Acacia agrees to pay higher royalties to Tanzania

Saturday July 15 2017

A mining area in Tanzania. The new royalty fees are just one of the measures put in place by amendments to the country’s mineral law. PHOTO | FILE


Acacia Mining has agreed to pay the higher royalties imposed by Tanzania this month, even as the company disputes with the government the value of its mineral exports.

The UK-listed miner said it would now pay a six per cent royalty, up from four per cent, on gold, copper and silver, as well as the new one per cent clearing fee that was recently imposed by the country’s mineral law, which was recently revised.

“To minimise further disruptions of our operations we will, in the interim, satisfy the requirements of the new legislation governing the natural resources sector as regards the increased royalty rate applicable to metallic minerals such as gold, copper and silver of six per cent in addition to the recently imposed one per cent clearing fee on exports,” the company said in a statement posted on its website.

Acacia has been embroiled in a dispute with the Tanzania government over a ban on the export of gold and copper concentrates. President John Magufuli signed the three new mining laws last week.

In addition to the increased royalties, the new laws require the government to own at least a 16 per cent stake in mining projects, give the government the right to dissolve or renegotiate contracts and remove the right to international arbitration.

READ: Tanzania seeks to reform mining sector for citizens' benefit


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The higher royalty rates have put more financial pressure on Acacia’s mines, especially its Bulyanhulu and Buzwagi operations, which have been affected by the export embargo since March.


On June 2, Acacia said its cash balance had declined by $116 million in two months as a result of the concentrates ban, which it says is costing the company about $1 million a day.

Acacia has referred the disputes for arbitration, putting in doubt the fate of planned talks between the government and the miner’s parent company Barrick Gold, whose chairman visited President Magufuli last month.   

AngloGold, which runs the Geita Gold Mine, has also announced a plan to take the government to an arbitration court, protesting “violation” of mineral development agreements (MDAs).

Acacia Mining served the government with notices of arbitration on behalf of its two companies, Bulyanhulu Gold Mine Ltd and Pangea Minerals Ltd, which own Bulyanhulu and Buzwagi gold mines respectively.

Tanzania has stopped issuing any new mining licences until the process of installing all the legal, structural and procedural provisions in the new law is complete.

In a statement to the Johannesburg Stock Exchange, AngloGold Ashanti said it wants to make sure that Geita Gold Mine will not be affected by the legal and fiscal reforms that are being undertaken by the government.

Arbitration under the rules of the United Nations Commission on International Trade Law was provided for in the MDA signed between the two parties about 20 years ago.

Will not participate in talks

On its part, Acacia said it intends to refer its current dispute with the government to the arbitration process in accordance with the dispute resolution processes agreed on by Tanzania in its MDAs with Bulyanhulu Gold Mine Ltd and Pangea Minerals Ltd.

READ: Acacia seeks arbitration after Tanzania tears up mining contracts

Acacia said it would not directly participate in the planned discussions between its parent company Barrick Gold Corporation and the Tanzania government, which means any resolution that may be identified as a result of such discussions will be subject to approval by Acacia. 

“The company will work with Barrick as much as is necessary to support such discussions,” the company said.

The talks between the government and Barrick Gold Corporation aim to reach a consensus on the controversy of underreporting of earnings from minerals, the ban on exports of copper concentrates and construction of a local smelter. 

“This was what President John Magufuli and Barrick Gold’s chairman John Thornton agreed on when they met in Dar es Salaam last month. And if this is what Acacia refers to in the arbitration process, it is doubtful whether the intended talks will make any significant impact,” said analyst Augustine Kosanu.

“It is also not likely that the miner will be able to stop the intended review of MDAs through the talks. I think the arbitration option by Acacia primarily intends to prevent the government from undertaking measures that contravene terms stipulated in the MDA, just like Geita Gold Mine,” he added.

Mining audit

President Magufuli who is determined to overhaul the terms of most MDAs signed before he came into power, “because they don’t serve the best interests of the country,” was quoted as saying the talks were likely to start any time soon.

A government-ordered audit by two presidential committees of the mining sector, found that Acacia had evaded taxes, under-declared gold exports and failed to report some metals in the copper concentrates, such as iron, sulphur, rhodium, iridium and lithium.

The committee concluded that, at a minimum, the country lost a total of Tsh68.6 trillion ($30.3 billion) from the export of 44,277 containers of copper concentrates by Acacia, between 1998 and March this year.

The committee submitted a rationale to parliament to pass three Bills under certificate of urgency including the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) and the Natural Wealth and Resources (Permanent Sovereignty).

The Bills, which President Magufuli has already signed into law, have provision for the government to renegotiate mining contracts that it deems prejudicial to the interests of Tanzanians.  

In regulations made last year, the government also wants mining companies to sell 30 per cent of their shares through initial public offerings at the Dar es Salaam Stock Exchange.