Paragraph entered by Atlantic migration, in order for SteelFirst articles to display correctly on Metal Bulletin.
The iron ore and bauxite-rich nation, which appointed its first-ever democratically elected leader just three years ago, ratified an amended version of its 2011 mining code on Monday April 8, following more than a year of consultation with miners and development partners.
Cutting minimum investment levels, taxes and royalties, the revised code is designed to make Guinea more "attractive and competitive", according to Guinea’s minister of mines Mohamed Lamine Fofana.
“We have put in place a more flexible tax system to encourage investment,” Fofana said.
Mining profit taxes have been cut to 30% from a previously tabled 35%, with taxes on bauxite exports dropping to $4 per tonne from a proposed $11-13 per tonne.
Iron ore royalties will be tied to recognised industry index prices, and bauxite prices to the LME aluminium price.
The minimum investment threshold for low capital intensive minerals, such as gold or diamonds, has been reduced to $500 million from $1 billion. This amendment does not cover iron ore or bauxite.
Exploration permit sizes have been stretched to 500 square metres from 350 sq km for bauxite and iron ore, and to 100 sq m from 50 sq km for other minerals.
Guinea’s participation in mining companies as a stakeholder has also been clarified.
The earlier code indicated that the government could do what it wanted with the 15% free carry equity holding in all new mining projects in the country stipulated in the 2011 code.
The amended mandate has clarified that the government does not have the right to sell on this stake – a grey area in the 2011 code.
Anti-corruption terms top priorities
In return for the concessions made by the government, the amended code has given miners three different timelines for complying with the regulations.
Guinea has put anti-corruption terms and a tax on capital gains at the top of its list of priorities for miners.
Companies looking to develop projects in Guinea have until 2015 to agree to mining code terms covering transparency, anti-corruption, taxes on capital gains and mining title transfers of interests, according to documents seen by Steel First.
Profits made by companies on the sale of a capital asset will be taxed, with companies leaving their mining titles forfeit in the case of non-payment of capital gains taxes.
“Companies proved to be involved in corrupt practices will be completely penalised – either with massive fines or by having their licence revoked,” Fofana told Steel First.
Environmental, community and health and safety clauses also have a 2015 deadline, with terms relating to employment and local procurement to be implemented over a maximum period of eight years.
The government is yet to set in stone some of the most important clauses in the revised code.
Timeframes for the implementation of amendments to tax and customs terms, the state’s stake in mining companies, and mineral marketing and foreign exchange controls will all be "subject to negotiations" between mining convention holders and the government.
Miners active in Guinea have largely welcomed the revised code.
"We believe these changes will be very positive in attracting additional mining and infrastructure investment into Guinea, which should have positive ramifications for the country itself and, indeed, for Bellzone Mining,” Bellzone Mining ceo Glenn Baldwin said.
In December 2012, Bellzone became the first mining company to export ore from Guinea since 1966. The UK-listed miner has a 50% stake in the Forecariah iron ore project in western Guinea, which is half owned by the China Investment Fund.
“These changes should help towards encouraging investment in mining and the development of Guinea’s resources for the benefit of all stakeholders,” Sable Mining ceo Andrew Groves said.
Sable Mining is developing the Nimba deposit in Guinea’s south-eastern region close to the border with Liberia.
Israeli diamond billionaire Beny Steinmetz’s mining arm, Beny Steinmetz Group Resources (BSGR), whose mining concession for blocks 1&2 of the Simandou project is being reviewed by Guinea’s technical mining review committee as part of wider mining reforms, declined to comment.
Brazilian mining major Vale, which owns 51% of BSGR’s stake in Simandou through joint venture company VBG, said the group "had no comments so far on the amendments".
The code is fully applicable to all mining titles and permits not secured by an earlier convention.
This means that it does not apply to Anglo-Australian mining major Rio Tinto, which is developing Blocks 3&4 of Simandou, one of the world’s largest untapped iron ore reserves.
Rio Tinto signed a $700 million settlement fee to the government of Guinea in 2011, which exempts it from any changes to the mining code.
A spokesman for the company said that Rio Tinto had yet to see the revised code and would not comment on speculation.
Russian aluminium major Rusal, which operates the Frigua bauxite refinery located near Guinea’s capital Conakry, was less positive about the new code.
“The new mining code does not apply to the existing concessions and agreements and as such has no relation to Rusal's businesses in Guinea,” a spokesman told Steel First, adding that the revisions would "decrease" Guinea’s appeal to mining sector investors.
Guinea has cut its tax and royalty demands in its revised mining code in a bid to woo investors and push forward existing projects in the impoverished West African country.