Tancoal Energy, the 70%-owned subsidiary of Intra Energy Corporation and 30% the National Development Corporation received the attached notification from the Ministry of Minerals, Mining Commission of Tanzania directing Tancoal to charge royalty to customers on their cost of transport.
The following summarises the impact on customers and gives a background to the royalty issue:
- 3% Royalty + 1% Clearance and Inspection Fee to be charged on the cost of transport from Tancoal mine to customers plants for both domestic and export customers
- Mining Commission has given standard rates per ton per km to be charged;
- USD $0.06 per ton per km for domestic customers;
- USD $0.08 per ton per km for export customers;
- Price of coal will increase by USD $2.94 per tonne to largest domestic customers and USD $8.23 per tonne to largest export customers;
- Mining Commission will not issue coal transportation permits after 15 September 2019 if the royalty on transport is not implemented;
- Tancoal does not own trucks and will be forced to sell to licenced dealers who will buy on behalf of customers creating an additional cost.
Tancoal has been producing and selling coal in Tanzania since 2011.
Coal from the mine is transported 52 km to the sales point at Kitai where the coal undergoes final processing and is then loaded onto customers trucks Free On Transport, which is where change of ownership takes place.
Royalties have always been paid at the sales point where the Government calculates the royalty and issues an invoice for payment.
Three independent law firms and a report received in July 2019 from the Attorney General all agreed that this was the proper interpretation of the law.
In addition, Tancoal has gone through numerous Government audits over the past 8 years, from agencies such as the Tanzania Revenue Authority, Tanzania Minerals Audit Agency and the Tanzania National Audit Office which have never mentioned this procedure as being incorrect.
The Attorney General has now recalled his July report and has changed the ruling to state that Tancoal is not in compliance with the law and should charge royalty on the transportation of the coal to the destination, wherever that may be.
Tancoal has been notified by the office of the Ministry of Minerals that the law must be implemented by 15 September 2019 otherwise trucks will not be allowed to leave the sales point.
The company continues to discuss this matter with the Government and customers to find a solution.