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Teranga Gold Corporation: June Quarter Report

TORONTO, ONTARIO -- (Marketwired) -- 07/30/14 -- TERANGA GOLD CORPORATION (TSX: TGZ)(ASX: TGZ) -

(All amounts are in US$000's unless otherwise stated)

For a full explanation of Financial, Operating, Exploration and Development results please see the Interim Condensed Consolidated Financial Statements as at and for the period ended June 30, 2014 and the associated Management's Discussion & Analysis at www.terangagold.com.


--  Gold production for the three months ended June 30, 2014 totaled 39,857
    ounces. Total cash costs were $815 per ounce sold(1) and all-in
    sustaining costs were $1,060 per ounce sold(1) for the three months
    ended June 30, 2014.

--  Despite the weaker second quarter the Company remains on track to meet
    its full year production guidance of 220,000 to 240,000 ounces(2), but
    expects production at the lower end of the guidance range; total cash
    costs are expected at the higher end of the range of $650 to $700 per
    ounce sold(1), and all-in sustaining costs are now expected to average
    about $900 per ounce, $25 per ounce higher than the top end of the
    original guidance range $800 to $875 per ounce sold(1).

--  The Company expects a strong second half of the year with higher
    production and lower costs resulting from higher grades mined at
    Sabodala and from high grade production from Masato.

--  A non-cash inventory write-down to net realizable value of $13.4 million
    ($0.04 loss per share) resulted in a consolidated loss attributable to
    shareholders of $12.0 million ($0.04 loss per share) in second quarter
    2014.

--  Development of the Masato deposit, the first of the Oromin Joint Venture
    Group ("OJVG") deposits to be mined, is complete with mining expected to
    commence in third quarter 2014.

--  Technical analysis on mill optimization is expected to be completed in
    the third quarter.

--  Heap leach testing is underway, preliminary results are expected in the
    third quarter and a preliminary economic analysis by year end.

--  Infill drilling of the Masato high grade zone is complete, assays
    expected shortly. Reserve development drilling of high grade deposits
    continues on the OJVG mine license.

--  During the second quarter, the Company closed on its offering of
    36,000,000 common shares at a price of C$0.83 per share for net proceeds
    of $25.4 million.

--  Cash balance at June 30, 2014 was $28.4 million, including restricted
    cash. To date, the Company has made approximately $35.0 million of $80.0
    million in one-time payments planned for 2014, including debt
    repayments, one-time costs related to its Global Agreement with the
    Republic of Senegal and acquisition-related costs to acquire the OJVG.
    The Company remains on track to retire the balance of the debt facility
    outstanding by December 31, 2014.

"Despite a weaker quarter at Sabodala we are on track to meet our production guidance but at the lower end of guidance. The integration of the OJVG and the growth initiatives announced at the beginning of the year are moving forward quickly. Development of Masato, the first OJVG deposit, is complete and mining is to begin in the third quarter, two quarters post-acquisition. Reserve development drilling, mill optimization and heap leach testing began in the second quarter. We expect to be announcing the results of these growth projects through the balance of the year. Higher grades at Sabodala and the addition of Masato should lead to a strong second half of the year with higher production and lower costs", said Richard Young, President and CEO.

OPERATIONAL HIGHLIGHTS (details in Review of Second Quarter Operating Results table)


--  Gold production for the three months ended June 30, 2014 was 39,857
    ounces, 20 percent lower than the same prior year period due to lower
    mined and processed grade partly offset by higher tonnes milled. Gold
    production for the quarter was weaker than expected due to lower mined
    grade during the second half of the quarter, and longer than planned
    downtime associated with scheduled maintenance of the crushing and
    milling circuits in May.

--  Total cash costs for the three months ended June 30, 2014, excluding a
    non-cash inventory write-down to net realizable value ("NRV"), were $815
    per ounce, compared to $642 per ounce in the same prior year period.
    While total mine production costs were 9 percent lower than the year
    earlier quarter, higher per ounce costs were due to lower production and
    lower capitalized deferred stripping costs compared to the year earlier
    period.

--  All-in sustaining costs for the three months ended June 30, 2014,
    excluding a non-cash inventory write-down to NRV, were $1,060 per ounce,
    11 percent lower than the same prior year period. All-in sustaining
    costs were lower due to lower capital expenditures in the current year
    period.

--  Total tonnes mined for the three months ended June 30, 2014 were 18
    percent lower compared to the same prior year period. Mining activities
    in the current year were solely focused on lowering the benches of phase
    3 of the Sabodala pit which has an overall reduced stripping ratio. In
    the same prior year period, mining activities were focused on completing
    phase 2 near the bottom of the Sabodala pit combined with primarily
    waste stripping of the upper benches of phase 3.

--  Total tonnes mined are expected to decline further in the second half of
    the year in line with the Company's plan to minimize material movement
    in the current gold price environment with a focus on maximizing free
    cash flows.

--  Ore tonnes mined for the three months ended June 30, 2014 were 40
    percent higher than the same prior year period as mining activities in
    the prior year period was mainly focused on waste stripping of phase 3.

--  Ore tonnes and overall grade mined in the second half of the quarter
    were lower than planned as mining activity focused on a peripheral area
    of the Sabodala ore body on the upper benches of phase 3. This area of
    the ore body has shown less continuity than in other peripheral areas
    previously mined. Greater variation in grade and thickness and
    complexity in the geometry and continuity resulted in lower than
    expected grades and ore tonnage. Management changed its practices for
    ore recovery in these areas by increasing sampling, revising blast hole
    modeling and mining the ore zones at 5 metre benches from the previous
    10 metre bench intervals.

--  In addition, access to a high grade area of the deposit, scheduled for
    mining in the second quarter was deferred into the third quarter due to
    bench access constraints which required a small redesign of phase 3.
    This modification adds 1.3 million waste tonnes to the 2014 plan that
    was originally scheduled for mining in phase 4 of the Sabodala pit in
    2016.

--  Mining through the balance of the year is primarily taking place in the
    high grade area of the Main Flat Zone. This is expected to lead to
    higher ore grades mined and processed in the second half of 2014.
    Provided grades and ore tonnes mined are on plan, the Company remains on
    track to meet its 2014 production guidance of 220,000 to 240,000 ounces
    but expects production at the lower end of the range.

--  Total mining costs for the three months ended June 30, 2014 were 10
    percent lower than the same prior year period due to decreased material
    movement partly offset by higher costs for light fuel oil (LFO) and
    higher costs associated with the redesign of phase 3 and mining in 5
    metre benches from the previous 10 metres. Unit mining costs for the
    three months ended June 30, 2014 were 10 percent higher than the same
    prior year period due to fewer tonnes mined. Mining is concentrated on
    the lower benches of phase 3 of the mine plan with limited space
    resulting in lower productivity.

--  Total mining costs for the balance of the year are expected to be
    approximately $7.0 million higher than plan due to changes in the mine
    plan that will result in an additional 2.6 million tonnes mined, half of
    which, as noted previously, is related to the redesign of phase 3 and
    the balance is related to earlier than planned access to Masato.

--  The development of Masato, the first deposit from the OJVG acquisition,
    is complete and ready for production in the third quarter.

--  Ore tonnes milled for the three months ended June 30, 2014 were 15
    percent higher than the same prior year period due to improvements made
    during the first and second quarters of 2013 to reduce the frequency and
    duration of unscheduled operational downtime and increase throughput in
    the crushing circuit to better match mill capacity. During the second
    quarter of 2014, scheduled maintenance of the crushing and milling
    circuits resulted in a net 10 days of planned and unplanned downtime in
    May, due to repairs to the secondary cone crusher, replacement of high
    wear components in the SAG mill and repairs to the primary crusher. No
    major downtime is scheduled for the balance of the year.


--  Processed grade for the quarter ended June 30, 2014 was 28 percent lower
    than the same prior year period, mainly due to lower ore grades.

--  Total processing costs for the three months ended June 30, 2014 were 3
    percent higher than the same prior year period, mainly due to higher
    mill throughput. Unit processing costs for the three months ended June
    30, 2014 were 10 percent lower than the prior year period due to higher
    tonnes milled.

--  Total mine site general and administrative costs for the three months
    ended June 30, 2014 were 7 percent lower than the prior year mainly due
    to lower insurance costs. Unit general and administration costs for the
    three months ended June 30, 2014 were 21 percent lower than the same
    prior year period due to lower general and administrative costs and
    higher tonnes milled.

FINANCIAL HIGHLIGHTS (details in Review of Second Quarter Financial Results table)


--  Gold revenue for the three months ended June 30, 2014 was $57.5 million,
    24 percent lower than the same prior year period. The decrease in gold
    revenue was due to 20 percent lower production and 6 percent lower
    realized gold prices during the second quarter of 2014.

--  During the second quarter 2014, the Company recorded a loss attributable
    to shareholders of $12.0 million ($0.04 loss per share), compared to a
    profit attributable to shareholders of $7.2 million ($0.03 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 a non-cash
    inventory write-down to NRV totaling $13.4 million and lower revenues.

--  During the three months ended June 30, 2014, the Company recognized a
    non-cash write-down on long-term low-grade ore stockpile inventory of
    $13.4 million, as a result of an increase in costs added to low-grade
    ore stockpiles during the quarter. Fewer ounces mined during the quarter
    resulted in an increase in the per ounce cost of inventory (including
    applicable overhead, depreciation and amortization). Higher per ounce
    inventory costs have a greater impact on low-grade stockpile values
    because of the higher future processing costs required to produce an
    ounce of gold. The non-cash write-down represents the portion of
    historic costs that would not be recoverable based on the Company's
    long-term forecasts of future processing and overhead costs at a gold
    price of $1,237 per ounce (including the impact of the Franco-Nevada
    gold stream). Fluctuations in the mine plan result in wide fluctuations
    in the per ounce cost of our long-term ore stockpiles. During periods
    where fewer ounces are mined, per ounce costs rise, while during those
    periods when mining takes place in higher grade areas, per ounce costs
    fall. As mining takes place in higher grade areas of Sabodala and
    Masato, a portion of this non-cash write-off is expected to reverse over
    the course of the balance of the year. Conversely, should long-term gold
    prices decline or future costs rise, there is a potential for further
    NRV adjustments.


--  Cash flow used in operations was $9.8 million for the three months ended
    June 30, 2014, compared to cash flow provided by operations of $20.8
    million in the same prior year period. The decrease in operating cash
    flow compared to the prior year quarter was due to lower revenues and
    higher net working capital outflows.

--  Capital expenditures for the three months ended June 30, 2014 were $6.8
    million compared to $26.0 million in the same prior year period. The
    decrease in capital expenditures was mainly due to lower sustaining and
    development expenditures and lower capitalized deferred stripping in the
    second quarter of 2014.

--  During the second quarter of 2014, 44,285 ounces were sold at an average
    realized gold price of $1,295 per ounce. During the second quarter of
    2013, 54,513 ounces were sold at an average realized price of $1,379 per
    ounce.

--  On May 1, 2014, the Company closed on its offering of 36,000,000 common
    shares at a price of C$0.83 per share for gross proceeds of C$29.9
    million, with a syndicate of underwriters. Net proceeds were $25.4
    million after consideration of underwriter fees and expenses totaling
    approximately $1.9 million.

--  The Company's cash balance at June 30, 2014 was $28.4 million, including
    restricted cash. Cash and cash equivalents were similar to the balance
    reported at March 31, 2014, as the increase in cash from the proceeds of
    the share offering was offset by cash flow used in operations of $9.8
    million, debt and interest repayments totaling $9.2 million and capital
    expenditures of $6.8 million.

--  For the year to date ended June 30, 2014, the Company has made a total
    of $35.0 million in one-time payments. This includes $16.4 million in
    debt repayments, $2.1 million in payments to the Republic of Senegal and
    one-time payments related to the acquisition of the OJVG, including $9.0
    million for transaction, legal and office closure costs and $7.5 million
    to acquire Badr's share of the OJVG.

OUTLOOK 2014


--  Despite the weaker second quarter, the Company remains on track to meet
    its 2014 annual production guidance range of 220,000 to 240,000 ounces
    but expects production at the lower end of the range. Total production
    costs, including mining, processing and site general and administrative
    expenditures are expected to be at the higher end of guidance of $155 to
    $165 million due to changes in the mine plan that result in more
    material moved than planned.(3) As a result, total cash costs are
    expected to be at the higher end of the original guidance range of $650
    to $700 per ounce.

--  Total exploration and evaluation expenditures for the Sabodala and OJVG
    mine licenses as well as the Regional Land Package were originally
    expected to total approximately $10 million for 2014. However, the
    expenditures may increase to $12 million, for additional drilling, to
    expedite the conversion of resources to reserves on the mine licenses.

--  Administrative and Corporate Social Responsibility ("CSR") expenses are
    expected to be $15 to $16 million, in line with guidance. These include
    corporate office costs, Dakar and regional office costs and CSR costs,
    but exclude corporate depreciation, transaction costs and other non-
    recurring costs.

--  Sustaining capitalized expenditures, including sustaining mine site
    expenditures, project development expenditures, capitalized deferred
    stripping, reserve development expenditures and payments to the Republic
    of Senegal were originally expected to be $28 to $33 million. In the
    first half of 2014, Management identified further growth opportunities
    (please see Business and Project Development section for additional
    information) including opportunities to convert resources to reserves on
    the mine licenses; mill optimization opportunities to increase the
    milling rate; and opportunities to accelerate heap leach testing and
    related activities. Including planned expenditures for these growth
    opportunities, and through optimization of existing capital projects,
    total capital expenditures are now expected to be approximately $33
    million in 2014.

--  As a result of production at the lower end of guidance and cash cost at
    the higher end of guidance, the Company now expects all-in sustaining
    costs of about $900 per ounce, $25 per ounce higher than the top end of
    the original guidance range of $800 to $875 per ounce.

--  Total depreciation and amortization for the year is expected to be
    between $285 and $315 per ounce sold in line with guidance, comprised of
    $125 to $140 per ounce sold related to depreciation on Sabodala plant,
    equipment and mine development assets, $40 to $45 per ounce sold related
    to assets acquired with the OJVG and $120 to $130 per ounce sold for
    depreciation of deferred stripping assets. At the end of 2014, the
    balance of the deferred stripping asset related to Sabodala is expected
    to be approximately $30 million, which will be amortized over the mining
    of phase 4 of the Sabodala pit.

BUSINESS AND PROJECT DEVELOPMENT

Franco-Nevada Gold Stream


--  On January 15, 2014, the Company completed a gold stream transaction
    with Franco-Nevada Corporation ("Franco-Nevada"). The Company 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, in
    exchange for a deposit of $135.0 million. Franco-Nevada's purchase price
    per ounce is set at 20 percent of the prevailing spot price of gold.

--  The deposit of $135.0 million has been treated as deferred revenue
    within the statement of financial position.

--  During the three months ended June 30, 2014, the Company delivered 5,625
    ounces of gold, to Franco-Nevada. During the three months ended June 30,
    2014, the Company recorded revenue of $7.3 million, consisting of $1.5
    million received in cash proceeds and $5.8 million recorded as a
    reduction of deferred revenue.

Acquisition of the OJVG


--  During the third and fourth quarters of 2013, the Company issued
    71,183,091 Teranga shares to acquire all of the Oromin shares (Oromin
    being one of the three joint venture partners holding 43.5 percent of
    the OJVG) for total consideration of $37.8 million.

--  On January 15, 2014, the Company acquired the balance of the OJVG that
    it did not already own from Bendon International Ltd. ("Bendon") and
    Badr Investment Ltd. ("Badr").

--  The Company acquired Bendon's 43.5 percent participating interest in the
    OJVG for cash consideration of $105.0 million. Badr's 13 percent carried
    interest in the OJVG was acquired for cash consideration of $7.5 million
    and further contingent consideration based on higher realized gold
    prices and increases to OJVG reserves through 2020. For the three months
    ended June 30, 2014, $3.8 million of contingent consideration has been
    accrued based on targeted additions to OJVG reserves. The acquisitions
    of Bendon's and Badr's interest in the OJVG were funded by the gold
    stream agreement with Franco-Nevada and from the Company's existing cash
    balance.

--  The acquisition of Bendon's and Badr's interests in the OJVG increased
    the Company's ownership to 100 percent and consolidated the Sabodala
    region, increasing the size of the Company's interests in mine license
    from 33km2 to 246km2, more than doubling the Company's reserve base and
    providing the Company with the flexibility to integrate the OJVG
    satellite deposits into its existing operations. The contribution of 100
    percent of the OJVG has been reflected into Teranga's results from
    January 15, 2014.

--  Acquisition related costs of approximately $0.3 million have been
    expensed during the three months ended June 30, 2014, and are presented
    within Other expenses in the consolidated statements of comprehensive
    income.

Golouma Mine License and Extension of Sabodala Mine License


--  During the second quarter of 2014, the integration of the Golouma mine
    license into an expanded Sabodala mine concession was agreed to in
    principle with the Senegalese Ministry of Mines and a revised expanded
    Sabodala mining convention is anticipated to be executed during the
    third quarter. The Company has all approvals required to process Golouma
    ore in the Sabodala mill. The Sabodala mine license was also extended
    until 2022 as part of the integration of the two license areas during
    the second quarter of 2014.

Municipal and Provincial Election in Senegal


--  In June 2014, Senegal held municipal and provincial elections. Following
    the elections, the President re-constituted his cabinet with the
    appointment of a new Prime Minister and a number of new ministers in
    various portfolios. The Ministers of Mines and Finance, key points of
    contact for the Company, remained unchanged. Overall, the Company
    believes the new Prime Minister and new cabinet members will continue
    with the President's pro foreign investment and mining mandate. In fact,
    the new Prime Minister was previously in charge of the Emerging Senegal
    Plan, and visited Sabodala with the President in April of this year.

Base-Case Life of Mine Plan


--  During the first quarter 2014, the Company filed a National Instrument -
    Standards of Disclosures for Mineral Projects ("NI 43-101") technical
    report which include an integrated life of mine ("LOM") plan for the
    combined operations of Sabodala and the OJVG. The integrated LOM plan
    has been designed to maximize free cash flow 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, the
    integrated 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, the integrated LOM production schedule represents
    a "base case" scenario with flexibility to improve gold production
    and/or cash flows in subsequent years. During the second quarter 2014,
    the Company's technical team commenced a review of the 2015 mine plan to
    identify opportunities, which may result in lower material movement,
    lower capital expenditures and higher free cash flows.

Mill Enhancements


--  The average hourly mill throughput rate estimated when the crusher is in
    operation is approximately 430 tonnes per operating hour (tpoh) or 3.5
    million tonnes per annum (mtpa). However, the mill has experienced
    periods of sustained operation where the mill throughput has exceeded
    480 tpoh. These occurrences have typically been when the mill was
    operating when the primary and secondary crushed ore stockpile levels
    have been full. Analysis of plant data shows that there is a correlation
    between the crusher downtime and mill throughput, which in turn is
    directly related to the inventory level of the crushed stockpiles.

--  Several engineering studies have been initiated to determine potential
    throughput enhancements to the current plant design, including:

    --  The design and cost to install a second crushing system that would
        provide redundancy and near 100% availability to the crusher
        stockpiles.

    --  The quantification of the relationship between an increase in
        crusher availability to the SAG and Ball mill system (SABC), as well
        as other design enhancements within the crush and grinding system.

--  Key milestones for the project are as follows:

    --  Quantify SAG mill critical sizing relationships and throughput
        potential through test work and simulation;

    --  Determine the maximum sustained production rate and required design
        changes to the SABC and crushing circuit;

    --  Develop a cost estimate and construction schedule; and

    --  Technical analysis supporting a development decision (targeted for
        completion in third quarter 2014).

--  The Company is targeting an overall 5 to 10 percent increase in
    throughput.

Heap Leach Project


--  The LOM plan shows a significant amount of both oxide and sulphide low
    grade reserves that are mined during the operating period but not
    processed until the end of the mine life. There also exists significant
    potential along an 8km mineralized structural trend covering both mine
    leases to increase the known reserves with near surface, oxidized ore.

--  The potential benefit to accelerating value from this ore earlier by
    feeding it through a heap leach process is being evaluated. A
    comprehensive testwork program is in progress that will evaluate the
    heap leach potential for:

    Phase 1
            - Saprolite, near surface ore
            - Various stages of the soft and hard oxidized transition zones

    Phase 2
            - Sulphide ore on the ROM stockpile

--  Previous testwork has shown that there are higher capital and operating
    costs to heap leaching ore as depth increases and the level of oxidation
    decreases. Phase 1 of the testwork will form the basis to determine the
    optimum economics for three geological zones within the oxide:
    saprolite, soft transition and hard transition. Phase 2 of the analysis
    will examine the leachability for the sulphide ore. However, since this
    is likely to include much higher capital and operating costs, the
    decision to proceed in this phase will be contingent on the results of
    the testwork carried out for Phase 1.

--  The testwork is being completed by Klappes, Cassidy and Associates (KCA)
    at their facilities in Reno, Nevada, who are experienced in testing and
    designing heap leach facilities throughout the world, including West
    Africa. Phase 1 of the program is expected to be completed in third
    quarter 2014, at which point engineering design can commence to
    determine capital costs and operating parameters as a basis for economic
    analysis.

--  The decision to initiate testwork for Phase 2 of the program will be
    based on the results of Phase 1.

--  Key milestones for the project are as follows:

--  Complete Phase 1 testwork, economic analysis and if warranted, initiate
    engineering design to pre-feasibility study ("PFS") level - third
    quarter 2014;

--  Complete additional follow up optimization testwork and, if warranted,
    initiate Phase 2 testwork - third/fourth quarters 2014;

--  Commence preliminary economic analysis and make development decision -
    fourth quarter 2014; and

--  Initiate feasibility study ("FS") level engineering design, initiate
    targeted resource drilling and environmental studies to support an
    environmental and social impact assessment ("ESIA") submission - 2015

--  The Company is targeting potential annual heap leach production between
    30,000 and 50,000 ounces commencing 2017.

Gora Development


--  The Gora deposit which hosts 0.29 million ounces of proven and probable
    reserves at 4.74 g/t will be operated as a satellite deposit 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 revised environmental and social impact assessment ("ESIA") for the
    Gora project was filed with the Senegalese authorities on April 1, 2014.
    The revised EISA is required to be validated by a technical committee
    and once approved it is then presented by that authority to a public
    hearing. Following the public hearing it is anticipated that the
    Ministry of Environment ("MOE") will issue an environmental approval for
    the Gora project. The technical committee meeting to validate the
    revised Gora EISA is scheduled for August. Assuming a successful
    validation hearing, Management anticipates the final approval to be
    received by the MOE within 30 to 60 days.

--  Management expects the permit process to be completed in third quarter
    2014 and construction to be initiated based on the new integrated LOM
    plan with the OJVG by fourth quarter 2014. Initial engineering is
    ongoing and site surveys were conducted during the second quarter 2014
    to allow for initiation of the access road construction in late 2014.

Sabodala Mine License 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.

Niakafiri


--  In 2013, additional surface mapping was completed at Niakafiri in
    conjunction with the re-logging of several diamond drill holes which
    were incorporated into the geological model for the Niakafiri deposit.
    Further exploration work, including additional drilling, is targeted for
    the fourth quarter of this year following discussions with Sabodala
    village.

--  In addition to the potential expansion of hard ore reserves at
    Niakafiri, the Company is exploring for potential softer ore that may be
    conducive to heap leach, with emphasis on the mineralized trend to the
    north and south of the current reserves at Niakafiri.

OJVG Mine License Reserve Development


--  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 reserve additions within the
    mining lease. These targets have been selected based on potential for
    discovery and inclusion into open pit reserves.

Masato


--  Development of the Masato deposit is complete and is ready for mining
    once the geological drilling programs have been completed and analyzed.
    The access road construction, waste dump preparation, mine
    infrastructure and bench access development have been completed.

Masato Geology Programs


--  A significant amount of geological field work occurred on the Masato Ore
    body during the second quarter 2014 to increase understanding in
    preparation for mining in the second half of 2014. These programs
    include infill Diamond Drill Hole ("DDH") drilling of the high grade
    zones, a gridded pattern Reverse Circulation ("RC") grade control
    program, surface trenching and a condemnation drilling program for the
    waste dump areas.

1.  Infill DDH Drilling

  During the second quarter 2014, 22 diamond drill holes totaling
  approximately 2,800 metres were completed to confirm the existing
  interpretation and grades of the mineralization domains, upgrade resource
  classification of Inferred Resource blocks, "twin" previously drilled
  holes and delineate high grade zones. Sampling and dispatch of core
  samples to ALS Chemex in South Africa is ongoing. Assay results are
  expected in third quarter 2014 and will be incorporated into an updated
  resource model.

  A total of 4 diamond drill holes were drilled for geotechnical data and
  testing. Logging is ongoing and will be completed in third quarter 2014.

2.  Surface Mapping, Trenching and RC Grade Control

  A gridded RC drill program has been planned to delineate mineralization at
  10 metre spacing to determine the optimal spacing of RC holes for the mine
  operations grade control program. A total of 98 holes totaling 6,100
  metres are planned in two separate test blocks in the Masato north and
  south pit areas. The program was 50 percent complete at the end of second
  quarter 2014, and is expected to be completed during third quarter 2014.
  Assay results from the first 28 holes have been received and confirm the
  existing mineralization model trends and grades.

  A total of 16 trenches have been planned to confirm the location and
  grades of near surface mineralization. Approximately 85 percent of the
  trenches in the North Pit area have been excavated with 50 percent of
  these having been mapped and sampled. The remaining trenching and sampling
  programs with the receipt of assay results is expected to be completed in
  third quarter 2014. Four additional trenches were excavated for heap leach
  sampling program. Assay results returned to date confirm the surface
  location of mineralization and gold grades from adjacent drill holes.

3.  Condemnation RAB drilling

  A Rotary Air Blast ("RAB") drilling sterilization program over the planned
  dumps and lay down footprint areas was completed during second quarter
  2014. Approximately 80 percent of the assay results have been received to
  date of which the maximum gold value reported was 0.6 g/t. There is no
  indication at present of economic concentrations of gold occurring in
  these areas.

  Data from the RAB drilling program was used in conjunction with surface
  mapping data to produce soil isopach plans (for stripping and stock piling
  of topsoil) and soil characteristics for geotechnical investigations.

Golouma


--  Infill drilling is planned for potential conversion of inferred
    resources and evaluating the mineralization potential of structural
    features along strike to the existing reserves. Since access has been
    established, drilling is expected to commence in third quarter 2014.

Kerekounda


--  Both RC and DDH drilling is planned to determine the extent of
    mineralization further along strike of the existing reserves. This
    program is expected to commence in fourth quarter 2014.

Niakafiri SE and Maki Medina


--  Both RC and DDH drilling is planned for potential conversion of inferred
    resources, geotechnical holes for pit wall determination and exploratory
    holes to the north toward the Niakafiri deposit to evaluate extension
    along strike. Pending results of the heap leach test work, additional
    drilling to determine near surface oxide resources may also be
    evaluated. Work in these areas is expected to commence in late third
    quarter 2014 and continue through to the end of the year.

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 past 3 years, with the
    initiation of a regional exploration program on this significant land
    package, a tremendous amount of exploration data has been collected and
    systematically 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 despite being
    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 and the Company is using a systematic,
    disciplined approach to maximize potential for success.

Ninienko


--  An extensive mapping and a trenching program, over 1,500 metres, was
    conducted during second quarter 2014 at the Ninienko prospect. This work
    outlined a 500 metre-plus wide zone with gold mineralization occurring
    in flat lying, near surface (0-2 metres) quartz vein and felsic breccia
    units developed over a strike length of 1,500 metres.

--  Highlights of the elevated gold values reported from these trenches
    include:

  0.5m @ 3.96 g/t, Quartz feldspar breccia
  1.5m @ 7.24 g/t, Broken quartz feldspar breccia
  0.9m @ 7.38 g/t, Quartz vein
  0.4m @ 9.65 g/t, Quartz feldspar breccia and quartz vein
  1.0m @ 2.53 g/t, Quartz feldspar breccia and quartz vein
  1.0m @ 2.70 g/t, Quartz feldspar breccia and quartz vein
  0.4m @ 2.48 g/t, Quartz vein
  1.2m @ 2.45 g/t, Quartz feldspar breccia and quartz vein
  0.8m @ 3.27 g/t, Quartz vein
  1.0m @ 8.89 g/t, Quartz vein

--  An isopach plan of the mineralized quartz vein and felsic breccia
    systems is in progress, this will be used to develop a plan for DDH and
    a possible RC drill program in fourth quarter 2014. Additional trenching
    and mapping will also be undertaken in the second half of 2014.

Soreto


--  Following up on a small 5 DDH program at the Soreto prospect in 2013, a
    program totaling 15 DDH for 2014 has commenced, with 7 DDH totaling
    1,500 metres completed during the second quarter 2014 with assay results
    pending. These were located along two fence lines placed 150 metres on
    either side of the 2013 fence that intersected gold values including 3
    metres at 2.1 g/t, 7 metres at 1.38 g/t and 1 metre at 12.2 g/t. Several
    of these holes intersected shallow dipping (25 - 35 degrees ) altered
    shear zones with felsic dyke, sheared and brecciated silicified
    metasediments containing quartz-carbonate veins with disseminated pyrite
    and visible gold in places. The shear zones coincide with the major NNE
    regional shear structure with an associated 6km long geochemical soil
    anomaly. Sampling and dispatch of split core samples to ALS Chemex in
    South Africa is ongoing.

--  A further 8 DDH totaling 2,000 metres are planned to be drilled along
    the current fence lines. It is expected that all the DDH will be sampled
    and assay results received by the end of third quarter 2014.

KC Prospect


--  Approximately 3,200 metres of trenching was completed across a
    mineralized structural trend with intense quartz veining and brecciated
    felsic intrusives developed over a strike length of approximately 1,800
    metres. Sampling of the trenches yielded elevated gold values in the
    overburden of up to 18.45 g/t over 0.4 metres and 6.27 g/t over 0.6
    metres. The quartz vein and breccia zone yielded elevated gold values in
    the range of 1.95 g/t over 0.3 metres true width and 1.41 g/t over 0.2
    metres true width with limited continuity along strike. Due to limited
    mineralization in the in situ rock, it was determined that follow up
    drilling was not likely to produce results and resources were best
    allocated to higher prospective targets.

--  A follow-up soil sampling and trenching program is planned in fourth
    quarter 2014 to evaluate a large soil anomaly (peak values of 2.64 g/t
    and 2.38 g/t) located 800 metres to the west of workings which may
    account for the elevated gold anomalies identified in over burden in the
    trenches.

Garaboureya


--  Evaluation of the Garaboureya prospect which shows promise through high
    soil geochemical anomalies and mineralization in outcropping rock is
    planned later in the year. The Company is working to obtain drill core
    from over 200 DDH holes previously drilled which were exploring for iron
    ore deposits on the property. The drill core was not assayed for gold.
    Access to the drill core could help accelerate the understanding of the
    geology.

Review of Second Quarter Financial Results


(US$000's, except where                   Three months            Six months
 indicated)                             ended March 31         ended June 30
                                --------------------------------------------
Financial Data                         2014       2013       2014       2013
----------------------------------------------------------------------------
Revenue                              57,522     75,246    127,324    189,061
Profit attributable to
 shareholders of Teranga           (12,018)      7,196    (8,061)     52,179
  Per share                          (0.04)       0.03     (0.02)       0.21
Operating cash flow                 (9,793)     20,838      4,510     44,478
Capital expenditures                  6,846     25,990      9,556     48,166
Free cash flow (1)                 (16,639)    (5,152)    (5,046)    (3,688)
Cash and cash equivalents
 (including bullion receivables
 and restricted cash)                28,381     53,536     28,381     53,536
Net debt(2)                             280     28,925        280     28,925
Total assets                        706,182    583,937    706,182    583,937
Total non-current financial
 liabilities                        128,069     20,484    128,069     20,484
----------------------------------------------------------------------------
----------------------------------------------------------------------------

Note: Results include the consolidation of 100% of the OJVG's operating
results, cash flows and net assets from January 15, 2014.

(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, bullion receivables and
      restricted cash.

Review of Second Quarter Operating Results



                                          Three months            Six months
                                         ended June 30         ended June 30
                                --------------------------------------------
Operating Results                      2014       2013       2014       2013
----------------------------------------------------------------------------
Ore mined               ('000t)         974        698      2,236      2,011
Waste mined - operating ('000t)       5,233      2,683     11,384      5,197
Waste mined -
 capitalized            ('000t)         458      4,770        955      9,792
                                --------------------------------------------
Total mined             ('000t)       6,665      8,151     14,575     17,000
Grade mined              (g/t)         1.39       1.59       1.51       1.77
Ounces mined              (oz)       43,601     35,728    109,053    114,657
Strip ratio            waste/ore        5.8       10.7        5.5        7.5
Ore milled              ('000t)         817        709      1,710      1,405
Head grade               (g/t)         1.69       2.36       1.86       2.83
Recovery rate              %           89.8       92.3       89.9       92.2
Gold produced(1)          (oz)       39,857     49,661     91,947    117,962
Gold sold                 (oz)       44,285     54,513     98,052    124,180

Average realized price    $/oz        1,295      1,379      1,294      1,217
Total cash cost (incl.
 royalties)(2)         $/oz sold        815        642        750        582
All-in sustaining
 costs(2)              $/oz sold      1,060      1,185        925      1,024

                          ($/t
Mining                   mined)        2.90       2.64       2.85       2.62
                          ($/t
Milling                  milled)      21.29      23.77      19.68      23.13
                          ($/t
G&A                      milled)       4.92       6.25       4.88       6.21
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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
      prior to a non-cash inventory write-down to net realizable value and
      are non-IFRS financial measures that do not have a standard meaning
      under IFRS. Please refer to Non-IFRS Performance Measures at the end
      of this report.

Review of Second Quarter Cost of Sales


                                          Three months            Six months
(US$000's)                               ended June 30         ended June 30
                                --------------------------------------------
Cost of Sales                          2014       2013       2014       2013
----------------------------------------------------------------------------
Mine production costs - gross        40,988     44,901     84,057     87,932
Capitalized deferred stripping      (1,543)   (13,802)    (2,961)   (28,493)
                                --------------------------------------------
                                     39,445     31,099     81,096     59,439

Depreciation and amortization -
 deferred stripping assets            5,038      1,627     12,470      3,814

Depreciation and amortization -
 property, plant & equipment and
 mine development expenditures        8,529     15,692     19,307     33,824
Royalties                             2,422      3,748      5,903      9,358
Rehabilitation                            -          1          -          2

Inventory movements                 (5,518)      2,303   (12,997)      5,640
Inventory movements - non-cash      (1,103)    (1,834)    (1,681)    (3,470)
                                --------------------------------------------
Total cost of sales before
 writedown to net realizable
 value                               48,813     52,636    104,098    108,607

Writedown to net realizable
 value                                9,111          -      9,111          -
Writedown to net realizable
 value - depreciation                 4,312          -      4,312          -
                                --------------------------------------------
                                     13,423          -     13,423          -
                                --------------------------------------------
Total cost of sales                  62,236     52,636    117,521    108,607
----------------------------------------------------------------------------
----------------------------------------------------------------------------


Quarterly Operating and Financial Results



(US$000's, except
 where indicated)                  2014                 2013
                      ------------------------------------------------------
                        Q2 2014  Q1 2014  Q4 2013  Q3 2013  Q2 2013  Q1 2013
----------------------------------------------------------------------------
Revenue                  57,522   69,802   58,302   50,564   75,246  113,815
Average realized gold
 price ($/oz)             1,295    1,293    1,249    1,339    1,379    1,090
Cost of sales            62,236   55,285   50,527   37,371   52,636   55,971
Net earnings (loss)    (12,018)    3,957  (4,220)    (442)    7,196   44,983
Net earnings (loss)
 per share ($)           (0.04)     0.01   (0.01)   (0.00)     0.03     0.18
Operating cash flow     (9,793)   14,303   13,137   16,692   20,838   23,640

Ore mined ('000t)           974    1,262    1,993      537      698    1,312
Waste mined -
 operating ('000t)        5,233    6,151    6,655    3,321    2,683    2,513
Waste mined -
 capitalized ('000t)        458      497      420    4,853    4,770    5,023
Total mined ('000t)       6,665    7,910    9,068    8,711    8,151    8,848
Grade Mined (g/t)          1.39     1.61     1.61     1.08     1.59     1.87
Ounces Mined (oz)        43,601   65,452  103,340   18,721   35,728   78,929
Strip ratio
 (waste/ore)                5.8      5.3      3.6     15.2     10.7      5.7
Ore processed ('000t)       817      893      860      887      709      696
Head grade (g/t)           1.69     2.01     2.11     1.41     2.36     3.31
Gold recovery (%)          89.8     90.1     89.7     91.6     92.3     92.1
Gold produced(1)(oz)     39,857   52,090   52,368   36,874   49,661   68,301
Gold sold (oz)           44,285   53,767   46,561   37,665   54,513   69,667
Total cash costs per
 ounce
 sold(2)(including
 Royalties)                 815      696      711      748      642      535
All-in sustaining
 costs per ounce
 sold(2)
(including Royalties)     1,060      813      850    1,289    1,185      898
Mining ($/t mined)          2.9      2.8      2.6      2.5      2.6      2.6
Milling ($/t mined)        21.3     18.2     18.0     17.6     23.8     22.5
G&A ($/t mined)             4.9      4.8      4.8      4.6      6.3      6.2
----------------------------------------------------------------------------
----------------------------------------------------------------------------


(US$000's, except
 where indicated)            2012
                      ------------------
                        Q4 2012  Q3 2012
----------------------------------------
Revenue                 122,970  105,014
Average realized gold
 price ($/oz)             1,296    1,290
Cost of sales            57,250   45,814
Net earnings (loss)      54,228   26,033
Net earnings (loss)
 per share ($)             0.22     0.11
Operating cash flow      59,670   13,976

Ore mined ('000t)         2,038      655
Waste mined -
 operating ('000t)        4,362    1,786
Waste mined -
 capitalized ('000t)        912    4,456
Total mined ('000t)       7,312    6,897
Grade Mined (g/t)          2.04     1.92
Ounces Mined (oz)       133,549   40,516
Strip ratio
 (waste/ore)                2.6      9.5
Ore processed ('000t)       725      650
Head grade (g/t)           3.40     3.11
Gold recovery (%)          90.7     84.6
Gold produced(1)(oz)     71,804   55,107
Gold sold (oz)           71,604   62,439
Total cash costs per
 ounce
 sold(2)(including
 Royalties)                 532      509
All-in sustaining
 costs per ounce
 sold(2)
(including Royalties)     1,004    1,025
Mining ($/t mined)          3.1      2.7
Milling ($/t mined)        19.9     21.9
G&A ($/t mined)             6.4      5.7
----------------------------------------
----------------------------------------
(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.

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                   Three months            Six months
 indicated)                              ended June 30         ended June 30
                                --------------------------------------------
Cash costs per ounce sold              2014       2013       2014       2013
----------------------------------------------------------------------------
Gold produced(1)                     39,857     49,661     91,947    117,962
Gold sold                            44,285     54,513     98,052    124,180

Cash costs per ounce sold
Cost of sales                        62,236     52,636    117,521    108,607
Less: depreciation and
 amortization                      (13,567)   (17,319)   (31,777)   (37,638)
Less: realized oil hedge gain             -          -          -      (487)
Add: non-cash inventory movement      1,103      1,834      1,681      3,470
Less: inventory writedown to net
 realizable value                  (13,423)          -   (13,423)          -
Less: other adjustments               (246)    (2,135)      (497)    (1,645)
                                --------------------------------------------
Total cash costs                     36,103     35,016     73,505     72,307
Total cash costs per ounce sold         815        642        750        582

All-in sustaining costs
Total cash costs                     36,103     35,016     73,505     72,307
Administration expenses(2)            4,009      3,566      7,621      6,689
Capitalized deferred stripping        1,543     13,802      2,961     28,493
Capitalized reserve development         110        509        231      2,837
Mine site capital                     5,191     11,679      6,361     16,836
                                --------------------------------------------
All-in sustaining costs              46,956     64,572     90,680    127,162
All-in sustaining costs per
 ounce sold                           1,060      1,185        925      1,024

All-in costs
All-in sustaining costs              46,956     64,572     90,680    127,162
Social community costs not
 related to current operations          493        368        902        708
Exploration and evaluation
 expenditures                           583      1,486      1,727      3,513
                                --------------------------------------------
All-in costs                         48,032     66,426     93,310    131,383
All-in costs per ounce sold           1,085      1,219        952      1,058

Depreciation and amortization        13,567     17,319     31,777     37,638
Non - cash inventory movement       (1,103)    (1,834)    (1,681)    (3,470)
                                --------------------------------------------
Total depreciation and
 amortization                        12,464     15,485     30,096     34,168
Total depreciation and
 amortization per ounce sold            281        284        307        275
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(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.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF COMPREHENSIVE INCOME / LOSS
(Unaudited and in US$000's except per share amounts)


----------------------------------------------------------------------------
                                          Three months            Six months
                                         ended June 30         ended June 30
                                       2014       2013       2014       2013
----------------------------------------------------------------------------
Revenue                              57,522     75,246    127,324    189,061
Cost of sales                      (62,236)   (52,636)  (117,521)  (108,607)
----------------------------------------------------------------------------
Gross profit                        (4,714)     22,610      9,803     80,454
----------------------------------------------------------------------------


Exploration and evaluation
 expenditures                         (583)    (1,486)    (1,727)    (3,513)
Administration expenses             (4,039)    (3,857)    (8,027)    (7,687)
Share-based compensation              (350)      (356)      (661)      (283)
Finance costs                       (2,648)    (2,861)    (4,764)    (5,557)
Gains on gold hedge contracts             -      3,115          -      5,308
Gains on oil hedge contracts              -          -          -         31
Net foreign exchange losses            (47)      (423)          -      (484)
Loss on available for sale
 financial asset                          -    (3,493)          -    (4,455)
Other expenses                        (248)    (3,691)    (2,033)    (3,682)
----------------------------------------------------------------------------
                                    (7,915)   (13,052)   (17,212)   (20,322)
----------------------------------------------------------------------------
Net (Loss)/profit                  (12,629)      9,558    (7,409)     60,132
----------------------------------------------------------------------------


(Loss)/profit attributable to:
Shareholders                       (12,018)      7,196    (8,061)     52,179
Non-controlling interests             (611)      2,362        652      7,953
----------------------------------------------------------------------------
(Loss)/profit for the period       (12,629)      9,558    (7,409)     60,132
----------------------------------------------------------------------------


Other comprehensive
 income/(loss):
Items that may be reclassified
 subsequently to profit/loss for
 the period
  Change in fair value of
   available for sale financial
   asset, net of tax                    (6)          -          4    (6,418)
  Reclassification to income,
   net of tax                             -          -          -        962
----------------------------------------------------------------------------
Other comprehensive
 income/(loss) for the period           (6)          -          4    (5,456)
----------------------------------------------------------------------------
Total comprehensive
 (loss)/income for the period      (12,635)      9,558    (7,405)     54,676
----------------------------------------------------------------------------


Total comprehensive (loss)/
 income attributable to:
Shareholders                       (12,024)      7,196    (8,057)     46,723
Non-controlling interests             (611)      2,362        652      7,953
----------------------------------------------------------------------------
Total comprehensive
 (loss)/income for the period      (12,635)      9,558    (7,405)     54,676
----------------------------------------------------------------------------


Earnings (loss) per share from
 operations attributable to the
 shareholders of the Company
 during the period

- basic (loss)/earnings per
 share                               (0.04)       0.03     (0.02)       0.21
- diluted (loss)/earnings per
 share                               (0.04)       0.03     (0.02)       0.21

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF FINANCIAL POSITION
(Unaudited and in US$000's)


----------------------------------------------------------------------------
                                            As at June        As at December
                                              30, 2014              31, 2013
----------------------------------------------------------------------------
Current assets
Cash and cash equivalents                       13,381                14,961
Restricted cash                                 15,000                20,000
Trade and other receivables                      2,164                 7,999
Inventories                                     59,448                67,432
Other assets                                     6,471                 5,756
Available for sale financial
 assets                                              9                     6
----------------------------------------------------------------------------
Total current assets                            96,473               116,154
----------------------------------------------------------------------------
Non-current assets
Inventories                                     73,021                63,740
Equity investment                                    -                47,627
Property, plant and equipment                  211,510               222,487
Mine development expenditures                  269,451               173,444
Intangible assets                                  536                   947
Goodwill                                        55,191                     -
----------------------------------------------------------------------------
Total non-current assets                       609,709               508,245
----------------------------------------------------------------------------
Total assets                                   706,182               624,399
----------------------------------------------------------------------------
Current liabilities
Trade and other payables                        39,972                56,891
Borrowings                                      28,661                70,423
Deferred Revenue                                23,838                     -
Provisions                                       2,516                 1,751
----------------------------------------------------------------------------
Total current liabilities                       94,987               129,065
----------------------------------------------------------------------------
Non-current liabilities
Borrowings                                           -                 3,946
Deferred Revenue                                99,492                     -
Provisions                                      14,549                14,336
Other non-current liabilities                   14,028                10,959
----------------------------------------------------------------------------
Total non-current liabilities                  128,069                29,241
----------------------------------------------------------------------------
Total liabilities                              223,056               158,306
----------------------------------------------------------------------------
Equity
Issued capital                                 367,851               342,470
Foreign currency translation
 reserve                                         (998)                 (998)
Other components of equity                      16,100                15,776
Investment revaluation reserve                       4                     -
Retained earnings                               88,680                96,741
----------------------------------------------------------------------------
Equity attributable to
 shareholders                                  471,637               453,989
Non-controlling interests                       11,489                12,104
----------------------------------------------------------------------------
Total equity                                   483,126               466,093
----------------------------------------------------------------------------
Total equity and liabilities                   706,182               624,399
----------------------------------------------------------------------------

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in US$000's)


----------------------------------------------------------------------------
                                                                  Six months
                                                               ended June 30
                                                  2014                  2013
----------------------------------------------------------------------------
Issued capital
Beginning of period                            342,470               305,412
  Shares issued from public
   offerings                                    27,274                     -
  Less: Share issue costs                      (1,893)                     -
----------------------------------------------------------------------------
End of period                                  367,851               305,412
----------------------------------------------------------------------------
Foreign currency translation
 reserve
Beginning of period                              (998)                 (998)
----------------------------------------------------------------------------
End of period                                    (998)                 (998)
----------------------------------------------------------------------------
Other components of equity
Beginning of period                             15,776                16,358
  Equity-settled share-based
   compensation reserve                            324                 1,059
----------------------------------------------------------------------------
End of period                                   16,100                17,417
----------------------------------------------------------------------------
Investment revaluation reserve
Beginning of period                                  -                 5,456
  Change in fair value of
   available for sale financial                      4               (5,456)
   asset, net of tax
----------------------------------------------------------------------------
End of period                                        4                     -
----------------------------------------------------------------------------
Retained earnings
Beginning of period                             96,741                49,225
  Profit attributable to
   shareholders                                (8,061)                52,179
----------------------------------------------------------------------------
End of period                                   88,680               101,404
----------------------------------------------------------------------------
Non-controlling interest
Beginning of period                             12,104                11,857
  Non-controlling interest -
   portion of profit for the                       652                 7,953
   period
  Dividends accrued                            (1,267)               (6,664)
----------------------------------------------------------------------------
End of period                                   11,489                13,146
----------------------------------------------------------------------------
Total shareholders' equity at
 June 30                                       483,126               436,381
----------------------------------------------------------------------------


INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF
TERANGA GOLD CORPORATION
STATEMENTS OF CASH FLOW
(Unaudited and in US$000's)


----------------------------------------------------------------------------
                                          Three months            Six months
                                         ended June 30         ended June 30
----------------------------------------------------------------------------
                                       2014       2013       2014       2013
----------------------------------------------------------------------------
Cash flows related to operating
 activities
(Loss) / Profit for the period     (12,629)      9,558    (7,409)     60,132
Depreciation of property, plant
 and equipment                        5,423     10,880     12,404     26,234
Depreciation of capitalized mine
 development costs                    8,144      6,528     19,373     11,524
Inventory movements - non-cash      (1,103)    (1,834)    (1,681)    (3,470)
Inventory write-down to net
 realizable value - depreciation      4,312          -      4,312          -
Amortization of intangibles             160        252        405        521
Amortization of deferred
 financing costs                        861        518      1,604        868
Inventory write-down to net
 realizable value                     9,111          -      9,111          -
Unwinding of discount on mine
 restoration and rehabilitation         238         25        207         49
 provision
Share-based compensation                350        356        661        283
Deferred gold revenue recognized    (5,830)          -   (11,670)          -
Net change in gains on gold
 forward sales contracts                  -    (3,116)          -   (42,955)
Net change in losses on oil
 contracts                                -          -          -        456
Buyback of gold forward sales
 contracts                                -    (8,593)          -    (8,593)
Loss on available for sale
 financial asset                          -      3,493          -      4,455
Loss on disposal of property,
 plant and equipment                      -          -          -         99
(Increase) / decrease in
 inventories                        (4,971)      4,247   (13,342)      4,526
Changes in working capital other
 than inventory                    (13,859)    (1,476)    (9,465)    (9,651)
----------------------------------------------------------------------------
Net cash provided by (used in)
 operating activities               (9,793)     20,838      4,510     44,478


Cash flows related to investing
 activities
Decrease in restricted cash               -          -      5,000          -
Acquisition of Oromin Joint
 Venture Group ("OJVG")                   -          -  (112,500)          -
Expenditures for property, plant
 and equipment                        (840)    (7,733)    (1,283)   (12,357)
Expenditures for mine
 development                        (6,006)   (18,257)    (8,273)   (35,736)
Acquisition of intangibles                -          -          -       (73)
Proceeds on disposal of
 property, plant and equipment            -          -          -         35
----------------------------------------------------------------------------
Net cash used in investing
 activities                         (6,846)   (25,990)  (117,056)   (48,131)


Cash flows related to financing
 activities
Net proceeds from equity
 offering                            25,485          -     25,485          -
Proceeds from Franco-Nevada gold
 stream                                   -          -    135,000          -
Repayment of borrowings             (8,194)          -   (46,388)          -
Draw down from equipment finance
 lease facility, net of                   -      2,697          -     13,843
 financing costs paid
Financing costs paid                      -          -    (1,000)          -
Interest paid on borrowings           (976)    (1,543)    (2,132)    (3,213)
Dividend payment to government
 of Senegal                               -    (2,700)          -    (2,700)
----------------------------------------------------------------------------
Net cash provided by (used in)
 financing activities                16,315    (1,546)    110,965      7,930


Effect of exchange rates on cash
 holdings in foreign currencies         (1)        156          1        475
----------------------------------------------------------------------------


Net increase (decrease) in cash
 and cash equivalents                 (325)    (6,542)    (1,580)      4,752
Cash and cash equivalents at the
 beginning of period                 13,706     51,016     14,961     39,722
----------------------------------------------------------------------------
Cash and cash equivalents at the
 end of period                       13,381     44,474     13,381     44,474
----------------------------------------------------------------------------

CORPORATE DIRECTORY


Directors                                     Senegal Office
Alan Hill, Chairman                           2K Plaza
Richard Young, President and CEO              Suite B4, 1er Etage
Jendayi Frazer, Non-Executive Director        sis la Route due Meridien
                                              President
                                              Dakar Almadies
Edward Goldenberg, Non-Executive Director     T: +221 338 693 181
Christopher Lattanzi, Non-Executive Director  F: +221 338 603 683
Alan Thomas, Non-Executive Director
Frank Wheatley, Non-Executive Director
                                              Auditor
Senior Management                             Ernst & Young LLP
Richard Young, President and CEO
Mark English, Vice President, Sabodala        Share Registries
Operations
Paul Chawrun, Vice President, Technical       Canada: Computershare Trust
Services                                      Company of Canada
Navin Dyal, Vice President and CFO            T: +1 800 564 6253
David Savarie, Vice President, General        Australia: Computershare
Counsel & Corporate Secretary                 Investor Services Pty Ltd
Kathy Sipos, Vice President, Investor &       T: +1 300 850 505
Stakeholder Relations
Aziz Sy, Vice President, Development Senegal
Macoumba Diop, General Manager and Government
Relations Manager, SGO
                                              Stock Exchange Listings
Registered Office                             Toronto Stock Exchange, TSX
                                              symbol: TGZ
121 King Street West, Suite 2600              Australian Securities
                                              Exchange, ASX symbol: TGZ
Toronto, Ontario, M5H 3T9, Canada
T: +1 416 594 0000                            Issued Capital
                                              ------------------------------
F: +1 416 594 0088                            As of July 30, 2014
                                              ------------------------------
E: [email protected]                   Issued shares      352,801,091
W: http://www.terangagold.com/                Stock options       23,159,933

                                              ------------------------------
                                              Exercise Price
                                              (C$)                   Options
                                              ------------------------------
                                              $3.00               15,368,333
                                              $1.09 - $2.17        7,791,600
                                              ------------------------------
                                              ------------------------------

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 31, 2014, 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, and fairly represents, 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, and fairly represents, 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 Somigol Other are based on, and fairly represents, 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.

SECOND QUARTER CONFERENCE CALL & WEBCAST

The Company will host a conference call and webcast on July 30, 2014 at 5:30 p.m. EDT Toronto (Sydney 7:30 a.m. AEST).


Telephone
Toronto: 416-340-2216
North America toll-free: 1-866-223-7781
International: 1-416-340-2216

Live Webcast

The webcast can be accessed directly at:

www.gowebcasting.com/5674 and on Teranga's website at www.terangagold.com

The conference call replay will be available for two weeks after the call by dialing 1-905-694-9451 or toll-free 1-800-408-3053 and entering the Passcode: 9093856.



------
(1)   Total cash costs per ounce, all-in sustaining costs per ounce and
      total depreciation and amortization per ounce are prior to an
      inventory write-down to net realizable value. Total cash costs per
      ounce, all-in sustaining costs per ounce and total depreciation and
      amortization per ounce 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)   This production target is based on existing proven and probable
      reserves only from both the Sabodala mining license and OJVG mining
      license as disclosed in the Company's Management's Discussion and
      Analysis for the year ended December 31, 2013. 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.
(3)   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
(4)   Key Assumptions: Based on increase of 20 - 30 tpoh; $15 million
      initial capital; 14-year operations, $1250-$1500 spot gold price, 5
      percent discount rate, before the effect of taxes, minority interests,
      and Franco-Nevada gold stream

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