AngloGold to earn Tanzania $200m

Published Oct 29, 2012

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ANGLOGOLD Ashanti’s Tanzanian unit expects payments to the government to double to about $200 million (R1.7 billion) this year, after it pays its first full-year corporate tax and a royalty increase that it is negotiating to decrease .

Geita Gold Mine paid about $100m to Tanzania last year, of which “slightly less” than $45m was royalties, Geita managing director Gary Davies said on Friday. The royalty component would grow because the government raised the rate and gold’s price increased, he said.

“We are paying the 4 percent royalty rate but in protest, because we are still discussing it, and have not yet reached an agreement,” he said. “The latest round of discussion was fairly positive. I can’t give details of it.”

The Tanzanian government increased royalties for mining firms by 1 percentage point to 4 percent when it enacted legislation in 2010. African Barrick Gold, the biggest producer of the metal in the east African country, is the only mining firm that has agreed to pay the higher royalty so far.

Tanzania, which vies with Mali to be Africa’s biggest producer of gold after South Africa and Ghana, is seeking to gain more from the resource.

Energy and Minerals Minister Sospeter Muhongo has urged companies to aim at breaking even in at most five years, so that they start paying corporate tax.

“Tanzania’s mining industry is currently based on six major mines, and we think [the] government should aim at gaining more from the sector by expanding it, awarding more licences,” Davies said. “Trying to gain more from the existing operations may instead shrink the sector.”

Geita was producing about 500 000 ounces a year and the company had a mine life of about seven years, he said.

“We are doing exploration to try and extend it, probably for another seven, eight years,” Davies added.

The company had started studies for underground mining at Nyakanga, which was part of the Geita licence, that might be completed by 2015, he said.

AngloGold was also exploring alternative sources of energy to decrease dependence on expensive fuel-generated power, Davies said. Tanzania Electric Supply may connect the mine to the national grid by 2015.

“Electricity from the national grid will have an impact on cost,” Davies said. “We will maintain it as one of the alternatives among other sources.”

AngloGold stock declined 1.33 percent to close at R280.51 on the JSE on Friday. – Bloomberg

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