Paladin Energy’s subsidiary Paladin Africa has recorded a 20 percent increase in production compared to last year at the mining company’s Kayelekera Uranium Project in northern Malawi.

According to Paladin’s Quarterly Activities Report (period ending 30 June 2013), Kayelekera delivered a record annual production of 1,344 tonnes of uranium oxide for the financial year 2013. The June quarter production levels were 4 percent greater than the March quarter and a record since the mine began production.

Revenue for the year is USD 408.4 million, which is a 14 percent increase on the 2012 financial year although recent weak prices that are associated with reactor restarts in Japan have affected revenue.

Nevertheless, Paladin Africa General Manager for International Affairs Greg Walker continues to explain that the mine in Malawi is making a loss. As we noted before, this would not be the first time a subsidiary reported a loss in a country to minimise taxation payments. According to some estimates, Malawi lost 12% of GDP to illicit financial flows between 1980 and 2009. This is of course not the only way the country loses money.

A new report on revenue opportunities in (and current losses from) Malawi’s mining sector shows that Malawi may lose between USD 205 million and USD 281 million over the 13 years of the mining project due to the favourable tax regime agreed between Paladin and the government of the day. Walker vehemently defended the company against this assertion.

To learn more about illicit financial flows, transfer pricing and tax avoidance, take a look at the Norwegian government’s overview of how companies are able to shift profits and thereby avoid taxation, and to delve deeper, study Professor Sol Picciotto‘s seminal book International Business Taxation: A Study in the Internationalization 
of Business Regulation, which can be downloaded for free, here.

Local communities continue to be disgruntled about the mining project. During Malawi’s president’s 5-day tour of the north of the country, Paramount Chief Kyungu for Karonga asked the president to ensure mining activities benefit communities,

These mining companies can inject part of the proceeds from their mining activities towards raising the standards and capacity of the health facility.

Paramount Chief Kyungu of Karonga asks President Joyce Banda to ensure communities benefit from mines (Courtesy of Nyasa Times)

Safety is also a concern at the mine. During the June quarter, the annual external safety, health and environment NOSA (National Occupational Safety Association) audit was conducted at Kayelekera Mine for the period May 2012 to May 2013 and a 5 Star Platinum result was achieved. This is laudable, however, it does little to quiet reports that a former mine employee is suffering from radiation sickness and Paladin is not covering medical expenses.

Other mine workers at Kayelekera are unhappy. The Anti-Corruption Bureau is currently investigating a case brought against Paladin by a former employee who alleges that Paladin bribed police with food and fuel to prevent them from taking a case of assault seriously.

In addition, last month, Nyasa Times reported that 5 Kayelekera workers were arrested in connection with the theft of explosives from the China Road and Bridge Construction Company in Chitipa, which borders Karonga District that is home of the mine site. The mine workers had allegedly threatened the mine management by email over unmet demands for a salary increase. Discontented mine workers are not only found at Kayelekera but also making their presence known across the continent in Ghana, South Africa, Zambia and Mozambique, among other countries.

Paladin also faces challenges in other countries. The most recent Quarterly Activities Report indicates that terrorist attacks on the Areva mining operations at Arlit and in the nearby town of Agadez in Niger have halted the Paladin’s planned activities on its nearby exploration properties.