Mozambique’s New Mining Law: A Re-Balanced Exercise
Mozambique’s new Mining Law (Law No. 20/2014 of 18 August) introduces changes largely targeted at re-balancing the terms to which mining activities are carried out towards Mozambique and Mozambicans, following a trend began through the so-known as “Mega Projects Law” (Law No. 15/2011 of 10 August 2011).
Before the entry into pressure from the New Mining Law, the performance of mining activities in Mozambique was controlled by Law No. 14/2002 of 26 June 2002 (the “2002 Mining Law”).
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Jean-Louis Neves Mandelli
27 October 2014
PROJECT DEVELOPMENT & FINANCE CLIENT PUBLICATION
Increasing Local Development and
Participation in the Mining Sector
The main focus of the new Mining Law is increasing
local participation in mining operations, both in the
public and private sector. Many of the requirements
imposed under the new Mining Law reflect the
requirements recently introduced in the oil and gas
sector, which was reformed at the same time. As in the
oil and gas sector, some of the more controversial
requirements imposed by the new Mining Law did not
appear in early drafts of the law but rather were
introduced late in the legislative process.
Local Content Obligations
The new Mining Law sets out local content
requirements for the procurement of goods and
services for mining activities which are designed to
promote the development of Mozambican businesses
“The main focus of the new
Mining Law is increasing local
participation in mining
These include a requirement for foreign persons to
associate themselves with Mozambican persons to
supply goods and/or services to the mining sector in
Mozambique (Article 53(2)) and for operators in the
mining sector to give preference to Mozambican goods
and services to the extent that they are of comparable
quality and available in the timeframes and quantities
required Art 22(4)). Early drafts of the law made this
requirement subject to the price of Mozambican goods
and services not exceeding 10% of comparable
imported goods or services. Its deletion in the new
Mining Law could be problematic for operators as it
seems they would be required to choose Mozambican
goods and services over imported ones even if they are
significantly more expensive.
As concerns the development of local know-how,
operators in the mining sector are required to provide
employment and technical training for Mozambican
nationals, with a preference for the population
residing in the immediate vicinity of the concession
area (see Art 33(2) and Art 36(c)). The new Mining
Law does not, however, provide any detail of how
many Mozambican workers are required to be trained
and employed to discharge these obligations. It is
unclear whether and to what extent the new Mining
Law imposes more stringent obligations than those
currently in force under Mozambique’s labour laws
(which include a quota regime for the employment of
local and foreign workers). However, this regime
follows the legislative trend in the oil and gas sector as
evidenced by similar reforms in the new Petroleum
Law (Law No. 21/2014 of 18 August 2014).
Another similarity to the regime recently introduced
in the oil and gas sector is the requirement that all
holders of mining concessions be listed on the
Mozambican Stock Exchange. This was one of the
requirements introduced shortly before the law was
passed. The law does not provide any further details of
the timeframes for the listing or how much of the
share capital is to be listed. This will need to be
understood more fully by investors so they can take it
into account in structuring their investments. For
instance, investors looking to develop projects on a
project finance basis will need to understand the
impact of this requirement on the share security and
completion support available to lenders. While there is
precedent in other jurisdictions on how to address
similar issues, it is not clear whether such precedent
solutions would be permitted in Mozambique.
Minerals Processing in Mozambique
The new Mining Law requires that, if economically
viable, any processing activities relating to minerals
produced in Mozambique must be undertaken in
Mozambique (Art. 57). This was not a requirement in
early drafts of the law. Early drafts contemplated an
incentive-based mechanism to encourage foreign
investors to process minerals in Mozambique.
It is unclear how this requirement is intended to
operate and whether this would constitute an absolute
prohibition on the export of unprocessed minerals of
the type seen in other jurisdictions such as Indonesia.
This may be clarified in the implementing regulations.
However, we would expect this to cause significant
concerns for investors, particularly for mining
companies who are not in the business of processing
and treating minerals.
Holders of Mining Titles
The new Mining Law also provides that rights to
undertake any mining activities (“mining titles”) can
only be granted to Mozambican natural or legal
persons (although legal persons can be foreign
owned). Previously foreign incorporated companies
could hold exploration licences.
More Stringent Requirements on Mining
The unprecedented investor attention that
Mozambique has been receiving in recent years has
increased the Mozambican State’s leverage over
investors into the country’s mining sector. The
Mozambican State has sought to use this leverage to
impose more stringent requirements on mining
operators and increase its control over mining
More Stringent Obligations
Under the new Mining Law operators are given
shorter timeframes in which to conduct exploration
activities, an example of which is in relation to the
maximum term of exploration licences (as detailed in
the table below).
Significantly more stringent timeframes also apply to
the commencement of mining activities once a
discovery has been made. The consequence of failing
to meet these timeframes is also more draconian as it
can entitle the State to revoke the applicable mining
Consistent with the approach taken in other recent
Mozambican law reforms (such as under the new
Petroleum Law), the new Mining Law imposes more
stringent environmental requirements. Mining
operators are required to submit a decommissioning
plan for approval by Mozambican authorities and to
provide financial guarantees to cover
decommissioning costs (Art 71). The new Mining Law
does not specify when such a guarantee would need to
be provided. This may be covered in the implementing
The environmental compliance requirements
applicable to mining activities have also been
restructured with the new Mining Law imposing
different requirements on operators depending on the
type of mining title they hold rather than the
environmental impact of each project (as was the case
under the 2002 Mining Law (Art 69)).
The new Mining Law also imposes significantly more
stringent obligations on any operators requiring to
resettle people within an area affected by mining
operations, including with respect to the
compensation payable to people affected by
resettlement (see Arts 29-32).
Increased State Control
The new Mining Law reinforces the Mozambican
State’s control over the country’s mineral resources.
For instance, it introduces a right for the State to
require mining operators to sell mineral products to
Mozambique to the extent necessary for use in
Mozambican industry (Art 21).
Greater Mozambican State control is also exercised
over transfers of interests in mining titles. The 2002
Mining Law only required the Government’s consent
for transfers of interests by the title holder and not in
the case of transfers of shares in the title holder. The
new Mining Law now clearly states that any transfer of
a direct or indirect stake in the title holder also
requires the Government’s prior consent (Art 62(2)).
This would appear to be the case irrespective of the
amount of shareholding interest transferred. In the
context of a project financing, the lenders may wish to
have the Government agree in a direct agreement to
certain objective criteria relating to the identity of a
transferee which, if satisfied, would constitute consent
of the Government.
Compliance with the requirements of Mozambican
mining law is more strictly policed under the new
Mining Law as it specifically contemplates criminal
liability for breaches of mining laws (such as
conducting exploration, production, processing or
marketing of mineral resources without the necessary
The circumstances of mining titleholder default in
which the Mozambican State has the right to revoke a
mining title are also more extensive. For instance,
under the new Mining Law the State is entitled to
revoke a mining title if the holder of the mining title is
indebted to the State (Art 64(1)(e)).
Less Extensive Investment Protection
The investment protection regime applicable under
the 2002 Mining Law was, in some respects, more
beneficial than the general investment protection
regime available to investors in other sectors. For
instance, the 2002 Mining Law included undertakings
by the Mozambican State not to change the tax regime
applicable to a mining title holder and to indemnify
mining title holders from adverse financial
consequences resulting from changes in mining
These additional investment protections have been
removed under the new Mining Law. In fact, the
investment protection regime applicable to the mining
sector is now less extensive than that generally
applicable to other sectors under Mozambican law.
The types of investment subject to investment
protection only cover cash investments to the extent
such cash is applied in payment of development costs.
Cash investment per se (e.g., subscription of share
capital) does not appear to constitute foreign
investment for the purposes of investment protection
under the new Mining Law.
once for up to
Broader Scope of Regulated Activities
The scope of application of the new Mining Law is
broader than that of its predecessor as it also regulates
the beneficiation, processing and sale and purchase of
mineral resources on a stand-alone basis within
The regulations implements the new Mining Law
should provide additional details of the terms of these
The new Mining Law follows the trend set by other recent Mozambican legislation (such as the Mega Projects Law and
the new Petroleum Law) pursuant to which the Government of Mozambique is seeking to make the terms under
which mining activities are conducted more beneficial to Mozambique and Mozambicans. However, while the new
Mining Law does impose some potentially onerous new requirements which may be controversial for investors (such
as concerns the IPO requirement and the requirement that all mineral processing be undertaken in Mozambique), it
is not a radical overhaul of the Mozambican mining regime. In particular, it does not affect the tax and fiscal
incentives regime applicable to mining operations which has been reformed separately pursuant to a new Mining Tax
Law which will come into force on 1 January 2015. Instead, it is mostly focused on reforming the way in which mining
operators conduct their activities. These reforms are aimed both at requiring greater Mozambican participation in the
mining sector and at imposing more stringent requirements on mining operators.
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ACTIVITY TYPE OF
Not required if
mining operator has
rights under a
mining certificate or
Required even if
mining operator has
right to produce
Marketing licence Not required if
holds a mining
certificate or mining
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