TANZANIA MINERALS AUDIT AGENCY VISION to Be a Centre of Excellence in Monitoring and Auditing of Mining Operations

Tanzania Minerals Audit Agency (TMAA) marked five years of its establishment by recording good performances as highlighted in this Annual Report. This has been made possible through the keen leadership of TMAA’s Ministerial Advisory Board combined with diverse skills, experience, commitment, hard work and dedication of staff. In the Annual Report for year 2013 we promised to continue improving our audits with the aim of ensuring maximization of Government revenue from the mineral sector. Following completion of year 2014, it is my sincere pleasure to report the following key outcomes: i. A total of TZS 101.3 billion was collected as royalty from the large scale mines, while total royalty payable decreased by 5.6% to TZS 107.38 billion compared to TZS 113.78 billion realized in year 2013. The decrease was mainly attributed by lower gold prices and closure of one major gold mine. ii. A total of TZS 428.24 billion was collected by the Government as taxes and levies from the large scale mines, up by 29.5% compared to TZS 330.76 collected in year 2013. iii. A total of TZS 4.1 billion was collected as royalty from licensed miners dealing in building materials and industrial minerals as a result of TMAA's strategic audits, up by 141% compared to TZS 1.7 billion realized in year 2013. iv. A total of TZS 2.3 billion was collected as royalty from mineral licensees with elution plants operating in Geita, Mwanza and Mbeya regions as a result of TMAA's strategic audits, up by 135% compared to TZS 981 million realized in year 2013. v. Continued improvements in compliance to environmental management best practices by large, medium and some small scale mines as a result of TMAA environmental audits. ivi. Enhanced curtailing of illegal trading and smuggling of minerals whereby 27 incidents were reported for minerals worth TZS 832 million. In each quarter of year 2014, the Agency recorded good performance results. This was greatly contributed by embracing the ethics and values of the Agency. On the other hand, support from the Ministry of Energy and Minerals was also vital to the Agency’s performance. With deep gratitude and appreciation, I would like to thank all TMAA staff for teamwork and cooperation in implementing the Agency’s Action Plan that ensured that our goals and targets are significantly met. I am convinced that, the aim of the Government to maximize its revenues from the mineral sector is progressively being realized. TMAA shall aggressively continue to monitor and audit large, medium and small scale mining operations in year 2015 so as to ensure that mineral rights holders make the required payments to the Government and conduct their activities in a sound environmental manner. I am optimistic that there will be more successes in year 2015 compared to those achieved in year 2014 as we continue working hard to build excellence across the organization. I trust you will find our 2014 Annual Report informative, and I encourage you to send us your feedback. Mining for Sustainable National Development. ii Table of Contents <a href="#8_0">GLOSSARY OF TERMS...................................................................................... VI </a><a href="#10_0">2014 PERFORMANCE HIGHLIGHTS .................................................................... 1 </a><a href="#16_0">1.0 WORK</a><a href="#16_0"> </a><a href="#16_0">PLANNED FOR YEAR 2014................................................................ 7 </a><a href="#18_0">2.0 AUDIT</a><a href="#18_0"> </a><a href="#18_0">RESULTS AND PERFORMANCE FOR YEAR 2014 .................................. 9 </a> <a href="#18_1">2.1 AUDITING</a><a href="#18_1"> </a><a href="#18_1">OF MINERALS PRODUCED AND EXPORTE</a><a href="#18_1">D</a><a href="#18_1">........................... 9 </a><a href="#19_0">2.1.1 Minerals</a><a href="#19_0"> </a><a href="#19_0">Produced by Major Gold Mines in Year 2014 .......................... 10 </a><a href="#20_0">2.1.2 Minerals</a><a href="#20_0"> </a><a href="#20_0">Exported by Major Gold Mines in Year 201</a><a href="#20_0">4</a><a href="#20_0">........................... 11 </a><a href="#21_0">2.1.3 Auditing</a><a href="#21_0"> </a><a href="#21_0">of Diamonds Production and Exports ..................................... 12 </a><a href="#22_0">2.1.4 Auditing</a><a href="#22_0"> </a><a href="#22_0">of Tanzanite Production and Export</a><a href="#22_0">s</a><a href="#22_0">.</a><a href="#22_0">..................................... 13 </a><a href="#23_0">2.1.5 Auditing</a><a href="#23_0"> </a><a href="#23_0">of Coal Production and Sales ................................................. 14 </a><a href="#23_1">2.1.6 Auditing</a><a href="#23_1"> </a><a href="#23_1">of Building Materials and Industrial Minerals........................... 14 </a><a href="#25_0">2.1.7 Auditing</a><a href="#25_0"> </a><a href="#25_0">of Gold Produced and Sold by Vat Leaching and Elution Plant </a> <a href="#25_0">Operators........................................................................................... 16 </a><a href="#25_1">2.1.8 Mineral</a><a href="#25_1"> </a><a href="#25_1">Royalty Payments for Year 201</a><a href="#25_1">4</a><a href="#25_1">.</a><a href="#25_1">............................................. 16 </a><a href="#26_0">2.1.9 Combating</a><a href="#26_0"> </a><a href="#26_0">Minerals Smuggling and Illegal Tradin</a><a href="#26_0">g</a><a href="#26_0">.</a><a href="#26_0">............................. 17 </a><a href="#27_0">2.2 FINANCIAL</a><a href="#27_0"> </a><a href="#27_0">AUDIT AND TAX REVIEW.................................................. 18 </a><a href="#27_1">2.2.1 Financial</a><a href="#27_1"> </a><a href="#27_1">Audit and Tax Review Results for Year 2014 ........................... 18 </a><a href="#28_0">2.2.2 Achievements</a><a href="#28_0"> </a><a href="#28_0">Resulting from TMAA's Financial Audits ......................... 19 </a><a href="#29_0">2.3 ENVIRONMENTAL</a><a href="#29_0"> </a><a href="#29_0">MONITORING AND AUDITIN</a><a href="#29_0">G</a><a href="#29_0">.</a><a href="#29_0">............................... 20 </a> <a href="#0_0">3.0 HISTORICAL</a><a href="#0_0"> </a><a href="#0_0">DATA ................................................................................... 27 </a><a href="#0_1">4.0 UPDATE</a><a href="#0_1"> </a><a href="#0_1">ON PROSPECTIVE PROJECTS ........................................................ 42 </a> <a href="#0_2">4.1 Mkuju</a><a href="#0_2"> </a><a href="#0_2">River Project .......................................................................... 42 </a><a href="#0_1">4.2 Kabanga</a><a href="#0_1"> </a><a href="#0_1">Nickel Project ..................................................................... 43 </a><a href="#0_1">4.3 Mchuchuma-Liganga</a><a href="#0_1"> </a><a href="#0_1">Project............................................................. 44 </a><a href="#0_3">4.4 Nyanzaga</a><a href="#0_3"> </a><a href="#0_3">Gold Project ..................................................................... 44 </a> <a href="#0_4">5.0 CHALLENGES</a><a href="#0_4"> </a><a href="#0_4">FACED IN YEAR 2014 .......................................................... 45 </a><a href="#0_1">6.0 PLANNED</a><a href="#0_1"> </a><a href="#0_1">ACTIVITIES FOR YEAR 2015........................................................ 46 </a><a href="#0_1">7.0 CONCLUSION..........................................................................................</a><a href="#0_1"> </a><a href="#0_1">49 </a>iii <a href="#12_0">Table 1: Key Achievements in Year 2014................................................................3 </a><a href="#16_1">Table 2: Work Planned for Year 2014 ....................................................................7 </a><a href="#19_1">Table 3: Minerals Produced by Major Gold Mines in Year 2014 .............................10 </a><a href="#20_1">Table 4:</a><a href="#20_1"> </a><a href="#20_1">Quantity and Value of Minerals Exported by Major Gold Mines, 2014 .....11 </a><a href="#22_1">Table 5: Diamonds Production and Export, 201</a><a href="#22_1">4</a><a href="#22_1">.</a><a href="#22_1">.................................................13 </a><a href="#22_2">Table 6: Tanzanite Production and Exports by TTM, 2014 .....................................13 </a><a href="#23_2">Table 7: Coal Production and Sales at Ngaka Coal Mine, 2014 ..............................14 </a><a href="#24_0">Table 8:</a><a href="#24_0"> </a><a href="#24_0">Building Materials and Industrial Minerals Production in Year 2014.........15 </a><a href="#25_2">Table 9:</a><a href="#25_2"> </a><a href="#25_2">Gold Produced at Vat Leaching/ Elution Plants in Mwanza, Geita and </a> <a href="#25_2">Mbeya region</a><a href="#25_2">s</a><a href="#25_2">.</a><a href="#25_2">....................................................................................16 </a><a href="#27_2">Table 10: Unresolved Queries Communicated to TRA (2014) ................................18 </a><a href="#29_1">Table 11: Summary of Environmental Measures Taken by Large and Medium </a> <a href="#29_1">Scale Mines..........................................................................................20 </a><a href="#0_5">Table 12: Common Shortfalls on Environmental Management Noted at Large </a><a href="#0_5">and Medium Scale Mining Operations...................................................23 </a><a href="#0_0">Table 13: Common Shortfalls on Environmental Management Noted at Small </a> <a href="#0_0">Scale Mining, Vat leaching and Elution Plant Sites ..................................25 </a><a href="#0_6">Table 14:</a><a href="#0_6"> </a><a href="#0_6">Profiles of Seven Large Scale Gold Mines ..............................................27 </a><a href="#0_7">Table 15: Tax & Royalty Payments by 9 Major Mines, 1999 </a><a href="#0_7">– </a><a href="#0_7">2014 (TZS Billion).......27 </a><a href="#0_8">Table 16: Historical Minerals Sales by Major Mines (1999 - 2014</a><a href="#0_8">)</a><a href="#0_8">.</a><a href="#0_8">.........................28 </a><a href="#0_9">Table 17: Historical Tax Payments by Major Mines (2006 - 2014, Amounts in </a> <a href="#0_9">TZS Bil.) ...............................................................................................35 </a><a href="#0_1">Table 18: Procurement of Goods and Services by Large Scale Mines </a> <a href="#0_1">(2001 </a><a href="#0_1">– </a><a href="#0_1">2014</a><a href="#0_1">)</a><a href="#0_1">.</a><a href="#0_1">.....................................................................................37 </a><a href="#0_9">Table 19: Tanzania Mineral Reserves for Selected Minerals and Projects </a> <a href="#0_9">(December 2014) .................................................................................38 </a><a href="#0_1">Table 20: Status of Employment in the Major Mines </a><a href="#0_1">– </a><a href="#0_1">Number of Locals versus </a> <a href="#0_1">Expatriates...........................................................................................41 </a><a href="#0_10">Table 21: Planned Activities for Year 2015 ...........................................................46 </a>iv <a href="#20_2">Figure 1:</a><a href="#20_2"> </a><a href="#20_2">Gold Production, 2014 - Contribution by Mine............................11 </a><a href="#21_1">Figure 2:</a><a href="#21_1"> </a><a href="#21_1">Total Gold Export Quantity, 2014 - Contribution by Mine ............12 </a><a href="#0_9">Figure 3:</a><a href="#0_9"> </a><a href="#0_9">Historical Gold Exports by Major Mines (2000- 2014) ..................29 </a><a href="#0_9">Figure 4:</a><a href="#0_9"> </a><a href="#0_9">Total Gold Exports by Large Scale Gold Mines (2001 - 2014)........30 </a><a href="#0_9">Figure 5:</a><a href="#0_9"> </a><a href="#0_9">Historical Minerals Export Value by Major Mines (2000 - 2014) ....31 </a><a href="#0_9">Figure 6:</a><a href="#0_9"> </a><a href="#0_9">Total Gold Export Value by Large Scale Gold Mines (2001 - 2014) 32 </a><a href="#0_9">Figure 7:</a><a href="#0_9"> </a><a href="#0_9">Historical Royalty Payments by Major Mines (2001 - 2014)...........33 </a><a href="#0_1">Figure 8:</a><a href="#0_1"> </a><a href="#0_1">Total Royalty Payments by Large Scale Gold Mines (2000 - 2014</a><a href="#0_1">)</a><a href="#0_1">.34 </a><a href="#0_11">Figure 9:</a><a href="#0_11"> </a><a href="#0_11">Africa's Top Four Gold Producing Countries (2008 </a><a href="#0_11">– </a><a href="#0_11">2014</a><a href="#0_11">)</a><a href="#0_11">.</a><a href="#0_11">.........34 </a><a href="#0_1">Figure 10:</a><a href="#0_1"> </a><a href="#0_1">Gold Price Trends (2001 - 2014) .................................................36 </a><a href="#0_12">Figure 11:</a><a href="#0_12"> </a><a href="#0_12">Silver Price Trends (2000 - 2014</a><a href="#0_12">)</a><a href="#0_12">.................................................36 </a><a href="#0_13">Figure 12:</a><a href="#0_13"> </a><a href="#0_13">Copper Price Trends (2001 - 2014) .............................................36 </a>vABG ARD African Barrick Gold Acid Rock Drainage <ul style="display: flex;"><li style="flex:1">MT </li><li style="flex:1">Metric Ton </li></ul>MW N/A Megawatt ARMZ AtomRedMetZoloto BFS Bag Filter System BGM Bulyanhulu Gold Mine Bil. Billion Not Applicable NCM NDC NEMC Ngaka Coal Mine National Development Corporation National Environment Management Council <ul style="display: flex;"><li style="flex:1">BZGM Buzwagi Gold Mine </li><li style="flex:1">NLGM </li></ul>NMGM PAYE REE New Luika Gold Mine North Mara Gold Mine Pay As You Earn Cap. Crt Chapter Carat <ul style="display: flex;"><li style="flex:1">CT </li><li style="flex:1">Corporate Tax </li></ul>Rare Earth Elements <ul style="display: flex;"><li style="flex:1">Skills Development Levy </li><li style="flex:1">EIA </li><li style="flex:1">Environmental Impact </li></ul>Assessment SDL <ul style="display: flex;"><li style="flex:1">EMP </li><li style="flex:1">Environmental Management </li></ul>Plan <ul style="display: flex;"><li style="flex:1">SHCL </li><li style="flex:1">Sichuan Hongda Company Limited </li></ul>EPP FEED g Environmental Protection Plan Front End Engineering Design Gram STAMICO State Mining Corporation <ul style="display: flex;"><li style="flex:1">TAA </li><li style="flex:1">Tanzania Airports Authority </li></ul>Tulawaka Gold Mine Tanzania Minerals Audit Agency Troy Ounce TGM TMAA toz GGM Geita Gold Mine GGML Geita Gold Mine Limited GPM ISO <ul style="display: flex;"><li style="flex:1">Golden Pride Mine </li><li style="flex:1">TRA </li><li style="flex:1">Tanzania Revenue Authority </li></ul><ul style="display: flex;"><li style="flex:1">Troy Ounce </li><li style="flex:1">International Organization of </li></ul>Standardization troy oz <ul style="display: flex;"><li style="flex:1">ISR </li><li style="flex:1">Insitu Recovery </li><li style="flex:1">TSF </li><li style="flex:1">Tailings Storage Facility </li></ul><ul style="display: flex;"><li style="flex:1">JNIA </li><li style="flex:1">Julius Nyerere International </li></ul>Airport <ul style="display: flex;"><li style="flex:1">TTM </li><li style="flex:1">TanzaniteOne Tanzanite Mine </li></ul><ul style="display: flex;"><li style="flex:1">kg </li><li style="flex:1">Kilogram </li><li style="flex:1">TZS </li><li style="flex:1">Tanzanian Shilling </li></ul><ul style="display: flex;"><li style="flex:1">KIA </li><li style="flex:1">Kilimanjaro International Airport </li><li style="flex:1">UNESCO </li><li style="flex:1">UN Educational, Scientific and Cultural </li></ul>Organization <ul style="display: flex;"><li style="flex:1">lb </li><li style="flex:1">Pound </li><li style="flex:1">USD </li></ul>VAT United States Dollar <ul style="display: flex;"><li style="flex:1">Value Added Tax </li><li style="flex:1">LME </li></ul>MA mg Mil. London Metal Exchange Mwanza Airport Milligram WDL WHT Williamson Diamonds Limited Withholding Tax Million vi This annual report presents data on minerals production and exports collected by the Agency from its physical audits. The report also presents data on royalties and taxes as collected by the Agency from reliable sources. Historical data are also presented and analyzed as collected from different sources as outlined in the report. The information contained in this report has not been subjected to independent verification. No promise, guarantee, representation, warranty or undertaking, expressed or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, reliability, completeness or correctness of the information or opinions contained herein. Neither TMAA, nor its advisors, nor any of its directors, officers or employees or any representatives of such persons, shall have any responsibility or liability whatsoever (in negligence or otherwise) for any loss arising from any use of the information or any other information or material discussed. This report also contains confidential information, by accepting such information, the recipient agrees to keep permanently confidential all information contained herein, and that such information will only be used for the purpose that has been disclosed to TMAA, and will not divulge any such information to any other party without express consent of TMAA. Any reproduction of such information, in whole or in part, is prohibited without the permission of TMAA. vii This report covers results of auditing activities performed by the Tanzania Minerals Audit Agency (TMAA) in the year 2014. It also addresses status of implementation of the audit program and highlights key findings and achievements. Auditing of quantity and quality of minerals from the major mines was comprehensively undertaken by TMAA in year 2014. Gold output (from gold bars and Copper Concentrate products) by the major gold mines in year 2014 was 1.27 million troy ounces, up 1.6% compared to 1.25 million produced in year 2013. Geita Gold Mine (GGM) was the leading gold producer in year 2014 with 37.5% of total production. Total mineral exports in year 2014 from gold bars and Copper Concentrate produced by the seven major gold mines (Biharamulo, Bulyanhulu, Buzwagi, Geita, Golden Pride, New Luika and North Mara) were: 1.27 million troy ounces of gold; 13.8 million pounds of copper; and 0.47 million troy ounces of silver with total worth of USD 1.66 billion, down 7.3% compared to USD 1.79 billion realized in year 2013. The decrease was mainly caused by lower metal prices notably gold during the reporting period. Mineral royalty paid to the Government by the seven major gold mines during the year under review was USD 62.4 million. This represents a decrease of 11.2% compared to USD 70.3 million realized in year 2013. However, the Government is expecting to collect USD 66.1 million in total as royalty for the year 2014 once final royalty is paid. Tanzanite output at TanzaniteOne Tanzanite Mine (TTM) was 3.8 million carats (Grade A – I) in year 2014. The mine sold Tanzanite worth USD 9.66 million, with total royalty paid amounting to USD 268,906. Diamonds output at Williamson Diamonds Limited (WDL) during year 2014 was 203,786 carats, which is up by 28.5% as compared to 158,562 1carats produced in year 2013. The mine exported 226,351 carats of diamonds worth USD 73.6 million in year 2014, compared to 144,354 carats worth USD 39.56 million sold in year 2013. Total provisional royalty paid for the exported diamonds was USD 3.4 million. During year 2014, auditing of revenue generated, capital investment and operating expenditure was conducted on 6 large scale mining entities, 21 medium scale mining entities and 2 mineral dealers. The audits revealed a number of significant queries which would lead to recovery of unpaid revenue on the side of the Government once they are acted upon by the relevant Government bodies. Furthermore, environmental auditing conducted during year 2014 involved large, medium and small scale mining areas. Major mines audited include 6 gold mines, one Tanzanite mine and two diamond mines. Additionally, the Agency audited 27 medium scale mines, 35 small scale mines and 63 vat leaching and elusion processing plants. The audits have attributed to improvements on environmental management practices in the respective mines. On another note, Golden Pride Mine owned by Resolute Mining Tanzania Limited was officially closed after it performed last gold shipment on 12th February, 2014 hence ending its production and export activities. The mine, which was the first major gold mining project developed in Tanzania, was commissioned in year 1998 at a capital cost amounting to USD 48 million. During its mine life of 17 years, the mine produced and sold 2.2 million troy ounces of gold and 207,803 troy ounces of silver, all worth USD 1.5 billion. The mine has so far paid royalty amounting to USD 47.3 million and other Government taxes and levies amounting to TZS 181.4 billion. Table 1 highlights key achievements attained in year 2014 as a result of TMAA audits and administrative initiatives taken by the Agency to improve its performance. 2<ul style="display: flex;"><li style="flex:1">Function </li><li style="flex:1">Achievements </li></ul>To audit revenue 1. Audit of financial records and tax review generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of conducted by TMAA in collaboration with the Tanzania Revenue Authority (TRA) has helped to accelerate and/or increase payments of corporate tax by Geita Gold Mine Limited (GGML) -operating Geita Gold Mine (GGM) and owned by AngloGold Ashanti Limited. GGML paid corporate tax amounting to TZS 97.7 billion for year 2014. Cumulatively, the company has paid corporate tax amounting to TZS 424.1 billion since it started <ul style="display: flex;"><li style="flex:1">paying corporate tax in year 2009. </li><li style="flex:1">gathering </li></ul>taxable information and providing the same to TRA and other relevant authorities. 2. Audit of financial records and tax review conducted by TMAA in year 2014 resulted into collection of unpaid Government revenues as itemized below: i. Withholding tax amounting to TZS 905.5 million which was not paid from payments made to mining technical services providers. ii. Royalty amounting to TZS 761.3 million and empowerment fund amounting to TZS 336.7 million. iii. iv. Skills Development Levy (SDL) amounting to TZS 150.9 million. Service Levy amounting to TZS 2.77 billion. 3. Regular financial audits conducted by TMAA have enhanced financial record keeping and compliance by major mining companies. 3<ul style="display: flex;"><li style="flex:1">Function </li><li style="flex:1">Achievements </li></ul>The audited companies in year 2014 were: Shanta Mining Company Limited (New Luika Gold Mine), Geita Gold Mining Ltd, TanzaniteOne Mining Ltd, Bulyanhulu Gold Mine Ltd, North Mara Gold Mine Ltd, Resolute Tanzania Limited, Tancoal Energy Ltd, TOL Gases Ltd, Minjingu Mines and Fertilizers Ltd, Kioo Limited, Maseyu Quarries Ltd, Gulf Concrete & Cement Products Ltd, Shriram Construction Ltd, Ashraf Company Ltd, Highland Estates Ltd, KASSCO Mining Ltd, Rhino Plant & Equipment Ltd, Nyanza Road Works Ltd, Off Route Technologies Ltd, Marc Contractors Limited, Al Hushoom Investment Limited, Tanzania Sands & Stones Quarries Limited, China Henan International Cooperation Group Co. Ltd, Sino Hydro Corporation, Chongqing Foreign Trade & Economic Cooperation Company Ltd, China Civil <ul style="display: flex;"><li style="flex:1">Engineering Construction Corporation, </li><li style="flex:1">China </li></ul>Communication Construction Company, Charming Gems Ltd and Ruvu Gemstones Ltd.

TANZANIA MINERALS AUDIT AGENCY VISION to Be a Centre of Excellence in Monitoring and Auditing of Mining Operations

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