On the basis of Acacia Mining' s (ACA) preliminary results for 2016, there should be little wonder why the company has become a potential takeover candidate in the eyes of Canada's Endeavour Mining. Production of 829,705 ounces of gold was a record for the Africa-focused miner, while all-in sustaining costs fell 14 per cent and both operational cash flow and net cash more than doubled.
Judging by the 2017 outlook, it appears Acacia thinks it can repeat the trick. The ageing Buzwagi mine, whose steadily falling output had caused the market to expect a drop in production this year, has had its life extended, sparking management confidence that production can climb by as much as 8.5 per cent at an all-in sustaining cost of just $880-$920 (£705-£737) per ounce. Hitting the lower end of that range would represent an 8 per cent fall in the cost base.
This steely focus on costs has slightly compromised the group's reserves and resources of gold, which fell 4 per cent in the year to 27.5m ounces. However, this could soon be replaced by the maiden resource on Acacia's West Kenya exploration project, details of which are expected this quarter.
Consensus forecasts are for 41.2¢ adjusted EPS and $263m pre-tax profit in 2017, up from 34.5¢ and $244m in 2016.
ACACIA MINING (ACA) | ||||
|---|---|---|---|---|
| ORD PRICE: | 498p | MARKET VALUE: | £2.04bn | |
| TOUCH: | 497-498p | 12-MONTH HIGH: | 615p | LOW: 208p |
| DIVIDEND YIELD: | 1.7% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 454¢ | NET CASH: | $218m | |
| Year to 31 Dec | Turnover ($bn) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2012 | 1.01 | 179 | 24.5 | 16.3 |
| 2013 | 0.93 | -929 | -181 | 3.0 |
| 2014 | 0.93 | 115 | 21.8 | 4.2 |
| 2015 | 0.87 | -124 | -48.1 | 4.2 |
| 2016 | 1.05 | 242 | 23.2 | 10.4 |
| % change | +21 | - | - | +148 |
Ex-div: 4 May Payment: 31 May £1 = $1.25 | ||||
