The code, signed on January 30 and due to be formally published by the end of February, contains new fiscal and operational incentives for mining companies, while also carving out a larger share of revenue for the government. Gabon hopes to accelerate the development of several key projects in the coming years, including the high-profile Belinga iron deposit, but will need to work hard to attract investors in the context of slowing commodity prices.New code, new incentives
Authorities aim to increase the mining industry's contribution to GDP from 6% at present to 25% in the next 15-20 years, a target that will require considerable new investment and exploration activity. Current production consists almost exclusively of manganese and gold, but the new mining code is intended to draw investors in across the board. The code will continue to provide companies with a tax-free prospection and exploration period, including duty-free imports of equipment and other inputs, which existed under the previous code.
It also aims to create a more attractive fiscal context; corporate income tax rates will remain at 35% but the mining royalty system will be more flexible. According to comments to the press by Fabrice Nzé-Békalé, director of the national mining company Société Equatoriale des Mines (SEM), royalties will be subject to negotiation, and lower rates will be applied to more difficult, cost-intensive projects. Nzé-Békalé also explained that the new code will clarify mining companies' obligations toward local communities, improve transparency in licence issues and standardise contract terms.
At the same time, Gabon is working to expand information on resource size and quality, Nzé-Békalé told OBG, "A lot of deposits require more exploratory work in order to be classified as a reserve and for the moment there are very few sites in the phase of exploitation in Gabon."Sharing the wealth
The revision of Gabon's previous mining code, which dates back to 2000, has been in the works for four years, delayed in part by the government's working to establish a national operator and set new guidelines for public participation.
Under the new code, SEM will have a non-negotiable 10% carried interest (free of charge) in all production contracts, with an option to purchase an additional 25% stake at market prices.
The completion of the mining code paves the way for a new production licence to be issued for Belinga, the largest project currently in the pipeline. The site holds an estimated 1bn tonnes of high-grade iron ore. However pending studies - conducted to certify the reserves -may take a further 18-24 months according to officials recently, which could delay the government's plan to issue licences for Belinga.
Gabonese authorities have also turned their attention to courting investors for upcoming projects in gold and marble mining. Gold mining has increased considerably in recent years, helping to diversify sector output away from manganese. Morocco's Managem saw production on its Bakoudou mine - currently the only commercial production by a foreign investor - double from 600 kg in 2012 in 1250 kg in 2013, with similar estimates for 2014. SEM has also greatly improved the structure and efficiency of the artisanal gold mining sector; 43 kg of gold were produced from independent gold miners in 2013, and SEM hopes to expand this to 100 kg per year in the near-term.
In the near-term, the slump in global commodity prices that has affected iron ore, manganese, gold, copper and many others will reduce the incentives for companies to take on large-scale, costly exploration projects. However, Gabonese authorities are hoping that investors will be lured by a weak market in anticipation of a future upswing.
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