ACR awash with cash but no revenue

African Consolidated Resources has not earned a single cent since it listed on the London Alternative Investment Market four years ago. But it is awash with cash. The company has raised more than 20 million pounds through floating shares.

ACR says its key assets are gold, platinum, diamonds, nickel, rock phosphates and copper but it has not exploited any of these for the past five years. It was listed on the AIM in June 2006. It raised 4 million pounds through the initial public offer.

Though the company made a loss of 1.1 million pounds for the half year to August 2006, increasing to 1.7 million pounds for the year ended February 2007, it still had 1.5 million pounds in cash.

The company raised another 4.5 million pounds through an issue of shares in 2007 and a further 12.3 million pounds last year. The bulk of the money, 10 million pounds was raised after the company had been declared the legal owner of the diamonds at Marange but was not allowed to exploit the diamonds.

Despite its success, which seemed to have been boosted by the High Court judgment, the company seemed to have run out of words to sell its project. The opening of the 2009 annual report and the 2009-2010 interim report was almost identical.

It is not clear why ACR has not been able to exploit its gold resources because the company has never been short of cash.

Most gold mines closed in 2008 because of viability problems but they reopened in the first quarter of 2009 when the government introduced a multi-currency system and allowed gold producers to sell their product on the open market as opposed to the Reserve Bank of Zimbabwe which owed some of them sizeable amounts.

Asked why the company had not earned any revenue since its listing in 2006, ACR chief executive Andrew Cranswick said his company had a very advanced and modern strategy. He said the mineral development cycle was 10 to 20 years with exploration taking one to six years; resource definition another four to six years; pre-feasibility studies, one to two years; plant and mine design and fabrication, two to three years; and mine commissioning, another one to three years.

“The ACR strategy was to start the high-risk, low cost exploration cycle early before the competition decided to come in. We did this as Zimbabweans who understand the risks better than foreigners with the hope that by the time we were approaching mining stage on any one or more minerals, the investment climate would have improved as would commodity prices. We sold the concept to our foreign investors after we had exhausted domestic capital and they have continued to invest money into the company showing their faith in us and our belief that Zimbabwe is improving,” Cranswick said.

He said to a large extent the company had been very successful and the plan was working. While there were still many areas that Zimbabwe could improve on, there were also significant milestones of improvement. The economy had been dollarised meaning that feasibilities and operating cost projections could be done accurately. The gold sale rules had been de-regulated and there were tax incentives for gold producers.

“In the past 5 years we have been discovering, doing JV’s and developing resource definition of all the mineral deposits we have found. We are nearing a point that these will go into production. This was the curve we expected and other than the Marange crisis, all is according to plan,” Crasnwick said.

“Marange was an extraordinary find in many ways. It had the potential for a low-cost start-up and low operating cost. The fact that other shady operators (Mafiki-zolos) who invested nothing in Zimbabwe now have the benefit instead of ACR who has committed so much investment across the board in so many minerals is tragic. It remains a big downer for the faith investors will have and the big dollars will not flow until that is resolved.”

Cranswick said ACR should be earning revenue from gold with the next 12 months and hopefully from diamonds if an agreement is reached. Production of nickel, rock phosphates and platinum was still a long way off.

The government has repeatedly denied ACR access to Marange diamonds since 2006 and has allowed in other operators. This is probably because of the way ACR acquired the diamond finds and its unnamed black partners.

ACR has always claimed that it has black and white shareholders but it has never had any black directors. Cranswick told SW Radio last month that the company had at least 25 black shareholders but he could not name any because he needed their permission.

There have been whispers that ACR’s partners are top lieutenants of President Mugabe and he is not going to allow ACR to operate because he feels betrayed.

President Mugabe made no bones about this at the 2006 party annual conference at Goromonzi soon after revoking ACR licence.

“Tose tinoda mari, sonke siyathanda imali ehe, ( We all want money, yes) but there are proper ways of getting it and improper ways of getting it…… If you are going to be harnessed by European companies which are already in it, which we are fighting against, then we will be fighting against you as well, ndozvamunoda here izvozvo? (Is that what you want)?” he asked.

The fight has been on since.

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