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Guinea: New Law on Mining in the Offing

(Apr. 28, 2011) On April 26, 2011, Reuters reported that the Government of the Republic of Guinea is gearing up to issue a new mining law (hereinafter the draft Code) which, among other things, seeks to substantially increase the government's stake in mining projects in the country, tighten application procedures for mining concessions, give tax breaks to mining companies, and create a development fund. (Richard Valdmanis & Bate Felix, Guinea Eyes Bigger Mine Stakes, New Rules, REUTERS (Apr. 26, 2011).)

Guinea is the world's top exporter of aluminum ore (bauxite) and is said to have the biggest iron ore reserves in the world. (Id.) Its bauxite reserve is more than 40 billion tons (with alumina content of more than 40%), which accounts for more than half of the total world reserves. (Symposium Mines Guinea 2011, Guinea Mining Conference and Exhibition, May 10-12, 2011,ECONFERENCE (last visited Apr. 26, 2011).) Its iron reserves are estimated at 25 billion tons. (Id.)

The draft Code increases the government stake in the industry substantially and tightens the application process for mining permits. The government would automatically have a 15% interest in any mining project, with the option to buy an additional 20% interest. (Valdmanis & Felix, supra.) Currently, government interest in mining projects is capped at 15%. (Id.) The draft Code would also change the lax application process for permits currently in place and require mining companies to complete feasibility studies, as well as social and environmental impact studies, before they can be granted concessions. (Id.) At present, companies are able to negotiate agreements to postpone these studies until after they are granted concessions. (Id.)

The draft Code also introduces tax incentives. In an attempt to attract investment in the mining sector, the Code seeks to give mining companies heavy tax breaks and deductions geared towards easing the costs of the early phases of their involvement, mainly for research and mine construction. (Id.) The breaks would be for several types of taxes, including value-added taxes, equipment import taxes, and customs duties. (Id.)

Much like the recently approved Ghanaian Petroleum Management Bill, the Guinean draft Code envisages the establishment of a new development fund. (See Hanibal Goitom, Ghana: Parliament Approves Petroleum Management Bill, GLOBAL LEGAL MONITOR (Mar. 7, 2011).) The existing 0.5 to 1% community development levy imposed on mineral turnover would be paid to the fund. (Id.) However, the Code does not provide specifics as to how the Fund would be administered. (Id.)