Investing in the Mining sector in Tanzania. 1. Relevant Authorities and Legislation Laws Regulating Mining Sector In Tanzania

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1 Investing in the Mining sector in Tanzania 1. Relevant Authorities and Legislation 1.1. Laws Regulating Mining Sector In Tanzania The principal legislation regulating mining is the Mining Act, No. 15 of 2010 ( the Mining Act ) as well as regulations made under the Act concerning mineral rights, environmental protection,mineral beneficiation, safety and occupational health, mineral trading and mining of radioactive material. Other laws affecting the mining industry include the Environmental Management Act, 2004, the Income Tax Act, 2004 (which sets out a special regime for the mining sector), and the Tanzania Investment Act, 1997 which contains provisions that prohibit expropriation of property without due process of law that guarantees fair and speedy compensation, guarantee of profit, and capital repatriation as well as access to international arbitral process 1.2. Body charged with administering Mining Laws The mining industry is administered by the Ministry of Energy and Minerals. The chief officer relating to mining regulation is the Commissioner for Minerals, a presidential appointee whose responsibility is to oversee the effective implementation of the provisions of the Mining Act. The Minister has a role to play as well concerning granting mining licences and related matters. There is a Mining Advisory Board constituted under the Mining Act, with the responsibility among others to advise the Minister on matters relating to the mining industry. 2. Procedure for acquisation of mining rights in Tanzania There are four categories of mining licences. These are: the Special Mining Licence (SML), the Mining Licence (ML), the Gemstone Mining Licence (GML), and a Primary Mining Licence (PML). SMLs are issued in respect of large-scale mining operations whose capital is not less that USD 100,000, while a ML is one relating to medium-scale mining operations whose capital investment is between USD 100,000 to USD 100,000, GMLs are reserved for Tanzanian citizens except in the case of joint ventures where 50 per cent of the joint venture interest is controlled by a Tanzanian national and PMLs are restricted to Tanzanian citizens only. Therefore there aredifferent procedures applicable to different mineral rights acquistaion. These Procedures are prescribed under the Mining Act and the Regulations and there is no substantial difference regarding the procedure based on the type of minerals. However, application for SML and ML must be accompanied by an environmental impact assessment, a plan for resettlement and compensation of surface rights holders, plan for procurement of local goods and services, employment, and training of Tanzanians.

2 3. Foreign Ownership Requirements and Restrictions There are no special rules for foreign applicants to acquire mineral rights in tanzania except in the case of a Primary Mining Licence (which is restricted to Tanzanian nationals or companies exclusively owned by Tanzanian nationals) and Gemstone Mining Licences (also restricted to Tanzanian nationals only). A foreign individual may be in partnership or joint venture with a Tanzanian national (who must have a 50 per cent interest). However a company holding a mineral right shall not, without the prior approval of the Licensing Authority, transfer its shares if the effect of the transfer would be to give the transferee control of the company. The law provides that the Licensing Authority s consent shall not be unreasonably withheld Further, there is no statutory prescription or restriction concerning the nature of a legal entity holding a mineral right. However, in the case of medium- and large-scale mining operations the nature of the legal entity is traditionally a private limited liability company incorporated in Tanzania. 4. Requirements for ownership by indigenous persons or entities? There is no indigenous ownership requirement under the Mining Act, except the restrictions of ownership of Primary Mining Licences and Gemstone Mining Licences to Tanzanian nationals. 5. State have free carry rights or options to acquire shareholdings Special Mining Licence holders may enter into a Development Agreement with the Government and to negotiate and agree with the Minister concerning, among other things, the grant of a State free carried interest 6. Processing and Beneficiation Are there special regulatory provisions relating toprocessing and further beneficiation of mined minerals? Mineral rights holders are obliged under the Mining Act to set aside a certain amount of minerals for local processing. The Mining(Mineral Beneficiation) Regulations, 2010 provide for further procedures regulating beneficiation of mined minerals The Mining Act prohibits the selling or disposing of, or export of, any raw gold or gemstones except by holders of a Dealer s Licence. The export or import of any radioactive minerals must be in maccordance with the Atomic Energy Act. Holders of mineral rights are not required to have a Dealer s Licence in order to export their minerals. 7. Transfer and Encumbrance

3 The Mining Act permits the transfer of minerals rights subject to prior approval of the Licensing Authority; the approval of which shall not be unreasonably withheld. The approval of the Licensing Authority shall not be required in the case of a transfer to an affiliate or to a bank or financial institution as security for a loan. A mineral right may be assigned or mortgaged to a bank or other financial institution as security for any loan or guarantee in respect of mining operations and in such case approval of the licensing Authority shall not be required but the mineral rights holder mus notify the Licensing Authority of the intended mortgage A mineral right may be granted or held by more than one person an may be subdivided subject to approval of the Licensing Authority. An application for a mineral right must specify the mineral that willbe mined and the licence granted will also specify the mineral thatcan be mined under the licence. However, in addition, a primarymining licence holder may explore for other minerals but must be authorised by their licence to mine the same.. 8. Rights to Use Surface of Land A mineral rights holder may enter the mining area and take all the necessary action to facilitate exploration or mining, may erect buildings, and any facility on the licence area and stack or dump and mineral waste products in the manner provided for in the Environmental Management Plan subject to the consent of various Government agencies where the land is used for any public purposes and the consent of the private lawful occupiers. Tanzania The holder of a mineral right must, through consultation with thelocal Government authority and the village council if applicable, get the consent of the lawful occupier before he can have access to the licence area. Such consent may be granted subject to adequate compensation for the land and improvements thereon. Where consent is being unreasonably withheld, the Minister may direct that such consent be dispensed with. The Constitution and the Investment Law prohibit any kind of expropriation without due process of law that provides for fair, adequate and speedy compensation. The Mining Act provided for the suspension or cancellation of a mineral right in the event of a default under the Act but subject to strict notice requirements and advice of the Mining Advisory Board. 9. Environmental Application for Special mining Licences, Mining Licences or Gemstone Mining Licences must be accompanied by an environmental impact statement and an

4 environmental management plan. The Minister of Energy and Minerals may reject an application if the application for a licence is submitted without an environmental impact statement or an environmental management plan while the applicant is not exempted. Within seven days of the date of submitting the application, applicants are obliged to publish their environmental impact statement in the prescribed manner. The licensing authority shall not issue a licence until the expiry of at least 60 days from the date of application. An application for a Special Mining Licence must be accompanied by the applicant s environmental certificate issued in terms of the Environmental Management Act. Every holder of a Special Mining Licence or a Mining Licence shall, in terms of the Mining (Safety, Occupational Health, and Environmental Protection) Regulations 2010 be required to prepare and submit to the Chief Inspector of Mines a closure plan that shall compromise a programme to reclaim and rehabilitate land and water courses, a programme to support social economic activities to provide alternative livelihood to local communities beyond the mine life, the cost of providing statutory and other benefits to employees beyond the mine life and the cost of reclaiming and rehabilitating the mine area. The Minister shall require the holders of a Mining licence or a Special Mining Licence to provide for the posting of a rehabilitation bond in the form of an escrow account, or capital bond, or insurance guarantee bond, or bank guarantee which takes into account the mine closure costs. The bond and guarantee will form a separate agreement between the Government and the licence holder. The Mining (Safety, Occupational Health and Environmental Protection) Regulation, 2010 details various obligations for licence holders including, but not limited to: the obligation to provide a report to the Commissioner as well as to the Ministry responsible for the environment outlining the post-operational state of dams, dykes, related seepage control, spillway works, mine water pumps and post-operational monitoring; ensure that permanent spillways are designed to the standard required by the Chief Inspector of Mines and installed prior to the final abandonment of the tailing dam; ensure that all tailings ponds shall be reclaimed in accordance to landuse objectives unless permanent access is required to be maintained; the obligation that chemicals or agents that cannot be returned to the manufacturer area to be disposed of as required by the Chief Inspector of Mines; and the obligation that all potential acid-generating material to be placed in a manner that minimises the production and release of acid levels that assures protection of environmental quality. The Minister of Energy and Minerals may, by an order published in the Gazette, declare any vacant area or any area relinquished from a Prospecting Licence to be an area designated exclusively for mining operations by persons holding Primary Mining Licences. 10. Native Title and Land Rights

5 A mineral rights holder cannot enter any occupied land without the approval of the surface rights holder including any land that is for public or various Government uses such as; national parks, forestreserves, game reserves, conservation areas, municipalities, townships, villages or private lawful occupiers, and after they have reached agreement for compensation through consultation with the local Government and village council, if applicable 10 Health and Safety The principal regulation governing health and safety is the Environmental Management Act No. 20, 2004 and its Subsidiary Legislation administered by the National Environmental Management Council. These include: The Environmental (Registration of Environmental Experts) Regulations, 2005; The Environmental Impact Assessment and Audit Regulations, 2005; The Environmental Management (Air Quality Standards) Regulations, 2007; The Environmental Management (Soil quality standards) Regulations, 2007; The Environmental Management (Water Quality Standards) Regulations, 2007; The Environmental (Solid Waste Management) Regulations, 2009; The Environmental (Hazardous Waste Control and Management) Regulations, 2009; Environmental regulations Strategic Assessment; and Environmental Management (Fees and Ch). In addition the Occupation Health and Safety Act No. 5, 2003 is also relevant Are there obligations imposed upon owners, employers, managers and employees in relation to health and safety? The Mining (Safety, Occupational Health and EnvironmentalProtection) Regulations, 2010 provide for detailed obligations upon owners, managers, employers and employees in relation to safety. The regulation obliges mines to publish safety regulations at mine sites and to be explained to illiterate persons, they provide for general safety procedures to be observed, detailed cleanliness requirements, provisions of healthy food, clean toilets, adequate ventilation and healthy working environment underground, emergency procedures and treatment in case of accidents, and in general how to maintain a safe and secure working environment 11. Administrative Aspects There is a central register of all mineral rights which includes a record of all applications, grants, variations and dealings in, charges, assignments, transfer, suspension and cancellation of the rights. There are also zonal registers which maintain a record of mineral rights in the respective zones. All the registers are open to the public.

6 The Commissioner has powers of adjudication of disputes between rights holders in relation to themselves of third parties other than the Government. Persons aggrieved by the decision of the Commissioner exercising his adjudication powers under the Mining Act may appeal to the High Court. The Constitution of the United Republic of Tanzania guarantees the right to private ownership of property and State protection of that property and forbids nationalisation of private property without due process of the law which provides for a fair and speedy compensation Although the Tanzania Investment Act, 1997 does not apply to mining, there are saving provisions that apply to mining in relation to the guarantee of transfer of profits, foreign loan repayment and access to international dispute resolution and guarantee against arbitrary expropriation. Tanzania is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and has adopted the UNCITRAL rules which are embodied under the arbitration clause of Model Development Agreement. Some countries such as the UK have a reciprocal enforcement of foreign judgment arrangement which makes it possible for reciprocal enforcement of judgments. In addition, international arbitral awards are enforceable through the Tanzanian judicial system. 12. Taxes and Royalties There is a special fiscal regime for mining companies as detailed below. US$ accounting mining companies may opt to maintain their accounts in the US$ currency and their tax liability will be assessed and calculated in US$. Corporate income tax corporate tax is payable under the Income Tax Act, 2006 (Income Tax Act Revised Edition) at a rate not exceeding per cent. Income is computed in the manner set out in the Income Tax Act, as may be amended form time to time. Depreciation allowance for capital; expenditure depreciation shall be deducted at a rate of 20 per cent on capital expenditure for exploration and development Loss carry-forwards losses may be carried forward indefinitely until recovered against income. Expenditure on another licence area expenditure on prospecting and mining operations in respect of another licence area may, for the purpose of ascertaining taxable income, be treated as though it was expenditure incurred in respect of the mining licences Withholding tax on dividends withholding tax on dividends is at a rate of 10 per cent.

7 Withholding tax on interest withholding tax on the interest on foreign loans is at the rate of 10 per cent and accrued interest is deemed a payment; therefore, withholding tax thereon is payable. Withholding tax on payment for technical services and onmanagement fees withholding tax on the above is capped at the rate of 5 per cent, where the technical service fee or the management fee is paid to a resident person, or 15 per cent on a nonresident person Customs duty on imports of mining equipment and supplies import duties under the terms of the Customs Traffic Act by a mining company or its subcontractors are at a 0 per cent rate during exploration and in the first year of operation; thereafter they will not exceed 5 per cent. Value-added tax VAT special relief has recently been limited to cover only exploration and prospecting activities, while excise duty exemptions were abolished in Holders of Special Mining Licences may enter into a DevelopmentAgreement with the Government which may provide for fiscal stability such that the tax regime existing on the date of agreement is frozen creating a stable and predictable fiscal regime over the life of the mine Royalties are chargeable on the gross back value of minerals produced under licence at the rate of 5 per cent for uranium,bgemstones and diamonds, and 4 per cent and 3 per cent respectively for metallic minerals including gold, and other minerals. Gross value is defined under the Mining Act to mean the market value ofbminerals at the point of refining or sale or in the case ofbconsumption within Tanzania, at the point of delivery withinbtanzania. 13. Regional and Local Rules and Laws Municipal authorities have a mandate to make their own financialbylaws and such bylaws may affect mining operations within a specific municipality imposing regulations on areas such as environment and taxes. One aspect of taxation that is likely to arise is service levies. There are no rules, protocols, policies or laws other than those discussed above. However, Tanzania is a member of the Kimberley Process (KP) which is open to willing participating countries to put in place control measures, by way of legislation or otherwise, to provide certificates of origin for diamonds as a way of controlling the source of diamonds from conflict countries known as Blood Diamonds. The KP is intended to ensure that diamond purchases would not finance and perpetuate conflicts Tanzania