MINING, MINERALS & NATURAL RESOURCES
NIGERIA
JAPAN Davis & Takahashi Horitsujimusho Gaikokuho Kyodo Jigyo Hiroaki Takahashi Partner Tel: 81-3-6234-1240 htakahashi@davis.jp www.davis.jp
The Investment Potential of Mining in Nigeria
Traditionally, Japan has been regarded as a non-natural resource country, dependent on imports for most of its mineral resources and energy. However, with the remarkable advancements in technological innovation, mineral development in Japan has become feasible and attractive – in particular, marine mineral resource development. Mineral resource development in the ocean around Japan has attracted a lot of attention from the international business community. The sixth largest ocean area in the world, Japan’s ocean resources – including the exclusive economic zone (EEC) of 200 nautical miles – have greatly expanded its available mineral deposits. Not surprisingly, further attention to the proper management and development of domestic mineral resources (including development with foreign capital) is expected in the near future. Problems Prior to the Mining Amendment Act The Mining Act has never been amended since its enactment in 1950 – a time lag that has resulted in a number of problems that need to be addressed. We look at some of the key problems and issues. Firstly, the old Mining Act has no provisions setting out the requirements for applicants desiring to be granted mining rights. Without such provisions, the government has not had the ability to adequately screen applicants that seek mining and development rights, to ensure that they have the ability to develop the mineral resources. As a result, numerous applications have been made for new mining rights by persons with no ability to undertake the mineral development.
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Secondly, the old Mining Act has the ‘firstto-file’ policy, where the first person to file an application for the mineral rights is granted priority. This – together with the new opportunities opening up in marine mineral development – has contributed to the increase in applications for mining rights by applicants without substantial ability or incentive to undertake development. It is situations like these that lead to speculative actions in the market. Thirdly, the old Mining Act has no regulations governing the exploration of mineral resources, which has resulted in disordered exploration activities being conducted. The government has been especially concerned with mineral exploration activities by foreign ships in Japan’s ocean areas. To address each of these problems, the following amendments have been made under the Mining Amendment Act. New Permission Criteria for the Creation of Mining Rights Under the new requirements in the Mining Amendment Act, the applicant must demonstrate that it has firstly, the necessary ‘financial basis’, i.e. sufficient funds and certainty of funding; secondly, the necessary ‘technical capability’, i.e. looking after all aspects of the business (organisation, structure, business history etc) with the primary technicians; and thirdly, the necessary level of ‘social credibility’, i.e. no history of violating criminal laws, other relevant laws or material disputes with investors. There is also an additional and more comprehensive requirement, which now allows the government to deny permission for mining rights to an applicant where it hinders the promotion of public interest from the viewpoint of a stable supply of minerals. More specifically, the requirement is that the mineral resource development cannot be ‘extremely inappropriate’ in light of domestic and foreign social and economic circumstances, nor can it be likely to hinder the promotion of public interest. The Minister of Economy, Trade and Industry has provided some guidance to
interpret this comprehensive requirement, and has illustrated cases that would not be in compliance. A New Procedure to Create Mining Rights The Mining Amendment Act defines ‘Specified Minerals’ as including oil, natural gas, certain ocean floor minerals and asphalt. As Specified Minerals have been determined to be particularly important for the national economy, a stable supply is therefore particularly necessary. There is now a new application procedure for mineral rights in respect of these. While the previous application procedure was based on a ‘firstto-file’ policy, this does not apply to Specified Minerals. Instead, the government is to designate a Specific Mineral Lot and solicit for applications for mineral rights, granting permission for the mineral rights to the applicant it determines is most appropriate, in accordance with the applicant satisfying the permission criteria requirements. A New Permission System for the Exploration of Minerals The term ‘exploration for minerals’ generally means activities involving the ‘investigation’ into geological structure that are necessary for developing mineral resources. It is limited to investigations that do not accompany mining activities and which are undertaken in a fixed area. As mentioned above, under the old Mining Act, the exploration for minerals has not been subject to regulation. However, under the Mining Amendment Act, a new exploration permission system has been established, whereby an applicant desiring to undertake exploration for minerals will be required to apply for permission in advance. The requirements include a determination of the appropriateness of the applicant’s proposed exploration methods and that it has not violated the Mining Act. Another requirement is that the exploration is not ‘extremely inappropriate’ in light of domestic and foreign social and economic circumstances, nor is it likely to hinder the promotion of public interest.
There is significant evidence that Nigeria has over 34 different solid minerals distributed in the country’s richly endowed geology. Some of the known minerals include; gold, coal, bitumen, iron-ore, tantalite/columbite, lead/zinc, sulphides, barytes, cassiterite, limestones, talc, feldspar and marble. Ownership of solid mineral resources is vested in the Nigerian government which grants the following titles to explore, mine and sell mineral resources: (i) the Reconnaissance Permit; (ii) the Exploration Licence; (iii) the Mining Lease; (iv) the Small Scale Mining Lease; (v) the Quarrying Lease; and (vi) the Water Use Permit. The use of land for mining operations is given priority over other uses of land, and is considered (for the purposes of access, use and occupation of land for mining operations) to constitute an overriding public interest within the context of the Nigerian Land Use Act.
CHILE
The Introduction of The Mining Amendment Act in Japan With the introduction of the ‘Mining Amendment Act’ (the ‘Act’), the Mining Act of Japan has been amended for the first time in 61 years. The rapid growth of demand for global energy in both emerging and developed economies has created international competition for natural resources in recent years. Coming into force on January 21, 2012, the Act has been enacted to firstly, ensure proper maintenance and management of domestic mineral resources, and secondly, to overcome the existing problems of the current Act.
Adepetun Caxton-Martins Agbor & Segun Taiwo Afonja Partner, Energy & Project Finance Group Tel: +234 1 4622093-4; +234 803 303 2977 tafonja@acas-law.com www.acas-law.com It is worth noting that the Ministry of Mines and Steel Development, responsible for formulating policies and regulating operations in the solid minerals industry, has prioritised the development of seven strategic minerals (‘7SM’) – coal, bitumen, limestone, iron ore, barytes, gold and lead/zinc. As world-class minerals, these have been carefully chosen for development in view of their strategic importance to Nigeria’s economy, and the sufficient quantities that are available to sustain mining operations for years to come. Companies engaged in mining activities are liable to Companies Income Tax at the rate of 30% on assessable profits, and education tax at the rate of 2% on assessable profits. A value added tax of 5% is payable with respect to vatable goods and services. Royalty, annual fees and rentals are also payable. However, incentives on mining activities include: firstly, a three to five years tax holiday for new mining companies and
Eelaw Energy and Environment Legal Advice Paulina Riquelme Founding Partner Tel: (56) (2) 2299567 priquelme@eelaw.cl
The New Chilean Environmental Compliance and Enforcement Rules: A Burden or Opportunity? Chile has recently undergone a radical change in its environmental framework regulations. These amendments focus on improving the environmental policy-making process. They introduce adjustments to the environmental assessment system, create a new compliance and enforcement system, as well as provide access to adequate environmental justice. With this scenario in mind, a new agency was created with the specific mandate to ensure that companies and individuals comply with the environmental regulations – the Superintendence of the Environment (the ‘Superintendence’). The Superintendence plays the role of head and coordinator of environmental compliance and enforcement. To meet this task, it has been attributed a wide range of faculties, such as access to a variety of environmental compliance mechanisms and broad inspection powers. It also has the ability to establish temporary measures
a system of deferred royalty payment determined by the investment level and nature of the project; secondly, a 95% capital allowance on qualifying capital expenditure incurred on exploration, development and processing; thirdly, an annual indexation of unclaimed balance of capital expenditure by 5% (only applicable to mines that commence production within five years of enactment of the Nigerian Minerals and Mining Act 2007); fourthly, the carrying forward of losses; fifthly, exemption from customs and import duties on approved plants and machinery, equipment and accessories – imported specifically and exclusively for mining operations; and lastly, interest income tax relief. Nigeria’s solid minerals wealth is rumoured to exceed her oil wealth. The favourable fiscal regime put in place makes Nigeria an attractive investment destination for those wishing to exploit her solid minerals potential.
William Faulconer Associate Tel: (56) (2) 2299567 wfaulconer@eelaw.cl www.eelaw.cl
for the protection of the environment and impose sanctions that can range from US$900 to over US$9 million, or could even entail the revocation of an environmental permit and permanent closure of a project. In order to compensate for these powers, the Chilean legislators have determined that a technical jurisdictional counterpart is necessary. To that effect, they have mandated the submission of a Bill to create the Environmental Tribunals, which effectively leaves the Superintendence’s enforcement and punitive powers pending until their establishment. This Bill was recently approved and will start to operate towards the end of 2012. In the meantime, the Superintendence has been busy gathering the necessary information to make an effective and efficient enforcement policy once all its powers come into force. With this objective in mind, environmental permit holders have been encouraged to upload their obligations to its database. Why should companies voluntarily declare their obligations? The Superintendence has stated publicly that it will be strict in
enforcing every single one of the obligations contained in each environmental permit. This might sound an obvious approach, but it has come as a shock to industry in Chile. Up until now, enforcement faculties have been dispersed in several different agencies and have turned out to be diffuse and ineffective. The current sanctions have also had a low deterrence effect. The new approach towards environmental compliance and enforcement is a reality soon to be faced by all productive activities. In this context, an opportunity arises for permit holders to put in order their projects, according to the obligations contained in the permit and the commitments undertaken in the process of obtaining it. Furthermore, it is a chance to advance in corporate thinking regarding sustainability and in doing so, forge a new path towards corporate and social responsibility. As the new regulations clearly intend to preclude the approach of ‘business as usual’, they can either be seen as a burden or an opportunity.
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