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INTRODUCTION TO

THE LEGAL FRAMEWORK


FOR MINING IN MOZAMBIQUE
Second Edition
INTRODUCTION TO THE LEGAL
FRAMEWORK FOR MINING IN
MOZAMBIQUE
SECOND EDITION - JULY 2010

SAL & Caldeira, Advogados, Lda.


Av. Julius Nyerere 3412 Maputo - Mozambique
Phone + 258 21 24 14 00 Fax + 258 21 49 47 10
Email: admin@salcaldeira.com
www.salcaldeira.com

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Foreword

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Table of Contents
FOREWORD ................................................................................................................................................................. 2
TABLEOFCONTENTS.................................................................................................................................................... 3
GLOSSARY.................................................................................................................................................................... 5
SECTION1 INTRODUCTION ....................................................................................................................................... 11
SECTION2 BACKGROUND.......................................................................................................................................... 12
2.1 GEOGRAPHY ......................................................................................................................................................... 12
2.2 HISTORY .............................................................................................................................................................. 12
2.3 POPULATION ......................................................................................................................................................... 12
2.4 GOVERNMENTANDPOLITICALSYSTEM ....................................................................................................................... 13
2.5 ECONOMY ............................................................................................................................................................ 13
2.6 LEGALSYSTEM ...................................................................................................................................................... 13
2.7 INTERNATIONALAFFILIATIONS................................................................................................................................... 14
SECTION3 MINING.................................................................................................................................................... 15
3.1 PRIMARYSOURCESOFLAWFORMININGINMOZAMBIQUE ............................................................................................. 15
3.2 RIGHTSTOMINERALRESOURCES ............................................................................................................................... 15
3.3 TYPESOFMININGLICENSES ..................................................................................................................................... 15
3.3.1 ReconnaissanceLicense............................................................................................................................. 15
3.3.2 ExplorationLicense.................................................................................................................................... 18
3.3.3 MiningConcessions ................................................................................................................................... 21
3.4 MININGCONTRACTS............................................................................................................................................... 24
3.5 RULESREGARDINGASSOCIATEDMINERALS .................................................................................................................. 24
3.6 EXTINGUISHINGMININGTITLES ................................................................................................................................ 24
3.7 DECLARATIONOFANAREAASAMININGRESERVE......................................................................................................... 25
3.8 TRADINGOFMINERALPRODUCTS.............................................................................................................................. 25
3.8.1 Procedurestoobtainatradinglicense....................................................................................................... 26
3.8.2 Typesandcostofobtainingatradinglicense ............................................................................................ 26
3.9 PERFORMANCEBOND ............................................................................................................................................. 26
SECTION4 ENVIRONMENT ....................................................................................................................................... 28
4.1 THEENVIRONMENTALLAW ...................................................................................................................................... 28
4.2 ENVIRONMENTALREGULATIONSFORMININGACTIVITIES................................................................................................ 29
4.2.1 Level1activities:Basicnormsofenvironmentalmanagement.................................................................. 29
4.2.2 Level2activities:Environmentalmanagementplans ................................................................................ 29
4.2.3 Level3activities:EnvironmentalImpactAssessments(EIAs) ..................................................................... 30
4.3 ENVIRONMENTALQUALITYANDEFFLUENTEMISSIONNORMS .......................................................................................... 33
4.4 ARCHAEOLOGICALHERITAGEPROTECTION ................................................................................................................... 33
SECTION5 LAND ....................................................................................................................................................... 35
5.1 PRIMARYSOURCESOFLANDLAWINMOZAMBIQUE ...................................................................................................... 35
5.2 LANDANDLIMITATIONSONTHERIGHTTOUSEANDENJOYLAND ..................................................................................... 35
5.3 THERIGHTTOUSEANDENJOYLAND ......................................................................................................................... 35
5.4 SPECIFICPROVISIONSONTHERIGHTTOUSELANDFORMININGACTIVITIES ........................................................................ 36
5.5 SOMESPECIFICOBLIGATIONSONTHEUSEOFLANDFORMINING ..................................................................................... 36
SECTION6 TAXATION............................................................................................................................................... 37
6.1 PRIMARYSOURCESOFTAXLAWINMOZAMBIQUE ........................................................................................................ 37
6.2 PERSONALINCOMETAX(IRPS)................................................................................................................................. 37

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6.3 CORPORATEINCOMETAX(IRPC) .............................................................................................................................. 38


6.4 VALUEADDEDTAX ................................................................................................................................................. 39
6.5 THETAXREGIMEFORMININGACTIVITIES ................................................................................................................... 39
6.5.1 ProductionTax .......................................................................................................................................... 39
6.5.2 SurfaceTax................................................................................................................................................ 40
6.6 TAXBENEFITSFORMINING ...................................................................................................................................... 41
6.7 DOUBLETAXATIONTREATIES .................................................................................................................................... 42
SECTION7 COMPANYLAW........................................................................................................................................ 43
7.1 THELIMITEDLIABILITYQUOTACOMPANY(SOCIEDADEPORQUOTASORLIMITADA) ................................................................ 43
7.2 THELIMITEDLIABILITYSHARECOMPANY(S.A.) ............................................................................................................. 43
7.3 LEGALPROCEDURESTOSTARTUPACOMPANY ........................................................................................................... 44
SECTION8 LABOR..................................................................................................................................................... 45
8.1 BASICPRINCIPLESOFLABORLAW .............................................................................................................................. 45
8.2 FORMSOFEMPLOYMENTCONTRACT .......................................................................................................................... 45
8.3 FOREIGNWORKERS................................................................................................................................................. 46
8.3.1 Procedureforhiringforeignworkers ......................................................................................................... 46
8.4 SOCIALSECURITY ................................................................................................................................................... 47
8.5 MINEWORKSAFETY .............................................................................................................................................. 47
SECTION9 FOREIGNEXCHANGECONTROL............................................................................................................... 49
9.1 EXCHANGELAW..................................................................................................................................................... 49
9.1.1 ProcedurestoobtainloansoutsideMozambique ...................................................................................... 49
9.1.2 Repatriationoffunds................................................................................................................................. 50
SECTION10 DISPUTERESOLUTION ............................................................................................................................. 51
10.1 LITIGATION ........................................................................................................................................................... 51
10.1.1 CompetentForumRules ............................................................................................................................ 51
10.1.2 EnforceabilityofJudgmentsbyForeignCourts .......................................................................................... 51
10.2 ARBITRATION ........................................................................................................................................................ 52

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Glossary
This glossary contains the most common technical terms used in this booklet. The definitions herein are
those provided in the relevant legislation in force in Mozambique.

MINING LEGISLATION

TERM DEFINITION

Associated Minerals Minerals occurring in the deposit alongside the main minerals (for which the
mining title was granted), whether of magmatic, metamorphic or sedimentary
origin, or other minerals not occurring in the deposit but within the area covered
by the mining title.

Cadastral Atlas Set of maps or charts held by the government, and containing geographical
locations of areas with current mining titles, designated areas of mining pass,
declared areas of mining reserve, restricted mining areas, total or partial
protection zones, and any other areas of geological interest.

Cadastral Unit Quadrilateral formed by the intersection of parallels meridians, with an equal
distance of 15 sexagesimal seconds and covering an average planimetric surface
of 20 hectares, the coordinates of the vertices being multiples of 15.

Designated Area for Area declared available for the attribution of mining passes.
Mining Pass

Foreign Direct Any form of foreign capital contribution, originating from countries other than
Investment Mozambique, and which can be subject to pecuniary valuation, be it personal
capital, or resources, provided by a foreign investor and destined for investment
through a company incorporated in Mozambique, and operating in Mozambique,
and in the context of this guide, in the mining sector.

Direct National As for Foreign Direct Investment, but where the investor in question is a
Investment Mozambican national.

Exploration Activities undertaken with the aim of discovering, identifying, determining the
characteristics and assessing the economic value of mineral resources.

Exploration Area Area subject to an exploration license.

Exploration License Mining title granted under the terms of the mining legislation, which allows
exploration for mineral resources.

Exportable Profits The part of profits or dividends derived from those mining activities involving
direct foreign investment which are eligible for export in accordance with the
relevant legislation, the remittance abroad of which may be freely undertaken by
the investor, subject to payment of taxes and other dues (including legally
required deductions related to the constitution or replacement of reserve funds,
credit refunds etc).

Mine Any place, excavation or works where mineral exploitation is undertaken,


including all infra-structures and land provisions, be these surface, underground,
aerial, fluvial, lacustrine or marine, that are necessary for the operation,
functioning and maintenance of mining exploitation. The mine also includes areas
for storage of waste and residue and social infrastructure.

Mine Closure Methods and procedures followed in the conception, development, construction,

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Programme operation and closure of a mine, with the aim of decommissioning said mine and
rehabilitating and monitoring environmental impacts in the mined area and
adjoining areas affected by mining activity, taking into consideration social,
economic and cultural aspects.

Mineral Resources Any solid, liquid or gaseous substance existing in or on the earths crust and
formed by or linked to geological phenomenon.

Mineral Resources Minerals with the appropriate physical-mechanical and chemical properties to be
for Building used for construction, technically known as inert.

Mineral Water Underground water with healthy or therapeutic properties including minero-
medicinal, medicinal and thermal waters, originating from aquifers and rising
through a spring or other natural opening, or obtained through bore-holes, wells,
or any form of excavation made to capture said water.

Mining Extraction of any mineral resources.

Mining Activity Operations comprising, either singly or together activities such as


reconnaissance, prospecting, exploration, mining, processing and treatment.

Mining Cadastre National system of recording and administration of the licensing process for
mining activities.

Mining Certificate Mining title allowing for small-scale exploitation of mineral resources.

Mining Certificate Area subject to a mining certificate.


Area

Mining Concession Usage title granted allowing the exploitation of mineral resources.

Mining Contract Written contract between a mining operator and the State in accordance with the
mining legislation.

Mining Concession Area subject to a mining concession.


Area

Mining Operations Work undertaken in the context of any mining activity.

Mining Pass An authorization allowing for artisanal mining activity in certain designated areas.

Mining Product or Minerals extracted with or without beneficiation or processing.


Ore

Mining Operator Natural or legal person holding a mining title or an authorization or hired by the
holder of a mining title or authorization to carry out reconnaissance, exploration,
mining exploitation or beneficiation.

Mining Title Reconnaissance license, exploration license, mining concession and mining
certificate, or any of the foregoing, as the context in which the expression is used
requires

Minister Minister responsible for the mineral resources portfolio.

MIREM Ministry of Mineral Resources (Ministrio dos Recursos Minerais)

Processing Processes undertaken to obtain metals, alloy or other raw materials requiring
additional processing from materials extracted or treated during mining.

Programme for the A set of procedures established and documented which sets forth causes,
Control of Risk and consequences, frequency or probability, prevention and risk reduction measures

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Emergency for accidents and emergencies which may occur during mining.
Situations

Reconnaissance Activities undertaken with the aim of identifying mineral resources through geo-
scientific methods.

Reconnaissance Area subject to a reconnaissance license.


Area

Reconnaissance License granted allowing the reconnaissance of mineral resources.


License

Royalty Payment for the use of certain rights.

Title-holder Natural or legal person in whose name a mining license or title is issued.

Treatment Processes undertaken to separate, concentrate, purify or beneficiate minerals.

ENVIRONMENTAL LEGISLATION

TERM DEFINITION

Activity Any public or private act which may affect the environment including but not
limited to: production; use of technology; use of resources; application of plans,
programmes or instruments. Activities may be held to affect air, light, soil, water,
organic or inorganic matter, as well as the socio-cultural and economic conditions
which impact the lives of communities.

Associations for the International, national or local legal persons which seek to protect, conserve and
Defense of the value the environment.
Environment

Bio-diversity The diversity within and between species and their eco-systems.

Deforestation The removal of forest without replacement or regeneration taking place.

Desertification Natural or man-made soil degradation, often resulting from the removal of
vegetation, or climatic conditions, leading to the transformation of soil into desert.

Environmental Audit A management tool designed to ensure ongoing legal compliance and
compliance with the environmental management plan submitted as part of the
Environmental Impact Assessment, and which seeks to identify areas for
improvement. The purpose of the audit is to organise and interpret environmental
monitoring data, to verify that monitoring is legally compliant, to compare actual
impacts with those predicted, to evaluate the environmental management system
in place and determine whether or not mitigation measures in use are
satisfactory.

Environmental Any negative change in the characteristics of the environment including pollution,
Degradation desertification, erosion and deforestation.

Environmental The diverse elements within the environment such as air, water, soil, sub-soil,
Elements flora, fauna and socio-economic aspects. It is the interaction of these elements
which results in their equilibrium. Environmental elements are also considered
natural resources.

Environmental The use of reputable specialists to evaluate the gravity and cost of damage
Expertise caused to the environment.

Environmental This is the entire set of procedures from the submission of initial information
Impact Assessment about a proposed activity for pre-assessment through to the issuing of an

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

environmental license.

Environmental Part of the environmental impact assessment process this study technically and
Impact Study scientifically analyses the potential consequences for the environment of a given
activity.

Environmental Any positive or negative change in the environment resulting from human activity.
Impact

Environmental Any and all legal instruments which govern the management of the environment.
Legislation

Hazardous Waste Substances or objects resulting from processes which are to be eliminated or
and Residues which must, by force of law, be eliminated and which are risks by virtue of their
characteristics such as inflammability, corrosiveness, or being explosive, toxic,
infectious, radioactive or having any other characteristic which render them a
danger to the health or life living beings and to the quality of the environment.

MICOA Ministry for the Coordination of Environmental Action (Ministrio para a


Coordenao de Aco Ambiental)

Pollution The depositing in the environment of substances or residues, regardless of their


form, or the emission of light, sound and other forms of energy in such a way and
in such quantities as to negatively affect the environment.

Sectoral Legislation The legal instruments which govern management of the environment for specific
sectors (in this case, mining).

Sustainable Development based on environmental management undertaken in such a way as


Development to satisfy the needs of the current generation without compromising the
equilibrium of the environment or the ability of future generations to also satisfy
their needs.

Wetlands Natural or artificial, permanent or temporary, still or moving, fresh, brackish or


salt, marshes, swamps, bogs or water areas, including areas of sea water the
depth of which at low tide does not exceed six metres and that sustain types of
plant and animal life which require saturated soil conditions.

LAND LEGISLATION

TERM DEFINITION

Cadastre Services The public service responsible for implementing and updating the Land Cadastre.

Exploitation Plan Document presented by an applicant for the right to use and benefit from land
describing the purpose for which the land will be used and improvements which
the applicant plans to undertake.

Family Use Use of land for meeting household needs land is cultivated using the family
labor.

Foreign Legal Any legal person constituted under the terms of Mozambican or foreign
Person legislation, in which more than fifty percent of the share capital belongs to foreign
citizens, corporations or institutions.

Foreign Natural Any individual whose nationality is not Mozambican.


Person

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Local Community A grouping of families and individuals, living in a territorial area that is at the
level of a locality or smaller, which seeks to safeguard their common interests
through the protection of areas for habitation or agriculture, whether cultivated
or lying fallow, forests, places of cultural importance, pastures, water sources
and areas for expansion.

National Legal Any legal person constituted and registered under the terms of Mozambican
Person legislation, with its head office in the Republic of Mozambique, in which at least
fifty percent of its share capital belongs to national citizens, Mozambican
corporations or institutions be they private or public.

Local Public Provincial government, district government and local municipal authorities.
Administration
Bodies

Parcel A delimited portion of land that is capable of being subdivided in accordance with
planning rules.

Real Estate Agents Persons whose activities include the promotion of construction and/or
urbanization.

Rural Tenement A delimited portion of land and the structures on it that have no independent
(Prdio Rstico) economic use or value, where the source of income depends principally on the
land itself, while the structures are there to support the exploitation of the land.

Special License A document that authorizes the carrying out of any economic activity within total
or partial protection zones.

Topographical Map Drawing to scale of a parcel or demarcated section of land, which unequivocally
specifies, at least, its location, identification, limits and boundaries, existing
servitudes, authorized uses and the conditions to which these are subject, the
name of the titleholder of the right of land use and benefit and the identity of the
issuing authority.

Total or Partial Public property designated for the conservation of animal or plant species,
Protection Zone biodiversity, historical, scenic or natural assets, which has a management system
preferably involving local community participation and is the subject of specific
legislation.

Town Planning A group of indicators enabling the dimensions and bearing capacity of land to be
Indexes determined.

Urban Land All areas located within the urban perimeter of cities, towns and villages.

Urban Tenement A building incorporated on the land, with the grounds that serve it, as well as a
(Prdio Urbano) delimited parcel or section that is within an urbanized area.

Urbanisable Area An area that is liable to be built up, comprising all or part of one or more urban or
rural tenements.

Urbanised Area An area of consolidated occupancy, in which urban tenements (prdios urbanos)
occupy their respective land parcels or sections exclusively without competition
from other buildings held by third parties, and which is within a town planning
scheme.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Section 1 Introduction
This booklet is a general survey of the legal framework for mining in Mozambique, including
practical issues of interest to investors. It was conceived and prepared principally for the
benefit of larger investors in the field. For that reason, some subjects, such as investment
guaranties and dispute resolution, are addressed in some detail, while others, such as the
regulations applicable to small-scale mining, are only mentioned in passing.

This booklet is the second edition of one we prepared in 2001. Since that year, the main legal
instruments governing mining and even some of the more general legislation regulating it
were replaced. Considering too that our country is fast becoming a destination for mining
investment, it is more than timely for a new investors guide to the legal framework for mining
in Mozambique.

Fresh investment has been flowing into a variety of minerals. Coal has led the way, with large
investments in world-class deposits in Tete in progress. Following coal are gold, mineral
sands, rare earth minerals and semi-precious stones. Given that geological mapping is far
from complete, and exploration still in its early stages, it is very likely that more commercial
discoveries will be made. Indeed, judging only by the results achieved in neighboring
countries with mature mining industries, such as South Africa and Zimbabwe, it can be said
with some confidence that Mozambiques mineral endowment is substantial.

In addition to the abundance of the minerals, investors who wish to process their output in
Mozambique may take advantage of relatively inexpensive energy (derived from
hydroelectricity, natural gas and, in the near future, thermal coal), excellent natural ports and
a motivated, trainable workforce.

Confidence in Mozambique as a destination for mining investment rests not only on the
countrys generous natural endowment. It is founded also on the proven commitment of the
Mozambican Government to create the conditions necessary to bring the country into
production. Attracting investment in mining is a high national priority; it is part of the
Governments larger policy goal of industrialization, intended to create jobs and reduce the
proportion of Mozambicans living in absolute poverty.

We hope that readers will find this booklet a useful introduction to the legal framework for
mining in Mozambique. Please, note that the legal analysis contained herein is general in
nature, and was not prepared in response to any inquiry, and does not reflect the application
of the relevant law to specific facts. It is entirely likely that specific matters may arise in
respect of which Mozambican legislation not discussed in this booklet is relevant, or in
respect of which specific legislation discussed would be applied distinctly from the manner
described herein. We therefore recommend that, in the event that a reader has a specific
legal or business question in relation to mining and beneficiation in Mozambique, he or she
timely consult legal counsel with respect to the application of Mozambican law to that specific
matter.

This booklet discusses Mozambican legislation as in force at 15 March 2010.

Samuel J. Levy
slevy@salcaldeira.com

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Section 2 Background
2.1 Geography
Mozambique is located on the east coast of southern Africa. It covers an area of 799,380 km2,
with a coastline approximately 2,515 km long. Mozambique shares extensive borders, on the
west with South Africa, Swaziland, Zimbabwe, Zambia and Malawi, and on the north with
Tanzania.

2.2 History
Much of Mozambique was occupied by Bantu populations from the time of its pre-history.
Coastal areas were historically strongly influenced by Arab traders and, since the 16th
century, by Portuguese traders and settlers. Portugal consolidated its hold over Mozambique
only in the late 19th and early 20th centuries, defeating Mozambican forces in a series of
battles and exiling their leaders. By 1975 there were some 250,000 Portuguese settlers in
Mozambique, occupying 80 percent of administrative and clerical posts in the public and
private sectors. Education and economic opportunities for native Mozambicans were very
strictly limited during the colonial period.

Independence was achieved in 1975, after 10 years of guerrilla war led by the Front for the
Liberation of Mozambique (FRELIMO), the present ruling party. The general exodus of
Portuguese settlers at independence resulted in a critical shortage of skilled labor in the
country.

War returned to Mozambique shortly after independence. The Government's application of


United Nations sanctions against the government of neighboring Rhodesia led to cross-border
raids. Later, with Rhodesian and South African assistance, the RENAMO guerrilla movement
took form. RENAMO and Government forces fought a civil war until 1992 in the course of
which thousands of lives were lost and much of the countrys limited economic infrastructure
was destroyed. An experiment in central planning, the dominant theory of economic
organization in Mozambique beginning in 1975, aggravated the destruction. Mozambique
became, and remains, one of the poorest countries in the world.

In 1984, Mozambique joined the International Monetary Fund (IMF) and the World Bank, and
in 1987 began to implement a structural adjustment program and a market economy. In
1992, a cease-fire between the Government and RENAMO was finally reached, and the first
fully democratic multiparty elections were held in 1994. Since then economic growth has been
robust. Three further rounds of national elections have been held since, with the FRELIMO
party returned to power each time for consecutive five-year mandates. The current President
of the Republic, the Hon. Armando Emlio Guebuza, was reelected in October 2009 and took
office in January 2010. In that same election, the FRELIMO party won a majority of the seats
in Parliament.

2.3 Population
According to the most recent census data (2007), Mozambique has approximately 20.8
million inhabitants. Population growth rates are estimated at 2.4%, and life expectancy at birth
is around 47.9 years.

The majority of the Mozambican population is of Bantu origin. Within this group, several
smaller groups are distinguishable. Of these, the most numerically significant are the
Emakua, the Shangana, the Chisena and the Lomwe. There are also minorities of Asian and
European extraction.

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2.4 Government and Political System


Mozambique is a presidential democracy: the President is both the Head of State and the
Head of Government. The 2004 Mozambican Constitution provides for the separation of the
legislative, executive and judicial powers. Two hundred and fifty members of parliament are
elected at five-yearly intervals by universal adult suffrage.

The Mozambican State is unitary: provincial governors are appointed by and serve at the
pleasure of the President. Provincial governments, led by the Governor, are composed of
directors who exercise locally the powers and perform the duties of the Ministries to which
they belong. Thus, provincial directors are answerable to both the Governor, as the leader of
the Provincial Government, and the Minister responsible for their activities.

Mozambique also has 43 municipalities whose governments are elected by universal adult
suffrage of the residents thereof. Municipal governments exercise their limited powers under
the primary tutelage of the Ministry of State Administration.

2.5 Economy
At the end of the civil war Mozambique was ranked as the poorest country in the world, with a
GDP per capita of $110. Since then, the economy has expanded rapidly: between 1996 and
2006, GDP grew by an average of 8% per year. Over the past three years, GDP is estimated
to have grown by an average 7.3% per year. The October 2009 World Economic Outlook,
published by the International Monetary Fund (IMF), projects GDP growth of 5.2% in 2010.

Inflation has been reduced considerably from almost 17% in 2002 to 6.2% by the end of 2008.
The inflation rate in 2009 was 3.25%, the lowest of any SADC country.

Mozambique has also made rapid improvements in key social indicators over the past few
years. In the period between 1990 and 2007, Mozambique saw the fastest increase in the
Human Development Index (HDI) in the world.1 Over that 17 year period, HDI increased by
almost 50%, albeit from a very low base.

2.6 Legal System


The Mozambican legal system is based on the Romano-Germanic tradition of the civil law. It
is directly inherited from Portugal. At independence, all Portuguese laws not inconsistent with
the new constitution were retained and remain in force. Much background law from that
period including, for example, the civil code and the civil procedure code (much of it dating
from the mid-20th century) remains little modified. The period of Socialist orientation after
independence spread a gloss of Soviet-inspired economic and organizational legislation on
the underlying Portuguese legal framework. Most of this has now been replaced with
contemporary legislation consistent with market principles.

In the rest of this document, and unless otherwise noted, laws refers to acts of parliament,
decrees and resolutions to acts of the Council of Ministers which, in constitutional terms, is
the Government of Mozambique, and rulings or ministerial rulings to the acts of a single
ministry or of ministries jointly. In hierarchical terms, laws are superior to decrees and
resolutions, which in their turn are superior to rulings. The Constitution is the supreme law of
the land and also prevails over international treaties and conventions.

1
The Human Development Index or HDI is and index produced by the United Nations Development Program which
combines measures of life expectancy, educational attainment, and GDP per capita for countries worldwide. The
report uses statistics which are two years old; the latest year for which data is available is 2007.

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2.7 International Affiliations


Mozambique belongs to the following international organizations, among others:

The United Nations and its agencies;


The International Monetary Fund;
The World Bank;
The Organization of African Unity;
The Southern African Development Community (SADC);
The Commonwealth;
The African Development Bank; and
The World Trade Organization.

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Section 3 Mining
3.1 Primary Sources of Law for Mining in Mozambique
The primary sources of law for mining in Mozambique are the following:

The Constitution of the Republic of Mozambique of 2004 (the Constitution);


Law n. 14/2002 of 26 June (the Mining Law);
Law n. 11/2007 of 27 June (the Tax Regime for Mining);
Decree n. 16/2005 of 24 June (the Regulation on Trade of Mineral Products);
Decree n. 61/2006 of 26 December (the Regulation on Mine Work Safety)
Decree n. 62/2006 of 26 December (the Mining Regulations);
Decree n. 5/2008 of 9 April (the Regulation of Tax Regime for Mining); and
Resolution n. 4/98 of 24 February (the Geological and Mining Policy).

3.2 Rights to Mineral Resources


In Mozambique, mineral resources located in and beneath the soil are the property of the
State.2

Under certain conditions, the State may grant to private persons rights with respect to
minerals resources as long as such rights are exercised in accordance with industry best
practice, respect for the environment, and for the benefit of the national economy.3 The rights
granted include, among others, reconnaissance, exploration, mining, treatment and
4
processing, and trade or other forms of disposal of mineral products.

These rights of use and enjoyment of mineral resources are granted by the State by means of
the following licenses:

(i) Reconnaissance License (Licena de Reconhecimento);


(ii) Exploration License (Licena de Prospeco e Pesquisa);
(iii) Mining Concession (Concesso Mineira);
(iv) Mining Certificate (Certificado Mineiro); and
(v) Mining Pass (Senha Mineira).

The last two licenses listed above the Mining Certificate and the Mining Pass -- are relevant
principally to small-scale artisanal mining activities and are not covered in this guide.

3.3 Types of Mining Licenses


The mining law reflects a general tendency towards greater transparency in the award of
mining rights, reduction of the scope of regulatory discretion, and greater security for the
holders of rights, from initial reconnaissance through the mining stage. Rights with respect to
mining are to be issued on a first come, first served basis.5
3.3.1 Reconnaissance License
A reconnaissance license allows the holder to carry out reconnaissance operations over
relatively large areas (not exceeding 100,000 hectares) during a maximum period of two
years, and is not renewable.6

2
Constitution, Article 98, paragraph 1, and Mining Law, Article 4.
3
Mining Law, Article 2.
4
Ibid.
5
Ibid.: Article 5, paragraph 2.
6
Mining Law, Article 7, paragraph 5, and Mining Regulations, Article 24, paragraph 2, and Article 25, paragraph 1.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

3.3.1.1 Holding a reconnaissance license


A reconnaissance license may be held by any person, national or foreign, natural or legal with
the relevant capacity, and who intends to carry out the reconnaissance activities permitted
under this license (see subsection 3.3.1.3), subject to payment of the applicable fee.7

3.3.1.2 Procedures to obtain a reconnaissance license


A reconnaissance license is requested by means of a letter to the Minister of Mineral
Resources submitted via the National or Provincial Directorate of Mines. This request must
8
include:

the full identity of the applicant and, in the case of a legal person, indication of the
headquarters, equity capital, identity, nationality and address of any legal
representative or in the case of commercial representation in Mozambique, the
address and identity of its representative;
indication of the mineral resources to be covered by the license;
indication of the area requested;
the time period required (which cannot exceed two years); and
the licensing form purchased from the Provincial or National Directorate and duly
filled in.

The following documents must also be attached:9

documentation demonstrating technical and financial resources available to the


applicant as well as experience in the management and undertaking of the type of
operations requested in the license application;
in the case of a legal persons, a notarized copy of the certificate of incorporation and
other relevant corporate documents;
proof of payment of the processing fee (see subsection 3.3.1.4); and
any other relevant information that the applicant wishes to include.

The request is considered as having been submitted on the date of receipt, which is indicated
by way of a stamp, and by payment of the processing fee.10

In the five days subsequent to the application being submitted the applicant may be asked to
clarify certain aspects of the request.11 Once this is done, a decision will be taken by the
Minister and the applicant notified in writing within ten days of the decision.12 The applicant
then has thirty days to pay the relevant fees (see subsection 3.3.1.4) and collect the license.13
Rejected applications shall include a documented justification for the rejection.14

3.3.1.3 Rights and obligations imposed on holders of a reconnaissance license


Holders of a reconnaissance license are permitted to:

have access to and overfly the area, on a non-exclusive basis;


obtain and remove samples;
occupy the area and construct temporary installations, subject to applicable law; and
use the water, wood and other materials necessary for reconnaissance subject to the
laws in force.15

7
Mining Law, Article 6, paragraph 1and Article 7, paragraph 1.
8
Mining Regulations, Article 21, paragraph 2.
9
Ibid.: Article 21, paragraph 3.
10
Ibid.: Article 21, Paragraph 4.
11
Ibid.: Article 5, paragraph 2.
12
Ibid.: Article 23, paragraph 1.
13
Ibid.: Article 23, paragraph 4.
14
Ibid.: Article 23, paragraph 2.
15
Mining Law, Article 8.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

In addition to any other conditions, a holder of a reconnaissance license must:16

carry out the reconnaissance for which it requested the license;


submit annual reports as required by law17
compensate holders of surface rights for damage to their interests in the course of
reconnaissance; and
preserve the environment.

This last obligation includes the duty to restore the land to its original state in the event of
damage in the course of reconnaissance activities.

Further to the obligations described in the preceding paragraph, holders of a reconnaissance


license are not allowed to:

excavate to a depth of greater that one meter or remove of more than 3m of material;
excavate more than 12m per hectare;
drill holes of more than 102mm in diameter;
drill more than 4 holes per hectare; and

18
use mechanical drills.

The license holder is further required to submit a report each year on the work carried out in
19
that period.

3.3.1.4 Cost of acquiring and holding a reconnaissance license


There are two specific costs associated with the acquisition and holding of a reconnaissance
license: fees and surface tax.

The costs involved in an application for a reconnaissance license as follows.

Table 1: Fees for Reconnaissance Licenses


PROCESS VALUE (MT) VALUE (US$)20
Reconnaissance License
Fee for registration of application 2.000,00 70
Fee for issue of title 850,00 30

In addition the license holder must pay an annual surface tax which depends on the area of
the license. (Surface tax must also be paid on exploration licenses and mining concessions,
at rates higher than those that applies to reconnaissance licenses.)

Table 2: Surface Tax for Reconnaissance Licences


TYPE OF MINING
MINERAL RESOURCE RATE (MT) RATE (US$)
TITLE
Diamonds 10,00 Mt/Km 0.35/Km
Reconnaissance
License Other minerals 25,00 Mt/Km 0.90/Km

Therefore the surface tax on a reconnaissance license of the maximum possible extension of
1,000 Km would amount to US$900 a year.

16
Ibid.: Article 9.
17
Mining Regulations, Article 27.
18
Mining Regulations, Article 26.
19
Ibid.: Article 27.
20
At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01
February 2010, and rounded. Dollar amounts are further rounded.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

The tax regime applicable to mining activities is covered in more detail in Section 6, below.

3.3.2 Exploration License


An exploration license allows the holder thereof to conduct prospecting and research
operations in a designated area (not exceeding 25,000 hectares) for a period of five years,
and is renewable for up to a further five years.21

3.3.2.1 Holding of an exploration license


As with reconnaissance licenses, an exploration license may be held by any person, national
or foreign, natural or legal with the relevant capacity, that intends to carry out the exploration
activities allowed for under this license (see section 3.3.2.3), subject to payment of the
22
applicable fee.

3.3.2.2 Procedures for obtaining an exploration license


Exploration licenses may be granted either on application by an interested entity or by public
tender.23

An exploration license is requested by means of a letter to the Minister of Mineral Resources


submitted via the National or Provincial Directorate of Mines. This request must include:

the full identity of the applicant and, in case of a legal person, indication of the
headquarters, equity capital, the identity, nationality and address of any legal
representative or, in the case of commercial representation in Mozambique, the
address and identity of its representative;
indication of the mineral resources to be covered by the license;
indication of the area requested;
the time period required, which cannot exceed five years;
a work programme and minimum budget; and
the licensing form, purchased from the Provincial or National Directorate and duly
filled in.24

The following documents must be attached:

documentation demonstrating the applicants technical and financial resources as


well as experience in the management and undertaking of the type of activity applied
for;
in the case of a legal person, a notarized copy of the certificate of incorporation or
other constitutive document and any amendments thereto;
proof of payment of the processing fee; and

25
any other relevant information that the applicant wishes to include.

In the five days subsequent to the application being submitted the applicant may be asked to
26
clarify certain aspects of the request. Once this is done, a decision will be taken by the
Minister and the applicant notified in writing within ten days of such decision.27 The applicant
then has thirty days to pay the relevant fees (see subsection 3.3.2.7) and collect the license.28
29
Rejected applications shall include a documented justification for the rejection.

21
Mining Regulations, Article 33, paragraph 2 and Article 35.
22
Mining Law, Article 6, paragraph 1and Article 7, paragraph 1.
23
Mining Regulations, Article 8, paragraph 2.
24
Ibid.: Article 30, paragraph 2.
25
Ibid.: Article 30, paragraph 3.
26
Ibid.: Article 5, paragraph 2.
27
Ibid.: Article 32, paragraph 1.
28
Ibid.: Article 32, paragraph 4.
29
Ibid.: Article 32, paragraph 2.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

The Minister has the right to reject any application for an exploration license for an area
previously held by the applicant the licenses for which have been cancelled or withdrawn in
the period up to 12 (twelve) months prior to the filing of the new application.30

The exploration license is valid from its date of issue. If a concession is subsequently
requested for same area, following on from exploration, the exploration license remains valid
until a decision is taken regarding the issuing of the concession.31

3.3.2.3 Rights and obligations imposed on holders of an exploration license

Holders of an exploration license are permitted to: 32

access the area subject to exploration;


prospect on an exclusive basis the mineral resources covered by the license, within
the licensed area;
prospect associated mineral that may occur in the area covered by the exploration
license;
collect, remove and export samples and specimens not exceeding acceptable limits
(which are not clearly established in the legislation) for exploration purposes;
conduct sampling and trial processing of the mineral resources not exceeding
acceptable limits (which are not clearly established in the legislation) in order to
determine the mining potential;
sell, subject to authorization by the Ministry of Mineral Resources, specimens and
samples obtained for exploration purposes or for sampling and trial processing (see
subsection 3.7 for further information on the trading of mineral products);
occupy land and erect any temporary installations, structures or buildings necessary
for carrying out exploration activities;
utilize water, timber and other materials in the licensed area for exploration activities,
subject to the applicable laws,(i.e. those governing the domains indicated); and
receive compensation if, after carrying out prospecting for at least two years, the area
covered by the exploration license is for some reason closed to mining activity.

Under the terms of the exploration license, the holder is required to:

work according to the programme submitted to the National Directorate of Mines;


present an annual investment report detailing investment undertaken to date and
investment planned, by 31st January each year;
pay the relevant fees (see subsection 3.3.2.7); and
submit a work programme detailing work undertaken to date and minimum
expenditure likely to be incurred in the upcoming year. This report is to be submitted
three months prior to the end of each year.33
The holder of an exploration license has the exclusive right to the award of one or more
mining concessions in relation to any area subject to the exploration license held.34

3.3.2.4 Procedures for the export of samples resulting from exploration and research
activities
The holder of an exploration license may export samples for laboratory analysis. To do so the
license-holder must submit a letter to the National or Provincial Directorate of Mines
requesting authorization and providing proof of the respective mining title.

30
Ibid.: Article 32, paragraph 3.
31
Ibid.: Article 34.
32
Mining Law, Article 11.
33
Ibid.: Article 37.
34
Mining Law, Article 13, paragraphs 2 and 3.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

The letter must include detailed information on the samples to be exported, including where
the samples were taken, what minerals are being prospected for, the quantity of samples, the
destination laboratory, the types of analysis and tests to be undertaken, the means of
transport for the samples and their exit border.

The holder of the exploration license must also declare if the samples have commercial value.
The National or Provincial Directorate of Mines will verify the information provided by the
applicant and if it is confirmed, a release document (Guia de Sada) will be issued in respect
of the specific samples listed in the letter.35

3.3.2.5 Extension of an exploration license


An exploration license may be extended for a further period of up to five years. To extend a
license an application must be submitted to the Minister at least sixty days before the expiry
of the current license.36

3.3.2.6 Transfer of exploration licenses


Unlike reconnaissance licenses, exploration licenses are transferrable.37 To transfer an
exploration license an application must be submitted to the Minister of Mineral Resources via
the National Directorate of Mines specifying the conditions of the transfer and including the
legal instrument or document by which the transfer will be made. In addition, applicants must
demonstrate:

that the transferee has accepted in writing the terms and conditions of the exploration
license;
the legal capacity of the parties;
that the transferee has the technical and financial resources as well as experience in
the management and undertaking of exploration activities; and

38
proof of payment of the required fees (see subsection 3.3.2.8).

If appropriate, the Minister will authorize the transfer of the license within 90 days from the
date of application.

In practice, when an exploration license is held by a legal person, it is more common for the
shares or quotas of such legal person to be transferred rather than to apply for authorization
to transfer to exploration license itself.

3.3.2.7 Geographical extension or abandonment of the licensed area


To extend the geographic area of an exploration license, an application must be submitted to
the Minister of Mineral Resources, indicating the reason therefor. The Minister may then
authorize the extension subject the terms and conditions she deems appropriate. The
submission will be denied when the additional area requested is not available or when the
applicant has not met its obligations with respect to other mining licenses it might hold.39
There is a small fee associated with the application for extension as well as the additional
surface tax that will have to be paid annually (see next subsection for further details).

The license holder may also abandon all or part of the area by giving notice to the Minister at
least ninety days in advance. Partial abandonments must be registered on the license
holders title.40

35
Ibid.: Article 36, paragraph 5.
36
Ibid.: Articles 38 and 39.
37
Mining Law, Article 10, paragraph 5.
38
Mining Regulation, Article 108.
39
Mining Regulation, Article 41.
40
Ibid.: Article 42.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

3.3.2.8 Cost of acquiring and holding an exploration license


The costs associated with exploration licenses can be categorized into three groups: fees;
fees for amendments; and surface tax.

(i) The fees related to an application for an exploration license are set forth below.

Table 3: Fees for Exploration Licenses


VALUE
PROCESS VALUE (MT)
(US$)41
Exploration License
Fee for registration of application 2.000,00 70
Fee for issue of title 850,00 30
Fee for late submission of application for renewal 600,00 20
Fee for renewal 500,00 18

(ii) The fees related to amendments of exploration licenses titles are set forth below.

Table 4: Fees for Amendments to Exploration Licenses


VALUE
PROCESS VALUE (MT)
(US$)42
Fees for application of transfer of title 5.000,00 180
Fees for registration of transfer of titles 850,00 30
Fees for of application for extension of area 1.000,00 35
Fees for registration of extension of area 750,00 25

(iii) The annual surface tax due for exploration licenses is set forth below.

Table 5: Surface Tax for Exploration Licenses


TYPE OF MINING MINERAL
RATE (MT) RATE (US$)43
TITLE RESOURCE
1st and 2nd year: 250,00 Mt/Km 9/Km
3rd year: 625,00 Mt/Km 22/Km
4th and 5th year: 1.300,00 Mt/Km 46/Km
Exploration
All minerals 6th year: 1.500,00 Mt/Km 54/Km
License
7th year: 2.000,00 Mt/Km 71/Km
8th year: 2.500,00 Mt/Km 89/Km
9th and 10th year: 3.000,00 Mt/Km 107/Km

The tax regime of mining activities is covered in more detail in Section 6, below.

3.3.3 Mining Concessions


A mining concession is a license which allows the exploitation of mineral resources in a given
area. Concessions are granted by the State for the period equivalent to the economic life of
the mine (or mining operation) up to a maximum of 25 years, and are renewable for further
periods not exceeding 25 years.44 The area of the concession shall not exceed that which is
reasonably necessary for the mining operation. To discourage applicants from requesting
large areas and keeping them out of use, surface tax (covered in subsection 6.4.2 is levied on
mining concessions.

41
At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01
February 2010, and rounded. Dollar amounts are further rounded.
42
Ibid.
43
Ibid.
44
Mining Law, Article 13, paragraph 5.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

3.3.3.1 Holding of a mining concession


Any legal person established and registered in Mozambique, can hold a mining concession.45
Neither natural persons nor legal persons established in other jurisdictions may apply for or
hold mining concessions.

3.3.3.2 Procedures for obtaining a mining concession


When an application for a mining concession is made in respect of an area which was
previously held, by the applicant, under an exploration license, the application is said to
emerge from the exploration license. In such cases, the concession will be granted provided
that the holder of the exploration license has fulfilled all of its obligations thereunder.46 A
mining concession can also be obtained without a previous exploration license for the area
petitioned.47 The procedures to obtain a concession are the same in both cases.

The application is made by way of a request addressed to the Minister, which must be
prepared in the form of a model letter provided by the National Directorate of Mines and
includes:

the complete identity of the applicant, including address of headquarters, equity


capital, identity, nationality and address of the company applying and those of its
commercial representative in Mozambique, where applicable.

The application must also include:

details of the exploration license where relevant;


the location of the area;
an indication of the mineral resources to be included in the concession; and
the period of license required which may not exceed twenty-five years, and which
shall be consistent with the mining plan (plano de lavra).48

The application is accompanied by a licensing form purchased from the Provincial or National
Directorate and duly completed.49

The following must be annexed to the application:

documentation demonstrating technical and financial resources available to the


applicant as well as experience in the management and undertaking of the type of
operations applied for;
a notarized copy of the certificate of incorporation and other relevant company
documents and amendments thereto;
economic feasibility study;
a mining plan, (a technical document detailing the intended mining and mineral
processing methodology);
proof of payment of processing fee (see subsection 3.3.3.3);
any other relevant information that the applicant wishes to include.50

Once the application has been submitted the applicant has five days to correct any errors or
omissions identified by the Mining Cadastre.51 A further period of 30 days is included for
corrections or the provision of additional documentation requested by the National Directorate

45
Ibid.: Article 6, paragraph 2. In addition, a Mining Concession is granted to the person who meets these
requirements and pays the respective fee. See also Mining Law, Article 13, paragraph 1 and Mining Regulation,
Article 44, paragraph 3.
46
Mining Law, Article 13, paragraph 2.
47
Mining Regulation, Article 44, paragraph 1.
48
Ibid.: Article 44, paragraph 4.
49
Ibid.: Article 44, paragraphs 2 and 4.
50
Ibid.: Article 44, paragraph 5.
51
Ibid.: Articles 5 and 46.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

of Mines.52 Under the terms of the law, a decision will be made and the applicant informed
within 10 days.53

3.3.3.3 Transfer of a mining concession


Mining concessions are transferrable.54 To transfer a mining concession, an application must
be submitted to the Minister of Mineral Resources through the National Directorate of Mines
specifying the conditions of the transfer and including the legal instrument by which the
transmission will be made. In addition, applicants must demonstrate:

that the transferee has accepted in writing the terms and conditions of the mining
concession;
the legal capacity of the parties;
that the transferee possesses the technical and financial resources as well as
experience in the management and undertaking of mining operations of the sort
included in the concession; and
proof of payment of the required fees (see subsection 3.3.2.8).55

If the conditions are met, the Minister will authorize the transfer of the license within 90 days
from the date of application.56 Rejections are communicated within 10 days after the
corresponding decision.57

3.3.3.4 Cost of acquiring and holding a mining concession


As with exploration licenses, the costs associated with mining concessions can be
categorized into three groups: fees; fees for amendments; and surface tax.

(i) The fees related to an application for a mining concession are set forth below.

Table 6: Fees for Mining Concessions


VALUE
PROCESS VALUE (MT)
(US$)58
Exploration License
Fee for registration of application 2.000,00 70
Fee for issue of title 1.200,00 43
Fee for late submission of application for renewal 600,00 20
Fee for renewal 850,00 30

(ii) The fees related to amendments to mining concession titles are set forth below.

Table 7: Fees for Amendments to Mining Concessions


VALUE
PROCESS VALUE (MT)
(US$)59
Fees for application of transfer of title 5.000,00 180
Fees for registration of transfer of titles 850,00 30
Fees for of application for extension of area 2.000,00 70
Fees for registration of extension of area 2.000,00 70

(iii) The annual surface tax due for mining concessions is set forth below.

52
Ibid.: Article 46, paragraph 2.
53
Ibid.: Article 47, paragraph 2.
54
Mining Law, Article 13, paragraph 6.
55
Mining Regulation, Article 108.
56
Ibid.: Article 108, paragraph 1, clause c).
57
Ibid.: Article 108, paragraph 3.
58
At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01
February 2010, and rounded. Dollar amounts are further rounded.
59
Ibid.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Table 8: Surface Tax for Mining Concessions


TYPE OF MINING MINERAL RATE
RATE (MT)
TITLE RESOURCE (US$)60
All mineral
products 1st up to 5th year: 2.500,00 Mt/Km 90/Km
Mining Concession
excluding 6th year onwards: 5.000,00 Mt/Km 180/Km
mineral water

The tax regime for mining activities is covered in more detail in Section 6, below.

3.4 Mining Contracts


In connection with large-scale projects, the State and the holder a mining concession may
enter into a mining contract.61 The scope of a mining contract can be quite broad but in no
event may its contents conflict with the terms of Mozambiques mining and other applicable
legislation. Indeed, as the tax legislation related to mining has narrowed the Governments
discretion to grant fiscal benefits, the scope of the subject matter in mining contracts has
tended to contract. Obligatory subjects include the circumstances or ways in which the
Council of Ministers (i.e. the Government) will exercise its powers and dispute resolution.62

3.5 Rules regarding Associated Minerals


If in the course of mining operations the titleholder finds associated minerals, the discovery
must be reported forthwith to the Ministry of Mineral Resources. The titleholder shall also
inform the Ministry if the associated minerals exist in a commercial quantity. If extraction is
economically feasible and the titleholder is interested in doing so, it may amend its work
program to provide for extraction of the associated minerals.63

If the license-holder is not interested in extracting the associated minerals, the State reserves
the right to negotiate their extraction with a third party. The titleholder must store or otherwise
conserve the associated minerals to allow for a prospective third party operation to recover
and use them.64

For the purpose of the rules set forth above, associated minerals is understood broadly to
include not only minerals that are conventionally associated in geological terms but also any
other mineral that occurs simultaneously with the mineral object of the license in question.65

3.6 Extinguishing Mining Titles


Mining titles can be extinguished by a variety of means.66 These include:

(i) expiration, meaning, by the passage of time;

(ii) total abandonment of the area;

(iii) revocation on grounds available under the Mining Law and Mining Law Regulation,
when, with 60 days prior notice, the titleholder is notified of the intention of revoke the
title and underlying motives therefore, which may include:

i. bankruptcy or an agreement or composition with creditors, unless there is a


registered mortgage on the corresponding mining facilities; or

60
Ibid.
61
Theoretically, a mining contract can also be signed in connection with an exploration license.
62
Mining Law, Article 25, paragraph 2.
63
Mining Regulation, Article 20, paragraphs 1 and 2.
64
Ibid.: Article 20, paragraph 3.
65
Ibid.: Article 20, paragraph 5.
66
Ibid.: Article 43.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

ii. transformation and dissolution of the title holding company, unless prior
consent was obtained for such transformation and dissolution for the
purposes of a merger or reconstitution of the company.

Immediate revocation occurs:

i. based on the lack of payment of the mining production tax and surface tax if,
after 90 days from the date the tax is due, the titleholder does not pay the tax
and any interest accrued thereon;
ii. lack of mining activity for a period of 6 months, 10 months or 24 months, after
the issuance of the title and if it is a reconnaissance license, exploration
license or mining concession, respectively; and
iii. failure to meet the obligations set forth in the Mining Law Regulation.67

cancellation of the mining title. This occurs when, after due notice of the decision
granting the mining title, the applicant does not pick it up within 30 days.68

3.7 Declaration of an Area as a Mining Reserve


When the development and exploration of certain mineral resources is considered of public
interest for the national economy or the future development of the region in which they occur,
the Council of Ministers may declare that the land on which the mineral resources are located
to be reserved, specifying the type of activities not allowed in the reserved area.69 Such areas
may become the object of mining titles in the future; indeed, anyone otherwise eligible may
apply for a mining title in respect of the area.70 Any such declaration is, however, without
prejudice to any vested rights of existing titleholders.71
A recent example of an area declared a mining reserve is an area of 9,528 ha in Chibuto,
Gaza Province, which was declared reserved for mining heavy sands and other minerals by
Decree n. 60/2009 of 8 October. In that instance, the following activities were prohibited:

intensive and sustainable economic activities, particularly, agricultural, industrial and


commercial activities, except for cattle grazing;
conventional housing and other lasting infrastructure;
burials; and
grant of land use rights.72

Decree n. 60/2009 of 8 October further establishes that when the State finds an investor to
execute a mining project in the reserved area, its status as a reserve shall cease.73

3.8 Trading of Mineral Products


If the products to be traded arise from mining activities conducted under the aegis of certain
types of mining licenses (namely, concessions, mining passes and mining certificates), they
may be freely traded by the license holder; no additional trading license is required.74

Trade of mineral products in any other circumstance must be duly licensed and supervised by
the licensing authority in accordance with specific regulations. 75

67
Mining Law, Article 2, paragraph 2 and Article 24; Mining Regulation, Article 43, Article 37, paragraph 2 and Article
118.
68
Mining Regulations, Article 43 and Article 32, paragraph 5.
69
Mining Law, Article 42, paragraph 1.
70
Ibid.: Article 42, paragraphs 1 and 3.
71
Ibid.: Article 42, paragraph 2.
72
Decree n. 60/2009 of 8 October, Article 3.
73
Ibid.: Article 4.
74
Mining Law, Article 26, paragraph 1.
75
Ibid.: Article 26, paragraph 2.

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Decree n. 16/2005 of 24 June (Regulation on Trade of Mineral Products) regulates the trade
of mineral products by Mozambican nationals. Legal persons proposing to trade minerals
must be legally incorporated in Mozambique and the majority of their share capital must be
held by Mozambican natural or legal persons.76 This decree does not apply to radioactive
77
minerals.

3.8.1 Procedures to obtain a trading license


Natural and legal persons who wish to trade mineral products produced by others must
request a license from the Minister of Mineral Resources.78 This is done by means of an
application containing:

the complete identity of the applicant and, in case of legal persons, the identity of the
shareholders and distribution of the equity capital;
indication of the class of license (see subsection 3.8.2 below) and area of operation;
the mineral products to be traded; and
a trading program, including details of human, financial and technical resources to be
used.

The application is then processed in the same manner as license applications (see above). If
the application is denied due to lack of supporting information, the applicant may add the
information and re-tender the application. If the application is accepted, a license to trade in
minerals is issued for a period of five years, renewable once for an equal period.79

3.8.2 Types and cost of obtaining a trading license


There are three types of trading licenses, categorized into Class I, II, and III.

Class I licenses give their holders the right to purchase mineral products for the
manufacture of gold products;
Class II licenses allow the purchase of mineral products from artisanal miners and
their subsequent sale; and
Class III licenses give the general right to buy and sell mineral products as well as to
refine them.80

A processing fee of 1.500,00 Mt, (approximately US$ 55,00 at current exchange rates) must
be paid when requesting a license.81 Additionally the following fees must be paid annually by
the holder of each type of license.

Table 9: Annual Fees for Mineral Trading Licenses


LICENSE TYPE VALUE (MT) VALUE (US$)82
Class I License 10.000,00 355
Class II License 15.000,00 535
Class III License 25.000,00 895

3.9 Performance Bond


Financial guarantees and insurance against environmental damage are addressed in Section
4.2.6, below.

76
Decree n. 16/2005 of 24 June, Article 2, paragraph 2, clauses a) and b).
77
Ibid.: Article 2, paragraph 4.
78
Ibid.: Article 4, paragraph 1.
79
Ibid.: Article 9.
80
Ibid.: Article 1, clauses f), g) and h), and Article 8, paragraph 1.
81
Ibid.: Article 6, paragraph 1.
82
At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on 01
February 2010, and rounded. Dollar amounts are further rounded.

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The Mining Regulation requires mining titleholders to provide either a bank guarantee or letter
of guarantee from their parent company, equivalent to 10% to 20% of the value defined in the
work program and minimum expenditure amount submitted as part of the license application
process. These guarantees (sometime referred to as performance bonds) are meant to
83
ensure compliance with the terms and conditions of the mining license (or mining contract).
The guarantee may be removed by the titleholder from the second year of operations if it
demonstrably fulfilled the approved work program. Conversely the guarantee may be called
84
on by the State for any breach that would otherwise entitle it to repeal the mining title.

83
Mining Regulation, Article 111, paragraph 1 and 2.
84
Ibid.: Article 111, paragraph 3.

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Section 4 Environment
The primary sources of environmental law in Mozambique are:

o The Constitution of the Republic of 2004 (the Constitution);


o Law n. 10/88 of 22 December (the Legal Protection of Mozambiques Cultural
Heritage Law);
o Law n. 20/97 of 1 October (the Environmental Law);
o Decree n. 32/2003 of 12 August (the Regulation on the Process of Environmental
Audit);
o Decree n. 26/2004 of 20 August (the Environmental Regulations for Mining
Activities);
o Decree n. 18/2004 of 2 June (the Environmental Quality and Effluent Emission
Norms);
o Decree n. 45/2004 of 29 September, as amended by Decree n. 42/2008 of 4
November (the Environmental Impact Evaluation Process Regulation);
o Decree n. 11/2006 of 15 June (the Regulation for Environmental Inspection);
o Ministerial Diploma n. 129/2006 of 19 July (the General Directive for Studies of
Environmental Impact);
o Ministerial Diploma n. 130/2006 of 19 July (the General Directive for the Process of
Public Participation in the Process of Evaluation of the Environmental Impact);
o Ministerial Diploma n. 189/2006 of 14 December (the Basic Norms for Environment
Management); and
o Decree n. 27/94 of 20 July (the Archaeological Heritage Protection Regulation).

4.1 The Environmental Law


The Environment Law prohibits pollution85 as well as activities that accelerate erosion,
desertification, deforestation or any other form of environmental degradation except as
permitted by law.86 It also prohibits the importation of hazardous waste except as may be
permitted by specific legislation.87

The Environment Law also provides that the government may establish environmental quality
standards, defined as the admissible levels of pollution prescribed by law.88 The
Environmental Quality and Effluent Emission Norms regulate atmospheric, water and soil
quality for industrial purposes, effectively establishing standards for air pollution and effluent
emissions.89

The Environmental Law is regulated by a range of additional instruments, both general and
sector-specific.
MICOA is the Government institution responsible for ensuring the preservation and
responsible use of natural resources, the coordination of environmental activities and
environmental licensing.90

85
The Environment Law in its Article 1, paragraph 21 defines pollution as the depositing into the environment of
substances or residues, regardless of type, and the emission of light, sound and other forms of energy in such a way
and quantity as to cause negative effect.
86
Environment Law, Article 9, paragraph 1.
87
Ibid.: Article 9, paragraph 2. Such legislation has yet to be introduced. Note, however, that Mozambique has ratified
the Bamako Convention of 30 January 1991. This convention addresses the prohibition of the transport of dangerous
waste and the control of cross-border movement of such waste in Africa (See Resolution n. 19/96 of 26 November).
88
Environment Law, Article 10, paragraph 1 and Article 1, paragraph 19.
89
See Environmental Quality and Effluent Emission Norms, Article 2.
90
Provincial Directorates for Coordination of Environmental Action (Direces Provinciais para Coordenao da
Aco Ambiental - DPCA) and in some cases District Directorates for Coordination of Environmental Action
(Direces Distritais para Coordenao da Aco Ambiental - DDCA) are the local representatives of MICOA.

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4.2 Environmental Regulations for Mining Activities

The Mining Law and the Environmental Regulation for Mining Activities classify mining
activities into three levels depending on the scope of the operation and the relative complexity
of equipment used.91 The three levels are as follows:

o Level 1 activities consist of small scale artisanal mining and mineral exploration
activities that do not involve mechanized equipment;
o Level 2 activities include mineral exploration that involves the use of mechanized
equipment, quarrying and the mining of construction materials, and pilot projects; and
o Level 3 activities include all other mining activities not included in the previous
categories and which make use of mechanized equipment.92

The environmental obligations for each level are as follows;

o Level 1 activities need to observe the basic norms of environmental management, are
set out in Ministerial Diploma n 189/2006 of 14 December;
o Level 2 activities require the present an environmental management plan; and
o Level 3 activities must carry out an environmental impact assessment (EIA).93

4.2.1 Level 1 activities: Basic norms of environmental management


The basic norms of environmental management are designed to minimize environmental
damage and negative socio-economic impacts resulting from Level 1 mining activities, using
simple methods to prevent pollution of air, soil and water.94

4.2.2 Level 2 activities: Environmental management plans

To proceed with any exploration that involves mechanized equipment, an environmental


management plan, together with a program to control potentially dangerous or emergency
situations, must first be approved.95

The Environmental Regulation for Mining Activities indicates that an environmental


management plan must be presented together with an application for the issuance of a mining
title.96 Where a mining title (for example, an exploration license) has been issued without an
environmental management plan (in cases where the initial exploration program did not
involve the use of mechanized equipment), such a plan must be submitted and approved,
together with an updated exploration work plan, when the exploration program advances to a
stage that requires mechanized equipment.97 However, note that the recent practice of DNM
is to require an environmental management plan to be filed within a short time after the
issuance of the exploration license, in order to impel investors to use more complex methods
of prospecting earlier in the license term.

91
Mining Law, Article 37 and Environmental Regulations for Mining Activities, Article 1.
92
Environmental Regulations for Mining Activities, Article 1.
93
Ibid.: Article 5.
94
Ministerial Diploma n. 189/2006 of 14 December, Article 1.
95
Environmental Regulation for Mining Activities, Article 11, paragraphs 1 and 9.
96
Ibid.: Article 11, paragraph 3.
97
Ibid.: Article 11.

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The submission of the environmental management plan must be preceded by verification of


the initial natural conditions of the area in which the mining activity is to take place, signed by
98
the proponent thereof, in the form of an assumption of environmental liability.

The environmental management plan must include the following:

a) location and basic description of the project;


b) methods and procedures to be used during the project;
c) expected impact on the environment and mitigating actions;
d) monitoring program;
e) rehabilitation program for the affected area.99

The environmental management plan is then considered by MIREM, which shall recommend
the approval, amendment or rejection of the plan within 30 days. If the plan is recommended
for approval, it will then be passed on to the MICOA (specifically, to the DPCA (Direco
Provincial para a Coordenao da Aco Ambiental) at the provincial level100 for a final
evaluation and decision.101 Activities that involve mechanized equipment cannot start until the
102
approval of the environmental management plan by MICOA.

Technically, under the terms of the Environmental Regulation for Mining Activities, if MICOA
does not approve the environmental management plan within 90 days from the date of issue
of the mining title, the mining title automatically becomes null.103 In practice, however, MIREM
coordinates with MICOA during its evaluation of the proposed environmental management
plan, and initial approval by MIREM generally results in approval by MICOA.

Once approved, the environmental management plan is valid for the life of the mining title up
to a maximum of 10 years, whichever is shorter.104

4.2.3 Level 3 activities: Environmental impact assessments (EIAs)


An EIA technically and scientifically examines the consequences of implementation of a
mining project on the environment. EIAs must be undertaken by an environmental specialist
licensed by MICOA and carried out during the feasibility stage of the project.105 The EIA
process is meant to generate a project-specific environmental license to carry out a mining
project.

As in EIAs generally, the project proponent first submits to MICOA the so-called terms of
reference (ToRs) for the EIA. The ToRs for mining-related EIAs are required to state the
timing and procedures for the related public consultation process.106

98
Environmental Regulation for Mining Activities, Article 11, paragraph 2.
99
Ibid.: Article 11, paragraph 4.
100
See Decree n. 42/2008 of 04 December, Article 1, which in turn modifies Article 5 of the Environmental Impact
Evaluation Process Regulations to attribute this function as indicated.
101
Environmental Regulation for Mining Activities, Article 11,paragraphs 6 and 7.
102
Ibid.: Article 11, paragraph 9.
103
Ibid.
104
Ibid.: Article 11, paragraph 5.
105
Environmental Regulation for Mining Activities, Article 8, paragraph 2.
106
Ibid.: Article 8 paragraph 3.

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The EIA report must include an environmental management programme. This programme
shall include environmental, biophysical, social, economic, and cultural aspects as well as an
environmental monitoring and a mine closure plan. The environmental management
programme must cover a period of at least five years, at the end of which period a new plan
must be submitted for approval. The environmental management programme must also
include a risk and emergency management plan. The EIA, including the environmental
management programme, is scrutinized by MICOA and MIREM.107 The renovation of the
,
environmental license is subject to a fee of 10.000,00 Mt (corresponding to US$ 357).108 109

Having approved the EIA, MICOA issues an environmental license within 10 days thereof the
approval. The license is valid for the same period as the mining title but must be reviewed
every five years.110

In addition to the requirement to review the environmental license every five years, the holder
of the license must submit an environmental management report annually at the end of each
calendar year. This report must the findings arising from the project proponents own
environmental, biophysical, socio-economic and cultural monitoring.111 This monitoring can be
carried out internally by the license holder or by means of private audits it contracts. (See
subsection 4.2.3.3 below).

4.2.3.1 The Environmental impact evaluation process


The Environmental Impact Evaluation Process Regulations set forth the criteria to apply in
environmental impact evaluations (of which EIAs are part), the basic procedures thereof and
the associated fees. Mining projects are governed by a more sector-specific regulation,
namely, the Environmental Regulation for Mining Activities.112 Still, in instances in which the
Environmental Regulation for Mining Activities specifically provides, or where it is silent, the
more generally applicable Environmental Impact Evaluation Process Regulations will apply.113

Whether performed under the specific terms of Environmental Regulation for Mining Activities
or the Environmental Impact Evaluation Process Regulations, environmental impact studies
may only be carried out by technical personnel registered at MICOA.114 Foreign individuals or
companies may register as such but must demonstrate compliance with all requirements
related to labor authorization and professional registration in Mozambique.115 Registered
consultants are civilly and criminally liable for the information in their environmental impact
studies and jointly and severally with their clients for activities carried out in accordance with
their advice that nevertheless result in damage to the environment.116

4.2.3.2 Cost of an environmental license


The fee for environmental licensing for Level 2 and Level 3 mining activities is 0.2% (two
tenths of one percent) of the value invested in the activity.117 The value invested is normally
determined by the proponent of the activity. Other, more modest fees are charged for other
services rendered in connection with environmental licensing. For example, the fee for

107
Ibid.: Article 8 paragraph 3 and Article 9 and 10.
108
At the exchange rate of 28 MT/1US$, based on the official sell rate as published by the Bank of Mozambique on
01 February 2010, and rounded. Dollar amounts are further rounded.
109
Decree n. 42/2008 of 04 December, Article 20, paragraph 4.
110
Environmental Regulation for Mining Activities, Article 13.
111
Ibid.: Article 14.
112
Environmental Impact Evaluation Process Regulation, Article 2.
113
See, e.g., Environmental Regulation for Mining Activities, Article 22, paragraph 2, which refers to the
Environmental Impact Evaluation Process Regulations for the fee associated with the issuance of the environmental
license.
114
Environmental Impact Evaluation Process Regulation, Article 21, paragraph 2.
115
Ibid.: Articles 21, paragraphs 6, 7 and 8.
116
Ibid.: Article 23, paragraph 4.
117
Environmental Regulation for Mining Activities, Article 22 paragraph 2 together with Environmental Impact
Evaluation Process Regulation, Article 25, paragraph 1 (as modified by Decree n. 42/2008 of 4 November, Article 1).

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renewing an environmental license after five years is either 5,000MT or 10,000MT (between
approximately US$180 and US$360), depending on the categorization of the activity.118

The applicant for an environmental license is also responsible for the travel costs and out of
office expenses of technical staff of MICOA (calculated according to the standard civil service
rates) as well as costs related to correspondence, consultancy fees for the environmental
consultants, costs arising from public consultations and other fees related to the production of
119
the documents required for the licensing process.

If an activity subject to environmental licensing is undertaken without the correct license, the
proponent may be fined up to double the cost of licensing and have its activity immediately
suspended.120

4.2.3.3 Environmental audits and environmental inspections

An environmental audit is understood in Mozambique as a management assessment tool to


track the functioning of the management and monitoring system for environment protection.121
It is required to be systematic, documented and objective.122

There are two types of environmental audits: public and private.

Public audits are those undertaken by the State, and are carried out whenever the States
finds find is necessary for the activities in operation.123

Private environmental audits are used by project proponents in order to ensure that their
activities conform to the terms of their approved environmental management plans and
generally applicable environmental law 124

A proponent is legal required to follow the recommendations recorded in an environmental


audit and may be penalized for not doing so as provided at law.125
The costs of environmental audits are borne by the applicant.126

The purposes of environmental inspections are similar to those of environmental audits: to


supervise and monitor compliance with environmental rules.127 But by contrast thereto,
inspections are more formal. This is because they can, in a much broader range of instances,
lead to the imposition of fines for non-compliance with environmental obligations. An
inspection will, by way of example, operate to determine, formally and legally, whether the
recommendations of an earlier environmental audit have in fact been followed. Similar,
inspectors will check to see if the mitigation measures proposed in the EIA are being duly
applied.128

There are two types of environmental inspection:

ordinary, when done in the scope of the implementation of MICOAs regular plan of
activities ; and

118
See Environmental Impact Evaluation Process Regulation, Article 20, as modified by Decree n. 42/2008 of 4
November, Article 1. Calculate at the exchange rate of 28 MT/1US$, based on the official sell rate as published by
the Bank of Mozambique on 01 February 2010, rounded. Dollar amounts are further rounded.
119
Order from Minister of MICOA, on 5 March 2008.
120
Regulation on the Process of Environmental Audit, Article 26, paragraph 3.
121
Regulation on the Process of Environmental Audit, Article 2.
122
Ibid.
123
Regulation on the Process of Environmental Audit, Article 3, clause a) and Article 6.
124
Ibid.: Article 3, clause b), and Article 7.
125
Ibid.: Article 10, paragraph 5.
126
Ibid., Article 9.
127
Regulation for Environmental Inspection, Article 2.
128
See, e.g., Regulation for Environmental Inspection, Article 1, clauses b) and c).

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extraordinary, in order to achieve certain objectives regarding any public or private


activity that may compromise the stability of the environment.129

The Regulation for Environmental Inspection supplies the procedure by which inspections are
130
carried out; formal reports lodged; and fines imposed (and either paid or contested). It also
supplies factors that can be held to aggravate or mitigate an identified offense and the effect
these have on the calibration of fines. 131

4.3.2.4 Restoration bond - insurance


Persons undertaking Level 2 and Level 3 mining activities are required to provide a species of
bond to cover the costs of restoration of the environment during mine closure.132 The value of
the bond is based on an estimate of the costs of such restoration (as carried out during or
after the active life of the project).133 In connection with Level 2 mining activities, the value is
supposed to be based on the terms of corresponding environmental management program; in
connection with Level 3 mining activities, on the terms of the corresponding EIA.134 The value
is set by MIREM and reviewed every two years.135 The bond may take the form of an
insurance policy, a bank guarantee or a deposit in cash in a bank account that MIREM
maintains specifically for the purpose.136

Persons engaged in activities involving a high risk of environmental degradation must obtain
insurance to cover such liability.137 Environmental damage caused by mining operations are
the responsibility of the titleholder or the operator. In respect of legal persons, the legal
representative of such person or the person otherwise in charge is jointly and severally liable
with his principal unless he proves that was unaware of or did not consent to the act or
omission that caused the damage.138

4.3 Environmental Quality and Effluent Emission Norms


The Environmental Quality and Effluent Emission Norms supplies two types of norms for
emission standards:

i) norms which establish upper limits for the protection of public health (including
sensitive members of the public such as children, the elderly and asthmatics); and
ii) norms which establish limits for public well-being, including damage to livestock,
crops and buildings.139 Parameters are established for atmospheric, water, and soil
pollution as well as for noise pollution.

The legislation also deals with extraordinary emissions resulting from accidents or other
unusual circumstances.140 In such cases, the organization responsible for the emission is
required to obtain a license from MICOA (after the fact, of course) and pay a fee.141

4.4 Archaeological Heritage Protection


The Mining Law provides that among the things a titleholder may not remove from
archaeological finds discovered in the area under title.142

129
Ibid., Article 4.
130
See, in general, Regulation for Environmental Inspection, Chapters II and III.
131
Ibid.: Article 20.
132
Environmental Regulation for Mining Activities, Article 24, paragraph 1.
133
Ibid.: paragraph 2.
134
Ibid.: paragraphs 3 and 4.
135
Ibid.: paragraph 6.
136
Ibid.: paragraph 5.
137
Environmental Law, Article 25.
138
Environmental Regulation for Mining Activities, Article 20 and Article 26, paragraphs 3 and 4.
139
Environmental Quality and Effluent Emission Norms, Article 1 paragraphs 14 and 15.
140
Ibid.: Article 2, paragraph 1.
141
Ibid.: Article 22, paragraph 2 and Article 23, paragraph 1.
142
Mining Law, Article 15, paragraph 3.

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Archaeological heritage is defined by the Archaeological Heritage Protection Regulation as


fixed and moveable assets of archaeological, paleontological, anthropological or geological
value, related to past generations, discovered by accident, through prospecting or
143
archaeological excavation, as well as that which has not yet been discovered. That
regulation imposes a number of relevant obligations, set forth below.

If a person excavating or otherwise moving earth makes an archaeological find, it is classified


as an accidental discovery.144 In such cases, the discovery must be communicated within 48
hours to the relevant district administration or to the city council.145

Any project involving excavation, large-scale earth moving or the removal of semi-buried or
buried items (from under land or sea) must include preliminary archeological prospecting and
provide for salvage archeology (i.e. the study of discovered archeological elements under
threat of destruction) in the event of a discovery. For the purpose, the project budget must
reflect a line item in an amount not less than 0.5% of the total cost of the works.146

Finally, it bears note that the area around an archaeological discovery may be declared a
Total Protection Zone, thereby precluding any subsequent demolition, construction or physical
modification of the area. However these requirements may be modified it the proponent of the
activity is able to demonstrate that the archaeological discovery will not be harmed by the
activity proposed.147

In practice, mining projects in Mozambique have not been significantly affected by the
Archaeological Heritage Protection Regulation, but investors should be aware of its existence
and potential effects.

143
Archaeological Heritage Protection Regulation, Article 2, paragraph 7.
144
Ibid.: Article 2, paragraph 2.
145
Ibid.: Article 10, paragraph 1 and Law 10/88 of 22 December ,Article 6, paragraph 3.
146
Ibid.: Article 12.
147
Ibid.: Article 21.

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Section 5 Land
Land law in Mozambique is a complex field to which investors must pay careful attention. The
basic structure of Mozambican land law is set forth below.

5.1 Primary Sources of Land Law in Mozambique


The primary sources of land law in Mozambique are:

o The Constitution;
o Resolution n. 10/95 of 17 October (the National Land Policy Resolution);
o Law n. 19/97 of 1 October (the Land Law); and
o Decree n. 66/98 of 15 July (the Land Regulations).

A lot of other legislation touches on questions related to land. These include, among others:

o decrees governing fees for the use of land;


o land policy for particular areas (usually in relation to large-scale agricultural projects);
o the role and requirements of surveyors;
o the registration of land; and
o the procedures for the presentation and review of investment proposals concerning
land areas greater than 10,000 hectares.

The Land Regulations do not apply to urban areas, which have distinct rules regarding land
(see Decree n. 60/2006 of 26 December).

We will focus on the essential land legislation in Mozambique with which mining investors
should be familiar.

5.2 Land and Limitations on the Right to Use and Enjoy Land
The Constitution provides that land is the property of the State and may not be sold or
otherwise transacted, mortgaged or given in pledge.148 In addition, the Constitution provides
that the right to use and enjoy land may be granted by the State to natural or legal persons,
based on the social or economic use to which it is proposed to be put.149

While colloquially people in Mozambique often refer to selling land, in point of legal fact that
transaction is not possible. What they are, in fact, sometimes selling is improvements on land
along with the right to use and enjoy land. Such rights are often called by the acronym that
corresponds to their legal name: direitos de uso e aproveitamento de terra (rights to use and
enjoy land), or DUATs.

5.3 The Right to Use and Enjoy Land


Both nationals and foreigners may hold rights to use and enjoy land. The latter must, as a
condition precedent, have an approved investment plan. Foreigners who are natural persons
must also have been resident in Mozambique for at least five years in order to hold land;
foreign legal persons must, in their turn, register or incorporate a company in Mozambique for
the purpose. Nationals may also acquire land rights by customary law or by good faith
occupation for longer than 10 years; by contrast, foreigners may acquire land rights in the first
instance only by applying to the Government for DUATs.150
148
Constitution, Article 109, paragraph 1.
149
Ibid.: Article 110.
150
Land Law, Chapter III. The procedures for the acquiring land by application presuppose that the land will be put to
an economic use. Chapter IV of the Land Law sets forth the basic terms of those procedures. First, the applicant

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5.4 Specific Provisions on the Right to Use Land for Mining Activities
In principle, the grant of an exploration license or a concession entails an automatic right to
apply for and receive the right to use and enjoy the land necessary for mining activity.151

The use of land for mining activities has priority over other uses of land, where the economic
and social benefit from the mining operations is higher than those from such other uses.152

In instances in which an exploration license or a concession is issued in respect of an area in


which another person already has land rights, such persons rights will be deemed
extinguished once fair and reasonable compensation is paid by the license or concession
holder to the holder of such prior rights.153 The law provides for mediation, by MIREM or
other dispute resolution providers, when the concession holder and the holder of the interests
cannot agree on the compensation payable.154 In the final instance, any unresolved dispute
can be finally adjudicated in court.155 In practice, however, the Provincial (or municipal)
Government is actively involved in ensuring that discussions of compensation and the terms
of its payment; often, there is experience and policy in the province on the going rates for
different interests in land (crops, trees, homes etc). While sometimes time-consuming, the
process of negotiating compensation with local communities does not, in practice, operate to
stop the progress of mining projects in Mozambique.

5.5 Some Specific Obligations on the Use of Land for Mining


The holder of the mining concession must, within thirty days before the start of mining
activities, present to the National Directorate of Mines a copy of the DUATs and of the
environmental license it has obtained.156 This does not apply to mining concessions arising
from the exploration licenses.157

Both the DUATs and the environmental license must be obtained within three years from date
of issuance of the mining concession, under penalty of revocation of the concession.158

DUATs issued in connection with a mining concession have the duration of that concession. If
and when the concession is renewed, so are the DUATs.159

In all matters related to land in Mozambique, a good neighbor policy, and a cordial
relationship and close coordination with the relevant Government authorities, especially on
the provincial level, is a prerequisite for success.

must submit a plan of use (plano de explorao). Depending on the extent and the classification of the area (full or
partial protection zones), the application must be directed to different individuals or governmental bodies for approval.
Specifically, applications for up to 1,000 hectares of land are directed to the Governor of the relevant province; for
between 1,000 and 10,000 hectares to the Minister of Agriculture; and for areas greater than 10,000 hectares to the
Council of Ministers. In urban areas that have property registries, the President of the Municipal Council is
responsible for decisions on land allocation. On the basis of the proposed plan of use, the competent authority may
issue a provisional authorization. If the applicant then fulfils the plan of use during the applicable time frame, she is
entitled to definitive authorization. If the classification of the area in question is partial or full protection zones, the
competence will be of the Provincial Governor or Minister of Tourism, respectively; but in these situations no DUATs
is issued, but rather, special permits, under specific conditions.
151
Mining Law. Article 43, paragraph 1.
152
Ibid.: Article 43, paragraph 2.
153
Ibid.: Article 43, paragraph 4.
154
Mining Regulation, Article 113, paragraph 4.
155
Ibid.: paragraph 5.
156
Mining Law, Article 15, paragraph 1 and Mining Regulation Article 53, paragraph 1.
157
Mining Regulation Article 53, paragraph 2.
158
Mining Law, Article 15, paragraph 2.
159
Mining Law, Article 43, paragraph 3.

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Section 6 Taxation
The Mozambican tax system is divided into national and municipal taxes. National taxes, in
turn, are of two categories: (i) direct taxation of income and wealth; and (ii) indirect taxation of
expenditure. Each is discussed below.

6.1 Primary Sources of Tax Law in Mozambique


The primary sources of tax law in Mozambique are:

o The Constitution;
o Law n. 15/2002 of 26 June (establishes the principles of organization of the tax
system of the Republic of Mozambique);
o Law n. 2/2006 of 22 March (establishes the principles and general norms governing
Mozambican tax system for all national and municipal taxes);
o Law n. 32/2007 of 31 December (the Value Added Tax Code Cdigo do Imposto
sobre o Valor Acrescentado, or CIVA);
o Law n. 33/2007 of 31 December (the Personal Income Tax Code Cdigo do
Imposto sobre o Rendimento das Pessoas Singulares or CIRPS);
o Law n. 34/2007 31 December (the Corporate Income Tax Code Cdigo do Imposto
sobre o Rendimento das Pessoas Colectivas or CIRPC);
o Decree n. 7/2008 of 16 April (the Regulations of the CIVA, or RCIVA);
o Decree n. 8/2008 of 16 April (the Regulations of the CIRPS, or RCIRPS); and
o Decree n. 9/2008 of 16 April (the Regulations of the CIRPC, or RCIRPC).

Other distinct codes and legislation govern still other specific taxes. Among these are Specific
Consumption Tax Code; the General Rules on Customs Clearance; the Stamp Tax Code; the
Real Property Transfer Tax Code; and the Municipal Tax Code. The details of these codes
and their application, while relevant to any business in Mozambique, are beyond the scope of
this discussion.

Finally, of direct interest to mining investors are the following:

o Law n. 11/2007 of 27 June (Tax Regime for Mining Activities);


o Law n. 13/2007 of 27 June (Tax Benefits for Mining and Petroleum); and
o Decree n. 5/2008 of 9 April (Regulation on Specific Tax Regime for Mining
Activities).

A decree supplying further details relating to Law n. 13/2007 of 27 June is expected to be


passed in the near future.

The mining sector-specific tax and customs benefits regime is discussed in Section 6.5.

Each of the foregoing taxes is discussed briefly below.

6.2 Personal Income Tax (IRPS)


IRPS is a direct tax applied on the total annual income (whether in money or in kind) even
when such income is obtained by illicit means.

The income referred to above is classified in the following categories:

1st Category: Employment income;


2nd Category: Business and professional income;
3rd Category: Income from investments and capital gains;

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4th Category: Income from real estate;


5th Category: Other income.160
.
IRPS on employment income is levied on a steeply graduated basis. The rates applicable to
annual income in Meticais vary from 10 percent to 32 percent, depending on the amount of
the taxable income. As for the income of other categories, to the extent the income is paid by
a legal person to beneficiaries who are natural persons, such income is subject to withholding
at source at the rate of 20 percent.

IRPS applies to individuals resident in Mozambican territory with respect to their worldwide
161
income. For non-residents with income in Mozambique, IRPS applies only to such income
and not to income earned outside the country.162 For natural persons, the basic test for tax
residence is presence in Mozambican territory for more than 180 days in a calendar year.163

The applicable rates of IPRS are set forth below:164

Table 10: IRPS Rates

TAXABLE ANNUAL INCOME (MTs) RATE DEDUCTIBLE (MTs)

Up to 42,000 10% __

From 42,001 to 168,000 15% 2,100

From 168,001 to 504,000 20% 10,500

From 504,001 to 1,512,000 25% 35,700

More than 1,512,000 32% 141,540

Annually each taxpayer must submit a personal tax return reporting her income for the
previous year. It bears note that first category income that is, employment income is to be
withheld at the source by employers at rates specified in law.

6.3 Corporate Income Tax (IRPC)


IRPC is a direct tax on income obtained during the relevant tax period (usually the calendar
year), even when such income is obtained by illicit means.165

The incidence of IRPC depends on the residence of the taxpayer. The basic test of residence
is whether the taxpayer has headquarters or effective management in Mozambican territory.
Such taxpayers are taxed on their worldwide income.166

Sometimes a taxpayer that is non-resident (i.e. does not have headquarters or effective
management in Mozambique) is held nevertheless to have created a permanent
establishment in Mozambique. Such taxpayers are taxed only their income derived from
activities in Mozambique.

160
CIRPS, Article 1, paragraph 2.
161
Ibid.: Article 18, paragraph 1, and Article 20, paragraph 1.
162
Ibid.: Article 18, paragraph 1, and Article 20, paragraph 2.
163
Ibid.: Article 21, paragraph 1, clause a). In addition, if an individual maintains a home in Mozambique in
circumstances that would lead one to conclude that he intends it to be his primary residence, such individual is
considered to be tax resident in Mozambique even though he does not remain in the country for more than 180 days
in a calendar year Ibid.: Article 21, paragraph 1, clause b).
164
Ibid.: Article 54, paragraph 1.
165
CIRPC, Article 1
166
CIRPC, Articles 2 and 3.

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Finally, legal persons that are neither resident nor have a permanent establishment in
Mozambique may still have income in or related to Mozambique that is subject to IRPC.167 In
such cases, the relevant tax is collected by withholding at the source by the Mozambican
payer.

The generally applicable rate of IRPC is 32 percent..168 Corporate income subject to


withholding at the source is taxed at the flat rate of 20 percent of the value of the service
rendered.169

6.4 Value Added Tax


IVA is a general consumption tax levied on goods and services. It is applicable at each stage
of the economic cycle, which means that the basis for taxation is the value added at each
stage of that cycle. IVA is due in respect of the following operations:

a. Transfer of goods and services undertaken within the national territory, on a paid
basis; and
b. Import of goods.

IVA is levied at a fixed rate of 17%.170 Exports are exempt from IVA, which allows exporters to
recover the value of accumulated IVA incorporated in exported goods.171 Note, though, that
many taxpayers in Mozambique that are large-scale exporters or that are otherwise in a
structural position as creditors to whom IVA reimbursements are owed have experienced
substantial delays and costs associated with the reimbursement process.

Mining investors enjoy some benefits in respect of IVA. These are discussed in Subsection
6.6 below.
6.5 The Tax Regime for Mining Activities
Certain specific taxes apply to mining activities. These are:

o Production tax (imposto sobre a produo, also sometimes referred to as royalties);


and
172
o Surface tax (imposto sobre a superfcie).

Each is discussed below.

6.5.1 Production Tax


Production tax is levied on the value of the quantity of mineral products extracted within
Mozambican territory, regardless of the eventual sale, export or other disposition of such
mineral products.173 In general, the value of the product is considered to be is sales price (or,
if it is not sold in the relevant tax period, its market price).174 The Tax Authority is empowered
to alter the taxable amount reported by the taxpayer in instances in which the relevant sales
price is below the normal market prices or was made on a non-commercial basis.175
Currently applicable rates of production tax are as follows:176
167
Ibid.: Article 62, paragrapg 2.
168
Ibid.: CIPRC, Article 61, paragraph 1. Preferential rates apply to certain sectors (as agriculture 10%) for limited
periods, but no preferential rates apply to mining investment.
169
Ibid.: Article 62, paragraph 1.
170
Ibid.: Article 17, paragraph 1. According to the Law n. 15/2002 of 26 June, Article 67, clause b), the rate may be
increased by decree of the Council of Ministers up to a limit of 25%.
171
CIVA, Article 13.
172
Tax Regime for Mining Activities. Article 1.
173
Ibid.: Articles 2 and 3. There are some limited exemptions from production tax but none of interest to commercial
investors.
174
Ibid.: Article 7, paragraphs 2, 3 and 4.
175
Ibid.: Article 8.
176
Ibid.: Article 9.

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Table 11: Production Tax (percentage of the value of the mineral product)

DESCRIPTION PERCENTAGE
Diamonds 10
Precious metals (gold, silver and platinum) and precious stones 10
Semi-precious stones 6
Base minerals 5
Coal and other mineral products 3

6.5.2 Surface Tax


Surface tax is an annual tax levied in respect of a reconnaissance license, an exploration
177
license, a mining concession or mining certificate. It is payable by the holders of such
mining titles.

Surface tax is calculated on the basis of the number of hectares or square kilometers of the
area under license.178 Rates vary according to the type of the mining title, the nature of the
mineral resource and the period the license has been held.179

Payment of surface tax exempts the titleholder from the payment of the land tax for the area
covered by the mining title to the extent the DUATS coincide with the area under title.180

Table 12: Surface Tax

TYPE OF MINING TITLE MINERAL RESOURCE RATE (per km or ha)

Diamonds 10 Mt/Km
Reconnaissance License
Other minerals 25 Mt/Km

1st and 2nd year: 250 Mt/km


3rd year: 625 Mt/km
4th and 5th year: 1,300 Mt/km
th
6 year: 1,500 Mt/km
Exploration License All minerals
7th year: 2,000 Mt/km
8th year: 2,500 Mt/km
9th and 10th year: 3,000 Mt/km

All mineral products 1st up to 5th year: 2,500 Mt/km


Mining Concession 6th year onwards: 5,000 Mt/km
excluding mineral water

20-100 ha: 10,000 Mt


100-200 ha: 20,000 Mt
Mining Certificate All minerals 200-300 ha: 30,000 Mt
300-400 ha: 40,000 Mt
400-500 ha: 50,000 Mt

It bears note that an indeterminate fraction of the revenues from production tax is to be
channeled to the local communities in which such activities take place. The specific fraction is
determined in the annual State Budget based on anticipated revenue from mining activities.181

177
Ibid.:, Article 13.
178
Ibid.: Article 12.
179
Ibid.: Article 16.
180
bid.: Article 18.
181
Ibid.; Article 19.

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6.6 Tax Benefits for Mining


Law n. 13/2007 of 27 June (the Tax Benefits for Mining and Petroleum) sets forth for the very
limited fiscal and customs incentives.

New mining projects are exempt for a period of five years from the commencement of the
mining activities, from:

o customs duties payable on importation of equipment (whether for exploration or for


mining) that is classified as class K of the Customs Schedule;

o customs duties payable on importation of certain specific equipment that is not so


classified but is considered analogous to class K goods. An exhaustive list of such
equipment is set forth in Annex A to Decree n. 13/2007 of 27 June; and

o VAT and specific consumption tax, if any, that would otherwise be payable on the
importations mentioned above.182

To be eligible for the limited benefits described above, a taxpayer must:

o have been authorized by the competent authority to undertake mining activities;


o hold a taxpayer identification number (a Nmero nico de Identificao Tributria, or
NUIT);
o keep organized accounts in accordance with the General Plan of Accounts Plano
Geral de Contabilidade and the CIRPS or the CIRPC; and
o not have committed tax crimes or other offenses recognized by the Tax Authority.183

It bears mention that mining investors with tax and customs benefits that vested before the
entry into force of the Tax Benefits for Mining and Petroleum continue to enjoy such benefits
(i.e. are explicitly grandfathered) under the law.184

In respect of tax benefits, it bears note that in Mozambique, taxes are created or modified by
law. Conventionally, in the context of taxation, the term law is understood to refer to a
normative act of the Parliament. The incidence and rates of tax, tax benefits, and taxpayers
guarantees may only be established by law.185

This constitutional principle effectively precludes the granting of tax exemptions by the
Government, whose normative acts, under the Mozambican hierarchy of laws principles, are
subordinate to the normative acts of the Parliament. Thus, if a law (i.e., an act of Parliament)
establishes a tax at a certain rate, a decree (i.e., an act of Government) cannot suspend its
application or diminish the rate set. Indeed, the constitutional option to preclude the creation
of taxes and tax exemptions by the Government bespeaks a broader trend in Mozambican
legislation to diminish the scope for case-by-case flexibility in negotiations with investors.

Notwithstanding this constitutional principle, one can sometimes find room for flexibility in the
interpretation of tax legislation in contractual negotiations with the Government of
Mozambique. Still, investors should start with an understanding of what is and what is not
possible under Mozambican law, so as not to waste time and goodwill insisting on treatment
the Government cannot grant, and that would not, if granted, be legally effective. In
investment negotiations related to tax, attention should rather be devoted to key matters
where gaps or ambiguities in the legislation allow the flexibility to achieve more satisfactory
results.
182
Ibid.: Article 6. The exemption is only available in respect of goods that are not produced in Mozambique or that, if
produced, do not satisfy the specific requirements (whether of purpose or functionality) needed for or inherent in the
activity.
183
Tax Benefits for Mining and Petroleum, Article 8.
184
Ibid.: Article 11.
185
Constitution, Article 100.

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Beneficiation is classified as a mining activity and is also eligible for the limited tax benefits
foreseen in Law n. 13/2007 of 27 June.

6.7 Double Taxation Treaties


Mozambique has bilateral treaties for the avoidance of double taxation with the following
countries:

o Portugal (Resolution n. 9/91of 20 December, as amended by Resolution n. 34/2008


of 16 October);
o Mauritius (Resolution n. 54/98 of 12 November);
o Italy (Resolution n. 27/99 of 8 September);
o United Arab Emirates (Resolution n. 10/2004 of 14 April);
o Macau (Resolution n. 33/2008 of 16 October); and
o South Africa (Resolution n. 35/2008 of 30 December).

For many mining investors in Mozambique, sound tax strategy starts with careful
consideration of which of the tax-favorable jurisdictions in which to incorporate the immediate
parent of the Mozambican subsidiary that will carry out the mining investment project.
Although the six treaties are quite similar, there are subtle differences among them and, of
course, considerable differences in taxation in those jurisdictions themselves. Investors
should seek sound professional advice on the interpretation of different elements of the
treaties against double taxation as part of their strategic planning.

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Section 7 Company Law


The principal forms of business enterprises in Mozambique are:

o The limited liability quota company (sociedade por quotas); and


o The limited liability share company (sociedade annima).

The former is known colloquially as the limitada or simply Lda., the latter as the S.A. Other
forms of business enterprises that distribute and limit liability distinctly from the limitada and
the S.A. are also included in the Commercial Code, but are not common used and therefore
are not discussed below.

The primary source of company law in Mozambique is the Commercial Code, approved by
the council of Ministers by Decree-Law n. 2/2005 of 27 December, as amended by Decree-
Law n. 2/2009 of 24 April.

7.1 The limited liability quota company (sociedade por quotas or limitada)
Limitadas are appropriate vehicles for business enterprises of a relatively small scale that
bring together the capital and labor of numbers of co-venturers. Limitadas can be managed
by their members and with relatively few formalities. Quotas in limitadas are not embodied in
certificates; the evidence of ownership depends on the public record as published in the
Official Gazette (the Boletim da Repblica). As such, transferring interests in limitadas,
whether by public deed (required when the equity capital includes real property or when the
company was originally incorporated in that way) or by private instrument, must become a
matter of public record.

The basic requirements to form a limitada are as follows:

o Number of members: at least one (if the sole member is a natural person) or two (if at
186
least one member is a legal person) and up to 30.
o Equity capital: there is no explicit minimum capital requirement. Equity capital must
be adequate to the purposes of the company as determined by the members.187
o Minimum paid-in capital: 50% of the value of each quota. Quotas may be of unequal
amounts.
o Limit of members liability: the sum of the value of (i) each members contribution to
the equity capital of the company; and (ii) the capital of other members of the
company subscribed but not yet paid in.

7.2 The limited liability share company (S.A.)


S.A.s are appropriate vehicles for larger business enterprises that bring together the capital of
large numbers of co-venturers. Although S.A.s can be managed by shareholders, they are
typically structured so as to separate ownership and management. There are more formalities
associated with the corporate life of the S.As, including requirements for the publication of
notices and certain corporate acts. Their accounts must be audited and, in limited cases
foreseen by specific legislation, published in a newspaper of record.

The basic requirements to form a S.A. are as follows:

186
Commercial Code. Articles 288 and 328.
187
Ibid.: Article 289, paragraph 2.

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o Number of shareholders: at least three, unless one of the shareholders is the State or
a subordinate body thereof, in which case the S.A. may have a single shareholder.188
o Equity capital: no minimum is specified.
o Minimum paid-in capital: 10% of the shares subscribed by each member, in cash.189
o Limit of shareholders liability: the value of the shares subscribed by that shareholder.

It bears mention that it is not difficult to transform a legal person from a limitada to an S.A.
Thus, one strategy for ambitious investors is to start as a limitada the administratively
simpler, less expensive of the two forms of legal person and later transform into an S.A., if
the need to attract new investors (e.g. through a stock market listing) so commends.

7.3 Legal Procedures to Start up a Company


The process by which a business enterprise is incorporated is essentially the same for
limitadas and S.A.s.

The steps required to start up a company are the following:

o Obtain name reservation certificate;


o Draft articles of association;
o Open a bank account;
o Incorporation by public deed (if the equity capital includes real property) or private
instrument;
o Publication in the Official Gazette; and
o Registration at the Legal Entities Registry.

Under ordinary circumstances the majority of these procedures require a week to complete.
Publication in the Official Gazette can take considerably longer. But once incorporation has
taken place, the new company has legal personality and can freely contract. And once the
company is registered at the Legal Entities Registry, third parties are deemed to have notice
of its existence.

Still other, subsequent steps must be taken to register the new company as a taxpayer, an
employer and, eventually, a contributor the social security system. For more information, see
our booklet The Legal Framework for Company Start-up in Mozambique available at
http://www.acismoz.com/.

188
Ibid.: Article 332.
189
Ibid.: Article 337.

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Section 8 Labor
The primary sources of labor law in Mozambique are:

o The Constitution;
o Law n. 12/2009 of 12 March (establishes the rights and obligation of the people living
with HIV/AIDS, and adopts necessary rules for prevention, protection and treatment);
o Law n. 23/2007 of 1 August (the Labor Law);
o Law n. 5/2002 of 5 February (the Law for the Protection of Workers with HIV/AIDS);
o Decree n. 50/2009 of 11 September (the Regulation of the Commission on Labor
Mediation and Arbitration COMAL);
o Decree n. 45/2009 of 18 August (the Regulation of the General Inspectorate of
Labor);
o Decree n. 55/2008 of 30 December (the Regulation on Foreign Workers);and
o Decree n. 61/2006 of 26 December (the Regulation on Mine Work Safety).

8.1 Basic Principles of Labor Law


The Constitution prohibits involuntary servitude except in the context of and as regulated by
the penal code.190 It provides that all workers have a right to a fair wage, rest and vacation,
191
and to a safe and hygienic work environment. Workers may be dismissed only in the cases
and under the terms established by law. Workers have the right to organize in professional
groups and unions, as regulated by law;192 they have a guaranteed right to strike, and lock-
193
outs may not be used against them.

The interpretation and application of the Labor Law are subject to the principles of the right to
work, stability in employment and position, change of circumstances and non-discrimination
on the basis of sexual orientation, race or HIV-positive status.194

8.2 Forms of employment contract


Chapter III of the Labor Law governs individual, as distinct from collective, labor relations.
Under Chapter III, there are two forms of contract for full-time employment:

the indeterminate period contract (contrato por tempo indeterminado); and

the fixed term contract (contrato a prazo), which may be:


o for a period certain (a prazo certo), or
o for a period uncertain (a prazo incerto).

These are not interchangeable options. The indeterminate period contract is the rule. Fixed
term contracts are exceptions that may only be used within the limits legally established, as
indicated below.

Fixed term contracts may only be used for specific, non-permanent tasks. The maximum
duration of any fixed term contract is two years. All contracts that are not for an explicit fixed
period are considered indeterminate period contracts. Fixed term contracts may be renewed
twice; provided, that special, more liberal rules apply to small and medium companies.195
190
Constitution, Article 84, paragraph 2.
191
Ibid.: Article 85, paragraphs 1 and 2.
192
Ibid.: Article 86.
193
Ibid.: Article 87.
194
Labor Law, Article 4, paragraph 1.
195
Ibid.: Article 40, paragraph 1 and Article 42 paragraph 1. A small company is one that has up to 10 employees; a
medium-sized company is one that has more than 10 and up to 100 employees; and, a large company is one that
has more than 100 employees see Labor Law, Article 34.

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As noted above, fixed term contracts are subdivided into two categories; (i) contracts for a
period certain (a prazo certo) which can be used when the required period of employment is
known (for example to cover the maternity leave of another employee); and, (ii) for a period
uncertain (a prazo incerto) which may be used only when it is not possible to foresee with
certainty when the event or circumstances that justified use of that form of contract in the first
place will end (a field exploration program that might last 30 days or considerably longer).196

As in respect of forms of contract, many other aspects of labor relations are governed by
specific rules. Foreign employers should not simply assume that the same level of flexibility or
regulation that characterizes labor legislation in their home country governs labor in
Mozambique. For more a more detailed description of Mozambican labor law, see The Legal
Framework for Employment in Mozambique, available at http://www.acismoz.com/.

8.3 Foreign workers


Employers, whether national and foreign, may employ a foreigner by authorization of the
Minister of Labor or an agency to which she delegates powers, on application.197

Employers may also employ, by simple communication to the Minister of Labor or an agency
to which she delegates powers, up to the number of foreigners permitted under the following
quotas:

a) in large firms, up to 5% of the total number of workers;


b) in medium firms, up to 8% of the total number of workers; and
c) in small firms, up to 10% of the total number of workers.198

See footnote 196, above, for the definition of large, medium and small firms.

In respect of investment projects approved by the Government that stipulate a number of


foreign workers greater or lesser than the quota indicated above, no authorization is required.
It is sufficient in such cases to inform the Minister of Labor within 15 days of the arrival of
such workers in the country.199

There are, nevertheless, certain conditions and restrictions on the hiring of foreigners. A
foreigner may be hired only if he has the academic or professional qualifications necessary
for the position and there are no Mozambican citizens with such qualifications or their number
is insufficient.200

Foreigners who enter Mozambique on a diplomatic, courtesy, official, tourism, visitor, student
or business visa may not be employed. Moreover, foreign workers with temporary residence
may not remain in Mozambique after the contract period based on which they entered the
country has expired.201
8.3.1 Procedure for hiring foreign workers
The hiring of foreign workers by authorization of the Minister of Labor is regulated by Decree
n. 55/2008 of 30 December (the Regulation on Foreign Workers). This is done by means of
an application addressed to the Labor Minister.

The application for authorization to hire foreign workers requires a set of accompanying
documents, some which must be obtained from other ministries or public agencies. These
include:

196
Labor Law, Article 44.
197
Ibid.: Article 31, paragraph 4 together with Article 33, paragraph 2.
198
Ibid.: Article 31, paragraphs 4 and 5.
199
Ibid.: Article 31, paragraph 6.
200
Ibid.: Article 33, paragraph 1.
201
Ibid.: Article 32, paragraphs 1 and 2.

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o three copies of the work contract;


o certificate of academic or technical /professional qualification of the foreign citizen to
be employed and documents proving professional experience. This must be
accompanied by a certificate of equivalence issued by the Ministry of Education;
o quitclaim certificate for the company issued by the National Institute of Social Security
(Instituto Nacional de Segurana Social);
o quitclaim certificate for the company issued by the entity which oversees the Finance
area;
o favorable opinion of the union delegate, union committee or sector union;
o payment of a fee which corresponds to ten minimum salaries in force in the
202
companys sector of activity.

It bears note that for short-term work assignments (those last up to 30 days, consecutive or
interspersed, in a calendar year), timely communication to the Ministry of Labor is sufficient;
no authorization is required. Should there be a further need for the services of the foreign
employee, the short-term work assignment can be renewed (at the discretion of the Minister
of Labor) for up to two further 30-day periods.

8.4 Social Security


The primary sources of law in relation to social security are:

o Labor Law (Articles 256 through 258);


o Law n. 4/2007 of 7 February (the Social Security Law);
o Decree n. 53/2007 of 3 December (the Social Security Regulation);
o Decree n 49/2009 of 11 September 2009 (the Regulation on the Articulation of the
Mandatory Social Security of Employees with those of the State workers and Agents
and Officials as well as the workers of Bank of Mozambique); and
o Decree n. 4/90 of 13 April (established the social security contribution).

The social security system is intended to ensure minimum subsistence and security to its
member workers in the event of illness or incapacitation, an old age pension, and family
benefits in the event of a member workers death. The system is administered by the
National Institute for Social Security (Instituto Nacional de Segurana Social, or INSS), an
autonomous public entity.

Employers are legally obliged to register themselves and enroll all workers, national and
foreign, for social security; provided that employers need not enroll foreign workers who prove
that they are enrolled in the social security system of another country.203

The legally required contribution to social security is seven percent of a workers monthly
salary: employers pay four percent and employees the remaining three percent.204
Employers are obliged to withhold both their own and their workers contributions at source
and pay the corresponding amount monthly to the INSS.

8.5 Mine Work Safety


Decree n. 61/2006 of 26 December (Regulation on Mine Work Safety) supplies detailed rules
on matters such as mine safety, worker health standards and first aid, transportation of
people and ore, ventilation standards, use of electrical equipment underground, use of
explosives, protection against fire and safety equipment. It also provides for inspection and
fines and fines and penalties in the event of non-compliance. The Regulation on Mine Work
Safety covers activity in both the exploration and (in greater detail) mining stages, covering a
broad variety of circumstances.

202
Regulation on Foreign Workers, Article 16, paragraph 2.
203
Social Security Law, Article 14.
204
Decree n. 4/90 of 13 April, Article 2.

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For more information on labor matters in Mozambique, see our booklet The Legal
Framework for Employment in Mozambique, available at http://www.acismoz.com/.

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Section 9 Foreign Exchange


Control
The primary sources of law in relation to foreign exchange control are:

o Law n. 11/2009 of 11 March (the Exchange Law); and


o Notice n. 05/GGBM/96 (the Exchange Regulations) (the repeal and replacement of
which is expected shortly).

9.1 Exchange Law


The Exchange Law is applicable to acts, transactions and operations of any sort carried out
between residents and non-residents (as defined for foreign exchange law purposes) that
result (or might result) in payments or receipt of payment abroad.205 It also covers other acts,
transactions and operations that may not so result but that are nevertheless classified at law
as exchange transactions.206 The Exchange Law explicitly applies to foreign investment in
Mozambique.207

A broad range of transactions are classified as exchange transactions and therefore subject
to registration with the Central Bank of Mozambique. In theory, under the Exchange Law,
exchange operations classified as current transactions no longer require authorization, as
they did under the law that preceded it.208 (As of this writing however, the Exchange
Regulations, which pertain to the law since repealed, do not provide for authorization-free
current transactions.) By contrast, capital operations including transactions relating to
foreign investment, opening and operating bank accounts in non-Mozambican financial
institutions, and loans and guaranties all continue to require the prior approval of the Bank
of Mozambique.209

Indeed, foreign direct investments must be registered, for the purposes of monitoring the flow
of foreign exchange, within 120 days of authorization. Each movement of funds, or of the
value of goods imported (or profits reinvested), under the authorization must be registered.210

9.1.1 Procedures to obtain loans outside Mozambique


The Exchange Regulations supply procedures through which Mozambican persons (including
locally organized subsidiaries of foreign companies) may obtain loans (including
shareholders loans) from sources outside Mozambique. In such cases, companies must
submit the following documents to the Bank of Mozambique:

(i) a copy of the proposed loan;


(ii) the justification, on social and economic grounds, for the loan; and
(iii) an indication of the resources available to repay the loan.211

Once the loan agreement has been signed, the debtor must file an authenticated copy with
the Bank of Mozambique. Thereafter, the debtor must seek authorization from the Bank of

205
Exchange Law, Article 1.
206
Ibid.
207
Ibid.: Article 27.
208
Ibid,: Article 6, paragraph 2. The law that the Exchange Law replaced was Law n. 3/96 of 04 January.
209
Ibid.: Article 6, paragraph 5, and Exchange Regulations, Article 3.
210
Exchange Regulations, Article 24.
211
Ibid.: Articles 28 through 31.

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Mozambique for the payment of each and every installment of interest, principal and
commission at least 10 days before such payment is due.

As of this writing, the import of foreign currency in amounts equal to or greater than US$5,000
212
is subject to a declaration by the person importing such funds.

9.1.2 Repatriation of funds


Under the Exchange Law, residents are obliged to declare the amounts and rights acquired,
generated or held abroad.213 In addition, they must remit to Mozambique the proceeds of
exports of goods, services or foreign investment.214 The Exchange Law admits of exceptions
in this as in other particulars which, in their turn, depend on special legislation as passed by
the Government (usually in the form of a decree). Thus, to the extent that exchange issues
are high on an investors list of considerations, it should raise them early in the course of
negotiations with the Government in order to ensure that any special dispensations are
properly reflected in the terms of its mining contract.

To transfer profits abroad, an investor must supply the following documentation:215

(i) a quitclaim certificate proving the investment was made and fiscal obligations
complied with, to be issued by the Ministry of Finance;
(ii) copy of the balance sheet and income statement for the year, including the official
opinion of an independent auditor, for each year audited by an auditing company
operating in the country with a license issued by the Ministry of Finance;
(iii) statement issued by an auditor confirming that the profits are a result of the years
in question and are results of operations of the companys activity, explaining
whether the profits were calculated before or after any transfers required by law
(iv) document issued by the competent entity confirming the compliance of the terms
of the investment authorization; and
(v) in cases of companies, for purposes of exporting profits, proof of consent of the
corporate body, or when transferring dividends, minutes of the general meeting
resolving on the distribution of profits.

The authorization for the transfer of exportable profits shall be made through issuance of a
Bulletin for the Authorization of Payments.

212
Ibid.: Article 34.
213
Exchange Law, Article 9, paragraph 1.
214
Ibid.: Article 9, paragraph 2.
215
Exchange Regulations, Article 25.

SAL & Caldeira Advogados, Lda.


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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

Section 10 Dispute Resolution


10.1 Litigation

In Mozambique, as elsewhere, there are many good reasons to avoid litigation. The courts
tend to be slow and expensive to use and more complex technical issues may require
knowledge of practice in the mining business that may not be present. As in any country,
foreign investors will reasonably be concerned about the natural sympathies a local court may
have for local parties. Alternatives to litigation, both within and outside Mozambique, are
briefly discussed below.

10.1.1 Competent Forum Rules


The forum in Mozambique in which a suit is heard depends on the nature of the subject
matter of the dispute and the identity of the parties involved. Suits against other private
persons are heard in the appropriate civil court. Suits against the Mozambican Government or
a subordinate body are heard either in the civil courts or, if the basis of the dispute is
considered to be an administrative law matter, and once the series of available administrative
remedies has been exhausted, in the Administrative Court (Tribunal Administrativo). Disputes
relating strictly to mining titles would be classified as administrative law matters.

Disputes relating to mining contracts, by contrast, may often be heard in a non-Mozambican


forum. Indeed, provision for dispute resolution by arbitration under the aegis of the
International Centre for the Settlement of Investment Disputes (ICSID) is a common feature
of mining contracts in Mozambique.

10.1.2 Enforceability of Judgments by Foreign Courts


A judgment against a Mozambican party obtained in a foreign court would be recognized and
enforced in Mozambique only once it has been reviewed and confirmed by the Supreme
Court of Mozambique. In order to confirm such a judgment, the Supreme Court would have to
find the following:

a) there are no doubts as to the authenticity of the document containing the judgment or
its reasoning (as distinct from the underlying merits of the case);

b) the matter is fully and finally resolved under the laws of the jurisdiction in which it was
heard;

c) the judgment was issued by a court of competent jurisdiction as determined by


Mozambican conflicts of laws rules;

d) there is no basis to claim that the matter is pending in the first instance or on appeal
in a Mozambican court, except in instances in which it was the foreign court that
determined that a Mozambican court had jurisdiction;

e) the defendant was properly served, unless the matter is one in which Mozambican
law dispenses with the need for initial service of process; and in the event that a
judgment is rendered against the defendant for failure to state a defense, that service
was made personally on the defendant;

f) the judgment does not contain decisions contrary to the principles of Mozambican
public order; and

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INTRODUCTION TO THE LEGAL FRAMEWORK FOR MINING IN MOZAMBIQUE

g) in the event it was rendered against a Mozambican person, the judgment does not
offend the provisions of Mozambican private law, in those instances in which
Mozambican conflict of laws rules determine that the underlying question must be
216
decided under Mozambican private law.

Recognition and execution of a foreign judgment may also be denied on some of the general
grounds available for the appeal any judgment. ,

10.2 Arbitration
A reasonable alternative to litigation in Mozambique is arbitration. In case of a dispute
between an investor and another private party, when both parties have chosen to submit their
conflict to arbitration under Mozambican law, it will be heard in accordance with the
procedures set forth in Law n. 11/99 of 8 July (the Law on Arbitration, Conciliation and
Mediation or Law of Arbitration).

Mozambique is a member of the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (the New York Convention, ratified by Resolution n. 22/98 of 6
June). Hence, the only grounds available to deny enforcement of a private arbitral award in
Mozambique are the limited grounds available under the New York Convention.

Mozambique is also a member of the Convention on the Settlement of Investment Disputes


Between States and Nationals of Other States (the Washington Convention, ratified by
Resolution n. 10/92 of 25 September) As noted above, provision for dispute resolution by
arbitration under the aegis of the International Centre for the Settlement of Investment
Disputes (ICSID) is a common feature of mining contracts in Mozambique.

Theoretically, arbitration may also be used when the Government of Mozambique is one of
the parties and the matter is one of administrative law. In such cases, the arbitration will be
governed by the Law n. 9/2001 of 7 July (the Administrative Litigation Law).

216
See Code of Civil Procedure, Articles 49 and 1094 et seq.; Law n. 10/92 of 6 May, Article 38, clause f).

SAL & Caldeira Advogados, Lda.


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