Shanta Gold, He­lio in row over gold ex­plo­ration deal

The East African - - MARKETS - By KENNEDY SENELWA Spe­cial Cor­re­spon­dent

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

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.

Pic­ture:

A gold mine pro­cess­ing ore at Meremeta in Tan­za­nia. File

Newspapers in English

Newspapers from Kenya

© PressReader. All rights reserved.