Acacia Mining (LSE: ACA, DSE: ACA), Tanzania’s largest gold miner, has recently published its unaudited results for the six months ended 30 June 2018, indicating a gold production of 254,759 ounces, 41% lower than H1 2017.

In Q3 2017, Acacia took to the decision to place its Bulyanhulu gold mine on reduced operations due to the unsustainable losses experienced at the mine due to the inability to export concentrate. This process was completed in Q4 2017.

However, despite the continuation of the challenging operating environment and the on-going disputes with the Government of Tanzania, the group has delivered a strong operational performance in H1 2018.

“In achieving first half production of 254,759 ounces we are on track to achieve the top end of our guidance range of 435,000-475,000 ounces for 2018 and continue to demonstrate the resilience that we have built within our business. All gold produced in 2018 is expected to be in doré form and will not, therefore, be impacted by the current GoT export ban on concentrate,”, the company’s press release report reads.

Peter Geleta, Interim CEO of Acacia commented; “The changes we made to the business in late 2017 have delivered the desired results, helping to return the group to free cash generation for the first time since Q4 2016 and we are on track to achieve the top end of our production guidance range of 435,000-475,000 ounces for 2018 at an AISC of US$935-985 per ounce. Following the stability we have brought to the business during the last six months, our priority remains on optimising performance across all areas of our operations as we manage through the current uncertainty in the operating environment and the on-going disputes with the Government of Tanzania. By continuing to be resilient, managing our costs and working to our mine plans, we are addressing what we can control and will look to deliver value for all of our stakeholders.”

Acacia is currently on a raw with the Tanzanian government after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold producer has always refuted the accusation and has been since in talks with the Government of Tanzania for a resolution.

Tanzanian Ministry of Minerals Mining Commission has granted a mining license for the Fungoni Heavy Mineral Sands Project to Australian exploration and development company Strandline Resources (ASX: STA).

Strandline Managing Director Luke Graham said securing the Mining Licence for Fungoni was a crucial step to build a significant, low-cost mineral sands business in Tanzania.

“We thank the Tanzanian authorities for their endorsement of the Fungoni project, the development of which will bring significant value and benefits to all stakeholders,” Mr Graham said.

“Strandline is now a huge step closer to making the transition from explorer to developer and ultimately producer of mineral sands products for decades to come,” he concluded.

The Fungoni project is located ~25km from the Dar es Salaam port in Tanzania. Its Definitive Feasibility Study (DFS), which was completed in October 2017 confirms that the project will produce premium-quality titanium and zircon products.

In May 2018, Strandline secured a binding offtake agreement for 100% of the ilmenite at Fungoni with Maoming Ubridge Group Mineral Industry Company of China.

Gold mining company Acacia Mining (LSE: ACA) recently issued a press release announcing that the Tanzanian Fair Competition Commission (FCC) has granted its approval for OreCorp (ASX: ORR) to increase its interest in Nyanzaga Mining Company Limited (NMCL) to 51%.

This move remains subject to: (i) the approval of the newly established Mining Commission, the application for which was lodged at the same time as the application for FCC approval; and (ii) the future payment of USD3 million to the Acacia Group.

In addition, members of the OreCorp Group have now entered into a completion agreement with Acacia and other members of the Acacia Group to allow OreCorp Tanzania to move to 100% ownership of NMCL, and thereby 100% ownership of the Nyanzaga Gold Project.

This move remains subject to: (i) the Tanzanian regulatory approvals referred to above; (ii) the grant of the Special Mining Licence (SML) in respect of the Project; and (iii) the making of a future payment of USD7 million.

Following completion Acacia will retain a net smelter return production royalty over the Project, capped at USD15 million.

Both OreCorp and Acacia believe that a simplified ownership structure of NMCL is beneficial to the future development of the Project and would enable it to be best placed to provide significant benefits to Tanzania and all stakeholders.

Nyanzaga Gold Mining Project
Located in Northwest Tanzania, Nyanzaga hosts a JORC 2012 compliant Mineral Resource Estimate (MRE) of 3.1 million ounces at 4.0 g/t gold. The MRE is the foundation of a Definitive Feasibility Study for project financing purposes (Project Financing DFS) currently underway.

The grant of the Special Mining Licence (SML) will be required before the Project Financing DFS is completed and any financing for the construction of the Project can be undertaken.

Upon grant of the SML, the Government of Tanzania will become an equity holder in the Project, acquiring a free carried interest of not less than 16% in the project in accordance with the Tanzanian Mining Act.

Why is Acacia Selling Off
Once Tanzania largest gold producer and exporter, Acacia Mining is currently in a tax row with the Government of Tanzania after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold producer has always refuted the accusation and has been since in talks with the Government of Tanzania for a resolution.

Meanwhile, the company has published its unaudited results for the six months ended 30 June 2018, indicating a gold production of 254,759 ounces, 41% lower than H1 2017, and confirmed that it has commenced a process to explore the sale of a stake in some or all of its Tanzanian operations.

Magnis Resources Limited (Magnis) (ASX: MNS) announced that AL Capital Holding has invested USD 11.1 million in Magnis for a 4.98% equity holding in the company.

In its press release, Magnis indicates that the funds raised are being used to strengthen the balance sheet to allow Magnis to capitalize on current and future growth opportunities in the battery technology sector; and, to fund the ongoing investment in the future development of the Company’s 100% owned Nachu Graphite project.

The Nachu graphite project in southeast Tanzania is one of the largest mineral resources of large flake graphite in the world, with an estimated production life of roughly 40 years.

The unique crystal structure and low impurities in the Nachu graphite mineralization allow production of a premium product concentrate purity levels up to 99.6% graphitic carbon content (TGC). This is firmly targeted at the rapidly growing lithium-ion battery sector.

Frank Poullas, Chairman of Magnis, commented: “[the] announcement is testament to the quality of our projects and our technologies. Our financial position is now secured for the medium term but more importantly, we have a strong partner and we welcome AL Capital’s investment.”

Tanzania Graphite
At the end of 2015, The Tanzanian Ministry of Energy and Minerals (MEM) announced that Tanzania will soon become one of the largest producers of graphite in the world, due to recent and abundant discoveries of graphite fields across the country.

Graphite discoveries in Tanzania come mainly from Australia based graphite developers, Magnis, Volt Resources (ASX:VRC) and Kibaran Resources (ASX:KNL).

Tanzania’s gold miner Acacia Mining (LSE: ACA, DSE: ACA), has recently published its unaudited results for the 3 months ended 30 September 2018, indicating a gold production 29% lower than Q3 2017 but ahead of both Q1 2018 and Q2 2018.

In Q3 2018, gold production was 136,640 ounces, compared to 120,981 ounces in Q3 2017 and 133,778 ounces in Q2 2018.

In Q3 2017, Acacia took to the decision to place its Bulyanhulu gold mine on reduced operations due to the unsustainable losses experienced at the mine due to the inability to export concentrate. This process was completed in Q4 2017.

Commenting on the latest results, Peter Geleta, Interim CEO of Acacia said “During the third quarter Acacia is pleased to have delivered a strong operational performance […]. This is a testament to the resilience and dedication of all of our people who continue to do their very best in the face of what is now an increasingly challenging operating environment in Tanzania.”

Looking at the closing of 2018, he explained that “As a result of our consistently strong production performance in the year to date, we are now targeting production to be marginally in excess of 500,000 ounces for the full year.”

However, he also showed his deep concern about the increasingly challenging operating environment in Tanzania, relating to the criminal charges of tax evasion and money laundering brought against several of its employees over the past weeks by the Tanzanian Prevention and Combating of Corruption Bureau (PCCB).

Acacia is currently in a raw with the Tanzanian government after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold producer has always refuted the accusation and has been since in talks with the Government of Tanzania for a resolution.

In his latest statement, Galea stated that the company will be reaching out to the Government of Tanzania to seek the opportunity for direct dialogue but also to inform it that failing a negotiated resolution, the company may need to pursue claims under the relevant bilateral investment treaty.

Petra Diamonds (LSE:PDL), the mining company which partially owns and operates the Williamson diamond mine in Tanzania, has published its Trading Update – Q1 FY 2019 Production and Sales Report, showing a production increase of 18% at the mine.

Williamson’s ROM production increased 18% to 100,278 carats (Q1 FY 2018: 85,213 carats), demonstrating the continued steady operational delivery of the mine.

However, the company notes that it remains in discussions with the Government of Tanzania in relation to the claimed VAT refund of USD25 million.

Petra Diamonds has a diversified portfolio with interests in three underground producing mines in South Africa (Finsch, Cullinan and Koffiefontein) and one open pit producing mine in Tanzania (Williamson).

Williamson, located south of the town Mwanza in northwest Tanzania, is the country’s only important diamond producer.

Tanzania Diamonds
In 2015, Tanzania was the 10th largest diamond producer in Africa after Botswana (17.3m ca), Angola (7.1m ca), South Africa (6m ca), the Democratic Republic of Congo (3.15m ca), Namibia (1.92m ca), Sierra Leone (0.5m ca), Zimbabwe (0.5m ca), Lesotho (0.35m ca) and Ghana (0.24m ca).

Australian mining company Volt Resources (ASX:VRC) recently announced that it has formally received mining licenses ML 591/2018 and ML 592/2018 from the Mining Commission of the Ministry of Minerals of Tanzania for the respective Stage 1 and Stage 2 developments of the Bunyu Graphite Project.

The Bunyu project (formerly Namangale), located in the Mtwara Region of South-east Tanzania, covers a combined area of 17.71km2 andis considered to be the biggest graphite mineral resource in the country.

It has estimated, measured, indicated, and inferred mineral resource of 461Mt graded at a total graphite content (TGC) of 4.9%.

The licenses provide Volt with the exclusive right to develop the graphite resources in the area for a period of 10 years, with the right of further 10 year renewals under section 53 of the Mining Act.

Trevor Matthews, CEO of Volt, explains that now that the Company has formally received the licenses, the completion of the Tanzanian Note Issue for the Bunyu development is the remaining key milestone prior to Volt’s subsidiary Volt Graphite Tanzania Ltd (VGT) proceeding with front-end engineering and design work for the initial Stage 1 operations and the ordering of long lead time components.

Concurrently with the Stage 1 development, VGT plans to be undertaking the Definitive Feasibility Study on the large-scale Stage 2 expansion at Bunyu.

Tanzania Graphite
Tanzania’s largest graphite deposits are located in the central and east southern regions of the country.

Graphite discoveries in Tanzania come mainly from Australia based graphite developers, Magnis Resources (ASX:MNS), Volt Resources (ASX:VRC) and Kibaran Resources (ASX:KNL).

The Natural Resource Governance Institute (NRGI), an independent nonprofit organization dedicated to improving countries’ governance over their natural resources to promote sustainable and inclusive development, has estimated Tanzania’a average effective tax rate at 74%.

In an article titled “Magufuli Seeks the Right Balance for Tanzania’s Mining Fiscal Regime“, the authors analyze the current fiscal regime for Tanzania’s mining sector that was introduced in 2017.

In that year, Tanzania passed new laws for its mining sector to greater benefit from its mineral and gas deposits. Among other significant changes, these laws increased taxation of the mining sector.

Using an Excel-based economic model that they developed for this analysis, the authors evaluated the impact of the fiscal regime on a number of hypothetical large-scale gold projects.

The result is that on a gold project with development costs of USD 420 million, per unit operating costs of USD 600 per ounce and a gold price of USD 1,300 per ounce, the average effective tax rate would be 74%.

This makes Tanzania the most taxed mining sector in the world, followed by Guinea (61%), South Africa (59%), Ghana (58%) and Chile (48%), Peru and Western Australia (45%), Zambia (44%), And Kyrgyzstan (39%).

By using the same model, under the previous fiscal regime in place until 2017, Tanzania’s average effective tax rate was 51%.

The authors conclude that the current fiscal regime in place in Tanzania is likely to limit mining sector activity and ultimately constrain government revenues.

Barrick Gold Corporation (NYSE:GOLD; TSX:ABX), the largest and majority shareholder of Acacia Mining, announced on 20th February 2019 that the Company, in its capacity as a facilitator, and the Government of Tanzania have arrived at a proposal that sets forth the commercial terms to resolve outstanding disputes concerning Acacia Mining’s operations in Tanzania.

Acacia is currently in a raw with the Tanzanian government after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold miner has always refuted the accusation and has been since in talks with the Government of Tanzania for a resolution.

Barrick says it will present its proposal to the Independent Directors of Acacia in the near future for their consideration.

The proposed framework is consistent with the agreement announced in October 2017 and includes the following elements:
-The creation of a local operating company to manage Acacia’s operations in the country.
-Economic benefits from Acacia’s operations to be shared on a 50/50 basis. The Government’s share of economic benefits would be in the form of royalties, taxes and a 16% free carry interest in the Tanzanian operations.
-A payment of USD 300 million to the Government of Tanzania to resolve outstanding tax claims, to be paid overtime on terms to be settled by the parties.

Mark Bristow, President and CEO of Barrick, said: “Significant amounts of real value have been destroyed by this dispute and, in Barrick`s view, this proposal will allow the business to focus on rebuilding its mining operations in partnership with their respective stakeholders, and most importantly long-suffering investors, including Barrick”.

Work is underway to finalize the definitive agreements needed to give effect to the proposal.

To become effective, the proposal and those agreements must be approved by Acacia and the Government of Tanzania, in keeping with applicable laws and regulations.

Following Barrick’s announcement, Acacia noted that it has not yet received any proposal from Barrick regarding a comprehensive resolution of the Company’s disputes with the GoT.

Any proposal received by Acacia will be subject to review by the Independent Committee of the Acacia Board of Directors.

International law firm Clyde & Co. has recently published an alert on a series of changes made to Tanzanian mining laws and regulations in February 2019.

These include changes to the Mining Act 2010 and changes to mining-related regulations, which Clyde & Co highlights and compares the current provisions.

When passed into law, which the firm estimates to be imminent, the Mining Act Amendment Bill will have a significant impact.

The main points to note include:
-the wide definition of “mineral ore”, which encompasses all naturally occurring material in the form of rocks or sediments from which economically viable minerals can be extracted;
-the inclusion of the definition of the term “tailings”, which are materials left over after the extraction of the mineral ore, which suggests a drive to get as much out of the mining sector as possible; and
-the fact that tailings and mineral ores can be traded in Tanzania, thus providing an opportunity to collect more revenue.

Meanwhile, the New Local Content Regulations amends the Mining (Local Content) Regulations that were created in 2018 (the Old Local Content Regulations).

These amendments include the following:
-An indigenous Tanzanian company shall have at least 20% of its equity owned by Tanzanian citizens, against current 51%;
-Period of review of the local content plan extended;
-The requirement to operate a bank account and transact business with a Tanzanian bank.

Clyde & Co. concludes that while the New Local Content Regulations continue to support the spirit of local content reflected in the Old Local Content Regulations and other supporting legislation, it is clear that stakeholders’ views were considered, with the aim of improving investment opportunities, specifically in the mining sector.

Tanzania Mining

Mining and quarrying activities in Tanzania contributed 3.7% to its GDP with USD 1.78bn in 2014, compared to only USD 598m in 2009, representing a value increase of almost 200%.

Based on Tanzania’s Development Vision 2025 plan, the mining sector is expected to account for 10% of the GDP by that year.

Tanzania has relaxed mining sector regulations after sustained advocacy efforts informed by the USAID East Africa Trade and Investment Hub (the Hub) policy analysis.

The new regulations will expand the number of commercial banks providing services to the mining sector and put Tanzania in compliance with its commitment to the free movement of capital within the East African Community (EAC) under the Common Market Protocol.

The Mining Regulations on Local Content (2019) came into effect on February 8 after years of advocacy against discriminatory measures in Tanzania’s Mining (Local Content) Regulation, GN No. 3 of 2018.

The Hub created a reform memo that identified regulations inconsistent with the EAC Common Market Protocol and international best practices and provided justifications for reform.

The memo highlighted how Tanzania had tightened local content requirements for contractors, sub-contractors and licensees in the mining sector; required a Tanzanian ownership stake of at least 51% for licensing; required a 25% Tanzanian equity partnership to supply goods or services to licensees; and compelled investors to use financial services from Tanzania banks unless they could demonstrate a lack of capacity.

These same areas for reform were included in the Hub’s Tanzania Investment Policy Assessment 2018.

The new regulations reduce the local ownership stake and local content requirements for mining firms and their service providers operating in the country, enabling more actors to participate in the sector.

This helps ensure that companies that have the resources to further develop Tanzania’s mining sector – and 20% Tanzanian ownership – can support the industry’s growth.  

The Hub It is funded by the U.S. Agency for International Development (USAID).  It boosts trade and investment with and within East Africa. 

It does this by deepening regional integration, increasing the competitiveness of select regional agricultural value chains, promoting two-way trade with the United States (U.S.) under the African Growth and Opportunity Act (AGOA) and facilitating investment and technology to drive trade growth intra-regionally and to global markets.

Tanzania Mining

Mining and quarrying activities in Tanzania contributed 3.7% to its GDP with USD 1.78bn in 2014, compared to only USD 598m in 2009, representing a value increase of almost 200%.

According to the Tanzania’s Development Vision 2025 plan, the mining sector is expected to account for 10% of the GDP by that year.

Acacia Mining (LSE: ACA), the largest gold producer in Tanzania, just released its Annual Report for 2018, showing a total gold production of 521,980oz, compared to 767,880 oz in 2017 (-32%).

During the same period, revenues reached USD 664m vs USD 752m in 2017, (-11.7%), due to a decrease in gold sales volumes mainly from the Bulyanhulu and Buzwagi mines, while EBITDA reached USD 226m vs USD 257m in 2017 (-12%).

The unsold concentrate on hand as a result of the concentrate ban remains unchanged at approximately 186,000 ounces of gold, 12.1 million pounds of copper and 159,000 ounces of silver.

Looking ahead to 2019, Peter Geleta, the Interim CEO, commented “Assuming a resolution of our disputes with the Government of Tanzania (GoT), the ability to economically produce and sell gold concentrate and a successful resumption of underground mining operations, […] further capital investment of around USD 120 to USD 140 million could deliver an expected life of mine of 18 years with an average steady-state production rate of 300,000 to 350,000 ounces per year. A final decision to resume underground mining operations and make necessary further capital
investments would be dependent on achieving a comprehensive settlement with the GoT. “

Acacia Mining is currently in a raw with the GoT after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold miner has always refuted the accusation and has been since in talks with the GoT for a resolution.

Gold mining company Shanta Gold (AIM: SHG) published an update on its plans to finance the Singida Gold Mining Project in Tanzania via an Initial Public Offering (IPO) on the Dar es Salaam Stock Exchange (DSE).

Singida is an advanced stage gold project, with three mining licenses, located in the Ikungi Administrative District in the Singida Region in central Tanzania.

The recently incorporate subsidiary Singida Resources Plc will proceed with a targeted USD 20 million minimum equity offering at DSE.

Shanta Gold will retain at least 51% ownership of Singida Resources and will operate the Project. The IPO proceeds would finance the upfront capital to bring the Project into production and provide additional funds for exploration targeting resource expansion.

The IPO is expected to take 6-12 months to complete and is the result of encouraging feedback from recent investor roadshows by management in Tanzania, Uganda, and Kenya, the company explains.

Eric Zurrin, CEO of Shanta Gold, commented:“I am pleased with the initial feedback from institutional investors across East Africa who are seeking USD linked investments in support of industrialization. Additionally, we are pleased to show our continued support to Tanzania and hope that this IPO will offer Tanzanians a rare investment opportunity within their own mining sector. I look forward to providing further updates throughout 2019 as this unique funding opportunity progresses.”

TANZANIA GOLD
Gold reserves in Tanzania are estimated at about 45m oz with gold exploration centered mostly on the greenstone belts around Lake Victoria.

In March 2017, the Ministry of Energy and Minerals of Tanzania issued a ban on the export of mineral concentrates and ores for metallic minerals such as gold, copper, nickel, and silver.

However, Shanta Gold clarifies that this only affects the export of gold concentrate and that the company only produces refined gold doré.

Acacia Mining (LSE: ACA), Tanzania’s largest gold producer, just released its latest interim results, showing a total gold production of 158,774 ounces in Q2 2019, with a 51% increase compared to Q1 2019.

The achieved gold production was also 19% higher than the prior year period, mainly due to the higher production at North Mara mine, offset by expected reductions in production at Buzwagi and Bulyanhulu mines.

Interim CEO Peter Geleta explained that these results have been achieved with the successful implementation of the revised mining plan at North Mara mines, which saw production increase by 80% over the period.

“We remain confident of achieving production within our guidance of 500,000 to 550,000 ounces for the year [2019],” Geleta added.

Acacia Mining is currently in a raw with the GoT after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold miner has always refuted the accusation and has been since in talks with the GoT for a resolution.

The GoT has also introduced a ban to export mineral concentrates and ores for metallic minerals such as gold, copper, nickel, and silver.

Acacia Mining (LSE: ACA), Tanzania’s largest gold producer, released a press release noting that its North Mara Gold Mine has received a letter from the Mining Commission of the Tanzanian Ministry of Minerals informing it that the Commission is soon to conduct an inspection of the mine’s gold production.

The letter states that export permits for gold shipments from North Mara will be issued following completion of this inspection.

Acacia is seeking clarification on the timing for completion of the inspection and will provide a further update in due course as appropriate.

North Mara Gold Mine
North Mara is of Acacia’s three mines in Tanzania, together with Bulyanhulu and Buzwagi.

It commenced commercial production in 2002 and has produced over 2 million ounces of gold to date.

However, in March 2017 the Ministry of Energy and Minerals of Tanzania issued a ban on the export of mineral concentrates and ores for metallic minerals such as gold, copper, nickel, and silver.

In a press release, the Ministry explained that “The ban intends to make sure that mineral value addition activities are carried out within Tanzania as emphasized in the Mineral Policy of 2009 and Mining Act of 2010.”

In May of the same year, a presidential committee found that Acacia allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold miner has always refuted the accusation and has been since in talks with the GoT for a resolution.

Acacia Mining (LSE: ACA), Tanzania’s largest gold producer, has received on 9th August 2019 a letter from the Mining Commission of the Tanzanian Ministry of Minerals authorizing the company to resume gold exports from North Mara mine, subject to its adherence to the export procedure.

The letter follows an investigation which the Mining Commission conducted at the mine on 30th and 31st July 2019, and an earlier letter dated 12 July 2019 from the Mining Commission which suspended gold shipments from North Mara pending the investigation.

Acacia notes that today’s letter also states that the Mining Commission believes that certain provisions of the Mining Regulations, 2010 were violated and directs the North Mara mine to submit a feasibility study report and current mine plan for its approval by 16th August 2019. 

Acacia Mining is currently in a raw with the Government of Tanzania after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold miner has always refuted the accusation and has been since in talks with the GoT for a resolution.

Acacia Mining (LSE: ACA), Tanzania’s largest gold producer, resumed the export of gold from its North Mara mine following the recent authorization from the Mining Commission of the Tanzanian Ministry of Minerals.

Following the sale of this gold, the company will be able to meet its financial obligations for an extended period of time.

However, since the Prohibition Notice issued by the Tanzanian National Environment Management Council came into effect, which ordered the North Mara Gold Mine to stop the use of its Tailings Storage Facility on 20 July 2019, all gold production at the processing plant at North Mara has been forced to cease.

Production at the plant will not resume until the Notice is lifted.  Mining activities at the North Mara Gold Mine remain unaffected for the time being with mined ore being added to stockpiles while a resolution is sought with respect to the Notice.

Acacia Mining is currently in a raw with the Government of Tanzania (GoT) after a presidential committee found in May 2017 that the company allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The gold miner has always refuted the accusation and has been since in talks with the Government of Tanzania for a resolution.

Barrick Gold Corporation, the largest gold mining company in the world, has announced that the scheme to acquire the shares it did not already own in Acacia Mining, Tanzania’s largest gold producer, has today become effective.

Under the scheme, Acacia’s shareholder will receive 0.168 New Barrick shares and any Acacia Exploration Properties Special Dividends and any Deferred Cash Consideration Dividends.

The listing of Acacia shares on the London Stock Exchange was suspended with effect from 7.30 a.m. (London time) on 17 September 2019.

The reasons for the acquisition of Acacia by Barrick are found in Acacia’s ongoing disputes with the Government of Tanzania (GoT) that affected the company’s operations in the country.

In March 2017, the GoT announced a ban on the export of metallic mineral concentrates and, as a consequence, Acacia took the decision to place the Bulyanhulu gold mine on reduced operations.

In addition, there are numerous ongoing unresolved disputes between the GoT and Acacia Group companies, including disputes in relation to tax, environmental and criminal matters.

In particular, a presidential committee found in May 2017 that Acacia allegedly under-declared its exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The company has always refuted the accusation and has been since in talks with the Government of Tanzania for a resolution, without success.

Barrick, which had 63.9% shareholding in Acacia, signed on October 2017 a set of framework documents with the GoT which envisaged a USD 300 million settlement payment and subsequent 50/50 sharing of economic benefits between Acacia and the GoT.

The GoT will receive its share of economic benefits through taxes, royalties, fees, and other fiscal levies and through the GoT’s 16% free carried interest in all distributions (including shareholder loan repayments).

As Acacia was not permitted to participate in the discussion, Acacia was not a party to the framework documents and was not involved in negotiating the terms included therein.

There followed a lengthy period of time during which Barrick and the GoT were discussing a set of agreements to implement the framework documents.

Mark Bristow, CEO of Barrick Gold, commented “We recognize that Acacia was previously not managed optimally. We firmly believe that we can manage the assets better as part of the group and together with the GoT as a 16% shareholder.”

The latest Bank of Tanzania (BOT) Monthly Economic Review indicates that in August 2019 gold exports rose by +25.1% to USD 1,915.3 million, driven by volume, and accounted for more than half of non-traditional exports.

The value of non-traditional exports was USD 3,904.2 million in the year ending August 2019 compared with USD 3,257.5 million in the corresponding period in 2018, largely driven by minerals (particularly gold), and manufactured goods.

The increase in the export of manufacturing goods manifested mostly in manufactured coffee, yarn and twine, iron and steel, and fertilizers.

Services receipts amounted to USD 3,916.3 million in the year ending August 2019 compared with USD 3,887.4 million in the year ending August 2018 and accounted for 44.7 percent of total exports. Much of the increase emanated from travel receipts.

The value of traditional goods exports fell by 55.0% year-on-year to USD 508.8 million in the year ending August 2019.

The decline was general for all traditional goods exports, save for coffee.

The value of coffee exports rose on account of an increase in volume following good weather during the crop season, while that of cashew nuts declined due to fall in both volume and unit prices in the world market.

The value of cloves, tobacco and sisal export decreased on account of volume, while that of tea was driven by price in the world market.

Cloves did not perform well due to the cyclical nature of the crop.

For the year ending August 2019, the overall export of goods and services improved slightly to USD 8,770.6 million from USD 8,713.2 million in the year ending August 2018.

Barrick Gold Corporation (NYSE:GOLD) (TSX:ABX) has recently reached an agreement to settle all disputes with the government of Tanzania (GoT) concerning the mining companies formerly operated by Acacia Mining but now managed by Barrick.

Acacia, a former subsidiary of Barrick and Tanzania’s largest gold producer, has been on a dispute with the GoT since May 2017 when a presidential committee accused the company to have under-declared its mineral exports and eventually presented it with a demand for USD 190 billion in unpaid taxes.

The company has always refuted the accusation and has been since in talks with the GoT for a resolution, without success.

Barrick, the largest shareholder of Acacia, announced on September 2019 a scheme to acquire the shares it did not already own in the company, which has become effective in the same month.

The terms of the agreement submitted by Barrick to the Tanzanian Attorney General for review and legalization includes the payment of USD 300 million to settle all outstanding tax and other disputes; the lifting of the concentrate export ban; the sharing of future economic benefits from the mines on a 50/50 basis; and the establishment of a unique, Africa-focused international dispute resolution framework.

In conjunction with the finalization of the agreement, a new operating company called Twiga Minerals Corporation (Twiga) has been formed to manage the Bulyanhulu, North Mara and Buzwagi mines in Tanzania.

The GoT will acquire a free carried shareholding of 16% in each of the mines and will receive its half of the economic benefits from taxes, royalties, clearing fees and participation in all cash distributions made by the mines and Twiga. An annual true-up mechanism will ensure the maintenance of the 50/50 split.

Speaking after a meeting with the chairman of the Negotiating Committee of the GoT, Prof Palamagamba Kabudi, Barrick president and chief executive Mark Bristow said the agreements introduced a new era of productive partnership with the GoT and would ensure that Tanzania and its people would share fully in the value created by the mines they hosted.

Tanzania Gold
Tanzania gold reserves are estimated at 45m ounces (oz). Gold production in Tanzania stands at around 50t per year which makes it the 4th largest gold producer in Africa after South Africa, Ghana, and Mali.

According to the Monthly Economic Review of the Bank of Tanzania (BOT), in August 2019 gold exports rose by +25.1% to USD 1,915.3 million, driven by volume, and accounted for more than half of non-traditional exports.