The miner’s shares have fallen more than 50% over the past 12 months as its majority owner Barrick Gold negotiates with the Tanzanian government to lift a ban on the export of gold and copper concentrates.
Tanzanian government claims Acacia owes unpaid royalties on undeclared exports.
The export ban prompted the miner to scale back operations at its two of its three mines - Bulyanhulu and Buzwagi.
Barclays upgrades Acacia to an ‘overweight’
“Following the collapse in the share price, we see attractive risk/reward on offer,” Barclays said.
“The shares are trading at a 32% discount to our 184p base case NPV (net present value), which assumes a US$300m tax settlement, 7% royalty and 16% government free carry in the assets.”
Barclays upgraded Acacia to an ‘overweight’ rating from ‘equal-weight’ and raised its target price to 171p from 165p.
The investment bank said the negotiations with the Tanzanian government have dragged on for more than a year but should be concluded soon.
“This is the key catalyst for a re-rating, allowing the market to price in the restart of Bulyanhulu and release of US$230mln concentrate inventory over 2019.”
Higher tax settlement a risk, says Barclays
But Barclays said since Acacia has "limited liquidity", a key risk is a potential increase in the US$300mln tax settlement with Tanzania.
Last Friday, Acacia said gold production dropped 36% year-on-year to 133,778 ounces in the second quarter after cutting back operations at Bulyanhulu and Buzwagi.
Barclays pointed out that compared to the first quarter, production was up 11% and accounted for more than half of the total estimated for the full year.
“1H18 results on 20 July is the next major catalyst for the stock,” the bank said.
“Finally while gold has struggled against a strong USD and no sign of the long-awaited inflation lift, we'd be surprised to see it fall much given current geopolitics and trade disputes.”
In late morning trading, shares fell 1.3% to 127p.