MAC/20: Mines and Communities

African roundup

Published by MAC on 2006-06-26


African roundup

26th June 2006

Losing value (and lives) in Africa

Despite (or because of )its recent huge expansion, gold mining in Tanzania accounts for little more than 2% of GDP.

Now legislators are demanding better profit sharing arrangements and fuller accountability to the communities where mines are located.

But -as reflected in tesimony at this year's international conference of theAfrican Initiative on Mining, Environment and Society (AIMES) - this will be far from an easy, or merely economic, task.


Foreign firms dominate Tanzania's mining sector

By MIKE MANDE
The East African

26th June 2006

Part of the reason why the mining industry is currently the whipping boy of parliament is because it is dominated by multinationals.

Except for the joint venture firm Williamson Diamond Ltd, which is co-owned by the government and the South African-based De Beers Ltd, local shareholding in mining companies is minimal.

And, with Tanzania having very few companies with the capacity to undertake large-scale works projects such as drilling, mining activity has not created major opportunities for Tanzanian business.

Tanzanian banks have not participated in the financing of these activities partly because they are risk averse in the sector but mainly because of lack of capacity to fund such capital intensive projects.

Gold mining in Tanzania is largely confined to a few major mines - Geita, Tulawaka and Kabanga, as well as several small alluvial operations in Nzega. It is believed that the country has more undiscovered deposits, which, are however largely in environmentally fragile areas.

In the past five years, Tanzania has been the focus of Africa's gold exploration and development, with the gold mining industry growing by 27 per cent in 2004 compared with 17 per cent in 1999.

The mining sector contributes 2.3 per cent of GDP, which is projected to grow to 10 per cent in 2025, according to the Development Vision 2025. Currently, there are more than 20 mining companies involved in mining various types of minerals in Tanzania, with most companies focusing on gold, diamond and tanzanite.

The companies that operate in the country include Northern Mining Explorations Ltd, Albidon Ltd, Anglogold Ashanti Ltd, Barrick Gold Corporation, Goldstream Mining NL, Lonmin PLC, Resolute Mining Ltd, Uranex and Unified Resources Development Ltd.

Others are ALS Chemex Tanzania, Anmercosa Exploration, Bulk Mining Explosives (Tanzania), Corstor (Tanzania), East Africa Gold Corporation, East African Gold Mines (Tanzania) Ltd, El Hillal Minerals, Engineering Associates, Exploration and Mining Association, Gaily & Roberts Ltd, Geological Survey of Tanzania, Kabanga Nickel Company, Kilimanjaro Mines Ltd, LTA Construction Ltd, Mansons Mines Logistics, Williamson Diamond Ltd and Mgusu Mining.

Most of the gold mined is found to the east and south of Lake Victoria, and there are also some deposits in the south and southwest of the country. The base metals are found in Kagera, Kigoma, Mbeya, Ruvuma and Mtwara regions while the gemstones are found in the east, west and the areas bordering Kenya in the north and Mbeya and Rukwa regions bordering Mozambique in the south.

Tanzania has been a significant diamond producer for several decades, with the bulk of production coming from the Williamson Diamond mine at Mwadui, where commercial production began in 1925.

According to Tony Devlin, chief executive officer of Williamson Diamond Ltd, there are over 300 kimberlites known in Tanzania of which 20 per cent are diamondiferous, being mostly found in Shinyanga region with a large deposit at Mwadui District.

Mr Devlin says that some 600 dipolar magnetic anomalies with similar geophysical characteristics to known kimberlite pipes have been recorded during recent geophysical surveys.

Several world-class gold deposits have already been discovered in the Lake Victoria goldfields and are at different stages of development. Gold deposits have also been discovered in the Southwest of Tanzania.

Recent exploration in northwest Tanzania has revealed extensive nickel-cobalt-copper mineralisation in the Karagwe-Ankolean System, where Sutton Resources of Australia is evaluating the resources and where diamond drilling has outlined contained resources of 500,000 tonnes, nickel 75,000 tonnes and copper and cobalt at 45,000 tonnes.

In addition, chromium and platinum group metals (PGM) have been recorded with substantial deposits of nickel enriched with cobalt delineated over the ultramafics in the Kagera region. There is also an indication of stratiform copper-silver-uranium type mineralisation in Shinyanga region.

Iron ore deposits have been identified in Liganga in the southwest of Tanzania in close proximity to the coal resources of Ketewaka-Mchuchuma with a resource of 45 million tonnes. Tanzania is also home to titanium resources in the beach sands along its Indian Ocean coast.

Other gemstones mined in the country are ruby, rhodolite, sapphire, emerald, amethyst, chrysoprase, peridot and tormaline. Recently, a major alluvial occurrence was discovered in the southern regions of Ruvuma, Mtwara and Lindi.

Lawrence Masha, Deputy Minister for Energy and Minerals, told The EastAfrican recently that gemstone exports were worth approximately $10 million in 1996, most of which were exported uncut. Great potential exists in the establishment of lapidary and jewellery manufacturing industries.

The Mining Act of 1998 under which large and small-scale operations are regulated provides guidelines for issuing reconnaissance license for one year and renewals for a period not exceeding a year after paying a fee of $250, annual rent of $10 per square kilometre and renewal fees of $200. The license may be either exclusive or non-exclusive.

The government also issues prospecting license for a period of up to three years, renewable two times for a period up to two years each with a license preparation fee of $400, annual rental of $30 per square kilometre and renewal fee of $200.

The mining license can only be granted to the holder of a prospecting license over the area for a period of 25 years or the life of the mine and renewable for a period not exceeding 15 years.

The license preparation fee is $600, annual rent is $1,500 per square kilometre and renewal fee is $200 after submitting the feasibility report, including environmental and health safeguards, plans for local sourcing of goods and services and employment and training of Tanzanians.

The companies mining in Tanzania are also exempted from paying of import duty and VAT on equipment and essential materials up to the anniversary of start of production, whereafter a 5 per cent seal applies.


Tanzania: Pressure mounting on government to act on exploitative contracts

Wilfred Edwin, Special Correspondent, Nairobi
The East African

26th June 2006

Summary & Comment: A review of mining contracts was a priority identified when the President took office last year. The government has undertaken an in-depth evaluation of why revenue from mining activities is so small. Companies are obliged to pay $200,000 annually to local authorities and a royalty of 3 per cent of the value of exports to the government. Now legislators are demanding better profit sharing arrangements and fuller accountability to the communities where mines are located.

Pressure mounting on government to act on exploitative contracts

The mining sector in Tanzania has once again come under intense scrutiny with signs that government officials are beginning to yield to public pressure for a fresh look at mining contracts.

Last week, the government publicly acknowledged that major mining companies have been fiddling with figures to avoid paying the requisite duties and royalties. Deputy Minister for Energy and Minerals, Lawrence Masha, disclosed in parliament that a recent audit report by government appointed assayers Alex Stewart had noted that reports presented by large scale gold mining firms on their operations were not correct. Mr Masha said that the investigations by the assayers were still going on. "The preliminary report by the committee is ready. I request the MPs to be patient as such problems and many others will be sorted out after the review process," said Mr Masha.

Members of Parliament last week pressed the government for more action on mining contracts, with the legislators demanding better profit sharing arrangements and better accountability to the communities where the mines are located. Legislator Chacha Wangwe demanded a government explanation for what he described as the mining companies' "insignificant contribution to the communities" compared with the profits they were making. Companies are obliged to pay $200,000 annually to respective local authorities "depending on the tax regime of the district and additionally pay a royalty of 3 per cent of the value of exports to the Tanzanian government."

The government had in June 2003 entered into a contract with Alex Stewart (Assayers) Government Business Corporation of the USA to verify the cost of production, transportation of gold, and capital invested by large scale miners. The mining sector grew by 15.7 per cent in 2005 compared with 15.4 per cent in 2004, contributing 3.5 per cent and 3.2 per cent to GDP respectively. The Minister for Planning, Economy and Empowerment, Juma Ngasongwa, says the government has formed a special committee to undertake an in-depth evaluation of why the revenue accruing from mining activities is so small.

Dr Ngasongwa attributes the higher growth of the sector to additional investments in Tulawaka Gold Mine in Biharamulo. Gold is the main mineral export with 48.2 tonnes being exported in 2004, but its impact on economic recovery and job creation has been very minimal. Review of the mining contracts was one of the priorities identified by President Jakaya Kikwete when he took office last year. He promised to provide a fair balance between returns to investors and the country's interests.

Despite being the continent's third largest gold exporter behind South Africa and Ghana, Tanzania was cited by the United Nations Conference on Trade and Development (UNCTAD) as one country that, despite massive FDI inflows, had yet to attain the desired goals, including job creation. The report had advised that countries like Tanzania needed to add value to the raw minerals as is the case in South Africa and Namibia to benefit the local economy. Tanzania has had no mineral processing facility since the closure of the diamond-cutting firm Tancut in the late 1980s.

The drive to introduce value addition saw former President Benjamin Mkapa inaugurate the Mwananchi Gold Company Ltd, a multibillion-shilling investment aimed at processing gold. Two months ago, officials from the Barrick Gold Corporation visited the country on a similar mission.

Key public concerns over the mining sector have revolved around the lopsided contracts that the government has entered into with the investors, resulting in meagre returns and royalties, lack of transparency in the mining sector and poor social relations.


Statement of the African Initiative on Mining, Environment and Society(AIMES)

Held in Johannesburg

14th to 16th June 2006

Preamble

We, members of Africa Initiative on Mining, Environment and Society(AIMES), (from Sierra Leone, Ghana, Nigeria, South Africa, Lesotho, Democratic Republic of Congo, Tanzania, Zambia, Burkina Faso, Zimbabwe and UK) have gathered here in Johannesburg to share information on the impact of mining on communities and share strategies to deal with the problems.

During our deliberations we came to the following conclusions :

Observations

We acknowledge the continent’s mineral potential, which, if harnessed and managed properly could enrich the ordinary peoples’ lives in Africa.

Despite this potential of enriching the lives of ordinary people, we discovered that many communities remain in abject poverty and they are increasingly losing their livelihood, sources of clean water, air , access to land, hunting grounds, forests.

The problems of prolonged colonialism are being exacerbated by the emergence of the African elite corrupted by continuing theft of mineral resources.

The meeting observed that Africa is now the second most important target for mineral exploration in the world especially with the increasing interest from China, India, Brazil and US. Given the performance history of the sector in Africa this is a cause for concern.

At the root of this de-development process are these agents : African governments, trans-national corporations and their home governments as well as multilateral bodies including World Bank/IMF, WTO etc.

These agents are collectively responsible for the repression of communities; in some cases leading to mass deaths such as :
• logistical support for state paramilitary forces by Anglo Gold Ashanti in DRC, leading to deaths of over a hundred people
• Ghanaian government providing military support to secure Golden Star Resources mining facilities at Prestea, Ghana, leading to deaths of several innocent civilians
• Shooting of innocent unarmed protesters by Amplats mine in Maandagshoek community (South Africa) by state policy.
• The reckless collaboration of Nigerian government with Shell in the Niger Delta has fuelled an explosive civil strive.

The meeting further observed that current policy frameworks in most African countries are deficient in provisions that guarantee community access to justice.

Demands

The meeting made the following demands (among others) on African governments :

Meaningfully participatory Mineral Policy reviews that would :- reduce incentives to mining companies to enhance mining revenue from the mining sector, improve environmental management, increase community benefits from the mining sector.

Codification of communities’ cultural, environmental, land and human rights.

Resolutions

The meeting resolved to:

Mobilise and work with affected communities to intensify the struggles against corporate domination of nation states and ensure corporate accountability, while communities’ human rights (cultural, environmental & land) must be respected and protected.

Lobby and engage national governments to develop mineral policy frameworks that will ensure that mineral extraction benefits the poor and affected communities.

The meeting was unanimous that the absence of transparency is one of the major causes of lack of mineral benefits from mining to the community and nations at large. The meeting therefore resolved to support initiatives that promote transparency in the minerals sector including the Extractive Industry Transparency Initiative (EITI) although the meeting recognised the strong weaknesses of the initiative.

Johannesburg, June 16 2006

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