Before the opening bell on Thursday, Acacia Mining PLC (LSE:ACA, Financial) released its operating and financial results for the first quarter of fiscal 2019.
The company posted 104,899 ounces of gold production, 13% lower than in the prior-year quarter due to several operating issues experienced at the North Mara Gokona underground mine, the Nyabirama open pit and the Buzwagi mine in Tanzania. The yellow metal was produced at an all-in sustaining cost of $1,023 per ounce, up 5% year over year as a result of fixed costs spread over a thinner production base.
Despite the production shortfall, the company is guiding from 500,000 to 550,000 ounces in 2019 gold production, which is in line with expectations for the year, at an all-in sustaining cost of $860 to $920 per ounce.
Acacia Mining, whose majority shareholder is Barrick Gold (GOLD, Financial), also recorded a 12% decrease in revenue to $138 billion, a 72% decline in adjusted earnings before interest, taxes, depreciation and amortization to $23.8 million and an earnings loss of $7 million. The adjusted net loss was $1.7 per share versus adjusted net earnings of $1.7 per share in the year-ago quarter. These financial results were influenced by lower sales as well as lower production and lower gold prices.
The production shortfall also impinged on the cash balance, which decreased by $17 million during the quarter to $99 million.
In addition, Acacia Mining is still negotiating with the government of Tanzania to resolve a dispute for an alleged unpaid historical corporate income tax for Bulyanhulu Gold Mine Ltd. The company received a $190 billion fine from the Tanzanian government in July 2017 and a ban on the export of unprocessed gold and copper in March 2017. For the benefit of all its shareholders, the company believes a negotiated resolution is the best way to proceed, relying on the support of its major shareholder Barrick Gold.
The closing share price was 1.61 British pounds ($2.08) on April 24, for a market capitalization of about 659.86 million pounds. Over the past year, the stock has gained 8.5%, outperforming the VanEck Vectors Gold Miners ETF (GDX, Financial) by about 15%.
The 52-week range is 0.94 pounds to 2.68 pounds. The 14-day relative strength index of 27 suggests the stock is close to oversold levels.
Wall Street issued a hold recommendation rating for shares of Acacia Mining with an average target price of 2.16 British pounds per share, or 34.1% higher than the closing price on Wednesday.
Disclosure: I have no positions in any securities mentioned.
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