Avocet Mining PLC Prospectus December 2011

c105718pu030 Proof 5: 7.12.11_13:38 B/L Revision:
monetary union creating a single large trading bloc. As a consequence there is a drive to develop a
common legal system among member countries.
Burkina Faso introduced a new mining code in 1997 and this was modified further in 2003 with the
law Order No. 031-2003/AN. Under this code the government has the ownership of all Mineral
Resources. Therefore, neither individuals nor entities may prospect for minerals or carry on mining
operations without a licence granted by the government pursuant to the mining code. The mining
code guarantees a stable fiscal regime for the life of any mine developed. It also guarantees the
stabilisation of financial and customs regulations and rates during the period of the exploitation to
reflect the rates in place at the date of signing. However the title holder can benefit from any
reductions of tax rates set up by a new law or regulation, provided it agrees to be subject to the new
provisions in their entirety.
There are no restrictions or distinctions between foreigners and citizens in the acquisition of mineral
rights.
The mining code identifies three different permits:
1. Exploration permit – An exploration permit is granted by the Minister of Mines and is
restricted to a total area of 250 square kilometres for all minerals. Permits have a duration of
three years and may be renewed twice for a period of three years each, bringing the total
exploration period to 9 years. The relinquishment of 25 per cent of the permit area is optional
for the first renewal and mandatory for the second renewal.
2. Exploitation permit – An exploitation permit is granted by the Council of Ministers based on
recommendation of the Minister of Mines. This gives the permit holder the right to operate an
industrial mine for exploitation purposes. The state automatically obtains a ten per cent
participation in the venture. The permit is valid for a period of 20 years. It is renewable after
the initial 20 years term for additional terms of five consecutive years until depletion of the
deposit.
3. Semi mechanised operations permit – It confers on its holder, within the limits of its perimeter,
surface and depth, the exclusive right to exploit the mineral substances contained therein
according to the provisions of mining regulations. The semi industrial exploitation permit is
issued for five years, renewable by additional terms of three years each. The maximum area for
which semi industrial exploitation permits are issued can not exceed one hundred hectares.
Duties, royalties and taxes
Gold production is subject to a government royalty rate based on the realised price of gold on the
date of delivery. Gold realised prices lower or equal to US$1,000 per ounce are subject to a royalty
rate of three per cent, a four per cent rate applies for realised prices between US$1,000 and US$1,300
per ounce, and a five per cent royalty rate is levied on all shipments with a gold realised price greater
than US$1,300 per ounce.
Profits are subject to corporate tax at a rate of 27.5 per cent. In addition, mining companies at the
exploitation phase benefit from a ten per cent reduction in the rate of tax, resulting in a rate of 17.5
per cent throughout the production period. Repatriated dividends are subject to a 6.25 per cent
withholding tax. This is a 50 per cent reduction from the standard rate of 12.5 per cent. Mining
operators at exploitation are subject to value added tax at a rate of 18 per cent.
There is no distinction between duties or royalties payable by domestic and foreign parties.
Environmental legislation
In January 1994, Burkina Faso proclaimed its first environmental act (Loi No 1002/94/ADP du 19
Janvier 1994 portant Code de l’Environnement au Burkina Faso). This act was then reviewed and
reformulated as Law No 005/97 ADP on 17 March 1997. In conjunction with this environmental
code the mining code, which became law on 22 October 1997 (Loi No 023/97/II/AN), refers to the
health, safety and environmental controls governing the mining industry.
The application for an exploitation permit must include an EIS, an enhancement and mitigation plan,
and an environmental monitoring and management programme. The consent from the people
concerned must be obtained to carry out mining activities within 100 metres of dwellings, wells,
religious buildings, burials or sacred ground. The owner or user of a tract of land must also be
compensated for resettlement or for the use of land, wood and water by the mining operator. Access
roads, power lines and other infrastructures built for the purpose of mining can be used by the public
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