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Acacia Mining 'deeply concerned' about turn of events in Tanzania

Acacia Mining will seek direct talks with the Tanzanian government to end the dispute
gold and dollars
Gold and cash is the heart of the dispute

Acacia Mining PLC (LON:ACA) shares plunged on Friday after the group expressed ‘deep concern’ over an escalation of its dispute with the Tanzanian government that this week saw money laundering charges brought against some staff.

Acacia’s parent Barrick is negotiating with the government but the miner said if no resolution is reached it will look at how to pursue its claims directly through a bilateral treaty.

READ: Acacia expects output to reach top end of guidance amid dispute with Tanzania government

Peter Geleta, Acacia’s interim chief executive, said he was: “Deeply concerned about the increasing risks to the safety and security of our people and the increasingly challenging operating environment in Tanzania which could impact the outlook for the business.

“I am particularly concerned with the criminal charges now being brought against several current or former employees over the past week, in connection with matters which are being raised in the arbitrations with the Government of Tanzania relating to Bulyanhulu and Buzwagi.”

Acacia’s dispute with the Tanzanian Government dates back 19 months.

In April, Acacia was banned from exporting gold and copper concentrates due to government claims that it was owed huge amounts of undeclared royalties on production from the Bulyanhulu and Buzwagi mines.

Production higher in Q3

In a trading update today, Acacia reported that production rose to 136,640 ounces in the third quarter of 2018, better than both the first and second quarters of the year. Gold sales were 135,875oz.

Third quarter revenue was US$165.6mln with underlying earnings of US$44.6mln.

The group added it is on target to produce 500,000 ounces of gold this year despite the uncertainty, slightly more than predicted earlier in the year.

“We are now tracking towards the lower end of our AISC guidance range of US$935-985 per ounce,” added Geleta.

In late morning trading, Acacia Mining shares were 13.2% lower at 137.45p.

In a note to clients, analysts at RBC Capital said: "Trading on 0.54x NAV there is a clear value opportunity, but we continue to expect that investor focus will remain on the outcome of the Tanzanian government negotiations with Barrick as well as any implications from the Barrick Randgold merger – neither of which are materially updated in today’s release. 

"This leaves us with a Sector Perform recommendation and Speculative Risk rating until we can assess the long-term investment case with more clarity."

  -- Adds share price, analyst comment --

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