Acacia Mining directors take 10 pc salary cut

DAILY NEWS Reporter and Agencies

DIRECTORS of Acacia Mining, including CEO Brad Gordon, would take a 10 per cent cut in salaries in the 2016 financial year as the firm sought to reduce operational costs and deliver an increase in free cash flow.

Mr Gordon earned just over £1m including basic salary and all other benefits in 2014, according to the firm’s annual report. The company, which in November fired 1,050 people, said it would lift gold production by up to 780,000 ounces, a 6.5 per cent increase over the 731,912 oz produced in 2015.

This would be at an allin sustaining cost of $965/oz, down from $1,112/oz in the 2015 financial year. In a conference call to present the £663m firm’s fourth quarter production figures, Gordon styled 2015 as “a year of transformation” and said that 2016 would “bear the fruits” of the transformation.

For 2015, the performance of North Mara, one of three operations Acacia manages in Tanzania, was a stand out moment, along with promising results from exploration in East Africa, but “as with all transformations not everything goes to plan,” he said.

Mr Gordon added that he “understood the disappointment” with gold production growth at Bulyanhulu which is about 100,000 oz off its targeted 350,000 oz/year output level.

“I firmly believe it is a 350,000 oz mine.” Investec Securities said in a morning note that it was expecting more overall production from Acacia in 2016 of some 805,000 oz “so will need to downgrade slightly”.

“Clearly, delivering on the ambitious Bulyanhulu production targets is proving more difficult than envisaged, notwithstanding the strong 4Q15,” said Investec.

Bulyanhulu produced 78,000 oz in the three months to December, more than any quarter in Acacia’s 2015 financial year. Deutsche Bank chose Acacia as its top mining pick in a January report - an assessment based on share value, followed by the performance of the balance sheet. The bank had, however, also assumed a 12.5 per cent increase in gold production.

Shares in Acacia Mining were 9 per cent higher by mid-morning in London, but on a 12-month return basis, they are 43 per cent lower.

In addition to cutting remuneration, Acacia would save $25m a year following its retrenchments in November. At total employees of about 5,000, including contractors, Acacia had more than halved its work force since Gordon was appointed in 2013. Acacia said its cost saving measures were in preparation for “a lower gold price environment”.

As a result, the company would also lower its gold price assumption for its gold reserves calculation to $1,100/oz from $1,300/oz previously. “We will see a reduction in reserves and and that will have an impact on planning as well,” said Gordon.

“Will have more on that in mid-February,” he added referring to the firm’s full-year results presentation.