Mineral Resources

Mineral Resources

Sector Overview

Sierra Leone’s primary mineral resources are diamonds, Rutile, bauxite, gold and iron ore. Mining, particularly of diamonds, gold, Rutile and bauxite, has a proven track record of viability in Sierra Leone. General geology suggests that reserves exceed what is known and being explored. Other known mineral deposits include iron ore, platinum, chromites, lignite and base metals (copper, nickel, molybdenum, lead and zinc). With the introduction of the Kimberley certification Process, official mineral exports increased from US $10 million in 2000 to about US $140 million in 2007 thereby returning, at least in nominal terms, to the previous peak level achieved in 1991.

Sierra Leone has a long history of mining as its major economic activity which has a proven track record. For years it was referred to as the “Land of Iron and Diamonds.” The country is endowed with vast and varied mineral resources, including diamonds, gold, rutile, ilmenite, zircon, iron ore, platinum, chromites, lignite, bauxite, base metals (copper, nickel, molybdenum, lead and zinc) and petroleum. However, the country has not managed to exploit their potential.

The sector has seen a significant overall recovery since the end of the war in terms of both operations and output. Mining accounted for almost 60 percent of export revenues in 2010, including $132 million in diamonds, $33 million for rutile and $31 million for bauxite.

The mining sector provides employment and livelihood to over 135,000 workers, the overwhelming majority of whom are engaged in artisanal, small-scale mining operations. Artisanal mining constitutes an estimated 84 percent of total diamond exports from Sierra Leone.

The mining sector is set to undergo a rapid expansion in light of production increases from expansions of existing and the opening of new operations.

The mineral sector in Sierra Leone is made up of three sub-sectors; the large-scale production of non-precious minerals such as Rutile, Bauxite and more recently iron ore. Large scale production of precious minerals, particularly diamonds, artisanal and small-scale production of precious minerals, mainly diamonds, and to a much lesser extent, gold. The industry comprises a combination of a few large operations, more numerous small to medium-sized companies and a very large number of artisanal mines.

Map of known Mineral Deposits in Sierra Leone 

Advantages of the Mining Sector

1. Traditional Mining Strength

Traditional strength in mining where Investors can capitalise on this strength to either expand current production, add value in the production process, or to rebuild infrastructure required to engage in large-scale mining.

2. Proven Mineral Deposits

The prospects for the continued expansion of the mining sector are favourable as there are proven and sufficient reserves of existing precious and non-precious minerals to allow increased investments and production for the foreseeable future. There are also more mining areas becoming available.

3. Transparent and Modern Regulatory Regime

The sector has undergone major legal, regulatory and policy reforms.  The Mines and Minerals Act of 2009 presents a relatively transparent framework in: The issuance of mining related licenses, the fiscal regime and a universally applied tax code, among other regulations. The establishment of a Mining Cadastre Office (MCO), which in turn created an Online Repository that provides data on the licensing and mineral concession management

4. Cheap Labour

The sector is among the leading formal employers in the economy; and is benefitting from competitive wages, compared to other economies

Licensing: Areas and Periods

Category Nature Elements
Exploration Reconnaissance

 

Typically issued to provide potential investors an opportunity to identify specific areas for more intensive exploration. Normally non-exclusive and valid for 1yr with maximum renewal period of 1 year. It is issued to cover a maximum area of 10,000km2
Full Exploration This license grants exclusivity over license are. It is valid for 4 years with and initial renewal option of 3 years and further renewal of another 2 years, bringing total maximum exploration period of 9 years. Licensed are issued for a maximum area 250km2 and licensees are encouraged to relinquish down to 125km2
Mining Small Scale Licenses are issued for land areas of up to 100 Hectare and for an initial period of 3 years, with a renewal option for another 3 years.
Large Scale Licenses are issued for land areas of up to 250km2 and for an initial period of 25 years, with a renewal option for another 15 years, subject to terms and conditions and the general fiscal conditions as specified in the Mines and Mineral Act.

Licensing: Process and Requirements

The license application process has been simplified, and requirements clarified. The evaluation process is very transparent and results of an application evaluation are communicated to the applicant within very short periods of time.

Type of License Key Requirements
Exploration License Applications made through MCO

Company must be a registered limited company

Technical work programme should be included

Expenditure commitment details

Demonstration of financial & technical capacity

Mining License Feasibility study, based on prove exploration

Detailed mine operational plan

Environmental Impact Assessment & management plan

Financial surety for environmental obligations

Community Development Agreement

Surface Rent Agreement

The Fiscal Regime

Category of Minerals Relevant Rate (%) Remarks
Precious Stones 6.5 Valuation based on the market price at time of sale

Clear regulations on market based valuation of minerals

Precious Metals 5.0
Other Minerals 3.0

The Tax Code

The tax code is designed and implemented to ensure level playing field for small and large players in the sector. The following is a summary of applicable taxes and treatment allowances of certain items for tax purposes

Item Description Applicable Treatment
Corporate Tax Rate 35% tax rate on corporate profits
Cost Amortisation

(Exploration and Development)

4 year profiled depreciation at 40%, 20%, 20%, 20% respectively, starting in the year the cost was incurred
Thin Capitalisation Where the debt equity ratio exceeds 3:1, interest on loans granted by affiliated parties shall not apply
Limits on HQ Expenses 1.5% of sales
Special Tax Incentives Losses can be carried forward from one year to the next up to 10yrs from the commencement of commercial production