i 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).
Production sharing agreements
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.
Enhanced social and environmental obligations
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.
II LEGAL FRAMEWORK
Mining in Senegal is mainly regulated by:
- Act No. 27/2016 on the Mining Code dated 30 October 2016, enacting the 2016 Code;
- Act No. 2003-36, dated 24 November 2003, enacting the 2003 Code; and
- Decree No. 2004-647, dated 17 May 2004, implementing the Mining Code.
Apart from the Mining Codes, the mining sector is also regulated by:
- Regulation No. 18/2003/CM/WAEMU, dated 22 December 2003, enacting the West African Economic and Monetary Union (WAEMU) Mining Code;2
- the Environmental Code, No. 2001-01 of 15 January 2001;
- the Tax Code, No. 2012-31 of 31 December 2012;
- the revised Uniform Act of OHADA3 relating to general commercial law, dated 15 December 2010;
- Statute No. 98/03, dated 8 January 1998, enacting the Forest Code and its implementing decree, dated 20 February 1998; and
- the exchange regulations in force in the member countries of WAEMU.
The competent authorities in the mining sector are:
- the Ministry of Energy and Mines;
- the Directorate of Mines and Geology; and
- the district mine departments (each of the 14 administrative districts in the country has a mining office).
By Decree No. 2013-381, dated 20 June 2013, Senegal constituted its national committee for the EITI. The main objective of the committee is to enforce the EITI, the objective of which is to ensure the transparent use of revenues from mining in such a way as to contribute to poverty reduction and sustainable development.
III MINING RIGHTS AND REQUIRED LICENCES AND PERMITS
All mineral substances contained in the ground and underground within the territory of the Republic of Senegal, its territorial waters and continental plateau are the property of the state; mining exploitation title-holders acquire possession of the mineral substances that they extract.
Titles are transferable and transmittable subject to the prior approval of the Minister of Mines.
ii Surface and mining rights
Within Senegal, and in accordance with the 2003 Code, the state can grant to one or many legal entities the right to undertake or conduct one or many mining operations relating to mineral substances contained in the ground or underground.
These legal entities must prove their technical and financial capacities to carry out all mining operations. The conditions under which mining operations can be carried out by these entities are defined by agreements (mining conventions) between the state, represented by the Minister of Mines and Geology (the Minister), and applicants.
No one can undertake or conduct an activity within Senegal governed by the 2003 Code without holding a mining title according to the terms of the mining legislation.
Three original copies of the application for a prospecting authorisation must be forwarded to the Minister, who must acknowledge receipt. The application must provide:
- the information and documents showing the identity of the person responsible for the work as set out under Article 5 of the 2003 Code;
- the aims of the planned prospecting, its scientific or economic character, its geographical location and its likely duration; and
- a brief description of the programme of work, the methods to be used, the anticipated results and supplementary technical information (in particular, the parameters for basic analysis of the initial state of the prospecting site and its environment).
A prospecting authorisation is granted for six months and is renewable once, with no fee required. It does not confer any pre-emptive rights on its beneficiary. It is not transferable and does not give rise to any fiscal exemptions. The beneficiary is obliged to communicate the results of its research to the Director of Mines and Geology.
The beneficiary should first get approval for its research project and the budget. The applicant for a research permit should then submit three original copies to the Minister. The application must provide:
- the information and documents showing the identity of the person responsible for the work as set out under Article 5 of the 2003 Code;
- a description of the mineral substances for which the application for the permit is being made;
- the coordinates of the exploration area;
- an estimate of the surface area of the exploration permit area being sought;
- an extract of the map of Senegal on a scale of 1:50,000 or 1:200,000 on which the exploration permit area being sought is indicated;
- a presentation of the planned exploration work and the methods to be used; and
- any supplementary technical information, such as the parameters for basic analysis of the exploration site.
A research permit is issued for three years, renewable twice. In the event of renewal, the research permit holder must relinquish part of the perimeter granted (generally 25 per cent) and gain approval of the programme and the budget for the renewal requested. In the event of competitive requests, priority is given to the tender offering the best conditions and guarantees for the state.
An exploitation permit is delivered by a presidential decree for a period not exceeding five years. It is renewable and can be transferable. The applicant should include:
- three original copies of the application addressed to the Minster four months before expiry of the exploration permit;
- documents providing identification of persons and corporates, the reference of the exploration permit coordinates and surface area of the permit area being sought;
- a feasibility study indicating the characteristics and performance of mining production units, an economic and financial assessment of the project and its socio-economic impact;
- a report detailing the results of the exploration phase indicating, in particular, the reserves, grades, types of mineral deposits and metallurgic tests;
- a plan for the development and start of mining operations;
- an investment plan and a timing chart for the undertaking of the mining project;
- an environmental impact study concerning the mining operation (approved by the Ministry of Environment, which issues a confirmatory certificate); and
- a draft of the convention between the state and the exploration permit holder if the demand does not derive from a current, valid exploration permit.
An exploitation company must be set up, under the provisions of the OHADA Uniform Act relating to commercial companies and economic interest groups, between the company with the research permit, or its designated subsidiary, and the state of Senegal. The parties will sign a shareholders' agreement to set out the terms and conditions for the establishment and management of the company.
The government takes its free carried stake during the exploitation phase, which represents 10 per cent of the mining company shares, and may negotiate up to 25 per cent for itself or local applicants.
The company is managed by a board of directors, the composition of which depends on the proportion of the shares in the exploitation company.
This is issued by a presidential decree for a period of five years and is renewable for a period not exceeding 25 years. Concession of mining exploitation titles on a perimeter cancels any previous exploration permit within that perimeter. These rights are granted by decree to applicants who demonstrate adequate technical, financial and managerial capability to engage in mining activities.
The 2003 Code also provides other permits and licences to conduct mining activities, such as those for artisanal and small mine exploitation, and private and temporary quarries.
The protection of mining rights depends on the mining operations.
For prospecting, the authorisation confers on its holder a non-exclusive right of prospecting valid for substances targeted over the whole of the authorised zone. However, the prospecting authorisation does not confer any particular right for obtaining a mining title or disposing of the discovered substances for commercial purposes.
The prospecting authorisation is neither transferable nor transmittable. It constitutes a movable possession that cannot be lent or given as a guarantee.
For exploration, the permit confers on its holder, within the boundaries of its perimeter on the surface and indefinitely in depth, the exclusive right to explore for the mineral substances for which it is issued.
Any holder of an exploration permit that satisfies all its contractual obligations, in accordance with the clauses of the 2003 Code, is entitled to:
- take samples of mineral substances extracted during exploration work;
- an exploitation permit or a mining concession; and
- be prioritised for the granting of an exploration permit for all substances other than those relative to its mining title and that could be discovered within the perimeter of the valid exploration permit.
A mining exploitation title confers on its holder:
- the exclusive right of exploitation and the free disposal of mineral substances for which the mining exploitation title has been issued, within the limits of the perimeter attributed and indefinitely in depth;
- the right to renew the title;
- the right to extend the rights and obligations attached to the mining exploitation title and other collecting and processing related to substances for which the mining exploitation title is issued (the holder is obliged to request an extension of its title to these substances within six months);
- the right to occupy an area of the national territory and free disposal of mineral substances attributed to it under the exploitation permit;
- the right to transform the exploitation permit into a mining concession in the case of discovery of significant additional proved reserves within the perimeter of the exploitation permit or within another adjoining perimeter belonging to the holder of the exploitation permit;
- a real state right distinct from the propriety of the land, registered as such and susceptible to mortgage. The decree granting the exploitation permit or mining concession is, in effect, a state-approved declaration for carrying out work in relation to the permits; and
- the right to give up, transmit or let its mining exploitation title, subject to prior authorisation of the Minister in charge of mines and payment of fixed taxes.
iii Additional permits and licences
Only the permits and licences mentioned above are required to conduct mining activities.
iv Closure and remediation of mining projects
Any holder of a mining title is under an obligation to rehabilitate sites when each mining title expires, except for the perimeters that are still covered by an exploitation mining title. To this end, the holder of a mining title must open an account in a commercial bank in Senegal into which funds are paid to cover the cost of the implementation of the restoration programme.
IV ENVIRONMENTAL AND SOCIAL CONSIDERATIONS
i Environmental, health and safety regulations
Each applicant for a mining permit must prepare, at its own expense, an environmental impact study (EIS) in accordance with the Environment Code and the implementing decrees.
Health and safety rules apply to prospecting, exploration and exploitation work, most notably in quarries, plants and laboratories, as well as the security rules relating to transport, stockpiling and use of explosives and dangerous products summarised by the Mining Code, the Labour Code and by decree.
Any accidents that occur during a mining operation, as well as any identified dangers, should be brought to the attention of the Ministry of Energy and Mines, the competent administrative authority.
All mining title-holders should abide by the preventative measures prescribed by the administration in charge of public security, hygiene and employee security, for preservation of their deposits, expanses of underground water, buildings and public roads.
ii Environmental compliance
All mining projects require the completion of an environmental assessment.
As previously noted, each applicant for a mining permit must prepare, at its own expense, an EIS to assist in this purpose.
iii Third-party rights
The occupation of lands by the holder of a mining title, within or outside the perimeters granted, gives the owners or occupants of the lands the right to compensation for any losses suffered. The expenses, compensation and, in general, all charges relating to the application of land occupation clauses are borne by the mining title-holder.
V OPERATIONS, PROCESSING AND SALE OF MINERALS
i Processing and operations
Sale, import and export of extracted or processed minerals
Subject to exchange regulations and clauses in the 2003 Code, the holder of a mining title can freely:
- import, without financial settlement, any equipment belonging to it;
- import to Senegal any possessions and services necessary for such activities; and
- export the mineral-extracted substances, their concentrates, primary derivatives and all other derivatives after performing legal and regulation formalities for exporting these substances.
Holders of mining titles are guaranteed a free choice of suppliers, subcontractors and service providers as well as partners.
However, all protocols, contracts and conventions with the purpose of entrusting, giving up or transferring partially or totally the rights and obligations resulting from the mining title, are subject to prior approval of the Minister.
The holders of mining titles, their suppliers and subcontractors must use, as far as possible, services and materials of Senegalese origin, and products made or sold in Senegal insofar as these services and products are available under competitive conditions of price, quality, guarantees and delivery.
ii Foreign investment
The holders of mining titles granted in accordance with the 2003 Code are submitted to the exchange regulation in force in Senegal. As such, they are allowed to:
- collect in Senegal all funds acquired or borrowed from abroad, including receipts from the sale of their share production;
- transfer abroad:
- the dividends and products of capital invested, as well as the product of clearings or realisation of their assets; and
- funds destined for the reimbursement of loans (capital and interest) contracted abroad, and payment of foreign suppliers of materials and services for mining operations; and
- import all funds acquired or borrowed abroad as are necessary for carrying out mining operations.
Foreign workers resident in Senegal, employed by any mining title-holder, are guaranteed the free conversion and transfer of all or part of their salary, subject to the payment of taxes and various contributions, in accordance with the exchange regulations.
Foreign bank accounts may be opened by mining title-holders in Senegal in currencies necessary to carry out transactions for mining operations. Nevertheless, foreign investors must comply with the WAEMU foreign exchange regulations. Where the amount to be repatriated is up to 500,000 West African CFA francs, it should be lodged with an authorised intermediary with supporting documentation. Payments abroad as capital transactions for the repayment of long-term debt should be subject to a request to the Minister of Finance for authorisation. Each request must be accompanied by supporting documentation attesting to the nature and circumstances of the operation.
The general guarantees granted by the state concern requisition and expropriation, the confidentiality of documents and information, non-discrimination, the free choice of partners, suppliers and subcontractors, the stabilisation of fiscal and customs regimes, and exchange regulation. A clause is inserted into each mining convention that protects mining title-holders from amendments to the taxation regime, in an attempt to maintain contract stability.
Constructed or acquired installations and infrastructures in the framework of mining operations cannot be expropriated or requisitioned by the state, except for reasons of force majeure or public necessity. In this case, the state will pay to the holder of the mining title fair compensation in accordance with the relevant legislation.
Under the 2003 Code, any activity exploiting mineral substances, authorised in accordance with the provisions of the 2003 Code, is subject to payment of an annual mining royalty of 3 per cent of the value of the mining site. The terms of payment and collection of mining royalties are specified in the implementing decree. There are no exemptions from mining royalties, which is due on any minerals extracted from the soil or subsoil of Senegal.
The holder of the mining exploitation title is liable for company tax, in accordance with the clauses of the General Tax Code, but the holder of a mining concession is exempt for seven years from company tax starting from the concession's date of issuance. For large exploitation projects necessitating mining concessions and mobilisation of a large investment, the duration of the exemption is at least equal to the period of the loan repayment, but may not exceed 15 years from the date of issuance of the mining concession.
Specific advantages are also granted during the exploration and exploitation phases. The holder of an exploration permit benefits from total exemption from the tax regimes and taxes of any nature during the entire period of the permit and its renewals.
In 2012, the state created a new special contribution on mines and quarries at a rate of 5 per cent, but many mining companies have refused to pay this tax because they consider it a breach of the stabilisation clause in the mining conventions.
Starting from the date of the mining exploitation title or small mine exploitation authorisation being granted, or the extension of production capacity of an existing exploitation, the holder of a mining exploitation permit or mining concession or beneficiary of a small-mine exploitation authorisation, as well as any undertakings working on its behalf, will be exempt from all customs duties applicable on entry, including value added tax and COSEC fees relating to:
- equipment, materials, supplies, machines and spare parts not produced or manufactured in Senegal, and specific materials required for mining operations;
- fuel, oil products, materials and spare parts, and complements required for mining operations; and
- temporary admission to full exoneration from import and export taxes and duties in relation to materials, machines and equipment that, once used, may be re-exported or transferred.
The period expires once the Minister has been notified of the first production date. It may last no longer than four years for mining concessions, two years for exploitation permits and one year for small-mine exploitation authorisations.
iv Other fees
The grant, renewal, extension or conversion and the sale, transfer or farm-out of mining titles for research and exploitation are subject to the payment of fixed fees, as follows:
- research permits: 500,000 West Africa CFA francs;
- mining concessions: 7.5 million West Africa CFA francs; and
- other mineral mining rights: 1.5 million West Africa CFA francs.
These amounts are reviewed every five years by decree.
As previously noted, the concession holder is under an obligation to compensate the landowner in the event that its activities cause damage to the landowner's property.
There is also an obligation to restore the site to its previous state upon expiry of a mining title, to which end it must open an account in a bank in Senegal into which funds are paid to cover the costs of implementation of the restoration programme.
1 Mouhamed Kebe is the managing partner of Geni & Kebe.
The information contained in this chapter is correct as at October 2017.
2 WAEMU is the economic union of eight African states with a common currency, the same reserve bank and the same business law: Benin, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.
3 The common business law system of 16 African countries: Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Comoros, Congo, Democratic Republic of the Congo, Equatorial Guinea, Gabon, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo.