TMAA Annual Report 2011F

Message from the Chief Executive Officer It is a privilege to present the 2011 Tanzania Minerals Audit Agency (TMAA)
Annual Report. During the last 12 months, we continually focused our attention in improving our performance, which provided more significant achievements as highlighted in this report. The year 2011 has not been without challenges, all of which have been dealt with decisively by the Agency with the full support of the Minister, Permanent Secretary, TMAA Ministerial Advisory Board and other stakeholders. Indeed, it is the honor and privilege to be part of TMAA that is committed to ensuring that the Government maximizes its benefits from the mineral sector through effective monitoring and auditing of large, medium and small-scale mining operations. I particularly want to thank all TMAA staff for their hard work, integrity, dedication, determination and innovation that allowed us to turn our vision into reality. Moreover, I would like to thank the TMAA Ministerial Advisory Board for their commitment, expertise, knowledge and experience for the advice offered during the year under review. Our ability to fulfill TMAA roles and functions has expanded to auditing large, medium and small-scale mines. It is worth to note that in 2011, our financial audits on mining entities in collaboration with the Tanzania Revenue Authority (TRA) has succeeded in accelerating payments of corporate tax by Geita Gold Mine owned by AngloGold Ashanti Limited and Golden Pride Mine owned by Resolute Tanzania Limited. Also, our environmental audits have triggered improvements in compliance to environmental management best practices by large and medium scale mines. As we go into 2012, I remain optimistic of attaining more success through the Agencys planned activities for the betterment of the Nation. The success of the Agency in 2011 is attributed to joint efforts by everybody within TMAA, and it is my hope that the Agency will go from strength to strength with its
TMAA Annual Report, 2011
employees continued commitment. I therefore look forward to continued TMAA exemplary achievements in the years to come. We, at TMAA, are all looking forward to ensure that the Government maximizes benefits from the mining industry as part of implementing Tanzania Development Vision 2025.
We Dared, We Succeeded and We are Forging Ahead.
Eng. Paul M. Masanja CHIEF EXECUTIVE OFFICER
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Table of Contents
GLOSSARY OF TERMS .....................................................................................................................vii 2011 PERFORMANCE HIGHLIGHTS ................................................................................................. 1 1.0 MANAGEMENT OVERVIEW .................................................................................................... 6 2.0 TARGETS FOR 2011 ................................................................................................................... 8 3.0 AUDIT RESULTS AND PERFORMANCE FOR 2011 ................................................................. 9 3.1 Auditing of Minerals Produced and Exported................................................................. 9 3.1.1 Minerals Produced by Major Gold Mines in 2011 .......................................................... 9 3.1.2 Minerals Exported by Major Gold Mines in 2011.......................................................... 10 3.1.3 Auditing of Diamonds Production and Exports ............................................................. 11 3.1.4 Auditing of Tanzanite Production and Exports ............................................................. 12 3.1.5 Auditing of Building Materials in the Eastern Zone ..................................................... 13 3.1.6 Auditing of Coal Production at Ngaka Coal Project ..................................................... 13 3.1.7 Historical Minerals Production from Medium and Small Scale Mines (2005 - 2010) .............................................................................................................................................. 14 3.2 Mineral Royalty Payments for 2011 ..............................................................................15 3.2.1 Gold Production Performance Snapshot ....................................................................... 16 3.2.2 Historical Data on Mineral Production and Export ...................................................... 17 3.2.3 Historical Prices of Gold, Silver, Copper and Diamond (2001 - 2011) ........................ 20 3.2.4 Historical Royalty Payments by Major Mines (2001 - 2011) ........................................ 22 4.0 FINANCIAL AUDIT AND TAX REVIEW...................................................................................27 4.1 4.2 Financial Audit and Tax Review Results for 2011 .......................................................27 Achievements Resulting from TMAAs Financial Audits ...........................................28
5.0 ENVIRONMENTAL MONITORING AND AUDITING ..............................................................30 6.0 CHALLENGES FACED IN 2011 .................................................................................................34 7.0 PERFORMANCE EVALUATION OF WORK DONE BY THE AGENCY IN 2011 .......................35 8.0 PLANNED ACTIVITIES FOR 2012 ............................................................................................37 9.0 CONCLUSION ...........................................................................................................................40
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List of Tables Table 1: Key Achievements in 2011 ........................................................................................................ 3 Table 2: Targets for 2011 .......................................................................................................................... 8 Table 3: Minerals Produced by Major Gold Mines in 2011 ............................................................... 10 Table 4: Quantity and Value of Exported Minerals in 2011 ............................................................... 10 Table 5: Diamonds Production and Export, 2011 ................................................................................ 12 Table 6: Tanzanite Production and Exports Summary in 2011 ......................................................... 12 Table 7: Mineral Produced by Small Scale Miners (2005 - 2010) .................................................... 14 Table 8: Historical Mineral Exports by Major Mines (2005 - 2011) ................................................. 17 Table 9: Diamond Prices Index 2011..................................................................................................... 21 Table 10: Historical Taxes Paid by Large Scale Mining Entities (1999 2011, Billion TZS) ......... 23 Table 11: Procurement of Goods and Services by Large Scale Miners (2001 2011, Million TZS) ......................................................................................................................................... 23 Table 12: Tanzania Mineral Reserves (Selected Minerals and Projects) ...................................... 24 Table 13: Status of Employment in the Major Gold Mines Number of Locals versus Expatriates.............................................................................................................................. 26 Table 14: Unresolved Queries Communicated to TRA for Consideration and Action .................. 27 Table 15: Achievements Resulting from TMAA Financial Audits .................................................... 28 Table 16: Common Environmental Shortfalls Noted on Large Scale Mines .................................. 30 Table 17: Common Environmental Shortfalls Noted on Medium Scale Mines .............................. 32 Table 18: Common Environmental Shortfalls Noted on Small Scale Mines .................................. 32 Table 19: Implementation Status of Planned Audit Activities for 2011 ........................................... 35 Table 20: Targets for 2012 ...................................................................................................................... 37
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List of Figures Figure 1: TMAA Organization Structure............................................................................................ 7 Figure 2: Total Gold Exports Contribution by Mine, 2011.............................................................. 11 Figure 3: Monthly Actual Provisional Royalty Payments by Major Mines 2011 .................... 15 Figure 4: Calculated Provisional Royalty by Mine 2011............................................................. 15 Figure 5: Total Royalty Paid by Major Gold Mines (1998 - 2010) ................................................. 16 Figure 6: Africas Top Four Gold Producing Countries (2008 2011) ......................................... 16 Figure 7: Actual versus Projected Gold Production by Major Gold Mines (2001 2011)........ 17 Figure 8: Historical Gold Production by Six Major Gold Mines (1999 2011) ........................... 18 Figure 9: Historical Gold Export Quantity versus Value (2001 - 2011) ......................................... 19 Figure 10: Historical Copper Export Quantity versus Value (2001 - 2011) .................................. 19 Figure 11: Gold Price Trends (2001 - 2011)...................................................................................... 20 Figure 12: Silver Price Trends (2001 - 2011).................................................................................... 20 Figure 13: Copper Price Trends (2001 - 2011) ................................................................................. 21 Figure 14: Royalty Paid by Major Gold Mines (2001 - 2011) ......................................................... 22 Figure 15: Composition of Taxes Paid by Large Scale Mining Entities (2011) in TZS Billion .. 24
TMAAs Roles and Functions a. To monitor and audit quality and quantity of minerals produced and exported by large, medium and small scale miners; to determine revenue generated to facilitate collection of payable royalty. b. To audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the Tanzania Revenue Authority (TRA) and other relevant authorities. c. To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure. d. To collect, analyze, interpret and disseminate minerals production and exports data for projecting Government revenue, planning purposes and decision making in the administration of the mining industry. e. To counteract minerals smuggling and minerals royalty evasion in collaboration with relevant Government authorities. f. To assess values of minerals produced by large, medium and small scale miners to facilitate collection of payable royalty. g. To advise the Government on all matters relating to the administration of the mineral sector with main focus on monitoring and auditing of mining operations to maximize Government revenue. h. To promote and conduct research and development in the mineral sector that will lead to increased Government revenue. i. To examine and monitor implementation of feasibility reports; mining programs and plans; annual mining performance reports; and environmental management plans and reports of mining companies.
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GLOSSARY OF TERMS
ARD BGM BGML BZGM Cap. Crt EIS EMP EPP FDI g GGM GGML GPM lb ISO kcal Kg LME N/A NAL NEMC NMGML MAB MEM mg Acid Rock Drainage Bulyanhulu Gold Mine Bulyanhulu Gold Mine Limited Buzwagi Gold Mine Chapter Carat Environmental Impact Statement Environmental Management Plan Environmental Protection Plan Foreign Direct Investment Gram Geita Gold Mine Geita Gold Mine Limited Golden Pride Mine Pound International Organization of Standardization Kilocalories Kilogram London Metal Exchange Not Applicable New Alamasi National Environment Management Council North Mara Gold Mine Limited Ministerial Advisory Board Ministry of Energy and Minerals Milligram MMP MP PAYE PML ppm RTL SDL STAMICO t TGM TMAA TOML TOL toz TRA TSF TTM TZS UNCTAD URT VAT WAD WHT WDL WDLP Wt Mwadui Mpya Pit Member of Parliament Pay As You Earn Pangea Minerals Limited Parts Per Million Resolute Tanzania Limited Skills Development Levy
State Mining Corporation
Tonne Tulawaka Gold Mine Tanzania Minerals Audit Agency TanzaniteOne Mining Limited Tanzania Oxygen Limited Troy Ounce Tanzania Revenue Authority Tailings Storage Facility TanzaniteOne Tanzanite Mine Tanzanian Shilling United Nations Conference on Trade and Development United Republic of Tanzania Value Added Tax Weak Acid Dissociable Withholding Tax Williamson Diamonds Limited Williamson Diamonds Limited Pit Weight
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2011 PERFORMANCE HIGHLIGHTS This report covers results of auditing activities performed by Tanzania Minerals Audit Agency in the year 2011. The report addresses the status of implementation of the audit program and highlights key findings and achievements. The task of auditing quality and quantity of mineral products from the major mines was comprehensively undertaken by TMAA in 2011. Gold production from the major gold mines (from gold bars and Copper Concentrate products) increased by 4.9% from 1.22 million troy ounces in 2010 to 1.28 million troy ounces in 2011. Geita Gold Mine (GGM) was the leading gold producer in 2011 with 34.2% of total production, while Tulawaka Gold Mine (TGM) was the least gold producer with 6.6% of total production. The total mineral exports in 2011 from gold bars and Copper Concentrate produced by the six major gold mines were: 1.29 million troy ounces of gold worth USD 2.04 billion; 13.84 million pounds of copper worth USD 55.71 million; and 456,080 troy ounces of silver worth USD 16.07 million. Mineral royalty paid by the six major gold mines to the Government during the year under review was USD 57.1 million. This presents an increase of 21.8% compared to USD 46.9 million realized in 2010. However, the Government is expecting to collect USD 58.81 million in total as royalty for the year 2011 once final royalty is paid. Tanzanite output at TanzaniteOne Tanzanite Mine (TTM) was 1.3 million carats in 2011 (Grade A BL(I)), compared to 2.2 million carats produced in 2010. Tanzanite worth USD 10.89 million was exported in 2011, down from USD 15.8 million realized in 2010. Total royalty paid by TTM in 2011 was USD 284,811.63. Diamonds output at Williamson Diamonds Limited (WDL) during the year amounted to 19,610 carats, down by 54.7% compared to 43,264 carats produced in 2010. The mine sold 22,922 carats of diamonds worth USD 6.56 million in 2011, compared to 50,740 carats worth USD 9.5 million sold in 2010. Total payable royalty for the exported diamonds was USD 327,895. The decline in production and export of diamonds in 2011 was a result of suspension of mining and processing activities at
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WDL in August 2011 mainly due to pit expansion, shortage of water for process plant operations and plant refurbishment. Environmental monitoring and auditing was conducted on the following mines: Geita Gold Mine (GGM), TanzaniteOne Tanzanite Mine (TTM), Bulyanhulu Gold Mine (BGM), Buzwagi Gold Mine (BZGM), Tulawaka Gold Mine (TGM), Golden Pride Mine (GPM), 21 medium and 17 small scale mines. The conducted environmental audits have successfully assisted in improving environmental management practices in the respective mines. During the year 2011, auditing of revenue generated, capital investment and operating expenditure was conducted on Geita Gold Mining Limited (GGML), Resolute Tanzania Limited (RTL), TanzaniteOne Mining Limited (TOML), Bulyanhulu Gold Mine Limited (BGML), Pangea Minerals Limited (PML) - owner of BZGM and TGM, North Mara Gold Mine Limited (NMGML), Williamson Diamonds Limited (WDL), Nyanza Mines (T) Limited, Marmo E. Granito Limited, Tanga Cement Company Limited, ARM Tanzania Limited, Mineral Extraction Technologies Limited, Mbabani Minerals Limited and Aurum Africa Limited (holder of Dealer's Licence). The audits did reveal a number of significant queries which would recover huge amounts of lost revenue on the side of the Government once they are rectified. Table 1 highlights key achievements attained in year 2011 as a result of TMAA audits, and administrative initiatives taken by the Agency to improve its performances.
Table 1: Key Achievements in 2011

Function To audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the TRA and other relevant authorities. Achievements 1. Audit of financial records and tax review conducted by TMAA in collaboration with TRA has helped to accelerate payment of corporate tax by GGML, operating GGM and owned by AngloGold Ashanti Limited; and RTL, operating GPM and owned by Resolute Mining Limited. RTL paid a total of TZS 33.9 billion as corporate tax for the period up to June 2011. In September and December, 2011 RTL made payments of corporate tax amounting to TZS 14.6 billion and TZS 14.1 billion respectively. Cumulatively, the company has paid corporate tax amounting to TZS 62.6 billion. GGML paid corporate tax amounting to TZS 3.2 billion in 2009. Another payment of corporate tax was made in November, 2011 amounting to TZS 9.5 billion. The entity is expected to pay about USD 50 million as corporate tax for year 2011/2012. 2. Four gold mines owned by African Barrick Gold (ABG) have paid fuel levy amounting to USD 2 million which was not settled up to 2010 as follows: (BGM USD 200,000; NMGM USD 1 million; TGM USD 200,000 and BZGM USD 600,000). The entities made the respective payments following audit queries raised by TMAA which disclosed non-payment of fuel levy for the stipulated amounts. 3. PML is expected to pay USD 32 million as corporate tax due for TGM for the financial year 2008 as a result of ring fencing BZGM capital expenditure to year 2009 in which the mine started generating income. This is a result of TMAA audits in collaboration with TRA on the respective mines for the financial years 2007 through 2009. 4. RTL has settled the unpaid withholding tax amounting to TZS 223.4 million as a result of its failure to withhold tax from
Function
Achievements payments made to technical service providers for the financial year 2008/2009. 5. WDL has paid TZS 136.7 million as Local Government Service Levy, PAYE and royalty, which was not paid for the period of 2004 through 2008. The payment was made following TMAA audit. 6. TOL Gases Limited has agreed to pay royalty of TZS 94.15 million which was not paid to the Government by the entity for the period of 2006 through 2010. 7. Regular financial audits conducted by TMAA have enhanced financial record keeping by major mining companies as well as self-compliance.
To monitor and audit quality and quantity of minerals produced and exported by large, medium and smallscale miners.
1. TMAA has managed to increase its scope of audit by auditing large, medium and small scale mines. 2. TMAA successfully audited and analyzed minerals produced and exported by GGM, GPM, BGM, BZGM, NMGM, TGM, WDL and TTM. This ensured availability of accurate and reliable data on minerals produced and exported by the respective miners. 3. TMAA is in the final process of registering its Laboratory under ISO 17025 for the purpose of attaining international recognition and acceptance of laboratory results. Once the sought accreditation is attained, the Agency will commercialize its laboratory services to generate income. 4. TMAA in collaboration with the Minerals Department has been publishing local indicative mineral prices on monthly basis through local newspapers and its website (www.tmaa.go.tz) for the purpose of assessment and valuation of minerals; informing the general public on the prevailing mineral prices in Tanzanian market; helping local miners bargain reasonable and fair prices for their minerals; and increasing Government revenues through
Function
Achievements enhanced mineral price knowledge. 5. TMAA in collaboration with the Zonal Mines Office Eastern Zone initiated monitoring and auditing of production and sales of building materials by using Sales Vouchers in Dar es Salaam and Coast regions. The audit is aimed at ensuring that the Government collects maximum royalty from sales of building materials and tackles the ongoing illegal mining of building materials in the country. Through this exercise, TMAA facilitated collection of royalty amounting to TZS 372 million for the period from June to December, 2011. 6. TMAA in collaboration with the Minerals Department has introduced modern security seals for securing packages/ containers containing minerals for export.
To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.
1. TMAA has widened its environmental monitoring and auditing activities to medium and small scale mining operations. During year 2011 TMAA conducted environmental audits on 21 medium scale mines and 17 small scale mining operations. 2. TMAA conducted assessment of environmental rehabilitation liabilities for the large scale gold mines as of June, 2011. It has been revealed that total amount of USD 201 million is not secured to the Government. This suggests that rehabilitation of the respective mining areas may become a burden to the Government in case of unexpected closure or abandonment. Negotiations are underway between the Government and large scale gold mining entities to agree on forms and amounts of rehabilitation bonds to be posted.
1.0
MANAGEMENT OVERVIEW
TMAA Ministerial Advisory Board was formed on 29th March, 2011 and officially launched on 19th May, 2011 by Honorable William Mganga Ngeleja (MP), Minister for Energy and Minerals. The main duty of the Board is to advise the Minister for Energy and Minerals on matters pertaining to efficient and effective performance of TMAA. The Board comprises of the Board Chairman, Dr. Yamungu Kayandabila and six members namely, Dr. Consolath D. Ishebabi, Mr. Rogers Sezinga, Eng. James L. Ngeleja, Mr. Thomas N. Nchimani, Mr. Gray Mwakalukwa, and Eng. Benjamin J. Mchwampaka. The Board held its first meeting on 28th 29th September, 2011 in Arusha. The first board meeting was preceded by board members visiting four large scale mines which are BGM, GGM, WDL and TTM. The visit aimed at familiarizing board members with mining operations as well as TMAA auditing activities.
TMAA Ministerial Advisory Board Members in a group photo with the Chief Executive Officer for TMAA, Eng. Paul Masanja (seated second right). Seated centre is Board Chairman, Dr. Yamungu Kayandabila.
Figure 1: TMAA Organization Structure

MINISTER MAB PERMANENT SECRETARY CHIEF EXECUTIVE PROCUREMENT UNIT INTERNAL AUDIT UNIT LEGAL UNIT
BUSINESS SUPPORT (DIRECTOR)
MINERALS VALUATION & LABORATORY SERVICES

(DIRECTOR)
ENVIRONMENTAL MONITORING & AUDITING (DIRECTOR)
MINERALS PRODUCTION & EXPORTS MONITORING (DIRECTOR)
FINANCIAL AUDITING & ANALYSIS (DIRECTOR)
INFORMATION & COMMUNICATION TECHNOLOGY (DIRECTOR)
FINANCE & ACCOUNTS (MANAGER)
MINERALS VALUATION (MANAGER)
ENVIRONMENTAL MONITORING & AUDITING OF LARGE & MEDIUM SCALE MINES (MANAGER)
MINERALS PRODUCTION & EXPORT MONITORING OF LARGE SCALE MINES (MANAGER)
FINANCIAL AUDITING & ANALYSIS FOR LARGE & MEDIUM SCALE MINING (MANAGER)
DATA MANAGEMENT AND ANALYSIS (MANAGER)
HUMAN RESOURCE & ADMINISTRATION (MANAGER)
LABORATORY SERVICES (MANAGER)
ENVIRONMENTAL MONITORING & AUDITING OF SMALL SCALE MINES (MANAGER)
MINERALS PRODUCTION & EXPORT MONITORING OF MEDIUM & SMALL SCALE MINES (MANAGER)
FINANCIAL AUDITING & ANALYSIS FOR SMALL SCALE MINING (MANAGER)
COMMUNICATION
INFORMATION TECHNOLOGY (MANAGER)
PLANNING AND RESEARCH DEVELOPMENT (MANAGER)
TAX AUDIT & REVIEW (MANAGER)
2.0
TARGETS FOR 2011
Table 2 summarizes operational activities which were set for implementation in the year 2011. Table 2: Targets for 2011
Function To monitor and audit quality and quantity of minerals produced and exported by large, medium and smallscale miners. Targets Stationing full time Auditors at all major mines to witness and record daily production, weighing, packaging and sealing of minerals. Taking mineral samples where necessary and performing logistics of shipment of collected samples from the mine sites to the Agency laboratory in Dar es Salaam for assaying. Determining quantity and provisional value of minerals produced using Agencys laboratory results and market prices. Conducting strategic audit of medium and small scale mines to gather information on minerals production and sales. Conducting royalty reconciliation by comparing mines assay results against those of TMAA. To audit revenue Verifying the authenticity of revenue declared, capital investment and generated, capital operating expenditure incurred by the mining companies in the investment and course of mineral production and other supportive operations. operating expenditure Examining tax accounting of mining companies in order to determine of the large and whether accounting methods used were appropriate and in medium scale mines compliance with statutory provisions. for the purpose of Performing revenue forecasting based on available historical, current gathering taxable and future economic variables relating to large and medium scale information and mining projects. providing the same to Reviewing annual costs incurred by the mining companies and the TRA and other performing costbenefit analysis of the activities undertaken by the relevant authorities. mines in particular year of expenditure. To monitor and audit Reviewing Environmental Management Plans (EMPs), rehabilitation environmental programs and reports from mining companies submitted to the management, relevant Government Institutions. environmental budget Conducting physical inspection at the mine site on environmental and expenditure for management activities. progressive Assessing adequacy of funds allocated for environmental rehabilitation and management and progress on the implementation of the mine closure. environmental programs. Compiling environmental audit queries (compliance and financial) and outstanding issues (if any) and communicating the same to the audited miners for their response and action.
3.0
3.1
AUDIT RESULTS AND PERFORMANCE FOR 2011 AUDITING OF MINERALS PRODUCED AND EXPORTED
The auditing of minerals produced and exported by major gold mines conducted by TMAA in 2011 was aimed at ascertaining the quantity and quality of gold, silver and copper production and exports by each mine. This audit is vital so as to provide the Government with a precise account of exportable gold-containing products, for the purpose of confirming the amount of revenue generated from the exported mineral products and royalty due. TMAA auditors witnessed each and every smelting session performed during the year 2011 in their respective gold rooms. This includes the pouring, marking, weighing and sampling of ingots. The auditors also witnessed the weighing and loading of the Copper Concentrate in containers for export and took samples of the material. All samples were transported by secure means to the TMAA laboratory in Dar es Salaam where they were analyzed to determine the amount of fine gold, silver and copper contained. TMAA witnessed production and exports of diamonds at WDL and Tanzanite at TTM, where auditors are stationed at each mine to witness, record and report on a daily basis mineral production and exports activities undertaken by the mine. TMAA also conducted strategic auditing of building materials in Dar es Salaam and Coast regions for the purpose of facilitating royalty collection. Furthermore, TMAA stationed one Auditor at Ngaka Coal Project in Mbinga District to witness, record and report coal production and sales operations at the mine. 3.1.1 Minerals Produced by Major Gold Mines in 2011 Table 3 summarizes the quantity of gold bars and Copper Concentrate produced by major gold mines in 2011 as audited by TMAA. A total of 2,806 mineral samples were collected from the major gold mines for laboratory analysis of which 725 were from gold bars and 2,081 were from Copper Concentrate.
Table 3: Minerals Produced by Major Gold Mines in 2011

Detail Number of gold bars produced Weight of gold bars produced (kg) Number of containers loaded with Copper Concentrate Net wet weight of Copper Concentrate produced (tons) Gold quantity (toz) Silver quantity (toz) Copper quantity (lb) Year 2011 2,209 39,584 2,027 40,956 1,280,342 439,665 13,967,339 Year 2010 2,140 37,401 2,124 44,421 1,221,527 422,692 11,905,511
3.1.2
Minerals Exported by Major Gold Mines in 2011
Table 4 summarizes the quantity and value of minerals exported by major gold mines in 2011 as audited by TMAA. The prices applied in the computation of values of gold, silver and copper exports are as quoted from the London Metal Exchange (LME). Gold export contribution by each major gold mine is shown in Figure 2. Table 4: Quantity and Value of Exported Minerals in 2011
Detail Number of gold bars exported Number of Copper Concentrate containers exported Gold quantity (toz) Silver quantity (toz) Copper quantity (lb) Gold gross value (USD) Silver gross value (USD) Copper gross value (USD) Total Value (USD) Year 2011 2,198 2,054 1,293,671 456,080 13,836,311 2,041,511,060 16,065,979 55,706,563 2,113,283,602 Year 2010 2,104 1,992 1,214,594 406,235 10,806,687 1,484,735,450 8,234,030 36,374,430 1,529,343,910
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Basic Facts from Tables 3 and 4 Gold production increased by 4.9% from 1.22 million troy ounces in 2010 to 1.28 million troy ounces in 2011, mainly due to increased output at GGM. Total value of mineral exports by the six major gold mines increased by 38.1% from USD 1.53 billion in 2010 to USD 2.11 billion in 2011, mainly due to increased gold prices in the world market. Figure 2: Total Gold Exports Contribution by Mine, 2011
3.1.3
Auditing of Diamonds Production and Exports
Diamond mining operations at the Williamson Diamonds Mine are composed of the following distinct activities: mining of ore at the pit, re-treatment of tailings to recover missed diamonds and gravel mining. The open pit mining and tailings retreatment are the largest of the operations. Current ore grade is about 6 carats per hundred tons (or 12 mg/t) mined from three open pits namely: Mwadui Mpya Pit (MMP), New Alamasi (NAL) and Williamson Diamonds Limited Pit (WDLP). Table 5 summarizes the quantity of diamonds produced and exported by WDL in 2011 as audited by TMAA.
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Table 5: Diamonds Production and Export, 2011

A: Diamonds Production WDLP (Carat) 0
Remarks:
MMP (Carat) 6,013
NAL (Carat) 12,374
Total Weight (Carat) 18,387
WDL suspended production completely on 18th August, 2011 due to shortage of water for process plant operations. Production is expected to resume in January, 2012. The only work going on at the mine site is pit expansion and plant refurbishment.
B: Diamonds Export Total Weight (Carat) 23,922 Average Price (USD/Carat) 274.14 Estimated Value (USD) 6,557,891 Provisional Royalty (USD) 327,895
3.1.4
Auditing of Tanzanite Production and Exports
TMAA auditor stationed at TTM is responsible for witnessing, recording and reporting on a daily basis Tanzanite production and exports activities undertaken by the mine. Table 6 summarizes the quantity of Tanzanite produced and exported by TTM in 2011 as audited by TMAA. Table 6: Tanzanite Production and Exports Summary in 2011
A: Tanzanite Production A B BL (Carat) (Carat) (Carat) 1,299 55,000 142,273 B: Tanzanite Exports Description Total Weight (g) Cut Tanzanite Rough Tanzanite 303,902.31 Total B(SI) (Carat) 22,380 B(I) (Carat) 62,285 BL(SI) (Carat) 83,157 BL(I) (Carat) 924,456 Total (Carat) 1,290,851
Total Weight (Carat) 50,031.48 1,519,511.55 1,569,543.03
Export Value (USD) 5,321,839.59 4,596,383.69 9,918,223.28
Royalty Paid (USD) 56,268.32 228,543.31 284,811.63
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3.1.5
Auditing of Building Materials in the Eastern Zone
TMAA in collaboration with the Zonal Mines Office Eastern Zone initiated monitoring and auditing of production and sales of building materials by using Sales Vouchers in Dar es Salaam and Coast regions. The audit is aimed at ensuring that the Government collects maximum royalty from sales of building materials. This audit commenced on 1st June, 2011 as a pilot program in the two regions with expectations of adopting the program to other areas of the country since it has confirmed enormous achievements in collecting government royalty from building materials. During the period of June to December 2011, a total of 746,234.21 tonnes of building materials worth TZS 12.4 billion (with payable royalty amounting to TZS 372 million) were produced and sold by the licensed miners in Dar es Salaam and Coast regions as audited by TMAA. This is huge increase, compared to about TZS 2 million only which was previously collected by the Government on yearly basis before the introduction of Sales Vouchers for monitoring sales of building materials in the Eastern Zone.
3.1.6
Auditing of Coal Production at Ngaka Coal Project
TMAA commenced monitoring and auditing of coal production and sales activities by TANCOAL Energy Limited at Ngaka Coal Project in Mbinga District, Ruvuma Region. The Agency stationed one Mineral Auditor at the mine site on 24th October, 2011 to witness, record and report coal production and sales operations at the mine on daily basis. TANCOAL Energy Limited is owned jointly by National Development Corporation (30%) and Intra Energy Corporation (70%). Ngaka Coal Project, which is owned and operated by TANCOAL Energy Limited, comprises of Ngaka, Mbalawala and Mbuyura coalfields. TANCOAL was granted Mining Licence No. 439/2011 on 18th August, 2011 to mine and sell coal. As per feasibility study, the mine has a proven reserve of 40.2 million tonnes of coal with quality of 6,400 Kcal/Kg, sulphur content of 1.56% and ash content of 22%. Currently, the mine produces about 16,000 metric tonnes of coal per month, which is sold to local and foreign customers who use it mainly for industrial purposes. Total sales of coal from TANCOAL through local trade and exports from August to December, 2011 were 515 metric tonnes worth USD 51,000. Total royalty paid to the Government was TZS 2,416,354.
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3.1.7
Historical Minerals Production from Medium and Small Scale Mines (2005 - 2010)
Table 7 summarises historical minerals production statistics for selected minerals produced by medium and small scale miners during the year 2005 through 2010 as reported by Zonal and Resident Mines Offices. Table 7: Minerals Produced by Small Scale Miners (2005 - 2010)
Mineral Gold Diamond Tanzanite Limestone Galena Coal Gypsum Zircon Tin Kaolin Copper
Unit Weight (Kg) Value (USD) Weight (Carat) Value (USD) Weight (g) Value (USD) Weight (g) Value (TZS) Weight (Kg) Value (TZS) Weight (Tonne) Value (TZS) Weight (Tonne) Value (TZS) Weight (Tonne) Value (TZS) Weight (Tonne) Value (TZS) Weight (Tonne) Value (TZS) Weight (Tonne) Value (USD)
2005 1,019.55 13,802,570.80 24,498.05 3,100,704.69 1,306,655.22 34,016,728.35 102,100.00 6,977,547.15 7,401.86 218,361,396 6,732.32 1,307,875.00 2,035.00 -
2006 2007 2008 2009 5,163.99 4,754.86 4,467.74 5,228.11 95,136,100.99 113,966,372.25 104,136,437.23 123,703,657.67 84,930.86 70,278.97 87,321.44 46,435.53 5,396,273.85 6,814,623.09 6,309,293.95 5,759,160.96 5,504,055.46 6,299,513.89 5,030,610.74 5,012,484.39 20,757,607.91 29,200,927.31 22,103,371.28 9,091,121.20 109,086.40 164,543.90 207,922.45 106,185.00 7,455,000.00 10,908,400.00 15,941,900.00 19,363,500.00 83.40 248.50 20.50 - 37,503,488.00 133,000,000.00 1,650,000.00 2,376.30 1,316.70 - 68,912,555.00 38,756,612.00 5,500.00 2,120.00 1,820.00 162,254,840 62,541,865.60 64,676,000.00 7,847.43 1,955,000.00 2,060.00 1,220.50 1,000.00 9,463,000.00 5,853,540.00 1,015.00 28,896.00 18,624.00 2,500,000.00 28,896,000.00 18,624,000.00 750,000.00 22,500.00 -
2010 2,201.47 71,345,177.92 28,901.51 4,755,561.52 5,702,857.75 17,777,725.67 120,000.00 21,882,751.80 109.00 12,450,500.00 3,000,000.00 150,000.00
TOTAL 22,835.72 522,090,316.86 342,366.36 32,135,618.06 28,856,177.45 132,947,481.72 809,837.75 82,529,098.95 461.40 184,603,988.00 3,692.30 107,669,167.00 16,841.86 507,834,101.58 14,579.75 3,262,875.00 6,315.50 15,316,540.00 48,535.00 50,020,000.00 3,750,000.00 172,500.00
Source: Zonal and Resident Mines Offices.
3.2
MINERAL ROYALTY PAYMENTS FOR 2011
Total calculated provisional royalty1 for 2011 from the major mines increased by 42.4% from USD 41.29 million in 2010 to USD 58.80 million in 2011. Actual provisional royalty paid during the period amounted to USD 57.61 million at an average of USD 4.8 million per month. Figure 3: Monthly Actual Provisional Royalty Payments by Major Mines 2011
Figure 4: Calculated Provisional Royalty by Mine 2011
Calculations of provisional royalty are based on 3% of 90% of gross value of gold, silver and copper exported by major gold mines in 2011. Royalty for Tanzanite and diamonds is computed at 5% of export value. TMAA Annual Report, 2011
15
Figure 5: Total Royalty Paid by Major Gold Mines (1998 - 2010)
3.2.1
Gold Production Performance Snapshot GGM was the leading gold producer in 2011 with 34.2% of total production, while TGM was the least gold producer with 6.6% of total production. Tanzania produced 1.3 million troy ounces of gold in 2011, and was therefore the fourth-largest gold-producing country in Africa after South Africa (which produced 6 million troy ounces), Ghana (which produced 3 million troy ounces), and Mali (which produced 1.4 million troy ounces (Figure 6).
Figure 6: Africas Top Four Gold Producing Countries (2008 2011)
Sources: World Gold Council and South African Chamber of Mines.

16
3.2.2
Historical Data on Mineral Production and Export
Figure 7 summarizes actual and projected gold production by major mines for the period of 2001 through 2011. Figure 7: Actual versus Projected Gold Production by Major Gold Mines (2001 2011)
Table 8 summarizes historical mineral exports by major mines from 2005 to 2011. Table 8: Historical Mineral Exports by Major Mines (2005 - 2011)
Mineral Gold (toz) Silver (toz) Copper (lb) Tanzanite (carat) Diamonds (carat)
2005 1,170,500 381,688 7,618,921 1,460,075 190,384
2006 1,308,600 541,488 8,631,835 1,230,600 189,396
2007 1,127,700 431,124 5,548,485 1,700,134 220,209
2008 1,020,200 343,499 5,388,703 2,203,162 134,000
2009 1,114,775 399,178 7,093,375 1,910,000 133,526
2010 1,214,594 406,235 10,806,687 2,200,000 43,264
2011 1,293,671 456,080 13,836,311 1,569,543 23,922
17
Basic Facts from Figure 7 and Table 7 Gold output has been gradually increasing from year 2008 through 2011. This increase is partly due to commencement of gold production at BZGM in 2009 and increased gold production at GGM in 2010 and 2011. Actual gold production for 2011 was below projection mainly due to low production at BZGM and BGM resulting from electric power outages in the country and SAG mill motor failure at BZGM. GGM also experienced lower production than projected due to SAG mill malfunction. Diamonds production at WDL slumped from 43,264 carats achieved in 2010 to 18,387 carats in 2011 due to partial suspension of production on 1st April, 2010 to allow for pit expansion and plant refurbishment. WDL suspended production completely on 18th August, 2011 due to shortage of water for process plant operations. Production is expected to resume in January, 2012. Tanzanite output at TTM decreased to 1.57 million carats in 2011 as compared to 2.20 million carats produced in 2010. Figure 8 summarizes historical gold production by the six major gold mines for the period of 1999 through 2011. Figure 8: Historical Gold Production by Six Major Gold Mines (1999 2011)
18
Figure 9 summarizes historical gold production and export value by the six major gold mines for the period of 2001 through 2011. Figure 9: Historical Gold Export Quantity versus Value (2001 - 2011)
Figure 10 summarizes historical copper production and export value by BGM and BZGM for the period of 2001 through 2011. Copper export value rose sharply from USD 36.4 million in 2010 to USD 53.5 million in 2011 largely due to increased industrial demand for copper which triggered sharp commodity price increase in the world market. Figure 10: Historical Copper Export Quantity versus Value (2001 - 2011)
19
3.2.3
Historical Prices of Gold, Silver, Copper and Diamond (2001 - 2011)
Annual average gold price increased by 28.4% from USD 1,223.98 per troy ounce for 2010 to USD 1,571.28 per troy ounce for 2011 (Figure 11). This increase was mainly due to high demand of gold coupled with increasing global macroeconomic, currency and geopolitical risks. Figure 11: Gold Price Trends (2001 - 2011)
Source: LME Official Gold Prices in USD/troy oz.
Annual average silver price increased by 74.5% from USD 20.138 per troy ounce for 2010 to USD 35.145 per troy ounce for 2011 (Figure 12). The increase was due to increased industrial demand and global decline in silver production. Figure 12: Silver Price Trends (2001 - 2011)
Source: LME Official Silver Prices in USD/troy oz.
20
Annual average copper price increased by 17.07% from USD 3.42 per pound in 2010 to USD 4 per pound in 2011 (Figure 13). The increase was mainly due to high industrial and construction demand, mainly in China, India and Brazil. Figure 13: Copper Price Trends (2001 - 2011)
Source: LME Official Copper Prices in USD/LB (Cash Seller)
Diamond prices increased during January to June 2011, but declined sharply during July - December, 2011 due to enlarged uncertainty caused by the global economic crisis, volatile financial, currency and commodity markets, as well as continued political instability in the Middle East. Table 9 summarizes diamond price index for the first and second half of 2011. Table 9: Diamond Prices Index 2011
0.3 carat Year 2011 1st Half of 2011 2nd Half of 2011 -1.0% 25.4% -21.0% 0.5 carat 20.2% 37.8% -12.7% 1.00 carat 19.3% 34.0% -11.0% 3.00 carat 18.3% 31.4% -9.9% 5.00 carat 6.4% 18.0% -9.9%
Source: RapNet Diamond Index (RAPI)
21
3.2.4
Historical Royalty Payments by Major Mines (2001 - 2011)
Figure 14 shows actual royalty paid by the major mines to the Government from year 2001 to 2011. Figure 14: Royalty Paid by Major Gold Mines (2001 - 2011)
Actual royalty paid to the Government by the major mines has been increasing from year 2001 through 2011 mainly due to the increase of mineral prices.
22
Table 10: Historical Taxes Paid by Large Scale Mining Entities (1999 2011, Billion TZS)
1999 PAYE SDL WHT VAT Stamp Duty Import Duty Excise Duty Corporate Tax TOTAL 1.7 0.6 0.5 0.0 0.3 3.1 2000 7.3 1.6 8.8 0.2 0.6 18.5 2001 12.4 1.9 8.3 0.2 0.4 23.2 2002 16.6 2.6 8.4 0.3 2.2 30.1 2003 18.5 2.4 7.9 0.0 1.5 1.7 31.9 2004 11.5 3.4 7.3 0.1 3.3 3.3 28.8 2005 17.4 11.8 10.0 0.2 6.4 3.8 49.6 2006 11.8 2.5 3.3 1.3 0.1 0.1 3.1 22.2 2007 22.3 3.8 3.3 3.2 0.0 0.1 1.6 34.2 2008 44.0 7.5 5.6 4.0 0.0 2.1 4.0 67.3 2009 52.6 9.8 7.9 4.7 0.0 2.1 4.5 81.6 2010 49.9 11.3 13.1 4.7 0.2 21.3 100.5 2011 90.3 19.5 12.3 25.8 0.004 50.9 198.8 TOTAL 356.3 78.7 96.7 43.7 1.3 14.7 4.4 94.2 690.0
Table 11: Procurement of Goods and Services by Large Scale Miners (2001 2011, Million TZS)
2001 Foreign Local TOTAL 75.47 109.51 184.98 2002 111.90 125.45 237.35 2003 215.73 186.15 401.88 2004 102.73 130.48 233.21 2005 336.08 237.97 574.05 2006 217.24 349.60 566.84 2007 467.88 547.82 1,015.7 2008 649.78 554.93 1,204.71 2009 619.90 551.77 1,171.67 2010 546.17 337.92 884.09 2011 991.29 379.57 1,370.86 TOTAL 4,334.17 3,511.17 7,845.34
Figure 15: Composition of Taxes Paid by Large Scale Mining Entities (2011) in TZS Billion
Table 12: Tanzania Mineral Reserves (Selected Minerals and Projects)

Mine/ Project Owner Location Mineral Mineral Resources/ Ore Reserves 11 million ounces 2.9 million ounces 8.73 million ounces 0.16 million ounces 2.8 million ounces 67,000 troy ounces Remarks
1 2 3
Bulyanhulu Gold African Barrick Mine Gold (100%) Buzwagi Gold Mine African Barrick Gold (100%)
Kahama Kahama Geita
Gold Gold Gold
Proven & Probable Proven & Probable Indicated
Geita Gold Mine AngloGold Ashanti Limited (100%) Golden Pride Mine North Mara Gold Mine Tulawaka Gold Mine Resolute Mining Limited (100%) African Barrick Gold (100%) African Barrick Gold (70%) & Northern Mining Exploration Ltd (30%) African Barrick Gold (100%) African Barrick Gold (100%)
4 5 6
Nzega Tarime Biharamulo
Gold Gold Gold
Proven & Probable Proven & Probable Proven & Probable
7 8
Golden Ridge Gold Project Nyanzaga Gold Project
Shinyanga Sengerema
Gold Gold
0.53 million ounces 0.3 million ounces
Indicated Indicated
24
Mine/ Project
Owner
Location
Mineral
Mineral Resources/ Ore Reserves 3.94 million ounces 0.36 million ounces
Remarks
Handeni Gold Project Chunya Gold Project (New Luika Gold Mine) Buckreef Gold Project TanzaniteOne Mine Williamson Diamonds Mine Kabanga Nickel Project Dutwa Nickel Project
Canaco Resources Inc. (100%) Shanta Mining Limited (100%)
Handeni
Gold
Measured & Indicated Indicated
10
Chunya
Gold
11
Tanzania Royalty (55%) & STAMICO (45%) TanzaniteOne Mining Limited (100%) Petra Diamonds Ltd. (75%) & URT (25%)
Geita
Gold
0.95 million ounces 63 83 million carats
Indicated
12
Simanjiro
Tanzanite
Indicated
13
Kishapu
Diamonds
4.6 million carats Measured & Indicated 1.16 billion pounds 751.8 million pounds 23.2 million pounds 28.5 million pounds 17.64 million pounds 125.3 million tons 40.2 million tons Inferred
14
Barrick Gold Corp. Ngara (50%) & Xstrata Plc (50%) African Eagle Resources Plc. (90%) Uranium One Inc. (100%) Mwanza
Nickel
15
Nickel Cobalt
Inferred Inferred Indicated Inferred Proven
16 17 18
Mkuju River Project
Namtumbo Bahi/ Manyoni Ludewa
Uranium Uranium Coal
Manyoni Uranex (100%) Uranium Project Mchuchuma Coal Mine National Development Corporation
19
Mbalawala Coal Intra Energy Project/ Ngaka Corporation (70%) Basin & NDC (30%) Liganga Iron Ore Project National Development Corporation
Ruvuma
Coal
Proven
20
Ludewa
Iron Ore
45 million tons
Proven
25
Table 13: Status of Employment in the Major Gold Mines Number of Locals versus Expatriates
Year Type of Employee BGM BZGM GGM GPM NMGM TGM TTM WDL Grand Total
Expat. 2005 Locals Total Expat. 2006 Locals Total Expat. 2007 Locals Total Expat. 2008 Locals Total Expat. 2009 Locals Total Expat. 2010 Local Total Expat. 2011 Local Total
177 2,042 2,219 180 1,787 1,967 140 1,687 1,827 185 2,012 2,197 181 2,266 2,447 195 2,430 2,625
58 569 627 49 671 720 105 746 851 132 875 1,007
108 1,801 1,909 116 1,985 2,101 114 2,338 2,452 129 1,964 2,093 121 1,814 1,935 86 1,792 1,878 82 1,601 1,683
16 276 292 15 282 297 15 302 317 34 225 259 27 238 265 34 266 300 37 297 334
83 928 1,011 129 978 1,107 127 621 748 138 703 841 157 876 1,033
51 248 299 32 283 315 41 325 366 41 338 379 65 356 421 75 473 548
21 612 633 24 694 718 25 644 669 26 714 740 29 613 642 33 648 681 32 643 675
12 671 683 12 725 737 11 717 728 10 677 687 4 610 614 8 584 592 8 558 566
N/A N/A N/A N/A N/A N/A 460 6,999 7,459 567 7,139 7,706 583 6,917 7,500 650 7,361 8,011 718 7,753 8,471
26
4.0
FINANCIAL AUDIT AND TAX REVIEW
One of the essential functions of TMAA is to audit revenue generated, capital investment and operating expenditure of the large and medium scale mines for the purpose of gathering taxable information and providing the same to the Tanzania Revenue Authority (TRA) and other relevant authorities. 4.1 FINANCIAL AUDIT AND TAX REVIEW RESULTS FOR 2011
Audit of revenue generated, capital investment and operating expenditure during the year 2011 was conducted on GGML, TOML, BGML, PML (BZGM and TGM), NMGML, RTL, WDL, Nyanza Mines (T) Limited, Marmo E. Granito, Tanga Cement Company Limited, ARM Tanzania Limited, Mineral Extraction Technologies Ltd, Mbabani Minerals Ltd and Aurum Africa Ltd (holder of Dealers Licence). A number of queries were raised during the audit and communicated to the respective auditees for responses. TMAA received responses from the respective auditees. Unresolved queries emanated from the discussions were forwarded to TRA for consideration and action. Most of the queries were common from one entity to another and are summarized in a combined form in Table 14. Table 14: Unresolved Queries Communicated to TRA for Consideration and Action Query Unqualified capital and operating expenditure deductions Wrongly claimed hedge financial liabilities and losses Non-withholding of taxes from payments of technical services, insurance premium, management fees and royalty for former mineral rights Over-claimed additional capital allowance Disallowable items claimed as allowable expenses Understated mineral sales Total Amount (USD) 335,854,729 183,645,187 168,102,142 145,475,786 34,391,948 18,154,991
1. 2. 3.
4. 5. 6.
27
4.2
ACHIEVEMENTS RESULTING FROM TMAAS FINANCIAL AUDITS
Table 15 summarizes achievements made as a result of TMAAs financial audits and tax reviews conducted on mining entities in collaboration with TRA. Table 15: Achievements Resulting from TMAA Financial Audits Issue 1. Corporate Tax Payments Achievement RTL paid a total of TZS 33.9 billion as corporate tax for the period up to June 2011. In September and December, 2011 RTL made payments of corporate tax amounting to TZS 14.6 billion and TZS 14.1 billion respectively. Cumulatively, the company has paid corporate tax amounting to TZS 62.6 billion. GGML paid corporate tax amounting to TZS 3.2 billion in 2009. Another payment of corporate tax was made in November, 2011 amounting to TZS 9.5 billion. The entity is expected to pay about USD 50 million as corporate tax for year 2011/2012. PML is expected to pay USD 32 million as corporate tax due for TGM for the financial year 2008 as a result of ring fencing BZGM capital expenditure to year 2009 in which the mine started generating income. This is a result of TMAA audits in collaboration with TRA on the respective mines for the financial years 2007 through 2009. 2. Royalty Payments WDL paid royalty amounting to TZS 19.8 million which was not paid to the Government by the entity for the period of 2004 through 2008. TOL Gases Limited has agreed to pay royalty of TZS 94.15 million which was not paid to the Government by the entity for the period of 2006 through 2010. 3. Fuel Levy Four gold mines owned by African Barrick Gold (ABG) have paid fuel levy amounting to USD 2 million which was not settled up to 2010 as follows: (BGM USD 200,000; NMGM USD 1 million;
28
Issue
Achievement TGM USD 200,000 and BZGM USD 600,000). The entities made the respective payments following audit queries raised by TMAA which disclosed non-payment of fuel levy for the stipulated amounts.
4. Withholding RTL has settled the unpaid withholding tax amounting to TZS Tax 223.4 million as a result of its failure to withhold tax from Payments payments made to technical service providers for the financial year 2008/2009. 5. PAYE WDL has settled the unpaid PAYE amounting to TZS 36.6 million as a result of its failure to pay the tax for financial year 2004 through 2008. WDL has settled the unpaid Service Levy amounting to TZS 80.3 million as a result of its failure to pay the levy to Kishapu District Council for year 2008. Regular financial audits conducted by TMAA have enhanced financial record keeping by major mining companies as well as self-compliance.
6. Service Levy 7. Record Keeping
29
5.0
ENVIRONMENTAL MONITORING AND AUDITING
Environmental monitoring and auditing activities conducted by TMAA in mining areas aims at ensuring sound environmental management during life of mine and after closure. TMAA monitors and audits environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure. Environmental monitoring and auditing activities conducted during 2011 involved auditing of large, medium and small scale mining areas. Mines audited included 5 large scale mines (GGM, BGM, BZGM, TGM and TTM), 21 medium scale mines and 17 small scale mining areas. Most of the noted shortfalls were common from one mine to another as summarized in Tables 16, 17 and 18. The noted shortfalls were communicated to the respective mines for consideration and corrective actions. Most of them have been addressed by the responsible miners. Table 16: Common Environmental Shortfalls Noted on Large Scale Mines Common Noted Shortfall 1. Financial guarantee for rehabilitation and mine closure for six major gold mines not posted to the Government. The liability amounted to USD 201 million as of June, 2011. Status Negotiations are underway for signing agreements between the Government and license holders on bond and financial guarantee as per Regulation 207 of the Mining (Safety, Occupational Health and Environmental Protection) Regulations, 2010. Various methods have been employed to reduce WAD Cyanide levels including: installation of cyanide destruct plant and dilution system. Furthermore, special equipment and staff are being deployed to scare birds and
30
2. High levels of Weak Acid Dissociable (WAD) Cyanide disposed on the Tailings Storage Facility (TSF). There are cases of up to 678
Common Noted Shortfall ppm linked to wildlife mortalities on TSF. 3. Inadequate management of Acid Rock Drainage (ARD) resulting into contamination of surface and ground water. 4. Inadequate solid waste management.
Status wildlife away from the TSF.
Management measures for ARD are being implemented, including further studies to see the impact to surface and ground water.
Ongoing actions have been taken by mine operators to rectify this issue.
5. Inadequate chemicals and hydrocarbons management. 6. Unlined trenches and ponds which receive process water.
Action plans have been put in place to rectify this issue.
Action plans have been put in place to rectify the shortfall.
7. Use of process water from TSF for dust Action plans have been put in suppression. place to rectify this issue. 8. Inadequate budget allocation for Some entities have started environmental management activities. setting aside sufficient funds for progressive rehabilitation and other environmental management activities.
31
Table 17: Common Environmental Shortfalls Noted on Medium Scale Mines Common Noted Shortfall 1. Absence of necessary documentation for environmental management such as Environmental Impact Statement (EIS), Environmental Management Plan (EMP) and Mine Closure Plans. 2. Absence of environmental progressive rehabilitation. budget Status Responsible mining entities are taking corrective actions to address the noted shortfalls. actions actions are are
for Corrective underway.
3. Absence of financial provision for Corrective decommissioning and restoration liability. underway. 4. Absence of environmental expert(s).
Some entities have employed environmental experts to oversee environmental management activities. Action plans have been put in place to rectify this issue.
5. Air pollution resulting from excessive dust generated during crushing operations.
Table 18: Common Environmental Shortfalls Noted on Small Scale Mines Common Noted Shortfall 1. 2. Absence of Environmental Protection Plans (EPP). Absence of permit for importation, transportation, storage and usage of cyanide in vat leaching plants. This may lead to mishandling of cyanide which is highly toxic. Deforestation.
Status Work-in-progress for rectification. Some miners have started to comply.
3.
Awareness is being created to address

32
Common Noted Shortfall
Status this shortfall.
4.
Poor storage and handling of cyanide in vat leaching operations. Improper disposal of garbage and solid waste.
Corrective measures are being taken by the responsible miners.
5.
Awareness is being created to address this shortfall.
6.
Uncontrolled mining activities and improper disposal of tailings and waste rocks. Mercury pollution as a result of poor handling and usage of the chemical in amalgamation processes. Abandonment of pits and trenches which endangers humans and animals.
Work-in-progress for rectification.
7.
Awareness is being created to address this shortfall.
8.
Backfilling and/or fencing of useless pits and trenches is ongoing.
33
6.0
CHALLENGES FACED IN 2011
It is vividly acceptable to state that the Agency has made tremendous achievements from its operations for the year under review. However, the year 2011 has not been without challenges. The following are the key challenges which hampered implementation of planned activities: 1. Little awareness by medium and small scale miners on TMAAs roles and functions. 2. Inadequate human and financial resources to comprehensively monitor and audit all large, medium and small scale mining operations in the country. 3. Delays by some Government bodies in implementing audit recommendations by TMAA aimed at maximizing Government revenue from mining industry and ensuring sound environmental management. 4. Poor record keeping by medium and small scale miners which hinders audit effectiveness.
34
7.0
PERFORMANCE EVALUATION OF WORK DONE BY THE AGENCY IN 2011
Table 19 summarizes status of implementation of planned activities for 2011. Table 19: Implementation Status of Planned Audit Activities for 2011 Function To monitor and audit quality and quantity of mineral produced and exported by large, medium and small scale miners. Key Activities Weight Stationing full time Auditors at all major mines to witness and record daily production, 1 weighing, packaging and sealing of minerals. Taking mineral samples where necessary and performing logistics of shipment of collected 1 samples from the mine sites to the Agency laboratory in Dar es Salaam for assaying. Determining quantity and provisional value of minerals produced using Agencys laboratory 1 results and market prices. Conducting mineral royalty reconciliation by comparing mines actual royalty payments 1 against payable royalty as computed by TMAA. To audit revenue Verifying the authenticity of revenue declared, generated, capital investment and operating expenditure capital incurred by the mining companies in the 1 investment and course of mineral production and other operating supportive operations. expenditure of Examining tax accounting of mining the large and companies in order to determine whether 1 medium scale accounting methods used were appropriate mines for the and in compliance with statutory provisions. purpose of Consolidating annual financial projections gathering taxable based on future projections received from the 1 information and large and medium scale miners. providing the Reviewing annual costs incurred by the same to TRA and mining companies and performing cost other relevant 1 benefit analysis of the activities undertaken by authorities. the mines in particular year of expenditure.
Score 1
0.8
0.75
0.5
0.75
35
Function To monitor and audit environmental management, environmental budget and expenditure for progressive rehabilitation and mine closure.
Total Percentage
Key Activities Weight Reviewing Environmental Management Plans (EMPs), rehabilitation programs and reports 1 from mining companies submitted to the relevant Government Institutions. Conducting physical inspection at mine sites 1 on environmental management activities. Assessing adequacy of funds allocated for environmental management and progress on 1 the implementation of the environmental programs. Compiling environmental audit queries (compliance and financial) and outstanding 1 issues (if any) and communicating the same to the client for response. 12 100%
Score 0.75
0.9
1 10.45 88%
36
8.0
PLANNED ACTIVITIES FOR 2012
Table 20 summarizes the auditing activities planned to be undertaken by TMAA in 2012. Table 20: Targets for 2012
Function Targets Auditing of quality To witness and record production of all minerals at Geita Gold and quantity of Mine (Geita), Bulyanhulu Gold Mine (Kahama), North Mara Gold produced and Mine (Tarime), Tulawaka Gold Mine (Biharamulo), Golden Pride exported minerals Mine (Nzega), Buzwagi Gold Mine (Kahama), Williamson for the purpose of Diamonds Mine (Kishapu), TanzaniteOne Tanzanite Mine determining (Simanjiro), Ngaka Coal Project (Mbinga) and Shanta Gold Mine values and royalty (Chunya). due. To undertake strategic auditing of minerals produced by medium and small scale miners. To collect samples of gold bearing materials produced by major gold mines and ship the same to the TMAA Laboratory in Dar es Salaam for analysis. To witness boxing, sealing and shipment for export of all minerals produced by major mines. To analyze mineral samples collected from the major gold mines so as to be able to accurately determine the quantity of gold, silver and copper contained. To return the analyzed mineral samples to the respective mines. To dispose laboratory wastes in a sound environmental manner. To store the collected data on production and exports of minerals in the TMAA database to ensure its correctness, security and easy access. To analyze the collected data to determine values and payable royalties of the minerals produced and exported. To collect, analyze and disseminate minerals production and exports data for projecting Government revenue, planning purposes and decision making in the administration of the mining industry. To counteract minerals smuggling and minerals royalty evasion in collaboration with relevant Government authorities.
37
Function Targets Auditing of To verify correctness of quantities and value of minerals produced revenue by large and medium scale mines such as BGM, NMGM, BZGM, generated, capital TGM, GPM, GGM, WDL, TTM, EL-Hillal Minerals, Nyanza Salt investment and Mine, TOL-Kyejo Project, TAZARA Kongoro Quarry, Mbeya Cement operating Quarry, Marmo E. Granito, Mineral Extraction Technologies, Twiga expenditure of the Cement Quarry, Mundarara Ruby, Minjingu Phosphates, Arusha large and medium Aggregates, Rajiv Construction, Ngaka Coal Project, Nyanza mining companies Roadworks Quarry, KASCCO Quarry, Katavi and Kapufi Gold Mine for the purpose of Limited, Shanta Gold Mine and Lukalasi Gold (just to mention a tax assessments. few) for the purpose of determining the amount of royalties due. To review financial statements, accounts, vouchers and other supporting records of large and medium scale mining companies (as listed above) for the purpose of verifying revenue generated, capital investments and operating costs incurred by the mines in the course of minerals production. To review tax accounting of large and medium scale mines (as listed above) based on revenues and allowable expenses for the purpose of giving assurance to the Government on correctness of taxable income or declared losses. To review financial projections and budgets on revenues, capital and operating expenditure of the major mining companies for the purpose of forecasting potential Government revenues from major mines in form of taxes and royalties. Monitoring and To monitor and audit environmental management activities in large scale mines (GPM, WDL, NMGM, GGM, TTM, TGM, BZGM and auditing of BGM); medium scale mines (El-Hillal Minerals, Ngaka Coal environmental Project, Nyanza Salt Mines, Minjingu Phosphate, Mbeya Cement management, Quarry, Twiga Cement Quarry, Kilimanjaro Mines, Tanzanite Africa, environmental Tanga Cement Quarry); and strategic audit on small scale mining budget and operations, so as to ensure compliance as per the Environmental expenditure for Management Act, Cap.191 and the Mining Act, Cap.123. the purpose of To review budgets and actual expenditure of large and medium scale mines (as listed above) incurred on environmental assessment of conservation at different phases of mining operations and compliance to the provisions for restoration of disturbed land upon mine closure. Environmental Management Plan To verify on site the significant environmental expenditure incurred by large and medium scale mines (as listed above).
38
Function (EMP).
Targets To assess whether enough funds have been set aside by large and medium scale mines (as listed above) to ensure best practice environmental protection and management to minimize impacts to the environment. To determine the extent to which the mines rehabilitation programs have been implemented. To monitor and audit environmental management activities in large scale mines (as listed above); and strategic audit on small scale mining operations, so as to ensure compliance as per the Environmental Management Act, Cap.191 and the Mining Act, Cap.123.
39
9.0
CONCLUSION
Tanzania has witnessed a booming mining industry over the past decade. This kind of growth necessitates comprehensive monitoring and auditing of mining activities. It is worth to note that apart from royalty being widely known as mineral benefits paid by large scale mining companies to the Government, corporate tax amounting to TZS 50.9 billion was paid to the Government during the year 2011. This amount brings total amount of corporate tax paid by large scale mining companies to TZS 94.2 billion as of December, 2011. In view of the above and remarkable achievements made in 2011, TMAA is fully committed to strive for more achievements in the coming year in order to ensure that the Government maximizes revenue collection from the industry. More corporate tax is expected to be paid by mining companies in the coming year. Given that fact, TMAA will continue to monitor and audit the industry, always acting in the best interest of the Government. We, all at TMAA, are looking forward for continued collaboration with other relevant Government bodies to ensure that a win-win situation between Government and mining companies is realized for sustainable development of the Country. The Agency will continue to build capacities in all relevant areas to ensure more effective and comprehensive coverage of monitoring and auditing for the purpose of maximizing Government take.
We Dared, We Succeeded and We are Forging Ahead.
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TMAA Annual Report 2011F

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TMAA Annual Report 2011F

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Message from the Chief Executive Officer It is a privilege to present the 2011 Tanzania Minerals Audit Agency (TMAA)

We Dared, We Succeeded and We are Forging Ahead.

Eng. Paul M. Masanja CHIEF EXECUTIVE OFFICER

TMAA Annual Report, 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

Table 1: Key Achievements in 2011

TMAA Annual Report, 2011

TMAA Annual Report, 2011

Figure 1: TMAA Organization Structure

BUSINESS SUPPORT (DIRECTOR)

MINERALS VALUATION & LABORATORY SERVICES

ENVIRONMENTAL MONITORING & AUDITING (DIRECTOR)

MINERALS PRODUCTION & EXPORTS MONITORING (DIRECTOR)

FINANCIAL AUDITING & ANALYSIS (DIRECTOR)

INFORMATION & COMMUNICATION TECHNOLOGY (DIRECTOR)

FINANCE & ACCOUNTS (MANAGER)

MINERALS VALUATION (MANAGER)

MINERALS PRODUCTION & EXPORT MONITORING OF LARGE SCALE MINES (MANAGER)

DATA MANAGEMENT AND ANALYSIS (MANAGER)

HUMAN RESOURCE & ADMINISTRATION (MANAGER)

LABORATORY SERVICES (MANAGER)

ENVIRONMENTAL MONITORING & AUDITING OF SMALL SCALE MINES (MANAGER)

FINANCIAL AUDITING & ANALYSIS FOR SMALL SCALE MINING (MANAGER)

INFORMATION TECHNOLOGY (MANAGER)

PLANNING AND RESEARCH DEVELOPMENT (MANAGER)

TAX AUDIT & REVIEW (MANAGER)

TMAA Annual Report, 2011

TARGETS FOR 2011

TMAA Annual Report, 2011

Table 3: Minerals Produced by Major Gold Mines in 2011

Minerals Exported by Major Gold Mines in 2011

TMAA Annual Report, 2011

Auditing of Diamonds Production and Exports

TMAA Annual Report, 2011

Table 5: Diamonds Production and Export, 2011

MMP (Carat) 6,013

NAL (Carat) 12,374

Total Weight (Carat) 18,387

Auditing of Tanzanite Production and Exports

Total Weight (Carat) 50,031.48 1,519,511.55 1,569,543.03

Export Value (USD) 5,321,839.59 4,596,383.69 9,918,223.28

Royalty Paid (USD) 56,268.32 228,543.31 284,811.63

TMAA Annual Report, 2011

Auditing of Building Materials in the Eastern Zone

Auditing of Coal Production at Ngaka Coal Project

Source: Zonal and Resident Mines Offices.

MINERAL ROYALTY PAYMENTS FOR 2011

Figure 4: Calculated Provisional Royalty by Mine 2011

Figure 5: Total Royalty Paid by Major Gold Mines (1998 - 2010)

Figure 6: Africas Top Four Gold Producing Countries (2008 2011)

Sources: World Gold Council and South African Chamber of Mines.

Historical Data on Mineral Production and Export

2005 1,170,500 381,688 7,618,921 1,460,075 190,384

2006 1,308,600 541,488 8,631,835 1,230,600 189,396

2007 1,127,700 431,124 5,548,485 1,700,134 220,209

2008 1,020,200 343,499 5,388,703 2,203,162 134,000

2009 1,114,775 399,178 7,093,375 1,910,000 133,526

2010 1,214,594 406,235 10,806,687 2,200,000 43,264