Fatal Extraction

The Human Cost of Australia's Mining Empire in Africa

Shareholders call it golden pride mine; to residents it’s golden shame

Jul 11, 2015 • Finnigan Wa Simbeye • Daily News, Tanzania

Most of its Australian shareholders call it Golden Pride Mine but to many Nzega District residents, they call it Golden Shame Mine.

After over 14 years of operations at Nzega’s Golden Pride Mine in Tabora Region of central Tanzania, its residents are left poorer because of alleged destruction of their homes by explosives, poor health especially among mine workers who suffer from backache pains, chest pains and coughing.

But Resolute Tanzania Limited Chief Executive Officer, Gerald Mtui dismissed all claims which are shared by both ordinary people, Nzega District officials and their former Member of Parliament (MP), Dr Hamis Kigwangalla, who he accused of playing politics.

“Nothing much has changed since the mining company closed shop here, but most of us are happy that regular destruction of our houses by rock blasting at the mine has stopped,” said 70 year old, MaduruNdalami, a native of Isanzu village of Lusu ward where Golden Pride Mine is located.

Mzee Ndalami who is a father of eight said none of his children has secured a job here because the company prefers to hire outsiders, meaning people from outside Lusu ward and Nzega District.

He said his two houses developed cracks due to mine blasting and no compensation was ever paid by Resolute Tanzania Limited, a subsidiary of Australian based Resolute Mining Limited.

“To us this mine is a Golden Shame because after many years of operations all that we have managed to leap is environmental destruction, diseases and intensified poverty. We are left with young men who are impotent, women who are frustrated and an influx of criminals who come outside of Nzega,” the veteran council worker lamented as Nzega district remains one of the poorest in Tanzania with income per head of less than $500 against the national figure of over $900.

The infrastructure including roads, schools, hospitals, tap water supply and telephone communications remains poor. Responding to Mzee Ndalami’s claims, Mr Mtui said Golden Pride project was strictly implemented by observing provisions of the 1997 Mining Act and National Environmental Management Act of 2004.

“As required by the law, the mining site is far from residential houses, the law requires that such activities be at least 200 metres from homes, Golden Pride was 400m,” argued Mtui.

He said allegations of damaged houses by blasting were first made in 2005 and that authorities investigated them and found them to be untrue.

“The Assistant Zonal Mining Commissioner investigated the allegations and found them to be untrue several years ago,” Mtui stressed.

The Resolute CEO equally dismissed allegations of environmental destruction, former employees poor health but pointed out that as the mine was a commercial venture employing over 800 people directly and indirectly, the issue of increase in population cannot be dismissed.

“The law requires that we medically examine people when we employ them but also do the same when we terminate them, the issue of never arose. People are playing politics here,” he noted.

The issue of environmental conservation is waiting for an audit by National Environmental Management Council which will be completed in June 2016.

Mzee Ndalami’s story is shared by many of the district’s close to one million people. When Resolute took over the mine from BHP Billiton and Samax Resources in 1997, many residents here considered themselves lucky.

With promises of formal employment, infrastructure improvement and increased revenue for the district council promised by both company and government officials, many residents considered themselves fortunate.

“My government will work with the investor to ensure that your lives are improved through getting employment and also providing a reliable market for your farm produce,” said former Tanzanian President Benjamin Mkapa when he opened the mine in 1999.

Mr Mkapa, whose government opened up the mining sector to foreign investors after enacting the 1997 Mining Act which allowed companies such as Resolute to sign Mineral Development Agreements with the government and enable district councils such as Nzega to collect 0.03 per cent as service levy.

When Resolute started operations at Golden Pride in 1998 after investing $48m, it never paid any service levy to the district till 2012 when $2m (over 3bn/-) was paid following enactment of a bylaw required to substantiate the 1982 Local Authorities Levy Act.

“We don’t owe Nzega District Council anything in taxes, we have already informed them so and advised them to seek legal redress in courts of law if necessary,” argued Mtui.

He said Nzega District Council’s failure to enact a bylaw between 1998 and 2005 meant that they legally had no mandate to collect service levy from Golden Pride.

However, Nzega District officials argue that Resolute still owes them more money. “We are still talking to the company because the matter is legally complex,” said District Executive Director, Abdulrahman Mndeme.

Mr Mndeme said his office is working with Nzega lawmaker, Dr Kigwangalla and Ministry of Energy and Minerals to put pressure on Resolute, which made an estimated $3.3bn (gross) from 2.2 million metric tons of gold exports between 1998 and 2013.

Mndeme acknowledged that in 2005, the district council passed a bylaw to collect the 0.03 percent of the company’s annual gold production value as service levy.

“We are making progress but it’s taking time because these are complex legal issues,” he noted without giving details as to whether the council is considering legal action.

In a letter addressed to the company’s Chief Executive Officer, Peter R. Sullivan dated June 8, 2013, Dr Kigwangalla wrote, “It is because of our dire need to exploit our potentials and of course of the global system that calls for globalised solutions to development we had to attract foreign direct investment to our country and here is where you came in. In Nzega you invested US$ 48m and started harvesting gold and silver.

So far you have earned more than US $ 3 billion, and all put together, our country has only benefitted by receiving not more than US$ 19m in taxes , levies and Corporate Social Responsibility.” Official Resolute company records, however, show that by the end of February 2014 when gold extraction ceased, Golden Pride mine had produced 2,203,601 ounces of Gold and 2017,584 ounces of Silver.

“The minerals produced were worth Tanzanian Shillings 1.95 trillion. The mine paid to the government 71.31bn/- as royalty, 113bn/- as corporate income tax and 81.01bn/- as other taxes.

The mine also paid 5bn/- as service levy to the Nzega District Council. Put together, total payments to the Government equated to 13.9 percent of the total value of the minerals produced,” Resolute Tanzania said in its final report.

Tanzania Extractive Industry Transparency Initiative said mining companies are paying corporate tax because of MDAs signed according to the 1997 Mining Act, which required them to break even before starting to pay the tax.

Resolute was forced to pay because the mine’s lifespan was over and no corporate tax was paid despite the super profits made.

TEITI Chairman, Mark Bomani further noted that the government had better introduced a super-tax on gold exports since 2011 when world market prices for the mineral skyrocketed to over $1,600 per ounce while the price was only $280 per ounce when most of the MDAs including Resolute which was the first open pit commercial project to operate in Tanzania by 1998.

“Australia has introduced a super-tax following the world market gold price increase, it’s time our government did the same,” said Bomani who also chaired the 2009/10 Mining Sector Review Commission whose report forced the government to amend the 1997 Mining Act in 2010 drawing criticism from Tanzania Chamber of Mines, the umbrella organization of private mining companies in the country.

Former President Mkapa argued that tax holidays were granted to mining companies to attract them as the country had no good infrastructure to encourage such FDIs.

Critics, however, argued that grand corruption and World Bank influence backed by soft loans to fund huge infrastructure projects, are to blame. Some politicians are also accused of owning shares in such mining companies which allowed them to give too much concession.

President Jakaya Kikwete’s government has, however, reviewed legislation which has ended generous tax holidays, increased royalty and allow State Mining Corporation (SMC) to get a stake in such projects.

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