Acacia Mining gold sales fall as Tanzania export ban drags

Acacia Mining continued to be hit by the Tanzanian ban on gold and copper concentrate exports, but its mines in the country continued to operate normally in the first quarter of the year.

The FTSE 250 miner produced 219,670 ounces of gold, up 15% than the same period last year as the North Mara mine delivered “strong production”, there was a “significant step up” at Buzwagi but Bulyanhulu had a “slower start” to the year.

Gold sales of 184,744 oz fell by almost 35,000 oz from the fourth quarter of last year due to the Tanzania hiatus and flat on the first quarter of 2016, though the company enjoyed a 6% increase in gold price.

On 3 March, Tanzania's President John Magufuli issued a directive banning exports of gold/copper concentrate. Acacia's Bulyanhulu and Buzwagi mines were both affected as they produce gold in both doré and concentrate form, while North Mara was unaffected due to 100% of its production being doré.

The impact of this ban on sales saw net cash decrease to $196m during the quarter, with indirect tax outflows also hitting, down from December's $317.8m.

On the upside, cash costs were down 17% on last year to $577 per ounce sold, with all-in sustaining costs down 3% to $934 per ounce sold.

Revenue rose 6% to $234m as increased production and gold prices offset the impact of lower revenue from gold/copper concentrate sales, with concentrates accounting for around 30% of revenues.

Earnings before interest, tax, depreciation and amortisation jumped 25% to $82m and net earnings of $27m compared to the $52m loss last time.

Acacia declared a first provisional corporate tax payment of $8.7m the quarter due to the strong North Mara performance.

Tanzania's export ban

CEO Brad Gordon said "we continued to engage with the Tanzanian Government in order to be able to resume the export of gold/copper concentrate" and the company has even offered to support the Tanzanian government in a new study by third party experts to assess the economic potential of building a smelter in the country capable of processing Acacia's concentrate as well as looking for other solutions to help address "related issues" the government has.

The company stressed that it has been exporting concentrate from Bulyanhulu since 2001 and from Buzwagi since 2010 with all associated gold, copper and silver revenue declared, with both mines having been in full compliance with overseas sales laws and export permits.

Earlier this month a new presidential committee, formed of academics and industry professionals, has visited two Acacia mines as part of its efforts to investigate the contents of the concentrate containers in various locations in Tanzania.

The committee is due to report back to the President before the end of April, which a second committee has also been formed "to consider economic and regulatory issues relating to the export of metallic mineral concentrates from Tanzania".

Gordon said management "will re-assess the ongoing operation of Bulyanhulu and Buzwagi over the coming weeks due to the importance of concentrate as revenue for the two mines".

Optimistically, the company opted not to change full-year guidance, having expected to produce 850-900koz at an AISC of $880-920/oz.