ACACIA Mining’s cash balance had fallen about $116m in the last two months amid a stand off with the Tanzanian government which has embargoed gold/copper concentrates from its Bulyanhulu and Buzwagi mines.
The UK-listed gold miner said in an announcement today that its current gross cash balance was $165m which compares to $281m as of March 31. The company said the cash outflow from the two mines was about $15m per month.
Tanzania’s government, led by President John Magufuli, prohibited exports by Acacia because it believes the company has under-reported the value of the concentrate produced by the mines.
In a first Presidential Committee investigation it concluded the under-count had been by a factor of ten – an outcome that Acacia disputed as it would mean Bulyanhulu and Buzwagi each produced 1.5 million ounces a year.
The combined production of the two mines in Acacia Mining’s 2016 financial year was 51,262 oz of which an estimated 200,000 oz would have reported to concentrate. Acacia’s third mine, North Mara, only produces gold in the form of doré.
Despite the pressure on cash flow, Acacia’s business is holding up relatively well as it had paid a final dividend of some $34m and refunded $22m in advanced payments to clients of the embargoed concentrate. It had also paid $10m in a tax payment due by North Mara whilst not receiving long-standing VAT refunds from the Tanzanian government.
There had been some impact on productivity levels at the affected mines owing to “increased levels of uncertainty” but the company said that it was not making any changes to its full-year production guidance “at this stage”. Acacia previously guided to production of between 850,000 oz and 900,000 oz at an AISC of between $880/oz and $920/oz for the current financial year.
There were 85,000 oz of gold and four million pounds of copper, and 50,000 oz of silver contained within unsold concentrate, it said.
A second Presidential Committee formed to examine the economic and legal issues associated with historic exports of gold and copper concentrates was closed to finising its studies, Acacia Mining said.
“We remain hopeful that we will be able to reach a resolution to the current situation with the Government so that we can continue to deliver strong performance from our mines for the benefit of all stakeholders,” the company said. A conference call will be held at 1pm UK time (2pm CAT) today after which Miningmx will update this article.
As previously reported by Miningmx, analysts believe a protracted dispute with the Tanzanian government could result in the possible curtailment or closure of the Bulyanhulu and Buzwagi mines. “It now appears that a near-term resolution to resume concentrate exports may be difficult to achieve, likely forcing management to consider the suspension or curtailment of operations,” said Andrew Breichmanas, an analyst at BMO Capital Markets said earlier this week.
“We had expected the concentrate ban to be resolved, anticipating perhaps some penalty in the form of increased tax prepayments,” said Investec Securities analysts, Hunter Hillcoat and Marc Elliott.
“However, given the implausible assertions being propagated by the Tanzanian government, it now appears that Acacia may not be dealing with a rational administration and that there may not in fact be an equitable resolution to come.
“Unless some resolution is reached, Acacia now faces the prospect of a protracted and costly legal battle in international courts,” they said.
