AngloGold Ashanti Ltd.’s (ANG) Tanzanian unit expects payments to the government to double to about $200 million this year, after it pays its first full-year corporate tax and a royalty increase that it’s negotiating to decrease.
Geita Gold Mine Ltd. paid about $100 million to Tanzania last year, “slightly less” than $45 million of which was royalties, Geita Managing Director Gary Davies said. The royalty component will grow because the government raised the rate and gold’s price increased, he said.
“We are paying the 4 percent royalty rate but in protest, because we are still discussing it, and have not yet reached an agreement,” he said yesterday in an interview in the northern town of Arusha at a mining conference. “The latest round of discussion was fairly positive. I can’t give details of it.”
The Tanzanian government increased royalties for mining companies by 1 percentage point to 4 percent when it enacted legislation in 2010. African Barrick Gold Plc (ABG), the biggest producer of the metal in the East African country, is the only miner that has agreed to pay the higher royalty so far.
Tanzania, which vies with Mali to be Africa’s biggest producer of gold after South Africa and Ghana, is seeking to gain more from the resource. Energy and Minerals Minister Sospeter Muhongo has urged companies to aim at breaking even in at most five years, so that they start paying corporate tax.
“Tanzania’s mining industry is currently based on six major mines, and we think government should aim at gaining more from the sector by expanding it, awarding more licenses,” Davies said. “Trying to gain more from the existing operations may instead shrink the sector.”
Geita is producing about 500,000 ounces a year and has a mine-life of about seven years, he said.
“We are doing exploration to try and extend it, probably for another seven, eight years,” Davies said.
The company has started studies for underground mining at Nyakanga, which is part of the Geita license, that may be completed by 2015, he said.
AngloGold is also exploring alternative sources of energy to decrease dependence on expensive fuel-generated power currently, accounting for 15 percent of the plant’s costs, according to Davies. The Tanzania Electric Supply Co. may connect the mine to the national grid by 2015.
“Electricity from the national grid will have an impact on cost,” Davies said. “We will maintain it as one of the alternatives among other sources, while we see if that supply is reliable and sustainable.”
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