UPDATE 2-Tanzania increases royalties in new mining law

* Government to hold stake in new projects

* Tanzania is Africa’s third largest gold producer

* Firms to list on stock exchange

(Adds details, quotes, background)

By Fumbuka Ng’wanakilala

DAR ES SALAAM, April 24 (BestGrowthStock) – Tanzania’s parliament
has passed a new mining law that increases the rate of royalty
paid on minerals like gold from 3 percent to 4 percent and
requires the government to own a stake in future mining
projects.

Tanzania is Africa’s third largest gold producer, but also
has reserves of uranium, nickel and coal. Gold exports alone
earned it $1.076 billion in 2009, up from $932.4 million the
previous year.

The Mining Act 2010 passed late on Friday also requires
mining companies to list on the Dar es Salaam Stock Exchange.

As part of the new legislation, Tanzania will not issue new
gemstone mining licences to foreign companies. Current
agreements with foreign mining companies remain unchanged.

“This bill makes comprehensive provision for prospecting for
minerals, mining, processing and dealing in minerals, for the
granting, renewal and termination of mineral rights, for payment
of royalties, fees and other charges and for any other relevant
matters,” said part of the legislation.

“The bill is a response to challenges faced and experience
gained during 12 years of the implementation of the Mining Act
… that was enacted in the year 1998.”

African Barrick Gold (ABDL.L: ) (ABX.TO: ) has four gold mines
in Tanzania while Australia’s third largest gold miner, Resolute
Mining (RSG.AX: ) and South Africa’s Anglogold Ashanti (ANGJ.J: )
also have gold operations there.

British mining company African Eagle Ltd. (AFE.L: ) is raising
funds for its nickel project in Tanzania.

Gemstones identified by the new law include diamonds,
tanzanite, emerald, ruby, sapphire, turquoise, topaz, and others.
Gemstone producer Tanzanite One (TNZ.L: ), will not be affected by
the new ownership rules.

INVESTOR CONCERNS

Mining stakeholders said they will issue a joint statement
on the new mining law on Monday.

“The government will increase revenues a lot thanks to the
new mining legislation … But, it might send a negative signal
to investors and might impact foreign direct investment. I’m
worried on that,” Zitto Kabwe, a member of parliament from the
opposition Chadema party told Reuters.

The MP, who was a member of a commission appointed in 2007
to review Tanzania’s mining sector, said the new legislation
would bring significant changes to mining policy.

“We were supposed to pass a new law that balances benefits
of the people and the interests of mining companies. The mood of
the day in Tanzania is that foreign investors are stealing from
the country and this might not necessarily be the case all the
time.”

Government’s stake in future mining projects would be
determined by the level of investment in each individual joint
venture, Kabwe said.

Tanzania earned $57 million from mining royalties in 2009,
but is expected to double this amount after the new mining law
comes into force, he said.

“The main highlight of this new legislation is that it makes
gemstone mining the preserve of Tanzanians. It also changes the
method of calculating royalties by using the gross value of
minerals instead of the net value,” said Kabwe.
(Editing by Helen Nyambura-Mwaura and William Hardy)

UPDATE 2-Tanzania increases royalties in new mining law