AMN - TANZANIA: Acacia reduces Bulyanhulu operations

Acacia Mining will reduce operational activity at its Bulyanhulu mine in Tanzania to mitigate lost revenue associated with a Tanzanian Government ban on the exports of gold and copper concentrates. The ban was imposed in March based on allegations that Acacia owes royalties on undeclared exports of gold and copper concentrates from Bulyanhulu and Buzwagi mines.

Acacia said the ban had impacted approximately 35% of year-to-date group production and had resulted in a build-up of concentrate inventory valued at around US$265 million.

To help mitigate the lost revenue, Acacia has taken a number of actions to reduceits operating and capital costs in order to protect jobs and its 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 to date in 2017.

In a statement this week Acacia said: “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 program to reduce operational activity and expenditure at Bulyanhulu in order to preserve the viability of our business over the longer term.

“This program 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.

“Bulyanhulu will commence appropriate consultations with its stakeholders as part of a program to reduce operational activity. As part of the implementation of this program, 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-oing 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 program will lead to a significant reduction in the workforce from the current 1200 employee and 800 contractor roles.”

Discussions between Acacia’s majority shareholder Barrick Gold and the government are ongoing and Acacia continues to support the negotiations.

Acacia says that for the time being Buzwagi mine 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.

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.

www.acaciamining.com