The Mining Sector Just Collapsed Completely In This Troubled Nation

Tanzania’s mining sector has been in chaos lately. With the government escalating attacks on local gold, copper and gems producers over the last several months.

And this week, things hit their most dire point yet.

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The action kicked off last Thursday. When local media reported that Tanzania’s government had completed a review of the mining sector — and found “gross irregularities” in mining contracts and tax payments across the country.

The fallout then came fast and heavy. With at least two senior government officials being asked to resign over their alleged involvement in the mining problems.

And things didn’t stop there. With officials also ordering further legal action against AIM-listed diamond miner Petra Diamonds — which the government accused of tax avoidance and contract irregularities.

That action came down over the weekend. With Tanzania’s finance minister Philip Mpango saying Sunday that the government has seized Petra’s latest shipment of diamonds — which were taken at the Dar es Salaam airport, as they were being readied for export to Belgium.

The government says the diamond shipment is worth $29.5 million — but that Petra had underreported the value at just $14.7 million. As Minister Mpango declared that the diamonds have now been “nationalized” in response to the issue.

And elsewhere, things got even more serious. With local police reportedly arresting three executives from local gem miner Tanzanite One.

That company was apparently also implicated in last week’s parliamentary report — although few details have emerged as to the exact issues with the gem miner. But the government’s drastic response shows that the matter is getting serious very quickly.

With all that happening, miners are fleeing the country. Like major gold-copper producer Acacia Mining saying last week it will completely suspend operations at its Bulyanhulu mine over the coming month.

All of which confirms the mining sector here is headed for a complete collapse. Watch for more action by the government against the few remaining operations, and for ongoing effects in gold supply as this key African producing nation falters.

Here’s to the fall of a giant,

Dave Forest

Article by Pierce Points



About the Author

PiercePoints
Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at www.piercepoints.com. Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.