Tanzania: Tanzanian Mining Act 2010

On 23 April 2010 Tanzania's Parliament passed The Mining Act 2010 (the Act). The Act is a composite of a document presented to Parliament (the Initial Reading), together with a schedule of amendments (the Amendments). The Act has yet to be Gazetted and thus is not yet in force, though it is reputed to be under a "Certificate of Urgency" and therefore is expected to come into force shortly.

The intention of the Government of Tanzania (the GOT) is to within the Act address challenges that the GOT has identified in relation to the mining sector in Tanzania; specifically, low integration with other sectors of the economy, low contribution to the Gross Domestic Product compared to the sector growth and low capacity of the GOT to effectively regulate and administer the sector.

Industry concerns

The Act is more restrictive than its predecessor and is consistent with other recent legislation which seeks to concentrate a greater interest in the hands of Tanzanian nationals with increased regulation in key sectors whilst continuing to encourage inward investment. Some of the publicly expressed concerns were due to the restrictions contained in the Initial Reading (such as reservation of mineral rights and licenses for dealing in minerals being reserved to Tanzanian citizens and corporate bodies under the exclusive control of Tanzanian citizens) which were subsequently relaxed by the provisions of the Amendments. However, the Act does materially increase the levels of royalty payable to the GOT and places restrictions on non-Tanzanian participation in small scale mining, dealing in minerals and gemstone operations.

There are concerns within the industry that the restrictions will have a negative impact on the Tanzanian mining industry both in terms of its competitiveness and as a magnet for foreign investment.

We have yet to see an official copy of the Act, so our comments are subject to sight of this.

Key provisions

The Act will introduce significant changes to mining policy, in particular the following.

(a) Mineral rights and licenses for dealing in minerals will be reserved exclusively to Tanzanian citizens and corporate bodies under the exclusive control of Tanzanian citizens. It has been said that agreements/licences currently in force with non Tanzanian controlled mining companies remain unchanged but there is no clear "grandfathering" provision on this. The main point to note, however, is that the Amendments significantly mitigated the Tanzanian control issue in respect of general mining licences, and the restrictions will apply only to "primary mining licences", which are licences with respect to small scale mining operations involving capex of less than US $100,000. (Section 8 and Section 73)

(b) Licences to mine for gemstones are only to be granted to Tanzanians, regardless of the size of the operation, except where the Minister determines that the development is most likely to require specialised skills, technology or a high level of investment in which case the licence may be granted to an applicant so long as the non- Tanzanian participation element is no more than 50% (Section 8(4)).

(c) The Act gives the Minister power to prescribe a standard model form Mining Development Agreement for all projects exceeding US $100m. So far as we are aware no standard form has yet been prescribed. (Section 8(4))

(d) The Act gives the Minister power to make regulations authorising the GOT to participate in the conduct and financing of mining operations and give the GOT a free carried interest, the level of which is not set by statute but rather by negotiation between the GOT and the relevant mineral rights holder (Section 10).

(e) It amends the method by which GOT royalties are calculated so that they will in future be levied on the gross value of minerals, rather than the present method of calculation which refers to the net value (Section 87).

(f) It increases the rates of royalties levied by the GOT on the gross value of minerals as follows:
(i) uranium – 5%
(ii) gemstone and diamond – 5%
(iii) metallic minerals (copper, gold, silver, and platinum group) – 4%
(iv) gem – 1%
(v) in the case of other minerals, including building materials, salt, all minerals within the industrial
minerals group – 3%.
(Section 87)

(g) Although some writers have asserted that the Act imposes an obligation for mining companies to list on the Dar es Salaam Stock Exchange, whilst the Act does refer to the Minister having the right to make regulations relating to a public offering, provisions for doing so are not contained within the Act itself. (Section 109)

(h) The Act requires a greater degree of disclosure by the holders of mineral rights in respect of reports, records and general information. (Section 100 and Second Schedule)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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