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 it faces numerous development challenges 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.
The country is ranked 79th out of the 109 jurisdictions surveyed in the 2015 Fraser Institute Policy Perceptions Survey.
PRINCIPAL LEGISLATION AND REGULATOR
The Mozambican Parliament approved a new Mining Law in 2014 (Law No. 20/2014), which repealed the previous Mining Law (Law No. 14/2002). While the government was due to issue regulations pertaining to the new law within 90 days of its approval, as of December 2015 the regulations have not yet been promulgated, resulting in a degree of uncertainty in relation to the new law.
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 Mining Law also provides for the Inspectorate-General of Mineral Resources (Inspecção-Geral de Recursos Minerais), which is responsible for ensuring the observance of the Mining Law 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 Mining Law.
GRANT AND FORMS OF MINERAL TITLE
According to the Mining Law, mining permits 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 Mining Law are:
- Prospecting and Exploration Licences: issued to legal entities incorporated and registered in Mozambique that demonstrate that they have sufficient technical and financial capacity; it is valid for a period of five years and is renewable as of right for a further three years (Art. 39, ML) for all mineral resources besides those used for constructions which are valid for two years, renewable as of right for a further two years. Licence holders must submit annual reports detailing expenditure and activity, as well as a work programme and budget for the following year.
- Mining Concessions: necessary for mineral extraction, development and production. It 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.
Other forms of mineral title are available for small-scale operations (mining certificates and mining passes), as well as processing and treatment licences. The concept of a mining contract is incorporated into the law, but it is unclear when it might be used since it is not mandatory and is not prescribed. The Mining Law has numerous additional provisions that will prove troublesome to the miner. Among them are the obligation to list on the local stock exchange; the permissible use of a so-called “mining contract” that is to be used by the state, in part, in order to ensure a progressively greater state participating interest in a mining project; the restriction on transfers and changes of control; the manner in which surface rights are to be compensated; and the obligation to maintain production levels once in production (absent consent from the state).
For the holder of a mining concession, the right of access and use of land is assured by Article 43(a) and (b) of the Mining Law. The Mining Law provides that the state has priority over other pre-existing rights of land use (Art. 27, ML). Article 12 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; the agreement is required to be witnessed by a community-based organisation if requested by a party. In addition, Decree 26/2004 requires those who carry out Level 3 Activities (Category A projects as per the Mining Law – see below) to 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).
Unfortunately, the law presents the miner with a very substantial problem insofar as the government must negotiate against its interests; in this regard, the Mining Law specifically requires the government to obtain the "best terms and conditions" in favour of the community in any such negotiation (Art. 30.4, Mining Law). Whilst perhaps well intended, we suspect that this provision will cause substantial confusion in practice and may even lead governments to seek to economically expropriate any "super profits" that might otherwise have been possible to the miner. In terms of causing confusion, it is also noteworthy that in order to secure a mining concession the miner is required to have secured "the right to use and enjoyment of the land"; this is somewhat contradictory to many other provisions of the law and ensures that miners will have to blunder their way through the law along with the agencies which are charged with its administration.
Mining taxes and royalties are provided in Law 28/2014 concerning a Tax Regime for Mining Activity, approved on 23 September 2014. According to Chapter II, Section I, a mining operator shall pay a royalty 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, Law 28/2014). The rate is 8% for diamonds, 6% for precious metals, 3% for basic metals and other minerals and metals not mentioned, and 1.5% for aggregate (Art. 12, Law 28/2014). As well, this Law outlines the fees payable for annual taxes based on surface area and this will depend on the licence held; the fee is set in national currency (Mozambican Meticais - MT) per hectare and depends on the type of licence and its duration. Non-compliance with the payment of the taxes may result in revocation of the licence or permit (Article 64, ML).
With respect to environmental permitting of mining projects, Article 69 of the Mining Law indicates that different levels of environmental scrutiny are required for different activities: an Environmental Impact Study is required for a project falling under Category A; a Simplified Environmental Impact Study is required for activities falling into Category B; and an Environmental Management Program is required for activities included in Category C. Mining activities are classified as Category A if they relate to mining activities carried out under a mining concession; Category B covers mining activities in respect of quarries, prospecting and exploration activities, and small-scale mining activities pursuant to a mining certificate; Category C includes activities carried out under a mining pass (very small scale community mining activities) and non-mechanized prospecting and research activities (Art. 3, Law 45/2004). Mine developers are also required to submit a decommissioning plan for approval by Mozambican authorities and to provide financial guarantees to cover decommissioning costs (Art 71, ML).
See Mozambique - Environmental Overview Commentary.