21st Oct 2015 08:26
LONDON (Alliance News) - Acacia Mining PLC on Wednesday reported a dramatic drop in revenue and earnings in the first nine months of 2015 after its profit margin was squeezed by lower gold prices and higher production costs.
The FTSE 250-listed miner reported earnings before interest, tax, depreciation and amortisation of USD117.4 million in the nine month period ended September 30, a huge fall from the USD207.5 million reported a year ago, as revenue dropped to USD639.5 million from USD686.4 million.
That led to net earnings of USD1.7 million in the nine-month period, plummeting from USD69.3 million a year earlier.
In the third quarter alone, Acacia booked earnings before interest, tax, depreciation and amortisation of USD20.5 million, down from USD75.8 million a year, earlier as revenue declined to USD192.7 million from USD240.9 million.
That caused the miner to swing to a quarterly net loss of USD13.0 million in the third quarter from the USD28.4 million quarterly profit reported a year earlier.
Acacia said it produced 531,189 ounces of gold in the first nine months of 2015, which is slightly down from 537,567 ounces a year earlier. However, sales in the same time increased to 522,586 ounces compared to 509,437 ounces.
Third quarter production fell year-on-year and quarter-on-quarter, contributing to the fall in production since the start of 2015 due to short-term issues impacting the Bulyanhulu and Buzwagi mines in Tanzania, it said.
Full-year production is expected to come in at around 718,651 ounces, which would be broadly flat from 2014. That suggests Acacia is aiming to produce around 187,462 ounces in the fourth quarter of 2015, which can be compared to the 163,888 ounces produced in the third quarter.
Prices averaged USD1,172 per ounce in the first nine months of 2015, also down from an average of USD1,282 per ounce. Spot gold was trading at just under USD1,176 per ounce on Wednesday morning.
Compounding those price falls were increases in Acacia's production costs. For the nine month period, its all-in-sustaining cash cost rose to USD1,153 per ounce from USD1,111, meaning it has only made an average gross margin of USD19 per ounce in the first nine months of 2015.
In the third quarter, Acacia's all-in-sustaining cash cost totalled USD1,195 per ounce, meaning its costs outstripped its price, making its operations unprofitable. That cost was up from USD1,098 per ounce a year earlier.
"Although the third quarter was disappointing, it does not alter our confidence that we are close to completing the turnaround. We have addressed each of the issues that impacted the business in third quarter to ensure they do not re-occur and, importantly, key underlying metrics at Bulyanhulu are on track to sustain a step-up in production in the fourth quarter of 2015," said Chief Executive Brad Gordon.
For the full year, Acacia conceded its cash costs will be higher than its guidance. Acacia has an all-in-sustaining cash cost guidance of USD1,050 to USD1,100 per ounce and a cash cost of USD695 to USD725 per ounce, but the miner is expecting both to be around 5% higher than the top end of those ranges for the full year.
Capital expenditure in the first nine months of 2015 totalled USD134.4 million, down from USD196.0 million a year ago.
At the end of September, the company had a cash balance of USD226.4 million, down from USD286.7 million at the end of September 2014.
"In light of the lower gold price environment we are redoubling our efforts to further remove costs from the business in order to return to free cash generation. These initiatives will also be incorporated into annual life of mine planning which is currently underway," said Acacia.
Acacia shares were down 1.1% to 215.50 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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