SPOTLIGHT #7: Burkina Faso new Mining Code
At Lead up, we are committed to providing our clients with the most innovative dispute resolution solutions to fit their specific industry contexts. To do that, we have to stay on top of the recent developments in our clients’ sectors, and analyse these developments in line with our clients’ needs. Every month, in “Lead up Spotlight”, we share with you – our colleagues, clients and prospective partners – our analysis on a recent development relating to dispute resolution in an industry that matters to us and to our clients.
This month’s Lead up Spotlight focuses on the new Burkina Faso Mining Code, just approved by the country’s Assemblée Législative de Transition on 18 July 2024. This new legislation will undoubtedly affect miners already in the country and prospective miners looking to develop or invest into Burkina Faso’s projects.
Many changes to the Mining Code will have to be closely assessed by private foreign investors, such as the following:
- Opening of Share Capital to Burkinabe Investors: One of the major innovations is the requirement for mining companies to open a portion of their share capital to Burkinabe investors. This measure aims to encourage local participation, allow Burkinabe citizens to directly benefit from the country’s mineral wealth.
- State and Local Community Participation: The new Burkina Faso Mining Code allows for greater participation of the State in mining projects. The State’s statutory participation in the capital of mining companies for the granting of large or small mining exploitation permits increases from 10% to 15%, with the possibility for the State or the national private sector to subscribe to at least 30% of the company’s capital. The code also strengthens the rights of local communities in terms of consultation and compensation in cases of expropriation or environmental degradation.
- Issuance of Exploration Permits: Exploration permits will now be granted only to legal entities, excluding individuals. This measure aims to professionalize the sector and ensure that permit holders possess the necessary technical and financial capabilities.
- Reduction of Exemption Periods: The exemption period for preparatory work before exploitation is reduced to two years, non-renewable, in view of encouraging faster and more efficient exploitation of mineral resources.
- Abolition of Tax Incentives: The new legislation eliminates certain tax and customs incentives for mining companies during the exploitation phase, thus increasing State revenues.
- Duration of Exploitation Permits: The duration of large mine exploitation permits is reduced from 20 to 10 years, and that of small mine permits from 10 to 5 years, allowing for more frequent oversight and more flexible management of mineral resources by the State.
- Stabilization of the Fiscal and Customs Regime: One of the important provisions of the new Mining Code concerns the stabilization of fiscal and customs conditions for mining companies. In practice, this means that the fiscal and customs rules applicable at the time of signing the mining agreement will remain unchanged for a specified period, usually the duration of the project (not exceeding ten years). This includes taxes, customs duties, and other fiscal charges specific to mining activities.
- Regulatory and Monitoring Framework: The new legislation changes the regulatory and monitoring framework for mining activities by strengthening the capacities of oversight institutions (sworn officers of the mining administration now have the status of judicial police officers) and increasing penalties for non-compliance with regulations.
- National Gold Reserve: Mining companies are now required to contribute to a national gold reserve, which aims to enhance Burkina Faso’s economic stability and protect against global market fluctuations.
- No dispute resolution clause: the 2015 Mining Code included a reference, albeit uncertainly drafted, to dispute resolution through arbitration in relation to issues stemming from the application of the code. The new Mining Code does not contain any reference to dispute resolution or arbitration.
In a context where gold production has significantly increased – from 5.5 tons in 2008 to 56.85 tons in 2023 – and where the mining sectors contribution to the State budget has risen from 8.91 billion in 2008 to 529.25 billion in 2023, the Mining Code Law of July 2024 in Burkina Faso aims to reinforce the State’s control over the mining industry.
Given the uncertainty created by this new regime, and the general difficulty to predict further changes of the mining legal landscape in Burkina Faso, international mining contracts and conventions become an ever more important tool to secure the smooth running of operations in the territory.