ACACIA Mining shored up its balance sheet further by agreeing to sell a 2% net smelter royalty in the Houndé mine in Burkina Faso for $45m. The buyer of the royalty is Sandstorm Gold, a Toronto- and New York-listed company.
“Acacia’s decision to dispose of this royalty follows the announcement of commercial production at the mine in October and is consistent with our disciplined approach to capital allocation,” the company said in a statement today. The sale of the royalty followed a competitive process, it added.
The transaction is expected to close in the first quarter of 2018. The transaction “… together with the measures taken at both Bulyanhulu and Buzwagi to reduce cash outflows, will provide further strength to our balance sheet,” it said.
The disposal will offer another modicum of comfort to minority shareholders in Acacia Mining who had endured a torrid year which started with hopes high for increased dividends and record production. These aspirations were shattered, however, after the Tanzanian government embargoed concentrate exports from Acacia’s Bulyanhulu and Buzwagi mines claiming the firm had under-estimated the worth of the exports – and the government’s tax-take – for years. The government said it was owed tens of millions of dollars. The claims were stoutly refuted by Acacia management.
Then in October, following a protracted stand off with the government, Acacia unveiled a blue print for survival that did not include exporting minerals in concentrate – a piece of adaptation that would return it to positive cash flow in early 2018, it said.
It earlier made changes to its processing flow sheet at Buzwagi so that all of the recovered gold at the mine will be saleable doré. At Bulyanhulu, the mine had been put into a “reduced operational state” which would preserve the mine whilst the export ban was in place. The company had also secured a $1,300 per ounce floor price for the majority of its gold sales until February 2018.
The sale of the stake in Houndé, which is controlled and operated by Endeavour Mining, a company that, ironically, had sought a merger with Acacia Mining in the early months of 2017 before the Tanzanian government restrictions hit, will most probably be the final actions of CEO, Brad Gordon and Andrew Wray, his CFO.
On November 2, Gordon and Wray announced they would leave the company at the calendayear-end. The decision came less than a fortnight after Barrick Gold, Acacia’s 64.9% shareholder, had agreed a framework agreement with the Tanzanian government which included a $300m payment by Acacia in order to resolve a tax dispute. Andrew Wray, Acacia’s CFO, also quit the company.
They will be replaced by Peter Geleta who will be interim CEO and Jaco Maritz, currently Acacia’s GM who will be appointed CFO. Geleta is currently Acacia’s head of organisational effectiveness. Among Geleta’s and Maritz’s first responsibilities will be to hold a shareholder meeting in which minorities will vote on Barrick’s proposed framework agreement.