The Philippines government said this week it is trying to repair its damaged mining sector. With officials stating they will review all policies implemented by former environment secretary Regina Lopez — who took a hardline stance against operations around the country.
But as that mining nation swings to the better, another key metals country has gone the other way. With the government implementing a raft of policies that may well decimate the entire sector here.
As I’ve discussed, the Tanzania government has gone to war with miners in recent months. Accusing companies like Acacia Mining of cheating on export duties — resulting in a complete ban on concentrate exports earlier this year.
And this week, officials took the fight to another level — passing several new laws that will make mining much more challenging in the country.
Here’s what’s happening.
The biggest change is a requirement for state interest in all mining projects. With a new law passed Tuesday requiring miners to give up 16 percent of their shares to the government — at no cost.
And it doesn’t stop there. With the law further stating the government has the right to acquire up to 50 percent of the shares of any mining company.
The law states that such an increase in ownership will be “commensurate with the total tax expenditures incurred by the government in favour of the mining company” — a vague statement that could likely be invoked under a variety of situations.
The government also granted itself power to nullify any mining (and oil and gas) contracts, as it pleases. And stripped local miners of any right to international arbitration. Related: Has U.S. Shale Wrecked Its Own Recovery?
As a final stroke, officials also increased mining royalties — raising rates on precious metals and copper to 6 percent, from a former 4 percent. Uranium royalties will also rise to 6 percent, from 5 percent.
In-country firms like Acacia Mining immediately said they would seek arbitration over the new rules. But unless they can pull a rabbit from the hat, Tanzania’s mining sector is going to be very subdued going forward — with the new fiscal terms unlikely to be palatable for most firms.
Watch for developments on legal challenges to the new laws, and for a big drop-off in project activity — potentially with some effects on gold supply.
Here’s to self destructing.
By Dave Forest
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