Acacia Mining to lay off staff in cutting costs

ACACIA Mining plans to trim its working force and cut salaries to its seniors executives as it struggles to weather the storm on falling global gold prices.

The Chief Executive Officer, Mr Brad Gordon, said in a newsletter that redundancies and wage cut were among difficult decisions made by executive leadership team to cut down on rising operational cost, so as to overcome challenges brought about by global gold prices slump.

“This is the most difficult decision but we expect that there will have to be redundancies and these will need to happen this year.

We will not be awarding wage and salary increases at the end of the year. Our business can simply not afford it. Senior Executives and myself will be taking a 10 per cent pay cut,” he said in the newsletter.

The gold miner reported a net loss of 13 million US dollar in the three months to September 30, this year, compared with a net profit of 28 million US dollars in the same quarter in 2014.

The loss reflected a 20 per cent drop in revenue to 193 million US dollars after gold output fell 14 per cent to 163,888 troy ounces and gold sales dropped 6 per cent to 167,116 ounces.

The loss in September halted the bullish run of the mining company leading to a plunge of its share market in the London Stock Market, the CEO said. 

“Our progress over the last two years had been recognised by the investment market and Acacia had been one of the shining lights on the London Stock Exchange, but the under-performance in the September quarter was a surprise to the market and led to a 25 per cent fall in our share price relative to our peers.”

The mining company is also contending with poor output and difficulties in the market that threaten to drain its cash resources. The CEO said the company spent 46 million US dollars in three months up to September, out of 145 million US dollars remained as at the end of June, this year.

“At the end of June, after our debt obligations, we had $145 million in cash. At the end the September quarter we had consumed US$46 million of that cash which left us with US$99 million. 

"If the rate of decline continues our business is not sustainable; this will have a significant impact on our people and the communities in which we operate.”

The measures will help to cut down on operational cost seen to be increasing again this year after they were brought down in 2013 and 2014, the CEO said noting such measures were unavoidable if the company is to sustain their activities. 

“...having brought our total costs down over 2013 and 2014, with total spending for our operations and offices in 2014 of $767 million, we are seeing our costs increase again and project this year’s total costs to increase to almost $800 million.

With similar production and a lower gold price this is clearly not sustainable. For our business to survive and prosper, based on our current mine plans we must bring those total costs down by close to 10 per cent in 2016 to below US $730 million.”

Acacia Mining will be reviewing all supplier contracts to see where they can lower cost to business and do away with unnecessary spending, he said, adding it would be up to their business partners to support them if they want to remain long-term partners of the mining company.

The company will also defer all projects that are not business critical in the next six months until the business improves, he said.
Source: Daily News, reported by Henry Lyimo, from Dar es Salaam, Tanzania
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