UPDATE 2-Ivory Coast parliament approves new tax on gold profits

Fri Dec 14, 2012 1:59pm EST

* Govt wants revenues to fund post-war reconstruction

* Companies say new levy will stifle investment

By Joe Bavier

ABIDJAN, Dec 14 (Reuters) - Ivory Coast's parliament has approved a new tax on gold profits, a parliament official said on Friday, despite industry objections that the levy could stifle development of the country's budding mining sector.

The law was passed on Thursday as part of a bill modifying the 2012 budget.

"The bill modifying the fiscal annex of the 2012 budget was voted on ... It was approved," Marius Ndri, the director of legislative services for the National Assembly, said.

The law must now be signed by President Alassane Ouattara before it takes effect, a senior mines ministry official said.

"We have not yet enacted it," Noel Guetat, Mines Minister Adama Toungara's chief of staff, told Reuters.

"We cannot say whether that will be done before the end of the year," he added.

Ivory Coast, the world's top cocoa producer, is a relatively small but growing gold producer and is pushing to expand its long-neglected mining sector to help fund post-war reconstruction after a brief armed conflict last year ended a decade of political crisis.

The government proposed a new tax in September on what it termed "super profits", saying it would be applied for 2012 and yield some 40 billion CFA francs ($79.8 million) in additional income to the state.

"Most of these mining companies pay almost no tax...Of total state revenues, the mining companies pay in just 6 billion (CFA francs). That's the reality," Guetat said.

MINERS COMPLAINED

Miners complained, however, that the government failed to take into consideration their concerns that the levy would hurt some companies already operating in the West African nation and discourage others from investing.

The new tax will be levied on profits above a government-fixed estimated production cost of $615 per ounce, with the rate dependent upon the world price of gold, according to the text of the law seen by Reuters.

Companies will pay from 17 to 20 percent with gold prices between $1,600 and $1,800 per ounce. Above that range, the rate rises by 1 percent for each $50 increase in the gold price up to a maximum rate of 50 percent. Below $1,600, it falls by 1 percent per $50 decrease.

Miners obliged to pay corporate tax in Ivory Coast will pay a lower rate.

"It's not a windfall tax that's been sent to parliament; it's a punitive tax," Randgold Resources' CEO Mark Bristow told Reuters on Thursday before the law was approved.

The Africa-focused miner launched operations at its Tongon mine in Ivory Coast last October, with annual output of 280,000 to 300,000 ounces expected over the next five years.

Australia's Newcrest Mining and Canada's La Mancha Resources also operate mines in the country. In August, the government granted production permits to Canada's Endeavour Mining Corp and Occidental Gold, a unit of Australia's Perseus Mining Limited.

In a quarterly statement published in September, Perseus said a decision on its Sissingue mine was on hold "pending clarification of the fiscal regime applicable to the project".

The company had planned to invest more than $160 million to develop the mine, the government said in August.

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