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Alberto Abaterusso
Alberto Abaterusso
Articles (1663) 

Acacia Mining Is A Free Cash Flow Generator

Company reported $14 million in the second quarter

July 20, 2018 | About:

Acacia Mining PLC (ACA) is a free cash flow generator again with $14 million in the second quarter of fiscal 2018. thanks to a strong operationsl performance. That hasn't happened since the last quarter of 2016.

The company's operational changes in late 2017 are finally paying off in terms of increased gold production and lower costs. The changes consisted of switching the processing of material from stockpile at Buzwagi and transitioning to reduced operations at Bulyanhulu. The South African miner made the move after that the government of Tanzania prohibited the export of gold in concentrates. The ban was in place because the company understated revenues in past years.

The company closed the second quarter with a gold production of 120,981 ounces, up 12,797 ounces or plus 10.6% from the previous quarter.

Acacia Mining reported an All-In Sustaining Cost (AISC) of $918 per ounce of metal sold, which was 6% lower than the same item of the previous quarter.

The mine operator and subsidiary of Barrick Gold Corporation (ABX) in Africa could also report a 5% year-over-year growth in the volume of gold sold to 134,090 ounces in the second quarter of 2018. The metal placed on the market at $1,324 per troy ounce produced a quarterly turnover of $176.87 million, a 13% growth from the first quarter of 2018.

The adjusted net income and earnings before interest taxes depreciation and amortization, or Ebitda, was $5.12 million and $47.8 million versus same issues of $7.12 million and $43.8 million for the first quarter of 2018.

The adjusted net profit per share was 1.2 cents.

The company said it is on track to achieve about 475,000 ounces of gold production, which is the highest limit of the guidance range. The lowest limit is at 435,000 ounces of gold. Acacia Mining also anticipates selling one ounce of metal at an AISC of $935 to $985.

Thanks to a strong operation performance, Acacia Mining increased its liquidity available on hand by 49% to $120.1 million at the end of the second quarter of 2018 from the fourth quarter of last year.

There isn’t any doubt that with its second quarter results the company has demonstrated to be resilient despite an issue in Tanzania, which caused Acacia Mining to revise operation to stabilize the balance sheet. The company came out of the trimester stronger than before and with a solid balance sheet.

Shareholders can breathe a sigh of relief because they can be confident that  the company is resilient enough to guarantee appreciation in value.

Of course, this is also good news for Barrick Gold's shareholders as the Canadian gold producer has a 93.6% stake in the equity of Acacia Mining.

Acacia Mining is trading at around $1.50 per share. The market capitalization of 410.09 million shares outstanding is approximately $534.08 million.

The stock is trading below the 200, 100 and 50-SMA lines and the 52-week range is of $1.37 to $3.51.

(Disclosure: I have no positions in any security mentioned in this article.)

About the author:

Alberto Abaterusso
If somebody asks what being a value investor means, Alberto Abaterusso would answer, “The value investor is not just the possessor of the security that represents the company, but he is the owner of that company. As an owner of the company the value investor is actively involved in the dynamics of that company and his first concern is how to have sales progressively growing. Also, the value investor is probably one of the most demanding persons in the world concerning sales.”

Abaterusso is a freelance writer based in The Netherlands. He primarily writes about gold, silver and precious metals mining stocks. His articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. Alberto holds an MBA from Università degli Studi di Bari (Italy), Aldo Moro.

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