26 May 2017

Tanzania: Acacia Shares Plunge As Accusations Rattle Market (2)

Photo: The Citizen
Acacia Mining.

Acacia Mining shares dropped sharply for the second day in a row on Thursday, falling to their lowest level in more than a year after it was accused of under-reporting the amount of metal in its shipments.

'Financial Times' reported yesterday that shares of the London Exchange listed Acacia Mining fell over 40 per cent by yester-morning to 268p after the damning report on metallic mineral exports by the government raised fears that it may be forced to temporarily shut down some of its gold mines.

Shares in the FTSE 250 group fell 30 per cent on Wednesday, and dropped another 12 per cent to 268p by Wednesday evening.

In Dar es Salaam, shares of the mining firm at the Dar es Salaam Stock Exchange fell by 19.47 per cent yesterday after dropping by 17.3 per cent on Wednesday.

Acacia Mining is listed on the London Stock Exchange and the Dar es Salaam Stock Exchange under the ticker ACA, and is a constituent of the FTSE 250 Index.

It has been unable to export its output since the Tanzanian government issued a ban on exports of unprocessed gold and copper concentrate in March. Hopes the ban might be lifted were dashed on Wednesday after it was accused of under-reporting the amount of metal in its shipments.

A report by a presidential committee revealed that Acacia Mining declared the presence of gold, copper and silver in its mineral sand exports but did not declare other precious metals in the consignments.

The committee which presented its findings yesterday said they found that 277 containers held as much as 15.5 metric tons of gold, instead of the 1.1 tons that had been declared.

Following the report, President John Magufuli fired the Minister for Energy and Minerals, Prof Sospeter Muhongo and the Chief Executive Officer of the Tanzania Minerals Audit Agency (TMAA).

He also disbanded the Tanzania Minerals Audit Agency's board and asked authorities to investigate those responsible. Analysts are downgrading Acacia shares predicting more far reaching impact from the accusation levelled against the mining company, the largest in Tanzania.

DigitalLook, a financial information and solutions provider, reported RBC Capital Markets analyst Tyler Broda downgraded Acacia's shares to 'underperform' from 'sector perform' as he felt the developments may even put the miner's local operating licence under pressure.

But with the lack of near-term resolution to the concentrate ban and uncertainty around the future implications, the shares were likely to sag as investors further discount the potential cash flows in the near and medium term.

Dr Hildebrand Shayo, an economist with TIB Development Bank, said investors would naturally be keen on information that may affect their future return where they have invested.

"The serious issue is that innocent investors may be taken for a wild ride in which they stand to lose to manipulators masked behind the misinformation," Dr Shayo said. He said information from Prof Mruma-led committee not only shocked the company involved but sent a shock wave across the world thus affecting Acacia shares.

"The content of the report may be debatable for one reason or another but investors' confidence has already been affected," he said.

However, on Wednesday Acacia "reiterated that it fully declared everything of commercial value produced, paid all appropriate royalties and taxes on all of the payable minerals produced.

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