On Monday Kinross Gold Corp (NYSE:KGC) announced that it had resolved the dispute with the Mauritanian government and reached an agreement in to settle,

Kinross reaches agreement to settle tax exemption and fuel use disputes

Under the agreement, the Canadian mining company is expected to pay around $25 million to settle disputes over tax exemptions, mining licenses, and fuel use. The company also secured an expansion to its exploration license under the agreement. Kinross will receive a 30-year mining exploration license for the Tasiast Sud project.

On the other hand, the government of Mauritania will receive a free carried interest of 15% in the project. After completion of more feasibility work, the government will have the option of purchasing another 105 interest in the project.

This deal is similar to the one agreed by the Tanzanian government with Barrick Gold Corp (NYSE:GOLD) at the beginning of this year. The deal ended a protracted dispute between the Tanzanian government and the Canadian miner, which ended giving the government some interest in its 3 gold mines.

Mauritania to reinstate tax exemption on fuel for Kinross

Following the deal, the government of Mauritania will reinstate tax exemption for the company on fuel levies. The company indicated that the government will repay VAT refunds of around $40 million to Kinross. To resolve the tax exemption and fuel use disputes, Kinross will pay $10 million to the Mauritanian government. Equally, it will pay $15 million once it has received the exploration license for the Tasiast Sud projects and resolve issues around application for the license. This is with the aim of converting the license into an exploitation license.

The company indicated that it will now pay increasing royalty based on the price of gold. For prices below 1000/oz, the company will pay 4% while for prices above $1800 per ounce, it will pay a royalty of 6.5%. Kinross produced 391,097 gold ounces last year from the Tasiast sud gold mine. It indicated that the agreement enhances an encouraging foreign investment setting in Mauritania.