Acacia Mining gold production falls less than expected

Acacia Mining reported gold production slightly ahead of expectations but down 30% year on year.

The final three months of the year saw 148,477 ounces unearthed from its three mines in Tanzania and sold 147,636 ounces of gold doré.

The quarter was completed at a preliminary all-in sustaining cost of $779 per ounce sold, 18% lower than the same quarter in 2016. The preliminary cash costs of $581 per ounce sold, was 14% lower year on year.

The FTSE 250 miner had been hit by a dispute with the government of Tanzania over exports of gold and copper concentrate, which among other things, led it to switch its Bulyanhulu mine from concentrate to gold doré bars, which are not affected by an export ban put in place in March.

For the year as a whole, Acacia produced 767,883 ounces of gold, down 7% on 2016, mainly due to Bulyanhulu, but ahead of revised guidance of 750,000 ounces, with 27% drop to 592,861 ounces sold.

The preliminary 2017 AISC of $875 per ounce sold, was 9% cheaper than 2016 and below guidance.

The average grade processed for the quarter was 2.8 grams per tonne which was 3% lower than the prior year period, mainly due to no underground material being processed at Bulyanhulu, a lower head grade at North Mara driven by lower mined grades, partly offset by higher head grades at Buzwagi due to higher mined grades.

The FTSE 250 group had £81m of cash in the bank at the year end, down by $15m during the third quarter, with a net cash position of $10m from a $71m debt facility.

Acacia said the agreed sale of a non-core royalty in December for $45m will boost cash balances when proceeds are received later this month.

Interim chief executive Peter Geleta, who was promoted from 'head of organisational effectiveness' to the interim role at the start of this month, said: "Our focus remains on delivering optimal performance in the current operating environment and delivering value for all of our stakeholders."

"We are also continuing to support efforts towards achieving a negotiated resolution with the Tanzanian government. We look forward to providing guidance for the year in our preliminary results in February.”

Former CEO Brad Gordon and chief financial officer Andrew Wray both jumped ship in November after the miner's 64% owner Barrick Gold shook hands on an agreement where the Tanzanian government will take a 16% stake in the London-listed company's three mines in the country and share revenues.

Analysts in London felt the deal was rather unfair on Acacia' minority shareholders and called for the company to proceed with international arbitration. Barrick, said Jonathan Guy at Numis, bears "a substantial portion of the burden of responsibility for the poor state of relations with the government, having operated the mines previously and put in place many of the agreements with the Tanzanian government".