Ivory Coast plans a windfall tax of 19 per cent on gold mine profits to share in the benefits from soaring world prices for the metal.
The decision, revealed in a government document, sets the scene for a possible dispute with foreign companies building up the sector.
West Africa-focused Randgold Resources Ltd., Australia’s Newcrest Mining and Toronto-listed La Mancha Resources all operate mines in the country.
In August, the government granted production permits to Canada’s Endeavour Mining Corp. and Occidental Gold, a unit of Australia’s Perseus Mining Limited.
The document, seen by Reuters on Friday, also establishes a rate of 13 per cent, though it does not specify in what circumstances it will be applied.
Under the proposal, submitted on Wednesday and adopted during a cabinet meeting, the West African nation will set an indicative cost of production at $615 (U.S.) per ounce, with profits taxed at a rate of 19 per cent.
“The price of gold, which was around $300 per ounce in 2002, is today above $1,700, or practically a six-fold increase without any comparable increase in production costs,” read the text of the proposal obtained from government spokesman Bruno Kone.
“Mining companies have therefore benefited from this favourable climate without any effect for the state.”
The new tax was created through changes to Ivory Coast’s 2012 budget, but it was not immediately clear whether it would be applied retroactively.
Randgold’s CEO Mark Bristow told Reuters that while his company was open to dialogue with the government, it already operated under a clearly defined tax regime.
“We have very specific and legally binding stability agreements,” he said. “It’s my understanding that this will still need to go to parliament and there will be industry dialogue … It’s a process.”
Gold prices are up about 8 per cent since mid-August but remain below all-time peaks of around $1,900 hit a year ago. Spot gold added 0.2 per cent to $1,769 an ounce on Friday after climbing to an intra-day peak of $1,777.51, its highest since Feb. 29.
The modified tax structure will allow Ivory Coast to earn more than 44 billion CFA francs ($86.45-million) in revenues from the gold sector this year, more than double the forecast under the previous tax structure, the document said.
The tax increase follows a series of moves by other African minerals producers, including Guinea, Burkina Faso, Democratic Republic of Congo, and Senegal, who are also seeking to boost state share in revenues.
Neighbouring Ghana proposed a similar windfall tax of 10 per cent on mining companies’ profits in its 2012 budget.
But a Ghana mines ministry official told Reuters earlier this week that the government had delayed its implementation while it considered whether to scrap the proposed levy over fears it could do more harm than good.
Ivory Coast is a relatively small, but growing gold producer and is pushing to expand its long-neglected mining sector to help fund post-war reconstruction after a brief armed conflict last year ended a decade of political crisis.
The mines ministry has forecast output of 14 tonnes this year, roughly double 2010 output, with annual production predicted to rise to 25 tonnes by 2015 as new mines come on stream.Report Typo/Error