Tanzania Piles Up 1,100 Containers of Gold/Copper Concentrates Banned from Export

Tanzanian largest gold miner Acacia Mining (LSE:ACA; DSE:ACA) issued a market updated and hosted a conference call on 2nd June 2017 to explain the company’s current situation in Tanzania, following the ban on the export of mineral concentrates and ores for metallic minerals introduced in March this year by the Tanzanian government.

CEO Brad Gordon explained that the company’s mines in Tanzania continue to operate as normal, producing and selling gold doré whilst stockpiling gold/copper concentrate.

As of 31st May 2017, the company has approximately 85,000 ounces of gold, 4 million pounds of copper and 50,000 ounces of silver contained within unsold concentrate, which amounts now to 1,100 containers held in the country.

“In light of the increased levels of uncertainty we have seen some impact on productivity levels but at this stage, we are not making any changes to full-year guidance and continue to take steps to minimize further cash outflows from the business”, the market update reads.

The ban was introduced to ensure that mineral value addition activities are carried out in the country, after which the President of Tanzania Dr. John Magufuli established two special committees to examine the extent, types, and values of minerals contained in mineral sand in containers for export.

The findings of the first committee’s investigation were announced on 24 May 2017, identifying major discrepancies in the average concentration of these minerals, per ton of mineral sand, resulting in losses of revenue from royalties.

On the same day, President Magufuli revoked the appointment of the Minister of Energy and Mines Prof. Sospeter Muhongo, with immediate effect, dissolved the board of directors of the Tanzania Minerals Audit Agency (TMAA) and suspended its Chief Executive Officer.

However, Acacia made a number of observations that dispute and discredit the committee’s findings.

“We don’t know how they got their results. We haven’t seen the report, we have requested it and asked for an independent review, as we dispute the finding […] You don’t need to be too expert to understand that those findings are not correct”, Gordon explained during the conference call.

Details of the company’s observations on the findings are available here: www.tanzaniainvest.com/mining/acacia-discredit-committee-findings-export-gold-copper-concentrates.

Meanwhile, Acacia is co-operating with the second committee, which was set up to examine economic and legal issues associated with historic exports of gold/copper concentrates.

“We have provided extensive information to the second committee and have provided access to each of our mine sites. We believe that the committee is close to completing its work, following which we would welcome the opportunity to discuss the findings directly with senior government officials and remain hopeful that we will be able to reach a resolution to the current ban on exports, but we continue to consider all options”, Gordon explained.

He also stressed that Acacia will continue production as it is for some time, although it is losing USD 15 million per month in revenues as a consequence of the ban, and will not be changing its full-year guidance.

He also commented on the government’s intentions to establish smelting capacity in the country: “To make it viable, as per 2011 report of TMAA, it needs 150,000/200,000 tons of mineral concentrate per year. We produce 50,000/60,000 tons per year. However, we are prepared to work with the government to ascertain whether smelting is viable in the country with current technologies.”

Mining companies in Tanzania are also expected to list 30% of their share capital at the Dar es Salaam stock exchange (DSE), by August this year.

To this regard, Andrew Wray, Chief Financial Officer of Acacia Mining, explained that the company has engaged with the ministry to discuss alternatives to reach their objective without “trying to create liquidity in the market where it does not exist”, referring to the recent IPO of mobile operator Vodacom at DSE – the largest IPO in Tanzania to date – which has been extended to allow investors more time to participate.

“The regulation points out that the license mining holder has to list; this would make interesting if Buzwagi and Bulyanhulu mines are listed separately, so it would make more sense to make something at the group level which is part of what si being discussed with the Ministry”, Wray explained.

Acacia Mining already listed at DSE in 2011, to promote broader liquidity and ownership of its shares in Tanzania as part of the company’s longer term commitment to the country.