August 17, 2015

A 2014 note on Côte d’Ivoire's new mining code, looking at rights and obligations arising from mining titles (exploration and exploitation permits). 

Amendments to Côte d'Ivoire's mining legislation framework

In March 2012, the Government of the Republic of the Ivory Coast (Côte d’Ivoire) announced its intention to carry out a reform of its mining legal framework, in order to attract new investors. The executive branch of the country sought to diversify its economy and hoped to double its gold production (which had reached approximately 12 tonnes in 2013) by 2015. Since the time of such announcement, several drafts were communicated to the principal players in the sector, providing them with a preview of the contemplated reforms.

On 5 March 2014, the Parliament of the Republic of the Ivory Coast finally voted into law a text effecting a reform of the regime previously dating from law n° 95-553 of 18 July (the Mining Code of 1995), and the President of the Republic promulgated on 24 March 2014 law n° 2014-138 bearing the new mining code (the New Mining Code).

Mining titles

Exploration permit

The New Mining Code introduces new criteria for the attribution of exploration permits (PR), including the following requirements:

  • the applicant must have realised at least two mining exploration projects in the last ten years
  • the applicant must have a person in charge of the technical aspects of the works who has at least seven years of professional experience
  • the applicant must prove that it has the necessary financial capacity to bear the costs of the exploration works, by constituting a financial reserve with a prime ranking local bank.

The PR will be issued for an initial period of four years (as compared with three years in the 1995 Mining Code) and will be renewable twice for periods of three years each (previously two years). However, the period for exceptional renewal is reduced from three to two years.

The maximum surface area of the PR is reduced from 1,000 km² to 400 km², which is further reduced by one-quarter (rather than one-half in the previous mining code) on renewal of the mining title. The holder of the title may retain the full surface area if the works so require, by payment of an option price.

The New Mining Code reinforces the requirement that works begin by reducing the time period for commencement from one year to six months. The use of products extracted during exploration works is subject to the payment of mining taxes, in addition to the prior declaration to the mining administration.

Exploitation permits

The New Mining Code provides a more detailed description of the contents of the feasibility study to be produced by the holders of the exploitation permit (PE), which must include, among others, a socio-economic impact study (SEIS), an environmental impact study and a community development plan. In addition, the holders of the PE must be able to demonstrate, within six months of the award of the title, the availability of a team of experienced mining engineers and geologists, a technical person in charge of the works with at least seven years of professional experience and a financial reserve constituted with a prime ranking local bank. Failure to do so could result in the withdrawal of the licence. The PE is granted for the life of the mine, up to a maximum period of 20 years, and the maximum term for successive renewals is fixed at ten years each. Similarly to PRs, the obligations relating to commencement of the works are more restrictive, with the period reduced from two years to one year.

General provisions

In addition, the New Mining Code introduces new grounds for withdrawal of titles. These include:

  • absence of proof of the constitution of the financial reserve by the holder of the PR or the PE
  • the undertaking of exploitation activities in the area covered by a PR
  • the failure to perform obligations of the title holder relating to mining exploration works or community development
  • child labour by an exploitation company.

PRs and PEs may also be withdrawn where there is evidence of fraudulent acquisition of a mining title and any instance of corruption or attempted corruption in the context of the attribution of the relevant title. The authorised periods for the delay or suspension of exploration activities and commencement of exploitation activities, and for the production of a request for a PE following demonstration of the existence of a deposit, are decreased to six months.

Mining titles may be transferred subject to regulatory approval or approval by the Minister of Mines. However, the New Mining Code modifies the nature of the PE, which becomes an indivisible real property right which can be the subject of a mortgage. This change is likely to facilitate the financing of mining projects in the Ivory Coast.


Mining conventions

Where the 1995 Mining Code made no reference to mining conventions, the New Mining Code contains a chapter relating specifically to mining conventions. It specifies that the holder of a PE must conclude a convention within 60 working days of the granting of its title. That convention is valid for an initial period of 12 years and may be renewed for successive periods of 10 years each. The text specifies that mining conventions aim principally at stabilising tax and customs regimes, but they may not depart from the provisions of the law. They can also provide for dispute resolution by international arbitration.The content of the conventions and their implementation will be determined by subsequent decree. 


Relations with the State and with local industry

Participation of the State in mining companies

Unlike mining reforms in certain neighbouring countries, the New Mining Code does not increase the non-contributing share of the state in exploitation companies, which remains at ten per cent. However, it fixes the maximum percentage of the state’s additional and contributing shareholding at 15 per cent, provided that this limit does not take into account shares which may be held by state-owned companies in the share capital of the exploitation company. Where the state effects investments in the exploration phase, its contributing shareholding is no longer limited to a maximum amount.

Local participation

Among the key objectives behind reforming Ivory Coast's mining legislation, the New Mining Code contains several provisions to ensure local populations gain increased benefit by mining operations. It is expressly indicated that the state “encourages” the participation of Ivoirians in the share capital of mining companies and reserves the right to make the authorisation of industrial mining activities conditional on such participation.

Holders of mining titles are required to grant preference to local enterprises when choosing sub-contractors, at equivalent conditions of quality, price and quantity. Moreover, the mining code demands that sub-contractors be approved and that sub-contracting agreements be transmitted to the state administration. Holders of mining titles and their sub-contractors must also grant preference to local entreprises for construction, supply and services agreements, again at equivalent conditions of quality, price and quantity.

Holders of mining titles and their sub-contractors must employ Ivoirian nationals on a priority basis and establish and finance a training programme for such personnel. They must also implement a training plan for small and medium-sized national companies in order to increase their participation in the supply of goods and services to PE holders in mining projects, and a contribution to the financing of the strengthening of capacity of administrative agents and the education of Ivoirian mining engineers and geologists.


Tax and customs provisions

Taxation of capital gains

Although various drafts gave consideration to the mining industry, the New Mining Code did not retain the principle of taxation of capital gains resulting from an indirect change of control of the holder of a mining title. It deals solely with capital gains realised on the transfer of mining titles, which are taxed at ordinary rates under the General Tax Code.

Ad valorem tax

ad valorem taxis defined directly in the New Mining Code, but the rate will be determined by subsequent government decree. However, it is specified that holders of PEs for raw diamonds will not be subject to such tax.

Exemptions during the exploration phase

The New Mining Code provides tax incentives during the exploration phase including exemption from the tax on profits, the minimum flat tax (impôt minimum forfaitaire), real property taxes and registration taxes on contributions to the company's capital realised at the time of the constitution of the company or of any increase in share capital.

Exemptions during the exploitation phase

The most significant tax advantages occur during the exploitation phase, as the state guarantees the stability of tax and customs treatment to holders of PEs. The tax on additional profit, the terms of which were never really clearly defined, is henceforth abolished. In addition, the New Mining Code provides for numerous exemptions for holders of PEs, their affiliated companies and their approved sub-contractors, particularly for customs duties on fuel and export duties and taxes on products of the mine. Holders of PEs are also entitled, but only up to the date of first commercial production, to exemption from VAT on foreign imports and services, local acquisition of goods and services and sales related to mining operations. There are also exemptions from tax on industrial and commercial profits and the minimum flat tax for five years following first commercial production, as well as exemption from tax on real estate and from the business license tax - except for transformation of extracted materials - for the entire duration of the validity of the permit.


Exchange control

Applying the principles of the UEMOA (West African Economic and Monetary Union) Regulation, the New Mining Code provides that proceeds of the sale of minerals must be repatriated to the Ivory Coast within the prescribed periods, not exceeding one month from the due date for payment (which in turn must not exceed 120 days following the date of shipment of the minerals).


Good governance and environmental and social provisions

Following the trend established by mining reforms in neighbouring countries, the New Mining Code devotes an entire section to principles of good governance and community development.

First of all, the State expressly guarantees the respect, protection and implementation of human rights and imposes the same obligation on holders of mining titles. The use of child labour in mining activities is moreover specifically prohibited.

In addition, holders of PEs are required to establish a community development plan and an investment plan, in addition to the constitution of a fund to which they are required to contribute annually for the realisation of socioeconomic projects for the benefit of local communities.

The rehabilitation and closing of mines are dealt with in a new section. In addition to the escrow account for rehabilitation of the environment provided for under the 1995 Mining Code, applicants for PEs are henceforth required to establish a plan for the closing and the rehabilitation in the framework of the SEIS. They also assume civil liability for a period of five years following the closing of the site for damages and accidents which could be triggered by the prior installations.

Furthermore, the New Mining Code retains the desire, introduced in the various previous drafts, to subject holders of mining titles to the good governance principles and criteria of the Extractive Industries Transparency Initiative (EITI) and the Equator Principles, which strike at both active and passive corruption in the mining sector, as well as the Kimberly Process Certification Scheme aimed at preventing illegal traffic in diamonds.


Transitory provisions

Mining titles and mining conventions which remain valid on the date of entry into force of the New Mining Code will continue to be valid for their remaining term, but subsequent renewals must be effected in conformity with the new law. Holders of such mining titles and beneficiaries of such mining conventions may however request directly to be subject to the New Mining Code, subject to regulatory conditions.