melchior
JF-Expert Member
- Nov 2, 2010
- 230
- 214
Mining concession fees hike; is the timing right?Those in the mining and exploration sectors are deeply concerned about recent changes implemented by the Ministry of Energy and Mining (MEM). As expected, these changes just add frustration to an industry that has already been devastated by a slowing economy, low commodity prices, and a lack of willing investors.
These changes also appear to be encouraging the few remaining investors to leave. This"final nail in the coffin" not only makes it difficult for companies to keep employees but now their assets as well. Owners of existing prospecting licenses (PL) that are due for renewal and those submitting new applications have been hit with a huge hike in the fee structure for various types of prospecting applications.
To be precise, under the new fee structure, an annual PL fee has jumped from USD 40 to USD 100 per square km, an astonishing 150 percent increase. The PL application fee is now USD 300 up from USD 100, a whopping 200 percent increase. Other fees that have been hiked include what is called Notification Fee, which is now USD 500 up from USD 200.
Transfer fees jumped from USD 200 to USD 3000, an astonishing 1400 percent increase. To put this into perspective, let's say "Company X" applies for a gold prospecting license over a 100 square km area. Under the new fee structure, Company X would be required to pay USD 10,000 (annual license fee) + USD 500 (notification fee) + USD 300 (application fee) which totals USD 10,800.
This new fee is 125 percent higher than the old fee of USD 4,800 for exactly the same size area. By any standard these increases in the fee structure are excessive. No doubt the mining and exploration sector, particularly local companies, will be severely impacted. The MEM states that the move was designed to discourage individuals from holding large concessions without making any attempt to add value and only intending to sell the claims to potential investors for a higher price whenever the industry recovers.
The MEM believes that this move will provide an opportunity for legitimate companies to own good properties at an affordable price without having to deal with a few greedy individuals. Majority of the people within the industry agree that eliminating a few dishonest individuals is a good idea. However, the new policy has already penalized legitimate junior mining companies as well as local individuals and artisanal miners who are striving to advance greenfield exploration in their legitimate concessions in spite of the current down turn. The TUIS chief executive officer, Tumbo Damian, suggests that now is an inappropriate time to implement further changes,
"The exploration and mining sector is facing difficulties raising capital as the industry is currently struggling with low commodity prices".In recent months we have witnessed a number of high profile expansion plans and proposed new projects put on hold throughout Tanzania, resulting in cancelled contracts and loss of jobs. A recent BoT report published in The Citizen (May 8th) shows revenue gained from gold sales last year has nose-dived by 14.8 percent from $2,232.3 million in 2011/12 to $1,901.2 million at the end of December last year.
Now is not the time to introduce a policy change that further discourages investment flowing into Tanzania and continues to make the industry internationally uncompetitive. There is no doubt that the government is tempted to increase revenue through additional new taxes, royalties, levies, duties, fees and charges etc. Driving investment out of the country will inevitably lead to a smaller mining industry in Tanzania and further jeopardize jobs and the significant revenue streams currently enjoyed by mining communities as well as the central government.
Comparatively, other countries around the regional are attracting investors by lowering permitting fees. Uganda provides a good example where the concession fee includes a one time preparation fee of USD 400, an application fee of USD 39 and an annual exploration permit of only USD 8 per square km. Consider "Company Y" with a focus in Uganda. This company would pay a total of USD 1,239 in fees to explore a 100 square km area in Uganda compared to USD 10,800 Company X will have to pay to explore the same size area in Tanzania.
Similarly, our neighbor in Kenya charges an annual concession fee of USD 15 per square km, again insignificantly less than USD 100 per square km Tanzania. This clearly demonstrates how expensive investing in Tanzania has become; concession fees are up 9 times more expensive in Tanzania than some other countries in the regional.
The mining community would like to see the government encourage the growth of the mining industry by advancing policies that promote exploration. The emphasis should be on new discoveries to create jobs and large future government revenues rather than increased short term income by hiking fees that discourage further exploration. On behalf of the mining community, I would like to propose that the government seriously reconsider the new fee structure by addressing the following issues:
• Revise the fee structure by reducing fees for small scale junior exploration, artisanal, and certain less privileged groups such as TAWOMA.
• The MEM has the resources and capability to identify unscrupulous individuals who maintain large land holdings with no intention to explore but rather plan to sell to the highest bidder. These persons should be selectively penalized rather than penalizing an entire industry.
• Revise the fee structure based on activities and production capacity rather than a fixed price per area to better reflect the scale and cost of the exploration/mining programs. For example, a Prospecting Licenses (PL) versus a Primary Mining Licenses (PML)
• The MEM should set or enact exisiting policy which will require a minimum investment in exploration or production in order to renew a license. Such a requirement should discourage holding land without creating value and should help create jobs for geoscientist and engineers because qualified people would be needed to do the necessary exploration and production work
• Engage in further consultation with industry through mining organizations such as TCME, TAWOMA etc. to ensure future fee changes for legitimate small scale prospecting, advanced exploration, and mining remain reasonable. Author: Dr. James Mataragio - Independent Energy and Mining
[email]Analystjmataragio@gmail.com[/EMAIL]
These changes also appear to be encouraging the few remaining investors to leave. This"final nail in the coffin" not only makes it difficult for companies to keep employees but now their assets as well. Owners of existing prospecting licenses (PL) that are due for renewal and those submitting new applications have been hit with a huge hike in the fee structure for various types of prospecting applications.
To be precise, under the new fee structure, an annual PL fee has jumped from USD 40 to USD 100 per square km, an astonishing 150 percent increase. The PL application fee is now USD 300 up from USD 100, a whopping 200 percent increase. Other fees that have been hiked include what is called Notification Fee, which is now USD 500 up from USD 200.
Transfer fees jumped from USD 200 to USD 3000, an astonishing 1400 percent increase. To put this into perspective, let's say "Company X" applies for a gold prospecting license over a 100 square km area. Under the new fee structure, Company X would be required to pay USD 10,000 (annual license fee) + USD 500 (notification fee) + USD 300 (application fee) which totals USD 10,800.
This new fee is 125 percent higher than the old fee of USD 4,800 for exactly the same size area. By any standard these increases in the fee structure are excessive. No doubt the mining and exploration sector, particularly local companies, will be severely impacted. The MEM states that the move was designed to discourage individuals from holding large concessions without making any attempt to add value and only intending to sell the claims to potential investors for a higher price whenever the industry recovers.
The MEM believes that this move will provide an opportunity for legitimate companies to own good properties at an affordable price without having to deal with a few greedy individuals. Majority of the people within the industry agree that eliminating a few dishonest individuals is a good idea. However, the new policy has already penalized legitimate junior mining companies as well as local individuals and artisanal miners who are striving to advance greenfield exploration in their legitimate concessions in spite of the current down turn. The TUIS chief executive officer, Tumbo Damian, suggests that now is an inappropriate time to implement further changes,
"The exploration and mining sector is facing difficulties raising capital as the industry is currently struggling with low commodity prices".In recent months we have witnessed a number of high profile expansion plans and proposed new projects put on hold throughout Tanzania, resulting in cancelled contracts and loss of jobs. A recent BoT report published in The Citizen (May 8th) shows revenue gained from gold sales last year has nose-dived by 14.8 percent from $2,232.3 million in 2011/12 to $1,901.2 million at the end of December last year.
Now is not the time to introduce a policy change that further discourages investment flowing into Tanzania and continues to make the industry internationally uncompetitive. There is no doubt that the government is tempted to increase revenue through additional new taxes, royalties, levies, duties, fees and charges etc. Driving investment out of the country will inevitably lead to a smaller mining industry in Tanzania and further jeopardize jobs and the significant revenue streams currently enjoyed by mining communities as well as the central government.
Comparatively, other countries around the regional are attracting investors by lowering permitting fees. Uganda provides a good example where the concession fee includes a one time preparation fee of USD 400, an application fee of USD 39 and an annual exploration permit of only USD 8 per square km. Consider "Company Y" with a focus in Uganda. This company would pay a total of USD 1,239 in fees to explore a 100 square km area in Uganda compared to USD 10,800 Company X will have to pay to explore the same size area in Tanzania.
Similarly, our neighbor in Kenya charges an annual concession fee of USD 15 per square km, again insignificantly less than USD 100 per square km Tanzania. This clearly demonstrates how expensive investing in Tanzania has become; concession fees are up 9 times more expensive in Tanzania than some other countries in the regional.
The mining community would like to see the government encourage the growth of the mining industry by advancing policies that promote exploration. The emphasis should be on new discoveries to create jobs and large future government revenues rather than increased short term income by hiking fees that discourage further exploration. On behalf of the mining community, I would like to propose that the government seriously reconsider the new fee structure by addressing the following issues:
• Revise the fee structure by reducing fees for small scale junior exploration, artisanal, and certain less privileged groups such as TAWOMA.
• The MEM has the resources and capability to identify unscrupulous individuals who maintain large land holdings with no intention to explore but rather plan to sell to the highest bidder. These persons should be selectively penalized rather than penalizing an entire industry.
• Revise the fee structure based on activities and production capacity rather than a fixed price per area to better reflect the scale and cost of the exploration/mining programs. For example, a Prospecting Licenses (PL) versus a Primary Mining Licenses (PML)
• The MEM should set or enact exisiting policy which will require a minimum investment in exploration or production in order to renew a license. Such a requirement should discourage holding land without creating value and should help create jobs for geoscientist and engineers because qualified people would be needed to do the necessary exploration and production work
• Engage in further consultation with industry through mining organizations such as TCME, TAWOMA etc. to ensure future fee changes for legitimate small scale prospecting, advanced exploration, and mining remain reasonable. Author: Dr. James Mataragio - Independent Energy and Mining
[email]Analystjmataragio@gmail.com[/EMAIL]
