A Two-page Summary of the Mines and Minerals Act 2009

The Ministry of Mineral Resources is introducing a new Mines and Minerals law which will transform minerals development in the country. The law will soon be submitted to Parliament.

This law is a major departure from previous mining legislation. It is more comprehensive with respect to the issues it addresses; it is more balanced between the interests of investors and communities; and is more rigorous in terms of governance and oversight. It makes Sierra Leone a leader in West Africa in terms of mining legislation and the law will bring important benefits to the economy, local communities and the country.

The law has four objectives:

• Addresses several issues not previously covered by the law including health and safety, environmental protection and community development;

• Tightens rules for administrators and mineral rights holders including application and reporting requirements;

• Promotes investment and minerals sector development by ensuring security of tenure and preventing companies from holding land under licence for too long without demonstrable activities;

• Rebalances fiscal benefits – including higher royalty rates for precious stones and precious minerals - between companies, communities and government.

Mines and Minerals Act 2009 – Main Features

• Improved clarity on the role and functions of the Minerals Advisory Board, including to certifying that an applicant for a mineral right is legally compliant with all requirements.

• Enabling the Government to issue minerals rights for proven economically viable deposits through a public competitive tender process.

• Improved provisions associated with registration of applications and recording of mineral rights – establishing a Mining Cadastre Office with clear instructions on managing information.

• Introduction of a Reconnaissance Licence - a non-exclusive mineral right that will enable more companies to identify areas of interest and apply for exclusive rights subsequently. This non-exclusive licence will essentially replace more commonly acquired exclusive prospecting licences. This non-exclusive licence will only be granted for 1 year and is renewable only once.

• Significantly reformed provisions for Exploration Licences - tightening the rules associated with the issuance of licences, introducing a minimum expenditure requirement (which will escalate every year), a maximum allowable area of 250km and shorter overall duration. Overall the obligations of a licence holder will be substantially increased over time, thus encouraging exploration and progressive relinquishments.

• Introduction of a Small Scale Mining Licence category - this enables the Government to closely control and regulate the sector. Applicants will now need to be considered by the MAB, complete an environmental impact assessment and report against a management plan, and more fully engage communities. This licence category will be valid for only 3 years (renewable) and over an area of up to 1 sq km.

• More rigorous provisions associated with artisanal and large-scale mining licences have been included, providing greater clarity on rights and obligations of licence holders. Artisanal mining licence holders now face more clearly defined social and environmental obligations and must provide more detailed information about sources of financing.

• The law more clearly defines the relationship between land owners/occupiers and holders of mineral rights. It restricts the ability of a mineral right holder to exercise rights on land dedicated for other public purposes. It defines when a mineral right holder is required to attain written consent from land owners/occupiers prior to exercising their rights. The law calls for fair and reasonable compensation for any disturbance of the rights of a land owner/occupier.

• Stronger provisions for the protection of the environment including the requirement for small and large scale mining licence holders to have an environmental impact assessment licence, carry out an Environmental Impact Assessment and have in place an Environmental Management Plan. All small and large scale mining licence holders will now need to provide financial surety against potential negative impacts on the environment.

• Introduce the requirement for large and certain small scale mining licence holders to enter into Community Development Agreements with affected communities prior to commencing mine development. The law establishes a minimum expenditure requirement of 0.1% of gross revenue to be made by mineral rights holders on community initiatives.

• New substantive part of the law dedicated to health and safety; requiring all minerals rights holders to provide and promote conditions for safe operations and a healthy working environment.

• Increased royalty rates for precious stones and precious minerals; diamonds will now be charged a 6.5% royalty, up from 5%, and precious metals (e.g. gold) will be charged a 5% royalty up from 4%. All royalties will also be assessed against market value rather than ex-mine price.

• Mineral rights holders will no longer be given any waiver on customs import duties; they will all pay the already reduced tariff rates for mining equipment.

• Provisions have been included in the law to ensure that all transactions are made transparent, and on fair market prices (i.e. arms length sales). Additionally, mining operations will be required to separate their accounts from other exploration activities carried out under other licences (i.e. ring-fencing). These provisions will better protect the Government from eroding taxable income of mining companies.

• Under the law the Government will have the right to acquire interests in large-scale mining operations on such terms as will be mutually agreed between the Government and the mining company.

• The law has a section dedicated to reporting, disclosure, and dissemination of information related to revenues and payments by both mineral right holders and Government, which provides the legal basis to make implementation of the Extractive Industries Transparency Initiative (EITI) compulsory. The Law goes quite far to make this an obligation of the licence holder and contravening this provision will be considered a prosecutable offence.

Work on the new law is being supported by development of:

• A new Diamond Trading Act, together with supporting regulations, to strengthen the legal and regulatory framework governing the trade of rough diamonds and to ensure full compliance with the Kimberley Process.

• Artisanal mining regulations, introducing stronger provisions on mining methods and the protection of the environment, improved terms and conditions for workers, and clarifying the commercial terms between supporters and artisanal mining licence holders.

• Regulations associated with the issuance and management of mineral rights. This will include all of the various applications procedures, assessment criteria, terms and conditions of all licences and administrative forms.

Extensive use of best practice in mining legislation was used in developing this law. Royalty rates were compared with regional and international levels; establishing a maximum allowable area for an exploration licence is very common, and 250 km is in line with international norms; and introducing escalating minimum expenditure requirements for exploration licence holders are increasingly being adopted elsewhere. The law is also consistent with the main ECOWAS principles and policies governing the mining sector.