SIERRA LEONE MINING REGULATIONS
Sierra Leone, officially the Republic of Sierra Leone, is located in West Africa, bordered by Guinea to the north and east, Liberia to the south-east and the Atlantic Ocean to the south and west. According to the World Bank, Sierra Leone has a population of over 7.3 million, with an average life expectancy of just 51 years – one of the lowest averages in the world. In 2016, Sierra Leone’s GDP was $3.669 billion (USD) (World Bank), making the country one of the poorest in the world. Sierra Leone is still recovering from the after effects of the civil war which lasted between 1991 and 2002 and, according to the UNDP, resulted in approximately 70,000 casualties and 2.6 million displaced people, though accurate statistics remain unknown. It is widely believed that the country’s mineral resources – in particular its diamonds – were a key motivation for the Revolutionary United Front and its backers.
Today, agriculture dominates Sierra Leone’s economy, accounting for approximately 70% of the GDP and employing approximately 61.1% of the population (World Bank). Since the end of the civil war, mineral exports have also been a major driver of the country’s economy, though economic growth has been greatly impacted by the fall in global commodity prices, particularly iron ore. In 2013, mineral exports were responsible for 93.8% of export revenues but by the end of 2014 this figure had reduced to 76.9% (USGS). Whilst the mining sector is a major contributor to GDP it employs just 1.4% of the population (World Bank). Sierra Leone is a world top ten producer of diamond and rutile (USGS), which along with iron ore are the main mineral exports. The country also has significant deposits of bauxite, gold, ilmenite and zirconium (USGS).
Sierra Leone was hit by the Ebola outbreak in 2014, which resulted in around 4000 deaths and, together with the fall in commodity prices, resulted in the economy contracting by 21.1% in 2015 (OECD). Since then economic growth has returned (4.3% in 2016 (OECD)) though continued growth will depend largely on rises in commodity prices – highlighting the need for diversification in the country’s economy. Illegal diamond mining continues to be a major problem, though international measures such as the Kimberley Process have had some impact.
In 2016, Sierra Leone was ranked 80th in the Fraser Institute’s Policy Perceptions Index of 104 jurisdictions. According to Transparency International’s Corruption Perception Index 2016, Sierra Leone is ranked 123rd out of 176 countries.
PRINCIPAL LEGISLATION AND REGULATOR
The principal legislation in Sierra Leone in relation to the mining industry is the Mines and Minerals Act 2009 (MMA), which regulates the licensing process for mineral activities in the country. Other relevant legislation includes the Environment Protection Agency Act 2008 (EPAA) and its accompanying regulations; the National Minerals Agency Act 2012 (NMAA), the Income Tax Act 2000 (ICA) and the Finance Act 2016. In addition, the Mines and Minerals Operational Regulation 2012 (MMOR) has specific requirements for surface, underground and open-pit mining operations and regulates mineral reporting standards, health and safety standards, the use of explosives and waste disposal.
In 2012 the National Minerals Agency (NMA) was established under the terms of the NMAA. The NMA, which is described as a semi-autonomous government agency, took over responsibility for the administration and regulation of the mining sector from the Ministry of Mines and Mineral Resources (Ministry) - though the Ministry remains the responsible authority for policy making in the sector. Under the terms of the MMA the Minister of Mines and Mineral Resources (Minister) is ultimately responsible for decisions relating to mineral rights; it is unclear if some of these duties are now carried out by the NMA, though the NMAA does not amend the MMA in this respect. The Minister is supported by the Director of Mines (Director), who heads the Directorate of Mines within the NMA; the Director is responsible for various inspections and ensuring that the terms of the MMA are being complied with (s. 6(1), MMA; see also s. 14(3), NMAA). The MMA also established the Minerals Advisory Board (MAB), which is composed of at least 15 people each representing various different organisation, communities and government agencies (see s. 11(2), MMA). The MAB has a variety of responsibilities including advising and making recommendations to the Minister in relation to granting, renewing, transferring and cancelling licences and certifying mineral rights applications (s. 12, MMA). Other relevant departments within the NMA include: the Mining Cadastre Office (MCO), which is responsible for managing mineral rights applications and maintaining a cadastral survey map of mineral rights (s. 40, MMA); the NMA Board which oversees the efficient operation of the NMA (s. 3(2), NMAA); the Department of Geological Survey which is responsible for facilitating and monitoring exploration and managing national geological information (s. 12(2)(b), NMAA); and the Department of Precious Minerals Trading which is responsible for administering precious minerals trading licences and certifying exports (s. 12(2), NMAA).
Under the terms of the MMA, ownership and control of all minerals in Sierra Leone and its continental shelf are vested in the Republic of Sierra Leone (s. 2(1), MMA).
GRANTS AND FORMS OF MINERAL TITLE
Mineral rights in Sierra Leone shall only be granted to: individuals over the age of 18 who are either citizens of Sierra Leone or have been resident in Sierra Leone for a period of 10 years immediately preceding the application and are not otherwise prohibited from obtaining rights under the MMA; co-operative societies registered in accordance with Sierra Leone laws; and body corporates incorporated and registered in accordance with Sierra Leone laws which are not otherwise prohibited from obtaining rights under the MMA (ss. 26 & 69, MMA). Rights shall be granted on application, except in designated areas where minerals have been discovered by the government in which case rights may only be granted by public tender (ss. 25 & 27, MMA).
All applications for mineral rights are submitted to the MCO and must be accompanied by a non-refundable fee ($250 (USD) for reconnaissance and exploration licences and $2,500 (USD) for large-scale mining licences (Aug. 2017)). Applications shall be forwarded to the MAB which will ensure that the requirements of the MMA have been met before the application is recorded and certified to the Minister. Ultimately the grant of all mineral rights is at the Minister’s discretion. Where the Minister refuses to grant an application the applicant must be provided with reasons for the refusal and be given the opportunity to amend the application. A decision of the Minister to refuse an application for a mineral right can be appealed in court.
All mineral rights may be granted subject to terms and conditions issued by the Minister. Each right shall specify the specific term for which it is granted and the area to which the right relates, subject to the maximum durations and areas specified in the MMA.
The MMA provides for the following mineral rights:
- Reconnaissance Licence: grants the holder the right to conduct non-exclusive and non-evasive reconnaissance operations in the designated area (ss. 1 and 64(1), MMA). The application must include: a statement of the technical and financial resources available to the applicant; details of any significant adverse effects the reconnaissance operations would be likely to have on the environment; and a statement of the applicant’s proposal regarding the employment of Sierra Leone citizens (s. 57, MMA). If the Minister grants the application, the applicant must notify the Minister of their willingness to accept the proposed licence within 30 days (s. 60(2), MMA). Reconnaissance licences shall be granted for a period not exceeding one year for an area no greater than 10,000 km² (s. 61(1), MMA). Activities under the licence must commence within 90 days of issuance (s. 65(1)(a), MMA). Holders are obligated to meet the requirements under section 65, MMA. Reconnaissance licences are renewable once for a period of up to one year subject to Ministerial approval (s. 63(6), MMA). Applications for renewal must be made 90 days prior to the expiry of the existing term and must be accompanied by a report of reconnaissance operations carried out so far, a proposed programme of future reconnaissance operations and a description of any alterations from the existing licence, amongst other information (s. 63(3), MMA).
- Exploration Licence: grants the holder the exclusive right to carry out approved exploration operations in the designated area (s. 77(1), MMA). The application for an Exploration Licence must contain a variety of documentation, including: company information with details of all shareholders having beneficial ownership of 5% or more of the issued share capital; company history of exploration operations in Sierra Leone; the name and qualifications of the person responsible for supervising the exploration programme; a planned exploration programme; a statement of the technical and financial resources available to the applicant; details of any adverse environmental effects; and a statement on proposals relating to the employment and training of Sierra Leone citizens (s. 70, MMA). If the Minister grants the application, the applicant must notify the Minister of their willingness to accept the proposed licence within 30 days (s. 72(2), MMA). Exploration licences shall be granted for a period not exceeding four years for an area no greater than 250 km2 (ss. 75-76, MMA). Approval of the programme of exploration operations must also be obtained and minimum expenditure obligations will be provided as part of the terms and conditions of the licence (s. 74(2), MMA). Exploration must commence within 90 days of issuance and the licence holder must meet the obligations specified under section 78, MMA. Licences are renewable twice, with the first renewal for a period no greater than three years and the second renewal for a period no greater than two years (ss. 76(6) & 76(11), MMA). Applications for renewal must be submitted at least 90 days prior to the expiry of the existing licence and contain the information specified under section 76(3), MMA (see s. 76(2) & (7), MMA). The application for the second renewal must also contain information on feasibility studies and environmental impact assessments to be carried out during the term of renewal and provide evidence that a mineral discovery has been made that may be of commercial value (s. 76(8), MMA; see also s. 76(10), MMA). The area for renewal shall be no greater than 125 km2, unless the Minister permits otherwise (s. 76(2) & (8)(a)(iii), MMA).
- Large-scale Mining Licence: The holder of an Exploration Licence shall have the exclusive right to apply for a Mining Licence over the exploration licence area (s. 79(1), MMA). An application for a large-scale Mining Licence (i.e. mining involving mechanised operations or underground openings exceeding 20m in depth (s.1, MMA)) must contain (amongst other things): the name and qualifications of the person responsible for supervising the programme of mining operations; the period for which the right is sought; a statement of the mineral deposits, including estimated reserves; a proposed programme of mining operations, including information on profitability, reclamation and rehabilitation measures, and environmental and social impacts; a detailed statement on forecast capital investment, operating costs, revenues and financing; information on consultations with interested and affected parties and the results thereof; proposals for the procurement of local goods and services and the employment and training of citizens; a report on marketing arrangements for the sale of mineral production; and an EIA licence (where required) (see s. 106(2), MMA). The Mining Licence shall not be granted unless the terms of section 108(3) are met, which includes that the applicant have adequate financial resources, technical competence and experience to carry out effective mining operations. The Minister shall not refuse a licence on the basis of such terms without first allowing the applicant to address the grounds for refusal (s. 108(4), MMA). If the Minister grants the licence the applicant shall have 60 days within which to accept the licence before the application lapses (s. 109(2), MMA). Mining licences shall be granted for a period not exceeding 25 years or the estimated life of the ore body, which ever is shorter (s. 110, MMA). Various additional documentation must be approved and appended to the licence (s. 111, MMA). Mining activities must commence within 180 days of registration of the licence and the licence holder must meet the obligations specified under section 115, MMA. The licence may be renewed for periods not exceeding 15 years (s. 112(2)(a), MMA). The application for renewal shall be accompanied by a statement providing details on: ore reserves, capital investment and forecasted costs and revenues; mining operations (if substantially different from the previous period); and social and environmental impacts and mitigation measures (s. 112(2), MMA). The Minister may renew the licence with or without variation of the conditions (s. 112(4), MMA).
Reconnaissance licences are not transferable (s. 68, MMA). Exploration and mining licences may be transferred with the prior approval of the Minister. Transfers may be subject to certain terms and conditions.
Other licences and permits issued in terms of the MMA include artisanal mining licences; small-scale mining licences (for mines that do not exceed the thresholds for large-scale mining licences); permits to explore for, mine, export or import any radioactive mineral; and dredging permits (see Parts 10-14, MMA).
Exploration and mining programmes must be submitted as part of the application for mining rights and must be approved by the Director (ss. 70(g) & 106(2)(i), MMA). Programmes will form part of the terms and conditions of the licence and minimum expenditure requirements will be given (ss. 74(2) & 110(2), MMA). Any amendments to the mineral programmes must be approved by the Director in the case of exploration, or the Minister in the case of mining (ss. 82 & 113, MMA).
Applications for mineral rights, including exploration, must contain proposals for the employment and training of Sierra Leone citizens (s. 70(k) & 106(n), MMA). Mineral rights holders are required to give preference to materials and products made in Sierra Leone and service agencies located in Sierra Leone which are owned by citizens, incorporated in Sierra Leone or public corporations (s. 163, MMA). Preference for employment must be given to citizens with the necessary skills and qualifications and training and employment schemes must be carried out by mining licence holders (s. 164, MMA).
A Community Development Agreement (CDA) with the primary host community shall be required where the operation exceeds certain limits and must be agreed and approved prior to the commencement of mining operations (s. 139(1), MMA; see also s. 141). The ‘primary host community’ is to be agreed between the licence holder and the local council; where there is no community of persons within 30km the primary host community shall be the local council (s. 139(2)-(3), MMA). Licence holders must spend no less than 1% of 1% of the gross revenue earned by the mining operations in the previous year to implement the CDA and provide the Minister with annual reports on expenditure (s. 139(4), MMA). The CDA must cover the extensive and broad criteria listed under section 140, MMA. The Minister must approve the CDA and if the terms cannot be agreed, the Minister shall make a decision on the CDA in consultation with the local council (s. 141, MMA).
The MMA requires an environmental impact assessment form part of the application for a large-scale Mining Licence (s. 131(2), MMA). Environmental requirements may also apply to exploration activities, though a simplified process will operate. Clear requirements are given under the Environmental and Social Regulations for the Mineral Sector (ESRMS), which were issued in 2012 to provide industry specific processes. Environmental licences shall be granted by the Board of Directors of the Environmental Protection Agency. Licences shall be refused where the environmental and social impacts are so great they are incapable of being avoided, mitigated or compensated for (s. 36(8)(c), ESRMS). Decisions on environmental licences may be appealed to the High Court within 30 days of notification.
Holders of large-scale mining licences must also reach an agreement with the owner or lawful occupier of the land to obtain a land lease or other rights to use the land. The agreement shall include details of surface rent (distributed in accordance with s. 34A, MMA), as well as the duration of the lease or right and the area to which it relates (s. 34, MMA). Where agreement cannot be reached it shall be determined by the Minister on the advice of the MAB. Compensation may be demanded by the owner or lawful occupier of the land and shall be based upon damages / market value of the land without reference to any enhanced value due to the presence of minerals (s. 35(1)-(3), MMA). The demand for compensation shall not entitle the owner or lawful occupier of the land to prevent or hinder the exercise of rights under a mineral right (s. 35(5), MMA). Where the mineral rights holder fails to pay compensation or the amount is unsatisfactory, the Minister may determine compensation on advice of the MAB (s. 35(6), MMA). The Minister may also compulsorily acquire private land or rights over private land for use by the holder of large-scale Mining Licence providing the Minister is satisfied that the licence holder has taken all reasonable steps to reach an agreement with the relevant parties (s. 36, MMA). In cases of compulsory acquisition compensation shall be paid on the same terms as stated above (s. 37, MMA). Owners or lawful occupiers shall also have the option to be compensated by resettlement; costs for resettlement shall be borne by the licence holder on the basis of an agreement with the relevant parties or a determination of the Minister (s. 38, MMA).
Holders of large-scale mining licences must pay an annual fee, currently set at $500,000 USD (Aug. 2017). The government has an option to acquire, on such terms as may be agreed between the relevant parties, a shareholding interest in any large-scale mining project (s. 162, MMA). Other royalty rates are clearly prescribed.
Terminations, suspensions and reductions in production must be notified to the Minister for approval (s. 118, MMA). Approval may be given subject to certain terms and conditions, including a date of resumption of production (s. 118(4), MMA). The MMA also contains extensive reporting requirements – with quarterly, semi-annually and annually reports on various matters required throughout the exploration and mining stages.
See ‘Environmental Overview Commentary’.