Mineral Resources
What Can Sierra Leone Offer You?
- Traditional strength in mining
- Opportunity to add value in finishing diamonds
- Opportunity to profit from supporting Sierra Leone’s construction boom
- Government efforts to improve the investment climate for the mining industry
Below are links to a list of the key players in the mineral resources industry and a map of the country’s known deposits.
Key Players in the Mineral Resources Sector
Map of Known Mineral Deposits
Mining Sector Overview
Minerals
Sierra Leone’s primary mineral resources are diamonds, Rutile, bauxite, gold and iron ore. Mining,
particularly of diamonds, gold, Rutile and bauxite, has a proven track
record of viability in Sierra Leone. General geology suggests that
reserves exceed what is known and being explored. Other known mineral
deposits include iron ore, platinum, chromites, lignite and base metals
(copper, nickel, molybdenum, lead and zinc). Between 2000 and 2003, the mining sector averaged
growth of 5.8 percent per annum. With the introduction of the Kimberley
certification Process, official mineral exports increased from US $10
million in 2000 to about US $140 million in 2007 thereby returning, at
least in nominal terms, to the previous peak level achieved in 1991.
Leading Growth Driver
The mining sector is
set to undergo a rapid expansion in light of production increases from
expansions of existing and the opening of new operations. Real GDP
growth for 2012 was initially projected to increase by over 50 percent
on account of growth in the mining sector; this estimate was
subsequently reviewed to about 35.9 percent due to delays in
commencement of exports, particularly in the iron ore sector.
Sector Composition
The
mineral sector in Sierra Leone is made up of three sub-sectors; the
large-scale production of non-precious minerals such as Rutile, Bauxite
and more recently iron ore; large scale production of precious minerals,
particularly diamonds; and artisanal and small-scale production of
precious minerals, mainly diamonds, and to a much lesser extent, gold. The industry
comprises a combination of a few large operations, more numerous small
to medium-sized companies and a very large number of artisanal mines. As
of April 2012, two hundred and thirty four (234) companies had been
granted licenses in various categories of trading, exploration and
mining.
Unique Selling Points
1. Proven Mineral Deposits
· The prospects for the continued expansion of the mining sector are favourable, as:
o There are proven and sufficient reserves of
existing precious and non-precious minerals to allow increased
investments and production for the foreseeable future.
· More mining areas are becoming available, as:
o The initial rush for exploration which started in
2002 continues to expire; and with the relinquishments are freeing up
areas for new investments.
o Between October 2008 and 2011, the available areas for mining activities increased from about 33,000 Km2 to over 50,000 Km2 due to relinquishments.
2. Transparent and Modern Regulatory Regime
· The sector has undergone major legal, regulatory and policy reforms.
· The Mines and Minerals Act of 2009 presents a relatively transparent framework in:
o The issuance of mining related licenses,
o The fiscal regime; and
o A universally applied tax code, among other regulations
· The establishment of a Mining Cadastre Office (MCO), which in turn created an Online Repository that provides data on the licensing and mineral concession management
3. Cheap Labour
· The sector is among the
leading formal employers in the economy; and is benefitting from
competitive wages, compared to other economies
Licensing: Areas and Periods
|
Category
|
Nature
|
Elements
|
|
Exploration
|
Reconnaissance
|
Typically issued
to provide potential investors an opportunity to identify specific
areas for more intensive exploration. Normally non-exclusive and valid for 1yr with maximum renewal period of 1 year. It is issued to cover a maximum area of 10,000km2
|
|
Full Exploration
|
This
license grants exclusivity over license are. It is valid for 4 years
with and initial renewal option of 3 years and further renewal of
another 2 years, bringing total maximum exploration period of 9 years.
Licensed are issued for a maximum area 250km2 and licensees are encouraged to relinquish down to 125km2
|
|
|
Mining
|
Small Scale
|
Licenses are issued for land areas of up to 100 Hectare and for an initial period of 3 years, with a renewal option for another 3 years.
|
|
Large Scale
|
Licenses are issued for land areas of up to 250km2
and for an initial period of 25 years, with a renewal option for
another 15 years, subject to terms and conditions and the general
fiscal conditions as specified in the Mines and Mineral Act.
|
Source: Ministry of Mines and Mineral Resources
Licensing: Process and Requirements
The
license application process has been simplified, and requirements
clarified. The evaluation process is very transparent and results of an
application evaluation are communicated to the applicant within very
short periods of time.
|
Type of License
|
Key Requirements
|
|
Exploration License
|
· Applications made through MCO
· Company must be a registered limited company
· Technical work programme should be included
· Expenditure commitment details
· Demonstration of financial & technical capacity
|
|
Mining License
|
· Feasibility study, based on prove exploration
· Detailed mine operational plan
· Environmental Impact Assessment & management plan
· Financial surety for environmental obligations
· Community Development Agreement
· Surface Rent Agreement
|
The Fiscal Regime
|
Category of Minerals
|
Relevant Rate (%)
|
Remarks
|
|
Precious Stones
|
6.5
|
· Valuation based on the market price at time of sale
· Clear regulations on market based valuation of minerals
|
|
Precious Metals
|
5.0
|
|
|
Other Minerals
|
3.0
|
Source: Ministry of Mines and Mineral Resources
The Tax Code
The
tax code is designed and implemented to ensure level playing field for
small and large players in the sector. The following is a summary of
applicable taxes and treatment allowances of certain items for tax
purposes
|
Item Description
|
Applicable Treatment
|
|
Corporate Tax Rate
|
35% tax rate on corporate profits
|
|
Cost Amortisation
(Exploration and Development)
|
4 year profiled depreciation at 40%, 20%, 20%, 20% respectively, starting in the year the cost was incurred
|
|
Thin Capitalisation
|
Where the debt equity ratio exceeds 3:1, interest on loans granted by affiliated parties shall not apply
|
|
Limits on HQ Expenses
|
1.5% of sales
|
|
Special Tax Incentives
|
Losses can be carried forward from one year to the next up to 10yrs from the commencement of commercial production
|
Source: Ministry of Mines and Mineral Resources
