2009-11-06 14:51:04 - Tanzania Mining Report Q4 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/tanzania-minin ..

Tanzania’s government has still not unveiled long-awaited changes to the country’s Mining Act, which were originally scheduled to be presented to parliament in February of this year. The government has given no reason for the delay in tabling this bill.

Although the bill has yet to be tabled, reports suggest the government wants to take a 10% stake in all

Tanzanian gold mines, remove tax breaks and incentives for mining companies, alongside increasing metals royalty payments from 3% to 5%. This follows recommendations made by a presidential review committee.

Certainly, there is an argument that Tanzania is not benefiting from mining activity to the same extent as some of its African neighbours. A 2008 report from the Business & Human Rights Resource Centre estimated that the combined loss to the country over the past seven years as a result of low royalty rates, unpaid corporation taxes, and tax evasion by major gold mines amounted to some US$400mn. Although mining companies have disputed the basis for the report, and questioned some of the figures used, it has had the effect of stirring up public anger that somehow Tanzania is not gaining its ‘fair share’ from mining extraction.

The mining industry of Tanzania is relatively small in terms of value, but its importance is highlighted by the fact that mining earns a substantially significant share of the export revenues for the country. At the present time, the mining sector contributes around 2.3% to annual GDP, but the government wishes to expand this to 10% by 2025.

Traditionally, gold and diamond production has been the mainstay of mining production for the country.

The nation is the third-largest gold producer in Africa behind South Africa and Ghana, and ranks among the top producers of diamonds in the world. In recent times, another metal that has been catching the spotlight is uranium – with a significant number of deposits being identified in Tanzania. Besides these, coloured gemstones are also mined extensively in the country.

Following trade liberalisation in the 1990s, the mining industry has been growing rapidly in Tanzania.

Characterised by large-scale mechanised mines owned primarily by foreign entities, the industry is burdened by several negatives. Topping the list is the lack of a good infrastructural system that discourages potential investment in the industry. Adherence to safety and environmental standards in mining is also abysmal. Further, procedural delays substantially increase the cost of business.

Nonetheless, with the government making fervent attempts to streamline the management of resources in the country, prospects look bright for its mining industry. Also, the discovery of substantial uranium deposits has been successful in diverting the focus of the international community to Tanzania – which translates into a strong possibility of much-needed capital inflow into the country.

In June 2009, President Jakaya Kikwere unveiled a TZS1.7trn stimulus package to help the domestic economy weather the ongoing global financial crisis. At the same time, the president said that producers of diamonds and other gemstones will be exempt from paying royalties to the government for the next two years, in an effort to keep production continuing at a time of low demand. This move could see the government lose some US$500,000 from diamond sales and US$2.5mn from tanzanite sales, according to a recent report on Bloomberg.

Benefits Of Gold Mining Shown In September 2009, the World Gold Council published a new report analysing the long-term benefits of gold mining to the Tanzanian economy. Using data across a planned 40-year operating period for largescale gold mining, the report found that gold mining had provided a significant impetus to Tanzania’s economy, not only in terms of foreign direct investment, but also in terms of taxes paid by the gold miners.

This would seem to contradict earlier criticism from some quarters that gold miners were paying an insufficient amount of tax revenue on their activities in-country. Consequently, it remains to be seen if any of the conclusions in the World Gold Council report will influence the government as it seeks to make changes to the country’s Mining Act.

Changes To Company Monitor BMI has made alterations to its Company Profile for Williamson Diamonds to reflect its new ownership by UK-based Petra Diamonds.

Industry Forecast Tanzania’s mineral industry, particularly gold mining is likely to grow in the near future, with increased production from the North Mara mine and the development of projects such as Buckreef and Tulawaka.

BMI forecasts the mining industry in Tanzania to reach a value of US$0.50bn by 2013, contributing around 1.4% to the nation’s GDP.