A new mining law for Mozambique

The Mining Law 20/2014 of 18 August 2014 (the New Mining Law) came into force in Mozambique on 22 August 2014 replacing the previous mining regime under Mining Law 14/2002 of 26 June 2002 (except in relation to mining contracts that were in force prior to 22 August 2014).¹

The New Mining Law was precipitated by the broad political consensus that Mozambique and its citizens have not benefitted sufficiently from the increase in mining activity and investment in Mozambique. It was developed based on the Government's 2013 Policy and Strategy for Mineral Resources (Resolução No 89/2013 de 31 de Dezembro) which, although continuing to identify foreign investment as a key factor, makes it clear that creating benefits for Mozambican nationals is the primary goal of legislative reform. It is also designed to bring mining legislation in Mozambique in line with international best practice.

The New Mining Law is expected to have far reaching consequences for investors in the mining sector in Mozambique. Key changes to the mining regime made by the New Mining Law include:

• the provision that new mining contracts must provide for State participation in the mining operations (no minimum of maximum percentage participation is specified),
• the introduction of local content requirements; non-nationals must "associate" themselves with a Mozambican national in order to provide goods and services to mining operators,
• the introduction of domestic supply obligations that give the Government the right to buy minerals at market price for use in the local industry if Mozambique's commercial interests so require,
• a broad provision that all transfers of mining rights, whether direct or indirect, are subject to approval by the Ministry of Mineral Resources (MIREM),
• the introduction of signing bonuses for mining concessions awarded through public tender;
• the requirement that the details of new mining contracts (except for strategic and competitive information) must be published in Mozambique's Official Gazette (Boletim da República),
• the discontinuation of the tax stabilisation provision which featured in the previous mining law. The New Mining Law explicitly excludes matters relating to tax from mining contracts. This may mean the Government will no longer be able to provide tax stability or deductibility undertakings in mining contracts,
• the reduction of the maximum period for exploration licences from 10 to 8 years. and
• the introduction of a requirement for concession holders to start production within 48 months of the issuance of a mining concession. Under the previous law, production had to be started within 36 month of the issuance of a DUAT (right to use and enjoy land) and an environmental permit. 

The New Mining Law will apply in tandem with other relevant legislation; for example, a new tax regime for Mining Production Tax is due to be approved in the near future. In addition, the law on Public Private Partnerships, Large Scale Projects and Company Concessions 15/2011 of 10 August 2011 (the Mega Projects Law), although not specific to mining, will still apply to mining projects.

Herbert Smith Freehills is not qualified to advise on Mozambique law. This article is based on our literal reading of the new law, and our practical experience of working on mining projects in Mozambique.

Endnote

1. A mining operator may opt for its pre-existing mining contract to be governed by the new law or if a pre-existing contract and the previous law are silent on aspects that are dealt with in the New Mining Law, then the New Mining Law shall apply to those parts of the relevant contract.

For further information, please contact Adekanmi Lawson, Solicitor and Kemi Adekoya, Trainee Solicitor, Paris or your usual Herbert Smith Freehills contact.