Key Issues of Mining Contracts Dr. Touahri

1
Mining Contracts Negociation key issues
government or public institution VS private
mining company
Dr. Belkacem Touahri, Independant Senior
Consultant
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A- Fundamental Considerations
1. Negociation involves two parts in a win-win
spirit Part A An authority representative of
the government or a public company or
organization Part B A mining private company
that is commited to invest in a mining
project. 2. The objectives of each party are
an increase in revenues, sustainable development,
good governance 3. The management in a form of
sharing control between the two parts or
supported only by the private company 4. The
rate of free participation to be granted by the
private company to the government or the
authority representing it 5. Regulations,
taxation 6. Which authority will represent the
government 7. Administrative procedures 8.
Respect for the laws and regulations in force in
the country.
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B- Critical issues

• Contract duration
• Project consistency
• Rights and obligations of contracting parties
• Communication and confidentiality
• Revisions, readjustments of contractual
  provisions
• Settlement of disputes.

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Duration

• 1- Duration of the
• Mining title
• Project
• Financing
• 2- End of the contract
• Calendar date of the end of the contract
• Date of the end of particular opérations (exp.
  site restoration)
• Right of the investor
• Obligations at the end of the contract.

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Project Consistency

• Objectives
• Technical program
• Employment
• Operating costs
• Amount of investments
• Operating costs
• Construction program
• Business Plan

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Rights and Obligations1/5

• Investor
• 1. Nature of mining rights
• Field of application
• Extension
• 2. Access rights and Land use

• Government
• 1. Recognition
• Execution force local and national
• Compensation
• Conditions
• 2. Local Approbation planning of infrastructures

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Rights and Obligations 2/5

• Government
• 1- Uphold
• Following of the market rules
• Ease of export
• 2- Uphold validate
• Following accounts control
• Compensations
• 3- Guarrantee

• Investor
• 1- Commercial
• Market price
• Freedom to export
• 2- Foreign exchange control
• Foreign payments
• Offshore accounts
• Reporting currency
• 3- Stability

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Rights and Obligations 3/5

• Investor
• 1- Environmental social obligations
• Consultation
• Evaluation
• Management
• Follow and Evaluation
• Closure of the exploitation
• Health safety

• Government
• 1- Sustainable development
• Participation
• Follow control
• Responsability
• Adjustments
• Auditing
• Support

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Rights and Obligations 4/5

• Government
• 1- Uphold standards,
• 2- Auditing
• 3- Tax benefits
• Recovery
• Local, regional and national incomes

• Investor
• 1- Payment of
• Charges, taxes other fees
• Land taxes
• Custom duties
• Social charges security insurance, pension
  cost)
• Income taxe on the salaries

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Rights and Obligations 5/5

• Investor
• 1- Pay rights and taxes
• Royalties
• Income tax
• Tax deductions
• Depreciations
• Losts
• Exonerations
• 2- Distribution of profits

• Government
• 1- Fiscal benefits
• Variable
• Distributed
• Fix
• Competitivity
• Minimum taxation
• No tax holiday

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Communication

• 1- Institutionalize the commitment to conduct
  local consultation under a sheddle
• Coordination of the development program
• Development of the local tax incomes
• Following of the environmental management
• Anticipate problems and their solutions
• 2- Publication of the results
• This is usefull for both parties company,
  government and local community

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Révision, modification et ajustement

• 1- Periodic reviews may be justified by because
  of
• Market price flucutation
• Technologicl process modifications
• Modification of the needs in infrastructures
• The results of the environmental management
• 2- The adjustments may have a temporary or
  mermanent character

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Resolution of litigates
1- Define the mechanism for the settlement of
minors disputes 2- Mediation can be retained it
can be optional or mandatory 3- For important or
major litigates, define the international
arbitration rules, place of the arbitration,
language, country right to apply and finally
assert that the execution of the sentence is
binding on both parties.
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Final Observations

• 1- For the investor the stability of the project
  depends on the political, economic and social
  stability of the country political regime,
  regulations and taxations, security
• 2- For both parties, this stability is based on
  an equilibirum between
• Benefit sharing of the project beteween the
  parties
• Benefits for the local community from the tax
  incomes, employment and local development.
• Sustainable development benefit induced by the
  project