovery and inclusion into open-pit reserves.
In total, the combined mine licence includes 5.7 million ounces of measured and indicated resources and a further 2.35 million ounces of inferred resources. A significant multiyear reserve development program is under way to add high-grade mill feed and low-grade heap leach feed to the open-pit reserve base, which should allow the company to further increase production toward its phase 1 organic growth target of 250,000 to 350,000 ounces of annual production. In addition, exploration programs are under way on the combined mine licence to make new discoveries that may further enhance both the phase 1 and phase 2 organic growth targets.
Niakafiri
In 2013, further surface mapping was completed at Niakafiri in conjunction with the 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 2015, following discussions with the Sabodala village.
In addition to the potential expansion of hard ore reserves at Niakafiri, the company is exploring for potential softer ore that may be conducive to heap leach, with emphasis on the mineralized trend to the north and south of the current reserves at Niakafiri.
Masato
An advanced exploration program began at Masato during the second quarter of 2014 and continued into the third quarter 2014 to inter alia test the continuity of portions of the high-grade subdomains, which were removed from the Masato reserve base after the acquisition of OJVG in 2014.
The overall program consisted of drilling and trenching to confirm interpretation of domains and high-grade subdomains, infill gaps and upgrading inferred resources, determining optimal RC grade control drill spacing, and obtaining additional geotechnical data for pit slope analysis. Over all, the program confirms the company's interpretation of the resource model and provides additional confidence in the nature of the high-grade mineralization within the deposit.
Surface trenching and RC drilling revealed additional ore zones not modelled in the supergene-enriched laterite ore near surface during mining of the uppermost benches in the third quarter 2014. RC drilling in advance of mining in 10-metre spacing of the ore zones will be continuing as part of a comprehensive grade control program for mine operations.
All drill hole assay data for the 2014 Masato exploration program, including drill hole locations and a location map, are available on the company's website under exploration.
Golouma northwest extension
Infill drilling was undertaken for potential conversion of inferred resources outside of the existing pit limits to the northwest of the current Golouma orebody to evaluate the mineralization potential of structural features along strike to the existing reserves. By the end of the fourth quarter of 2014, 26 diamond drill holes, totalling 3,100 metres, were completed. Encouraging gold values were reported from several holes. The presence of two gold-mineralized shear structures (north-south shear and northwest shear) within metavolcanic units located to the north and northwest of the existing reserves has been confirmed, with continued mineralization to the north, where these features intersect. An updated resource model and subsequent reserves evaluation will be completed based on the drilling completed in the fourth quarter of 2014. Additional drilling is continuing to test mineralization potential to the north and infill drilling along the northwest shear.
Masato northeast
Detailed mapping and trenching (4,300 metres) were completed on the Masato northeast prospect, which is situated one kilometre northeast along strike of the Masato deposit. The prospect overlies a sequence of mafic volcanics, within which there is a 2.5-kilometre-long structural splay off the main Masato structural trend. Trenching has defined a north-northeast-trending shear zone with distinctive quartz-carbonate-sericite alteration features. Assay results received to date indicate that elevated gold values are developed along the length of the shear structure. A 10-hole DDH drilling program is continuing to test the gold-mineralized zones at depth in sections of the shear. Additional drilling in addition to this program is expected to continue through the first half of 2015, with potential for a yearlong campaign, pending initial results.
Kerekounda
An 11-hole, 1,200-metre DDH drilling program was completed in the fourth quarter 2014, with the aim of determining the extent of mineralization farther along strike of the existing reserves to te south of the existing reserves pit. Assay results are awaited, and pending results, an updated resource model with subsequent reserves evaluation will be completed in the first half of 2015.
Niakafiri southeast and Maki Medina
Both RC and DDH drilling is planned for potential conversion of inferred resources, geotechnical holes for pit wall determination and exploratory holes to the north toward the Niakafiri deposit to evaluate extension along strike. Additional drilling to determine near-surface oxide resources will also be evaluated. Due to the positive results for the heap leach tests, work in these areas is expected to commence in the first quarter 2015, but may be deferred later into 2015 to coincide with drilling near Sabodala village on the Niakafiri reserves.
Regional exploration
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 four years, with the initiation of a regional exploration program on this significant land package, a tremendous amount of exploration data has been systematically collected and interpreted to implement methodical and cost-effective follow-up programs. Targets are in various stages of advancement and are prioritized for follow-up work and drilling. Early geophysical and geochemical analysis of these areas has led to the demarcation of at least 50 anomalies, targets and prospects, and the company expects that several of these areas will ultimately be developed into minable deposits. The company has identified some key targets that, though early stage, display significant potential. However, due to the sheer size of the land position, the process of advancing an anomaly through to a minable deposit takes time, using a disciplined screening process to maximize the potential for success.
Ninienko
An extensive mapping and trenching program covering 1,500 metres, which program was conducted during the second and third quarters of 2014 at the Ninienko prospect, is continuing. This work outlined a 500-plus-metre-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.
An isopach plan of the mineralized quartz vein and felsic breccia systems is in progress, and will be used to develop a plan for DDH and a possible RC drill program. Due to the limitation of surface trenching and mapping used to develop the flat-lying mineralized zone at surface, additional trenching and mapping will also be undertaken in prospective zones near to the area to expand on the currently defined zone and to further develop an understanding of the source of mineralization zones for potential drill targets at depth.
A detailed geochemical soil sampling program commenced in the fourth quarter of 2014 to follow up and test coincident gold-molybdenum-copper and potassium anomalies identified by an earlier regional termite mound-sampling program. The sampling program has led to the discovery of two separate shear zones both following the north-northeast regional-scale structural trend, which is host to other gold deposits in the region. The shear zones are characterized by quartz-carbonate alteration zones 10 to 20 metres in width with quartz veining and gossan development. These zones and other gold soil anomalies will be tested by a trenching program in 2015. A DDH program will follow later in 2015.
Soreto
Following up on a small five-hole DDH program at the Soreto prospect in 2013, a 15-hole DDH program for 2014 was primarily completed during the fourth quarter of 2014, with the rest during early 2015. These were located along two fence lines placed 150 metres on either side of the 2013 fence that intersected reasonable gold values. At least three continuous shear zones were intercepted along strike. These featured west-dipping (25 to 35 degrees) altered shear zones with felsic dike and 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 and, when projected to surface, align with the surface workings from artisanal mining.
Further infill drilling (13 DDHs) was undertaken in the fourth quarter 2014 to further extend these mineralized shear zones along strike and infill drill to 50-metre spacing between the fence lines. The company is awaiting assay results from the infill drilling program.
Gora northeast extension and Zone ABC
Trenching and mapping programs are being planned for the first quarter of 2015 to investigate potential gold-mineralized extensions of the Gora gold deposit into the Zone ABC prospect, which has significant gold soil anomalies coincident with regional structural trends.
KD prospect
Mapping and outcrop sampling programs were undertaken on KD during the fourth quarter 2014. The programs are investigating and following gold-in-soil anomalies identified in regional termite mound-sampling surveys. The anomalies coincide with northeast- and northwest-trending regional-scale structures. Rock chip sampling of outcrop within a northwest-trending shear zone in metasediments yielded a number of elevated gold values, including 40 grams per tonne and 83 gpt gold. Trenching programs to follow up on these anomalies have been planned for the first quarter 2015.
KC prospect
Approximately 3,200 metres of trenching 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 gpt over 0.4 metres and 6.27 gpt over 0.6 metre. The quartz vein and breccia zone yielded elevated gold values in the range of 1.95 gpt over 0.3-metre true width and 1.41 gpt 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 first quarter 2015 to evaluate a large soil anomaly (peak values of 2.64 gpt and 2.38 gpt) located 800 metres to the west of working, which may account for the elevated gold anomalies identified in overburden in the trenches. A limited trenching program to test a coincident induced polarization resistivity and chargeability high in the eastern portion of the prospect will also be undertaken in the first quarter of 2015.
The company expects to issue an exploration update in February, 2015, reviewing the most recent results of its exploration activities.
Renewal of Heremakono exploration permit
The Heremakono exploration permit is host to a series of exploration targets, most notably Ninienko, Soreto and Soreto North. This permit was originally awarded in October of 2005 and, absent an extraordinary request for an extension, would have expired in October, 2014. A lack of safe and secure access to certain exploration permits was an issue raised with the government of Senegal, and the state agreed to grant extraordinary extensions upon the expiry of its customary nine-year terms to address the company's concerns. During the fourth quarter 2014, the renewal of this significant exploration permit was granted, extending its term to Oct. 25, 2016.
Competent persons statement
The technical information contained in this document relating to the mineral reserve estimates for Sabodala, the ore stockpiles, Masato, Golouma and Kerekounda is based on, and fairly represents, information compiled by William Paul Chawrun, PEng, who is a member of the Professional Engineers Ontario, which is currently included as a recognized overseas professional organization in a list promulgated by the Australian Securities Exchange 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 is 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, and 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 National Instrument 43-101 (standards of disclosure for mineral projects). Ms. Martin has reviewed and accepts responsibility for the mineral reserve estimates for Gora and Niakafiri disclosed in this document and has consented to the inclusion of the matters based on her information in the form and context in which it appears in this report.
The technical information contained in this report relating to mineral resource estimates for Niakafiri, Gora, Niakafiri West, Soukhoto and Diadiako is based on, and fairly represents, information compiled by Patti 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 National Instrument 43-101. Ms. Nakai-Lajoie has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which she is undertaking to qualify as a competent person as defined in the 2004 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Ms. Nakai-Lajoie is a qualified person under National Instrument 43-101 (standards of disclosure for mineral projects). Ms. Nakai-Lajoie has consented to the inclusion in this report of the matters based on her compiled information in the form and context in which it appears in this report.
The technical information contained in this report relating to mineral resource estimates for Sabodala, Masato, Golouma, Kerekounda and Somigol other is based on, and fairly represents, information compiled by Ms. 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 National Instrument 43-101. Ms. Nakai-Lajoie has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which she is undertaking to qualify as a competent person as defined in the 2012 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Ms. Nakai-Lajoie is a qualified person under National Instrument 43-101 (standards of disclosure for mineral projects). Ms. Nakai-Lajoie has consented to the inclusion in this report of the matters based on her compiled information in the form and context in which it appears in this report.
Teranga's exploration programs are being managed by Peter Mann, FAusIMM. Mr. Mann is a full-time employee of Teranga and is not independent within the meaning of National Instrument 43-101. Mr. Mann has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which he is undertaking to qualify as a competent person as defined in the 2012 edition of the Australasian code for reporting of exploration results, mineral resources and ore reserves. Mr. Mann is a qualified person under National Instrument 43-101 (standards of disclosure for mineral projects). The technical information contained in this news release relating to exploration results is based on, and fairly represents, information compiled by Mr. Mann. Mr. Mann has verified and approved the data disclosed in this release, including the sampling, analytical and test data underlying the information. The RC samples are prepared at site and assayed in the SGS laboratory located at the site. Analysis for diamond drilling is sent for fire assay analysis at ALS Johannesburg, South Africa. Mr. Mann has consented to the inclusion in this news release of the matters based on his compiled information in the form and context in which it appears herein.
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.
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