intoduction to the legal framework for mining in

INTRODUCTION TO THE LEGAL FRAMEWORK

FOR MINING IN MOZAMBIQUE Second Edition

SAL & Caldeira Advogados, Lda.

INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN

MOZAMBIQUE SECOND EDITION - JULY 2010

© SAL & Caldeira, Advogados, Lda. Av. Julius Nyerere 3412 • Maputo - Mozambique Phone + 258 21 24 14 00 • Fax + 258 21 49 47 10

Email: [email protected] www.salcaldeira.com

I N T R O D U C T I O N T O T H E L E G A L F R A M E W O R K F O R M I N I N G I N M O Z A M B I Q U E


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Foreword



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Table of Contents F O R E W O R D.................................................................................................................................................................2

T A B L E O F C O N T E N T S....................................................................................................................................................3

G L O S S A R Y....................................................................................................................................................................5

S E C T I O N 1 I N T R O D U C T I O N....................................................................................................................................... 11

S E C T I O N 2 B A C K G R O U N D.......................................................................................................................................... 12

2.1 GEOGRAPHY ......................................................................................................................................................... 12 2.2 HISTORY .............................................................................................................................................................. 12 2.3 POPULATION......................................................................................................................................................... 12 2.4 GOVERNMENT AND POLITICAL SYSTEM ....................................................................................................................... 13 2.5 ECONOMY............................................................................................................................................................ 13 2.6 LEGAL SYSTEM ...................................................................................................................................................... 13 2.7 INTERNATIONAL AFFILIATIONS................................................................................................................................... 14

S E C T I O N 3 M I N I N G.................................................................................................................................................... 15

3.1 PRIMARY SOURCES OF LAW FOR MINING IN MOZAMBIQUE............................................................................................. 15 3.2 RIGHTS TO MINERAL RESOURCES............................................................................................................................... 15 3.3 TYPES OF MINING LICENSES ..................................................................................................................................... 15 3.3.1 Reconnaissance License............................................................................................................................. 15 3.3.2 Exploration License.................................................................................................................................... 18 3.3.3 Mining Concessions ................................................................................................................................... 21

3.4 MINING CONTRACTS............................................................................................................................................... 24 3.5 RULES REGARDING ASSOCIATED MINERALS .................................................................................................................. 24 3.6 EXTINGUISHING MINING TITLES ................................................................................................................................ 24 3.7 DECLARATION OF AN AREA AS A MINING RESERVE......................................................................................................... 25 3.8 TRADING OF MINERAL PRODUCTS.............................................................................................................................. 25 3.8.1 Procedures to obtain a trading license....................................................................................................... 26 3.8.2 Types and cost of obtaining a trading license ............................................................................................ 26

3.9 PERFORMANCE BOND ............................................................................................................................................. 26

S E C T I O N 4 E N V I R O N M E N T....................................................................................................................................... 28

4.1 THE ENVIRONMENTAL LAW...................................................................................................................................... 28 4.2 ENVIRONMENTAL REGULATIONS FOR MINING ACTIVITIES................................................................................................ 29 4.2.1 Level 1 activities: Basic norms of environmental management.................................................................. 29 4.2.2 Level 2 activities: Environmental management plans ................................................................................ 29 4.2.3 Level 3 activities: Environmental Impact Assessments (EIAs) ..................................................................... 30

4.3 ENVIRONMENTAL QUALITY AND EFFLUENT EMISSION NORMS.......................................................................................... 33 4.4 ARCHAEOLOGICAL HERITAGE PROTECTION................................................................................................................... 33

S E C T I O N 5 L A N D....................................................................................................................................................... 35

5.1 PRIMARY SOURCES OF LAND LAW IN MOZAMBIQUE ...................................................................................................... 35 5.2 LAND AND LIMITATIONS ON THE RIGHT TO USE AND ENJOY LAND ..................................................................................... 35 5.3 THE RIGHT TO USE AND ENJOY LAND ......................................................................................................................... 35 5.4 SPECIFIC PROVISIONS ON THE RIGHT TO USE LAND FOR MINING ACTIVITIES ........................................................................ 36 5.5 SOME SPECIFIC OBLIGATIONS ON THE USE OF LAND FOR MINING ..................................................................................... 36

S E C T I O N 6 T A X A T I O N............................................................................................................................................... 37

6.1 PRIMARY SOURCES OF TAX LAW IN MOZAMBIQUE ........................................................................................................ 37 6.2 PERSONAL INCOME TAX (IRPS)................................................................................................................................. 37



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6.3 CORPORATE INCOME TAX (IRPC) .............................................................................................................................. 38 6.4 VALUE ADDED TAX................................................................................................................................................. 39 6.5 THE TAX REGIME FOR MINING ACTIVITIES ................................................................................................................... 39 6.5.1 Production Tax .......................................................................................................................................... 39 6.5.2 Surface Tax................................................................................................................................................ 40

6.6 TAX BENEFITS FOR MINING ...................................................................................................................................... 41 6.7 DOUBLE TAXATION TREATIES.................................................................................................................................... 42

S E C T I O N 7 C O M P A N Y L A W........................................................................................................................................ 43

7.1 THE LIMITED LIABILITY QUOTA COMPANY (SOCIEDADE POR QUOTAS OR LIMITADA) ................................................................ 43 7.2 THE LIMITED LIABILITY SHARE COMPANY (S.A.) ............................................................................................................. 43 7.3 LEGAL PROCEDURES TO START‐UP A COMPANY ........................................................................................................... 44

S E C T I O N 8 L A B O R..................................................................................................................................................... 45

8.1 BASIC PRINCIPLES OF LABOR LAW.............................................................................................................................. 45 8.2 FORMS OF EMPLOYMENT CONTRACT .......................................................................................................................... 45 8.3 FOREIGN WORKERS................................................................................................................................................. 46 8.3.1 Procedure for hiring foreign workers ......................................................................................................... 46

8.4 SOCIAL SECURITY ................................................................................................................................................... 47 8.5 MINE WORK SAFETY .............................................................................................................................................. 47

S E C T I O N 9 F O R E I G N E X C H A N G E C O N T R O L............................................................................................................... 49

9.1 EXCHANGE LAW..................................................................................................................................................... 49 9.1.1 Procedures to obtain loans outside Mozambique ...................................................................................... 49 9.1.2 Repatriation of funds................................................................................................................................. 50

S E C T I O N 10 D I S P U T E R E S O L U T I O N............................................................................................................................. 51

10.1 LITIGATION ........................................................................................................................................................... 51 10.1.1 Competent Forum Rules ............................................................................................................................ 51 10.1.2 Enforceability of Judgments by Foreign Courts .......................................................................................... 51

10.2 ARBITRATION ........................................................................................................................................................ 52



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Glossary This glossary contains the most common technical terms used in this booklet. The definitions herein are those provided in the relevant legislation in force in Mozambique.

MINING LEGISLATION

TERM DEFINITION

Associated Minerals

Minerals occurring in the deposit alongside the main minerals (for which the mining title was granted), whether of magmatic, metamorphic or sedimentary origin, or other minerals not occurring in the deposit but within the area covered by the mining title.

Cadastral Atlas Set of maps or charts held by the government, and containing geographical locations of areas with current mining titles, designated areas of mining pass, declared areas of mining reserve, restricted mining areas, total or partial protection zones, and any other areas of geological interest.

Cadastral Unit Quadrilateral formed by the intersection of parallels meridians, with an equal distance of 15 sexagesimal seconds and covering an average planimetric surface of 20 hectares, the coordinates of the vertices being multiples of 15.

Designated Area for Mining Pass

Area declared available for the attribution of mining passes.

Foreign Direct Investment

Any form of foreign capital contribution, originating from countries other than Mozambique, and which can be subject to pecuniary valuation, be it personal capital, or resources, provided by a foreign investor and destined for investment through a company incorporated in Mozambique, and operating in Mozambique, and in the context of this guide, in the mining sector.

Direct National Investment

As for Foreign Direct Investment, but where the investor in question is a Mozambican national.

Exploration Activities undertaken with the aim of discovering, identifying, determining the characteristics and assessing the economic value of mineral resources.

Exploration Area Area subject to an exploration license.

Exploration License Mining title granted under the terms of the mining legislation, which allows exploration for mineral resources.

Exportable Profits The part of profits or dividends derived from those mining activities involving direct foreign investment which are eligible for export in accordance with the relevant legislation, the remittance abroad of which may be freely undertaken by the investor, subject to payment of taxes and other dues (including legally required deductions related to the constitution or replacement of reserve funds, credit refunds etc).

Mine Any place, excavation or works where mineral exploitation is undertaken, including all infra-structures and land provisions, be these surface, underground, aerial, fluvial, lacustrine or marine, that are necessary for the operation, functioning and maintenance of mining exploitation. The mine also includes areas for storage of waste and residue and social infrastructure.

Mine Closure Methods and procedures followed in the conception, development, construction,



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Programme operation and closure of a mine, with the aim of decommissioning said mine and rehabilitating and monitoring environmental impacts in the mined area and adjoining areas affected by mining activity, taking into consideration social, economic and cultural aspects.

Mineral Resources Any solid, liquid or gaseous substance existing in or on the earth’s crust and formed by or linked to geological phenomenon.

Mineral Resources for Building

Minerals with the appropriate physical-mechanical and chemical properties to be used for construction, technically known as inert.

Mineral Water Underground water with healthy or therapeutic properties including minero-medicinal, medicinal and thermal waters, originating from aquifers and rising through a spring or other natural opening, or obtained through bore-holes, wells, or any form of excavation made to capture said water.

Mining Extraction of any mineral resources.

Mining Activity Operations comprising, either singly or together activities such as reconnaissance, prospecting, exploration, mining, processing and treatment.

Mining Cadastre National system of recording and administration of the licensing process for mining activities.

Mining Certificate Mining title allowing for small-scale exploitation of mineral resources.

Mining Certificate Area

Area subject to a mining certificate.

Mining Concession Usage title granted allowing the exploitation of mineral resources.

Mining Contract Written contract between a mining operator and the State in accordance with the mining legislation.

Mining Concession Area

Area subject to a mining concession.

Mining Operations Work undertaken in the context of any mining activity.

Mining Pass An authorization allowing for artisanal mining activity in certain designated areas.

Mining Product or Ore

Minerals extracted with or without beneficiation or processing.

Mining Operator Natural or legal person holding a mining title or an authorization or hired by the holder of a mining title or authorization to carry out reconnaissance, exploration, mining exploitation or beneficiation.

Mining Title Reconnaissance license, exploration license, mining concession and mining certificate, or any of the foregoing, as the context in which the expression is used requires

Minister Minister responsible for the mineral resources portfolio.

MIREM Ministry of Mineral Resources (Ministério dos Recursos Minerais)

Processing Processes undertaken to obtain metals, alloy or other raw materials requiring additional processing from materials extracted or treated during mining.

Programme for the Control of Risk and

A set of procedures established and documented which sets forth causes, consequences, frequency or probability, prevention and risk reduction measures



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Emergency Situations

for accidents and emergencies which may occur during mining.

Reconnaissance Activities undertaken with the aim of identifying mineral resources through geo-scientific methods.

Reconnaissance Area

Area subject to a reconnaissance license.

Reconnaissance License

License granted allowing the reconnaissance of mineral resources.

Royalty Payment for the use of certain rights.

Title-holder Natural or legal person in whose name a mining license or title is issued.

Treatment Processes undertaken to separate, concentrate, purify or beneficiate minerals.

ENVIRONMENTAL LEGISLATION

TERM DEFINITION

Activity Any public or private act which may affect the environment including but not limited to: production; use of technology; use of resources; application of plans, programmes or instruments. Activities may be held to affect air, light, soil, water, organic or inorganic matter, as well as the socio-cultural and economic conditions which impact the lives of communities.

Associations for the Defense of the Environment

International, national or local legal persons which seek to protect, conserve and value the environment.

Bio-diversity The diversity within and between species and their eco-systems.

Deforestation The removal of forest without replacement or regeneration taking place.

Desertification Natural or man-made soil degradation, often resulting from the removal of vegetation, or climatic conditions, leading to the transformation of soil into desert.

Environmental Audit A management tool designed to ensure ongoing legal compliance and compliance with the environmental management plan submitted as part of the Environmental Impact Assessment, and which seeks to identify areas for improvement. The purpose of the audit is to organise and interpret environmental monitoring data, to verify that monitoring is legally compliant, to compare actual impacts with those predicted, to evaluate the environmental management system in place and determine whether or not mitigation measures in use are satisfactory.

Environmental Degradation

Any negative change in the characteristics of the environment including pollution, desertification, erosion and deforestation.

Environmental Elements

The diverse elements within the environment such as air, water, soil, sub-soil, flora, fauna and socio-economic aspects. It is the interaction of these elements which results in their equilibrium. Environmental elements are also considered natural resources.

Environmental Expertise

The use of reputable specialists to evaluate the gravity and cost of damage caused to the environment.

Environmental Impact Assessment

This is the entire set of procedures from the submission of initial information about a proposed activity for pre-assessment through to the issuing of an



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environmental license.

Environmental Impact Study

Part of the environmental impact assessment process this study technically and scientifically analyses the potential consequences for the environment of a given activity.

Environmental Impact

Any positive or negative change in the environment resulting from human activity.

Environmental Legislation

Any and all legal instruments which govern the management of the environment.

Hazardous Waste and Residues

Substances or objects resulting from processes which are to be eliminated or which must, by force of law, be eliminated and which are risks by virtue of their characteristics such as inflammability, corrosiveness, or being explosive, toxic, infectious, radioactive or having any other characteristic which render them a danger to the health or life living beings and to the quality of the environment.

MICOA Ministry for the Coordination of Environmental Action (Ministério para a Coordenação de Acção Ambiental)

Pollution The depositing in the environment of substances or residues, regardless of their form, or the emission of light, sound and other forms of energy in such a way and in such quantities as to negatively affect the environment.

Sectoral Legislation The legal instruments which govern management of the environment for specific sectors (in this case, mining).

Sustainable Development

Development based on environmental management undertaken in such a way as to satisfy the needs of the current generation without compromising the equilibrium of the environment or the ability of future generations to also satisfy their needs.

Wetlands Natural or artificial, permanent or temporary, still or moving, fresh, brackish or salt, marshes, swamps, bogs or water areas, including areas of sea water the depth of which at low tide does not exceed six metres and that sustain types of plant and animal life which require saturated soil conditions.

LAND LEGISLATION

TERM DEFINITION

Cadastre Services

The public service responsible for implementing and updating the Land Cadastre.

Exploitation Plan Document presented by an applicant for the right to use and benefit from land describing the purpose for which the land will be used and improvements which the applicant plans to undertake.

Family Use Use of land for meeting household needs – land is cultivated using the family labor.

Foreign Legal Person

Any legal person constituted under the terms of Mozambican or foreign legislation, in which more than fifty percent of the share capital belongs to foreign citizens, corporations or institutions.

Foreign Natural Person

Any individual whose nationality is not Mozambican.



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Local Community A grouping of families and individuals, living in a territorial area that is at the level of a locality or smaller, which seeks to safeguard their common interests through the protection of areas for habitation or agriculture, whether cultivated or lying fallow, forests, places of cultural importance, pastures, water sources and areas for expansion.

National Legal Person

Any legal person constituted and registered under the terms of Mozambican legislation, with its head office in the Republic of Mozambique, in which at least fifty percent of its share capital belongs to national citizens, Mozambican corporations or institutions be they private or public.

Local Public Administration Bodies

Provincial government, district government and local municipal authorities.

Parcel A delimited portion of land that is capable of being subdivided in accordance with planning rules.

Real Estate Agents Persons whose activities include the promotion of construction and/or urbanization.

Rural Tenement (Prédio Rústico)

A delimited portion of land and the structures on it that have no independent economic use or value, where the source of income depends principally on the land itself, while the structures are there to support the exploitation of the land.

Special License A document that authorizes the carrying out of any economic activity within total or partial protection zones.

Topographical Map Drawing to scale of a parcel or demarcated section of land, which unequivocally specifies, at least, its location, identification, limits and boundaries, existing servitudes, authorized uses and the conditions to which these are subject, the name of the titleholder of the right of land use and benefit and the identity of the issuing authority.

Total or Partial Protection Zone

Public property designated for the conservation of animal or plant species, biodiversity, historical, scenic or natural assets, which has a management system preferably involving local community participation and is the subject of specific legislation.

Town Planning Indexes

A group of indicators enabling the dimensions and bearing capacity of land to be determined.

Urban Land All areas located within the urban perimeter of cities, towns and villages.

Urban Tenement (Prédio Urbano)

A building incorporated on the land, with the grounds that serve it, as well as a delimited parcel or section that is within an urbanized area.

Urbanisable Area An area that is liable to be built up, comprising all or part of one or more urban or rural tenements.

Urbanised Area An area of consolidated occupancy, in which urban tenements (prédios urbanos) occupy their respective land parcels or sections exclusively without competition from other buildings held by third parties, and which is within a town planning scheme.


SAL & Caldeira Advogados, Lda. 11

Section 1 Introduction This booklet is a general survey of the legal framework for mining in Mozambique, including practical issues of interest to investors. It was conceived and prepared principally for the benefit of larger investors in the field. For that reason, some subjects, such as investment guaranties and dispute resolution, are addressed in some detail, while others, such as the regulations applicable to small-scale mining, are only mentioned in passing. This booklet is the second edition of one we prepared in 2001. Since that year, the main legal instruments governing mining and even some of the more general legislation regulating it were replaced. Considering too that our country is fast becoming a destination for mining investment, it is more than timely for a new investor’s guide to the legal framework for mining in Mozambique. Fresh investment has been flowing into a variety of minerals. Coal has led the way, with large investments in world-class deposits in Tete in progress. Following coal are gold, mineral sands, rare earth minerals and semi-precious stones. Given that geological mapping is far from complete, and exploration still in its early stages, it is very likely that more commercial discoveries will be made. Indeed, judging only by the results achieved in neighboring countries with mature mining industries, such as South Africa and Zimbabwe, it can be said with some confidence that Mozambique’s mineral endowment is substantial. In addition to the abundance of the minerals, investors who wish to process their output in Mozambique may take advantage of relatively inexpensive energy (derived from hydroelectricity, natural gas and, in the near future, thermal coal), excellent natural ports and a motivated, trainable workforce. Confidence in Mozambique as a destination for mining investment rests not only on the country’s generous natural endowment. It is founded also on the proven commitment of the Mozambican Government to create the conditions necessary to bring the country into production. Attracting investment in mining is a high national priority; it is part of the Government’s larger policy goal of industrialization, intended to create jobs and reduce the proportion of Mozambicans living in absolute poverty. We hope that readers will find this booklet a useful introduction to the legal framework for mining in Mozambique. Please, note that the legal analysis contained herein is general in nature, and was not prepared in response to any inquiry, and does not reflect the application of the relevant law to specific facts. It is entirely likely that specific matters may arise in respect of which Mozambican legislation not discussed in this booklet is relevant, or in respect of which specific legislation discussed would be applied distinctly from the manner described herein. We therefore recommend that, in the event that a reader has a specific legal or business question in relation to mining and beneficiation in Mozambique, he or she timely consult legal counsel with respect to the application of Mozambican law to that specific matter. This booklet discusses Mozambican legislation as in force at 15 March 2010.

Samuel J. Levy [email protected]



Section 2 Background 2.1 Geography

Mozambique is located on the east coast of southern Africa. It covers an area of 799,380 km2, with a coastline approximately 2,515 km long. Mozambique shares extensive borders, on the west with South Africa, Swaziland, Zimbabwe, Zambia and Malawi, and on the north with Tanzania.

2.2 History

Much of Mozambique was occupied by Bantu populations from the time of its pre-history. Coastal areas were historically strongly influenced by Arab traders and, since the 16th century, by Portuguese traders and settlers. Portugal consolidated its hold over Mozambique only in the late 19th and early 20th centuries, defeating Mozambican forces in a series of battles and exiling their leaders. By 1975 there were some 250,000 Portuguese settlers in Mozambique, occupying 80 percent of administrative and clerical posts in the public and private sectors. Education and economic opportunities for native Mozambicans were very strictly limited during the colonial period. Independence was achieved in 1975, after 10 years of guerrilla war led by the Front for the Liberation of Mozambique (FRELIMO), the present ruling party. The general exodus of Portuguese settlers at independence resulted in a critical shortage of skilled labor in the country. War returned to Mozambique shortly after independence. The Government's application of United Nations sanctions against the government of neighboring Rhodesia led to cross-border raids. Later, with Rhodesian and South African assistance, the RENAMO guerrilla movement took form. RENAMO and Government forces fought a civil war until 1992 in the course of which thousands of lives were lost and much of the country’s limited economic infrastructure was destroyed. An experiment in central planning, the dominant theory of economic organization in Mozambique beginning in 1975, aggravated the destruction. Mozambique became, and remains, one of the poorest countries in the world. In 1984, Mozambique joined the International Monetary Fund (IMF) and the World Bank, and in 1987 began to implement a structural adjustment program and a market economy. In 1992, a cease-fire between the Government and RENAMO was finally reached, and the first fully democratic multiparty elections were held in 1994. Since then economic growth has been robust. Three further rounds of national elections have been held since, with the FRELIMO party returned to power each time for consecutive five-year mandates. The current President of the Republic, the Hon. Armando Emílio Guebuza, was reelected in October 2009 and took office in January 2010. In that same election, the FRELIMO party won a majority of the seats in Parliament.

2.3 Population

According to the most recent census data (2007), Mozambique has approximately 20.8 million inhabitants. Population growth rates are estimated at 2.4%, and life expectancy at birth is around 47.9 years. The majority of the Mozambican population is of Bantu origin. Within this group, several smaller groups are distinguishable. Of these, the most numerically significant are the Emakua, the Shangana, the Chisena and the Lomwe. There are also minorities of Asian and European extraction.



2.4 Government and Political System

Mozambique is a presidential democracy: the President is both the Head of State and the Head of Government. The 2004 Mozambican Constitution provides for the separation of the legislative, executive and judicial powers. Two hundred and fifty members of parliament are elected at five-yearly intervals by universal adult suffrage. The Mozambican State is unitary: provincial governors are appointed by and serve at the pleasure of the President. Provincial governments, led by the Governor, are composed of directors who exercise locally the powers and perform the duties of the Ministries to which they belong. Thus, provincial directors are answerable to both the Governor, as the leader of the Provincial Government, and the Minister responsible for their activities. Mozambique also has 43 municipalities whose governments are elected by universal adult suffrage of the residents thereof. Municipal governments exercise their limited powers under the primary tutelage of the Ministry of State Administration.

2.5 Economy

At the end of the civil war Mozambique was ranked as the poorest country in the world, with a GDP per capita of $110. Since then, the economy has expanded rapidly: between 1996 and 2006, GDP grew by an average of 8% per year. Over the past three years, GDP is estimated to have grown by an average 7.3% per year. The October 2009 World Economic Outlook, published by the International Monetary Fund (IMF), projects GDP growth of 5.2% in 2010. Inflation has been reduced considerably from almost 17% in 2002 to 6.2% by the end of 2008. The inflation rate in 2009 was 3.25%, the lowest of any SADC country. Mozambique has also made rapid improvements in key social indicators over the past few years. In the period between 1990 and 2007, Mozambique saw the fastest increase in the Human Development Index (HDI) in the world.1 Over that 17 year period, HDI increased by almost 50%, albeit from a very low base.

2.6 Legal System

The Mozambican legal system is based on the Romano-Germanic tradition of the civil law. It is directly inherited from Portugal. At independence, all Portuguese laws not inconsistent with the new constitution were retained and remain in force. Much background law from that period including, for example, the civil code and the civil procedure code (much of it dating from the mid-20th century) remains little modified. The period of Socialist orientation after independence spread a gloss of Soviet-inspired economic and organizational legislation on the underlying Portuguese legal framework. Most of this has now been replaced with contemporary legislation consistent with market principles. In the rest of this document, and unless otherwise noted, “laws” refers to acts of parliament, “decrees” and “resolutions” to acts of the Council of Ministers which, in constitutional terms, is the Government of Mozambique, and “rulings” or “ministerial rulings” to the acts of a single ministry or of ministries jointly. In hierarchical terms, laws are superior to decrees and resolutions, which in their turn are superior to rulings. The Constitution is the supreme law of the land and also prevails over international treaties and conventions.

1 The Human Development Index or HDI is and index produced by the United Nations Development Program which combines measures of life expectancy, educational attainment, and GDP per capita for countries worldwide. The report uses statistics which are two years old; the latest year for which data is available is 2007.



2.7 International Affiliations

Mozambique belongs to the following international organizations, among others:

• The United Nations and its agencies; • The International Monetary Fund; • The World Bank; • The Organization of African Unity; • The Southern African Development Community (SADC); • The Commonwealth; • The African Development Bank; and • The World Trade Organization.



Section 3 Mining 3.1 Primary Sources of Law for Mining in Mozambique

The primary sources of law for mining in Mozambique are the following:

• The Constitution of the Republic of Mozambique of 2004 (the “Constitution”); • Law n.º 14/2002 of 26 June (the “Mining Law”); • Law n.º 11/2007 of 27 June (the “Tax Regime for Mining”); • Decree n.º 16/2005 of 24 June (the “Regulation on Trade of Mineral Products”); • Decree n.º 61/2006 of 26 December (the “Regulation on Mine Work Safety”) • Decree n.º 62/2006 of 26 December (the “Mining Regulations”); • Decree n.º 5/2008 of 9 April (the “Regulation of Tax Regime for Mining”); and • Resolution n.º 4/98 of 24 February (the “Geological and Mining Policy”).

3.2 Rights to Mineral Resources

In Mozambique, mineral resources located in and beneath the soil are the property of the State.2 Under certain conditions, the State may grant to private persons rights with respect to minerals resources as long as such rights are exercised in accordance with industry best practice, respect for the environment, and for the benefit of the national economy.3 The rights granted include, among others, reconnaissance, exploration, mining, treatment and processing, and trade or other forms of disposal of mineral products.4 These rights of use and enjoyment of mineral resources are granted by the State by means of the following licenses:

(i) Reconnaissance License (Licença de Reconhecimento); (ii) Exploration License (Licença de Prospecção e Pesquisa); (iii) Mining Concession (Concessão Mineira); (iv) Mining Certificate (Certificado Mineiro); and (v) Mining Pass (Senha Mineira).

The last two licenses listed above – the Mining Certificate and the Mining Pass -- are relevant principally to small-scale artisanal mining activities and are not covered in this guide.

3.3 Types of Mining Licenses

The mining law reflects a general tendency towards greater transparency in the award of mining rights, reduction of the scope of regulatory discretion, and greater security for the holders of rights, from initial reconnaissance through the mining stage. Rights with respect to mining are to be issued on a first come, first served basis.5

3.3.1 Reconnaissance License

A reconnaissance license allows the holder to carry out reconnaissance operations over relatively large areas (not exceeding 100,000 hectares) during a maximum period of two years, and is not renewable.6 2 Constitution, Article 98, paragraph 1, and Mining Law, Article 4. 3 Mining Law, Article 2. 4 Ibid. 5 Ibid.: Article 5, paragraph 2. 6 Mining Law, Article 7, paragraph 5, and Mining Regulations, Article 24, paragraph 2, and Article 25, paragraph 1.



3.3.1.1 Holding a reconnaissance license

A reconnaissance license may be held by any person, national or foreign, natural or legal with the relevant capacity, and who intends to carry out the reconnaissance activities permitted under this license (see subsection 3.3.1.3), subject to payment of the applicable fee.7

3.3.1.2 Procedures to obtain a reconnaissance license

A reconnaissance license is requested by means of a letter to the Minister of Mineral Resources submitted via the National or Provincial Directorate of Mines. This request must include:8

• the full identity of the applicant and, in the case of a legal person, indication of the headquarters, equity capital, identity, nationality and address of any legal representative or in the case of commercial representation in Mozambique, the address and identity of its representative;

• indication of the mineral resources to be covered by the license; • indication of the area requested; • the time period required (which cannot exceed two years); and • the licensing form purchased from the Provincial or National Directorate and duly

filled in. The following documents must also be attached:9

• documentation demonstrating technical and financial resources available to the applicant as well as experience in the management and undertaking of the type of operations requested in the license application;

• in the case of a legal persons, a notarized copy of the certificate of incorporation and other relevant corporate documents;

• proof of payment of the processing fee (see subsection 3.3.1.4); and • any other relevant information that the applicant wishes to include.

The request is considered as having been submitted on the date of receipt, which is indicated by way of a stamp, and by payment of the processing fee.10 In the five days subsequent to the application being submitted the applicant may be asked to clarify certain aspects of the request.11 Once this is done, a decision will be taken by the Minister and the applicant notified in writing within ten days of the decision.12 The applicant then has thirty days to pay the relevant fees (see subsection 3.3.1.4) and collect the license.13 Rejected applications shall include a documented justification for the rejection.14 3.3.1.3 Rights and obligations imposed on holders of a reconnaissance license

Holders of a reconnaissance license are permitted to:

• have access to and overfly the area, on a non-exclusive basis; • obtain and remove samples; • occupy the area and construct temporary installations, subject to applicable law; and • use the water, wood and other materials necessary for reconnaissance subject to the

laws in force.15 7 Mining Law, Article 6, paragraph 1and Article 7, paragraph 1. 8 Mining Regulations, Article 21, paragraph 2. 9 Ibid.: Article 21, paragraph 3. 10 Ibid.: Article 21, Paragraph 4. 11 Ibid.: Article 5, paragraph 2. 12 Ibid.: Article 23, paragraph 1. 13 Ibid.: Article 23, paragraph 4. 14 Ibid.: Article 23, paragraph 2. 15 Mining Law, Article 8.



In addition to any other conditions, a holder of a reconnaissance license must:16

• carry out the reconnaissance for which it requested the license; • submit annual reports as required by law17 • compensate holders of surface rights for damage to their interests in the course of

reconnaissance; and • preserve the environment.

This last obligation includes the duty to restore the land to its original state in the event of damage in the course of reconnaissance activities. Further to the obligations described in the preceding paragraph, holders of a reconnaissance license are not allowed to:

• excavate to a depth of greater that one meter or remove of more than 3m³ of material; • excavate more than 12m³ per hectare; • drill holes of more than 102mm in diameter; • drill more than 4 holes per hectare; and • use mechanical drills.18

The license holder is further required to submit a report each year on the work carried out in that period.19

3.3.1.4 Cost of acquiring and holding a reconnaissance license

There are two specific costs associated with the acquisition and holding of a reconnaissance license: fees and surface tax. The costs involved in an application for a reconnaissance license as follows. Table 1: Fees for Reconnaissance Licenses

PROCESS VALUE (MT) VALUE (US$)20 Reconnaissance License Fee for registration of application Fee for issue of title

2.000,00

850,00

70 30

In addition the license holder must pay an annual surface tax which depends on the area of the license. (Surface tax must also be paid on exploration licenses and mining concessions, at rates higher than those that applies to reconnaissance licenses.) Table 2: Surface Tax for Reconnaissance Licences

TYPE OF MINING TITLE MINERAL RESOURCE RATE (MT) RATE (US$)

Diamonds 10,00 Mt/Km² 0.35/Km² Reconnaissance License Other minerals 25,00 Mt/Km² 0.90/Km²

Therefore the surface tax on a reconnaissance license of the maximum possible extension of 1,000 Km² would amount to US$900 a year. 16 Ibid.: Article 9. 17 Mining Regulations, Article 27. 18 Mining Regulations, Article 26. 19 Ibid.: Article 27. 20 At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01 February 2010, and rounded. Dollar amounts are further rounded.



The tax regime applicable to mining activities is covered in more detail in Section 6, below.

3.3.2 Exploration License

An exploration license allows the holder thereof to conduct prospecting and research operations in a designated area (not exceeding 25,000 hectares) for a period of five years, and is renewable for up to a further five years.21

3.3.2.1 Holding of an exploration license

As with reconnaissance licenses, an exploration license may be held by any person, national or foreign, natural or legal with the relevant capacity, that intends to carry out the exploration activities allowed for under this license (see section 3.3.2.3), subject to payment of the applicable fee.22

3.3.2.2 Procedures for obtaining an exploration license

Exploration licenses may be granted either on application by an interested entity or by public tender.23 An exploration license is requested by means of a letter to the Minister of Mineral Resources submitted via the National or Provincial Directorate of Mines. This request must include:

• the full identity of the applicant and, in case of a legal person, indication of the headquarters, equity capital, the identity, nationality and address of any legal representative or, in the case of commercial representation in Mozambique, the address and identity of its representative;

• indication of the mineral resources to be covered by the license; • indication of the area requested; • the time period required, which cannot exceed five years; • a work programme and minimum budget; and • the licensing form, purchased from the Provincial or National Directorate and duly

filled in.24 The following documents must be attached:

• documentation demonstrating the applicant’s technical and financial resources as well as experience in the management and undertaking of the type of activity applied for;

• in the case of a legal person, a notarized copy of the certificate of incorporation or other constitutive document and any amendments thereto;

• proof of payment of the processing fee; and • any other relevant information that the applicant wishes to include.25

In the five days subsequent to the application being submitted the applicant may be asked to clarify certain aspects of the request.26 Once this is done, a decision will be taken by the Minister and the applicant notified in writing within ten days of such decision.27 The applicant then has thirty days to pay the relevant fees (see subsection 3.3.2.7) and collect the license.28 Rejected applications shall include a documented justification for the rejection.29 21 Mining Regulations, Article 33, paragraph 2 and Article 35. 22 Mining Law, Article 6, paragraph 1and Article 7, paragraph 1. 23 Mining Regulations, Article 8, paragraph 2. 24 Ibid.: Article 30, paragraph 2. 25 Ibid.: Article 30, paragraph 3. 26 Ibid.: Article 5, paragraph 2. 27 Ibid.: Article 32, paragraph 1. 28 Ibid.: Article 32, paragraph 4. 29 Ibid.: Article 32, paragraph 2.



The Minister has the right to reject any application for an exploration license for an area previously held by the applicant the licenses for which have been cancelled or withdrawn in the period up to 12 (twelve) months prior to the filing of the new application.30 The exploration license is valid from its date of issue. If a concession is subsequently requested for same area, following on from exploration, the exploration license remains valid until a decision is taken regarding the issuing of the concession.31

3.3.2.3 Rights and obligations imposed on holders of an exploration license

Holders of an exploration license are permitted to: 32

• access the area subject to exploration; • prospect on an exclusive basis the mineral resources covered by the license, within

the licensed area; • prospect associated mineral that may occur in the area covered by the exploration

license; • collect, remove and export samples and specimens not exceeding acceptable limits

(which are not clearly established in the legislation) for exploration purposes; • conduct sampling and trial processing of the mineral resources not exceeding

acceptable limits (which are not clearly established in the legislation) in order to determine the mining potential;

• sell, subject to authorization by the Ministry of Mineral Resources, specimens and samples obtained for exploration purposes or for sampling and trial processing (see subsection 3.7 for further information on the trading of mineral products);

• occupy land and erect any temporary installations, structures or buildings necessary for carrying out exploration activities;

• utilize water, timber and other materials in the licensed area for exploration activities, subject to the applicable laws,(i.e. those governing the domains indicated); and

• receive compensation if, after carrying out prospecting for at least two years, the area covered by the exploration license is for some reason closed to mining activity.

Under the terms of the exploration license, the holder is required to:

• work according to the programme submitted to the National Directorate of Mines; • present an annual investment report detailing investment undertaken to date and

investment planned, by 31st January each year; • pay the relevant fees (see subsection 3.3.2.7); and • submit a work programme detailing work undertaken to date and minimum

expenditure likely to be incurred in the upcoming year. This report is to be submitted three months prior to the end of each year.33

The holder of an exploration license has the exclusive right to the award of one or more mining concessions in relation to any area subject to the exploration license held.34

3.3.2.4 Procedures for the export of samples resulting from exploration and research activities

The holder of an exploration license may export samples for laboratory analysis. To do so the license-holder must submit a letter to the National or Provincial Directorate of Mines requesting authorization and providing proof of the respective mining title.

30 Ibid.: Article 32, paragraph 3. 31 Ibid.: Article 34. 32 Mining Law, Article 11. 33 Ibid.: Article 37. 34 Mining Law, Article 13, paragraphs 2 and 3.



The letter must include detailed information on the samples to be exported, including where the samples were taken, what minerals are being prospected for, the quantity of samples, the destination laboratory, the types of analysis and tests to be undertaken, the means of transport for the samples and their exit border. The holder of the exploration license must also declare if the samples have commercial value. The National or Provincial Directorate of Mines will verify the information provided by the applicant and if it is confirmed, a release document (Guia de Saída) will be issued in respect of the specific samples listed in the letter.35

3.3.2.5 Extension of an exploration license

An exploration license may be extended for a further period of up to five years. To extend a license an application must be submitted to the Minister at least sixty days before the expiry of the current license.36

3.3.2.6 Transfer of exploration licenses

Unlike reconnaissance licenses, exploration licenses are transferrable.37 To transfer an exploration license an application must be submitted to the Minister of Mineral Resources via the National Directorate of Mines specifying the conditions of the transfer and including the legal instrument or document by which the transfer will be made. In addition, applicants must demonstrate:

• that the transferee has accepted in writing the terms and conditions of the exploration license;

• the legal capacity of the parties; • that the transferee has the technical and financial resources as well as experience in

the management and undertaking of exploration activities; and • proof of payment of the required fees (see subsection 3.3.2.8).38

If appropriate, the Minister will authorize the transfer of the license within 90 days from the date of application. In practice, when an exploration license is held by a legal person, it is more common for the shares or quotas of such legal person to be transferred rather than to apply for authorization to transfer to exploration license itself.

3.3.2.7 Geographical extension or abandonment of the licensed area

To extend the geographic area of an exploration license, an application must be submitted to the Minister of Mineral Resources, indicating the reason therefor. The Minister may then authorize the extension subject the terms and conditions she deems appropriate. The submission will be denied when the additional area requested is not available or when the applicant has not met its obligations with respect to other mining licenses it might hold.39 There is a small fee associated with the application for extension as well as the additional surface tax that will have to be paid annually (see next subsection for further details). The license holder may also abandon all or part of the area by giving notice to the Minister at least ninety days in advance. Partial abandonments must be registered on the license holder’s title.40

35 Ibid.: Article 36, paragraph 5. 36 Ibid.: Articles 38 and 39. 37 Mining Law, Article 10, paragraph 5. 38 Mining Regulation, Article 108. 39 Mining Regulation, Article 41. 40 Ibid.: Article 42.



3.3.2.8 Cost of acquiring and holding an exploration license

The costs associated with exploration licenses can be categorized into three groups: fees; fees for amendments; and surface tax. (i) The fees related to an application for an exploration license are set forth below.

Table 3: Fees for Exploration Licenses

PROCESS VALUE (MT) VALUE (US$)41

Exploration License Fee for registration of application Fee for issue of title Fee for late submission of application for renewal Fee for renewal

2.000,00 850,00 600,00 500,00

70 30 20 18

(ii) The fees related to amendments of exploration licenses titles are set forth below.

Table 4: Fees for Amendments to Exploration Licenses


Fees for application of transfer of title Fees for registration of transfer of titles Fees for of application for extension of area Fees for registration of extension of area

5.000,00 850,00

1.000,00 750,00

180 30 35 25

(iii) The annual surface tax due for exploration licenses is set forth below.

Table 5: Surface Tax for Exploration Licenses TYPE OF MINING

TITLE MINERAL

RESOURCE RATE (MT) RATE (US$)43

Exploration License All minerals

1st and 2nd year: 250,00 Mt/Km² 3rd year: 625,00 Mt/Km² 4th and 5th year: 1.300,00 Mt/Km² 6th year: 1.500,00 Mt/Km² 7th year: 2.000,00 Mt/Km² 8th year: 2.500,00 Mt/Km² 9th and 10th year: 3.000,00 Mt/Km²

9/Km² 22/Km² 46/Km² 54/Km² 71/Km² 89/Km²

107/Km² The tax regime of mining activities is covered in more detail in Section 6, below.

3.3.3 Mining Concessions

A mining concession is a license which allows the exploitation of mineral resources in a given area. Concessions are granted by the State for the period equivalent to the economic life of the mine (or mining operation) up to a maximum of 25 years, and are renewable for further periods not exceeding 25 years.44 The area of the concession shall not exceed that which is reasonably necessary for the mining operation. To discourage applicants from requesting large areas and keeping them out of use, surface tax (covered in subsection 6.4.2 is levied on mining concessions. 41 At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01 February 2010, and rounded. Dollar amounts are further rounded. 42 Ibid. 43 Ibid. 44 Mining Law, Article 13, paragraph 5.



3.3.3.1 Holding of a mining concession

Any legal person established and registered in Mozambique, can hold a mining concession.45 Neither natural persons nor legal persons established in other jurisdictions may apply for or hold mining concessions.

3.3.3.2 Procedures for obtaining a mining concession

When an application for a mining concession is made in respect of an area which was previously held, by the applicant, under an exploration license, the application is said to “emerge” from the exploration license. In such cases, the concession will be granted provided that the holder of the exploration license has fulfilled all of its obligations thereunder.46 A mining concession can also be obtained without a previous exploration license for the area petitioned.47 The procedures to obtain a concession are the same in both cases. The application is made by way of a request addressed to the Minister, which must be prepared in the form of a model letter provided by the National Directorate of Mines and includes:

• the complete identity of the applicant, including address of headquarters, equity capital, identity, nationality and address of the company applying and those of its commercial representative in Mozambique, where applicable.

The application must also include:

• details of the exploration license where relevant; • the location of the area; • an indication of the mineral resources to be included in the concession; and • the period of license required which may not exceed twenty-five years, and which

shall be consistent with the mining plan (plano de lavra).48

The application is accompanied by a licensing form purchased from the Provincial or National Directorate and duly completed.49 The following must be annexed to the application:

• documentation demonstrating technical and financial resources available to the applicant as well as experience in the management and undertaking of the type of operations applied for;

• a notarized copy of the certificate of incorporation and other relevant company documents and amendments thereto;

• economic feasibility study; • a mining plan, (a technical document detailing the intended mining and mineral

processing methodology); • proof of payment of processing fee (see subsection 3.3.3.3); • any other relevant information that the applicant wishes to include.50

Once the application has been submitted the applicant has five days to correct any errors or omissions identified by the Mining Cadastre.51 A further period of 30 days is included for corrections or the provision of additional documentation requested by the National Directorate

45 Ibid.: Article 6, paragraph 2. In addition, a Mining Concession is granted to the person who meets these requirements and pays the respective fee. See also Mining Law, Article 13, paragraph 1 and Mining Regulation, Article 44, paragraph 3. 46 Mining Law, Article 13, paragraph 2. 47 Mining Regulation, Article 44, paragraph 1. 48 Ibid.: Article 44, paragraph 4. 49 Ibid.: Article 44, paragraphs 2 and 4. 50 Ibid.: Article 44, paragraph 5. 51 Ibid.: Articles 5 and 46.



of Mines.52 Under the terms of the law, a decision will be made and the applicant informed within 10 days.53

3.3.3.3 Transfer of a mining concession

Mining concessions are transferrable.54 To transfer a mining concession, an application must be submitted to the Minister of Mineral Resources through the National Directorate of Mines specifying the conditions of the transfer and including the legal instrument by which the transmission will be made. In addition, applicants must demonstrate:

• that the transferee has accepted in writing the terms and conditions of the mining concession;

• the legal capacity of the parties; • that the transferee possesses the technical and financial resources as well as

experience in the management and undertaking of mining operations of the sort included in the concession; and

• proof of payment of the required fees (see subsection 3.3.2.8).55 If the conditions are met, the Minister will authorize the transfer of the license within 90 days from the date of application.56 Rejections are communicated within 10 days after the corresponding decision.57

3.3.3.4 Cost of acquiring and holding a mining concession

As with exploration licenses, the costs associated with mining concessions can be categorized into three groups: fees; fees for amendments; and surface tax. (i) The fees related to an application for a mining concession are set forth below.

Table 6: Fees for Mining Concessions


Exploration License Fee for registration of application Fee for issue of title Fee for late submission of application for renewal Fee for renewal

2.000,00 1.200,00

600,00 850,00

70 43 20 30

(ii) The fees related to amendments to mining concession titles are set forth below.

Table 7: Fees for Amendments to Mining Concessions


Fees for application of transfer of title Fees for registration of transfer of titles Fees for of application for extension of area Fees for registration of extension of area

5.000,00 850,00

2.000,00 2.000,00

180 30 70 70

(iii) The annual surface tax due for mining concessions is set forth below.

52 Ibid.: Article 46, paragraph 2. 53 Ibid.: Article 47, paragraph 2. 54 Mining Law, Article 13, paragraph 6. 55 Mining Regulation, Article 108. 56 Ibid.: Article 108, paragraph 1, clause c). 57 Ibid.: Article 108, paragraph 3. 58 At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01 February 2010, and rounded. Dollar amounts are further rounded. 59 Ibid.



Table 8: Surface Tax for Mining Concessions TYPE OF MINING

TITLE MINERAL

RESOURCE RATE (MT) RATE (US$)60

Mining Concession

All mineral products excluding

mineral water

1st up to 5th year: 2.500,00 Mt/Km² 6th year onwards: 5.000,00 Mt/Km²

90/Km² 180/Km²

The tax regime for mining activities is covered in more detail in Section 6, below.

3.4 Mining Contracts

In connection with large-scale projects, the State and the holder a mining concession may enter into a mining contract.61 The scope of a mining contract can be quite broad but in no event may its contents conflict with the terms of Mozambique’s mining and other applicable legislation. Indeed, as the tax legislation related to mining has narrowed the Government’s discretion to grant fiscal benefits, the scope of the subject matter in mining contracts has tended to contract. Obligatory subjects include the circumstances or ways in which the Council of Ministers (i.e. the Government) will exercise its powers and dispute resolution.62

3.5 Rules regarding Associated Minerals

If in the course of mining operations the titleholder finds associated minerals, the discovery must be reported forthwith to the Ministry of Mineral Resources. The titleholder shall also inform the Ministry if the associated minerals exist in a commercial quantity. If extraction is economically feasible and the titleholder is interested in doing so, it may amend its work program to provide for extraction of the associated minerals.63 If the license-holder is not interested in extracting the associated minerals, the State reserves the right to negotiate their extraction with a third party. The titleholder must store or otherwise conserve the associated minerals to allow for a prospective third party operation to recover and use them.64 For the purpose of the rules set forth above, “associated minerals” is understood broadly to include not only minerals that are conventionally associated in geological terms but also any other mineral that occurs simultaneously with the mineral object of the license in question.65

3.6 Extinguishing Mining Titles

Mining titles can be extinguished by a variety of means.66 These include:

(i) expiration, meaning, by the passage of time; (ii) total abandonment of the area; (iii) revocation on grounds available under the Mining Law and Mining Law Regulation,

when, with 60 days’ prior notice, the titleholder is notified of the intention of revoke the title and underlying motives therefore, which may include:

i. bankruptcy or an agreement or composition with creditors, unless there is a

registered mortgage on the corresponding mining facilities; or 60 Ibid. 61 Theoretically, a mining contract can also be signed in connection with an exploration license. 62 Mining Law, Article 25, paragraph 2. 63 Mining Regulation, Article 20, paragraphs 1 and 2. 64 Ibid.: Article 20, paragraph 3. 65 Ibid.: Article 20, paragraph 5. 66 Ibid.: Article 43.



ii. transformation and dissolution of the title holding company, unless prior consent was obtained for such transformation and dissolution for the purposes of a merger or reconstitution of the company.

Immediate revocation occurs:

i. based on the lack of payment of the mining production tax and surface tax if,

after 90 days from the date the tax is due, the titleholder does not pay the tax and any interest accrued thereon;

ii. lack of mining activity for a period of 6 months, 10 months or 24 months, after the issuance of the title and if it is a reconnaissance license, exploration license or mining concession, respectively; and

iii. failure to meet the obligations set forth in the Mining Law Regulation.67

• cancellation of the mining title. This occurs when, after due notice of the decision granting the mining title, the applicant does not pick it up within 30 days.68

3.7 Declaration of an Area as a Mining Reserve

When the development and exploration of certain mineral resources is considered of public interest for the national economy or the future development of the region in which they occur, the Council of Ministers may declare that the land on which the mineral resources are located to be reserved, specifying the type of activities not allowed in the reserved area.69 Such areas may become the object of mining titles in the future; indeed, anyone otherwise eligible may apply for a mining title in respect of the area.70 Any such declaration is, however, without prejudice to any vested rights of existing titleholders.71

A recent example of an area declared a mining reserve is an area of 9,528 ha in Chibuto, Gaza Province, which was declared reserved for mining heavy sands and other minerals by Decree n.º 60/2009 of 8 October. In that instance, the following activities were prohibited:

• intensive and sustainable economic activities, particularly, agricultural, industrial and

commercial activities, except for cattle grazing; • conventional housing and other lasting infrastructure; • burials; and • grant of land use rights.72

Decree n.º 60/2009 of 8 October further establishes that when the State finds an investor to execute a mining project in the reserved area, its status as a reserve shall cease.73

3.8 Trading of Mineral Products

If the products to be traded arise from mining activities conducted under the aegis of certain types of mining licenses (namely, concessions, mining passes and mining certificates), they may be freely traded by the license holder; no additional trading license is required.74

Trade of mineral products in any other circumstance must be duly licensed and supervised by the licensing authority in accordance with specific regulations. 75

67 Mining Law, Article 2, paragraph 2 and Article 24; Mining Regulation, Article 43, Article 37, paragraph 2 and Article 118. 68 Mining Regulations, Article 43 and Article 32, paragraph 5. 69 Mining Law, Article 42, paragraph 1. 70 Ibid.: Article 42, paragraphs 1 and 3. 71 Ibid.: Article 42, paragraph 2. 72 Decree n.º 60/2009 of 8 October, Article 3. 73 Ibid.: Article 4. 74 Mining Law, Article 26, paragraph 1. 75 Ibid.: Article 26, paragraph 2.



Decree n.º 16/2005 of 24 June (Regulation on Trade of Mineral Products) regulates the trade of mineral products by Mozambican nationals. Legal persons proposing to trade minerals must be legally incorporated in Mozambique and the majority of their share capital must be held by Mozambican natural or legal persons.76 This decree does not apply to radioactive minerals.77

3.8.1 Procedures to obtain a trading license

Natural and legal persons who wish to trade mineral products produced by others must request a license from the Minister of Mineral Resources.78 This is done by means of an application containing:

• the complete identity of the applicant and, in case of legal persons, the identity of the shareholders and distribution of the equity capital;

• indication of the class of license (see subsection 3.8.2 below) and area of operation; • the mineral products to be traded; and • a trading program, including details of human, financial and technical resources to be

used. The application is then processed in the same manner as license applications (see above). If the application is denied due to lack of supporting information, the applicant may add the information and re-tender the application. If the application is accepted, a license to trade in minerals is issued for a period of five years, renewable once for an equal period.79

3.8.2 Types and cost of obtaining a trading license

There are three types of trading licenses, categorized into Class I, II, and III.

• Class I licenses give their holders the right to purchase mineral products for the manufacture of gold products;

• Class II licenses allow the purchase of mineral products from artisanal miners and their subsequent sale; and

• Class III licenses give the general right to buy and sell mineral products as well as to refine them.80

A processing fee of 1.500,00 Mt, (approximately US$ 55,00 at current exchange rates) must be paid when requesting a license.81 Additionally the following fees must be paid annually by the holder of each type of license. Table 9: Annual Fees for Mineral Trading Licenses

LICENSE TYPE VALUE (MT) VALUE (US$)82 Class I License Class II License Class III License

10.000,00 15.000,00 25.000,00

355 535 895

3.9 Performance Bond

Financial guarantees and insurance against environmental damage are addressed in Section 4.2.6, below. 76 Decree n.º 16/2005 of 24 June, Article 2, paragraph 2, clauses a) and b). 77 Ibid.: Article 2, paragraph 4. 78 Ibid.: Article 4, paragraph 1. 79 Ibid.: Article 9. 80 Ibid.: Article 1, clauses f), g) and h), and Article 8, paragraph 1. 81 Ibid.: Article 6, paragraph 1. 82 At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01 February 2010, and rounded. Dollar amounts are further rounded.



The Mining Regulation requires mining titleholders to provide either a bank guarantee or letter of guarantee from their parent company, equivalent to 10% to 20% of the value defined in the work program and minimum expenditure amount submitted as part of the license application process. These guarantees (sometime referred to as performance bonds) are meant to ensure compliance with the terms and conditions of the mining license (or mining contract).83 The guarantee may be removed by the titleholder from the second year of operations if it demonstrably fulfilled the approved work program. Conversely the guarantee may be called on by the State for any breach that would otherwise entitle it to repeal the mining title.84

83 Mining Regulation, Article 111, paragraph 1 and 2. 84 Ibid.: Article 111, paragraph 3.



Section 4 Environment

The primary sources of environmental law in Mozambique are:

o The Constitution of the Republic of 2004 (the “Constitution”); o Law n.° 10/88 of 22 December (the “Legal Protection of Mozambique’s Cultural

Heritage Law”); o Law n.° 20/97 of 1 October (the “Environmental Law”); o Decree n.º 32/2003 of 12 August (the “Regulation on the Process of Environmental

Audit”); o Decree n.° 26/2004 of 20 August (the “Environmental Regulations for Mining

Activities”); o Decree n.º 18/2004 of 2 June (the “Environmental Quality and Effluent Emission

Norms”); o Decree n.° 45/2004 of 29 September, as amended by Decree n.º 42/2008 of 4

November (the “Environmental Impact Evaluation Process Regulation”); o Decree n.º 11/2006 of 15 June (the “Regulation for Environmental Inspection”); o Ministerial Diploma n.º 129/2006 of 19 July (the “General Directive for Studies of

Environmental Impact”); o Ministerial Diploma n.º 130/2006 of 19 July (the “General Directive for the Process of

Public Participation in the Process of Evaluation of the Environmental Impact”); o Ministerial Diploma n.º 189/2006 of 14 December (the “Basic Norms for Environment

Management”); and o Decree n.º 27/94 of 20 July (the “Archaeological Heritage Protection Regulation”).

4.1 The Environmental Law

The Environment Law prohibits pollution85 as well as activities that accelerate erosion, desertification, deforestation or any other form of environmental degradation except as permitted by law.86 It also prohibits the importation of hazardous waste except as may be permitted by specific legislation.87 The Environment Law also provides that the government may establish environmental quality standards, defined as the admissible levels of pollution prescribed by law.88 The Environmental Quality and Effluent Emission Norms regulate atmospheric, water and soil quality for industrial purposes, effectively establishing standards for air pollution and effluent emissions.89 The Environmental Law is regulated by a range of additional instruments, both general and sector-specific. MICOA is the Government institution responsible for ensuring the preservation and responsible use of natural resources, the coordination of environmental activities and environmental licensing.90 85 The Environment Law in its Article 1, paragraph 21 defines pollution as “the depositing into the environment of substances or residues, regardless of type, and the emission of light, sound and other forms of energy in such a way and quantity as to cause negative effect.” 86 Environment Law, Article 9, paragraph 1. 87 Ibid.: Article 9, paragraph 2. Such legislation has yet to be introduced. Note, however, that Mozambique has ratified the Bamako Convention of 30 January 1991. This convention addresses the prohibition of the transport of dangerous waste and the control of cross-border movement of such waste in Africa (See Resolution n.º 19/96 of 26 November). 88 Environment Law, Article 10, paragraph 1 and Article 1, paragraph 19. 89 See Environmental Quality and Effluent Emission Norms, Article 2. 90 Provincial Directorates for Coordination of Environmental Action (Direcções Provinciais para Coordenação da Acção Ambiental - DPCA) and in some cases District Directorates for Coordination of Environmental Action (Direcções Distritais para Coordenação da Acção Ambiental - DDCA) are the local representatives of MICOA.



4.2 Environmental Regulations for Mining Activities

The Mining Law and the Environmental Regulation for Mining Activities classify mining activities into three levels depending on the scope of the operation and the relative complexity of equipment used.91 The three levels are as follows:

o Level 1 activities consist of small scale artisanal mining and mineral exploration activities that do not involve mechanized equipment;

o Level 2 activities include mineral exploration that involves the use of mechanized equipment, quarrying and the mining of construction materials, and pilot projects; and

o Level 3 activities include all other mining activities not included in the previous categories and which make use of mechanized equipment.92

The environmental obligations for each level are as follows;

o Level 1 activities need to observe the basic norms of environmental management, are set out in Ministerial Diploma nº 189/2006 of 14 December;

o Level 2 activities require the present an environmental management plan; and o Level 3 activities must carry out an environmental impact assessment (EIA).93

4.2.1 Level 1 activities: Basic norms of environmental management

The basic norms of environmental management are designed to minimize environmental damage and negative socio-economic impacts resulting from Level 1 mining activities, using simple methods to prevent pollution of air, soil and water.94

4.2.2 Level 2 activities: Environmental management plans

To proceed with any exploration that involves mechanized equipment, an environmental management plan, together with a program to control potentially dangerous or emergency situations, must first be approved.95 The Environmental Regulation for Mining Activities indicates that an environmental management plan must be presented together with an application for the issuance of a mining title.96 Where a mining title (for example, an exploration license) has been issued without an environmental management plan (in cases where the initial exploration program did not involve the use of mechanized equipment), such a plan must be submitted and approved, together with an updated exploration work plan, when the exploration program advances to a stage that requires mechanized equipment.97 However, note that the recent practice of DNM is to require an environmental management plan to be filed within a short time after the issuance of the exploration license, in order to impel investors to use more complex methods of prospecting earlier in the license term.

91Mining Law, Article 37 and Environmental Regulations for Mining Activities, Article 1. 92 Environmental Regulations for Mining Activities, Article 1. 93 Ibid.: Article 5. 94 Ministerial Diploma n.º 189/2006 of 14 December, Article 1. 95 Environmental Regulation for Mining Activities, Article 11, paragraphs 1 and 9. 96 Ibid.: Article 11, paragraph 3. 97 Ibid.: Article 11.



The submission of the environmental management plan must be preceded by verification of the initial natural conditions of the area in which the mining activity is to take place, signed by the proponent thereof, in the form of an assumption of environmental liability.98 The environmental management plan must include the following:

a) location and basic description of the project; b) methods and procedures to be used during the project; c) expected impact on the environment and mitigating actions; d) monitoring program; e) rehabilitation program for the affected area.99

The environmental management plan is then considered by MIREM, which shall recommend the approval, amendment or rejection of the plan within 30 days. If the plan is recommended for approval, it will then be passed on to the MICOA (specifically, to the DPCA (Direcção Provincial para a Coordenação da Acção Ambiental) at the provincial level100 for a final evaluation and decision.101 Activities that involve mechanized equipment cannot start until the approval of the environmental management plan by MICOA.102 Technically, under the terms of the Environmental Regulation for Mining Activities, if MICOA does not approve the environmental management plan within 90 days from the date of issue of the mining title, the mining title automatically becomes null.103 In practice, however, MIREM coordinates with MICOA during its evaluation of the proposed environmental management plan, and initial approval by MIREM generally results in approval by MICOA. Once approved, the environmental management plan is valid for the life of the mining title up to a maximum of 10 years, whichever is shorter.104

4.2.3 Level 3 activities: Environmental impact assessments (EIAs)

An EIA technically and scientifically examines the consequences of implementation of a mining project on the environment. EIAs must be undertaken by an environmental specialist licensed by MICOA and carried out during the feasibility stage of the project.105 The EIA process is meant to generate a project-specific environmental license to carry out a mining project. As in EIAs generally, the project proponent first submits to MICOA the so-called terms of reference (“ToRs”) for the EIA. The ToRs for mining-related EIAs are required to state the timing and procedures for the related public consultation process.106

98 Environmental Regulation for Mining Activities, Article 11, paragraph 2. 99 Ibid.: Article 11, paragraph 4. 100 See Decree n.° 42/2008 of 04 December, Article 1, which in turn modifies Article 5 of the Environmental Impact Evaluation Process Regulations to attribute this function as indicated. 101 Environmental Regulation for Mining Activities, Article 11,paragraphs 6 and 7. 102 Ibid.: Article 11, paragraph 9. 103 Ibid. 104 Ibid.: Article 11, paragraph 5. 105 Environmental Regulation for Mining Activities, Article 8, paragraph 2. 106 Ibid.: Article 8 paragraph 3.



The EIA report must include an environmental management programme. This programme shall include environmental, biophysical, social, economic, and cultural aspects as well as an environmental monitoring and a mine closure plan. The environmental management programme must cover a period of at least five years, at the end of which period a new plan must be submitted for approval. The environmental management programme must also include a risk and emergency management plan. The EIA, including the environmental management programme, is scrutinized by MICOA and MIREM.107 The renovation of the environmental license is subject to a fee of 10.000,00 Mt (corresponding to US$ 357).108,109 Having approved the EIA, MICOA issues an environmental license within 10 days thereof the approval. The license is valid for the same period as the mining title but must be reviewed every five years.110 In addition to the requirement to review the environmental license every five years, the holder of the license must submit an environmental management report annually at the end of each calendar year. This report must the findings arising from the project proponent’s own environmental, biophysical, socio-economic and cultural monitoring.111 This monitoring can be carried out internally by the license holder or by means of private audits it contracts. (See subsection 4.2.3.3 below).

4.2.3.1 The Environmental impact evaluation process

The Environmental Impact Evaluation Process Regulations set forth the criteria to apply in environmental impact evaluations (of which EIAs are part), the basic procedures thereof and the associated fees. Mining projects are governed by a more sector-specific regulation, namely, the Environmental Regulation for Mining Activities.112 Still, in instances in which the Environmental Regulation for Mining Activities specifically provides, or where it is silent, the more generally applicable Environmental Impact Evaluation Process Regulations will apply.113 Whether performed under the specific terms of Environmental Regulation for Mining Activities or the Environmental Impact Evaluation Process Regulations, environmental impact studies may only be carried out by technical personnel registered at MICOA.114 Foreign individuals or companies may register as such but must demonstrate compliance with all requirements related to labor authorization and professional registration in Mozambique.115 Registered consultants are civilly and criminally liable for the information in their environmental impact studies and jointly and severally with their clients for activities carried out in accordance with their advice that nevertheless result in damage to the environment.116

4.2.3.2 Cost of an environmental license

The fee for environmental licensing for Level 2 and Level 3 mining activities is 0.2% (two tenths of one percent) of the value invested in the activity.117 The value invested is normally determined by the proponent of the activity. Other, more modest fees are charged for other services rendered in connection with environmental licensing. For example, the fee for

107 Ibid.: Article 8 paragraph 3 and Article 9 and 10. 108 At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01 February 2010, and rounded. Dollar amounts are further rounded. 109 Decree n.° 42/2008 of 04 December, Article 20, paragraph 4. 110 Environmental Regulation for Mining Activities, Article 13. 111 Ibid.: Article 14. 112 Environmental Impact Evaluation Process Regulation, Article 2. 113 See, e.g., Environmental Regulation for Mining Activities, Article 22, paragraph 2, which refers to the Environmental Impact Evaluation Process Regulations for the fee associated with the issuance of the environmental license. 114 Environmental Impact Evaluation Process Regulation, Article 21, paragraph 2. 115 Ibid.: Articles 21, paragraphs 6, 7 and 8. 116 Ibid.: Article 23, paragraph 4. 117Environmental Regulation for Mining Activities, Article 22 paragraph 2 together with Environmental Impact Evaluation Process Regulation, Article 25, paragraph 1 (as modified by Decree n.º 42/2008 of 4 November, Article 1).



renewing an environmental license after five years is either 5,000MT or 10,000MT (between approximately US$180 and US$360), depending on the categorization of the activity.118 The applicant for an environmental license is also responsible for the travel costs and out of office expenses of technical staff of MICOA (calculated according to the standard civil service rates) as well as costs related to correspondence, consultancy fees for the environmental consultants, costs arising from public consultations and other fees related to the production of the documents required for the licensing process.119 If an activity subject to environmental licensing is undertaken without the correct license, the proponent may be fined up to double the cost of licensing and have its activity immediately suspended.120

4.2.3.3 Environmental audits and environmental inspections

An environmental audit is understood in Mozambique as a management assessment tool to track the functioning of the management and monitoring system for environment protection.121 It is required to be systematic, documented and objective.122 There are two types of environmental audits: public and private. Public audits are those undertaken by the State, and are carried out whenever the States finds find is necessary for the activities in operation.123 Private environmental audits are used by project proponents in order to ensure that their activities conform to the terms of their approved environmental management plans and generally applicable environmental law 124 A proponent is legal required to follow the recommendations recorded in an environmental audit and may be penalized for not doing so as provided at law.125 The costs of environmental audits are borne by the applicant.126 The purposes of environmental inspections are similar to those of environmental audits: to supervise and monitor compliance with environmental rules.127 But by contrast thereto, inspections are more formal. This is because they can, in a much broader range of instances, lead to the imposition of fines for non-compliance with environmental obligations. An inspection will, by way of example, operate to determine, formally and legally, whether the recommendations of an earlier environmental audit have in fact been followed. Similar, inspectors will check to see if the mitigation measures proposed in the EIA are being duly applied.128 There are two types of environmental inspection:

ordinary, when done in the scope of the implementation of MICOA’s regular plan of activities ; and

118 See Environmental Impact Evaluation Process Regulation, Article 20, as modified by Decree n.º 42/2008 of 4 November, Article 1. Calculate at the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01 February 2010, rounded. Dollar amounts are further rounded. 119 Order from Minister of MICOA, on 5 March 2008. 120 Regulation on the Process of Environmental Audit, Article 26, paragraph 3. 121 Regulation on the Process of Environmental Audit, Article 2. 122 Ibid. 123 Regulation on the Process of Environmental Audit, Article 3, clause a) and Article 6. 124 Ibid.: Article 3, clause b), and Article 7. 125 Ibid.: Article 10, paragraph 5. 126 Ibid., Article 9. 127 Regulation for Environmental Inspection, Article 2. 128 See, e.g., Regulation for Environmental Inspection, Article 1, clauses b) and c).



extraordinary, in order to achieve certain objectives regarding any public or private activity that may compromise the stability of the environment.129

The Regulation for Environmental Inspection supplies the procedure by which inspections are carried out; formal reports lodged; and fines imposed (and either paid or contested).130 It also supplies factors that can be held to aggravate or mitigate an identified offense and the effect these have on the calibration of fines. 131

4.3.2.4 Restoration bond - insurance

Persons undertaking Level 2 and Level 3 mining activities are required to provide a species of bond to cover the costs of restoration of the environment during mine closure.132 The value of the bond is based on an estimate of the costs of such restoration (as carried out during or after the active life of the project).133 In connection with Level 2 mining activities, the value is supposed to be based on the terms of corresponding environmental management program; in connection with Level 3 mining activities, on the terms of the corresponding EIA.134 The value is set by MIREM and reviewed every two years.135 The bond may take the form of an insurance policy, a bank guarantee or a deposit in cash in a bank account that MIREM maintains specifically for the purpose.136 Persons engaged in activities involving a high risk of environmental degradation must obtain insurance to cover such liability.137 Environmental damage caused by mining operations are the responsibility of the titleholder or the operator. In respect of legal persons, the legal representative of such person or the person otherwise in charge is jointly and severally liable with his principal unless he proves that was unaware of or did not consent to the act or omission that caused the damage.138

4.3 Environmental Quality and Effluent Emission Norms

The Environmental Quality and Effluent Emission Norms supplies two types of norms for emission standards:

i) norms which establish upper limits for the protection of public health (including sensitive members of the public such as children, the elderly and asthmatics); and

ii) norms which establish limits for public well-being, including damage to livestock, crops and buildings.139 Parameters are established for atmospheric, water, and soil pollution as well as for noise pollution.

The legislation also deals with extraordinary emissions resulting from accidents or other unusual circumstances.140 In such cases, the organization responsible for the emission is required to obtain a license from MICOA (after the fact, of course) and pay a fee.141

4.4 Archaeological Heritage Protection

The Mining Law provides that among the things a titleholder may not remove from archaeological finds discovered in the area under title.142

129 Ibid., Article 4. 130 See, in general, Regulation for Environmental Inspection, Chapters II and III. 131 Ibid.: Article 20. 132 Environmental Regulation for Mining Activities, Article 24, paragraph 1. 133 Ibid.: paragraph 2. 134 Ibid.: paragraphs 3 and 4. 135 Ibid.: paragraph 6. 136 Ibid.: paragraph 5. 137 Environmental Law, Article 25. 138 Environmental Regulation for Mining Activities, Article 20 and Article 26, paragraphs 3 and 4. 139 Environmental Quality and Effluent Emission Norms, Article 1 paragraphs 14 and 15. 140 Ibid.: Article 2, paragraph 1. 141 Ibid.: Article 22, paragraph 2 and Article 23, paragraph 1. 142 Mining Law, Article 15, paragraph 3.



Archaeological heritage is defined by the Archaeological Heritage Protection Regulation as “fixed and moveable assets of archaeological, paleontological, anthropological or geological value, related to past generations, discovered by accident, through prospecting or archaeological excavation, as well as that which has not yet been discovered.”143 That regulation imposes a number of relevant obligations, set forth below. If a person excavating or otherwise moving earth makes an archaeological find, it is classified as an “accidental discovery”.144 In such cases, the discovery must be communicated within 48 hours to the relevant district administration or to the city council.145 Any project involving excavation, large-scale earth moving or the removal of semi-buried or buried items (from under land or sea) must include preliminary archeological prospecting and provide for salvage archeology (i.e. the study of discovered archeological elements under threat of destruction) in the event of a discovery. For the purpose, the project budget must reflect a line item in an amount not less than 0.5% of the total cost of the works.146 Finally, it bears note that the area around an archaeological discovery may be declared a Total Protection Zone, thereby precluding any subsequent demolition, construction or physical modification of the area. However these requirements may be modified it the proponent of the activity is able to demonstrate that the archaeological discovery will not be harmed by the activity proposed.147 In practice, mining projects in Mozambique have not been significantly affected by the Archaeological Heritage Protection Regulation, but investors should be aware of its existence and potential effects.

143 Archaeological Heritage Protection Regulation, Article 2, paragraph 7. 144 Ibid.: Article 2, paragraph 2. 145 Ibid.: Article 10, paragraph 1 and Law 10/88 of 22 December ,Article 6, paragraph 3. 146 Ibid.: Article 12. 147 Ibid.: Article 21.



Section 5 Land Land law in Mozambique is a complex field to which investors must pay careful attention. The basic structure of Mozambican land law is set forth below.

5.1 Primary Sources of Land Law in Mozambique

The primary sources of land law in Mozambique are:

o The Constitution; o Resolution n.° 10/95 of 17 October (the “National Land Policy Resolution”); o Law n.° 19/97 of 1 October (the “Land Law”); and o Decree n.° 66/98 of 15 July (the “Land Regulations”).

A lot of other legislation touches on questions related to land. These include, among others:

o decrees governing fees for the use of land; o land policy for particular areas (usually in relation to large-scale agricultural projects); o the role and requirements of surveyors; o the registration of land; and o the procedures for the presentation and review of investment proposals concerning

land areas greater than 10,000 hectares. The Land Regulations do not apply to urban areas, which have distinct rules regarding land (see Decree n.º 60/2006 of 26 December). We will focus on the essential land legislation in Mozambique with which mining investors should be familiar.

5.2 Land and Limitations on the Right to Use and Enjoy Land

The Constitution provides that land is the property of the State and may not be sold or otherwise transacted, mortgaged or given in pledge.148 In addition, the Constitution provides that the right to use and enjoy land may be granted by the State to natural or legal persons, based on the social or economic use to which it is proposed to be put.149 While colloquially people in Mozambique often refer to “selling” land, in point of legal fact that transaction is not possible. What they are, in fact, sometimes selling is improvements on land along with the right to use and enjoy land. Such rights are often called by the acronym that corresponds to their legal name: direitos de uso e aproveitamento de terra (rights to use and enjoy land), or “DUATs.”

5.3 The Right to Use and Enjoy Land

Both nationals and foreigners may hold rights to use and enjoy land. The latter must, as a condition precedent, have an approved investment plan. Foreigners who are natural persons must also have been resident in Mozambique for at least five years in order to hold land; foreign legal persons must, in their turn, register or incorporate a company in Mozambique for the purpose. Nationals may also acquire land rights by customary law or by good faith occupation for longer than 10 years; by contrast, foreigners may acquire land rights in the first instance only by applying to the Government for DUATs.150 148 Constitution, Article 109, paragraph 1. 149 Ibid.: Article 110. 150 Land Law, Chapter III. The procedures for the acquiring land by application presuppose that the land will be put to an economic use. Chapter IV of the Land Law sets forth the basic terms of those procedures. First, the applicant



5.4 Specific Provisions on the Right to Use Land for Mining Activities

In principle, the grant of an exploration license or a concession entails an automatic right to apply for and receive the right to use and enjoy the land “necessary for mining activity.”151 The use of land for mining activities has priority over other uses of land, where the economic and social benefit from the mining operations is higher than those from such other uses.152 In instances in which an exploration license or a concession is issued in respect of an area in which another person already has land rights, such person’s rights will be deemed extinguished once “fair and reasonable” compensation is paid by the license or concession holder to the holder of such prior rights.153 The law provides for mediation, by MIREM or other dispute resolution providers, when the concession holder and the holder of the interests cannot agree on the compensation payable.154 In the final instance, any unresolved dispute can be finally adjudicated in court.155 In practice, however, the Provincial (or municipal) Government is actively involved in ensuring that discussions of compensation and the terms of its payment; often, there is experience and policy in the province on the going rates for different interests in land (crops, trees, homes etc). While sometimes time-consuming, the process of negotiating compensation with local communities does not, in practice, operate to stop the progress of mining projects in Mozambique.

5.5 Some Specific Obligations on the Use of Land for Mining

The holder of the mining concession must, within thirty days before the start of mining activities, present to the National Directorate of Mines a copy of the DUATs and of the environmental license it has obtained.156 This does not apply to mining concessions arising from the exploration licenses.157

Both the DUATs and the environmental license must be obtained within three years from date of issuance of the mining concession, under penalty of revocation of the concession.158 DUATs issued in connection with a mining concession have the duration of that concession. If and when the concession is renewed, so are the DUATs.159 In all matters related to land in Mozambique, a good neighbor policy, and a cordial relationship and close coordination with the relevant Government authorities, especially on the provincial level, is a prerequisite for success.

must submit a plan of use (plano de exploração). Depending on the extent and the classification of the area (full or partial protection zones), the application must be directed to different individuals or governmental bodies for approval. Specifically, applications for up to 1,000 hectares of land are directed to the Governor of the relevant province; for between 1,000 and 10,000 hectares to the Minister of Agriculture; and for areas greater than 10,000 hectares to the Council of Ministers. In urban areas that have property registries, the President of the Municipal Council is responsible for decisions on land allocation. On the basis of the proposed plan of use, the competent authority may issue a provisional authorization. If the applicant then fulfils the plan of use during the applicable time frame, she is entitled to definitive authorization. If the classification of the area in question is partial or full protection zones, the competence will be of the Provincial Governor or Minister of Tourism, respectively; but in these situations no DUATs is issued, but rather, “special permits”, under specific conditions. 151 Mining Law. Article 43, paragraph 1. 152 Ibid.: Article 43, paragraph 2. 153 Ibid.: Article 43, paragraph 4. 154 Mining Regulation, Article 113, paragraph 4. 155 Ibid.: paragraph 5. 156 Mining Law, Article 15, paragraph 1 and Mining Regulation Article 53, paragraph 1. 157 Mining Regulation Article 53, paragraph 2. 158 Mining Law, Article 15, paragraph 2. 159 Mining Law, Article 43, paragraph 3.



Section 6 Taxation The Mozambican tax system is divided into national and municipal taxes. National taxes, in turn, are of two categories: (i) direct taxation of income and wealth; and (ii) indirect taxation of expenditure. Each is discussed below.

6.1 Primary Sources of Tax Law in Mozambique

The primary sources of tax law in Mozambique are:

o The Constitution; o Law n.º 15/2002 of 26 June (establishes the principles of organization of the tax

system of the Republic of Mozambique); o Law n.º 2/2006 of 22 March (establishes the principles and general norms governing

Mozambican tax system for all national and municipal taxes); o Law n.º 32/2007 of 31 December (the Value Added Tax Code – Código do Imposto

sobre o Valor Acrescentado, or “CIVA”); o Law n.º 33/2007 of 31 December (the Personal Income Tax Code – Código do

Imposto sobre o Rendimento das Pessoas Singulares or “CIRPS”); o Law n.º 34/2007 31 December (the Corporate Income Tax Code – Código do Imposto

sobre o Rendimento das Pessoas Colectivas or “CIRPC”); o Decree n.º 7/2008 of 16 April (the Regulations of the CIVA, or “RCIVA”); o Decree n.º 8/2008 of 16 April (the Regulations of the CIRPS, or “RCIRPS”); and o Decree n.º 9/2008 of 16 April (the Regulations of the CIRPC, or “RCIRPC”).

Other distinct codes and legislation govern still other specific taxes. Among these are Specific Consumption Tax Code; the General Rules on Customs Clearance; the Stamp Tax Code; the Real Property Transfer Tax Code; and the Municipal Tax Code. The details of these codes and their application, while relevant to any business in Mozambique, are beyond the scope of this discussion. Finally, of direct interest to mining investors are the following:

o Law n.º 11/2007 of 27 June (Tax Regime for Mining Activities); o Law n.° 13/2007 of 27 June (Tax Benefits for Mining and Petroleum); and o Decree n.º 5/2008 of 9 April (Regulation on Specific Tax Regime for Mining

Activities).

A decree supplying further details relating to Law n.° 13/2007 of 27 June is expected to be passed in the near future. The mining sector-specific tax and customs benefits regime is discussed in Section 6.5. Each of the foregoing taxes is discussed briefly below.

6.2 Personal Income Tax (IRPS)

IRPS is a direct tax applied on the total annual income (whether in money or in kind) even when such income is obtained by illicit means. The income referred to above is classified in the following categories:

1st Category: Employment income; 2nd Category: Business and professional income; 3rd Category: Income from investments and capital gains;



4th Category: Income from real estate; 5th Category: Other income.160 .

IRPS on employment income is levied on a steeply graduated basis. The rates applicable to annual income in Meticais vary from 10 percent to 32 percent, depending on the amount of the taxable income. As for the income of other categories, to the extent the income is paid by a legal person to beneficiaries who are natural persons, such income is subject to withholding at source at the rate of 20 percent. IRPS applies to individuals resident in Mozambican territory with respect to their worldwide income.161 For non-residents with income in Mozambique, IRPS applies only to such income and not to income earned outside the country.162 For natural persons, the basic test for tax residence is presence in Mozambican territory for more than 180 days in a calendar year.163 The applicable rates of IPRS are set forth below:164 Table 10: IRPS Rates

TAXABLE ANNUAL INCOME (MTs)

RATE

DEDUCTIBLE (MTs)

Up to 42,000 10% __

From 42,001 to 168,000 15% 2,100

From 168,001 to 504,000 20% 10,500

From 504,001 to 1,512,000 25% 35,700

More than 1,512,000 32% 141,540

Annually each taxpayer must submit a personal tax return reporting her income for the previous year. It bears note that first category income – that is, employment income – is to be withheld at the source by employers at rates specified in law.

6.3 Corporate Income Tax (IRPC)

IRPC is a direct tax on income obtained during the relevant tax period (usually the calendar year), even when such income is obtained by illicit means.165 The incidence of IRPC depends on the residence of the taxpayer. The basic test of residence is whether the taxpayer has headquarters or effective management in Mozambican territory. Such taxpayers are taxed on their worldwide income.166 Sometimes a taxpayer that is non-resident (i.e. does not have headquarters or effective management in Mozambique) is held nevertheless to have created a permanent establishment in Mozambique. Such taxpayers are taxed only their income derived from activities in Mozambique. 160 CIRPS, Article 1, paragraph 2. 161 Ibid.: Article 18, paragraph 1, and Article 20, paragraph 1. 162 Ibid.: Article 18, paragraph 1, and Article 20, paragraph 2. 163 Ibid.: Article 21, paragraph 1, clause a). In addition, if an individual maintains a home in Mozambique in circumstances that would lead one to conclude that he intends it to be his primary residence, such individual is considered to be tax resident in Mozambique even though he does not remain in the country for more than 180 days in a calendar year – Ibid.: Article 21, paragraph 1, clause b). 164 Ibid.: Article 54, paragraph 1. 165 CIRPC, Article 1 166 CIRPC, Articles 2 and 3.



Finally, legal persons that are neither resident nor have a permanent establishment in Mozambique may still have income in or related to Mozambique that is subject to IRPC.167 In such cases, the relevant tax is collected by withholding at the source by the Mozambican payer. The generally applicable rate of IRPC is 32 percent..168 Corporate income subject to withholding at the source is taxed at the flat rate of 20 percent of the value of the service rendered.169

6.4 Value Added Tax

IVA is a general consumption tax levied on goods and services. It is applicable at each stage of the economic cycle, which means that the basis for taxation is the value added at each stage of that cycle. IVA is due in respect of the following operations:

a. Transfer of goods and services undertaken within the national territory, on a paid

basis; and b. Import of goods.

IVA is levied at a fixed rate of 17%.170 Exports are exempt from IVA, which allows exporters to recover the value of accumulated IVA incorporated in exported goods.171 Note, though, that many taxpayers in Mozambique that are large-scale exporters or that are otherwise in a structural position as creditors to whom IVA reimbursements are owed have experienced substantial delays and costs associated with the reimbursement process. Mining investors enjoy some benefits in respect of IVA. These are discussed in Subsection 6.6 below.

6.5 The Tax Regime for Mining Activities

Certain specific taxes apply to mining activities. These are:

o Production tax (imposto sobre a produção, also sometimes referred to as royalties); and

o Surface tax (imposto sobre a superfície).172 Each is discussed below.

6.5.1 Production Tax

Production tax is levied on the value of the quantity of mineral products extracted within Mozambican territory, regardless of the eventual sale, export or other disposition of such mineral products.173 In general, the value of the product is considered to be is sales price (or, if it is not sold in the relevant tax period, its market price).174 The Tax Authority is empowered to alter the taxable amount reported by the taxpayer in instances in which the relevant sales price is below the normal market prices or was made on a non-commercial basis.175 Currently applicable rates of production tax are as follows:176 167 Ibid.: Article 62, paragrapg 2. 168 Ibid.: CIPRC, Article 61, paragraph 1. Preferential rates apply to certain sectors (as agriculture – 10%) for limited periods, but no preferential rates apply to mining investment. 169 Ibid.: Article 62, paragraph 1. 170 Ibid.: Article 17, paragraph 1. According to the Law n.º 15/2002 of 26 June, Article 67, clause b), the rate may be increased by decree of the Council of Ministers up to a limit of 25%. 171 CIVA, Article 13. 172 Tax Regime for Mining Activities. Article 1. 173 Ibid.: Articles 2 and 3. There are some limited exemptions from production tax but none of interest to commercial investors. 174 Ibid.: Article 7, paragraphs 2, 3 and 4. 175 Ibid.: Article 8. 176 Ibid.: Article 9.



Table 11: Production Tax (percentage of the value of the mineral product)

DESCRIPTION

PERCENTAGE Diamonds Precious metals (gold, silver and platinum) and precious stones Semi-precious stones Base minerals Coal and other mineral products

10 10 6 5 3

6.5.2 Surface Tax

Surface tax is an annual tax levied in respect of a reconnaissance license, an exploration license, a mining concession or mining certificate.177 It is payable by the holders of such mining titles. Surface tax is calculated on the basis of the number of hectares or square kilometers of the area under license.178 Rates vary according to the type of the mining title, the nature of the mineral resource and the period the license has been held.179 Payment of surface tax exempts the titleholder from the payment of the land tax for the area covered by the mining title to the extent the DUATS coincide with the area under title.180 Table 12: Surface Tax

TYPE OF MINING TITLE MINERAL RESOURCE RATE (per km or ha)

Diamonds 10 Mt/Km² Reconnaissance License

Other minerals 25 Mt/Km²

Exploration License All minerals

1st and 2nd year: 250 Mt/km² 3rd year: 625 Mt/km² 4th and 5th year: 1,300 Mt/km² 6th year: 1,500 Mt/km² 7th year: 2,000 Mt/km² 8th year: 2,500 Mt/km² 9th and 10th year: 3,000 Mt/km²

Mining Concession All mineral products excluding mineral water

1st up to 5th year: 2,500 Mt/km² 6th year onwards: 5,000 Mt/km²

Mining Certificate All minerals

20-100 ha: 10,000 Mt 100-200 ha: 20,000 Mt 200-300 ha: 30,000 Mt 300-400 ha: 40,000 Mt 400-500 ha: 50,000 Mt

It bears note that an indeterminate fraction of the revenues from production tax is to be channeled to the local communities in which such activities take place. The specific fraction is determined in the annual State Budget based on anticipated revenue from mining activities.181

177 Ibid.:, Article 13. 178 Ibid.: Article 12. 179 Ibid.: Article 16. 180 Íbid.: Article 18. 181 Ibid.; Article 19.



6.6 Tax Benefits for Mining

Law n.° 13/2007 of 27 June (the Tax Benefits for Mining and Petroleum) sets forth for the very limited fiscal and customs incentives. New mining projects are exempt for a period of five years from the commencement of the mining activities, from:

o customs duties payable on importation of equipment (whether for exploration or for mining) that is classified as class K of the Customs Schedule;

o customs duties payable on importation of certain specific equipment that is not so classified but is considered analogous to class K goods. An exhaustive list of such equipment is set forth in Annex A to Decree n.° 13/2007 of 27 June; and

o VAT and specific consumption tax, if any, that would otherwise be payable on the importations mentioned above.182

To be eligible for the limited benefits described above, a taxpayer must:

o have been authorized by the competent authority to undertake mining activities; o hold a taxpayer identification number (a Número Único de Identificação Tributária, or

“NUIT”); o keep organized accounts in accordance with the General Plan of Accounts – Plano

Geral de Contabilidade and the CIRPS or the CIRPC; and o not have committed tax crimes or other offenses recognized by the Tax Authority.183

It bears mention that mining investors with tax and customs benefits that vested before the entry into force of the Tax Benefits for Mining and Petroleum continue to enjoy such benefits (i.e. are explicitly grandfathered) under the law.184 In respect of tax benefits, it bears note that in Mozambique, taxes are created or modified by law. Conventionally, in the context of taxation, the term “law” is understood to refer to a normative act of the Parliament. The incidence and rates of tax, tax benefits, and taxpayers’ guarantees may only be established by law.185 This constitutional principle effectively precludes the granting of tax exemptions by the Government, whose normative acts, under the Mozambican hierarchy of laws principles, are subordinate to the normative acts of the Parliament. Thus, if a law (i.e., an act of Parliament) establishes a tax at a certain rate, a decree (i.e., an act of Government) cannot suspend its application or diminish the rate set. Indeed, the constitutional option to preclude the creation of taxes and tax exemptions by the Government bespeaks a broader trend in Mozambican legislation to diminish the scope for case-by-case flexibility in negotiations with investors. Notwithstanding this constitutional principle, one can sometimes find room for flexibility in the interpretation of tax legislation in contractual negotiations with the Government of Mozambique. Still, investors should start with an understanding of what is and what is not possible under Mozambican law, so as not to waste time and goodwill insisting on treatment the Government cannot grant, and that would not, if granted, be legally effective. In investment negotiations related to tax, attention should rather be devoted to key matters where gaps or ambiguities in the legislation allow the flexibility to achieve more satisfactory results. 182 Ibid.: Article 6. The exemption is only available in respect of goods that are not produced in Mozambique or that, if produced, do not satisfy the specific requirements (whether of purpose or functionality) needed for or inherent in the activity. 183 Tax Benefits for Mining and Petroleum, Article 8. 184 Ibid.: Article 11. 185 Constitution, Article 100.



Beneficiation is classified as a mining activity and is also eligible for the limited tax benefits foreseen in Law n.º 13/2007 of 27 June.

6.7 Double Taxation Treaties

Mozambique has bilateral treaties for the avoidance of double taxation with the following countries:

o Portugal (Resolution n.º 9/91of 20 December, as amended by Resolution n.º 34/2008 of 16 October);

o Mauritius (Resolution n.º 54/98 of 12 November); o Italy (Resolution n.º 27/99 of 8 September); o United Arab Emirates (Resolution n.º 10/2004 of 14 April); o Macau (Resolution n.º 33/2008 of 16 October); and o South Africa (Resolution n.º 35/2008 of 30 December).

For many mining investors in Mozambique, sound tax strategy starts with careful consideration of which of the tax-favorable jurisdictions in which to incorporate the immediate parent of the Mozambican subsidiary that will carry out the mining investment project. Although the six treaties are quite similar, there are subtle differences among them and, of course, considerable differences in taxation in those jurisdictions themselves. Investors should seek sound professional advice on the interpretation of different elements of the treaties against double taxation as part of their strategic planning.



Section 7 Company Law The principal forms of business enterprises in Mozambique are:

o The limited liability quota company (sociedade por quotas); and o The limited liability share company (sociedade anónima).

The former is known colloquially as the limitada or simply Lda., the latter as the S.A. Other forms of business enterprises that distribute and limit liability distinctly from the limitada and the S.A. are also included in the Commercial Code, but are not common used and therefore are not discussed below. The primary source of company law in Mozambique is the Commercial Code, approved by the council of Ministers by Decree-Law n.º 2/2005 of 27 December, as amended by Decree-Law n.º 2/2009 of 24 April.

7.1 The limited liability quota company (sociedade por quotas or limitada)

Limitadas are appropriate vehicles for business enterprises of a relatively small scale that bring together the capital and labor of numbers of co-venturers. Limitadas can be managed by their members and with relatively few formalities. Quotas in limitadas are not embodied in certificates; the evidence of ownership depends on the public record as published in the Official Gazette (the Boletim da República). As such, transferring interests in limitadas, whether by public deed (required when the equity capital includes real property or when the company was originally incorporated in that way) or by private instrument, must become a matter of public record. The basic requirements to form a limitada are as follows:

o Number of members: at least one (if the sole member is a natural person) or two (if at least one member is a legal person) and up to 30.186

o Equity capital: there is no explicit minimum capital requirement. Equity capital must be adequate to the purposes of the company as determined by the members.187

o Minimum paid-in capital: 50% of the value of each quota. Quotas may be of unequal amounts.

o Limit of members’ liability: the sum of the value of (i) each member’s contribution to the equity capital of the company; and (ii) the capital of other members of the company subscribed but not yet paid in.

7.2 The limited liability share company (S.A.)

S.A.s are appropriate vehicles for larger business enterprises that bring together the capital of large numbers of co-venturers. Although S.A.s can be managed by shareholders, they are typically structured so as to separate ownership and management. There are more formalities associated with the corporate life of the S.A’s, including requirements for the publication of notices and certain corporate acts. Their accounts must be audited and, in limited cases foreseen by specific legislation, published in a newspaper of record. The basic requirements to form a S.A. are as follows:

186 Commercial Code. Articles 288 and 328. 187 Ibid.: Article 289, paragraph 2.



o Number of shareholders: at least three, unless one of the shareholders is the State or a subordinate body thereof, in which case the S.A. may have a single shareholder.188

o Equity capital: no minimum is specified. o Minimum paid-in capital: 10% of the shares subscribed by each member, in cash.189 o Limit of shareholder’s liability: the value of the shares subscribed by that shareholder.

It bears mention that it is not difficult to transform a legal person from a limitada to an S.A. Thus, one strategy for ambitious investors is to start as a limitada – the administratively simpler, less expensive of the two forms of legal person – and later transform into an S.A., if the need to attract new investors (e.g. through a stock market listing) so commends.

7.3 Legal Procedures to Start up a Company

The process by which a business enterprise is incorporated is essentially the same for limitadas and S.A.s. The steps required to start up a company are the following:

o Obtain name reservation certificate; o Draft articles of association; o Open a bank account; o Incorporation by public deed (if the equity capital includes real property) or private

instrument; o Publication in the Official Gazette; and o Registration at the Legal Entities Registry.

Under ordinary circumstances the majority of these procedures require a week to complete. Publication in the Official Gazette can take considerably longer. But once incorporation has taken place, the new company has legal personality and can freely contract. And once the company is registered at the Legal Entities Registry, third parties are deemed to have notice of its existence. Still other, subsequent steps must be taken to register the new company as a taxpayer, an employer and, eventually, a contributor the social security system. For more information, see our booklet “The Legal Framework for Company Start-up in Mozambique” available at http://www.acismoz.com/.

188 Ibid.: Article 332. 189 Ibid.: Article 337.



Section 8 Labor The primary sources of labor law in Mozambique are:

o The Constitution; o Law n.º 12/2009 of 12 March (establishes the rights and obligation of the people living

with HIV/AIDS, and adopts necessary rules for prevention, protection and treatment); o Law n.° 23/2007 of 1 August (the “Labor Law”); o Law n.º 5/2002 of 5 February (the “Law for the Protection of Workers with HIV/AIDS”); o Decree n.º 50/2009 of 11 September (the “Regulation of the Commission on Labor

Mediation and Arbitration – COMAL”); o Decree n.º 45/2009 of 18 August (the “Regulation of the General Inspectorate of

Labor”); o Decree n.º 55/2008 of 30 December (the “Regulation on Foreign Workers”);and o Decree n.º 61/2006 of 26 December (the “Regulation on Mine Work Safety”).

8.1 Basic Principles of Labor Law

The Constitution prohibits involuntary servitude except in the context of and as regulated by the penal code.190 It provides that all workers have a right to a fair wage, rest and vacation, and to a safe and hygienic work environment.191 Workers may be dismissed only in the cases and under the terms established by law. Workers have the right to organize in professional groups and unions, as regulated by law;192 they have a guaranteed right to strike, and lock-outs may not be used against them.193 The interpretation and application of the Labor Law are subject to the principles of the right to work, stability in employment and position, change of circumstances and non-discrimination on the basis of sexual orientation, race or HIV-positive status.194

8.2 Forms of employment contract

Chapter III of the Labor Law governs individual, as distinct from collective, labor relations. Under Chapter III, there are two forms of contract for full-time employment:

the indeterminate period contract (contrato por tempo indeterminado); and

the fixed term contract (contrato a prazo), which may be: o for a period certain (a prazo certo), or o for a period uncertain (a prazo incerto).

These are not interchangeable options. The indeterminate period contract is the rule. Fixed term contracts are exceptions that may only be used within the limits legally established, as indicated below. Fixed term contracts may only be used for specific, non-permanent tasks. The maximum duration of any fixed term contract is two years. All contracts that are not for an explicit fixed period are considered indeterminate period contracts. Fixed term contracts may be renewed twice; provided, that special, more liberal rules apply to small and medium companies.195 190 Constitution, Article 84, paragraph 2. 191 Ibid.: Article 85, paragraphs 1 and 2. 192 Ibid.: Article 86. 193 Ibid.: Article 87. 194 Labor Law, Article 4, paragraph 1. 195 Ibid.: Article 40, paragraph 1 and Article 42 paragraph 1. A “small company” is one that has up to 10 employees; a “medium-sized company” is one that has more than 10 and up to 100 employees; and, a “large company” is one that has more than 100 employees – see Labor Law, Article 34.



As noted above, fixed term contracts are subdivided into two categories; (i) contracts for a period certain (a prazo certo) which can be used when the required period of employment is known (for example to cover the maternity leave of another employee); and, (ii) for a period uncertain (a prazo incerto) which may be used only when it is not possible to foresee with certainty when the event or circumstances that justified use of that form of contract in the first place will end (a field exploration program that might last 30 days or considerably longer).196 As in respect of forms of contract, many other aspects of labor relations are governed by specific rules. Foreign employers should not simply assume that the same level of flexibility or regulation that characterizes labor legislation in their home country governs labor in Mozambique. For more a more detailed description of Mozambican labor law, see “The Legal Framework for Employment in Mozambique”, available at http://www.acismoz.com/.

8.3 Foreign workers

Employers, whether national and foreign, may employ a foreigner by authorization of the Minister of Labor or an agency to which she delegates powers, on application.197 Employers may also employ, by simple communication to the Minister of Labor or an agency to which she delegates powers, up to the number of foreigners permitted under the following quotas:

a) in large firms, up to 5% of the total number of workers; b) in medium firms, up to 8% of the total number of workers; and c) in small firms, up to 10% of the total number of workers.198

See footnote 196, above, for the definition of large, medium and small firms. In respect of investment projects approved by the Government that stipulate a number of foreign workers greater or lesser than the quota indicated above, no authorization is required. It is sufficient in such cases to inform the Minister of Labor within 15 days of the arrival of such workers in the country.199 There are, nevertheless, certain conditions and restrictions on the hiring of foreigners. A foreigner may be hired only if he has the academic or professional qualifications necessary for the position and there are no Mozambican citizens with such qualifications or their number is insufficient.200 Foreigners who enter Mozambique on a diplomatic, courtesy, official, tourism, visitor, student or business visa may not be employed. Moreover, foreign workers with temporary residence may not remain in Mozambique after the contract period based on which they entered the country has expired.201

8.3.1 Procedure for hiring foreign workers

The hiring of foreign workers by authorization of the Minister of Labor is regulated by Decree n.° 55/2008 of 30 December (the Regulation on Foreign Workers). This is done by means of an application addressed to the Labor Minister. The application for authorization to hire foreign workers requires a set of accompanying documents, some which must be obtained from other ministries or public agencies. These include: 196 Labor Law, Article 44. 197 Ibid.: Article 31, paragraph 4 together with Article 33, paragraph 2. 198 Ibid.: Article 31, paragraphs 4 and 5. 199 Ibid.: Article 31, paragraph 6. 200 Ibid.: Article 33, paragraph 1. 201 Ibid.: Article 32, paragraphs 1 and 2.



o three copies of the work contract; o certificate of academic or technical /professional qualification of the foreign citizen to

be employed and documents proving professional experience. This must be accompanied by a certificate of equivalence issued by the Ministry of Education;

o quitclaim certificate for the company issued by the National Institute of Social Security (Instituto Nacional de Segurança Social);

o quitclaim certificate for the company issued by the entity which oversees the Finance area;

o favorable opinion of the union delegate, union committee or sector union; o payment of a fee which corresponds to ten minimum salaries in force in the

company’s sector of activity. 202 It bears note that for short-term work assignments (those last up to 30 days, consecutive or interspersed, in a calendar year), timely communication to the Ministry of Labor is sufficient; no authorization is required. Should there be a further need for the services of the foreign employee, the short-term work assignment can be renewed (at the discretion of the Minister of Labor) for up to two further 30-day periods.

8.4 Social Security

The primary sources of law in relation to social security are:

o Labor Law (Articles 256 through 258); o Law n.º 4/2007 of 7 February (the “Social Security Law”); o Decree n.º 53/2007 of 3 December (the “Social Security Regulation”); o Decree nº 49/2009 of 11 September 2009 (the “Regulation on the Articulation of the

Mandatory Social Security of Employees with those of the State workers and Agents and Officials as well as the workers of Bank of Mozambique”); and

o Decree n.º 4/90 of 13 April (“established the social security contribution”). The social security system is intended to ensure minimum subsistence and security to its member workers in the event of illness or incapacitation, an old age pension, and family benefits in the event of a member worker’s death. The system is administered by the National Institute for Social Security (Instituto Nacional de Segurança Social, or INSS), an autonomous public entity. Employers are legally obliged to register themselves and enroll all workers, national and foreign, for social security; provided that employers need not enroll foreign workers who prove that they are enrolled in the social security system of another country.203 The legally required contribution to social security is seven percent of a worker’s monthly salary: employers pay four percent and employees the remaining three percent.204 Employers are obliged to withhold both their own and their workers’ contributions at source and pay the corresponding amount monthly to the INSS.

8.5 Mine Work Safety

Decree n.º 61/2006 of 26 December (Regulation on Mine Work Safety) supplies detailed rules on matters such as mine safety, worker health standards and first aid, transportation of people and ore, ventilation standards, use of electrical equipment underground, use of explosives, protection against fire and safety equipment. It also provides for inspection and fines and fines and penalties in the event of non-compliance. The Regulation on Mine Work Safety covers activity in both the exploration and (in greater detail) mining stages, covering a broad variety of circumstances.

202 Regulation on Foreign Workers, Article 16, paragraph 2. 203 Social Security Law, Article 14. 204 Decree n.º 4/90 of 13 April, Article 2.



For more information on labor matters in Mozambique, see our booklet “The Legal Framework for Employment in Mozambique”, available at http://www.acismoz.com/.



Section 9 Foreign Exchange Control

The primary sources of law in relation to foreign exchange control are:

o Law n.° 11/2009 of 11 March (the “Exchange Law”); and o Notice n.° 05/GGBM/96 (the “Exchange Regulations”) (the repeal and replacement of

which is expected shortly).

9.1 Exchange Law

The Exchange Law is applicable to acts, transactions and operations of any sort carried out between residents and non-residents (as defined for foreign exchange law purposes) that result (or might result) in payments or receipt of payment abroad.205 It also covers other acts, transactions and operations that may not so result but that are nevertheless classified at law as exchange transactions.206 The Exchange Law explicitly applies to foreign investment in Mozambique.207 A broad range of transactions are classified as “exchange transactions” and therefore subject to registration with the Central Bank of Mozambique. In theory, under the Exchange Law, exchange operations classified as “current transactions” no longer require authorization, as they did under the law that preceded it.208 (As of this writing however, the Exchange Regulations, which pertain to the law since repealed, do not provide for authorization-free current transactions.) By contrast, capital operations – including transactions relating to foreign investment, opening and operating bank accounts in non-Mozambican financial institutions, and loans and guaranties – all continue to require the prior approval of the Bank of Mozambique.209 Indeed, foreign direct investments must be registered, for the purposes of monitoring the flow of foreign exchange, within 120 days of authorization. Each movement of funds, or of the value of goods imported (or profits reinvested), under the authorization must be registered.210

9.1.1 Procedures to obtain loans outside Mozambique

The Exchange Regulations supply procedures through which Mozambican persons (including locally organized subsidiaries of foreign companies) may obtain loans (including shareholders’ loans) from sources outside Mozambique. In such cases, companies must submit the following documents to the Bank of Mozambique:

(i) a copy of the proposed loan; (ii) the justification, on social and economic grounds, for the loan; and (iii) an indication of the resources available to repay the loan.211

Once the loan agreement has been signed, the debtor must file an authenticated copy with the Bank of Mozambique. Thereafter, the debtor must seek authorization from the Bank of

205 Exchange Law, Article 1. 206 Ibid. 207 Ibid.: Article 27. 208 Ibid,: Article 6, paragraph 2. The law that the Exchange Law replaced was Law n.° 3/96 of 04 January. 209 Ibid.: Article 6, paragraph 5, and Exchange Regulations, Article 3. 210Exchange Regulations, Article 24. 211 Ibid.: Articles 28 through 31.



Mozambique for the payment of each and every installment of interest, principal and commission at least 10 days before such payment is due. As of this writing, the import of foreign currency in amounts equal to or greater than US$5,000 is subject to a declaration by the person importing such funds.212

9.1.2 Repatriation of funds

Under the Exchange Law, residents are obliged to declare the amounts and rights acquired, generated or held abroad.213 In addition, they must remit to Mozambique the proceeds of exports of goods, services or foreign investment.214 The Exchange Law admits of exceptions in this as in other particulars which, in their turn, depend on special legislation as passed by the Government (usually in the form of a decree). Thus, to the extent that exchange issues are high on an investor’s list of considerations, it should raise them early in the course of negotiations with the Government in order to ensure that any special dispensations are properly reflected in the terms of its mining contract. To transfer profits abroad, an investor must supply the following documentation:215

(i) a quitclaim certificate proving the investment was made and fiscal obligations complied with, to be issued by the Ministry of Finance;

(ii) copy of the balance sheet and income statement for the year, including the official opinion of an independent auditor, for each year audited by an auditing company operating in the country with a license issued by the Ministry of Finance;

(iii) statement issued by an auditor confirming that the profits are a result of the years in question and are results of operations of the company´s activity, explaining whether the profits were calculated before or after any transfers required by law

(iv) document issued by the competent entity confirming the compliance of the terms of the investment authorization; and

(v) in cases of companies, for purposes of exporting profits, proof of consent of the corporate body, or when transferring dividends, minutes of the general meeting resolving on the distribution of profits.

The authorization for the transfer of exportable profits shall be made through issuance of a Bulletin for the Authorization of Payments.

212Ibid.: Article 34. 213 Exchange Law, Article 9, paragraph 1. 214 Ibid.: Article 9, paragraph 2. 215 Exchange Regulations, Article 25.



Section 10 Dispute Resolution 10.1 Litigation

In Mozambique, as elsewhere, there are many good reasons to avoid litigation. The courts tend to be slow and expensive to use and more complex technical issues may require knowledge of practice in the mining business that may not be present. As in any country, foreign investors will reasonably be concerned about the natural sympathies a local court may have for local parties. Alternatives to litigation, both within and outside Mozambique, are briefly discussed below.

10.1.1 Competent Forum Rules

The forum in Mozambique in which a suit is heard depends on the nature of the subject matter of the dispute and the identity of the parties involved. Suits against other private persons are heard in the appropriate civil court. Suits against the Mozambican Government or a subordinate body are heard either in the civil courts or, if the basis of the dispute is considered to be an administrative law matter, and once the series of available administrative remedies has been exhausted, in the Administrative Court (Tribunal Administrativo). Disputes relating strictly to mining titles would be classified as administrative law matters. Disputes relating to mining contracts, by contrast, may often be heard in a non-Mozambican forum. Indeed, provision for dispute resolution by arbitration under the aegis of the International Centre for the Settlement of Investment Disputes (“ICSID”) is a common feature of mining contracts in Mozambique.

10.1.2 Enforceability of Judgments by Foreign Courts

A judgment against a Mozambican party obtained in a foreign court would be recognized and enforced in Mozambique only once it has been reviewed and confirmed by the Supreme Court of Mozambique. In order to confirm such a judgment, the Supreme Court would have to find the following:

a) there are no doubts as to the authenticity of the document containing the judgment or its reasoning (as distinct from the underlying merits of the case);

b) the matter is fully and finally resolved under the laws of the jurisdiction in which it was

heard; c) the judgment was issued by a court of competent jurisdiction as determined by

Mozambican conflicts of laws rules; d) there is no basis to claim that the matter is pending in the first instance or on appeal

in a Mozambican court, except in instances in which it was the foreign court that determined that a Mozambican court had jurisdiction;

e) the defendant was properly served, unless the matter is one in which Mozambican

law dispenses with the need for initial service of process; and in the event that a judgment is rendered against the defendant for failure to state a defense, that service was made personally on the defendant;

f) the judgment does not contain decisions contrary to the principles of Mozambican

public order; and



g) in the event it was rendered against a Mozambican person, the judgment does not

offend the provisions of Mozambican private law, in those instances in which Mozambican conflict of laws rules determine that the underlying question must be decided under Mozambican private law.216

Recognition and execution of a foreign judgment may also be denied on some of the general grounds available for the appeal any judgment. ,

10.2 Arbitration

A reasonable alternative to litigation in Mozambique is arbitration. In case of a dispute between an investor and another private party, when both parties have chosen to submit their conflict to arbitration under Mozambican law, it will be heard in accordance with the procedures set forth in Law n.° 11/99 of 8 July (the “Law on Arbitration, Conciliation and Mediation” or “Law of Arbitration”). Mozambique is a member of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”, ratified by Resolution n.º 22/98 of 6 June). Hence, the only grounds available to deny enforcement of a private arbitral award in Mozambique are the limited grounds available under the New York Convention. Mozambique is also a member of the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the “Washington Convention”, ratified by Resolution n.º 10/92 of 25 September) As noted above, provision for dispute resolution by arbitration under the aegis of the International Centre for the Settlement of Investment Disputes (“ICSID”) is a common feature of mining contracts in Mozambique. Theoretically, arbitration may also be used when the Government of Mozambique is one of the parties and the matter is one of administrative law. In such cases, the arbitration will be governed by the Law n.º 9/2001 of 7 July (the “Administrative Litigation Law”).

216See Code of Civil Procedure, Articles 49 and 1094 et seq.; Law n.º 10/92 of 6 May, Article 38, clause f).

intoduction to the legal framework for mining in

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