Dar es Salaam. Acacia Mining has thrown a blanket into an agreement between the government and its majority shareholder Barrick Gold, declaring it is not in a position to pay Tanzania $300 million (over Sh600 billion) upfront to resolve a tax dispute.
The London-based company, which operates Buzwagi, Bulyankhulu and North Mara gold mines in Tanzania, appeared to question Barrick’s statement that Acacia would pay the amount, which it said was “a goodwill gesture” as it continues to negotiate the tax dispute.
Reuters news agency quoted Acacia Chief Financial Officer Andrew Wray saying the company does not have the ability to foot the said bill upfront. The official was reportedly briefly analysts who wanted to understand the agreement that was signed in Dar es Salaam on Thursday.
Barrick Gold, which is Acacia’s majority stakeholder (64pc) reached the agreement with Tanzania that included the $300 million payment and splitting of “economic benefits” from operations in Tanzania.
Both the parties said a framework had been drawn to implement the agreement but with little information yet to be made public on its content, the Acacia stance would suggest a bumpy road ahead is not entirely unexpected.
Constitution and Justice Minister Prof Palamagamba Kabudi was also forced yesterday to issue a clarification on the 50/50 profit sharing with Barrick after the matter drew a lot of controversy on social media chatterboxes, with confusion on how that will be implemented.
Barrick’s interpretation of the 50/50 profit sharing also sharply differed with Prof Kabudi’s and is likely to fuel the debate on whether the two parties were reading from the same textbook. Bloomberg on Thursday quoted a Barrick statement revealing some of the details in the agreement, including Executive Chairman John Thornton’s confirmation that it is Acacia that will foot the $300 million bill.
A second statement issued by Barrick after the televised event at the State House in Dar es Salaam, indicated that in splitting the profit, the government’s share will be “delivered in the form of royalties, taxes, and a 16 percent free carry interest in the Tanzanian operations.”
But this was in contrast with Prof Kabudi’s clarification yesterday in which he said Tanzania’s share at 50 per cent will be paid after all taxes due, royalty, fuel and road levy and local authorities fees among others are paid.
According to Prof Kabudi, Tanzania expects in the end to get up to 70 per cent of the share from the mines. The minister said there was a lot of misinformation being peddled on the agreement with Barrick.
Acacia’s take on the agreement came as its third quarter financial results showed a dip in its revenue while trading of the shares at the London bourse also saw a drop. The company said it was still awaiting the framework agreement between Barrick and the government to be able to take its own decision.
The financial results indicated that the mining company’s revenue in quarter three was $171 million, a drop of 40 per cent compared to last year.
Earnings before interest, tax, depreciation and amortization also fell compared to last year, by 60 per cent to $50 million. Net profit was $16 million, falling 69.8 per cent compared to last year when it was $53 million.
These results were largely expected due to Acacia being caught up in the long-standing dispute with the government over taxes. The government banned exports of Acacia’s copper concentrates since March this year. The ban means up to 50 per cent of the mining giants operating revenue is tied up.
Debate by Tanzanians on social media continued to raise mixed views on what Tanzania is exactly entitled to following the agreement.
Many commentators urged for publication of the framework agreement so that the details are laid bare to end speculations.
As accolades poured in for President John Magufuli on pushing the agreement through, some Tanzanians were of the view that Barrick may have played the government in to buy time to avoid a potentially debilitating tax bill of $190 billion slapped by the government.
Natural Resource Governance Institute (NRGI) manager for East and Southern Silas Olan’g said comprehensive economic analysis was required to evaluate benefits to accrue from metals to be owned by the government other than gold, copper and silver as stated in the agreement.
Also, he said the same was required when considering construction of a smelter, a move that will ensure smelting job of metallic concentrates is locally executed.
Mr Olan’g hailed the 50/50 profit sharing agreement, noting that it is a gain because the company had already recovered its investment costs.