Rio Tinto has entered into an agreement with the Government of Madagascar on the future fiscal arrangements for the QIT Madagascar Minerals (QMM), renewing their long-term partnership for the sustainable operation of the QMM mine.
The new agreement was confirmed by Madagascar’s High Constitutional Court on 8 August 2023 and signed by the parties on 22 August 2023.
According to Rio Titno, it will increase the benefits received the the people of Madagascar and ensure a long-term future for the QMM mine while also providing Rio Tinto with fiscal arrangements.
The royalty rate will be raised from 2% to 2.5% under the agreement’s provisions, and QMM will pay its first dividend to the Government of Madagascar in 2023. The government would invest the equivalent of the US$12 million dividend in the 109-kilometre National Road 13 (RN13) rehabilitation project. Rio Tinto will contribute to the road project by adding up to $8 million if certain milestones and timelines are met. The initiative will significantly benefit the region by enabling the movement of people and essential supplies to difficult-to-reach areas.
Rio Tinto has agreed to cancel US$77 million in advances made to the Government of Madagascar to fund QMM. The State will now have a 15% free carry ownership stake in QMM and a 20% voting power, with no requirement to contribute to capital funding or risk of dilution.
QMM will also enhance its support for local communities by increasing its annual commitment to interest-based programs.
“Rio Tinto is committed to the responsible development of its mineral sands extraction business in Madagascar. This agreement is a significant milestone to support a long-term future for QMM and reaffirms our commitment to provide increased benefits for all parties, including the communities of Madagascar. We are privileged and honoured to be operating in Madagascar and we thank the country and its people for their trust,” Rio Tinto Iron and Titanium Managing Director Sophie Bergeron said.
Rio Tinto and the Government of Madagascar signed the Convention d’établissement (Framework Agreement) in 1998, laying the groundwork for Rio Tinto’s US$1 billion investment in QMM over the last 25 years. While the Framework Agreement will stay in effect for the duration of QMM’s mining operations, the fiscal component will be renegotiated after 25 years.
