Shanta Gold, Helio in row over gold exploration deal
ON JUNE 19, Shanta Gold Ltd acquired the Saza-makongolosi project for gold exploration in southwestern Tanzania owned by Helio Resource Corporation for about $4.6 million.
In the deal Shanta was to issue 59.5 million shares to Helio shareholders. But Shanta cancelled the agreement, citing fears of the potential impact of the new mining laws in Tanzania which came into force in July.
Now, the two companies are embroiled in a dispute over the deal, with Helio pushing for a conclusion.
“Shanta’s position remains it had clear and compelling rights to terminate the agreement,” said company chief executive Eric Zurrin.
He cited the Miscellaneous (Amendments) Act No.4/ 2017 passed in Parliament on July 4, which amended the Income Tax Act of 2004, Value Added Tax (VAT) Act 2015, Tax Administration Act, Mining Act of 2010 and Petroleum Act.
Mining contracts can now be renegotiated and the government of Tanzania insists on more local ownership.
Shanta said that the new Finance Act raised taxes and royalties which, with other legal changes, amounted to a material adverse effect on Helio. The Canadian firm disagrees.
“We strongly disagree with Shanta’s assertion that changes to Tanzania’s mining laws amount to a material adverse effect as defined in the agreement, and reject their opportunistic attempt to walk away from their obligations,” said Helio’s chief executive Richard Williams.
Royalty payments on gold exports rose to six per cent from four per cent, while one per cent clearing tax was imposed.
The changes were expected to cost Shanta an extra $3 million annually or $39 per ounce (oz) of gold.
“We believe that combining Shanta Gold and Helio continues to make sense for both companies and are disappointed our partner in this transaction chose to take this drastic step without any prior discussions,” said Mr Williams.
Helio argues the agreement remains in effect and it will take all commercially reasonable actions required to complete the transaction.
Helio has not disclosed whether legal proceedings will be instituted against Shanta and how the firm intends to enforce its rights. Shanta has unveiled $5 million cost-cutting drive to offset the impact of the changes.
A gold mine processing ore at Meremeta in Tanzania. File