by Roger Nellist

Historic mining agreement signed in January 2020
On Friday 24 January the Tanzanian Government signed an historic mining agreement with Barrick Gold, finally putting an end to the three or more years of acrimonious relations with Barrick’s former subsidiary (Acacia Mining, now wound up) and establishing the arrangements under which the new joint venture, Twiga Minerals Corporation (TMC), will operate in the country. In a televised ceremony in State House, witnessed by President Magufuli and Barrick’s President and CEO Mark Bristow, nine detailed agreements were signed which establish the terms under which the parties can go forward together with confidence. Amongst other things, they provide for a 16% free-carried interest shareholding for government in TMC (with representation on the joint management committee) and for the economic benefits to be split 50/50 after recovery of costs.

TMC will now operate the three gold mines at Bulyanhulu, North Mara and Buzwagi which together generate Tanzania’s biggest export earnings. After the signature Bristow said: “Reflecting our confidence in the potential of this highly prospective gold region, we have budgeted $50 million for exploration here in 2020 alone and are looking at various opportunities to sustain and expand our operations”. Barrick will also invest $40 million to upgrade the road between Bulyanhulu and Mwanza as well as building a housing estate and related infrastructure. In partnership with the University of Dar es Salaam they will also be supporting a $10 million programme to upgrade mining skills in Tanzania.

In welcoming the new deal, President Magufuli clarified that the many metal concentrate containers stored for the last two years at Dar es Salaam’s port will be sold by TMC to willing buyers and the profits shared. He said they are worth millions of dollars.

The nine agreements which cement this deal comprise: Framework Agreement, Twiga Shareholders Agreement, Bulyanhulu Shareholders Agreement, North Mara Shareholders Agreement, Buzwagi Shareholders Agreement, Bulyanhulu Development Agreement, North Mara Development Agreement, Pangea Development Agreement, and the Management & Administrative Service Agreement.

The new deal hopefully puts an end to a protracted period of enormous disruption in Tanzania’s mineral sector. The new terms are expected to improve Tanzania’s revenues from the gold mining operations. However, the detailed terms of those agreements were not made public and, in a session of the National Assembly in Dodoma a few days after their signature, Opposition MPs called for them to be made so. Chadema’s Shadow Minister of Minerals demanded that the government explain what the 16% and 50/50 split provisions actually mean for Tanzania. He also pressed Government to explain what has happened to the earlier claim for Barrick to pay unpaid tax of $190 billion. It is reported that the Government made major concessions to Barrick during the “arduous and frustrating” negotiations – allowing international arbitration, permitting the export of mineral concentrates again and waiving the requirement for the mining company to establish ore beneficiation facilities in the country. The offering of significant concessions by both parties during a major negotiation is, of course, the essence of the process by which an agreement can be concluded that, overall, is satisfactory to both sides.

Cooking with LPG rather than wood and charcoal
With Tanzania having lost eight million hectares of forest between 1990 and 2010 to firewood and charcoal for burning, the Government has embarked on a plan to raise to 50% the number of Tanzanian households using instead Liquefied Petroleum Gas (LPG) for cooking. The plan was unveiled in mid-February by the Tanzanian Environment Minister, Hon Mussa Zungu. Government wants to build further on the increasing use of LPG witnessed in recent years, and also to introduce more competition into LPG supply so as to reduce its price to households.

Data shows that marketing companies imported 8,000 tonnes of LPG in 2008. The volume had grown to 120,000 tonnes by 2017/18 and Government expects this to rise to 145,000 tonnes annually. Currently, 50% of the LPG imports are consumed in Dar es Salaam and the Coastal Zone; the Northern Zone consumes 23%, the Lakes Zone 12% and the Southern Highland Zone 8%.

Contract reviews and delays
Investor representatives, analysts, commentators and Government officials continue to look forward to the resumption of negotiations concerning the Host Government Agreement that will kickstart the mega Liquefied Natural Gas (LNG) project in Lindi. Those crucial negotiations are being held up whilst Government continues to review and renegotiate the country’s existing Petroleum Production Sharing Agreements, to bring their terms into line with the new natural wealth and resource legislation enacted in 2017.

The Ministry of Trade, Industry and Investment has stated that it is undertaking a similar review of the contracts governing the associated Mchuchuma coal mining and power generation project and the Liganga iron ore project. Those complex projects, said to be worth $3 billion, have so far taken nine years and are still not ready. The current contract reviews are introducing yet another delay. The implementing partner and investor – Tanzania China International Mineral Resource Ltd – has already invested considerable funds in the projects (which were originally expected to be implemented by 2016) and has completed necessary geological, technical and environmental impact work. However, it is understood there have been wrangles over certain tax exemptions on imported project equipment and supplies as well as the provision of other incentives. The investor says the projects are beset by burdensome red tape. However, construction is under way and reports indicate that the project could create 35,000 direct and indirect jobs. It has an expected lifespan of between 50 and 100 years.

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