Various stakeholders in the Zambian mining industry are eager to understand the implications of the draft Minerals Regulation Commission Bill (the “Bill”) once passed into law. A recurring theme that is causing apprehension amongst stake holders is section 15 of the Bill – which allows the Zambian Government the right to acquire an interest in greenfield exploration areas and subsequent mining areas. It is understandable why this has caused concern; therefore, this article looks to briefly delve into this issue in more depth.
Government’s acquisition of mining rights
Under the current Mines Act No 11 of 2015, the Zambian Government can acquire mining rights through an investment company for specific areas. These areas are reserved for Government investment and are not open for public application. The current law also allows the Government to close off certain regions for priority licensing, creating bidding opportunities for mining rights.
Whilst still maintaining the Governments right to close off certain areas as bidding areas and for priority licensing, in contrast, Section 15 of the proposed Bill has extended Governments rights by allowing the Minister of Finance, in consultation with the Minister of Mines, to acquire interests in exploration areas before licenses are granted. If minerals are discovered, the Government must maintain its interest when a mining license is issued. This change empowers the Government to acquire what could be termed a “free carry interest” in mining companies, potentially granting it more control over operations.
Industry reaction
This proposal has sparked significant concern among investors, including the Zambian Chamber of Mines. Many stakeholders have called for the removal Section 15 of the proposed Bill, leading to a compromise. It has been suggested that the original framework of the Mines Act should remain, allowing the Government to reserve certain areas for investment through the investment company, without a direct pre-stake in exploration areas, as proposed in section 15 of the Bill.
The revised proposal means the Government will still have the right to close off areas for its investment but will do so under existing legal frameworks. This approach is expected to ease investor fears while allowing the Government to strategically manage its mining interests.
Future implications
A critical question raised during discussions is whether the investment company for Government acquisitions will be ZCCM Investments Holdings PLC, the current vehicle for Government mining interests. Officials have indicated that a new entity will be established, separate from ZCCM-IH, to address legacy issues and provide a fresh start for Government interests in mining. According to Zambia’s Ministry of Mines and Minerals Development National Critical Minerals Strategy (2024-2028), this investment company is slated to hold at least a 30% stake in new mineral projects.
Conclusion
The Minerals Regulation Commission Bill marks a significant shift in Zambia’s mining policy, aiming to balance Government interests and investor confidence. While the removal of contentious provisions is a step toward compromise, the Government’s ability to reserve areas for its investment will remain a critical factor in shaping the future of mining in Zambia. As discussions continue, the outcome will undoubtedly impact the sector for years to come. If you have any questions on how the Bill will affect you, please reach out to the author.
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