5 Min Read
* Better terms needed to woo investment, government says
* Miners freeze spending due to uncertainty
* Guinea is world's top supplier of bauxite
By Saliou Samb
CONAKRY, April 9 (Reuters) - Guinea has amended its mining code to reduce some taxes and improve the investment climate, as investors and major producers in the sector grow more wary of big-ticket projects in difficult locations.
Several mining executives active in Guinea on Tuesday cheered the adoption of the revised code, saying it was a positive step towards attracting more investment into the mineral-rich West African country.
Since last year mining firms have frozen billions of dollars of planned investments in Guinea, which is the world's top supplier of aluminium ore bauxite and has rich iron ore reserves, citing fiscal uncertainty and political turmoil.
"The changes were made yesterday by the National Transitional Council, during a session in the presence of the minister of mines," Amadou Camara, a member of the council, told Reuters on Tuesday.
The changes cut mining profit taxes to 30 percent from 35 percent and reduce the tax on bauxite to 0.15 percent of the international market price for aluminium, from 0.55 percent, according to a copy of the amendments obtained by Reuters.
Other changes include an increase to the number of mining licences a single company can hold to five from three, a boost to the land area covered by exploration permits, and a lower minimum investment required for certain types of concessions.
The code will retain a controversial clause giving the state a free 15 percent stake in mining projects - as well as the option of purchasing an additional 20 percent - but makes clear that contracts signed before 2011 will be exempt.
"The positive aspect is that the government provided for private sector comments... and took on a number of the recommendations made by members of the Chamber (of Mines) - not all of the changes, but important ones," said Tom Wilson at London-based consultancy Africa Practice.
Guinea rewrote its mining code in 2011 to increase the state take from minerals resources but investors criticised the changes for making projects less profitable.
"To bring big companies to our resources, it is important to offer an improved judicial framework and better financial conditions," Mines Minister Mohamed Lamine Fofana wrote in a letter sent to the council before the changes were adopted, and obtained by Reuters.
Global miner Rio Tinto slowed progress of a major investment in Guinea's untapped Simandou iron ore deposit in March, the latest in a series investment cuts by companies including giants such as BHP Billiton, Vale, and RUSAL.
Company sources have said the decisions was driven in part by an continued government review of mining contracts and a political deadlock that triggered deadly riots and repeatedly delayed legislative elections.
Guinea, a former French colony, is undergoing a prolonged and shaky transition after a military coup in 2008.
A sharp slowdown in global commodity prices, which has led to record profit declines and writedowns for the world's top mining firms has also forced some to shelve expansion plans.
Miners said that new changes to the code would probably help to improve Guinea's image in the eyes of investors.
"We believe these changes will be very positive in attracting additional mining and infrastructure investment into Guinea," said Bellzone's CEO Glenn Baldwin, adding that it will have positive ramifications for the country and for Bellzone.
Guinea-focused Bellzone has started production from its Forecariah iron ore mine in the country. It also owns a bigger iron ore project in Kalia.
Sable Mining, developing the Nimba iron ore project in the south east of the country, said the improved tax environment on production will benefit the economics of its project.
"The government has recognised the need to foster a mining friendly jurisdiction," said Sable Mining CEO Andrew Groves.
Russian aluminium giant RUSAL, which controls bauxite mining developments and an alumina refinery in Guinea, was less positive. The company has been at odds with the Guinean government and a spokesman in Moscow, confirming the code did not apply to its existing agreements, also questioned whether it would make a difference.
"RUSAL continues to believe that the new Mining Code will decrease the attractiveness of investment into Guinea's mining sector," the spokesman said.