Mining in Ethiopia: Mining Law in Perspective

Mining is one of the best areas of investment in Ethiopia.  If you wonder to know the legal requirements of mining investment in Ethiopia here are the details.

According to the information released by the Ethiopian Investment authority, Ethiopia offers excellent opportunities for mineral prospecting and development. There is favorable geological environment hosting a wide variety of mineral resources. The following are some of them.

  1. Ethiopia’s green stone belts offer one of the finest areas for gold mineralization any where in the world, and more than 500 metric tons of gold deposits have already been identified by exploration. Precious and metallic minerals such as tantalum, and platinum;
  2. Industrial and construction minerals such as kaolin, diatomite, feldspar, quartz, silica sand, potash, phosphate, soda ash, salt, rock salt, limestone, marble and granite;
  3. Energy minerals including coal, oil shale, natural gas and to spring have also been identified in various parts of the country;
  4. With regard to fossil energy resources, there are significant opportunities for extracting oil and natural gas in the four major sedimentary basins, namely the Ogaden, the Gambella, the Blue Nile and the Southern Rift Valley.

In Ethiopia mining activity can be carried out by any kind of business, whether an Ethiopian or a foreign company, registered and licensed in Ethiopia. Under Ethiopian law there are four modes of doing business. These are;

  1. Sole proprietorship
  2. Business organizations incorporated in Ethiopia or abroad
  3. Public Enterprises established in accordance with the relevant law
  4. Cooperative societies formed in accordance with the relevant law

Private company:

Under Ethiopian law there are requirements set for registering a private company. One has to prepare an application form signed by the investor or agent. Where the application is made by an agent, a photo copy of his power of attorney is required. Moreover, three recent passport size photographs for approval and the registration process are necessary.

Minimum capital requirement of a private company under Ethiopian law

The minimum capital requirement for a wholly owned foreign investment is 100,000 USD for a single investment project presented in cash or in kind. Or  50,000 USD for projects in areas of engineering or architecture, accounting and audit services project studies or business management, consultancy services or publishing  which is going to be paid in cash or in kind.

After the company fulfils the necessary requirements and passes through the required registration procedure it will get the license to operate.

Types of mining license under Ethiopian mining law

According to the ministry of mines and energy, investors can invest on mining on all modes of dong business in Ethiopia. Namely, sole proprietorship, business organizations…. etc. the ministry of mines and energy has the authority to give mining license. It issues license to private investors engaged in exploration and mining operations, and ensures that they conduct mining operations and meet financial obligations in accordance with their concession agreements.

According to proc. No. 53/1995, there are two kinds of license in mining law, known as large scale and small scale licenses. However, there are additional concepts known as prospecting, exploration and artisanal license that may be acquired license that may be acquired before the above two.

Prospecting license is a license that grants an exclusive right to prospect for the minerals within the license area and it may not be transferred, assigned encumbered or inherited.

Exploration license grants an exclusive right to explore and mine for the minerals within the area specified n the license.

Artisanal mining license:- grants an exclusive right to explore and mine for the minerals within the license area. It shall include all tunneling and other underground work except vertical excavation of less than 15 meters in depth.

Small scale Mining license: – grants and exclusive rights to mine for the Minerals within the area specified in the license. It shall cover the area reasonably necessary to carry out mining operations. This kind of license may be transferred, assigned or encumbered with the prior approval of the Licensing Authority.

Large scale Mining license:-This license shall cover the area reasonably necessary to carry out mining operations. It shall also be transferred, assigned or encumbered with the prior approval of the Licensing Authority.

Validity Time of a Mining License

The Validity time of the license, renewal and cost of license differs depending on the type of license;

Prospecting license: – is valid for a period of one year and it may not be renewed.  In case of Exploration license, is valid for an initial period of three years and may be renewed twice for additional terms of one year each. The licensing Authority may further allow extension of renewal.

Artisanal Mining License shall be valid for one year and may be renewed indefinitely for like period.

Small scale Mining license is valid for a Maximum period of ten years or the life of the deposit, which ever is shorter, and may be renewed for a maximum period of five years each.

Large scale mining license shall be valid for a maximum period of twenty years or the life of the deposits, whichever is shorter. The license may be renewed for a maximum period of ten years each.

There are no limitations imposed on companies with foreign capital any differently than those imposed on domestic ones.

The process for application of a mining license is stated in regulation 182/94. Art 3-5 provide the requirement for application of prospecting license, exploration and Mining licenses. Summary is also available in the application form which we’ll get from Mining office with the directive. Further chapter II of the regulation provides the process of issuing a license art 6-13.

Fikadu Asfaw practices law in Addis Ababa, Ethiopia and is a member of the LawGuru Attorney Network.

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