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.