Nigeria: An Overview Of The Nigerian Minerals And Mining Act 2007

The Nigerian Minerals and Mining Act 2007 ("the Act") was passed into law on March 16, 2007 to repeal the Minerals and Mining Act, No. 34 of 1999 for the purposes of regulating the exploration and exploitation of solid materials in Nigeria. This paper reviews the critical aspects of the Act.

MINERALS PROSPECTING MINING AND QUARRYING

1. Ownership and Control of Minerals

The Act vests control of all properties and minerals in Nigeria in the State and prohibits unauthorised exploration or exploitation of minerals.¹. All lands in which minerals have been found in commercial quantities shall from the commencement of the Act be acquired by the Federal Government in accordance with the Land Use Act. Property in mineral resources shall pass from the Government to the person by whom the mineral resources are lawfully won, upon their recovery in accordance with provisions of the Act.

The Act further provides that the use of land for mining operations shall have a priority over other uses of land and be considered (for the purposes of access, use and occupation of land for mining operations) as constituting an overriding public interest within the meaning of the Land Use Act. In the event that a mining lease, a small scale mining lease or a quarry lease is granted over land subject to an existing and valid statutory or customary right of occupancy, the Governor of the state within which such rights are granted shall within sixty days of such grant or declaration revoke such right of occupancy in accordance with the provisions of section 28 of the Land Use Act.

2. Status of Holders of Mineral Titles granted under the Repealed Act

Any person who was the holder of a right or lease or license under the Repealed Act shall be deemed to have become, on the appointed date, the holder of an interim right, lease or license. During the interim period, the holder of an interim right, lease or license is authorized to carry on the operations which he was authorized to carry on immediately before the appointed date under the right, lease or license of which he was the holder and shall enjoy the same rights and be subject to the same liabilities as if the Repealed Act were still in force.²

3. The Administration of the Act

The Minister, amongst other things, is charged with the responsibility of ensuring the orderly and sustainable development of Nigerian's mineral resources, creating an enabling environment for private investors, both foreign and domestic by providing adequate infrastructure for mining activities and also identifying areas where Government intervention is desirable in achieving policy goals in mineral resources development. The Act also provides for the establishment of the Mining Cadastre Office (MCO). which shall be responsible for the administration of mineral titles and the maintenance of the cadastral registers.

The Minister is empowered by the Act to by regulation determine areas eligible for the grant of an exploration or mining lease based on a competitive bidding process. The MCO shall collect a fee for processing of applications for mineral titles and an annual service fee established at a fixed rate per square cadastral unit for administrative and management services rendered by the Cadastre. A mineral title shall become liable to revocation where the holder fails to pay the prescribed fees.

Other departments in the Ministry of Mines and Steel Development (MMSD) established by the Minister for the proper administration of the Act include the Mines Inspectorate Department(MID) and the Mines Environmental Compliance Department (MECD) .The Minister may also by notification in the Gazette, delegate to any department or officer of the Ministry the exercise or performance of any function conferred on him under the Act with the exception of his function to make regulations.

4. Mineral Titles

4.1 The right to search for or exploit Mineral Resources is obtained through one of the following underlisted mineral titles and engaging in any of these activities without the requisite mineral title or authority is an offence under the Act.

a) A Reconnaissance Permit:

This is a non exclusive Permit granted for a period of one year renewable annually upon compliance with relevant provisions of the Act. It permits its holder to search for Mineral Resources and obtain and remove surface samples in small quantities over any land which is not already subject to an exploration lease, small scale mining lease, mining lease or water use permit.

b) An Exploration License:

This License is granted for the duration of three years renewable for further two periods of two years each provided that the holder has complied with his minimum work obligation commitments and other relevant provisions of the Act. It is granted over land area not exceeding 200 square kilometers which is not already subject to an existing exploration license, mining lease, small scale mining lease or quarry lease and provides an exclusive right to its holder to conduct exploration activities upon the land within the area of his license including but not limited to the right to explore for all mineral resources and to carry out the operations and work necessary for the achievement of this objective, to take specimens and samples within specified limits for the purpose of analysis and conducting bulk sampling and trial processing for determining mining potential. The holder of an exploration license has the exclusive right to apply for, and to be granted subject to the Act, one or more Small Scale Mining Leases, Mining Leases or Quarry Leases in respect of any part (s) of the exploration area, upon due compliance with its Exploration obligations under the Act. The holder of an exploration license who sells any Mineral Resources as provided for in the Act shall be subject to the payment of royalty as if the Mineral Resources sold were obtained under a mining lease.

c) A Small Scale Mining Lease:

A Small Scale Mining Lease covers an area not exceeding 3 square kilometers and requires its holders to carry out effective rehabilitation of the mined out areas to the satisfaction of the MECD and pay prescribed fees. The Government through the Ministry shall provide certain extension services to duly registered and performing mining co-operatives of small scale artisinal miners to include amongst other services prospecting and exploration services to determine the geological setting, structure, nature of occurrence, quantity and quality of minerals being mined, provision of environmental impact assessment report and detailed guidelines on waste and tailing disposal and holding regular workshops to update miners knowledge on legal, marketing, business skills and infrastructural support.³

d) A Mining Lease:

This is an exclusive permit granted in respect of an area not exceeding fifty (50) square kilometers which is not within an Exploration License Area or a Small Scale Mining Area except to the holder of the Exploration License or Small Scale Mining Lease covering such area. It is granted for a period of twenty five (25) years renewable every twenty four (24) years provided the holder has complied with his minimum work obligation commitments and all other obligations and requirements of the Act. The Lease confers upon the holder the right to among other things, use, occupy and carry out Mineral Exploitation within the Mining Lease Area, and market, sell, export or otherwise dispose of the mineral products resulting from the Mining Operations. Subject to the provisions of the Act and any other enactment, the exclusivity of the Mining Lease does not derogate from the right of the lawful occupier of a licensed area to retain the right to graze livestock upon or to cultivate the surface of the land in so far as the grazing or cultivation does not interfere with the Mining Operations in such Area.⁴

Pre-Conditions for Commencement of Development on Mining Lease Area:The holder of a mining lease shall not commence any development work or extraction of Mineral Resources on the Mining Lease Area until after-

The holder of a mining lease, except a mining lease for mineral water exploitation, is required to have resolved the matters specified in subsections (a) and (b) above, within three (3) years from the issue of the Mining Lease, failing which the Mining Lease may be temporarily suspended without affecting the rental payments that shall continue and without prejudice to the transfer right of the title Holder under the provisions of the Act. In addition, the holder of a Mining Lease for Mineral Water Exploitation is required to have complied with the conditions specified in subsections (a) and (b) above, within two years from the issue of the Mining Lease for Mineral Water, failing which the Mining Lease may be suspended.

Technical Expertise Qualification Requirement: By virtue of this requirement, a Mining Lease is only granted by the Minister to companies who have employed a person with adequate professional qualification and experience in mining, the Minister being further satisfied that such expert shall be retained by the company during the currency of the lease. The subsistence of a mining lease upon grant and the carrying out of mining operations is predicated on the retention of a qualified and experienced mining professional in the company's employ who shall supervise personally the mining operations being undertaken by the company during the period of the lease.

Rights of Lessee to remove fixtures: The lessee of a mining lease who has paid all rents, royalties and other payments due to be made by it under the Act or under the terms of its lease, is permitted within three (3) months, in the case of alluvial lease and six (6) months in the case of lode lease, after the expiration or other determination of his lease, to remove all or any of the plants, building or other property of the lessee. Provided that such property shall become the property of the Federal Government and may be dealt with and disposed of in lieu of the rent, royalty or other payments, as the case may be where on the expiration or determination of the lease, a lessee is in default in the payment of any rent, royalty or other payments or a lessee has failed to remove its property within the term specified above or within such further period, if any, as the Mines Inspectorate may allow the plant, building and property of the lessee on the land.

e) A Quarrying Lease :

This part of the Act applies in relation to all naturally occurring quarriable minerals such as asbestos, china clay, fuller's earth, gypsum, marble, limestone, mica, pipe clay, slate, sand, stone, late rite, gravel, which may also be lawfully extracted under Mining Leases and prohibits every operation for the purpose of extracting any quarriable mineral from a quarry including sand dredging in the navigable water ways or else for industrial use without the grant of a lease or license by the Minister under the Act.

A Quarrying Lease is granted in respect of any area of land not exceeding 5 hectares and unless previously revoked or otherwise determined, remains in force for a period of five years or less from the date of the grant of the lease and shall then expire unless renewed. The holder is authorized to amongst other things, carry out quarry operations on the land within the area of the lease, remove and dispose of any quarriable minerals specified in the lease and do all such things as specified in the Act which may be necessary or convenient for the carrying out of its quarrying operations.

The MCO shall require the area specified in an application for a lease to be surveyed before granting a lease.

f) A Water Use Permit:

A Water Use Permit confers on its holder, the right to obtain and use water for its exploration and mining operations.

Qualified Applicants

4.2.1 A qualified applicant for a Reconnaissance Permit, an Exploration Lease, a Small Scale Mining Lease and a Quarry Lease shall be-

Provided that:

For an Exploration Lease Applicant, such applicant could also be theholder of a Reconnaissance Permit granted in respect of the area subject to the application, who has fulfilled all the conditions attached to the Reconnaissance Permit.⁶

4.2.2 For a Mining Lease, a qualified applicant must be a body corporate duly incorporated under the Companies and Allied Matters Act or other legal entity that-

4.2.3 A qualified applicant for a Water Use Permit is –

The Holder of an Exploration Lease, Mining Lease or Quarry Lease subsisting at the time the water right granted will be used, or an applicant for a Mining Lease, Small Scale Mining Lease or Quarry Lease for which the water right will be required to be used.¹⁰

4.3 The Mining Cadastre Office shall not grant a mineral title under the Act to an applicant if it is shown that within a period of five years before the date of the application a shareholder holding a controlling share of the applicant has been convicted of an offence under the Act. Furthermore, an applicant for mineral title must satisfy the MCO among other things that it has sufficient working capital for the exploration or mining of the area applied for and possesses technical competence to carry on the proposed operation as prescribed in the Regulations under the Act.

5. Mining Incentives

Any company or enterprise engaged in mining operations shall be entitled in determining its total profits, to deduct from its assessable profits a capital allowance of ninety-five per cent of Qualifying Capital Expenditure incurred in the year in which the investment is incurred. All operators in the mining industry shall be granted the following benefits: exemption from payment of customs and import duties in respect of plant, machinery, equipment and accessories imported specifically and exclusively for mining operations subject to their inspection and approval by the Mines Inspectorate Director; expatriate quota and residence permit in respect of the approved expatriate personnel; and personal remittance quota for expatriate personnel, free from any tax imposed by any enactment for the transfer of external currency out of Nigeria.¹¹ A holder of a mineral title may be permitted by the Central Bank of Nigeria to enjoy free transferability of funds and retain in a foreign exchange domiciliary account a portion of his foreign exchange earnings for use in acquiring spare parts and other inputs required for the mining operations which would otherwise not be readily available without the use of such earnings. Any company granted mineral title under the Act shall enjoy a three year tax relief period commencing on the date of operation which may be extended by the Minister for one further period of two years under certain circumstances.

The provisions of the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act¹² and the Nigerian Investment Promotion Commission Act¹³ also apply to any investment in foreign currency made in respect of any mineral title granted under the Act. Companies engaged in the exploitation of mineral resources shall establish a tax deductible reserve for environmental protection, mine rehabilitation, reclamation and mine closure costs. However, the appropriateness of the reserve must be certified by an independent qualified person taking into account the determination made under the provisions of the Act.¹⁴

6. POSSESSION AND PURCHASE OF MINERALS

With the exception of bona fide specimens of mineralogical, geological or educational interest or the receipt by an employer of minerals from his tributers, unless mineral is won from a mineral title area of which a person is the holder or is permitted to possess or purchase such mineral and also entitled to explore and exploit the minerals, no person other than an officer of the Ministry authorized in that behalf by the Minister and acting in the execution of his duty shall possess any Mineral. In addition, no person shall purchase any mineral unless he holds a license to purchase minerals issued under the Act.

This chapter also provides for the establishment of a Minerals Buying Centre also for the purpose of receiving proceeds recovered under a small scale mining Lease and issue valid sales receipts.

7. ENVIRONMENTAL CONSIDERATIONS AND RIGHTS OF HOST COMMUNITIES

This chapter provides for the winning of materials [such as salt, soda, potash or galena] by host communities in relation to areas covered by mining leases; prohibition of mineral exploration in certain areas; reservation of rights of owner or occupier; payment of surface rents; assessment of various compensations and payment of same; restoration of mines land; reclamation; Community Development Agreements; Environmental obligations to include preparation and submission of environmental impact assessment statements and participation in the environmental protection and rehabilitation program.¹⁵

The Minister shall establish an Environmental Protection and Rehabilitation Fund for the purpose of guaranteeing the environmental obligations of Holders of Mineral titles as provided under the Act. The trustees appointed by the Minister shall operate the fund in accordance with the provisions of the Trustees Investment Act or amendments thereof.¹⁶

This section prohibits pollution of water course, alterations in water supply and provides that everyone who uses water in connection with mining operation shall ensure that the water in use does not contain injurious substances in quantities likely to prove detrimental to animal or vegetable life. Also, no person shall, in the course of Exploration or mining, carry out operations, in or under any area held to be sacred or permit injury or destruction of any tree or other thing which is the object of veneration.

8. OFFENCES AND PENALTIES

This chapter provides for penalties to offences including [illegal mining, false and misleading statements in applications for mineral title, false or non-declaration of important information, smuggling of minerals, use of false or fraudulent scales, misrepresentation and unlawful interference or obstruction].

Regarding dispute resolution, any dispute arising between the holder of a mineral title and the Government in respect of the interpretation and application of the Act, its regulations and the terms and conditions of mineral titles shall be resolved, in the first instance, on an amicable basis. Where the dispute is in the nature of a bona fide investment dispute, and such dispute is not amicably settled as stated above, it shall be resolved in accordance with the provisions of the Nigerian Investment Promotions Act. Any other dispute not settled within these parameters and any offence under the Act and regulations shall be resolved and tried in the Federal High Court.

9. CONCLUDING REMARKS

The Minerals and Mining Act 2007, provides a useful framework for the exploration and exploitation of minerals in Nigeria. The robust provisions in relation to local community relationships, should also serve as a useful framework for the oil and gas sector, which has over the years witnessed a fraught relationship between the local community and the oil and gas companies.

Footnotes

1. Section 2 of the Act

2. Section 163 of the Act

3. Section 91 of the Act

4. Section 72 of the Act

5. Section 47 of the Act

6. Section 48 of the Act

7. Section 49 of the Act

8. Section 51 of the Act

9. Section 50 of the Act

10. Section 52 of the Act

11. Section 25 of the Act

12. Cap F34 of the Laws of the Federation 2004

13. Cap N117 Laws of the Federation of Nigeria 2004

14. Section 30 of the Act

15. Sections 97 to 120 of the Act

16. Section 121 of the Act

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.