Giant mining company Acacia on Monday said it would halt underground work at its flagship Tanzania gold mine and cut its production guidance amid a confrontation between the industry and the government.
Acacia, majority-owned by Barrick Gold (ABX.TO), said it would have to scale back operations at Bulyanhulu mine and cut staff as it coped with a government ban on exports of unprocessed ore, imposed in March to encourage the construction of a local smelter.
“The impact of the ban, in addition to the deterioration of the current operating environment, has led to negative cash flow of approximately $15 million per month at the mine and thus has made ordinary course operations at Bulyanhulu unsustainable,” Acacia said in a statement.
It said that underground activity would cease and the processing of underground ore would stop within four weeks, under a programme “to preserve the viability of our business over the longer term.”
Acacia has been caught up in sweeping changes to Tanzania’s mining industry spearheaded by President John Magufuli, who believes his country is not getting its fair share of profits.
The government also accuses Acacia of evading taxes for years by under-declaring exports – an allegation dismissed by the company which said in July it had been hit with a $190 billion tax bill, equivalent to four times the East African country’s annual gross domestic product.
Shares in the FTSE 250 company plummeted 9 percent to 188 pence by 1000 GMT, making it the biggest decliner among an index of its peers.
According to the miner, a combination of scaling back Bulyanhulu, cutting corporate overheads, expansionary drilling at its largest mine North Mara, greenfield exploration activity and gold hedging should return Acacia back into cash generation next year.
