Tanzania is hailing the agreement it signed with Barrick Gold,
the owners of Acacia Mining, as a reference point for other African
countries struggling to get the most from their natural resources in the
face of lopsided contracts entered into with multinationals.
The
agreement marks a win for President John Magufuli who since the
beginning of the year has resolutely pushed through changes to laws
governing the extractive industry convinced that, despite the risk of
provoking investor flight, they needed urgent reform in order to benefit
the country.
“I would want to see all other gold
mining firms follow suit and append (signatures) to this kind of
agreement. The same goes for diamond and tanzanite. Those who don’t want
can leave. We would like to see Tanzania benefit more from its
resources and such agreements will guarantee that,” President Magufuli
said in a statement after Barrick Gold agreed to cede substantial
proceeds from mineral sales to the government.
President
Magufuli had shortly before that coaxed out of Barrick chairman John
Thornton unprecedented concessions, including splitting halfway the
economic benefits from the business, paying $300 million in tax arrears,
infrastructure development and better working conditions for workers in
the mines.
50:50 economic benefits
President
Magufuli instructed Justice and Legal Affairs Minister Palamagamba
Kabudi to ensure that other mining firms align their operations to the
agreement reached with Acacia.
Acacia agreed to give a
16 per cent stake in its three mines; Bulyanhulu, Buzwagi and North Mara
to the government. The two would incorporate a company which, after
meeting costs and paying taxes and royalties, would share 50:50 economic
benefits from the business. It was not immediately clear what this
entails though Mr Kabudi suggested it referred to profit.
“The
50:50 sharing of the revenue will happen after the miner has paid up
the requisite royalties and taxes, including 6 per cent royalty, value
added tax of 30 per cent, road and fuel levy, and other levies that they
are supposed to pay,” Mr Kabudi.
Indonesia
The
agreement is being watched with interest by big miners globally as it
is likely to embolden other governments to change mining laws or alter
operating contracts midstream as a wave of resource nationalism blows
across the world.
In Indonesia, Rio Tinto, Newcrest
Mining (both Australian) and Freeport McMoran (US) are bracing for
bruising new laws that seemingly relax rules on export of ores but
actually require companies to show progress after every six months upon
setting up of local processing facilities.
The
Indonesian laws also remove exemptions from a requirement that companies
sell at least 49 per cent of their companies to locals within ten years
of operation.
Tanzanian workers
Tanzania
got a nod from Barrick that Acacia would construct a smelting facility,
and that the miners will list at least 25 per cent of their shares at
the Dar es Salaam Stock Exchange.
“This agreement is a
first in Africa and other countries will come to learn from us. We have
many projects such as Stigler’s gorge, railway and roads. I want this
money ($300 million) to be paid quickly because Tanzania needs it,”
President Magufuli said.
Acacia is expected to pay $300 million as goodwill for the $190 billion tax demand that Tanzania slapped on the firm in July.
President
Magufuli’s urgent need for cash, however, may not be met has Acacia has
indicated it can only make the payment in tranches.
Mr
Kabudi said that the miner has agreed to abide by the new laws, and to
move their headquarters from Johannesburg to Mwanza, ‘the city that is
located at the heart of the gold zone.’
Acacia’s accounting department would also be moved from London to Dar es Salaam.
New company
A
new Tanzanian operating company will be created to manage Bulyanhulu,
Buzwagi and North Mara, and all future operations in the country.
Barrick
said it will allow government representation on the board running the
three mines, maximise employment of Tanzanians, build local capacity and
a tarmac road to Bulyanhulu to ease access to this mining site.
“It
will also increase procurement of goods and services within Tanzania.
We have also committed to work with Tanzania to advance concepts for
increasing in-country beneficiation of gold,” Barrick said, committing
to total transparency of operations.
A ban on export of mineral concentrates is under review.
The
mining firm also agreed to allocate funds for the construction of a
college building for research, to be complemented by a specialised
testing lab. Barrick also said that they were still reviewing
conditions, together with Tanzania, for the lifting of the concentrate
export ban.
President Magufuli said workers would now
be allowed to work from their homes instead of living in dormitories
within the mines, be hired permanently and have any disputes resolved
within the country.
Prof Thornton, however, said the
agreement would be subject to approval by Barrick’s independent
directors and shareholders who own 64 per cent of Acacia.
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