October 1, 2012 / 12:00 PM / 8 years ago

Ivory Coast says may negotiate gold tax rate

* Government adopted 19 pct tax on profits last month

* Companies say new levy could choke sector development

By Joe Bavier

ABIDJAN, Oct 1 (Reuters) - Ivory Coast is open to discussing with miners the rate of a proposed windfall tax on gold profits but will not back away from the levy meant to capitalise on soaring world prices for the metal, the country’s mines minister said on Monday.

The West African nation’s government adopted a tax of 19 percent on profits above an indicative cost of production set at $615 per ounce during a cabinet meeting last month.

Miners say the new tax would violate existing stability agreements and hinder the development of the country’s nascent mining sector.

“Ivory Coast is not the first country to apply an increase on profits and super profits ... This is not new,” Mines Minister Adama Toungara said during a meeting with mining companies on Monday.

“What we can perhaps discuss is the percentage. But we can’t say that this right of the state to participate in these fabulous profits cannot be granted to Ivory Coast,” he said.

West Africa-focused Randgold Resources, Australia’s Newcrest Mining and Toronto-listed La Mancha Resources all 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.

“(Ivory Coast) is in a very early stage of mining activity, and this sector must be allowed to develop,” said Moussa Serifou, general manager in Ivory Coast for Cluff Gold, which holds a 90-percent stake in the Yaoure mine.

“Any significant change in the sector could compromise the contribution of many companies ... the introduction of additional taxes could rule out 80 percent of projects,” he said.

Gold prices rose by just over 5 percent last month, their largest monthly percentage gain since January’s 11-percent increase. Spot gold remained steady at $1,770.31 an ounce on Monday morning.

The Ivorian government says the modified tax structure will allow it to earn more than 44 billion CFA francs ($86.30 million) in revenues from the gold sector this year, more than double the forecast under the previous tax structure.

Neighbouring Ghana proposed a similar windfall tax of 10 percent on mining companies’ profits in its 2012 budget, but it has since indicated that it may scrap the levy over fears it could do more harm than good.

Ivory Coast 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 mines ministry has forecast output of 14 tonnes this year, roughly double 2010 output, with annual production predicted to rise to 25 tonnes by 2015 as new mines come on stream.

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