TERANGA Gold cleared an inventory backlog of $38m in gold bullion by clubbing together with other West African gold producers who chartered flights to gold refineries in Europe.
The company, listed in Toronto, said it would continue to overcome the suspension of commercial flights out of Africa as a result of COVID-19 lockdowns by cooperating with a number of firms in Burkina Faso, and one other firm in Senegal. “Flights will leave every two weeks,” said Navin Dyal, vice-chairman and CFO of Teranga Gold.
Teranga reported a negative $9.8m hit to operating cash flow in the first quarter of its 2020 financial year as a result of inventory build up. Some 23,600 ounces of gold valued at an average price of $1,609/oz was affected by the cancellation of flights.
All in all, Teranga reported a 97% year-on-year decline in operating cash flow for the March quarter as a result of the inventory build-up and some other factors such as the repayment of a gold advance. Despite this setback, it reported strong production numbers for the quarter.
It’s newly commissioned mine Wahgnion in Burkina Faso shot the lights out with throughput far in excess of expectations and that may necessitate a change in mine plan in order to accommodate the switch-up in output.
Sabodala, a mine in Senegal, had a somewhat less impressive quarter but total group production for the three months still came in 27% higher year-on-year at 91,312 oz. The company is expected to announce itself a mid-tier gold producer by year-end.
This is the view of president and CEO, Richard Young, who said in a conference call today Teranga was well advanced with the incorporation of a third mine – the Massawa complex – bought from Barrick Gold in a $430m cash and shares deal.
“We have advanced a lot in the last couple of years but we are only just getting started,” said Young. “We expect to reposition ourselves as a low-cost, mid-tier gold producer.”
Massawa is located close to Sabodala and will therefore form a single footprint for Teranga in Senegal and take full-year production significantly ahead of the 345,000 to 355,000 oz guided for the current, 2020 financial year.
Young added that at spot dollar gold the company expected to be net cash by the end of 2021 whereafter the board would be realistically called upon to form a dividend policy. “Much in life is to do with timing,” said Young.
Shares in Teranga Gold increased four per cent in early Toronto trade, but on a year-to-date basis, the stock is up about 220%.
