Ouagadougou, Burkina Faso — 31 August 2012 – Impoverished Burkina Faso is considering the introduction of a 20% tax on the sale of mining licenses in a move to raise funds that could hit expansion plans by miners operating in the west African state.
The draft law, a copy of which has been obtained by Reuters, is the latest example of resource nationalism which has become a defining feature of Africa’s political risk profile as countries attempt to extract more revenue from mining firms.
In Burkina Faso, mining companies are required to register with the government any agreements they make to sell a licence. The government has said proposed revisions to the mining code will go to the legislature before the end of the year.
A source in the mining ministry, who declined to be named, confirmed the proposed new tax and said it was meant to cool speculation on mining rights, or the "flipping" of mining titles for a fast profit.
But it could be a disincentive to investors who would not want to be penalised for developing a mining asset by paying 20% of its sale price to the government.
Small and mid-sized gold miners have been especially active in the country, which has a similar geology to neighboring Ghana and Mali, Africa’s second and third largest bullion producers respectively. The country also has potentially rich zinc resources.
Miners operating there include Avocet Mining Plc, Cluff Gold Plc and Blackthorn Resources.
"Gains made on the sale of rights, and the income linked to forms of transactions related to the rights, will give rise to the collection of a specific duty at a rate of 20 percent payable during the registration process," the draft law says.
Resource nationalism is often cited as a concern by investors and was ranked this year as the top risk to mining and metals companies worldwide by Ernst & Young.
Producers in Ghana, Africa’s second largest gold producer have raised concerns about government moves to raise the corporate mining tax to 35% from 25% and to introduce a 10% windfall tax as well.
On the Fraser Institute’s 2011/12 mining index “’ a measure of industry perceptions of a country’s policies and minerals potential “’ Burkina Faso is ranked third most attractive in Africa, behind Botswana and Ghana and ahead of heavyweights such as South Africa.
Source: Reuters Africa. For more information, click here.