August 22, 2019 / 4:23 PM / 24 days ago

UPDATE 1-Mali's new mining code ends tax exemptions, shortens regulatory stability period

* Mali Mines Ministry sets out new regulation

* Miners will no longer be exempt from VAT during production

* Regulatory “stability period” will be shorter

* Change aims to increase contribution of mining to Mali economy (Adds comments, context)

BAMAKO, Aug 22 (Reuters) - Mining companies operating in Mali will no longer be exempt from value-added tax during production and will only be protected from fiscal changes for a shorter period, according to a new mining code announced by the Mines Ministry on Wednesday.

An opening salvo in what could be a protracted negotiation between the government and corporates over mining regulation in Africa’s third-largest gold producer, the move is seen by some as a new instance of “resource nationalism” on the continent.

The regulatory change seeks to redress the “shortcomings” of a 2012 law by bringing a “substantial increase” in the contribution of the mining sector to the economy, the Mines Ministry said in a statement.

The new code in Mali shortens the “stability period” during which mining companies’ existing investments are protected from changes to fiscal and customs regimes.

Changes to regulatory stability clauses have been strongly opposed by international mining companies elsewhere in Africa, most notably in the Democratic Republic of Congo where miners spent months at loggerheads with the government.

Under Mali’s previous law, stability was ensured for 30 years. It was not made clear on Wednesday what the length of the new stability period would be, but the Economy Ministry said last year that the government aimed to reduce those protections to the lifespan of a mine.

“It’s the reality of the playing field at the moment, a lot of companies in Mali will have looked at what happened in DRC and Tanzania and they will have to be very cautious,” said Warren Beech, partner and head of mining at Eversheds Sutherland in Johannesburg.

“The battle plan is see what it means, understand the impact, and engage with government.”

Companies operating in the country including Barrick Gold Corp, B2Gold and Hummingbird Resources had no immediate comment on the new code.

AngloGold Ashanti is assessing the impact of the new mining code on its Mali operations, which make up less than 3% of the company’s production, a spokesman said.

Jamie Boyton, chairman of Capital Drilling - which operates in west and east Africa, said as a service company he is relatively sheltered from resource nationalism, but “all investors want to see stability.”

Mali’s government had been negotiating with a working group of mining companies to draft a new code, but said last year that it would move to implement a new law unilaterally if no compromise was reached.

It was not clear whether the new code was the product of compromise or whether it was proposed without consultation.

“This reform shouldn’t come as a surprise, even if it is probably later than anticipated. Miners will have known about the government’s intentions for well over a year now,” said Eric Humphery Smith, West Africa analyst at consultancy Verisk Maplecroft.

The previous iteration of the code was already advantageous for miners, he added. (Reporting by Tiemoko Diallo, Additional reporting by Helen Reid in Johannesburg and Barbara Lewis in London Writing by Edward McAllister and Helen Reid Editing by Leslie Adler and Kirsten Donovan)

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