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(Jul 31, 2013) The transitional Parliament of Guinea (Conseil National de Transition, CNT) adopted Law L/2013/053/CNT on April 8, 2013, which amends the Mining Code, Law L/2011/006/CNT. The President promulgated the new Law on April 17, 2013, by Presidential Decree D/2013/075/PRG/SGG. (Amendments to the Guinean Mining Code, Norton Rose Fulbright website (June 2013); Albert Atangana, Guinea: Amendment to Mining Code – Highlights (July 16, 2013), International Bureau of Fiscal Documentation online subscription database.)

According to a commentary on the new Law prepared by the Norton Rose Fulbright law firm, the 2011 Mining Code, which was to replace the 1995 code, was so roundly criticized that the Guinean authorities "almost immediately" decided to "suspend" application of its tax and customs provisions "and in effect not [enforce] the remaining provisions." (Amendments to the Guinean Mining Code, supra.) This created legal uncertainty in the country's mining industry, and so the authorities worked out amendments to the 2011 Code to address some of the mining companies' concerns. While some of the amendments "do provide a level of relief in respect to certain provisions of the 2011 Mining Code … new restrictive rules are also introduced and many of the industry concerns remain unaddressed." (Id.)

Some of the key features of the new Law are:

EXPLORATION AREA: Increased maximum area of exploration licenses, from 350 km² to 500 km² for bauxite and iron ore, and from 50 km² to 100 km² for other substances, including gold, but retention of the limits on the maximum number of exploration licenses that any one individual can hold for any one substance, namely, three for bauxite and iron ore and five for other substances. (Id.)

LICENSING CONDITIONS: Reduction in the investment threshold required for licensing as a mining operator under the mining concession regime, from US$1 billion to US$500 million for projects involving exploitation of precious stones (gold, platinum, diamonds and other gems); metallic substances; non-metallic substances and rare earths; and mineral and thermal waters, but retention of the threshold US$1 billion for exploitation projects of bauxite and radioactive substances. (Id.)

INFRASTRUCTURE: Easing of rules on the transfer to state ownership of infrastructure built and financed by a mining title holder. Instead of the transfer having to occur after the infrastructure's amortization and within a maximum of 20 years, it is to occur "after the time necessary for a fair return on investment," with an additional grace period of five years, and the mining companies will be permitted to maintain a priority right on the use of the infrastructure, even after the transfer to the state. (Id.)

TAXATION: Complete overhaul of the 2011 Code's provisions on tax and customs. (Id.) Some of the changes are:

  • The tax on industrial and trade income along with corporate income tax rates are reduced from 35% to 30% (Atangana, supra).
  • A tax on extraction, applicable to minerals other than precious metals (at varying rates), and a tax on the production of precious metals (5% for silver, gold, platinoids, palladium, and rhodium) replaces the mining taxes that had formerly been imposed under article 161 of the 2011 Mining Code. Both types of taxes are still deductible when calculating taxable profits. Any delay of over 30 days in payment of either tax will be subject to sanctions that could lead, if prolonged and/or repeated, to withdrawal of the mining title and closing of the facilities. (Amendments to the Guinean Mining Code, supra.)
  • New export taxes, applicable to the export of minerals other than precious substances are introduced, at various rates of taxation ranging, depending on the substance, from 0.075% for bauxite to 3% for concentrated uranium. In addition, the export tax on the industrial or semi-industrial production of diamonds is replaced by a tax on the raw export of precious stones and other gemstones; if these substances are exported after having been cut in Guinea, the export tax rate is reduced. (Id.)
  • The new Code requires that an advance pricing agreement be made if company negotiates a long-term contract or pricing arrangement with a mineral substance purchaser. (Atangana, supra.)
  • The scope of tax incentives is clarified for those available during the research and development phases and stricter rules are introduced on the grant of such incentives. (Id.)
  • In regard to tax stabilization, the period of stability for incentives available to companies that have concluded a mining agreement with the state is extended from 10 years to 15, the distinction between exploitation title holders and concession holders in regard to the availability of this time period has been removed, and the requirement to pay for an annual stabilization premium has been eliminated. However, the scope of the stabilization is limited to either the applicable tax rate or the tax assessment base, depending on the applicable taxes. (Id.; Amendments to the Guinean Mining Code, supra.)
  • The list of infringements that may trigger the withdrawal of a mining license newly includes the non-payment of capital gains tax due when transferring mining interests. (Atangana, supra.)
  • The 2013 Code introduces new provisions on the mining products list and its content, addressing in particular each activity phase, as well as proposed amendments to the various categories of goods that a mining list can include. (Amendments to the Guinean Mining Code, supra.)

EMPLOYMENT: Retention of the quota system created by the 2011 Code, under which a mining company must employ a certain percentage of Guinean nationals, depending on the stage of the project and the position involved, but with a few minor changes, e.g.:

  • removal of the requirement that mining companies give priority to residents of local communities for positions not requiring qualification, although management may reserve certain positions for such persons (id.);
  • clarification that the obligation to appoint a Guinean deputy general manager (and of a Guinean general manager within five years) must be met "as at the 'date of first commercial production', rather than the 'launch of the exploitation company' which was a rather vague concept" (id.);
  • clarification that the Guinean general manager and deputy general manager are to be hired in compliance with the mining company's own procedures (id.); and
  • removal of the three-year restriction on the term of employment for expatriate personnel, and substitution with the requirement that their term of employment conform to the initial term provided for in the Law on the Entry and Residence of Foreigners and the Labour Code, a term that may be renewed only once (id.).
DIRECT SUBCONTRACTORS: introduction of provisions specifically on this subject. Direct subcontractors "exclusively include entities directly providing goods and services to mining title holders in relation to activities covering exploration, construction of mining facilities or extraction." (Id.)

PUNISHMENTS: Although the provisions on penalties for violation of the 2011 Code "have remained substantially unchanged, ... the amounts of the fines have, in certain instances, been substantially increased, up to five times their initial amounts," for such offenses as delays in beginning development projects, the mining of diamonds or gems without proper authorization, the violation of closed or protected zones, and breaches of provisions on hazardous substances and on work hygiene and safety. (Id.)

Author: Wendy Zeldin More by this author
Topic: Mining More on this topic
Jurisdiction: Guinea More about this jurisdiction

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Last updated: 07/31/2013