New Mining Code in Mali
The trend of mining reforms in West and Central Africa continues, this time in Mali, Africa’s 3rd largest gold producer, with the announcement by the Malian Government on 22 August 2019 that it has adopted a draft Ordinance containing a new mining code (the New Mining Code).
The New Mining Code has not entered into force to date and remains to be published in the Malian official gazette. It is also to be supplemented by an implementing Decree, and no draft of such Decree has been made available to the public. This briefing is therefore based on our understanding of the latest version of the draft New Mining Code provided to the mining industry. Accordingly, the proposed changes highlighted below may vary depending on the final version published in the Malian official gazette.
While it is true that the Government, in an unprecedented exercise, consulted the mining industry on the proposed reform, it appears that the vast majority of the concerns raised by the industry throughout the review process were not taken into account.
Given that a number of provisions remain to be specified in the implementing Decree of the New Mining Code, particularly on the tax front, it is difficult at this stage to assess the impact of the reform on the attractiveness of Mali as a mining investment destination.
That being said, a reading of the latest version of the New Mining Code reveals a reform of the mining sector in line with the trends generally observed in sub-saharan Africa: increase of transparency and control by the State, increase in taxes, reduced scope both of exemptions and of benefits for investors.
Some of the key changes introduced by the New Mining Code would include:
- Reduction of the initial validity period of large scale exploitation permits (see below for the changes in the various classes of mining titles) from 30 to 10 years.
- Reduction of tax and customs stability period granted to exploitation titleholders from 30 years to 10 years to reflect the new initial validity period of large scale exploitation permit.
- More stringent obligations in relation to the protection of the environment (in particular during the exploration phase) and local content.
- Obligation for exploitation titleholders to contribute to 2 newly created mining funds, namely a Local Development Mining Fund and a Fund for the Financing of Geological and Mining Research. The contribution to the first fund, which is stated to apply even to pre-existing exploitation titleholders, is equal to 0.25% of the monthly turnover before tax or the value of the products extracted during the considered month.
- Reshuffle of the group classification of substances and changes in the various classes of mining titles, particularly with the removal of the prospection authorization and a new distinction between small scale exploitation permit versus large scale exploitation permit (instead of exploitation authorization of small mines versus exploitation permits under the previous mining legislation).
- The ability for the Government to launch tenders for the issuance of exploration permits.
On the tax and customs front, the New Mining Code would introduce a number of provisions which will increase the mining company’s financial burden. Among those:
- Capital gains tax applicable to direct and indirect transfers of mining titles or shares.
- Progressive royalty in case of a significant increase in the sale price of mining commodities.
- The reduced tax rate of 25% on industrial and commercial profits and corporate tax would only apply for 3 years after start of production (instead of 15 years under the previous mining legislation).
- Removal of the 3-year VAT exemption enjoyed by exploitation titleholders.
Finally, the New Mining Code’s transitory provisions would move away from Mali’s tradition of preserving the legal stability for pre-existing titleholders. Indeed, other than the tax and customs regimes which would remain stabilized for holders of pre-existing mining conventions, the entire New Mining Code would be applicable to pre-existing titleholders.
We will post a more thorough analysis of the changes introduced by this reform once the New Mining Code has been published and its implementing Decree adopted.