Ministry calms investors over licence revocation

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“  For instance, we might agree with the license holders to cede part of their mining areas to facilitate what the government intended. We want to arrive at an agreement which will favour both parties”
Mr Ally Samaje, Commissioner for Minerals

Dar es Salaam. The Ministry of Energy and Minerals will not rush to implement the order by President John Magufuli to cancel mining licences of two private firms in Shinyanga and Simiyu Regions.

Instead, the ministry has started to critically look at the decree with a view to ensure that all legal requirements will be adhered to when implementing the President’s order.

The clarification came even as the International Finance Corporation (IFC) clarified that it had divested from the mineral prospecting and mine development company in one of the affected licences. The Citizen reported yesterday that IFC was one of the shareholders in the Dutwa nickel mining project whose mining licence the President ordered withdrawn on Wednesday.

“IFC engaged with African Eagle Resources in 2012 to fund early stage nickel exploration activities at the Dutwa project. These activities were not successful, as a result of which IFC divested in 2013. IFC has not had any involvement or ownership stake in the project since then,” Ms Neha Sud, the IFC Communications Officer told The Citizen in an email communication. IFC which is a private investment arm of the World Bank had given the mineral company $5m or Sh10.5bn for a 10 per cent stake in the project.

The cancellation of the licences in quick succession has sent tongues wagging over the policy and investment implications for Tanzania, with experts fearing strained relations between investors and the government. President Magufuli has defended his actions, saying he was prioritising the interests of the majority poor Tanzanians whose fortunes he is committed to change.

  Speaking at State House a few weeks ago, President Magufuli lashed at  decision by some mining officers to evict 15,000 people from a mining area licensed to Acacia Mining (formerly African Barrick Gold) and ordered the ministry to cancel the license issued to the company so that the area can be divided among the small miners.

Two days ago, addressing a rally in Bariadi in Simiyu Region, President Magufuli also ordered ministry officials to annul a mining license issued to African Eagle Resources for mining of nickel so as to allow construction of a water tank on a hill located inside the license area.

While the African Eagle Resources was certified to operate Dutwa Nickel fields in Busega and Bariadi districts in Simiyu region, the Acacia mining was to extract minerals at Nyalinyongo village in Shinyanga region. President Magufuli repeated his orders on Thursday in Shinyanga regarding the Acacia licence.

Responding to queries by The Citizen yesterday, the Commissioner for Minerals Mr Ally Samaje said that they were planning to meet the investors whose licenses have been ordered withdrawn by the President for consultations so as to discuss a better way to respond to the issue and find a solution without posing problems to their investment or the government. “We have received the order but cancelling mining licences is not a simple task. There are laws and regulations which should be observed in doing so as a way of ensuring justice,” he said.

He noted that, among other things, the discussions planned with the investors aim at looking at alternative ways of resolving the misunderstandings which prompted the Head of State to issue such orders. “For instance, we might agree with the license holders to cede part of their mining areas to facilitate what the government intended. We want to arrive at an agreement which will favour both parties,” he explained in a telephone interview. According to him, under the new directives, some parts of the contracts will have to be reviewed but their licenses will remain operational unless they have breached terms and conditions.

“Mining sector still needs investors and there is no way we can withdraw their licences without following the legal processes, because doing so will upset other potential investors. We need to stick to our laws and regulations so that we avoid the possibility of compensating them in a costly way,” he noted.

“These companies have been listed at the stock markets so any attempt to cancel their licences without paying attention to legal requirements will disturb their investment and they will have a right to seek compensation.”

According to the commissioner, in order for the mining license to be cancelled, the ministry has to observe a number of procedures such as providing the investor with the notice of intention to cancel the mining permit, outlining specific part(s) of the contract that were breached.

Mr Samaje said the notice should also be copied to the mining advisory board that has the legal mandate to advise the Minister for Energy and Minerals on the decision to be made. According to him, the minister shall cancel the mining licence after the advice from the board.

But the negotiation route that the commissioner was talking about will not be easy if reports within Acacia is anything to go by. The Citizen has learnt that Acacia has indicated it may not be willing to cede its Shinyanga licence. “They have been approached for talks and have been told to consider letting go part of the mine licence area but they are not keen,” an impeccable source within the sector told The Citizen.

According to the source who requested for anonymity over the sensitivity surrounding the debate, Acacia was considering a legal challenge should the government move to withdraw its licence.

Yesterday while weighing in the matter, the shadow minister for Minerals and Energy Mr John Mnyika appealed to the ministry to observe the law when dealing with investors.

“Before the mining licence is cancelled, the ministry should explain in detail terms and conditions that were breached, this is according to the law,” he said, echoing what the commissioner indicated.

Mr Mnyika who is the Kibamba MP warned that cancelling the licenses without following the law would have dear consequences to the country.

While in Simiyu, Dr Magufuli ordered the cancellation of Eagle Resources licence in reaction to Regional Administrative Secretary Commissioner Mr Jumanne Sagini note that water project in Simiyu was delayed because the ideal site for constructing a tank was within a mining license in Dutwa village.

The foreign firm has reportedly invested about $26 million (over Sh56bn) in the project, with most of it used for prospecting for nickel. Reports show the area has deposits of 110 million tonnes of nickel. The company listed in London and Johannesberg was expecting to start mining this year after the establishment of an open pit mine.