July 20, 2018 / 9:25 AM / a month ago

UPDATE 1-Acacia Mining reports fall in H1 earnings as costs rise

(Adds detail, shares, quotes)

LONDON, July 20 (Reuters) - Acacia Mining reported a fall in first-half core earnings on Friday due to an impairment on a project and higher costs mainly stemming from arbitration with the Tanzanian government that pushed the company into a quarterly loss.

The London-listed miner said earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to $133.6 million, from $161 million a year earlier. It also recorded a net loss of $19.1 million in the second quarter.

Shares in Acacia, majority owned by Barrick Gold, were down around 2 percent by 0920 GMT.

Tanzania, where Acacia has all of its operating mines, has introduced sweeping changes to its mining industry including banning the export of raw minerals and introducing laws to reap more revenue from the sector.

Chief Financial Officer Jaco Maritz said he expects costs to decline in the second half of the year.

Gold production for the first half reached 254,759 ounces at an all-in sustaining cost (AISC) of $945 per ounce, with output on track for the top end of Acacia's target for the year.

Acacia expects to mine between 435,000 and 475,000 ounces for 2018 at an AISC of $935-985 per ounce.

Output fell 41 percent from a year earlier because Acacia reduced operations at its Bulyanhulu mine due to the concentrate export ban. Compared to the previous six months, output was up 6 percent.

Barrick is still negotiating with the government on behalf of Acacia and last year struck a "framework agreement" that would see Acacia pay $300 million in goodwill, split economic benefits and hand over 16 percent ownership of its mines.

Last month, Barrick failed to provide a new deadline for the completion of talks with the government after it missed a mid-year target to do so.

"It's difficult to comment on timeframes given that we are not in the room," interim Chief Executive Peter Geleta told Reuters, adding that Barrick has said negotiations were "progressing well".

"The longer it drags on, obviously, the uncertainty and keeping people motivated is always a challenge."

Acacia generated free cash flow in the second quarter for the first time since 2016, at $14 million, the company said.

Cash balance at the end of June was $120 million, down from $176 million a year earlier but up from $80.5 million in December.

The increase was due to a non-core royalty sale earlier this year and strong operational performance, Acacia said.

The miner took an impairment of $24 million on the Nyanzaga project, where its joint-venture partner Orecorp said it would buy Acacia's 51 percent stake.

Jefferies analysts said Acacia's adjusted EBITDA fell short of the investment bank's estimates, adding that costs dragged down a "solid operational quarter". (Reporting by Zandi Shabalala; Editing by Jason Neely and Dale Hudson)

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