Guinea eyes bigger mine stakes, new rules

Tue Apr 26, 2011 12:03pm GMT

By Richard Valdmanis and Bate Felix

DAKAR (Reuters) - Guinea's government aims to more than double the stake it can hold in mining projects and to toughen procedures for issuing development permits, according to a draft of the West African state's new mining code.

The changes are aimed at boosting the impoverished country's share in its vast minerals wealth, but could backfire by limiting much-needed future investment from international mining firms, analysts and industry insiders said.

Other proposed changes in the code, which is set to become law in coming months, include new tax breaks for mining companies involved in exploration and mine construction, and the creation of a 'Local Development Fund' fed by an existing 0.5-1.0 percent levy on minerals sales.

Guinea is the world's top exporter of the aluminum ore bauxite and holds some of the world's biggest unexploited iron ore reserves that have drawn billions of dollars in planned investment from miners Rio Tinto and Vale.


The draft mining code would give the Guinean state a free 15 percent of mining projects, as well as the option of purchasing an additional 20 percent -- bringing the total potential state share to 35 percent.

This proposal, which would more than double the current 15 percent state share in projects, will draw the biggest protest from mining companies who argue it will cut into their revenues without reducing capital outlay.

It is unclear if the government will compromise on the issue and legal battles over retroactivity to existing mining projects are a possibility if the code becomes law.   Continued...

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