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ACACIA MINING PLC - Results for the 12 months ended 31 December 2016

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PR Newswire

14 February 2017

Results for the 12 months ended 31 December 2016 (Unaudited)

Based on IFRS and expressed in US Dollars (US$)

Acacia Mining plc (“Acacia’’) reports full year 2016 results

“2016 was another successful year for Acacia as we delivered record production, reduced our all-in sustaining costs by 14% and more than doubled our net cash position” said Brad Gordon, Chief Executive Officer of Acacia Mining. “This excellent operational performance translated into strong financial performance with EBITDA more than doubling to US$415 million and adjusted net earnings increasing to US$161 million. We continued to invest into our exploration portfolio and are poised to announce a maiden resource on the West Kenya project, in which we strategically increased our interest to 100% in 2016. As a result of this strong underlying performance in 2016, the Board of Directors has proposed a full year dividend of 10.4 cents (final dividend of 8.4 cents) which is at the top end of our policy and more than twice the total dividend announced for 2015 (4.2 cents). We expect 2017, driven by the mine life extension at Buzwagi, to see further production growth and cost reductions, with production expected to be between 850,000-900,000 ounces at an AISC of between US$880-920 per ounce.

Financial Highlights

·     Revenue of US$1,054 million, 21% higher than 2015, due to a 13% increase in gold sales and a 7% higher gold price


ARIVA.DE Börsen-Geflüster

·     EBITDA1 of US$415 million, more than doubled from 2015, mainly due to higher revenues and lower operating costs

·     Net earnings of US$95 million (US23.2 cents per share), with adjusted net earnings1 of US$161 million (US39.2 cents per share), is up from US$7 million in 2015

·     Operational cash flow of US$318 million, 103% up on 2015, driven primarily by higher EBITDA

·     Proposed final dividend of US8.4 cents per share, total 2016 dividend of US10.4 cents per share, more than double 2015

·     Net cash of US$218 million, an increase of 107% during 2016

·     Cash on hand of US$318 million as at 31 December 2016, an increase of US$85 million during the year

Operational Highlights

·     Gold production of 829,705 ounces, 13% higher than 2015, with gold sales of 816,743 ounces

·     Cash costs1 of US$640 per ounce sold,17% lower than 2015

·     AISC1 of US$958 per ounce sold, 14% below 2015, including a US$37 per ounce share-based payment charge

·     North Mara achieved record annual production of 378,443 ounces at AISC of US$733 per ounce sold

·     Bulyanhulu overcame significant downtime in Q3 2016 and delivered production of 289,432 ounces, 6% higher than 2015

·     Six month extension of mining at Buzwagi, which will lead to a 40% increase in production compared to 2016

Three months ended 31 December Year ended 31 December
(Unaudited) 2016 2015 2016 2015
Gold production (ounces) 212,954 200,723 829,705 731,912
Gold sold (ounces) 209,292 198,617 816,743 721,203
Cash cost (US$/ounce)1 679 728 640 772
AISC (US$/ounce)1 952 1,004 958 1,112
Net average realised gold price (US$/ounce)1 1,211 1,107 1,240 1,154
(in US$'000)
Revenue 263,890 228,668 1,053,532 868,131
EBITDA 1 105,681 57,630 415,388 174,971
Adjusted EBITDA1 103,010 59,166 409,903 180,916
Net earnings/(loss) 48,285 (198,860) 94,944 (197,148)
Basic earnings/(loss) per share (EPS) (cents) 11.8 (48.5) 23.2 (48.1)
Adjusted net earnings1 46,415 2,040 161,021 6,838
Adjusted net earnings per share (AEPS) (cents)1 11.3 0.5 39.2 1.7
Cash generated from operating activities 60,933 45,110 317,976 156,465
Capital expenditure2 57,826 42,931 195,898 183,617
Cash balance 317,791 233,268 317,791 233,268
Long term borrowings 99,400 127,800 99,400 127,800

    1 These are non-IFRS measures. Refer to page 26 for definitions

  2 Excludes non-cash capital adjustments (reclamation asset adjustments) and include finance lease purchases and land purchases recognised as long term prepayments

CEO Statement

2016 was a landmark year for Acacia as we delivered record group production of 829,705 ounces, which was almost 100,000 ounces ahead of 2015. It also exceeded our initial guidance range for the year of 750,000-780,000 ounces and revised guidance given in October 2016, of approximately 820,000 ounces. Performance was driven by North Mara, where the mine had a record year and at Bulyanhulu, which registered its highest production year for ten years, testament to the work we have undertaken to turn the asset around.

We also saw a substantial fall in our all-in sustaining costs (AISC) to US$958 per ounce, which was 14% below 2015 levels and at the bottom of our guidance range of US$950-980 per ounce. This was a result of the changes that were made to the business in late 2015, improved operating efficiencies at the assets and the increased production profile. If we were to focus purely on asset performance, and remove the impact of the increase in the share price on the valuation of share based payments, our AISC would have been US$921 per ounce, 17% below 2015 and well below our guidance range.

I was especially pleased with the return to free cash generation during the year, which is our primary focus. Over the past twelve months we doubled our net cash on the balance sheet to US$218 million which provides significant flexibility for us going forward. At the same time, the success of North Mara meant that a corporate tax charge amounting to US$55 million was incurred, which included a US$20 million cash pre-payment agreed with the Tanzanian Revenue Authority in Q1 2017.

Year in Review

2016 was a very strong operational year as we saw the benefit of the first full year of operations at the Gokona Underground at North Mara. This deposit was previously mined as a high grade open pit and commenced underground mining in mid-2015 after we made the strategic decision to go underground in 2014. The mine delivered ahead of expectations in 2016, partly due to a 61% increase in mined grade compared to the resource model. This drove additional ounces and the overall mine achieved a record production year of 378,443 ounces, a 32% increase over 2015. At Bulyanhulu we overcame an extended process plant shutdown in the third quarter which led to a loss of approximately one month of milling capacity to deliver 289,432 ounces, a 6% increase on 2015. This demonstrates the increased operational resilience as part of our ongoing programme to unlock the geological and operational potential of the asset. At Buzwagi, production was behind expectations at 161,830 ounces, 5% below 2015 as a result of lower mined grades due to a change in pit sequencing in order to enhance operational efficiencies as part of the extension of mining in 2017.

On the cost side, we demonstrated further improvement in AISC as the operational efficiencies and increased production rates took effect. North Mara was again the standout performer, with an AISC of US$733 per ounce, which was 20% lower than 2015 driven by the increased production base. At Bulyanhulu, AISC fell by a further 16% to US$1,058 per ounce as a result of the restructuring that took place in Q4 2015. At Buzwagi we saw AISC above plan at US$1,095 per ounce due to the lower ounce profile, though this was still 8% lower than 2015. Together, this led to a 14% fall in the headline AISC to US$958 per ounce, over US$150 per ounce lower than 2015. On an annual basis this now represents a 43% reduction in AISC from its peak in 2012.

The strong performance meant that we ended the year with US$318 million of cash on our balance sheet, an increase of US$85 million over the previous year. This includes the US$20 million corporate tax cash pre-payment, US$28 million on debt repayments, US$20 million on dividends and US$36 million on share based payments as a result of the vesting of awards during the year. As a result, net cash on the balance sheet more doubled from US$106 million, ending the year at US$218 million.

Total revenue for the year amounted to US$1,054 million which was 21% ahead of 2015 as a result of the increased production profile and the US$96 per ounce higher average realised gold price. EBITDA was similarly strong at US$415 million, up from US$175 million in 2015. We had net earnings of US$95 million, which were primary impacted by a US$72 million provision as a result of historic tax cases, but were still significantly ahead of 2015’s loss of US$197 million. Adjusted net earnings amounted to US$161 million, which was US$154 million above 2015. 

Reserves and Resources

Notwithstanding the strengthening of the gold price in 2016 we have taken the decision to maintain the 2015 gold price assumptions in our reserve and resource calculations. This not only brings consistency of planning on an annual basis but it also helps underpin the financial robustness of our long-term planning. Our reserve pricing is maintained at US$1,100 per ounce and our resource pricing has been maintained at US$1,400 per ounce.

On a group basis, our overall reserves and resources declined by 4% from 28.6 million ounces to 27.5 million ounces during the year. At our operating mines, total reserves and resources declined by 861,000 ounces, which was primarily a result of depletion. At our exploration properties we had a marginal reduction of 112,000 ounces as a result of the inclusion of our share of the South Houndé resource in Burkina Faso which largely offset the change to the methodology of how we account for the Nyanzaga joint venture resource which has been converted from a large scale low grade resource to a smaller high grade resource from a combined open pit and underground.

Whilst total Reserves and Resources were largely flat, Reserves fell by 1.1 million ounces to 7.6 million ounces. In addition to depletion, this is largely a result of the reclassification of approximately 583,000 ounces of Reef 2 material at Bulyanhulu from Reserves into Inferred Resources as a result of the change in the required drill spacing for underlying resource classifications. Prior to recent drilling programmes, the search radius for Reef 1 and Reef 2 were the same, with a 100 metre search radius around each drill hole used for Indicated Resources (which can then be converted into a Probable Reserve) and a 200 metre search radius used for Inferred material. Following the recent drilling, the variography has shown that due to the different geometries of the Reef 2 series the 100 metre search radius is not appropriate and has been reduced to 50 metres. This has meant that some ounces previously classified as Probable Reserves (based on the underlying indicated resource) have now largely been moved to Inferred Resources. We are undertaking drilling programmes during 2017 to reduce drill spacing in available areas to bring material back into the Indicated categories and will continue this programme over the coming years.

This change to the classification of Resources at Bulyanhulu, together with depletion, has meant that Reserves in the underground mine declined by 1.0 million ounces to 4.9 million ounces. However, the grade of the Reserves has increased from 8.85g/t in 2015 to 9.75g/t as a result of the change to cut-off grade calculations and the reduction in the mill reconciliation factor which had previously been included as a result of mill performance in 2015.

At North Mara, we largely replaced Reserves in the Gokona deposit despite mining approximately 225,000 ounces from the underground in 2016, at a significantly higher grade than included in the prior year Reserves declaration. This Reserves replacement was a result of changes to the underground Grade Control model due to our improved understanding of the ore body which included additional stope designs. We expect to complete the technical work to better estimate the future impact of the positive reconciliations received during 2016 in late Q1 2017.  As such the results of this work have not yet been incorporated into the current Reserves statement. In the Nyabirama pit we saw depletion of 170,000 ounces during 2016, of which approximately 111,000 ounces were replaced as a result of Grade Control model updates. Together, this led to reserves at North Mara falling by 83,000 ounces to 1.9 million ounces.

We believe that the current Reserves position at North Mara does not reflect the potential of either of the ore bodies at the mine and in 2017 are commencing extension programmes to identify new resources and upgrade existing resources at both Gokona and Nyabirama. We are targeting significant upgrades to the Reserves and Resources at the mine over the next several years as part of our target to produce more than 300,000 ounces per annum for at least ten years at North Mara. 

At Buzwagi, the extension of mining by a further six months led to the inclusion of 152,000 ounces of Resources into Reserves which meant that the mine fully replaced Reserves. Buzwagi now has 6.0 million tonnes of in-pit Reserves at 1.7 grams per tonne which will be mined during 2017, with lower grade material stockpiled for processing in 2018 and beyond.

Discovery

We had a very positive year in exploration and expect to announce the maiden resource on the West Kenya Project in Q1 2017.  I am confident that this will confirm that it has the making of a very high quality asset. We will provide more details on this as we go through the year but believe that this resource is the first step in delineating a multi-million ounce high grade resource in the Liranda Corridor in Kenya.

We also made progress in West Africa and continued to expand our land package on the highly prospective Houndé belt in Burkina Faso. We now have a licence area of 2,700 square kilometres through four joint ventures which provides access to 125 strike kilometres on the belt.  As part of this programme we have completed the first stage of the earn-in on the South Houndé joint venture with Sarama Resources and as a result now own 50% of the joint venture and have taken over operatorship of the project. Due to this we have consolidated 50% of the 2.1 million ounce resource on the project into our resource statement. In Mali, we took our first steps in exploring the licences we have acquired with promising initial results and will continue to look to expand our land package on the Senegal-Mali shear zone.

The joint venture with OreCorp Limited to progress our Nyanzaga Project in Tanzania continues to move forward. OreCorp took over management of the project for a three year period in late 2015. This structure allows the project to be progressed whilst giving Acacia the optionality to maintain a 75% stake in the project once it reaches a development decision. During the year OreCorp competed a scoping study on the project which outlined a combined open pit and underground project that produces 2.4 million ounces of gold over a 13 year life at an AISC of US$798/oz and requires pre-production capital of US$248 million (inclusive of contingency). OreCorp are now undertaking a pre-feasibility study which is due to be complete in the coming months. 

Safety

Safety performance during 2016 was disappointing as regrettably in January 2016, one of our contractors at North Mara passed away as a result of a haul truck accident. We also saw an increase in our total reportable injury frequency rate of 9% to 0.74. This was driven by an increase at Bulyanhulu, although we saw an improvement in safety performance in the fourth quarter at the mine. Despite these disappointing results we did see areas of improvement, with Buzwagi’s TRIFR reducing by 44%, as we fully embedded our behavioural safety programme, “Tunajali” or “We Care” into the business and at North Mara we saw safety performance remaining in line with 2015 levels despite the increased level of complexity of operations. We also saw a 46% reduction in the number of High Potential Incidents (incidents that could under slightly different circumstances have led to a fatality or permanent disability). We continue to target zero injuries and having every person going home safely every day.

Operating Environment

As a major contributor to the Tanzanian economy we were pleased to be able to increase our contribution during 2016 through incurring a corporate tax charge amounting to US$55 million. This was a result of the strong performance at North Mara and included our agreement to pre-pay US$20 million of cash corporate taxes. Our increase in tax payments, which when added to royalties of US$47 million, payroll taxes of US$40 million and other taxes of approximately US$20 million provides a significant contribution to the Tanzanian Government’s aim of self-funding the national budget.

During 2016 there have continued to be a number of tax cases that are being dealt with in the court system in Tanzania which we are seeking to resolve. As communicated earlier in the year, we recorded a tax provision of US$69.6 million in respect of historic capital deductions at Bulyanhulu, North Mara and Tulawaka as a result of a Court of Appeal ruling. We are also dealing with claims to levy taxes in Tanzania on the UK registered Acacia Mining plc which we believe have no basis in law given this company is tax resident and permanently established in the UK. Given the materiality of the amounts being claimed, we are also addressing a constructive resolution of these issues as part of our ongoing engagement with the Tanzania Revenue Authority (“TRA”) as well as at a senior level in the Government.

During the year we also saw a build-up in the total indirect tax receivables from US$110.2 million as at 31 December 2015 to US$136.4 million as at 31 December 2016. The increase was mainly due to a significant delay in VAT refunds in the second half of 2016 as a result of ongoing audits by the Tanzanian Revenue Authority on submitted VAT. We continue to engage with the TRA in order that they approve the payment of outstanding amounts as well as returning to the previously agreed timeline of three months for dealing with ongoing claims for refund.

Final dividend

Our dividend policy is based on cash flow in order to ensure that it is closely aligned with the focus on cash generation within the business. As a result we aim to pay a dividend of between 15-30% of our operational cash flow after sustaining capital and capitalised development but before expansion capital and financing costs.

In line with this policy, in July we declared an interim dividend of 2.0 cents per share, which was a 43% increase on 2015. As a result of strong performance in the second half of the year, we are pleased to recommend a final dividend of 8.4 cents per share. This represents a full year pay-out of 10.4 cents per share, or US$43 million, which is at the top of the pay-out range and more than twice 2015. The decision to recommend a dividend at the top of the range reflect the confidence we have in the business, the significant free cash flow the company generated in 2016 and the fact that we are able to fund out of free cash flow the organic projects currently in our pipeline. We believe the distributing of capital to our shareholders is a key differentiator for Acacia and continues our track record of providing strong total returns to our shareholders across the cycle.

Outlook

The group delivered another year of strong performance in 2016 and we expect that we will further improve on this in 2017 with production increasing to between 850,000-900,000 ounces at a lower all-in sustaining cost of between US$880-920 per ounce. Cash costs per ounce are also expected to decline from US$640 per ounce to between US$580-620 per ounce in 2017. We expect production to increase through the year and as such we expect a production ratio of 45:55 in terms of the first half versus the second half of the year, which will have a commensurate impact on our cost profile and our cash generation.

The further improvement in operating metrics is primarily driven by the revision to the mine plan at Buzwagi, where mining has been extended by approximately six months. This will lead to the mining of approximately 2 million tonnes more of higher grade ore during 2017 than previously planned and will drive a step up of approximately 40% in production over 2015 and a reduction in AISC of up to 30%.

At Bulyanhulu, we expect production to be in line with the previous year and AISC to reduce by up to 5%. We expect to see a reduction in cash costs, but will see an increase in sustaining capital as we invest to enhance the operation of the process plant and undertake a targeted fleet renewal programme to improve operating efficiencies amongst the older equipment within the underground fleet. We also continue to invest in underground development and in support of this will be upgrading ventilation and paste line infrastructure as we focus on creating greater flexibility underground. This investment in core infrastructure is a critical element in optimising the value delivery from this long-life, high grade asset in combination with continuing to drive cost savings and improve mining efficiencies.

North Mara performed ahead of expectations during 2016 and as a result we expect production to reduce by up to 10% during 2017 as an increased proportion of underground ore is sourced from the lower grade West Zone which will offset the impact of the increase in underground tonnes mined. The reduction in production, together with an increase in capital as we invest in the delivery of increased underground mining rates, together with open pit waste stripping will mean that AISC will increase by up to 10%.

As a result of the investments into both Bulyanhulu and North Mara outlined above we expect to see capital expenditure in 2017 of between US$210-230 million. This is comprised of approximately US$75-85 million of sustaining capital, US$120-130 million of capitalised development / stripping and US$15 million of expansion capital, made up predominantly of capitalised drilling at North Mara as we look to delineate additional resources to support a 10 year life of mine producing in excess of 300,000 ounces per annum.

As previously indicated we plan to increase our greenfield exploration spend to approximately US$25 million, as we look to build on the excellent progress made in Kenya during 2016 and we step up our exploration activity in Burkina Faso and Mali on our expanded land packages there.

Finally, I would like to thank all of my colleagues for their commitment, enthusiasm and hard work throughout what has been a year of continued delivery at Acacia. We have made further progress on the journey to making this company a leader in Africa and I am looking forward to an even better year in 2017. I would also like to thank our Board for their support and guidance through the year.

Brad Gordon

Chief Executive Officer

Key Statistics Three months ended 31 December Year ended 31 December
(Unaudited) 2016 2015 2016 2015
Tonnes mined (thousands of tonnes) 9,644 10,128 38,491 41,390
Ore tonnes mined (thousands of tonnes) 2,584 2,822 9,419 10,311
Ore tonnes processed (thousands of tonnes) 2,567 2,413 9,818 9,268
Process recovery rate exc. tailings reclaim (percent) 92.5% 90.9% 92.3% 89.7%
Head grade exc. tailings reclaim (grams per tonne) 3.2 3.2 3.3 3.1
Process recovery rate inc. tailings reclaim (percent) 88.9% 87.5% 88.5% 87.4%
Head grade inc. tailings reclaim (grams per tonne) 2.9 3.0 3.0 2.8
Gold production (ounces) 212,954 200,723 829,705 731,912
Gold sold (ounces) 209,292 198,617 816,743 721,203
Copper production (thousands of pounds) 4,255 4,496 16,239 14,981
Copper sold (thousands of pounds) 3,384 3,720 14,745 13,318
Cash cost per tonne milled exc. tailings reclaim (US$/t)1,3 66 69 62 68
Cash cost per tonne milled inc. tailings reclaim (US$/t)1,3 55 60 53 60
Per ounce data
     Average spot gold price2 1,222 1,106 1,251 1,160
     Net average realised gold price1 1,211 1,107 1,240 1,154
     Total cash cost1 679 728 640 772
     All-in sustaining cost1 952 1,004 958 1,112
Average realised copper price (US$/lb) 2.45 2.03 2.21 2.33

Financial results

Three months ended 31 December Year ended 31 December
(Unaudited, in US$'000 unless otherwise stated) 2016 2015 2016 2015
Revenue 263,890 228,668 1,053,532 868,131
Cost of sales (196,314) (196,874) (727,080) (734,167)
Gross profit 67,576 31,794 326,452 133,964
Corporate administration (6,218) (7,308) (21,895) (34,455)
Share based payments 9,795 284 (29,929) (5,537)
Exploration and evaluation costs (7,330) (4,984) (24,020) (19,737)
Corporate social responsibility expenses (3,068) (3,348) (10,665) (12,882)
Impairment charges - (146,201) - (146,201)
Other income (charges) 1,208 (2,172) 11,649 (28,079)
Profit/(loss) before net finance expense and taxation 61,963 (131,935) 251,592 (112,927)
Finance income 365 258 1,512 1,384
Finance expense (2,644) (2,888) (11,047) (12,617)
Profit/(loss) before taxation 59,684 (134,565) 242,057 (124,160)
Tax credit/(expense) (11,399) (64,295) (147,113) (72,988)
Net profit/(loss) for the year 48,285 (198,860) 94,944 (197,148)

1 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to “Non IFRS measures” on page 26 for definitions.

2 Reflect the London PM fix price.

For further information, please visit our website: www.acaciamining.com or contact:

Acacia Mining plc +44 (0) 207 129 7150

Brad Gordon, Chief Executive Officer

Andrew Wray, Chief Financial Officer

Giles Blackham, Investor Relations Manager

Bell Pottinger +44 (0) 203 772 2500

Lorna Cobbett

About Acacia Mining plc

Acacia Mining plc (LSE:ACA) is Tanzania’s largest gold miner and one of the largest producers of gold in Africa. We have three producing mines, all located in north-west Tanzania: Bulyanhulu, Buzwagi, and North Mara and a portfolio of exploration projects in Tanzania, Kenya, Burkina Faso and Mali.

Our approach is focused on strengthening our core pillars; our business, our people and our relationships, whilst continuing to invest in our future. Our ambition is to create a leading African Company.

Acacia is a UK public company headquartered in London. We are listed on the Main Market of the London Stock Exchange with a secondary listing on the Dar es Salaam Stock Exchange. Barrick Gold Corporation is our majority shareholder. Acacia reports in US dollars and in accordance with IFRS as adopted by the European Union, unless otherwise stated in this report.

Conference call

A presentation will be held for analysts and investors on 14 February 2017 at Noon London time.

For those unable to attend, an audio webcast of the presentation will be available on our website www.acaciamining.com. For those who wish to ask questions, the access details for the conference call are as follows:

Participant dial in: +44 (0) 20 3003 2666 
Password: Acacia

FORWARD- LOOKING STATEMENTS

This report includes “forward-looking statements” that express or imply expectations of future events or results. Forward-looking statements are statements that are not historical facts. These statements include, without limitation, financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future production, operations, costs, projects, and statements regarding future performance. Forward-looking statements are generally identified by the words “plans,” “expects,” “anticipates,” “believes,” “intends,” “estimates” and other similar expressions.

All forward-looking statements involve a number of risks, uncertainties and other factors, many of which are beyond the control of Acacia, which could cause actual results and developments to differ materially from those expressed in, or implied by, the forward-looking statements contained in this report. Factors that could cause or contribute to differences between the actual results, performance and achievements of Acacia include, but are not limited to, changes or developments in political, economic or business conditions or national or local legislation or regulation in countries in which Acacia conducts - or may in the future conduct - business, industry trends, competition, fluctuations in the spot and forward price of gold or certain other commodity prices (such as copper and diesel), currency fluctuations (including the US dollar, South African rand, Kenyan shilling and Tanzanian shilling exchange rates), Acacia’s ability to successfully integrate acquisitions, Acacia’s ability to recover its reserves or develop new reserves, including its ability to convert its resources into reserves and its mineral potential into resources or reserves, and to process its mineral reserves successfully and in a timely manner, Acacia‘s ability to complete land acquisitions required to support its mining activities, operational or technical difficulties which may occur in the context of mining activities, delays and technical challenges associated with the completion of projects, risk of trespass, theft and vandalism, changes in Acacia‘s business strategy including, the ongoing implementation of operational reviews, as well as risks and hazards associated with the business of mineral exploration, development, mining and production and risks and factors affecting the gold mining industry in general. Although Acacia‘s management believes that the expectations reflected in such forward-looking statements are reasonable, Acacia cannot give assurances that such statements will prove to be correct. Accordingly, investors should not place reliance on forward-looking statements contained in this report.

Any forward-looking statements in this report only reflect information available at the time of preparation. Save as required under the Market Abuse Regulation or otherwise under applicable law, Acacia explicitly disclaims any obligation or undertaking publicly to update or revise any forward-looking statements in this report, whether as a result of new information, future events or otherwise. Nothing in this report should be construed as a profit forecast or estimate and no statement made should be interpreted to mean that Acacia‘s profits or earnings per share for any future period will necessarily match or exceed the historical published profits or earnings per share of Acacia.

LSE: ACA

TABLE OF CONTENTS

Interim Operating Review 9
Exploration Review 14
Financial Review 19
Significant judgements in applying accounting policies and key sources of estimation uncertainty 25
Non-IFRS measures 26
Risk Review 30
Condensed Financial Information:
- Consolidated Income Statement and Consolidated Statement of Comprehensive Income 31/32
- Consolidated Balance Sheet 33
- Consolidated Statement of Changes in Equity 34
- Consolidated Statement of Cash Flows 35
- Notes to the Condensed Financial Information 36

Operating Review

Acacia delivered production of 829,705, an increase of 13% year on year, while AISC of US$958 per ounce sold and cash cost of US$640 per ounce sold were 14% and 17% respectively lower than 2015.

North Mara’s production for the full year of 378,443 ounces was 32% higher than in 2015, and a record for the mine. This was as a result of a 25% higher head grade driven by the higher mining grade achieved from the Gokona underground mine (15.6 g/t) and a 4% improvement in recoveries. Gold ounces sold for the full year of 376,255 ounces were 30% higher than the prior year and broadly in line with production. AISC fell by 20% to US$733 per ounce sold predominantly due to the higher production base and lower cash costs.

Bulyanhulu saw a 6% increase in production to 289,432 ounces, the highest production level achieved since 2006, after it overcame significant plant downtime in Q3 2016. Ounces produced from underground mining increased by 6% from 2015, as a result of an 8% increase in grade in combination with a 3% increase in throughput due to improved plant availability and underground delivery. Ounces produced from tailings retreatment increased by 4% due to 21% higher throughput and 8% higher head grade, partly offset by 19% lower recovery rates. AISC decreased by 16% to US$1,058 per ounce sold due to the higher production base, lower direct mining costs and lower sustaining capital expenditure.

At Buzwagi, gold production of 161,830 ounces was 5% lower than 2015 due to a 14% decrease in grade as a result of ore being primarily sourced from lower grade splay material. This was partly offset by an 8% increase in throughput due to improved mill availability and improved milling rates. AISC decreased by 8% to US$1,095 per ounce sold from US$1,187 per ounce sold in 2015, mainly due to lower cash costs.

Total tonnes mined during the year amounted to 38.5 million tonnes, 7% lower than 2015 primarily due to lower waste tonnes mined at Buzwagi. Ore tonnes mined of 9.4 million tonnes were 9% lower than 2015 mainly due to lower ore tonnes from the Nyabirama open pit at North Mara as mining focused on waste stripping of the next stage of the pit.

Ore tonnes processed amounted to 9.8 million tonnes, an increase of 6% on 2015, primarily driven by increased throughput at Bulyanhulu as reprocessed tailings increased from 1.4 million tonnes in 2015 to 1.7 million tonnes in 2016.

Head grade for the year (excluding tailings retreatment) of 3.3g/t was 6.5% higher than in 2015 (3.1g/t). This was due to a 25% increase in head grade at North Mara due to the contribution of the higher grade Gokona underground ore and an 8% higher head grade at Bulyanhulu due to an increase in mine grade, which was partially offset by a 14% decrease in head grade at Buzwagi due to the mining of lower grade splay areas.

Our cash costs for the year were 17% lower than in 2015, and amounted to US$640 per ounce sold. The decrease was primarily due to:

?      Higher production base (US$76/oz);

?      Higher capitalisation of development costs mainly at North Mara due to higher waste stripping at Nyabirama Stage 4 (US$39/oz);

?      Lower labour costs due to a reduction in employees, together with a favourable currency impact on Tanzanian shilling based wages when compared to 2015 (US$23/oz); and

?      Lower energy and fuel costs due to lower fuel prices and an increased reliance on grid power (US$13/oz).

These were partly offset by higher sales related costs as a result of higher sales volumes (US$17/oz) and increased contracted services, mainly related to increased contracted mining and drilling at North Mara (US$12/oz).

All-in sustaining cost of US$958 per ounce sold for the year was 14% lower than 2015, driven by lower cash costs (US$132/oz) (refer to above) and an increased production base (US$40/oz), lower sustaining capital expenditure (US$25/oz) and lower corporate administration costs (US$15/oz). This was partly offset by higher capitalised development mainly at North Mara (US$36/oz) and the impact of a higher revaluation charge relating to future share-based payments compared to 2015 amounting to US$24.4 million (US$30/oz) following the 108% increase in Acacia’s share price over the year.

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