JOHANNESBURG (miningweekly.com) – London-listed gold producer African Barrick Gold (ABG) says it has started the new financial year stronger, with the first quarter of 2014 delivering higher production and lower all-in sustaining costs.

The Tanzania-focused group on Thursday reported gold output of 168 375 oz during the quarter under review – an 18% rise on the first quarter of 2013.

The achieved all-in sustaining costs of $1 131/oz during the quarter was 3% lower than the fourth quarter of 2013 and 28% lower than the first quarter of 2013.

"We have delivered another strong set of results … [and] remain on track to achieve our guidance of [between] 650 000 oz [and] 690 000 oz of gold production at all-in sustaining costs an ounce of between $1 100 and $1 175,” ABG CEO Brad Gordon said.

However, while the 159 384 oz of gold sold during the period was 10% higher than the corresponding quarter last year, a 19% lower average realised gold price of $1 303/oz resulted in a 12% drop in revenue to $216-million and a 21% decline in earnings before interest, tax, depreciation and amortisation (Ebitda) to $65-million.

Net earnings for the first quarter increased 8% to $22.4-million, or 5.5c a share, compared with the first quarter of 2013, and after sustaining capital, ABG generated cash flow from operations of $13.3-million.

ABG also cut total capital expenditure 47% to $55.7-million during the three months to March 2014.

“As a result of our continued cost discipline, we generated positive cash from the operations during the quarter and continue to expect to be cash-flow positive for the full year,” Gordon said.

The group ended the quarter with a cash position of $254-million.

“We remain committed and on track to deliver against the $185-million cost-saving target as previously set out and reflected in our all-in sustaining cost guidance,” Gordon added.

Further, he pointed out that ABG was progressing the ongoing review of its core mining areas, which was expected to deliver further efficiencies and cost savings “throughout 2014 and beyond”.

Meanwhile, the gold producer on Thursday approved the next step in optimising production levels at its Bulyanhulu operation, in Tanzania, through the acceleration of mining from the Upper East zone.

“One of our key aims for this year is to demonstrate the potential that exists at Bulyanhulu and to ensure that the production base is more representative of the scale of the reserve base,” Gordon said.

The company would inject about $15-million to deliver initial production from the zone within three months.

Gordon noted that the zone would produce 1.7-million ounces of gold – averaging 60 000 oz/y – over 25 years at all-in sustaining costs of $900/oz.

The first phase of development comprised the ordering and mobilisation of the equipment required for the underground development to start in the first half of 2014, with first ore expected to be mined soon thereafter.

The second phase, expected to kick off in 2015, would see the start of a $20-million process plant expansion to increase plant capacity from 1.1-million tonnes a year to 1.3-million tonnes a year by 2016.

Further, ABG would, in 2017, embark on the two-year construction of a box cut over the shallower portion of the Upper East zone.

“The box cut will be the location [of] a second decline [and] will be developed to open up the shallower reserves on Reefs 1 and 2,” explained Gordon.

ABG would also continue, throughout the second quarter of 2014, commissioning the carbon-in-leach expansion at the mine, which, together with the acceleration of the Upper East zone and the mined grade improvement, would provide “a clear path” to increase output from Bulyanhulu to over 350 000 oz/y by 2015.