Mali Tightens Grip on Mining Sector with New Code and Local Content Law

Overview of Changes

Two years after its military coup, Mali has introduced a new mining code and legislation on local content in the mining sector, imposing significant requirements on foreign mining companies. The new code replaces the 2019 Mining Code and applies to all new permits and renewal of existing permits on projects already underway. However, the local content law takes immediate effect for all existing mining projects across the country.

Key Requirements

The legislation aims to increase state revenues from mining activities by imposing a range of requirements on mining companies:

• Gradual Reduction of Foreign Employment: Gradually reduce foreign employment from 10% in the first three years to 5% in the following three years and eventually reach full Malian employment.
• Local Sourcing of Goods and Services: Source all goods and services for mining operations from local subcontractors, with an exception where the service cannot be provided by a local company or at comparable costs to foreign entities.
• Insurance via Local Insurers: Insure all mining activities via locally approved insurers.

Consequences of Non-Compliance

Consequences for non-compliance range from fines to imprisonment or cancellation of mining permits. The Malian government has also increased its stake in locally-incorporated mining companies, with an option to acquire up to 35% of shares, including a minimum of 10% for free.

Valuation Method and Impact on Mining Companies

The valuation method for shares acquired by the state is capped at exploration costs incurred up to the preparation of the feasibility study plus interest. This is expected to result in a significant discount on market value for mining companies.

Recommendations for Foreign Mining Companies

Foreign mining companies operating in Mali should carefully consider the changes and monitor future implementations of the new code and local content law. They may seek legal advice early to ensure that no statement or claim made can affect their rights under any investment treaty, or the amount of any future claim. It is also recommended to preserve evidence that may become relevant and material in the context of a dispute.

Conclusion

The introduction of the new mining code and local content law marks a significant shift in Malian authorities’ approach to regulating the mining sector, and its impact on foreign mining companies will be closely watched by industry stakeholders.