September 03, 2014
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As highlighted in our client alert of March 7, 2014, the Ivorian Parliament approved a new mining code (the “New Mining Code”) on March 5 which aimed at modernizing the mining sector and increasing its transparency.
However, in the absence of any implementing legislation, operators have been unable to assess exactly the extent of the changes brought by the New Mining Code as its main provisions appeared broad enough to leave a certain degree of flexibility to the government.
Many of these missing key details were recently supplemented with the adoption of (i) order no. 2014 148 (the “New Order”) published on May 29, 2014 which introduces revised ad valorem and land royalties and (ii) decree no. 2014-660 (the “New Decree”) adopted on June 25, 2014 (to be published soon) which provides clear answers on some, if not all, of the questions that were left open in the New Mining Code (together with the New Mining Code, the “New Mining Legislation”).
The major highlights of this New Mining Legislation are in line with the current trends observed in West Africa which emphasize local community development and environment protection. Thus, the New Order and the New Decree introduce additional contributions and/or obligations such as the mandatory creation of several development funds.
This New Mining Legislation also introduces increased financial obligations and commitments for operators with higher rates and fees applicable to mining activities and the new obligation for title holders to provide a bank guarantee. However, taking into account changing market conditions, the government has not attempted to reinstate the additional profit tax or introduce a production sharing mechanism.
This New Mining Legislation also aims at clarifying and modernizing the legal framework applicable to mining activities. The requirements for mining permits application, renewal and perimeter as well as the provisions regarding the size and terms of State’s stake in the share capital of the project company to which a mining title is issued have been made more specific. Furthermore, title holders are now allowed to grant security interests over their title to guarantee amounts borrowed to finance mining exploitation activities. The New Mining Legislation also codifies existing local practices by requiring mining companies to enter into a mining convention governing the exploitation phase and it now guarantees the stability of the convention’s tax and customs regime provided it is compliant with the New Mining Legislation.
Accordingly, whilst it is true that this New Mining Legislation is more burdensome and is likely to financially impact mining activities (especially given the creation of apparently at least three mandatory development funds), the overall legal framework also appears to be more transparent and sounder for operators.
Grey areas nonetheless still remain due to the provisions governing the entry into force of such implementing regulation: by only broadly stating that the New Decree and the New Order repeal all contrary provisions found in previous legislation (including decree no. 96-634 dated August 9, 1996 in application of law no. 95-553 dated July 18, 1995), this new regulation leaves a substantial degree of uncertainty regarding which provisions continue to be in force since only those that are clearly contradictory can be safely considered as repealed. As a result important issues could be left open to interpretation such as whether the obligation to employ at least 80% of Ivorian nationals is still mandatory or whether the fixed duties provided by ordinance no. 96-600 dated August 9, 1996 are still payable and at which rate.