Uganda to Introduce Competitive Bidding for Mining Licences

on Oct 4, 2012

Uganda’s mining sector is likely to get a boost by new regulations intended to change the way mining licences are awarded. On 1 October 2012, Reuters reported that the country was planning to start distributing mineral prospecting and production licences by means of competitive bidding rather than on a first-come-first-served-basis, with the policy change being prompted by investor interest.

Uganda’s mining sector is largely underexploited, given that much of the activity is dominated by small scale producers involved mostly in gold and cobalt mining, the east African country’s leading mineral exports.
!m[](/uploads/story/517/thumbs/pic1_inline.png)Reuters quoted the permanent secretary of Uganda’s ministry of energy and minerals, Kabagambe Kaliisa, who said at a news conference that the change of policy scheduled to commence in 2013, follows acquisition of extensive geological data on Uganda’s mineral resources.

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The data in question identified 16 mineral targets for exploration and development, which reduced the risk of failure in finding minerals. In addition, the data also pointed at several other potential mineral formations requiring additional studies. Uganda’s energy ministry notes that in recent years, geophysical surveys have been conducted on some 80 percent of the country, confirming existence not only of gold, but also of diamonds, rare earths, base metals, uranium, titanium and other minerals in various locations.

The new system for distributing mining licences is seen as an improvement on the previous practice since it will enable the government to select the most appropriate project based on criteria such as experience and financial standing. “The normal practice and policy has been that if you come and say this is my target, the commissioner is almost obligated to license you,” notes Mr Kabagambe, as quoted by Reuters.

In addition to implementing competitive bidding, the ministry also intends to introduce more rigorous scrutiny of applicants since some speculators have reportedly been securing licences only to flip them for a profit. “They hold ground and do no work,” points out Mr Kabagambe, as quoted by Reuters. “So we’ll be doing due diligence to find out whether you have financial capacity, technical capacity, whether you have the experience to carry out the work programme that you’ve been licensed to do.”

Uganda is also likely to become a crude oil producer, as in 2006, commercial hydrocarbon deposits were discovered in the Albertine rift basin, along the country’s border with the Democratic Republic of Congo. Uganda’s government estimates that the reserves total 3.5 billion barrels, with 30 percent of the oil recoverable.
Bloomberg reports that in the first quarter of 2012, Uganda licensed 62 investment projects amid growing interest in the country’s oil industry. “The energy, oil and water sectors recorded the highest value of planned investment from four projects, followed by mining, real estate and business services,” noted Patrick Bitature, chairman of Uganda Investment Authority, a semi-autonomous government agency operating in partnership with the private sector and Government of Uganda. It would be interesting to observe whether the mining sector will move up the investment ladder once the new competitive bidding system comes into place.


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