[miningmx.com] – ACACIA Mining, the UK-listed gold producer, insisted there was no need to redesign the business as the company would generate significant free cash flow by the end of 2015 even if the gold price fell lower.
The company, which mines in Tanzania, posted a near two-thirds decline in interim net profit to $14.7m for the six months ended June, but it maintained the dividend 1.4 US cents per share – a performance that disappointed analysts.
“Overall, a negative set of results,” said Goldman Sachs. “Dividend announced came in at USc1.4/shr, below our expectations of USc 3/shr,” it said. “We expect the stock to trade down today especially given the weakness in gold prices.”
Bloomberg News reported that speculators had moved into a net short position in New York which was likely to force the dollar price of gold down further at registering a five year low earlier this month.
“You’re starting to see some real fear in the gold market for the first time,’ said Eric Crittenden, chief investment officer at Longboard Asset Management. “I’m not going to be the least bit surprised if this turns into something very significant and we get a lot lower prices,” said Crittenden in an interview with Bloomberg News.
However, Acacia CEO, Brad Gordon, said the company’s five year plan was good enough to see it withstand the current market weakness.
“We remain focused on delivering the plan we have previously set out which will enable us to drive returns to our shareholders without having to redesign our business in reaction to the gold price environment,” he said in notes to the firm’s interim figures.
This would “… ensure that we are in a position by the end of 2015 to generate strong cash flow at and below the current gold price,” said Gordon.
Acacia said in its statement that it would cut capital spending to no more than $220m, but acknowledged that higher corporate expenses related to the cost of employing mining consultants and share-based payments, would offset these gains.
As a result, there would be no change in the guided all-in sustaining costs which would be between $1,050 to $1,100/oz sold. Gold production would remain at 750,000 oz to 800,000 oz at a cash cost, including royalties, of up to $725/oz.
Said Investec Securities: “Production was broadly in line with market expectations, although earnings were softer than expected, impacted by the slightly higher cash costs and by share-based payment costs”.
It added, however, that “the key thing” was an increase in Acacia’s cash position which improved to $287m compared to $270m in the previous financial year.
