MOZAMBIQUE - MINING REGULATION
Mozambique, officially the Republic of Mozambique, is located in southern Africa, bordered by Tanzania to the north, Malawi and Zambia to the northwest, Zimbabwe to the west, South Africa and Swaziland to the south and the Indian Ocean to the east. The country became independent in 1975 after several centuries of Portuguese control; while it suffered a prolonged civil war after independence, Mozambique has enjoyed stability since the country's first democratic elections in 1994. Mozambique's economy has improved considerably since the end of the civil war, with an average growth of 7% over the last twenty years (World Bank). In spite of this a large portion of the country's population live in poverty and numerous development challenges exist including malnutrition, malaria, low levels of literacy and short average life expectancy.
Mozambique is well endowed with natural resources with predictions that these resources will result in continued economic growth over the coming years. The country produces substantial quantities of mineral sands (ilmenite and zircon), aluminium and coal, as well as beryllium and tantalum. Gold is produced in small quantities by artisanal miners.
PRINCIPAL LEGISLATION AND REGULATOR
The Mozambican Parliament approved a new Mining Law in 2014 (Law No. 20/2014)(ML), which repealed the previous Mining Law (Law No. 14/2002). The Mining Law Regulations (RML) (Decree No. 31/2015) were subsequently passed in 2015, establishing the rules for exploration and mining operations as well as regulating mining permit procedures. Other relevant legislation applicable to the industry includes the Law on the Specific Regime of Taxation and Fiscal Benefits for Mining Operations 2014 (Law 28/2014) (Mining Tax Law); the Regulation of the Specific Regime of Taxation for Mining 2015 (Decree 28/2015) (Mining Tax Regulation); the Law on Public Private Partnerships 2011 (Law 15/2011); the Regulation on the Law on Public Private Partnerships (Law 16/2012); the Regulation on the Resettlement Process Resulting from Economic Activities 2012; and the Environmental Regulation for Mining Activity (Decree 26/2004).
Several government bodies share responsibility for overseeing and regulating the mining industry in the country. The Ministry of Mineral Resources and Energy (Ministério dos Recursos Minerais e Energia) (MIREME)) is the primary managing body; it develops and implements policies relating to the industry and is also responsible for overseeing the National Directorate of Mines (Direcção Nacional de Minas (NDM)) and the National Institute of Mines (Instituto Nacional de Minas (INM)). The INM is responsible for: reviewing, analysing and approving mining projects (including the completion of technical and economic studies for the opening of new mines and the decommissioning and/or closure of existing mines); minimising the social and environmental impacts of mining projects; publishing guidelines on public and private sector participation in the mining sector; and the development and proposal of new policies to MIREM concerning the development of the mining industry. The responsibilities of the NDM include the development of policies for the mining sector; the regulation and monitoring of mining projects; and the administration of the granting of licences and concessions. In addition the ML also provides for the Inspectorate-General of Mineral Resources (Inspecção-Geral de Recursos Minerais), which is responsible for ensuring the observance of the ML and all other relevant legislation (Art. 14, ML). While Mozambique’s Council of Ministers (a body which includes the president, prime minister and the other government ministers) is ultimately responsible for the granting of concessions and mining licences, this process is mainly administered and managed by the NDM.
According to Article 98 of the Mozambique Constitution (1990) natural resources in the soil and subsoil are the property of the state, a fact which is reiterated in Article 4 of the ML.
GRANT AND FORMS OF MINERAL TITLE
Applications for Prospecting and Exploration Licences and Mining Concessions may be granted on request or through a public tender process (Reg. 21, RML). According to the ML, mining titles may only be granted to Mozambican citizens or legal entities constituted in accordance with Mozambican legislation, which have proven financial and technical capacity (save for mining passes and commercialisation licences).
The key forms of mineral titles provided for in the ML are:
- Prospecting and Exploration Licences: grant the holder the exclusive right to prospect for minerals in the concession area and undertake research activities. Licences are valid for a period of five years and are renewable for a further three-year period (Art. 39, ML) for all mineral resources besides construction minerals which are valid for two years, renewable for a further two years. The holder of a Prospecting and Exploration Licence may request an enlargement of the area upon renewal (Reg. 41, RML) subject to the maximum licence area not being exceeded (198 hectares in respect of construction minerals and 19,998 hectares in respect of all other minerals (Reg. 35, RML)). From the end of the second year of the licence onwards the licence area must be progressively reduced, though the RML is not clear on the extent of such reductions (Reg. 42, RML). Licence holders must submit annual reports detailing expenditure and activity (see Reg. 40 and Annex 11, RML), as well as a work programme and budget for the following year.
- Mining Concessions: are necessary for mineral extraction, development and production. Concessions may be granted for a period of up to 25 years, and may be renewed for an equal period, taking into account the useful economic life of the mine (Art. 42, ML). Applicants for a Mining Concession must submit a feasibility study, production plan and proof of technical and financial capacity to the MIREME alongside a variety of other information. The holder of a Mining Concession must, by 30 March of each year, submit a work programme and budget for the operations of the following year, as a well as a plan for the sale of minerals. Concession holders must submit monthly, quarterly and annual reports on the production and sale of mineral products (see Reg. 56.2, RML).
Other forms of mineral title are available for small-scale operations (mining certificates and mining passes), as well as processing and treatment licences.
The transfer of a mining title may only take place two years after the beginning of mining activities, subject to the approval of the government (Art. 62, ML).
Article 12, ML indicates that pre-existing land users are entitled to fair compensation where land is required for mining operations; fair compensation for areas where families or communities are established must be determined by agreement of the government, the community and the company. In addition, Decree 26/2004 requires those who carry out Level 3 Activities (Category A projects as per the ML) conclude agreements with local communities in respect of the “methods and procedures for the management of environmental, biophysical, socio -economic and cultural areas for the duration of the project and after it is disposal” (Art. 28, Decree 26/2004).
Mining taxes and fees are provided under the Mining Tax Law and Mining Tax Regulation. According to Chapter II, Section I, a mining operator shall pay a mining production tax calculated by reference to the value of minerals extracted and by reference to third party sales (which are required to reflect the international market price for the commodity) (Art. 10, Mining Tax Law). The Mining Tax Law also outlines the fees payable for annual taxes based on surface area, which will depend on the licence held. Under Article 65 of the Regulation on the Law on Public Private Partnerships 2012, the state is granted the option of a 5% free carried interest. Non-compliance with the payment of the taxes may result in revocation of the licence or permit (Article 64, ML). Tax stability agreements over a ten year period may be negotiated in respect of investments over $100 million (USD).
For environmental impact assessment (EIA) and environmental licensing purposes mining activities are classified into three categories with varying environmental management requirements applicable.
Exploration and mining activities must be undertaken in accordance with an approved work plan/programme (Reg. 35.1(h), ML). The RML prescribes the content of exploration plans (see Reg. 102, RML) and mining plans (see Reg. 47, RML). Production must be maintained in accordance with the approved work plan and amendments to work plans must be approved by the INM (Reg. 52.4, RML).
The ML has numerous additional provisions that will prove troublesome to investors, including local stock exchange requirements, local participation matters, the use of “mining-contracts” by the state and production and employment obligations.
See Mozambique - Environmental Overview Commentary.