ACACIA Mining has agreed to pay new surcharges on its revenues in Tanzania even as it battles the country over sweeping changes to the laws governing its three gold mines.
The FTSE 250 Company said it had agreed a new royalty rate on gold sales - with the African country's government - of 6pc, up from 4pc, as well as a new 1pc clearing fee that was recently imposed on exports.
The extra cost for Acacia, which had revenue of $1bn last year, has been estimated at around $31m (£23.9m) a year. Acacia has been in open dispute with the government of Tanzania since March when the country banned the export of powdered gold concentrates, which represents about a third of its output.
The government subsequently accused Acacia of under-reporting the amount of concentrates it exports by a factor of 10, essentially amounting to a multibillion-dollar fraud dating back years.
Acacia has strongly denied the charges, and last week served ‘notices of arbitration’ on two of its three gold mines in the country. These notices mean it can seek intervention at the London Court of International Arbitration if Tanzania tries to rip up its original contracts with the company.
It came after Tanzania’s parliament endorsed three new laws that could allow it to dissolve the underlying contracts held by natural resources producers in the country and block companies from seeking international arbitration.
Acacia said it had acceded to the new royalty charges to “minimise further disruptions to our operations”. Its mines are continuing to operate and it is stockpiling concentrates in the hope that the export ban will be lifted. It has put the cost of the ban at $1m a day and has warned that it may have to close at least one of its mines if the dispute is not resolved soon.
It emerged earlier this month that Acacia’s management would not participate directly in negotiations to resolve the impasse. Instead Barrick Gold, its majority shareholder with a 64 per ccent stake, will take part in talks with the government, which have yet to begin in earnest.
Tyler Broda, an analyst at RBC, said: “We believe that this is a show of good faith by the company to help reach a satisfactory resolution in its dispute with the government.”
Acacia’s shares fell 1.6 per cent in Friday morning trade. The stock has sunk nearly 50 per cent since the export ban began in March.
Acacia’s latest move came as South African AngloGold Ashanti announced on Thursday that it had begun arbitration proceedings against Tanzania over a new law that allows authorities to renegotiate contracts with mining firms.
The world’s third-biggest gold producer said that in light of the changes to the mining legislation it had “no choice” but to take such precautionary step to safeguard its agreements with Tanzania.
The company said that in light of the changes to the mining legislation it had “no choice” but to take a precautionary step to safeguard its indirect subsidiary agreements with the government in relation to the development and operation of the Geita Gold Mine.
The operation, which produced 489,000 ounces of gold last year, is AngloGold’s largest mine and one the company is considering to invest in to extend its life beyond 2025, when it’s expected to run out of ore.
A Mine Development Agreement (MDA) was signed by AngloGold subsidiaries – Samax Resources and Geita Gold Mine – and the Tanzanian government about 20 years ago.
The company said that the contract was instrumental in its decision to make a significant investment in the development of Geita, which last year paid a total of $130 million in taxes and contributed $593 million in revenue to Tanzania’s output as measured by the gross domestic product.
AngloGold follows Acacia’s announcement last week that it had begun arbitration proceedings, adding that its largest shareholder, Barrick Gold, and the Tanzanian government had agreed to continue parallel talks over claims that point fingers at Acacia.
Among the allegations, Tanzania’s authorities have said the firm has been operating illegally and evading tens of billions of dollars in taxes by understating the amount of metal concentrates it exports from the three gold and copper mines it operates.