February 12, 2018 / 11:56 AM / 3 months ago

Acacia Mining scraps dividend after slumping to annual loss

LONDON (Reuters) - Acacia Mining (ACAA.L) has scrapped its 2017 dividend after slumping to a $707 million (510.21 million pounds) yearly net loss on the back of a hefty charge on the value of its main assets in Tanzania, sending its shares down more than 14 percent.

Acacia, Tanzania’s largest gold miner, is struggling with a ban on concentrates introduced in March which has forced it to reduce operations at its flagship Bulyanhulu mine.

The company, majority owned by Barrick Gold (ABX.TO), said on Monday it had taken a $644 million impairment charge to reflect the impact of the ban as well as the effects of government legislation on the industry.

The year before it had earned $95 million and paid a dividend of 4.2 cents per share.

Acacia said the export ban resulted in about $264 million in lost revenue and a cash burn of $237 million in 2017, though it expects to return to cash-flow generation this year.

The export ban was introduced when a government audit said it found 10 times more gold in Acacia’s containers than the company had declared, as well as undeclared minerals. Acacia disputes the findings.

The miner, which has shed more than half its market value in the last year, has stockpiled 186,000 ounces of unprocessed gold which resulted in a loss of revenue and rising costs.

Tanzania, Africa’s fourth-largest gold producer, is also making sweeping changes to its mining industry to reap greater rewards from its resources. Laws introduced in July require a higher government ownership of mines and raise royalties and taxes.

REDUCED OPERATIONS

Acacia’s impairment charge was a result of the expected impact of the laws and of the reduced operations at Bulyanhulu, which could reduce the value of its operations, Acacia said.

“This morning’s cutting of the dividend will be the final straw for many loyal shareholders who have stuck with the company in the hope a deal will be reached within the next five months,” Accendo Markets analyst Henry Croft said.

The dividend decision means it is the first time since Acacia listed in 2010 that it is not making a payout. The company has a policy to pay between 15 and 30 percent of operational cash flow after costs.

    Acacia Mining Dividends: reut.rs/2BTVWwK

    Its shares were down some 14 percent at 148 pence by 1009 GMT, after falling as low as 146.8p, their lowest since late 2013.

    Acacia produced 767,883 ounces of gold in 2017, down 7 percent on the year before after it reduced operations at one of its three mines in Tanzania.

    Its all-in sustaining cost of producing an ounce of gold, an industry benchmark, fell to a record low of $875, but is expected to rise to between $935 and $985. Production will be down as much as 43 percent to between 435,000-475,000 ounces, Acacia said, but output at its North Mara mine should be broadly flat.

    The fallout between Acacia and the Tanzanian government reached a nadir in July when the company was served with a $190 billion bill for unpaid taxes, penalties and interest.

    Acacia Mining shares down over the last year: reut.rs/2BVZi24

    But a deal struck between parent Barrick and the government in October said Acacia would pay $300 million in good faith, hand over a 16 percent stake in its three mines and split the “economic benefits” from the operations.

    Acacia raised its tax provision to $172 million, based on the estimated impact of the agreement.

    Negotiations between Barrick and the government are ongoing, interim chief executive Peter Geleta said, adding that a more detailed version of the agreement should given to Acacia in the first half of this year.

    Reporting by Zandi Shabalala; Editing by David Goodman and David Holmes

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