On October 2, 2013, the Council of Ministers of Burkina Faso adopted a draft of new mining code. This draft which was in discussion since 2012, aims to amend and replace the Law No. 031-2003/AN of May 8, 2003 on the Mining Code in Burkina Faso. By the adoption of this new mining code, Burkina Faso primarily intends to increase its revenues from the mining sector while promoting its local economy and the mining sector’s contribution to local development. The mining sector has become increasingly important for the economy of Burkina Faso which recently became the third gold producer in Africa after Ghana and Mali.
Notable innovations or changes in the draft of mining code include:
1° Provisions on the obligations to comply with and protect human rights and rights of local communities affected by mining activities as the introduction of the concept of social responsibility of mining companies in the mining code.
2° Creation of several funds: mining fund for local development, fund for protection and rehabilitation of the environment, fund for rehabilitation and safety of artisanal mining sites and fight against harmful effects and use of chemicals and fund for mining research.
3° State participation of a 10% free and non-dilutable stake in mining exploitation companies will now also apply to industrial small scale mining permit. The draft also provides for the State to acquire an additional optional participation in mining exploitation companies on commercial terms to be negotiated between parties. This option will not apply to exploitation permits granted before the entry of force of the new mining code.
4° Creation of a preferential dividend for the State equal to its ownership stake in the share capital of the mining company.
5° Exploration permit, semi-industrial exploitation permit and artisanal permit will be subject to term sheets whose content should be defined by the new mining regulations. Large scale or small scale mine permits are subject to a mining convention. The draft also intends to shorten the maximum duration of a mining convention from 25 to 20 years and its renewal periods from 10 to 5 years.
6° Non-eligibility of officers of the Administration of Mines to obtain mining titles or authorizations is extended to local and national politicians as well as to state officials. These people cannot hold any interest in mining titles or authorizations.
7° New provisions to promote local businesses and national and local workers. There is a new requirement for holders of mining permits or authorizations and their sub-contractors to give preference to Burkinabe enterprises for any contract for services or supplies provided that Burkinabe enterprises offer at least equivalent conditions. For workers, holders of mining permits or authorizations and their sub-contractors must in priority hire local managers if they have the same skill levels and qualifications. Mining companies must also file a training plan with the Administration of Mines which must also plan for gradual replacement of expatriated staff. Mining companies must also hire in priority workers from local community for positions that require no specific skills.
8° Setting in the mining code the tax on capital gains on any transactions for partial or total transfer of mining titles 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.
9° Amendments to the tax and custom advantages during the exploitation phase. The draft of mining code provides that holders of exploitation permits are subject now to the payment of the tax on industrial and commercial profits at the general rate and removed the preferential rate for tax on industrial and commercial profits and on revenues on security. The draft of mining code also removes certain tax exemptions as defined in article 90 of the current Mining Code as the minimum flat rate for tax on industrial and commercial profits, tax on patent, employer and apprentice tax and registration fee for certain corporate acts. While the version of the July 2012 draft of mining code provided that titleholders can benefit during the extension phase of the mine from the same custom advantages available during the development work, the draft of new mining code now provides that the holder of an exploitation permit benefits during the extension phase of the mine of the advantages available during the exploitation phase.
10° Limitation of the period of stabilization of the tax and custom regime to a maximum of 20 years.
This draft law will then be submitted to the Parliament of Burkina Faso for discussion and adoption. According to the Constitution of Burkina Faso, draft laws presented by the Government are introduced before the National Assembly for review and adoption.
Therefore, after its adoption by the National Assembly, the draft of mining code will be submitted to the President of the Republic, for promulgation within 21 days following its submission.
