ENERGY & MINERALS

by Roger Nellist

Tanzania’s mining sector turmoil continues
The ban on the export of mineral concentrates that the government imposed in early 2017 is still in force and has hit the country’s major gold producer, Acacia Mining, hard. The company has been forced to stockpile its output, especially from its Bulyanhulu gold mine, and as a result this year has suffered a big drop in its revenues and cash reserves. In an effort to contain costs Acacia initiated in the summer a process of voluntary redundancies but in September, in a leaked internal memo from the company’s Managing Director, Mr Assa Mwaipopo, employees were told that it had become necessary to adopt a compulsory retrenchment scheme, beginning that month with a staff consultation process. Employees would be consulted on the staff retrenchment selection criteria, the timing of lay-offs and the terms of the severance package. It is understood that this is the second time that Acacia Mining has retrenched its Tanzanian workforce since the government’s mineral export ban came into effect.

Acacia’s parent company – the Canadian (Toronto based) Barrick Gold Corporation – owns 64% of Acacia Mining and this year has itself embarked on a massive staff reduction programme. Barrick’s Executive Chairman, John Thornton, said in September that he was seeking to achieve a leaner organisation and that, having slashed middle management by half to about 700, “we want to get it down to 300”.

In October, industry reports suggested that Barrick wished to take back full ownership and control of Acacia Mining, though it was uncertain whether that meant all three of Acacia’s Tanzanian gold mines or just Bulyanhulu. (The other two mines that Acacia operates are North Mara and Buzwagi). Estimates then put the value of the remaining 36% stake in Acacia at about $300 million. However, the potential buy-back was thought to be complicated by two big issues. First, Barrick was in merger talks with Randgold Resources, its big African gold producing rival, and needed to finalise that mega deal (rumoured to be worth more than $18 billion) before the merged group could find solutions to the Acacia Mining problem. Also, Barrick had just concluded a 50-50 deal with the Shandong Gold Corporation, a large Chinese mining company, under which each company will purchase 50% of the other’s shares. The Chinese deal is important for Tanzania because it can bring additional capital, technical expertise and importantly political connections. Thornton commented: “It’s one thing to be a Canadian company. It’s another to have China as your partner”. The second complicating issue is that Acacia is still in dispute with the Tanzanian government over its earlier concentrate exports and the bill it has been handed of $190 billion in unpaid taxes; Barrick has been trying to resolve the dispute and is unlikely to want to take back full ownership of Acacia until those major matters are settled.

But that is not the only problem Acacia Mining faces. In late October Mr Mwaipopo (the company’s Managing Director) appeared in court in Dar es Salaam charged with several serious criminal offences including money-laundering, tax evasion and forgery. The executive denied all charges but was remanded. He is one of three senior Acacia officials facing charges at the Kisutu Resident’s Magistrate Court, all of whom deny the charges. The other two are Acacia’s former Vice President for Corporate Affairs, Deo Mwanyika, and the Bulyanhulu gold mine’s Corporate Relations Manager, Alex Lugendo. The charges claim that in one transaction, $719 million was transferred into the account of a government official.

Acacia Mining issued a statement in response to these and other matters. “In light of recent developments in Tanzania,” the statement read, “the Company is now considering its position including in particular with respect to the Government actions and the charges now being brought.”

More work for the TEITI
At the end of October in Dodoma the Minister for Minerals, Ms Angella Kairuki, launched the Board of the Tanzania Extractive Industries Transparency Initiative (TEITI) and commissioned it to compile a special register detailing the ownership, shareholders, revenue and income of Tanzania’s extractive companies and operations. Acknowledging that this would not be an easy task she emphasised that such a register was essential to enable Tanzanians to know who owns what and for the government to satisfy itself that the country is obtaining its rightful share of the revenues generated from mineral, gas, and perhaps eventually oil, production. The Minister announced that some regulations would be changed to ensure that the TEITI can audit the extractive operations thoroughly. The TEITI Board is chaired by the former Controller and Auditor General, Mr Ludovick Utouh.

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