Acacia mining to review operations

Picture: Lori Waselchuk/AP

Picture: Lori Waselchuk/AP

Published Apr 20, 2017

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London - Tanzanian gold producer Acacia

Mining will have to review its mining operations if the

government's ban on gold and copper ore exports remains in

place, a senior executive said on Thursday.

Shares in Acacia, which is majority owned by Barrick Gold

, briefly touched a six-week low, paring losses by 0900

GMT to trade down 3.7 percent after it said first-quarter core

profits rose 25 percent to $82 million but cash-flow was reduced

by $36 million in part due to the ban.

The government halted the export of unprocessed ore on March

3, following President John Magufuli's call for the construction

of more gold smelters in the country, Africa's fourth-largest

gold producer.

"If we get to a point where it's a pure stalemate and we

don't see that dialogue there, then we are going to have to

re-appraise," Chief Financial Officer Andrew Wray told Reuters,

adding that negotiations continued.

"We are making contingency plans in the background of what

we would need to do if we can't resolve this."

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Non-essential spending in the quarter was pushed back in

response to the ban and the company would have to "really take

stock if it makes sense to continue producing given the cash

burn", Wray said.

The company has offered to fund a study on whether it could

afford to build a smelter in Tanzania after a study in 2011

found there wasn't sufficient ore volume in the country to

justify it.

The export ban effects two of its three mines and the

company said it would reassess the ongoing operation of both

operations "over the coming weeks".

"Clearly the message to the government is to sort this out

or people are going to lose jobs (and the government

royalties)," Investec analysts said in a note.

The company is also facing a tax audit and VAT refunds have

not been received.

Acacia's gold production in the first quarter totalled

219 670 ounces but sales were lower by 34 926 ounces.

However, Tanzania's biggest gold producer stuck to its

full-year production targets, as its mines continue to operate

normally and stockpile its ore while negotiations continue with

the government.

Acacia said in February it expects production this year to

be between 850 000-900 000 ounces, up from about 830 000 ounces

last year.

A technical committee appointed by President Magafuli is

expected to report back in the next few days, Wray said.

REUTERS 

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