In October 2016, the Senegalese Parliament passed a new Mining Code (the New Mining Code), which affects the way mining permits are processed, places additional social and environmental obligations on mine operators and changes the way royalties and taxes are calculated.
The New Mining Code only applies to organisations that acquired mining permits after 8 November 2016. The provisions of the 2003 Mining Code will continue to apply to those organisations that were issued permits prior to this date.
This article discusses the key amendments to the mining regulatory framework that will apply to organisations that fall within the ambit of the new regime.
Length of mining permits
In terms of the New Mining Code, small mine permits will be issued for an initial term of five years (previously these permits were issued for a term of three years). The term may be renewed for an additional three year period and can be renewed indefinitely.
Mining permits will be issued for an initial term of between five and 20 years (previously it was a maximum of 25 years). Permits will be renewable for an indefinite period (or until the resource is exhausted).
Changes to fees, royalties, taxes and tax relief
The New Mining Code has brought about changes to the fee structure. Under the New Mining Code, fees such as entry fees and quarry permits will be increased (the exact amount of the increase has not yet been determined) and an annual surface royalty has been introduced, which is payable by all mining title holders.
In 2012, most taxes relating to the mining sector were allocated to the General Tax Code. This practice continues under the New Mining Code, except for the introduction of a specific "mining tax". Mining activities will now be subject to a quarterly "mining tax", which is levied on the market value of the commercialised product.
Mining title holders will continue to benefit from exemption from all taxes and fees, including value-added tax (VAT) and the COSEC port charge, up until the first day of commercial production. This exemption, however, does not apply to the statistical royalty, community solidarity royalty and other community taxes.
The introduction of production sharing agreements
The New Mining Code permits the State of Senegal and a mining company to enter into a production sharing agreement. The mining company is entitled to split profits with the state and agree to an amount to be paid in lieu of paying the quarterly mining tax.
Enhanced social and environmental obligations
Under the New Mining Code, all mining title holders are required to comply and protect human rights in areas that are affected by mining operations. Mining title holders are now required to contribute annually to a local development fund to promote the economic and social development of local communities residing near mining areas. These projects are obliged to include women's empowerment projects.
In addition, small mine permit holders will be required to provide a guarantee as security for the cost of rehabilitating the mine site (which was not a requirement under the 2003 Mining Code).
Mining permit holders are still required to deposit funds in a trust account with a Senegalese bank, which will be used to rehabilitate the mine site.