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Randgold CEO warns African govts against punitive taxes
October 16, 2012 / 6:06 PM / 5 years ago

Randgold CEO warns African govts against punitive taxes

* African nations seeking bigger share of mining revenues

* Tax increases could stifle still developing sector

By Jonny Hogg

KINSHASA, Oct 16 (Reuters) - African countries risk stifling their nascent mining sectors and driving away new investors if they push forward with mining code revisions aimed at boosting short-term revenues, gold miner Randgold Resources’ chief executive said on Tuesday.

The Africa-focused company operates mines in Mali and Ivory Coast. It is currently developing the Kibali mine in the Democratic Republic of Congo.

Speaking at a mining conference in Congo’s capital Kinshasa, Mark Bristow said that a raft of proposals by African countries to capitalise on historically high metals prices by imposing new tax regimes could backfire.

“I am concerned that recent moves by African governments to drastically change mining codes and impose punitive taxes have not considered the risks to the long term sustainability of the resource industry,” he said.

“(We must) all resist - governments and companies alike - the temptation of harvesting short term gains from an industry still very much in its infancy,” he added.

Ivory Coast, where Randgold inaugurated its Tongon gold mine late last year, announced plans last month to implement a windfall tax at 19 percent on gold profits, though it later said the percentage may be up for negotiation.

Ghana, Africa’s number 2 bullion producer after South Africa, proposed a similar tax of 10 percent late last year.

Congo is expected to replace its ten-year-old mining code early next year, with the emphasis firmly on generating more government revenue from the sector.

The country’s mines ministry has repeatedly said it does not generate enough income from its vast mining assets while attempting to reassure investors already nervous following a chaotic review of mining contracts that ended in 2010.

Randgold Resources is planning to start producing gold from its Kibali project, expected to be one of Africa’s largest gold mines, towards the end of next year. But Bristow warned that the venture’s viability would be at risk if the fiscal burden placed on companies by the new code was increased.

“Over a projected lifetime of 16 years the DRC state will in fact receive more than the other shareholders who are financing 100 percent of the project,” he told delegates at the conference.

“One of our key requirements is that the tax system should be stable, predictable and transparent. Negative changes to the fiscal rules would no doubt damage our ability to meet our investment criteria,” he said.

Congo, which is recoving from decades of corrupt dictatorship and one of the world’s deadliest wars, is betting heavily on its largely unexploited mineral wealth, which includes massive reserves of copper, tin and gold.

However, despite assurances by the government that it is tackling corruption and opening its doors to investment, it remains one of the toughest countries in the world in which to do business.

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