By Alicia Bertrand, Thomson Reuters Tax & Accounting Canada
Acacia Mining has been reassessed by the Tanzania Revenue Authority for US$190 billion on alleged unpaid taxes, penalties, and interest.
Acacia Mining, specifically Bulyanhulu Gold Mine Limited and Pangea Minerals Limited, the owners and operators of the Bulyanhulu and Buzwagi mines in Tanzania, received Notices of Adjusted Assessment that stated approximately US$40 billion of alleged unpaid taxes and approximately US$150 billion of penalties and interest owing.[1] Acacia Mining disputes the reassessments and states that the company has “fully declared all revenues.”[2]
After two auditing Presidential Committees completed in May and June 2017, it was alleged that Acacia Mining had under-declared export revenues and quantities of exported gold/copper concentrate, and allegedly operated illegally in Tanzania after legislative changes in March 2017.
Legislative Changes
On March 3, 2017, legislation was passed to prevent the export of gold/copper concentrate from Tanzania.[3] It was a devastating blow to the mining industry in the country. Acacia Mining stated that “At Bulyanhulu and Buzwagi [mines] the combined direct impact of the current directive is the average daily loss of revenues of more than US$1 million per day.”[4]
The Impact on Canada’s Mining Corporations
This conflict caused Acacia Mining, majority owned by Canada’s Barrick Gold, to file international arbitration notices for the two mines to protect Barrick Gold’s shareholders. Barrick Gold is the world’s largest gold producer, and holds a 63.9% equity interest in Acacia Mining.[5]
The audits and accusations against Acacia Mining had impacted Canadian markets in the mining sector in March 2017 when Canadian gold miner Endeavour Mining Corporation ended discussions with Acacia Mining regarding a potential merger.[6]
[1] Acacia Mining, “Receipt of Tax Assessments,” July 24, 2017, online at: http://www.acaciamining.com/media/press-releases/2017/2017-07-24.aspx
[3] Acacia Mining, “Update on the export of metallic mineral concentrates,” March 24, 2017, online at: http://www.acaciamining.com/media/press-releases/2017/2017-03-24.aspx
[5] Barrick Gold, “Barrick Comments on Release of Second Presidential Committee Report on Concentrate Exports in Tanzania,” June 12, 2017, online at: http://www.barrick.com/investors/news/news-details/2017/Barrick-Comments-on-Release-of-Second-Presidential-Committee-Report-on-Concentrate-Exports-in-Tanzania/default.aspx
[6] Reuters, “Canada's Endeavour Mining ends merger talks with Acacia,” March 21, 2017, online at: http://ca.reuters.com/article/businessNews/idCAKBN16S280-OCABS