Holy Mali: Seeing Gold at the End of the Tunnel

The ongoing saga between mining companies and the Malian government has been one of the most followed mining industry disputes in recent memory. To assert greater control over its natural resources and subsequently increase its share of tax revenue, Mali's government made changes to the mining tax code in 2023 and enforced these new rules on mining companies operating in the country. In this commentary, we provide our viewpoint on the topic.

Key highlights include:
-- In 2023, new regulations in Mali entail the government increasing its ownership interest to 35% from 20% in operating mines and an increase in royalties to 10.5% from 6%.
-- The biggest surprise for mining companies was the hefty tax bills through the government's retroactive application of the new tax code for the 2020, 2021, and 2022 tax years.
-- Perhaps an even bigger concern is whether governments in other countries will follow the precedent set by Mali and forcefully assert ways to increase the share of tax revenue from mining companies.

"We factor in the amount of production from countries with less predictable legal and regulatory environments," said Brian Szeto, Vice President of the Morningstar DBRS Corporate Ratings team. "Changes in mining regulations can quickly and negatively affect the profitability of a mining operation and, as a result, the credit quality of an issuer."