The legal framework governing the conduct of all mining and related operations within the territory of Eritrea is embodied in the mining law, which comprises the Minerals Proclamation (No68/1995), the Mining Income Tax Proclamation (No69/1995) and Regulations on Mining Operations (Legal Notice No19/1995), all of which were promulgated in March 1995.
The mining law was prepared to satisfy the key policy which is that all mineral resources in Eritrea are public property, and hence the State has a duty to ensure the conservation and sustainable development of these resources for the benefit of the people. It also provides a favourable environment for foreign direct investment into the mining sector.
Due recognition is made of the significant role that foreign investment and skills can play in the development of this sector, and of the capital intensive, long-term, and risky nature of mining investments. The law also recognises the importance of regulations to ensure the proper protection of the natural environment, and strongly urges operators to comply with sound principles of resource management and land use.
The Eritrean mining law is up to date, attractive and competitive, as it provides considerable benefits and incentives to investors. For example, the law provides for:
■ The right to exploit any commercial discoveries made pursuant to a valid exploration licence.
■ The right to sell locally or export, free of all duties and taxes and without being required to obtain any other authorisation or permission from any other government agency, all minerals produced pursuant to a mining licence.
■ A simple and fair taxation system which recognises the risky nature of mining investments, and hence allows:
- accelerated depreciation (straight line method over four years) of all capital and preproduction costs; write-offs of exploration expenditure incurred anywhere in the country;
- the carrying forward of losses;
- a generous reinvestment deduction (5% of gross income); and no dividend tax;
- a nominal rate of import duty (0.5%) on machinery, equipment and spare parts necessary for mining operations; and
- low royalty rates as well as an option for the reduction, suspension or waiver of the royalties in appropriate circumstances.
■ Equitable foreign exchange regulations, permitting; free and unrestricted repatriation of earnings; retention of a portion of foreign currency earnings abroad in external accounts; and maintenance of foreign currency accounts in
banks in Eritrea.
■ A simple ‘one-stop’ licensing system enabling all the formalities for all types of licences for mining operations to be completed by a single government agency (the Department of Mines within the Ministry of Energy and Mines).
The mining law permits these licence types:
- Prospecting Licence, valid for one year and non-renewable.
- Exploration Licence, valid for an initial three years, but which may be renewed twice for additional terms of one year each, with an option for further renewals in appropriate circumstances.
- Mining Licence, valid for 20 years with optional 10-year renewals. Licences are exclusive and grant their holders an automatic right to obtain an Exploration Licence from within a Prospecting Licence, and a Mining Licence from an
- Exploration Licence, subject to the fulfilment of the obligations under the preceding licence. Although the maximum area that a single licence can cover is fixed at 100km2 for a Prospecting Licence, 50km2 for an Exploration Licence and 10km2 for a Mining Licence, simultaneous possession of multiple contiguous licences is permitted.
Applications for licences may be made by individuals or legal entities of any nationality and are made on specified forms that can be obtained from the Department of Mines of the Ministry of Energy and Mines, and must be accompanied by a non-refundable processing (registration) fee and supporting documents.
Successful applicants are also subject to a payment of licence fees and the first year’s rental upon the issue of a licence. The rate of these fees is governed by regulation.