An Anglo-Australian gold miner has agreed to pay £127million to the Mali government to settle a tax dispute that led to the arrest of the firm’s British boss.
Resolute Mining has handed over £63million in the first step towards securing the release of its chief executive Terry Holohan and two other senior managers, who are being detained.
Shares in Resolute have tumbled more than 40 per cent since news of Holohan’s arrest was made public last week, wiping out all the stock’s gains from the recent rise in gold prices.
The arrests came amid rising tensions between Mali and Western mining firms. A military junta, which took control of the West African nation in a coup in 2020, is trying to extract more income from the sector.
Detained: Resolute Mining has handed over £63m in the first step towards securing the release of chief exec Terry Holohan (pictured) and two senior managers
Mali is one of Africa’s top gold producers but is also one of the poorest countries in the world. Last year the government rewrote Mali’s mining code to channel more revenues into state coffers.
Authorities began renegotiating existing mining contracts under the new law this summer – and the detention of Western executives has started to become a pattern.
Under the updated rules, the state can take a stake of up to 30 per cent in mining projects and an extra 5 per cent later to be given to private Malian investors. Previously the government’s ownership was limited to 20 per cent.
Meanwhile, certain levy exemptions have been abolished and firms are being asked to repay back taxes.
Many smaller miners have already signed the updated code but bigger players, such as Sydney and London-listed Resolute and Canadian rival Barrick Gold, are yet to complete the negotiations.
Holohan was in Mali for talks with mining and tax authorities when he was ‘unexpectedly’ detained on November 8.
The British businessman joined Resolute in 2021 as chief operating officer before being promoted to chief executive the following year, taking over when Stuart Gale abruptly quit.
A mining industry veteran, Holohan had previously worked in Africa for 30 years followed by a decade spent in Asia.
He had flown to Mali’s capital Bamako to discuss claims made against Resolute related to taxes, customer levies, maintenance, and management of offshore accounts. The company said the claims were ‘unsubstantiated’.
Four Barrick executives were detained in the country for four days in September. The New York-listed group was forced to pay £67million related to its ongoing negotiations with the Mali government in October.
The authorities have demanded a total of £277million in back taxes, the Financial Times reported.
Russ Mould, investment director at broker AJ Bell, said: ‘Governments have been trying to increase their share of the value of metals and minerals taken out of mines by companies since time immemorial, so this is not a new trend by any means, even if events in Mali place a fresh focus upon it.’
Concern: Shares in Resolute have tumbled more than 40% since news of Holohan’s arrest was made public last week, wiping out all the stock’s gains from the recent rise in gold prices
Resolute, which previously said the tax claims were unsubstantiated, yesterday said that its agreement ‘sets the framework for further detailed discussions with the government regarding the long-term future of the operations in Mali, including migration of the company’s assets in Mali to the 2023 Mining Code and maintaining the safety of the company’s employees’.
The first £63million paid by Resolute will come from existing cash reserves, with the rest of the money to be handed over in the coming months.
The total amount that Resolute has agreed to transfer is more than the entirety of the company’s cash reserves. As of October 31, the firm had a net cash balance of £124million.
Resolute said the detained executives ‘remain safe and well and continue to receive support on the ground from the UK and international embassies and consulates’.
‘The company notes that operations on site continue as normal and have not been impacted,’ a spokesman said yesterday.
Resolute’s gold mine in Syama – 186 miles south east of Bamako – is the firm’s largest asset and contributed nearly two-thirds of its annual sales last year.
The company owns an 80 per cent stake in the project, with the rest owned by the Mali government.
Shares in Resolute slipped 5.3 per cent, or 1.1p, to 19.7p yesterday.
DIY INVESTING PLATFORMS
Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.