TMAA Annual Report 2011F

i TMAA Annual Report, 2011

Message from the Chief Executive Officer

It is a privilege to present the 2011 Tanzania Minerals Audit Agency (TMAA) Annual Report. During the last 12 months, we continually focused our attention in improving our performance, which provided more significant achievements as highlighted in this report. The year 2011 has not been without challenges, all of which have been dealt with decisively by the Agency with the full support of the Minister, Permanent Secretary, TMAA Ministerial Advisory Board and other stakeholders.

Indeed, it is the honor and privilege to be part of TMAA that is committed to ensuring that the Government maximizes its benefits from the mineral sector through effective monitoring and auditing of large, medium and small-scale mining operations. I particularly want to thank all TMAA staff for their hard work, integrity, dedication, determination and innovation that allowed us to turn our vision into reality. Moreover, I would like to thank the TMAA Ministerial Advisory Board for their commitment, expertise, knowledge and experience for the advice offered during the year under review.

Our ability to fulfill TMAA roles and functions has expanded to auditing large, medium and small-scale mines. It is worth to note that in 2011, our financial audits on mining entities in collaboration with the Tanzania Revenue Authority (TRA) has succeeded in accelerating payments of corporate tax by Geita Gold Mine owned by AngloGold Ashanti Limited and Golden Pride Mine owned by Resolute Tanzania Limited. Also, our environmental audits have triggered improvements in compliance to environmental management best practices by large and medium scale mines. As we go into 2012, I remain optimistic of attaining more success through the Agency’s planned activities for the betterment of the Nation.

The success of the Agency in 2011 is attributed to joint efforts by everybody within TMAA, and it is my hope that the Agency will go from strength to strength with its

ii TMAA Annual Report, 2011

employees’ continued commitment. I therefore look forward to continued TMAA exemplary achievements in the years to come. We, at TMAA, are all looking forward to ensure that the Government maximizes benefits from the mining industry as part of implementing Tanzania Development Vision 2025.

We Dared, We Succeeded and We are Forging Ahead.

Eng. Paul M. Masanja

CHIEF EXECUTIVE OFFICER

iii TMAA Annual Report, 2011

Table of Contents GLOSSARY OF TERMS .....................................................................................................................vii

2011 PERFORMANCE HIGHLIGHTS ................................................................................................. 1

1.0 MANAGEMENT OVERVIEW .................................................................................................... 6

2.0 TARGETS FOR 2011 ................................................................................................................... 8

3.0 AUDIT RESULTS AND PERFORMANCE FOR 2011 ................................................................. 9

3.1 Auditing of Minerals Produced and Exported ................................................................. 9

3.1.1 Minerals Produced by Major Gold Mines in 2011 .......................................................... 9

3.1.2 Minerals Exported by Major Gold Mines in 2011 .......................................................... 10

3.1.3 Auditing of Diamonds Production and Exports ............................................................. 11

3.1.4 Auditing of Tanzanite Production and Exports ............................................................. 12

3.1.5 Auditing of Building Materials in the Eastern Zone ..................................................... 13

3.1.6 Auditing of Coal Production at Ngaka Coal Project ..................................................... 13

3.1.7 Historical Minerals Production from Medium and Small Scale Mines (2005 - 2010) .............................................................................................................................................. 14

3.2 Mineral Royalty Payments for 2011 ..............................................................................15

3.2.1 Gold Production Performance Snapshot ....................................................................... 16

3.2.2 Historical Data on Mineral Production and Export ...................................................... 17

3.2.3 Historical Prices of Gold, Silver, Copper and Diamond (2001 - 2011) ........................ 20

3.2.4 Historical Royalty Payments by Major Mines (2001 - 2011) ........................................ 22

4.0 FINANCIAL AUDIT AND TAX REVIEW ...................................................................................27

4.1 Financial Audit and Tax Review Results for 2011 .......................................................27

4.2 Achievements Resulting from TMAA’s Financial Audits ...........................................28

5.0 ENVIRONMENTAL MONITORING AND AUDITING ..............................................................30

6.0 CHALLENGES FACED IN 2011 .................................................................................................34

7.0 PERFORMANCE EVALUATION OF WORK DONE BY THE AGENCY IN 2011 .......................35

8.0 PLANNED ACTIVITIES FOR 2012 ............................................................................................37

9.0 CONCLUSION ...........................................................................................................................40

iv TMAA Annual Report, 2011

List of Tables

Table 1: Key Achievements in 2011 ........................................................................................................ 3

Table 2: Targets for 2011 .......................................................................................................................... 8

Table 3: Minerals Produced by Major Gold Mines in 2011 ............................................................... 10

Table 4: Quantity and Value of Exported Minerals in 2011 ............................................................... 10

Table 5: Diamonds Production and Export, 2011 ................................................................................ 12

Table 6: Tanzanite Production and Exports Summary in 2011 ......................................................... 12

Table 7: Mineral Produced by Small Scale Miners (2005 - 2010) .................................................... 14

Table 8: Historical Mineral Exports by Major Mines (2005 - 2011) ................................................. 17

Table 9: Diamond Prices Index 2011 ..................................................................................................... 21

Table 10: Historical Taxes Paid by Large Scale Mining Entities (1999 – 2011, Billion TZS) ......... 23

Table 11: Procurement of Goods and Services by Large Scale Miners (2001 – 2011, Million TZS) ......................................................................................................................................... 23

Table 12: Tanzania Mineral Reserves (Selected Minerals and Projects) ...................................... 24

Table 13: Status of Employment in the Major Gold Mines – Number of Locals versus Expatriates .............................................................................................................................. 26

Table 14: Unresolved Queries Communicated to TRA for Consideration and Action .................. 27

Table 15: Achievements Resulting from TMAA Financial Audits .................................................... 28

Table 16: Common Environmental Shortfalls Noted on Large Scale Mines .................................. 30

Table 17: Common Environmental Shortfalls Noted on Medium Scale Mines .............................. 32

Table 18: Common Environmental Shortfalls Noted on Small Scale Mines .................................. 32

Table 19: Implementation Status of Planned Audit Activities for 2011 ........................................... 35

Table 20: Targets for 2012 ...................................................................................................................... 37

v TMAA Annual Report, 2011

List of Figures

Figure 1: TMAA Organization Structure ............................................................................................ 7

Figure 2: Total Gold Exports Contribution by Mine, 2011 .............................................................. 11

Figure 3: Monthly Actual Provisional Royalty Payments by Major Mines – 2011 .................... 15

Figure 4: Calculated Provisional Royalty by Mine – 2011 ............................................................. 15

Figure 5: Total Royalty Paid by Major Gold Mines (1998 - 2010) ................................................. 16

Figure 6: Africa’s Top Four Gold Producing Countries (2008 – 2011) ......................................... 16

Figure 7: Actual versus Projected Gold Production by Major Gold Mines (2001 – 2011) ........ 17

Figure 8: Historical Gold Production by Six Major Gold Mines (1999 – 2011) ........................... 18

Figure 9: Historical Gold Export Quantity versus Value (2001 - 2011) ......................................... 19

Figure 10: Historical Copper Export Quantity versus Value (2001 - 2011) .................................. 19

Figure 11: Gold Price Trends (2001 - 2011) ...................................................................................... 20

Figure 12: Silver Price Trends (2001 - 2011) .................................................................................... 20

Figure 13: Copper Price Trends (2001 - 2011) ................................................................................. 21

Figure 14: Royalty Paid by Major Gold Mines (2001 - 2011) ......................................................... 22

Figure 15: Composition of Taxes Paid by Large Scale Mining Entities (2011) in TZS Billion .. 24

vi TMAA Annual Report, 2011

TMAA’s Roles and Functions

a. To monitor and audit quality and quantity of minerals produced and exported by large, medium and small scale miners; to determine revenue generated to facilitate collection of payable royalty.

b. To audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the Tanzania Revenue Authority (TRA) and other relevant authorities.

c. To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.

d. To collect, analyze, interpret and disseminate minerals production and exports data for projecting Government revenue, planning purposes and decision making in the administration of the mining industry.

e. To counteract minerals smuggling and minerals royalty evasion in collaboration with relevant Government authorities.

f. To assess values of minerals produced by large, medium and small scale miners to facilitate collection of payable royalty.

g. To advise the Government on all matters relating to the administration of the mineral sector with main focus on monitoring and auditing of mining operations to maximize Government revenue.

h. To promote and conduct research and development in the mineral sector that will lead to increased Government revenue.

i. To examine and monitor implementation of feasibility reports; mining programs and plans; annual mining performance reports; and environmental management plans and reports of mining companies.

vii TMAA Annual Report, 2011

GLOSSARY OF TERMS

ARD Acid Rock Drainage MMP Mwadui Mpya Pit BGM Bulyanhulu Gold Mine MP Member of Parliament BGML Bulyanhulu Gold Mine Limited PAYE Pay As You Earn

BZGM Buzwagi Gold Mine PML Pangea Minerals Limited

Cap. Chapter ppm Parts Per Million Crt Carat RTL Resolute Tanzania Limited EIS Environmental Impact Statement SDL Skills Development Levy EMP Environmental Management Plan STAMICO State Mining Corporation

EPP Environmental Protection Plan t Tonne

FDI Foreign Direct Investment TGM Tulawaka Gold Mine g Gram TMAA Tanzania Minerals Audit Agency GGM Geita Gold Mine TOML TanzaniteOne Mining Limited GGML Geita Gold Mine Limited TOL Tanzania Oxygen Limited GPM Golden Pride Mine toz Troy Ounce lb Pound TRA Tanzania Revenue Authority ISO International Organization of

Standardization TSF Tailings Storage Facility

kcal Kilocalories TTM TanzaniteOne Tanzanite Mine

Kg Kilogram TZS Tanzanian Shilling

LME London Metal Exchange UNCTAD United Nations Conference on Trade and Development N/A Not Applicable

NAL New Alamasi URT United Republic of Tanzania

NEMC National Environment Management Council

VAT Value Added Tax WAD Weak Acid Dissociable

NMGML North Mara Gold Mine Limited WHT Withholding Tax MAB Ministerial Advisory Board WDL Williamson Diamonds Limited MEM Ministry of Energy and Minerals WDLP Williamson Diamonds Limited Pit mg Milligram Wt Weight

1 TMAA Annual Report, 2011

2011 PERFORMANCE HIGHLIGHTS

This report covers results of auditing activities performed by Tanzania Minerals Audit Agency in the year 2011. The report addresses the status of implementation of the audit program and highlights key findings and achievements.

The task of auditing quality and quantity of mineral products from the major mines was comprehensively undertaken by TMAA in 2011. Gold production from the major gold mines (from gold bars and Copper Concentrate products) increased by 4.9% from 1.22 million troy ounces in 2010 to 1.28 million troy ounces in 2011. Geita Gold Mine (GGM) was the leading gold producer in 2011 with 34.2% of total production, while Tulawaka Gold Mine (TGM) was the least gold producer with 6.6% of total production.

The total mineral exports in 2011 from gold bars and Copper Concentrate produced by the six major gold mines were: 1.29 million troy ounces of gold worth USD 2.04 billion; 13.84 million pounds of copper worth USD 55.71 million; and 456,080 troy ounces of silver worth USD 16.07 million.

Mineral royalty paid by the six major gold mines to the Government during the year under review was USD 57.1 million. This presents an increase of 21.8% compared to USD 46.9 million realized in 2010. However, the Government is expecting to collect USD 58.81 million in total as royalty for the year 2011 once final royalty is paid.

Tanzanite output at TanzaniteOne Tanzanite Mine (TTM) was 1.3 million carats in 2011 (Grade A – BL(I)), compared to 2.2 million carats produced in 2010. Tanzanite worth USD 10.89 million was exported in 2011, down from USD 15.8 million realized in 2010. Total royalty paid by TTM in 2011 was USD 284,811.63.

Diamonds output at Williamson Diamonds Limited (WDL) during the year amounted to 19,610 carats, down by 54.7% compared to 43,264 carats produced in 2010. The mine sold 22,922 carats of diamonds worth USD 6.56 million in 2011, compared to 50,740 carats worth USD 9.5 million sold in 2010. Total payable royalty for the exported diamonds was USD 327,895. The decline in production and export of diamonds in 2011 was a result of suspension of mining and processing activities at


WDL in August 2011 mainly due to pit expansion, shortage of water for process plant operations and plant refurbishment.

Environmental monitoring and auditing was conducted on the following mines: Geita Gold Mine (GGM), TanzaniteOne Tanzanite Mine (TTM), Bulyanhulu Gold Mine (BGM), Buzwagi Gold Mine (BZGM), Tulawaka Gold Mine (TGM), Golden Pride Mine (GPM), 21 medium and 17 small scale mines. The conducted environmental audits have successfully assisted in improving environmental management practices in the respective mines.

During the year 2011, auditing of revenue generated, capital investment and operating expenditure was conducted on Geita Gold Mining Limited (GGML), Resolute Tanzania Limited (RTL), TanzaniteOne Mining Limited (TOML), Bulyanhulu Gold Mine Limited (BGML), Pangea Minerals Limited (PML) - owner of BZGM and TGM, North Mara Gold Mine Limited (NMGML), Williamson Diamonds Limited (WDL), Nyanza Mines (T) Limited, Marmo E. Granito Limited, Tanga Cement Company Limited, ARM Tanzania Limited, Mineral Extraction Technologies Limited, Mbabani Minerals Limited and Aurum Africa Limited (holder of Dealer's Licence). The audits did reveal a number of significant queries which would recover huge amounts of lost revenue on the side of the Government once they are rectified.

Table 1 highlights key achievements attained in year 2011 as a result of TMAA audits, and administrative initiatives taken by the Agency to improve its performances.


Table 1: Key Achievements in 2011

Function Achievements

To audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the TRA and other relevant authorities.

1. Audit of financial records and tax review conducted by TMAA in collaboration with TRA has helped to accelerate payment of corporate tax by GGML, operating GGM and owned by AngloGold Ashanti Limited; and RTL, operating GPM and owned by Resolute Mining Limited.

• RTL paid a total of TZS 33.9 billion as corporate tax for the period up to June 2011. In September and December, 2011 RTL made payments of corporate tax amounting to TZS 14.6 billion and TZS 14.1 billion respectively. Cumulatively, the company has paid corporate tax amounting to TZS 62.6 billion.

• GGML paid corporate tax amounting to TZS 3.2 billion in 2009. Another payment of corporate tax was made in November, 2011 amounting to TZS 9.5 billion. The entity is expected to pay about USD 50 million as corporate tax for year 2011/2012.

2. Four gold mines owned by African Barrick Gold (ABG) have paid fuel levy amounting to USD 2 million which was not settled up to 2010 as follows: (BGM – USD 200,000; NMGM – USD 1 million; TGM – USD 200,000 and BZGM – USD 600,000). The entities made the respective payments following audit queries raised by TMAA which disclosed non-payment of fuel levy for the stipulated amounts.

3. PML is expected to pay USD 32 million as corporate tax due for TGM for the financial year 2008 as a result of ring fencing BZGM capital expenditure to year 2009 in which the mine started generating income. This is a result of TMAA audits in collaboration with TRA on the respective mines for the financial years 2007 through 2009.

4. RTL has settled the unpaid withholding tax amounting to TZS 223.4 million as a result of its failure to withhold tax from


Function Achievements payments made to technical service providers for the financial year 2008/2009.

5. WDL has paid TZS 136.7 million as Local Government Service Levy, PAYE and royalty, which was not paid for the period of 2004 through 2008. The payment was made following TMAA audit.

6. TOL Gases Limited has agreed to pay royalty of TZS 94.15 million which was not paid to the Government by the entity for the period of 2006 through 2010.

7. Regular financial audits conducted by TMAA have enhanced financial record keeping by major mining companies as well as self-compliance.

To monitor and audit quality and quantity of minerals produced and exported by large, medium and small-scale miners.

1. TMAA has managed to increase its scope of audit by auditing large, medium and small scale mines.

2. TMAA successfully audited and analyzed minerals produced and exported by GGM, GPM, BGM, BZGM, NMGM, TGM, WDL and TTM. This ensured availability of accurate and reliable data on minerals produced and exported by the respective miners.

3. TMAA is in the final process of registering its Laboratory under ISO 17025 for the purpose of attaining international recognition and acceptance of laboratory results. Once the sought accreditation is attained, the Agency will commercialize its laboratory services to generate income.

4. TMAA in collaboration with the Minerals Department has been publishing local indicative mineral prices on monthly basis through local newspapers and its website (www.tmaa.go.tz) for the purpose of assessment and valuation of minerals; informing the general public on the prevailing mineral prices in Tanzanian market; helping local miners bargain reasonable and fair prices for their minerals; and increasing Government revenues through

http://www.tmaa.go.tz/�


Function Achievements enhanced mineral price knowledge.

5. TMAA in collaboration with the Zonal Mines Office – Eastern Zone initiated monitoring and auditing of production and sales of building materials by using “Sales Vouchers” in Dar es Salaam and Coast regions. The audit is aimed at ensuring that the Government collects maximum royalty from sales of building materials and tackles the ongoing illegal mining of building materials in the country. Through this exercise, TMAA facilitated collection of royalty amounting to TZS 372 million for the period from June to December, 2011.

6. TMAA in collaboration with the Minerals Department has introduced modern security seals for securing packages/ containers containing minerals for export.

To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.

1. TMAA has widened its environmental monitoring and auditing activities to medium and small scale mining operations. During year 2011 TMAA conducted environmental audits on 21 medium scale mines and 17 small scale mining operations.

2. TMAA conducted assessment of environmental rehabilitation liabilities for the large scale gold mines as of June, 2011. It has been revealed that total amount of USD 201 million is not secured to the Government. This suggests that rehabilitation of the respective mining areas may become a burden to the Government in case of unexpected closure or abandonment. Negotiations are underway between the Government and large scale gold mining entities to agree on forms and amounts of rehabilitation bonds to be posted.


1.0 MANAGEMENT OVERVIEW

TMAA Ministerial Advisory Board was formed on 29th March, 2011 and officially launched on 19th May, 2011 by Honorable William Mganga Ngeleja (MP), Minister for Energy and Minerals. The main duty of the Board is to advise the Minister for Energy and Minerals on matters pertaining to efficient and effective performance of TMAA. The Board comprises of the Board Chairman, Dr. Yamungu Kayandabila and six members namely, Dr. Consolath D. Ishebabi, Mr. Rogers Sezinga, Eng. James L. Ngeleja, Mr. Thomas N. Nchimani, Mr. Gray Mwakalukwa, and Eng. Benjamin J. Mchwampaka. The Board held its first meeting on 28th – 29th September, 2011 in Arusha. The first board meeting was preceded by board members visiting four large scale mines which are BGM, GGM, WDL and TTM. The visit aimed at familiarizing board members with mining operations as well as TMAA auditing activities.

TMAA Ministerial Advisory Board Members in a group photo with the Chief Executive Officer for TMAA, Eng. Paul Masanja (seated second right). Seated centre is Board Chairman, Dr. Yamungu Kayandabila.


Figure 1: TMAA Organization Structure

LEGAL UNIT

PERMANENT SECRETARY

CHIEF EXECUTIVE

MINISTER

MAB

PROCUREMENT UNIT INTERNAL AUDIT UNIT

FINANCE & ACCOUNTS (MANAGER)

HUMAN RESOURCE &

ADMINISTRATION (MANAGER)

PLANNING AND RESEARCH

DEVELOPMENT (MANAGER)

MINERALS VALUATION (MANAGER)

LABORATORY SERVICES

(MANAGER)

ENVIRONMENTAL MONITORING & AUDITING OF

LARGE & MEDIUM SCALE MINES (MANAGER)

ENVIRONMENTAL MONITORING & AUDITING OF SMALL SCALE

MINES (MANAGER)

MINERALS PRODUCTION &

EXPORT MONITORING OF

LARGE SCALE MINES

(MANAGER)

MINERALS PRODUCTION

& EXPORT MONITORING OF MEDIUM & SMALL SCALE

MINES (MANAGER)

DATA MANAGEMENT AND ANALYSIS

(MANAGER)

INFORMATION COMMUNICATION TECHNOLOGY

(MANAGER)

FINANCIAL AUDITING &

ANALYSIS FOR LARGE & MEDIUM

SCALE MINING (MANAGER)

FINANCIAL AUDITING &

ANALYSIS FOR SMALL SCALE

MINING (MANAGER)

TAX AUDIT & REVIEW

(MANAGER)

MINERALS VALUATION & LABORATORY

SERVICES (DIRECTOR)

BUSINESS SUPPORT

(DIRECTOR)

ENVIRONMENTAL MONITORING &

AUDITING (DIRECTOR)

MINERALS PRODUCTION &

EXPORTS MONITORING (DIRECTOR)

FINANCIAL AUDITING & ANALYSIS

(DIRECTOR)

INFORMATION & COMMUNICATION

TECHNOLOGY (DIRECTOR)


2.0 TARGETS FOR 2011

Table 2 summarizes operational activities which were set for implementation in the year 2011.

Table 2: Targets for 2011 Function Targets To monitor and audit quality and quantity of minerals produced and exported by large, medium and small-scale miners.

Stationing full time Auditors at all major mines to witness and record daily production, weighing, packaging and sealing of minerals.

Taking mineral samples where necessary and performing logistics of shipment of collected samples from the mine sites to the Agency laboratory in Dar es Salaam for assaying.

Determining quantity and provisional value of minerals produced using Agency’s laboratory results and market prices.

Conducting strategic audit of medium and small scale mines to gather information on minerals production and sales.

Conducting royalty reconciliation by comparing mines’ assay results against those of TMAA.

To audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the TRA and other relevant authorities.

Verifying the authenticity of revenue declared, capital investment and operating expenditure incurred by the mining companies in the course of mineral production and other supportive operations.

Examining tax accounting of mining companies in order to determine whether accounting methods used were appropriate and in compliance with statutory provisions.

Performing revenue forecasting based on available historical, current and future economic variables relating to large and medium scale mining projects.

Reviewing annual costs incurred by the mining companies and performing cost–benefit analysis of the activities undertaken by the mines in particular year of expenditure.

To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.

Reviewing Environmental Management Plans (EMPs), rehabilitation programs and reports from mining companies submitted to the relevant Government Institutions.

Conducting physical inspection at the mine site on environmental management activities.

Assessing adequacy of funds allocated for environmental management and progress on the implementation of the environmental programs.

Compiling environmental audit queries (compliance and financial) and outstanding issues (if any) and communicating the same to the audited miners for their response and action.


3.0 AUDIT RESULTS AND PERFORMANCE FOR 2011

3.1 AUDITING OF MINERALS PRODUCED AND EXPORTED

The auditing of minerals produced and exported by major gold mines conducted by TMAA in 2011 was aimed at ascertaining the quantity and quality of gold, silver and copper production and exports by each mine. This audit is vital so as to provide the Government with a precise account of exportable gold-containing products, for the purpose of confirming the amount of revenue generated from the exported mineral products and royalty due.

TMAA auditors witnessed each and every smelting session performed during the year 2011 in their respective gold rooms. This includes the pouring, marking, weighing and sampling of ingots. The auditors also witnessed the weighing and loading of the Copper Concentrate in containers for export and took samples of the material. All samples were transported by secure means to the TMAA laboratory in Dar es Salaam where they were analyzed to determine the amount of fine gold, silver and copper contained.

TMAA witnessed production and exports of diamonds at WDL and Tanzanite at TTM, where auditors are stationed at each mine to witness, record and report on a daily basis mineral production and exports activities undertaken by the mine. TMAA also conducted strategic auditing of building materials in Dar es Salaam and Coast regions for the purpose of facilitating royalty collection. Furthermore, TMAA stationed one Auditor at Ngaka Coal Project in Mbinga District to witness, record and report coal production and sales operations at the mine.

3.1.1 Minerals Produced by Major Gold Mines in 2011

Table 3 summarizes the quantity of gold bars and Copper Concentrate produced by major gold mines in 2011 as audited by TMAA. A total of 2,806 mineral samples were collected from the major gold mines for laboratory analysis of which 725 were from gold bars and 2,081 were from Copper Concentrate.


Table 3: Minerals Produced by Major Gold Mines in 2011

Detail Year 2011

Year 2010

Number of gold bars produced 2,209 2,140

Weight of gold bars produced (kg) 39,584 37,401

Number of containers loaded with Copper Concentrate 2,027 2,124

Net wet weight of Copper Concentrate produced (tons) 40,956 44,421

Gold quantity (toz) 1,280,342 1,221,527

Silver quantity (toz) 439,665 422,692

Copper quantity (lb) 13,967,339 11,905,511

3.1.2 Minerals Exported by Major Gold Mines in 2011

Table 4 summarizes the quantity and value of minerals exported by major gold mines in 2011 as audited by TMAA. The prices applied in the computation of values of gold, silver and copper exports are as quoted from the London Metal Exchange (LME). Gold export contribution by each major gold mine is shown in Figure 2.

Table 4: Quantity and Value of Exported Minerals in 2011

Detail Year 2011

Year 2010

Number of gold bars exported 2,198 2,104

Number of Copper Concentrate containers exported 2,054 1,992 Gold quantity (toz) 1,293,671 1,214,594

Silver quantity (toz) 456,080 406,235 Copper quantity (lb) 13,836,311 10,806,687

Gold gross value (USD) 2,041,511,060 1,484,735,450

Silver gross value (USD) 16,065,979 8,234,030 Copper gross value (USD) 55,706,563 36,374,430

Total Value (USD) 2,113,283,602 1,529,343,910


• Gold production increased by 4.9% from 1.22 million troy ounces in 2010 to 1.28 million troy ounces in 2011, mainly due to increased output at GGM.

Basic Facts from Tables 3 and 4

• Total value of mineral exports by the six major gold mines increased by 38.1% from USD 1.53 billion in 2010 to USD 2.11 billion in 2011, mainly due to increased gold prices in the world market.

Figure 2: Total Gold Exports Contribution by Mine, 2011

3.1.3 Auditing of Diamonds Production and Exports

Diamond mining operations at the Williamson Diamonds Mine are composed of the following distinct activities: mining of ore at the pit, re-treatment of tailings to recover missed diamonds and gravel mining. The open pit mining and tailings re-treatment are the largest of the operations. Current ore grade is about 6 carats per hundred tons (or 12 mg/t) mined from three open pits namely: Mwadui Mpya Pit (MMP), New Alamasi (NAL) and Williamson Diamonds Limited Pit (WDLP). Table 5 summarizes the quantity of diamonds produced and exported by WDL in 2011 as audited by TMAA.


Table 5: Diamonds Production and Export, 2011

A: Diamonds Production

WDLP (Carat)

MMP (Carat)

NAL (Carat)

Total Weight (Carat)

0 6,013 12,374 18,387 Remarks: WDL suspended production completely on 18th August, 2011 due to shortage of

water for process plant operations. Production is expected to resume in January, 2012. The only work going on at the mine site is pit expansion and plant refurbishment.

B: Diamonds Export

Total Weight (Carat)

Average Price (USD/Carat)

Estimated Value (USD)

Provisional Royalty (USD)

23,922 274.14 6,557,891 327,895

3.1.4 Auditing of Tanzanite Production and Exports

TMAA auditor stationed at TTM is responsible for witnessing, recording and reporting on a daily basis Tanzanite production and exports activities undertaken by the mine. Table 6 summarizes the quantity of Tanzanite produced and exported by TTM in 2011 as audited by TMAA. Table 6: Tanzanite Production and Exports Summary in 2011

A: Tanzanite Production A

(Carat) B

(Carat) BL

(Carat) B(SI)

(Carat) B(I)

(Carat) BL(SI)

(Carat) BL(I)

(Carat) Total

(Carat) 1,299 55,000 142,273 22,380 62,285 83,157 924,456 1,290,851

B: Tanzanite Exports Description Total Weight

(g) Total Weight

(Carat) Export Value

(USD) Royalty Paid

(USD) Cut Tanzanite - 50,031.48 5,321,839.59 56,268.32 Rough Tanzanite 303,902.31 1,519,511.55 4,596,383.69 228,543.31 Total 1,569,543.03 9,918,223.28 284,811.63


3.1.5 Auditing of Building Materials in the Eastern Zone

TMAA in collaboration with the Zonal Mines Office – Eastern Zone initiated monitoring and auditing of production and sales of building materials by using “Sales Vouchers” in Dar es Salaam and Coast regions. The audit is aimed at ensuring that the Government collects maximum royalty from sales of building materials. This audit commenced on 1st June, 2011 as a pilot program in the two regions with expectations of adopting the program to other areas of the country since it has confirmed enormous achievements in collecting government royalty from building materials.

During the period of June to December 2011, a total of 746,234.21 tonnes of building materials worth TZS 12.4 billion (with payable royalty amounting to TZS 372 million) were produced and sold by the licensed miners in Dar es Salaam and Coast regions as audited by TMAA. This is huge increase, compared to about TZS 2 million only which was previously collected by the Government on yearly basis before the introduction of “Sales Vouchers” for monitoring sales of building materials in the Eastern Zone.

3.1.6 Auditing of Coal Production at Ngaka Coal Project

TMAA commenced monitoring and auditing of coal production and sales activities by TANCOAL Energy Limited at Ngaka Coal Project in Mbinga District, Ruvuma Region. The Agency stationed one Mineral Auditor at the mine site on 24th October, 2011 to witness, record and report coal production and sales operations at the mine on daily basis. TANCOAL Energy Limited is owned jointly by National Development Corporation (30%) and Intra Energy Corporation (70%). Ngaka Coal Project, which is owned and operated by TANCOAL Energy Limited, comprises of Ngaka, Mbalawala and Mbuyura coalfields. TANCOAL was granted Mining Licence No. 439/2011 on 18th August, 2011 to mine and sell coal. As per feasibility study, the mine has a proven reserve of 40.2 million tonnes of coal with quality of 6,400 Kcal/Kg, sulphur content of 1.56% and ash content of 22%. Currently, the mine produces about 16,000 metric tonnes of coal per month, which is sold to local and foreign customers who use it mainly for industrial purposes. Total sales of coal from TANCOAL through local trade and exports from August to December, 2011 were 515 metric tonnes worth USD 51,000. Total royalty paid to the Government was TZS 2,416,354.

3.1.7 Historical Minerals Production from Medium and Small Scale Mines (2005 - 2010)

Table 7 summarises historical minerals production statistics for selected minerals produced by medium and small scale miners during the year 2005 through 2010 as reported by Zonal and Resident Mines Offices.

Table 7: Minerals Produced by Small Scale Miners (2005 - 2010) Mineral Unit 2005 2006 2007 2008 2009 2010 TOTAL

Gold Weight (Kg) 1,019.55 5,163.99 4,754.86 4,467.74 5,228.11 2,201.47 22,835.72 Value (USD) 13,802,570.80 95,136,100.99 113,966,372.25 104,136,437.23 123,703,657.67 71,345,177.92 522,090,316.86

Diamond Weight (Carat) 24,498.05 84,930.86 70,278.97 87,321.44 46,435.53 28,901.51 342,366.36 Value (USD) 3,100,704.69 5,396,273.85 6,814,623.09 6,309,293.95 5,759,160.96 4,755,561.52 32,135,618.06

Tanzanite Weight (g) 1,306,655.22 5,504,055.46 6,299,513.89 5,030,610.74 5,012,484.39 5,702,857.75 28,856,177.45 Value (USD) 34,016,728.35 20,757,607.91 29,200,927.31 22,103,371.28 9,091,121.20 17,777,725.67 132,947,481.72

Limestone Weight (g) 102,100.00 109,086.40 164,543.90 207,922.45 106,185.00 120,000.00 809,837.75 Value (TZS) 6,977,547.15 7,455,000.00 10,908,400.00 15,941,900.00 19,363,500.00 21,882,751.80 82,529,098.95

Galena Weight (Kg) - - 83.40 248.50 20.50 109.00 461.40 Value (TZS) - - 37,503,488.00 133,000,000.00 1,650,000.00 12,450,500.00 184,603,988.00

Coal Weight (Tonne) - - 2,376.30 1,316.70 - - 3,692.30 Value (TZS) - - 68,912,555.00 38,756,612.00 - - 107,669,167.00

Gypsum Weight (Tonne) 7,401.86 5,500.00 - 2,120.00 1,820.00 - 16,841.86 Value (TZS) 218,361,396 162,254,840 - 62,541,865.60 64,676,000.00 - 507,834,101.58

Zircon Weight (Tonne) 6,732.32 7,847.43 - - - 14,579.75 Value (TZS) 1,307,875.00 1,955,000.00 - - - 3,262,875.00

Tin Weight (Tonne) 2,035.00 2,060.00 1,220.50 - 1,000.00 - 6,315.50 Value (TZS) - - 9,463,000.00 - 5,853,540.00 - 15,316,540.00

Kaolin Weight (Tonne) - - 1,015.00 28,896.00 18,624.00 - 48,535.00 Value (TZS) - - 2,500,000.00 28,896,000.00 18,624,000.00 - 50,020,000.00

Copper Weight (Tonne) - - - 750,000.00 - 3,000,000.00 3,750,000.00 Value (USD) - - - 22,500.00 - 150,000.00 172,500.00

Source: Zonal and Resident Mines Offices.


3.2 MINERAL ROYALTY PAYMENTS FOR 2011

Total calculated provisional royalty1

Figure 3: Monthly Actual Provisional Royalty Payments by Major Mines – 2011

for 2011 from the major mines increased by 42.4% from USD 41.29 million in 2010 to USD 58.80 million in 2011. Actual provisional royalty paid during the period amounted to USD 57.61 million at an average of USD 4.8 million per month.

Figure 4: Calculated Provisional Royalty by Mine – 2011

1 Calculations of provisional royalty are based on 3% of 90% of gross value of gold, silver and copper exported by major gold mines in 2011. Royalty for Tanzanite and diamonds is computed at 5% of export value.


Figure 5: Total Royalty Paid by Major Gold Mines (1998 - 2010)

3.2.1 Gold Production Performance Snapshot

• GGM was the leading gold producer in 2011 with 34.2% of total production, while TGM was the least gold producer with 6.6% of total production.

• Tanzania produced 1.3 million troy ounces of gold in 2011, and was therefore the fourth-largest gold-producing country in Africa after South Africa (which produced 6 million troy ounces), Ghana (which produced 3 million troy ounces), and Mali (which produced 1.4 million troy ounces (Figure 6).

Figure 6: Africa’s Top Four Gold Producing Countries (2008 – 2011)

Sources: World Gold Council and South African Chamber of Mines.


3.2.2 Historical Data on Mineral Production and Export

Figure 7 summarizes actual and projected gold production by major mines for the period of 2001 through 2011.

Figure 7: Actual versus Projected Gold Production by Major Gold Mines (2001 – 2011)

Table 8 summarizes historical mineral exports by major mines from 2005 to 2011.

Table 8: Historical Mineral Exports by Major Mines (2005 - 2011)

Mineral 2005 2006 2007 2008 2009 2010 2011

Gold (toz) 1,170,500 1,308,600 1,127,700 1,020,200 1,114,775 1,214,594 1,293,671

Silver (toz) 381,688 541,488 431,124 343,499 399,178 406,235 456,080

Copper (lb) 7,618,921 8,631,835 5,548,485 5,388,703 7,093,375 10,806,687 13,836,311

Tanzanite (carat) 1,460,075 1,230,600 1,700,134 2,203,162 1,910,000 2,200,000 1,569,543

Diamonds (carat) 190,384 189,396 220,209 134,000 133,526 43,264 23,922


• Gold output has been gradually increasing from year 2008 through 2011. This increase is partly due to commencement of gold production at BZGM in 2009 and increased gold production at GGM in 2010 and 2011.

Basic Facts from Figure 7 and Table 7

• Actual gold production for 2011 was below projection mainly due to low production at BZGM and BGM resulting from electric power outages in the country and SAG mill motor failure at BZGM. GGM also experienced lower production than projected due to SAG mill malfunction.

• Diamonds production at WDL slumped from 43,264 carats achieved in 2010 to 18,387 carats in 2011 due to partial suspension of production on 1st April, 2010 to allow for pit expansion and plant refurbishment. WDL suspended production completely on 18th August, 2011 due to shortage of water for process plant operations. Production is expected to resume in January, 2012.

• Tanzanite output at TTM decreased to 1.57 million carats in 2011 as compared to 2.20 million carats produced in 2010.

Figure 8 summarizes historical gold production by the six major gold mines for the period of 1999 through 2011.

Figure 8: Historical Gold Production by Six Major Gold Mines (1999 – 2011)


Figure 9 summarizes historical gold production and export value by the six major gold mines for the period of 2001 through 2011.

Figure 9: Historical Gold Export Quantity versus Value (2001 - 2011)

Figure 10 summarizes historical copper production and export value by BGM and BZGM for the period of 2001 through 2011. Copper export value rose sharply from USD 36.4 million in 2010 to USD 53.5 million in 2011 largely due to increased industrial demand for copper which triggered sharp commodity price increase in the world market.

Figure 10: Historical Copper Export Quantity versus Value (2001 - 2011)


3.2.3 Historical Prices of Gold, Silver, Copper and Diamond (2001 - 2011)

Annual average gold price increased by 28.4% from USD 1,223.98 per troy ounce for 2010 to USD 1,571.28 per troy ounce for 2011 (Figure 11). This increase was mainly due to high demand of gold coupled with increasing global macroeconomic, currency and geopolitical risks.

Figure 11: Gold Price Trends (2001 - 2011)

Source: LME Official Gold Prices in USD/troy oz. Annual average silver price increased by 74.5% from USD 20.138 per troy ounce for 2010 to USD 35.145 per troy ounce for 2011 (Figure 12). The increase was due to increased industrial demand and global decline in silver production.

Figure 12: Silver Price Trends (2001 - 2011)

Source: LME Official Silver Prices in USD/troy oz.


Annual average copper price increased by 17.07% from USD 3.42 per pound in 2010 to USD 4 per pound in 2011 (Figure 13). The increase was mainly due to high industrial and construction demand, mainly in China, India and Brazil.

Figure 13: Copper Price Trends (2001 - 2011)

Source: LME Official Copper Prices in USD/LB (Cash Seller) Diamond prices increased during January to June 2011, but declined sharply during July - December, 2011 due to enlarged uncertainty caused by the global economic crisis, volatile financial, currency and commodity markets, as well as continued political instability in the Middle East. Table 9 summarizes diamond price index for the first and second half of 2011. Table 9: Diamond Prices Index 2011

0.3 carat 0.5 carat 1.00 carat 3.00 carat 5.00 carat

Year 2011 -1.0% 20.2% 19.3% 18.3% 6.4%

1st Half of 2011 25.4% 37.8% 34.0% 31.4% 18.0%

2nd Half of 2011 -21.0% -12.7% -11.0% -9.9% -9.9% Source: RapNet Diamond Index (RAPI)


3.2.4 Historical Royalty Payments by Major Mines (2001 - 2011)

Figure 14 shows actual royalty paid by the major mines to the Government from year 2001 to 2011.

Figure 14: Royalty Paid by Major Gold Mines (2001 - 2011)

Actual royalty paid to the Government by the major mines has been increasing from year 2001 through 2011 mainly due to the increase of mineral prices.

Table 10: Historical Taxes Paid by Large Scale Mining Entities (1999 – 2011, Billion TZS)

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOTAL

PAYE 1.7 7.3 12.4 16.6 18.5 11.5 17.4 11.8 22.3 44.0 52.6 49.9 90.3 356.3

SDL 0.6 1.6 1.9 2.6 2.4 3.4 11.8 2.5 3.8 7.5 9.8 11.3 19.5 78.7

WHT 0.5 8.8 8.3 8.4 7.9 7.3 10.0 3.3 3.3 5.6 7.9 13.1 12.3 96.7

VAT - - - - - - - 1.3 3.2 4.0 4.7 4.7 25.8 43.7

Stamp Duty 0.0 0.2 0.2 0.3 0.0 0.1 0.2 0.1 0.0 0.0 0.0 0.2 0.004 1.3

Import Duty 0.3 0.6 0.4 2.2 1.5 3.3 6.4 - - - - - - 14.7

Excise Duty - - - - - - - 0.1 0.1 2.1 2.1 - - 4.4

Corporate Tax - - - - 1.7 3.3 3.8 3.1 1.6 4.0 4.5 21.3 50.9 94.2

TOTAL 3.1 18.5 23.2 30.1 31.9 28.8 49.6 22.2 34.2 67.3 81.6 100.5 198.8 690.0

Table 11: Procurement of Goods and Services by Large Scale Miners (2001 – 2011, Million TZS)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOTAL

Foreign 75.47 111.90 215.73 102.73 336.08 217.24 467.88 649.78 619.90 546.17 991.29 4,334.17

Local 109.51 125.45 186.15 130.48 237.97 349.60 547.82 554.93 551.77 337.92 379.57 3,511.17

TOTAL 184.98 237.35 401.88 233.21 574.05 566.84 1,015.7 1,204.71 1,171.67 884.09 1,370.86 7,845.34


Figure 15: Composition of Taxes Paid by Large Scale Mining Entities (2011) in TZS Billion

Table 12: Tanzania Mineral Reserves (Selected Minerals and Projects)

Mine/ Project Owner Location Mineral Mineral Resources/ Ore Reserves

Remarks

1 Bulyanhulu Gold Mine

African Barrick Gold (100%)

Kahama Gold 11 million ounces

Proven & Probable

2 Buzwagi Gold Mine


Kahama Gold 2.9 million ounces

Proven & Probable

3 Geita Gold Mine AngloGold Ashanti Limited (100%)

Geita Gold 8.73 million ounces

Indicated

4 Golden Pride Mine

Resolute Mining Limited (100%)

Nzega Gold 0.16 million ounces

Proven & Probable

5 North Mara Gold Mine


Tarime Gold 2.8 million ounces

Proven & Probable

6 Tulawaka Gold Mine

African Barrick Gold (70%) & Northern Mining Exploration Ltd (30%)

Biharamulo Gold 67,000 troy ounces

Proven & Probable

7 Golden Ridge Gold Project


Shinyanga Gold 0.53 million ounces

Indicated

8 Nyanzaga Gold Project


Sengerema Gold 0.3 million ounces

Indicated


Mine/ Project Owner Location Mineral Mineral Resources/ Ore Reserves

Remarks

9 Handeni Gold Project

Canaco Resources Inc. (100%)

Handeni Gold 3.94 million ounces

Measured & Indicated

10 Chunya Gold Project (New Luika Gold Mine)

Shanta Mining Limited (100%)

Chunya Gold 0.36 million ounces

Indicated

11 Buckreef Gold Project

Tanzania Royalty (55%) & STAMICO (45%)

Geita Gold 0.95 million ounces

Indicated

12 TanzaniteOne Mine

TanzaniteOne Mining Limited (100%)

Simanjiro Tanzanite 63 – 83 million carats

Indicated

13 Williamson Diamonds Mine

Petra Diamonds Ltd. (75%) & URT (25%)

Kishapu Diamonds 4.6 million carats Measured & Indicated

14 Kabanga Nickel Project

Barrick Gold Corp. (50%) & Xstrata Plc (50%)

Ngara Nickel 1.16 billion pounds

Inferred

15

Dutwa Nickel Project

African Eagle Resources Plc. (90%)

Mwanza

Nickel 751.8 million pounds

Inferred

Cobalt 23.2 million pounds

Inferred

16 Mkuju River Project

Uranium One Inc. (100%)

Namtumbo Uranium 28.5 million pounds

Indicated

17 Manyoni Uranium Project

Uranex (100%) Bahi/ Manyoni

Uranium 17.64 million pounds

Inferred

18 Mchuchuma Coal Mine

National Development Corporation

Ludewa Coal 125.3 million tons

Proven

19 Mbalawala Coal Project/ Ngaka Basin

Intra Energy Corporation (70%) & NDC (30%)

Ruvuma Coal 40.2 million tons Proven

20 Liganga Iron Ore Project

National Development Corporation

Ludewa Iron Ore 45 million tons Proven


Table 13: Status of Employment in the Major Gold Mines – Number of Locals versus Expatriates

Year Type of Employee

BGM BZGM GGM GPM NMGM TGM TTM WDL Grand Total

2005

Expat. - - 108 16 - - 21 12 N/A

Locals - - 1,801 276 - - 612 671 N/A

Total - - 1,909 292 - - 633 683 N/A

2006

Expat. 177 - 116 15 - 51 24 12 N/A

Locals 2,042 - 1,985 282 - 248 694 725 N/A

Total 2,219 - 2,101 297 - 299 718 737 N/A

2007

Expat. 180 - 114 15 83 32 25 11 460

Locals 1,787 - 2,338 302 928 283 644 717 6,999

Total 1,967 - 2,452 317 1,011 315 669 728 7,459

2008

Expat. 140 58 129 34 129 41 26 10 567

Locals 1,687 569 1,964 225 978 325 714 677 7,139

Total 1,827 627 2,093 259 1,107 366 740 687 7,706

2009

Expat. 185 49 121 27 127 41 29 4 583

Locals 2,012 671 1,814 238 621 338 613 610 6,917

Total 2,197 720 1,935 265 748 379 642 614 7,500

2010

Expat. 181 105 86 34 138 65 33 8 650

Local 2,266 746 1,792 266 703 356 648 584 7,361

Total 2,447 851 1,878 300 841 421 681 592 8,011

2011

Expat. 195 132 82 37 157 75 32 8 718

Local 2,430 875 1,601 297 876 473 643 558 7,753

Total 2,625 1,007 1,683 334 1,033 548 675 566 8,471


4.0 FINANCIAL AUDIT AND TAX REVIEW

One of the essential functions of TMAA is to audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the Tanzania Revenue Authority (TRA) and other relevant authorities.

4.1 FINANCIAL AUDIT AND TAX REVIEW RESULTS FOR 2011

Audit of revenue generated, capital investment and operating expenditure during the year 2011 was conducted on GGML, TOML, BGML, PML (BZGM and TGM), NMGML, RTL, WDL, Nyanza Mines (T) Limited, Marmo E. Granito, Tanga Cement Company Limited, ARM Tanzania Limited, Mineral Extraction Technologies Ltd, Mbabani Minerals Ltd and Aurum Africa Ltd (holder of Dealer’s Licence). A number of queries were raised during the audit and communicated to the respective auditees for responses. TMAA received responses from the respective auditees.

Unresolved queries emanated from the discussions were forwarded to TRA for consideration and action. Most of the queries were common from one entity to another and are summarized in a combined form in Table 14.

Table 14: Unresolved Queries Communicated to TRA for Consideration and Action

Query Total Amount

(USD) 1. Unqualified capital and operating expenditure deductions 335,854,729 2. Wrongly claimed hedge financial liabilities and losses 183,645,187 3. Non-withholding of taxes from payments of technical services,

insurance premium, management fees and royalty for former mineral rights

168,102,142

4. Over-claimed additional capital allowance 145,475,786 5. Disallowable items claimed as allowable expenses 34,391,948 6. Understated mineral sales 18,154,991


4.2 ACHIEVEMENTS RESULTING FROM TMAA’S FINANCIAL AUDITS

Table 15 summarizes achievements made as a result of TMAA’s financial audits and tax reviews conducted on mining entities in collaboration with TRA. Table 15: Achievements Resulting from TMAA Financial Audits

Issue Achievement 1. Corporate

Tax Payments

• RTL paid a total of TZS 33.9 billion as corporate tax for the period up to June 2011. In September and December, 2011 RTL made payments of corporate tax amounting to TZS 14.6 billion and TZS 14.1 billion respectively. Cumulatively, the company has paid corporate tax amounting to TZS 62.6 billion.

• GGML paid corporate tax amounting to TZS 3.2 billion in 2009. Another payment of corporate tax was made in November, 2011 amounting to TZS 9.5 billion. The entity is expected to pay about USD 50 million as corporate tax for year 2011/2012.

• PML is expected to pay USD 32 million as corporate tax due for TGM for the financial year 2008 as a result of ring fencing BZGM capital expenditure to year 2009 in which the mine started generating income. This is a result of TMAA audits in collaboration with TRA on the respective mines for the financial years 2007 through 2009.

2. Royalty Payments

• WDL paid royalty amounting to TZS 19.8 million which was not paid to the Government by the entity for the period of 2004 through 2008.

• TOL Gases Limited has agreed to pay royalty of TZS 94.15 million which was not paid to the Government by the entity for the period of 2006 through 2010.

3. Fuel Levy • Four gold mines owned by African Barrick Gold (ABG) have paid fuel levy amounting to USD 2 million which was not settled up to 2010 as follows: (BGM – USD 200,000; NMGM – USD 1 million;


Issue Achievement TGM – USD 200,000 and BZGM – USD 600,000). The entities made the respective payments following audit queries raised by TMAA which disclosed non-payment of fuel levy for the stipulated amounts.

4. Withholding Tax Payments

• RTL has settled the unpaid withholding tax amounting to TZS 223.4 million as a result of its failure to withhold tax from payments made to technical service providers for the financial year 2008/2009.

5. PAYE • WDL has settled the unpaid PAYE amounting to TZS 36.6 million as a result of its failure to pay the tax for financial year 2004 through 2008.

6. Service Levy

• WDL has settled the unpaid Service Levy amounting to TZS 80.3 million as a result of its failure to pay the levy to Kishapu District Council for year 2008.

7. Record Keeping

• Regular financial audits conducted by TMAA have enhanced financial record keeping by major mining companies as well as self-compliance.


5.0 ENVIRONMENTAL MONITORING AND AUDITING

Environmental monitoring and auditing activities conducted by TMAA in mining areas aims at ensuring sound environmental management during life of mine and after closure. TMAA monitors and audits environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.

Environmental monitoring and auditing activities conducted during 2011 involved auditing of large, medium and small scale mining areas. Mines audited included 5 large scale mines (GGM, BGM, BZGM, TGM and TTM), 21 medium scale mines and 17 small scale mining areas.

Most of the noted shortfalls were common from one mine to another as summarized in Tables 16, 17 and 18. The noted shortfalls were communicated to the respective mines for consideration and corrective actions. Most of them have been addressed by the responsible miners.

Table 16: Common Environmental Shortfalls Noted on Large Scale Mines

Common Noted Shortfall Status 1. Financial guarantee for rehabilitation and

mine closure for six major gold mines not posted to the Government. The liability amounted to USD 201 million as of June, 2011.

Negotiations are underway for signing agreements between the Government and license holders on bond and financial guarantee as per Regulation 207 of the Mining (Safety, Occupational Health and Environmental Protection) Regulations, 2010.

2. High levels of Weak Acid Dissociable (WAD) Cyanide disposed on the Tailings Storage Facility (TSF). There are cases of up to 678

Various methods have been employed to reduce WAD Cyanide levels including: installation of cyanide destruct plant and dilution system. Furthermore, special equipment and staff are being deployed to scare birds and


Common Noted Shortfall Status ppm linked to wildlife mortalities on TSF.

wildlife away from the TSF.

3. Inadequate management of Acid Rock Drainage (ARD) resulting into contamination of surface and ground water.

Management measures for ARD are being implemented, including further studies to see the impact to surface and ground water.

4. Inadequate solid waste management.

Ongoing actions have been taken by mine operators to rectify this issue.

5. Inadequate chemicals and hydrocarbons management.

Action plans have been put in place to rectify this issue.

6. Unlined trenches and ponds which receive process water.

Action plans have been put in place to rectify the shortfall.

7. Use of process water from TSF for dust suppression.


8. Inadequate budget allocation for environmental management activities.

Some entities have started setting aside sufficient funds for progressive rehabilitation and other environmental management activities.


Table 17: Common Environmental Shortfalls Noted on Medium Scale Mines

Common Noted Shortfall Status 1. Absence of necessary documentation for

environmental management such as Environmental Impact Statement (EIS), Environmental Management Plan (EMP) and Mine Closure Plans.

Responsible mining entities are taking corrective actions to address the noted shortfalls.

2. Absence of environmental budget for progressive rehabilitation.

Corrective actions are underway.

3. Absence of financial provision for decommissioning and restoration liability.

Corrective actions are underway.

4. Absence of environmental expert(s). Some entities have employed environmental experts to oversee environmental management activities.

5. Air pollution resulting from excessive dust generated during crushing operations.


Table 18: Common Environmental Shortfalls Noted on Small Scale Mines

Common Noted Shortfall Status

1. Absence of Environmental Protection Plans (EPP). Work-in-progress for rectification.

2. Absence of permit for importation, transportation, storage and usage of cyanide in vat leaching plants. This may lead to mishandling of cyanide which is highly toxic.

Some miners have started to comply.

3. Deforestation. Awareness is being created to address


Common Noted Shortfall Status this shortfall.

4. Poor storage and handling of cyanide in vat leaching operations.

Corrective measures are being taken by the responsible miners.

5. Improper disposal of garbage and solid waste.

Awareness is being created to address this shortfall.

6. Uncontrolled mining activities and improper disposal of tailings and waste rocks.

Work-in-progress for rectification.

7. Mercury pollution as a result of poor handling and usage of the chemical in amalgamation processes.

Awareness is being created to address this shortfall.

8. Abandonment of pits and trenches which endangers humans and animals.

Backfilling and/or fencing of useless pits and trenches is ongoing.


6.0 CHALLENGES FACED IN 2011

It is vividly acceptable to state that the Agency has made tremendous achievements from its operations for the year under review. However, the year 2011 has not been without challenges. The following are the key challenges which hampered implementation of planned activities:

1. Little awareness by medium and small scale miners on TMAA’s roles and functions.

2. Inadequate human and financial resources to comprehensively monitor and audit all large, medium and small scale mining operations in the country.

3. Delays by some Government bodies in implementing audit recommendations by TMAA aimed at maximizing Government revenue from mining industry and ensuring sound environmental management.

4. Poor record keeping by medium and small scale miners which hinders audit effectiveness.


7.0 PERFORMANCE EVALUATION OF WORK DONE BY THE AGENCY IN 2011

Table 19 summarizes status of implementation of planned activities for 2011.

Table 19: Implementation Status of Planned Audit Activities for 2011

Function Key Activities Weight Score To monitor and audit quality and quantity of mineral produced and exported by large, medium and small scale miners.

Stationing full time Auditors at all major mines to witness and record daily production, weighing, packaging and sealing of minerals.

1 1

Taking mineral samples where necessary and performing logistics of shipment of collected samples from the mine sites to the Agency laboratory in Dar es Salaam for assaying.

1 1

Determining quantity and provisional value of minerals produced using Agency’s laboratory results and market prices.

1 1

Conducting mineral royalty reconciliation by comparing mines’ actual royalty payments against payable royalty as computed by TMAA.

1 0.8

To audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to TRA and other relevant authorities.

Verifying the authenticity of revenue declared, capital investment and operating expenditure incurred by the mining companies in the course of mineral production and other supportive operations.

1 0.75

Examining tax accounting of mining companies in order to determine whether accounting methods used were appropriate and in compliance with statutory provisions.

1 1

Consolidating annual financial projections based on future projections received from the large and medium scale miners.

1 0.5

Reviewing annual costs incurred by the mining companies and performing cost–benefit analysis of the activities undertaken by the mines in particular year of expenditure.

1 0.75


Function Key Activities Weight Score To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.

Reviewing Environmental Management Plans (EMPs), rehabilitation programs and reports from mining companies submitted to the relevant Government Institutions.

1 0.75

Conducting physical inspection at mine sites on environmental management activities. 1 0.9

Assessing adequacy of funds allocated for environmental management and progress on the implementation of the environmental programs.

1 1

Compiling environmental audit queries (compliance and financial) and outstanding issues (if any) and communicating the same to the client for response.

1 1

Total 12 10.45 Percentage 100% 88%


8.0 PLANNED ACTIVITIES FOR 2012

Table 20 summarizes the auditing activities planned to be undertaken by TMAA in 2012.

Table 20: Targets for 2012

Function Targets Auditing of quality and quantity of produced and exported minerals for the purpose of determining values and royalty due.

To witness and record production of all minerals at Geita Gold Mine (Geita), Bulyanhulu Gold Mine (Kahama), North Mara Gold Mine (Tarime), Tulawaka Gold Mine (Biharamulo), Golden Pride Mine (Nzega), Buzwagi Gold Mine (Kahama), Williamson Diamonds Mine (Kishapu), TanzaniteOne Tanzanite Mine (Simanjiro), Ngaka Coal Project (Mbinga) and Shanta Gold Mine (Chunya).

To undertake strategic auditing of minerals produced by medium and small scale miners.

To collect samples of gold bearing materials produced by major gold mines and ship the same to the TMAA Laboratory in Dar es Salaam for analysis.

To witness boxing, sealing and shipment for export of all minerals produced by major mines.

To analyze mineral samples collected from the major gold mines so as to be able to accurately determine the quantity of gold, silver and copper contained.

To return the analyzed mineral samples to the respective mines. To dispose laboratory wastes in a sound environmental manner. To store the collected data on production and exports of minerals

in the TMAA database to ensure its correctness, security and easy access.

To analyze the collected data to determine values and payable royalties of the minerals produced and exported.

To collect, analyze and disseminate minerals production and exports data for projecting Government revenue, planning purposes and decision making in the administration of the mining industry.

To counteract minerals smuggling and minerals royalty evasion in collaboration with relevant Government authorities.


Function Targets Auditing of revenue generated, capital investment and operating expenditure of the large and medium mining companies for the purpose of tax assessments.

To verify correctness of quantities and value of minerals produced by large and medium scale mines such as BGM, NMGM, BZGM, TGM, GPM, GGM, WDL, TTM, EL-Hillal Minerals, Nyanza Salt Mine, TOL-Kyejo Project, TAZARA Kongoro Quarry, Mbeya Cement Quarry, Marmo E. Granito, Mineral Extraction Technologies, Twiga Cement Quarry, Mundarara Ruby, Minjingu Phosphates, Arusha Aggregates, Rajiv Construction, Ngaka Coal Project, Nyanza Roadworks Quarry, KASCCO Quarry, Katavi and Kapufi Gold Mine Limited, Shanta Gold Mine and Lukalasi Gold (just to mention a few) for the purpose of determining the amount of royalties due.

To review financial statements, accounts, vouchers and other supporting records of large and medium scale mining companies (as listed above) for the purpose of verifying revenue generated, capital investments and operating costs incurred by the mines in the course of minerals production.

To review tax accounting of large and medium scale mines (as listed above) based on revenues and allowable expenses for the purpose of giving assurance to the Government on correctness of taxable income or declared losses.

To review financial projections and budgets on revenues, capital and operating expenditure of the major mining companies for the purpose of forecasting potential Government revenues from major mines in form of taxes and royalties.

Monitoring and auditing of environmental management, environmental budget and expenditure for the purpose of assessment of compliance to the Environmental Management Plan

To monitor and audit environmental management activities in large scale mines (GPM, WDL, NMGM, GGM, TTM, TGM, BZGM and BGM); medium scale mines (El-Hillal Minerals, Ngaka Coal Project, Nyanza Salt Mines, Minjingu Phosphate, Mbeya Cement Quarry, Twiga Cement Quarry, Kilimanjaro Mines, Tanzanite Africa, Tanga Cement Quarry); and strategic audit on small scale mining operations, so as to ensure compliance as per the Environmental Management Act, Cap.191 and the Mining Act, Cap.123.

To review budgets and actual expenditure of large and medium scale mines (as listed above) incurred on environmental conservation at different phases of mining operations and provisions for restoration of disturbed land upon mine closure.

To verify on site the significant environmental expenditure incurred by large and medium scale mines (as listed above).


Function Targets (EMP). To assess whether enough funds have been set aside by large and

medium scale mines (as listed above) to ensure best practice environmental protection and management to minimize impacts to the environment.

To determine the extent to which the mines’ rehabilitation programs have been implemented.

To monitor and audit environmental management activities in large scale mines (as listed above); and strategic audit on small scale mining operations, so as to ensure compliance as per the Environmental Management Act, Cap.191 and the Mining Act, Cap.123.


9.0 CONCLUSION

Tanzania has witnessed a booming mining industry over the past decade. This kind of growth necessitates comprehensive monitoring and auditing of mining activities.

It is worth to note that apart from royalty being widely known as mineral benefits paid by large scale mining companies to the Government, corporate tax amounting to TZS 50.9 billion was paid to the Government during the year 2011. This amount brings total amount of corporate tax paid by large scale mining companies to TZS 94.2 billion as of December, 2011. In view of the above and remarkable achievements made in 2011, TMAA is fully committed to strive for more achievements in the coming year in order to ensure that the Government maximizes revenue collection from the industry. More corporate tax is expected to be paid by mining companies in the coming year. Given that fact, TMAA will continue to monitor and audit the industry, always acting in the best interest of the Government.

We, all at TMAA, are looking forward for continued collaboration with other relevant Government bodies to ensure that a win-win situation between Government and mining companies is realized for sustainable development of the Country.

The Agency will continue to build capacities in all relevant areas to ensure more effective and comprehensive coverage of monitoring and auditing for the purpose of maximizing Government take.

We Dared, We Succeeded and We are Forging Ahead.

Documents

TMAA Annual Report 2011F