ABG agrees to raise royalty on Tanzanian gold

BY BUSINESS REPORTER

AFRICAN Barrick Gold Plc (ABG) has agreed with the Tanzanian government to raise the royalty rate it pays on gold exports, the country's minerals ministry said yesterday.

ABG, which has four mines in Africa's fourth-largest gold producing country, agreed to an increase in royalties to 4 percent from 3 percent and also agreed to pay the royalty based on a new revenue formula.

The formula takes into account the gross sale value of gold sent abroad instead of its net value at point of export.

The minerals ministry announced the deal in newspaper advertisements, which also said talks were proceeding with Anglogold Ashanti Ltd, which owns the Geita gold mine, and Resolute Tanzania Ltd, which owns the Golden Pride mine, with a view to those two companies also paying the new royalty rate.

A mining official familiar with the talks, however, told Reuters that the government statement was premature and that several details of the deal were yet to be agreed.

Tanzania had begun major reforms of its mining sector following growing criticism over the industry's relatively minor contribution to economic growth. It forecasts the contribution of the mining sector to gross domestic product (GDP) will grow to 10 percent by 2025 from 3.8 percent last year.

The ministry said seven gold-producing mines in Tanzania had paid 341.57 billion Tanzanian shillings in royalties between 1998 and last year. It said large-scale gold mines in the country had invested some $2.92 billion during the period.

"The mines posted total output from 1998 to 2010 of 12.56 million ounces of gold," said the minerals ministry, adding that the total gold produced during the period, and its byproducts of silver and copper, was worth $7.53 billion.

The ministry said ABG's Tulawaka gold mine was expected to pay $32 million corporate tax calculated from 2008 after successful negotiations on the payment of new taxes based on the country's 2010 mining legislation.

It said two other gold mines owned by Anglogold Ashanti and Resolute Tanzania had already started to pay corporate tax.

The Tanzanian government has urged ABG to sell at least 10 percent of its shares on the Dar es Salaam Stock Exchange (DSE) after the mining company cross-listed on the local bourse on December 7.

Barrick Gold Corp, the world's biggest gold miner, owns around 74 percent of the shares in ABG, with the remaining stake held by external investors.