More trouble for Acacia

16Jun 2017
The Guardian Reporter
The Guardian
More trouble for Acacia
  • The beleaguered gold mining firm is now being sued by five village councils for 53 billion/- in unpaid royalties over 15 years from its North Mara quarry

FIVE village councils in Tarime District, Mara Region have filed a case before the Mwanza High Court demanding 53 billion/- in outstanding royalties from the North Mara gold mine owned by Acacia Mining Plc. 


The plaintiffs in the case filed at the Mwanza district registry are the Nyamwanga, Kerende, Kewanja, Nyangoto and Genkuru village councils, all located in the district.

They jointly and severally claim from the North Mara Gold Mine Limited company (formerly East Africa Gold Mines Limited) payments of $26,786,250.30 due from July 2002 to December 2011, plus interest at a commercial bank rate of 21 percent from January 2012 to the date of the case judgment.

The commercial case has been set for hearing before Judge Sirilius Matupa on June 27.

According to the plaintiffs’ suit, between August 24 and September 8, 1995, the village councils and East Africa Gold Mines Limited separately entered into agreements whereby the council’s surrendered various mineral prospecting licenses to the defendant.

In return, among the benefits and consideration, the defendant undertook to pay a royalty equal to the value of one per cent of all gold produced under the licenses, calculated at London spot prices at the governing rate of US dollars.

As per the agreements, the said payments were to be effected to the plaintiffs (councils) quarterly and in cash as calculated on the last day of each respective quarter, says the suit lodged by advocate Joseph Rutabingwa in behalf of the plaintiffs.

It adds that following the actual commencement of mining, the actual amount of gold produced from 2002 to December 2011 was 2,114,701 ounces.

States the petition: “Such production was in relation to the findings by the appointed agent M/S KPMG Certified Public Accountants. When calculated at the spot price of 1,290 US dollars per ounce (at the time), the actual amount due to the plaintiff, as one percent royalty, is $27,279,655.80.” 

It says during the entire period, the defendant paid to the plaintiffs a sum of $493,405.50 only, leaving a balance of $26,786,250.30 which the plaintiffs are now claiming jointly and severally.

The suit continues that on June 2, 2014, basing on a preliminary report by appointed auditors KPMG, the mining firm was served with a demand notice of claim and intention to sue, but no response was received.

“By refusing the pay the amount timely, the defendant has denied gainful use of the sum for various economic activities. We therefore pray for interest on the said sum compounded annually from January 2012, at the rate of 21 percent, to the date of judgment,” it adds. 

North Mara Gold Mine Ltd said in its written statement of defence that it “vehemently” disputes the plaintiffs’ “frivolous” claims.

The company said it has been using the said royalty to pay school fees for children hailing from the villages surrounding the mine, and asserted that the plaintiffs (councils) are pretending to be ignorant of that fact.

The company further stated that it was due to such claims that they agreed to have a full financial audit into the claims, although this was inconclusive due to lack of sufficient records.

It attributed the lack of records to various changes from the predecessor companies, plus lack of honesty from village leaders.

The company operates three major mine pits - Gokona, Nyabirama and Nyabigena. According to its statement of defence, it was agreed that the royalty  calculation would based on gold produced and sold from the Nyabigena pit only and not all three pits as alleged by the plaintiffs.

The company says available data indicates that production of gold from the Nyabigena pit commenced in 2005 and ceased in 2010, with the production report showing that the total amount of gold produced was 685,382 ounces, while gold sold was 318,027 ounces.

The company asserts further that despite having stopped production at the Nyabigena pit and upon request from the then village leaders, it granted a further advance payment to the villages amounting to $493,405.25.