Acacia Mining plc 2014 Preliminary Results Presentation February - - PowerPoint PPT Presentation

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LSE:ACA Acacia Mining plc 2014 Preliminary Results Presentation February 2015 Important Notice This presentation includes forward - looking statements that express or imply Although Acacias management believes that the expectations


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Acacia Mining plc

2014 Preliminary Results Presentation February 2015

LSE:ACA

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Important Notice

This presentation includes “forward-looking statements” that express or imply expectations of future events or results as opposed to historical facts. These statements include, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, projects, and statements regarding future performance. Forward-looking statements are generally identified by the words “plans,” “expects,” “anticipates,” “believes,” “intends,” “estimates” and other similar expressions. All forward-looking statements involve a number of risks, uncertainties and

  • ther factors, many of which are beyond the control of Acacia, which could cause

actual results and developments to differ materially from those expressed in, or implied by, the forward-looking statements contained herein. Factors that could cause or contribute to differences between the actual results, performance and achievements of Acacia include, but are not limited to, changes or developments in political, economic or business conditions or national or local legislation or regulation in countries in which Acacia conducts - or may in the future conduct - business, industry trends, competition, fluctuations in the spot and forward price

  • f gold or certain other commodity prices (such as copper and diesel), currency

fluctuations (including the US dollar, South African rand, Kenyan shilling and Tanzanian shilling exchange rates), Acacia’s ability to successfully integrate acquisitions, Acacia’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to process its mineral reserves successfully and in a timely manner, Acacia’s ability to complete land acquisitions required to support its mining activities, operational or technical difficulties which may occur in the context of mining activities, delays and technical challenges associated with the completion of projects, risk of trespass, theft and vandalism, changes in Acacia’s business strategy and ongoing implementation of operational reviews, as well as risks and hazards associated with the business of mineral exploration, development, mining and production and risks and factors affecting the gold mining industry in general. Although Acacia’s management believes that the expectations reflected in such forward-looking statements are reasonable, Acacia cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance on forward-looking statements contained in this presentation. Any forward-looking statements in this presentation only reflect information available at the time of preparation. Subject to the requirements of the Disclosure and Transparency Rules and the Listing Rules or applicable law, Acacia explicitly disclaims any obligation or undertaking publicly to update or revise any forward- looking statements in this presentation, whether as a result of new information, future events or otherwise. Nothing in this presentation should be construed as a profit forecast or estimate and no statement made should be interpreted to mean that Acacia’s profits or earnings per share for any future period will necessarily match or exceed its historical published profits or earnings per share. Mineral reserves and mineral resources estimates contained in this presentation have been calculated as at 31 December 2014 in accordance with National Instrument 43-101 as required by Canadian securities regulatory authorities. Canadian Institute of Mining, Metallurgy and Petroleum (CIM) definitions were followed for mineral reserves and resources. The reserves and resources figures stated are

  • estimates. No assurances whatsoever can be given that the indicated quantities of

metal will be produced and totals stated may not add up due to rounding. You are reminded that you have received this presentation on the basis that you are a person to whom this presentation may be lawfully made and delivered. You may not and are not authorised to: (i) reproduce or publish this presentation; or (ii) distribute, disclose or pass on this presentation to any other person, in whole

  • r in part, by any medium or in any form, in breach of any applicable securities
  • laws. BY ACCEPTING THIS PRESENTATION, YOU ACKNOWLEDGE AND

AGREE TO THE CONTENTS OF THIS DISCLAIMER AND YOU AGREE TO BE BOUND BY THE FOREGOING LIMITATIONS.

2 February 2015 2014 Preliminary Results Presentation

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Introduction

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What we stand for

February 2015 2014 Preliminary Results Presentation 4

A leading asset portfolio in Africa

1

Focused on free cash flow

2

Growing our footprint

5

Disciplined capital allocation

3

Becoming the partner of choice

4

Our Three Pillars

… unearthing Africa’s potential

Our People Our Business Our Relationships

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Building a track record of delivery

February 2015 2014 Preliminary Results Presentation 5

Consistently improving performance

Increasing production

  • Production of 719koz in

2014

  • CIL Expansion brought on

stream

  • Upper East zone brought

forward

  • Gokona underground
  • Greenfield and brownfield

exploration success Financial discipline Efficient Delivery

  • Nine successive quarters of

reduction in costs

  • Over US$600/ounce

reduction in quarterly AISC

  • Delivered US$185m of

Operational Review savings

  • Focused exploration

programme

  • Strong balance sheet - net

cash position

  • Delivering free cash flow
  • Consistent dividend payer
  • Tulawaka sold without any

residual liability

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Highlights

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FY 2014 - Highlights

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A watershed year for Acacia

  • Gold production of 719koz, 13% higher than 2013 and ahead of guidance
  • AISC of US$1,105/oz, 18% lower than 2013
  • Returned to cash generation from Q2 2014 onwards

Generated over US$100m of free cash, pre growth, dividends and Tulawaka disposal

  • Operating cash flow of US$290 million and EBITDA of US$253 million
  • 40% increase in proposed full year dividend to US4.2 cents per share
  • Significant return on investment in exploration programmes

2.3Moz of resources added at Bulyanhulu as a result of drilling

  • Set out 5 year vision for the company

2014 Preliminary Results Presentation February 2015

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Consistent reduction in costs

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200 400 600 800 1,000 1,200 1,400 1,600 1,800 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 FY 12 FY 13 FY 14

US$/ounce

Quarterly AISC and Cash Cost Evolution (US$/oz)

Cash cost / ounce AISC / ounce

February 2015 2014 Preliminary Results Presentation

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Outlook

Investing for growth, while increasing production and reducing costs

626 642 719 750-800 500 550 600 650 700 750 800 2012 2013 2014 2015E

Production (koz)

171 112 61 95 113 171 132 130 47 117 61 5 100 200 300 400 2012 2013 2014 2015E

Capital Expenditure (US$ Million)1

Expansion Cap Dev't Sustaining 9

EUS/$ million

2014 Preliminary Results Presentation February 2015

1,561 1,346 1,105 1,050- 1,100 500 700 900 1,100 1,300 1,500 2012 2013 2014 2015E

AISC per ounce sold (US$/oz)

941 827 732 695-725 500 600 700 800 900 2012 2013 2014 2015E

Cash cost per ounce sold (US$/oz)

1 Sustaining capital guidance includes US$15 million of land purchases which is not included in historic numbers as treated as a pre-payment for accounting

purposes

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Operations Review

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Operational highlights

1 Non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ”Non IFRS measures”’ on page 24 of preliminary results for definitions. 2 Cash cost per tonne milled excluding the reprocessing of tailings at Bulyanhulu amounted to US$69 per tonne for the quarter and US$65 for the year ended 31 December 2014.

February 2015 2014 Preliminary Results Presentation 11

Operational Performance 2014 2013 % change Tonnes mined (thousands of tonnes) 41,684 54,076 (23)% Ore tonnes mined (thousands of tonnes) 8,170 7,225 13% Ore tonnes processed (thousands of tonnes) 8,413 7,914 6% Process recovery rate (percent) 88.0% 88.4% 0% Head grade (grams per tonne) 3.0 2.8 7% Gold production (ounces) 718,651 637,002 13% Gold sold (ounces)1 703,680 643,597 9% Cash cost per tonne milled1,2 (US$) 61 66 (8)% Per ounce data (US$) Average spot gold price1 1,266 1,411 (10)% Average realised gold price1 1,258 1,379 (9)% Total cash cost1 732 812 (10)% All-in sustaining cost1 1,105 1,346 (18)%

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Bulyanhulu

  • Year end 2014 underground Reserves of 9.2Moz at 9.7g/t
  • Produced 235koz at AISC of US$1,266/oz in 2014
  • Progressing implementation of efficient mechanised mining
  • Significant investment in development to increase flexibility in mine plan
  • Mine now being set up in order to deliver on its geological endowment

12 2014 Preliminary Results Presentation February 2015

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North Mara

  • Year end 2014 Reserves of 2.0Moz at 2.6g/t
  • Production of 274koz at AISC of US$947/oz in 2014
  • Becoming a combined open pit (Nyabirama) & underground ( Gokona) operation
  • Local community relations significantly improved

February 2015 2014 Preliminary Results Presentation 13

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Buzwagi

  • Year end 2014 Reserves of 900Koz at 1.35g/t
  • Production of 210koz at AISC of US$1,055/oz in 2014
  • Mine in harvest mode to ensure cash generation
  • LOM includes two years of mining, followed by processing of stockpiles

14 2014 Preliminary Results Presentation February 2015

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Exploration

  • Exploration is a key driver of value and now is the time to invest
  • Drove 2.3Moz of resource additions at Bulyanhulu
  • Expanded footprint into Burkina Faso
  • Looking to further expand exploration portfolio
  • Annual spend to be maintained at ~US$20 million

15 2014 Preliminary Results Presentation February 2015

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Financial Review

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Financial highlights

1 Non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ”Non IFRS measures”’ on page 24 of preliminary results for definitions.

2 Excludes non-cash reclamation asset adjustments and includes finance lease purchases.

.

February 2015 2014 Preliminary Results Presentation 17

Financial Performance 2014 2013 % change Revenue US$m 930,248 929,004

  • EBITDA1

US$m 252,716 240,407 5% Tax (expense) / credit US$m (25,977) 187,959 nm Net earnings / (loss) US$m 90,402 (781,101) nm Basic earnings / (loss) per share (EPS) US cents 22.1 (190.4) nm Dividend per share (cents) US$m 4.2 3.0 40% Cash and cash equivalents US$m 293,850 282,409 4% Cash generated from operating activities US$m 289,528 187,115 55% Operating cash flow per share1 US cents 70.6 45.6 55% Capital expenditure2 US$m 253,802 385,068 (34)% Long term debt (Borrowings) US$m 142,000 142,000

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Return to free cash generation

1,10 0 to 1,175

February 2015 2014 Preliminary Results Presentation 18

North Mara and Buzwagi drove cash generation in 2014

282 117 20 57 14 14 294 235 255 275 295 315 335 355 375 395 415 435 Cash at Dec 2013 Cashflow from sustaining

  • perations

Exploration Expansion Capex Dividends Net Tulawaka cashflow Cash at Dec 2014 US$ millions

Cash flow Bridge

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Significant year on year reduction in AISC

1,10 0 to 1,175

February 2015 2014 Preliminary Results Presentation 19

Third year in a row of lower AISC

1,561 1,346 80 75 78 5 1,105

1,000 1,100 1,200 1,300 1,400 1,500 1,600 2012 AISC 2013 AISC Cash costs Sustaining Capital Capitalised Strip Other 2014 AISC US$/oz

All-in Sustaining Cost Bridge (US$/oz)

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Focus on cost control

Continuing to enforce strict financial discipline

February 2015 2014 Preliminary Results Presentation 20

  • 200

400 600 800

  • 100

200 300 400 500 600 700 800 2012 2013 2014 Koz US$ million

Direct Mining Costs Pre-capitalisation

Labour Energy Consumables Maintenance Contracts G&A Production

294 176 96

50 100 150 200 250 300 350 2012 2013 2014 US$/oz

Sustaining Capex per ounce

  • Delivered flat direct mining costs
  • ver the past three years whilst

adding 124koz of production

  • Continuing to bring sustaining

capex per ounce into line with industry averages

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Other charges

February 2015 2014 Preliminary Results Presentation 21

Operational Optimisation

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EBITDA and Earnings affected by significant non-cash items

  • Full year earnings amounted to US$90 million, equating to US 22.1 cents per

share

  • Impacted by significant increase in other charges driven by non-cash items

Other Charges (US$m) 2014 2013 Operational Review costs (including restructuring cost) 13,689 13,305 Unrealised non-hedge derivative losses (non cash)1 13,621 7,203 Foreign exchange losses/ (gains) (non cash) 13,516 (3,622) Legal costs 6,710 3,138 Other 385 10,400 Total 47,921 30,424

1 As at 31 Dec 2014, open oil hedge position for oil for 2015 amounted to 326,000 barrels at an average price of $97 - $110 per barrel, and for 2016 250,000 barrels at

an average price of $75 - $95 per barrel.

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Committed to dividends

February 2015 2014 Preliminary Results Presentation 22

  • Changed from an earnings based

metric to a cash flow based metric in July

Payout range remained the same at 15-30%

  • Recommending final dividend of 2.8

cents per share, equating to a full year dividend of 4.2 cents

Increase of 40% on 2013

Represents 19% of net cash flow, above bottom of range

  • Payout is 6% higher than if under

previous earnings based metric

Prioritising shareholder returns

Dividend Calculation US$m Cash added to balance sheet 11.4 Add back: Growth Capital 61.2 Add back: Cash Finance expenses 6.4 Add back: Dividends 13.9 Net Cash Flow 93.0 Payout Range 15-30% Proposed Full Year Dividend 17.2 Proposed Full Year payout ratio 19%

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Investment Case

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Where we plan to be…

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…Moving to the 1st Quartile

2014 Preliminary Results Presentation February 2015

  • $500

$1,000 $1,500 $2,000 $2,500 $3,000

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100%

US$/oz Aggregate Mine Production

Global All-in Sustaining Cost Curve

ACA Q4/14 ABG Q3/12

5 year LOM Ave

* Source: Macquarie Research / GFMS 2015E Estimate AISC curve

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Our investment case

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Business now set up to deliver free cash flow with significant improvements still to come

  • Investing for growth
  • Continued operational & financial delivery
  • Strong free cash generation
  • Mines delivering to their geological endowment
  • Moving toward industry 1st quartile cost performance
  • Developing strong relationships across Africa

2014 Preliminary Results Presentation February 2015

…A fresh approach to mining

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Appendix

Operating Metrics Exploration & Development Reserves & Resources

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Bulyanhulu* North Mara Buzwagi Group** Q4 2014 Q4 2013 Q4 2014 Q4 2013 Q4 2014 Q4 2013 Q4 2014 Q4 2013 Key operational information: Ounces produced

  • z

66,033 53,186 70,655 60,358 44,398 51,830 181,084 165,375 Ounces sold

  • z

63,166 56,735 75,760 61,050 55,316 50,382 194,243 168,167 Cash cost per ounce sold US$/oz 772 776 668 636 818 941 744 774 AISC per ounce sold US$/oz 1,225 1,118 912 1,075 990 1,300 1,088 1,163 Copper production Klbs 1,370 1,348

  • 1,738

2,200 3,107 3,548 Copper sold Klbs 1,425 1,304

  • 2,390

1,706 3,815 3,010 Mining information: Tonnes mined Kt

  • 3,653

4,104 6,878 7,244 10,776 11,570 Ore tonnes mined / hoisted Kt 245 222 788 678 1,248 1,250 2,281 2,151 Processing information: Ore milled Kt 245 229 718 643 1,052 945 2,405 1,817 Head grade g/t 9.0 7.9 3.5 3.4 1.4 1.9 85.5% 88.5% Mill recovery % 83.8% 91.2% 86.9% 86.0% 94.2% 88.8% 2.7 3.2 Cash cost per tonne milled US$/t 199 193 70 60 43 50 60 72

Q4 2014 Operating Metrics

2014 Preliminary Results Presentation 27 February 2015 * Bulyanhulu mining and processing information represent ROM only – Tailings reprocessing statistics are as follows: Q414 – Ore Milled 390Kt @ 1.0g/t, recoveries of 59.4% for 7,035 ounces recovered. Q4 13 No activity ** Group figures for ore milled, head grade and mill recovery include reclaimed tailings in processing information

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Bulyanhulu* North Mara Buzwagi Group** FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 Key operational information: Ounces produced

  • z

234,786 198,286 273,803 256,732 210,063 181,984 718,651 637,002 Ounces sold

  • z

215,740 195,304 274,540 260,945 213,399 187,348 703,680 643,597 Cash cost per ounce sold US$/oz 812 890 623 659 791 945 732 812 AISC per ounce sold US$/oz 1,266 1,344 947 1,227 1,055 1,506 1,105 1,346 Copper production Klbs 5,289 4,855

  • 8,780

7,115 14,068 11,970 Copper sold Klbs 4,925 4,508

  • 8,523

7,062 13,448 11,570 Mining information: Tonnes mined Kt

  • 16,265

21,027 24,510 32,177 41,684 54,076 Ore tonnes mined / hoisted Kt 909 872 2,569 2,601 4,692 3,753 8,170 7,225 Processing information: Ore milled Kt 906 871 2,804 2,643 4,086 4,400 8,413 7,914 Head grade g/t 8.7 7.8 3.5 3.5 1.7 1.5 3.0 2.8 Mill recovery % 88.0% 90.9% 87.2% 86.8% 92.4% 88.2% 88.0% 88.4% Cash cost per tonne milled US$/t 193 200 61 65 41 40 61 66

FY 2014 Operating Metrics

2014 Preliminary Results Presentation 28 February 2015 * Bulyanhulu mining and processing information represent ROM only – Tailings reprocessing statistics are as follows: FY14 – Ore Milled 617Kt @ 1.1g/t, recoveries of 56.9% for 12,405 ounces recovered. FY13 No activity ** Group figures include reclaimed tailings in processing information

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Appendix

Operating Metrics Exploration & Development Reserves & Resources

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Gokona Underground

  • Production of 450,000 ounces over a 5

year life of mine with AISC below US$750/oz

  • Reduces mine footprint, supporting

improved community relationships

  • Utilises exploration decline in the

Gokona pit

  • Total pre-production capital of US$37

million (including exploration decline)

 Potential to lower costs by contracting

equipment

  • Submitted final applications for the

required permits to commence mining underground

  • First ore anticipated to be in H1 2015

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Moving into construction phase

Proven Probable Proven and Probable

Kt Grade (g/t) Koz Kt Grade (g/t) Koz Kt Grade (g/t) Koz

Gokona U/G

95.4 5.88 18 1,894 8.18 498 1,989 8.06 516

Preliminary Results Presentation February 2015

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Bulyanhulu – Reef 1 & 2

February 2015 2014 Preliminary Results Presentation 31

Reef 1 Reef 2

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Targeting new near surface ounces providing greater flexibility

Bulyanhulu near mine exploration focus

  • World class ore body (>20Moz)
  • Extensive geochemical footprint
  • Untested reef extensions and

multiple sub-parallel gold zones

  • Targeting discovery of new

production centres within 5km

  • f processing plant

2014 Preliminary Results Presentation February 2015

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Kenya: Ndori-Kakamega greenstone belt

  • Geological features of all the

well endowed Archean greenstone belts

 >1,000km² of regional mapping  >30,000 soil samples collected  >50 gold-in-soil anomalies for

follow-up programmes

 >1,150 AC holes  Ground geophysics (IP)

  • Potential new gold corridors

delineated in several locations

  • High grade drill intersections
  • n the Kakamega Dome camp

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2,200 km2 across highly-prospective greenstone belt

2014 Preliminary Results Presentation February 2015

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Kenya: Liranda Corridor

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  • Successful Aircore programme

with over 87 holes returning intercepts of over 0.5 g/t; best results included:

 6m @ 22.3 g/t  12m @ 12.6 g/t  6m @ 30.9 g/t  3m @ 15.2 g/t

  • Potential new gold corridor

delineated

  • Gold across multiple lithologies
  • Follow-up diamond core

drilling commenced during Q4

High grade results within 12km under-explored corridor

2014 Preliminary Results Presentation February 2015

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Burkina Faso – Entry into Houndé Belt

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Multiple structural domains with 50km of surface gold anomalies

  • The Houndé Belt is quickly emerging

as a significant gold belt

  • Several recent >1Moz discoveries
  • Earn-in signed with Sarama

Resources on the South Houndé Project

  • Acacia can earn into 75% of the

Project

  • 815km2 of prospective Birimian

geology

  • Existing 1.5Moz Inferred resource
  • Extensive gold-in-soil anomalies

already delineated

2014 Preliminary Results Presentation February 2015

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Appendix

Operating Metrics Exploration & Development Reserves & Resources

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Reserves and Resources

Reserves and Resources estimates calculated in accordance with NI43-101 – 2013 Reserves calculated at US$1,300/oz and Resources at US$1,500/oz February 2015 2014 Preliminary Results Presentation 37

2014 YE 2013 YE Tonnes (000's) Grade Au (g/t) Ounce (000's) Tonnes (000's) Grade Au (g/t) Ounce (000's) Bulyanhulu Proven and probable (U/G) 29,681 9.667 9,225 29,610 9.530 9,072 Proven and probable (Tailings) 9,082 1.046 305 7,974 1.229 315 Mineral Resource (U/G) 12,399 8.491 3,385 10,225 10.653 3,502 Inferred (U/G) 13,725 9.897 4,367 6,632 12.877 2,745 Buzwagi Proven and probable 20,762 1.345 898 24,105 1.445 1,120 Mineral Resource 48,333 1.298 2,017 49,109 1.291 2,038 Inferred 4,623 1.237 184 7,173 1.183 273 North Mara Proven and probable 23,653 2.692 2,047 21,710 3.169 2,212 Mineral Resource 17,960 2.873 1,659 25,266 3.316 2,694 Inferred 10,073 3.236 1,048 735 2.730 65 Exploration Proven and probable

  • Mineral Resource

105,296 1.422 4,812 105,296 1.422 4,812 Inferred 4,456 1.352 194 4,456 1.352 194 Total* Proven and probable 83,178 4.665 14,475 83,399 4.743 12,719 Mineral Resource 183,988 2.007 11,873 189,895 2.137 13,046 Inferred 32,877 5.481 5,793 18,995 5.365 3,276