Barrick takes Senegalese dispute to the ICC

Canadian mining company Barrick is referring a tax dispute over tax liabilities associated with the sale of its Massawa mining project in Senegal to the International Chamber of Commerce (ICC).

Significance – Substantive differences

Randgold entered Senegal in 1995, discovered the Massawa project in 2009 and merged with Barrick Gold in 2018-19. In December 2019, Barrick announced the sale of its 90% stake in the still undeveloped Massawa project to Teranga Gold, another Canadian firm, for a reported USD430 million of which, USD380 million would be paid upfront[1]. The transaction was completed in March 2020.

According to Barrick Gold statements to the press last week (1 May), Senegalese tax authorities (DGID[2]) have issued a USD208 million tax bill in conjunction with that sale, which breaks with the “investment agreement and relevant legislation in place”[3]. The dispute appears to centre on a breakdown in communication and differences in view about the transaction’s precise financial details and whether tax increases over the life of the project are applicable[4]. A phrase repeated by DGID’s supporters in the local press is that exemptions only apply to mining operations and “the transfer of title is not a mining operation”[5]. It points to local frustration at the pace of development.

There may be other sources of grievance. In other instances, in Senegal, the sense that multinational corporations are bypassing local authorities, first in decision making and second in financial flows, has been aggravating for local stakeholders to put it lightly. Moreover, COVID-19 restrictions and cabinet reshuffles over the last year will have added an additional layer of difficulty to negotiations.

Outlook – It’s not over yet

Senegal is not alone. The ICC recorded a record number of cases last year[6] and the pace does not appear to have slowed since. Nevertheless, the race is not yet run in the bilateral Massawa discussions. Engagement is expected to continue. As stated by Barrick, negotiations are ongoing, pending the appointment of an arbitrator. Meanwhile, the timing of the dispute is somewhat unfortunate for Senegal given efforts to attract further investment into the extractives industry e.g., approaching 31 May deadline for oil licensing tenders.  

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[1] https://www.mining-journal.com/m-amp-a/news/1377513/teranga-to-create-top-tier-senegal-gold-complex-via-massawa-buy

[2] Direction générale des impôts et domaines (DGID)

[3] https://www.barrick.com/English/news/news-details/2021/barrick-refers-senegalese-tax-dispute-to-arbitration/default.aspx

[4] NB the mining code was revised in 2003 and 2016 for example

[5] https://www.dakaractu.com/Contentieux-opposant-l-Etat-du-Senegal-et-Barrick-Gold-Birahime-Seck-invite-la-societe-aurifere-a-la-treve-au-flux_a202998.html

[6] https://iccwbo.org/media-wall/news-speeches/icc-announces-record-2020-caseloads-in-arbitration-and-adr/

*image credit: Kelly Sikkema

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