JOHANNESBURG (miningweekly.com) – Despite London-listed Acacia Mining reporting a strong operational performance for the three months ended March 31, which includes the company’s best cost performance since 2010, the Tanzania-focused gold miner’s first-quarter results were undercut by a tax provision taken following an adverse court ruling.
The company saw a net loss of $52-million – from a profit of $9.2-million in the 2015 first quarter – as a result of additional tax provisions of $70-million.
The company explained that, following the October 2015 elections, the new Tanzania government was focused on reducing corruption, wasteful spending and reliance on foreign aid. To achieve this, the government had targeted the Tax Revenue Authority (TRA) and the courts to accelerate court rulings on backlogged cases, which included several of Acacia’s material tax disputes with Tanzania, resulting in expedited tax provisions that impacted on Acacia’s first quarter.
Nevertheless, Acacia CEO Brad Gordon was “delighted” by the company’s “excellent start” to 2016.
“All three operations performed ahead of expectations leading to a $19-million increase in our net cash position, after making our first prepayment of corporate tax amounting to $10-million. This performance is not reflected in our headline net earnings given the tax provision . . . but our underlying adjusted earnings of $18-million were 71% higher than Q1 2015,” said Gordon.
Acacia saw a 5% year-on-year increase in production of 190 210 oz, and an all-in sustaining cost (AISC) of $959/oz – 14% lower than the previous year’s comparable period, which saw an AISC of $1 117. This reflected the company’s lowest-recorded AISC since 2010.
“[This is] further evidence of our cost-control measures and improved volumes [and] we expect to see continued benefits . . . through the year,” said Gordon.
Acacia’s earnings before interest, taxes, depreciation and amortisation, or Ebitda, rose by 24% to $65.55-million, which the company attributed to higher revenue and lower cash costs.
Driven by the gold price rally and increased gold sales, the company’s revenues of R221-million were up 3% year-on-year, while cash costs were down 11% to $693/oz from $783/oz in the first quarter of 2015.
However, the average realised gold price was still weaker year-on-year, dropping to $1 150/oz from $1 207/oz in 2015.
Acacia’s positive first-quarter results reflect the success of the company’s strong turnaround from a stumble in the 2015 third quarter, which saw the company completely restructuring the workforce and achieving a much-improved fourth quarter.
TAX EVASION ALLEGATIONS
Earlier this month, the Tanzanian Tax Board ruled in favour of the Tanzania Revenue Authority, which demanded that Acacia pay $41.25-million to the country following allegations that the miner, formerly African Barrick Gold, was engaging in a “sophisticated scheme of tax evasion”.
This was despite Acacia’s apparent show of commitment to Tanzania in March, whereby Acacia signed a memorandum of understanding for a corporate tax repayment to the Tanzania government.
Acacia has filed a notice of intention to appeal the tribunal’s ruling this month, as it believed the judgment was “fundamentally flawed”. The TRA alleged that Acacia was withholding tax on the basis that Acacia was a permanent resident in the country and was, therefore, liable for Tanzanian tax.
Acacia argued, however, that it did not have permanent residency in Tanzania. As a result, no tax provision, with regard to this specific dispute, had been raised during the quarter.