Abidjan - Ivory Coast’s new windfall tax on gold profits could hamper plans by Randgold Resources to branch out from its Tongon mine and launch new projects in the West African nation, the miner’s chief executive said.
Ivory Coast’s government in September adopted a 19% tax on gold profits, seeking to capitalise on current high gold prices to help fund reconstruction following a decade-long political crisis.
Mining companies were quick to criticise the move, however, claiming they were not consulted beforehand. The government has said that while the tax is not negotiable, the rate could still be changed.
“From our point of view, we have protection in our investment agreements with the government on the development and operating of Tongon,” Randgold CEO Mark Bristow said in an interview.
“But more importantly, any changes in taxation will impact the ongoing opportunities and the encouragement of further exploration and investment in building new mines,” he said.
The tax increase follows a raft of similar moves by other African countries to boost their share of mining revenues as companies move in to develop the continent’s enormous potential.
Democratic Republic of Congo said on Tuesday it was seeking to raise its stake in new projects to 35% from 5% under a revised mining code. Ghana introduced a 10% windfall tax this year, which it has yet to apply.
Randgold, which focuses on West Africa, last October launched operations at Ivory Coast’s Tongon mine, with annual output of 280 000 to 300 000 ounces expected over the next five years. It continues to explore on the Nielle concession where Tongon is located as well as on its Diaouala property.
“Randgold Resources is very committed to not only having Tongon, but having more than one mine,” Bristow said.
“We are still investing significantly in exploration ... We are one of the biggest explorers in Cote d’Ivoire as well as the biggest producer.”
Australia’s Newcrest Mining and Toronto-listed La Mancha Resources also operate gold mines in the country. Canada’s Endeavour Mining Corp and Occidental Gold, a unit of Australia’s Perseus Mining Limited, received production licenses in August.
Room to negotiate
Many investors had shied away from Ivory Coast after an armed conflict broke out in 2002, splitting the country between northern rebels and government loyalists in the south.
A brief civil war ended the impasse last year, however, and companies are now taking a second look, attracted by the largely untapped reserves of gold, nickel, iron ore and manganese.
The government forecasts that annual gold output will rise to 25 tonnes by 2015 from around 15 tonnes currently.
The new 19% windfall tax would yield some $79.1m in additional income to the state this year, the government said.
But under pressure from miners, who said the new tax risked stifling essential investment in a mining sector still in the early stages of development, Ivory Coast’s mines minister said earlier this month the tax rate might still be negotiable.
“I think everyone has an opinion on the way this thing was managed, but the situation at the moment is that the law has not been promulgated yet,” Bristow said.
“What’s happened since it was announced is that we’ve engaged with the ministry and the president’s office. There’s a repeated willingness to engage and try to find a win-win situation with the ministry.”