Acacia looks to clear up Tanzanian 'illegal mining' dispute

Acacia Mining has confirmed that it is continuing to operate all three of its mines in Tanzania, after the government accused it of operating illegally and avoiding tax by under-declaring its gold exports.

Acacia pointed out that its Tanzanian mines are all owned and operated by companies that are legally incorporated and registered in Tanzania, which each hold special mining licences, possibly in response to the government's accusation that the company was not properly licensed in the country.

In a short announcement on Tuesday, the FTSE 250 company pointed out that it indirectly owns the three operating companies and that its corporate structure was fully disclosed to the Tanzanian Capital Markets and Securities Authority (CMSA) at the time of Acacia’s cross listing on the Dar es Salaam Stock Exchange in 2011, which was approved by the CMSA.

Since the cross listing the only change has been the change of Acacia’s name from African Barrick Gold plc to Acacia Mining plc, the company noted.

Acacia has now created a micro-site on its website to "provide clear and factual information around the current situation" http://www.acaciamining.com/export-ban-facts.aspx, which includes "background to the current situation, clarification around the allegations, and details of our contribution to the Tanzanian economy".

Acacia has been banned from exporting gold/copper concentrate since March and said it is losing around $1m a month as the ban effects two of its three mines in the country.

Some analysts believe the company will have to pay a large sum to resolve the dispute, while other think the Tanzanian government's demand may be more complicated.

It was reported on local media over the weekend that Acacia confirmed it is in the process of retrenching its workers at its mines, though mostly in the security section.

RBC Capital Markets said on Monday it was not surprised that the results of the second committee concludes that Acacia has underpaid historical taxes and royalties.

"The issuance of recommendations around remedies, albeit including claims of 15+ years of incorrect taxes‎ paid based on the refuted concentrate container results, could create a path to resolution," analysts said, adding that the potential impact to the MDA at North Mara places uncertainty across all of Acacia's Tanzanian operations.

"This also complicates any decision to temporarily shut Bulyanhulu or Buzwagi in the near term. Acacia does not however have the financial ability to continue to mine indefinitely without exporting concentrates."

RBC continue to see a potential for resolution over the long term for Acacia ‎especially should the government's actions impact foreign direct investment in Tanzania or the wider economy upon a halt of operations at Bulyanhulu and Buzwagi.