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Impairment rocks Acacia

Operational difficulties weighed on the gold miner in 2015, although costs are expected to drop sharply this year
February 15, 2016

The recent surge in the price of gold has done wonders for Acacia Mining's (ACA) shares, but that couldn't stop an 8 per cent share price dip following results for 2015, which detailed a net loss of $197m (£136m). Slightly higher cash costs, last year's depressed gold price, and a hefty $189m post-tax impairment on lower price assumptions combined to forestall a planned turnaround that chief executive Brad Gordon described as "slower than I had hoped to achieve".

IC TIP: Hold at 233p

The year's big stumbling block came in the third quarter, when power interruptions and contamination of the ore processing circuit, combined with lower ore tonnes and reduced head grade to pare back production at the Bulyanhulu mine. While the episode is now behind the Tanzania-focused producer, free cash-flow objectives for 2015 were missed.

More encouragingly, management believes savings initiatives will translate to a 15 per cent fall in all-in cash costs to $950-$980 an ounce in 2016, against production increases of 5 per cent. That should help it hit JPMorgan forecasts of earnings before interest and tax of $111m and EPS of 18¢ this year, (from $40m and 5¢ in 2015).

ACACIA MINING (ACA)

ORD PRICE:233pMARKET VALUE:£956m
TOUCH:231.4-233.2p12-MONTH HIGH:317pLOW: 154p
DIVIDEND YIELD:1.2%PE RATIO:na
NET ASSET VALUE:436¢NET CASH:$105.5m

Year to 31 DecTurnover ($bn)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (¢)
20111.2240367.016.3
20121.0117924.516.3
20130.93-929-1813.0
20140.9311521.84.2
20150.87-124-48.14.2
% change-7---

Ex-div: 27 May

Payment: 5 May

£1=$1.45