Madagascar considers taking stakes in mining projects, increasing royalty fees – by Drazen Jorgic (Reuters U.S. – September 2, 2015)

NAIROBI – Madagascar plans to increase royalty fees and claim 10 percent stakes in mining concessions, under proposed changes to its mining code, according to a draft document seen by Reuters on Wednesday.

One of Africa’s poorest countries, Madagascar hopes to accelerate economic growth by developing natural resources but it has struggled to attract foreign investors in recent years due to political instability and falling commodity prices.

The draft, dated Aug. 27 and which could still be tweaked before parliament debates it in October, suggests the Indian Ocean island could take up to 10 percent stakes in concessions for free, and could acquire further shares at market rates.

The much-anticipated changes regarding concessions would apply to projects yet to be granted exploitation licences and are unlikely to affect the country’s biggest projects, including the $7 billion Ambatovy nickel mine, operated and 40 percent-owned by Canada’s Sherritt International, or the $1 billion ilmenite mine run by London-listed Rio Tinto.

But most smaller mining firms seeking to renew permits or obtain fresh licences could be affected. Only a handful of licences have been granted since 2011, with a backlog of about 4,000 permit requests gathering dust at the mining ministry.

The draft bill also suggests lifting royalty fees to 4 percent for minerals and 5 percent for precious metals, while the fee for rough stones would be 7.5 percent.

Rates are now 2 percent of gross exports of raw commodities and 1 percent if minerals are processed locally before export.

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