A ban on exporting unprocessed ore from Tanzania wiped one fifth off the market value of gold producer [BOLD] Acacia Mining (ACA) between 3 and 6 March. Don’t be fooled by the subsequent small recovery in the share price; we believe there remains a significant risk to near-term earnings.

The Tanzania Government wants miners to use local smelters, or build their own smelters in-country, to process ore. The Philippines could follow suit, according to reports.

The move echoes Indonesia’s decision in 2014 to ban exports of unprocessed nickel ore. That caused a disruption to global nickel supply and pushed up the metal price.

Acacia says 30% of its group revenue is affected by the new law in Tanzania, being the amount it made in 2016 from gold/copper concentrate exports from two of its mines. A third mine, North Mara, produces 100% gold dore and is unaffected by the news.

Analysts say Acacia can continue mining operations and stockpile ore near-term. They point out that Acacia accounts for half of the country’s gold production, so it is in the Government’s interests to resolve the problem as it could lose out on royalty and tax income.

Building a smelter seems highly unlikely given that Acacia’s affected production is sub-scale to make this processing cost efficient. It is also worth considering Tanzania has high energy costs which are a negative factor for power-hungry smelters. (DC)

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