Cameroon’s new mining code: financing and state powers

The new code builds on the foundations of the 2016 mining code and reflects the increased involvement of foreign companies in Cameroon’s mining market in recent years – and the desire of the state to derive greater local value from those companies. In addition to changes to the regulatory and permitting regimes, the new code provides for new financing arrangements and enhanced rights of the state.

The establishment of three mining funds

The new mining code introduces the Mining Sector Development Fund, which is aimed at financing inventory activities for detecting minerals and other mining and geological activities. This fund will be resourced by holders of mining permits and licences, dependent on their gross production. The organisation and functioning of this fund will be determined by further regulation.

The code also establishes the Mining Site and Quarry Restoration, Rehabilitation and Closure Fund. This fund is designed to finance the implementation of environmental conservation and rehabilitation programmes following mining activities, which are known for their significant environmental impacts. The holders of mining permits and licences will contribute to this fund.  However, unlike the Mining Sector Development Fund, these amounts must be transferred to an escrow account in Cameroon’s central bank and will be exempt from income tax.

The third fund established by the new mining code is the Special Local Capacity Building Account. This fund is primarily aimed at financing Cameroon’s economic, social, cultural, and technological development by developing local enterprises. The resources for this fund will be obtained from 0.5% to 1% of the total turnover of mining companies in Cameroon. The exact percentage will be determined by the mining agreements concluded between the mining companies and the state. 

State rights and enhanced powers for the National Mining Corporation

Established by presidential decree in 2020, the National Mining Corporation, or SONAMINES, is a public corporation with the state as its sole shareholder. Its primary mandate is to ensure that the Cameroonian economy reaps the benefits of the country’s mining activities and to foster economic development in Cameroon. SONAMINES plays a crucial role in the mining sector by acquiring shares in companies engaged in various mining activities. These activities range from exploration and exploitation to financial transactions, that are either directly or indirectly related to its corporate purpose or contribute to its growth.

Under the new mining code, SONAMINES has been given exclusive rights to purchase and market gold and diamonds in Cameroon. This positions it as a key intermediary in all production sharing agreements between the state and mining companies.

The management of non-industrial mining activities is devolved to regional and local authorities, which aim to streamline operations, enhance revenue generation, and create local employment and economic growth opportunities.

Section 47 of the new mining code mandates state participation in the share capital of companies that are involved in both small-scale and industrial mining. The state’s participation will be up to 10% of the total shares and the state will be entitled to these shares free of charge. Importantly, these shares will not be diluted should the share capital increase. The state can increase its shares in the capital for profit purposes, by mutual consent of the parties, in proportions not exceeding 10% for small-scale mining and an additional 25% for industrial mining.

These provisions ensure that the state will receive dividends as a shareholder of at least 10% in small-scale and industrial mining companies.

Section 48 of the new code establishes conditions for sharing production between the state and the mining permit applicant. These conditions are included in the mining agreements by the parties. The state’s share in the product sharing will depend on the size of the mining project and the nature of the substance mined. It will range between 1% and 5% for precious and semi-precious substances, and between 2% and 15% of the production for other mineral substances.

Co-written by Christin Kleingeld and Keagile Madiba of Pinsent Masons.