Operational hiccups at Tanzanian mines wound Acacia’s Q3 showing

JOHANNESBURG (miningweekly.com) – “Disappointing” operational performances at London-listed Acacia Mining’s Bulyanhulu and Buzwagi mines, in Tanzania, have driven a 14% year-on-year slump in the production of gold to 163 888 oz for the third quarter ended September 30, while sales volumes, at 16 116 oz for the three months, exceeded production by 2%, the company said on Wednesday.

Bulyanhulu saw a 2% decrease in production to 62 188 oz over the quarter, owing mainly to delays in opening new high-grade long-hole stopes, which led to reduced headgrade and lower tons mined than planned.

A specialist contractor had since been brought in to undertake the stope opening process, which Acacia believed would ensure sufficient long-hole stopes were available as the company moved into the final quarter of the year.

Buzwagi’s output narrowed 46% year-on-year to 33 961 oz for the three months, driven by the mining of lower-than-planned grades together with reduced mill throughput as a result of extended crusher downtime in September and an unplanned reline of the semiautogenous grinding mill.

Total tons mined at the operation during the quarter amounted to 10.8-million tons – a 2% decrease from the third quarter of the prior year, while ore mined of 2.6-million tons was 30% higher than in the prior year’s comparable quarter, owing to changes in mine plans, which drove an increase in the amount of ore moved.

At Tanzania’s North Mara mine, Acacia mined some 22 600 oz for the quarter, lifting production 5% to 67 738 oz.

Group all-in sustaining costs (AISC) of $1 195/oz sold were 9% higher than tht of the third quarter of 2014 and 4% higher than the second quarter of this year, owing to the lower production base.

“As previously communicated, we had a challenging third quarter, with short-term issues impacting Bulyanhulu and Buzwagi. While North Mara again performed well, group production of 163 888 oz was lower than the previous quarter and means we expect to fall short of our original plans for 2015,” CEO Brad Gordon said in a statement.

Acacia now expected to deliver full-year production of around 718 651 oz, with cash costs and AISC expected to be around 5% above the top of their initial respective guidance ranges of between $1 050/oz and $1 100/oz sold for the full year.

Meanwhile, the company in September announced the formation of an earn-in joint venture (JV) with emerging resources group OreCorp to progress the Nyanzaga project, in Tanzania.

OreCorp would act as manager of the project and could earn an up to 25% ownership through the completion of various work programme milestones over a three-year period for an aggregate project investment of $15-million, including an up-front payment to Acacia of $1-million, which had been received after the period end.

“The formation of the JV allows the project to be reassessed and then progressed through to the completion of a definitive feasibility study by a dedicated team who have experience in delivering value from large-scale projects in Tanzania and across Africa, while allowing Acacia the optionality to maintain a 75% stake in the project once it gets to a development decision,” said the company.

Looking to its financial showing, Acacia posted a 20% year-on-year dip in third-quarter revenue to $193-million, owing to the lower gold price and lower sales ounces, while earnings before interest, taxes, depreciation and amortisation narrowed 73% over the period to $21-million on the back of lower revenues and a higher cost base.

The company realised a net loss of $13-million, or $0.03 a share, for the period, while operational cash flow decreased 96% to $4-million and capital expenditure slumped 37% to $51-million.

Acacia ended the quarter with cash of $226-million.

Gordon added that, in light of the lower gold price environment, the group would redouble efforts to further remove costs from the business to return to free cash generation.

These initiatives would also be incorporated into yearly life-of-mine planning, which was currently under way.

“Over the past two years, we have made significant changes to the business to lay the foundation for improved and consistent operational delivery. Although the quarter was disappointing, it does not alter our confidence that we are close to completing the turnaround.

“We have addressed each of the issues that impacted the business in to ensure they do not reoccur and, importantly, key underlying metrics at Bulyanhulu are on track to sustain a step-up in production in the final quarter of the year,” he concluded.