The Mining (State Participation) Regulations, 2022

THE MINING (STATE PARTICIPATION) REGULATIONS, 2022 NOW PUBLISHED The Minister of Minerals on 23th September, 2022 published the Mining (State Participation) Regulations, 2022 (the Regulations) which revoke similar regulations which were passed in 2020. Among other things the Regulations cover the following; All persons holding Mining or Special Mining Licenses are required to initiate negotiations with the Government ( GOT) to enter into a joint venture arrangement (JVC) which will allow the GOT to be issued with not less than 16% free carried interest (FCI) in the relevant company. Such notification to the GOT should be sent by the mineral right holder within ninety (90) days from 23th September,2022. The GOT Equity interest shall comprise of the following in the JVC: i. Statutory allocation of shares by every mining interest in the form of undilutable FCI shares. ii.

Shares acquired by the GOT through contributing its reversionary mineral rights to the JVC. iii. Shares acquired through quantification of tax expenditures enjoyed by the mining entity during its establishment provided that the GOT total shares in such entity shall not exceed 50%. iv. Shares mutually negotiated and agreed upon between the GOT and the mining company. v. Save for FCI shares which are preferential in nature and undilutable, all other types of shares may be held as ordinary shares.

The GOT, by virtue of holding FCI shares: i. has the right to appoint two board members to sit in the board of directors of the mining company; ii. has the right to appoint up to two suitable persons to the top executive management of the mining company; iii. is entitled to participate in assets distribution on winding up of the mining company; and iv. is entitled to receive distributions made by the mining company i.e. loan notes. The GOT shall not be under obligation to provide financial contribution on account of its FCI shares even in the case of an increase in share capital of the mining company. FCI shares shall enjoy preferential treatment and be entitled to preferred dividend immediately to a distributable profit.

The JVC arrangements shall be governed by the following principles: i. incorporation of a JVC with the GOT as a shareholder; ii. having a jointly agreed financial model to guide the operations of the JVC; iii. jointly managing the JVC as per the agreed shareholders agreement;

iv. JVC to hold all proceeds from sale of mineral products in local and foreign currency bank accounts in Tanzania; v. issuing or transferring the mineral rights to the JVC; vi. Tanzanians shall be given preferences for appointment to management positions; and vii. agreeing on modalities of in-country beneficiation of the mined minerals. The Regulations has a template of the Framework Agreement; Shareholders Agreement and the Memorandum of Association of the JVC to be incorporated. The Framework Agreement covers: i. The Framework Agreement incorporates the principles stipulated in the Regulations, as mentioned above. ii. The GOT shall receive its shares of economic benefits through the JVC taxes, royalties, fees and other fiscal levies. iii. The JVC shall manage the operations of the mining project and future mining operations. iv.

The GOT shareholder shall be issued with not less than 16% FCI; shares obtained through development by the GOT of the public infrastructure servicing the mining venture; and such other proportion ordinary shares to be agreed by the Parties. v. The JVC operations shall be carried out in Tanzania, with focus of engaging local experts, including keeping the JVC records in Tanzania; preferential treatment to be extended to Tanzanian nationals to management positions; and implementing a local procurement plan. vi. The GOT shall not unilaterally seek to increase ownership in the JVC beyond 16%, unless there is an agreement between the parties. vii. All shareholders loans to the JVC which bears interest, shall be subject to the obligation to issue loan notes to the GOT representing 16% therein. viii.

The Investor company (or its appointed subsidiary) shall not hold more than 84% of the shares in the JVC. ix. The terms of the Framework Agreement may be disclosed by the Parties to their legal advisors, auditor and financiers; by order of the court or tribunal; for compliance purpose i.e. audit, tax or regulatory requirements; to organs and government agencies for compliance purpose. x. The Agreement shall be governed in accordance with, the laws of Tanzania xi. The disputes shall be first be resolved through negotiations, reconciliation and later arbitration. xii. All disputes not resolved through negotiations and conciliation shall be finally resolved by Arbitration

The Shareholders Agreement covers the following: i. The board shall consist of five (5) directors: two (2) from the GOT and three (3) from the Investor, each Director with mandate to appoint his or her alternate. ii. The quorum of the board meeting shall be three directors, provided that one of the directors must be the appointee of the GOT. iii. All board meetings shall be held in Tanzania. iv. Shareholders shall meet once annually, with a quorum of two members, with not less than 51% of the voting power.

v. The initial CEO of the company shall be appointed by the Investor, save for subsequent CEO who shall be appointed by the board. vi. Distributions shall be distributed to shareholders in proportion to their Proportionate Interest. vii. Deadlock for reserved matter shall be referred to the CEO of Investor and the Treasury Registrar for resolution within 90 days. viii. Shareholder’s representative shall be permitted to inspect the mining company’s books, records and data, assets and all technical report. ix. The Agreement shall be terminated on the date which the mining company has only one shareholder, terminated in writing by all shareholders or on windingup of the mining company. x. The Agreement shall be governed by, and construed in accordance with the laws of Tanzania. xi. All disputes not resolved through negotiations and conciliation shall be finally resolved by Arbitration xii.

All parties shall be required to execute the Deed of Adherence – which is attached in the Regulations. Disclaimer The views expressed in this paper are those of the author only and should not be considered as an official interpretation, defamatory or interference of any legislation, laws or policies of any country including Tanzania. The contents of this paper should not under any circumstances be reproduced or used without our express written consent. It should not be considered as a legal advice to any of its recipient(s) and should not be relied upon without obtaining further legal advice. We accept no liability for any loss occasioned or suffered due to the contents of this paper.