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MJB Consulting June 2010 -----------------------------------------------------------------------------------------------------------------

African Business & Legal Intelligence Mining Report

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Ivory Coast (Côte d’Ivoire)

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 country’s 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 thenorth 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 (Côte d’Ivoire).

2. Geology

Ivory Coast (Côte d’Ivoire) 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.

3. 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 Minière du Littoral) is a consortium between state-owned

Société pour le Développement Minier de la Côte d'Ivoire (51 %), China

National Geological & Mining Corporation (39 %) and private operators

(10%). In 2009, the company produced 300,000 tonnes of manganese inLauzoa (South). It is targeting a production of 500,000 tonnes by 2011.




• 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

(Côte d’Ivoire), 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 km² in the country.

• Lihir Gold of Australia operates the Bonikro gold mine located in the central-

southern 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 minesituated 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

(Côte d’Ivoire).

• Tata Steel of India has signed a joint venture agreement with Société pour le

Développement Minier de la Côte d'Ivoire for the development of the Mount

Nimba iron ore deposit. This deposit is spread over three countries - Guinea,

Ivory Coast (Côte d’Ivoire) 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 (Côte

d’Ivoire).

• XStrata of Switzerland is conducting a feasibility study on the Touba-

Biankouma nickel deposit in northwestern Ivory Coast (Côte d’Ivoire), where

reserves of nickel are estimated at 293 metric tonnes.




4. Political-situation

Ivory Coast (Côte d’Ivoire) 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 Council’s 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 Komoé A. Kouadio.

5. Legal-system

The legal system of Ivory Coast (Côte d’Ivoire) 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

déterminant les modalités d’application 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 activités régies par le Code minier et portant fonctionnement du compte de

réhabilitation de l’environnement ouvert à la Caisse autonome d’Amortissement .

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 theAdministrative Section of the Supreme Court. However, the Mining Code prescribes

that exploration permit’s 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.

6. Regulatory-bodies

The main bodies regulating the mining industry in Ivory Coast (Côte d’Ivoire) are:

• The Council of Ministers: exploration and exploitation permits are subject toa 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 Minière Interministérielle): 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.




• 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.

7. 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 (Côte d’Ivoire) subject to a valid exploration permit

( permis de recherche) or exploitation permit ( permis d’exploitation) 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 km² and a maximum surface of

1000 km². 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 theDepartment 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 andexploitation 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 permit’s 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 electriclines, as well as other infrastructure works.




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: CFA 500,000

o Renewal: CFA 500,000

- Exploitation permit:

o Application: CFA 1,000,000

o Renewal: CFA 2,000,000

• Surface fee:

- Exploration permit:o Application: CFA 1,000 per km2/year

o First renewal: CFA 2,000 per km2/year

o Second renewal: CFA 5,000 per km2/year

o Exceptional renewal: CFA 10,000 per km2/year

- Exploitation permit:

o Application: CFA 50,000 per km2/year

o Renewals: CFA 50,000 per km2/year

• Royalty:

An ad valorem tax is payable per trimester on the company’s turnover less

transports and refining costs. The rate is 3% for gold, diamond and precious

metals. It is 2.5% for base metals.

9. 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 permit’s application.




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 areavailable at identical conditions in Ivory Coast (Côte d’Ivoire), vehicles used for the

transport of people or goods, and on certain movable assets.

10. Business-structures

Ivory Coast (Côte d’Ivoire) 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 (Société A Responsabilité Limitée orSARL), 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 (Société Anonyme or SA), with a minimum of

one shareholder and a minimum capital of CFA 10,000,000.

11. 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. Thisprogramme must be approved by the Department of Mines and must run every year

on an adequate budget.

12. 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 (Côte d’Ivoire) 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.

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 (Côte d’Ivoire).

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.




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 d’Investissement , 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 (Côte d’Ivoire) 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 (Côte d’Ivoire) was

accepted as an EITI Candidate Country (Extractive Industries Transparency Initiative)

on 12 May 2008.

Ivory Coast (Côte d’Ivoire) 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 UNConvention 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 (Côte d’Ivoire) 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 (Côte d’Ivoire) has signed the

1984 ECOWAS Tax Treaty which came into force on 1 January 1985. Ivory Coast

(Côte d’Ivoire) is also part of the 2008 UEMOA Tax Treaty which came into force on 1

January 2009. Finally, Ivory Coast (Côte d’Ivoire) has signed international tax treatieswith France, Germany, Belgium, Norway, Canada, the United Kingdom, Switzerland

and Tunisia.

MJB-Consulting MJB Consulting provides legal advice and business intelligence in Africa. This publication

contains general information. By means of this publication, MJB Consulting is not

rendering accounting, business, financial, investment, legal, tax or other professional

advice or services, nor should this publication be used as a basis for any decision or

action that may affect your finances or your business. Before making any decision or

taking any action that may affect your finances or your business, you should consult with

a qualified professional adviser. MJB Consulting shall not be responsible for any loss

whatsoever sustained by any person who relies or relied on this publication.

© MJB Consulting 2010

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