Tanzania yearns for improved stakes in mineral deals

TANZANIA: MUCH as Tanzania’s benefit-sharing partnership model in mining and other extractive industry has gained global recognition, the government is determined to continue improving the contracts for the country to reap more benefits from its resources.

Speaking with editors in Dar es Salaam on Monday, in run up to the Second CEO Forum scheduled for Arusha next month, the Treasury Registrar (TR), Mr Nehemiah Mchechu  said his office has already initiated talks and negotiations with several mining companies operating in the country, for review of benefit-sharing partnership.

“We have been fast tracking completion of mineral contracts review. Under the current law, in the mining sector, the government must have at least 16 per cent stake in the mining companies operating large reserves of mineral activities. “We have already reached a review agreement with at least 10 mining companies and the exercise is ongoing…we expect to reach out to over 200 mining companies under this procedure.

“In fact, we have realised that we need a special unit or department within the TR office to deal with the mining sector. The objective is to ensure the country’s interest is protected and resources benefit its people to the optimum,” he said.

Mr Mchechu also said that it was imperative for the government not only to negotiate having improved shares, but must ensure the companies hire sharp and exposed local individuals to be fully engaged in decision making for the country to reap rightful benefits from its resources.

He said already at Nyanzaga mining the government has negotiated and the stake has risen to 20 per cent. “We wanted to break through the trap of signing a 16 per cent stake and raise our shares a bit,” he said.

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

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The Nyanzaga gold project, set for launch next year, will be the largest gold mining project in Tanzania.

According to Mr Mchechu 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. The life of mine is 10.7 years – with a peak gold production of 295 koz in year six.

The DFS estimates the capex at 474 million US dollars. The project has pre-tax Net Present Value NPV of 5 per cent of 926 million US dollars and an Internal Rate of Return (IRR) of 31 per cent.

The all-in sustaining cost is estimated at US$954/ oz, allowing for a hefty margin at the current prevailing gold price.

Several major decisions made by the government have brought positive impacts not only to the mining sector, but also to the protection of the country’s natural resources in general.

With a significant and well-established gold mining industry, Tanzania has East Africa’s most developed mining sector that has garnered the attention of advanced legislative reforms.

Among them are reforms under the administration of the third phase President the late Benjamin Mkapa that supported the growth of the gold mining industry and reforms under the fourth phase President Jakaya Kikwete that committed the sector to transparency and the overhaul of mining legislation in 2010.

The most historically significant reforms were taken during the fifth phase administration of the late President John Magufuli.

In 2017, President Magufuli passed three of legislations, namely the Written Laws (Miscellaneous Amendments) Act 2017, mainly focused on the Mining Act 2010, the Natural Wealth and Resources (Permanent Sovereignty) Act 2017, and the Natural Wealth and Resources (Review and Re-Negotiation of Unconscionable Terms) Act 2017.

One of such milestone decisions initiated by the fifth phase government was the introduction of the Mining (Local Content) Regulations, 2018, which were included in the Written Laws (Miscellaneous Amendments) Act No.

7 of 2017, following the amendments of the Mining Act of 2010. Section 10 (1) of the Act, as revised in 2018, states that in any mining operations under a mining license or special mining license, the government shall have not less than 16 per cent non-dilutable free carried interest shares in the capital of a mining company, depending on type of minerals and level of investment.

Sub-section (2) states, “In addition to the free carried interest shares, the government shall be entitled to acquire, in total, up to 50 per cent of the shares of the mining company commensurate with the total tax expenditures incurred by the government in favour of the mining company.”

Whereas Sub-section (3) stipulates that acquisition by the government of shares in the company shall be determined by the total value of the tax expenditure enjoyed by the mining company

And indeed, establishment of a joint venture mining firm, Twiga Minerals Corporation Limited in January 2020, made the government, for the first time in the country’s independence history, to have legal secured interests and opening a new era of productive partnership in the mining industry.

This follows the successful negotiations and subsequent signing of a landmark agreement between the government of and Barrick Gold Corporation, the second-largest gold mining company in the world, with its headquarters in Toronto, Ontario, Canada.

Just recently, the Barrick Gold Corporation borrowed Tanzania’s benefit-sharing partnership model for the reopening of the Porgera mine in Papua New Guinea.

Barrick Gold President and Chief Executive Mr Mark Bristow said that there is a need to guarantee the long-term viability of the Loulo-Gounkoto gold mining complex and announced the gold firm’s plan to extend more investment in Mali.

“It’s worth noting that Barrick developed a highly successful benefit-sharing partnership for our Tanzanian operations which has since also been used as a model for the reopened Porgera mine in Papua New Guinea,” Mr Bristow told Malian media and stakeholders.

The same Tanzanian model was also adopted for its new Reko Diq copper and gold project in Pakistan, according to Barrick’s statement.