Acacia Mining (LON:ACA), Tanzania’s No.1 gold producer majority owned by Barrick, has agreed to pay higher mining taxes in the country even though it’s still disputing in an international court some of the changes to the laws governing its three gold mines.
The company, which spun off from Barrick Gold in 2010, will now pay a 6% royalty, up from 4%, on metallic minerals including gold, copper and silver. The miner also said it would continue to pay the recently imposed 1% clearing fee on exports.
Acacia’s decision to comply with higher royalties fits experts forecast that companies already active in the Tanzanian mining sector will stay put, despite the much-less favourable regulatory environment.
“Acacia’s preparedness to pay higher tax rates will also incentivize the government to relax its ban on unprocessed minerals as it can earn tax on profits Acacia doesn’t earn,” Charlotte King, analyst at the Economist Intelligence Unit, said in an emailed statement.
“This reinforces our view that the ban will eventually be watered down,” she noted. In practical terms, the move means that Acacia, which had revenue of $1bn last year, will pay about $31 million extra in royalties a year. But the company noted the decision was momentary.
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