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- May 10, 2012
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By Tanzeel Akhtar
Tanzania’s president John Magufuli and Barrick Gold Corp are racing to negotiate a resolution to an escalating dispute over subsidiary ACACIA Mining PLC’s operations in the country.
While ACACIA maintains it would prefer a negotiated solution, the company served notice for arbitration in London on July 4.
ACACIA will not be party to the negotiations between Barrick, which owns a 64 percent stake in the company, and the Tanzanian government.
“We are now fully focused on negotiations with the Tanzanian government to bring about a swift resolution to the situation at hand. Our focus now is to cooperate with the government’s team and work towards a win-win solution for all,” ACACIA Mining said in a statement to This is Africa.
The multibillion dollar tax dispute between the dual London and Dar es Salaam-listed miner and the Tanzanian government escalated in June when several hundred locals invaded Acacia’s North Mara gold mine attempting to steal gold ore, leading to violent clashes with police. Some 66 people were arrested, Reuters reported.
ACACIA’s three mines in Tanzania were blocked from export in March after two government commissions alleged the company had been underreporting mineral levels in its mine, potentially cheating the government of billions in taxes.
The company denies it has avoided paying taxes to the host government. Nevertheless, since the ban ACACIA's market value nearly halved to about $1.4bn.
“We have never stolen, we have never evaded taxes, we have never forged documents to avoid paying royalties and we have never been unlawful,”ACACIA CEO Brad Gordon wrote in an internal memo on June 13.
The crackdown on Tanzania’s mining sector is wider than just targeting ACACIA’s operations. The Tanzanian government unexpectedly announced a ban on the export of all unprocessed minerals in March, fearful it was losing out on revenues and royalties from processed goods.
Investors in the sector, which accounted for 3.7 percent of the east African country’s GDP in 2014, have been watching the Magafuli government’s actions with concern.
Mr Magafuli - nicknamed the bulldozer - has a reputation for a hard-charging, no nonsense attitude that is tough on corruption but also brooks little opposition. Critics claim he can be overly single-minded and abrasive in pursuit of his projects.
According to Per Wimmer, founder of corporate advisory Wimmer Financial LLP, there is more to the conflict. The Magafuli government is “keen to keep more of the gold value chain” in Tanzania.
The administration has been pushing larger gold producers to set up smelting businesses in Tanzania.
Acacia, for its part, had not complied. “ ACACIA does not share this eagerness for smelting to form part of their future business. The government is, therefore, trying to apply a stick and carrot approach to achieve its objective,” he explains.
Smelting is a capital intensive and lower return business than straight extraction, though it does offer more job opportunities and export revenues for host countries. Currently most African gold smelting is done out of South Africa.
Tanzania’s president John Magufuli and Barrick Gold Corp are racing to negotiate a resolution to an escalating dispute over subsidiary ACACIA Mining PLC’s operations in the country.
While ACACIA maintains it would prefer a negotiated solution, the company served notice for arbitration in London on July 4.
ACACIA will not be party to the negotiations between Barrick, which owns a 64 percent stake in the company, and the Tanzanian government.
“We are now fully focused on negotiations with the Tanzanian government to bring about a swift resolution to the situation at hand. Our focus now is to cooperate with the government’s team and work towards a win-win solution for all,” ACACIA Mining said in a statement to This is Africa.
The multibillion dollar tax dispute between the dual London and Dar es Salaam-listed miner and the Tanzanian government escalated in June when several hundred locals invaded Acacia’s North Mara gold mine attempting to steal gold ore, leading to violent clashes with police. Some 66 people were arrested, Reuters reported.
ACACIA’s three mines in Tanzania were blocked from export in March after two government commissions alleged the company had been underreporting mineral levels in its mine, potentially cheating the government of billions in taxes.
The company denies it has avoided paying taxes to the host government. Nevertheless, since the ban ACACIA's market value nearly halved to about $1.4bn.
“We have never stolen, we have never evaded taxes, we have never forged documents to avoid paying royalties and we have never been unlawful,”ACACIA CEO Brad Gordon wrote in an internal memo on June 13.
The crackdown on Tanzania’s mining sector is wider than just targeting ACACIA’s operations. The Tanzanian government unexpectedly announced a ban on the export of all unprocessed minerals in March, fearful it was losing out on revenues and royalties from processed goods.
Investors in the sector, which accounted for 3.7 percent of the east African country’s GDP in 2014, have been watching the Magafuli government’s actions with concern.
Mr Magafuli - nicknamed the bulldozer - has a reputation for a hard-charging, no nonsense attitude that is tough on corruption but also brooks little opposition. Critics claim he can be overly single-minded and abrasive in pursuit of his projects.
According to Per Wimmer, founder of corporate advisory Wimmer Financial LLP, there is more to the conflict. The Magafuli government is “keen to keep more of the gold value chain” in Tanzania.
The administration has been pushing larger gold producers to set up smelting businesses in Tanzania.
Acacia, for its part, had not complied. “ ACACIA does not share this eagerness for smelting to form part of their future business. The government is, therefore, trying to apply a stick and carrot approach to achieve its objective,” he explains.
Smelting is a capital intensive and lower return business than straight extraction, though it does offer more job opportunities and export revenues for host countries. Currently most African gold smelting is done out of South Africa.
