Bloomberg News

African Barrick Tumbles on Tanzanian Mining ‘Super Tax’ Plan

June 08, 2011

(Updates with closing share price in eighth paragraph.)

June 8 (Bloomberg) -- African Barrick Gold Plc, Tanzania’s biggest producer of the metal, fell the most in more than seven months in London after the country said it may set a minerals “super-profit” tax similar to a levy proposed in Australia.

The stock slumped 7.8 percent, the biggest decline since Oct. 14. AngloGold Ashanti Ltd., which also mines in Tanzania, dropped 3.1 percent in Johannesburg.

“Considering the increasing trend in mineral prices, it is optimal to introduce a super-profit tax on the windfall earnings from the mineral sector,” Tanzania’s planning commission said in a report today. African Barrick is “not aware of any such plans and has not been involved in any discussions or consultation in relation to this,” the London-based company said in a statement.

African Barrick operates four mines in the country that account for all of its gold production, while AngloGold runs the Geita mine. Tanzania is the joint third-largest gold producer in Africa behind South Africa and Ghana, matching Mali’s 44.6 metric tons in 2010, according to research company GFMS Ltd.

African Barrick said it has accords for all its mines that guarantee tax and fiscal stabilization that can’t be amended without its agreement. AngloGold said Geita wouldn’t be affected because its tax arrangement with Tanzania is valid for the life of the mine.

Tanzanian Growth Targets

The levy was proposed in a five-year planning report that targets an annual average economic growth rate of 8 percent from 2011-12 to 2015-16, the commission said. The expansion is expected to accelerate to 10 percent from 2016 to 2025, it said.

African Barrick fell 35 pence to 415 pence by the 4:30 p.m. close in London, while the benchmark FTSE 100 Index fell 1 percent. AngloGold slipped 9.31 rand to 289.99 rand in Johannesburg.

Australia’s planned 30 percent tax on iron ore and coal profits will earn A$7.7 billion ($8.2 billion) in its first two years, the country’s Treasury Department said last month. The tax is scheduled to start in July 2012 after the laws are passed by parliament.

Australian Prime Minister Julia Gillard in July scaled back the original proposal from a 40 percent tax on all resource profits to a levy with a higher threshold that exempts most commodities.

--Editors: John Viljoen, Tony Barrett

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net.

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net


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