Developments in Tanzania are “concerning” for AngloGold Ashanti because its Geita mine is a “tier one” asset in which it is currently investing $180m during the current financial year to end-December with further capital expenditure planned for next year.
That’s according to AngloGold Ashanti CEO Srinivasan (Venkat) Venkatakrishnan who added clarity was needed on the impact of Tanzania’s new legislation affecting the mine development agreements that formed the basis of future investment in mining in the country.
Speaking on a media call in Johannesburg on Monday Venkat added that, “that’s why we are seeking dialogue with the government. It’s very difficult to say why the Tanzanian government has taken these particular actions but it’s very clear there is a view the State is not getting a sufficient participation in the share of the revenues generated.
““This situation requires patience, diplomacy and the need to take a long-term view,” he commented
Changes made by the new legislation include, amongst others: the right for the government to renegotiate mine development agreements (MDAs) at its discretion; the provision to the Tanzanian government of a 16% free-carried interest in all mining projects and the right for the government to acquire up to 50% of any mining asset commensurate with the value of the tax benefits provided to the owner of that asset by the Tanzanian government.”
Venkat said AngloGold Ashanti was seeking a “constructive dialogue with the Tanzaniangovernment and its agencies to gain assurances that Geita mine will not be affected by these legal and fiscal changes.”
He added that AngloGold’s subsidiaries in Tanzania are paying the increased royalty of 6% (previously 4%) along with a new 1% clearing fee on gold exports “under protest to ensure continued processing of export shipments.”
Venkat pointed out Geita had experienced “a challenging past” with major investments required at various points in its history to keep the mine operational while Geita was now entering a programme to extend its life through underground development.
He stressed the benefits to Tanzania from the Geita operation commenting that, “this is a message we need to get through. This should count in our favour.
“This mine has delivered more than a billion dollars to the Tanzanian government so far in the form of royalties, corporate taxes and employee income tax. The government has benefitted from the start following our acquisition of Geita in 2000 but the mine only repaid the capital investment made and broke even in 2011.
“ The government’s share of the net cash distributed by Geita since 2000 has grown to 55% while AngloGold Ashanti’s share has only grown to 45% . We are the largest taxpayer in the mining industry and one of the largest taxpayers in the country.”
Venkat said Geita continued to operate normally but added that, “during this capital investment phase we are operating the mine on a self-funding basis given the higher royalties and the lock-up of VAT receivables we are starting to see at the mine.”
Quizzed on what precisely he meant by “self funding basis” Venkat commented, “the mine generates sufficient funds from its own operations to cover the capex required but we have to take a long-term view.
“Depending on how the landscape changes over the next couple of months we will go back and relook at our capital expenditure plans looking at how we have deployed the capital and at the same time taking a longer-term view on the asset.”