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VSA Capital Market Movers - Acacia Mining and Rio Tinto

VSA Capital Market Movers - Acacia Mining and Rio Tinto

Acacia Mining (LON:ACA)
Acacia Mining  has announced strong results for Q1 2017 with gold production of 220koz up 15% YoY and 3% QoQ which with an average gold price of US$1,221/oz resulted in revenue of US$234m, up 6% YoY. Cash costs of US$577/oz were down 15% QoQ and 17% YoY resulting from stronger grades and recoveries. EBITDA therefore benefitted from stronger revenues and lower mining costs and consequently was up 25% YoY. ACA reversed a net loss in Q1 2016 of US$52m to produce a net profit of US$27m in Q1 2017.

AISC were down 2% QoQ and 3% YoY to US$934/oz with the decline in operating cash costs offsetting in part an increase in capex of 30% to US$47m. Despite higher capital spending the strong earnings improvement has significantly benefitted ACA’s balance sheet with net cash strengthening further, up 58% YoY to US$196m.

Despite the strong operational performance in Q1 the ban on the export of mineral concentrates from Tanzania has meant that ACA is now unable to export product from Bulyanhulu and Buzwagi as these mines unlike North Mara produce a mixture of concentrate and dore. Concentrate accounted for 30% of group revenues in 2016 and since the ban was implemented a stockpile of c.30koz has been built by ACA who are in negotiations with the government to resolve the issue.

Rio Tinto (LON:RIO)
Rio Tinto  has released weak operating results for Q1 2017 as strikes and bad weather disrupted production. A cyclone in Australia during the period caused flooding at the mine site, damage to railways and prevented ship loading meaning that iron ore production of 77mnt was down 3% YoY and 10% QoQ although the company has reiterated guidance of 330-340mnt for the full year.

Hard coking coal was also impacted by the cyclone and changes to the mine plan timing at Kestrel and production of 1.58mnt was down 20% YoY and 28% QoQ. Semi soft and thermal coal production of 5.2mnt was up 4% YoY and down 1% QoQ.

Copper production of 84kt was down 37% QoQ and YoY as operations at Escondida were disrupted by strikes. In combination with curtailed production at Grasberg Rio has reduced its copper output guidance for the full year to 500-550kt. Bauxite and aluminium saw modest annual improvements of 2% although quarterly declines of 7% and 3% to 11.3kt and 889kt respectively. Diamond production was also weak as Argyle production was down 11% YoY and 16% QoQ to 3mnct and flat YoY at Diavik but up 15% QoQ to 1mnct.

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