Acacia Mining interim earnings drop amid ongoing Tanzania dispute

Acacia Mining posted a drop in first-half core earnings on Friday as it said it was not yet clear when it might resolve the dispute with the Tanzanian government over its gold exports.

In the six months to 30 June, earnings before interest, taxes, depreciation and amortisation were down 17% to $133.6m, while adjusted EBITDA was 45% lower than the first half of last year at $91.6m. Meanwhile, first-half revenue was down 15% on the same period a year ago to $333.4m.

Gold production during the period was 41% lower than the year before at 254,759 ounces, while gold sales of 251,045 ounces were in line with production.

The company generated cash from operating activities of $58.9m, up $57.6m from the first half of last year, while net cash of $63.3m increased by $53.8m from the end of 2017.

In addition, Acacia - which is majority-owned by Barrick Gold - said it generated free cash flow of $14m in the second quarter thanks to a strong operational performance.

Chief executive officer Peter Geleta said: "The changes we made to the business in late 2017 have delivered the desired results, helping to return the group to free cash generation for the first time since Q4 2016 and we are on track to achieve the top end of our production guidance range of 435,000-475,000 ounces for 2018 at an all-in sustaining costs of $935-985 per ounce.

"Following the stability we have brought to the business during the last six months, our priority remains on optimising performance across all areas of our operations as we manage through the current uncertainty in the operating environment and the on-going disputes with the Government of Tanzania. By continuing to be resilient, managing our costs and working to our mine plans, we are addressing what we can control and will look to deliver value for all of our stakeholders."

RBC Capital Markets analyst Tyler Broda said the financials for Acacia remain "somewhat of a sideshow" due to the ongoing negotiations between parent Barrick and the Government of Tanzania.

"Whilst likely to disappoint the market today we would note that H1 EBITDA sits at 50% of FY consensus and 52% of our FY forecast," Broda said. "Operationally the underlying mines are performing well with Q2 all-in Sustaining costs (AISC) of $918/oz coming in -2% below our forecast.

"Management are continuing with a number of initiatives in an effort to keep costs under control and help offset local inflation. That this was Acacia's first quarter with free cash flow since Q4 2016 should also help ease any concerns on short term liquidity."

At 1250 BST, the shares were down 5% to 111.60p.