Practice Areas > Mining Law
Mining is increasingly becoming the leading sector in Tanzania in terms of exports. During the last ten years Tanzania has witnessed high growth in mining sector. Reputable mining companies such as Barrick Gold, Ashanti Anglo-Gold, Placer Dome and Resolute are operating large-scale mines in Tanzania. The main legislation under which mining activities are regulated in Tanzania is the Mining Act, 1998. Other relevant statutes include Income Tax Act, 2004; Environment Management Act, 2004, Tanzania Investment Act, 1997, etc. There are detailed regulations made under the Mining Act such as Mining (Environmental Management and Protection), 1999; and Mining (Safe Working and Occupational Health),1999; and Mining (Dispute Resolutions) Rules, 1999.
Recognizing the increasing importance of mining sector, LawCastles provides advisory services on key legal issues concerning mining tenements; registration, compensation, mortgage and other dealings in mining tenements; mergers and acquisitions advice in respect of mining assets; employee relations; foreign investment approvals; mine development, construction and engineering, operations and manufacturing, mining and haulage; environmental issues; taxation issues; negotiating and drafting joint venture agreements, and arrangements for joint ventures for the exploration, development and operation of mineral and petroleum resources.
Title to Mineral Rights
Section 5 of the Mining Act Cap. 123 vest the entire property in and control over minerals in any land to the United Republic of Tanzania. Private parties can be licensed to carry out prospecting, exploration or trading. There are regulations which states the maximum area on which a particular license can be granted. The licences normally do not cover surface rights although the Act limits the rights of the third parties over surface rights in a licensed area. In case third party surface rights interfere with production, the Act allows the licences holder to remove third parties after making compensation. In addition to licences, the Act section 10 of the Act allows the minister responsible for minerals to conclude minerals development agreement with a holder of a mineral right (normally special mining licences). The objectives of the minerals development agreements is to guarantee the fiscal stability of a long-term mining project, define the circumstances or manner in which the minister may exercise his discretion conferred on him by the legislation, lay down environmental requirements and to define the dispute settlement mechanism arising out or relating to the agreement. Licences are transferable subject to approval of the minister responsible for minerals.
Guarantee Against Nationalization and Exploration
The Constitution is the fundamental law in Tanzania, overriding all other legislation. Chapter 24 of the Constitution guarantees the right to own property and to protect it in accordance with the law. There is full recognition of private property and protection against any non-commercial risks. Tanzania is an active member of the Multilateral Investment Guarantees Agency. Tanzanian is also a member of The International Centre for Settlement of Investment Disputes and has ratified the New York Convention.
The incentives available to investors under Tanzania Investment Act, 1997 include guarantee against nationalization and expropriation and unrestricted right to international arbitration in the case of disputes with the Government. In addition, Tanzania has signed bilateral investment treaties with Germany, United Kingdom, Sweden, Denmark, Switzerland, Egypt, South Korea, Mauritius, Malawi and Zimbabwe. Most of these bilateral investment agreements have provisions which guarantee foreign investors from contracting countries against nationalization and expropriation
Administration of Mineral Exploration, Production and Trading Activities
The Mining Act establishes the office of the Commissioner for Minerals within the Ministry of Energy and Minerals. The Commissioner is appointed by the President of the United Republic of Tanzania. The Commissioner has a responsibility to supervise and regulate minerals exploration and extraction activities. The Act also establishes a Mining Advisory Committee which has the responsibility of advising the minister responsible for minerals on matters concerning minerals sector generally. The Act empowers the minister responsible for minerals to grant, renew, suspend or cancel licences for minerals exploration, production or trading.
Mineral Rights Available Under Tanzanian Law
Broadly, mineral rights that are available under Tanzanian law can be classified into three groups, namely, investigatory, production, and trading. Investigatory rights are given in a form of prospecting or retention licences, production rights are given in a form of mining licence and trading licences are given in a form of dealership licences. The minister has the power to grant, renew, suspend or cancel any licence. Licences are granted on a 'first-come, first-served' basis except in a situation where licences are subjected to a competitive bidding process. The major licences which may be granted under the Mining Act, 1998 to foreign owned companies include the following:
· Prospecting licences with preliminary reconnaissance period which are given for two years. Subsequently, the licence holder can be granted a normal prospecting licence an area not exceeding the size permitted for a normal prospecting licence.
· Prospecting licences which are given for an initial period of three years. The prospecting licence can be renewed twice for a period not exceeding two years for each renewal subject to relinquishing half of the area covered by the licence. A request for renewal must be submitted within three months before the expiry date. Subsequently, a prospecting licence may only be retained to complete an already started feasibility study.
· Retention licences which can be given for a maximum of five years over an area where the holder of a prospecting licence has identified mineral deposit of commercial significance and mining cannot be started by reason of technical constraints, adverse market conditions or other economic factor of temporary character. A retention licence can be renewed once for a period not exceeding five years subject to submission of updated studies and assessment of the prospects and commercial exploitation of mineral deposits.
· Special mining licences which can be given for a maximum of twenty five years. As pointed out above, special mining licences are normally supplemented by minerals development agreements which guarantees the fiscal stability of a long-term mining project, defines the circumstances or manner in which the minister may exercise his discretion conferred on him by the legislation, laying down environmental requirements and to define the dispute settlement mechanism arising out or relating to the agreement.
· Mining licences which can be given for a maximum of ten years.
· Gemstone mining licences which can be given for maximum of ten years.
There are primary prospecting licences and primary mining licences which are restricted to citizens of Tanzania, or corporate entities whose membership is composed exclusively of Tanzanian citizens.
Taxation
There is a special tax regime for mining companies (including those owned by foreign parties). Some of the main features of the tax framework for mining companies include the following aspects:
· Depreciation allowance for exploration and mining equipment is deducted at a rate of 100 per cent on capital expenditure;
· Losses may be carried forward indefinitely until recovered against income;
· Expenditure on prospecting and mining operations in respect of another licence area may, for the purpose of calculating taxable income, be treated as part of the expenditure incurred in respect of the mining operations;
· Withholding tax on payments for technical services and on management fee is capped at 3 per cent where the technical services fee, or management fee, does not exceed 2 per cent of the amount claimed as deduction from income in respect of operating expenses incurred in mining operations, and 20 per cent for any excess amount;
· Import duties by a mining company or its subcontractors is charged at 0 per cent during exploration and in the first year of operation, and thereafter it is capped at 5 per cent;
· VAT on imports and local supplies of goods and services to a mining company or its subcontractors are exempted. Any VAT paid by mining companies on local supplies or imports of goods or services, is recoverable. Exports of minerals are zero-rated; and
· Royalties’ rates for minerals are 5% and 3% for diamonds and other minerals respectively on the net back value of minerals produced under licence. Net value is defined in the Mining Act, Cap. 123 as the market value of minerals ‘free on board’ at the point of export from Tanzania, or in case of consumption within Tanzania, at the point of delivery within Tanzania, less cost of transport, insurance and handling charges, from the mining area to the point of export or delivery and the cost of smelting and refining or other processing costs.
Export of Minerals
Export of minerals is governed by the Mining Act, Cap. 123. Export of all minerals requires a permit from the Commissioner for Minerals. The export process must comply with the export procedure described under the Mining (Mineral Trading) Regulations, 1999. There are fees which are payable before the export permit is granted. In addition, provisional royalty or provisional payment in lieu of royalty must be paid before issuance of export permit. The Commissioner has powers to re-value minerals to be exported. The consignment of minerals to exported must be sealed by the Commissioner before is taken out of the country.
Oil and Gas
Section 4 of the Petroleum (Exploration and Production) Act, Cap. 328 (‘Act’) vests the entire property in and control over oil and gas in any land to the United Republic of Tanzania. Private parties (including foreign parties) can be licensed to conduct exploration or production. Section 8 of this Act establishes the office of the Commissioner for Petroleum Affairs (‘Commissioner’). The Commissioner is appointed by the President of the United Republic of Tanzania and has powers to carry out general administration of oil and gas exploration and development activities. The Act empowers the Minister to grant, renew, suspend or cancel licences for oil and gas exploration or development. The licences normally do not cover surface rights although the Act limits the rights of the third parties over surface rights in a licensed area. In case third party surface rights interfere with exploration or production, section 74 of the Act allows the licences holder to remove third parties after making compensation. In addition to licences, agreements can be entered by private persons and the Government adding conditions or benefits to a licence. Licences are transferable subject to approval of the minister responsible for petroleum.
Environmental Protection
The main legislation is Environmental Management Act, 2004 (‘Act’). For minerals sector, there are additional regulations, namely, Mining (Environmental Management and Protection) Regulations, 1999 issued under the Mining Act, Cap. 123. Section 232 of the Act provides that where any provision in the Act is in conflict or otherwise inconsistent with the provisions of any other law, the provision of the Act has to prevail. This legislation establishes National Environmental Management Council which is national environmental protection agency responsible for administration of the Act and other environmental laws. It also provides for legal and institutional framework for impact and risk assessments, prevention and control of pollution, waste management, environmental quality standards, public participation, compliance and enforcement, and implementation of international instruments on environment. This legislation also lays down the procedure for conducting Environmental Impact Assessment (‘EIA’). The steps for conducting EIA are described for under the Environmental Impact Assessment and Audit Regulations, 2005. These Regulations were made under the Act. EIA is required for all projects that are likely to have significant adverse environmental impacts. The EIA is generally required with a view to determining the scale, extent and significance of the impacts and to identify appropriate mitigation measures. The projects which require mandatory EIA include extractive industries (including mining).
Health and Safety Laws
The main legislation is Occupational Health and Safety Act, 2003. The Act establishes the office of chief inspector which has powers to administer the Act. There are additional regulations for minerals sector, namely, Mining (Safe Working and Occupational Health) Regulations, 1999. Under these regulations, the chief inspector of mines appointed pursuant to the Mining Act, Cap. 123 and have powers to administer mining health and safety laws.
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