Acacia Mining PLC (LSE:ACA, Financial) reported operating and financial results for the first six months of fiscal 2017 on July 21.
The introduction of an export ban on the company’s mineral concentrates by the Tanzanian government in March along with a VAT outflow of $51 million have negatively impacted the liquidity available on hand, which decreased nearly 45% from $318 million to $176 million.
The government of Tanzania accused Acacia of having under-declared volumes and values of the minerals that it traded abroad. As a penalty, the government of Tanzania imposed an export ban on the company’s mineral concentrates to trade abroad.
Tanzania’s restrictions on metal concentrates to trade abroad caused Acacia Mining to miss revenue of approximately $175 million. The mining company closed the first six months of the year with revenue of $391.6 million, a 22.4% decrease on a year-over-year basis.
During the first half of 2017, the company sold 312,438 ounces of gold – 22.1% lower year over year – for an average realized price of $1,235 per ounce, and 1.304 million pounds of copper – an 83.9% decrease year over year – for an average realized price of $2.99 per pound.
In the first six months of 2017, the company produced 428,203 ounces of gold, a nearly 4% increase year over year, while copper production was 9.065 million pounds, a 7.6% increase year over year.
The sale of one ounce of gold cost $577 in total cash and $893 in all-in sustaing costs. Both were significantly lower compared to the same period in 2016, when the company sustained a total cash cost of $640 per ounce and an AISC of $941 per ounce of metal sold.
Acacia Mining reported adjusted Ebitda of $166,219,000 at the end of the first half of 2017, which – considering first-half 2016 adjusted Ebitda of $225.135 million and a current enterprise value of $1.15 billion – leads to an adjusted EV/Ebitda ratio of 2.94.
The company was able to turn around its net earnings for the period. It reported net earnings of $62,543,000, or $15.3 per share, up from a loss of $6,128,000, or $1.5, in the comparable period of 2016.
Net earnings – adjusted to one-time charges – were $65,906,000, or $16.1 per share, in the first six months of 2017 compared to $58,767,000, or $14.3 per share, in the comparable 2016 period.
The Tanzanian export ban impacted Acacia's operations as it only generated $1.315 million in operating cash flow. Last year, the miner reported $157.096 million in operating cash flow.
The company allocated $92.456 million for capital expenditures, leaving it with negative cash flow of $91.141 million.
Acacia's investors hope the company will resolve issues regarding the export ban with the Tanzanian government soon as it has caused disruptions at its Bulyanhulu, Buzwagi and North Mara operations.
CEO Brad Gordon said that the company’s is negotiating with the government of Tanzania in an attempt to preserve shareholder value.
According to the latest news, John Magufuli, the president of Tanzania, has threatened to shut down all the company’s mines if Acacia’s executives delay negotiations with the government to resolve tax evasion charges. In the meantime, the Tanzanian government has asked all foreign employees of the company to leave the country.
The export ban has caused Acacia’s management to lower the production guidance for fiscal 2017, which is forecasted to be 850,000 ounces. The guidance for AISC was left unchanged at a range between $880 per ounce and $920 per ounce of metal sold.
Acacia Mining is trading around 2.81 British pounds ($3.65) per share with a market capitalization of 1.06 billion pounds, a price-book (P/B) ratio of 0.78 and a price-earnings (P/E) ratio of 8.79.
As of today, the company has a recommendation rating of 2.8 out of 5.
Disclosure: I have no positions in Acacia Mining.
