Bloomberg News

Mozambique Plans to Revise Mining Law, Wants Greater Share

July 06, 2011

(Updates with comment from minister in second paragraph.)

July 6 (Bloomberg) -- Mozambique’s government plans to revise the country’s mining law and will seek to give the state a share of projects in “strategic sectors” such as coal, Mineral Resources Minister Esperanca Bias said.

The government started a series of meetings with license holders and other interested parties about its plans, Bias said at an industry conference today in the capital, Maputo. The government won’t take any decisions without discussing them with the companies, she said in an interview after the speech.

“The state should have a percentage of participation in consortia or companies that have mining concessions to explore mineral resources that are considered strategic,” Bias said.

Resource-rich African nations, including Namibia, Zimbabwe and Guinea, are planning to revise mineral laws to take advantage of commodity prices which have surged on the global economic recovery. Vale SA is mining coal in Mozambique, while Rio Tinto Plc is buying Riversdale Mining Ltd. that operates in the southern African country. Rio Tinto declined to immediately comment.

The changes will affect all mining activities, including coal, gold, uranium and all other minerals, although the percentage the state will keep is still up for discussion, Bias said in the interview. The law could be ready by the end of the year, she said.

Gains Tax

Shares of Dublin-based Kenmare Resources Plc, a producer of titanium minerals in Mozambique dropped 8.1 percent to 55 pence as of the 4:30 p.m. close in London, the biggest decline since October. Kenmare wasn’t immediately available to comment.

“Kenmare is one of the only significant mining operations currently operating in Mozambique so I’m sure they will be having conversations,” Jeremy Dibb, a Canaccord Genuity Ltd. analyst in London, said by phone.

The new law, which would replace the Mining Law of 2002, may see investors who sell their licenses or concessions pay tax on the gains made on the transactions, Bias said. It will probably also give the state the right to take back concessions not developed within a certain period, she said.

“When we have consensus then everyone will know” what the new law’s terms are, she said.

Mozambique will hold the government share of projects through the state-owned Empresa Mocambicana de Exploracao Mineira SA, Bias said.

--With assistance from Jesse Riseborough in London. Editors: Gordon Bell, Alastair Reed, Antony Sguazzin

To contact the reporter on this story: Fred Katerere in Johannesburg at fkaterere@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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