Dec '13/Jan '14

Legislative outlook

A roundup of changes in mining law from around the world

By Eavan Moore

As mining companies, big and small, worked their way through a difficult marketplace this year, they also faced changes in many of the jurisdictions where they operate. A number of countries, also finding themselves in tight financial situations, retooled and even revamped their mining laws and tax regimes; some looked to ease the rules to lure foreign investment, and others hoped to recoup more money from mining companies. Here is CIM Magazine’s overview of who did what this year.


Ethiopia’s Parliament passed an amendment proposed by the Ministry of Mines that reduced the corporate tax on mining companies from 35 per cent to 25 per cent in July. The rationale from the ministry was that greater foreign investment is needed to develop infrastructure in the country. Mesfin Tafesse, an Ethiopian-based consultant and attorney-at-law, said the move could attract investment in the long term.

The Ministry of Mining in Kenya raised royalty rates in August, including increasing the gross sales value tax of gold to five per cent and to 10 per cent (from the previous level of three per cent) on rare earth, niobium and titanium ores, which have recently become a focus of exploration and development. Monica Gichuhi Mwai, Kenya Chamber of Mines’ CEO, said industry initially supported adjusting royalties after a decade of stasis but had unsuccessfully requested “benchmarking and consultation to ensure that the new royalties are in sync with other jurisdictions and do not adversely affect current operators.” Separately, the gov­­ernment has proposed a new comprehensive mining act and, in October, announced its intentions to seek a 10 per cent stake in large mining concessions.

Ecuador passed a law in June intended to make it easier for smaller mining operations to start up. The country’s heavy windfall tax on mining profits now only comes into force once the mine’s investment has been recovered. Mining royalties have been capped at eight per cent for gold, copper and silver exports, and royalty rates are three per cent for small mines and four per cent for medium-size mines. Small and medium-size mines also now have the option of concession agreements that are more flexible than the existing exploitation contracts. The law follows a 2009 mining reform that raised taxes and added red tape for mining companies.

Guinea overhauled its mining code, adding some new restrictions but also lowering some costs. Corporate taxes were reduced from 35 to 30 per cent and the tax on bauxite, its principal mineral commodity, was lowered from 0.55 per cent of the aluminum price to 0.15 per cent. David Pearl, executive chairman of explorer Sovereign Mines of Africa, remarked that Guinea’s efforts to improve its perception as a mining jurisdiction have been successful. “Investors will be much more receptive,” he said. “It’s more transparent.” He noted as well that stricter enforcement of the regulations is “nice for companies like us that play by the rules.”

President Evo Morales enacted new mining legislation for Bolivia, setting out to revoke concessions held by companies that are not explored or developed within a certain period, without compensation. He blamed previous policies, allowing concessions to be treated as real estate, for the lack of activity. One million hectares of the 2,454 private mining concessions in Bolivia are reportedly considered “inactive.” This comes ahead of a proposed new mining law that would establish a double deduction of exploration costs against future profit taxes for companies, while maintaining current taxation and royalty levels on existing, privately held mines. Neil Ringdahl, CEO of explorer Apogee Silver, said the law would benefit miners: “I believe it will encourage new investment in exploration and mining, creating new jobs for the country. Importantly, under the proposed new mining law, the investments already made by foreign mining companies in the country remain secure.”


Despite much debate and discussion, Mexico was poised to approve a new corporate tax regime in mid-November, raising costs for mining operations. The law would leave in place a 30 per cent corporate income tax previously scheduled for reduction. It would also add the country’s first mining royalty – a 7.5 per cent tax on EBITDA (earnings before interest, taxes, depreciation and amortization) – and a special fee for precious metals miners. Overall, 16 mining CEOs had signed a letter asking the government to consider a 4.5 per cent royalty instead. Meghan Brown, director of investor relations at Endeavour Silver, which operates three silver mines in the country, said the abrupt cost escalation could mean Endeavour will look elsewhere to build its fourth mine.

After several years of study, the government of Brazil proposed an overhauled mining code in June that included a hike of maximum royalties to four per cent of revenue and minimum investment requirements on concessions. The bill text is likely to undergo changes as it passes through the House of Representatives and the Federal Senate, according to lawyers José Alberto da Costa Araujo and Pedro Freitas, who noted that it faces an uncertain timeline given that 2014 will be a campaign-heavy election year. The code’s impact on Brazil’s mining states and the controversy surrounding its provisions contribute to “a scenario of uncertainty on whether the code, in whatever form, will come to be,” the lawyers noted.

Australia’s newly elected Liberal National Party government has drafted a repeal of the 2012 minerals resource rent tax (MRRT). Treasurer Joe Hockey called MRRT “complex and unnecessary” and estimated the new law his government had drafted would eventually save it $13 billion over four years by killing or cutting spending programs that were tied to MRRT revenue, which had fallen short of initial estimates. Liberal Nationals have insufficient Senate representation to pass the law alone, but a July 2014 changeover following this year’s elections would add support. “The repeal of MRRT would be something that we would see as highly likely to proceed,” said tax consultant Sean Neary.

Governments anxious for change

President Robert Mugabe’s Zimbabwe African National Union – Political Front Party won a large majority in the Zimbabwe Parliament, shoring up his campaign to give black Zimbabweans majority control of mining and other companies. Enforcement progress on his 2011 indigenization law has been slow to date. Francis Nhema, the country’s new youth development, indigenization and economic empowerment minister, suggested earlier this year that the emphasis would be on personalized enforcement plans for each company and on encouraging Zimbabweans to start their own firms.

Pauline Marois’ Parti Quebecois minority government in Quebec, Canada, failed to pass its latest mining reform in October. “This is the third attempt to modify, amend or replace the Mining Act in the last three years and all have failed,” noted Charles Kazaz, partner at Blake, Cassels & Graydon LLP. “Right now it is very difficult to envision how a fourth bill would be presented, unless there is consensus ahead of time between at least one of the opposition parties as to what would be included in the bill.” The previously governing Liberals had sought to reduce ministerial discretion and soften lease requirements. Meanwhile, a new royalty regime proposed in May has yet to be tabled in the national assembly.

Seeking to cure its budget deficit, South Africa’s ruling ANC Party formed a committee to study potential changes to the country’s mining tax. The committee is expected to report its findings to Minister of Finance Pravin Gordhan, but there are no published timelines on when this might happen. South Africa’s troubled mining industry has generally opposed new tax burdens.

To watch in 2014

The government of Myanmar began debating an overhaul of its mining code in October, in a process that will stretch into 2014. The code is intended to make mining easier and more attractive in a country with little exploration activity but with gold, copper, tungsten and nickel potential.

Haiti is writing a new mining law with guidance from the World Bank in order to better regulate and tax its mining industry. Prime Minister Laurent Lamothe sees mining as a way out of Haiti’s dependence on foreign aid.

In Canada, the Yukon Territory has plans to amend its regulations to comply with a court decision requiring it to notify and consult with First Nations affected by small-scale mineral exploration activities.

Post a comment


PDF Version