What goes up: Acacia shares are back down as its Tanzania row hits revenues

 
Courtney Goldsmith
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Photo taken on April 29, 2010 in Paris s
Acacia lost around $90m over the quarter due to the export ban (Source: Getty)

Shares in Acacia Mining fell this morning as the firm booked a fresh revenue hit thanks to Tanzania's export ban.

Despite that, Brad Gordon, the miner's boss, said Acacia had continued to be "resilient" in the face of challenges.

Yesterday, Acacia's shares shot up more than 30 per cent after its parent company Barrick Gold came to a long-awaited agreement with the government of Tanzania over the future of its mines, which are operated by Acacia.

Barrick confirmed economic benefits generated by Acacia would be shared with Tanzania on a 50/50 basis following a painful dispute over a ban on gold and copper concentrate exports Tanzania introduced in March. Over that period, Acacia's shares price more than halved.

However, shares have fallen more than eight per cent as Acacia said it could not immediately afford a $300m (£228m) payment to the government which Barrick had agreed to.

Acacia "continues to seek further clarification". No formal proposal has been put to Acacia for consideration as yet, but the miner will be required to approve any deal.

Revenue and profit slump on export ban

In the company's third quarter results, gold production was seven per cent lower at 191,203 ounces compared with the previous year, while all-in sustaining costs were $939 per ounce sold, six per cent lower than the year before.

Revenue was down 40 per cent to $171m due to the ban on concentrate exports, which resulted in the loss of gross revenue of around $90m in the quarter. Profit before tax tumbled to $25m from $81m the previous year.

In September, Acacia said it would reduce operations at its "unsustainable" Bulyanhulu mine, and that process is now ahead of schedule with an expected cost of $25m.

The miner also downgraded its output forecast. Acacia now expects annual production to be around 750,000 ounces, which is 100,000 ounces lower than the bottom of the previous guidance range, due to lower output at Bulyanhulu and North Mara.

What Acacia said

“Our business has continued to be resilient in the face of the challenges in Tanzania”, Gordon said.

Whilst production at Buzwagi was especially pleasing, the continued restrictions on the export of gold/copper concentrate, together with a lack of refunds of VAT have further impacted our balance sheet, with our cash position falling to $95m at the end of the quarter.

We note yesterday’s announcement that a framework agreement has been signed, which highlights the progress in the discussions between Barrick Gold Corporation and the government of Tanzania.

Read more: Shares in Acacia Mining surge after Barrick Gold and Tanzania strike a deal

What analysts said

Analysts at Investec noted that Acacia has lost a "staggering" $1.5bn since the concentrate ban was first announced.

"While progress appears to be being made, there are still significant uncertainties, as evidenced by the market’s yo-yo reaction to yesterday’s news," they said.

"To us the offered tax payment sounds like a starting point not a resolution, while we cannot be sure of what the 50:50 partnership entails. However, progress does now appear to be being made such that the value of the concentrates and indirect tax outflows could eventually be recovered and all operations returned to optimal production."

Read more: Shares in Acacia drop further after Tanzania's huge tax bill

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