HomeNewsAngloGold says Tanzania law changes worry investors

AngloGold says Tanzania law changes worry investors

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Tanzania should stick to existing agreements in the fast-growing mining sector or investors will lose confidence, the company which owns the country’s biggest gold mine said on Saturday.

Report by Reuters

Major international miners are still in talks with the government two years after it passed mining legislation that included a rise in royalties on gold exports to 4% of gross value from 3% of netback value.

The law also required mining companies to pay the government 0,3% of their annual turnover, up from the previous requirement of a maximum
$200 000 a year.

AngloGold Ashanti said it expected the Dodoma government to respect its mineral development agreement, which it said was a legal contract signed before the new mining legislation was put in place.

“Our investors obviously expect that those contracts should be honoured because they’ve made an investment for the long term,” Gary Davies, managing director of AngloGold’s Geita gold mine said in an interview.

“What’s key is that the goalposts are stable because otherwise investors will need to factor that into their investments. I think any investor would be concerned about that, we are no different.”

East Africa’s second biggest economy argues it is not seeing the fruits of soaring commodity prices, in particular gold. It plans to increase the mining sector’s contribution to the economy to 10% of GDP by 2025 from 3,3% last year.

But the miners say hiking taxes and increasing royalties is the wrong approach.

They say Tanzania should focus on attracting more investors and issuing additional mining licences.

Tanzania is Africa’s fourth biggest gold producer. Gold export earnings jumped 47% to $2,226 billion last year.

Hindering growth
Major gold mining companies in Tanzania include African Barrick Gold Plc, which has four gold-producing mines, AngloGold Ashanti Ltd and Resolute Mining Ltd.

Tanzania’s energy and minerals ministry declared in July that all mining companies had agreed to pay the new royalty rate from May and said the government would keep mining contracts under review in a bid to deepen their economic contributions.

African Barrick Gold, which has four gold mines in Tanzania, is however the only company that has so far publicly announced it will pay the new 4% royalty rate.

AngloGold’s Davies said negotiations continued over several aspects of the 2010 legislation.

“Investors need to have that degree of certainty and stability in order to put large investments over the long term.”

The Geita mine recorded revenues in excess of $4,2 billion over the past decade and paid $683 million to the Treasury during the period in corporate tax, royalties, withholding taxes, payroll taxes and other fees, Davies said.

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