Randgold: Tax proposal off table for now

Feb 04 2013 19:16
Cape Town - Ivory Coast is no longer considering a proposed windfall tax on gold mines and will instead focus on adjusting royalties and revising the mining code to increase state revenue, the head of Randgold Resources said.

Ivory Coast's government in September adopted a new tax on so-called super profits from gold, 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 had said the tax was not negotiable, though the rate could be changed.

"That is off the table; it has been sent back to the Ministry of Mines. This week we have got to numbers that are workable," Randgold Chief Executive Mark Bristow said in an interview on Monday, declining to give further details.

The new tax was to be levied on profits above a government-fixed estimated production cost of $615 per ounce, with the rate dependent upon the world price of gold, according to the text of the law, which was passed by parliament in December.

Companies would have paid 17% to 20% of revenues above the estimated cost level with gold prices between $1 600 and $1 800 per ounce. Above that range, the rate rose by 1 percent for each $50 increase in the gold price up to a maximum rate of 50%. Below $1 600, it fell by 1% per $50 decrease.

"There will be an adjustment on royalties, and there is a review of the code, but the guidance is that what comes out has to put Cote d'Ivoire at the top of the competition ranks," Bristow said.

Randgold, a member of Britain's FTSE 100 index, operates the Tongon mine in Ivory Coast, 55 km south of the border with Mali.

Australia's Newcrest Mining and Canada's La Mancha Resources also operate mines in the country. In August, the government granted production permits to Canada's Endeavour Mining Corp and Occidental Gold, a unit of Australia's Perseus Mining Limited.

The tax increase in the West African nation follows a series 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.

The Democratic Republic of Congo, where Randgold is building the Kibali mine, has said it is seeking to raise its stake in new projects to 35 percent from 5 percent under a revised mining code.

"The 35 percent as a number is not significant, as long as you have someone to fund it. If you expect the mining industry to fund it, that is a real issue, as all you do is lift the hurdle rates - and the people who suffer are those in the country," Bristow said.

"There are many projects that won't work, projects that will start and not deliver."
randgold resources  |  ivory coast



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