Tanzanian gold miner Acacia Mining’s ongoing dispute with tax authorities has seen it make a $70m provision and agree to make forward payments to the government.
Acacia CEO Brad Gordon said the company had an “excellent start to 2016”, with all three operations performing ahead of expectations.
This led to a $19m increase in its net cash position, after making its first prepayment of corporate tax of $10m.
Its performance is not reflected in headline net earnings, Gordon said, given the tax provision of almost $70m following a recent adverse court ruling, although underlying adjusted earnings of $18m were 71% higher than the previous year.
The Tanzanian Revenue Authority got a court ruling against Acacia last month and Acacia has “a number of other material tax disputes in various stages of the tax tribunal and court processes”, which it believes have no merit.
A Court of Appeal decision, which it lost, relating to a dispute over tax calculations at Bulyanhulu from 2000-2006, has resulted in Acacia increasing its tax provisions by $70m.
Acacia said the Court of Appeal was reviewing seven issues raised by the TRA in 2012 on certain historic tax loss carry forwards and ruled in favour of Bulyanhulu by the Tax Appeals Board in 2013. The TRA appealed and in 2014 the Tax Tribunal reversed the decision for all seven issues. Acacia appealed, but in March the Court of Appeal found in favour of the TRA in five of the seven issues.
Acacia has now “exhausted” the legal route in Tanzania but considering its options.
While it awaits a revised tax assessment, it has raised further tax provisions of $69.9m relating to Bulyanhulu as well as a possible effect on the applicability of certain deductions for other years and other mines.
Total provisions for uncertain tax positions now amount to $128m, and Bulyanhulu will be in a tax payable situation a year earlier than previously expected.
The TRA also claimed $41m of withholding tax on historic offshore dividend payments made by Acacia, which Acacia is also appealing a ruling which includes tax evasion allegations.
Last month Acacia reached agreement with the government to bring forward corporate tax payments by three years. To date, $10m of prepayments have been made.
Looking at its quarterly performance, revenue of $221m was 3% higher than the previous year, driven by increased gold sales. Earnings before interest, tax,depreciation and amortisation were 24% higher on the back of higher revenue and lower cash costs
But additional tax provisions of $70m resulted in a net loss of $52m. Its net cash position increased to $124m, $19m higher than 31 December 2015.
Gold production of 190,210 ounces was 5% higher than last year and sales of
184,181 ounces, were 7% higher. All-in sustaining costs of $959 per ounce sold, were 14% lower.
