Acacia Mining scales down as Tanzanian export ban bites

Source: Reuters News

JOHANNESBURG/BENGALURU-Acacia Mining said on Monday it would stop underground work at its flagship Tanzanian gold mine and lay off staff to cope with a ban on exports of unprocessed ore, part of a confrontation between the industry and the government.

The FTSE 250 Company said the partial shutdown at Bulyanhulu would cut its overall production, sending its shares plummeting 9 percent to 188 pence by 1000 GMT, making it worst decliner among an index of its peers.

The nationwide ban on gold and copper concentrates - imposed by the government in March to encourage the construction of a local smelter - had left a build-up of ore inventory and cut revenue as the firm faced tax bills and other costs, said Acacia, which is majority-owned by Barrick Gold.

“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,” it added in a statement.

Annual production is expected to be 100,000 ounces lower than the bottom of the previous guidance range of 850,000-900,000 ounces, it added.

Acacia has been caught up in sweeping changes to Tanzania’s mining industry spearheaded by President John Magufuli, who believes his country is not getting its fair share of profits.

The government also accuses Acacia of evading taxes for years by under-declaring exports - an allegation dismissed by the company which said in July it had been hit with a $190 billion tax bill, equivalent to four times the East African country’s annual gross domestic product.

Reporting by Noor Zainab Hussain and Esha Vaish in Bengaluru, Barbara Lewis in 

London and Zandi Shabalala in Johannesburg; editing by Jason Neely