ARUSHA, Tanzania (Reuters) - Tanzania should stick to existing agreements in the fast-growing mining sector or investors will lose confidence, the company which owns the country’s biggest gold mine said on Saturday.
Major international miners are still in talks with the government two years after it passed mining legislation that included a rise in royalties on gold exports to 4 percent of gross value from 3 percent of netback value.
The law also required mining companies to pay the government 0.3 percent of their annual turnover, up from the previous requirement of a maximum $200,000 a year.
AngloGold Ashanti told Reuters it expected the Dodoma government to respect its mineral development agreement, which it said was a legal contract signed before the new mining legislation was put in place.
“Our investors obviously expect that those contracts should be honored because they’ve made an investment for the long term,” Gary Davies, managing director of AngloGold’s Geita gold mine said in an interview.
“What’s key is that the goal posts are stable because otherwise investors will need to factor that into their investments. I think any investor would be concerned about that, we are no different.”
East Africa’s second biggest economy argues it is not seeing the fruits of soaring commodity prices, in particular gold. It plans to increase the mining sector’s contribution to the economy to 10 percent of GDP by 2025 from 3.3 percent last year.
But the miners say hiking taxes and increasing royalties is the wrong approach. They say Tanzania should focus on attracting more investors and issuing additional mining licenses.
Tanzania is Africa’s fourth biggest gold producer. Gold export earnings jumped 47 percent to $2.226 billion last year.
Major gold mining companies in Tanzania include African Barrick Gold Plc, which has four gold-producing mines, AngloGold Ashanti Ltd and Resolute Mining Ltd.
Tanzania’s energy and minerals ministry declared in July that all mining companies had agreed to pay the new royalty rate from May and said the government would keep mining contracts under review in a bid to deepen their economic contributions.
African Barrick Gold, which has four gold mines in Tanzania, is however the only company that has so far publicly announced it will pay the new 4 percent royalty rate.
AngloGold’s Davies said negotiations continued over several aspects of the 2010 legislation.
“Investors need to have that degree of certainty and stability in order to put large investments over the long term.”
The Geita mine recorded revenues in excess of $4.2 billion over the past decade and paid $683 million to the Treasury during the period in corporate tax, royalties, withholding taxes, payroll taxes and other fees, Davies said.
“Last year we produced 494,000 ounces and we are looking to be in a similar range this year,” he said.
Laurent Coche, AngloGold’s senior vice-president for sustainability in Africa, said the company wanted talks with Tanzania about how to boost growth of the mining sector.
“There is also a need to distinguish between the short-term issues and long-term issues. We would be willing to be part of a conversation around developing the country’s mining vision ... looking at 20 or 30 years down the road,” Coche told Reuters.
Other mining companies contacted on the matter directed Reuters to the Tanzania Chamber of Minerals and Energy (TCME), which represents the interests of mining investors.
It has said mining contracts all included fiscal stability clauses and that the unstable legal environment was hindering growth in the mining sector.
African Barrick Gold’s Tulawaka gold mine and Resolute Mine’s Golden Pride mine are both expected to close down in mid-2013 after depleting their reserves, although work is underway to explore possibilities of mine-life extension.
Editing by Richard Lough
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