SOUTH African-based Anglogold Ashanti, owners of the Geita gold mine in the Lake Zone, yesterday joined Acacia Mining Plc in filing for international arbitration over legislative changes in Tanzania which entitle the government to re-negotiate all existing mineral development agreemets (MDAs).
Among the changes passed by parliament and swiftly signed into law by President John Magufuli on July 5 is a provision for the government to take ownership of a minimum 16 per cent stake in all operative mining companies at no cost, with the right to buy shares equal to half the business.
Revenue royalties on gold, copper, silver and platinum have also been hiked to 6 per cent from 4 per cent previously.AngloGold operates the Geita gold mine which, at production of 489,000 ounces of gold last year, was comfortably Tanzania's single biggest gold-producing mine.
Geita also accounts for 40 per cent of AngloGold's total production in Africa of 1.3 million ounces.
Gold production from continental Africa (excluding South Africa) is equal to 36 per cent of total AngloGold output.In a presentation earlier this year, AngloGold said there was potential to extend the Geita mine beyond its current eight-year lifespan (closing 2025). There were also plans to increase production this year.
In a statement to the Johannesburg Stock Exchange yesterday, the company said: “AngloGold Ashanti’s subsidiaries are seeking a constructive dialogue with the GoT (Government of Tanzania), and its agencies, to gain assurances that Geita Mine will not be affected by these legal and fiscal changes.”
“In the circumstances, the subsidiaries have, however, had no choice but to take the precautionary step of safeguarding their interests under the MDA by commencing arbitration under the rules of the United Nations Commission on International Trade Law as clearly provided for in the MDA.”
The MDA was signed between the Tanzanian government and AngloGold subsidiaries Samax Resources and Geita Gold Mining about 20 years ago.
According to the statement, it was “instrumental in the decision to make the significant investment in the development of Geita Mine at a time of significantly lower gold prices and when Tanzania was an untested jurisdiction for new mine development.”
In that time, about $1 billion has been returned to the Tanzanian government and $130m in tax take alone last year, the statement added.
Geita said it also contributed $593 million (1.3 trillion/-) in revenue to the output of the country as measured by the gross domestic product in 2016. The mine employed an average of 3,748 people last year in permanent and contractor provisions.
Acacia initiated its own arbitration proceedings on July 4 whilst backing direct talks between its largest shareholder, Barrick Gold, and the Tanzanian government to succeed.
The London Stock Exchange-listed company’s dispute with the Tanzanian government is based on a government claim that the company has for years been under-estimated the value of its concentrate exports. As a result, concentrate has been impounded at the port of Dar es Salaam since April, a position that is threatening the viability of Bulyanhulu and Buzwagi, the two Acacia mines from which the concentrate was produced.
A host of mining companies operating in Tanzania requested share trading suspensions on July 3 following the emergence of the terms of legislation. “The good news is that the three new laws…at least sets up a platform for negotiation which should lead to some resolution for companies in limbo, like Acacia which is currently barred from exporting concentrates,” said Investec Securities earlier this month.