The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous impact and influence on Canada’s political and business elite as well as the rest of the country’s print, radio and television media. Brenda Bouw is the Globe’s mining reporter.
Tanzania is eyeing a “super-profit tax” on miners to help pay for a development program in the East African country, the latest in a growing list of governments trying to grab more money from the resource sector amid rising commodity prices.
While the Tanzanian government hasn’t confirmed that it is weighing such a plan, reports say the new tax could be similar to one proposed last year in Australia.
“Considering the increasing trend in mineral prices, it is optimal to introduce a super-profit tax on the windfall earnings from the mineral sector,” state government documents viewed by Reuters.
Bloomberg reported the comments come from the country’s planning commission, which the Tanzanian government website describes as a think-tank under the President’s office that advises on economic issues.
African Barrick Gold, the largest gold producer in the Tanzania with four operating mines, said it’s not aware of any new tax proposal, and hasn’t been involved in any discussions about one.
The London-based company, spun out by majority-owner Barrick Gold Corp. (ABX-T43.770.410.95%) of Toronto last year, also said it has mineral development agreements at its Tanzanian mines that guarantee “tax and fiscal stabilization.” They can’t be amended without their consent, African Barrick said in a statement Wednesday.
Still, investors remain skeptical and drove down African Barrick shares by 8 per cent on the London Stock Exchange on Wednesday to their lowest level since the company went public in March, 2010. Barrick holds a 75-per-cent stake in African Barrick.
The possible tax increase is another blow for African Barrick, which is investigating recent shootings at its violence-plagued North Mara mine, as well as allegations of sexual assaults by about a dozen police and security guards.
“We find it hard to see how ABG is going to recover quickly from this constant pounding of bad news,” analysts at Citigroup Global Markets Inc. wrote in a research note Wednesday.
Goldman Sachs isn’t changing its estimates on African Barrick because the tax proposal isn’t confirmed, but noted that an additional 10-per-cent tax hike would reduce the company’s net asset value by about 15 to 20 per cent.
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