Dar es Salaam. Acacia Mining Company is set to forego the establishment of another gold mine in Tanzania after agreeing to sell its stake in the Nyanzaga Gold Project in Shinyanga Region.
OreCorp Tanzania Limited has paid Acacia $3 million (Sh6.6 billion) to raise its stake in the mine project to 51 per cent, the two companies confirmed Friday.
Acacia has also signed an agreement with OreCorp for 100 per cent acquisition of the project, saying full ownership by its partner would best suit the interests of Tanzania.
However, both the agreements for OreCorp to raise its stake and the final acquisition of the mine project will depend on approvals by the Tanzanian Fair Competition Commission (FCC) and newly established Mining Commission. Application for these approvals and for issuance of a special mining licence have reportedly been lodged with the authorities.
Nyanzaga Gold Project was to become the newest gold mine in Tanzania under the Acacia stable after North Mara, Buzwagi and Bulyankhulu gold mines. The exploratory work on the Nyanzaga project returned Mineral Resource Estimate (MRE) of 3.1 million ounces at 4.0 g/t gold, to okay the case for establishment of a large scale mine.
The acquisition deal was announced in Acacia’s quarter two financial results released Friday as well as in a brief posted by OreCorp on its website. OreCorp first obtained 25 per cent stake in the project in an Earn-in Agreement on September 2015.
The gold project is known as Nyanzaga Mining Company Limited (NMCL) and was a wholly owned subsidiary of Acacia. OreCorp said it fulfilled its earn-in obligations by spending approximately $14 million (Sh30.8bn) to complete a feasibility study for the anticipated mine.
According to the companies, OreCorp will move to 100 per cent ownership of NMCL by making a further payment of $7 million (Sh15.4bn). Acacia will also pocket a net smelter return royalty (NSR) of $15 million (Sh.33bn).
Nyanzaga gold mine is likely to be the first to see the Tanzania government become an equity holder of a free carried interest of not less than 16 per cent as stipulated in the new Mining Act.
In its brief, Acacia also noted that talks between the government and its parent company, Barrick Gold, was still in progress to reach an agreeable roadmap to implement the cooperation framework agreed with the government in 2017.
The company said the delay in arriving at an agreement has put on hold its talks with potential Chinese firms that have shown interest in buying into one or several of its mines in Tanzania.
Barrick announced in June this year that it would not be providing a timetable for the completion of its discussions with the government “in order to allow its process to continue in an orderly manner and without an arbitrary deadline.”
The mining company further highlighted the ongoing tax disputes with the government regarding VAT returns which it says currently stands at $64 million (Sh140.8 billion) for exports alone and $172.5 million (Sh379.5 billion) pending receivables as at June 30, 2018.
Acacia said it has submitted to the government preliminary local content plans and hopes to reach a solution with authorities. It however said international arbitrations filed by Buzwagi and Bulyanhulu gold mines will continue to protect the mine interests ahead of a settlement of any kind in the ongoing talks between the government and Barrick Gold.
In the financials, Acacia reported a fall in first-half core earnings but said it managed to generate cash due to strong operational performance at its mines.
The London-listed miner said earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to $133.6 million (Sh293.9 billion) from $161 million (Sh354.2 billion) a year earlier.