Tanzania Aims to Raise Royalties on Gold Miners

Tanzania plans to conclude negotiations with mining companies early next month to allow the government to raise royalty payments on gold exports to 4 percent from 3 percent.

Energy and Minerals Minister William Ngeleja said in a presentation to parliament seen by Reuters on Monday that the government was in talks with mining companies to review various taxes in line with mining legislation passed last year.

Tanzania is Africa's fourth-largest gold producer and has attracted significant investment in the mining sector over the past decade, but there is political pressure on the government to stake claim to a bigger share of revenue from mineral exports.

"We have agreed that the first week of September has been set as the deadline for concluding this dialogue in order for them to start paying royalty based on the new formula," he said.

"I don't see any way that these companies will not agree to the new royalty regime ... Talks are proceeding very well."

The minister rejected criticism from some members of parliament suggesting the country had not benefited from its vast mineral resources, but said there was a need for the government to correct mistakes in previous mining contracts.

Tanzania's annual gold exports have tripled to $1.5 billion in the last five years due to the increase in the price of gold but government revenues have remained at around $100 million a year.

"We drafted a new (mining) policy in 2009 and enacted a new mining act last year among other things to address the shortfalls identified in the past ... we have now decided that the government shall own a stake in all future mines," Ngeleja said.

The minister said the government would not impose the new royalty payments on existing mining companies, but would seek voluntary compliance from the firms.

"We have succeeded to ensure some of the (mining) companies start paying corporate tax, which has been a source of public outcry. Resolute mining company ... is now paying 30 percent corporate tax," he said.

Mineral development agreements in place guarantee a stable tax regime for existing mining companies in Tanzania for the duration of the mines' lifespan.

African Barrick Gold has four gold mines in Tanzania while Australia's third largest gold miner, Resolute Mining and South Africa's Anglogold Ashanti also have gold mining operations there.

British mining company African Eagle Ltd. is raising funds for its nickel project in Tanzania.

Tanzania said in June it was considering a "super profit" tax on earnings from minerals as one of the ways to fund its five-year development plan.

The move follows similar steps in other producer countries that have sought to increase fiscal revenue from the mining industry and to take advantage of rising prices.

Gold hit a record $1,813.79 an ounce on Thursday as investors flocked to gold as a haven from risk.

The minister did not mention the proposed super profit tax in his presentation to parliament.