Sierra Leone is a resource-rich country with significant deposits of iron ore, diamonds, bauxite, rutile and gold, as outlined in the SIERRA LEONE AT A GLANCE section. In 2013, before the drop in commodity prices and the outbreak of Ebola, mining revenues (including licensing fees, signature bonuses, royalties, income tax, customs duties and other non-tax mining revenues) accounted for approximately US$110 million (or 21.2 per cent. of the NRA’s revenue).

At that time, Sierra Leone was one of the world’s top iron ore producers and the sixth largest exporter to China. After the collapse of iron ore prices from an average of US$96/t in 2014 to US$56/t in September 2015, together with a slowdown in Chinese demand, companies such as African Minerals and London Mining were forced to cease in-country operations. With further private investment into oil and gas projects grinding to a halt, it had a significant impact on Sierra Leone’s economy, which contracted by more than 21.5 per cent. in 2015. Sierra Leone’s output of diamonds and gold also shrank markedly in 2015.

Despite this downturn and continuing uncertainty in the iron ore sector, Sierra Leone’s domestic revenue was projected to grow to US$633 million in 2016, which is 10.4 per cent of the GDP. This is compared to 9.8 per cent. of GDP in 2015. The GoSL has committed to developing its mining capabilities, allocating US$1.7 million from the 2016 budget to the Ministry of Mines and Mineral Resources. Approximately, US$380,000 was to be provided for the reconstruction of the regional offices of the NMA and US$500,000 to support the Extractive Industry Transparency Initiative.

There are other indications of a more positive outlook for the mining in Sierra Leone in the near future. For example, the German International Development Cooperation, the UK Department for International Development, the African Development Bank and the World Bank pledged to provide about US$1 million to support various projects in the mining sector in 2016. The recovering revenues from the oil, gas and mining sectors are expected to make up 17 per cent. of Sierra Leone’s economy by 2020. Business Monitoring International’s mining team estimated that the iron ore production in Sierra Leone would increase by 22 per cent in 2016 to 11.8 million tonnes per annum.

Oil exploration in Sierra Leone dates back to the early 1960s, with initial work mostly completed in shallow water using 2D surveys. Mobil found oil in 1982 at well A-1 and Amoco in 1985 at well A-2, with both discoveries made at water depth of less than 100 metres. According to the Petroleum Directorate, the current cycle of exploration commenced in the year 2000, when TGS-NOPEC acquired 5,800 kilometres of seismic data. With introduction of the first petroleum legislation in 2001, Sierra Leone’s offshore area was divided into seven blocks. The nation’s first bidding round in 2003 saw four exploration blocks awarded. As of 2012, Sierra Leone held three exploration bid rounds in which international companies such as Chevon, Tullow Oil and Repsol participated.

Over time, there have been a number of deepwater discoveries in Sierra Leone with the first made by Anadarko in 2009 (Venus). Anadarko’s second discovery followed in 2010 (Mercury). In 2012, Tullow Oil found oil in the block it shares with Anadarko and Repsol (Jupiter). This was followed by Lukoil’s discovery on Block SL-05B-11 (Savannah). While none of these discoveries have resulted in commercial production, each new find creates greater interest in Sierra Leone’s offshore holdings and more potential bidders for blocks. The GoSL estimates that oil production could start in 2017.




The key piece of legislation that governs the mining sector in Sierra Leone is the Mines Act. Investors should consider a number of key provisions under the Mines Act as follows.


The following mineral licences are available in Sierra Leone: (i) the “reconnaissance licence”, (ii) the exploration licence, (iii) the artisanal mining licence, (iv) the small-scale mining licence, and (v) the large-scale mining licence. For a company to be granted mineral rights under the Mines Act it must be registered or incorporated in accordance with the Companies Act.

The most relevant of these licences for industrial projects are the exploration licence and the large-scale mining licence:

  • The exploration licence grants an exclusive right to explore for one or more specified substances within the licensed area. The licence is valid for an initial period of up to four years over a maximum area of 250 km2. Renewals are permitted, provided that the maximum area over which the licence is being renewed does not exceed 125 km2 and the extension granted under the licence is for no more than three years in the first instance and two years in the second instance.
  • The large-scale mining licence gives its holder an exclusive right to conduct exploration and mining operations within the licensed area and dispose of the minerals to which the licence relates. Licences may be granted for an initial period of up to 25 years, with the possibility of subsequent renewals for periods of up to 15 years.

Both of the key licences mentioned above are granted by the on the recommendation of the Advisory Board. The Minister of Mines has a right to suspend or cancel the licence if the holder fails to meet any prescribed minimum annual programmes of work or work expenditure and the licensee may surrender the area covered by its mineral right by notice to the Minister of Mines. Licences are also transferable, with the approval of the Minister of Mines (upon certification by the Advisory Board) and registration in the register of mining rights. Investors should note that there are no specific “change of control” provisions in the Mines Act which could impact a sale of shares by the licence-holding company.

Surface Rights

The holder of a large-scale mining licence will need to obtain a land lease or other rights to use the land. The rent and other terms of the lease will need to be agreed between the licence holder and the owner or lawful occupier of the land. If an agreement cannot be reached between the licence holder and the owner/lawful occupier of the land, the will determine the terms of use on the advice of the Advisory Board.

In any case, the Minister of Mines has the power to compulsorily acquire private land or rights over and under private land for use by the holder of a large-scale mining licence. Before compulsory acquisition, the Minister of Mines needs to be satisfied that the licence holder has taken all reasonable steps to acquire rights over the private land in question. Upon compulsory acquisition, the Minister of Mines can permit the licence holder to use the land or exercise such other rights with respect to the land.

The rent agreed under the lease is distributed in the following proportions (which are specified by the Mines Act): (i) land owners/lawful occupiers – 50 per cent; (ii) District Council -15 per cent; (iii) Paramount Chiefs – 15 per cent; (iv) Chiefdom Administration – 10 per cent; and (v) Constituency Development Fund – 10 per cent.

The licence holder is required to pay fair and reasonable compensation for any disturbance of the rights of the owner or occupier (such as the right to graze stock) and for any damage to the land surface, trees, buildings or works.

If the licence holder’s use of private land requires the resettlement of the owner or occupier, the licence holder will be required to pay resettlement costs as agreed with the owners or lawful occupiers or by separate agreement with the Minister of Mines.

The compulsory purchase and compensation provisions are modelled on English law and may therefore be familiar to international investors.

The Mines Act is supplemented by the Mines and Minerals Operational Regulations 2013, which contain requirements to be fulfilled by licence holders in relation to surface, open pit and underground mining operations, reporting of mineral resources, health and safety standards, waste disposal, as well as explosives and blasting (including the requirement to hold a blasting licence in order to use explosives).

State Participation

The GoSL has a right to acquire an interest in any large-scale mining operations under terms agreed between the GoSL and the licence holder. For instance, the GoSL currently has a 10 per cent. free carried interest in African Railway and Port Services, the subsidiary company that runs the port and rail infrastructure at the Tonkolili iron ore mine, which was formerly run by African Minerals and is now 100 per cent. controlled by Shandong Iron Ore Mining.


The EPA Act provides that mining projects may only be undertaken following the preparation and approval of an environmental impact assessment and the issuance of an environmental impact assessment licence. An environmental impact assessment licence is valid for 12 months, is renewable and may impose specific conditions in relation to the conduct of the project. The EPA Act has, since its adoption, been supplemented by the Sierra Leone Environmental Protection Agency (Environment Impact Assessment License) Regulations and the Prohibition of Ozone Depleting Substances Regulations. As with the compulsory purchase and compensation provisions relating to land, these requirements may be familiar to international investors as they are based on EU

A register of environmental impact assessment licences is maintained, and all licensed projects are monitored by the EPA. The EPA may enter and inspect licensed premises, seize property, take samples of substances and arrest persons who are suspected of committing an offence under the EPA Act.

In addition, holders of large-scale mining licences are required to provide financial assurance (in the form of surety bonds, trust funds with pay-in periods, insurance policies, cash deposits or annuities) for potential environmental liabilities. They are also obliged to file regular environmental management plans.

The Environment Protection (Mines and Minerals) Regulations 2013 create a number of further obligations for licence holders in relation to the environmental permit process, environmental standards, grievance mechanisms and mine closures. The Regulations also provide helpful guidance on the contents of environmental impact assessment reports and environmental management plans. The EPA has, in the past, suspended operations where licence holders have failed to comply with environmental policies.

Health and Safety

Licence holders are required to conduct safe operations in their mines and must provide a healthy working environment for their workers. Licence holders must ensure that the mine is commissioned, operated, maintained and decommissioned in such a way that workers can perform their work without endangering their health and safety.

Community and Local Content

Under the Mines Act, holders of a large-scale mining licence are obliged to enter into a community development agreement with the primary host local community once certain production thresholds are met. Community development agreements should address issues of significance such as educational scholarship, financial support, environmental and socio-economic management and local governance enhancement in the host community. Licence holders are required to spend no less than 1 per cent. of the gross revenue amount earned in the previous year in order to implement the community development agreement.

In addition, licence holders are required to give preference to materials and products made in Sierra Leone and services provided by companies located in Sierra Leone. Licence holders should prioritise the employment of Sierra Leonean workers possessing the necessary qualifications and experience.

The the SLNC Act was passed in an effort to promote local content and the interests of the SLNSC. The SLNC Act requires shippers that load or clear cargo for either export or import to obtain a “Certificate of Compliance” from the SLNC, a joint venture set up between SLNSC and Premuda, an Italian shipping company. The SLNC Act also provides that SLNC has the right to ship at least 40 per cent. of all inbound and outbound cargo at “prevailing market rates”.

Some private investor stakeholders have expressed concerns over these provisions, which allow for the preferential treatment of a national company at the expense of other shipping companies. Furthermore, these provisions do not take into consideration the fact that shippers may have already entered into agreements with other companies for the purposes of shipping their goods and that penalties are likely to be payable under those contracts in order to terminate them.


The GoSL has demonstrated significant flexibility in providing incentives to attract investment in the sector. The Mines Act contains provisions in relation to taxation and royalties which must be read in conjunction with other relevant laws, such as the Income Tax Act 2000, the Goods and Services Tax Act 2009 and the Customs Act 2011.

Large-scale mining licence holders are obliged to deliver certified copies of all “sales, management, commercial and other financial agreements in excess of fifty thousand US Dollars or equivalent concluded with any other person, including affiliates” to the Sierra Leonean tax authorities.

The fiscal regime associated with large-scale mining licences differs significantly across companies. The degree to which such differentiation is sustainable in the long term remains to be seen.


In 2006, Sierra Leone joined the EITI, a global standard to promote open and accountable management of natural resources by ensuring full disclosure of taxes and other payments made by oil, gas and mining companies to governments. Sierra Leone was accepted as a candidate in 2008 and was declared to be “compliant” with the EITI standards in 2014. Based on publicly available information, a draft EITI Bill is currently being prepared.

The NMA is a new semi-autonomous government agency which was established under the National Minerals Agency Act 2012, in an effort to promote effective governance of the mining sector. Its mandate is to “administer and enforce the [Mines Act], any other acts related to the trade in minerals and related regulations and make recommendations to the Minister [of Mines] for amendment and other improvements in [these] laws and regulations“.

The NMA is in charge of managing the Sierra Leone Online Repository System, an online database created in January 2012 to enhance transparency and provide information on revenue data in relation to the country’s extractive industry. (see the Ministry of Mines and Mineral Resources and the for NMA copies of large-scale mining licence agreements entered into by the GOSL and other helpful resources).


In a bid to regulate the processing of diamonds in the country, Sierra Leone enacted the Polishing Act to provide for the control of diamond cutting and polishing through the issue of licences. Accordingly, any person involved in cutting, polishing, crushing or setting diamonds for the purpose of business or trade in Sierra Leone is required to possess a diamond cutter and polisher’s licence issued by the Minister of Mines.

Once an application has been properly made under the Polishing Act, the Minister of Mines may grant the applicant a diamond cutter and polisher’s licence for a period of up to five years (subsequently renewable for further periods of up to five years).

The holder of a licence under the Polishing Act is entitled to buy, deal in, export, import as well as, cut, polish, crush or set diamonds for the purposes of business or trade. The Polishing Act requires the licence holder to ensure that all diamonds cut and polished under the licence conform to international standards, and contains the usual provisions in relation to local content.




Activity in Sierra Leone’s petroleum sector is still in the exploration phase. All exploration currently takes place offshore within 14 blocks parcelled out of the country’s maritime territory. As of 2013, three of these blocks remained unlicensed. The GoSL estimates that production could start in 2017, but there is uncertainty about the size of the oil resources and whether extraction is financially viable. Early estimates of Sierra Leone’s oil reserves range between 500-700 million barrels of oil. The relatively unexplored oil and gas industry remains a pillar of the country’s economic objectives, with the GoSL showing willingness to give foreign investors attractive terms.

The main legislation governing petroleum exploration and production activities in Sierra Leone is the Petroleum Act. Section 2(1) vests all rights of ownership in and control of petroleum (crude oil, natural gas or combination of both) in its natural state in the Republic of Sierra Leone. The Petroleum Act sets out the type of licences required for carrying out certain activities in the petroleum sector (examples of which are detailed in the following paragraphs), and other obligations in relation to environmental protection, health and safety of workers, and local participation.

The rights that can be granted under the Petroleum Act include: (i) a “reconnaissance permit”; (ii) a petroleum licence; and (iii) a permit for the laying and operation of pipelines.

Petroleum licences permit the licence holder to explore for and produce petroleum. However, they can only be granted to companies registered or incorporated in Sierra Leone under the Companies Act. There are no foreign investment approval requirements or restrictions when commencing such a business and any foreign entity may have a 100 per cent. shareholding in a natural resources-focused company incorporated in Sierra Leone. No parent company guarantees or other economic support needs to be provided under the Petroleum Act. However, the licensee will be required to provide a guarantee equivalent to the estimated costs for completing its exploration program during the initial period.

Licences are granted through a competitive bidding process for an initial exploration period of up to seven years (comprising an initial period of three years, renewable for two further periods of two years each). If the tender process is unsuccessful, the Ministry may assign a licence through direct negotiations. There are a number of requirements imposed on exploration licence holders, including a minimum work program.

Before any commercial production can be pursued, the operator must submit detailed development plans with a maximum duration of 30 years. The Petroleum Act also addresses decommissioning and joint development phases. For example, a licensee is required to submit a decommissioning plan for approval by the relevant Minister not less than 90 days prior to surrender, revocation or permanent termination of the facility. However, no security deposits are required in respect of future decommissioning liabilities.

A licence cannot be transferred without Ministerial approval, which shall not be unreasonably withheld. The state of Sierra Leone will have a pre-emptive right to acquire the interest at the same price as agreed with the potential purchaser. The Petroleum Act also enables the Sierra Leone National Petroleum Company (NP) to acquire a participation interest on a standalone and commercial basis or hold such interest on behalf of the GoSL.

The GoSL obtains revenue from the oil and gas sector through imposition of royalties on total production and income tax levied on profitable projects under the Income Tax Act 2000. This legislation also provides for taxation on profits recovered after the transfer of any participating interest in a licence. The Petroleum Resource Rent Tax is another relevant fiscal regime with the current base rate set at 40 per cent. Lastly, under the Petroleum Act, the award of a licence or the achievement of specific production target may be conditional on payment of a lump sum bonus, which has to be disclosed according to the terms and procedures of the EITI.

Under the Petroleum Act, the Minister also has the power to direct a licensee to make deliveries from its petroleum production to cover national requirements and may further direct to whom the petroleum shall be delivered. The price paid for the petroleum delivered is to be agreed by the parties (this would ordinarily be at a fair market value). NP remains the most dominant downstream player in Sierra Leone, owning the largest petroleum facility and tanker fleet in the country.

The Petroleum Regulatory Agency (the PRA), which was formed by an act of Parliament in 2014, supervises and co-ordinates the operations of the petroleum downstream sector in Sierra Leone. The remit of the PRA is to issue licences and regulate the importation, refining, storage, transportation and distribution of petroleum products in a bid to ensure their regular supply to users at reasonable standard prices, and the efficient administration and enforcement of legislation relating to downstream petroleum activities. The PRA publishes on its website the retail pricing formula and commercial pricing formula used to calculate standard prices.

On 11 November 2016 the GoSL announced that it was removing all subsidies and tax exemptions for retail fuel, thereby ending over ten years of direct GoSL support for retail petroleum products. There is now no difference in the prices applying to commercial and retail fuel. The GoSL hopes that the removal of subsidies will minimise the loss of revenues, remove distortions in the domestic petroleum market and put an end to the smuggling of subsidised Sierra Leonean fuel to neighbouring countries.

In early 2016, the Director General Raymond S. Kargbo also revealed that the Petroleum Directorate is undertaking review of the onshore petroleum regime. The Petroleum Directorate is a regulatory body established under the Petroleum Act to facilitate the optimal exploration and development of Sierra Leone’s petroleum resources. It administers the licencing and participation of commercial entities in the sector. The aim of its current review is to establish the legal framework for onshore exploration and subsequently merge these provisions with the offshore legislation. The proposed new law is expected to provide for a detailed and competitive fiscal regime with new environmental provisions covering standards of compliance and safety, including issues such as the decommissioning of infrastructure, and well and land restoration.




Despite its relatively small size, Sierra Leone is widely recognised as a promising investor target for its extractives industry. Sierra Leone has rich mineral deposits. The country is home to what is considered to be one of the world’s largest iron ore deposits at the Tonkolili mine, which contains an estimated 12.8 billion tonnes of iron ore deposits. Two other large mines in the country contain a combined estimate of 1.75 billion tonnes of iron ore deposits.

Sierra Leone is also endowed with significant bauxite reserves. The country’s Port Loko deposit contains 100 million tonnes of bauxite deposits and is strategically located between the capital and one of the country’s main ports, Port Pepel. In 2014, Sierra Leone produced approximately 1 per cent. of the world’s bauxite production.

The country is also home to the world’s largest reserves of rutile (a high grade titanium ore, used in the production of paint and papers), producing an estimated 120,000 tonnes of contained titanium dioxide in 2014, which accounted for roughly 14 per cent. of total world production in that year.

Sierra Leone has significant reserves of gold and diamonds. In 2015, Sierra Leone exported 500,039 carats of diamonds, compared to 620,181 carats in 2014. Production volumes have further recovered following Ebola to 359,080 carats in H1 2016. The country produced approximately 96 kg of gold in terms of mine output in 2013 and 33 kg in 2014.

Export volumes have fluctuated in the last two decades, in a manner correlating largely with the country’s political and economic stability and global commodity prices. Having contributed to more than 20 per cent. of Sierra Leone’s GDP in the 1990s, the mining sector suffered during the civil war, before rebounding fourfold in the 2000s as production normalised. The sector has been heavily affected by the Ebola outbreak, particularly due to travel restrictions which made access to mining sites difficult or impossible. The effects were compounded by a drop in commodity prices. Production remains below Sierra Leone’s potential output and reserves remain under-exploited.

As mentioned, Sierra Leone has made significant efforts to improve the integrity of its mining sector to meet developed world standards.

Key developments that have improved prospects in the Sierra Leone extractives industry include:

  • the GoSL’s recognition of the need to actively encourage new investment in the sector (given that there was significant focus in the past on the re-establishment of closed mines or the exploitation of previously proven reserves);
  • the adoption of detailed regulations, which provide more predictability and certainty to investors;
  • the introduction of the certificate of origin scheme and the implementation of the Kimberley Process, which has facilitated a rapid resumption of diamond exports through official channels; and
  • an increased political will to improve transparency and effectiveness in the governance of the mining industry through the NMA and ACC.

In seeking to promote transparency in its extractives sector, Sierra Leone is looking to promote itself as a best-in-class arena for investment in extractives – something which will be especially important as discoveries of offshore oil fields by African Petroleum and Anadarko are developed. There may also be increased interest in onshore exploration once the current review of the legal regime is finalised by the Petroleum Directorate.

Key developments that have improved prospects in the Sierra Leone extractives industry include:

the GoSL’s recognition of the need to actively encourage new investment in the sector (given that there was significant focus in the past on the re‑establishment of closed mines or the exploitation of previously proven reserves);

the adoption of detailed regulations, which provide more predictability and certainty to investors;

the introduction of the certificate of origin scheme and the implementation of the Kimberley Process, which has facilitated a rapid resumption of diamond exports through official channels;


an increased political will to improve transparency and effectiveness in the governance of the mining industry through the NMA and ACC.

Key developments that have improved prospects in the Sierra Leone extractives industry include:

the GoSL’s recognition of the need to actively encourage new investment in the sector (given that there was significant focus in the past on the re‑establishment of closed mines or the exploitation of previously proven reserves);

the adoption of detailed regulations, which provide more predictability and certainty to investors;

the introduction of the certificate of origin scheme and the implementation of the Kimberley Process, which has facilitated a rapid resumption of diamond exports through official channels;


an increased political will to improve transparency and effectiveness in the governance of the mining industry through the NMA and ACC.



As described above, and as in the case of any emerging economy, investors coming to Sierra Leone will need to address the key challenges of poor transport infrastructure, limited locally-manufactured inputs and a largely-unskilled labour force. These challenges present issues for the extractives sector including high operational costs in some areas. As outlined in the INFRASTRUCTURE: WATER, ROADS, RAIL, PORTS, AIRPORTS, TELECOMS AND TOURISM section, the GoSL is implementing an extensive infrastructure rehabilitation and construction programme, which will reduce some of these constraints with time.

The greatest challenge to date has been the 2014 drop in commodity prices, which has had a global effect on investments in the extractives sector. This has been particularly damaging to Sierra Leone’s economy due to the coinciding Ebola crisis. It remains to be seen what opportunities will arise in the sector as it returns to capacity. The upstream petroleum industry in Sierra Leone is also entirely in the exploration phase. In order to reach the production phase, investment in infrastructure will be required.