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Things are going from bad to worse for Acacia Mining (LON:ACA), one of the largest gold producers in Africa, as the government of Tanzania sent the company a $190-billion bill in fines and allegedly unpaid taxes from two of its mines.
Together with disputing the astronomic bill, the company — Tanzania’s No.1 gold producer — said it’s evaluating all of its options and rights, adding it will provide a further update in due course.
Shares collapsed once again on the news to close almost 21% lower in London at 184.5p, dragging the company’s market capitalization to less than $984 million, according to Google Finance. The stock has lost 66% of its value since March, when President John Magufuli’s ban on concentrates exports came into effect, affecting two of Acacia’s three mines or about a third of the firm’s output.
Shares collapsed once again on the news to close more than 25% lower in London, dragging the company’s market cap to less than $984 million
Acacia, which spun off from Barrick Gold in 2010, but it’s still majority-owned by the gold giant, first locked horns with the government of Tanzania last year, as it was accused of tax evasion in the ongoing case that triggered today’s multi-billion bill. The dispute escalated in March, when the concentrates ban officially began.
Less than four months later, Tanzania accused the company of operating illegally and said it had found evidence of the alleged tax evasion as a presidential team found the value of minerals within raw concentrate at the port of Dar es Salaam was 10 times higher than Acacia’s declared amount.
The escalating conflict pushed Barrick to intervene and Acacia to file arbitration notices for its Bulyanhulu and Buzwagi mines in order to protect its shareholders and the company, aiming to reach a settlement.
In mid-July, the miner agreed to pay higher taxes in the country and it’s now paying a 6% royalty, up from 4%, on metallic minerals including gold, copper and silver. The company also said it would continue to pay the recently imposed 1% clearing fee on exports.
The firm disclosed last week that members of its staff had been arrested and questioned, but denied early reports claiming that Tanzania had asked its foreign workers to leave the country.
World’s largest gold producer Barrick, which has a 64% stake in Acacia, is currently in talks with authorities in hopes of reaching a agreement over the claims against its subsidiary and the country’s current ban on mineral concentrate exports.
Its shares were also hit by today’s news, falling more than 2.3% by noon in Toronto to Cdn$19.82 and almost 2.7% in New York to $15.76 by 12:21 pm.
Acacia Mining, which owns and operates Tanzania’s three major mines, is also facing a lawsuit in the UK from relatives of miners who died at North Mara. Law firm Deighton Pierce Glynn is acting on 10 cases, most of which relate to incidents since 2013, and one as recently as last year.
According to Tanzania’s official data, 65 civilians have been killed by police at North Mara for trespassing since 2006 and another 270 have been injured.
21 Comments
TimmyG
Magufuli is a tyrant who wants to extort Acacia for himself and his cronies. Tanzania will not see another penny from foreign investment after this obvious shakedown. It will soon become an economic wasteland.
EMMANUEL MASANGULA
and that is you’re prediction
MMMMMM
We take what we already own, nothing less, nothing more.
hapatoshi
Tyrant is a person who is showed by Magufuli ghost workers, students etc. but continues to perpetuate corruption tribalism. Fyi, tanzania has NEVER been the westerners’ puppet, neither has she been colonialists’s FAVOURITE. In general, nothing new! May be for the country that loves “MITUMBA”
MMMMMM
As a Tanzanian, We take what we already own, nothing less, nothing more.
Nick
Sure mate. Like Zimbabwe or Venezuela. Good with that.
Archie1954
I really hate to think of a Canadian multinational company acting illegally, unethically or immorally in a poor third world nation. That is not how Canadians have been advised by governments to act in the third world. We were to be the answer to American pillage and destruction. These company officials, if the accusations are true, should be prosecuted to the full extent of the law!
PMFR
Must be a typo or is this Tanzanian shillings? That would make the fine about US$85 million… Acacia only has a market cap of about US$1b….
Alex
This is not a typo. The official statement is for 190Bn USD. Tanzanian government must be deluded. All the Gold companies in the world would not have this market cap, let alone Acacia.
Tath_Ngui
One small blow against a vicious, greedy, monolithic exploitative system that has refined the art of robbing the African continent off its bounty, while sending back peanuts and a bad attitude. Carry on Magufuli. But be careful. The greedy global gangsters will try to come after you. Better to keep the treasures in the ground for a future generation. Carry on, our hero.
ThaOracle
What if I were to tell you …… that Tanzania has officially proven itself to be a clone of the dumpster fire that is Zimbabwe? Hope all Tanzanians will enjoy the spoils of the “great shakedown” along with the smoldering mess which accompanies it over the next few decades.
Vtz
Tell who? You don’t know anything like to be Tanzanian or Zimbabwean. So keep your mouth shut.
Isaac
Why is it that you hate when Afircan’s stand up to protect their resources? Why is it that the West want to exploit African countries and punish them with sanctions when they speak up and claim what is theirs?
Have you ever seen a Tanzanian or African mining in the UK,US, or Canada and taking minerals to Africa?
Who gave the West the right to exploit African resources without being questioned?
patentbs
Nothing changes. What promise a few decades ago and what cesspool now. Got burned there once when the lights in Dar were either dim or out. Found out that when you deal in Tanzania you write off your assets first – then you install them.
Every successful operation in the nation ( there are few) pays their taxes to the correct collectors – not to the government. Just saying.
Mark
Clearly there is a great deal more information than the summary above – keep us updated as facts are drawn out. So far it “seems” that there is fault on both sides; where will the line be after all the real information comes out? The damage to both parties is not sustainable….
Guest
I doubt the 190 billion is the right number for only taxes? I have questions about the sources of the writer and probably to deminished the efforts that have been going on in close doors between Tanzanian Goverment and BG/Acacia.
But we shouldn’t forget that Mining companies took advantage of African countries including Tanzania. This is the country that some of governments contracts were signed in the hotels and not in the Ministry of natural resources
Corruption was at its peak and mining companies failed their due delegent.
Also, I have a question to fellow westerners, name one country which is a gold producer were by crushed rock with gold is being transported to different country?But, it happened in Tanzania, first by road and then by ship surprising even Tanzania government didn’t know where this crushed rock with not only gold were transported.
Marry river project in Baffin land Alaska the highest iron ore with Fe 65+ this is type of mine that they transport crushed rock because its high grade ore, what’s happed in Tanzania? With crushed rock with Gold Zink etc?
BG/Acacia claimed didn’t make money lost money still the kept mining?
I will ask the writer to dig more researches…
Mining Engineer
Alex
Interesting how most comments are rather irrational and extreme. Tanzania does have a right to control its minerals. However when you enter an agreement with a company most countries honour it and if they need to change the agreement it is renegotiated with reason rather than calling people thieves and fabricating ridiculous reports.
The 190Bn USD, is an incorrect number, it is greater than the total worth of all publicly listed gold miners. Meaning that even if all the gold companies sold all their assets they would still be unable to pay this amount. Tanzania will never receive this amount and I doubt Acacia’s mines would ever generate this as income. Tanzania can nationalise the mines if it wants, but it will never receive this amount of money.
I also find it funny that foreigners have been called thieves in this post, yet so many African countries depend on foreign aid in order run their governments. Does that mean we are thieves if we do business with you, but we are needed if we simply give you money? Regardless I wish Tanzania good luck in this time and for them not to repeat the mistake of alienating all foreign nations.
Madbull
190 billion USD is a lot of money. I think its mainly made up of penalties rather than taxes. Penalties are meant to strike fear in the hearts of the rest. They are mainly bullying tactics to force Acacia out of the asset or to the negotiating table.
Now I fully understand the impact of political risk. Some guy gets into power and chokes an investment to death. For that reason when I mine in Africa I will loot and run. Big monies now, small monies later.
Acacia, do not pay that ridiculous amount. It does not make sense. I do not believe that there is a desire to resolve this amicably from Tanzania. Tanz wants the asset in my opinion.
Perplexed
Why is it that when a British company opens a mine in Canada, pays royalties, pay taxes its called resource development but when it does the exact same thing in Africa its called stealing? Royalties, jobs, taxes are paid in both locations.
Othann Mpoli
All in all in fully-respects the discussions and mediation should be balanced in business way,rather than quarreling and thus is a business its involves a lot of things which should be left behind.
Nutu G.
It would be fun to read this thread again 5 years from now… Reminder set! 🙂