OIL, GAS AND MINING IN MOZAMBIQUE

ZAMBIA, ABRIL DE 2012

LOCALIZAÇÃO GEOGRÁFICA DE MOÇAMBIQUE

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STRUCTURE OF PRESENTATION1. MINING SECTOR

1.1 characterization1.2 specific legislation1.3 fiscal contribution

1. Oil/Petroleum sector2.1 characterization2.2 specific Legislation2.3 fiscal contribution

3. Ongoing activities

4. Challenges

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1. Mining Sector1.1 Characterization

Mineral resources that are found in soil and subsoil, in interior waters, along the territorial sea, exclusive economic zone and in the continental of Mozambique, are state property.

The rights and obligations regarding the use and exploitation of mineral resources with respect for the environment, with view to their rational utilization and benefit the national economy.

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1. Mining Sector 1.1 Characterization

The mining industry subdivides into:

• Small operators – holders of mining (73).

• Medium and large operators – holders of mining titles, consisting of: mining certificates (127); – mining concession(215); – Prospecting and miningexploration (761);

- License of recognition (11).

•

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1. Mining Sector 1.1 Characterization

Licenses

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1. Mining Sector 1.2 Specific legislation

Law n.º 14/2002, of 26 June, approving the mining law.

Decree n.º 62/2006, of 26 of December, approving the Regulation of the Mining Law.

Law n.º 11/2007, of 27 of June, updating the tax laws relating to mining

Law n.º 13/2007, of 27 de June, regards the revision of the system of tax incentives for mining and oil companies. 7

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Decree n.º 16/2005,of 24 of June, approving the Regulation of Marketing of Mineral Products

Decrete n.º 26/2004, of 20 of August, approving the Environmental Regulation for Mining Activities.

Government diploma n.º 189/2006, of 14 of December, adopting the Basic Standards for Environmental Management for Mining activity.

Government diploma n.º 92/2007, of 11 de June, adopting rules and procedures governing the registration of eligible techniques for the preparation of reports and programs of work prospecting mining projects.

1. Mining Sector 1.2 specific Legislation

Mining activities fees - Tax Tax on Production

Persuant to Law.º 11/2007, of 27 de June, the rates of Mining Production Tax, are:

10% for diamond 10% for precious metal (gold, silver andplatinum) and precious

stones 6% for semi-precious stones 5% for basic minerals 3% for coaland other mineral products

The tax base for the Mining Production is the value of the quantity of product extracted from the mining land. 9

1. Mining Sector 1.2 Specific legislation

Fees applicable for the mining activities - Taxes on the surface

According to Law n.º 11/2007, of 27 June, taxes on surface are the following:

License Recognition For diamand…………….……….10,00MT/Km2

For other minerals………………25,00MT/Km2

Search and Prospecting License for all minerals 1st and 2nd year………….…………..250,00MT/Km2

3rd ………….……………..….625,00MT/Km2

4th and 5th year…………...……….1.300,00MT/Km2

6thyear…………….….………...1.500,00MT/Km2

7th year…………….…………….2.000,00MT/Km2

8th…………….…………….2.500,00MT/Km2

9th and 10th……….…………..3.000,00MT/Km2

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1. Mining Sector 1.2 Specific legislation

Fees applicable for the mining activities - Taxes on the surface

Mining concession

For mineral water………………………70.000,00MT for each title For other mineral resources: From 1st to 5th year………………………….2.500,00MT/Km2

For 6th ygear onwards ………….............5.000,00MT/Km2

Mining certificate 20 – 100 hectare…………………………….10.000,00MT 101 – 200 hectare…………………………….30.000,00MT 201 – 300 hectare………………...................30.000,00MT 301 – 400 hectare………………...................40.000,00MT 401 – 500 hectare………………...................50.000,00MT

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1. Mining Sector 1.2 Specific legislation

FISCAL INCENTIVES – Law n. 13/2007

The projects carried out under the Mining Law, benefit for 5 years from the date of commencement of mining, and exempt from.

i. Customs duties payable on imports of equipment for the

exploration or mining in class "K" of the Customs Tariff Book;

i. Custos duties payable on imports of goods listed in annex I to this Law, comparable to the class “K” of the Customs Tariff Book for the purpose of this Act

The imports referred to in the preceding paragraph also benefit from VAT exemption and ICE.

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1. Mining Sector 1.3 FISCAL CONTRIBUTION

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Million in MTDescription 2008 2009 2010 2011Nominal GDP 240 357.70 269 346.00 324 224.00 371 645.00 fiscal Contribuição in mining sector 2 178.27 2 988.93 4 819.31 16 647.86

AT total Revenue 39 190.07 47 564.98 63 566.12 81 119.18 fiscal Ratio 16.30% 17.66% 19.61% 21.83%GDP weight in Mining Sector 0.91% 1.11% 1.49% 4.48%Peso do sector mineiro na receita da AT 5.56% 6.28% 7.58% 20.52%Fonte: Adaptado de DNEAP-MPD e AT-MF

Câmbio: 27,95 MT/USD - Fonte: Banco de Moçambique, Jornal Notícias 16/04/2012

2. Oil/Petroleum 2.1Characterization

The activities of prospecting, exploration, development and production of oil shall be exercised by means of a concession, granted sa result of public tender or direct negotiation. The realization of petroleum operations are subject to prior conclusion of a contract that may be:

Of Recognition - on an exclusive basis, a maximum of two years;

Research and production - exclusive right to exploration and

production of oil for a period not exceeding 30 years; Of oil or gas pipeline - the right to form and operate pipelines for the

transportation of crude oil or natural gas, where these operations are not covered by a contract research and manufacturing

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2. Oil/Petroleum Sector2.2 Specific Legislation

Law n. 12/2007• The Tax on Oil Production falls upon on oil

produced in Mozambique, from the area of development and production.

• It is considered oil- crude oil, natural gas or other hydrocarbons produced or capable of being produced from crude oil, natural gas, oil sands or clays.

• The rates of Tax on Oil are as follow:– 10% for crude oil;

– 6% for natural gas. 15

2. Oil/petroleum sector2.2 Specific legislation

FISCAL INCENTIVES – Law n. 13/2007

The projects carried out under the Mining Law, benefit for 5 years from the date of commencement of mining, and exempt from.

i. Customs duties payable on imports of equipment for the

exploration or mining in class "K" of the Customs Tariff Book;

i. Custos duties payable on imports of goods listed in annex I to this Law, comparable to the class “K” of the Customs Tariff Book for the purpose of this Act

The imports referred to in the preceding paragraph also benefit from VAT exemption and ICE.

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2. Oil/Petroleum Sector 2.3 FISCAL CONTRIBUTION

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Million in Mts

DescriPTION 2008 2009 2010 2011 Nominal GDP 240 357.70 269 346.00 324 224.00 371 645.00 fiscal Contribuição in oil sector

1 671.76 1 981.50 1 542.99 4 738.29 AT total Revenue 39 190.07 47 564.98 63 566.12 81 119.18 fiscal Ratio 16.30% 17.66% 19.61% 21.83%GDP weight in oil Sector 0.70% 0.74% 0.48% 1.27%Peso do sector petrolífero na receita da AT 4.27% 4.17% 2.43% 5.84%Fonte: Adaptado de DNEAP-MPD e AT-MF

Câmbio: 27,95 MT/USD - Fonte: Banco de Moçambique, Jornal Notícias 16/04/2012

3. Ongoing Activities Induction to the AT Stuff of the technical activities carried out in the industry

and oil

train specialists in the various areas of this sector, through visits to the Mega Projects and other sectors of the mining industry.

Megaprojects Monitoring on the sectors of Mining and Petroleum.

Participation in rounds of negotiation of concession contracts, Mining and Petroleum. Induction of AT Stuff of the technical activities carried out in the industry and oil.

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4. Challenges• In relation to licenses granted, develop joint activities with MIREM

in order to control the Tax rate on surface;

• In order to combat tax evasion define mechanisms of control and

revenue collection to the miners( mine diggers);

• Training of stuff in the area of customs and border guards in order

to recognize the mine product when crossing borders;

• To standardize procedures in the taxation of Mega projects

compared to other African countries and the rest of the world; • Include stuff from MIREM in the Audit work conducted by AT.

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MUITO OBRIGADO

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