Gold mine executives detained in Mali warned of ‘tax audit’ issue two weeks ago
Industry sources believe the Mali military government wants an extra $250m from Resolute Mining – and is detaining the company’s executives to force payment
A “tax audit” ordered by the military-controlled government of Mali may be the reason the chief executive of Australian goldminer Resolute Mining has been detained in the mineral-rich but financially struggling West African country.
Terry Holohan and two other Resolute executives were arrested on Friday at their hotel in Mali’s capital, Bamako, and detained by the country’s anti-corruption and financial crime unit.
The executives were reportedly being questioned over suspicions of providing false evidence and misappropriation of public goods, allegations they denied.
In a statement, Resolute Mining said the executives were in Bamako “to hold discussions with the mining and tax authorities regarding general activities related to the Company’s business practices in Mali in addition to progressing open claims which have been made against Resolute and which the Company maintains are unsubstantiated.”
Following the conclusion of those meetings on Friday, the company said, the three employees were “unexpectedly detained”.
Resolute said it had followed all official processes with respect to its affairs and was working towards a settlement with the Mali government on the future of the Syama Gold Mine, the third-largest goldmine in the country.
The three men were receiving support from the UK and other international embassies and consulates, the company said.
Mining industry figures in Australia were in shock over the detention but pointed out that goldmining companies in particular were attractive targets for “shakedowns” because of soaring prices.
The surprise move comes as Malian President Assimi Goita – who has just promoted himself to five-star general – introduces a new mining code that allows the state to acquire up to 30 per cent of projects and requires all foreign companies to “renegotiate” existing contracts.
Industry sources believe the Mali government wants an extra $250m from Resolute Mining while the company was looking at a figure closer to $75m.
Former Resolute managing director John Welborn said the development was deeply concerning but not entirely surprising, and was highly irresponsible behaviour from the Mali government.
“It looks like basically a hostage situation where the military junta has worked out that if they want to secure payment they detain executives until they’re paid,” Mr Welborn said.
“Resolute will have seen this as a negotiation of a taxation regime and the military junta will have seen it as just an opportunity to extract money.”
The first public sign the company might be facing trouble came two weeks ago in a quarterly earnings call – which Mr Holohan was also on – when chief financial officer Chris Eger revealed Resolute had been subject to increased tax audits in Mali.
“One very negative impact to the business, which is reflected in all of these numbers, relates to tax leakage that we were seeing across the company as a result of the increased fiscal pressures that we see both, unfortunately, in Mali and in Senegal,” Mr Eger said.
“Both countries are economically struggling and therefore, have been slow in returning our VAT refunds, and we’ve seen increased numbers of tax audits across the board.”
Asked about other near-term risks, Mr Holohan said that “from a security point of view, we don’t have any concerns”.
Mr Holohan pointed out that he had been in Mali only a couple of weeks before and would be going again to Bamako last week.
Regarding security risks, Mr Holohan referred to an incident two weeks before that “caught everybody by surprise”, apparently a reference to an attack by al-Qa’ida-linked militants on several locations across Bamako, killing at least 77 people and injuring 255 others.
However, Mr Holohan assured those on the call: “I can tell you that won’t happen again in the city. Where we are, down very close to the Côte d’Ivoire border, (it is) very, very quiet and we just continue as normal.
“I think in terms of what’s happening in Mali from a government perspective, we all know there’s a lot of mining companies. They’ve got their mining codes that are coming to the end of life. There’s a lot of negotiations happening there. It’s not affecting us at this stage.”
One mining analyst told The Australian the issue of the tax audits might have been an early warning of looming problems.
“With hindsight, perhaps there’s more to it. The way it typically works in these places, is you’ve got a military government trying to extract as much as they can from companies, and they’ll make a spurious claim and expect them to settle halfway – and if they don’t, problems ensue.
“But detaining a chief exec suggests there’s something pretty material behind this.”
A mining company boss with experience in Mali said the situation looked very serious.
“The government there needs money and the goldmining industry is the one that pays up, because typically they can, and especially now with the price of gold going up they have cash flow.
“It’s going to become an international issue because Terry is English, not Australian, so there’s a lot of complexities to this.”
Minns beefs up hate-speech laws
The NSW government has announced a suite of strengthened hate-speech and anti-Semitism reforms after recent, spiralling attacks targeting the state’s Jewish community.
Workers bear brunt of cost-of-living squeeze
While the financial strain continued to ease in the December quarter, new figures reveal that workers faced the sharpest rise in their living costs of all household cohorts.