Acacia Mining is trying to repair relations with Tanzania, where it owns three mines, including the Buzwagi mine, seen above.</caption>Brookes
Accused of tax evasion and excessive profits in an impoverished African region, a Canadian-owned mining company is trying to patch up its tense relationship with the Tanzanian government by paying taxes ahead of schedule and spending $2-million (U.S.) on advertising to showcase its investments.
Acacia Mining, a subsidiary of Toronto-based Barrick Gold Corp., has faced a growing barrage of verbal attacks from political leaders and media commentators in Tanzania, where it owns three gold mines. And on some issues, the company acknowledges that its critics may have a valid point.
"Governments, probably rightly, don't think they're getting a fair share of the wealth," Acacia chief executive Brad Gordon said in an interview on Monday.
"So we need to get smarter about how that wealth is distributed. I just think we need to look at the distribution of that wealth and how taxes are paid."
Under agreements signed when Acacia's predecessors first entered the country, the company was able to pay no corporate taxes in Tanzania for a 15-year period. It seemed like a good deal at the time, but now the company faces a backlash – part of the increasingly fraught relationship between African governments and the mining industry.
"There's just no trust," Mr. Gordon said in an interview. "They talk about the billions of dollars that have been ripped out of the continent over a long, long time."
Asked whether the growing criticism of the industry is due to a perception problem or a justice problem, he answered: "A bit of both."
Last year, a tax tribunal in Tanzania accused Acacia of engaging in a "sophisticated scheme of tax evasion." It said the company had failed to pay corporate tax in Tanzania, while still paying more than $400-million in dividends to its shareholders. The tribunal ordered Acacia to pay $41.25-million in taxes. The company's appeal was dismissed on procedural grounds in October, but the company is still fighting the ruling.
To help allay the criticism of Acacia's lack of corporate taxation, the company decided to make a goodwill gesture: It paid $20-million to the Tanzanian government in what it called a "pre-payment" of taxes, before the taxes were legally required to be paid.
At the African Mining Indaba conference in Cape Town on Monday, Mr. Gordon showed a slide reading: "Governments believe that mines have massive wealth, steal ore or withhold taxes."
The mistrust has led to a "destructive relationship" between investors and governments, he told the conference.
In the interview later, he recalled a private meeting with dozens of cabinet ministers from across Africa, where two senior government leaders stood up and "lambasted" the mining industry in highly negative terms, to his shock.
"It's almost an intractable situation, but somehow, we've got to fix it," Mr. Gordon said.
"We're not going to get anywhere with the gap that exists between the industry and governments in Africa today. And yet there's this huge opportunity. It is the richest continent on Earth in terms of mineral resources, and yet it's the least effective mining industry on Earth in terms of the returns generated and wealth distributed to all the stakeholders."
After years of internal reforms and improved relations with local communities, the public criticisms of Acacia feel unfair, he said. "I know our leadership team, our values, the people we employ. We got rid of all the dickheads. There's some really good people at Acacia, and to get criticized for some of that stuff, it hurts."
The company has launched a $2-million "branding campaign" in print, radio and television advertising in Tanzania to showcase its $3-billion in overall investment in the country, including about $200-million in annual capital spending.
The advertising is similar to the kind of campaign that a company such as Coca-Cola would launch, Mr. Gordon said. "We don't just want to be seen as a mining company. We market ourselves more like a consumer products company."
After slashing its operating costs and boosting revenue in recent years, Acacia is talking to its Toronto-listed rival, Endeavour Mining Corp., about a potential $4-billion merger.
Mr. Gordon would not discuss the prospects of reaching a deal with Endeavour, which has extensive mining operations across West Africa. But he said the deal, if it happened, would put Acacia three years ahead of schedule in its plan to become a pan-African business.
Geoffrey York