Randgold Seeks Better Relations in Mali Amid $144M Tax Dispute

Trust Bloomberg Tax for the international news and analysis to navigate the complex tax treaty networks and global business regulations.

By Ben Stupples

Nov. 4 — Randgold Resources Ltd., the world’s eighth-largest gold miner by market capitalization, is keen to improve relations with Mali’s government to avoid future tax disputes in the west African country.

“We need to get in there and work on a better relationship,” Mark Bristow, Randgold co-founder and chief executive officer told Bloomberg BNA about the ongoing dispute with the Malian government. “Randgold’s been there for 21 years, and our business plans go way beyond 10 years from now.”

Bristow’s comments in an Oct. 27 telephone interview came the day after Randgold announced it would make a payment of 15 billion Mali francs ($25 million) to help resolve a three-year tax dispute about tax payments between 2011 and 2013. The government froze the company’s bank accounts and closed its offices in Bamako, Mali’s capital, for more than 10 days in October because of the dispute.

The Malian government has brought tax claims of $144 million against Randgold’s operations in the west African nation, according to the company’s third quarter results published Nov. 3.

Randgold also claims that the Malian government owes it $99.1 million in refundable value-added tax (VAT) balances.

“Having taken professional advice, the group considers material elements of the outstanding claims to be without merit or foundation and is strongly defending its position,” Randgold said Nov. 3.

Final Solution

Randgold agreed to make the $25 million payment based on the expectation of a “final and global solution” to the dispute with the Mali government, the company said in an Oct. 26 statement. Any leftover money from the payment will return to Randgold once the dispute is resolved, it added.

Bristow met with Mali’s minister of finance and economy, Boubou Cisse, the weekend of Oct. 22 to discuss its payment to the government, which had demanded further payment as a condition of reopening Randgold’s Bamako offices on Oct. 21.

The pair had a “constructive engagement” during the weekend meeting, Bristow said. Randgold expects to recover the 15 billion Mali francs paid to the government, he added.

“There’s nothing of owing—it will all come back,” Bristow said about the payment. “We’ve been looking for a global solution, otherwise this goes round and round, and we’d like to get clarification going forward, and we also don’t want to waste everyone’s time with these sort of arguments.”

Mali’s Response

Mohamed Lamine Samake, a technical adviser to Mali’s finance ministry, didn’t reply to repeated requests for comment on the Randgold tax dispute.

In an Oct. 27 briefing note to analysts covering Randgold, London-based communications agency Cadogan PR, on behalf of the Malian government, described the forced closure of the miner’s Bamako offices as “partially successful” as it resulted the company making the $25 million payment.

Randgold still owes Mali’s tax authorities a “substantial amount,” and the government will continue to take the “necessary action” to recover it, the briefing note said without giving further details.

Different Accounts

“There are two very different accounts of what’s going on,” Bruce Whitehouse, associate professor of anthropology at Bethlehem, Pa.-based Lehigh University, told Bloomberg BNA in an Oct. 31 telephone interview. Whitehouse focuses on sub-Saharan Africa and counts Mali as a research interest.

“The one that you hear Randgold talking about is that the Mali government is not being transparent or consistent, and is fishing for tax revenues where it hasn’t before, and you read in the Malian press that western corporations are out to exploit the Malian people and deprive the state of revenues.”

Three of Randgold’s five mines in Africa are located in Mali, the eighth-largest in Africa country by geographical area; the government owns a 20 percent stake in each one. Last year, Randgold paid Mali almost $150 million in taxes and dividends, according to its 2015 annual report.

Randgold’s refund claim of $99.1 million in VAT payments follow its tribunal this year with the World Bank’s International Center for Settlement of Investment, which found that the Malian government had “wrongly collected” taxes from Randgold, but the disputed amount only reached $29.2 million.

“I’m not prepared to be robust in this discussion because it’s solvable,” Bristow said Oct. 27 about the ongoing tax dispute in Mali. “We can’t take the mines and leave the country, and we have clear legal documents that will force the two partners to come to the right conclusion, which will be fair and legally binding.”

Multinational Taxes

The taxes that multinational companies pay to tax authorities has become an area of increasingly global focus, largely due to the Organization for Economic Cooperation and Development’s efforts to combat tax avoidance strategies through 15 measures in its base erosion and profit shifting project, launched three years ago.

Yet Nikolas Toleris, a London-based mining analyst with Mirabaud Securities Ltd., said Randgold’s tax dispute in Mali puts the country’s government in a worse light than the multinational gold miner.

“It would alarm other potential investors that, even if there’s an agreement, the government could still close your offices and possibly stop you mining,” he told Bloomberg BNA Oct. 28. “It’s not a good sign. It could do more harm to Mali than Randgold.”

Gold mining accounts for 16 percent of the Malian economy, Toleris said in an Oct. 28 e-mail. Randgold, AngloGold Ashanti Ltd. and IAMGOLD Corp. are the main gold producers in Mali, and each mine is governed by a convention that oversees taxes and allows arbitration if disputes can’t be resolved, he added.

BlackRock Inc

At 6.4 billion pounds, Randgold’s market capitalization is more than half the size of the Malian economy. The company’s largest shareholder is BlackRock Inc., the world’s largest asset manager, which holds a 14.4 percent stake in the miner, according to data compiled by Bloomberg BNA.

Citing BlackRock, Bristow highlighted the responsibility that Randgold has to invest shareholders’ money and earn returns for them in the “challenging jurisdictions” in which the company operates.

“They want the money to make a difference in the emerging world and we have to manage these dynamics, and we do,” he said Oct. 27. “You don’t do that walking around and poking everyone in the eye.”

Third Quarter Results

The Jersey, Channel Islands-based Randgold recorded third quarter profits on Nov. 3 of $77.3 million, a 32 percent increase from the previous three months. In a conference call following the results, Bristow said that the gold miner had “bounced back.”

With assistance from Francois Rihouay in Bamako, Mali.

To contact the reporter on this story: Ben Stupples in London at bstupples@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request International Tax