Kinross Gold Corporation has reached an agreement in principle with the Government of Mauritania to enhance the parties’ partnership. The key terms of the agreement, which remain subject to definitive documentation, are the culmination of discussions between Kinross and the government that balance the interests of both parties.
The terms contemplate reasonable commercial trade-offs intended to provide certainty and resolution of outstanding matters.
Under the terms of the agreement, the government will provide Kinross with a 30-year exploitation licence for Tasiast Sud under the 2008 Mining Code and the 2012 Mining Convention, granted with expedited permitting and the possibility of early mining.
The agreement also provides for the reinstatement of the tax exemption on fuel duties and the repayment by the government to Kinross of approximately $40 million in outstanding VAT refunds with an agreed payment schedule through 2025.
Kinross will make a $10 million payment to the government after completion of the definitive agreements to resolve disputed matters related to fuel use and tax exemptions.
In addition, upon receiving the exploitation licence for Tasiast Sud, Kinross will make a $15 million payment to resolve disputed matters arising out of Kinross’ prior application to convert the Tasiast Sud exploration licence into an exploitation licence.
At Tasiast, Kinross has also volunteered to update its existing fixed 3% royalty payable under the 2006 Tasiast Mining Convention. While the 2006 convention remains in full force and effect for Tasiast, the mining laws of Mauritania have evolved in a manner that is consistent with other African mining jurisdictions.
Accordingly, Kinross decided it was appropriate to pay an escalating royalty tied to the price of gold that aligns with the 2008 Mining Code (that replaced the 1999 Mining Code) and the 2012 Mining Convention, and is comparable with other royalties in the region.
A renewed partnership approach for Tasiast Sud contemplates the government receiving a 15% free carried interest in Tasiast Sud with an option to purchase an additional 10% participating interest in the project after additional feasibility work is completed.
The parties have also agreed to enhanced exploration programs at Tasiast Sud and Kinross-held concessions north of the current mining area, to the extent achievable in the current COVID-19 environment.
The exploration program at the large, underexplored and prospective Tasiast Sud property is expected to focus on upgrading existing indicated resource estimates of 193,000 ounces of gold and inferred resource estimates of 817,000 ounces and to potentially enhance the probable reserve estimates of 144,000 ounces.
The government will have the right to nominate two observers to the board of directors of the Kinross subsidiary operating the Tasiast mine and will also have a right to nominate one representative and one observer to the board of the Kinross subsidiary that will operate Tasiast Sud. These changes are intended to enhance transparency and communication between Tasiast and the government.
Kinross president and CEO J Paul Rollinson said: “We are pleased to see further development of a positive foreign investment climate in Mauritania with this successful outcome of our discussions with the government, along with the IFC-led Tasiast project financing signed in December 2019. This balanced agreement will deliver increased stability, position Tasiast for long-term success, and provide enhanced benefits to Mauritania and its people.”
Mauritanian Minister of Petroleum, Mines and Energy Mohamed Abdel Vetah said: “This agreement is a result of positive efforts between the Government of Mauritania and Kinross to amicably resolve our discussions. It also highlights our commitment to providing an attractive investment climate in the country and ensures that the Mauritanian people will receive the appropriate benefits from the Tasiast mine.
"Tasiast is an important contributor to Mauritania and we believe our new agreement will be a positive model for other foreign mining investors. We are pleased that our longstanding and important partnership with Kinross has been strengthened, and we welcome the continued investment in our country and contributions to its socio-economic development.”