A COMPREHENSIVE ANALYSIS OF THE MINING ACT, 2016 LAWS OF KENYA
Introduction
The Mining Act, 2016 (Cap 306), was enacted to give effect to Articles 60, 62(1) (f), 66(2), 69, and 71 of the Constitution of Kenya 2010. The Act repealed the following statutes; the Trading in Unwrought Precious Metals Act and the Diamond Industry Protection Act. Essentially this act aimed at consolidating under one Statute issues relating to prospecting, mining, processing, refining, treatment, transport, and any dealings in minerals in Kenya.
This mining legislation in Kenya is thus crucial for individuals, local traders, foreign investors, and multinational mining companies intending to engage in mineral-related activities in the country. Understanding this Act is vital for compliance and successfully navigating Kenya’s mining sector.
In this article, we analyze key provisions under the Act, including Ownership, and point out legal gray areas.
Definition of Minerals
Section 4 of the Act, defines “Minerals” to mean a geological substance whether in solid, liquid, or gaseous form occurring naturally in or on earth, in or under water, in mine waste or tailing, and includes the minerals specified in the First Schedule but does not include Petroleum, hydrocarbon gases or groundwater.
Ownership and Control of Minerals in Kenya
The Law in Kenya provides that all minerals including those on Land, Lakes, rivers, streams or watercourses, exclusive economic zones, and the Continental shelf are the property of the Republic of Kenya and are vested in the national government in trust of the people. This, therefore, means that even in circumstances where the minerals are discovered on an individual’s land, the government still has a claim. Notably, the government has a right of pre-emption of all strategic minerals raised, won, or obtained within the territory of Kenya. However, foreign investors may receive special permits or exemptions for land access, including compulsory land acquisition in cases where private or community landowners withhold consent (Sec. 40).
Mineral Rights and Licensing
Under Part IV of the Act, any person or entity intending to prospect, mine, or deal in minerals must obtain the relevant license from the Cabinet Secretary in charge of mining. The Act Sets out the following categories of mineral rights:
- Large-scale mining operations include; a reconnaissance licence, prospecting licence, a retention licence, and a mining licence.
- Small-scale mining operations include; prospecting permits and Mining permits.
- Mining rights on private and Community Land; The Act requires the owners’ consent and if it is on community Land, there has to be express consent.
- Government participation in mining licence; where a mineral right is for large-scale mining operations, the State shall hold a 10% free carried interest in the share capital of the right in respect of which financial contribution shall not be paid by the State.
- Local equity participation; A holder of a mining licence whose planned Capital expenditure exceeds the prescribed amount must list at least 20% of its equity on a local stock exchange within three years after commencement of production.
- Assignments, transfers, mortgage, and trade of mineral rights; the Act requires the holder of a mineral right to obtain the consent of the Cabinet secretary before assigning, transferring, or mortgaging mineral rights.
All applications must comply with set environmental and safety standards. The Cabinet Secretary has the discretion to grant or refuse a license based on the applicant’s qualifications and compliance with legal requirements.
Licensing Exemptions
The Act provides certain exemptions from licensing requirements. These include:
- Artisanal Miners; Individuals or small-scale miners operating under community-based mining schemes may be exempted from full licensing requirements but must adhere to registration and regulatory guidelines.
- Government Institutions; State agencies engaged in mineral exploration for research and development purposes may be exempt from standard licensing.
- Minerals for Domestic and Non-Commercial Use; Individuals extracting minerals in small quantities for personal or non-commercial purposes may not require a full mining licence but must comply with local regulations.
- Foreign Investors and International Entities; certain exemptions may apply to foreign investors or international mining entities under bilateral or multilateral agreements. Additionally, foreign entities engaging in research, technology transfer, or government-sanctioned projects may be granted specific licensing waivers or relaxed requirements.
- Mining Activities on Private Land; in cases where mining is conducted on private land with owner consent, certain regulatory exemptions may apply, provided environmental and safety standards are met.
Royalties, Fees, and Government Revenue
- The Act prescribes royalty payments for mineral extraction, with provisions for reduction or suspension in special cases.
Import and Export of Minerals in Kenya
Export of minerals; the holder of a mineral right, a mineral dealer licence, or a diamond dealer’s licence must apply to the Director of Mines for an export permit. The Act allows for preferential export terms under mineral agreements, including potential royalty reductions or delayed payments for foreign investors dealing in strategic minerals. Notably, the establishment of a Minerals and Metal Commodity Exchange aims to facilitate secure and efficient transactions for foreign investors.
Importing of minerals; the law requires the person intending to import minerals to make a declaration at the point of entry. Mining companies, particularly those involved in large-scale operations, may benefit from import duty exemptions on mining equipment and machinery to encourage foreign direct investment.
Stability Agreements
Large-scale investors may enter into mineral agreements with the government that offer fiscal stability provisions (Sec. 117-120). These agreements ensure tax and regulatory predictability for foreign investors over a specified period.
Legal Gray areas
Even though Parliament has made a serious effort to protect and control the mining industry, a few areas might need further interrogating. For instance, on small-scale operations, the law is not clear whether the prospecting permit confers exclusive or non-exclusive rights. The reconnaissance permit under small-scale operations takes a departure from cadastral unit system in defining the area and leaves specifications quite open.
The Mining Act, of 2016 is a cornerstone in regulating Kenya’s mineral sector. Compliance with its provisions is crucial for businesses and investors to avoid legal risks and penalties. Given the complexity of Kenya’s mining regulatory framework, CR Advocates LLP offers expert legal services in this area, including advisory on licensing, due diligence, compliance audits, and legal representation in disputes related to mining operations.
For further legal guidance on the Mining Act 2016 Kenya , feel free to reach out to CR Advocates LLP for professional assistance.
A COMPREHENSIVE ANALYSIS OF THE MINING ACT, 2016 LAWS OF KENYA
Introduction
The Mining Act, 2016 (Cap 306), was enacted to give effect to Articles 60, 62(1) (f), 66(2), 69, and 71 of the Constitution of Kenya 2010. The Act repealed the following statutes; the Trading in Unwrought Precious Metals Act and the Diamond Industry Protection Act. Essentially this act aimed at consolidating under one Statute issues relating to prospecting, mining, processing, refining, treatment, transport, and any dealings in minerals in Kenya.
This mining legislation in Kenya is thus crucial for individuals, local traders, foreign investors, and multinational mining companies intending to engage in mineral-related activities in the country. Understanding this Act is vital for compliance and successfully navigating Kenya’s mining sector.
In this article, we analyze key provisions under the Act, including Ownership, and point out legal gray areas.
Definition of Minerals
Section 4 of the Act, defines “Minerals” to mean a geological substance whether in solid, liquid, or gaseous form occurring naturally in or on earth, in or under water, in mine waste or tailing, and includes the minerals specified in the First Schedule but does not include Petroleum, hydrocarbon gases or groundwater.
Ownership and Control of Minerals in Kenya
The Law in Kenya provides that all minerals including those on Land, Lakes, rivers, streams or watercourses, exclusive economic zones, and the Continental shelf are the property of the Republic of Kenya and are vested in the national government in trust of the people. This, therefore, means that even in circumstances where the minerals are discovered on an individual’s land, the government still has a claim. Notably, the government has a right of pre-emption of all strategic minerals raised, won, or obtained within the territory of Kenya. However, foreign investors may receive special permits or exemptions for land access, including compulsory land acquisition in cases where private or community landowners withhold consent (Sec. 40).
Mineral Rights and Licensing
Under Part IV of the Act, any person or entity intending to prospect, mine, or deal in minerals must obtain the relevant license from the Cabinet Secretary in charge of mining. The Act Sets out the following categories of mineral rights:
All applications must comply with set environmental and safety standards. The Cabinet Secretary has the discretion to grant or refuse a license based on the applicant’s qualifications and compliance with legal requirements.
Licensing Exemptions
The Act provides certain exemptions from licensing requirements. These include:
Royalties, Fees, and Government Revenue
Import and Export of Minerals in Kenya
Export of minerals; the holder of a mineral right, a mineral dealer licence, or a diamond dealer’s licence must apply to the Director of Mines for an export permit. The Act allows for preferential export terms under mineral agreements, including potential royalty reductions or delayed payments for foreign investors dealing in strategic minerals. Notably, the establishment of a Minerals and Metal Commodity Exchange aims to facilitate secure and efficient transactions for foreign investors.
Importing of minerals; the law requires the person intending to import minerals to make a declaration at the point of entry. Mining companies, particularly those involved in large-scale operations, may benefit from import duty exemptions on mining equipment and machinery to encourage foreign direct investment.
Stability Agreements
Large-scale investors may enter into mineral agreements with the government that offer fiscal stability provisions (Sec. 117-120). These agreements ensure tax and regulatory predictability for foreign investors over a specified period.
Legal Gray areas
Even though Parliament has made a serious effort to protect and control the mining industry, a few areas might need further interrogating. For instance, on small-scale operations, the law is not clear whether the prospecting permit confers exclusive or non-exclusive rights. The reconnaissance permit under small-scale operations takes a departure from cadastral unit system in defining the area and leaves specifications quite open.
The Mining Act, of 2016 is a cornerstone in regulating Kenya’s mineral sector. Compliance with its provisions is crucial for businesses and investors to avoid legal risks and penalties. Given the complexity of Kenya’s mining regulatory framework, CR Advocates LLP offers expert legal services in this area, including advisory on licensing, due diligence, compliance audits, and legal representation in disputes related to mining operations.
For further legal guidance on the Mining Act 2016 Kenya , feel free to reach out to CR Advocates LLP for professional assistance.
LEGAL ALERT: KENYA TAX AMENDMENTS 2024 – IMPACT, IMPLICATIONS, AND EXPECTATIONS FOR 2025