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Gold Fields says Ghana tax plan may halt projects

Gold Fields Ltd, the fourth-biggest producer of the metal, said Ghana’s plan to raise tariffs on mines and introduce a windfall tax could force it to halt expansion projects worth US$1 billion in the country.

“The tax situation is a big concern,” chief executive Nick Holland said at a presentation in Johannesburg today. “Frankly, unless we can see some flexibility on tax, I don’t see the projects built as proposed, if at all,” he said, referring to plans to expand the Damang and Tarkwa mines.

The West African nation will start charging a 10% windfall tax on mining companies next year and boost their corporate tax rate to 35% from 25%, Finance Minister Kwabena Duffuor told lawmakers in his annual budget statement on Nov 16. Companies will be allowed to write down 20% of capital spending each year for five compared with a current 80% writedown on taxable income in the first year now.

Ghana is the latest African commodity producer planning to benefit from higher international prices for its products.

Guinea and Zimbabwe have sought greater stakes in mining assets while Zambia has doubled royalties on minerals. Gold exports from Ghana in the nine months to September were worth US$3.7 billion, according to the central bank, and Duffuor said the country earned C148.8 million (US$91 million) in royalties in the same period. Gold prices have risen 23% in 2011.

“If the proposed taxes stand as is, it will make these projects very difficult,” Holland said. “There needs to be a better dispensation for us to proceed.” It isn’t sustainable for Gold Fields to be paying higher royalties than other gold producers in the country, he said, declining to elaborate on the changes the company wants.

“There are positive signs that we may get relief on the windfall tax and capital allowance,” Peet van Schalkwyk, executive vice-president for the West African region, said in the presentation.

Gold Fields on April 15 agreed to buy Iamgold Corp’s interests in its Tarkwa and Damang mines in Ghana for US$667 million to increase its output and reserves. The company’s operations in Ghana comprised 26% of Gold Fields’ 900,000oz of output in the third quarter through September.

It plans to spend initial capital of as much as US$600 million to extend its life of mine at Tarkwa by 2015 and add 1Moz of production. The board is expected to approve the Damang Super-pit project, which aims to double production to 450,000oz/y, early in 2012, Van Schalkwyk said.
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