The tax and royalties payments averaged about US$35.8 million (81.6bn/-) on quarterly basis, which is nearly US$6 million (13.6bn/-) more the payments it made in the first three months of 2018. The total disbursements during the 15 months amounted to US$173.3 million (about 395.3bn/-).
The 2017 remittances, which was a tumultuous year for the subsidiary of Canada’s Barrick Gold, were also above the company’s average disbursements for the period 2008-2017. Acacia figures seen by Smart Money show that Tanzania’s largest gold producer remitted a total of US$1.044 billion to Treasury during the period, which amounts to slightly over 2.38trn/- at the current market exchange rate.
The 2017 payments amounted to about 327bn/-. This was divided into corporate taxes of US$34.6 million (about 78.9bn/-), royalties of US$44.9 million (about 102.4bn/-), payroll taxes of US$46.1 million (nearly 105.2bn/-) and import duties of US$17.5 million (nearly 40bn/-).
“Acacia remains committed to supporting the Tanzanian economy, having contributed US$30.3 million (about 69.1bn/-) in taxes and royalties during the first quarter (of 2018),” the company said in a note on its performance for the period in which it reported a near 50 per cent fall in earnings after reducing operations at its flagship Bulyanhulu mine amid a tax dispute with the government.
“This includes royalties and clearing taxes of US$12.2 million, corporate tax of US$9.6 million, payroll taxes of US$7.6 million, and US$0.9 million in import duties. We have also paid US$1.1 million in local service levies due on H2 2017 revenues,” it added.
The company said its gold production in quarter one (Q1) fell 45 per cent from a year earlier to 120,981 ounces, mainly due to lower output at the Bulyanhulu mine. Acacia, which is publicly listed in the UK with a secondary listing on the Dar es Salaam Stock Exchange, operates three major mines in the country that include Buzwagi and North Mara.
Immediately after announcement of the new results, shares of the company in London skidded 8.8 per cent to 141 pence and have now tumbled more than 70 per cent since Tanzania introduced a ban on concentrate exports in March 2017.
According to the performance announcements, the company has stuck to its full-year targets, targeting output of between 435,000-475,000 ounces, or at least 38 per cent lower than 2017, at a cost of $935-985 per ounce. The statement said adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) for the three months to March 31, 2018, fell to US$44 million from US$82 million a year earlier.
An equity research published last week by Seeking Alpha of the US says that the concentrate ban imposed by the government last year has impacted the company’s ability to generate cash. Seeking Alpha, which is a crowd-sourced content service for financial markets, said revenue stood at US$752 million in 2017 down 29 per cent year-on-year as a result of inability to sell gold, silver and copper contained in concentrate minerals.
The update on Q1 performance said the financials were naturally lower than last year but pleasing to see a build in the cash position. According to it, the sale of the non-core Houndé royalty in January for US$45 million bolstered cash in hand and this together with the successful delivery of the operational plans at Bulyanhulu and Buzwagi means the company exited the quarter with US$107 million as of March 31.
As previously announced, it noted, net cash increased to US$50 million during the quarter. The company added that it has taken action to stabilise the business and expect further growth in the balance sheet in the coming months.
“The business and our people have consistently shown resilience in the face of a challenging operating environment and we expect to continue to deliver full year results in line with market expectations,” reads the update.
“Whilst the concentrate ban remains in place, we no longer produce concentrate so are able to sell everything going forward,” it adds noting that Acacia has maintained investment in exploration both at North Mara and across Africa.
“Our focus is to deliver optimal performance from all aspects of the business within our control in the current operating environment, return the business to free cash generation. We remain committed to delivering value for all of our stakeholders whilst working towards a resolution and conclusive and collaborative way forward with the government.”
Acacia Mining, which spun-off from Barrick Gold last 2010, was accused of tax evasion in an ongoing case that triggered an enormous US$190 billion tax bill. The government slapped the company with charges of alleged tax evasion, which the miner denies.
This conflict escalated to a point that its former parent company intervened by working out some arbitration notices for its Buzwagi and Bulyanhulu mines to provide protection for its shareholders to reach a settlement. Acacia agreed to pay the taxes eventually.
Last year, the government prohibited exports of metal concentrate, forcing the company to scale-down production at its Bulyanhulu mine. Discussions between the government and Barrick remain ongoing.
According to the Seeking Alpha equity research, Barrick indicated that a possible solution will likely to be reached in the first half of 2018. It also has it that Acacia is providing support to Barrick and any agreements between Barrick and the government would require Acacia's approval.
“As you know, discussions between Barrick and the Government of Tanzania have continued during the first quarter. They are working towards finalizing agreements in the coming months,” Acacia notes in the update.
“We continue to support Barrick throughout the process, and await a detailed agreed proposal that will be reviewed by an Independent Committee of the company’s directors,” it adds. “We are also continuing to engage with a number of Chinese parties regarding a potential investment into one of more of our mines, following the receipt of approaches during the first quarter.”