Overviewi New mining code
The Parliament of Senegal passed a new Mining Code, Act No. 27/2016 on the Mining Code, on 30 October 2016.
The new Mining Code (the 2016 Code) applies to new applications only; the provisions of the 2003 Mining Code (the 2003 Code) will continue to apply to existing permits.
Key changes from the 2003 Code to the 2016 Code are summarised below.Length of mining permits
Under the 2016 Code, a small-mine permit will be issued for an initial term of five years (three years under the 2003 Code). The term may be renewed for three years at a time without any limit on the number of renewals.
A mining permit will be issued for an initial term of between five and 20 years (depending on the mineral reserves identified and the investment required); the maximum term for an initial permit under the 2003 Code is 25 years. Mining permits are renewable as many times as necessary until the resource is exhausted.Changes to fees, royalties, taxes and tax relief
Under the 2016 Code:
- Fees such as entry fees and quarry permits will increase.
- 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 moved from the 2003 Code to the General Tax Code. This continues under the 2016 Code, except for the specific 'mining tax'. Under the 2016 Code, mining activities will be subject to a quarterly tax levied on the market value of the commercialised product. Rates for some common substances include iron ore (concentrate 5 per cent, locally processed 2 per cent), phosphate (calcium-aluminate and lime phosphate 5 per cent, phosphoric acid 1.5 per cent) and gold at 1.5 per cent.
- The mining title-holder will continue to be exempt from all taxes and fees, including valued added tax (VAT) and the port charge levied by the Senegalese Shippers' Council (COSEC) during the period commencing on the date of entry into force of the mining permit (or small-mine permit) and ending on the first day of commercial production (investment period). However, the exemption will not apply to the statistical royalty, community solidarity royalty and other community taxes (rates for these taxes are not defined in the 2016 Code).
The 2016 Code permits the state of Senegal and a mining company to enter into a production sharing agreement. This gives the mining company the exclusive right to research and mine a particular area and recover the cost of doing so from sale of the mined substance. The profits from the sale of the product are split between the state and the mining company in an amount specified in each individual agreement. Where a production sharing agreement exists, the mined substance will not be subject to the quarterly mining tax outlined above.Local development funds
The 2016 Code introduces an obligation for mining title-holders to contribute annually to a local development fund.
- Entry fees for the grant of small-mine permits and mining permits, and fees for research permits, semi-mechanised authorisations and quarry permits, will increase under the 2016 Code.
- The 2016 Code introduces an annual surface royalty payable by all title-holders, including holders of research permits and quarry permits. This will be 50,000 West African CFA francs per hectare for a small-mine permit and 250,000 West African CFA francs per square kilometre for a mining permit.
- Most taxes relating to the mining sector were moved from the 2003 Mining Code to the General Tax Code in 2012. However, the specific 'mining tax' that is included in the 2003 Code will continue in modified form under the 2016 Code. The mining tax under the 2016 Code is structured so that all authorised mining activities will be subject to a quarterly mining tax levied on the market value of the commercialised product. The tax rate will vary depending on which substance is being mined. Rates for some common substances include iron ore (concentrate 5 per cent, locally processed 2 per cent), phosphate (calcium-aluminate and lime phosphate 5 per cent, phosphoric acid 1.5 per cent) and gold at 1.5 per cent.
The 2016 Code introduces an obligation for mining title-holders to contribute annually to a local development fund in the amount of 0.5 per cent of sales, minus annual fees (unspecified). The purpose of the local development funds is to promote the economic and social development of local communities around mining areas, and must include women's empowerment projects.
Under the 2016 Code, small-mine permit holders will be required to provide a guarantee as security for the cost of rehabilitating their mine site. Small-mine permit holders under the 2003 Code are not required to do this. Obligations for mining permit holders remain the same (to deposit funds in a trust account with a Senegalese bank that will be used to rehabilitate the mine site).
Under the 2016 Code, all mining title-holders are required to:
- respect, protect and implement human rights in areas affected by mining operations;
- respect the provisions of the Forestry Code where the mining title has been granted over a classified forest zone; and
- respect the principles and obligations under the Extractive Industries Transparency Initiative (EITI), such as declaring all payments made to the state to the EITI authorities.
The passing of the new law follows a three-year consultation and legislative drafting process and introduces many initiatives that have been used within the region.
The bill will now be presented to the president for promulgation and, after that time, it will be published in the National Gazette.
The 2003 Code was designed to attract and foster investment and development in mineral resources in the country. It embodies a transparent, predictable, simple, stable and non-discriminatory mineral regime. The country's Mineral Policy Statement sets out the main objectives for the development of the mineral resources to be found in Senegal and promotes the international principles necessary to encourage foreign investment inflows into the national economy. Application of the 2003 Code is designed to reduce transaction costs and the legal environment is based on the principles of clarity, flexibility, competitiveness and sustainability, provided that:
- diversification of mineral production and the beneficiation of mineral products before export is encouraged;
- the lawful rights and interests of investors are guaranteed;
- foreign investments are governed by the non-discriminatory principle, meaning that foreign investors will be treated no less favourably than comparable domestic investors;
- the protection of the environment and the sustainability of mining will be a key objective; and
- projects will be designed using a comprehensive information system for mineral resources management, integrated with other natural resources (such as land, forest reserves and water) with proper regard for environmental and social issues.