25 February 2019

Tanzania Braces for U.S.$300 Million in Royalties From Acacia Mining

In a letter dated 20th February, Barrick Gold Corporation stated that it had arrived at a proposal with the government of Tanzania involving terms to resolve outstanding disputes concerning Acacia Mining Plc's operations in Tanzania.

In the letter, it was stated that the company would present the proposal to the Independent Directors of Acacia in the near future for their consideration. The proposed framework involved the; the creation of local operating company to manage Acacia's operations in Tanzania, economic benefits from Acacia's operations to be shared on a 50/50 basis with the government's share being in the form of royalties, taxes and a 16 per cent free carry interest in the Tanzanian operations, a payment of Tshs.690 billion ($300 million) to the government of Tanzania to resolve outstanding tax claims to be paid over time on terms to be settled by the parties.

The President and CEO of Barrick, Mark Bristow went on to state that significant amounts of real value had been destroyed by this dispute and in Barrick's view , the proposal would allow the business to focus on rebuilding its mining operations in partnerships with their respective stakeholders, and most importantly long suffering investors. The letter finally stated that work was underway to finalize the definitive agreements need to give effect to the proposal, and for the proposal to become effective, the agreements must be approved by Acacia and the Government of Tanzania.

Barrick holds a 63.9 percent equity interest in Acacia, a publicly traded company listed on the London Stock Exchange that is operated independently of Barrick.

In 2017 Tanzania slapped Acacia with a Tshs.437 trillion ($190 billion) tax of which Tshs.92 trillion ($40 billion) was alleged unpaid taxes and Tshs.345 trillion ($150 billion) for penalties and interest owed. The government appointed committees had found out that Acacia Mining was operating illegally and had understated its gold exports.

Acacia refuted the government's allegations through its website claiming it had declared all materials produced and had paid royalties and taxes in full. Barrick promised to pay Tshs.690 billion ($300 million) in goodwill to solve this dispute, and Acacia mineral concentrates have banned from export by the Tanzanian government to this date.


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