Shares in Acacia Mining plummet on 'disappointing' production update

Shares in Acacia Mining plunged to their lowest level in almost a year after a subdued third-quarter production update rocked the stock.

The mid-cap gold miner reported production of 164,000 ounces in the last three months - a lower than expected output level and well below last year’s figure of 190,986.

The FTSE 250 firm now anticipates full-year production will be come in around last year’s level of over 700,000 ounces, but it said cash costs per ounce sold would be around 5pc higher than previously forecast. Analysts at Investec described the update as “a short-term negative” and the “first major stumble” from chief executive Brad Gordon since he joined the group.

Mr Gordon said he was “disappointed” in the quarterly operational performance, as the miners’ output was hindered by lower-grade ores mined at Bulyanhulu and Buzwagi in Tanzania.

Investec also said the fall in net cash by $45m in one quarter was “alarming”. It now stands at around $100m at the end of last month. Canaccord Genuity echoed this viewpoint, saying it will tarnish “the recently rebuilt positive sentiment” towards management. However, analysts at Citigroup were unperturbed by the update, saying “a poor third-quarter is not a game changer”.

With spot gold prices hitting $1,151.30 per ounce in intraday trading, the bank see it as “an appropriate investment for this stage of the gold price cycle”. Despite a more positive tone, shares plunged to the bottom of the mid-cap index, falling 41.1p, or 15.8pc to 219.2p.

Having found themselves among the laggards in early trade, a late rally in commodity prices lifted mining stocks back into positive territory. A move by HSBC to slash a slew of miners’ target prices had little impact, as Glencore rose 2.9pc to 117.9p, Anglo American advanced 4.3pc to 604.2p, while Rio Tinto slipped 0.1pc to £23.14.

Relaying feedback from its trip to China to investors, HSBC said the economy was “slowing, but not panicking”. Jeff Yuan, of HSBC, said: “Growth, while evidently slowing, has not seen a sharp decline in the last few months, as a direct interpretation of the Chinese stock market might suggest.”

Oil stocks also gained in late trading, with Brent crude reaching a high of $51.99 per barrel. Royal Dutch Shell B shares rose 60.5p to £17.67, BP added 10.4p to 378.1p and BG Group made gains of 27.5p to close at £10.62. Chris Beauchamp, of IG, said: “So long as Syria remains a flashpoint in international affairs we are likely to see a constant bid under the oil price.”

Meanwhile, on the wider market, Britain’s benchmark index endured a rollercoaster ride, dipping into the red before ending the session in positive territory.

Having enjoyed stellar gains a day previously, the FTSE 100 slid by 0.7pc in intraday trade, as Mike McCudden, of Interactive Investor warned the blue chip index “looked to have run out of steam”.

Despite the International Monetary Fund cutting its global growth forecasts for a second time this year, the blue chip index claimed its fifth consecutive trading session of gains, up 27.24points, or 0.43pc, to 6,326.16.

^{FTSE 100 one-day graph (Source: Bloomberg)}

• Citigroup urges investors to 'be brave' as it forecasts a 20pc gain in global equities by end-2016

Ahead of half-year results Tesco leapt 5.6p, or 3pc, to 192.2p after Barclays began covering the stock with an “equal weight” rating. However, the bank does not believe like-for-like sales figures will show any dramatic progress from the first quarter.

Indeed, analysts said they are sceptical that Tesco’s results will elicit the same share price reaction as Sainsbury’s did last week, when it raised its profit guidance for the year. Shares in Sainsbury’s finished 2.2pc better at 272.4p and Morrisons climbed 3.2pc to 173.6p.

• Tesco slashes payments terms to 14 days for small firms

On what was otherwise a quiet day in the City, rumours resurfaced Imperial Tobacco was an imminent takeover target. Possible suitors are thought to include British American Tobacco and Japan Tobacco, with a price of £45 a share circulating the rumour mill. The FTSE 100 stock leapt 49p, or 1.5pc, to £34.26.

Brewer SABMiller tumbled 142p to £36.22 amid renewed talk that it had rejected an informal takeover offer from Anheuser-Busch InBev, as it was deemed too low.

Mr Beauchamp warned: “The 3.8pc drop in SABMiller shares reflects growing scepticism that this merger may go the way of the Vodafone/Liberty move and end up on the ash-heap of history; what seemed like a done deal a few days ago has now become a lot more uncertain.”

Read across from the US biotech industry continued to dent UK-listed pharmaceutical stocks. Hikma slipped 105p to £22.60, Shire fell 119p to £44.85 and AstraZeneca was 46.5p lower at £42.01.

The Nasdaq Biotech Index has plunged 24pc this year, and it was most recently hurt by Hillary Clinton, the would-be Democratic presidential candidate for 2016, describing the sector’s policies as “price gouging”. Analysts at HSBC said: “The market- and risk-aversion- driven declines are not specific to US biotech companies, European and Japanese biotech company share prices have also experienced de-ratings.”

BTG fell 9.4pc to 601p after sales of Varithena, its varicose vein treatment, stalled. However, Dr Mike Mitchell, of Panmure Gordon, said the potential of the treatment “remains attractive”.

Finally, Nostra Terra Oil and Gas rallied 26.3pc after it announced its intention to establish a strategic joint venture company with Independent Resources.