JOHANNESBURG (miningweekly.com) – Tanzania’s ongoing concentrate export ban, implemented in March, has significantly impacted on LSE-listed Acacia Mining’s results for the first six months of the year.
Despite delivering its highest-ever first-half production levels during the period to June, Acacia now expects production to stay on the bottom end of its guidance, as concentrate exports from Bulyanhulu and Buzwagi have been prevented.
“As a result of the impact of the ban, we are now targeting the lower end of the production guidance range of 850 000 oz to 900 000 oz for 2017 but, owing to strong cost discipline, we are leaving all-in sustaining cost (AISC) guidance unchanged [at between $880 and $920/oz],” said Acacia CEO Brad Gordon in a trading update on Friday.
The company has, however, served arbitration notices for its Bulyanhulu and Buzwagi mines, and will work to achieve a negotiated resolution.
Acacia has been exporting concentrate from Bulyanhulu since 2001 and from Buzwagi since 2010 and has fully declared all associated gold, copper and silver revenue.
Tanzania’s general ban on the export of metallic mineral concentrates followed a Presidential directive to promote the creation of a domestic smelting industry.
In addition, the Presidential Committee, following investigations into the technical and economic aspects of the historic exports of gold/copper concentrates, accused Acacia and its predecessor companies of, historically, significantly under-declaring the contents of concentrate exports, which has allegedly led to an under-declaration of taxes of tens of billions of dollars.
Following the ban, Acacia ceased all exports of gold/copper concentrate, including the 277 containers that had been approved for export prior to the ban and are now being held in Dar es Salaam at both the port and a staging warehouse.
Acacia’s three mines, however, continue to produce and sell gold doré, while stockpiling gold and copper concentrate.
North Mara is unaffected as 100% of its production is doré gold.
In the first half of 2017, concentrate accounted for 36% of Acacia’s group level production, with 64% of Buzwagi’s production and 46% of Bulyanhulu’s production, respectively, being concentrate.
“It is a complex and fluid situation which has led to a significant reduction in our cash balance to $176-million [in the first half of the year], from $318-million [in the comparative period last year], as a result of being unable to realise $175-million of revenue during the half-year under review, together with a $51-million [value-added tax] outflow,” said Gordon.
“I am pleased with how we have performed in light of this.”
Gold production during the period reached a high of 428 203 oz, 4% higher than in the first six months of 2016.
Bulyanhulu and Buzwagi continue to stockpile concentrate, which has resulted in the build-up of about 127 000 oz of gold contained in unsold concentrate. The company also reported 8.3-million pounds of copper and 107 000 oz of silver contained in the unsold concentrate.
AISC for the first six months decreased 5% to $893/oz.
“If we had been able to sell all of the concentrate produced, AISC would have been about $800/oz,” he commented.
Acacia’s revenue in the six months to June fell 22% to $391.7-million, while earnings before interest, taxes, depreciation and amortisation contracted 13% to $161.4-million.
Acacia did not declare a dividend for the period owing to the negative cash flow. However, according to Reuters, the company expects to reinstate dividends by year-end.
“We expect that, following the negotiations, there will be a resolution and we will achieve positive cash flow in the second half and when that occurs we would expect to announce a dividend in February,” Gordon told the newswire.