By ADAM IHUCHA
TanzaniteOne Mining Ltd (TML) has finally ceded a 50
per cent stake to the Tanzanian government.
TML and Tanzania’s State Mining Corporation (Stamico)
have signed a 10-year joint venture agreement, ending nearly 12 months of
intense negotiations.
Stamico had wanted the shares for free for TML to
comply with the law, which requires existing foreign gemstone mining firms to
transfer a 50 per cent stake to locals.
But after 12 months of negotiations, TML carried the
day, compelling Stamico to commit itself to offset a huge debt in exchange for
the 50 per cent stake.
Under the agreement, Stamico agreed to reimburse TML
$4 million in recognition of the expenditure incurred in development of mine
infrastructure.
“The reimbursement will be paid by Stamico utilising
40 per cent of its share of the net residual profit until the amount is paid in
full,” the joint venture agreement reads.
TML extracts tanzanite at Mererani Hills, nearly 40
kilometres southeast of Arusha, and has invested over $100 million in
state-of-the art mining technology over the years.
Going by the firm’s profit after tax of $0.7 million
for the year ended 31 December 2011, it will take Stamico over 11 years to
clear the amount, a year beyond the joint venture agreement duration.
This is only possible if the company makes an average
profit of $0.7 million per annum for 11 years and four months consecutively.
TML in the year ended December 2012 recorded a net
loss of Tsh22 billion ($13.6 million), compared with a net profit of Tsh1.12
billion ($0.7 million) realised in 2011.
In the first six months to June this year, TML posted a net loss amounting to $0.56 million.
However, TML attributed the loss to a provision of
Tsh9 billion ($5.6 million) for taxes for the period between 2004 and 2008 and
Tsh7 billion ($4.4 million) impairment of assets as a result of illegal mining
activities.
William Nasha, a natural resources analyst, faulted
the deal, saying the agreement is a rip-off as it goes against the good
intention of the new mining law.
Mr Ole Nasha said the law stipulates that a foreign
company should offer 50 per cent shares to individual Tanzanians and not the
state-run-corporation.
“The idea of changing the Mining Act was to create
opportunities for Tanzanians to have a stake in the lucrative mineral trade.
How would Tanzanians individually benefit from Stamico owning the 50 per cent
share?” he asked.
“Profits and losses of the company are
a matter of how management prepares their accounts. This is a smart way of
escaping having to paint the true picture of a firm’s returns. They should have
left if they were making losses,” he said.
Energy and Minerals Minister Prof
Sospeter Muhongo is on record as saying the government decided to acquire the
shares through Stamico first and later on they would be sold to individual
Tanzanians.
“If we succeed in getting the shares, I
believe we cannot be deceived anymore, and will be able to reap what we deserve
because these royalties and taxes have never benefited us significantly,” Prof
Muhongo told parliament.
According to the agreement, the mining
operation shall be self-financed from the proceeds.
Stamico director general Gray
Mwakalukwa said that under the agreement, both parties will establish a joint
operating committee (JOC) with three representatives from each side.
“JOC’s powers shall be equivalent to
those of a board of directors and it will have the final say on mining, sales,
profit sharing and all matters pertaining to the partnership,” Mr. Mwakalukwa
added.
JOC will decide all matters relating to
the company’s operations, make strategic decisions relating to the conduct of
the operations, consider and approve budgets and other operation plans.
The two parties will also establish an
independent monitoring and evaluation unit, with each party appointing two
executives.
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