Big win for Mali Minerals, as country’s new mining code ensures 35% of new Lithium Project

The Malian government has just won a major victory in its strategy to develop the country’s mineral resources. The country’s new mining code, adopted in 2023, has just been applied to the Bougouni lithium project, located in southwest Mali.

This project, co-owned by the British Kodal Minerals and the Chinese Hainan Mining, will now allow the Malian State to hold 35% of the shares; 30% for the State and 5% for local investors. In return, Kodal Minerals benefits from a 10-year mining permit, which is renewable.

This decision is in line with the government’s policy aimed at strengthening state participation in mining projects and maximising economic benefits for the country. Earlier this year, the same mining code had already been applied to the Goulamina project, which will become the largest lithium mine in Africa.

In an era where the global demand for lithium is skyrocketing due to its use in the booming electric vehicle market and renewable energy initiatives, Mali’s Mines have emerged as significant players in the mining sector.

The mining code is designed to create a favourable environment for both local and foreign investments in Mali’s mining sector, and it offers a range of categories of mineral titles available to authorise exploration and mining.

The New Mining Code does not apply to exploration and mining permits granted under previous legislation but applies to new permits and renewal of existing permits on projects already underway. However, the Local Content Law applies, with immediate effect, to all existing mining projects across the country

Assessments made by some commentators in the country show that the new code has some key features as well. The earlier mentioned allocation of a 30% stake to the government and 5% to local investors in new lithium projects ensures that Malians will directly benefit from the resources extracted from their land. The state can also take a 10% stake in mining projects and can buy an additional 20% within the first two years of commercial production.

It also introduces clearer guidelines for all stakeholders, establishing a balanced framework for mining operations that would allow greater local participation in the mining value chain, government sources say. For example, it requires that all goods and services procured for mining operations be sourced from Malian subcontractors, with an exception where the service cannot be provided by a local company, or at costs comparable to those of foreign entities, or according to “international standards” applicable in the mining sector.

There is also the requirement to insure all mining activities via locally approved insurers. However, where the amount of cover exceeds the insurer’s financial capacity, the insurer can (but is not obliged to) seek reinsurance from a foreign company.

However, a reading of the new rules indicates a strong shift towards indigenous control by boosting local expertise in the sector through training of the indigenous workforce, limiting foreign employees over time.

Part of the new rules dictates that mining companies must gradually reduce the proportion of foreign employees from 10% in the first three years to 5% in the following three years of operation. Tax exemptions for mining companies during operations have also been removed.

A major feature is its emphasis on environmental considerations and promoting responsible mining practices, aligning with global sustainability goals.

The mining code has also been applauded for its support for Local Communities impacted by mining operations, ensuring that they receive tangible benefits from the projects.

With substantial lithium deposits, Mali stands to benefit heavily from the projected growth in electric vehicle production, which is anticipated to rise dramatically in the coming years.

While experts say the new mining code could boost the national budget by 500 billion CFA francs ($820 million), some experts fear, however, that mining investment in the country will slow down as many global mining firms would see vastly reduced financial gains for their huge investments. In addition, they say, the country would need to work on its infrastructure to fully harness the potentials of the mining code.

On the issue of insurance cover exceeding the insurer’s financial capacity, experts say this is  likely to be particularly problematic for local insurers who wish to partake in large-scale projects, which could potentially threaten their viability.

In spite of these challenges, Mali’s new mining code signifies a major advancement for the country’s mining sector, especially the future of lithium mining. By ensuring that the country retains a stake in its resources, key voices in the regions’ mining industry say the government is fostering an environment where local communities would reap the benefits of their resources.

As Mali Minerals embarks on this new chapter, its success will rest on navigating the challenges ahead while maximising the opportunities presented by its rich mineral resources. This development holds the potential not just for economic growth, but for transforming Mali’s position in the global lithium landscape, setting a precedent for responsible and equitable mining practices.