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African mining boom triggers tax grab

African countries are moving to grab a bigger slice of their commodity wealth as rivalry for the world's remaining reserves of iron ore, uranium and gold sap the bargaining power of mining companies.

business Updated: Jul 11, 2011 21:07 IST

African countries are moving to grab a bigger slice of their commodity wealth as rivalry for the world's remaining reserves of iron ore, uranium and gold sap the bargaining power of mining companies.

Tanzania's proposal to study a so-called super tax on mines sent African Barrick Gold, the East African nation's biggest producer of the metal, to a record low in June. Ghana, Namibia, Guinea, Uganda, Mozambique and Gabon also are acting to increase their share of profits from mining. The balance of power is swinging in favour of African governments as commodity prices soar and Brazil's Vale and China's Minmetals Resources join western firms bidding for contracts.

"The fact that Chinese, Brazilian and Indian companies are becoming much more involved in the African mining space means that Western mining companies are feeling squeezed," said Chris Melville, a London-based African mining consultant at Menas Associates. "When you have more suitors, you can afford to be a little bit more selective and a little bit more demanding."

Companies may have little choice but to pay more. The copper belt running through Zambia and the Democratic Republic of Congo holds 10% of world copper reserves, while Congo alone has two-thirds of cobalt deposits. Botswana has 200 billion metric tonnes of coal reserves and Guinea is the world's biggest exporter of bauxite, the ore used to make the main raw material in aluminum production.

(In Exclusive Partnership with The Washington Post)