Tanzania mining industry cuts jobs as gold price slumps

The tumbling price of gold and poor gemstone output have forced mining companies to lay off hundreds of workers.

Two leading mining firms — Acacia Mining Plc and TanzaniteOne — have announced plans to shed 1,685 jobs or 16 per cent of the mining industry’s 10,000 strong formal workforce by the end of this year.

Whereas Tanzania’s largest gold miner, Acacia Mining Plc will cut 1,050 jobs in the next few months, TanzaniteOne will lay off 635 workers.

Acacia said in a statement that the move to cut back on staff was taken in response to the current slump in the price of gold and low performance. The world market gold price has fallen from $1,800 per ounce three years ago to $1,072 per ounce last week.

“As a result, approximately 1,050 of our people, representing 27 per cent of our workforce, have either left or are expected to leave over the next few months,” Acacia’s statement reads.

Bulyanhulu mines will be most affected by the cuts. Acacia also operates Buzwagi and North Mara in northwest Tanzania.

The restructuring is expected to lead to an annual saving of $25 million, prior to a restructuring charge of approximately $11 million predominantly incurred in 2015.

This is one of a number of initiatives to ensure costs within the business are optimised and in turn enhance cash flow generation.

Acacia is also working to further refine capital expenditure, renew discussions with contractors and major suppliers to improve their rates, rationalise corporate administration spend and ensure its community spending is in line with the corporate strategy.

Acacia CEO Brad Gordon says that after honouring its debts in June, Acacia had $145 million cash in its coffers, which fell to $99 million at the end of September.

In September 2015, the company reported that it had incurred a $13 million net loss in the third quarter, owing to lower output and high operational costs.

“Acacia had been one of the shining lights on the London Stock Exchange but the underperformance in the September quarter led to a 25 per cent fall in our share price relative to our peers” Mr Gordon says.

FINANCIAL DIFFICULTIES

Tanzania’s largest miner, which has produced nearly eight million ounces over a decade, said the $13 million loss was against a net profit of $28 million in the third quarter of 2014.

The loss reflected a 20 per cent slump in revenue to $193 million on the backdrop of declines in output and sales.

During the quarter, gold production at the company’s mines fell 14 per cent to 163,888 ounces while sales went down six per cent to 176,116 ounces.

The cost of producing an ounce of the precious metal rose nine per cent on the year to $1,195, which Acacia attributed to short-term operational challenges at its Bulyanhulu and Buzwagi mines.

TanzaniteOne has justifiedits decision to shed 50 per cent of the workforce by citing the decline in Tanzanite gemstone production.

Last week, TanzaniteOne, owned by Sky Associates and the State Mining Corporation announced that it would send way 635 staff out of its 1,284 strong workforce.

TanzaniteOne mining manager, Apolinary Modest said that the company was undergoing financial difficulty, thanks to the low production of the precious stone at Mererani Hills in Simanjiro district, Manyara Region.

Mining is one of biggest private sector employers in Tanzania, providing jobs for nearly 10,000 people.