Key Takeaways:
- Tanzania’s stake in Sotta Mining Corporation rises to 20%.
- The increase marks the first time the government has gone beyond the 16% minimum share in a mining project.
- Nyanzaga Gold Project will be Tanzania’s largest gold mine, valued at $500 million.
- The project is expected to create 1,500 jobs and generate significant revenue for the government.
MWANZA – Tanzania’s government has achieved a significant milestone in its benefit-sharing model for the extractive industry, as its free carried interest in Sotta Mining Corporation Limited (SMCL) has risen from 16% to 20%. This marks the first instance in which the government, through the Office of the Treasury Registrar (OTR), has successfully increased its stake beyond the 16% minimum established under the Mining Act of 2010 (amended in 2017).
SMCL is a joint venture between the Tanzanian government and OreCorp, via its subsidiary Nyanzaga Mining Company Limited (NMCL). This development is part of the government’s ongoing efforts to ensure greater returns from the country’s vast mineral wealth, facilitated by the pro-business policies of President Samia Suluhu Hassan’s administration.
Boost in Government Revenue and Stake
Nehemiah Mchechu, the Treasury Registrar, announced the increase in shares, attributing it to positive negotiations between the government and the parent company, Perseus Mining Limited, an Australian mining firm.
“This increase to 20% reflects investor confidence in the Tanzanian business environment fostered by President Samia Suluhu Hassan. It will lead to higher dividends for the government and provide additional economic benefits from the mining project,” Mchechu noted.
As the government looks to further boost its earnings from mining ventures, Mchechu revealed that the OTR has initiated a review of all existing mining contracts. This review seeks to identify areas where Tanzania could potentially negotiate higher ownership stakes, ensuring the country benefits more from its natural resources.
Setting a New Precedent in Mining Contracts
Currently, under the 2017 amendments to the Mining Act, the government is entitled to a minimum 16% stake in mining projects. However, Mchechu emphasized that this is a baseline, and through careful negotiation, ownership stakes could be increased, as seen with Sotta Mining.
“Many investors tend to maintain the government’s free carried interest at 16%, but our review aims to increase this where possible. Our goal is to ensure that Tanzanians benefit more from their natural resources,” he said.
Nyanzaga Gold Project to Be Tanzania’s Largest
SMCL Chief Financial Officer, Isaac Lupokela, credited the government’s efforts through the OTR and the Ministry of Minerals for the increase in shares. He also highlighted the significance of the Nyanzaga Gold Project, Tanzania’s largest gold mine, set to launch next year.
Valued at a staggering $500 million (about 1.4 trillion Tanzanian shillings), the Nyanzaga project is expected to provide 1,500 jobs over its 15-year lifespan. It will be located in the Lake Victoria goldfields, approximately 60 kilometers southwest of Mwanza.
“This project is a direct result of Tanzania’s investor-friendly policies under President Samia’s leadership,” Lupokela said, noting that the company has already disbursed 94% of the compensation needed to initiate the project. The remaining 6% will be released once outstanding land conflicts are resolved.
According to the Definitive Feasibility Study (DFS) conducted last year, Nyanzaga is poised to produce an average of 250,000 ounces of gold per year during its first eight years of operation.
A Win for Tanzania
In addition to increasing its stake, the government has already started benefiting financially from the Nyanzaga project. SMCL paid $16 million (approximately 43.6 billion Tanzanian shillings) in capital gains tax earlier this year, demonstrating the project’s significant potential to generate revenue for Tanzania.
The increase in government ownership is expected to set a precedent for future mining agreements, reinforcing Tanzania’s commitment to maximizing returns from its vast natural resources while maintaining a business-friendly environment for investors.
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