Through Law No. 2012-015 of 27 February 2012 which established the Mining Code (the new Mining Code), the Malian National Assembly has adopted new legislation resulting in amendments to the Mining Code of 19 August 1999 (the former Mining Code). The political instability which immediately followed the adoption of the law delayed promulgation of the new legislation. However, mining operators in Mali have recently been notified of the entry into force of the new Mining Code. The new Mining Code is supplemented by Decree No. 2012-311/P-RM dated 21 June 2012 (the new Mining Regulation).
Unlike the new legislation adopted in Guinea in September 2011, the Malian new Mining Code does not involve an in-depth restructuring of the Country’s regime. The parameters of the regime have remained substantially the same, but a number of innovations and adjustments have been introduced, with an apparent objective of protecting the interests of the Malian population and ensuring that they benefit from the development of the mining sector. Several of the significant changes in the new Mining Code are focused on promoting and implementing transformation within Mali, ensuring the development of local communities, protecting the environment and securing proper site rehabilitation and mine closure.
We have summarised below the major changes introduced by the new Mining Code.
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The principal changes concerning the classification of minerals, superposition and mining titles are as follows:
- While the former Mining Code distinguished between ‘precious stones’ and ‘every other mineral’, the new Mining Code has a more detailed classification of minerals. There are now 5 groups of minerals consisting essentially in (a) precious and fine stones, (b) precious metals (gold, silver, platinum) and industrial metals (others), (c) bulk metals (ferrous metals and bauxite), (d) energy minerals, (e) non metallic substances others than energy minerals.
- The new Mining Code introduces new rules on title superposition whereby a mining title for substances in group 1 (diamond, emerald, sapphire, beryl, jade, opal, garnet, alexandrite, andalusite, chalcedony, quartz, tourmaline, and corundum) may be superposed with mining titles for substances in all other groups. However titles for substances in other groups may not be superposed among each other.
- The new Mining Code has retained the previous classes of mining titles, namely the exploration authorisation, the prospection authorisation, the research permit, the mechanical artisanal exploitation authorisation, the exploitation authorisation for small mines and the exploitation permit. However, a number of changes have been made to the rights attaching to these titles. For example:
- the exploration authorisation can no longer be renewed and will no longer provide its holder with a priority right to apply for a research permit;
- with respect to the exploration permit, the length of each renewal period has been reduced from 3 years to 2 years, although the new Mining Code has introduced the possibility of extending the second renewal period by an additional year if this is required in order to complete a feasibility study. Surprisingly, however, the obligation to return 50% of the surface area at each renewal seems to have been removed;
- the holder of the exploitation permit is now required to begin exploitation within three (3) years of the issuance of the permit. The permit holder must notify the Administration in charge of Mines of its intention to begin exploitation, and must mention any significant changes in key parameters of the feasibility study. If the changes affect the completion times and the viability of the proposed operation, the permit holder must submit a new feasibility study.
- The list of events that could lead to the withdrawal of a mining title has remained substantially the same as in the former Mining Code, but it is no longer exhaustive. The new Mining Code states that any failure to observe the conditions, obligations and restrictions attached to a title may now lead to its withdrawal. The notice period of 90 days for exploitation permits and 60 days for all other titles has been maintained under the new Mining Code.
- The new Mining Code has retained the right of the Administration in charge of Mines to prescribe any reasonable measure to ensure an appropriate exploitation of the subsoil resources by the holder of an exploitation permit. In the event that the holder of an exploitation permit does not apply appropriate exploitation methods, the new Mining Code now also entitles the Administration in charge of Mines to authorise the suspension of activities, in accordance with the rules set out in the Mining Regulation.
- The new Mining Code has introduced the concept of the merging of contiguous exploration permits.
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Participation of the State
The Malian Government has retained its right to a 10% non-dilutable free carried interest in the capital of a company holding an exploitation permit, in addition to an option to acquire another 10% for cash. However, the new Mining Code has also introduced the option for domestic private investors to acquire for cash at least 5% of the shares of the exploitation company, under the same conditions as other private shareholders. The conditions for the exercise of such right by Malian private investors and the exact obligations of a mining operator have not been specifically set out in either the new Mining Code or the new Mining Regulation.
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While the new Mining Code has essentially maintained operators’ obligations with regard to the employment, training and promotion of Malian personnel, new beneficiation rules have been introduced through the new article 21 which requires mining operators to proceed with the treatment, refining or transformation of mineral products in units based in Mali. This however remains a flexible rule as companies may be exempted if a specific authorisation is delivered by the Administration in charge of Mines. Neither the new Mining Code, nor the new Mining Regulation specifically set out the criteria under which such authorisation can be obtained.
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Environment and Site Rehabilitation
More stringent obligations have been introduced in relation to the protection of the environment. For example:
- The new Mining Code has retained the obligation that the holder of an exploitation permit submit a first demand bank guarantee from an internationally recognized bank (designed to ensure the rehabilitation and security of the site) following the termination of works. The Mining Regulation - which sets out the applicable amount and modalities - states that the bank guarantee must be 5% of the anticipated turnover, unless such amount proves to be insufficient in which case the mining company is required to cover any shortcomings. In comparison, the old Mining Regulation required the guarantee amount to equal the expected rehabilitation expenses.
- New rules have also been introduced in relation to mine closure and site rehabilitation, which must be the subject of a detailed plan filed as part of the application for an exploitation permit. The plan, which may have to be updated every five (5) years, must set out the method for the dismantlement and regeneration of the various components of the mining facilities. It must also set out progressive rehabilitation work that is to take place during exploitation and before mine closure.
- A number of new provisions enshrined in the new Mining Regulation introduce new environmental obligations on holders of mining titles. These include the obligation to:
- develop and implement appropriate procedures to manage chemicals and to ensure transportation, warehousing, handling and secure means of disposal of such substances as well as fuels and lubricants;
- build on site wastewater treatment facilities;
- establish a programme for waste reduction, sorting and recycling;
- ensure storages of oil and lubricants is made over large areas with containment walls;
- implement a management plan for water and mud tanks on the site;
- formulate and implement a site-specific program to monitor the quality of drained water and water collected from the dumps, the tailings and the tailing sites well as surface water and groundwater that can be contaminated by mining activity;
- establish regular procedures for inspection, monitoring, verification of the data recording and reporting pertaining to the tailings dams; and
- implement technical mechanisms to reduce emissions of greenhouse gas.
- The new Mining Code also imposes continued civil liability on the holder of an exploitation permit in respect of damages or accidents caused by old equipment, even after the closure of the mine and issuance of an environmental discharge.
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New rules have also been introduced to promote the development of local communities. These include the obligation to file a Community Development Plan together with the exploitation permit application, which is developed in consultation with the interested local communities as well as the local and regional authorities. The modalities of this consultation are set by the new Mining Regulation. The Community Development Plan must be updated every 2 years. The Administration in charge of Mines is required to create a Technical Committee on Local and Community Development which is in charge of approving and implementing the Community Development Plan.
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Relationship with third parties
The rules covering the relationship between holders of mining titles and owners or occupants of land have remained substantially the same, except for the following processes which have been introduced:
- the option for the title holder to request that a building – both within or outside its mining perimeter – necessary for the works and installations be declared of public utility. The same may apply for facilities aimed at the transportation and warehousing of mineral production; and
- the possibility for land owners and occupants burdened by an easement to request an expropriation or indemnification if the easement renders the normal use of the property impossible.
The title holder must also return any cultivated land to its previous state, by re-establishing the layer of topsoil as well as public roads.
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Fixed Fees, Surface Rights and ISCP
As with the former Mining Code, title holders must pay fixed fees for the grant, assignment, transfer and renewal of mining titles, as well as annual surface rights. However, contrary to the previous regime, the quantum of such fees or rights are provided in the Mining Regulation rather than being set out in the Mining Code. This will give the Administration increased flexibility to change the figures, including when an indexation is required, since this will not require a new law to be promulgated.
Special tax on certain products (Impôt Spécial sur Certains Produits or ISCP), calculated on the basis of turnover exclusive of VAT , also continues to apply. However, while the Mining Code implies that the ISCP is payable in respect to substances in groups 1 to 4, the new Mining Regulation imposes a 3% ISCP only for substances in groups 1 and 2.
Ad Valorem Tax
The new Mining Code has introduced an ad valorem tax applicable to all substances, the taxable basis of which is the square-mine value (“valeur carreau mine”) of extracted substances, exported or not, minus intermediary fees and expenses. The tax rate is set at 3% for substances in groups 1 and 2 and at 1% for all other substances.
Capital Gains Tax
The rate of tax on capital gain arising from the assignment of a mining title is reduced to 10%, compared to 20% under the former Mining Code. However, even when no capital gain is realised, a tax equal to 2% of the costs of works performed (for research permits and prospection authorisations) and 1% of the value of the project as per the feasibility study (for exploitation permits and exploitation authorisations) is payable upon the assignment of the relevant title.
General Taxes and Exemptions
Holders of prospecting authorisations and exploration permits are exempted from all taxes, including VAT, except for the following:
- the mining taxes, royalties and fees referred to above;
- youth employment tax and vocational training tax;
- the housing tax;
- expenses and payroll taxes due by employees, as prescribed by the regulations;
- tax on salaries and wages due by employees;
- road tax discs on vehicles, except heavy equipment exclusively used for prospecting or exploration operations;
- tax on insurance contracts, except for site vehicles and / or other vehicles exclusively used for exploration or prospecting operations;
- registration fees;
- contribution to the import verification programme; and
- statistical charges.
In addition to the taxes payable by holders of exploration and prospecting permits, as stated above, holders of exploitation permits are also subject to:
- lump sum contribution of employers;
- tax on security generated income;
- patent rights and related charges;
- tax on industrial and commercial profits or corporate tax (impôt sur les bénéfices industriels et commerciaux or l’impôt sur les sociétés);
- stamp duty on the intentions to export mining products.
The above is substantially similar to the regime existing under the former Mining Code, except that the tax on the import of petroleum and oil products applicable to holders of exploration permits and prospection authorisations (provided under Article 108(k) of the former Mining Code) and the tax on real estate income applicable to holders of exploitation permits and authorisations (provided under Article 109(j) of the former Mining Code) do not seem to have been maintained under the new regime.
In addition to the above, the new Mining Code has maintained the 3 year VAT exemption for holders of exploitation permits, and has reduced the rate of tax on industrial and commercial profits or corporate tax to 25% during fifteen years from commencement of production.
A new tax has been introduced applying to holders of an exploitation permit that would produce, in one year, more than 10% of the expected quantity fixed in the annual production program approved by their shareholders’ general assembly. This consists of standard taxes and rights applying to operations and results relating to overproduction.
Finally, the new Mining Code has extended certain tax benefits to investments in infrastructure, accommodation facilities, catering, education, health and leisure.
A new particular regime has been introduced by Article 135 of the new Mining Code, available to holders of exploitation permits and authorisations, in relation to works consisting in the extension of old activities in Mali, on the basis of a feasibility study previously approved by the State, and to investments of particular importance to the development of the Malian mining industry.
The new Mining Code does not introduce significant changes in relation to tax stability, except that in addition to mining rights, taxes, and royalties – which have been and are still excluded from the realm of stabilisation – the new Mining Code provides for new exclusions covering rights, taxes, and royalties set by international organisations to which Mali is party.
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Fund for research, training and promotion of mining activities
The new Mining Code provides for the creation of a fund to finance research, training and promotion of mining activities to allow the optimal exploitation of the mineral potential. This fund is set up on a yearly basis and managed in accordance with the Finance Law. The fund is financed by:
- the allocation of an amount from the Gold Resources Special Allocation Account, aimed at financing mining exploration;
- the training resources, paid by mining companies upon signing of their Mining Convention (Convention d’Établissement) or upon transfer of mining rights;
- the resources intended for the profit-sharing of agents (intéressement), indexed on a portion of the penalties under the Mining Code and the discovery premium.
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In relation to insurances covering their equipment, exploitation and responsibility, holders of exploitation permits are required to subscribe to policies provided by insurance companies licensed in Mali under the Conférence Interafricaine sur les Marchés d’Assurances (CIMA) Code of 1992 (the CIMA Code). It is noteworthy that the CIMA Code provides that the subscription of direct insurance abroad is prohibited.
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The new Mining Code creates new banking, accounting and reporting obligations for mining companies which use foreign bank accounts to finance certain transactions, including, among others, the acquisition, circulation and import of materials and equipment.
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The penal regime existing under the former Mining Code has remained substantially unchanged, except that the failure by the holder of a research permit or the holder of an exploitation permit which carries on research activities to file quarterly activities reports has now been added to the list of penal offences. In addition, the quantum of fines has been substantially increased in several instances.
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As a general principle, mining titles which were valid before the entry into force of the new Mining Code remain subject to the provisions of Ordinance No. 91-065/P-CTSP of 19 September 1991 and the former Mining Code and their respective implementing regulations.
However, the new Mining Code provides for a number of exceptions to the above general principle, namely for provisions relating to the following: groups of substances, renewal of titles and procedures for area reduction, waiver, transfer, transmission, leasing, requirements for administrative supervision and mining police, demarcation of mining exploitation title, protection and rehabilitation of the environment, community development plan and mine closure. This means that the provisions of the Mining Code pertaining to the foregoing would apply to all mining titles.
Also, holders of mining titles which were valid before the entry into force of the new Mining Code have been given a period of six (6) months to comply with health, hygiene and safety provisions.
The new Mining Code does not refer to any renegotiation of mining conventions.
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