UBS cuts Acacia to 'neutral' on share price strength

UBS downgraded Acacia Mining to ‘neutral’ from ‘buy’ with an unchanged price target of 275p, as it highlighted recent share price strength and uncertainty over the Bulyanhulu mine.

The bank said it continues to see value potential in the stock over the next two to three years if the company can deliver at the Bulyanhulu mine. However, it does not see clear catalysts to unlock value in the next 12 months.

“After a 70% rally in the share price from its January 16 low versus a c20% gain in the gold price, in our view the share price is already discounting a significant improvement in operating performance at Buly.”

UBS said there is a risk that optimism over the stock fades if production at Bulyanhulu – Acacia’s largest gold mine by resources – stagnates in 2016.

In addition, the bank expressed some doubts that Acacia would be able deliver its targeted 350,000 ounces at Bulyanhulu by 2018.

“Until we receive greater clarity on timing and a clear pathway to achieving these targets in our view the market is unlikely to give ACA the 'benefit of the doubt' at Buly,” it said.

At 1545 GMT, Acacia shares were down1.8% to 267.10p.