Kinross Gold resolves Mauritania disputes and secures expansion

JOHANNESBURG (Reuters) - Canadian mining firm Kinross Gold on Monday said it reached an agreement with Mauritania’s government under which the company will pay a total of $25 million to resolve disputes over fuel use, tax exemptions, and mining licences.

FILE PHOTO: People look on during the Kinross Gold Corporation annual general meeting for shareholders in Toronto, May 9, 2012. REUTERS/Mark Blinch

Under the deal, the government will give Kinross a 30-year exploitation licence for its new project Tasiast Sud. Mauritania will receive a 15% free carried interest in the project, with an option to purchase an additional 10% after further feasibility work is completed.

The deal terms are similar to those agreed by Barrick Gold in January when it ended a long-running tax dispute with Tanzania by giving the government a stake in three gold mines.

Mauritania will reinstate a tax exemption on fuel duties and repay around $40 million in VAT refunds to Kinross, the company said in a statement.

Kinross will pay the government $10 million to resolve disputes around fuel use and tax exemptions, and $15 million upon receiving the Tasiast Sud exploitation licence, to resolve disputes around its application to convert the exploration licence into an exploitation licence.

It also said it would now pay an escalating royalty - tied to the price of gold - from 4% for prices below $1,000 an ounce, to 6.5% for prices of $1,800/oz and above.

The gold price has soared as the global pandemic drives investors into safe-haven assets, and was last trading just above $1,700 per ounce.

Kinross, whose Tasiast gold mine produced 391,097 ounces of gold last year, said the agreement further develops a “positive foreign investment climate” in Mauritania.

Mines minister Mohamed Abdel Vetah said: “Tasiast is an important contributor to Mauritania and we believe our new agreement will be a positive model for other foreign mining investors”.

A workers’ strike at Tasiast mine last month resulted in a two-week shutdown which the company said would not affect 2020 production.

Reporting by Helen Reid; editing by Emelia Sithole-Matarise