Madagascar is located in the Indian Ocean approximately 400km off the east coast of Mozambique, south eastern Africa. The nation is the fourth-largest island in the world. Madagascar's topography is characterised by a mountainous central plateau and surrounding coastal plain. The climate is diverse with tropical rainforest in the east, savannah grassland in the center and west.
Some of the world’s largest miners operate in Madagascar including Rio Tinto, and Sumitomo which operates the Ambatovy Project, one of the world’s largest nickel mines.
The country is also host to other numerous commodities including copper, zinc, cobalt, chromite, coal, uranium and a growing graphite industry.
Rio Tinto and the Sumitomo-Korea Resources-SNC-Lavalin consortium are the largest investors in the mining sector in Madagascar with the 2006 Fort Dauphin mineral sands and 2010 Ambatovy laterite nickel developments respectively. Both are large scale long life operations which required in-country investments of approximately US$900 million and US$7.0 billion respectively.
After several years of discussion and consultation with the mining industry, both Houses of the Malagasy Government passed the Revised Mining Code into law on 7 June 2023. Following a review for Constitutional and Legal implications of the Mining Code, the President of Madagascar declared the Mining Code approved on 27 July 2023.
This significant event occurred following the Malagasy Council of Ministers approving the Ministry of Mines and Strategic Resource to resume processing applications for all mining permits on 30 March 2023 (AKORA - ASX Announcement 4 April 2023).
The Implementation Rules will now be prepared and these Rules will enable exploration and mining companies to understand how to progress against the Revised Mining Code. When these Implementation Rules become available the company will provide commentary on how they influence AKORA.
Changes in the Revised Mining Code that the company currently understand are that the mining royalty will increase from 2 to 5% - this compares to a 7.5% royalty for Direct Ship Iron Ore in Western Australia. The revised Mining Code states that when transformation/upgrading of the mined product occurs, within Madagascar, then the royalty reduces from 5% to 3.5%. Our present understanding of ‘Transformation’ of a mineral substance means that all operations that give mineral substances a different appearance than the original, or to modify their chemical or mineralogical composition, in order to valorise them. The degree of transformation will need to be confirmed once the particular Implementation Rule is announced. For comparison, the royalty in Western Australia for upgrading iron ore to a higher grade concentrate is 5%.
The corporate income tax rate in Madagascar is 20%.
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