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Acacia Mining woes intensify

The deepening stand-off with the Tanzanian government has wiped 50 per cent off the gold miner's share price in three months
May 26, 2017

The political crisis engulfing Acacia Mining (ACA) just got worse. In a televised press conference last week, Tanzanian president John Magufuli said that an investigation showed the gold miner had under-reported or failed to declare the precious metals in its concentrate shipments. The news follows March's ban on the export of gold and copper concentrate, which the Tanzanian government said would encourage beneficiation within the country.

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Since the ban, Acacia has been stockpiling concentrate at containers at a Dar es Salaam port. The government said an inspection of these stockpiles revealed minerals valued at more than 10 times the amount declared by Acacia. According to Reuters, Mr Magufuli also fired his mining minister and the head of the country’s mining audit agency for failing to properly monitor gold and copper concentrate exports.

Acacia said it had not yet seen a copy of the government's report, but denied the charges of under-reporting, stating it declares everything of commercial value and pays "all appropriate royalties and taxes on all of the payable minerals that we produce". The protestations failed to stop the shares falling 30 per cent on the day of the announcement, and another 15 per cent in the following trading session.

Reiterating their buy rating and 500p target price for the stock, analysts at Numis "continue to assume that both the government and Acacia are rational actors and that ultimately what the government wants is for Acacia to resume exports", a calculation partly based on Tanzania’s need to attract long-term foreign investment for its oil and gas sector.