Energy: Tanzania backflips on coal royalties; Intra Energy now has to charge more and earlier
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Tanzania has been notorious for its treatment of mining companies since its 2017 legislative changes which included potential renegotiation of agreements and greater government stakes in mining projects.
The government told coal miner Intra Energy (ASX:IEC) it needs to change how it charges royalties. This was despite telling Intra Energy only two months ago it was following the law correctly.
Intra Energy has paid royalties since it began in 2011 but it is usually paid at the sales point. But now it must apply the royalty on the transportation of coal to the final destination.
The ministry has ordered the company to implement this by September 15 or else it will not let trucks leave the sales point.
Intra Energy told shareholders it would have to sell through dealers since it does not own its trucks. This will increase its costs.
The royalty will be 3 per cent plus a 1 per cent clearance and inspection fee. On top of this, Intra Energy must pay 6 US cents (9c) per tonne per kilometre for domestic customers and 8 US cents per tonne for international customers.
The company estimates the price of coal will increase by $US2.94 per tonne for the largest domestic customers. Meanwhile, exporting customers will face a $US8.23 per tonne hike.
Intra Energy said it intended to discuss the situation with the government and customers to find a solution.
Shares are unchanged today, but the price has dropped in recent months, from as high as 3c back in April. The Tanzanian government run National Development Corporation owns 30 per cent of Intra Energy’s Tanzanian subsidiary and Intra Energy own the remaining 70 per cent.
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