Acacia Mining (ACA.L) is a UK-based gold producer in Tanzania. Formerly African Barrick Gold Plc, the company’s operations range from exploration and development to mine construction and operation. It has reserves and resources of approximately 30m ounces of gold, with three producing mines, all located in northwest Tanzania. ACA also has a portfolio of exploration projects in Tanzania, Kenya and Burkina Faso. Bulyanhulu is an underground gold mine with shaft and ramp access. Buzwagi is a low-grade bulk deposit with a single large open pit. North Mara is a combined open pit and underground operation from two deposits, Gokona (underground) and Nyabirama (open pit).
On February 24 2017, ACA published FY results. CEO Brad Gordon said 2016 had been “another successful year for Acacia”. The company delivered record production, reduced all-in sustaining costs by 14% and more than doubled the net cash position. Group EBITDA more than doubled to US$415m, on revenues 21% higher at US$1.054m, on the back of which a full year dividend of 10.4 cents was proposed (final dividend of 8.4 cents) which is at the top end of ACA policy and more than twice the total dividend announced for 2015 (4.2 cents). ACA said it continued to invest into its exploration portfolio and is poised to announce a maiden resource on the West Kenya project. 2017. Driven by the mine life extension at Buzwagi, this is expected to result in further production growth and cost reductions, with production expected to be between 850,000-900,000 ounces at an AISC of between US$880-920 per ounce.
Toward the end of 2016, when trading around 350p, ACA appeared across a number of key VectorVest metrics, indicating it was a stock with upside potential. It is worth noting that this potential does not come without risk, indeed ACA only records 0.98 on the RS (Relative Safety) metric, which is fair on a scale of 0.00 to 2.00. However the GRT (Earnings Growth Rate) metric, (which reflects a company’s one to three year forecasted earnings growth rate in percentage per year), records ACA at 35.00%, which VectorVest considers to be excellent. Added to this, in plain Value terms, ACA has a current Value of 681.53p per share. Despite recovering to 490p, the stock is still undervalued.
The chart of ACA.L is shown above with the inverted “head and shoulders”pattern nearing completion. The share is on a Buy recomendation by VectorVest and once the “neckline” of the head and shoulders is exceeded the first technical target is above 700.
Summary: As with Centamin (CEY), another gold producer recently highlighted by VectorVest, the global geo-political climate offers plenty of reasons to own gold stocks at present. ACA also ticks all the boxes in this regard, and while not without risk, its GRT metric, progressive dividend policy and the bullish outlook expressed by CEO Brad Gordon provides plenty of fundamental and technical positives to warrant inclusion into a portfolio of growth stocks. Buy.
Dr David Paul
April 19 2017
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