The company posted a net loss of $52.4 million in its first quarter 2016 financial results compared with a profit of $9.2 million a year earlier, after taking tax provisions following recent adverse tax rulings against the gold miner in Tanzania.
The mining giant, which has been involved in several protracted legal wrangles with TRA over tax calculations, said its total provisions for uncertain tax positions in Tanzania now amount to $128 million (close to 300 billion shillings).
Acacia said it made the tax provision following last month's decision by the Tax Revenues Appeals Tribunal in Dar es Salaam to order the miner to pay TRA over $41.25 million (90 billion/-) withholding tax in addition to another separate long-standing tax dispute involving its three mines.
"Following the October 2015 elections, the new Tanzanian government has focused on reducing corruption, wasteful spending and reliance on foreign aid with the aim of self-funding the national budget," Acacia said in a statement yesterday on its results for the first three months of this year (January-March).
"To achieve this, the government has targeted a significant increase in tax revenue and have specifically mandated TRA and the Tanzanian courts to accelerate the handling of a backlog of over 400 cases that are currently sitting in the court system."
Acacia said TRA's tax crackdown increased further in March following the decision of the US government's Millennium Challenge Corporation (MCC) aid agency to withdraw around $470 million of financial assistance in protest at the re-running of the Zanzibar election.
"Other major donor nations are also assessing their funding to Tanzania," said Acacia.
The company, which has three gold-producing mines in Tanzania -- Bulyanhulu, North Mara and Buzwagi -- said due to the uncertain tax environment in the country, it has made further tax provisions for another long-standing dispute with TRA over tax calculations.
"Following the acceleration of court cases, there have been a number of unexpected rulings across a range of sectors. Acacia has experienced several of these adverse court rulings, with one relating to a Court of Appeal decision leading to an increase in its tax provisions," it said.
"As previously disclosed, Acacia has a number of other material tax disputes in various stages of the tax tribunal and court processes. We continue to believe these claims have no merit and will vigorously defend our position in each of them."
The latest Court of Appeal ruling stems from a long-standing dispute over tax calculations at Bulyanhulu from 2000-2006.
The Court of Appeal reviewed seven issues initially raised by TRA in 2012 regarding some historic tax loss carry forwards and ruled in favour of Bulyanhulu by the Tax Appeals Board in 2013.
However, TRA appealed against the ruling and in 2014 the Tax Tribunal reversed the decision for all seven issues.
Acacia in turn appealed against this judgement and the Court of Appeal last month ruled in favour of TRA in five of the seven issues.
"The legal route in Tanzania has now been exhausted. However we are considering our options for the next steps. Acacia is yet to receive a revised tax assessment following the judgement, but has raised further tax provisions of $69.9 million in Q1 2016 in order to address the direct impact of the ruling on Bulyanhulu’s tax loss carry forwardsand the potential impact this may have on the applicability of certain deductions for other years and our other mines," it said.
"The additional tax provisions raised are $35.1 million relating to Bulyanhulu, $30.4 million relating to North Mara and $4.4 million relating to Tulawaka for historical tax assessments from when the mine was in our portfolio."
However, Acacia posted a 3 per cent increase in revenue in the first three months of 2016 to $221 million, compared to Q1 2015, driven by increased gold sales.
The company said it sold 184,181 ounces of gold in Q1 2016, representing a 7 per cent increase from the previous year. Gold production was up 5 per cent to 190,210 ounces.
President Magufuli in February released 12.5 billion/- state funding to the Judiciary and ordered the country's courts to speed up a backlog of tax-related cases worth over 1 trillion/-.
The chairman of the Tanzania Chamber of Minerals and Energy (TCME), Ambassador Ami Mpungwe, has defended mining companies operating in the country against allegations of largescale tax evasion.
Multinational mining enterprises in Tanzania have for years been suspected of engaging in substantial tax dodging, causing the government to get less than its fair share of revenues from the lucrative sector.
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