Advertisement

Petra pays Tanzania $4.08 million in taxes, royalties

Sunday December 24 2017
petra

An underground tunnel in Petra Diamonds’ mine in Cullinan, outside Pretoria. The mine is the world’s main source of the pricy blue diamonds. PHOTO | REUTERS

By Allan Olingo

Diamond miner Petra has paid $4.08 million to the Tanzanian government in royalties, corporate taxes, and mining fees licence this year.

The firm also says that it invested a further $114.3 million in the Tanzanian economy through capital, wages, social investment, training and supplies.

The tax and royalties is, however, a drop from its initial estimate of $11.9 million, and last year’s expenditure of $13.9 million.

According to its Sustainability Report for 2017, the miner paid $47.2 million in taxes and royalties compared with $49.6 million the previous year.

“Given the high levels of capital being invested in our expansion programmes in 2017, Petra Group continues to be subject to varying levels of tax shields at each of its operations. However, as the capital expenditure levels continue to fall from their peak in 2016, payments of taxes and royalties are due to rise considerably, in line with the profitability of each operation,” the firm said.

“Petra’s contribution to taxes and royalties in Tanzania will rise in future, in line with the amendments to the Mining Act 2017 meaning that royalty contributions have increased to 6 per cent of turnover (previously 5 per cent) and a rough diamond export levy of 1 per cent has been applied,” the report added.

Advertisement

Seized diamonds

In October, the firm reported a fall in its first quarter revenue by 17 per cent to $78.7 million after the Magufuli administration seized its diamond consignment worth $29 million over accusations of underdeclaration.

READ: Petra Diamonds revenues fall in first quarter from Tanzania crackdown

The miner is also facing negative prospects in the country after President John Magufuli indicated that he will be seeking to renegotiate the gold, diamond and Tanzanite mining agreements in a bid to ensure the country gets better terms from the mining firms as was done with Acacia.

“I would want to see all other mining firms follow suit and append to this kind of agreement. Those who don’t want can leave. We would like to see Tanzania benefit more from its resources and such kind of agreements will guarantee that,” President Magufuli said.

Petra’s chief executive officer Johan Dippenaar said that its revenues fell from $94.8 million to $78.7 million as were diamonds from the Williamson mine being detained by Tanzania. It is still negotiating with the Tanzania government about the first parcel of diamonds.

READ: Tanzania to repossess Petra Diamond’s mine

Renegotiation

It now remains to be seen on how Petra will chart its way around the country, saddled by a mounting debt, seized consignment, falling revenues and an expected tough renegotiations with the Magufuli administration that will likely eat into its full year 2018 profit margins.
The London Stock Exchange-listed firm said it’s net debt had risen to $614 million, from $555 million as of June 30, adding that the net debt was higher than previously expected levels because of the Williamson case.

The company has undrawn bank facilities of $ 20.9 million up from June’s $5.6 million, with an additional cash balance of $125.8 million down from $203.7 million in June.
In October, Petra also announced that it was likely to breach key debt covenants with its lenders as a result of the labour disruptions in South Africa and the seizure of its $15 million consignment by Tanzania.
“The compliance with the two EBITDA related maintenance covenant measurements related to the senior debt facilities for the 12-month period ending December 2017 has been placed at risk,” it said.

ALSO READ: Dangote, Dar disagree over mining laws

Advertisement