Dar es Salaam — Tanzania's decision this month to grant a licence to a major uranium mining company could catapult the nation into the top five countries producing the strategic resource, officials say.
The Ministry of Energy and Minerals issued a special licence to Mantra Tanzania Limited, which is owned by Mantra Resources, an Australian subsidiary of AtomRedMetZoloto (ARMZ), a Russian mining firm. ARMZ will build and operate the Mkuju River uranium mine in southern Tanzania through Uranium One, its Canadian arm. Mantra Tanzania Limited has been operating in Tanzania since 2010.
The government granted Mantra a provisional licence in December, when construction on the underground mine started. Construction will take two years, and the site is said to contain at least 36,000 tonnes in known uranium deposits. Various reports suggest that the mine would extract 14,000 tonnes of the radioactive element annually.
Such a rate of production would put Tanzania in a position to overtake Canada as the world's second biggest uranium producer, according to Dalaly Peter Kafumu, the ministry's former commissioner for minerals.
Currently, Kazakhstan is the number one uranium producer in the world, having produced 19,451 tonnes in 2011 and commanding 36% of the world's total uranium production, according to the World Nuclear Association. Kazakhstan is followed by Canada, which produced 9,145 tonnes or 17% of the total production. "Tanzania is going to produce more than that," Kafumu told Sabahi.
Tanzania, nonetheless, would be limited to selling its uranium ore on the international market because it lacks the technology and funding to harness the element for domestic energy use, Kafumu said.
The mining project has met all legal requirements to being implementation, according to Tanzanian Vice President Mohamed Gharib Bilal, who recently visited the site of the Mkuju River project.
The project will bring in 728 billion shillings ($448 million) in foreign direct investments and create 1,600 jobs during the mine's construction, he said, adding that the mine will eventually bring in 405 billion shillings ($249 million) in annual revenue.
The deal already has caused controversy because of the mine's location on a small patch of the Selous Game Reserve, which the United Nations Educational, Scientific and Cultural Organisation has designated for protection as a World Heritage Site. Activists have aired concerns about how mining for uranium in the area could threaten the environment and public health.
Worries over payment of capital gains taxes:
According to Public Accounting Committee Chairman Zitto Kabwe, Tanzania stands to also lose a lot of money through its deal with Mantra Resources because the government failed to collect almost 303 billion shillings ($187 million) in capital gains taxes from the company before issuing the licence to mine.
Tanzanian law stipulates that any foreign-owned company doing business in Tanzania pays capital gains tax, when it is sold to a third party. The law was enacted in 2011 to close loopholes in a tax holiday incentive programme, which allows foreign companies to operate tax-free for their first five years of operation in Tanzania. Some companies were changing ownership after the five-year term to continue to qualify for tax-free status.
"I have written the speaker of the National Assembly, asking her to tell the government to explain to the parliamentarians what has gone wrong," Kabwe told Sabahi.
The government could have withheld the licence or conditioned its release on the payment of this tax as leverage in negotiations, Kabwe said.
Minister for Energy and Minerals Sospeter Muhongo told Sabahi that the government will not lose money in the deal. He said the government still is negotiating with the company on how much Mantra Resources will pay in taxes under its mineral development agreement with Dar es Salaam.
The government issued the mining licence to Mantra after two years of due diligence, the minister said, adding that Tanzanians should have a positive attitude toward foreign investors because projects like the uranium mining deal are vital to building the country's economy.