It started with a ban on export of mineral concentrates by the Tanzanian that the UK headquartered firm probably hoped would soon go away. But there was no winning this and the ban has persisted, with the Government insisting that mining firms set up mining refineries in the country and export finished products.
Then it was accused of operating in Tanzania. Again, there was no winning this one. A Commission formed by President John Magafuli found that indeed Acacia had for close to two decades operated illegally in Tanzania and was a major tax defaulter.
Following the investigations and a guilty verdict, the Government of Tanzania slapped, Acacia with a whooping with $190 billion bill. In Kenyan currency, that translates to about Sh19 trillion (at current exchange rate of about Sh103 to the dollar), which included Sh4 trillion in unpaid taxes since 1998 and Sh15 trillion being penalties and interest).
To demonstrate how heavy, the tax demand is almost three times the value of goods and services that were produced in Kenya last year – is the Gross Domestic Product (GDP) – that stood at Sh7.2 trillion as at December 2016, according to the Kenya Economic Survey 2017.
The miner protested the fine and said it is looking at all possible options at its disposal, including international arbitration but silent on the possible exit from Tanzania.
It is thus not surprising when Acacia Mining, majority owned by Canada’s Barrick Gold, in early September said it is scaling down activities in one of its key mines in Tanzania. The firm in an update said it would reduce activities at the Bulyanhulu Mine, which would result in a significant reduction in the number of jobs at the mine.
The move was attributed to the continued standoff with the Government over the ban of exporting mineral concentrates.
“Regrettably, the implementation of this programme will lead to a significant reduction in the workforce from the current 1,200 employee and 800 contractor roles,” said the firm in the statement.
“The impact of the ban, in addition to the deterioration of the current operating environment, has led to negative cash flow of approximately US$15 million per month at the mine and thus has made ordinary course operations at Bulyanhulu unsustainable.”
While the firm is scaling down operations, it is yet to make an explicit gesture or statement that it is ready to leave Tanzania, which is its most prolific operation.
The activities in Tanzania are however getting in the in the way of the company moving forward its discovery in Kakamega.
Acacia earlier this year said it had discovered substantial gold resources in Kakamega and is in the process of undertaking further exploratory mining and testing in Western Kenya. In its half year report this year however, the firm announced that the fight with the Tanzanian Government could slow down works in Western Kenya..
Among the factors that it noted would be slowing down works in Kakamega include the need to take samples to South Africa for testing as opposed to Tanzania due to the ban on mineral concentrates. The company has been mining gold in Tanzania and has relatively superior equipment that it had hoped could save it the trouble of shipping samples from prospects in the region including Kenyan to far flung labs.
“At the end of June we had approximately 23 holes with assays (ores) pending due to the need to send samples to South Africa rather than to Tanzania, due to impact of the current export ban. As a result, the majority of the results received during the period are from the first quarter,” said Acacia Mining in a statement updating its shareholders on its activities.
Acacia in February said it had struck high-grade gold at its mines at Liranda Corridor in Kakamega, which have an estimated resource of 1.31 million ounces of gold, whose grade, is one of the highest in Africa. The resource has could be valued at Sh171 billion ($1.65 billion).
It expects further exploration to increase the resources in the area, which can go up to as much two million ounces of gold.
“We are targeting a significant increase in the resource to 2 million ounces prior to the end of 2017. We also plan to commence a scoping study looking at the potential for an underground mining operation during second half of 2017,” said Acacia Mining.