Mining law and regulations
Senegal adopted a new Mining Code in 2003 (Law No2003-36, which was gazetted at the end of February 2004; No6150, pp339-357).The law was designed to attract and foster mineral resources investment and development in the country. The code embodies a transparent, predictable, simple, stable and non-discriminative mineral regime. The country’s Mineral Policy Statement sets forth the main objectives for the development of the mineral resources occurring in Senegal, and promotes international principles that are necessary to encourage foreign investment inflows in the national economy. Application of the 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 will be encouraged;
- The lawful rights and interests of investors will be guaranteed. Foreign investments will be governed by the non-discriminatory principle, meaning that they will be treated no less favourably than similar domestic investors;
- The protection of the environment and the sustainability of mining will be a key objective;
- Projects will be designed using a comprehensive information system for mineral resources management that is integrated with other natural resources (such as land, forest reserves and water) with proper regard for environmental and social issues.
The Mining Code sets forth the mineral ownership, the types of minerals subject to regulation and their legal regime, the access to mineral rights, the rights and obligations of the mineral title’s holder, the special incentives granted during exploration and exploitation stages, and the settlement of disputes. These are summarised below :
Access to mineral rights
There are three fundamental mineral rights, specifically the research permit, the exploitation permit and the mining concession.
- Research permit: issued for three years in compliance with the Mining Code. In case of competitive requests, the priority is given to the tender offering the best conditions and guarantees for the State. The research permit is renewable twice with stipulations to relinquish areas, generally 25% on each occasion, and subject to the agreed exploration work programme and budget progress. After the second renewal, the so-called permit can be exceptionally extended for a duration not exceeding its initial period of validity.
- Exploitation permit: granted for a period not exceeding five years, and is renewable.
- Mining concession: attributed for a period of five years, and is renewable for a period not exceeding 25 years. Concession of the mining exploitation titles brings about the cancellation of the exploration permit inside the exploitation perimeter. Nevertheless it will remain the rights of exploration previously held over the remaining of the perimeter of the research permit up to its expiration. These rights are granted by decree to applicants who demonstrate adequate technical, financial and managerial capability to engage in mining activities.
Rights and obligations
- Security of tenure and a fully automatic award of exploitation titles after successful
- Exploration.
- Retention rights and the transferability of mineral titles which are critical requirements to invest in mining operations.
- Any research permit holder complying with all its contracting obligations, and given the proof of the existence of a commercially exploitable deposit is entitled to an exploitation right. This exploitation permit is a non-movable asset. It is indivisible and constitutes a real state right that is distinct from the property of the land, registered as such and susceptible to mortgage and to transfer.
Mining title-holder rights
These include the right to:
- Exclusivity of exploitation of mineral resources.
- Renew the mineral titles for one or more periods up to the exhaustion of the deposits.
- Extend rights and obligations attached to the titles
- Access to lands.
- Renounce its rights.
- Stability of the legal, administrative, financial and fiscal conditions of the exploitation.
Mining title-holder obligations
The holder of mining titles shall fulfil various obligations, including:
- To start mining operations as soon as possible and with diligence.
- To exploit the deposit in a way which does not compromise the reserves and which protects the environment.
- To report regularly the results of the mining operations.
- To protect the environment and shall submit an Environmental Impact Assessment atthe exploitation stage as well as an Environmental Management Plan.
- To deposit funds in a fiduciary bank account opened in the host country in order to cover mine closure and mine rehabilitation costs.
FISCAL REGIME
Law No2003-36 of 2003, concerning the mining code, introduced several innovations, including :
- Fiscal incentives allowing the holder of a mining concession to benefit from exemptions for a seven- year period, with the aim of encouraging the prompt realisation of investments and commence- ment of production.
- Total exemption of all taxes for the holder of a research permit during the period of validity of the permit and any renewals.
- Exoneration of all Customs duties and taxes, including VAT and the Conseil Sénégalais des Chargeurs (Senegalese Council of Shippers, COSEC) withholding tax on :
- Equipment, materials, supplies, machines, equipment and utility vehicles included in the registered programme, and replacement parts and functional items not produced or fabricated in Senegal, which are specifically destined to be used in mining research operations and which are vital to the realisation of the research programme;
- Fuels and lubricants for fixed facilities, drilling instruments, machines and other equipment destined for research operations under the permit granted;
- Petrol products for producing energy used during the research programme;
- And Spare parts and pieces for machines and equipment, specifically used in the realisation of the research programme.
Upon the certified presentation of a research permit, the equipment, materials, supplies, machines, equipment and utility vehicles specifically destined for mining research operations, machines and construction vehicles, which can be re-exported or sold after use, temporarily qualify with the total suspension of duties and taxes on importation and exportation. Specific benefits granted during the development phase are :
During the period of the realisation of investments and the commencement of an exploration or the expansion of the production capacity of an existing mine, the exploration permit holder or the beneficiary a small mine exploration authorisation and the contractors working on its behalf benefit from exemption from taxes and dutiesincluding VAT and COSEC;
- On materials, equipment, supplies, machines and utility vehicles included in the registered programme and equipment directly destined for mining operations;
- Fuels and lubricants for fixed facilities, materials and drills, machines and other equipment destined for mining operations;
- And spare parts and pieces for machines and equipment, specifically destined for mining operations. Financial benefits are granted in the development phase. Throughout the duration of the exploration, holders of exploration or concession contracts or the beneficiaries of a small mine exploration authorisation are exempted from the exploration tax on products issuing from their exploration activities within the scope of the awarded title.
The holder of an exploration permit is exempted for three years, and the holder of a mining concession is exempted for seven years from company tax until recovery of all bans and exploration expenses, as well as exemptions from:
- VAT on goods and services purchased from local or foreign suppliers;
- Entrance fees;
- Minimum basic tax;
- Property taxes except for residential property;
- Basic tax payable by employers; and from
- Duties and taxes when setting up a new company or raising capital.
SETTLEMENT OF DISPUTES
The availability of international dispute-settlement procedures between foreign investors and the State consolidates the lawful rights and interests of the mineral investors. The Mining Code provides for international arbitration as a means of dispute settlement.
All disputes between the State and the holders of mineral titles related to the execution or interpretation of the clauses of the mineral agreement are brought before any arbitral tribunal chosen by disputant parties. In addition, the OHADA Common Court of Justice and Arbitration may be chosen as the arbitration facility.