Tanzanian accuses Acacia of mining gold illegally

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Published Jun 12, 2017

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Dar es Salaam - Tanzania’s

government accused Acacia Mining of operating illegally in the East African

country and said mining companies have been evading taxes. Acacia’s shares

slumped.

An audit ordered by President John Magufuli in March found

that Acacia had been conducting business in Tanzania “contrary to the law,”

Nehemiah Osoro, chairman of a committee of academics, lawyers and economists

that conducted the probe, said at a briefing Tuesday in the commercial capital,

Dar es Salaam. The audit covered mineral exports over the past 19 years.

“We should summon them and demand that they pay us back our

money,” Magufuli said after receiving the committee’s report. “If they accept

that they stole from us and seek forgiveness in front of God and the angels and

all Tanzanians and enter into negotiations, we are ready to do business.”

Acacia’s shares dropped as much as 14 percent and were 10

percent lower at 269.40 pence by 12:06 p.m. in London. The company, which is majority owned

by Barrick Gold Corp., said in an earlier statement that it has “fully

cooperated” with the audit committee’s work.

Read also:  Zuma to strengthen relations during Tanzania state visit 

The accusation is the latest sign of deteriorating relations

between Acacia and the country where it mines all its gold. Last month, a

Tanzanian presidential committee investigating the export of gold and copper

concentrates, a semi-processed form of ore, said that Acacia hasn’t fully

declared all the minerals contained in its concentrate. Acacia said it revealed

everything of commercial value that it produces and pays all appropriate

royalties and taxes.

Acacia slid almost 40 percent in two days after the first committee

report last month. The firm has been in dispute with the government since the

country issued a surprise ban on concentrate exports in March. The restriction

is costing Acacia about $1 million a day in sales and the company has said it

may be forced to shutter its flagship Bulyanhulu mine unless a solution is

found.

Acacia also said that it will make another statement “as

soon as practical” following Monday’s presentation by the government.

Mine Concern

“If no resolution is found over the summer we would expect

Bulyanhulu to be placed on care and maintenance,” Numis Securities Ltd. said in

a note to investors Monday.

Before the concentrate ban was introduced, Acacia had been

making progress in turning around the troubled Bulyanhulu operation, with

output at the mine increasing 6 percent in 2016 to the highest in a decade.

Concentrates accounted for 45 percent of Bulyanhulu’s

revenue last year and about 30 percent of the company’s total sales. Magufuli

is overhauling Tanzania’s mining industry as he seeks to generate more revenue

to help finance projects including the building of a new port, railway and oil

pipeline.

Last month, the president fired Mines Minister Sospeter

Muhongo after a separate probe found mineral exports had been understated.

‘Big Sin’

Companies exported minerals worth as much as 381 trillion

shillings [$170.2 billion] between 1998 and 2017, and declared 40 percent fewer

containers than they actually shipped, Magufuli said. Unpaid taxes by mining

companies operating in Tanzania

could amount to as much as 108.5 trillion shillings, he said.

“These people are ruthless,” a visibly agitated Magufuli

said in a live broadcast. “They have taken all this gold and other minerals,

but revenues, taxes, they didn’t pay.”

The president said he agreed with all 20 recommendations in

the report. Proposals include maintaining the mineral-export ban until all

back-taxes are paid, having companies receive their revenue in Tanzanian bank

accounts and renegotiating mining agreements to allow the state to buy shares

in the companies.

The report also recommended that any arbitration be handled

by Tanzanian courts and that the government rectify mining and tax laws to make

the industry more beneficial to the nation.

Companies have mined diamonds, for example, in Tanzania since

1949. The government’s stake in those companies has fallen to 35 percent from

50 percent, but the state has yet to receive any dividends, Magufuli said.

“This is inhuman and it’s a big sin,” Magufuli said. “What

curse have we been burdened with?”

BLOOMBERG 

 

 

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