While the mining industry already plays an important role in Morocco’s economy, representing 25 percent of its exports, the national development strategy set out some lofty goals which include tripling non-phosphate revenues by the year 2025 and doubling jobs in the sector to over 30,000.
Morocco holds three quarters of global phosphate reserves, and so the export of phosphate products has traditionally dominated its mining industry, comprising up to 90 percent of mining exports. Other minerals reserves abound (including lead, zinc, copper, manganese, gold, silver, iron ore and barite), but have remained largely underground, due partly to a mining code which failed to encourage investment and partly to the success of the phosphate market which left them in its shadows.
In order to attract investment for the development of all its mineral treasures, Morocco is making great strides in modernizing its mining sector, including the recent introduction of a new mining code.
A new mining code
For over 60 years the mining sector was governed by the mining code of 1951, which had long ago become obsolete. Its overhaul came about through the introduction of a new mining code, following the enactment of Law 33.13 of July 2015 and its implementation decree in April 2016.
The new mining code introduces new types of mining authorizations, increases the term of a mining license to ten years and now covers all mineral substances with the exception of phosphates (reserved for the State) and construction materials.
Mining concessions granted under the old code remain valid and governed by the laws in force on the date they were granted, however, one year before expiry they must be replaced with a mining license issued under the new code. Holders of existing research permits were required to renew their permits within one year following the introduction of the new code, however, this period has since been extended to August 2017. Failure to comply with these requirements will lead to revocation of the mining title.
Exploration and mining operations
The new code allows for three types of mining rights within a specified area:
- An exploration authorization, granted for two years and renewable once for two years over areas of 100 to 600 km2. Applicants must enter into a contract with the mining administration detailing the planned exploration activities and investments
- A research permit, granted for three years over an area measuring 4 km by 4 km. It is renewable once for four years, subject to a minimum expenditure and works program. Unlike in other mining jurisdictions, the surface area of the permit is not reduced upon renewal
- A mining license, granted for ten-year terms and renewable for successive periods of ten years until the reserves are exhausted. Previously, this term was limited to only four years and its extension is a welcome change for investors. Interestingly, the grant of a mining license will revoke a research permit only to the extent its surface area is covered by the mining license and a new research permit will be issued for the area not covered by the license
Mining rights must be held by a Moroccan legal entity but there are no restrictions on foreign shareholders.
Transparency and environment
Mining title holders must provide the administration with information on their mining activities, including geological reports, mining statistics, work programs, budgets and information on products extracted. The code allows agents from government departments to make site visits to audit this information, however, further details on these submissions will be set out in future regulations.
Mining operations must be carried out in accordance with all environmental legislation currently in force, which includes a requirement to submit an environmental impact assessment. Furthermore, and in line with many other jurisdictions in Africa, permit holders must now develop a mine abandonment plan in accordance with the requirements set by regulations.
As referenced above, the new code provides a legal structure that contemplates, and indeed depends on, various regulatory texts which have yet to be published. These regulations will provide greater detail to the code’s existing provisions, particularly in the areas of local content, community development initiatives, environmental protection and abandonment of the mine.
In recent years, the mining industry has become accustomed to granting between 10 and 15 percent in mining projects to the host government. Investors may be relieved, and even surprised, to learn that there is no such requirement in Morocco.
For tax purposes, while mining companies are treated as per any other company in Morocco, various incentives may apply to mining activities including a reduced corporate tax rate of 17.50 percent (for exporting mining companies or those selling mining products to an exporting company) and a general income tax rate of 20 percent.
Mining companies are also subject to an annual ‘mining tax’ ranging from one to three dirhams per tonne extracted, as specified by the regional authorities where the mining activity takes place.
According to the Ministry of Mines, only 36 percent of the country has been geologically mapped. The Moroccan government is aware that mapping of a country's potential resources and providing easily accessible mining data is a vital step for any country in attracting foreign investment. Various sources report that the Mining Ministry is currently undertaking a number of initiatives to address these issues, including the establishment of a modern centralized mapping system.
In its global survey of mining companies 2015, the Fraser Institute ranked Morocco’s mining legislation among the top 10 most attractive in Africa and 24th place globally. The Government’s initiatives to establish a modern geological database will no doubt give the sector a further boost.
Benefitting from a stable economic, legal and political environment located on the doorstep of Europe, and with a rapidly developing infrastructure network, Morocco’s new code is sure to play a key role in a new dawn for the Moroccan mining sector.