Modern Mining: Featured News

The mining industry is currently under pressure in many parts of Africa from governments seeking a bigger share of the mining pie, no more so than in Tanzania where President John Magufuli, aka ‘The Bulldozer’, has launched what appears to be an all-out assault on the country’s mining companies. While his actions might play well to the ‘man in the street’, they are clearly going to lead to a dramatic loss of mining revenues and have already impacted on Tanzania’s standing as an attractive destination for mining investment.

Arthur Tassell commentThe company bearing the brunt of the President’s wrath is, of course, LSE-listed Acacia Mining, which operates the Bulyanhulu, North Mara and Buzwagi gold mines and is Tanzania’s biggest gold producer. It has been accused of under-declaring the value of concentrate exports from two of its mines (Bulyanhulu and Buzwagi) over a long period, resulting in a huge loss to the Tanzanian fiscus.

How big a loss, you might ask? Well, according to the Tanzanian Revenue Authority, Acacia owes US$40 billion in unpaid taxes and approximately US$150 billion in penalties and accrued interest. These are frankly incredible figures which bear no relation to reality and which Acacia (even assuming it were guilty of the infractions it is accused of, which it vehemently denies) has no prospect of paying. After all, the total amount claimed of US$190 billion is over 200 times Acacia’s market value and more than four times the entire 2016 GDP of Tanzania.

The turmoil in Tanzania started in March this year, when the government imposed a ban on gold/copper concentrate exports. More recently and quite arbitrarily, it has passed new legislation altering the legal and regulatory regime governing the resources sector, in the process over-turning what should have been rock solid agreements already in place with some mining companies. In addition, it has banned the issuing of new mining licences. According to Magufuli, this ban will be lifted once “things are in order”, whatever that means.

In response to these moves, Acacia said on 4 September that it had decided “to commence a programme to reduce operational activity and expenditure at Bulyanhulu in order to preserve the viability of our business over the longer term. This programme will include the preservation of all assets and equipment to enable the mine to resume ordinary course operations should the export ban be lifted and the operating environment stabilised.”

Acacia added that as a result of the planned reduction in operational activity, it now expected “annual production to be in the order of 100 000 ounces lower than the bottom of the previous guidance range of 850 000-900 000 ounces.”

Petra Diamonds has also been hit by the new, aggressive mood of the government, confirming on 11 September that a not insignificant (71 654 carats) parcel of diamonds from its Williamson mine (which is 25 % owned by the State) had been blocked from export to Petra’s marketing office in Antwerp. The government claims the consignment was significantly under-valued and – as I write this – the latest news is that two government officials have been arrested for ‘economic sabotage’ relating to this under-valuation.

In its statement on the incident, Petra says it complies fully with all legislation in Tanzania and with the provisions of the Kimberley Process and notes that the government “has complete oversight of the diamonds produced at the mine, which are physically controlled by a number of different government representatives in conjunction with Petra from the point of recovery until the point of sale.”

Another casualty of the current uncertainty surrounding Tanzania’s mining sector is the recent deal between Shanta Gold and Helio Resource Corp, in terms of which Shanta was going to acquire Helio and – as part of the transaction – Helio’s SMP project which has gold resources of 635 koz, with all the deposits located within trucking distance of Shanta’s New Luika mine in the Lupa goldfield. Shanta has now terminated the agreement (a move which Helio is challenging), citing the “potential impact on Helio of the bills signed into law on 10 July 2017.”

President Magufuli is on record as saying Tanzania’s people “must profit from our God-given mineral resources”. I don’t think anyone would dispute this proposition and indeed Tanzania is already benefitting very nicely from its minerals industry, with Acacia (and its predecessor companies), for example, having invested over US$4 billion in the country since start-up over 15 years ago. Over this period, Acacia has also spent more than US$3 billion with Tanzanian suppliers, invested over US$75 million in communities and paid over US$1 billion in taxes and royalties.

Perhaps by the time these words gets into print some progress might have been made in resolving the standoff between the Tanzanian government and the mining industry. But I’m not counting on it. President Magufuli seems intent on pursuing a ‘bull at a gate’ approach and one can only speculate where it will all end. Even if some sort of compromise is eventually worked out, the damage will have been done and I doubt that Tanzania will be recovering its reputation as a ‘mining friendly’ country any time soon.

Arthur Tassell

Contact Modern Mining

Title: Editor
Name: Arthur Tassell
Email: mining@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108

Title: Advertising Manager
Name: Bennie Venter
Email: benniev@crown.co.za
Phone: +27 11 622-4770
Fax: +27 11 615-6108

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