Tenke, China Moly and African Taxes

Tenke Fungurume was acquired by China Molybdenum on has just been taken acquired by China Molybdenum.

In the last 12 months, there appears to have been a notable pick-up in interest in mining assets across Africa. Of specific interest are those transactions where the underlying asset resides  in Africa, though the listed entity, payments, change of ownership etc all takes place in another jurisdiction outside of Africa. A recent example of this is the sale of Tenke Fungurume (TFM) where a listed USA company sold its shares in the DRC mine to a Chinese consortium.

At first glance this is a seamless transaction but the question that comes to mind is the following:

Is there any benefit to the country where the asset resides?

Africa has always been hungry for mega-mining projects. The kudos, the infrastructure, the employment, the status and the revenue. However since 2015, there has been a growing movement focused on tax injustices in Africa and a bid to stop illicit financial flows.

Movements such as Stopthebleeding Africa IFF campaign received a huge boost, when in January this year, African leaders adopted the ground-breaking “High Level Panel on illicit financial flows.” This high level endorsement was backed by  Thabo Mbeki, the African Union and the Economic Commission for Africa, representing an unprecedented level of support for any financial campaign on the continent.

African governments are under huge pressure to review their double tax treaties, particularly in Sub-Saharan Africa. Most recently South Africa and Rwanda successfully renegotiated their agreements with Mauritius to curb tax drainage.

So what does this mean for this example? There are risks attached and the Core Consultants’ risk map below highlights some of these risks:

If one considers the risk map, the Tenke transaction is seemingly straightforward where the investor of the asset, simply passes ownership to a new company with no effect to the underlying asset (figure 1)

figure 1: At first glance the sale of TFM to China Moly is straightforward

However the reality is that there are a number of financial and tax risks that Tenke needs to consider in order to satisfy the various African tax structures. Just as an example the risk map could look as follows:

figure 2: Potential risk map for Tenke/China Moly deal


Selling assets in Africa is never straightforward. The fact that there is impending changes to the tax duties and double tax treaties adds a level of complexity. It is important when doing business in Africa to work with a company that has a well defined process, understands Africa’s regulations, is up to date with changes to Africa’s regulations and to follow this process to the letter.




Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.