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4-Traders Homepage  >  Equities  >  London Stock Exchange  >  Acacia Mining PLC    ACA   GB00B61D2N63

ACACIA MINING PLC (ACA)
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Delayed Quote. Delayed  - 12/14 05:35:05 pm
175.8 GBp   +2.63%
12/14 ACACIA MINING : s) in Company
11/28 ACACIA MINING : Director/PDMR Shareholding
11/08 ACACIA MINING : Gets More Time to Pay 53bn/
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Investors wary as Tanzania moves to assert more control over mines

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09/25/2017 | 11:43am CET

New laws and a crackdown on mining firms in Tanzania has slowed fresh investment in what has long been seen as one of Africa's brightest mining prospects as companies assess the consequences of government efforts to claim a bigger slice of the pie.

Takeover bids and exploration plans have been cancelled and workers laid off. The share prices of many firms listed in Australia, Britain, South Africa and Canada with interests in Tanzania have halved as the value of their investments tumble.

The tumult follows the passage of three laws in July that, among other things, hike taxes on mineral exports, mandate a higher government stake in some mining operations and force the construction of local smelters to bring Tanzania higher up the mining food chain.

The regulations aim to stamp out what President John Magufuli, nicknamed "the Bulldozer", has called years of corrupt practices and tax evasion that have robbed the country of revenue from a sector accounting for about four percent of GDP.

Many of the changes were first suggested by the political opposition and have proved wildly popular with voters in Tanzania, where GDP per capita is still only $880(650.65 pounds).

International investors are not happy, however, especially because the details remain unclear. Magufuli fired the minister of mining in May and he has not been replaced.

Junior explorer Manas Resources (>> Manas Resources Limited) expected to complete its acquisition of the Victoria Gold Project from Cienega Sarl by early 2018, but the company told Reuters it may run out of time if there is no clarity soon.

"Because of the changes in legislation and the time being taken to implement new regulations, the sector has slowed down to a point where it is impacting exploration activities and our capacity to finalise the deal," said Manas CEO Phil Reese.

The director of one minerals company said he is shutting his Tanzanian office because he believes the laws will make it illegal for him to recoup the cost of his many unsuccessful exploration projects against the few successful ones, and require him to share his valuable geological data with the government for free.

"There will be no nickel and gold exploration in Tanzania for the foreseeable future," the head of another company said.

Both men asked not to be named to avoid jeopardising their relations with the government.

One mining services company said it had laid off more than 50 employees in the last 18 months.

EXPORT BANS

The first serious blow to mining companies this year came in March, when Tanzania banned the export of gold and copper ore over a tax dispute with the country's biggest gold miner, London-listed Acacia (>> Acacia Mining PLC), and to encourage the construction of domestic smelters.

The government says Acacia, majority-owned by Barrick Gold (>> Barrick Gold Corp), owes $190 billion in tax, penalties and interest for the period between 2000 and 2017. But miners say it would be impossible for listed and independently audited companies to hide billions of dollars in extra revenue.

They also argue Tanzania does not produce enough ore to make building a smelter commercially viable. Africa's fourth-largest gold producer, the country is also a source of graphite, diamonds, tanzanite and rare earth minerals.

Under the new regulations, the government can force mining and energy companies to renegotiate contracts to give the state at least 16 percent in projects, rising to 50 percent in some cases, and raise export royalties. [nL8N1JV4PG]

The move is not so unusual in Africa. South Africa in June raised the threshold for black ownership in miners to 30 percent.

Increasing shares of royalties is also part of a wider global trend that could lead to permanently higher prices, one mining CEO said, asking not to be identified.

The Philippines, the world's top nickel supplier, and Brazil, which produces gold, copper, tin and bauxite, are making the same push.

"If all the governments want more of a share, commodities prices will reflect that," the CEO said. "But if it's just one government, they might get a bigger share of nothing."

Miners say the problem in Tanzania is that the laws, passed in less than a week, were pushed through without consultation.

They also say it is still unclear how they will be applied - if, for example, the 16 percent will apply only to precious metals or also industrial minerals such as graphite.

The mining commission that will oversee the regulations has yet to be formed. A ministry official, who asked not to be named, said it's not clear when it will start work.

MINING DEALS TAKE A HIT

Bigger miners can draw on cash reserves to weather the sudden changes, but junior miners are more vulnerable to investor jitters because funders are quicker to pull out when project capital injections are smaller.

London-based Tremont Investment immediately cancelled a bid for Australia's Cradle Resources (>> Cradle Resources Ltd) after the laws were passed. Shanta Gold (>> Shanta Gold Limited) cancelled a takeover bid for Helio Resource Corp. <HRC.V> shortly thereafter, also citing the laws.

The shares of gold miner Orecorp (>> Orecorp Ltd), whose only other asset is an exploration project in Mauritania, are down 72 percent since March.

Junior miner Kibo Mining (>> Kibo Mining PLC) has seen little impact because in addition to gold exploration, it is developing a coal mine to fuel Tanzania's first coal-fired power station.

The new government regulations, including moves to increase government ownership, were sound and warranted, Kibo Mining CEO Louis Coetzee told Reuters, but he lamented the "questionable methodology" of the process.

The government recently has shifted its attention from precious metals to precious stones, announcing on Sept. 20 that the military would build walls and checkpoints around tanzanite mines and the central bank would buy the stones. [nL5N1M14DH]

A parliamentary inquiry team had said on Sept. 7 that it had uncovered massive smuggling of the blue-violet gemstone.

On the same day, the government confiscated a consignment of diamonds from a mine majority-owned by Petra Diamonds (>> Petra Diamonds Limited) after accusing the firm of under-declaring the value of the stones by around half. Petra denies the charge.

Minerals companies and mining analysts said Tanzania could overplay its hand.

"Minerals may not be mobile but the capital that funds the mines is," said Ben Gargett, head of PricewaterhouseCoopers Australia-Africa practice. "Investors are saying, 'On our risk radar, Tanzania has just gone a lot further down on the list.'"

(Additional reporting by Fumbuka Ng'wanakilala in Dar es Salaam; Editing by Sonya Hepinstall)

By Katharine Houreld and Zandi Shabalala

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Financials ($)
Sales 2017 744 M
EBIT 2017 170 M
Net income 2017 100 M
Finance 2017 32,6 M
Yield 2017 0,86%
P/E ratio 2017 9,53
P/E ratio 2018 6,06
EV / Sales 2017 1,26x
EV / Sales 2018 0,86x
Capitalization 967 M
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Technical analysis trends ACACIA MINING PLC
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Mean consensus HOLD
Number of Analysts 17
Average target price 2,80 $
Spread / Average Target 19%
EPS Revisions
Managers
NameTitle
Bradley Austin Gordon Chief Executive Officer & Executive Director
Kelvin Dushnisky Non-Executive Chairman
Mark Morcombe Chief Operating Officer
Jaco Maritz Chief Financial Officer
André Falzon Independent Non-Executive Director
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