June 2010 ----------------------------------------------------------------------------------------------------------------African Business & Legal Intelligence Mining Report -----------------------------------------------------------------------------------------------------------------

MJB Consulting

Ivory Coast (Cte dIvoire)

Population: 21,058,798 Area: 322,462 km2 Capital: Yamoussoukro Main mineral resource(s): gold Gross Domestic Product: $35,82 billion Currency: CFA Franc (XOF) Budget: $4,655 billion Inflation rate: 2% Security: Medium risk Language: French Time zone: GMT (UTC + 0) International calling code: + 225
1. Overview Mining accounts for less than 1% of the countrys Gross Domestic Product and is essentially depending on gold. In 2009, gold production reached 6,943 kg, an increase of 142% on the 2,874 kg mined in 2008. Production is expected to increase strongly by 2011 with the start of operations at the new Tongon gold mine in the north of the country. Other mineral occurrences include bauxite, copper, cobalt, iron ore and manganese. Diamonds continue to be mined artisanally despite the ban imposed since 2005 by the United Nations Security Council on exports of rough diamonds originating from Ivory Coast (Cte dIvoire). Geology Ivory Coast (Cte dIvoire) lies within the West African birimian greenstone belt which extends through Ghana, Guinea, Mali and Burkina Faso. Formed about 50 millions years ago, the birimian rocks are major sources of gold and diamonds. Mining interests Several international companies have interests in the Ivoirian mining industry: Cluff Gold of the United Kingdom runs the Angovia gold mine located approximately 40 km north-west of the capital Yamoussoukro. Production started in 2008 and reached 273 kg by the end of 2009. The company is forecasting a production of 850 kg in 2010. CML (Compagnie Minire du Littoral) is a consortium between state-owned Socit pour le Dveloppement Minier de la Cte d'Ivoire (51 %), China National Geological & Mining Corporation (39 %) and private operators (10%). In 2009, the company produced 300,000 tonnes of manganese in Lauzoa (South). It is targeting a production of 500,000 tonnes by 2011.

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Etruscan Resources of Canada holds 85% of Agbaou mine which is situated approximately 200 km northwest of Abidjan. The feasibility study indicates that the Agbaou Project should produce an average of 2,300 kg of gold per year over a 6.3 year mine life. The company has applied for an exploitation permit. La Mancha of Canada operates the Ity gold mine in western Ivory Coast (Cte dIvoire), approximately 700 km from Abidjan. Gold production was 1,466 kg by the end of 2009, a slight decrease as compared to 2008 (1,544 kg) due to a reduction in mill throughput and a lower gold recovery rate. In addition, the company holds interests in five exploration permits covering 3,591 km in the country. Lihir Gold of Australia operates the Bonikro gold mine located in the centralsouthern portion of the country, approximately 240 km north-west of Abidjan. Production began in August 2008, reaching 975 kg in December 2009 and 755 kg in March 2010. On 8 June 2010, Newcrest Mining of Australia announced that the process to acquire Lihir Gold was well underway in a deal that would create one of the world's largest gold producers. Perseus Mining of Australia is exploring the Tengrela deposit, located north of the country, close to the border with Mali. In October 2009, an updated resource estimate set the indicated gold resources at 16,215 kg and inferred resources at 8,300 kg. The company announced a new discovery at Tengrela on 3 June 2010. Randgold of the United Kingdom is close to completing its new Tongon mine situated in the north of the country. Production is due to start in the fourth quarter of 2010. The mine is expected to produce around 7,800 kg annually over an 11 year lifespan. This will be the biggest gold project in Ivory Coast (Cte dIvoire). Tata Steel of India has signed a joint venture agreement with Socit pour le Dveloppement Minier de la Cte d'Ivoire for the development of the Mount Nimba iron ore deposit. This deposit is spread over three countries - Guinea, Ivory Coast (Cte dIvoire) and Liberia - and is estimated to host about 1 billion metric tonnes of iron ore reserves. The exploration works have commenced in April 2010. Taurian Resources of India explores for manganese in the Zanzan region in northeastern Ivory Coast, where it holds two exploration licenses, one for the Bondokou area and one for the Toumodi area. The company also explores a bauxite deposit in Divo, located approximately 180 km from Abidjan. Divo is said to be the largest bauxite deposit in Ivory Coast (Cte dIvoire). XStrata of Switzerland is conducting a feasibility study on the ToubaBiankouma nickel deposit in northwestern Ivory Coast (Cte dIvoire), where reserves of nickel are estimated at 293 metric tonnes.

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4.

Political-situation Ivory Coast (Cte dIvoire) is currently recovering from a civil war which resulted in the north-south partition of the country between 2002 and 2007. President Laurent K. Gbagbo (Front Populaire Ivoirien) and Prime Minister Guillaume Soro (Forces Nouvelles) are implementing the Ouagadougou peace accord signed on 4 March 2007. A presidential election was due in 2005, but it has been postponed on several occasions. On 21 October 2005, the UN Security Councils resolution 1633 endorsed the extension of President Laurent K. Gbagbo's term in office. A new government was formed on 4 March 2010. The Minister of Mines is Komo A. Kouadio.

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Legal-system The legal system of Ivory Coast (Cte dIvoire) is civil law-based. The main legislation regulating mining activities is the Mining Code, enacted by Law n 95-553 of 17 July 1995. Pursuant to this Code, Government has adopted Decree n 96-634 of 09 August 1996 dterminant les modalits dapplication de la loi du 18 juillet 1995 portant Code minier and Ordinance n 96-600 of 09 August 1996 fixant les droits fixes, les redevances superficiaires, les taxes superficiaires, les taxes proportionnelles relatifs aux activits rgies par le Code minier et portant fonctionnement du compte de rhabilitation de lenvironnement ouvert la Caisse autonome dAmortissement. The Ivorian judicial system adheres to the rule of law enforced pursuant to established procedures. Courts are constitutionally independent from the executive and legislative branches of the State. In specie, mining rights applicants may seek annulment of the decision refusing the permit by filing a motion with the Administrative Section of the Supreme Court. However, the Mining Code prescribes that exploration permits applicants are not entitled to any financial compensation from the State should the permit be denied. In the event of a dispute between the holder of a mining right and the State as to the implementation of the mining legislation, the Mining Code provides that, failing to reach an amicable solution, the parties may submit the matter to Courts or to arbitration pursuant to Ivorian law.

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Regulatory-bodies The main bodies regulating the mining industry in Ivory Coast (Cte dIvoire) are: The Council of Ministers: exploration and exploitation permits are subject to a decree issued by the Council of Ministers (i.e. the Government) following the proposal made by the Minister of Mines. The Council of Ministers may also withdraw mining rights, for instance if the permit holder fails to protect the environment or neglects to pay the surface rights relating to his title. COMINE (Commission Minire Interministrielle): the Interministerial Mining Commission assesses the technical aspects of mining titles applications. The Minister of Mines: the Minister may propose to the Council of Ministers that a mining right be granted or withdrawn. He is responsible for renewing mining rights or approving their transfer.

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The Department of Mines: the Department processes applications for mining titles along with COMINE. It is also in charge of approving the research programme required to obtain an exploration permit, the health and safety regulations adopted by mining operators, as well as the relinquishment of mining rights. The Department also keeps a registry of all mining titles and provides maps thereof. The Department of Environment: the Department approves, along with the Department of Mines, the environmental impact assessment study and the environmental management plan required to obtain an exploitation permit.

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Mining-rights The Mining Code prescribes that all mineral substances in the soil or subsoil belong to the State. However, the State may grant to local or foreign companies the rights to explore or to exploit these mineral substances by awarding mining titles. Artisanal and semi-industrial mining are restricted to Ivorian nationals. Any local or foreign private party may engage in exploration or exploitation of mineral substances in Ivory Coast (Cte dIvoire) subject to a valid exploration permit (permis de recherche) or exploitation permit (permis dexploitation) granted upon completion of the prescribed administrative procedure. Mining regulations prescribe that COMINE has 45 days to examine applications for exploration or exploitation permits and to propose a decision to Government from the date of the application. The exploration permit has a minimum surface of 1 km and a maximum surface of 1000 km. It is granted for an initial period of three years and may be renewed twice for two consecutive two-year periods. After seven years, an exceptional renewal may still be granted for an additional period of three years if deemed justified by the Department of Mines. The exploration area is halved for each renewal. The holder of an exploration permit may obtain an exploitation permit if a deposit has been discovered within the perimeter of the exploration permit, subject to a feasibility study, an environmental impact assessment study and an environmental management plan. The exploitation permit is valid for 20 years and may be renewed pursuant to the available resources as described in the feasibility study. The Ivorian State is entitled to a free non-dilutable 10% share within the company running the project for as long as the operation lasts. To maintain the validity of his mining rights, the permit holder must commence exploration within one year (exploration permit) or commence development and exploitation works within two years (exploitation permit) as from the date of issue of the permit concerned. He must also pay the surface rights relating to his mining title and comply with other requirements relating to health and safety, protection of the environment, forest heritage or site rehabilitation. Failing to fulfil these obligations may result in the permit being withdrawn. The Mining Code grants holders of mining titles an exclusive right to search for or to exploit mineral substances on or below the surface of the permits perimeter. The rights holders are allowed to occupy and access the land required for carrying on their mining activities. This includes for instance the construction of industrial plants, the use of the water, the establishment of means of communications and electric lines, as well as other infrastructure works.

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However, mining rights must be exercised so as to affect as little as possible the interests of the owner and/or the lawful occupant of the land. The latter are entitled to a fair compensation for the occupation of the land required for mining activities. Disputes arising about the amount of the compensation will be arbitrated by the Department of mines. 8. Duties,-royalties-and-taxes The standard 25% rate on corporate tax on profits is applicable to mining rights holders. General tax legislation also applies to them, such as VAT (18%), tax on dividends (12%), social security contributions (12%-15%) and payroll taxes (local staff: 2.8%, foreigners: 12%). In addition, the Mining Code and the regulations provide for specific charges to be paid to Treasury: Flat fee: Exploration permit: o Application: o Renewal: Exploitation permit: o Application: o Renewal:

CFA 500,000 CFA 500,000

CFA 1,000,000 CFA 2,000,000

Surface fee: Exploration permit: o Application: o First renewal: o Second renewal: o Exceptional renewal: Exploitation permit: o Application: o Renewals:

CFA 1,000 per km2/year CFA 2,000 per km2/year CFA 5,000 per km2/year CFA 10,000 per km2/year

CFA 50,000 per km2/year CFA 50,000 per km2/year

Royalty: An ad valorem tax is payable per trimester on the companys turnover less transports and refining costs. The rate is 3% for gold, diamond and precious metals. It is 2.5% for base metals.

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Tax-incentives During the exploration phase, tax on capital increase is reduced by half. The import of goods and products required for the exploration programme is fully exempted from customs duties and other taxes, including VAT, provided they appear on the list attached to the exploration permits application.

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Exploitation permit holders enjoy a similar exemption on the import of goods and products required for mining operations. However, this exemption may not exceed a period of four years from the date the permit was issued. Holders of an exploration or an exploitation permit are not exempted from import duties and other taxes, including VAT, on the importation of equipment which are available at identical conditions in Ivory Coast (Cte dIvoire), vehicles used for the transport of people or goods, and on certain movable assets. 10. Business-structures Ivory Coast (Cte dIvoire) is part of OHADA (Organisation for the Harmonization of Business Law in Africa) since 11 February 1996. The Uniform Act relating to Commercial Companies and Economic Group Partnerships of 17 April 1997 provides the legal framework of the main business structures used by private parties to carry on mining activities: The private limited liability company (Socit A Responsabilit Limite or SARL), with a minimum of one shareholder (either a natural or a juristic person) and a minimum capital of CFA 1,000,000. The company limited by shares (Socit Anonyme or SA), with a minimum of one shareholder and a minimum capital of CFA 10,000,000.

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Use of domestic and foreign employees Mining operators must employ at least 80% of Ivorian citizens. The holder of an exploitation permit will have to submit an Ivoirisation programme which must be approved by Government. As soon as the exploitation begins, the permit holder must set up a comprehensive training programme for Ivorian staff members. This programme must be approved by the Department of Mines and must run every year on an adequate budget. Exchange control and exports restrictions Mining rights holders may be authorized to: Open up a bank account denominated in a foreign currency; Receive in Ivory Coast (Cte dIvoire) or abroad any funds acquired or borrowed abroad, including the proceeds from the sale of their production; Transfer dividends abroad, as well as the proceeds from liquidated assets.

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There are no restrictions or limitations imposed on the processing, export or sale of metallic minerals. On 29 October 2009, the United Nations Security Council renewed until 31 October 2010 the ban on exports of rough diamonds originating from Ivory Coast (Cte dIvoire). 13. Environment, health and safety Exploration permits are subject to the prior approval of a research programme by the Department of Mines. This programme must be implemented by the permit holder under the supervision of the Department.

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Exploitation permit applications must include an environmental impact assessment study and an environmental management plan to be approved by the Department of Mines and the Department of Environment. This plan will include a rehabilitation programme prescribing the measures of remediation after closure and the costs thereof. To support these costs, the operator must open a rehabilitation account with the Banque Nationale dInvestissement, a state-owned bank. This account is to be funded throughout the entire lifetime of the project pursuant to the rehabilitation budget defined in the environmental impact assessment study. The budget may be revised with a frequency which does not exceed 5 years. Once the permit is granted, the Department of Mines will run periodical controls to ensure that operators use their best endeavours to protect the environment. Mining rights holders must also comply with the Environment Code n 96-766 of 3 October 1996. 14. International treaties Ivory Coast (Cte dIvoire) is part of the World Trade Organization (WTO), the Multilateral Investment Guarantee Agency (MIGA) and the Convention for the Creation of the International Centre for Settlement of Investments Disputes (ICSID). It also adheres to OHADA Treaty. In addition, Ivory Coast (Cte dIvoire) was accepted as an EITI Candidate Country (Extractive Industries Transparency Initiative) on 12 May 2008. Ivory Coast (Cte dIvoire) has also ratified the Vienna Convention for the Protection of the Ozone layer, the Rio Convention on Biological Diversity, the Stockholm Convention on Persistent Organic Pollutants, as well as the Kyoto Protocol to the UN Convention on Climate Change. Numerous treaties have been concluded to promote foreign investment with countries such as Germany, Italy, the Netherlands, Sweden Switzerland, the United-Kingdom, the USA, China and Qatar. Ivory Coast (Cte dIvoire) is part of the Economic Community of West African States (ECOWAS) and the West African Economic and Monetary Union (UEMOA). Both organizations promote economic integration among its Member States, including the harmonization of fiscal policies. Hence, Ivory Coast (Cte dIvoire) has signed the 1984 ECOWAS Tax Treaty which came into force on 1 January 1985. Ivory Coast (Cte dIvoire) is also part of the 2008 UEMOA Tax Treaty which came into force on 1 January 2009. Finally, Ivory Coast (Cte dIvoire) has signed international tax treaties with France, Germany, Belgium, Norway, Canada, the United Kingdom, Switzerland and Tunisia.
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MJB Consulting 2010

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