Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
African Barrick Gold (LON:ABG) has decided to pay the Tanzanian government an extra 1% in royalties, in light of the current gold price environment.
In a statement, the miner, which is Tanzania’s largest gold producer, said the new royalty would be in addition to its prevalent three percent rate stipulated in its existing mineral development agreements with the government.
Gold is currently trading at the lowest in over four months on concerns over the European debt crisis. US June gold futures, which often dictate spot gold, are at their lowest since late December.
Last month, AFG that has four producing mines -all in northwest Tanzania – posted a 17% fall in first-quarter output, but reiterated its full-year production forecast.
Tanzania, which competes with Mali to be Africa’s third-biggest gold producer, is now facing difficulties to stay among the biggest gold producers on the continent.
African Barrick Gold vice-president of corporate affairs, said last week that poor infrastructure, rising of operational cost and the absence of huge deposits of gold in the Tanzania, compared to its neighbours, could force investors in mining to turn to other gold producing countries.
Bullion Street reported that Mwanyika mentioned a long list of problems facing gold mining companies, which hinder growth in production:
“The increased cost of production forced ABG to cut down production by 10% last year, although the overall shipments of the metal went up to a record due to the increased price in the world market,” he elaborated.
According to Mwanyika, it takes up to 10 days to clear imported mining equipment at the Tanzanian ports while in other countries could take to three days only to process such consignment.
Barrick Gold (NYSE & TSX: ABX) holds a 73.9% equity interest in ABG, one of the five largest gold producers in Africa.
