Tanzania to Raise Royalty Payments on Gold Exports

Tanzania plans to raise royalty payments on exports of gold by the end of this year as it seeks to restructure the mining sector, Minerals and Energy Minister William Ngeleja said Wednesday.

Africa's fourth-largest gold producer has been undertaking major reforms of its mining sector following growing criticism over the industry's relatively minor contribution to economic growth.

Tanzania's annual gold exports have tripled to $1.5 billion in the past five years as gold prices have risen, but government revenues have remained at around $100 million a year.

We have already basically reached agreement with mining companies on raising royalty payments ... we expect migration to the new rates to start this year in 2011, Ngeleja told a news conference at a mining and energy conference in the northern Tanzanian town of Arusha.

The Ministry of Finance and the Tanzania Revenue Authority (TRA) are finalising the procedures for that.

Tanzania initially planned to conclude negotiations with mining companies last month on the new royalty payments.

The 2010 Mining Act increased the rate of royalty paid on minerals such as gold from 3 percent to 4 percent and required the government to own a stake in future mining projects.

East Africa's second-largest economy had also drafted a new mining policy in 2009 as part of efforts to restructure the sector.

WIN-WIN SITUATION

Ngeleja said some mining companies had already started to pay more taxes after the government introduced changes.

He said the state was actively engaged in mining activities after enforcement of the law and cited the Ngaka coal project, in which the government has a 30 percent stake, and the Buckreef gold project, in which the state owns 45 percent of shares.

We aim at a win-win situation reflected in a rational and fair revenue sharing resulting from mining and energy sectors, Ngeleja said in his speech at the conference.

Tanzania announced in June that it was considering a super profit tax on earnings from minerals as one of the ways to fund its five-year development plan.

The move follows similar steps in other producer countries, which have sought to increase fiscal revenues from the mining industry and to take advantage of rising prices.

Major miners with investments in Tanzania include African Barrick Gold , Resolute Mining and South Africa's Anglogold Ashanti .

British mining company African Eagle Ltd. is raising funds for a nickel project in Tanzania.