Milestone as govt shares in Sotta mining climb to 20pc

MWANZA: TANZANIA’S benefit-sharing partnership model in mining and other extractive industry has attained yet another milestone, as the government’s free carried interest shares in the Sotta Mining Corporation Limited (SMCL) have climbed from 16 per cent to 20 per cent.

This is the first mining company in which the government, through the Office of Treasury Registrar (OTR), has increased its stakes from 16 per cent to 20 per cent, thanks to the government’s pro-business approach under President Samia Suluhu Hassan.

SMCL is a joint venture between the government of Tanzania and OreCorp through its subsidiary company Nyanzaga Mining Company Limited (NMCL).

In accordance with the Mining Act 2010 (as amended in 2017), 16 per cent is a minimum share that the government is entitled to acquire in the capital of any mining company, which is subjected to mineral type and the level of investment.

The Treasury Registrar, Mr Nehemiah Mchechu, said yesterday that the increase in its free-carried interests to above a threshold of 16 per cent follows a positive discussion between the government through the OTR and the joint investor, the parent company Perseus Mining Limited of Australia.

“Investors are impressed by the friendly business environment fostered by the sixth phase administration under President Dr Samia Suluhu Hassan, which is why they did not hesitate to increase our free carried interest shares,” said Mr Mchechu.

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“The increase in shares will result in a higher dividend for the government as a shareholder. Additionally, the government will benefit from other economic advantages generated by the project,” he said.

In a bid to ensure that the government increases its shares in the mining companies, the OTR is, in initial stages expected to start reviewing all mining contracts that the government entered with investors.

“We are reviewing the mining contracts to identify and rectify any shortcomings in the current agreements with a view to creating a room for the government to benefit more from its natural resources,” he asserted.

“As per the current contracts, the government is entitled to own a minimum of 16 per cent of the shares. This implies that the actual ownership can be 16 per cent or higher, depending on the terms negotiated,” he elaborated.

However, most investors tend to limit the free carried interest shares to the 16 per cent mark, the situation that has prompted the government to consider reviewing the contracts to allow for increased ownership.

For his part, SMCL Chief Financial Officer, Mr Isaac Lupokela, attributed an increase of free carried interests to the effective efforts of the OTR and the Ministry of Minerals.

Mr Lupokela reaffirmed the SMCL’s commitment to delivering the first major gold mine (Nyanzaga) at a value of an eye-watering 500 million US dollars (about 1.4tri/-). As an icing on the cake, the project to be delivered in over 15 years, is set to offer 1,500 jobs to Tanzanians.

“Our investment is an outcome of good policies in this country under President Samia’s leadership,” he said.

He stated that the company has already paid over 94 per cent of the compensation to facilitate the project’s initiation. He added that the remaining six per cent will not be disbursed until the land conflict faced by the owners is resolved.

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The government has already started benefiting from the project. In April and May this year, the company paid the government a total of 16 million US dollars (about 43.6bn/-) in capital gain tax.

The Nyanzaga gold project, set for launch next year, will be the largest gold mining project in Tanzania. It will be an open pit mining project. Nyanzaga is located in the Lake Victoria goldfield of north-western Tanzania, approximately 60 km southwest of the city of Mwanza on Lake Victoria.

According to the Definitive Feasibility Study (DFS) on Nyanzaga completed last year, the proposed mine will be a substantial operation able to produce an average of 250 koz per annum over its first eight years of production.