AngloGold taking Tanzania to UN court over country’s new mining law

Geita open pit mine, located in northwestern Tanzania, is AngloGold’s largest single gold mining operation. (Image: AngloGold Ashanti)

South African AngloGold Ashanti (JSE:ANG), has taken a page from Acacia Mining’s (LON:ACA) book by announcing Thursday it had begun arbitration proceedings against Tanzania over a new law that allows authorities renegotiate contracts with mining firms.

The world’s third-biggest gold producer said that in light of the changes to the mining legislation it had “no choice” but to take such precautionary step to safeguard its agreements with Tanzania.

The company, the world’s third-biggest gold producer, said that in light of the changes to the mining legislation it had “no choice” but to take a precautionary step to safeguard its indirect subsidiaries agreements with the government in relation to the development and operation of the Geita gold mine.

The operation, which produced 489,000 ounces of gold last year, is AngloGold’s largest mine and one the company is considering to invest in to extend its life beyond 2025, when it’s expected to run out of ore.

The Mine Development Agreement (MDA) was signed by AngloGold subsidiaries – Samax Resources and Geita Gold Mining – and the Tanzanian government about 20 years ago.

The company said that contract was instrumental in its decision to make a significant investment in the development of Geita, which last year paid a total of $130 million in taxes and contributed $593 million in revenue to Tanzania’s output as measured by the gross domestic product.

AngloGold follows Acacia’s announcement last week that it had begun arbitration proceedings, adding that its largest shareholder, Barrick Gold (TSX, NYSE:ABX) and the Tanzanian government had agreed to continue parallel talks over claims that point fingers at Acacia.

Among the allegations, Tanzania’s authorities have said the firm has been operating illegally and evading tens of billions of dollars in taxes by understating the amount of metal concentrate in exports from the three gold and copper mines it operates.