Troll JF
JF-Expert Member
- Feb 6, 2015
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US broker Jefferies has become the latest to slash its price target for Tanzania–based gold miner Acacia Mining PLC (LON:ACA).
In a gloomy assessment it sees little early resolution of the escalating dispute with the country’s government over concentrate exports.
A committee set up by the Tanzanian President has accused ACA of under-reporting gold contained in 277 containers to a degree that is difficult to reconcile, said the broker.
Acacia reports that the container, which represented six weeks of concentrate production from two of its four mines, Bulyanhulu and Buzwagi, held c30koz of gold, while the government audit claims this figure was more than 10 times greater.
The claim, which is higher than Bulyanhulu and Buzwagi's entire 2016 estimated concentrate production, was immediately refuted by the company.
“The development, in our opinion, has decreased visibility of a near-term solution and increases the likelihood of a closure of the Bulyanhulu and Buzwagi mines,” said Jefferies.
“Allegations and accusations aside, the export ban on concentrates remains in place, impacting 45% and 55% of Bulyanhulu and Buzwagi production, respectively.
“While North Mara is unaffected, as it only produces doré, ACA continues to lose c$1mln per day in revenue from the lost sales volumes.”
The closure of the two mines now appears increasingly likely and is reflected in a new price target of 265p.
“With US$196m net cash as of March 31, we do not have immediate concerns over the liquidity of the company, though note a us$22m advanced payment will likely need to be repaid near-term.”
Hold is the broker’s view. Shares bounced 8% to 288.9p.
In a gloomy assessment it sees little early resolution of the escalating dispute with the country’s government over concentrate exports.
A committee set up by the Tanzanian President has accused ACA of under-reporting gold contained in 277 containers to a degree that is difficult to reconcile, said the broker.
Acacia reports that the container, which represented six weeks of concentrate production from two of its four mines, Bulyanhulu and Buzwagi, held c30koz of gold, while the government audit claims this figure was more than 10 times greater.
The claim, which is higher than Bulyanhulu and Buzwagi's entire 2016 estimated concentrate production, was immediately refuted by the company.
“The development, in our opinion, has decreased visibility of a near-term solution and increases the likelihood of a closure of the Bulyanhulu and Buzwagi mines,” said Jefferies.
“Allegations and accusations aside, the export ban on concentrates remains in place, impacting 45% and 55% of Bulyanhulu and Buzwagi production, respectively.
“While North Mara is unaffected, as it only produces doré, ACA continues to lose c$1mln per day in revenue from the lost sales volumes.”
The closure of the two mines now appears increasingly likely and is reflected in a new price target of 265p.
“With US$196m net cash as of March 31, we do not have immediate concerns over the liquidity of the company, though note a us$22m advanced payment will likely need to be repaid near-term.”
Hold is the broker’s view. Shares bounced 8% to 288.9p.
