The government of Mali escalated its efforts to gain control over the country’s mineral resources lately as reflected by the detention of the Chief Executive Officer, Terence Holohan, and other employees of Resolute Mining.
The head of the mining company was arrested by authorities shortly after engaging in discussions about taxes and operational matters.
Resolute is an Australia-based mining firm that holds an 80% stake in the Syama Gold Mine. The remaining stake is in the hands of the country’s government.
Companies in the mining sector have been under increased pressure by the current administration, which consists of a group of military officers who took power after a coup in 2020 that led to the ousting of Ibrahim Boubacar Keita.
Assimi Goita, the leader of the coup and current head of the military junta, has held on to power ever since and has postponed on multiple occasions a widely-awaited election that would help the country transition back to a Democratic system and restore the rule of the constitution.
The junta has been pushing to renegotiate the terms of the country’s contractual agreements with mining companies to make sure that a higher share of the proceeds produced by the mines are used to strengthen Mali’s finances – theoretically.
Government Demands Payment of $160M in Back Taxes
Mali’s government alleges that Resolute Mining owes the country approximately $161 million in back taxes. This estimation was obtained from a recent audit of the sector and its operations.
The government’s claim includes outstanding tax claims and customs levies. Meanwhile, they are also vowing to amend current agreements on the maintenance and management of offshore accounts and develop a more adequate framework for future operational negotiations.
Resolute has refused to acknowledge this debt and has categorized the military junta’s claim as “unsubstantiated.” They have resorted to diplomatic channels to settle the dispute following the arrest of its CEO but they have now opted to pay the bill to resolve the matter and secure the release of these employees.
The payment structure involves an initial settlement of $80 million while the remaining $80 million would be disbursed in the coming months.
An Overview of Mali’s Chaotic Political Situation
The political situation in Mali has been fragile since 2020 when the military took over the federal government.
The military junta has repeatedly pushed back the date for the elections and this has caused outrage among political parties and citizens who believe that the coup’s leader is just dragging his feet on the matter to fill his pockets in the meantime.
Goita’s coup resulted in a breakup of diplomatic relationships with multiple countries and hurt the local economy as a handful of nations have imposed sanctions on Mali to press the junta to hold elections and comply with the schedules they have already agreed on.
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In 2023, Goita claimed that a new constitution was allegedly approved by the country’s citizens. The electoral body claimed that 98% of voters said “yes” to the proposed document, but turnout was just 38%.
Democratic parties denounced the move as it gave Goita far-reaching powers to dissolve the parliament and dictate policy on multiple government matters.
The junta also opted to oust 12,000 troops from the United Nations from the country’s territory and hired 1,000 Russian mercenaries from the Wagner Group to ensure Mali’s peace at a point when jihadists control certain regions.
The mining sector is a critical battleground for military leaders who advocate for economic sovereignty for Mali. Adopting and enforcing new regulations for the industry may translate into higher revenues from mineral extraction. However, arresting the CEO of Resolute was not considered an act of good faith by the countries involved in the negotiations.
Last month, Barrick Gold was forced to pay $85 million to the government as well as part of a similar agreement.
“This memorandum of agreement is intended to settle outstanding differences and to establish the principles that would guide Barrick’s partnership with the government in the future, including an increase in the state’s share of the economic benefits generated by the Loulo-Gounkoto complex,” the company said in a statement released back then.
Record-High Gold Prices Motivate All Parties to Put an End to the Dispute
The United Kingdom and the Australian government have been involved in the negotiations with Mali’s current government to secure the release of Holohan and two other employees who are currently imprisoned until these pending taxes are paid.
Australia does not have a consular office in the country but it has managed to coordinate efforts with regional diplomatic missions to negotiate the terms of the agreement.
Resolute Mining has informed multiple times that Holohan and the employees that were captured are all “safe and well” and have been allowed by the government to receive diplomatic aid.
However, the ongoing dispute has affected the performance of Resolute Mining’s stock.
The company’s share price has experienced significant volatility lately with shares plummeting more than 40% since the detention was first reported.
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Despite these challenges, Resolute has maintained that its on-site operations at the Syama Gold Mine continue normally and have not been impacted by these ongoing negotiations.
The timing of the dispute is particularly challenging as gold prices have reached all-time highs. This creates an additional layer of incentives for both parties. In the case of Resolute, it would like to solve the matter as fast as possible to ensure the safety of its employees and ramp up production to take advantage of these higher prices.
Meanwhile, the government is motivated to take any necessary means to ensure that it can capture a higher share of the profits that would result from these positive market conditions.
As the release of Holohan materializes, the situation in Mali is far from getting better. Mining companies in the country may still have to deal with the erratic approach of the military junta and the country’s complex political environment, which is viewed by some as a ticking time bomb.