April 24, 2010 / 10:26 AM / 9 years ago

UPDATE 2-Tanzania increases royalties in new mining law

* Government to hold stake in new projects

* Tanzania is Africa’s third largest gold producer

* Firms to list on stock exchange

(Adds details, quotes, background)

By Fumbuka Ng’wanakilala

DAR ES SALAAM, April 24 (Reuters) - Tanzania’s parliament has passed a new mining law that increases the rate of royalty paid on minerals like gold from 3 percent to 4 percent and requires the government to own a stake in future mining projects.

Tanzania is Africa’s third largest gold producer, but also has reserves of uranium, nickel and coal. Gold exports alone earned it $1.076 billion in 2009, up from $932.4 million the previous year.

The Mining Act 2010 passed late on Friday also requires mining companies to list on the Dar es Salaam Stock Exchange.

As part of the new legislation, Tanzania will not issue new gemstone mining licences to foreign companies. Current agreements with foreign mining companies remain unchanged.

“This bill makes comprehensive provision for prospecting for minerals, mining, processing and dealing in minerals, for the granting, renewal and termination of mineral rights, for payment of royalties, fees and other charges and for any other relevant matters,” said part of the legislation.

“The bill is a response to challenges faced and experience gained during 12 years of the implementation of the Mining Act ... that was enacted in the year 1998.”

African Barrick Gold ABDL.L (ABX.TO) has four gold mines in Tanzania while Australia’s third largest gold miner, Resolute Mining (RSG.AX) and South Africa’s Anglogold Ashanti (ANGJ.J) also have gold operations there.

British mining company African Eagle Ltd. AFE.L is raising funds for its nickel project in Tanzania.

Gemstones identified by the new law include diamonds, tanzanite, emerald, ruby, sapphire, turquoise, topaz, and others. Gemstone producer Tanzanite One TNZ.L, will not be affected by the new ownership rules.


Mining stakeholders said they will issue a joint statement on the new mining law on Monday.

“The government will increase revenues a lot thanks to the new mining legislation ... But, it might send a negative signal to investors and might impact foreign direct investment. I’m worried on that,” Zitto Kabwe, a member of parliament from the opposition Chadema party told Reuters.

The MP, who was a member of a commission appointed in 2007 to review Tanzania’s mining sector, said the new legislation would bring significant changes to mining policy.

“We were supposed to pass a new law that balances benefits of the people and the interests of mining companies. The mood of the day in Tanzania is that foreign investors are stealing from the country and this might not necessarily be the case all the time.”

Government’s stake in future mining projects would be determined by the level of investment in each individual joint venture, Kabwe said.

Tanzania earned $57 million from mining royalties in 2009, but is expected to double this amount after the new mining law comes into force, he said.

“The main highlight of this new legislation is that it makes gemstone mining the preserve of Tanzanians. It also changes the method of calculating royalties by using the gross value of minerals instead of the net value,” said Kabwe. (Editing by Helen Nyambura-Mwaura and William Hardy)

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