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Acacia lifts H1 gold output 6% as North Mara ramps up

27th July 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – After the successful start-up of mining at the Gokona underground project, at London-headquartered Acacia Mining’s developing North Mara mine, in Tanzania, the group has lifted gold output for the six months ended June 30 by 6%, producing 367 301 oz and selling 355 470 oz of gold in the first half of the year.

All-in sustaining costs (AISC) for the half-year of $1 133/oz remained largely flat on the prior comparative period as a result of “structural changes” to operations implemented over the past year, while cash costs rose 4% over the six months to $780/oz.

Acacia CEO Brad Gordon on Monday said the company continued to make progress in the development of its North Mara and Bulyanhulu mines, with a particular focus on laying the foundations to enable the operations to generate strong cashflow below the current gold price by the end of the year.

“Production at Bulyanhulu increased by 26% in the first half of the year and we expect further production increases in the second half, as we benefit from our investment in the mine.

“North Mara, meanwhile, delivered the first stoping ore from the Gokona underground project ahead of schedule. As this production is delivered and we continue to drive cost efficiencies, we expect unit costs to decline over the remainder of the year.

“We also maintain our production guidance of between 750 000 oz and 800 000 oz for the year at a cash cost of between $695/oz and $725/oz sold,” he commented.

Acacia would continue the ramp-up of the Gokona underground project over the remainder of the year, targeting ultimate production of 450 000 oz at an average grade of 8.2 g/t over a five-year mine life, with AISC of under $750/oz sold.

“We are confident that the existing reserve will be extended as we increase our understanding of the orebody beneath the openpit,” said Gordon.

DIVIDEND PAYOUT
Looking to the balance sheet, Acacia posted flat revenue of $447-million for the six months, as increased ounces sold offset the lower gold price. Earnings before interest, taxes, depreciation and amortisation of $97-million were 26% below that of the prior year’s first half.

This slump was the result of the impact of noncash net foreign exchange revaluation charges of $15-million, noncash share-based payment costs of $8-million and increased cash costs, Acacia maintained.

Declaring net earnings of $15-million for the period, the gold asset developer achieved basic earnings a share of $0.31, declaring an interim dividend of $0.14.

EXPLORATION PIPELINE
Elaborating on the expansion of Acacia’s exploration activities in West Africa, Gordon said the group had, over the period under review, signed agreements with local Malian entities for the acquisition of equity interests in three exploration licences located within the Kenieba Inlier region in western Mali.

The properties covered 150 km2 along the Senegal-Mali shear zone, which was host to more than 50-million ounces of gold, and were located over regional geochemical soil anomalies with a lack of modern exploration.

The agreements allowed for Acacia to earn a 95% interest in each of the licences over a 30-month period.

“Acacia’s exploration team has already started scout work and regolith mapping to determine areas suitable for soil sampling and those requiring auger or drilling.

“Planned fieldwork for the second half of the year is scheduled to start by November, after the wet season, and will focus on surface geochemical programmes and reconnaissance drilling,” he explained.

Acacia would, meanwhile, continue to expand its footprint in the prospective Houndé belt, in Burkina Faso, through the signing of two further earn-in agreements with Canyon Resources and Thor Explorations.

The Thor Explorations agreement allowed Acacia to earn up to an 80% interest in the Central Houndé project, with an initial earn-in of a 51% interest by the completion of agreed exploration expenditures over a three-year period, with an additional 29% interest to be earned by the completion of a prefeasibility study on a mineral resource on the project area.

The Canyon Resources agreement allowed Acacia to earn up to a 75% interest in the Pinarello and Konkolikan projects through the completion of an upfront cash payment and agreed exploration expenditure over a two-year period.

Planned exploration spend in West Africa was expected to be $7-million for the full year.

OUTLOOK
As it moved into the latter half of the year, Acacia expected the contribution from Bulyanhulu to continue to increase quarter-on-quarter as it delivered improved grades and tonnage as a result of the investment in development, maintenance and improved mining practices.

At North Mara, the company expected the headgrade to remain similar to that of the second quarter, as the Gokona underground ramped up to replace ounces previously sourced from the Gokona openpit within the mill feed.

At Buzwagi, Acacia expected the grade to remain around or slightly above reserve grade in the second half, with throughput levels anticipated to remain at nameplate capacity.

“As a result of continued financial discipline, we now expect capital expenditure (capex) for the year to be between $200-million and $220-million while sustaining capital will be between $80-million and $90-million, with capitalised development expected to be up to $130-million,” Gordon noted.

Capitalised development continued to be driven by increased development activity at Bulyanhulu and was focused on opening additional mining areas, and at North Mara as the Gokona Underground is ramped up.

The planned reduction in capex would be broadly offset by higher corporate administration and share-based payment costs, which resulted in unchanged guidance for AISC of between $1 050/oz and $1 100/oz sold.

“Primarily as a result of the ramp-up at Bulyanhulu, the fourth quarter is expected to be the strongest quarter for production and, consequentially, the lowest for cash costs and AISC,” said Gordon.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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