Acacia lifts dividend as 780,000 oz output hopes buoyed

Brad Gordon, CEO, Acacia Mining

ACACIA Mining said it could exceed forecast gold production for 2016 of some 780,000 ounces following a strong showing in the first half of its financial year that yielded a two US cents per share dividend.

In comments to the UK-listed firm’s interim results, ended June 30, Acacia Mining CEO, Brad Gordon, said net cash had been increased $47m in the second quarter alone taking total net cash for the half year to $171m.

On a net profit level, however, Acacia registered a net loss of $6m owing to a $70m tax provision in the first quarter. This was after raising its tax provision after a court appeal regarding the extent of taxed losses at the company’s Bulyanhulu mine from 2000 to 2006 was judged in favour of the Tanzania Revenue Authority. Further legal measures in Tanzania had now been exhausted, Acacia said.

Acacia, which also operates the North Mara and Buzwagi mines in Tanzania, said it would consider its options regarding the tax issue going forward. The court appeal judgement did not imply any short-term pressure on Bulyanhulu’s cash flow, it said.

On an adjusted net earnings level, Acacia booked a $59m profit, equal to $14.3c/share, up from $18m year-on-year. The interim divided, partially spurred by “an improved gold outlook”, represented a 43% increase over last year’s payout at the half year.

Investec Securities said the free cash flow had been a long time coming. “Give credit where credit is due,” it said in a morning note.

“We have long been critical of Acacia’s seeming inability to generate free cash and are therefore now encouraged by the $47m lift in net cash in the quarter, leaving a cash balance of $284m and emboldening the company to declare a 43% lift in interim dividend to $2.0cps,” the bank said.

“We are pleased with performance in the first half, and are now expecting to deliver at or above the upper end of full year production guidance of 750 to 780,000 ounces,” said Gordon in a statement. All in sustaining costs for the year would expected to be at the lower end of the firm’s $950 to $980/oz guidance.

Production totalled 221,815 oz in the second quarter taking total production for the year to 412,025 oz. This is 12% higher than the first half of 2015 and supports Acacia’s high hopes for the remainder of the year. Gold sales for the year so far totalled 400,963 oz.

Acacia said the transition to underground mining at North Mara delivered above expectations with high grades at Gokona supporting production of 100,016 oz in the quarter.

“Bulyanhulu again produced above plan, delivering 78,643 ounces, although a planned two week shaft closure for maintenance in August and a move back towards reserve grade will reduce output in Q3,” said Acacia in a statement.

Commenting on the likelihood of new expansion, Acacia said it it would continue to optimise its portfolio and was considering brownfields expansions at Bulyanhulu and North Mara as well as Buzwagi.

“We continue to invest in our high quality exploration portfolio and believe it holds the potential to host our next mine,” the company added.