Production falls amid legal concerns at Acacia Mining

Acacia Mining posted its third quarter results for the three months ended 30 September on Friday, reporting a 3% fall in revenue to $165.6m, which it put down to lower realised gold prices and lower production.

The London-listed company said EBITDA was 11% lower at $44.6m, mainly due to lower revenue, while net earnings slipped 26% to $11.9m, or 2.9 US cents per share.

Cash generated from operating activities for the quarter rose by $56.4m to $33.6m, which the board said was mainly due to negative working capital outflows of $65.3m which impacted the third quarter of last year.

Net cash stood at $74m - an increase of $11m during the quarter and an increase of $65m for the first nine months of the year.

Cash balances were broadly flat on the prior quarter at $117m, including a loan repayment of $14m during the quarter.

The company paid corporate income tax relating to North Mara of $9.6m, bringing year-to-date corporate tax paid to $32.9m, which was fully offset against the VAT receivable.

On the operational front, Acacia said gold production fell 29% year-on-year to 136,640 ounces for the third quarter, though that was still ahead of both the first and second quarters.

It reported that gold sales of 135,875 ounces were in line with production.

It said it expected to exceed the upper end of its full-year production guidance range of 435,000 to 475,000 ounces, with production now expected to be marginally in excess of 500,000 ounces for the year.

The company’s all-in sustaining cost of $880 per ounce sold was 6% lower than the third quarter of last year, 4% lower than the second quarter of this year, and 10% lower than the first quarter, and was now reportedly tracking towards the lower end of the full-year guidance range of between $935 and $985 per ounce.

“During the third quarter Acacia is pleased to have delivered a strong operational performance, producing 136,640 ounces of gold at an all-in sustaining cost of $880 per ounce sold,” said Acacia’s interim chief executive officer Peter Geleta.

“This is a testament to the resilience and dedication of all of our people who continue to do their very best in the face of what is now an increasingly challenging operating environment in Tanzania.

“Having returned the group to free cash generation during the second quarter of this year, I am also pleased to note that we have maintained this trend, remaining cash flow positive this quarter, with a net cash position of $74m.”

Geleta said that, as a result of the company’s “consistently strong” production performance in the year-to-date, it was now targeting production to be marginally in excess of 500,000 ounces for the full year.

“In line with our ongoing cost reduction strategy, we have also steadily reduced our costs throughout the year and are now tracking towards the lower end of our all-in sustaining costs guidance range of $935-$985 per ounce.”

Mr Geleta also said that, against the “strong operating performance”, he was “deeply concerned” about the increasing risks to the safety and security of the firm’s people and the increasingly challenging operating environment in Tanzania, which could impact the outlook for the business.

“I am particularly concerned with the criminal charges now being brought against several current or former employees over the past week, in connection with matters which are being raised in the arbitrations with the Government of Tanzania relating to Bulyanhulu and Buzwagi.

“We are seeking to engage with Barrick to understand how the recent significant escalations of government actions against BGML, NMGML and PML and employees will be taken into account in any further direct discussions between Barrick and the Government.

“We will also be reaching out to the government to seek the opportunity for direct dialogue regarding the ongoing disputes between the government, the company and the broader Acacia Group, and also to inform the government that failing a negotiated resolution the company may need to pursue claims under the relevant bilateral investment treaty.”