Acacia Mining Plc is preparing to close a loss-making mine after a row over exports with the Tanzanian government escalated.
Shares in the FTSE 250 gold miner plunged nearly 40pc last week after a report by the Tanzanian government accused it of under-representing the amount of gold in the concentrate it exports, potentially depriving the country of millions in royalties.
The government said that Acacia’s gold output was 10 times greater than it claimed – a level that would “make it third-biggest gold miner in the world”, the company said.
The findings, published with great fanfare on national TV, mean an export ban on gold concentrate imposed at the start of March is likely to continue indefinitely. Acacia is still able to ship out gold bars, which make up 70pc of its output, but estimates that it is losing $1m (£780,000) in revenue every day.
The company, which is dependent on its three mines in Tanzania, has been stockpiling gold concentrate in the hope of a quick end to the dispute. But it is now preparing to close Bulyanhulu mine to stem mounting losses.
Acacia is dependent on three mines in Tanzania
Around 45pc of Bulyanhulu’s output is gold concentrate, and the losses from stockpiling production cannot be offset by sales of gold bars.
Acacia’s Buzwagi and North Mara mines will remain operational for now.
Some observers suggest that Tanzania’s president, John Magufuli, is trying to force Acacia to fund a new gold-smelting industry, but experts say the country’s output is too small for this to be economically viable.
Acacia is petitioning the government to allow a third party to assess its output.
“We need to defend ourselves,” said a person close to the situation. “The numbers are not believable. We are not guilty of a multi-billion dollar fraud.”
A second government committee is looking at gold concentrate production in Tanzania dating back 15 years - roughly the time-span that Acacia, formerly African Barrick, has been operating there. As Acacia is by far the largest miner in the country, it is thought to be the focus of the probe.