10 July 2014

Cove updates on tax charge

02/03/2012 Ben Jaglom

Cove Energy (COV) has declared that it is 'seeking clarity' on whether or not it faces a tax charge from the government of Mozambique.

The AIM-quoted concern said it was responding to press reports that indicated the Mozambican government was looking to charge a levy of 8.5 per cent on the company's stake in the Rovuma Offshore Area 1 off the coast of Mozambique. It said it was 'seeking clarity' and would make 'further announcements when or if appropriate'.

Cove has been the subject of a bidding battle of late. Oil giant Shell offered £992 million for the group with a subsequent offer of state owned Thai oil explorer PTT coming two days later for £1.2 billion. 

The government of Mozambique understandably is seeking to benefit from the enormous mineral wealth that exists in the country, with the Portuguese-speaking nation currently the focus of a number of explorers interested in profiting from its resources with the charge representing part of its attempts to prevent the revenues going entirely into the hands of a collection of Western companies. Mozambique fought an elven year campaign starting in 1964 to liberate it from Portuguese rule.

Following the bid from PTT last month Growth Company Investor suggested 'holding on for the ride' as the shares traded at 237p. They have since sunk to 203.25p, having slipped nine per cent this morning on news relating to the tax charge. We retain our advice and suggest investors wait and see if any further bids come for the group.

Tags: Bid from the group, Government of Mozambique, Western powers in Mozambique

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