Several natural resources laws regulate mining, and we’ll walk you through the types of licenses required in Tanzania’s mineral sector and the conditions for trading in minerals here.
Those interested in investing in the mining industry may choose from the following mining rights or licenses:
- Prospecting mining licenses.
- Special mining licenses.
- Mining licenses.
- Primary mining licenses.
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A prospecting mining license enables entry into a prospecting mining region favorable to the minerals to which it relates, as well as the performance of operations and other activity required for that purpose, such as the removal and excavation of earth and soil. The license will specify the group and type of mineral it applies to. It could be used and issued for minerals that fall under the Mining Act (energy, metallic, gemstones excluding kimberlitic, building, or industrial minerals).
The original term of a prospecting license is four years, and it can be renewed for an additional three years before it can no longer be extended. A prospecting license is provided to a local mining business, which shall be chosen by the Minister awaiting approval by the Cabinet at the conclusion of the two periods mentioned above, after which the territory covered by the license reverts to the government.
Subject to prior Cabinet clearance, anyone planning to do exploration work in such a region must do so through agreements established with a local mining business.
A prospecting mining license is subject to the following rules:
- A maximum of 20 licenses, provided that the total combined prospecting areas must not transcend 2,000 square kilometers.
- Operations must start within three months of receiving a prospecting license, or the licensing authority may permit it within another time frame.
- Announcing the discovery of any mineral deposit with a potential market value to the licensing authority.
- The prospecting program that is part of the prospecting license must be followed.
- Make sure that prospecting procedure costs don’t drop below USD 500 per square kilometer during the initial period or USD 2,000 per square kilometer after the first renewal.
In areas where additional prospecting is authorized, the minimum investment is USD 6,000 per square kilometer. A prospecting license requires a minimum investment of USD 100 for industrial minerals and building materials and USD 250 for gemstone prospecting.
A special mining license will be issued for massive mining operations with capital expenditures above USD 100 million. The license gives the holder the sole authority to conduct mining operations in the designated mining area for the specified minerals. The projected life of the holder, as stated in the feasibility study, or any other duration the licensee requests, whichever is shorter, is the length of time it is issued. A renewal application for a special mining license may be lodged at any time but no later than one year before the license expires.
A special mining license may be subject to the following conditions:
- Establish the mining area and begin production while adhering to the mining operations program and environmental management plan.
- Must hire Tanzanian nationals and put in place a succession plan for foreign workers in accordance with ideas given while applying for the license that is also appended to the license.
- The mining area shall be marked and maintained as marked.
- The mine closure plans shall be prepared and updated as mandated.
- To implement a proposed strategy for the relocation, resettlement, and payment of residents within mining zones in conformity with the Land Act.
- To provide a rehabilitation bond if the ministry in charge of minerals requests.
- Following the environmental management act’s requirements, get an environmental certificate.
- Should have a strategy in place for Tanzanian citizens’ employment and training.
- If a development deal has been signed, adhere to its provisions.
Depending on the type of minerals and the level of investment, the government is eligible for not less than 16% non-dilutable free carried interest shares in the equity of a mining company. Although the relevant provision states that the type of minerals and the degree of investment will decide the percentage of free carried interest, the regulation does not mention how these factors will affect the determination of the percentage. Therefore, it would imply that projects using particular minerals might draw a higher proportion of free carried interest.
Additionally, based on the total amount of tax spending made available to the mining business, the government is allowed to purchase up to 50% of the shares of that company.
A tax expenditure is “the estimated value of tax benefits provided by the government to a mining company.” This means that the government will be able to purchase a more significant percentage of shares in a mining company, up to a maximum of 50%, the more tax incentives the company receives.
The Mining Public Offering Regulations require that a minimum local shareholding be acquired through a public offer issued under the Capital Markets Securities Authority. That holders of special mining licenses must control 30% of a shareholding regionally.
When referring to a body corporate, the phrase “local shareholding” relates to shares held by a corporation in which Tanzanian people or the government own a beneficial interest in at least 50% of the company’s shares.
The regulations give the Minister the authority to issue a waiver if the license holder cannot obtain the required minimum local shareholding after a failed public offering. The license holder must apply for the waiver, and the Capital Markets and Securities Authority must recommend it.
As a leading firm of legal advisory in Tanzania, Shikana Group advises and draws up strategy to ensure that its clients obtain the required licenses they need to operate in a given sector in Africa.
Our legal team have extensive experience dealing with licensing applications in the tourism, gaming, mining, financial services, oil and gas, and telecommunication sectors.
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