Surveys revealed the existence of high grade iron ore in Northern Mauritania, near Kediet d'Idjil, in the 1940s and of copper in Central Mauritania, near Akjout, in the early 1930s.
However, as recently stated in a Financial Times article, "from its independence from France in 1960 until recently, Mauritania was considered an impoverished and sparsely populated backwater on the far edge of both the Arab world and Africa"1
Several arguments have been put forward to explain this situation:
- during the colonial era, Mauritania was not administered as a separate entity before 1920 - it is a relatively 'young' country,
- ninety percent of Mauritanian territory is in the Sahara Desert,
- its population is relatively small – approximately one million people at the time of independence; and
- the privately owned "Mauritanian Iron Ore Mining Company" (MIFERMA), which was set up in 1952 by the French government and Western steel producers2 with support from the World Bank, to develop the Kedia d'Idjil deposit was nationalised on 28 November 1974.3
Mauritania's economic standing has evolved significantly over the last decades.
Mauritania ranked fourth in the 2013 Fraser Institute survey for African countries.
The National Industrial and Mining Mauritanian Company (SNIM) – the successor of MIFERMA – has become one of the ten largest iron ore producers in the world and the second largest employer in the country after the state.4 In 2013, it produced 13 million tonnes of iron ore valued at approximately US$1.4 billion, which made Mauritania the second largest iron producer in Africa after South Africa and the fifteenth largest iron ore producer in the world. SNIM’s ambition is to reach 40 million tonnes with a production cost of no more than US$40 per tonne and to become one of the world’s top five iron ore producers by 2025.
The capacity of the Nouadhibou mineral port was expanded to allow for 250,000-tonne vessels with a loading rate of 10,000 tonnes per hour in June 2013.
A few months later, in October 2013, SNIM announced the discovery of new iron ore resources of approximately 830 million tonnes near Zouerate.
The Mauritanian iron ore sector, which has historically been largely controlled by SNIM, is also increasingly opening up to foreign investors.5 Glencore and SNIM entered into a rail and post services binding term sheet in relation to the Askaf project6 after two years of negotiations in June 2014. The development of this project will require an investment of US$900m and production is expected from 2017, with a target of 7 million tonnes a year.
The gold sector is also expanding – Kinross, the operator of the Tasiast mine,7 which produced almost 250,000 ounces in 2013, is currently arranging financing for a US$1.6 billion expansion to bring production to approximately 830,000 ounces of gold per year.
Finally, the Guelb Moghrein copper-gold mine, which has been operated by First Quantum since 2004 and started production in 2006, is currently producing almost 40,000 tonnes of copper annually and the impact of recent strike action on the 2014 production is expected to be limited.
Brief history of the Mauritanian legal mining framework
At the time of independence in 1960, the key piece of mining regulation was Decree no. 54-1110 of 13 November 1954 on mineral substances in overseas Territory.
The first Mauritanian mining code was adopted by Law no. 77-204 of 30 July 1977 (the 1977 Mining Code). It covered hydrocarbons as well as minerals and provided, inter alia, that mining companies had to transfer a share of their production to the state.
The 1977 Mining Code was amended by Ordinance no. 80-295 of 6 November 1980 and Ordinance no. 88-150 of 13 November 1988 in order to:
- reduce the first term of exploration permits from five to three years, and
- provide for additional requirements in relation to quarterly and annual reporting.
The levels of surface royalty and issuance, renewal and transfer fees referred to in the 1977 Mining Code were detailed in Decree no. 80-121 of 9 June 1980 on mining taxes and fees (the Tax Decree).8
A new mining code was adopted by Law no. 99-013 of 23 June 1999 (the 1999 Mining Code).
This reform was supported by the World Bank and formed part of the liberalisation process encouraged by a number of international institutions in the 1990s.
The 1999 Mining Code was intended to:
- stimulate foreign investment, and
- provide foreign investors with a comprehensive and detailed mining and tax regime and certain key guarantees, including the stabilisation of the framework applicable to mining projects in Mauritania.
A model mining agreement was adopted by Law no. 2003-02 of 20 January 2002 (the "2002 Model Mining Agreement Law") on the basis of the 1999 Mining Code.
Mauritania's current mining code
A new mining code was adopted by Law no. 2008-011 of 27 April 2008 (the 2008 Mining Code). It provided for:
- additional requirements in terms of mandatory start of works following the granting of a permit;
- detailed customs, value added tax and amortisation regimes and certain tax incentives during the exploration phase, and
- additional power to the administration (e.g. request reports on extraction methods) and the right for the Minister to suspend or terminate exploration permits.
Law no. 2009-026 of 23 June 1999 amended the 2008 Mining Code in order to:
- provide for the state's right to be granted a 10% participation at no cost in entities holding an exploration permit, and
- reduce the maximum initial area of exploration permits from 2000km2 to 1000km2.
Decree no. 99-160 of 30 December 1999 on Mining Titles (the 1999 Mining Decree) set up detailed application, renewals and transfer processes. Additional authorisations were also provided in Decree no.139-2000/PM/MMI on mining administration.
The 1999 Mining Decree was replaced by Decree 2008/159/PM/MIM of 4 November 2008, which set up additional rules in relation to various application processes. It was amended by Decree no. 2009-051 of 4 February 2009 to update certain requirements.
Mauritania also adhered to the Extractive Industries Transparency Initiative in 2005, was admitted as a candidate country in 2007 and became compliant in 2012.
The 2008 Mining Code was recently further amended by Law no. 2012-014 of 22 February 2012 (the 2012 Mining Code Update) to:
- provide that exploration permits' areas must be reduced by 25% upon each renewal (the 2008 Mining Code did not provide for a specific percentage);
- provide for a capital gain tax9 capped at 10% for the transfer of any exploitation permit, and
- provide for sliding-scale float-based production royalty rates as follows:
Please click here to view the table.
The 2012 Mining Code Update also refers to the adoption of implementing regulations in relation to a training tax equal to 1% of the net profit of producing mining companies.10
To our knowledge, the implementing regulations referred to in the 2012 Mining Code Update have not yet been adopted.
Finally, a new model mining agreement (the 2012 Model Mining Agreement) was adopted by Law no. 2012-012 of 12 February 2012 (the 2012 Model Mining Agreement Law) to replace the 2002 Model Mining Agreement Law that was based on the 1999 Mining Code.
The 2012 Model Mining Agreement Law provides:
- that mining agreements and the 2008 Mining Code as amended shall prevail over any contradictory legislation, and
- for a tax stabilisation regime guaranteeing that the only applicable taxes are those provided for in the mining agreement.11
- states that the state's 10% participation cannot be diluted in the event of share capital increase,
- provides for various local content obligations,12 and
- states that any transfer of more than 10% of the share capital of a mining title holder or any transfer causing a change of its majority shareholder will be subject to the Minister's approval.13
Interestingly, the 2012 Model Mining Agreement Law provides that:
- mining agreements are not mandatory and that the administration will have the discretionary right to decide whether a mining agreement should be entered into for each project, and
- mining agreements cannot deviate from the 2012 Model Mining Agreement and will be approved by decree, which seems to contradict the provision stating that any amendment agreement relating to provisions that deal with legislative requirements will be subject to legislative ratification.
As a consequence, investors will need to review carefully the provisions of any contemplated mining agreement with the state. They are likely to insist on legislative ratification of their mining agreement if any provision of such agreement may be seen as deviating from the provisions of the 2008 Mining Code as amended or from the 2012 Model Mining Agreement.