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Tanzanian miners respond to new laws threatening to derail mining contracts

Tanzania-focused mining companies are currently reviewing new laws passed in Tanzania
Tanzania's mining sector is turning into 'yet another African basket case', says Shore Capital

Mining and energy companies operating in Tanzania have been dealt a fresh blow after the country’s parliament passed a trio of bills that allow the government to dissolve existing contracts.

Tanzania’s government could revoke a contract if it is deemed to have “unconscionable terms” under the terms of the new laws. The parliament also passed a bill to prohibit disputes relating to natural resources being heard in foreign courts.

The bills are aimed at giving the country a bigger share of revenue from its natural resources. 

Shore Capital analysts said they feared that Tanzania was tranforming into "yet another African basket case" from what was once a "relative safe haven of stability and sense" in mining. 

In response to the new laws, Acacia Mining (LON:ACA) said it had served ‘notices of arbitration’ on two of its three gold mines in the country. This means it can seek intervention at the London Court of International Arbitration, should Tanzania honour its original contracts.

READ: Acacia Mining, Shanta Gold and Capital Drilling hit by red tape after Tanzania parliament passes new laws

"This is a necessary step to protect the interests of our stakeholders in light of the ongoing dispute, however we still believe a negotiated resolution is the best outcome and will continue to work towards this," an Acacia spokesman said.

The company is currently engaged in a legal dispute with Tanzania’s government over royalties it allegedly owes on the exports of gold/ copper concentrate from its two mines in the country.

Last week Acacia’s woes grew after the government approved a new Finance Act, which will impose a 1% clearing fee on all minerals exports. 

Other miners with Tanzania operators that will be hit by the new legislation include Shanta Gold Limited(LON:SHG), Capital Drilling Ltd (LON:CAPD) and Kibo Mining (LON:CAPD).

Shanta said in a statement that it was seeking advice on the changes while Capital Drilling said it was “monitoring the situation closely” and will update shareholders on any potential risks.

Kibo also said it was reviewing the legislation. Edenville Energy plc (LON:EDL) stressed that it has recently been through a comprehensive permitting process for its Rukwa coal project in Tanzania with the government and had received “widespread support”.


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