The draft legislation published by the Tanzanian government recommending changes to the legal framework governing the country’s natural resources sector contains a number of concerning provisions.
That’s the view of JP Morgan Cazenove analyst Luke Nelson who commented in a research note that the firm’s initial review highlighted concerns over a string of issues including: development/stability agreements; mineral exports/beneficiation; state asset ownership; government oversight of mining operations; local goods and services sourcing and royalties.
London-listed gold miner Acacia Mining – which operates three mines in Tanzania and is already embroiled in a serious dispute with the government over tax issues and the export of gold concentrates from its mines which has been banned – said it “noted “ the publication of the draft legislation.
Acacia added it would “review the proposed changes in the context of our existing agreements “ and pointed out that the proposed discussions with the Tanzanian government over the ban on the export of gold concentrates “have yet to commence.”
During a press briefing held on June 15 Acacia CEO Brad Gordon described the upcoming negotiations as, “ a real opportunity to rebase our operating environment in the country.”
Nelson pointed out the draft legislation suggested existing stabilization agreements could be renegotiated should the National Assembly find their terms to be “unconscionable” which could include terms that were “inequitable and onerous to the state” or give “preferential treatment for the benefit of a particular investor.”
He said the legislation also suggested future stabilization agreements will be time-bound and make provision for periodic renegotiation.
The draft legislation also covers the equity stakes to be taken by the Tanzanian government in mining companies providing for a right to acquire up to 50% “commensurate with the total tax expenditures incurred by the government in favour of the mining company.”
Nelson added that, “the timeline for Parliamentary debate and possible enactment remains unclear. We note that Acacia’s negotiations with the government over the existing concentrate ban are also yet to begin, although in our view the government may have been keen to release this draft legislation prior to engaging with the company so this may now allow the process to move forward.
“It seems likely, in our view, that those talks will now expand to include the provisions of the proposed new legislation.”
