Gold miner Harmony, which showed grit in winning its battle for a R333-million deferred tax credit from the South African Revenue Service (Sars), is to use the tax break to sweeten its Free State gold projects.

The upshot of it all is that the company will pay R333-million less tax, Harmony CFO Hannes Meyer tells Mining Weekly in a video interview.

The tax break Harmony was seeking goes back to the com-pany’s purchase of Freegold from AngloGold Ashanti many years ago.

When Sars was having none of its claim for the ‘post-1973 Freegold mine’ allowance on unredeemed capital expendi-ture, Harmony decided to take Sars to court.

The court date was set down for March 14, but two business days before the case was due to be heard, Sars backed down.

Now the R333-million allowance is likely to be offset against the taxable earnings that Harmony’s new Tshepong and Phakisa growth projects generate.

Part of Harmony’s evidence was a letter signed by the then South African Finance, Minister Barend du Plessis, in 1985, which authenticated the annually accruing 10% allowance.

Harmony is allowed to offset the unused portion of R1,1-billion in capital allowances against future profits.
Not making use of the R1,1-billion allowance results, for example, in the amount growing by R110-million to R1,2-billion for the next year.

Harmony finance executives Adriaan van den Berg and James Jackson “did a lot of digging” over a period of years to win Sars’ acknowledgement, under the watchful eye of Harmony’s corporate financial manager Herman Perry.

Harmony has applied its 29% average 2010 Freegold tax rate to the allowance, which has resulted in the R333-million future tax asset.

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