Acacia Mining, one of the largest gold producers in Africa, will be forced to close its flagship mine in Tanzania unless the government lifts an export ban that has seen the company chew through almost half its cash pile in the past six months.
The FTSE 250 company, which is majority owned by Barrick Gold, has been involved in a bitter dispute with Tanzania’s President John Magufuli since he banned exports of unprocessed ores in March as part of a plan to promote the development of domestic smelting.
Brad Gordon, Acacia’s chief executive, said on Friday that the company would be “prudent” to mothball the Bulyanhulu mine if negotiations with the east Africa nation had not been concluded by the end of September. “We have to protect our cash pile,” Mr Gordon said as the company released interim results.
Tanzania has accused Acacia, one of the country’s largest private employers, of operating illegally and failing to pay billions of dollars of taxes; the company has denied the charges. In June, Tanzania agreed to start discussions with Barrick to try and settle the dispute, which has wiped £1bn off Acacia’s market value over the past six months.
Mr Gordon said he was disappointed not to be involved in the negotiations with the government but was confident of a positive outcome because both sides had too much to lose.
“We could be sitting here at the end of the year in a very different space,” he said.
Friday’s results showed Acacia’s cash position had fallen to $176m at the end of June, down from $318m at the beginning of the year, because it has been unable to sell 127,000 ounces of gold concentrate, or powder.
In the six months to June, revenue fell 22 per cent to $391.7m, while pre-tax profits were down just 2 per cent to $99.5m supported by “strong cost discipline”. Acacia did not declare an interim dividend because of the export ban.
“While the cash reduction is frightening, it is a natural reflection of the $1m a day that is being tied up in inventories while the export ban remains in place,” said Hunter Hillcoat, analyst at Investec Securities.
Acacia has invested more than $4bn in Tanzania over the past 20 years and operates three mines in the country.
Bulyanhulu has been hit hardest by the export ban because almost half of its output is gold concentrate and it produces fewer valuable by-products such as copper.
Mr Gordon dismissed reports that two senior Acacia executives had been detained at an airport in Tanzania this week but said some of the company’s international contractors had faced difficulties getting work and residency permits.
Shares in Acacia fell 16 per cent, to a 17-month low of 234.5p on Friday. The shares are down 50 per cent since March and the company’s market value now stands below £1bn.
The FTSE 250 company, which is majority owned by Barrick Gold, has been involved in a bitter dispute with Tanzania’s President John Magufuli since he banned exports of unprocessed ores in March as part of a plan to promote the development of domestic smelting.
Brad Gordon, Acacia’s chief executive, said on Friday that the company would be “prudent” to mothball the Bulyanhulu mine if negotiations with the east Africa nation had not been concluded by the end of September. “We have to protect our cash pile,” Mr Gordon said as the company released interim results.
Tanzania has accused Acacia, one of the country’s largest private employers, of operating illegally and failing to pay billions of dollars of taxes; the company has denied the charges. In June, Tanzania agreed to start discussions with Barrick to try and settle the dispute, which has wiped £1bn off Acacia’s market value over the past six months.
Mr Gordon said he was disappointed not to be involved in the negotiations with the government but was confident of a positive outcome because both sides had too much to lose.
“We could be sitting here at the end of the year in a very different space,” he said.
Friday’s results showed Acacia’s cash position had fallen to $176m at the end of June, down from $318m at the beginning of the year, because it has been unable to sell 127,000 ounces of gold concentrate, or powder.
In the six months to June, revenue fell 22 per cent to $391.7m, while pre-tax profits were down just 2 per cent to $99.5m supported by “strong cost discipline”. Acacia did not declare an interim dividend because of the export ban.
“While the cash reduction is frightening, it is a natural reflection of the $1m a day that is being tied up in inventories while the export ban remains in place,” said Hunter Hillcoat, analyst at Investec Securities.
Acacia has invested more than $4bn in Tanzania over the past 20 years and operates three mines in the country.
Bulyanhulu has been hit hardest by the export ban because almost half of its output is gold concentrate and it produces fewer valuable by-products such as copper.
Mr Gordon dismissed reports that two senior Acacia executives had been detained at an airport in Tanzania this week but said some of the company’s international contractors had faced difficulties getting work and residency permits.
Shares in Acacia fell 16 per cent, to a 17-month low of 234.5p on Friday. The shares are down 50 per cent since March and the company’s market value now stands below £1bn.
