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Mining

July 2016

Briefing

Mortgage of a
Mineral Right and
Mining in Wildlife
Conservation Areas
In this months briefing, we look at the process to
mortgage mineral rights and undertake mining
operations in Wildlife Conservation Areas in
Tanzania.
Legal Basis
The Mining Act of 2010 (the Mining
Act) is the basic law which governs
all mining and mineral activities in
Tanzania. The Wildlife Conservation
Act of 2009 (the Wildlife Conservation
Act) is the principal act of parliament
providing for all wildlife related
activities.

A: Mortgage of a Mineral Right


Holders of Mining Licences, Special
Mining Licences and Primary Mining
Licences (Mineral Rights) may
mortgage their Mineral Rights to a
financial institution, bank or any
other person as a security for funds
advanced to the mineral rights holder.
The Mining Act does not expressly use
the word mortgage however it uses
the term assign which includes the
right to mortgage or charge mineral
rights. A mortgage of Mineral Rights is
subject to obtaining the prior written
consent of the licensing authority,
however no such prior written consent
is required if:
the mortgage or charge is to a
financial institution or bank as
security for a loan or guarantee;
the assignment is to an affiliate
where the obligations of the affiliate
are guaranteed by the holder of
the mineral rights or by the parent
company of the holder of the
mineral rights (an affiliate for this

purpose means a company which


directly or indirectly controls or
is controlled by the holder of the
mineral rights); or
the mortgage or charge or
assignment is provided in favour of
another person who is considered to
be the holder of the Mineral Rights
i.e. where a Mineral Right is jointly
owned by more than one person.
The person applying for consent to
mortgage or charge Mineral Rights
is required to submit to the Ministry
of Energy and Minerals (MEM) an
application in the prescribed form as
well as the following certified copies of
documents:
application letter requesting for
consent and giving summary of the
transaction;
executed Mortgage Agreement;
executed Loan Agreement or letter
of offer of a loan facility signed by
the parties;
certificate of incorporation and
memorandum and articles of
association, if the holder of the
Mineral Right is a corporate body;
copy of identification of the holder of
the Mineral Right, if an individual;
incorporation documents or copy of
identification card of the mortgagee;
copy of the Mineral Rights being
mortgaged; and

payment of the relevant taxes


including stamp duty at the
Tanzania Revenue Authority (TRA)
and the respective agreements being
stamped by TRA.
The application should be submitted
to MEM in case of Mining Licences
and Special Mining Licences and to
the Zonal Mines office in the case of
Primary Mining Licences.
Points to note:
A Primary Mining Licence, cannot be
mortgaged to a person who is not a
Tanzanian, or to a company which is
not owned 100% by Tanzanians.
If the Mineral Right being mortgaged
is owned by a corporate body, the
mortgage should also be registered
at the Business Registrations and
Licencing Agency (BRELA) and a
certificate of creation of charge
should be obtained. The application
at BRELA should be submitted
using BRELA Form No. 96 and
should be accompanied by a copy
of the mortgage agreement and the
prescribed fee.
It is possible to engage a security
trustee which can be a bank, a
financial institution or any other
person e.g. a law firm to hold the
Mineral Right being charged/
mortgaged on behalf of the lender.
If the security trustee is a bank or
a financial institution, no consent
will be required from a licensing
authority. However if the security
trustee is another person e.g. a
law firm, prior consent from the
licensing authority to mortgage/
charge the Mineral Right will be
required.
Once the consent from the relevant
authority has been obtained, the
parties can proceed to lodge an
application to mortgage the Mineral
Right at the MEM or Zonal Mines
Office by submitting certified copies of
the following documents:
receipt as proof of payment of the
prescribed fee
consent letter
form no. MRF 13
the mortgage agreement

letter of offer, loan agreement or any


other agreement showing what the
mortgage/charge is for
application letter stating in
summary the nature of the
transaction
incorporation documents of the
mortgagor and mortgagee if
corporate bodies
identification documents for
the mortgagor or mortgagee if
individuals
mineral rights licences which are
being mortgaged/charged
valid business licence
proof of payment of the relevant
taxes

B: Mining in Wildlife
Conservation Areas
A wildlife conservation area includes
national parks, game reserves, game
controlled areas and the Ngorongoro
Conservation Area. The Wildlife
Conservation Act restricts any person
from collecting sand, prospect or
mine in any wildlife conservation area
however the person may prospect or
mine in a wildlife conservation area if
the undertaking involves prospecting
for or mining oil, gas or uranium.
Hence mining or exploration in a
wildlife conservation area is allowed if;
the mining or exploration is for
uranium i.e. no other minerals
will be mined in the wildlife
conservation area;
the holder of the Mineral Rights has
undertaken environmental impact
assessment as required by the
Environmental Management Act of
2004;
protection cost has been paid by
the holder of the Mineral Rights as
prescribed in the regulations made
under the Wildlife Conservation Act;
concession fee has been paid to the
Minister responsible for wildlife; and
the Government of Tanzania is the
initiator of such undertaking.
In support of the Wildlife Conservation
Act, the Mining Act provides that
the holder of Mineral Rights shall
not undertake mining activities

in a wildlife conservation area


without obtaining the prior written
consent from the Ministry of Natural
Resources and Tourism (MNRT).

Contact us
This monthly briefing is prepared
for clients and contacts of Clyde &
Co operating in the mining sector in
Tanzania. We aim to keep our clients
abreast of developments in the sector
as they happen and if you have any
questions on the issues raised above
please contact us using the details
provided:

Peter Kasanda

Partner, Dar es Salaam


E: peter.kasanda@clydeco.com
T: +255 767 850 056

Michael Strain

Legal Director, Dar es Salaam


E: michael.strain@clydeco.com
T: +255 767 850 052

Amalia Lui

Senior Associate, Dar es Salaam


E: amalia.lui@clydeco.com
T: +255 767 850 030

Clyde & Co Tanzania


11th Floor, Golden Jubilee Towers
Ohio Street
PO Box 80512
Dar es Salaam, Tanzania
T: +255 (0) 767 302 200
F: +255 (0) 222 103 004
Further advice should be taken
before relying on the contents
of this summary.
Clyde & Co Tanzania accepts no responsibility for
loss occasioned to any person acting or refraining
from acting as a result of material contained in
this summary.
No part of this summary may be used,
reproduced, stored in a retrieval system or
transmitted in any form or by any means,
electronic, mechanical, photocopying, reading or
otherwise without the prior permission of Clyde
& Co Tanzania.
Clyde & Co Tanzania is a limited liability
partnership registered in England and Wales.
Authorised and regulated by the Solicitors
Regulation Authority.
Clyde & Co Tanzania 2016
CC010739 - June 2016

However there is a lacuna in both


laws because neither the Mining Act
nor the Wildlife Conservation Act
provides a clarity in the situation
where Mineral Rights have been
granted by MEM within a wildlife
conservation area yet the same area
covers hunting blocks which have
been granted to other persons by
MNRT. The Wildlife Conservation Act
allows a person to apply for hunting
blocks for commercial purposes, while
in some cases MEM may grant Mineral
Rights over areas which fall within the
hunting blocks granted by the MNRT.
Due to this lacuna, over the years
Mineral Rights holders and the
companies holding hunting blocks
have entered into agreements in
which Mineral Rights holders pay
compensation to companies holding
hunting blocks and in return the
holders of hunting blocks do not
undertake hunting activities in
areas falling within the boundaries
of the Mineral Rights holders. This
has led to strong opposition in the
Tanzanian parliament where it was
argued that holders of hunting blocks
have authorised mining companies

to enter and mine within wildlife


conservation areas without proper
authorisation from the relevant
government authorities. In response to
this, MNRT imposed a restriction that
no hunting block owners are allowed
to enter into such agreements with
owners of Mineral Rights unless such
agreements have been submitted,
reviewed and approved by the MNRT.
This has been the practice to-date
pending the implementation of the
regulations which will clearly provide
as to how such situations should be
dealt with.

Mining Events in Tanzania


Tanzanian Explorers Club
The Tanzanian Explorers Club
(TEC) is for people working in, or
affiliated with, the Tanzanian mineral
exploration sector and provides an
informal environment to facilitate
networking within the industry and
information sharing between key
participants in the Tanzanian mining
sector. If you are interested in joining
the next TEC meeting please email
Clyde & Cos mining team to find out
further details.