Gold mining companies pay more to govt at last

Giant gold mining companies, African Barrick Gold (ABG) Limited, Geita Gold Mines and Resolute Gold Mines Ltd have started abiding to the new mining law after concluding a series of negotiations with the government.

The government enacted the new Mining Act in 2010 under which, among other things, raised royalty rates across the board by basing calculations on gross profits rather than net values as before.

Royalty rates for gold are now fixed  at 4 per cent, up from 3 per cent, that of uranium is 5 per cent  while diamond miners will continue to pay 5 per cent.

Both Presidents Benjamin Mkapa and Jakaya Kikwete formed a number of committees to study the shortcomings in the mining legislations and make proposals that would enable the country to benefit more from its mineral resources. Some of the proposals have been included in the new law.

The negotiations, according to sources from both the government and the mining sector, have started paying off. Discussions included other issues that were not part of the new law, including convincing the miners to accept the ring-fencing practice income tax, according to the Commissioner for Minerals in the Ministry of Energy and Minerals, Mr Ally Samaje.

Ring fencing entails limiting cost recovery for an extractive project to the revenues generated by that same project. The Income Tax Act has no provision for ring fencing on a mine-by-mine basis, leaving companies with the option of siphoning one mine’s revenues to offset another’s losses.

 “We have been in good progress in our negotiations with the big gold mining companies. The three gold miners, ABG, Geita Gold Mines and Resolute have begun to pay royalties of 4 per cent.

Technically, they have graduated from paying 3 to 4 per cent in royalty as per the new mining law,” Mr Samaje said. The commissioner, who spoke on behalf of the ministry’s permanent secretary, said there were six gold mining projects that are already paying royalties and taxes under the 2010 Mining Act.

They include the four under ABG namely; Bulyanhulu, Tulawaka, Buzwagi and North Mara and Geita and Resolute gold mines.

He said while in 1999 world market prices of gold ranged between US$250 and $300 per ounce, now the price of gold is $1,700 per ounce, which is almost seven times the price fetched by gold dealers more than ten years ago.

“Gold mining projects now are in a better advantage than they were a decade ago. We are also in a better position to negotiate with investors so that they spread more benefits to the citizens in terms of corporate social responsibility projects,” he said.

The commissioner for minerals said that such positive developments in implementation of the new Mining Act was a welcome move that must go hand in hand with increased benefits of the mining sector to national economy.

“With these positive developments, we want to see more benefits to Tanzanians, especially those surrounding the mines. This is possible through corporate social responsibility programmes,” he said.

Deputy minister for Energy and Minerals Stephen Masele also says the negotiations involved reviewing the Mining Development Agreements (MDAs) seeking to reduce grace period from 15 to 10 years for all major gold investors.

“There is a need to further educate stakeholders and Tanzanians in general on implementation of 2010 Mining Act, because a lot of developments have taken place, but many people are still harbouring doubts,” he said.

The Chairman of Tanzania Chamber of Minerals and Energy (TCME), Mr Joseph Kahama, confirmed to The Citizen that the mining firms were implementing the new law, specifically on royalty payments and new tax formula.
Source: The Citizen,http://www.thecitizen.co.tz
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