Acacia Drops Most Since July on Output Cut Over Tanzania Row

DAR ES SALAAM (Capital Markets in Africa) Acacia Mining Plc shares dropped the most since July as the company will stop underground production at Tanzania’s Bulyanhulu mine until a dispute with the government over taxes and exports is resolved.

The stock declined as much as 15 percent, the most since July 25, as Acacia cut its output forecast to about 750,000 ounces, from 850,000 to 900,000 ounces, for this year. It traded down 8.9 percent by 11:31 a.m. in London, as other gold miners rose in line with higher prices for the precious metal.

Acacia will focus on only mining surface waste material at its flagship operation from next month, the London-based company said in astatement Monday. The miner kept its forecast for all-in sustaining costs at $880 to $920 an ounce.

Tanzania banned exports of unprocessed gold in March and slapped Acacia with a $190 billion tax bill and fine, claiming under-declared export revenue from the mines from 2000 to 2017. Acacia’s Bulyanhulu and Buzwagi mines produce a copper-gold concentrate that is processed outside the country.

 “The impact of the ban, in addition to the deterioration of the current operating environment, has led to negative cash flow of approximately $15 million per month at the mine and thus has made ordinary course operations at Bulyanhulu unsustainable,” the company said in the statement.

There will be “significant reduction” in Bulyanhulu’s workforce, which currently consists of about 2,000 people, including contractors, Acacia said. Tanzania’s government hasn’t received official confirmation of the decision to reduce production, Benjamin Mchwampaka, commissioner for minerals at the Tanzanian Ministry of Energy, said by phone.

“Once we see an official communication, we will respond and decide on a way forward,” he said.

Tanzania’s public clampdown on large companies like Acacia are making the country a less friendly investor destination, BMI Research, a unit of Fitch Group, says in an emailed note. President John Magufuli is likely to be re-elected for another five years in 2020, meaning such policies are likely to continue, hampering “economic growth, squeezing employment and wages for the population,” BMI said.

Unable to export much of its production, Acacia has been stockpiling ore near its mines. Its cash outflow has been about $210 million this year, it said. Buzwagi, Acacia’s third-largest mine, will operate as normal for the time being, the company said.

Barrick Gold Corp., which owns about 64 percent of Acacia, is in discussions with the government over the dispute, the company said.

Source: Bloomberg Business News