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Teranga Gold Reports Q4 and Full Year 2018 Financial and Operating Results

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

TORONTO, Feb. 22, 2019 (GLOBE NEWSWIRE) -- Teranga Gold Corporation ("Teranga" or the "Company") (TSX:TGZ; OTCQX:TGCDF) today reported its operating and financial results for the three and twelve months ended December 31, 2018. The Company also provided an update on the development of its second mine, Wahgnion Gold Operations (“Wahgnion”).

“In 2018, we significantly advanced our vision of building a multi-asset mid-tier gold producer in West Africa,” said Richard Young, President and Chief Executive Officer. “By the end of 2019, we will have two long-life mines in two jurisdictions capable of producing between 300,000 and 350,000 ounces of gold per year and a third project, Golden Hill, potentially moving towards feasibility stage development. As well, we have very prospective land positions in Côte d’Ivoire that could represent the next phase of Teranga’s longer-term growth.”

OPERATING HIGHLIGHTS

  • Fourth quarter 2018 gold production totalled 59,442 ounces, at cost of sales, total cash costs(1) and all-in sustaining costs(1)marginally higher than the prior year quarter due to lower gold production

  • Record full-year gold production of 245,230 ounces, exceeding the high end of Teranga’s increased 2018 production guidance range of 235,000-240,000 ounces

  • FY2018 ounce metrics improved year-over-year and beat guidance:  
    • cost of sales of $937 per ounce (2018 guidance range $950 - $1,025 per ounce)
    • total cash costs(1) of $660 per ounce (2018 guidance range $700 - $750 per ounce)
    • all-in sustaining costs (excluding non-cash inventory movements and amortized advanced  royalties)(1) of $940 per ounce (2018 guidance range $950 - $1,025 per ounce)

FINANCIAL HIGHLIGHTS

  • Fourth quarter net loss attributable to shareholders of $10.6 million ($0.10 loss per share) and adjusted net profit attributable to shareholders(2) of $1.2 million ($0.01 per share) both declined year-over-year largely as a result of lower gold production and lower gross profit, higher losses on gold forward sales contracts, and a non-cash financing expense due to adoption of a new accounting standard during the year. (The non-cash financing expense is excluded from adjusted net profit attributable to shareholders(2).)

  • Full-year net profit attributable to shareholders of $11.8 million ($0.11 per share) and adjusted net profit attributable to shareholders(2) of $18.1 million ($0.17 per share) were both lower than the prior year largely due to higher income taxes and a non-cash financing expense due to adoption of a new accounting standard during the year that more than offset higher production and gross profit. (The non-cash financing expense is excluded from adjusted net profit attributable to shareholders(2).)

  • FY2018 EBITDA(1) increased by 17% to $111.9 million, mainly due to higher gross profit and gains on gold hedges

  • FY2018 Operating cash flow increased by 29% to $92.1 million, mainly due to higher revenues and lower income taxes paid

  • Cash and cash equivalents declined to $46.6 million at December 31, 2018, as construction activities continued to ramp up during the quarter at the Company’s second mine, Wahgnion

ORGANIC GROWTH

  • Wahgnion:  Development of Teranga’s second mine tracking well for completion
    • Achieved major construction project milestones in 2018
    • On track for first gold pour and ramp up to nameplate production in Q4 2019
    • Increased open-pit mineral reserves by ~40% to 1.6 million ounces
    • Increased mine life to 13 years and improved first five years’ production and cost profile
    • Filed updated NI 43-101

  • Golden Hill:  The Company’s most advanced exploration project
    • Announced early-stage initial resource estimate (effective November 30, 2018) comprised of 6.4 million tonnes at 2.02 g/t gold in the indicated category for 415,000 ounces and 11.95 million tonnes at 1.68 g/t of gold in the inferred category for 644,000 ounces of gold
    • Initiated metallurgical test work to support future advanced engineering studies
    • Increased ownership in Golden Hill to 100%
    • Signed joint venture agreement on property immediately north of Golden Hill

  • Côte d’Ivoire Exploration
    • Commenced resource modelling, metallurgical test work and exploration work on Afema
    • Advanced Miminvest properties including an initial drill program on the Guitry property

“At our flagship Sabodala operation, the mine continued to significantly outperform the reserve model in 2018, resulting in record production and costs well below the lower end of our guidance range for the year,” said Paul Chawrun, Chief Operating Officer. “With Wahgnion well on track, we are preparing a new mine plan for 2019 to mine more material than was planned for in the October 2018 technical report to accommodate the possibility of an earlier-than-planned commissioning and ramp up of the plant.  And, at Golden Hill, we look forward to building upon the recently announced high grade initial resource.”

LOOKING AHEAD TO 2019

  • First pour and ramp up at Wahgnion expected in Q4 2019
  • With two operating gold mines, the Company’s production and cost guidance for 2019 is as follows:
  Gold ProductionCost of Sales/ozAll-in Sustaining Costs/oz(1)*
 Sabodala215koz-230koz$1,050 - $1,125$825 - $900
 Wahgnion30koz-40koz$1,175 - $1,250$750 - $825
 Consolidated245koz-270koz$1,050 - $1,125$900 - $1,000
 *All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalties).  All-in sustaining costs for Sabodala includes sustaining capital expenditures but excludes growth capital related to the Sabodala village resettlement.  Consolidated all-in sustaining costs adds corporate administration and share-based compensation expense to mine site figures.
  • Growth capital spending guidance for 2019
    • Wahgnion construction: $115 - $120 million
    • Wahgnion pre-operating: ~ $30 million
    • Sabodala village resettlement: $15 - $20 million

  • Build on Golden Hill’s initial resource and complete an internal technical and economic assessment

  • Continue to explore highly prospective properties in Côte d’Ivoire

OPERATING & FINANCIAL HIGHLIGHTS

  

Three months ended 
December 31,
 
Twelve months ended
 December 31,

Operating Data   2018 2017 
 Change 2018 2017  Change 
Gold Produced(oz)59,442 67,934 (13%)245,230 233,267 5
Gold Sold(oz)61,696 68,944 (11%)246,073 231,078 6
Average realized gold price1($ per oz)1,232 1,279 (4%)1,271 1,261 1
Cost of sales per ounce($ per oz sold)962 930 3%937 961 (3%)
Total cash costs1($ per oz sold)692 689 1%660 721 (8%)
All-in sustaining costs (excluding non-cash inventory movements and amortized advanced royalty costs)1($ per oz sold)998 860 16%940 943 (0%)
  Three months ended 
December 31,

Twelve months ended
 December 31,
Financial Data 2018 2017 
 Change 2018 2017 
 Change 
Revenue($000s)76,140 88,280 (14
%)312,628 291,683 7
Cost of sales($000s)(59,374)(64,149)(7
%)(230,517)(222,113)4
Gross profit($000s)16,766 24,131 (31
%)82,111 69,570 18
Net (loss)/profit attributable to 
  shareholders of Teranga
($000s)(10,639)5,758 N/A11,794 31,932 (63%) 
   Per share($)(0.10)0.05 N/A0.11 0.30 (63%) 
Adjusted net profit attributable to 
  shareholders of Teranga2
($000s)1,229 8,717 (86
%)18,075 30,106 (40%) 
  Per share2($)0.01 0.08 (86
%)0.17 0.28 (40%) 
EBITDA1($000s)12,516 26,630 (53
%)111,855 95,335 17
Operating cash flow before changes  
  in working capital other than  
  inventories
($000s)25,384 24,708 3
%96,649 82,610 17
Operating cash flow($000s)41,784 32,452 29
%92,060 71,379 29
Sustaining capital expenditures 
  (excluding deferred stripping)
($000s)5,727 3,985 44
%18,846 25,382 (26%) 
Capitalized deferred stripping - 
  sustaining
($000s)13,526 7,655 77
%45,978 29,428 56
Growth capital expenditures($000s)53,174 10,509 406
%137,334 24,623 458
Cash and cash equivalents, as at($000s)      46,615 87,671 (47%) 

CONSOLIDATED FINANCIAL STATEMENTS

A copy of Teranga’s consolidated financial statements and management’s discussion & analysis for the three and twelve months ended December 31, 2018 are available on the Company’s website at www.terangagold.com, SEDAR at www.sedar.com and on the OTC Markets’ website at www.otcmarkets.com/terangagold.

Q4 & YEAR-END 2018 CONFERENCE CALL & WEBCAST

Teranga will host a conference call/audio webcast today at 8:30 a.m. ET, during which management will review the highlights for the fourth quarter and year-ended December 31, 2018, as well as review the initial resource at Golden Hill and discuss next steps with the project.  Those wishing to listen can access the live conference call and webcast as follows:

Date & Time: Friday, February 22, 2019 at 8:30 a.m. ET
  
Telephone: Toll-free +1-877-291-4570
 Local of International +1-647-788-4919
 Please allow 10 minutes to be connected to the conference call.
  
Webcast: The webcast can be accessed on Teranga’s website at http://www.terangagold.com/q42018.
  
Replay: The conference call replay will be available for two weeks after the call by dialling
 +1-416-621-4642 or toll-free at +1-800-585-8367 and entering the conference ID 7383035#.
  
Note: The slide presentation will be available for download at www.terangagold.com for simultaneous viewing during the call.


ENDNOTES

(1) This is a non-IFRS financial measure and does not have a standard meaning under IFRS.  All-in sustaining costs quoted for individual mines exclude inventory movements, amortization of advanced royalties, allocations of corporate overheads or share-based compensation expense.  All-in sustaining costs quoted on a consolidated basis, exclude inventory movements and amortization of advanced royalties but include corporate administration expense and share-based compensation expense.  Please refer to Non-IFRS Financial Measures in the Company's Management's Discussion and Analysis for the three and twelve months ended December 31, 2018.
  
(2)This is a non-IFRS financial measure and does not have a standard meaning under IFRS. 

Starting in 2018, the Company adopted “adjusted net profit attributable to shareholders” and “adjusted basic earnings per share” as new non-IFRS financial measures.  These non-IFRS financial measures are used by management and investors to measure the underlying operating performance of the Company.  Presenting these measures from period to period is expected to help management and investors evaluate earnings trends more readily in comparison with results from prior periods.

The Company calculates “adjusted net profit attributable to shareholders” as net (loss)/profit attributable to shareholders adjusted to exclude specific items that are significant, but not reflective of the underlying operations of the Company, including: the impact of unrealized and realized foreign exchange gains and losses, gains and losses on derivative instruments, accretion expense on long-term obligations, impairment provisions and reversals thereof, and other unusual or non-recurring items.  Commencing the second quarter 2018, the Company also excluded the impact of foreign exchange movements on deferred taxes and other non-cash fair value changes from adjusted net profit attributable to shareholders as management does not believe these factors to be reflective of the underlying performance of the Company.

“Adjusted basic earnings per share” is calculated using the weighted average number of shares outstanding under the basic method of earnings per share as determined under IFRS.

Adjusted net profit attributable to shareholders and adjusted basic net earnings per share are calculated as follows:


 Three months ended 
December 31,

 Twelve months ended 
December 31,

 
(US$000s)2018 2017 2018 2017 
Net (loss)/profit attributable to shareholders(10,639)5,758 11,794 31,932 
         
Adjustments (net of tax) for:        
Loss/(gains) on derivative instruments7,149 3,488 (9,299)(1,832)
Accretion expense2,077 340 9,646 778 
Acquisition- - - 52 
Net foreign exchange losses422 497 3,008 4,536 
Impact of foreign exchange on deferred taxes1,847 (1,366)4,379 (5,360)
Change in fair value of share warrant liability137 - (1,136)- 
Change in fair value of gold offtake payment liability236 - (317)- 
Adjusted net profit attributable to shareholders1,229 8,717 18,075 30,106 
         
Basic (loss)/earnings per share(0.10)0.05 0.11 0.30 
Adjusted basic earnings per share0.01 0.08 0.17 0.28 

FORWARD-LOOKING STATEMENTS

This press release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws ("forward-looking statements"), which reflects management's expectations regarding Teranga’s future growth opportunities, results of operations, performance (both operational and financial) and business prospects (including the timing and development of new deposits and the success of exploration activities) and other opportunities. Wherever possible, words such as "plans", "expects", "does not expect", "scheduled", "trends", "indications", "potential", "estimates", "predicts", "anticipate" “to establish” or "does not anticipate", "believe", "intend", "ability to" and similar expressions or statements that certain actions, events or results "may", "could", "would", "might", "will", or are "likely" to be taken, occur or be achieved, have been used to identify such forward looking information. Specific forward-looking statements in this presentation include forecasting 2019 gold production, cost guidance and anticipated timing for first gold pour and ramp up to nameplate production at Wahgnion.  Although the forward-looking information contained in this press release reflects management's current beliefs based upon information currently available to management and based upon what management believes to be reasonable assumptions, Teranga cannot be certain that actual results will be consistent with such forward-looking information. Such forward-looking statements are based upon assumptions, opinions and analysis made by management in light of its experience, current conditions and its expectations of future developments that management believe to be reasonable and relevant but that may prove to be incorrect. These assumptions include, among other things, the closing and timing of financing, the ability to obtain any requisite governmental approvals, the accuracy of mineral reserve and mineral resource estimates, gold price, exchange rates, fuel and energy costs, future economic conditions, anticipated future estimates of free cash flow, and courses of action. Teranga cautions you not to place undue reliance upon any such forward-looking statements.

The risks and uncertainties that may affect forward-looking statements include, among others: the inherent risks involved in exploration and development of mineral properties, including government approvals and permitting, changes in economic conditions, changes in the worldwide price of gold and other key inputs, changes in mine plans and other factors, such as project execution delays, many of which are beyond the control of Teranga, as well as other risks and uncertainties which are more fully described in Teranga's Annual Information Form dated March 29, 2018, and in other filings of Teranga 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 document should be construed as either an offer to sell or a solicitation to buy or sell Teranga securities. All references to Teranga include its subsidiaries unless the context requires otherwise.

ABOUT TERANGA

Teranga is a multi-jurisdictional West African gold company focused on production and development as well as the exploration of approximately 6,400 km2 of land located on prospective gold belts.  Since its initial public offering in 2010, Teranga has produced more than 1.6 million ounces of gold at its Sabodala operation in Senegal. Focused on diversification and growth, the Company is advancing construction of its second producing gold mine, Wahgnion, which is located in Burkina Faso, as well as carrying out exploration programs in three West African countries:  Burkina Faso, Côte d’Ivoire and Senegal.  The Company had more than 4.0 million ounces of gold reserves as of June 30, 2018.  Teranga applies a rigorous capital allocation framework for its investment decisions and is focused on funding future organic growth plans responsibly. 

Steadfast in its commitment to set the benchmark for responsible mining, Teranga operates in accordance with the highest international standards and aims to act as a catalyst for sustainable economic, environmental, and community development as it strives to create value for all of its stakeholders.  Teranga is a member of the United Nations Global Compact and a leading member of the multi-stakeholder group responsible for the submission of the first Senegalese Extractive Industries Transparency Initiative revenue report.