ASX-listed Magnis Resources has received and reviewed initial legal advice on the new legislative amendments to the legal framework governing the mining and natural resources sector in Tanzania and its impact on the company’s activities in Tanzania.

The legal advice confirms the in-country management and board’s assessment that further clarity is required before an appropriate assessment of the impacts can be made on the Nachu graphite project, in south-east Tanzania.

Magnis said in August that it continues to have a close working relationship with government and is still carefully following up developments with relevant authorities so that all objectives are met. The situation, with the recently introduced legislation, in Tanzania continues to evolve, impacting all companies working within the mining and exploration sector, including those that hold mining licences and special mining licences (SMLs). Magnis awaits appointments for the newly prescribed “Mining Commission” to confirm all mining licence agreements and the appointment of a new Minister for the Ministry of Energy and Minerals to allow meaningful and authoritative communication to occur.

The Nachu graphite project has an expected mine life of 40 years and covers an area of 199 km2, as well as an inferred resource of 174-million tons of 5.4% graphitic content at a 3% cutoff grade.

Three supplementary Bills were passed by the Tanzanian Parliament in July and the company understands these to have received Presidential acceptance and been officially signed, thereby becoming Acts and operating as law.

Magnis explains that the three new Bills are called the Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Bill, 2017, the Natural Wealth and Resources (Permanent Sovereignty) Bill, 2017, and the Written Laws (Miscellaneous Amendments) Bill, 2017.

“Until these new regulations are reviewed, the company and legal advisers cannot make sufficiently detailed statements to shareholders and the market,” the company says.

The new legislation appears as though it will impact on Magnis Resources’ wholly owned subsidiary, Uranex Tanzania (UTZ), which plans to conduct graphite mining operations and produce a graphite concentrate. The level of impact requires further clarification given that the project holds an SML and mineral development agreement (MDA).

In particular, the company explains, the Written Laws (Miscellaneous Amendments) Bill will require clarification on its potential impact on UTZ, as Magnis notes the inclusion of Section 10 of the Bill, referencing not less than 16% nondilutable free-carried interest in shares of the mining company (UTZ in this case), compared with the 5% free-carried shareholding in the project for the government of Tanzania as was originally agreed upon.

The Natural Wealth and Resources Contracts Act mentions government renegotiation of “unconscionable terms”, which will need to be investigated further and which require clarification for the company.

Magnis explains that, in addition to the free-carried interest shares in UTZ, government can acquire up to 50% of the shares in the mining company commensurate with the total tax expenditures incurred by government through the shares that they own or tax incentives in favour of the mining company.

One of the key terms agreed to in the MDA was a tax rate of 30%, thus no special tax concessions were applicable given that the current tax rate in Tanzania is already 30%. A production royalty of 3% was also agreed to in the original MDA and this remains unchanged under the new legislation.

Further, an amendment to Section 90 of the Mining Act applies an inspection fee of 1% of the gross value of exportation of minerals. This is a new inclusion, which will have an impact on the Nachu graphite project; however, the extent of this has yet to be fully determined, Magnis said in July.

At the time, Magnis added that it was in ongoing discussions with the Tanzanian government and is seeking advice on these legislative changes, particularly with reference to the existing SML and MDA and will provide further updates to shareholders and the market when received.

The company has been advised by the Export Processing Zone Authority that the new legislation will not have an impact on its subsidiary Magnis Technologies Tanzania, which will use Magnis’s developed technology in the special economic zone (SEZ) for the processing of graphite concentrate to produce final products. The SEZ was approved by the current government and announced to the ASX on March 29.

The approval to operate within an SEZ allows Magnis to apply the advanced technologies it has been developing to produce value-enhanced graphite products. SEZ legislation was introduced in Tanzania in 2006 and provides incentives for companies to create value addition and advance employment in and development of Tanzania. The SEZ licences are issued by the Minister of Industry and Trade.

In July, Magnis said it would remain in voluntary suspension from trading on the ASX until the new regulations are clear. At the time it noted that, once the new legislative changes become Acts and further clarification is provided on the status of the SML and MDA on the Nachu graphite project, the company and its advisers will assess the impact of these changes and update shareholders and the market.

“The company’s board and management have always acted in the best interests of all stakeholders in the project and have been respectful in our dealings with the government of Tanzania and will continue to develop that relationship with authorities,” the company highlighted.

Magnis emphasised that it respected government’s ambition to amend the mining legislative laws to provide the country with a structured framework for the industry in future. The company planned to remain in suspension until August 28.