MAC: Mines and Communities

Tanzania mulls "Super Tax" On Minerals

Published by MAC on 2011-06-13
Source: PlanetArk, Reuters (2011-06-09)

And it's not alone

Tanzania has, for some years, been "led by the corporate tail" when it comes to securing an equitable share of mineral royalties and other taxes.

Now the government  is contemplating a "Super Profits Tax" on mine earnings.

And it is not alone.  Peru's newly-elected president, Ollanta Humala, has also indicated he might introduce such legislation in the near future. See: Peru Mining Stocks Plunge as Humala Claims Election Victory

In an interview with Mining Weekly (10 June 2011) Thomas Wilson,  Control Risks Group's senior analyst for Africa, said he thought such moves were "inevitable... And it's always been like that, it's always followed the mineral cycle".

He added: "Reviews of outdated laws and a push by governments to be more active in their resources sectors are not necessarily a bad thing...But they must resist the temptation to turn reviews of laws and contracts into a purely revenue generating exercise."

London-listed African Barrick Gold and South Africa's AngloGold Ashanti both insisted last week that they were protected from any tax rise by existing mineral development agreements.

However, Christopher Melville of political risk consultancy, Menas Associates, points out:

"There are few new mines coming on stream in Tanzania and there is relatively little exploration investment as well. If the government is serious about the windfall tax it can have no other targets than the producing mines operated by the big players".

In contrast to the position adopted by African Barrick and AngloGold Ashanti , it now appears that Australia's own world-class mining companies have accepted the need for new tax laws in the country.

Following a major advertising campaign during the past year, bankrolled by Australia's mining industry and which helped secure the downfall of the country's prime minister,  the idea of a 40% "super profits tax" was dropped in favour of a 30% "Resource Rent". See: London Calling reviews Australian taxation

Tanzania Says Mulls "Super Tax" On Minerals

By Fumbuka Ng'wanakilala

PlanetArk

9 June 2011

Tanzania, one of Africa's top gold producers, is considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan, according to documents seen by Reuters.

The move follows similar steps in other producer countries that have sought to increase fiscal revenue from the mining industry and to take advantage of rising prices.

Australia was among the first to consider a hefty resource tax, but it had to climb down from initial proposals for a headline tax of 40 percent after pre-election talks with mining giants like BHP Billiton and Rio Tinto.

"Revenue from the mineral resources will be one of the important sources of financing the medium-term plan. Considering the increasing trend in mineral prices, it is optimal to introduce a super profit tax on the windfall earnings from the mineral sector," the plan, launched by President Jakaya Kikwete late on Tuesday, said.

Worries over the tax helped drag down shares of miners operating in the region including African Barrick Gold, which has four gold mines in Tanzania. At 1301 GMT, its shares were trading at 414 pence, down 8 percent, underperforming a sector battered by recovery concerns.

Shares in AngoGold Ashanti, which also has gold operations in the country, were down 2.6 percent.

"African Barrick Gold is not aware of any such plans and has not been involved in any discussions or consultation in relation to this, either as ABG or through the Tanzanian Chamber of Minerals and Energy," the company said in a statement.

"All of our current operating mines are subject to Mineral Development Agreements which guarantee tax and fiscal stabilization for a long-term mining project by reference to the law in force at the effective date of the agreement."

It said MDAs could not be amended without agreement.

Tanzania is set to unveil its 2011/12 budget on Wednesday.

(Editing by George Obulutsa)


Documents confirm Tanzania is looking at mining "super profit tax"

Reuters

8 June 2011

DODOMA -Tanzania, one of Africa's top gold producers, is considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan, according to documents seen by Reuters. The move follows similar steps in other producer countries that have sought to increase fiscal revenue from the mining industry and to take advantage of rising prices.

Australia was among the first to consider a hefty resource tax, but it had to climb down from initial proposals for a headline tax of 40 percent after pre-election talks with mining giants like BHP Billiton and Rio Tinto.

"Revenue from the mineral resources will be one of the important sources of financing the medium-term plan. Considering the increasing trend in mineral prices, it is optimal to introduce a super profit tax on the windfall earnings from the mineral sector," the plan, launched by President Jakaya Kikwete late on Tuesday, said.

Worries over the tax helped drag down shares of miners operating in the region including African Barrick Gold, which has four gold mines in Tanzania. At 1301 GMT, its shares were trading at 414 pence, down 8 percent, underperforming a sector battered by recovery concerns.

Shares in AngloGold Ashanti, which also has gold operations in the country, were down 2.6 percent.

"African Barrick Gold (ABG) is not aware of any such plans and has not been involved in any discussions or consultation in relation to this, either as ABG or through the Tanzanian Chamber of Minerals and Energy," the company said in a statement.

"All of our current operating mines are subject to Mineral Development Agreements which guarantee tax and fiscal stabilisation for a long-term mining project by reference to the law in force at the effective date of the agreement."

It said MDAs could not be amended without agreement.

Tanzania is set to unveil its 2011/12 budget on Wednesday.

(Reporting by Fumbuka Ng'wanakilala; editing by George Obulutsa)


AngloGold says any Tanzanian "super profits" tax will not apply

Reuters

8 June 2011

JOHANNESBURG - Africa's biggest gold miner AngloGold Ashanti said on Wednesday its Geita mine in Tanzania would not be effected if the country imposes a super tax on the industry.

"Our mining development agreement cements in place existing tax arrangements for the life of Geita mine. So it wouldn't be affected," spokesman Alan Fine said in an e-mailed response to a query from Reuters on the matter.

Tanzania, one of Africa's top gold producers, is considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan, according to documents seen by Reuters.

(Reporting by Ed Stoddard and Yumna Mohamed, editing by David Dolan)

__________________________________________________________________________

Controversial Australian mining tax law moves closer

Reuters

10th June 2011

CANBERRA - Australia moved closer to introducing a contentious 30% mining tax being eyed by other countries, releasing draft laws and seeking reaction from resource companies to legislation expected to be passed later this year.

The government unveiled the mining tax over a year ago but modified its plan before last August' s elections after global miners including BHP Billiton , Rio Tinto, and Xstrata launched a public campaign against it.

Big miners and minority lawmakers are now broadly supportive and the legislation is expected to pass parliament and take effect on July 1, 2012.

Treasury forecasts the tax will reap A$7.7-billion in its first two years, helping the budget return to surplus by fiscal 2012/13.

"These reforms will ensure Australians receive a better return from their non-renewable resources and will help strengthen our economy through increased superannuation, new and better infrastructure, and business tax cuts," Treasurer Wayne Swan said in a statement on Friday.

Greens lawmakers who will control the balance of power in the upper house Senate from July this year said they would try to harden the tax to reap more from miners, but would not threaten passage of the legislation by insisting on changes.

"It (the draft) will provide a good opportunity to improve the mining tax," a Greens party spokeswoman said.

Resource sector fury over the tax and a A$20-million campaign against it ahead of last year's cliff-hanger elections led in part to the ousting of former prime minister Kevin Rudd and a minority government for Rudd's successor Julia Gillard.

Private consultations with miners over the past few months helped iron out differences over the tax, which applies only to coal and iron ore, but some sticking points remain before the bills go to parliament, after a second drafting round.

The biggest point of difference now involves valuation of multiple tenements within a project, as their classification as a single or multiple projects will influence tax levels and the value of projects that can be shielded from the tax.

The tax point for underground coal mines is also a sticking point, as the government is resisting any costly concessions after Western Australia (WA) state raised royalties, threatening to cause a A$2-billion national budget hole.

Resource Minister Martin Ferguson has promised miners reimbursement for future state royalties, in exchange for acceptance of the tax.

But BHP and AngloCoal are arguing that mine sites straddling multiple exploration or production permits should be treated as a single project, helping them claim tax breaks.

Some big miners have complained the tax would damage Australia's sovereign risk reputation, although the government has pointed to a pipeline of planned resource projects totalling A$173.5-billion.

Other resource countries are also looking closely at following suit, including Tanzania, which is considering introducing a mining super profit tax closely aligned to Canberra's resource rent tax.

Peru's newly elected president, Ollanta Humala, has also flagged higher mining taxes.

Australia's legislation excludes small miners with profits of under A$50-million a year and allows projects to access immediate write offs on new investments. The tax brings forward unused losses at the official long-term bond rate plus 7%.

The draft, which called for comment by July 14, said the legislation would account for different commodities by using appropriate pricing arrangements to ensure only the value of the resources extracted was taxed.

BHP said in a statement it was committed to working with the government to implement the tax as agreed, while Rio Tinto said it was still assessing the impact of the 161 pages of legislation

The government, based on advice from an advisory group on the tax, wants each tenement or lease within a mining site to be valued individually, creating bureaucratic hurdles for companies and possibly a tax burden.

The Mineral Council of Australia, which represents Australia's biggest miners, said the draft laws were an important milestone.

"For the Australian minerals industry, the overriding policy objective is to ensure industry can invest in Australia in an environment of stable and internationally-competitive taxation arrangements," the council said.

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