This is the first of a series of monthly mining briefings which Clyde & Co aims to publish on the legal and regulatory framework affecting the mining industry in Tanzania. This first issue outlines and analyses the process that should be followed when renewing an existing prospecting licence, in particular the process involved in: (i) relinquishing 50% of the licence area; (ii) re-applying for the relinquished area; and (iii) renewing the licence.

The Legal Regime: Background

In short, the mining industry in Tanzania is regulated at a national level and governed by the Mining Act 2010 (the Act) and its supporting regulations.  The main regulatory body responsible for the mining industry is the Ministry of Energy and Minerals (MEM). Generally, under the Act mining licences must be granted for all mining in Tanzania. In addition to mining licences, the MEM has the power to grant prospecting licences, which provide for exclusive prospecting rights for minerals in defined areas. This briefing focuses on the process of renewing such a licence.

Prospecting licence

A prospecting licence can be granted for metallic minerals, energy minerals and gemstones, kimberlistic diamonds, industrial minerals and building materials.  The maximum total period for a prospecting licence is 11 years. This period is made up of  the "initial period" of four years, which can be renewed for three years and thereafter for two years, followed by a further two years upon application. There are a number of practical steps to consider when making a renewal application for a prospecting licence, these are outlined below.

Submit renewal application on time

A renewal application must be submitted no later than one month before the expiry date of the prospecting licence. We recommend that you keep a database listing all applicable licences and their expiry dates and insert diary reminders well in advance of the expiry date to allow enough time to make a renewal application. Our experience is that it can take 1-2 months to finalise renewal applications, including completing the required paperwork, establishing communications with the MEM and making key internal decisions on the matter.

Relinquishing 50% of licence area

On renewal of the initial period for a prospecting licence 50% of the area subject to the licence must be relinquished. The renewal application must include details of the area relinquished but no other specific forms or notice are required. The relinquished area is deemed to be relinquished automatically upon the date of expiry of the initial period of the prospecting licence. Key points to note in relation to this process include:

  • No further activity can be carried out on the relinquished area by the relinquishing party after the expiry of the prospecting licence.
  • The relinquishing party should restore the area being relinquished to its original condition as far as possible, in line with good mining practice.
  • The area relinquished must be a single block, it is not possible for the relinquishing party to 'cherry-pick' different sections of the licence area.

We recommend that you make an early assessment of the prospecting area and keep in mind that, unless an application for a mining licence (see below) is made, 50% of the area must be relinquished. Such a forward-looking approach can assist with costs and development plans for the area.

Reacquisition of the relinquished area

The relinquished area reverts to the Government of Tanzania (GOT) and the relinquishing party must re-apply for the relinquished area if it wishes to hold a prospecting licence over that area. It should be noted that no special consideration will be given to the fact that the area was previously held by the relinquishing party; an application for the area must be made in the usual way. Key points to note in relation to this process include:

  • Within four months of the date of relinquishment: the relinquished area shall be deemed to have been designated as an area for which the Minister may (i) invite an application by tender or (ii) declare the area to be exclusively reserved for small scale miners. The tender would be an open process.
  • After four months of the date of relinquishment: if the four month period described above expires without the Minister deciding on a course of action, then the land falls vacant and an application for a licence over the area may be made in the usual way. Under this process, earlier applications take precedence over later applications.

Unfortunately, the risk of losing the relinquished area to a competitor under the above process is difficult to mitigate against. Our experience suggests that a re-applying party can best position itself in relation to the process by pre-completing all paperwork and maintaining regular contact with the MEM and the Minister. 

A possible solution: application for a mining licence

Applying for a mining licence may allow the holder of a prospecting licence to avoid relinquishing 50% of the prospecting licence area. Under the Act, a holder of a prospecting licence is an entitled applicant. However, there are a number of conditions which the holder of a prospecting licence would need to satisfy when applying for a mining licence and any party contemplating such an application should first seek legal advice to establish whether these conditions are being met.

Practical steps to take away

Our experience suggests that a holder of a prospecting licence can best position itself by:

  • Monitoring its prospecting licences and the expiry dates of those licences
  • Making an early assessment of the prospecting area
  • Pre-completing paperwork and maintaining regular contact with the MEM and Minister towards the end of the prospecting licence period
  • Making an application for a mining licence in respect of the prospecting area where the conditions for such an application can be met

Other News

Mining sector growth

The Tanzanian mining sector is forecast to double in value from US $64 million in 2010 to US $1.28 billion in 2015 according to a study published by Business Monitor International. The study expects annual average growth in the sector of 7.7% between 2011 and 2015. Despite the positive forecast of the study, the Tanzanian Chamber of Minerals and Energy has warned that the mining sector is off its 2025 target of contributing 10% of the country's GDP.  The current contribution of the mining sector to the country's GDP is 3.7%. The Chamber of Minerals and Energy cites uncertainties surrounding the mining sector, such as VAT refunds, fiscal deficiencies and issues of law and order, as restricting future growth and new investment.

Environmental rehabilitation bond

MEM has introduced an environmental rehabilitation bond for mining companies to ensure that depleted mines are restored once the company winds up its operations. Mining companies will now be required to deposit an amount in a GOT run fund. The amount to be deposited is to be calculated on the basis of the size of the mining company's operations. The GOT will use the deposit to rehabilitate any disused mines left behind by the company. The bond can be reclaimed if the company restores the mine itself. The new rule is expected to come into effect in late July 2013.

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 & Co's mining team to find out further details.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.