AngloGold, African Barrick in ‘Advanced’ Talks on Tax Refunds in Tanzania

AngloGold Ashanti Ltd. (ANG), African Barrick Gold Ltd. (ABG) and other miners of the precious metal are in “advanced” talks with Tanzania’s government about a $273.9 million tax refund, the Chamber of Minerals and Energy said.

Tanzanian tax policy for the mining industry provides for a refund of duties on fuel used to generate electricity to power gold mines, as well as value-added tax, or VAT. Miners are claiming about 60 percent of the total amount in refundable fuel duties and 40 percent from VAT, said Godvictor Lyimo, chairman of the finance committee at the chamber.

“Engagements with government to resolve the matter are at advanced stages,” Lyimo said in an interview on April 20 from Dar es Salaam, Tanzania’s commercial capital. “Government has shown good will to resolve it.”

Tanzania is Africa’s fourth-biggest gold producer, according to data on the U.S. Geological Survey’s website. South Africa, Ghana and Mali are the largest producers on the continent. Exports of the metal from Tanzania jumped 22 percent to $1.6 billion in the year through February, the Bank of Tanzania said last month.

Mining companies in Tanzania say the taxes owed to them have accumulated since 2002. TheTanzania Revenue Authority confirmed negotiations are continuing.

“We are in talks with the miners, but cannot give you figures of payments from our taxpayers,” Protas Mmanda, the authority’s director for taxpayer education, said in a phone interview.

Refund Claims

AngloGold, the world’s third-biggest gold miner, is claiming $62 million in refundable fuel duties and $49 million in VAT from Tanzania’s government, according to its 2010 annual report. African Barrick, which operates four mines in the country, is owed $121 million, its annual report shows.

“ABG has been actively involved in discussions with the Tanzanian government and the Tanzanian Revenue Authority to resolve the status of fuel exercise levies and VAT refunds for its operations,” African Barrick said. “These issues have been outstanding for some time and were further complicated by amendments made to certain tax laws.”

In 2009, the Tanzanian government amended its tax laws requiring miners to pay VAT on all purchases. Previously, miners where allowed VAT relief because of the volume of their orders. Government then had to refund the bills after every 30 days. The state also relieved gold miners of duties on fuel for generating power.

Fuel Consumption

The industry consumes about 13.5 million liters (3.57 million gallons) of fuel per month, while gold-mining companies estimate fuel accounts for 30 percent of their operating cost, Lyimo said.

“Our position at the chamber is that government should move fast in resolving the matter because holding that money is constraining the companies’ cash flows,” he said. “That amount of money can start a new mine.”

Tanzanian President Jakaya Kikwete said last month that the country’s mining operations expanded at an average rate of 12 percent over the past decade, making it the country’s fastest-growing industry. Mining accounts for one-third of Tanzania’s foreign-exchange earnings and generates 2.3 percent of its gross domestic product, he said.

To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi atpmrichardson@bloomberg.net.