TIDMBZM
RNS Number : 0444W
Bellzone Mining PLC
09 November 2017
9 November 2017
Bellzone Mining plc
("Bellzone" or "the Company")
Mining Convention Update Signed
Following previous updates on 8 June and 14 September 2017,
Bellzone (AIM: BZM) announces the signing on 9 November 2017, by
its wholly-owned subsidiaries OTN Mining Ltd (Jersey) and Bellzone
Holding SA and by the Republic of Guinea, represented by the
Guinean Minister of Mines and Geology and the Minister of Budget,
of the Addendum (L'Avenant ndeg1 à la Convention de Base)
("Addendum"). The Addendum updates the Mining Convention
(Convention de Base) ("Convention") for its Kalia Mine and
associated infrastructure, which was originally signed on 26 July
2010 and ratified by Presidential Decree on 2 September 2010.
Subsequent ratification of the Addendum by the National Assembly
and promulgation into law by Presidential Decree is expected to
follow in accordance with Guinean legal process.
Negotiations on the Addendum commenced in 2015 as part of the
national programme undertaken by the Technical Committee for the
Review of Mining Titles and Conventions (the "CTRTCM") overseen by
the Strategic Committee, both implemented by the Government of
Guinea. Negotiations were concluded with the Ministry of Mines and
Geology after the closure of the statutory review process in April
2016.
The Addendum reflects the parties' good-faith efforts to comply
with Article 52 of the existing Convention to amend it as necessary
to restore the balance that initially prevailed at the original
signing. Importantly, the Addendum provides the legal framework for
detailed commitments by Bellzone to conclusively determine the
feasibility of its planned ferronickel ("FeNi") project, implement
such project if feasible and to define the path towards the
realisation of the world-class iron ore project at Kalia.
Addendum Highlights
The Addendum updates the Convention. The Addendum maintains the
existing legal, tax and customs stability provisions such that,
other than where specifically provided, the Convention as amended
by the Addendum remains under the jurisdiction of the 1995 Mining
Code but nevertheless incorporates important aspects of the new
Mining Code adopted by Guinea in 2011, as amended ("2011 Mining
Code"). In addition, the Addendum recognises particular updates to
broader laws and regulations to better align Bellzone's operations
with Guinea's on-going economic development. In particular, the
Addendum recognises the ability to undertake independently-defined
sub-projects (such as the ferronickel sub-project) and thereby
provides the economic flexibility to generate new revenue streams
as they become viable.
Key Bellzone undertakings:
-- Submit the Kalia Mine Economic & Social Impact Assessment
("ESIA") revised for the impact of the proposed ferronickel
smelters by the end of October 2018.
-- Conclude the ferronickel feasibility study by the end of
November 2018.
-- If the ferronickel feasibility study is positive, commence
development of the ferronickel mine and production facility within
6 months of the approval of the feasibility study by the Ministry
of Mines and Geology and achieve commercial production within a
further 6 months, such commercial production being deemed achieved
when FeNi or NPI (Nickel Pig Iron) production levels, over a period
of 90 days, will correspond to 10,000 tons per annum.
-- Commence a ferronickel project expansion study within a
period of 2 years from the beginning of commercial production of
the FeNi or NPI sub-project.
-- Review and update the 2013 KP1 iron ore Bankable Feasibility
Study ("BFS") within four years of the date of signature of the
Addendum, other than in respect of bankability status. If this
review is positive, commission a full update of the KP1 BFS.
Updated economic conditions:
-- Tax regime highlights:
- Commercial and industrial profit tax ("BIC") exempt until the
end of the 8(th) year after the first commercial production for
each sub-project, then the rate of 30% (reduced from 35% in the
Convention) applies;
- Export tax (royalty) levied on Free On Board value at 7% for
unprocessed iron ore, 3.5% for processed iron ore and 2% for Nickel
content of ferronickel or NPI;
- Tax on dividends and investment income levied at 10% for
Guinea-resident shareholders and 0% for non-residents;
- Exemption from VAT to the benefit of the Company, its
Affiliates and Direct Sub-Contractors on the purchase or lease of
goods and services (imported or domestic) tied to mining
operations;
- Tax-deductible contribution to Local Development Fund of the
greater of US$2 million per annum or 0.5% of turnover for five
years from the first commercial production from the main iron ore
project, 0.5% of turnover for the following three years and 0.7%
thereafter, or, if another sub-project proceeds without the
production of iron ore, 0.5% of turnover between the first
commercial production of the first sub-project and the 8(th)
anniversary of such date and rising to 0.7% thereafter;
- Local training tax of 1.5% of annual payroll after the first
commercial production of the first sub-project, which may be
expended directly by the Company on local training programmes and,
failing such expenditure, paid to the Guinean Treasury;
- 10% withholding tax on fees paid to foreign service providers
as well as the price for the acquisition of goods and services
sourced locally from persons not registered for VAT; and
- Expatriate taxes at the rate of 10%.
-- Exemptions throughout the duration of the Convention from
certain taxes such as license tax, extraction tax, registration
rights and stamp duties and generally any other tax not
specifically provided for in the Addendum or the Convention.
-- The tax and customs stability clauses of the Convention were
maintained and will apply to the new regime, including the
provision allowing Bellzone to benefit from future more favourable
tax and customs rates as they are amended by Guinea.
-- The State waives it rights under the 2011 Mining Code to
acquire any additional participation in Bellzone Holdings S.A.
without prejudice to the possibility for the State to acquire an
additional participation if an agreement to that effect is reached
between the State and the Company. In return, the State shall have
an equity interest in Bellzone Holdings S.A. via a non-dilutable
carry amounting to:
- 5% beginning from the first commercial production date for the
ferronickel sub-project.
- Increasing to 7.5% after the 7(th) anniversary of the first
commercial production date for the ferronickel sub-project.
- Increasing to 10% on the date of the first commercial
production for the main iron ore project, whether this occurs prior
to or after the 7(th) anniversary of the first commercial
production date for the first sub-project.
- Any sale, by the State, of the above participation is subject
to a right of pre-emption in favour of Bellzone.
Next Steps
Further work on the ferronickel project will be undertaken in
line with the agreed timetable, and the Company will in parallel
dynamically assess the impact of the recent strengthening of iron
ore prices on the overall KP1 project.
Mr. Michael Farrow, Chairman of Bellzone, said:
"Bellzone is one of the longest established exploration and
mining companies in Guinea. Our operating track-record has been
based on strong mutual respect with the Government, as well as on
our joint efforts to ensure the attractiveness of the country as an
investment destination. We are very pleased that we have now agreed
a legal framework which updates our existing Convention, by
providing improved clarity on the path towards realising Kalia's
unique potential and reinforcing competitive investment conditions.
Much work has gone into the negotiations and on behalf of the Board
and all our shareholders, I would like to express my sincere
appreciation to the President and his team for their unwavering
support. The respect for due process and the rule of law are vital
marks of a thoughtfully progressive nation. As we have said all
along, Bellzone is immensely proud to showcase Guinea's world-class
mining sector to the international community and we hope to
solidify our position as an unrivalled pillar of its future
success."
Enquiries:
Bellzone Mining plc
Simon Edwards +44 (0) 7767 492 712
WH Ireland Limited
Nominated Adviser and
Broker
James Joyce / James Bavister +44 (0) 20 7220 1666
http://www.bellzone.com/
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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