African countries risk harming own economies by seeking short-term mining gains: CEO
African governments risk harming their own economies by trying to squeeze quick returns from the mining companies in their countries, said Tuesday Randgold Resources’ (LON:RRS) chief executive Mark Bristow.
Speaking at the DRC’s Mining and Energy Indaba, Bristow said current moves in a number of African countries to amend mining codes on terms less favourable to miners were dangerously “short-sighted.” He warned they did not take into account the increased risk this might present to the long-term sustainability of the resources industry and its ability to contribute to job creation and economic development.
According to Bristow, when the Kibali gold project in the Democratic Republic of Congo pours its first gold scheduled for the end of next year, it would rank as one of the largest gold mines in Africa and it will boost the DRC’s economy.
“To achieve that, we need the support of all our stakeholders in the DRC, including the government, as well as of our international investors,” he said.
Over a projected lifetime of 16 years, explained Bristow, it is anticipated that more than 50% of the net pre-tax value generated by the project will be distributed to the State in the form of taxes, royalties and dividends.
“The DRC state will in fact receive more than the other shareholders who are financing 100% of the project. This figure does not reflect the jobs it will create or the money it will spend with local businesses. What’s important to note is that the estimates from our feasibility study are based on the DRC’s current mining code and fiscal parameters. Any drastic changes to these will have a negative impact on costs, profits and even the life of the mine,” he stated in a press release.
The executive said that increasing the tax burden on those who had taken the risk of investing in the African country would not only damage the country’s fledgling mining industry. According to him, it would also discourage future investors from developing new operations, which would make profits, pay taxes and provide employment.
Apart from its massive gold project in the DRC, Randgold operates gold mines in Mali and Côte d’Ivoire.