ACACIA MINING PLC Intention to reduce operational activity at Bulyanhulu

 
TIDMACA 
 
4 September 2017 
 
                               Acacia Mining plc 
 
                                    LSE:ACA 
 
                  ("Acacia" or the "Company" or the "Group") 
 
            Intention to reduce operational activity at Bulyanhulu 
 
  * Decision driven by unsustainable cash outflows at the mine due to 
    concentrate ban and operating environment 
  * Due to  this change, Acacia believes the Group can return to positive cash 
    generation in 2018 
  * Talks between Barrick Gold Corporation ("Barrick")  and Tanzanian 
    Government on-going 
 
Since the gold/copper concentrate export ban was imposed on 3 March 2017, 
impacting approximately 35% of year to date group production, Acacia has seen a 
build-up of approximately US$265 million of concentrate inventory in Tanzania, 
based on current prices. To help to mitigate the lost revenue, Acacia has taken 
a number of actions to reduce our operating and capital costs in order to 
protect jobs and our supplier base, both of which are predominantly Tanzanian. 
Despite these actions, the loss of revenue, together with an outflow of 
approximately US$65 million of indirect taxes and costs from other changes to 
the operating environment, has led to a significant cash outflow of 
approximately US$210 million in 2017 year to date. 
 
Accordingly, as part of Acacia's 2017 Interim Results, we announced that we 
would need to consider reducing operational activity and expenditure at the 
Bulyanhulu mine if the concentrate ban was not lifted by the end of Q3 2017. 
The impact of the ban, in addition to the deterioration of the current 
operating environment, has led to negative cash flow of approximately US$15 
million per month at the mine and thus has made ordinary course operations at 
Bulyanhulu unsustainable. Acacia has therefore decided to commence a programme 
to reduce operational activity and expenditure at Bulyanhulu in order to 
preserve the viability of our business over the longer term. This programme 
will include the preservation of all assets and equipment to enable the mine to 
resume ordinary course operations should the export ban be lifted and the 
operating environment stabilised. 
 
In the meantime, discussions between Barrick and the Government of Tanzania are 
on-going. Acacia continues to support the discussions and still believes that a 
negotiated resolution is the best outcome for all stakeholders. 
 
Following this announcement, Bulyanhulu will commence appropriate consultations 
with its stakeholders as part of a programme to reduce operational activity. As 
part of the implementation of this programme, underground activity will cease 
and the processing of underground ore is planned to cease within four weeks. 
The retreatment of tailings, which is currently suspended to preserve water in 
light of the on-going drought conditions in northern Tanzania, is expected to 
recommence in October, assuming adequate rainfall is received, and will 
continue at a rate of 30-35,000 ounces per annum whilst underground activity is 
ceased. Regrettably, the implementation of this programme will lead to a 
significant reduction in the workforce from the current 1,200 employee and 800 
contractor roles. 
 
It is envisaged that the process of moving to a reduced operational state will 
be completed in three months and will include one-off costs of US$20-25 million 
in addition to the natural unwinding of around two months' worth of working 
capital (approximately US$35-40 million). The mine will also incur an average 
of US$5 million per month of operating cash outflows over the next three 
months, before reaching a steady state of around US$3 million per month. These 
costs will be partly offset by the revenue from the retreatment of tailings, 
which produces saleable doré. 
 
For the time being Buzwagi, our other mine affected by the concentrate ban, 
will continue to operate in the ordinary course, due to its remaining short 
mine life and lower impact of the changes in the operating environment on the 
Company's cash outflows. The mine has commenced a trial to test whether it is 
cash flow positive in light of the current export ban to change the processing 
flow sheet to solely produce doré and no concentrate. This change would mean a 
reduction in overall gold and silver recoveries and the mine would no longer 
recover the contained copper, but would enable the mine to sell all the gold 
and silver it produces rather than only 35% of production. This could bring 
forward the planned end of gold/copper concentrate production from mid-2018. 
 
We do not believe that is possible to make a similar change to the processing 
flow sheet at Bulyanhulu as the different nature of the ore at Bulyanhulu means 
that such a change is not economic. 
 
As a result of the planned reduction in operating activity at Bulyanhulu, 
Acacia now expects annual production to be in the order of 100,000 ounces lower 
than the bottom of the previous guidance range of 850,000-900,000 ounces. This 
revised guidance is based on limited production occurring beyond August at 
Bulyanhulu and marginally lower production at North Mara than previously 
planned due to underground development delays as a result of work permit issues 
for key contractors. 
 
Previous AISC guidance of between US$880-920 per ounce sold remains unchanged 
due to the impact of on-going cost-saving initiatives and a further reduction 
in capital expenditure guidance to approximately US$160 million. The one-off 
and on-going costs of the reduced operational state at Bulyanhulu are not 
included in our AISC calculation, though the ongoing tailings retreatment costs 
are included. 
 
Once the changes at Bulyanhulu are completed, Acacia believes the Group will be 
able to return to positive cash generation in early 2018. The Company is also 
evaluating further steps to reduce cash outflows and protect its balance sheet, 
with the cash balance at the end of August 2017 amounting to US$107 million, 
with US$71 million of debt. These steps may include a reduction in corporate 
overheads, expansionary drilling at North Mara, greenfield exploration activity 
and a gold hedging programme. 
 
Acacia reiterates that it shares the Government of Tanzania's goals of 
enhancing the country's social and economic development. Since its inception, 
over 15 years ago the Company, and its predecessors, have invested over US$4 
billion (TSH8.8 trillion) into the country to build and sustain our mines, 
spent over US$3 billion (TSH6.6 trillion) with Tanzanian suppliers to support 
the operation of our business, invested over US$75 million (TSH165 billion) 
into our communities and paid over US$1 billion (TSH2.2 trillion) in taxes and 
royalties. 
 
In the first six months of 2017 alone, Acacia paid US$53 million (TSH117 
billion) in taxes and royalties to Tanzania and delivered projects that 
supported over 40,000 people in the communities around our mines. Over 5,000 
employees and contractors work across Acacia's operations, with over 95% of our 
employees being Tanzanian. An independent EY report into Acacia's contribution 
to Tanzania in 2016 stated that for every direct Acacia employee, 11 additional 
jobs are supported in the broader Tanzanian economy and the Group represented 
around 1.6% of Tanzanian gross domestic product (GDP). 
 
The Company remains hopeful that the ongoing discussions between Barrick and 
the Government of Tanzania will lead to a resolution to the concentrate ban and 
operating environment and enable the re-assessment of the operating situation 
at Bulyanhulu in the near future. 
 
Acacia management will host a conference call to discuss this announcement at 
09:00 BST this morning. Details for the conference call are below and a 
recording will be available on http://www.acaciamining.com/ and accessed 
through the press release, shortly after the call finishes: 
 
Dial-in:     [phone] 
 
Passcode:    Acacia Mining 
 
ENQUIRIES 
 
For further information, please visit our website: http://www.acaciamining.com/ 
or contact: 
 
Acacia Mining plc      [phone] 
 
Brad Gordon, Chief Executive Officer 
 
Giles Blackham, Investor Relations 
 
Camarco                [phone] 
 
Gordon Poole / Billy Clegg / Nick Hennis 
 
About Acacia Mining plc 
 
Acacia Mining plc (LSE:ACA) is Tanzania's largest gold miner and one of the 
largest producers of gold in Africa. We have three mines, all located in 
north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of 
exploration projects in Kenya, Burkina Faso and Mali. 
 
Acacia is a UK public company headquartered in London. We are listed on the 
Main Market of the London Stock Exchange with a secondary listing on the Dar es 
Salaam Stock Exchange. Barrick Gold Corporation is our majority shareholder. 
Acacia reports in US dollars and in accordance with IFRS as adopted by the 
European Union, unless otherwise stated in this announcement. 
 
Disclaimer and forward-looking statements 
 
This announcement is for information purposes only and does not constitute an 
invitation or offer to underwrite, subscribe for or otherwise acquire or 
dispose of any securities of Acacia in any jurisdiction. 
 
This announcement includes "forward-looking statements" that express or imply 
expectations of future events or results as opposed to historical facts. These 
statements include, financial projections and estimates and their underlying 
assumptions, statements regarding plans, objectives and expectations with 
respect to future production, operations, costs, projects, and statements 
regarding future performance. Forward-looking statements are generally 
identified by the words "plans," "expects," "anticipates," "believes," 
"intends," "estimates" and other similar expressions. 
 
All forward-looking statements involve a number of risks, uncertainties and 
other factors, many of which are beyond the control of Acacia, which could 
cause actual results and developments to differ materially from those expressed 
in, or implied by, the forward-looking statements contained herein. Factors 

that could cause or contribute to differences between the actual results, 
performance and achievements of Acacia include, but are not limited to, changes 
or developments in political, economic or business conditions or national or 
local legislation or regulation in countries in which Acacia conducts - or may 
in the future conduct - business, industry trends, competition, fluctuations in 
the spot and forward price of gold or certain other commodity prices (such as 
copper and diesel), currency fluctuations (including the US dollar, South 
African rand, Kenyan shilling and Tanzanian shilling exchange rates), Acacia's 
ability to successfully integrate acquisitions, Acacia's ability to recover its 
reserves or develop new reserves, including its ability to convert its 
resources into reserves and its mineral potential into resources or reserves, 
and to process its mineral reserves successfully and in a timely manner, 
Acacia's ability to complete land acquisitions required to support its mining 
activities, operational or technical difficulties which may occur in the 
context of mining activities, delays and technical challenges associated with 
the completion of projects, risk of trespass, theft and vandalism, changes in 
Acacia's business strategy and ongoing implementation of operational reviews, 
as well as risks and hazards associated with the business of mineral 
exploration, development, mining and production and risks and factors affecting 
the gold mining industry in general. 
 
Although Acacia's management believes that the expectations reflected in such 
forward-looking statements are reasonable, Acacia cannot give assurances that 
such statements will prove to be correct. Accordingly, investors should not 
place reliance on forward-looking statements contained in this announcement. 
Any forward-looking statements in this announcement only reflect information 
available at the time of preparation. Save as required under the Market Abuse 
Regulation or otherwise as may be required under applicable law, Acacia 
explicitly disclaims any obligation or undertaking publicly to update or revise 
any forward-looking statements in this announcement, whether as a result of new 
information, future events or otherwise. Nothing in this announcement should be 
construed as a profit forecast or estimate and no statement made should be 
interpreted to mean that Acacia's profits or earnings per share for any future 
period will necessarily match or exceed its historical published profits or 
earnings per share. 
 
 
 
END 
 

(END) Dow Jones Newswires

September 04, 2017 02:00 ET (06:00 GMT)