Shorts are declining, page-32

Mozambique is not Tanzania. Mozambique is governed from Maputo. If proximity to incompetent regimes defined policy I'd be more worried about Zimbabwe than Tanzania:


But Zimbabwe has been doing economically stupid things for a long time and Mozambique hasn't copied them.

The 20/2014 Mining Law, already has generous provisions for the Mozambique government including a 32% corporate tax rate, 3% royalty for graphite (aka production tax), surface tax (6000 Meticals per hectare, Syrah has 110km2 = 11,000 hectares = 66M Meticals = USD$1.09M p.a., resource rent tax of 20% on super economic profits).

Royalties are 8% for diamonds, 6% for precious and semi-precious stones or metal.

Law 15/2011 requires large scale projects (capex exceeding ~USD$207M at current exchange rates) to float 5-20% of their Mozambique operations (i.e. Twigg Exploration and Mining, Limitada when it applies not all of Syrah's operations) at some point in the future, "...on commerical market terms" (Page 18). Presumably commercial market terms means that it is not free carried interest, that capital will be raised if part of a business is floated in Maputo. This being the case, capital raised can be used to buyback existing Syrah shares sterilising any dilution to zero. Or the funds could be used to expand operations depending on what management decided. This is different to Tanzania. It's an exercise in developing capital markets in Mozambique where they're trying to boost stock exchange activity. Tanzania has engaged in partial-nationalisation which could proceed to full-nationalisation.

Positively for Syrah, the 20/2014 Mining Law does not apply retrospectively, so, the new law wouldn't apply to Syrah until 2039 (if at all) when they apply for their second 25 year mining concession. Due to Syrah's large discount rate ~12%, 2039 cash flows are currently immaterial to the valuation so the 20/2014 Mining Law doesn't impact us.

Mining taxes are a balancing act between plucking the goose and encouraging FDI. Magufuli has killed the goose (although many others believe/claim that the Tanzanian goose is in fact Lazarus), I don't see Mozambique making the same mistake as they've already seen the folly of an economic Mugabe.