Teranga Gold Corporation

TSX : TGZ
ASX : TGZ


Teranga Gold Corporation

February 20, 2014 18:55 ET

Teranga Gold Corporation: December Quarter and 2013 Year End Report

TORONTO, ONTARIO--(Marketwired - Feb. 20, 2014) - Teranga Gold Corporation (TSX:TGZ)(ASX:TGZ)

For a full explanation of Financial, Operating, Exploration and Development results please see the Audited Consolidated Financial Statements and Management's Discussion & Analysis for 2013 at www.terangagold.com.

  • Loss attributable to shareholders of $4.2 million ($0.01 loss per share) in fourth quarter 2013 compared to a profit of $54.2 million ($0.22 per share) resulting from transaction costs related to the acquisition of the Oromin Joint Venture Group Ltd. (OJVG) and lower gross profit

  • Profit attributable to shareholders of $47.5 million ($0.18 per share) in 2013 compared to a profit of $92.6 million ($0.38 per share) in 2012

  • Subsequent to year end, completed acquisition of remainder of interest in neighbouring property - OJVG - by way of stream transaction with Franco-Nevada to fund the completion of the acquisition and to retire $30 million of $60 million bank debt facility

  • Proven and Probable open pit Reserves on a combined basis with OJVG increased by 120 percent to 2.8 million ounces, Measured and Indicated Resources increased by 123 percent to 6.2 million ounces, and Inferred Resources increased by 42 percent to 2.6 million ounces(1)

  • Significant potential exists to add to gold inventory on both the Mine Licenses, as well as, large Regional Land Package - Company has ~70Km of strike length on an emerging gold belt

  • Combined mine plan expected to balance gold production and cash flow generation with a base case average annual gold production of about 250,000 ounces at all-in sustaining costs of about $900 per ounce between 2014 and 2019, based on existing proven and probable reserves only

  • Combined mine plan is "base case" and does not include potential from heap leaching; potential from infill drilling to bring back some reserve ounces that were excluded from the recently acquired OJVG; or the potential for additional Measured and Indicated resource conversion to Proven and Probable mineral reserves. This work will be a priority for 2014.

  • Gold production for 2014 is expected in the range of 220,000 to 240,000 ounces(2) at total cash costs of $650 to $700 per ounce and all-in sustaining costs of $800 to $875 per ounce

"We emerged from 2013 stronger than ever, executing operationally and announcing a transformational acquisition of our neighbor. The life of mine plan we have prepared is a base case that we are well positioned to build on, and I have no doubt that our best years lay ahead," said Alan Hill, Executive Chairman.

DECEMBER QUARTER FINANCIAL HIGHLIGHTS

  • Gold revenue for the three months ended December 31, 2013 was $58.3 million compared to gold revenue of $123.0 million for the same prior year period. The decrease in gold revenue for the fourth quarter 2013 was driven by lower gold sales from lower production and lower spot gold prices.

  • Consolidated loss for the three months ended December 31, 2013 was $4.2 million ($0.01 loss per share), compared to profit of $54.2 million ($0.22 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 higher transaction costs related to the acquisitions of Oromin and the remainder of the OJVG during the fourth quarter of 2013 and lower gross profit.

  • Operating cash flow for the three months ended December 31, 2013 provided cash of $13.1 million compared to $59.7 million cash provided in the prior year. The decrease in operating cash flow compared to the prior year quarter was mainly due to a lower gross profit and a decrease in net working capital inflows during the fourth quarter of 2013.

  • Capital expenditures were $3.7 million for the three months ended December 31, 2013, compared to $28.5 million in the same prior year period. The decrease in capital expenditures over the prior year quarter was mainly due to lower sustaining and development expenditures and lower capitalized reserve development expenditures in the fourth quarter of 2013.

  • During the fourth quarter of 2013, 46,561 ounces were sold at an average gold price of $1,249 per ounce compared to 71,604 ounces sold at an average price of $1,296 per ounce in the same prior year period, including 33,606 ounces being delivered into gold hedge contracts at an average price of $833 per ounce.

DECEMBER QUARTER OPERATIONAL HIGHLIGHTS

  • Gold production for the three months ended December 31, 2013 was on plan at 52,368 ounces of gold and 27 percent lower than the same prior year period. Lower production was due to lower processed grades, partly offset by higher mill throughput.

  • Total cash costs for the three months ended December 31, 2013 totalled $711 per ounce sold, 34 percent higher than the same prior year period. Higher total cash costs per ounce were due to an increase in material mined and milled during the quarter compared to the year earlier period. Total cash costs have been adjusted for the adoption of IFRIC 20 for capitalization of a portion of production phase stripping costs.

  • All-in sustaining costs for the three months ended December 31, 2013 were $850 per ounce sold compared to $1,004 per ounce sold in the same prior year period. The decrease compared to the prior year was due to lower capital expenditures and administration expenses in the current year period, partly offset by higher total cash costs.

  • Total tonnes mined for the three months ended December 31, 2013 were 24 percent higher compared to the same prior year period. The increase in total tonnes mined was mainly due to improved productivities and shorter ore and waste haul distances.

  • During the quarter, mining activities were focused on the upper benches of phase 3 of the Sabodala pit, while in the same prior year period mining took place in a high grade ore zone on lower benches of phase 2.

  • Ore tonnes mined for the three months ended December 31, 2013 were 2 percent lower compared to the same prior year period and ore grades mined were lower than the same prior year period, in line with plan. This resulted in 23 percent fewer ounces mined for the three months ended December 31, 2013 as mining activities were concentrated on waste stripping activities in phase 3 of the mine plan. Conversely, mining activities during the prior year period took place in lower benches of phase 2 and included a substantial amount of high-grade ore.

  • Unit mining costs for the fourth quarter of 2013 were $2.65 per tonne, a decrease of 15 percent compared to the same prior year period. Total mining costs were 5 percent higher than the same prior year period due to higher material movement.

  • Ore tonnes milled for the three months ended December 31, 2013 were 19 percent higher than the same prior year period due to improvements made to reduce the frequency and duration of unplanned downtime and an increase in throughput in the crushing circuit to match mill capacity.

  • Processed grade for the three months ended December 31, 2013 was 38 percent lower than the same prior year period, as planned. Mill feed during the fourth quarter 2013 was sourced from phase 3 of the Sabodala pit at grades closer to reserve grade. While in the year earlier period, mill feed was sourced from a high grade zone on the lower benches of phase 2 of the Sabodala pit.

  • Unit processing costs for the three month period ended December 31, 2013 were 10 percent lower than the same prior year period at $17.96 per tonne, mainly due to an increase in throughput. Total processing costs for the three months ended December 31, 2013 were 7 percent higher than the same prior year period mainly due to an increase in material processed.

FULL YEAR FINANCIAL HIGHLIGHTS

  • Gold revenue for the twelve months ended December 31, 2013 was $297.9 million compared to gold revenue of $350.5 million for the same prior year period. The decrease in gold revenue was due to lower spot gold prices in the current year.

  • Consolidated profit for the twelve months ended December 31, 2013 was $47.5 million ($0.18 per share), compared to profit of $92.6 million ($0.38 per share) in the same prior year period. The decrease in profit and earnings per share were primarily due to lower gross profit and higher other expenses related to transaction costs associated with the acquisitions of Oromin and the remainder of the OJVG.

  • Operating cash flow for the year ended December 31, 2013 provided cash of $74.3 million compared to $105.0 million cash provided in the prior year. The decrease in operating cash flow was mainly due lower revenue and gross profit in the current year. In the prior year period, the settlement of a large gold shipment made at the end of 2011 was received at the beginning of 2012.

  • Capital expenditures were $69.1 million for the twelve months ended December 31, 2013, compared to $115.8 million in the same prior year period. The decrease was due to lower development capital as the mill expansion was completed in 2012 and lower capitalized reserve development expenditures in the current year, partially offset by higher capitalized deferred stripping costs.

  • Net cash used by financing activities for the year ended December 31, 2013 was $10.5 million compared to net cash provided by financing activities was $39.7 million for the prior year. 2013 includes proceeds of $12.8 million received from the finance lease facility, repayment of borrowings of $12.3 million and interest paid on borrowings of $7.1 million. 2012 includes proceeds from the loan facility of $58.0 million, net of deferred financing costs, and proceeds from the finance lease facility of $2.9 million, partially offset by repayments of the finance lease facility of $16.8 million and interest paid on borrowings of $4.1 million.

  • Gold sold for the year was 208,406 ounces at an average gold price of $1,246 per ounce, including 45,289 ounces being delivered into gold hedge contracts at an average price of $806 per ounce. This compares to 207,814 ounces sold at an average price of $1,422 per ounce in the same prior year period, including 62,606 ounces being delivered into gold hedge contracts at an average price of $832 per ounce.

"Our recent acquisition more than doubles our reserve and resource base and mine life. While we are already one of the lowest all-in cost producers, this coupled with the operational flexibility to mine from several pits allows us to focus on maximizing free cash flow. We have a tremendous land package on an emerging gold belt and we are now well positioned to add profitable ounces in the short, medium and long term, all in Senegal", said Richard Young, President and CEO

FULL YEAR OPERATING HIGHLIGHTS

  • Gold production for the year was at the higher end of guidance of 190,000 - 210,000 ounces, at 207,204 ounces, 3 percent lower than the same prior year period, mainly due to lower processed grades, partly offset by higher mill throughput.

  • Total cash costs for the year were below guidance of $650 - $700 per ounce, at $641 per ounce, compared to $556 per ounce in the same prior year period. The increase in total cash costs was mainly due to an increase in material processed and higher royalty costs in 2013 compared to 2012. Total cash costs have been adjusted for the adoption of IFRIC 20 for capitalization of a portion of production phase stripping costs.

  • All-in sustaining costs for 2013 were at the low end of guidance, of $1,000 - $1,100 per ounce, at $1,033 per ounce, 14 percent lower than the same prior year period. Lower all-in sustaining costs were mainly due to lower capital expenditures, as result of the completion of the mill expansion in 2012, and a reduction in reserve development expenditures in 2013, partly offset by higher total cash costs and capitalized deferred stripping.

  • Total tonnes mined for the twelve months ended December 31, 2013 were 20 percent higher compared to the same prior year period. The increase in total tonnes mined was mainly due to improved haul truck productivities as a result of shorter ore and waste haul distances, as well as, improved loading efficiencies.

  • Unit mining costs for the twelve months ended December 31, 2013 were 4 percent lower than the same prior year period mainly due to improved truck and loading productivities.

  • Total mining costs were 15 percent higher than the same prior year period due to increased material movement.

  • Ore tonnes milled for the year ended December 31, 2013 were 29 percent higher than the same prior year period due to improvements made to reduce the frequency and duration of unplanned downtime and an increase in throughput in the crushing circuit to match mill capacity. These improvements were primarily accomplished during two planned major shutdowns in January and May with a third taking place in October. As a result of the work completed, mill throughput achieved annualized design capacity of 3.5 million tonnes of primarily hard ore in the second half of 2013.

  • Processed grade for the year ended December 31, 2013 was 27 percent lower than the same prior year period, as planned. Mill feed during the second quarter of 2013 onwards was sourced from a combination of lower grade stockpile material and ore from phase 3 of the Sabodala pit at grades closer to reserve grade. In the year earlier period, leading into the first quarter 2013, mill feed was sourced from a high grade zone on the lower benches of phase 2 of the Sabodala pit.

  • Unit processing costs for the year ended December 31, 2013 were in line with the prior year period at $20.15 per tonne, due to an increase in throughput partly offset by higher processing costs.

  • Total processing costs for the year ended December 31, 2013 were 28 percent higher than the same prior year period, mainly due to higher overall throughput in the crushing circuit from mid-June onwards which resulted in an increase in consumption of heavy fuel oil (HFO) and cyanide as a result of higher tonnes milled and higher maintenance costs associated with the planned January, May and October shutdowns. These increases were partly offset by lower consumption of grinding media due to better management of recycled product.

OUTLOOK 2014

Year ended December 31
2013 Actuals 2014 Guidance Range
Operating Results
Ore mined ('000t) 4,540 5,300 - 6,000
Waste mined - operating ('000t) 15,172 18,200 - 19,000
Waste mined - capitalized ('000t) 15,066 500 - 1,000
Total mined ('000t) 34,778 24,000 - 26,000
Grade mined (g/t) 1.62 1.60 - 1.70
Strip ratio (waste/ore) 6.7 3.25 - 3.50
Ore milled ('000t) 3,152 3,400 - 3,600
Head grade (g/t) 2.24 2.20 - 2.40
Recovery rate % 91.4 90.0 - 91.0
Gold produced1 (oz) 207,204 220,000 - 240,000
Total cash cost (incl. royalties)2,3 $/oz sold 641 650 - 700
All-in sustaining costs2,3 $/oz sold 1,033 800 - 875
Mining ($/t mined) 2.59 2.75 - 2.95
Milling ($/t milled) 20.15 18.00 - 19.00
G&A ($/t milled) 5.38 4.75 - 5.25
Gold sold to Franco-Nevada1 (oz) - 22,500
Exploration and evaluation expense (Regional Land Package) ($ millions) 5.4 4.0 - 6.0
Administration expenses and Social community costs (excluding depreciation) ($ millions) 13.6 15.0 - 16.0
Mine production costs ($ millions) 170.8 155.0 - 165.0
Capital expenditures
Mine site sustaining ($ millions) 9.9 7.0 - 8.0
Capitalized reserve development (Mine License) ($ millions) 3.5 4.0 - 6.0
Project development costs
Government payments ($ millions) 3.5 12.0 - 14.0
Development ($ millions) 0.5 3.0 - 5.0
Mobile equipment and other ($ millions) 8.4 -
Total project development costs ($ millions) 12.4 15.0 - 19.0
Capitalized deferred stripping2 ($ millions) 43.3 2.0 - 3.0
Total capital expenditures ($ millions) 69.1 28.0 - 33.0
1 22,500 ounces of production are to be sold to Franco Nevada at 20% of the spot gold price.
2 Total cash costs per ounce and all-in sustaining costs per ounce are non-IFRS financial measures and do not have a standard meaning under IFRS. Please refer to Non-IFRS Performance Measures at the end of this report.
3Total cash costs per ounce sold for 2012 were restated to comply with the Company's adoption of IFRIC 20 - Stripping Costs in the Production Phase of a Surface Mine, in line with the Company's accounting policies and industry standards.
4 All-in sustaining costs per ounce sold include total cash costs per ounce, administration expenses (excluding Corporate depreciation expense and social community costs not related to current operations), capitalized deferred stripping, capitalized reserve development and mine site sustaining capital expenditures (including project development costs) as defined by the World Gold Council.
Key assumptions: Gold spot price/ounce - US$1,250, Light fuel oil - US$1.15/litre, Heavy fuel oil - US$0.98/litre, US/Euro exchange rate - $1.325
Other important assumptions include: any political events are not expected to impact operations, including movement of people, supplies and gold shipments; grades and recoveries will remain consistent with the life-of-mine plan to achieve the forecast gold production; and no unplanned delays in or interruption of scheduled production.
  • The Company's 2014 operating budget has been designed to maximize free cash flow. Mining activity in 2014 is expected to focus on completing phase 3 of the Sabodala pit, as phase 4 of the Sabodala mine plan has been deferred to minimize material moved. Mining equipment freed up from the deferral of Sabodala phase 4 is anticipated to be used to begin mining activities at the Masato deposit in the fourth quarter of the year.

  • The higher processing rate in 2014 is a result of improvements made in the first half of 2013 to the crushing circuit and in line with throughput rates in the second half of 2013.

  • Total cash costs per ounce for 2014 are expected to be similar to 2013 while all-in sustaining costs per ounce are expected to be lower than 2013, mainly due to lower capital expenditures and deferred stripping costs.

  • Exploration and evaluation expenditures for 2014 are expected to total approximately $10 million for both the Mine License and Regional Land Package combined. The exploration program in 2014 will focus on the conversion of resources to reserves and extensions of existing deposits along strike on the Sabodala and OJVG mine licenses, as well as, the continuation of a systematic regional exploration program designed to identify satellite and standalone deposits.

  • Administrative and Corporate Social Responsibility expenses are expected to total $15 - $16 million, similar to 2013. Lower administrative costs at the corporate office are expected to be offset by higher social commitments related to the acquisition of the OJVG and additional staffing in the Dakar office. The 2014 plan has been designed to provide the necessary support for operations and development and includes corporate office costs, Dakar office costs and corporate responsibility costs, but excludes corporate depreciation, transaction costs and other non-recurring costs.

  • Capitalized expenditures, including sustaining mine site expenditures, project development expenditures, capitalized deferred stripping, reserve development expenditures and payments to the Government of Senegal are expected to total $28 - $33 million.

LIQUIDITY AND CAPITAL RESOURCES

  • During the first quarter of 2013, the Company entered into a new $50.0 million finance lease facility with Macquarie ("Equipment Facility"). The proceeds were put towards additional equipment for the Sabodala pit. During the fourth quarter of 2013, the Company cancelled the undrawn commitment from the Equipment Facility.

  • During the third quarter of 2013, the Company amended its existing $60.0 million loan facility agreement with Macquarie ("Loan Facility"). The amended agreement had extended the final repayment date of its existing loan facility agreement by one year to June 30, 2015.

  • Subsequent to year end, on January 15, 2014, the Company amended the Macquarie Loan Facility ("Loan Facility") and retired half of the balance of $30.0 million. The remaining balance of $30.0 million is scheduled to be repaid in three quarterly instalments of $5.0 million beginning on March 31, 2014. The final $15.0 million will be repaid on December 31, 2014. The amended Loan Facility agreement replaced the restricted cash requirement with a minimum liquidity threshold of $15.0 million and removes the Project Life Ratio financial covenant.

  • The Company's cash position at December 31, 2013 was $42.3 million, including bullion receivable and restricted cash of $20 million. At $1,250 per ounce gold, the Company expects to generate sufficient cash flow to retire the balance of the Loan Facility and the majority of the mobile equipment loan. However, the Company's cash position is highly dependent on the gold price. The Company is continually reviewing operating, development and exploration expenditures in order to ensure adequate liquidity and flexibility exists to support debt repayments. While our objective is to repay the outstanding balance of the Loan Facility in 2014, the Company may look to extend the repayment terms beyond 2014, should lower gold prices materialize or review other alternatives to ensure sufficient liquidity is maintained by the Company.

STRATEGY

Company performance in 2013

  • During 2013, the price of gold decreased 28 percent, its first annual decrease in 13 years. In light of this gold price weakness, Teranga quickly took steps in early 2013 to reduce discretionary spending while maintaining its production guidance. The Company's exploration team was consolidated into one exploration facility and the organizational design was revised for increased efficiencies. Additionally, the Company's technical team designed a new mine plan on a standalone basis, resulting in less material movement, lower reserves and production but higher free cash flows at current gold prices.

  • Despite the challenges faced, the Company was able to deliver on its plans and this included the following:

  • Met or exceeded production and cost guidance for the year;

  • Resolved the outstanding items to bring the expanded mill to design capacity;

  • Eliminated the inherited out of the money hedge contracts;

  • Established a long-term fiscal and investment agreement with the Senegalese government, which

    • Reinforced Teranga's long-term commitment to the country; and
    • Demonstrated Senegal's willingness to work with foreign investors in a fair and transparent manner; and

  • Completed the acquisition of the OJVG and prepared an initial integrated life of mine ("LOM") plan.

Strategy for 2014 and Beyond

  • The 2014 budget and integrated LOM plan for the combined operations have been designed to maximize free cash 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, this 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 2015-2018 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, this LOM production schedule represents a "base case" scenario with flexibility to improve gold production and/or cash flows in subsequent years.

  • With the OJVG acquisition now complete, the Company can clearly outline its short, medium and long-term objectives:

  • In the Short-term (2014-2015):

    i. Integrate OJVG and Sabodala operations;

    ii. Increase free cash flow through higher production and lower material movement, in part
    to retire the balance of the debt facility outstanding; and

    iii. Increase reserves through the conversion of Measured, Indicated and Inferred Resources.

  • In the Medium-term (2014-2016):

    i. Evaluate the heap leach processing option (permit and build if the returns meet Teranga's hurdle rate);

    ii. Continue to look for ways to improve mill throughput; and

    iii. Optimize mine planning and grade.

  • In the Long-term (2015 onward):

    i. Remain disciplined about investments in exploration with a commitment to a modest, multi-year exploration program; and

    ii. Look to make exploration discoveries on the regional exploration land package by continuing to systematically work through the many targets and prospects.

  • The Company expects to create value for shareholders by maximizing free cash flows in the short-term by integrating the OJVG allowing for annual production of approximately 250,000 ounces at lower quartile all-in sustaining costs of about $900 per ounce and a high conversion of EBITDA into free cash flow.

  • In the longer term, the Company expects to create shareholder value by leveraging the existing processing infrastructure, while adding profitable reserves and potentially expanding its processing capacity. All capital projects will be evaluated based on a disciplined capital allocation strategy based on robust hurdle rates and quick payback periods. The Company is focused only on gold and only in Senegal.

  • Once the Loan Facility has been extinguished and there is sufficient cash to execute on the business plan, the Company will look to returning capital to shareholders when appropriate.

ACQUISITION OF OROMIN

  • On August 6, 2013, the Company acquired 78,985,388 common shares of Oromin Explorations Limited ("Oromin"), representing approximately 57.5 percent of the Oromin shares that the Company did not already own. Together with the 18,699,500 Oromin shares owned by the Company and a further 2,091,013 shares obtained, this represented a total of 99,775,901 Oromin shares or approximately 72.6 percent of the outstanding Oromin shares.

  • Former shareholders of Oromin were entitled to receive 0.6 of a common share of Teranga for each Oromin share. Total consideration paid of $24.1 million consisted of the issuance of 48,645,840 Teranga common shares at a price of $0.48 per share for consideration of $23.5 million and the fair value of Oromin stock options replaced by 7,911,600 Teranga stock options for consideration of $0.6 million. Share issue costs totaled $0.2 million.

  • On October 4, 2013, the Company completed the acquisition of all of the issued and outstanding common shares of Oromin that it did not already own (Oromin being one of the three joint venture partners holding 43.5 percent of the OJVG), issuing 22,537,251 additional Teranga common shares at a price of $0.61 per share for consideration of $13.8 million.

  • In total, the Company issued 71,183,091 Teranga shares to acquire all of the Oromin shares for net consideration of $37.8 million, including the fair value of Oromin stock options replaced by 7,911,600 Teranga stock options. As a result, Teranga's total number of issued and outstanding shares increased to 316,801,091.

FRANCO-NEVADA GOLD STREAM AND ACQUISITION OF THE OJVG

  • On January 15, 2014, the Company completed a $135.0 million stream transaction with Franco-Nevada Corporation ("Franco-Nevada") to fund the acquisition of Bendon's interest in the OJVG for $105.0 million and retire half of the project finance facility with Macquarie of $30.0 million. As a result of the two transactions, Teranga is required to deliver to Franco-Nevada 22,500 ounces annually over the first six years followed by 6 percent of production from the Company's existing properties, including those of the OJVG, thereafter. Franco-Nevada's purchase price per ounce is set at 20 percent of the spot price of gold.

  • The Company also acquired Badr's 13 percent carried interest for $7.5 million and further contingent consideration based on higher realized gold prices and increases to OJVG reserves through 2020.

  • The acquisition of Bendon and Badr's interests in the OJVG increased Teranga's ownership to 100 percent and consolidates the Sabodala region, increasing the size of Teranga's interests in mine license from 33km2 to 246km2 and more than doubling the Company's reserve base.

  • Acquisition related costs of approximately $11.0 million for Oromin and the OJVG have been paid during the year ended December 31, 2013.

  • Following the acquisition of Bendon's interests in the OJVG subsequent to year-end, the legal claim filed by Bendon was dismissed.

RESERVES AND RESOURCES

  • Mineral Resources at December 31, 2013 are presented in Table 1. Total open pit Proven and Probable Mineral Reserves at December 31, 2013 are set forth in Table 2. 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 ("NI 43-101") regulations. The design for the open pit limits, related phasing and long term planning for the Sabodala open pit was carried out to maximize the economics under current market conditions by removing high cost (high strip) gold ounces in the Sabodala pit.

  • The Sabodala pit design is consistent with the Mineral Reserves reported for the third quarter 2013 results which are based on a $1,000 per ounce gold price pit shell for Phase 4. The cut off grades were established using an estimated gold price of $1,250 per ounce. Mining phases in the Sabodala pit have been determined similarly to the previous designs, where the mine sequencing is based on accessing the high grade Main Flat Extension ("MFE") through successive phases to balance waste stripping and optimize cash flows.

  • Dilution and ore recovery estimates for the Sabodala Mineral Reserves were based on a comparison of the resource model with actual production performance over a 24 month span using a 5 metre minimum mining width and 10 metre bench height.

  • The Niakafiri pit design remains unchanged from December 2012. The Gora pit design has been adjusted to reflect a pit shell at $1,200 per ounce and an updated dilution analysis.

  • The Masato, Golouma and Kerekounda pit designs have been based on a $1,250 per ounce pit shell. Geotechnical studies conducted previously by the OJVG were reviewed by independent consultants and were determined to be acceptable. Detailed dilution analyses were conducted on each of these deposits, ore cut-off grades were established using an estimated gold price of $1,250 per ounce.

  • As a result of the work we have conducted, overall reported open pit Mineral Reserves for the OJVG deposits have increased by approximately 90,000 ounces as compared to the last technical report issued by the OJVG in January 2013. An increase in open pit Mineral Reserves was identified at the Golouma's and Kerekounda deposits, which was partially offset by a decrease at Masato. Analyses of high grade zones within the Masato ore body continue to be evaluated. Due to the manner of the interpretation of structural controls defining these high grade zones, management has determined that further work and infill drilling is necessary to accurately define these trends within the mineralized envelopes. For purposes of this updated reserve estimate, the Company has applied a conservative interpretation method resulting in approximately 300,000 ounces of high grade mineralization being excluded from Masato Mineral Reserves.

  • The following Mineral Reserves and Mineral Resources tables at December 31, 2013 are inclusive of 100 percent of the OJVG Mineral Reserves and Mineral Resources. On January 15, 2014, the Company acquired the balance of the OJVG that it did not already own.
Table 1 Mineral Resources Summary as at December 31, 2013
Measured Indicated Measured and Indicated
Tonnes Grade Au Tonnes Grade Au Tonnes Grade Au
(Mt) (g/t) (Moz) (Mt) (g/t) (Moz) (Mt) (g/t) (Moz)
Sabodala 24.28 1.32 1.03 22.95 1.29 0.95 47.23 1.31 1.98
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 ML 25.07 1.40 1.13 35.29 1.42 1.61 60.25 1.42 2.74
Masato 43.93 1.11 1.57 43.93 1.11 1.57
Goluma 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 0.00 0.00 0.00 76.89 1.39 3.44 76.89 1.39 3.44
Total 25.07 1.40 1.13 112.18 1.40 5.05 137.14 1.40 6.18
Inferred Resources
Area Tonnes Au Au
(Mt) g/t Moz
Sabodala 17.88 0.94 0.54
Gora 0.21 3.38 0.02
Niakafiri 7.20 0.88 0.21
ML Other 10.60 0.97 0.33
Subtotal ML 35.89 0.95 1.11
Masato 25.59 1.13 0.93
Goluma 2.46 2.01 0.16
Kerekounda 0.34 4.21 0.05
Somigol Other 12.87 0.84 0.35
Subtotal Somigol 41.26 1.12 1.49
Total 77.16 1.04 2.59

Notes for Mineral Resources Estimate:

  1. CIM definitions were followed for Mineral Resources.
  2. Mineral Resources for Sabodala include Sutuba.
  3. Mineral Resource cut-off grades for Sabodala, Masato, Golouma, Kerekounda and Somigol Other are 0.2 g/t Au for oxide and 0.35 g/t Au for fresh.
  4. Mineral Resource cut-off grades for Niakafiri are 0.3 g/t Au for oxide and 0.5 g/t Au for fresh.
  5. Mineral Resource cut-off grade for Gora is 0.5 g/t Au for oxide and fresh.
  6. Mineral Resource cut-off grade for Niakafiri West and Soukhoto is 0.3 g/t Au for oxide and fresh.
  7. Mineral Resource cut-off grade for Diadiako is 0.2 g/t Au for oxide and fresh.
  8. Measured Resources include stockpiles which total 8.60 Mt at 0.86 g/t Au for 0.24 Mozs.
  9. High grade assays were capped at grades ranging from 10 g/t to 30 g/t Au at Sabodala, 20 g/t to 70 g/t Au at Gora, from 2 g/t to 30 g/t Au at Masato, from 5 g/t to 70 g/t for Golouma, from 11 g/t to 50 g/t at Kerekounda, and from 0.8 g/t to 110 g/t at Somigol Other.
  10. Inferred resources at Majiva have been removed, as the Makana permit has been allowed to lapse.
  11. The figures above are "Total" Mineral Resources and include Mineral Reserves.
  12. Sum of individual amounts may not equal due to rounding.

For clarity, the Resource estimates disclosed above with respect to Niakafiri, Gora and ML Other (which includes Niakafiri, Niakafiri West, Soukhoto and Diadiako) were prepared and first disclosed under the JORC Code 2004. 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. See Competent Person Statements.

Table 2 Mineral Reserves Summary as at December 31, 2013
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 3.45 1.64 0.18 5.53 1.58 0.28 8.98 1.60 0.46
Gora 0.50 4.58 0.07 1.39 4.80 0.21 1.89 4.74 0.29
Niakafiri 0.23 1.69 0.01 7.58 1.12 0.27 7.81 1.14 0.29
Stockpiles 8.60 0.86 0.24 8.60 0.86 0.24
Subtotal ML 12.78 1.23 0.51 14.50 1.65 0.77 27.28 1.45 1.27
Masato 25.24 1.21 0.98 25.24 1.21 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 0.00 0.00 0.00 32.59 1.47 1.54 32.59 1.47 1.54
Total 12.78 1.23 0.51 47.09 1.52 2.31 59.87 1.46 2.81

Notes for Reserves Estimate:

  1. CIM definitions were followed for Mineral Reserves.
  2. Mineral Reserve cut off grades for Sabodala are 0.40 g/t Au for oxide and 0.5 g/t Au for fresh based on a $1,250/oz gold price and metallurgical recoveries between 90 percent and 93 percent.
  3. Mineral Reserve cut off grades for Niakafiri are 0.35 g/t Au for oxide and 0.5 g/t Au for fresh based on a $1,350/oz gold price and metallurgical recoveries between 90 percent and 92 percent.
  4. Mineral Reserve cut off grade for Gora is 0.76 g/t Au for oxide and fresh based on $1,200/oz gold price and metallurgical recovery of 95 percent.
  5. Mineral Reserve cut off grade for Masato, Golouma, Kerekounda are 0.4 g/t Au for oxide and 0.5 g/t for fresh based on $1,250/oz gold price and metallurgical between 90 percent and 93 percent.
  6. Sum of individual amounts may not equal due to rounding.
  7. The Niakafiri deposit is adjacent to the Sabodala village and relocation of at least some portion of the village will be required which will necessitate a negotiated resettlement program with the affected community members.
  8. The Gora deposit is intended to be merged into the Sabodala mining license which the State of Senegal has agreed to in principal subject to completion and receipt of an approved environmental and social impact assessment which is ongoing.
  9. The SOMIGOL deposits lie adjacent to the Sabodala mining license and it is intended that these licenses be merged which the State of Senegal has agreed to in principal under the terms of its previously announced global investment agreement in May of 2013. Any additional specific permits are anticipated to be minor given both licenses are already fully approved including environmental and social impact assessments.
  10. There are no other known political, legal or environmental risks that could materially affect the potential development of the identified mineral resources or mineral reserves other than as already set out in the Company's Annual Information Form dated March 28, 2013 - see RISK FACTORS beginning on page 62.

For clarity, the Reserve estimates disclosed above with respect to Niakafiri and Gora were prepared and first disclosed under the JORC Code 2004. 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. See Competent Person Statements.

OROMIN TECHNICAL INTEGRATION

  • The acquisition of Oromin in August 2013 provided access to the OJVG technical data. Since then, management has been evaluating and integrating the geological and technical databases to develop updated resources and reserves to establish a combined LOM plan that will be supported by a NI 43-101 compliant technical report, targeted for March 2014.

  • The ongoing technical work for the OJVG integrated mine plan has included:

  • A comprehensive review of the Golouma, Masato and Kerekounda ore bodies including re-logging and re-assay of key drill intercepts, QA/QC checks and detailed interpretation to update these resource models;

  • Economic Lerchs-Grossman (LG) pit optimization and detailed pit designs to reflect the current gold price;

  • Preliminary Life of Mine (LOM) mine planning schedules for optimized cash flow analysis, detailed dilution analysis, pit designs, mine operating and capital estimates;

  • An updated tailings deposition and water balance model;

  • Ongoing analysis of the metallurgical test results for ore characterization studies of select areas within the Masato and Golouma ore bodies to increase understanding from Feasibility Study level and optimize feed and gold recovery to the Sabodala mill; and

  • Environmental and social impact reviews for a reduced footprint using the Sabodala operations.

  • In addition to development of an integrated LOM, the OJVG technical team was engaged with the Teranga technical teams both at site in Senegal and the corporate offices.

INTEGRATED LIFE OF MINE SCHEDULE

  • Table 3 represents a life of mine schedule developed from the proven and probable reserves listed in Table 2. The pit sequencing schedule is based on blending the material movement capability with the mine mobile fleet and the availability of high grade ore within the various ore bodies. This schedule represents one of a number of possibilities that can be adjusted as economic conditions change. Open pit mining methods similar to current operations at the Sabodala deposit were applied by providing the highest grade available for plant feed and stockpiling lower grade ore for processing at the end of mine life. A detailed mine dilution and ore recovery analysis was applied for the Masato, Golouma and Kerekounda deposits to determine mine operating parameters.

  • Capital and operating cost estimates for the LOM are provided in Table 4 and Table 5 respectively. Sustaining capital estimates for mining were based on the major component and replacement schedule for the existing mobile equipment fleet, while the capital development costs for Gora and the OJVG deposit were based on additional mine mobile equipment and infrastructure for new pit development. Sustaining capital estimates are based on the existing schedules for the plant operations, including an additional tailings lift forecasted in approximately three years. Operating costs for the mine were calibrated to 2013 costs at Sabodala and then adjusted for percentage of oxide ore and average weighted haul distance to the various ore body locations.

Table 3: Life of Mine

LOM 2014-2019 AVG 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Sabodala Phase 3 Ore Mined Mt 4.8 4.8 - - - - - - - - - - - - - - -
Ore Grade g/t 1.68 1.68 - - - - - - - - - - - - - - -
Waste Mt 16.5 16.5 - - - - - - - - - - - - - - -
Contained Oz Moz 0.26 0.26 - - - - - - - - - - - - - - -
Sabodala Phase 4 Ore Mined Mt 4.1 - - 0.5 1.7 1.9 - - - - - - - - - - -
Ore Grade g/t 1.51 - - 1.01 1.53 1.61 - - - - - - - - - - -
Waste Mt 29.6 - - 13.1 11.9 4.6 - - - - - - - - - - -
Contained Oz Moz 0.20 - - 0.02 0.09 0.10 - - - - - - - - - - -
Masato Phase 1 Ore Mined Mt 13.5 0.9 12.6 - - - - - - - - - - - - - -
Ore Grade g/t 1.09 0.91 1.10 - - - - - - - - - - - - - -
Waste Mt 32.3 3.4 28.9 - - - - - - - - - - - - - -
Contained Oz Moz 0.47 0.03 0.44 - - - - - - - - - - - - - -
Masato Phase 2 Ore Mined Mt 11.8 - - - - - - 0.3 2.5 9.0 - - - - - - -
Ore Grade g/t 1.37 - - - - - - 0.60 0.98 1.50 - - - - - - -
Waste Mt 101.3 - - - - - - 29.9 38.6 32.7 - - - - - - -
Contained Oz Moz 0.52 - - - - - - 0.01 0.08 0.43 - - - - - - -
Gora Ore Mined Mt 1.9 - 0.2 0.7 0.3 0.4 0.2 - - - - - - - - - -
Ore Grade g/t 4.74 - 3.80 4.15 6.55 3.75 6.99 - - - - - - - - - -
Waste Mt 38.1 - 5.1 12.0 9.7 9.6 1.7 - - - - - - - - - -
Contained Oz Moz 0.29 - 0.03 0.10 0.06 0.05 0.05 - - - - - - - - - -
Golouma Ore Mined Mt 6.5 - - 1.0 0.5 0.8 2.5 1.7 - - - - - - - - -
Ore Grade g/t 2.24 - - 2.89 2.61 2.26 2.01 2.07 - - - - - - - - -
Waste Mt 89.8 - - 16.1 15.7 17.0 35.0 6.0 - - - - - - - - -
Contained Oz Moz 0.46 - - 0.09 0.04 0.06 0.16 0.11 - - - - - - - - -
Kerekounda Ore Mined Mt 0.9 - - 0.1 0.8 - - - - - - - - - - - -
Ore Grade g/t 3.26 - - 1.50 3.53 - - - - - - - - - - - -
Waste Mt 18.0 - - 7.4 10.6 - - - - - - - - - - - -
Contained Oz Moz 0.09 - - 0.01 0.09 - - - - - - - - - - - -
Niakafiri Ore Mined Mt 7.8 - - - - 4.6 3.2 - - - - - - - - - -
Ore Grade g/t 1.14 - - - - 1.14 1.14 - - - - - - - - - -
Waste Mt 22.6 - - - - 12.9 9.7 - - - - - - - - - -
Contained Oz Moz 0.29 - - - - 0.17 0.12 - - - - - - - - - -
Total Ore Mined Mt 51.3 6.3 5.7 12.8 2.3 3.3 7.7 5.9 2.1 2.5 9.0 - - - - - - -
Ore Grade g/t 1.57 1.61 1.56 1.15 2.84 2.60 1.51 1.74 1.82 0.98 1.50 - - - - - - -
Waste Mt 348.0 40.1 19.9 33.9 48.6 47.8 44.1 46.4 35.9 38.6 32.7 - - - - - - -
Contained Oz Moz 2.58 0.33 0.29 0.47 0.21 0.27 0.37 0.33 0.12 0.08 0.43 - - - - - - -
Stockpile Ore Balance Mt 10.9 19.7 18.0 17.4 21.2 23.1 21.4 20.0 25.2 21.4 17.6 13.8 10.0 6.2 2.2 0.0
Stockpile Grade g/t 0.79 0.77 0.71 0.71 0.70 0.69 0.69 0.69 0.73 0.70 0.70 0.69 0.67 0.65 0.66 -
Contained Oz Moz 0.27 0.48 0.41 0.40 0.47 0.51 0.47 0.44 0.60 0.48 0.39 0.31 0.22 0.13 0.05 0.00
Ore Milled Mt 59.9 3.9 3.4 4.0 4.0 3.8 4.0 4.0 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 4.0 2.2
Head Grade g/t 1.46 2.24 2.25 2.05 2.21 2.35 2.31 2.27 1.32 0.89 2.29 0.93 0.71 0.71 0.74 0.71 0.64 0.62
Oxide % 13% 23% 6% 50% 34% 6% 26% 15% 0% 1% 0% 0% 0% 0% 0% 0% 36% 50%
Rec. oz Moz 2.553 0.254 0.227 0.242 0.260 0.261 0.271 0.265 0.145 0.097 0.254 0.102 0.078 0.078 0.081 0.078 0.075 0.040

Table 4: Capital Expenditures

Sustaining Capex Unit LOM 2014-2019 AVG 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Mining USDM 25.5 3.6 3.5 3.5 3.5 3.5 3.5 4.0 3.5 0.5 - - - - - - - -
Processing USDM 29.5 2.2 3.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 0.5 -
Admin & Other Sustaining USDM 11.3 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 0.8 0.5 0.5 0.5 0.5 0.3 0.3 -
Community Relations USDM 25.0 4.2 - - 8.3 8.3 8.3 - - - - - - - - - - -
Total Sustaining Capex USDM 91.3 10.9 7.5 6.5 14.8 14.8 14.8 7.0 6.5 3.5 2.8 2.5 2.5 2.5 2.5 2.3 0.8 -
Capital Projects & Development USDM
OJVG & Gora Development USDM 62.1 10.3 7.0 42.0 12.2 - 0.9 - - - - - - - - - - -
Government Waiver Payments USDM 16.9 2.8 10.0 4.2 - - 2.7 - - - - - - - - - - -
Other Projects & Development USDM 3.0 0.5 - - 3.0 - - - - - - - - - - - - -
Total Projects and Development USDM 82.0 13.7 17.0 46.2 15.2 - 3.6 - - - - - - - - - - -
Combined Total (USDM) USDM 173.2 24.6 24.5 52.7 30.0 14.8 18.4 7.0 6.5 3.5 2.8 2.5 2.5 2.5 2.5 2.3 0.8 -

Table 5: Operating Cost

Activity Unit LOM 2014-2019 AVG 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029
Mining USD/t mined 2.55 2.53 2.85 2.39 2.51 2.54 2.49 2.55 2.50 2.53 2.66 - - - - - - -
Processing USD/t milled 17.78 17.26 18.50 16.01 17.35 18.01 16.93 16.98 17.59 17.86 18.01 18.26 18.26 18.26 18.26 18.26 18.26 18.26
General & Admin. USDM 165 15 18 16 15 14 14 14 14 14 10 6 6 6 6 6 4 2
Mining USDM 1,014 117 71 112 128 130 129 134 95 104 112 - - - - - - -
Processing USDM 1,072 67 65 64 70 68 68 68 67 68 68 69 70 69 69 69 73 46
General & Admin USDM 165 15 18 16 15 14 14 14 14 14 10 6 6 6 6 6 4 2
Refining & Freight USDM 13 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0
Byproduct Credits USDM (5) (0) (0) (0) (0) (0) (1) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0)
Total Operating Costs USDM 2,259 200 154 193 213 213 212 216 176 186 191 76 76 76 76 76 77 48
Deferred Stripping Adjustment(2) USDM (3) (1) (3) - - - - - - - - - - - - - - -
Inventory Adjustment USDM 62 (26) (17) (52) (30) (17) (17) (22) (28) (48) 16 51 37 39 39 39 37 35
Royalty USDM 154 15 12 15 16 16 17 17 9 6 15 6 5 5 5 5 4 3
Total Cash Costs(1) USDM 2,472 190 146 156 200 213 212 211 157 144 221 133 118 119 119 119 119 86
Total Cash Costs(1) USD/oz 968 745 675 645 768 814 781 796 1,085 1,479 873 1,307 1,512 1,533 1,535 1,535 1,589 1,935
Capex USDM 173 25 25 53 30 15 18 7 7 4 3 3 3 3 3 2 1 -
Capitalized Deferred Stripping USDM 3 1 3 - - - - - - - - - - - - - - -
Capitalized Reserve Development USDM 9 2 5 4 - - - - - - - - - - - - - -
Corporate Admin USDM 142 14 16 15 14 14 14 14 14 14 8 4 4 3 2 2 2 2
All-In Sustaining Cash Costs(1) USDM 2,799 231 194 227 244 242 245 232 178 161 232 140 124 124 123 123 121 88
All-In Sustaining Cash Costs(1) USD/oz 1,096 906 838 941 937 925 901 875 1,226 1,659 915 1,371 1,595 1,604 1,593 1,590 1,626 1,980

(1) Total cash costs per ounce and all-in sustaining costs per ounce are non-IFRS financial measures and do not have a standard meaning under IFRS. Please refer to non-IFRS Performance Measures at the end of this report.
(2)Excludes any deferred stripping adjustment beyond 2014 as required by IFRIC20
The estimated ore reserves underpinning the production targetes (as defined in the ASX Listing Rules), set out in the table above, have been prepared by Mr Paul Chawrun, who is a Competent Person, in accordance with the requirements of the JORC Code 2012
This production guidance is based on existing proven and probable reserves only from both the Sabodala mining licence and OJVG mining license as disclosed in the Reserves and Resources section of this Report. This production guidance also assumes an amendment to OJVG mining license to reflect processing of OJVG ore through the Sabodala mill.
Key assumptions: Gold spot price/ounce - US$1,250, Light fuel oil - US$1.00/litre, Heavy fuel oil - US$0.98/litre, US/Euro exchange rate - $1.325

GORA DEVELOPMENT

  • Gora, hosting 0.29 million ounces of proven and probable reserves (see Table 2) at 4.74g/t is planned to be operated as a satellite 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 technical report and an environmental and social impact assessment (ESIA) have been provided to the Senegalese government, and the permit approval process is ongoing.

  • Management expects the permit process to be completed in 2014 and construction to be initiated in 2015 based on the new integrated LOM plan with the OJVG.

SABODALA MINE LICENSE (ML) RESERVE DEVELOPMENT

  • The Sabodala Mine License covers 33km2 and, in addition to the mine related infrastructure, contains the Sabodala, Masato, Niakafiri, Niakafiri West, Soukhoto and Dinkokhono deposits.

  • The drill program on the ML was completed during the first quarter 2013 with 11,700 metres drilled. The 2014 drill program will be integrated into the combined Sabodala/OJVG reserve delineation program.

Sabodala

  • The drill program at Sabodala was completed in the first quarter of 2013, with results returned by mid-April 2013. Drilling targeted the MFE immediately adjacent to the current ultimate pit, as well as additional mineralization located below the MFE, to upgrade and increase mineral resources. Drilling successfully confirmed continuation of these zones, and updated resource and reserve models were generated.

  • Waste dump condemnation drilling to the southeast of the Sabodala pit was completed in the first quarter of 2013.

Niakafiri

  • The timing of a planned drill program at the Niakafiri deposit along strike is under review in light of both the decrease in gold prices and the acquisition of the OJVG, which has led to a re-evaluation of priorities.

  • Additional surface mapping was carried out at Niakafiri in conjunction with the re-logging of several diamond drill holes with a view to updating the geological model for the Niakafiri deposit.

Masato North

  • A preliminary drill program consisting of six holes was completed to test the northern extent of the Niakafiri Shear Zone, adjacent to the ML boundary. Narrow mineralized low grade zones were intersected, with future analysis planned.

OJVG MINE LICENSE

  • The OJVG mine license covers 213km2. As we have integrated the OJVG geological database into a combined LOM plan, a number of areas have been revealed as potential sources for reserves addition within the mining lease. These targets have been selected based on potential for discovery and inclusion into open pit reserves.

  • The high grade "cores" in Masato that were not included in the current reserves estimate will be targeted in 2014 so that the mineralization characteristics can be better understood and then modeled.

  • Additional areas targeted include additions to the measured resources at the Golouma and Kerekounda deposits for potential to extend the currently designed pit shells, and to explore near surface oxide targets along a 4km long mineralized trend that includes the existing resources of Niakafiri, Niakafiri SE and Maki Medina.

REGIONAL EXPLORATION

  • The Company currently has 9 exploration permits encompassing approximately 1,055km² of land surrounding the Sabodala and OJVG mine licenses (246km2 exploitation permits). Over the last 3 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 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 mineable 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 mineable deposit takes time with a systematic approach to maximize potential for success.

  • The exploration team uses a disciplined screening process to optimize the potential for success in exploring the myriad of high potential anomalies located within the regional land package.

  • The Ninienko, Soreto/Diabougou and Garaboureya prospects all demonstrate significant surface mineralization, geochemical and geophysical markers within consistent geological zones for gold mineralization providing potential for significant discoveries. These prospects along with other smaller potentially satellite deposits are planned to undergo various stages of trenching, reverse circulation ("RC") and diamond drilling hole ("DDH") programs.

Review of Fourth Quarter and Year End Financial Results

Three months ended Year ended Fifteen months ended
(US$000's, except where indicated) December 31 December 31 December 31
Financial Data 2013 2012 2013 2012 2011
Revenue 58,302 122,970 297,927 350,520 236,873
Profit (loss) attributable to shareholders of Teranga (4,220 ) 54,228 47,516 92,600 (16,040 )
Per share (0.01 ) 0.22 0.18 0.38 (0.07 )
Operating cash flow 13,137 59,670 74,307 104,982 5,132
Capital expenditures 3,725 28,521 69,056 115,785 76,392
Free cash flow1 9,412 31,149 5,251 (10,803 ) (71,260 )
Cash and cash equivalents (including restricted cash and bullion receivables) 42,301 44,974 42,301 44,974 24,549
Net debt2 32,068 75,182 32,068 75,182 95,748
Total assets 624,399 564,541 476,612
Total non-current financial liabilities 29,241 68,505 67,042
Note: December 31, 2012 values were restated due to the adoption of IFRIC 20. Refer to Adoption of New Accounting Standards.
Note: Results include the consolidation of 72.6% of Oromin's operating results, cash flows and net assets from August 6, 2013 and 100% from October 4, 2013.
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, restricted cash and bullion receivables.

Review of Fourth Quarter and Year End Operating Results

Three months ended December 31 Year ended December 31
Operating Results 2013 2012 2013 2012
Ore mined ('000t) 1,993 2,038 4,540 5,916
Waste mined - operating ('000t) 6,655 4,362 15,172 12,265
Waste mined - capitalized ('000t) 420 912 15,066 10,696
Total mined ('000t) 9,068 7,312 34,778 28,877
Grade mined (g/t) 1.61 2.04 1.62 1.98
Ounces mined (oz) 103,340 133,549 236,718 376,184
Strip ratio waste/ore 3.6 2.6 6.7 3.9
Ore milled ('000t) 860 725 3,152 2,439
Head grade (g/t) 2.11 3.40 2.24 3.08
Recovery rate % 89.7 90.7 91.4 88.7
Gold produced1 (oz) 52,368 71,804 207,204 214,310
Gold sold (oz) 46,561 71,604 208,406 207,814
Average price received $/oz 1,249 1,296 1,246 1,422
Total cash cost (incl. royalties)2 $/oz sold 711 532 641 556
All-in sustaining costs2 $/oz sold 850 1,004 1,033 1,200
Mining ($/t mined) 2.65 3.11 2.59 2.71
Milling ($/t milled) 17.96 19.88 20.15 20.39
G&A ($/t milled) 4.84 6.35 5.38 6.12
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 non-IFRS financial measures and do not have a standard meaning under IFRS. Please refer to Non-IFRS Performance Measures at the end of this report.

Review of Fourth Quarter and Year End Cost of Sales

(US$000's) Three months ended December 31 Year ended December 31
Cost of Sales 2013 2012 2013 2012
Mine production costs - gross 43,555 42,846 170,752 145,832
Capitalized deferred stripping (1,444 ) (3,268 ) (43,264 ) (32,535 )
42,111 39,578 127,488 113,297
Depreciation and amortization 26,702 20,534 77,902 55,645
Royalties 2,890 3,689 14,755 10,491
Rehabilitation - 23 6 36
Inventory movements - cash (11,945 ) (4,126 ) (8,552 ) (5,409 )
Inventory movements - non-cash (9,231 ) (2,448 ) (15,094 ) (8,822 )
(21,176 ) (6,574 ) (23,646 ) (14,231 )
Total cost of sales 50,527 57,250 196,505 165,238

Non-IFRS Financial Measures

The Company provides some non-IFRS measures as supplementary information that management believes may be useful to investors to explain the Company's financial results. Refer to the Company's Management's Discussion and Analysis for further details.

(US$000's, except where indicated) Three months ended December 31 Year ended December 31
Cash costs per ounce sold 2013 2012 2013 2012
Gold produced1 52,368 71,804 207,204 214,310
Gold sold 46,561 71,604 208,406 207,814
Cash costs per ounce sold
Cost of sales 50,527 57,250 196,505 165,238
Less: depreciation and amortization (26,702 ) (20,534 ) (77,902 ) (55,645 )
Less: realized oil hedge gain - (365 ) (487 ) (1,936 )
Add: non-cash inventory movement 9,231 2,448 15,094 8,822
Less: other adjustments 41 (737 ) 358 (893 )
Total cash costs 33,097 38,062 133,568 115,586
Total cash costs per ounce sold 711 532 641 556
All-in sustaining costs
Total cash costs 33,097 38,062 133,568 115,585
Administration expenses2 2,753 5,332 12,650 17,996
Capitalized deferred stripping 1,444 3,268 43,264 32,535
Capitalized reserve development 529 5,671 3,524 26,086
Mine site capital 1,752 19,582 22,267 57,166
All-in sustaining costs 39,575 71,915 215,274 249,367
All-in sustaining costs per ounce sold 850 1,004 1,033 1,200
All-in costs
All-in sustaining costs 39,575 71,915 215,274 249,367
Social community costs not related to current operations 311 471 1,763 1,558
Exploration and evaluation expenditures 1,043 2,699 5,405 16,657
All-in costs 40,929 75,085 222,442 267,582
All-in costs per ounce sold 879 1,049 1,067 1,288
Depreciation and amortization 26,702 20,534 77,902 55,645
Non - cash inventory movement (9,231 ) (2,448 ) (15,094 ) (8,822 )
Total depreciation and amortization 17,471 18,086 62,808 46,823
Total depreciation and amortization per ounce sold 375 253 301 225
1 Gold produced represents change in gold in circuit inventory plus gold recovered during the period.
2 Administration expenses include share based compensation and exclude Corporate depreciation expense and social community costs not related to current operations.
TERANGA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
(US$000's except per share amounts)
For the years ended December 31
2013 2012
(Restated)
Revenue 297,927 350,520
Cost of sales (196,505 ) (165,238 )
Gross profit 101,422 185,282
Exploration and evaluation expenditures (5,405 ) (16,657 )
Administration expenses (14,717 ) (15,573 )
Share based compensation (813 ) (4,694 )
Finance costs (12,148 ) (7,362 )
Gains/(losses) on gold hedge contracts 5,308 (15,274 )
Gains/(losses) on oil hedge contracts 31 (427 )
Net foreign exchange losses (1,233 ) (2,574 )
Loss on available for sale financial asset (4,003 ) (11,917 )
Share of income from equity investment in OJVG 52 -
Other expenses (11,895 ) (2,749 )
(44,823 ) (77,227 )
Profit before income tax 56,599 108,055
Income tax benefit - 115
Net profit 56,599 108,170
Profit attributable to:
Shareholders 47,516 92,600
Non-controlling interests 9,083 15,570
Profit for the year 56,599 108,170
Other comprehensive income/(loss):
Exchange differences arising on translation of Teranga corporate entity - (63 )
Change in fair value of available for sale financial asset, net of tax
Gains (losses), net of tax - -
Reclassification to income, net of tax (5,456 ) 6,775
Other comprehensive income/(loss) for the year (5,456 ) 6,712
Total comprehensive income for the year 51,143 114,882
Total comprehensive income attributable to:
Shareholders 42,060 99,312
Non-controlling interests 9,083 15,570
Total comprehensive income for the year 51,143 114,882
Earnings per share from operations attributable to the shareholders of the Company during the year
- basic earnings per share 0.18 0.38
- diluted earnings per share 0.18 0.38
TERANGA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(US$000's)
As at December 31, 2013 As at December 31, 2012
(Restated)
Current assets
Cash and cash equivalents 14,961 39,722
Restricted cash 20,000 -
Trade and other receivables 7,999 6,482
Inventories 67,432 74,969
Financial derivative assets - 456
Other assets 5,756 6,836
Available for sale financial assets 6 15,010
Total current assets 116,154 143,475
Non-current assets
Inventories 63,740 32,700
Equity investment 47,627 -
Property, plant and equipment 222,487 247,898
Mine development expenditures 173,444 138,609
Intangible assets 947 1,859
Total non-current assets 508,245 421,066
Total assets 624,399 564,541
Current liabilities
Trade and other payables 56,891 44,823
Borrowings 70,423 10,415
Financial derivative liabilities - 51,548
Provisions 1,751 1,940
Total current liabilities 129,065 108,726
Non-current liabilities
Borrowings 3,946 58,193
Provisions 14,336 10,312
Other non-current liabilities 10,959 -
Total non-current liabilities 29,241 68,505
Total liabilities 158,306 177,231
Equity
Issued capital 342,470 305,412
Foreign currency translation reserve (998 ) (998 )
Other components of equity 15,776 16,358
Investment revaluation reserve - 5,456
Retained earnings 96,741 49,225
Equity attributable to shareholders 453,989 375,453
Non-controlling interests 12,104 11,857
Total equity 466,093 387,310
Total equity and liabilities 624,399 564,541
TERANGA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(US$000's)
For the years ended December 31
2013 2012
(Restated)
Issued capital
Beginning of year 305,412 305,412
Shares issued from public offerings 37,264 -
Less: Share issue costs (206 ) -
End of year 342,470 305,412
Foreign currency translation reserve
Beginning of year (998 ) (935 )
Exchange difference arising on translation of Teranga corporate entity - (63 )
End of year (998 ) (998 )
Other components of equity
Beginning of year 16,358 12,599
Equity-settled share based compensation reserve 1,605 3,759
Stock options to Oromin Explorations Ltd. ("Oromin") employees 585 -
Acquisition of non-controlling interest in Oromin (2,772 ) -
End of year 15,776 16,358
Investment revaluation reserve
Beginning of year 5,456 (1,319 )
Change in fair value of available for sale financial asset, net of tax (5,456 ) 5,456
Impairment - 1,319
End of year - 5,456
Retained earnings
Beginning of year 49,225 (43,375 )
Profit attributable to shareholders 47,516 92,600
End of year 96,741 49,225
Non-controlling interest
Beginning of year 11,857 (3,713 )
Non-controlling interest - portion of profit for the period 9,083 15,570
Dividends paid and accrued (8,836 ) -
End of year 12,104 11,857
Total shareholders' equity at December 31 466,093 387,310
TERANGA GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
(US$000's)
For the years ended December 31
2013 2012
(Restated)
Cash flows related to operating activities
Profit for the year 56,599 108,170
Depreciation of property, plant and equipment 48,185 41,999
Depreciation of capitalized mine development costs 30,091 14,127
Amortization of intangibles 1,021 650
Amortization of borrowing costs 3,120 877
Unwinding of discount on mine restoration and rehabilitation provision 156 53
Share based compensation 813 3,759
Net change in gains on gold forward sales contracts (42,955 ) (39,010 )
Net change in losses on oil contracts 456 2,364
Buyback of gold forward sales contracts (8,593 ) (39,000 )
Loss on available for sale financial asset 4,003 11,917
Loss/(gain) on disposal of property, plant and equipment 102 (131 )
Increase in inventories (23,503 ) (27,363 )
Changes in working capital other than inventory 4,812 26,570
Net cash provided by operating activities 74,307 104,982
Cash flows related to investing activities
(Increase)/decrease in restricted cash (20,000 ) 3,004
Redemption of short-term investments - 593
Expenditures for property, plant and equipment (17,344 ) (51,451 )
Expenditures for mine development (51,603 ) (62,910 )
Acquisition of intangibles (109 ) (1,424 )
Proceeds on disposal of property, plant and equipment 38 195
Net cash used in investing activities (89,018 ) (111,993 )
Cash flows related to financing activities
Loan facility, net of borrowing cost paid (1,200 ) 57,695
Repayment of borrowings (12,282 ) (16,799 )
Drawdown from finance lease facility, net of financing costs paid 12,755 2,857
Interest paid on borrowings (7,054 ) (4,075 )
Dividend payment to government of Senegal (2,700 ) -
Net cash provided by (used in) financing activities (10,481 ) 39,678
Effect of exchange rates on cash holdings in foreign currencies 431 (415 )
Net (decrease) increase in cash and cash equivalents (24,761 ) 32,252
Cash and cash equivalents at the beginning of year 39,722 7,470
Cash and cash equivalents at the end of year 14,961 39,722
CORPORATE DIRECTORY
Directors
Alan Hill, Executive Chairman
Richard Young, President and CEO
Christopher Lattanzi, Non-Executive Director
Edward Goldenberg, Non-Executive Director
Alan Thomas, Non-Executive Director
Frank Wheatley, Non-Executive Director
Senior Management
Alan Hill, Executive Chairman
Richard Young, President and CEO
Mark English, Vice President, Sabodala Operations
Paul Chawrun, Vice President, Technical Services
Navin Dyal, Vice President and CFO
David Savarie, Vice President, General Counsel & Corporate Secretary
Kathy Sipos, Vice President, Investor & Stakeholder Relations
Aziz Sy, Vice President, Development Senegal
Macoumba Diop, General Manager and Government Relations Manager, SGO
Registered Office
121 King Street West, Suite 2600
Toronto, Ontario, M5H 3T9, Canada
T: +1 416-594-0000
F: +1 416-594-0088
E: investor@terangagold.com
W: http://www.terangagold.com/
Senegal Office
2K Plaza
Suite B4, 1er Etage
sis la Route due Meridien President
Dakar Almadies
T: +221 338 693 181
F: +221 338 603 683
Auditor
Ernst & Young LLP
Share Registries
Canada: Computershare Trust Company of Canada
T: +1 800 564 6253
Australia: Computershare Investor Services Pty Ltd
T: 1 300 850 505
Stock Exchange Listings
Toronto Stock Exchange, TSX symbol: TGZ
Australian Securities Exchange, ASX symbol: TGZ

FORWARD LOOKING STATEMENTS

This news release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of Teranga, or developments in Teranga's business or in its industry, to differ materially from the anticipated results, performance, achievements or developments expressed or implied by such forward-looking statements. Forward-looking statements include, without limitation, all disclosure regarding possible events, conditions or results of operations, future economic conditions and courses of action, the proposed plans with respect to mine plan and consolidation of the Sabodala Gold Project and OJVG Golouma Gold Project, mineral reserve and mineral resource estimates, anticipated life of mine operating and financial results, targeted date for a NI 43-101 compliant technical report, amendment to the OJVG mining license, the approval of the Gora ESIA and permitting and the completion of construction related thereto. Such statements are based upon assumptions, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments that management believe to be reasonable and relevant. These assumptions include, among other things, the ability to obtain any requisite Senegalese governmental approvals, the accuracy of mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic conditions and courses of action. Teranga cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. The risks and uncertainties that may affect forward-looking statements include, among others: the inherent risks involved in exploration and development of mineral properties, including government approvals and permitting, changes in economic conditions, changes in the worldwide price of gold and other key inputs, changes in mine plans and other factors, such as project execution delays, many of which are beyond the control of Teranga, as well as other risks and uncertainties which are more fully described in the Company's Annual Information Form dated March 27, 2013, and in other company filings with securities and regulatory authorities which are available at www.sedar.com. Teranga does not undertake any obligation to update forward-looking statements should assumptions related to these plans, estimates, projections, beliefs and opinions change. Nothing in this report should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities.

COMPETENT PERSONS STATEMENT

The technical information contained in this document relating to the mineral reserve estimates for Sabodala, the stockpiles, Masato, Golouma and Kerekounda is based on information compiled by Mr. William Paul Chawrun, P. Eng 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 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 is based on, and fairly represents, information and supporting documentation prepared by Julia Martin, P.Eng. 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 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 information compiled by Ms. Nakai-Lajoie. Ms. Patti Nakai-Lajoie, P. Geo., 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 Somgol Other are based on information compiled by Ms. Nakai-Lajoie. Ms. Patti Nakai-Lajoie, P. Geo., 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 disclosure of mineral reserve and mineral resource information is governed by NI 43-101 under the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resources and Mineral Reserves, adopted by the CIM Council, as may be amended from time to time by the CIM ("CIM Standards"). CIM definitions of the terms "mineral reserve", "proven mineral reserve", "probable mineral reserve", "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource", are substantially similar to the JORC Code corresponding definitions of the terms "ore reserve", "proved ore reserve", "probable ore reserve", "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource", respectively. 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.

ABOUT TERANGA

Teranga is a Canadian-based gold company listed on the Toronto Stock Exchange (TSX:TGZ) and Australian Securities Exchange (ASX:TGZ). Teranga is principally engaged in the production and sale of gold, as well as related activities such as exploration and mine development.

Teranga's mission is to create value for all of its stakeholders through responsible mining. Its vision is to explore, discover and develop gold mines in West Africa, in accordance with the highest international standards, and to be a catalyst for sustainable economic, environmental and community development. All of its actions from exploration, through development, operations and closure will be based on the best available techniques.

(1) See table 1 and 2 on page 8 of this Report for detailed breakdown of this resource and reserve estimates.

(2) This production guidance is based on existing proven and probable reserves only from both the Sabodala mining licence and OJVG mining license as disclosed in Table 2 on page 8 of this Report. The estimated ore reserves underpinning this production guidance have been prepared by a competent person in accordance with the requirements of the 2012 Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the "JORC Code"). This production guidance also assumes an amendment to OJVG mining license to reflect processing of OJVG ore through the Sabodala mill.

Contact Information

  • Teranga Gold Corporation
    Kathy Sipos
    Vice-President, Investor & Stakeholder Relations
    +1 416-594-0000
    ksipos@terangagold.com