Acacia Mining now hit with $190 billion tax bill in Tanzania

Acacia Mining is Tanzania’s biggest gold producer and operates three major mines in the country — Bulyanhulu, Buzwagi and North Mara (pictured). (Image courtesy of Acacia Mining.)

Things are going from bad to worse for Acacia Mining (LON:ACA), one of the largest gold producers in Africa, as the government of Tanzania sent the company a $190-billion bill in fines and allegedly unpaid taxes from two of its mines.

Together with disputing the astronomic bill, the company — Tanzania’s No.1 gold producer — said it’s evaluating all of its options and rights, adding it will provide a further update in due course.

Shares collapsed once again on the news to close almost 21% lower in London at 184.5p, dragging the company’s market capitalization to less than $984 million, according to Google Finance. The stock has lost 66% of its value since March, when President John Magufuli’s ban on concentrates exports came into effect, affecting two of Acacia’s three mines or about a third of the firm’s output.

Shares collapsed once again on the news to close more than 25% lower in London, dragging the company’s market cap to less than $984 million

Acacia, which spun off from Barrick Gold in 2010, but it’s still majority-owned by the gold giant, first locked horns with the government of Tanzania last year, as it was accused of tax evasion in the ongoing case that triggered today’s multi-billion bill. The dispute escalated in March, when the concentrates ban officially began.

Less than four months later, Tanzania accused the company of operating illegally and said it had found evidence of the alleged tax evasion as a presidential team found the value of minerals within raw concentrate at the port of Dar es Salaam was 10 times higher than Acacia’s declared amount.

The escalating conflict pushed Barrick to intervene and Acacia to file arbitration notices for its Bulyanhulu and Buzwagi mines in order to protect its shareholders and the company, aiming to reach a settlement.

In mid-July, the miner agreed to pay higher taxes in the country and it’s now paying a 6% royalty, up from 4%, on metallic minerals including gold, copper and silver. The company also said it would continue to pay the recently imposed 1% clearing fee on exports.

Acacia Mining now hit with $190 billion tax bill in Tanzania

The firm disclosed last week that members of its staff had been arrested and questioned, but denied early reports claiming that Tanzania had asked its foreign workers to leave the country.

World’s largest gold producer Barrick, which has a 64% stake in Acacia, is currently in talks with authorities in hopes of reaching a agreement over the claims against its subsidiary and the country’s current ban on mineral concentrate exports.

Its shares were also hit by today’s news, falling more than 2.3% by noon in Toronto to Cdn$19.82 and almost 2.7% in New York to $15.76 by 12:21 pm.

Acacia Mining, which owns and operates Tanzania’s three major mines, is also facing a lawsuit in the UK from relatives of miners who died at North Mara. Law firm Deighton Pierce Glynn is acting on 10 cases, most of which relate to incidents since 2013, and one as recently as last year.

According to Tanzania’s official data, 65 civilians have been killed by police at North Mara for trespassing since 2006 and another 270 have been injured.