20 July 2018

Results for the six months ended 30 June 2018 (Unaudited)

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

Acacia Mining plc (“Acacia’’) reports 2018 interim results

“We succeeded in delivering another strong operational performance during the first half, producing 254,759 ounces of gold across the Group at all-in sustaining costs (“AISC”) of US$945 per ounce,” said Peter Geleta, Interim CEO of Acacia. “The changes we made to the business in late 2017 have delivered the desired results, helping to return the Group to free cash generation for the first time since Q4 2016 and we are on track to achieve the top end of our production guidance range of 435,000-475,000 ounces for 2018 at an AISC of US$935-985 per ounce. Following the stability we have brought to the business during the last six months, our priority remains on optimising performance across all areas of our operations as we manage through the current uncertainty in the operating environment and the on-going disputes with the Government of Tanzania. By continuing to be resilient, managing our costs and working to our mine plans, we are addressing what we can control and will look to deliver value for all of our stakeholders.”

Operational Highlights

  • Regrettably, at North Mara, an operator for one of our contractors had a fatal vehicle-related accident during the period
  • H1 gold production of 254,759 ounces, 41% lower than H1 2017, with gold sales of 251,045 ounces being in line with production
  • H1 AISC1 of US$945 per ounce sold, 6% above H1 2017, but tracking below the mid-point of the full year guidance range
  • Q2 gold production of 133,778 ounces, 36% lower than Q2 2017, but 11% above Q1 2018
  • Q2 gold sales of 134,090 ounces, 5% higher than Q2 2017, and in line with gold production
  • Q2 AISC1 of US$918 per ounce sold, 10% above Q2 2017, but 6% lower than Q1 2018

Financial Highlights

  • H1 Revenue of US$333.4 million, 15% lower than H1 2017
  • H1 EBITDA1 of US$133.6 million, 17% down from H1 2017 and adjusted EBITDA1 of US$91.6 million 45% lower than H1 2017
  • H1 Net earnings of US$30.9 million (US7.5 cents per share), 51% down from US$62.5 million in H1 2017, impacted by a US$24.2 million impairment at Nyanzaga, with adjusted net earnings of US$13.5 million (US3.3 cents per share), 79% lower than H1 2017
  • Post period end, conditional agreement with OreCorp Limited, operator of the Nyanzaga Project, for them to take full ownership of the project in return for total consideration of US$10 million and a US$15 million capped net smelter royalty
  • Cash generated from operating activities in H1 2018 of US$58.9 million, was US$57.6 million higher than H1 2017
  • Generated US$14 million of free cash flow in Q2 2018 due to strong operational performance
  • Cash balance rose 49% during H1 2018 to US$120.1 million due to a non-core royalty sale and the strong operational performance
  • Net cash1 of US$63.3 million, increased by US$53.8 million from the end of 2017
Three months ended 30 June Six months ended 30 June
(Unaudited) 2018 2017 2018 2017
Gold production (ounces) 133,778 208,533 254,759 428,203
Gold sold (ounces) 134,090 127,694 251,045 312,438
Cash cost (US$/ounce)1 688 577 701 577
AISC (US$/ounce)1 918 835 945 893
Net average realised gold price (US$/ounce)1 1,324 1,255 1,328 1,235
(in US$'000)
Revenue 176,865 157,763 333,382 391,664
EBITDA 1 47,796 79,222 133,570 161,415
Adjusted EBITDA1 47,796 83,199 91,600 166,219
Net (loss)/earnings (19,118) 35,716 30,877 62,543
Basic (loss)/ earnings per share (EPS) (cents) (4.7) 8.7 7.5 15.3
Adjusted net earnings1 5,116 38,500 13,519 65,906
Adjusted net earnings per share (AEPS) (cents)1 1.2 9.4 3.3 16.1
Cash generated from/ (used in) operating activities 34,912 (23,909) 58,866 1,315
Capital expenditure2 25,507 45,628 51,286 92,456
Cash balance 120,089 175,886 120,089 175,886
Total borrowings 56,800 85,200 56,800 85,200

1 These are non-IFRS measures. Refer to page 24 for definitions.

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

Other Developments

Safety

During the first half of the year we saw further improvements in our overall safety results, with a Total Recordable Injury Frequency Rate (TRIFR) in H1 2018 of 0.26, which is 35% lower than the corresponding period in 2017. We also reduced the number of High Potential Incidents (HPIs) by 35% compared to H1 2017.

However, regrettably, on 11 June 2018, Sadock Crispin Tindahinile, an operator for one of our contractors at North Mara, passed away as a result of an accident which involved a reversing vehicle at the Gokona deposit. Our thoughts go out to his family, friends and colleagues. We have completed an investigation into the incident and are implementing the relevant recommendations at all our operations. We continue to target zero injuries and remain committed to every person going home safely every day.

Update on Discussions between Barrick Gold Corporation (“Barrick”) and the Government of Tanzania (“GoT”)

Barrick and the GoT continued their discussions during the first half, aimed at agreeing and documenting the details of the framework announced in 2017. Acacia has been providing support to Barrick to seek to ensure that they can have informed discussions with the GoT, but has not been directly involved in those discussions to date. Any proposal received by Acacia in the future for a comprehensive resolution of the Company’s disputes with the GoT that might be agreed in principle between Barrick and the GoT as a result of those discussions will be subject to review by the Independent Committee of the Acacia Board of Directors.

On the 24 June 2018 Barrick announced that it would not be providing a timetable for the completion of its discussions with the GoT, in order to allow its process to continue in an orderly manner and without an arbitrary deadline. Acacia continues to engage with Barrick to seek to understand Barrick’s expectations for the future conduct and a timetable for the completion of its discussions with the GoT.

Asset Level Discussions with Interested Parties

As previously announced, in response to a number of indicative expressions of interest from Chinese companies, the Company has engaged with a small number of parties to explore the potential sale of a stake in one or more of its Tanzanian assets. Given that the timetable and successful completion of any discussions in relation to any such transaction are likely to be inextricably linked to the Company’s ability to reach a comprehensive agreement with the GoT in order to settle historic disputes and provide a stable future operating environment, no significant progress is expected to be made on a potential transaction until there is a clearer picture of the likely outcomes of Barrick’s discussions with the GoT.

Acacia remains committed to shareholder value and evaluates all opportunities against strict strategic and financial criteria. Any transaction will be pursued only if it is determined by Acacia’s Board to be in the best interests of the Company. There is currently no certainty as to whether any agreement will be reached with any of the potential investors.

Contribution to Tanzania

Since the inception of its businesses, over 15 years ago, the Acacia Group and its predecessors have invested over US$4 billion into Tanzania and paid over US$1 billion in taxes and royalties. We remain committed to supporting efforts towards Tanzania’s socioeconomic advancement, including the realisation of the Government’s Development Vision 2025.

In the first half of 2018, Acacia paid a total of US$67.1 million in taxes and royalties. This is made up of provisional corporate tax payments for the first half of the year of US$19.1 million, a final 2017 corporate tax payment of US$4.2 million, royalties of US$25.7 million, payroll taxes of US$13.0 million and other taxes of US$5.1 million.

During the first half of the year, our Sustainable Communities initiatives contributed to tangible benefits for the local communities around our operations. These benefits included improvements to social infrastructure across multiple sectors including agriculture, water and sanitation, education, health, and road infrastructure. Access to safe, clean and potable water is a challenge and the provision of water infrastructure in Kakola, Msalala District alleviated this challenge for over 3,000 residents around our Bulyanhulu mine. As part of its commitment to improving access to quality health care services, North Mara funded an upgrade to the Nyamwaga Health Centre at a cost of over US$600,000. Following the upgrade, the Government has decided to turn the Nyamwaga Health Centre into a district and referral hospital, serving 350,000 people (2012 census data) and capable of handling approximately 500 patients a day.

Agriculture is an important economic mainstay for our local communities and is a key priority for our Sustainable Communities Strategy. At Buzwagi, where 75% of the local population are farmers, the first half of the year saw the development and implementation of a three-year US$1.1 million agricultural improvement project in partnership with Farm Concern International (“FCI”). The project seeks to substantially increase farmers’ incomes through greater productivity and improved links to market. Meanwhile at Bulyanhulu we continued to support approximately 250 local farmers to access inputs and services that improve agricultural practices and grow productivity. Furthermore, our partnership with Africare at Bulyanhulu enabled poultry farmers to register either as small enterprises or cooperatives. As part of the project the farmers were given over 6,000 day-old chicks and access to finance opportunities to grow their businesses.

An independent report released by EY during the half year demonstrated the significant contribution that Acacia’s three mines continue to make to Tanzania’s economy as well as the country’s broader social development. The report confirmed that during 2017 Acacia’s businesses purchased US$434 million of goods and services from suppliers located in Tanzania. This represented 67% of our total spend on goods and services in 2017. Of this amount, approximately US$120 million of goods and services were purchased from businesses in the direct locality of the three mines in the country’s Lake Zone.

Despite facing several challenges during the year, the EY report concluded that in 2017 Acacia contributed US$712 million to the national economy, which represents around 1.5% of Tanzania’s total gross domestic product. The 2017 contribution is comprised of US$200 million by our businesses, an indirect contribution via suppliers of US$304 million and induced contributions of US$208 million. Meanwhile Acacia’s three operations drove a direct tax contribution to the Tanzanian Treasury of US$143 million in 2017 and led to a further US$42 million in indirect or induced taxes.

Local Content Rules

During the period, Acacia’s three local businesses submitted preliminary local content plans to the Tanzanian Government in response to the new local content regulations that came into force in April 2018. These preliminary plans build on the work undertaken by Acacia over the past years to enhance and develop our local supply chain and increase local employment in the workforce. Under Acacia’s existing Mineral Development Agreements (“MDAs”), Acacia’s businesses are protected from changes to laws that govern their operations including the introduction of the local content regulations, but as part of our commitment to development in the country, the Company intends to work with the Government to clarify the requirements of the new local content regulations and to practically meet these requirements where possible. We continue to seek advice from the Government on clarification of specific points around these regulations and the practical implications thereof.

Update on Nyanzaga Project

Post-period end, OreCorp Tanzania Limited (“OreCorp”), a wholly owned subsidiary of OreCorp Limited (ASX:ORR) completed its earn-in obligations in respect of the Nyanzaga Project (the “Project”) in Tanzania in accordance with the earn-in agreement it entered into on 22 September 2015. As a result, OreCorp is executing its option under the earn-in agreement to move to 51% ownership in the Project through the payment of US$3 million to Acacia. This option is conditional on approval from the Tanzanian Fair Competition Commission and newly established Mining Commission.

Acacia believes that a simplified ownership structure of Nyanzaga would be beneficial to the future development of the Project and would enable it to be best placed to provide significant benefits to Tanzania. As a result, Acacia has signed a binding conditional agreement whereby OreCorp will move to 100% ownership of the Project, by making a further payment of US$7 million. This agreement is conditional on the Tanzanian regulatory approvals referred to above, definitive documentation and on the grant of the Special Mining Licence in respect of the Project. Acacia will also retain a net smelter return production royalty, capped at US$15 million.

Carrying Value Review

At the end of the reporting period, there remained a number of potential triggers for impairment testing of the carrying value of Acacia’s assets, including the on-going uncertainty surrounding a potential resolution of the Company’s disputes with the Government of Tanzania and the fact that Acacia’s market capitalisation has been lower than the carrying value of its assets for a prolonged period of time. As a result, Acacia undertook a review of the carrying value of its affected Cash Generating Units (“CGUs”) post period end using the latest information available as well as revised assumptions around potential timing for a comprehensive resolution with the GoT. Based on this review, the recoverable values of all our assets remain above their respective carrying values at the discount rates used during the previous reporting period. Further information on the carrying value review can be found in Note 6 to the condensed consolidated financial information.

As disclosed above, post period end, OreCorp, Acacia’s JV partner in the Nyanzaga Project, has executed its option under the earn-in agreement to increase its stake to 51% in the project through the payment of US$3 million to Acacia. Further to that, Acacia has signed a conditional agreement to sell its remaining 49% stake to OreCorp for US$7 million and a net smelter royalty capped at US$15 million based on future production. As a result of the agreement, Acacia expects to recover the value of the asset through sale and not through value in use and as such has valued the asset at fair value less costs to sell of US$10.0 million and recorded an impairment charge of US$24.2 million (refer to note 6 of the condensed consolidated financial information for details) and reclassified the intangible asset to non-current assets held for sale on the balance sheet.

Indirect Taxation update

During the first half of 2018, Acacia incurred a further US$28.3 million of VAT outflows and received no cash VAT refunds. We have also declared our first and second provisional corporate tax payments for 2018 relating to North Mara, amounting to approximately US$19.1 million, as well as a final 2017 corporate tax payment of US$4.2 million, and incurred foreign exchange revaluation losses on the balance of US$3.2 million. The provisional and final corporate tax payments have been partially offset against indirect tax receivables in line with an existing agreement with the Tanzanian Revenue Authority. As a result, the net indirect tax receivables balance increased from US$170.7 million as at 31 December 2017 to US$172.5 million as at 30 June 2018.

As previously disclosed, Tanzania’s new mining legislation includes an Amendment to the VAT Act 2015 to the effect that no input tax credit can be claimed for the exportation of “raw minerals”, with effect from 20 July 2017. Bulyanhulu, Buzwagi and North Mara have each now received notices from the Tanzania Revenue Authority that they are not eligible for any VAT relief from July 2017 onwards on the basis that all production (both doré and concentrate) constitutes “raw minerals” for this purpose. The total VAT claims submitted since July 2017 amount to approximately US$64 million. We have disputed this interpretation of the legislation as a matter of Tanzanian law, while this is also a matter that is in contravention of the relevant terms of our MDAs with the Government of Tanzania and subject to our on-going disputes with the GoT.

Dividend

Acacia has a cash flow based dividend policy where 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. As a result of the uncertainty around the potential resolution of the disputes between the Company and the GoT and current liquidity requirements, the Board of Directors has not recommended the payment of an interim dividend.

Bulyanhulu Reduced Operations and Optimisation Study Update

In Q3 2017, Acacia took to the decision to place Bulyanhulu on reduced operations (“ROP”) due to the unsustainable losses experienced at the mine due to the inability to export concentrate. This process was completed in Q4 2017. During the first half of 2018, reduced operating costs amounted to US$16.6 million and mainly consisted of site overhead costs including labour, power and camp related costs, security costs and on-going maintenance related work.

Acacia is taking the opportunity to progress essential capital spend of approximately US$10 million in 2018, primarily on the process plant, together with an optimisation study which is designed to ensure that when the mine restarts it does so in an optimised manner. The optimisation study work is progressing well and is on track for completion at the end of 2018. Preliminary indications from the study suggest that there will be a focus on higher grade and therefore higher margin ounces which consequently may lead to a smaller initial reserve base than currently estimated. Once the study is completed at the end of 2018, we will be in a position to provide further details.

International Arbitration

In 2017, Bulyanhulu Gold Mine Limited (“BGML”), the owner and operator of the Bulyanhulu mine, and Pangea Minerals Limited (“PML”), the owner and operator of the Buzwagi mine each referred their current disputes with the Government of Tanzania to arbitration in accordance with the dispute resolution processes agreed by the GoT in its MDAs with BGML and PML. The commencement of arbitration was necessary to protect the rights of BGML and PML. The arbitration processes have continued through 2018, with a number of necessary procedural steps having been undertaken. Acacia remains of the view that a negotiated resolution is the preferred outcome to its current disputes with the GoT and the Company will continue to work to achieve this.

Outlook

Despite the continuation of the challenging environment, the Group has delivered a strong operational performance in H1 2018. In achieving first half production of 254,759 ounces we are on track to achieve the top end of our guidance range of 435,000-475,000 ounces for 2018 and continue to demonstrate the resilience that we have built within our business. All gold produced in 2018 is expected to be in doré form and will not, therefore, be impacted by the current GoT export ban on concentrate.

During H1 2018 we recorded an AISC of US$945 per ounce sold, which was at the lower end of the guidance range of US$935-985 per ounce and continue to expect full year group all-in sustaining costs of between US$935-985 per ounce and cash costs per ounce of between US$690-720 per ounce. Capital expenditure during H1 2018 amounted to US$51 million, in line with expectations, and we continue to expect full year group capital expenditure of approximately US$100 million.

Acacia is committed to strong cost discipline and is continuing to take steps to ensure the long-term viability of our business whilst we work towards a comprehensive resolution of our disputes with the Government of Tanzania.

Key StatisticsThree months ended 30 June Six months ended 30 June
(Unaudited)2018 2017 2018 2017
Tonnes mined Kt 4,158 8,558 8,185 18,039
Ore tonnes mined Kt 841 3,996 1,679 7,212
Ore tonnes processed incl. tailings reclaim Kt 2,411 2,440 4,570 4,860
Process recovery rate excl. tailings reclaim % 92.0% 93.0% 91.5% 93.2%
Head grade excl. tailings reclaim g/t 2.1 3.3 2.2 3.4
Process recovery rate incl. tailings reclaim % 87.4% 89.3% 87.0% 89.6%
Head grade incl. tailings reclaim g/t 2.0 3.0 2.0 3.1
Gold production oz 133,778 208,533 254,759 428,203
Gold sold oz 134,090 127,694 251,045 312,438
Copper production Klbs - 4,409 - 9,065
Copper sold3 Klbs - (1,183) - 1,304
Cash cost per tonne milled excl. tailings reclaim1 US$/t 45 34 46 43
Cash cost per tonne milled incl. tailings reclaim1 US$/t 38 30 38 37
Per ounce data
     Average spot gold price2 US$/oz 1,306 1,257 1,318 1,238
     Net average realised gold price1 US$/oz 1,324 1,255 1,328 1,235
     Total cash cost1 US$/oz 688 577 701 577
     All-in sustaining cost1 US$/oz 918 835 945 893
Average realised copper price US$/lbs - 2.56 - 2.99

Financial results

Three months ended 30 JuneSix months ended 30 June
(Unaudited, in US$'000 unless otherwise stated) 2018 20172018 2017
Revenue 176,865 157,763333,382 391,664
Cost of sales (112,826) (94,571)(221,226) (243,967)
Gross profit64,03963,192112,156147,697
Corporate administration (5,846) (5,878)(11,304) (12,520)
Share based payments (121) 18,2091,406 7,785
Exploration and evaluation costs (3,608) (9,372)(7,231) (16,150)
Corporate social responsibility expenses (1,537) (1,544)(3,083) (3,739)
Impairment charges (24,234) -(24,234) -
Other charges (26,388) (8,802)(3,621) (19,617)
Profit before net finance expense and taxation2,30555,80564,089103,456
Finance income 676 946808 1,543
Finance expense (4,404) (3,216)(8,240) (5,454)
(Loss)/profit before taxation (1,423) 53,53556,657 99,545
Tax expense (17,695) (17,819)(25,780) (37,002)
Net (loss)/profit for the period(19,118)35,71630,87762,543

1 These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to “Non IFRS measures” on page 24 for definitions.

2 Reflect the London PM fix price.

3 Negative sales quantities in 2017 relate to the reversal of sales recorded during Q1 2017.

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

Acacia Mining plc +44 (0) 207 129 7150

Peter Geleta, Chief Executive Officer

Jaco Maritz, Chief Financial Officer

Sally Marshak, Head of Investor Relations and Communications

Camarco +44 (0) 20 3757 4980

Gordon Poole / Nick Hennis

About Acacia Mining plc

Acacia Mining plc (LSE:ACA) is the UK holding company of the Acacia Group, Tanzania’s largest gold miner and one of the largest producers of gold in Africa. The Acacia Group has three mines, all located in north-west Tanzania: Bulyanhulu, which is owned and operated by Bulyanhulu Gold Mine Limited, Buzwagi, which is owned and operated by Pangea Minerals Limited and North Mara, which is owned and operated by North Mara Gold Mine Limited.

The Acacia Group also has a portfolio of exploration projects in Kenya, Burkina Faso and Mali. 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 announcement.

Conference call

A presentation will be held for analysts and investors at 12.00 BST on 20 July 2018.

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

Participant dial in: +44 20 3936 2999
Password: 69 32 26

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 on-going 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 8
Exploration Review 13
Financial Review 17
Significant judgements in applying accounting policies and key sources of estimation uncertainty 23
Non-IFRS measures 24
Risk Review 28
Condensed Financial Information:
- Consolidated Income Statement and Consolidated Statement of Comprehensive Income 32/33
- Consolidated Balance Sheet 34
- Consolidated Statement of Changes in Equity 35
- Consolidated Statement of Cash Flows 36
- Notes to the Condensed Financial Information 37

Operating Review

Half Year Review

Acacia delivered first half production of 254,759 ounces of gold, a decrease of 41% year on year, with sales ounces broadly in line with production at 251,045 ounces. AISC of US$945 per ounce sold and cash cost of US$701 per ounce sold were 6% and 21% higher than H1 2017, respectively.

North Mara achieved production of 162,689 ounces of gold for the first half, down 9% from H1 2017. This was a result of lower average grades at the Gokona underground mine on account of a higher proportion of mining taking place in the lower-grade West Zone. Gold sold of 158,870 ounces for the half year was broadly in line with production. AISC of US$903 per ounce sold was 23% higher than H1 2017 (US$736), due to higher cash costs and lower sales volumes, partly offset by lower capitalised development costs.

At Buzwagi, gold production of 73,100 ounces of gold was 42% lower than the comparative period in 2017 as a result of the mine transitioning to a lower grade stockpile processing operation. Gold sold for the period amounted to 72,305 ounces, in line with production and 36% higher than H1 2017 when the mine was unable to sell concentrate due to the export ban imposed in March 2017. AISC per ounce sold of US$1,037 was 35% higher than H1 2017 (US$770/oz), mainly driven by the transition to processing lower grade stockpiles which drove higher cash costs.

Bulyanhulu produced 18,970 gold ounces, 85% lower than the same period in 2017. This was a result of the decision to place the underground mine on reduced operations. All production resulted from the reprocessing of tailings which was 6% higher compared to H1 2017 due to higher throughput and recovery rates as a result of operational efficiencies, partly offset by lower feed grades. Gold sold for the period of 19,870 ounces was 5% higher than production due to the selling of gold ounces on hand at the end of 2017 and 76% lower than H1 2017 mainly as a result of the lower production base. AISC per ounce sold for the half of US$827 was 38% lower than H1 2017 (US$1,340/oz) driven by reduced operating and capital spend, partly offset by lower sales, but excludes reduced operations costs of US$16.6 million.

Total tonnes mined during the first half amounted to 8.2 million tonnes, 55% lower than H1 2017, mainly as a result of the transition to a stockpile processing operation at Buzwagi and the placing of the underground mine at Bulyanhulu on reduced operations. Total ore tonnes mined of 1.7 million tonnes were 77% lower than H1 2017, mainly due to the reasons above.

Ore tonnes processed amounted to 4.6 million tonnes, a decrease of 6% on H1 2017, mainly driven by the halting of run-of-mine processing at Bulyanhulu.

Cash costs of US$701 per ounce sold for the half were 21% higher than in H1 2017, primarily due to:

  • The drawdown of ore stockpiles at Buzwagi and a decreased build-up in finished gold inventory compared to H1 2017 (US$369/oz), given H1 2017 was impacted by the imposition of the concentrate export ban, resulting in a build- up of finished gold inventory in H1 2017 of approximately 115,000 ounces; and
  • Lower production base (US$141/oz)

This was offset by:

  • Savings in direct mining costs (US$410/oz) driven by the cessation of mining activities at Buzwagi and Bulyanhulu, partly offset by higher direct mining costs at North Mara, and lower sales related costs (US$9/oz) driven by lower sales volumes.

All-in sustaining cost of US$945 per ounce sold for the first half was 6% higher than H1 2017, mainly due to the impact of lower sales volumes on individual cost items (US$77/oz), higher cash costs (refer to above) (US$124/oz), and a smaller credit relating to the share based payment revaluation driven by the reduction in Acacia’s share price (US$25/oz), partly offset by lower capitalised expenditure relating to North Mara and Bulyanhulu (US$144/oz) and lower sustaining capital spend mainly driven by Bulyanhulu being on reduced operations (US$19/oz).

Cash generated from operating activities of US$58.9 million for H1 2018, an increase of US$57.6 million from H1 2017 (US$1.3 million), mainly due to working capital outflows of US$24.2 million compared to outflows of US$159.7 million in H1 2017 which resulted from the build-up of concentrate stockpiles in H1 2017, partly offset by lower adjusted EBITDA (US$74.6 million).

Capital expenditure amounted to US$51.3 million compared to US$92.5 million in H1 2017. The decrease was mainly driven by lower capitalised development costs. Capital expenditure primarily comprised capitalised development and stripping (US$27.9 million), investment in mobile equipment and component change-outs mainly relating to North Mara (US$8.9 million), capitalised drilling for resource and reserve development at North Mara’s Gokona underground (US$3.7 million), and investment in fixed equipment and infrastructure (US$2.4 million).

Second Quarter Review

Acacia recorded two Lost Time Injuries during the quarter at North Mara, one of which related to the fatality involving a mechanic at the Gokona pit (please refer above). The Total Recordable Frequency Rate (TRIFR) of 0.12 for the second quarter was 76% lower than the corresponding period in 2017.

Production for Q2 2018 amounted to 133,778 ounces, a decrease of 36% on the same period in 2017, but 11% above Q1 2018.

North Mara produced 85,920 ounces, 3% higher than Q2 2017 (83,110 ounces) driven by marginally higher head grades compared to Q2 2017 together with increased proportion of higher grade underground tonnes being processed. Gold sold of 83,915 ounces for the quarter was in line with production and in line with Q2 2017. AISC of US$861 per ounce sold was 14% higher than in Q2 2017 (US$758/oz) as a result of higher cash costs and sustaining capital expenditure, partly offset by lower capitalised development costs.

At Buzwagi, gold production for the second quarter of 37,415 ounces was 44% lower than Q2 2017 (66,228 ounces) as a result of production now being derived solely from lower grade ore stockpiles. Gold sold for the quarter of 39,845 ounces was 6% higher than production due to the selling of gold ounces on hand at the end of Q1 2018 and significantly higher than Q2 2017 due to the inability to export concentrate following the export ban imposed in March 2017. AISC per ounce sold of US$1,025 was 35% higher than Q2 2017, mainly driven by the transition to processing lower grade stockpiles which drove higher cash costs due to a drawdown in ore inventory and lower production.

Bulyanhulu produced 10,443 ounces, 82% lower than Q2 2017, as a result of the decision to place the underground mine on reduced operations. All production resulted from the reprocessing of tailings which was 18% higher than Q2 2017 (8,856 ounces) due to process plant improvements. Gold sold for the quarter of 10,330 ounces was in line with the production base and 62% lower than H1 2017, as a result of the lower production base. AISC per ounce sold for the quarter of US$737 was 53% lower than Q2 2017 (US$1,558/oz) driven by reduced operating and capital spend, partly offset by lower sales, but excludes reduced operations costs of US$8.4 million.

Total tonnes mined during the quarter amounted to 4.2 million tonnes, 51% lower than Q2 2017, mainly as a result of the transition to a stockpile processing operation at Buzwagi and the halting of all underground mining at Bulyanhulu. Tonnes mined at North Mara were in line with the Q2 2017. Total ore tonnes mined of 0.8 million tonnes were 79% lower than Q2 2017, primarily due to the cessation of mining at Buzwagi and Bulyanhulu.

Ore tonnes processed amounted to 2.4 million tonnes, broadly in line with Q2 2017, with head grade for the quarter (excluding tailings retreatment) of 2.1g/t, 36% lower than Q2 2017 (3.3g/t) due to low-grade stockpile processing at Buzwagi and no underground material from Bulyanhulu.

Capital expenditure for the quarter amounted to US$25.5 million compared to US$45.6 million in Q2 2017, a decrease of 44%. Capital expenditure primarily comprised capitalised development and stripping at North Mara (US$12.4 million), mobile equipment and component change-outs at North Mara (US$5.2 million), capitalised drilling at North Mara (US$2.1 million), investment in Buzwagi’s tailings storage facility (US$0.7 million) and Bulyanhulu optimisation study costs (US$0.8 million).

Mine Site Review

North Mara

Key statistics

Three months ended 30 JuneSix months ended 30 June
(Unaudited)2018 20172018 2017
Key operational information:
Ounces produced oz 85,920 83,110162,689 179,578
Ounces sold oz 83,915 84,390158,870 178,130
Cash cost per ounce sold1 US$/oz 570 476588 441
AISC per ounce sold1 US$/oz 861 758903 736
Open pit:
Tonnes mined Kt 3,974 3,8967,814 7,750
Ore tonnes mined Kt 657 7331,308 1,536
Mine grade g/t 2.2 1.71.9 1.8
Underground:
Ore tonnes trammed Kt 184 162371 316
Mine grade g/t 8.3 8.48.0 9.0
Processing information:
Ore milled Kt 701 7091,410 1,419
Head grade g/t 4.1 4.03.9 4.3
Mill recovery % 92.8% 92.3%92.5% 92.5%
Cash cost per tonne milled1 US$/t 68 5766 55
Capital Expenditure
 - Sustaining capital2 US$('000) 7,993 5,92113,681 12,177
 - Capitalised development US$('000) 12,364 15,48527,932 33,282
 - Expansionary capital US$('000) 2,143 2,9533,668 4,489
22,50024,35945,28149,948
 - Non-cash reclamation asset adjustments US$('000) (1,032) (180)(1,165) (56)
Total capital expenditure US$('000)21,46824,17944,11649,892

1These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ‘Non-IFRS measures” on page 24 for definitions.

2 Includes land purchases recognised as long term prepayments.

Operating performance

Gold production for the first half of 162,689 ounces was 9% lower than H1 2017. The reduction primarily stemmed from lower average grades at the Gokona underground mine on account of a higher proportion of mining taking place in the lower-grade West Zone. Gold ounces sold for the half of 158,870 ounces were 11% lower than the prior period and broadly in line with production.

Cash costs of US$588 per ounce sold were 33% higher than H1 2017 (US$441/oz), mainly driven by increased direct operating costs (US$102/oz), mainly relating to higher external services costs and higher maintenance costs; as well as higher sales related costs linked to the increase in the royalty rate and the average gold price (US$32/oz) and the lower production base (US$15/oz).

AISC of US$903 per ounce sold was 23% higher than H1 2017 (US$736/oz) primarily as a result of higher cash costs discussed above together with the impact of lower sales volumes on individual cost items (US$36/oz), partly offset by lower capitalised development costs (US$34/oz).

We continued to undertake drilling programmes at Gokona during the period as we look to demonstrate the long term potential of the deposit and are also undertaking a pre-feasibility study at Nyabirama in tandem with the permitting for an underground exploration decline as we explore the potential for a second underground mine at North Mara.

Capital expenditure for the period before reclamation adjustments amounted to US$45.3 million, 9% lower than in H1 2017 (US$49.9 million). Key capital expenditure included capitalised stripping costs (US$18.2 million), capitalised underground development costs (US$9.7 million), capitalised drilling mainly for resource and reserve development at Gokona underground (US$3.7 million) and investment in mobile equipment and component change-outs (US$8.9 million).

Buzwagi

Key statistics

Three months ended 30 JuneSix months ended 30 June
(Unaudited)2018 20172018 2017
Key operational information:
Ounces produced oz 37,415 66,22873,100 126,084
Ounces sold oz 39,845 15,89572,305 53,094
Cash cost per ounce sold1 US$/oz 964 705964 697
AISC per ounce sold1 US$/oz 1,025 7621,037 770
Copper production Klbs - 3,095- 6,253
Copper sold2 Klbs - (826)- 705
Mining information:
Tonnes mined Kt - 4,297- 9,564
Ore tonnes mined Kt - 2,898- 4,951
Processing information:
Ore milled Kt 1,255 1,1192,256 2,195
Head grade g/t 1.0 1.91.1 1.8
Mill recovery % 90.1% 96.6%89.2% 96,7%
Cash cost per tonne milled1 US$/t 31 1031 17
Capital Expenditure
 - Sustaining capital US$('000) 881 7242,181 865
 - Non-cash reclamation asset adjustments US$('000) (119) 79372 (1)
Total capital expenditure US$('000)7628032,553864

1These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to “Non-IFRS measures” on page 24 for definitions.

2 Negative sales quantities in 2017 relate to the reversal of sales recorded during Q1 2017.

Operating performance

Gold production for the first half of 73,100 ounces was 42% lower than the comparative period in 2017 as a result of Buzwagi transitioning primarily to a low-grade stockpile processing operation compared to the processing of run-of-mine ore in the previous period. Gold sold in H1 2018 amounted to 72,305 ounces, in line with production and 36% higher than H1 2017 due to the inability to sell concentrate following the export ban in H1 2017.

Whilst lower than H1 2017, production was ahead of plan driven by higher than expected recoveries of 89.2% and throughput being above nameplate capacity. Grades of 1.1 g/t for the period were in line with expectations for the period. Following Buzwagi’s transition to primarily a stockpile processing operation, there was no copper production and therefore no copper sales during the half. During the period Buzwagi continued to engage closely with Government agencies around correspondence received from the Ministry of Minerals during Q1 2018 requiring the restoration of operation of the flotation circuit, which ceased in September 2017. With primarily only low-grade stockpiles planned to be processed through the remaining life of mine, there are no plans to resume flotation circuit operations.

There were no ore tonnes mined from the open pit in H1 2018 but at the beginning of Q3 2018 we started to mine the last ore blocks from the main zone in the open pit. These tonnes were deferred from Q4 2017 due to flooding of the bottom of the pit and were included in guidance at the beginning of the year.

Cash costs for the first half of US$964 per ounce sold were 38% higher than H1 2017 (US$697/oz), mainly due to a drawdown in ore inventory as a result of only processing ore stockpiles and a smaller finished gold build up due to the impact of the concentrate produced and not sold in H1 2017, offset by higher sales volumes (US$751/oz), partially offset by lower direct mining costs as a result of Buzwagi transitioning to a stockpile processing operation (US$534/oz).

AISC per ounce sold of US$1,037 was 35% higher than H1 2017 of US$770/oz, primarily driven by higher cash costs as explained above (US$267/oz).

Capital expenditure before reclamation adjustments amounted to US$2.2 million, higher than H1 2017 (US$0.9 million), mainly consisting of the expansion of the tailings storage facilities (US$1.8 million) which started late in 2017.

Bulyanhulu

Key statistics

Three months ended 30 JuneSix months ended 30 June
(Unaudited)2018 20172018 2017
Key operational information:
Ounces produced oz 10,443 59,19618,970 122,542
Ounces sold oz 10,330 27,40919,870 81,214
Cash cost per ounce sold1 US$/oz 584 813646 795
AISC per ounce sold1 US$/oz 737 1,558827 1,340
Copper production Klbs - 1,313- 2,811
Copper sold2 Klbs - (357)- 599
Run-of-mine:
Underground ore tonnes hoisted Kt - 204- 409
Ore milled Kt - 202- 423
Head grade g/t - 8.6- 8.5
Mill recovery % - 89.9%- 90.7%
Ounces produced oz - 50,340- 104,596
Cash cost per tonne milled1 US$/t - 91- 133
Reprocessed tailings:
Ore milled Kt 454 410904 823
Head grade g/t 1.3 1.41.2 1.4
Mill recovery % 55.1% 46.9%53.9% 47.2%
Ounces produced oz 10,443 8,85618,970 17,946
Capital Expenditure
 - Sustaining capital US$('000) 754 4,3872,109 8,599
 - Capitalised development US$('000) - 14,984- 31,054
 - Expansionary capital US$('000) 1,260 5041,534 982
2,01419,8753,64340,635
 - Non-cash reclamation asset adjustments US$('000) (14) (851)(1,746) 191
Total capital expenditureUS$('000)2,00019,0241,89740,826

1These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ‘Non-IFRS measures” on page 24 for definitions.

2 Negative sales quantities in 2017 relate to the reversal of sales recorded during Q1 2017.

Operating performance

Gold production for H1 2018 of 18,970 ounces was 85% lower than the same period in 2017. This was a result of the decision taken in September 2017 to transition to reduced operations at Bulyanhulu. Production consisted solely of the reprocessing of tailings which was 6% higher compared to H1 2017 due to higher throughput and recovery rates as a result of operational efficiencies, partly offset by lower feed grades. Gold sold for the half of 19,870 ounces was 5% higher than production due to the selling of gold ounces on hand at the end of 2017 and 76% lower than H1 2017 mainly as a result of the lower production base. AISC per ounce sold for H1 of US$827 was 38% lower than H1 2017 (US$1,340/oz) driven by reduced operating and capital spend, partly offset by lower sales, but excludes reduced operations costs of US$16.6 million.

There were no copper production or sales for the period as a result of the underground mine at Bulyanhulu being on reduced operations.

Cash costs of US$646 per ounce sold were 19% lower than H1 2017 (US$795), mainly due to lower direct mining costs compared to the prior year period as a result of Bulyanhulu being on reduced operations and lower sales related costs driven by lower sales volumes, partly offset by the lower production base.

Capital expenditure for the first half before reclamation adjustments amounted to US$3.6 million, significantly lower than H1 2017 (US$40.6 million) due to Bulyanhulu being on reduced operations. Expansionary capital includes Bulyanhulu optimisation study costs (US$0.8 million) and upgrades to processing facilities (US$0.6 million).

Exploration Review

Brownfield Exploration

North Mara

Gokona Underground

Activity on brownfield programmes in the first half of 2018 has been restricted to underground diamond drilling at Gokona, North Mara where a total of 21,071 metres of extension and infill drilling were completed during H1 2018.

Drilling continued with four rigs on the programmes to define the Upper Central zone beneath the open pit, with further significant intercepts returned during the half including:

  • UGKD453
 15.0m @ 13.2 g/t Au from 176m
  • UGKD457
 7.0m @ 53.1 g/t Au from 193m; and
17.0m @ 6.3 g/t Au from 225m
  • UGKD458
 14.6m @ 8.1 g/t Au from 190m and
26.0m @ 4.1 g/t Au from 222m
  • UGKD463
 10.0m @ 7.7 g/t Au from 174m
  • UGKD472
 10.0m @ 14.3 g/t Au from 174m
  • UGKD448
 20.0m @ 8.7 g/t Au from 157m
  • UGKD476
 14.0m @ 9.4g/t Au from 96m; and
10.0m @ 10.9g/t Au from 234m
  • UGKD479
 11.0m @ 3.2g/t from 359m
  • UGKD485A
 15.0m @ 3.6g/t Au from 185m
  • UGKD486
 10.0m @ 3.3g/t Au from 204m; and
30.0m @ 4.3g/t Au from 219m
  • UGKD487
 14.0m @ 6.0g/t Au from 95m
  • UGKD493
 17.5m @ 3.8g/t Au from 251m; and
10.0m @ 7.4g/t Au from 281m
  • UGKD480
 30.0m @ 4.6g/t Au from 163m; and
9.0m @ 11.1g/t Au from 201m
  • UGKD481
 31.0m @ 5.7g/t Au from 186m

The additional drilling information from the Central zone between the base of the open pit and the 1,000mRL elevation is currently being incorporated into an update of the Mineral Resource model. Initial development has already commenced on the 1040mRL and 1070mRL elevations into the defined Central Zone mineralisation. Drilling continues with three drill rigs in the 1030 Exploration Drive to test deeper mineralisation in the Central Zone.

The drilling programme testing the base of the second and the top of the third panels of mineralisation in the West Zone at Gokona continued during the half. Drilling continued to test the third mining panel in the West during June. During the first half several significant intersections were returned:

  • UKGC_01009
 27.0m @ 3.6g/t Au from 203m
  • UKGC_01011
  7.0m @ 7.4g/t Au from 179m; and
33.0m @ 8.4g/t Au from 224m
  • UKGC_01012
  9.0m @ 15.9g/t Au from 116m
  • UKGC_01029
 13.0m @ 4.1 g/t Au from 237m; and
16.0m @ 3.5g/t Au from 289m
  • UKGC_01073
  9.0m @ 6.4g/t Au from 72m; and
14.0m @ 5.8g/t Au from 118m

Greenfield Exploration

Kenya

One of the focuses of the exploration during H1 2018 was on testing for structures within the Liranda Corridor, parallel to Isulu, within five kilometres of the existing inferred resources in order to expand the current inferred resource of 1.17Moz at 12.6g/t. During H1 2018 two diamond rigs were active across the West Kenya Project with 22 holes drilled for 9,158 metres. In addition, prospect focused geological mapping and multi-element soil geochemical surveys were completed over several target areas.

Liranda Corridor

During the half, nine diamond holes for 3,400 metres were completed on the Isulu South East Prospect. These holes intersected multiple shear zones with disseminated sulfides, quartz veining, carbonate and sericite alteration. Mineralisation within shears of similar orientation to the Isulu prospect were intersected as targeted, however assays returned broad zones of lower-grade mineralisation including:

  • LCD0206:             20.5m @ 1.13 g/t Au from 44m; 1m @ 3.68g/ Au from 62.5m    
  • LCD0209:             31.8m @ 1.29g/t Au from 201m incl. 7.7m @ 3.05 g/t Au from 207 (Northern Zone).
  • LCD0210:             13.5m @ 0.90 g/t Au from 281m incl. of 1m @ 7.56g/t Au from 281m (Southern Zone).

The Northern and Southern Zones comprise shear structures with disseminated sulfides (pyrite, pyrrhotite, arsenopyrite, chalcopyrite), quartz carbonate veining with carbonate, sericite and minor green mica alteration. Detailed structural analysis and modeling was completed towards the end of the first half.

Multi-element analysis of the soils collected in H1 2018 and modeling of strong VTEM geophysical anomalies identified a ‘blind’ target between the Isulu and Bushiangala, the so-called GAP target. Interpretation of the geophysical signature points to a mineralised intrusive body. Drilling on this target started at the end of June 2018.

Lake Zone

In the Lake Zone Camp geological mapping and soil geochemical surveys were completed across several potential target areas with promising results received from Ochiegue-Ramula and Ramba-Lumba.

The Ochiegue-Ramula system consists of two targets: Ramula prospect and Ochiegue corridor. These targets together, situated only 1km apart, have a high potential for discovery of >500,000 ounces of gold. Previously drilled (2015) Ramula gold-bearing zones have been remodeled during the half and estimation resulted in a non-classified exploration target estimate of around 0.67Mt at 12.8g/t for 275Koz Au (uncapped), or 0.67Mt at 9.10g/t for 197Koz Au (30g/t capped) based on a Datamine block model. In H1 2018 three diamond drill holes totaling 758 metres were drilled to test continuity and extension of the Ramula mineralised zones. All holes intercepted mineralisation with the better visual results returned from RMD0002 where multiple specs of visible gold were encountered. Assays are still outstanding and, if positive, further work to improve the confidence in the resource estimate will be undertaken in H2 2018.

The Ochiegue target comprises a complex mineralised system hosted in intermediate volcanics and felsic intrusions. A >3km long Au soil anomaly (20ppb-1.34 ppm Au) associated with strong pathfinders (Te, W, As, Sb, Bi) has been identified in H1 2018. Four DD holes have been completed totaling 1,375 metres. Multiple potential shear zones and veins of various orientations have been intercepted by the holes hosted in the strongly altered rocks. Diamond hole RMD0004 intercepted multiple specs of visible gold in quartz veins. Assays are still outstanding.

The Ramba-Lumba target is characterised by multiple parallel and anastomosing shear structures and quartz veins mapped in a >3km long and up to 600m wide corridor. The shallow parts of the mineralised shears were partially mined in the 1980-1990s. Previously unknown ultramafic and conglomerate rocks have been mapped and verified by the multi-element soil anomalies. A total of four, widely spaced, DD holes, totaling 1604 metres, were drilled into the target. All holes intercepted strong alteration, sheared and mineralised structures and quartz veining. Significant intersections:

  • LZD0002: 1.5m @ 4.34g/t Au from 105m, 2.0m @ 30.7g/t Au from 109m incl.
  • LZD0004: 1.0m @ 1.10g/t Au from 129m; 1.6m @ 6.40g/t Au from 225m
  • LZD0006: 0.5m @ 2.65g/t Au from 328m; 1.0m @ 3.30g/t Au from 368m
  • LZD0007: 2.1m @ 4.81g/t Au from 79m; 1.0m @ 1.33g/t Au from 97m; 2.7m @ 2.91g/t Au from 102m

The holes are several hundred metres apart. It appears that better grade is associated where an intrusive is located in the vicinity and results will be followed up in the second half of the year.

Burkina Faso

During H1 2018 we continued to explore our properties in the highly prospective Houndé Belt in southwest Burkina Faso. Acacia currently manages four joint ventures covering over 2,700km².

South Houndé JV (Sarama Resources Limited) – current interest 50%, next stage earn-in to 70%

Tankoro Corridor– MM and MC Zones

Drilling at Tankoro comprised air-core drilling at the Djimbaké zone (southern part of the Tankoro Corridor) to test the continuity of mineralisation along strike. 4,424 metres were drilled during the half out of a programme total of 4,900 metres. The results received show continuity of low grade mineralisation; best results include 4m @ 1.2g/t Au from 22m in AC3702, 4m @ 1.4g/t Au from 20m in AC3703 and 6m @ 1.6g/t Au from 50m in AC3726.

During the first half air-core drilling was conducted at MM zone with a total of 2,037 metres drilled. The aim of the programme was to infill some of the better parts of the MM resource area to test the potential for additional high grade zones.

Better results MM zone included:

  • AC3743 6m @ 5.5g/t Au from 12m (including 3m @ 9.2g/t Au)
  • AC3746 11m @ 3.6g/t Au from 13m (including 4m @ 8.5g/t Au)
  • AC3752 14m @ 2.9g/t Au from 22m (including 2m @ 10g/t Au)
  • AC3755 12m @ 2.7g/t Au from 38m (including 6m @ 3.9g/t Au)
  • AC3759 12m @ 3g/t Au from 16m (including 6m @ 4.9g/t Au)
  • AC3762 25m @ 1.4g/t Au from 5m

During the first half of the year SRK Consulting (UK) Limited (SRK) were contracted to update the mineral resource estimation, based on the new 3D geology model. Preliminary results of the new mineral resource estimation (MRE) appear to demonstrate an increase in the geological inventory at the project. Recent results at MM demonstrate the existence of additional high grade oxide zones which are not included in the SRK work and are likely to add to the mineralisation inventory.

Central Houndé JV (Thor Explorations Limited) – current interest 51%, next stage earn-in to 80%

Detailed field geological mapping and rock-chip sampling continued on the Légué-Bongui Corridor and on the Ouéré soil anomaly during H1 2018. Regional soil sampling covered the north-western part of the Ouéré licence. A number of anomalies were identified and are ready for air-core drilling.

The programme for the year on the Central Houndé project comprises 11,500 metres of air-core drilling to test the continuity of the gold mineralisation along strike and to test recently identified soil anomalies. The drilling will be converted to reverse circulation (RC) where ground conditions are not suitable. For logistical reasons, drilling at Central Houndé will be conducted in Q4 2018 after the wet season finishes.

Pinarello & Konkolikan JV (Canyon Resources Limited) – 100% interest

The programme for the year on the Pinarello & Konkolikan project comprises 30,000 metres of air-core drilling to test the continuity of the gold mineralisation along strike on the priority targets (Tankoro Corridor South, Tangolobé and Gagnhy).

Following an IP geophysical survey, comprising 53 line kilometres, conducted on the Tangolobé target, a drilling programme started in mid-June on the Western part of the project. The programme consists of 14,200 metres of air-core (to be converted to RC where adverse ground conditions are encountered) and is aimed to test the continuity of the gold mineralisation on the southern extension of the Tankoro Corridor and to test regional soil anomalies.

Frontier JV (Metallor SA) – earning 100% through option payments

No field work was conducted on the Frontier project in H1 2018. A number of strong targets have already been identified. These targets will be followed up after the wet season ends in H2 2018 with 6,000 metres of air-core drilling.

Mali

During H1 2018 we continued to explore our properties in the highly prospective Senegal-Mali Shear Zone (SMSZ) in southwest Mali. Acacia currently manages two joint ventures and holds one permit covering a total of 191km².

Tintinba-Bané Project JV (Demba Camara and Cadem Gold) – 100% interest

The Tintinba-Bane Project consists of three permits covering approximately 150km2. These properties are located within the Kénéiba Inlier of Western Mali, along the world class Senegal-Mali-Shear-Zone (SMSZ), which hosts more than 50 million ounces of gold endowment.

During the half detailed geology and regolith mapping, rock-chip sampling and portable XRF measurements have been conducted to assess the potential of the existing targets and to outline new drilling targets.

A drilling programme started in mid-June that consists of 5,000 metres of air-core (to be converted to RC where adverse ground conditions) and is aimed at testing a number of regional soil anomalies.

Boubou JV (Mande Empire) – earning 100% through option payments

The Boudala JV is a joint venture with a local company over the Bou Bou licence located approximately 15 kilometres from the centroid of the Tintinba JV further to the south. The property is located within the central portion of the Kedougou-Kenieba Inlier and just to the east of the highly prospective Senegal-Mali Shear Zone (SMSZ). Acacia can earn up to 100% of the project through a series of staged payments over a period of 36 months.

During H1 2018 a regional soil sampling survey, accompanied by geology and regolith mapping, was conducted over the licence. Results are still outstanding at period end.

Gourbassi Est – 100% Acacia (ABG Exploration Mali SARL)

The licence is located immediately west of the Tintinba/Bane Project in the central SMSZ area of the Kedougou-Kenieba Inlier. The property is located to the west of the SMSZ in an area dominated by footway splays to the SMSZ. A regional soil sampling survey, accompanied by geology and regolith mapping, started during this quarter in the licence.

The exploration plan for the Gourbassi project in 2018 comprises 1,500 metres of air-core drilling and 3,000 soil samples. The aim of the programme is to generate exploration targets.

Financial Review

The financial performance of the Group has been impacted by the planned transitioning of Buzwagi to a primarily low grade stockpile processing operation and the transition of Bulyanhulu to reduced operations, which is evident in the half year results when compared to the corresponding period in 2017. In an effort to minimise the impact of the challenging operating environment, we have further increased our focus on cost control and optimising working capital and capital allocation. The key aspects of our financial performance over the first half of 2018 are summarised below, and should be read in conjunction with the consolidated condensed interim financial information:

  • Revenue of US$333.4 million was US$58.3 million lower than H1 2017 driven by the 20% decrease in sales volumes that resulted from the lower production base, partly offset by an 8% increase in the net average realised gold price.
  • Cash costs increased to US$701 per ounce sold in the first half of 2018 from US$577 per ounce sold in H1 2017, driven by the drawdown in ore inventory at Buzwagi and a smaller build-up in finished gold inventory compared to H1 2017, due to the impact of the build-up in concentrate on hand after the imposition of the concentrate export ban, the lower production base and lower co-product revenue, partly offset by lower direct mining costs.
  • AISC at US$945 per ounce sold was 6% higher than in H1 2017 (US$893 per ounce sold), mainly due to higher cash costs, the impact of lower sales volumes on individual cost items and lower non-cash share based payment revaluation credits, partly offset by lower capitalised development costs at Bulyanhulu and North Mara and lower sustaining capital expenditure at Bulyanhulu.
  • As a result of the above, EBITDA decreased by 17% to US$133.6 million, after being offset by lower other charges (mainly due to the gain on sale of a non-core mineral royalty for US$45.0 million), lower exploration expenditure and lower corporate administration costs.
  • An impairment charge of US$24.2 million related to the Nyanzaga exploration project in Tanzania, following the post period end conditional agreement to sell the Group’s stake in the project.
  • Lower tax expense of US$25.8 million compared to the prior year expense of US$37.0 million. The current year charge is driven by lower year to date profitability. Included in the current year tax expense is a 2017 final North Mara tax charge of US$3.1 million.
  • As a result of the above, net earnings amounted to US$30.9 million, 51% lower than US$62.5 million in H1 2017.
  • Adjusted net earnings of US$13.5 million were US$52.4 million lower than H1 2017. Adjusted earnings per share amounted to US3.3 cents, down from US16.1 cents in H1 2017.
    • Operational cash flow of US$58.9 million increased by US$57.6 million from H1 2017, primarily as a result of lower working capital cash outflows due to the build-up of concentrate on hand which impacted H1 2017, partly offset by lower adjusted EBITDA.

The following review provides a detailed analysis of our consolidated results for the 6 months ended 30 June 2018 and the main factors affecting financial performance. It should be read in conjunction with the unaudited condensed consolidated financial information and accompanying notes on pages 32 to 55, which have been prepared in accordance with International Financial Reporting Standards as adopted for use in the European Union (“IFRS”).

Revenue

Revenue for H1 2018 of US$333.4 million was US$58.3 million lower than H1 2017 due to a 20% decrease in gold sales volumes (61,393 ounces) mainly from Bulyanhulu and North Mara, partly offset by an increase in sales volumes from Buzwagi as the mine was able to sell all of its production in H1 2018 following the decision to switch off the flotation circuit in H2 2017; and an 8% increase in the average net realised gold price from US$1,235 per ounce sold in H1 2017 to US$1,328 in H1 2018.

The net realised gold price for the year to date of US$1,328/oz was US$10/oz higher than the average market price of US$1,318/oz due to the recognition of realised gains on the gold put options of US$1.7 million for H1 2017 as a result of the strike price of the put options of US$1,320/oz exceeding the average market price for the period.

Included in total revenue is co-product revenue of US$1.7 million for H1 2018 relating to silver sales, 70% lower than the prior period (US$5.8 million), as a result of the lack of concentrate sales from early March 2017. There were no copper sales since the concentrate export ban commenced and copper production also ceased from September 2017.

The concentrate ban has resulted in unsold concentrate on hand of approximately 186,000 ounces of gold, 12.1 million pounds of copper and 159,000 ounces of silver. These contained metals are in a condition to be sold, and will deliver revenue, net of government royalties, of approximately US$257 million (at the average year to date spot gold price).

Cost of sales

Cost of sales was US$221.2 million for H1 2018, representing a decrease of 9% on the prior year period (US$244.0 million). The key aspects impacting the cost of sales for the year include a 22% decrease in depreciation and amortisation costs as a result of the lower production base and carrying value of assets (after the 2017 impairment) at Bulyanhulu, 6% reduction in direct mining costs, primarily driven by the reduced operations at Bulyanhulu coupled with the move to stockpile processing at Buzwagi and the continuing focus on cost control.

The table below provides a breakdown of cost of sales:


(US$'000)		 Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Cost of Sales
Direct mining costs 79,163 61,527150,153 160,310
Third party smelting and refining fees 758 1,4172,027 6,738
Realised (gains)/ losses on economic hedges1 (238) 170(238) 278
Royalty expense 13,548 8,04025,699 18,682
Realised gains on gold hedges (1,662) -(1,662) -
Depreciation and amortisation2 21,257 23,41745,247 57,959
Total112,82694,571221,226243,967

1 Economic hedges include zero cost collars for brent crude and, in prior years, copper.

2 Depreciation and amortisation includes credits relating to the depreciation component of the cost of inventory build-up for Q2 2018 of US$0.6 million (Q2 2017 US$12.8 million) and for H1 2018 of US$0.9 million (H1 2017 US$15.8 million.)

A detailed breakdown of direct mining expenses is shown in the table below:


(US$'000)		Three months ended 30 JuneSix months ended 30 June
(Unaudited)2018 20172018 2017
Direct mining costs
Labour11,532 23,85923,703 47,261
Energy and fuel14,646 21,16128,974 44,604
Consumables16,188 22,26231,613 47,168
Maintenance11,404 26,35724,428 52,123
Contracted services21,740 33,48344,816 69,497
General administration costs6,910 21,78815,810 42,309
Gross direct mining costs82,420148,910169,344302,962
Capitalised mining costs(3,257) (87,383)(19,191) (142,652)
Total direct mining costs79,16361,527150,153160,310

Gross direct mining costs of US$169.3 million for H1 2018 were 44% lower than H1 2017 (US$303.0 million). The overall decrease was driven by the impact of the changes in mining activities at Bulyanhulu and Buzwagi, partly offset by an increase in costs at North Mara as follows:

  • An increase in maintenance cost driven by breakdowns and unplanned maintenance at both the open pit and underground.
  • Higher underground contracted services costs at Gokona due to improved ground support activities and higher ore development tonnes mined by the contractor.
  • Higher energy and fuel costs driven by increased power generation as a result of increased underground mining activities.
  • Increased consumables mainly driven by higher explosive and underground support materials.

Capitalised direct mining costs, consisting of capitalised development costs and investment in inventory is made up as follows:

(US$'000) Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Capitalised direct mining costs
Capitalised development costs (11,222) (25,962)(25,710) (56,530)
Drawdown/ (investment) in inventory 7,965 (61,420)6,519 (86,122)
Total capitalised direct mining costs(3,257)(87,382)(19,191)(142,652)

Total capitalised direct mining costs were 87% lower than H1 2017, primarily driven by a drawdown in ore inventory at Buzwagi in H1 2018 compared to the build-up of concentrate ounces at Bulyanhulu and Buzwagi in H1 2017, combined with a decrease in capitalised development costs mainly driven by the cessation of development activities at Bulyanhulu and the lower stripping costs at North Mara, as a result of a lower strip ratio at the Nyabirama pit.

Central costs

Total central costs amounted to US$9.9 million for H1 2018, a significant increase on H1 2017 (US$4.7 million) mainly driven by a lower non-cash share based payment revaluation credit compared to the prior period which saw a greater decrease in the share price and share price performance compared to the global mining index, impacting on the valuation of future share-based payment liabilities to employees. This was partly offset by a 10% decrease in corporate administration costs mainly as a result of lower labour costs across all corporate offices and the increased focus on cost control.


(US$'000)		 Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Corporate administration 5,846 5,87811,304 12,520
Share-based payments 121 (18,209)(1,406) (7,785)
Total central costs5,967(12,331)9,8984,735

Exploration and evaluation costs

Exploration and evaluation costs of US$7.2 million were incurred in H1 2018, 55% lower than the US$16.2 million spent in H1 2017 in line with the reduced budget for the year.

Corporate social responsibility expenses

Corporate social responsibility costs incurred for H1 2018 amounted to US$3.1 million compared to the prior year of US$3.7 million. Corporate social responsibility overheads and central initiatives in H1 2018 amounted to US$1.6 million and were lower than US$2.3 million in H1 2017. General community projects funded from the Acacia Maendeleo Fund amounted to US$1.5 million, in line with H1 2017 (US$1.4 million).

Impairment charges

After the reporting period, OreCorp, Acacia’s JV partner in the Nyanzaga Project, has executed its option under the earn-in agreement to increase its stake to 51% in the project through the payment of US$3.0 million to Acacia. Further to that, Acacia has signed a conditional agreement to transfer its remaining 49% stake to OreCorp for US$7.0 million and a net smelter royalty capped at US$15 million based on future production. This has resulted in Acacia recording an impairment charge of US$24.2 million for the Nyanzaga Project. Refer to Note 6 of the condensed consolidated financial information for further details.

Other charges

Other charges in H1 2018 amounted to US$3.6 million, compared to US$19.6 million in H1 2017. The main contributors include Bulyanhulu reduced operations costs not included within all-in-sustaining costs of US$16.6 million, legal fees driven by the concentrate export ban and historical outstanding tax matters of US$15.9 million, foreign exchange losses of US$4.7 million and once-off legal settlement costs relating to a North Mara village royalty settlement of US$3.0 million. The charges were largely offset by the gain on the sale of a non-core mineral royalty of US$45.0 million.

Finance expense and income

Finance expense of US$8.2 million for H1 2018 was 51% higher than in H1 2017 (US$5.5 million), mainly driven by the premium paid on gold put options. The key components were the premium paid on gold put options of US$3.0 million, accretion expenses of US$1.8 million relating to the discounting of the environmental rehabilitation liability, US$1.2 million relating to the servicing of the US$150 million undrawn revolving credit facility and borrowing costs relating to the Bulyanhulu CIL facility of US$1.1 million which were lower than the prior year due to a lower outstanding facility following capital repayments. Other costs include bank charges and interest on bank accounts.

Finance income relates predominantly to interest charged on non-current receivables and interest received on money market funds. Refer to note 8 of the condensed financial information for details.

Taxation matters

The total income tax charge of US$25.8 million was lower than the prior year expense of US$37.0 million. The current tax charge was predominantly made up of current year income tax for North Mara, driven by year to date profitability, in combination with deferred tax charges of US$5.9 million (2017: US$5.2 million) which reflects movements in temporary differences. Included in the current year tax expense is a 2017 final North Mara tax charge of US$3.1 million. The effective tax rate in H1 2018 amounted to 46% compared to 37% in H1 2017.

During H1 2018, we made provisional corporate tax payments of US$19.1 million relating to North Mara, which is based on the pro rata portion of North Mara’s expected full year profitability. These provisional corporate tax payments have been offset against the indirect tax receivable covered under the Memorandum of Settlement entered into with the Tanzanian Government in 2011, and as a result, were not paid in cash. In addition, during H1 2018 we have also offset US$4.2 million relating to the 2017 final corporate tax payment.

Net earnings and earnings per share

As a result of the factors discussed above, net earnings for H1 2018 were US$30.9 million, against the prior year earnings of US$62.5 million.

Earnings per share for H1 2018 amounted to US7.5 cents, a decrease of US7.8 cents from the prior year earnings per share of US15.3 cents. The decrease was driven by the lower earnings, with no change in the underlying issued shares.

Adjusted net earnings and adjusted earnings per share

Adjusted net earnings for the first half was US$13.5 million compared to US$65.9 million in H1 2017. Net earnings in the periods as described above have been adjusted for the impact of items such as impairment charges, restructuring costs, gain on the sale of a non-core mineral royalty and once-off legal settlements. Refer to page 26 for reconciliation between net earnings and adjusted net earnings.

Adjusted earnings per share for H1 2018 amounted to US3.3 cents, a decrease of US12.8 cents from H1 2017 adjusted earnings per share of US16.1 cents.

Financial position

Acacia had cash and cash equivalents on hand of US$120.1 million as at 30 June 2018 (US$80.5 million as at 31 December 2017) with net cash of US$63.3 million, up by US$53.8 million from 31 December 2017. The Group’s cash and cash equivalents are with counterparties whom the Group considers to have an appropriate credit rating. Location of credit risk is determined by physical location of the bank branch or counterparty. Investments are held mainly in United States dollars, with cash and cash equivalents in other foreign currencies maintained for operational requirements.

During 2013, a US$142 million facility (“Facility”) was put in place to fund the bulk of the costs of the construction of the Bulyanhulu tailings retreatment project (“Project”). The Facility is collateralised by the Project, and has a term of seven years with a spread over Libor of 250 basis points. The seven year Facility is repayable in equal instalments (bi-annual) over the term of the Facility, after a two year repayment holiday period. The interest rate has been fixed at 3.6% through the use of an interest rate swap. The full facility of US$142 million was drawn in 2013. During 2018, the 6th repayment amounting to US$14.2 million in total was made. At 30 June 2018, the outstanding capital balance is US$56.8 million (31 December 2017: US$71.0 million).

The above complements the existing undrawn revolving credit facility of US$150 million, which runs until November 2019.

The net book value of property, plant and equipment increased from US$771 million as at 31 December 2017 to US$774 million as at 30 June 2018 mainly as a result of capital expenditure of US$47.4 million as explained below, offset by depreciation charges of US$43.6 million. Refer to note 13 to the condensed financial information for further details.

The current portion of inventories increased from US$291.9 million as at 31 December 2017 to US$296.6 million as at 30 June 2018. This was mainly due to a build-up in supplies inventory and an increase in finished gold doré on hand at North Mara, partly offset by a decrease in ore stockpiles due to Buzwagi transitioning to a low-grade stockpile processing operation and a decrease in gold in circuit inventory at North Mara. Total finished gold ounces on hand of approximately 200,000 ounces as at 30 June 2018 comprised approximately 186,000 ounces of gold in concentrate and 14,000 ounces of gold in doré.

Total indirect tax receivables increased from US$170.7 million as at 31 December 2017 to US$172.5 million as at 30 June 2018. The increase was mainly due to VAT paid which was not refunded of US$28.3 million, partly offset by provisional corporate tax prepayments of US$19.1 million, a final corporate tax payment of US$4.2 million at North Mara and foreign exchange revaluation losses of US$3.2 million.

The net deferred tax position was an asset of US$64.0 million as at 30 June 2018 compared to the asset of US$70.0 million as at 31 December 2017. This was mainly as a result of temporary differences at all sites in the current period.

Net assets increased from US$1.12 billion as at 31 December 2017 to US$1.15 billion as at 30 June 2018. The increase reflects the current year income of US$30.9 million.

Cash flow generation and capital management

Cash flow

(US$000) Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Cash generated from/ (used in) operating activities 34,912 (23,909)58,866 1,315
Cash used in investing activities (21,472) (47,250)(4,511) (94,786)
Cash used in financing activities - (34,447)(14,200) (48,585)
Increase/ (decrease) in cash 13,440 (105,606)40,155 (142,056)
Foreign exchange difference on cash 92 50(579) 151
Opening cash balance 106,557 281,44280,513 317,791
Closing cash balance120,089 175,886120,089 175,886

Cash flow from operating activities was US$58.9 million for H1 2018, an increase of US$57.6 million from H1 2017 (US$1.3 million) mainly due to lower working capital outflows of US$24.2 million compared to outflows of US$159.7 million in H1 2017 as a result of the build-up in gold in concentrate ounces on hand in H1 2017, partly offset by lower adjusted EBITDA (US$74.6 million).

The working capital outflow relates to a net increase in indirect and corporate tax receivables of US$28.3 million, mainly driven by the lack of VAT refunds, partly offset by an increase in trade and other payables of US$4.4 million.

Cash flow used in investing activities was US$4.5 million for H1 2018, a decrease of US$90.3 million compared to H1 2017 (US$94.8 million), driven by the proceeds of the sale of a non-core royalty of US$45.0 million, lower capitalised development and sustaining capital expenditure at Bulyanhulu due to reduced operations, and lower capitalised stripping costs at North Mara.

A breakdown of total capital and other investing capital activities for 2018 is provided below:

(US$’000) Six months ended 30 June
(Unaudited) 2018 2017
Sustaining capital (18,607) (30,204)
Capitalised development (27,932) (64,336)
Expansionary capital (5,202) (5,522)
Total cash capital(51,741)(100,064)
Sale of mineral royalty 45,000 -
Reclamation spend (3,258) (250)
Non-current asset movement1 5,488 5,528
Cash used in investing activities(4,511)(94,786)
Capital expenditure reconciliation:
Total cash capital 51,741 100,064
Land purchases 130 1,247
Movement in capital accruals (585) (8,855)
Capital expenditure51,28692,456
Land purchases classified as long term prepayments (130) (1,247)
Non-cash rehabilitation asset adjustment (2,539) 134
Other non-cash capital expenditure (1,244) (1)
Total capital expenditure per segment note47,37391,342

1 Non-current asset movements relates to the movement in Tanzania government receivables, other long term assets

Sustaining capital

Sustaining capital expenditure includes investment in mobile equipment and component change-outs at North Mara (US$8.9 million), investment in fixed equipment and mining infrastructure at North Mara (US$2.4 million), expansion of the tailings storage facility (US$1.8 million) which started late 2017 at Buzwagi and the upgrade of the water management ponds and essential plant upgrade costs US$1.0 million at Bulyanhulu.

Capitalised development

Capitalised development includes North Mara capitalised stripping costs (US$18.2 million) and capitalised underground development (US$9.7 million).

Expansionary capital

Expansionary capital expenditure consisted mainly of capitalised expansion drilling at North Mara (US$3.7 million) and Bulyanhulu optimisation studies (US$0.8 million) and processing facilities upgrades (US$0.6 million).

Non-cash capital

Non-cash capital was a negative US$4.4 million and consisted mainly of a decrease in capital accruals, non-cash rehabilitation asset adjustments (US$2.5 million) driven by changes in US risk free rates impacting discount rates and foreign exchange losses on translation of asset balances.

Other investing capital

Other investing capital included the sale of a non-core mineral royalty for proceeds of US$45.0 million, offset by rehabilitation expenditure incurred at North Mara and Buzwagi of US$3.3 million and the movement in other non-current assets of US$5.5 million. During H1 2018 North Mara incurred negligible land purchases totalling US$0.1 million (H1 2017: US$1.2 million).

Cash flow used in financing activities for H1 2018 of US$14.2 million, a decrease of US$34.4 million from US$48.6 million in H1 2017, mainly as a result of a final 2017 dividend not being paid. A payment of the 6th instalment of the borrowings for the Bulyanhulu CIL facility totalling US$14.2 million was made in Q1 2018.

Dividend

As a result of the uncertainty around a resolution of the on-going disputes between the Company and the GoT and current liquidity requirements, the Board of Directors has not recommended an interim dividend for 2018.

Significant judgements in applying accounting policies and key sources of estimation uncertainty

Many of the amounts included in the condensed consolidated financial information require management to make judgements and/or estimates. These judgements and estimates are continuously evaluated and are based on management’s experience and best knowledge of the relevant facts and circumstances, but actual results may differ from the amounts included in the condensed consolidated financial information included in this release. Information about such judgements and estimation is included in the accounting policies and/or notes to the consolidated financial statements, and the key areas are summarised below.

Areas of judgement and key sources of estimation uncertainty that have the most significant effect on the amounts recognised in the condensed consolidated financial statements include:

  • Estimates of the quantities of proven and probable gold and copper reserves;
  • Estimates included within the life-of-mine planning such as the timing and viability of processing of long term stockpiles;
  • The capitalisation of production stripping costs;
  • The capitalisation of exploration and evaluation expenditures;
  • Review of goodwill, tangible and intangible assets’ carrying value, the determination of whether a trigger for an impairment review exist, whether these assets are impaired and the measurement of impairment charges or reversals, and also includes the judgement of reversal of any previously recorded impairment charges;
  • The estimated fair values of cash generating units for impairment tests, including estimates of future costs to produce proven and probable reserves, future commodity prices, foreign exchange rates and discount rates;
  • The estimated useful lives of tangible and long-lived assets and the measurement of depreciation expense;
  • Recognition of a provision for environmental rehabilitation and the estimation of the rehabilitation costs and timing of expenditure;
  • Whether to recognise a liability for loss contingencies and the amount of any such provision;
  • Whether to recognise a provision for accounts receivable, and in particular the indirect tax receivables from the Tanzanian Government, a provision for obsolescence on consumables inventory and the impact of discounting the non-current element of the indirect tax receivable;
  • Recognition of deferred income tax assets, amounts recorded for uncertain tax positions, the measurement of income tax expense and indirect taxes;
  • Determination of the cost incurred in the productive process of ore stockpiles, gold in process, gold doré/bullion and concentrate, as well as the associated net realisable value and the split between the long term and short term portions;
  • Determination of fair value of derivative instruments;
  • Determination of fair value of share options and cash-settled share-based payments;
  • Judgements around the prospect, timing and final terms of any comprehensive negotiated settlement that the Company might be able to agree with the Government of Tanzania, including by reference to the key terms of the Framework announcements made in October 2017 by Barrick and the GoT and including judgements around the timing and quantum of any cash outflows that might be made in respect of historical tax matters; and
  • Judgements around the timing of Bulyanhulu’s restart and production ramp up.

Non-IFRS Measures

Acacia has identified certain measures in this report that are not measures defined under IFRS. Non-IFRS financial measures disclosed by management are provided as additional information to investors in order to provide them with an alternative method for assessing Acacia’s financial condition and operating results, and reflects more relevant measures for the industry in which Acacia operates. These measures are not in accordance with, or a substitute for, IFRS, and may be different from or inconsistent with non-IFRS financial measures used by other companies. These measures are explained further below.

Net average realised gold price per ounce sold is a non-IFRS financial measure which excludes from gold revenue: unrealised gains and losses on non-hedge derivative contracts and export duties but it also includes realised gains and losses on gold hedge contracts reported as part of cost of sales.

Net average realised gold price per ounce sold have been calculated as follow:

(US$000) Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Gold revenue 175,919 160,231331,665 385,859
Add: Realised gold hedge gains 1,662 -1,662 -
Net gold revenue177,581160,231333,327385,859
Gold sold (ounces) 134,090 127,694251,045 312,438
Net average realised gold price (US$/ounce)1,3241,2551,3281,235

Cash cost per ounce sold is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, and production taxes, and exclude capitalised production stripping costs, inventory purchase accounting adjustments, unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and amortisation and corporate social responsibility charges. Cash cost is calculated net of co-product revenue. Cash cost per ounce sold is calculated by dividing the aggregate of these costs by total ounces sold.

The presentation of these statistics in this manner allows Acacia to monitor and manage those factors that impact production costs on a monthly basis. Cash costs and cash cost per ounce sold are calculated on a consistent basis for the periods presented.

The table below provides a reconciliation between cost of sales and total cash cost to calculate the cash cost per ounce sold.


(US$'000)		 Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Total cost of sales112,82694,571221,226243,967
Deduct: depreciation and amortisation* (21,257) (23,417)(45,247) (57,959)
Add: realised gains on gold hedges 1,662 -1,662 -
Deduct: Co-product revenue (946) 2,468(1,717) (5,805)
Total cash cost92,28573,622175,924180,203
Total ounces sold 134,090 127,694251,045 312,438
Total cash cost per ounce sold (US$/ounce)688577701577

* Depreciation and amortisation includes the depreciation component of the cost of inventory sold.

All-in sustaining cost (AISC) per ounce sold is a non-IFRS financial measure. The measure is in accordance with the World Gold Council’s guidance issued in June 2013. It is calculated by taking cash cost per ounce sold and adding corporate administration costs, share-based payments, reclamation and remediation costs for operating mines, corporate social responsibility expenses, mine exploration and study costs, realised gains and/or losses on operating hedges, capitalised stripping and underground development costs and sustaining capital expenditure. This is then divided by the total ounces sold. A reconciliation between cash cost per ounce sold and AISC for the key business segments is presented below:

(Unaudited) Three months ended 30 June 2018Three months ended 30 June 2017
(US$/oz sold) Bulyanhulu North Mara Buzwagi Group*Bulyanhulu North Mara Buzwagi Group*
Cash cost per ounce sold 584 570 964 688813 476 705 577
Corporate administration 35 32 24 4444 21 81 46
Share based payments - - - 1(38) (13) (78) (143)
Rehabilitation 28 8 6 923 10 11 13
CSR expenses 17 8 8 119 10 (3) 12
Capitalised development - 147 - 92547 184 - 239
Sustaining capital 73 96 23 73160 70 46 91
Total AISC 737 861 1,025 9181,558 758 762 835

* The group total includes a cost of US$18/oz in Q2 2018 mainly related to corporate costs incurred, and a credit of US$95/oz in Q2 2017.

(Unaudited) Six months ended 30 June 2018Six months ended 30 June 2017
(US$/oz sold) Bulyanhulu North Mara Buzwagi Group*Bulyanhulu North Mara Buzwagi Group*
Cash cost per ounce sold 646 588 964 701795 441 697 577
Corporate administration 43 37 32 4536 23 48 40
Share based payments (21) (1) (3) (6)(4) (2) (6) (25)
Rehabilitation 28 8 6 916 10 7 11
CSR expenses 25 10 8 138 8 7 12
Capitalised development 13 176 - 112382 187 - 206
Sustaining capital 93 85 30 71107 69 17 72
Total AISC 827 903 1,037 9451,340 736 770 893

* The group total includes a cost of US$9/oz in H1 2018 mainly related to corporate costs incurred, and a credit of US$5/oz in H1 2017.

AISC is intended to provide additional information on the total sustaining cost for each ounce sold, taking into account expenditure incurred in addition to direct mining costs and selling costs.

Cash cost per tonne milled is a non-IFRS financial measure. Cash costs include all costs absorbed into inventory, as well as royalties, co-product credits, and production taxes, and exclude capitalised production stripping costs, inventory purchase accounting adjustments, unrealised gains/losses from non-hedge currency and commodity contracts, depreciation and amortisation and corporate social responsibility charges. Cash cost is calculated net of co-product revenue. Cash cost per tonne milled is calculated by dividing the aggregate of these costs by total tonnes milled.

EBITDA is a non-IFRS financial measure. Acacia calculates EBITDA as net profit or loss for the period excluding:

  • Income tax expense;
  • Finance expense;
  • Finance income;
  • Depreciation and amortisation; and
  • Impairment charges of goodwill and other long-lived assets.

EBITDA is intended to provide additional information to investors and analysts. It does not have any standardised meaning prescribed by IFRS and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. EBITDA excludes the impact of cash costs of financing activities and taxes, and the effects of changes in operating working capital balances, and therefore is not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate EBITDA differently.

A reconciliation between net profit for the period and EBITDA is presented below:

(US$000) Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Net profit/(loss) for the period (19,118) 35,71630,877 62,543
Plus income tax expense/(credit) 17,695 17,81925,780 37,002
Plus depreciation and amortisation1 21,257 23,41745,247 57,959
Plus: impairment charges/write-offs2 24,234 -24,234 -
Plus finance expense 4,404 3,2168,240 5,454
Less finance income (676) (946)(808) (1,543)
EBITDA47,79679,222133,570161,415
Adjusted for:
Restructuring costs - 2,477- 3,304
Gain on sale of non-core mineral royalty - -(45,000) -
One off legal settlements - 1,5003,030 1,500
Adjusted EBITDA47,79683,19991,600166,219

1 Depreciation and amortisation includes the depreciation component of the cost of inventory sold.

2 Refer to note 6 of the condensed financial information.

Adjusted EBITDA is a non-IFRS financial measure. It is calculated by excluding one-off costs or credits relating to non-routine transactions from EBITDA. It excludes other credits and charges that, individually or in aggregate, if of a similar type, are of a nature or size that requires explanation in order to provide additional insight into the underlying business performance.

EBIT is a non-IFRS financial measure and reflects EBITDA adjusted for depreciation and amortisation and impairment charges.

Adjusted net earnings is a non-IFRS financial measure. It is calculated by excluding certain costs or credits relating to non-routine transactions from net profit attributed to owners of the parent. It includes other credit and charges that, individually or in aggregate, if of a similar type, are of a nature or size that requires explanation in order to provide additional insight into the underlying business performance.

Adjusted net earnings and adjusted earnings per share have been calculated as follows:

(US$000) Three months ended 30 JuneSix months ended 30 June
(Unaudited) 2018 20172018 2017
Net earnings/(loss) (19,118) 35,71630,877 62,543
Adjusted for:
Gain on sale of non-core mineral royalty - -(45,000) -
Restructuring cost - 2,477- 3,304
Impairment charges/write-offs1 24,234 -24,234 -
Once-off legal settlements2 - 1,5003,030 1,500
Tax impact of the above - (1,193)378 (1,441)
Adjusted net earnings5,11638,50013,51965,906

1 The impairment charge was recognised as a result of the revaluation of Acacia’s remaining stake in the Nyanzaga Project.

2 Once-off legal settlements relate to the North Mara royalty settlement.

Adjusted net earnings per share is a non-IFRS financial measure and is calculated by dividing adjusted net earnings by the weighted average number of Ordinary Shares in issue.

Free cash flow is a non-IFRS measure and represents the change in cash and cash equivalents in a given period.

Net cash is a non-IFRS measure. It is calculated by deducting total borrowings from cash and cash equivalents.

Mining statistical information

The following describes certain line items used in the Acacia Group’s discussion of key performance indicators:

  • Open pit material mined – measures in tonnes the total amount of open pit ore and waste mined.
  • Underground ore tonnes hoisted – measures in tonnes the total amount of underground ore mined and hoisted.
  • Underground ore tonnes trammed – measures in tonnes the total amount of underground ore mined and trammed.
  • Total tonnes mined includes open pit material plus underground ore tonnes hoisted.
  • Strip ratio – measures the ratio of waste?to?ore for open pit material mined.
  • Ore milled – measures in tonnes the amount of ore material processed through the mill.
  • Head grade – measures the metal content of mined ore going into a mill for processing.
  • Milled recovery – measures the proportion of valuable metal physically recovered in the processing of ore. It is generally stated as a percentage of the metal recovered compared to the total metal originally present.

Risk Review

We have made a number of further developments in the identification and management of our risk profile over the course of H1 2018. Our principal risks have continued to fall within four broad categories: strategic risks, financial risks, external risks and operational risks. Generally, the makeup of our principal risks has not significantly changed from that published in the 2017 Annual Report. However, there have been changes in certain risk trends and impact assessments as a result of the challenges in our operating environment in Tanzania, particularly as a result of ongoing disputes with the Government of Tanzania, and developments or trends affecting the wider global economy and/or the mining industry. As a result of our mid-year assessment, we continue to view our principal risks for the remainder of 2018 as relating to the following:

  • Political, legal and regulatory developments
  • Single country risk
  • Attraction and retention of employees
  • Significant changes to commodity prices
  • Operational security and theft
  • Liquidity
  • Significant fraud and corruption
  • Reserve and resource estimates
  • Environmental hazards and rehabilitation
  • Safety risks relating to mining operations

Further details as regards our Principal Risks and Uncertainties and risk assessments conducted in respect thereof are provided as part of the 2017 Annual Report and Accounts.

Directors’ Responsibility Statement

The Directors confirm that, to the best of their knowledge, the condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union. The half-year management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:

  • an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed consolidated interim financial information, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
  • material related-party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report.

The Directors of Acacia Mining plc are listed in the Acacia Mining plc Annual Report for 31 December 2017. A list of current Directors is maintained on the Acacia Mining plc Group website: www.acaciamining.com.

On behalf of the Board

Peter Geleta, Interim Chief Executive Officer                                Kelvin Dushnisky, Chairman

Independent review report to Acacia Mining plc

Report on the condensed consolidated interim financial information

Our conclusion

We have reviewed Acacia Mining plc's condensed consolidated interim financial statements (the "interim financial statements") in the interim results of Acacia Mining plc for the 6 month period ended 30 June 2018. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’, as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

Emphasis of Matter – Impact of mineral concentrate export ban

In forming our conclusion on the interim financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 2 to the financial statements concerning the impact of the mineral concentrate export ban and negotiations with the Government of Tanzania on the group’s and parent company’s assets, liabilities and cash flows. In addition, these conditions, along with the other matters explained in note 2 to the interim financial statements, indicate the existence of a material uncertainty which may cast significant doubt about the group’s and parent company’s ability to continue as a going concern, should the assumptions on which the disclosures are made in note 2 prove not to be correct. The interim financial statements do not include the adjustments that would result if the group and parent company were unable to continue as a going concern.

What we have reviewed

The interim financial statements comprise:

?the consolidated balance sheet as at 30 June 2018;

?the consolidated income statement and consolidated statement of comprehensive income for the period then ended;

?the consolidated statement of cash flows for the period then ended;

?the consolidated statement of changes in equity for the period then ended; and

?the explanatory notes to the interim financial statements.

The interim financial statements included in the interim results have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The interim results, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the interim results based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom’s Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial statements consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the interim results and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

London

19 July 2018

  1. The maintenance and integrity of the Acacia Mining plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial statements since they were initially presented on the website.
  2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Condensed Financial Information

Consolidated income statement

For the six months ended 30 JuneFor the year ended 31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)Notes201820172017
Revenue333,382 391,664 751,515
Cost of sales(221,226) (243,967) (458,447)
Gross profit112,156147,697293,068
Corporate administration(11,304) (12,520) (26,913)
Share-based payments1,406 7,785 8,236
Exploration and evaluation costs(7,231) (16,150) (24,829)
Corporate social responsibility expenses(3,083) (3,739) (8,213)
Impairment charges 6 (24,234) - (850,182)
Other charges 7 (3,621) (19,617) (90,370)
Profit/ (loss) before net finance expense and taxation64,089103,456(699,203)
Finance income 8 808 1,543 1,944
Finance expense 8 (8,240) (5,454) (12,407)
Profit/ (loss) before taxation56,65799,545(709,666)
Tax (expense)/credit 9 (25,780) (37,002) 2,272
Net profit/ (loss) for the period30,87762,543(707,394)
Earnings/ (loss) per share (cents):
Basic earnings/ (loss) per share (cents) 10 7.5 15.3 (172.5)
Diluted earnings/ (loss) per share (cents) 10 7.5 15.2 (172.5)

The notes on pages 37 to 55 are an integral part of this financial information.

Consolidated statement of comprehensive income

For the six months ended 30 JuneFor the year ended 31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Net profit/ (loss) for the period30,877 62,543 (707,394)
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Changes in fair value of cash flow hedges72 52 108
Total comprehensive income/ (loss) for the period30,94962,595(707,286)

The notes on pages 37 to 55 are an integral part of this financial information.

Consolidated balance sheetAs at
30 June (Unaudited)		As at
30 June (Unaudited)		As at
31 December (Audited)
(US$’000)Notes201820172017
ASSETS
Non-current assets
Goodwill and intangible assets 12 48,149 216,190 82,383
Property, plant and equipment 13 774,353 1,465,309 770,574
Deferred tax assets171,838 3,208 169,513
Non-current portion of inventory 15 129,318 115,775 133,550
Derivative financial instruments 14 739 770 907
Other non-current assets 16 161,051 58,474 180,708
1,285,448 1,859,726 1,337,635
Current assets
Inventories 15 296,633 280,692 291,880
Trade and other receivables16,890 12,039 18,085
Derivative financial instruments 14 1,692 601 2,619
Other current assets 16 105,379 190,868 70,155
Cash and cash equivalents120,089 175,886 80,513
540,683 660,086 463,252
Non-current assets classified as held for sale 17 10,000 - -
Total assets1,836,1312,519,8121,800,887
EQUITY AND LIABILITIES
Share capital and share premium929,199 929,199 929,199
Other reserves222,742 961,912 191,793
Total owners' equity1,151,941 1,891,111 1,120,992
Total equity1,151,9411,891,1111,120,992

Non-current liabilities
Borrowings 18 28,400 56,800 42,600
Deferred tax liabilities107,806 148,341 99,533
Derivative financial instruments 14 - 1,068 -
Provisions124,461 147,314 127,028
Other non-current liabilities4,113 4,778 5,038
264,780 358,301 274,199
Current liabilities
Trade and other payables370,797 228,942 350,450
Borrowings 18 28,400 28,400 28,400
Derivative financial instruments 14 380 1,114 481
Provisions19,213 9,336 24,650
Other current liabilities620 2,608 1,715
419,410 270,400 405,696
Total liabilities684,190628,701679,895
Total equity and liabilities1,836,1312,519,8121,800,887

The notes on pages 37 to 55 are an integral part of this financial information.

Consolidated statement of changes in equity

NotesShare capitalShare premiumOther distributable reserveCash flow hedging reserveShare option reserve
(US$’000)
Balance at 31 December 2016 (Audited)62,097867,1021,368,7135593,953
Total comprehensive income for the period- - - 52 -
Dividends to equity holders of the Company- - - - -
Share option grants- - - - 6
Balance at 30 June 2017 (Unaudited)62,097867,1021,368,7136113,959
Total comprehensive loss for the period- - - 56 -
Share option grants- - - - (238)
Dividends to equity holders of the Company- - - - -
Balance at 31 December 2017 (Audited)62,097867,1021,368,7136673,721
Total comprehensive income for the period- - - 72 -
Balance at 30 June 2018 (Unaudited)62,097867,1021,368,7137393,721

   

NotesAccumulated lossesTotal owners' equityTotal non- controlling interestsTotal equity
(US$’000)
Balance at 31 December 2016 (Audited)(439,529)1,862,895-1,862,895
Total comprehensive income for the period62,543 62,595 - 62,595
Dividends to equity holders of the Company(34,385) (34,385) - (34,385)
Share option grants- 6 - 6
Balance at 30 June 2017 (Unaudited)(411,371)1,891,111-1,891,111
Total comprehensive loss for the period(769,937) (769,881) - (769,881)
Share option grants- (238) - (238)
Dividends to equity holders of the Company- - - -
Balance at 31 December 2017 (Audited)(1,181,308)1,120,992-1,120,992
Total comprehensive income for the period30,877 30,949 - 30,949
Balance at 30 June 2018 (Unaudited)(1,150,431)1,151,941-1,151,941

The notes on pages 37 to 55 are an integral part of this financial information.

Consolidated statement of cash flows

For the six months ended
30 June		For the year ended
31 December
(US$’000) Notes(Unaudited)
2018		(Unaudited)
2017		 (Audited)
2017
Cash flows from operating activities
Net profit/ (loss) profit for the period30,877 62,543 (707,394)
Adjustments for:
  Tax expense/(credit)25,780 37,002 (2,272)
  Depreciation and amortisation43,594 69,722 125,968
  Finance items7,432 3,911 10,463
  Impairment charges24,234 - 850,182
  Gain from sale of mineral royalty(45,000) (1,753) (1,753)
  Loss on disposal of property, plant and equipment- - 123
Cash settlement of share options- - (259)
Working capital adjustments 19 (24,162) (159,697) (313,091)
Other non-cash items 19 1,749 (8,209) 22,160
Cash generated from/ (used in) operations before interest and tax64,5043,519(15,873)
Finance income808 1,543 1,944
Finance expenses(6,446) (3,747) (9,043)
Net cash generated by/ (used in) operating activities58,8661,315(22,972)
Cash flows used in investing activities
Purchase of property, plant and equipment(51,741) (100,064) (157,408)
Movement in other assets5,376 3,746 6,856
Proceeds from sale of mineral royalty45,000 1,753 1,753
Other investing activities 19 (3,146) (221) (2,912)
Net cash used in investing activities(4,511)(94,786)(151,711)
Cash flows used in financing activities
Loans paid(14,200) (14,200) (28,400)
Dividends paid- (34,385) (34,385)
Net cash used in financing activities(14,200)(48,585)(62,785)
Net increase/ (decrease) in cash and cash equivalents40,155 (142,056) (237,468)
Net foreign exchange difference(579) 151 190
Cash and cash equivalents at the beginning of the period80,513 317,791 317,791
Cash and cash equivalents at the end of the period120,089175,88680,513

The notes on pages 37 to 55 are an integral part of this financial information.

Notes to the condensed financial information

1. General Information

Acacia Mining plc, formerly African Barrick Gold plc (the “Company”, "Acacia” or collectively with its subsidiaries the “Group”) was incorporated on 12 January 2010 and re-registered as a public limited company on 12 March 2010 under the Companies Act 2006. It is registered in England and Wales with registered number 7123187.

On 24 March 2010 the Company’s shares were admitted to the Official List of the United Kingdom Listing Authority (“UKLA”) and to trading on the Main Market of the London Stock Exchange, hereafter referred to as the Initial Public Offering (“IPO”). The address of its registered office is No.1 Cavendish Place, London, W1G 0QF.

Barrick Gold Corporation (“Barrick”) currently owns approximately 63.9% of the shares of the Company and is the ultimate parent and controlling party of the Group. The financial statements of Barrick can be obtained from www.barrick.com.

The condensed consolidated interim financial information for the six months ended 30 June 2018 was approved for issue by the Board of Directors of the Company on 19 July 2018. Statutory accounts for the year ended 31 December 2017 were approved by the Board of Directors on 6 March 2018 and delivered to the Registrar of Companies. The report of the auditors’ on those accounts was unqualified, but did contain an emphasis of matter paragraph regarding the impact of the mineral concentrate export ban and negotiation with the Government of Tanzania, and did not contain any statement under section 498 of the Companies Act 2006. The condensed consolidated interim financial information has been reviewed, not audited. The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.

The Group’s primary business is the mining, processing and sale of gold. The Group has three operating mines located in Tanzania. The Group also has a portfolio of exploration projects located across Africa.

2. Basis of Preparation of the condensed interim financial information

The condensed consolidated interim financial information for the six months ended 30 June 2018 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, ‘Interim Financial Reporting’ as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2017, which have been prepared in accordance with IFRS as adopted by the European Union. The condensed consolidated interim financial information has been prepared under the historical cost basis, as modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The financial information is presented in US dollars (US$) and all monetary results are rounded to the nearest thousand (US$’000) except when otherwise indicated.

Acacia Group’s business activities, together with factors likely to affect its future development, performance and position, are set out in the operational and financial review sections of this interim results release. The financial position of the Acacia Group, its cash flows, liquidity position and borrowing facilities are described in the operating and financial review sections of this interim results release.

At 30 June 2018, the Group had cash and cash equivalents of US$120 million with a further US$150 million available under the undrawn revolving credit facility which remains in place until November 2019. Total borrowings at the end of the period amounted to US$57 million, of which US$28 million will be paid in the next 12 months. Total indirect tax receivables at the end of the period amounted to US$173 million, of which US$54 million is included in other current assets and are expected to be received or recovered within 12 months. The refunds remain dependent on processing and payments of refunds by the Government of Tanzania. Furthermore, included in working capital is finished gold contained in concentrate of approximately 186,000 ounces, approximately 12.1 million pounds of copper contained in concentrate and approximately 159,000 ounces of silver contained in concentrate.

In assessing the Acacia Group’s going concern status the Directors have taken into account the impact of the concentrate export ban on on-going operations as well as the following factors and assumptions: the current cash position; the latest mine plans, the short-term gold price, and Acacia Group’s capital expenditure and financing plans. In addition, the Directors have considered a range of scenarios around the various potential outcomes for the resolution of the current operating challenges in Tanzania in the circumstances, including the cash flow impact of an extended concentrate export ban; and the potential impacts of the timing and final terms of any comprehensive settlement which might be approved by the Company which reflect key terms of the framework announcements made by Barrick and the GoT in October 2017, including the lifting of the concentrate export ban and staged payments of US$300 million relating to historical tax matters. In addition, the Directors have assumed that the Group will not be required to settle its current outstanding borrowing obligations and will repay these in accordance with the current terms of the relevant agreements. After making appropriate enquiries and considering the uncertainties described above, the Directors consider that it is appropriate to adopt the going concern basis in preparing the condensed consolidated interim financial information, however have concluded that the combination of the above circumstances represents a material uncertainty that may cast significant doubt on the Group’s ability to continue as a going concern. The condensed consolidated interim financial information does not include any adjustments that would result if the Group was unable to continue as a going concern should the assumptions referred to above prove not to be correct.

The auditors have included an emphasis of matter within their Independent review report on page 30, drawing attention to the material uncertainties related to the impact of the concentrate export ban and ongoing discussions between Barrick and the GoT on the Group’s assets, liabilities and cash flows, and have included a separate section within their Independent review report under the heading “Emphasis of matter - Impact of mineral concentrate export ban” detailing the matters outlined above.

3. Accounting Policies

The accounting policies adopted are consistent with those used in the Acacia Mining plc annual financial statements for the year ended 31 December 2017. As disclosed in those annual financial statements, IFRS 9, “Financial Instruments” and IFRS 15, “Revenue from contracts with customers” were applicable for financial reporting periods starting 1 January 2018 and as a result have been adopted by the Group, however the changes have not materially affected the Group. There are no other new standards, interpretations or amendments to standards issued and effective for the period which materially impacted on the Group. The following exchange rates to the US dollar have been applied:

As at
30 June
2018		Average
six months ended
30 June
2018		 As at
30 June
2017		 Average
six months ended
30 June
2017		 As at
31 December
2017		 Average
year ended
31 December
2017
South African rand (US$:ZAR)13.7512.29 13.09 13.20 12.36 13.30
Tanzanian shilling (US$:TZS)2,2662,252 2,230 2,224 2,230 2,229
Australian dollars (US$:AUD)1.351.30 1.30 1.33 1.28 1.30
UK pound (US$:GBP)0.760.73 0.59 0.79 0.74 0.78

4. Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017.

5. Segment Reporting

The Group has only one primary product produced in a single geographic location, being gold produced in Tanzania. In addition the Group produces copper and silver as a co-product. Reportable operating segments are based on the internal reports provided to the Chief Operating Decision Maker (“CODM”) to evaluate segment performance, decide how to allocate resources and make other operating decisions. After applying the aggregation criteria and quantitative thresholds contained in IFRS 8, the Group’s reportable operating segments were determined to be: North Mara gold mine; Bulyanhulu gold mine; Buzwagi gold mine; a separate Corporate and Exploration segment, which primarily consists of costs related to other charges and corporate social responsibility expenses.

Segment results and carrying values include items directly attributable to the segment as well as those that can be allocated on a reasonable basis. Segment carrying values are disclosed and calculated as shareholders equity after adding back debt and intercompany liabilities, and subtracting cash and intercompany assets. Capital expenditures comprise of additions to property, plant and equipment. The Group has also included segment cash costs and all-in sustaining cost per ounce sold.

Segment information for the reportable operating segments of the Group for the periods ended 30 June 2018, 30 June 2017 and 31 December 2017 is set out below.

For the six months ended 30 June 2018
(Unaudited)
(US$’000,except per ounce amounts)		North MaraBulyanhuluBuzwagiOtherTotal
Gold revenue 210,172 26,192 95,301 -331,665
Co-product revenue 903 446 368 -1,717
Total segment revenue211,07526,63895,669-333,382
Segment cash operating cost1 (94,267) (13,286) (70,088) -(177,641)
Realised gains on gold hedges 1,103 - 559 -1,662
Corporate administration (5,919) (852) (2,340) (2,193)(11,304)
Share-based payments 194 414 212 5861,406
Exploration and evaluation costs - - - (7,231)(7,231)
Other charges and corporate social responsibility expenses (9,170) (18,617) (2,396) 23,479(6,704)
EBITDA2103,016(5,703)21,61614,641133,570
Impairment charges - - - (24,234)(24,234)
Depreciation and amortisation4 (25,548) (18,668) (731) (300)(45,247)
EBIT277,468(24,371)20,885(9,893)64,089
Finance income808
Finance expense(8,240)
Profit before taxation56,657
Tax expense(25,780)
Net profit for the period30,877
Capital expenditure:
Sustaining 13,552 2,109 2,181 18018,022
Expansionary 3,668 1,534 - -5,202
Capitalised development 27,932 - - -27,932
45,1523,6432,18118051,156
Non-cash capital expenditure adjustments
Reclamation asset adjustment (1,165) (1,746) 372 -(2,539)
Other non-cash capital expenditure--- (1,244)(1,244)
Total capital expenditure43,9871,8972,553(1,064)47,373
Segmental cash operating cost 94,267 13,286 70,088177,641
Deduct: co-product revenue (903) (446) (368)(1,717)
Total cash costs93,36412,84069,720175,924
Sold ounces 158,870 19,870 72,305251,045
Cash cost per ounce sold2588646964701
Corporate administration charges 37 43 3245
Share-based payments (1) (21) (3)(6)
Rehabilitation - accretion and depreciation 8 28 69
Corporate social responsibility expenses 10 25 813
Capitalised stripping/ UG development 176 13 -112
Sustaining capital expenditure 85 93 3071
All-in sustaining cost per ounce sold29038271,037945
Segment carrying value3 270,535 592,245 189,060 52,241 1,104,081

   

For the six months ended 30 June 2017
(Unaudited)
(US$’000,except per ounce amounts)		North MaraBulyanhuluBuzwagiOtherTotal
Gold revenue 220,217 100,023 65,619 -385,859
Co-product revenue 653 2,760 2,392 -5,805
Total segment revenue220,870102,78368,011-391,664
Segment cash operating cost1 (79,251) (67,344) (39,413) 0(186,008)
Corporate administration (4,181) (2,937) (2,559) (2,843)(12,520)
Share-based payments 361 340 309 6,7757,785
Exploration and evaluation costs - - - (16,150)(16,150)
Other charges and corporate social responsibility expenses (4,204) (1,242) (6,408) (11,502)(23,356)
EBITDA2133,59531,60019,940(23,720)161,415
Depreciation and amortisation4 (29,009) (26,940) (1,777) (233)(57,959)
EBIT2104,5864,66018,163(23,953)103,456
Finance income1,543
Finance expense(5,454)
Profit before taxation99,545
Tax expense(37,002)
Net profit for the period62,543
Capital expenditure:
Sustaining 10,930 8,599 865 95721,351
Expansionary 4,489 982 - 515,522
Capitalised development 33,282 31,054 - -64,336
48,70140,6358651,00891,209
Non-cash capital expenditure adjustments
Reclamation asset adjustment (56) 191 (1) -134
Other non-cash capital expenditure--- (1)(1)
Total capital expenditure48,64540,8268641,00791,342
Segmental cash operating cost 79,251 67,344 39,413 -186,008
Deduct: co-product revenue (653) (2,760) (2,392) -(5,805)
Total cash costs78,59764,58437,021-180,203
Sold ounces 178,130 81,214 53,094 -312,438
Cash cost per ounce sold2441795697577
Corporate administration charges 23 36 4840
Share-based payments (2) (4) (6)(25)
Rehabilitation - accretion and depreciation 10 16 711
Corporate social responsibility expenses 8 8 712
Capitalised stripping/ UG development 187 382 -206
Sustaining capital expenditure 69 107 1772
All-in sustaining cost per ounce sold27361,340770893
Segment carrying value3 294,744 1,281,208 142,280 97,233 1,815,465

   

For the year ended 31 December 2017
(Audited)
(US$’000,except per ounce amounts)		North MaraBulyanhuluBuzwagiOtherTotal
Gold revenue 406,917 134,110 203,267 - 744,294
Co-product revenue 1,296 2,937 2,988 - 7,221
Total segment revenue 408,213 137,047 206,255 - 751,515
Segment cash operating cost1 (163,001) (93,521) (98,417) - (354,939)
Realised gains on gold hedges 1,294 - 1,399 - 2,693
Corporate administration (8,313) (6,314) (5,694) (6,592) (26,913)
Share-based payments 511 593 349 6,783 8,236
Exploration and evaluation costs - (571) - (24,258) (24,829)
Other charges and corporate social responsibility expenses (13,243) (52,916) (13,605) (18,819) (98,583)
EBITDA2 225,461 (15,682) 90,287 (42,886) 257,180
Impairment charges - (837,921) - (12,261) (850,182)
Depreciation and amortisation4 (54,826) (46,531) (4,288) (556) (106,201)
EBIT2 170,635 (900,134) 85,999 (55,703) (699,203)
Finance income 1,944
Finance expense (12,407)
Loss before taxation (709,666)
Tax expense 2,272
Net profit for the year (707,394)
Capital expenditure:
Sustaining 20,927 9,033 4,338 1,259 35,557
Expansionary 10,270 1,190 - 113 11,573
Capitalised development 61,066 39,543 - - 100,609
92,263 49,766 4,338 1,372 147,739
Non-cash capital expenditure adjustments
Reclamation asset adjustment (2,951) (4,158) (1,978) - (9,087)
Total capital expenditure 89,312 45,608 2,360 1,372 138,652
Segmental cash operating cost 163,001 93,521 98,417354,939
Deduct: co-product revenue (1,296) (2,937) (2,988)(7,221)
Total cash costs 161,705 90,584 95,429347,718
Sold ounces 324,455 107,855 160,552592,861
Cash cost per ounce sold2 498 840 594587
Corporate administration charges 26 59 3545
Share-based payments (2) (6) (2)(14)
Rehabilitation - accretion and depreciation 11 20 511
Corporate social responsibility expenses 11 10 814
Capitalised stripping/ UG development 188 367 -170
Sustaining capital expenditure 71 83 2762
All-in sustaining cost per ounce sold2 803 1,373 667875
Segment carrying value3 249,170 600,359 194,385 82,864 1,126,778

1   The CODM reviews cash operating costs for the three operating mine sites separately from corporate administration costs and exploration costs. Consequently, the Group has reported these costs in this manner.

2   These are non-IFRS financial performance measures with no standard meaning under IFRS. Refer to ‘Non IFRS measures’ on page 24 for definitions.

3  Segment carrying values are calculated as shareholders equity after adding back debt and intercompany liabilities, and subtracting cash and intercompany assets and include outside shareholders’ interests.

4   Depreciation and amortisation includes the depreciation component of the cost of inventory sold.

6. Impairment Assessment

In accordance with IAS 36 “Impairment of assets” and IAS 38 “Intangible Assets” a review for impairment of goodwill is undertaken annually, or at any time an indicator of impairment is considered to exist, and in accordance with IAS 16 “Property, plant and equipment” a review for impairment of long-lived assets is undertaken at any time an indicator of impairment is considered to exist.

At the end of the reporting period, there remained a number of potential triggers for impairment testing, including the on-going uncertainty surrounding a potential resolution of the Company’s disputes with the Government of Tanzania and the fact that the Company’s market capitalisation has been lower than its carrying value for a prolonged period of time.

As a result, the Group has undertaken a carrying value assessment of its affected cash generating units (“CGUs”) and long life intangible assets. The assessment compared the recoverable amount of CGU to the carrying value of the CGUs. The recoverable amount of an asset is assessed by reference to the higher of value in use (“VIU”), being the net present value (“NPV”) of future cash flows expected to be generated by the asset, and fair value less costs to dispose (“FVLCD”). The FVLCD of a CGU is based on an estimate of the amount that the Group may obtain in a sale transaction on an arm’s length basis. There is no active market for the Group’s CGUs. Consequently, FVLCD is derived using discounted cash flow techniques (NPV of expected future cash flows of a CGU), which incorporate market participant assumptions. Cost to dispose is based on management’s best estimates of future selling costs at the time of calculating FVLCD. Costs attributable to the disposal of a CGU are not considered significant.

For the purpose of carrying value assessments in accordance with applicable accounting standards, Management has based its calculation of future cash flows of the affected CGUs by reference to key terms of the Framework announcements by Barrick and by the GoT in October 2017. Based on Barrick’s announcements and its discussions and exchanges with Acacia, it is Barrick’s belief that it will be able to agree with the GoT a detailed proposal for a comprehensive settlement of the situation, and that this will be in a form that Barrick could recommend to Acacia for review. Key assumptions applied in these calculations include a 50% economic share of future economic benefits for the GoT in the form of taxes, royalties and a 16% free carry interest in the CGUs, as well as a US$300 million payment in relation to historical tax claims paid in instalments as concentrate sales recommence. In addition the Framework announcements provided for Acacia to contribute certain monies to fund specific projects in Tanzania. With no updated information from Barrick, Management had to make a best estimate of what can reasonably be assumed for timing of conclusion of discussions between Barrick and the GoT and an agreement of a proposal to be put to the Company for review, with consequent timing for the commencement of concentrate sales and a potential Bulyanhulu start-up. Management considers that it is reasonable for review purposes to assume a six month prolongation (to the end of 2018) to the discussions between Barrick and the GoT, and that in these circumstances there would be a further three to four months delay thereafter for the resumption of concentrate sales and exports, with concentrate revenues commencing in Q2 2019. The start-up of Bulyanhulu production in late 2019 would be unaffected by a further six month delay in the discussions, VAT refunds are assumed to recommence and historic carried forward tax losses are assumed to continue to be available to offset against future taxable profits.

Acacia has been providing support to Barrick to seek to ensure that they can have informed discussions with the GoT, but has not received for review a detailed proposal that has been agreed between Barrick and the GoT, and therefore no conclusions can be made by Acacia as to whether any particular terms of settlement would be approved by Acacia. In the meantime, Acacia continues to reserve its rights included under our mine development agreements, the disputes between Acacia and the GoT have not yet been resolved, and PML and BGML remain in international arbitration with the GoT. Acacia continues to prefer a negotiated resolution, but believes that there remain a range of potential outcomes to the current situation.

Acacia considers that, in conducting the review of carrying values in accordance with applicable accounting standards as at 30 June 2018, the discount rate used in the 31 December 2017 calculation remains appropriate to (a) reflect the uncertainty around the final terms of any comprehensive settlement that might be agreed or whether settlement will be reached at all, and (b) to best reflect the potential reduction in value as a result of the proposed 16% free carry interest for the GoT which cannot otherwise be included in calculations of value at a CGU level conducted on a 100% basis. Therefore, for the purposes of the carrying value review of the affected CGUs, we have kept a discount rate of 11% compared to Acacia’s updated calculated weighted average cost of capital of 6.5%.

The key economic assumptions used in the reviews during 2018 and 2017 were:

For the 6 months ended
30 June		For the year ended
31 December
20182017
Gold price per ounce US$1,200 US$1,200
Copper price per pound US$2.75 US$2.75
British Pound (US$:GBP) 0.76 0.76
Tanzanian Shilling (US$:TZS) 2,250 2,250
Long-term oil price per barrel US$60 US$60
WACC 6.5% 6.5%
Discount rate used in carrying value review 11% 11%
NPV multiples 1 1

Using the latest information received and updated with the latest understanding of the framework agreement between the parties, the carrying values of all our assets are still below the Company’s view of its recoverable values.

After the reporting period, OreCorp, Acacia’s JV partner in the Nyanzaga Project in Tanzania, executed its option under the earn-in agreement to increase its stake to 51% in the project through the payment of US$3.0 million to Acacia. Further to that, Acacia has signed a conditional agreement to sell its remaining 49% stake to OreCorp for US$7.0 million and a net smelter royalty capped at US$15 million based on future production. In line with the applicable accounting standard and driven by the uncertainty surrounding the current environment, management did not recognise an asset for the right to the royalty. As a result of the agreement, Acacia expects to recover the value of the asset through sale and not through value in use and as such has valued the asset at fair value less costs to sell of US$10.0 million and recorded an impairment charge of US$24.2 million and reclassified the intangible asset to non-current assets held for sale on the balance sheet.

The carrying value for the Group is now approximately US$1.1 billion, made up of US$0.6 billion for Bulyanhulu, US$0.3 billion for North Mara and US$0.2 billion for Buzwagi.

The impairment charges recognised in the income statement for the periods ended 30 June 2018 and 31 December 2017 comprise the following:

For the six months ended
30 June		For the year ended
31 December
 (in thousands of United States dollars)20182017
Bulyanhulu - 837,921
Nyanzaga exploration property1 24,234 12,261
Gross impairment charge24,234850,182
Comprising:
Impairment of goodwill - 121,546
Impairment of property, plant and equipment - 686,375
Impairment of supplies inventory - 30,000
Impairment of intangible assets 24,234 12,261
Gross impairment charge, before tax24,234850,182
Deferred income tax - (205,912)
Total impairment charge24,234644,270

1 The Nyanzaga exploration property is located in Tanzania. Acquired mineral interests /exploration and evaluation assets are classified as intangible assets and have indefinite useful lives.

Management’s view is that the recoverable values are most sensitive to changes in the assumptions around gold prices, discount rates and the timing of the resolution of the export ban. As a result, sensitivity calculations were performed for these for Bulyanhulu. The sensitivity analysis is based on a decrease in the long-term gold price of US$100 per ounce, and an increase in the discount rate of 1%, and a delay of resolution by 6 months.

Under these scenarios, a reasonably possible decrease in the gold price assumption of US$100 per ounce would result in an impairment charge, net of tax, at Bulyanhulu of approximately US$98 million.

A reasonably possible increase in discount rate of 1% would not result in any additional impairment charges.

A further delay of six months in the resolution of the export ban will also not result in any additional impairment charges.

Should a negotiated resolution of the current situation not eventuate, the recoverable values of the identified CGUs may be further impacted, and these will be reviewed at such time.

7. Other Charges

For the six months ended 30 JuneFor the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Other expenses
 Restructuring costs 844 3,304 25,077
 Discounting of indirect tax receivables - - 13,276
 Bulyanhulu reduced operations costs 16,636 - 24,804
 Foreign exchange losses 4,683 4,583 2,710
 Disallowed indirect taxes 2,085 615 -
 Unrealised non-hedge derivative losses 1,150 2,431 -
 Legal costs 15,931 4,601 14,421
 Once off legal settlements 3,030 1,500 5,083
 Project development costs - - 1,485
 Government levies and charges - 535 -
 Inventory write-downs - - 1,500
 Other 4,262 3,801 5,573
 Total48,62121,37093,929
Other income
 Unrealised non-hedge derivative gains - - (200)
 Sale of mineral royalty (45,000) (1,753) -
 Other - - (3,359)
 Total(45,000)(1,753)(3,559)
Total other charges3,62119,61790,370

8. Finance Income and Expenses

a) Finance income

For the six months ended 30 JuneFor the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Interest on time deposits 794 1,443 1,841
Other 14 100 103
Total8081,5431,944

b) Finance expense

For the six months ended 30 JuneFor the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Unwinding of discount1 1,794 1,708 3,364
Revolving credit facility charges2 1,154 1,151 2,341
Interest on CIL facility 1,061 1,573 2,911
Premium on gold put options 3,042 - 2,113
Interest on finance leases - 200 204
Bank charges 676 319 583
Other 513 503 891
Total8,2405,45412,407
  1. The unwinding of discount is calculated on the environmental rehabilitation provision.
  2. Included in credit facility charges are the amortisation of the fees related to the revolving credit facility as well as the monthly interest and facility fees.

9. Tax Expense

For the six months ended 30 JuneFor the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Current tax:
Current tax on profits for the period 16,712 31,793 35,667
Adjustments in respect of prior years1 3,120 - 172,000
Total current tax19,83231,793207,667
Deferred tax:
Origination and reversal of temporary differences 5,948 5,209 (209,939)
Total deferred tax5,9485,209(209,939)
Income tax expense25,78037,002(2,272)

1 The prior year charge included in 2018 relates to 2017 final tax adjustments at North Mara. Included in 2017 is a provision for uncertain tax positions of US$68.5 million relating to North Mara and US$103.5 million relating to Bulyanhulu, for uncertain tax positions, based on an estimate of the impact of a comprehensive settlement reflecting the key terms of the framework announcements made by Barrick and the GoT in October 2017.

Income tax expense is recognised based on management’s estimate of the weighted average effective annual income tax rate expected for the full financial year. The estimated average annual tax rate used for the year to 30 June 2018 is 46%, compared to 37% for the six months ended 30 June 2017.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to the profits of the consolidated entities as follows:

For the six months ended 30 JuneFor the year ended 31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Profit/(loss) before tax56,65799,545(709,666)
Tax calculated at domestic tax rates applicable to profits in the respective countries 18,600 30,519 (209,074)
Tax effects of:
Expenses not deductible for tax purposes2 4,605 57 49,142
Tax losses for which no deferred income tax asset was recognised 1,616 6,426 9,611
Utilisation of previously recognised tax losses - - (25,594)
Increase in provision for uncertain tax positions3 - - 172,000
Recognition of previously unrecognised deferred tax asset (3,154) - -
Prior year adjustments 3,120 - -
Other permanent differences 993 - 1,643
Tax charge25,78037,002(2,272)

2 Relates mainly to impairment charges relating to goodwill, intangibles and supplies inventory not deductible for tax purposes.

3 Included in 2017 is a provision for uncertain tax positions of US$68.5 million relating to North Mara and US$103.5 million relating to Bulyanhulu, based on an estimate of the impact of a comprehensive settlement reflecting the key terms of the framework announcements made by Barrick and the GoT in October 2017.

In December 2017, Acacia raised an additional tax provision of US$172 million relating to the estimated uncertain tax positions for its operating companies. Acacia based its calculation on an estimate of the impact of a comprehensive settlement reflecting the key terms of the framework announcements made by Barrick and the GoT in October 2017, including in respect of historical tax claims. This brought total provisions for Acacia’s uncertain tax positions to US$300 million. Acacia continues to reserve and protect all its legal rights, as noted above and including through the arbitrations commenced by BGML and PML, and no liability has been incurred by Acacia as a result of the framework announcements. The additional provision was required, however, to meet applicable accounting standards requiring assessment of current obligations for accounting purposes based on an assessment of relevant cash outflows from the relevant operating companies in respect of uncertain tax positions.

Tax periods remain open to review by the Tanzanian Revenue Authority (TRA) in respect of income taxes for five years following the date of the filing of the corporate tax return, during which time the authorities have the right to raise additional tax assessments including penalties and interest. Under certain circumstances the reviews may cover longer periods. Because a number of tax periods remain open to review by tax authorities, there is a risk that transactions that have not been challenged in the past by the authorities may be challenged by them in the future, and this may result in the raising of additional tax assessments plus penalties and interest.

10. Earnings/ (loss) Per Share (EPS)

Basic EPS is calculated by dividing the net profit/ (loss) for the period attributable to owners of the Company by the weighted average number of Ordinary Shares in issue during the period.

Diluted earnings/ (loss) per share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume conversion of all dilutive potential Ordinary Shares. The Company has dilutive potential Ordinary Shares in the form of stock options. The weighted average number of shares is adjusted for the number of shares granted assuming the exercise of stock options.

At 30 June 2018, 30 June 2017 and 31 December 2017, earnings/ (loss) per share have been calculated as follows:

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Earnings/ (loss)
Net profit/ (loss) attributable to owners of the parent 30,877 62,543 (707,394)
Weighted average number of Ordinary Shares in issue 410,085,499 410,085,499 410,085,499
Adjusted for dilutive effect of stock options - 382,474 -
Weighted average number of Ordinary Shares for diluted earnings per share 410,085,499 410,467,973 410,085,499
Earnings/ (loss) per share
Basic earnings/ (loss) per share (cents) 7.5 15.3 (172.5)
Dilutive earnings/(loss) per share (cents) 7.5 15.2 (172.5)

11. Dividends

Acacia has a cash flow based dividend policy where 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. As a result of the inability to export concentrates, Acacia experienced negative free cash flow in 2017 and therefore the Company did not pay a final 2017 dividend. Although the Company has generated limited free cash flow for 2018, the uncertainty in the Tanzanian operating environment and Group liquidity requirements has resulted in the Directors opting not to declare an interim dividend in 2018.

12. Goodwill and Intangible Assets              

For the six months ended 30 June 2018
(in thousands of United States dollars)		GoodwillAcquired exploration and evaluation properties1Total
At 1 January, net of accumulated impairment 6,352 76,031 82,383
Impairment2                       - (24,234) (24,234)
Reclassified as non-current asset held for sale3 - (10,000) (10,000)
At 30 June 20186,35241,79748,149
At 30 June 2018
Cost    401 250 102,842 504,092
Accumulated impairment    (394,898) (61,045)      (455,943)
Net carrying amount      6,352           41,79748,149

   

For the six months ended 30 June 2017
(in thousands of United States dollars)		GoodwillAcquired exploration and evaluation properties1Total
At 1 January, net of accumulated impairment        127,898 88,292 216,190
At 30 June 2017127,89888,292216,190
At 30 June 2017
Cost 401,250 112,842 514,092
Accumulated impairment (273,352) (24,550) (297,902)
Net carrying amount127,89888,292216,190

   

For the year ended 31 December 2017
(in thousands of United States dollars)		GoodwillAcquired exploration and evaluation properties1Total
At 1 January, net of accumulated impairment 127,898 88,292 216,190
Impairment (121,546) (12,261) (133,807)
At 31 December 20176,35276,03182,383
At 31 December 2017
Cost 401,250 112,842 514,092
Accumulated impairment (394,898) (36,811) (431,709)
Net carrying amount6,35276,03182,383

1 Exploration and evaluation assets classified as intangible assets have indefinite useful lives.

2 Impairments recognised in 2018 relate to the Nyanzaga exploration property located in Tanzania (US$24.2 million). Refer to note 6 for further details.

3 Intangible assets related to the Nyanzaga exploration property have been reclassified as non-current asset for sale as a result of Management’s intention to sell the property.

13. Property, Plant and Equipment

For the six months ended 30 June 2018 (Unaudited)
 (US$’000)		Plant and equipmentMineral properties and mine development costsAssets under construction¹Total
At 1 January 2018, net of accumulated depreciation and impairment 245,568 486,059 38,947 770,574
Additions - - 51,156 51,156
Non-cash reclamation asset adjustments (2,539) - - (2,539)
Foreign currency translation adjustments (1,244) - - (1,244)
Depreciation (25,145) (18,449) - (43,594)
Transfers between categories 15,094 34,823 (49,917) -
At 30 June 2018231,734502,43340,186774,353
At 1 January 2018
Cost 1,943,643 1,887,068 38,947 3,869,658
Accumulated depreciation and impairment (1,698,075) (1,401,009) - (3,099,084)
Net carrying amount245,568486,05938,947770,574
At 30 June 2018
Cost 1,954,954 1,921,891 40,186 3,917,031
Accumulated depreciation and impairment (1,723,220) (1,419,458) - (3,142,678)
Net carrying amount231,734502,43340,186774,353
For the six months ended 30 June 2017 (Unaudited)
 (US$’000)		Plant and equipmentMineral properties and mine development costsAssets under construction¹Total
At 1 January 2017, net of accumulated depreciation and impairment 553,993 842,019 47,164 1,443,176
Additions - - 91,209 91,209
Non-cash reclamation asset adjustments - - 134 134
Foreign currency translation adjustments 512 - - 512
Disposals/write-downs - - - -
Depreciation (37,854) (31,868) - (69,722)
Transfers between categories 21,373 74,511 (95,884) -
At 30 June 2017538,024884,66242,6231,465,309
At 1 January 2017
Cost 1,914,522 1,777,277 47,164 3,738,963
Accumulated depreciation and impairment (1,360,529) (935,258) - (2,295,787)
Net carrying amount553,993842,01947,1641,443,176
At 30 June 2017
Cost 1,936,407 1,851,788 42,623 3,830,818
Accumulated depreciation and impairment (1,398,383) (967,126) - (2,365,509)
Net carrying amount538,024884,66242,6231,465,309

   

For the year ended 31 December 2017
(Audited)
 (US$’000)		Plant and equipmentMineral properties and mine development costsAssets under construction¹Total
At 1 January 2017, net of accumulated depreciation and impairment 553,993 842,019 47,164 1,443,176
Additions - - 147,739 147,739
Non-cash reclamation asset adjustments (9,087) - - (9,087)
Foreign currency translation adjustments 1,212 - - 1,212
Disposals/write-downs (123) - - (123)
Impairment2 (274,608) (411,767) - (686,375)
Depreciation (71,984) (53,984) - (125,968)
Transfers between categories 46,165 109,791 (155,956) -
At 31 December 2017245,568486,05938,947770,574
At 1 January 2017
Cost 1,914,522 1,777,277 47,164 3,738,963
Accumulated depreciation and impairment (1,360,529) (935,258) - (2,295,787)
Net carrying amount553,993842,01947,1641,443,176
At 31 December 2017
Cost 1,943,643 1,887,068 38,947 3,869,658
Accumulated depreciation and impairment (1,698,075) (1,401,009) - (3,099,084)
Net carrying amount245,568486,05938,947770,574

1 Assets under construction represents (a) sustaining capital expenditures incurred constructing property, plant and equipment related to operating mines and advance deposits made towards the purchase of property, plant and equipment; and (b) expansionary expenditure allocated to a project on a business combination or asset acquisition, and the subsequent costs incurred to develop the mine. Once these assets are ready for their intended use, the balance is transferred to plant and equipment and/or mineral properties and mine development costs.

2 The impairment in 2017 relates to property, plant and equipment at Bulyanhulu.

Leases

Property, plant and equipment includes assets relating to the design and construction costs of power transmission lines and related infrastructure. At completion, ownership was transferred to TANESCO in exchange for amortised repayment in the form of reduced electricity supply charges. No future lease payment obligations are payable under these finance leases.

Property, plant and equipment also includes five drill rigs purchased under short-term finance leases.

The following amounts were included in property, plant and equipment where the Group is a lessee under a finance lease:

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
 Cost - capitalised finance leases51,618 51,618 51,618
 Accumulated depreciation and impairment(43,603) (42,050) (42,948)
 Net carrying amount8,0159,5688,670

14. Derivative Financial Instruments

The table below analyses financial instruments carried at fair value, by valuation method. The Group has derivative financial instruments in the form of economic and cash flow hedging contracts which are all defined as level two instruments as they are valued using inputs other than quoted prices that are observable for the assets or liabilities. The following tables present the group’s assets and liabilities that are measured at fair value at 30 June 2018, 30 June 2017 and 31 December 2017.

AssetsLiabilities

(US$’000)		CurrentNon-currentCurrentNon-current
For the six months ended 30 June 2018 (Unaudited)
Interest contracts: Designated as cash flow hedges 514 739 380 -
Commodity contracts - Fuel: Not designated as hedges 1,178 - - -
Total1,692739380-

   

AssetsLiabilities

(US$’000)		CurrentNon-currentCurrentNon-current
For the six months ended 30 June 2017 (Unaudited)
Interest contracts: Designated as cash flow hedges 528 611 518 -
Commodity contracts - Fuel: Not designated as hedges 73 159 596 1,068
Total6017701,1141,068

   

AssetsLiabilities

(US$’000)		CurrentNon-currentCurrentNon-current
For the year ended 31 December 2017 (Audited)
Interest contracts: Designated as cash flow hedges 531 667 481 -
Commodity contracts - Fuel: Not designated as hedges 2,088 240 - -
Total2,619907481-

15. Inventories

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Raw materials
Ore in stockpiles17,563 14,041 22,253
Mine operating supplies124,129 154,859 117,946
Work in process4,974 10,807 5,103
Finished products
Gold doré/bullion10,467 7,084 7,078
Gold, copper and silver concentrate1139,500 93,901 139,500
Total current portion of inventory296,633 280,692 291,880
Non-current ore in stockpiles129,318 115,775 133,550
Total425,951396,467425,430

1 Gold, copper and silver concentrate on hand relate to finished products at Bulyanhulu (US$88.5 million) and Buzwagi (US$51.0 million) due to the inability to export concentrate since March 2017.

16. Other Assets

a) Other current assets

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Current portion of indirect tax receivables154,289 157,936 38,285
Other receivables and advance payments251,090 32,932 31,870
Total105,379190,86870,155

1 The current portion of indirect tax receivables included an amount of US$46.5 million (December 2017: US$31.4 million) relating to North Mara and US$2.0 million (December 2017: nil) at Buzwagi as it was expected that the current portion will be recovered through offsets against corporate income tax, as agreed under the MOS entered into in 2012, within the next year. Indirect tax receivables in other corporate and exploration entities amounts to US$6.8 million.

2 Other receivables and advance payments relate to prepayments for insurance and income taxes offset against outstanding refunds for VAT and fuel levies and current amounts receivable from the NSSF of US$7.4 million (2017: US$4.8 million).

b) Other non-current assets

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(US$’000)201820172017
Amounts due from Government18,880 8,002 11,629
Operating lease prepayments – TANESCO powerlines285 809 374
Prepayments – Acquisition of rights over leasehold land233,410 42,250 35,948
Non-current portion of indirect tax receivables3118,236 6,897 132,405
Village housing121 254 151
Deferred finance charges119 262 201
Total161,05158,474180,708

1 Included in this amount are amounts receivable from the NSSF of US$4.4 million (2017: US$5.8 million).

2 Prepayments made to the landowners in respect of acquisitions of the rights over the use of the leasehold land.

3 The non-current portion of indirect tax receivables was subject to discounting to its current value using a discount rate of 6.5% (December 2017: 6.5%). There was no discounting charge in 2018 in the income statement (December 2017: US$13.3 million).

17. Non-current assets classified as held for sale

After period end, OreCorp, Acacia’s JV partner in the Nyanzaga Project, has executed its option under the earn-in agreement to increase its stake to 51% in the project through the payment of US$3.0 million to Acacia. Further to that, Acacia has signed a conditional agreement to sell its remaining 49% stake to OreCorp for US$7.0 million and a net smelter royalty capped at US$15 million based on future production. In line with the applicable accounting standard and driven by the uncertainty surrounding the current environment, management did not recognise an asset for the right to the royalty. As a result of the agreement, and Management’s commitment to a sale, Acacia expects to recover the value of the asset through sale and not through value in use and as such has valued the asset at fair value less costs to sell of US$10.0 million and recorded an impairment charge of US$24.2 million and reclassified the intangible asset to non-current assets held for sale on the balance sheet.

18. Borrowings

During 2013, a US$142 million facility was put in place to fund the bulk of the costs of the construction of one of Acacia’s key growth projects, the Bulyanhulu CIL Expansion project (“Project”). The Facility is collateralised by the Project, has a term of seven years with a spread over Libor of 250 basis points. In common with borrowing agreements of this nature the facility includes various covenants as well as a material adverse effect clause. The interest rate has been fixed at 3.6% through the use of an interest rate swap. The 7 year Facility is repayable in equal US$14.2 million bi-annual instalments over the term of the Facility, after a two year repayment holiday period. The full facility of US$142 million was drawn at the end of 2013. The first principal payment of US$14.2 million was paid in H2 2015 and regular repayments have been made each half year. As at 30 June 2018 the balance owing was US$56.8 million (2017: US$85.2 million) and all covenants have been complied with. Interest accrued to the value of US$0.5 million (2017: US$0.6 million) was included in accounts payable at the end of the period. Interest incurred on the borrowings as well as hedging losses on the interest rate swap for the period ended 30 June 2018 was US$1.1 million (2017: US$1.2 million).

19. Cash flow – other items

a) Operating cash flows - other items

Movements relating to working capital items

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(in thousands of United States dollars)201820172017
Indirect and corporate taxes1 (28,260) (51,047) (89,560)
Increase in indirect tax receivable (4,956) (33,747) (51,703)
Income tax paid – Final (4,187) - (3,257)
Income tax paid - Provisional (19,117) (17,300) (34,600)
Other current assets (103) 6,519 (10,774)
Trade receivables 1,195 6,931 745
Inventories2 (521) (113,217) (172,180)
Other liabilities3 (718) (7,626) (7,301)
Share based payments3 (1,302) (834) (1,780)
Trade and other payables4 4,427 795 (31,170)
Other working capital items5 1,120 (1,218) (1,071)
Total(24,162)(159,697)(313,091)

1 During the year, we have made US$23.3 million (2017: US$17.3 million at June and US$37.9 million at December) corporate tax payments. This has been funded through an offset against current indirect taxes that were due for refund.

2 The inventory adjustment includes the movement in current as well as the non-current portion of inventory.

3 The other liabilities adjustment mainly relates to the revaluation of future share-based payments. During the year, share-based payments of US$1.3 million (2017: US$0.8 million) were made.

4 The trade and other payables adjustment exclude statutory liabilities in the form of income tax payable.

5 Other working capital items include exchange rate losses associated with working capital.

Other non-cash items

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(in thousands of United States dollars)201820172017
Adjustments for non-cash income statement items:
Foreign exchange losses 4,104 4,734 2,900
Discounting of indirect tax receivables - - 13,276
Provisions added - 2,101 7,550
Provisions settled (4,000) - -
Movement in derivatives 1,066 2,431 (1,495)
Share option expense - 6 27
Provisional tax offsets - (17,300) -
Other non-cash items - (30) 92
Exchange loss on revaluation of cash balances 579 (151) (190)
Total1,749(8,209)22,160

b) Investing cash flows - other items

For the six months ended
30 June		For the year ended
31 December
(Unaudited)(Unaudited)(Audited)
(in thousands of United States dollars)201820172017
Other long-term receivables 112 29 194
Rehabilitation expenditure (3,258) (250) (3,106)
Total(3,146)(221)(2,912)

20. Commitments and Contingencies

The Group is subject to various laws and regulations which, if not observed, could give rise to penalties. As at 30 June 2018, the Group has the following commitments and/ or contingencies.

a) Legal contingencies

As at 30 June 2018, the Group was a defendant in a number of lawsuits. The plaintiffs are claiming damages and interest thereon for the alleged loss caused by the Group due to one or more of the following: unlawful eviction, termination of services and/or, non-payment for services, defamation, negligence by act or omission in failing to provide a safe working environment, unpaid overtime, public holiday compensation and various other commercial/project disputes. At present, Acacia considers the majority of cases to be without merit and therefore the likelihood of any material unfavourable outcome is remote and therefore no contingency is required.

b) Tax-related contingencies

The TRA has issued a number of tax assessments to the Group related to past taxation years from 2002-onwards. The Group believes that the majority of these assessments are incorrect and has filed objections and appeals accordingly in an attempt to resolve these matters by means of discussions with the TRA or through the Tanzanian appeals process. Overall, it is the current assessment that the relevant assessments and claims by the TRA are without merit. The claims include a TRA assessment to the value of US$41.3 million for withholding tax on certain historic offshore dividend payments paid by Acacia Mining plc to its shareholders in 2010 to 2013. Acacia is appealing this assessment on the substantive grounds that, as an English incorporated company, it is not resident in Tanzania for taxation purposes. The appeal is currently pending at the Court of Appeal. In addition, the Company has raised certain tax provisions amounting to US$300 million in aggregate, based on the potential impact of a comprehensive settlement of all outstanding tax disputes, including, according to Barrick, historic tax claims, reflecting the key terms of the Framework announcements by Barrick and the GoT in October 2017. Refer to note 9 for further information.

21. Related party balances and transactions

The Group has related party relationships with entities owned or controlled by Barrick Gold Corporation, which is the ultimate controlling party of the Group.

The Company and its subsidiaries, in the ordinary course of business, enter into various sales, purchase and service transactions and other professional services arrangements with others in the Barrick Group. These transactions are under terms that are on normal commercial terms and conditions. These transactions are not considered to be significant.

At 30 June 2018 the Group had no loans of a funding nature due to or from related parties (30 June 2017: zero; 31 December 2017: zero).