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GUINEA’S NEW MINING CODE HERALDS CHANGES IN MINING SECTOR 
September 29, 2011
Introduction
On 9 September 2011, the Republic of Guinea formally adopted a new miningcode. Not yet promulgated, no official version of the new code is currentlyavailable. Once promulgated, the code will repeal all provisions which contradictit, including the previous mining code of 30 June 1995.In this briefing, we summarise what we believe are the key changes to themining sector in Guinea heralded by the new code (based entirely on our readingof the unofficial version currently to hand and without sight of any backgrounddocumentation).
State’s equity participation in mining projects
The Guinean State is entitled to an overall shareholding of up to 35 per cent inthe share capital of mining companies in Guinea.This participation is fixed as follows and fluctuates according to the mineralsubstance involved:
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a free and non-dilutive shareholding of up to 15 per cent (the freeinterest)
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an option to purchase an additional shareholding of 20 per cent at a priceto be agreed with the investor (the contributing interest).Under the previous mining code, the State was only entitled to 15 per cent of the share capital of mining companies involved in precious substances projects.The percentages given above are set for projects involving bauxite, iron ore,gold and diamonds as well as radioactive and other minerals. For othersubstances (such as alumina, aluminium or steel), the percentage of freeinterest is reduced and the contributing interest increased, always reaching a 35per cent overall participation.The contributing interest can be reduced in exchange for an increase in themining tax rate.Under the new code, a shareholders’ agreement will identify decisions whichcannot be adopted without prior consultation with the Guinean State; it is notclear whether this will entail veto rights in favour of the latter.
Mining conventions
As under the previous code, mining conventions will follow a model adopted bydecree - although it is not clear whether a new decree will be issued to adopt anew model. Rather surprisingly, the new code only refers to mining concessionsbeing granted together with a mining convention; this raises the question as towhether a mining convention is no longer required when an exploitation permitis issued.
 
The maximum duration of a mining convention is 25 years, renewable for one orseveral periods of 10 years.Mining conventions cannot deviate from the provisions of the new code (but theycan still guarantee to the mining title holder that these conditions will remainunvaried).Mining conventions will be signed by the Minister of Mines, following the adviceof the National Mining Committee and the authorization of the Council of Ministers. Mining conventions will then be submitted to the legal opinion of theSupreme Court and ratified by Parliament.
Mining titles
As under the previous code, the new mining code has divided the mining titlesinto prospecting permits, exploitation permits and mining concessions. Anyofficial act relating to any of these permits must be published in the officialGazette and on the website of the Ministry of Mines.Late start of development work under an exploitation permit or miningconcession will lead to payment of penalties.
Prospecting permits
An individual or entity may not hold more than three prospecting permits forbauxite and iron ore within a maximum limit of 1,050 km2 and not more thanfive mine prospecting permits for other substances within a maximum limit of 250 km2.The area of a prospecting permit cannot exceed 350 km2 for industrialprospecting permits involving bauxite and iron ore (under the previous code itwas 500 km2 ) or 50 km2 for industrial permits involving other substances(under the previous code it was 500 km2) or 16 km2 for semi-industrialprospecting permits. No derogation is possible.When a permit is renewed, the reduced area transferred to the Guinean Statemust be accessible and, if possible, will constitute a block, the sides of which areattached to one of the sides of the permit area.
Exploitation permits
Industrial exploitation permits are issued for a maximum of 15 years (under theprevious code it was 10 years).
Mining concessions
A project is deemed to be a mining concession if it involves investment of atleast one billion US dollars.
Change of control
Any direct or indirect change of control of the company holding an interest in amining title must be submitted to the approval or validation of the Ministry of Mines.The direct or indirect acquisition of 5 per cent of the share capital of the entityholding the title is also subject to validation by the Ministry of Mines.Any modification of the shareholding in the entity holding the mining title,following a regular stock exchange transaction, must be communicated through
 
an information note to the Ministry of Mines within 48 hours. Any modification of the direct shareholding must be published in the official Gazette and on thewebsite of the Ministry of Mines.The law provides that the concept of 'change of control' is to be defined in aministerial decree.
Transparency and anti-bribery
Any company requesting or holding a mining title, and its direct sub-contractors,must provide the Centre de Promotion et de Développement Minier (CPDM) withthe following information regarding each entity constituting that company orsub-contractor:
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the identity of its shareholders
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a list of each subsidiary and its relationship with the company or sub-contractor and information on the jurisdiction where it operates
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the identity of its managers and senior managerial employees
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the identity of each shareholder and each person deemed to control thecompany, as well as each person holding 5 per cent or more of the votingrights and the chain within which such rights are exercised.Any company working in or with an interest in the Guinean mining sector - andany official, manager, employee, representative, shareholder or sub-contractorof this company - must not offer, give or promise to give an advantage to anofficial member of the Guinean Government or an elected person in order toinfluence a decision or an act adopted in the mining sector; or to any otherindividual, association, company or legal entity in order to exert influence on anysuch decision or act.A code of good conduct must be signed between the holder of a mining title andthe Ministry of Mines. The absence of this code will lead to the withdrawal of themining title.An anti-bribery monitoring plan must be submitted to the Ministry of Mines eachyear.Any breach of a legal provision regarding bribery is subject to criminal sanctionsand the withdrawal of the mining title.
Employment and training
The previous mining code had established general principles around preferenceto be given to the employment of Guinean nationals and with regard to trainingand technology transfer; the new code introduces a number of strengthenedobligations (articles 108 and 109).Specific quotas of Guinean nationals are provided for each category of workersof a mining company and each stage of a mining project. Any breach of thesequotas will be subject to a fine.A Guinean national with appropriate skills must be appointed as managingdirector of a mining company after a five-year period following the beginning of the exploitation. The deputy managing director must be a Guinean national assoon as the exploitation company starts its activity.
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