AngolGold Ashanti’s subsidiaries in Tanzania will commence arbitration proceedings against the government to ensure agreements for local operations are not affected.AngloGold Ashanti notes the enactment by the Republic of Tanzania’s Parliament and publication in the country’s official Government Gazette of the Natural Wealth and Resources Act, No 5 of 2017, the Natural Wealth and Resources Contracts Act, No 6 of 2017 and the Written Laws Act, No 7 of 2017.
AngloGold Ashanti’s indirect subsidiaries, Samax Resources and Geita Gold Mining, are parties to a Mine Development Agreement (MDA) in relation to the development and operation of the Geita gold mine in Tanzania, which governs the relationship between Samax Resources and Geita Gold Mining and the Government of Tanzania in relation to Geita Mine.
The MDA was instrumental in the decision to make the significant investment in the development of Geita Mine, at a time of significantly lower gold prices and when Tanzania was an untested jurisdiction for new mine development.
Since starting production almost two decades ago, Geita Mine has been a source of significant benefit to all stakeholders, yielding more than $1 billion in monetary benefit to the Government of Tanzania.
Last year alone, a total of $130 million in taxes was paid by Geita Mine.
The three pieces of new legislation in question purport to make a number of changes to the operating environment for Tanzania’s extractive industries, including those in its mining, and oil and gas sectors.
These changes include, among others: the right for the Government of Tanzania to renegotiate existing MDAs at its discretion; the provision to the Government of Tanzania of a non-dilutable, free-carried interest of no less than 16% in all mining projects; the right for the Government to acquire up to 50% of any mining asset commensurate with the value of tax benefits provided to the owner of that asset by the Government of Tanzania; removal of the refund of input VAT incurred; an increase in the rate of revenue royalties from 4% to 6%; requirements for local beneficiation and procurement; and constraints on the operation of off-shore bank accounts.