Burkina Faso is a landlocked country in West-Africa and surrounded by six countries: Mali to the north; Niger to the east; Benin to the southeast; Togo and Ghana to the south and Ivory Coast to the southwest. Burkina Faso is rich in natural resources and is emerging as one of the most attractive mining destinations in Africa especially for gold exploration and exploitation. Burkina Faso is ranked by Fraser Institute the third most attractive in Africa for mining with only Botswana and Ghana ahead of Burkina Faso. The income from gold plays an important role for the national economy. Gold production has doubled since 2008 and has become the second largest export product after cotton. Zinc and manganese are also exploited in Burkina Faso. The sub-soil contains various other mineral deposits such as magnetite, copper, lead, nickel, bauxite, phosphate and limestone. The mining sector currently represents 12.7 per cent of Burkina Faso GDP, but the Government is expecting the mining contribution to its GDP to double by 2015 as many gold, zinc and manganese projects are expected to generate revenues.
As in many other African mining jurisdictions, Burkina Faso is currently revising its 2003 Mining Code in view of increasing its benefits from the sector and improving its local economy by increasing local employment and business opportunities. This article gives a brief overview on mining law in Burkina Faso and discusses the main amendments proposed by the last draft of the new mining code that is expected to come into force by end of 2013.
II. Legal Framework
Burkina Faso’s legal system is based on civil law and is mainly copied from the French legal system. At the apex of the legal system, the Burkina Faso’ Constitution is the supreme law which was adopted by referendum of June 2, 1991 and revised three times by the Law No. 002/97/ADP of January 1997, the Law No. 003-2000/AN of April 11, 2000 and the Law No.001-2002/AN of January 22, 2002. The Constitution namely provides that the richness and natural resources belong to the people and are used to improve their life conditions.
Mining activities are mainly regulated by: the Law No. 031-2003/AN of May 8, 2003 on the Mining Code which is currently under revision, the Decree No. 2005-047/PRES/PM/MCE of February 3, 2005 on the management of authorizations and mining titles, the Decree No. 2010-075 PRES/PM/MEF of March 3, 2010 prescribing tax and mining royalties as amended by the Decree No. 2010-819 PRES/PM/MEF of December 31, 2010 and the Decree No. 2005-049/PRES/PM/MCE of February 3, 2005 setting the standard form of a mining convention for industrial exploitation permit, artisanal semi-industrial exploitation permit and exploration permit (together, “Mining Legislation”).
The Mining Code does not intend to create an exclusive and exhaustive legal framework for mining activities as many other legal instruments also regulate the mining activities in Burkina Faso. In this regard, the current Mining Code provides that its legal provisions shall apply without prejudice of those relating to specific areas governed by other legal instruments such as, for example, the Agrarian and Land Reorganization Act, Code of Public Health, Water management Act, Tax Code, Customs Code, Code of Environment, Forestry Code, Civil Code, Criminal Code and tax and custom laws.
At the regional level, Burkina Faso is a member of the West African Monetary and Economic Union (“WAEMU”) whose currency is the CFA Franc or CFA and a member of the Economic Community of West African States (“ECOWAS”). Burkina Faso also adhered to the Treaty on the Harmonization of Business Law in Africa (“OHADA”). 
III. General Principles
The Mining legislation aims to promote investment in the mining sector in Burkina Faso and to promote exploration and exploitation of natural resources necessary for the economic and social development of Burkina Faso. The scope of application of the Mining Code includes the prospection, exploration and exploitation of mineral deposits as well as the treatment, transport and transformation of mineral substances, except water and hydrocarbons. The natural deposits of mineral substances contained in the soil and sub-soil are ex officio the ownership of the State who shall ensure their development by resorting to private initiative in accordance with the provisions of the Mining Code.
In Burkina Faso, any individual or legal entity from Burkina Faso or of foreign nationality may carry out a mining activity regulated by the Mining Code. However, foreign legal entities are not eligible to hold exploitation permits. So, foreign companies need to create and incorporate a legal entity in Burkina Faso to hold exploitation permits. Any titleholder, except if he has his residency in Burkina Faso, needs to be registered in Burkina Faso and have an agent whose identity and qualifications must be given to the Administration of Mines. The appointed agent must be sufficiently aware of the mining activities of its principal in order to be able to provide the Administration of Mines with the necessary information. Prior to carry out such mining activity, a mining title or an authorization must be granted following the procedure set out by the Mining Code.
IV. Mining Titles
The Mining legislation envisages different mining titles: exploration permit, industrial exploitation permit and semi-industrial artisanal exploitation permit. The activities of prospection, traditional artisanal exploitation and exploitation for quarry substances are granted by administrative authorizations. This article focuses only on mining titles.
- Exploration permit
An exploration permit is granted by Decree of the Minister of Mines to any person who filed an application in accordance with the Decree No. 2005-047/PRES/PM/MCE of February 3, 2005 on the management of authorizations and mining titles. The application must be filed along with a program of exploration works that the applicant contemplates to carry out during the first year of validity of the permit and the related budget of such program. The exploration permit is valid for an initial period of three years from the date of the granting of the Ministerial Decree and may be renewed twice for consecutive periods of three years provided the titleholder complies with its rights and obligations set by the Mining Legislation. An exploration permit may be granted for a surface maximum of 250km2. Titleholders of exploration permit must start exploration works within the covered perimeter no later than 6 months of the date of validity of the permit and continue them diligently. Furthermore, holders of exploration permit are entitled to freely use the products extracted during their exploration works provided that the exploration works do not take on the character of exploitation works and subject to prior declaration to the Administration of Mines.
- Industrial exploitation permit
An industrial exploitation permit is granted by Decree taken by the Council of Ministers upon proposition of the Minister of Mines and after opinions issued by the Minister of the Environment and the National Commission of Mines to a holder of an exploration permit who complied with all the obligations set out by the Mining legislation and filed an application no later than three months before the expiry of the validity of its exploration permit in accordance with the Mining Legislation. The application must be filed along with a feasibility study and a plan for the development and exploitation of the mining deposits which shall include, inter alia, an environmental impact study and a mitigation and rehabilitation plan.
The current Mining Code provides for free state equity participation of 10 per cent in all companies on the delivery to the company of an industrial exploitation permit for large scale mine. The state equity participation is free and non-dilutable. The proposed draft of the new mining code extends the mandatory state equity participation to all industrial exploitation permits and contemplates the possibility for the State to acquire additional equity participation on commercial terms to be agreed with the mining company. So, the version of the new mining code as drafted today provides for an option for the Burkina Faso State to acquire an additional equity participation in all exploitation mining companies, but does not set any limit to such additional participation. As drafted today, the additional state equity participation shall not find application to exploitation permits granted before the entry into force of the new mining code.
The industrial exploitation permit grants its holder the exclusive right to explore and exploit mineral deposits within the covered perimeter. Its term of validity is 20 years for large scale mine and 10 years for small scale mine renewable for consecutive periods of 5 years. The industrial exploitation permit is a real property right which can be subject of mortgage or pledge. Unless the holder is exempted, the holder must commence the development and exploitation works no later than 2 years from the date of validity of the industrial mining permit and diligently continue in accordance with its undertakings.
- Semi-industrial artisanal exploitation permit
The semi-industrial artisanal exploitation permit is granted by the Administration of Mines after consultation with the competent administrative authorities and local communities. Its term of validity is 5 years and renewable for period of three years.
V. Mining Convention
The current Mining Code provides that exploration and exploitation permits shall be accompanied by a mining convention that the State will conclude with the titleholder. In fact, the application for an exploration or exploitation permit must include a proposed draft of a mining convention based on standard form of mining convention set by the Decree No. 2005-049/PRES/PM/MCE of February 3, 2005. The Mining convention supplements the provisions of the Mining Code and specifies the rights and obligations of the parties and may also offer to the titleholder the guarantee of stability for certain terms and conditions namely in relation to the fiscal, custom and change regimes. The duration of validity of the mining convention is maximum 25 years and renewable for successive periods of 10 years.
The proposed draft of new mining code contemplates to provide mining convention only for industrial exploitation permits. Exploration permits and semi-industrial exploitation permits would no longer be subject to a mining convention, but to term sheets whose content should be defined by the new Mining legislation. The proposed draft also intends to shorten the maximum duration of a mining convention to 20 years and its renewal periods to 5 years.
VI. Transfer and assignment of mining rights
Mining rights attached to mining titles are assignable and transferable in accordance with the conditions set in the Mining legislation.
However, prior to any partial or total assignment or transfer, approval of the Minister of Mines should be received. The application should be filed along with the documents listed in the Mining legislation and the assignee or transferee needs to be individual or legal entity that is eligible to hold mining rights. If the assignee or transferee offers the same guarantees of execution of its mining obligations as the assignor or transferor, the approval of the Minister of Mines shall be given provided that the assignor or transferor also complied with its own obligations. The Mining Code also provides for a tax on capital gains realized on such transaction in accordance with the Tax Code.
The draft of new mining code proposes now to set the tax on capital gains on such transaction at 20 per cent on the gains realized. However, this tax will not apply to transfer of an exploration permit to a subsidiary’s company before its conversion into an exploitation permit.
VII. Environmental and social considerations
The Mining legislation contains provisions that regulate the environmental, health and safety aspects of mining activities. Environmental aspects are regulated by the Mining legislation and the Environmental Code. Any applicant for mining title, except for exploration permit or authorization for quarrying exploitation, shall undertake an environmental impact study along with a public survey and an environmental management and mitigation plan.
The draft of new mining code proposes to include new provisions to give preference to local business and recruitment. For supply of goods and services, titleholders and holders of authorizations as their subcontractors would be obliged to give preference to local business provided they supply at the same quality, price and delivery terms. Concerning recruitment, titleholders, holders of authorizations and their subcontractors would be obliged to recruit in priority local employees for executive positions to the extent they offer the same qualifications and the necessary competencies to carry on the mining operations. The mining company would be obliged to file with the Administration of Mines a training plan for the local executives in order for them to progressively replace the expatriated employees. It is also provided that titleholder or holder of authorizations would be obliged to first recruit employees from the local community or the neighboring communities for positions that do not require any specific qualification.
VIII. Tax and custom regime
The Mining legislation provides for certain taxes that are specific to mining activities and offers certain tax incentives for titleholders at different stage of their projects to strengthen the competitiveness of the mining sector in Burkina Faso.
The tax and custom regime is protected by a stability clause. In this regard, article 93 of the Mining Code provides that the stabilization of the tax and custom regime is guaranteed to holders of exploitation permits and authorizations for exploitation during the period of validity of their permit or authorization in order to prevent an increase of their fiscal burden. During that period, tax rates, assessment rules and taxes shall be the same as those that existed at the date of the granting of the mining title or of the delivery of the authorization and no new taxes or charges of any nature shall be applicable to the titleholders during that period. However, the current Mining Code expressly excludes from its stability clause mining taxes, royalties and charges. The draft of new mining code proposes to limit the stabilization clause to a period of 20 years maximum. Further, holders of authorizations to exploit quarry substances shall benefit from the stabilization clause only if they would reach a certain level of investment to be defined by the Mining Regulations.
Holders of mining titles or authorizations are subject to the payment of fixed charges and proportional charges that include the surface area fees and the proportional mining royalties. The granting, renewal and transfer of mining titles or authorizations shall be subject to payment of fixed charges determined by the Decree No. 2010-075 PRES/PM/MEF specifying taxes and mining royalties.
The holders of mining titles or authorizations are also subject to the payment of an annual surface area fee which is assessed based on the surface covered by the permit or authorization and its period of validity. Furthermore, holders of mining titles or authorizations are subject to the payment of mining royalties calculated in percentage on the value of sales of extracted products. The current rates of the mining royalties are the following: 8 % for uranium; 7% for diamonds and gemstones, 3% to 5% for gold and precious metals (minimum rate is 3% which increases to 4% for prices between USD 1,000 and USD 1,300 per ounce, and to 5% for prices above USD 1,300 per ounce), 3% for based metals and other mineral substances.
The Mining code provides for some tax incentives for holders of exploration permits. The main incentives are exemption of the following taxes: value added tax on imports of goods needed for the realization of geological and mining activities or geological services, tax on industrial and commercial profits, tax on patent, employer and apprentice tax and registration fee for certain corporate acts. Holders of exploitation permits benefit from certain tax and custom incentives during the period of development work such as an exemption of the value added tax on certain imported equipment and services provided by geo-services companies. The period of such exemption is maximum 2 years which can be extended for another year provided that the level of investment reaches at least 50 per cent of the projected investment. During the period of development work, holders of exploitation permits are exempted of import duties on imports of goods, raw materials, equipment, fuels and lubricants intended for power generation and operation of vehicles and their components and spare parts as well, excluding statistic charge, community solidarity charge, community charge and other community charges. This exemption lasts for 3 years maximum and ends at the date of the first commercial production. During the exploitation stage, holders of exploitation permits are subject to the payment of the tax on industrial and commercial profits at the general rate reduced by 10 points and the tax on revenues on tangible assets at the general rate reduced by half. The current Mining Code provides for other tax incentives during the exploitation stage such as, for example, exemption for a period of 7 years of the patent tax, employer and apprentice tax, registration fees for certain corporate acts.
The draft of mining code proposes certain amendments to the current tax and custom regime. First, it proposes that holders of exploitation permits shall during the extension phase of the mine benefit from the same custom incentives available during the development work. The extension phase is any new mining investment program approved by the Minister of Mines which is initiated by a holder of an exploitation permit in exploitation phase for at least 2 years and which shall lead to an increase of 50 per cent of the duration of the mine; a realization of new investments different from the replaced investments; and a significant increase in employment. Second, the draft of new mining code proposes to remove the preferential rate for tax on industrial and commercial profits and tax on revenues on tangible assets that holders of exploitation permits currently benefit during the exploitation phase. Third, the draft of new mining code proposes to remove certain tax exemptions as defined in article 90 of the current Mining Code. Finally, the draft of new mining code proposes the creation of a new fund called “Mining Fund for Local Development”. The holders of exploitation permits and authorizations for quarrying exploitation shall be subject to the payment of 1 per cent of their turnover to the fund and the State shall pay 25 per cent of the collected mining royalties to the new fund. The modalities and management of the fund shall be specified by the implementation measures.
Burkina Faso is a relative stable country and emerging as one of the most attractive mining destinations in Africa, especially for gold exploration and exploitation.
As other African jurisdictions, Burkina Faso now intends to increase its benefits from the sector by increasing its equity participation in mining companies and increasing tax burdens for mining companies. Burkina Faso also intends to improve its local economy by increasing local employment and business opportunities for Burkinabe companies. Mining companies will also be expected to financially contribute to local communities by the creation of the Mining Fund for Local Development.
Burkina Faso Government has acknowledged the importance of the mining sector for its economy, but wants to review its mining policy by balancing the interests and increasing the benefits to the country and its people.