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Acacia becomes mining's latest political casualty

The gold miner has been blindsided by a Tanzanian government decree, amid a nascent international push to repatriate economic value
March 8, 2017

Talk of economic nationalism may centre on Donald Trump's America, but miners are already feeling the pinch of populist economic legislation around the globe. In the past month the Philippines has permanently closed several nickel mines, wiping out 8 per cent of the metal's supply and pushing up prices. In Indonesia, Freeport-McMoRan (US:FCX) and Rio Tinto 's (RIO) enormous Grasberg mine has also been shuttered after the government effectively revoked licences for the export of copper concentrate.

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But while the Philippines' ban has ostensibly focused on environmental degradation, Indonesia has sought to repatriate beneficiation - the processing, smelting or refining of minerals - in the hope of capturing a greater share of the economic value of mining.

The latest company to be felled by a nationalist turn is Acacia Mining (ACA), whose stock has been clobbered following the Tanzanian government's decision to ban the export of mineral concentrates and ores for metals including gold and copper. The decree, which was signed by the head of Tanzania's Ministry of Energy and Minerals last Friday (3 March), looks set to hit revenues at Acacia's operations at Bulyanhulu and Buzwagi, which account for around 30 per cent of group revenues.

The £1.7bn gold miner, whose shares dropped a fifth on the news, is "urgently seeking further clarification" from the ministry. In a parallel with Indonesia, it wants to encourage miners to move all smelting and processing operations to Tanzania, in theory boosting domestic skills, employment and revenues. For Acacia, which also operates a mine at North Mara and is Tanzania's largest gold miner, the news also throws a mooted tie-up with Canada's Endeavour Mining (TSX: EDV) - prefaced on the London-listed company's cash generation - into serious doubt.

Shanta Gold (SHG), an Aim-listed gold miner also based in Tanzania, only exports gold doré and is not affected by the decree.