Acacia agrees to pay higher taxes set in Tanzania new mining law

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.

It means that Acacia, which had revenue of $1bn last year, will pay about $31 million extra in royalties a year.

Acacia’s decision to comply with higher royalties fits experts forecast that companies already active in the sector will stay put, despite the much-less favourable regulatory environment.

“Acacia's preparedness to pay higher tax rates will also incentivise 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.

The company first locked horns with the government of Tanzania in March, when the country banned the export of gold concentrate, which represents about a third of Acacia’s output.

Less than four months later, Tanzania accused Acacia of operating illegally and evading tens of billions of dollars in taxes by understating the amount of metal concentrate in exports from the three gold and copper mines it operates in the country.

The conflict pushed Barrick to intervene. The world’s largest gold producer, which has a 64% stake in Acacia, is currently in talks with authorities in hopes of reaching a settlement over the claims against its subsidiary and the country’s current ban on mineral concentrate exports.

Acacia Mining owns and operates Tanzania’s three major mines — Bulyanhulu, Buzwagi and North Mara.

The African nation is the continent’s third-largest gold producer.

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