Reconciliation report of payments made by the extractive companies to the Malagasy State and of revenues collected by the Malagasy State Fiscal Year 2013

January 2015

Conducted on behalf of EITI Madagascar by :

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Executive summary Presentation of the assignment

Context and purpose of the report This document, entitled « EITI Madagascar Report – Year 2013 », is the fifth official reconciliation report of Madagascar, commissioned by the National Committee of EITI. Its first aim is the reconciliation of cash flows between the State and the main extractive industries (mining and upstream oil companies) in Madagascar for the 2013 fiscal year. The report also reflects the requirements of the EITI standards, including: ► the governance arrangements, tax and regulatory framework applying to extractives industries ; ► an overview of the extractive sector in Madagascar ; ► the contribution of the extractive sector in 2013 in relation to the economy and an overview of the extractive sector's tax contribution to the economy to the total of the tax revenues of the country ; ► the production per product and per company including : 1/ the total production volume and its value 2/ the total volume exported and the value of the export by raw material ; ► the specific information on the companies of the EAE (Entreprises Appartenant à l'Etat) which are State-owned companies, in particular : an explanatory of the rules and common practices ruling the financial relationships between the governement and the State- owned companies ; ► the situation regarding the procedures for granting licences in 2013 ; ► information on the actual property of the extractive companies ► information on the oil contracts ; ► the summary of the donations from extractive companies to the collectivity ; ► information related to the decentralised authorities (regions and municipalities) ; ► the use of the funds received from the extractive companies by the municipalities subject to a participatory budget practice.

The exchange rate used for the report is the average exchange rate of the Central Bank of Madagascar for 2013 in which 1 USD equals MGA 2,206.91.

Scope and approach The mission of the Reconciler is governed by the International Stantard ISRS 4400 related to the « Engagements to perform agreed-upon procedures regarding financial information » and the ISRS 4410 standard related to « Compilation Engagements ».

In accordance with the Terms of Reference, the approach consists of the following steps : Phase 1 : Preliminary analysis Phase 2 : Collection of the data to be reconciled Phase 3 : Initial reconciliation Phase 4 : Investigating discrepancies and drafting the report Phase 5 : Final report

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Materiality-defined scope The results of the materiality process, duly validated by the National Committee, have led to the definition of the scope presented in the table below :

Scope of the Characteristics report Group A 34 Filling of the reconciliation canvas required for the companies and for the State Group B Number of 5 Disaggregated statement by company provided by the State entities per Group C group 63 Aggregate statement provided by the State Total 102 Materiality threshold of Group A (USD) 79,226.53 Coverage rate reached by Group A 97.53%

102 entities, including companies and natural persons, were identified as having made a total of significant payments to the main public authorities. These entities whose payments exceed USD 5,000 are included in the scope of « EITI Madagascar Report – Year 2013».

They were classified into 3 groups: ► Group A consists of 34 entities, including two natural persons connected to companies in the same group. Filling the reconciliation canvas is required of the companies of this group, as well as of the authorities receiving payments from them. The work performed on this group enabled us to achieve a coverage rate of 97.53% with companies having made payments exceeding the materiality threshold of USD 79,226.53 ; ► Group B comprises 5 entities, for which the State alone is asked to provide a disaggregated statement per company ; ► Group C includes 63 entities, for which only the State is required to provide an aggregate statement.

Update of the Materiality rate During the reconciliation assignment, we performed updates that enabled us to redefine the scope of the materiality process.

The revised materiality threshold is USD 79,331.12 as opposed to the USD 79,226.53 defined initially. The scope became 99.12% instead of 97.53%.

Background information

Overview of the extractive sector Madagascar has a great potential in terms of minerals.

The major commercial-scale projects currently underway or planned in the mining sector are outlined below :

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Company name Ongoing or planned projects

QMM Ongoing operation: ilmenite, zirsill. Region Anosy Ongoing operation: nickel, cobalt. Mine in Moramanga, processing plant in Projet Ambatovy Toamasina. Kraoma Ongoing operation : chrome Wisco Research : Iron of Soalala Madagascar Consolidated Pre-feasibility stage: Coal of Sakoa Mining et PAM Sakoa Operating permit since 2011, currently performing the Environmental Impact Toliara Sands Assessment : Ilmenite of Ranobe Currently performing the Environmental Impact Assessment : ilmenite on the Mainland East Coast of Madagascar Aziana Owns mining licences for the bauxite of Manantenina Exploitation of pozzuolana, clay and cipolin in Antsirabe and Tamatave for the Holcim production and sales of cement

Moreover, the malagasy mining sector is also characterized by small mines, which are mostly informal. According to the data of 1990, this sector employed more than 500,000 workers, which is equivalent to the formal working population registered at the CNaPS in 2012, of all sectors. According to the ENEMPSI study, performed in 2012 by INSTAT1, 8% of the 2.2 million of Individual Production Units – of which 99% are informal – pertain to the branch of the mining extractive industry.

The illegal exploitation and exportation of gold are striking aspects of the small mines. As a matter of fact, not a single case of gold exportation was officially recorded in Madagascar until the first semester of 2012. Approximately 150 kilograms of gold were legally exported ; this has doubled the royalties and taxes collected by the Mining Authority during the month of April 2012. However, a decision of the Council of Ministers prohibited the exploitation of gold after this once off experience. Inspite of the prohibition of the exploitation of this precious metal, the United Nations estimated the value of the export from Madagascar at USD 18 million in 2012; this is equivalent to 600 kg of gold and could be representative of MGA 790 million of royalties.

Concerning oil, 16 international petroleum companies signed 25 contracts with OMNIS for hydrocarbon exploration and exploitation. Madagascar Oil SA has officially announced that the project Tsimiroro – block 3104 is a «commercial discovery». In October 2014, the company has submitted its Development Plan to the Steering Committee for approval.

Governance of the extractive sector The key actors in the mining governance are: ► the Ministry of Mines ; ► the Mining Cadastre Office (Bureau du Cadastre Minier de Madagascar, BCMM) ; ► the Gold Agency (Agence de l’Or) ; ► the Mine Police ; ► the decentralised territorial units.

In the upstream oil sector, we have the following entities: ► the Ministry of hydrocarbons ;

1Enquête Nationale sur l’Emploi et le Secteur Informel – Enempsi 2012 , November 2013 , vol. 1

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► the OMNIS, as a technical body, in charge of the regulation on one hand ; and on the other hand, as a national company in charge of the contracts with the oil companies.

Legal and tax framework

Legal : ► the common law of the mining sector is governed by the Mining Code of 1999, modified in 2005 and updated in 2006 and 2007. It monitors the mining companies, except those governed by the following two specific legislations : the Framework Agreement, signed by the Malagasy State, represented by OMNIS, and Qit-Fer and Titane Inc, monitoring the ilmenite project of QMM, and the Large Scale Mining Investment Law (Loi sur les Grands Investissements Miniers, LGIM) for companies whose investments exceed 50 billion MGA. Currently, Ambatovy is the only project under the LGIM. Moreover, many sectoral laws are applicable to the mining sector ; ► the upstream oil sector is ruled by a decree of 1997, as well as by oil contracts signed between the OMNIS and the companies. It is currently being reviewed.

Tax The particular, main tax regulations provided by the specific legislations designed to promote investments in the mining sector are : ► as part of the Framework Agreement : o decrease of the Income Tax and the Investment Income Tax (Impôt sur le revenu des Capitaux Mobiliers, IRCM) ; o decrease of the taxable base to the Tax on Transfers ; o 0% VAT ; o exemption of registration fees ; o low unique rate for the Tax on Insurance Contracts ; o decrease of the rate of the Building Property Tax (Impôt Foncier sur la Propriété Bâtie, IFPB) ; o stability of the tax framework. ► as part of the LGIM : o decrease of the taxable base to the Tax on Transfers ; o the right for the refund of the VAT credit ; o decrease of the rates and an upper limit amount for the registration fees ; o decrease of the rates and an upper limit of the amount of IFPB ; o stability of the tax framework.

In the oil sector, a taxation that exempts from three other taxes is applied during the production phase. During the exploration phase, the tax regime is that of the common law, provided by the General Tax Code (Code Général des Impôts, CGI). The key measures provided by the Oil Code are: ► the Direct Tax on Hydrocarbons (Impôt Direct sur les Hydrocarbures) set at the same rate as that of the Income Tax (Impôt sur le Revenu, IR) of the common law, which exempts oil companies from the payment of the IR and the IRCM ; ► the exemption from the tax on dividends (Impôt sur les dividendes) ; ► the taxes of common law for all the other taxes such as VAT (TVA), Wage Income Tax (IRSA) etc. The Oil Code does not provide for the stability of the tax framework.

Plans to reform the Mining and Oil Codes were announced in 2014 by the Government.

Situational analysis of the licensing procedures

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In the mining sector, the various types of licenses are delivered by the Registry Office (Bureau du Cadastre Minier de Madagascar, BCMM). The issuance of licences rests, among other things, upon technical advice, the publishing of a decision and the verification of administrative fees. The delivery of new licences has been suspended since April 6th, 2011 and this suspension still remains to this day. In the oil sector, the "mining rights for hydrocarbons" are granted following a tender process managed by the OMNIS.

Licenses records For the mining sector, records are available at the Bureau du Cadastre Minier de Madagascar (BCMM). These records are available on request and provide information as to the mining squares, the request date, the licensing date, etc. Regarding the oil sector, such records are non-existent. However, the website of OMNINS provides — as shown by a map that has been reproduced in this report — an overview of available blocks and the ones on which contracts were signed with OMNIS. The names of the parties of these contracts are available.

Information on the beneficial ownership No records of the beneficial owners2 are available in the public domain in Madagascar. For the companies in group A, it has been recommended but not mandatory to disclose the names of the beneficial owners. 22 companies out of the 47 accepted to do so in the frame of the 2012 EITI report.

Disclosure of the oil contracts The oil contract does not provide for procedures of conclusion and the publication of oil contracts. The CCP (Contrat de Partage de Production which is a Product Sharing Agreement) has a confidentiality clause. The main information available are the presidential decree for the approval of oil contracts and standard contracts. An overview of standard contracts, whether onshore or offshore, is available on the website of OMNIS, via the following link:http://www.omnis.mg/en/download-contracts-models.

2 Persons controling the company as a last resort.

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Financial relationships between the government and State-owned companies Only KRAOMA was identified as a State-owned company, meaning that the State owns the majority of the share capital (97% of the shares). KRAOMA is a public limited company ruled by the Law on commercial companies. In the frame of EITI, the companies have the same obligations as other companies in the extractive sector.

Contribution of the extractive sector to the economy The impact of the extractive sector in the GNP is assessed by INSTAT and the General Economy Directorate at 2,12% in 2013. This figure is to be analysed carefully, given the fact that INSTAT relied on the production structure of 1984, due to the absence of any recent investigation.

We noted a significant growth from 2012 to 2013 regarding the weight of the mining sector in the GDP (0.7% in 2012 to 2.12% in 2013) whereas this part is practically constant during the last ten years (0.1% per year of contribution with a slight improvement in 2010 and 0.2% in 2011). This was the result of the cumulation of the launch of operation of two big companies, QMM (earlier) and Ambatovy during this period.

Regarding foreign direct investments, the extractive sector prevails, as this sector alone represents approximately 42% of foreign investments received by Madagascar in the first trimester of 2013. During the construction phases of the QMM and Ambatovy, this proportion could represent more than the double of that which was observed in 2013 (86% in 2008).

Regarding tax revenues, the chart below shows that the extractive sector represents 14% of the total revenue of the Tax General Directorate in 2013, which appear to be double of last year’s figures. This is explained by the rise of Ambatovy.

Contribution of the extractive sector to the tax revenues in 2013

Montant des recettes fiscales reçues par la DGI en provenance des entreprises des Groupes A, B et C Montant des recettes fiscales totales de la DGI

86%

14%

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Regarding employment, for lack of more accurate information, the schedule below shows that the companies of group A, employing 4,600 persons in 2013, represent 0.8% of the workers affiliated to the Caisse Nationale de Prévoyance Sociale (CNaPS) as opposed to 0.9% in 2012.

Description 2013 Number of workers from Group A 4,600 Number of workers affiliated at the CNaPS all sectors combined 576,048

Percentage of the workers from Group A compared to the total of workers affiliated to the CNAPS 0.8%

As for the exported quantity, the schedule below shows the exported quantity reported by the companies. In 2013, the ilmenite was the first exported mining product (in value).

FROM COMPANIES PRODUCED EXPORTED QUANTITY QUANTITY VALUE OF EXPORTED COMPANIES Region of origin PRODUCTS PRODUCTS

(in tonnes) (in tonnes) (in MGA)

GALLOIS Etablissement Atsinanana Graphite 3,832.95 4,192.85 10,382,662,339.00 Vakinankaratra Poozzole 65,000.00 N/A N/A HOLCIM Vakinankaratra Cipolin 164,718.00 N/A N/A Vakinankaratra Argile 29,751.00 N/A N/A Betsiboka Sofia- Roches 1.50 N/A N/A MADAGASCAR MINING RESOURCES LTD S.A.R.L. Alaotra Mangoro Vatovavy Sols 2.20 N/A N/A fitovinany Dolomie 3,730.00 N/A N/A PROCHIMAD Amoron'i Mania Calcite 200.00 N/A N/A Kaolin 200.00 N/A N/A Sulphate Alaotra Mangoro 65,410.00 68,570.00 29,295,987,646.85 Ammonium PROJET AMBATOVY Atsinanana Cobalt 2,083.00 2,067.00 121,458,684,432.28 Nickel 2,514.00 25,507.56 803,024,114,385.96 RED GRANITI Atsimo Labradorites 3,591.45 2,989.92 N/D MADAGASCAR S.A.R.L. Andrefana Rocheux 59,085.00 61,000.00 KRAOMA S.A. Betsiboka 45,013,034,580.00 Concentré 58,100.00 49,000.00 Zircon Anosy 31,345.00 31,345.00 43,682,262,165.09 QIT MADAGASCAR Concentrate MINERALS S.A. Anosy Ilménite 530,421.00 530,421.00 167,523,336,557.73 GRANITEX S.A.R.L. Manjakandriana Granite 3,240.00 3,078.00 270,613,069.73

N/D : Not available (not provided) N/A : Not applicable to the company

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Main outcome of the reconciliation

Analysis of the results

Entities from Group A

To guarantee the understanding of the terms employed in this document, one should note that a negative discrepancy means that the State has reported more revenues than those paid by the companies. On the opposite, a positive discrepancy is when companies reported payments greater than those reported by the State.

The total amount of the financial flows in the report, represented by the total flow reported by the State, all groups included, amounts to MGA 427,68 billion, or USD 193.80 million. This amount represents the total amount received by the Malagasy State from extrative companies in 2013.

The table below shows that the percentage of the residual discrepancy for group A is equivalent to 2.42% of the total flow received by the State :

Total amount Total amount paid by Amount of total Total residual received by the the companies residual discrepancy discrepancy Currency administrations

(in thousands) (in thousands) (in thousands) (in %) MGA 434,175,403.01 423,926,956.46 10,248,446.55 2.42% USD 196,734.53 192,090.73 4,643.80

a) Main flows

The flows totaling the amount received by the Administrations are mainly :

► The non-refunded VAT3 amounting to MGA 129.40 billion equivalent to USD 58.63 million, 99% of which are related to the Ambatovy project; ► The unrecovered VAT4 of which the total amount is MGA 136.93 billion, equivalent to USD 62.05 million or the 86% discrepancy of TULLOW Madagascar, 8% of Ambatovy Project and 6% of Madagascar Oil; ► Tax on Wages income and similar (IRSA) for a total amount of MGA 42.66 billion equivalent to USD 19.33 million mainly generated by the Ambatovy project for 82% and QMM for 10% ; ► Mining Administration Fees (FAM) for a total amount of MGA 14.74 billion equivalent to USD 6.68 million comprising the discrepancies from the following companies: PAM Madagascar, Madagascar Chromium Company, Mainland and Goldsand ; ► Administration fees paid to OMNIS amounting to MGA 14.43 billion equivalent to USD 6.54 million mainly generated by : OPHIR ENERGY, Madagascar Oil et EXXON Mobil ;

3 The non-refunded VAT corresponds to the VAT paid to suppliers, the refund of which is claimed from the State in compliance with the law for the companies to which it applies, but the refund of which has not yet been received by the companies within the time limit set by the law.

4TVA n’ayant pas fait l’objet de demande de remboursement ou de déduction mais qui fait l'objet d’un paiement. TVA incluse dans le canevas car est considérée comme un paiement indirect effectué pour le compte de l’Etat. En effet, l’Etat encaisse cette TVA à travers la déclaration de la TVA collectée effectuée par les fournisseurs de la société.

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► Non-resident IR or TFT amounting to MGA 13.39 billion equivalent to USD 6.07 million that were noted for the Ambatovy Project, QMM and Holcim.

The other payments comprise flows that each represent less than 3% of the global amount of the payment flows received by the State.

Note on the non-refunded VAT In a letter dating back to January 22nd 2015 and addressed to the Minister attached to the Presidency in charge of the Strategic Resources, the Minister of Finances and Budget has precised the status of many requests for VAT refund that were submitted by the extractive companies at the end of the fiscal year 2013. The letter reflects the refunds approved by the Tax Directorate (Direction Générale des Impôts, DGI) mainly during the first quarter of 2014, for a total amount of MGA 90.47 billion, equivalent to USD 40.99 million.

b) Residual discrepancy Following our reconciliation work, the final residual discrepancy for group A is negative and amounts to MGA 10.25 billion equivalent to USD 4.64 million for the fiscal year 2013. This discrepancy represents 2.42% of the total revenue received by the State of which the per-company breakdown is provided below :

Residual Residual Reported by Reported by discrepanc discrepa the Company the State Residual ies ncies Companies discrepancie (in (in million (in million (in million s in % million MGA) MGA) MGA) USD) 001. PROJET AMBATOVY 225,804.03, 202,332.82 23,471.21 10.64, 229.02% 002. HOLCIM 20,475.06 22,962.49 -2,487.42 -1.13 -24.27% 003. MADAGASCAR OIL 14,092.24 14,045.84 46.40 0.02 0.45% - 004. OPHIR ENERGY - 10,687.00 -4.84 -104.28% 10,687.00 005. QIT MADAGASCAR MINERALS S.A. 19,699.60 18,369.56 1,330.04 0.60 12.98% 006. GOLD SAND S.A.R.L. 1,471.37 2,233.88 -762.51 -0.35 -7.44% 007. EXXON MOBIL 2,321.71 2,321.61 0.10 0.00 0.00% 008. KRAOMA S.A. 8,863.90 8,863.06 0.84 0.00 0.01% 009. MAINLAND MINING LTD S.A.R.L.U 5,476.01 5,476.01 - - 0.00% 010. GALLOIS Etablissement 1,707.92 1,577.97 129.94 0.06 1.27% 011. NIKO RESSOURCES [ENERMAD] 1,074.03 1,074.03 - - 0.00% 012. GROUPE PAM 3,300.59 3,981.75 -681.16 -0.31 -6.65% 013. MADA-AUST S.A.R.L. 831.25 828.10 3.16 0.00 0.03% 014. MADAGASCAR MINING RESOURCES LTD 805.01 805.42 -0.42 -0.00 0.00% S.A.R.L. 015. MADAGASCAR INTERNATIONAL TAK MINING 779.28 781.84 -2.56 -0.00 -0.02% S.A.R.L. 016. CALIBRA RESOURCES & ENGINEERS 311.85 312.06 -0.21 -0.00 0.00% MADAGASCAR S.A.R.L.U 017. NOVA RESOURCES S.A.R.L.U 868.97 634.79 234.18 0.11 2.29% 018. MADAGASCAR CHROMIUM COMPANY LTD 1,520.38 1,635.65 -115.27 -0.05 -1.12% S.A.R.L.U 019. UNIVERSAL EXPLORATION MADAGASCAR 646.18 567.25 78.92 0.04 0.77% S.A.R.L. 020. URAMAD S.A 504.86 504.87 -0.00 -0.00 0.00% 021. STERLING ENERGY LTD 422.94 422.06 0.88 0.00 0.01% 022. TULLOW MADAGASCAR 118,403.24 118,404.10 -0.86 -0.00 -0.01% 023. TOLIARA SANDS S.A.R.L. 538.25 511.36 26.89 0.01 0.26% 024. TANTALUM RARE EARTH (MALAGASY) 506.96 474.73 32.23 0.01 0.31% S.A.R.L.U 025. ROC OIL/SAPETRO 682.97 682.97 - - 0.00% 026. MADAGASCAR CONSOLIDATED MINING S.A. 447.79 448.06 -0.27 -0.00 0.00% 027. LABRADOR MADAGASCAR 402.59 391.29 11.30 0.01 0.11%

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Residual Residual Reported by Reported by discrepanc discrepa the Company the State Residual ies ncies Companies discrepancie (in (in million (in million (in million s in % million MGA) MGA) MGA) USD) 028. MINERAL PRODUCTS INTERNATIONAL GROUP 367.37 356.30 11.06 0.01 0.11% S.A.R.L. 029. AMICOH RESOURCES 558.29 484.83 73.46 0.03 0.72% 030. RED GRANITI MADAGASCAR S.A.R.L. - 287.25 -287.25 -0.13 -2.80% 031. TANETY LAVA S.A.R.L. 422.89 424.46 -1.57 -0.00 -0.02% 032. GRANITEX S.A.R.L. 40.94 216.73 -175.79 -0.08 -1.72% 033. EAX /CANDAX 651.94 651.74 0.20 0.00 0.00% 034. MADAGASCAR RESSOURCES S.A.R.L. 175.00 175.08 -0.08 -0.00 0.00% TOTAL 434,175.40 423,926.96 10,248.45 4.64 100.00%

OPHIR ENERGY and RED GRANITI did not fill out and/or sign their canvas within the agreed time frame. The information from the State shows figures amounting to MGA 10,974.25 million equivalent to USD 4.97 million which will be considered as residual discrepancies on the companies’ side.

The residual discrepancy by payment type is mainly explained by the following reasons:

► The non-refunded VAT generated a positive total of MGA 22.62 billion equivalent to USD 10.25 million which is 99% of the information from the Ambatovy project that were not found within the tax Administration; ► the customs duties and the Taxes on Petroleum Products (Taxes sur les produits pétroliers, TPP) show a positive discrepancy of MGA 1,575.88 million equivalent to USD 0.71 million in favour of the companies. These discrepancies resulted from : Projet Ambatovy, HOLCIM, QMM and the group PAM ; ► the non-resident IR or TFT showed a positive discrepancy of MGA 892.85 million equivalent to USD 0.40 million in favour of the companies, the main discrepancy of which comes from QMM for MGA 797.41 million which is 89% of the total discrepancy; ► the net VAT generated a total negative discrepancy of 226.94 million equivalent to USD 0.102 million which is 78% for OPHIR ENERGY; ► the contributions paid to the CNAPS correspond to a negative discrepancy of MGA 780.75 million equivalent to USD 0.35 million that could not be reconciled with the information of PAM SAKOA ; ► the Mining Administration Fees (Frais d’Administration Minière, FAM) show a negative discrepancy in favour of the State for MGA 939.16 million equivalent to USD 0.43 million explained by : o the payments traced at the BCMM, mainly by the companies that did not provide the canvas; o the fact that the data at the BCMM is not up to date regarding the new owner of the mining license in the case of transfer between companies, the payments are recorded in the name of the former owner for the license that was transferred. ► The VAT on import and VAT on oil products (TVP) have generated a total negative discrepancy of MGA 2,138.94 million equivalent to USD 0.97 million mainly for HOLCIM with a negative discrepancy of MGA 1,590.96 million equivalent to USD 0.721 million ; ► The administration fees paid to OMNIS generated a total negative discrepancy of MGA 10,316.81 million equivalent to USD 4.67 million mainly for OPHIR ENERGY, who did not provide a filled out canvas during the reconciliation;

c) Breakdown of flows per public entity

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The breakdown of flows per public entity is presented in the table below and shows that the DGI has received the most significant flows from the extractive companies for 2013, which is 80% of them.

Payment flows received by the public entities Name of the entity (in thousands (in thousands (in %) MGA) USD) Direction Général des Impôts 339,946,616.48 154,037.37 80% (DGI) BCMM 14,745,906.17 6,681.70 3% OMNIS 16,512,212.18 7,482.05 4% Douane 7,899,380.04 3,579.38 2% CNAPS 6,762,767.65 3,064.36 2% Other entities 38,060,073.94 17,245.87 9% Total 423,926,956.46 192,090.73 100%

Entities from Group B

Total amount Total amount received by the received by the Name of the entity State State in thousands MGA in thousands USD Mining entity 734,327.68 332.74 Legal persons 734,327.68 332.74 Oil company - - Total 734,327.68 332.74

As presented in the table above, the total sum of the flows reported in a unilateral disaggregated manner by the State amounts to MGA 0.73 billion equivalent to USD 0.33 million for group B.

Entities from Group C

Total amount Total amount received by the Type of entity received by the State State in thousands MGA in thousands USD Mining entity 3,017,479.02 1,367.29 Legal persons 2,668,599.36 1,209.20 Individuals 348,879.66 158.09 Oil company - - Total 3,017,479.02 1,367.29

As presented in the table above, the total sum of the flows reported in a unilateral and aggregated manner by the State amounts to MGA 3.02 billion, equivalent to USD 1.37 million million for group C.

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Other results

Donations 5 11 companies from Group A made donations during 2013. The total amount of these donations is MGA 2.40 billion equivalent to USD 1.09 million, 69% of which is cash and 31% in kind. These voluntary contributions were mainly made for building local public infastructures in favour of the community, such as: Primary Public Schools (Ecole Primaire Publique, EPP), Secondary Schools, market places, roads, well drilling, etc. and also donations in form of education and sport support.

Amount of voluntary contributions Total Companies Cash donations Donations in kind (in MGA) (in USD) (in MGA) (in MGA) QMM 1,553,826,600.62 87,830,630.40 1,641,657,231.02 743,871.40 PROJET AMBATOVY - 402,327,868.73 402,327,868.73 182,303.71 MADAGASCAR OIL 27,595,000.00 129,386,984.25 156,981,984.25 71,132.03 TOLIARA SANDS 9,157,563.32 42,305,932.66 51,463,495.98 23,319.25 HOLCIM - 47,125,468.23 47,125,468.23 21,353.60 MADAGASCAR CONSOLIDATED MINING 15,982,940.00 20,138,800.00 36,121,740.00 16,367.56 TANTALUM RARE EARTH (MALAGASY) 30,000,000.00 - 30,000,000.00 13,593.67 KRAOMA - 15,892,640.00 15,892,640.00 7,201.31 MAINLAND MINING LTD 12,525,000.00 294,060.00 12,819,060.00 5,808.60 MADA-AUST 8,407,130.00 - 8,407,130.00 3,809.46 SAPETRO 900,000.00 - 900,000.00 407.81 Total 1,658,394,233.94 745,302,384.27 2,403,696,618.21 1,089,168.40

Social expenditures6 5 companies from Group A made social expenditure payments during fiscal year 2013. These social expenditures amount to MGA 9.83 billion equivalent to USD 4.46 million, 65% of which is in cash and 35% is in kind. The social expenditures mainly comprise integrated development projects (Projets de Développement Intégrés, PDI) of QMM, the rehabilitation of the National Road RN5 by Mainland et various construction works.

Amount of voluntary contributions Total Mining companies Cash social expenditures Social expenditures (in MGA) (in USD) (in MGA) in kind (in MGA) MAINLAND MINING 3,497,496,936.57 - 3,497,496,936.57 1,584,793.64 PROJET AMBATOVY - 3,448,411,669.06 3,448,411,669.06 1,562,552.02 QMM 2,303,361,661.13 - 2,303,361,661.13 1,043,704.39 EAX 399,103,553.93 - 399,103,553.93 180,842.70 SAPETRO 185,518,779.32 - 185,518,779.32 84,062.68 Total 6,385,480,930.95 3,448,411,669.06 9,833,892,600.01 4,455,955.43

5 Definition of a donation according to the EITI standards: «Any cash or in-kind transfer from the mining and oil companies. The following shall not be considered as donations : - Sponsorings that are within the communication activities ; - Environmental and social requirements defined in the clear specifications by a government entity ; - Port, road, railway… infrastructures for the mining or oil operation. Even though the local population benefit from these infrastructures, they shall not in any case be considered as donations. By contrast, routing infrastructures made by mining companies for strictly public usage as well as social infrastructures constructions, free of charge, are considered as donations.» 6« Significant social expenditures from companies are ones that are made compulsory by the law or by a contract signed with the government. »

EY | 12 Reconciliation report EITI Fiscal Year 2013

Decentralised authorities

Flows received by the decentralised authorities (Regions and Municipalities) are mainly the Mining rebates and the Mining Administration Fees (FAM). • Mining Rebates : HOLCIM, QMM, KRAOMA and ETS GALLOIS paid a total of MGA 2.90 billion equivalent to USD 1.31 million for the rebates related to 2013. The beneficiairies are respectively the regions Vakinankaratra, Anosy, Betsiboka and Analanjirofo, as well as the municipalities located in these regions. • Mining Administration Fees : the mining companies in group A paid the respective municipalities and regions a total amount of MGA 1.86 billion equivalent to USD 0.84 million.

Moreover, the schedules showing the repayment and non-repayment of the FAM by the BCMM to the municipalities and the regions for all the mining operators in 2013 are presented in the tables below.

Administration fees for group A relevant to the fiscal year repaid by the BCMM to the municipalities and the regions for the year 2013 Amounts received Amounts received by the Total amount received by the regions municipalities Companies (In (In thousands (In thousands (In thousands thousands MGA) MGA) MGA) USD) PROJET AMBATOVY 38,105.45 22,228.18 60,333.63 27.34 CALIBRA RESOURCES & ENGINEERS 32,999.28 19,249.58 52,248.86 23.68 MADAGASCAR S.A.R.L.U GALLOIS Etablissement 17,059.68 9,951.48 27,011.16 12.24 GOLD SAND S.A.R.L. 168,315.16 98,183.84 266,499.00 120.76 KRAOMA S.A. 35,608.70 20,771.74 56,380.45 25.55 LABRADOR MADAGASCAR - 3,446.40 2,010.40 5,456.80 2.47 MADA-AUST S.A.R.L. 81,451.36 47,513.29 128,964.65 58.44 MADAGASCAR CHROMIUM COMPANY LTD 146,373.77 85,384.70 231,758.47 105.01 S.A.R.L.U MADAGASCAR CONSOLIDATED MINING S.A. 38,545.52 22,484.89 61,030.41 27.65 MADAGASCAR INTERNATIONAL TAK MINING 86,283.43 50,332.00 136,615.43 61.90 S.A.R.L. MADAGASCAR MINING RESOURCES LTD 80,434.01 46,919.84 127,353.85 57.71 S.A.R.L. MADAGASCAR RESSOURCES S.A.R.L. 20,678.40 12,062.40 32,740.80 14.84 MAINLAND MINING LTD S.A.R.L.U 164,284.61 95,832.69 260,117.30 117.86 MINERAL PRODUCTS INTERNATIONAL GROUP 38,211.70 22,290.16 60,501.85 27.41 S.A.R.L. NOVA RESOURCES S.A.R.L.U 63,766.98 37,197.41 100,964.39 45.75 GROUPE PAM 22,060.80 12,868.80 34,929.60 15.83 QIT MADAGASCAR MINERALS S.A. 20,175.05 11,768.78 31,943.83 14.47 RED GRANITI MADAGASCAR S.A.R.L. 3,963.26 2,311.90 6,275.17 2.84 TANETY LAVA S.A.R.L. 22,716.07 13,251.04 35,967.11 16.30 TANTALUM RARE EARTH (MALAGASY) 15,271.86 8,908.59 24,180.45 10.96 S.A.R.L.U TOLIARA SANDS S.A.R.L. 7,819.20 4,561.20 12,380.40 5.61 UNIVERSAL EXPLORATION MADAGASCAR 20,743.02 12,100.10 32,843.12 14.88 S.A.R.L. URAMAD S.A 48,183.67 28,107.14 76,290.82 34.57 TOTAL 1,176,497.38 686,290.14 1,862,787.52 844.07

(*)The nominative list of the beneficiary municipalities is presented in the Annexes.

EY | 13 Reconciliation report EITI Fiscal Year 2013

Statement of the administration fees subject to BCMM’s pending repayment to the municipalities for the year 2013

FAM not paid to the municipalities Region/municipality in MGA in USD En Mer 35,349,673.89 16,017.72 ALAOTRA MANGORO 15,025,800.00 6,808.52 AMORON'I MANIA 5,353,248.00 2,425.68 ANALAMANGA 32,328.00 14.65 ANALANJIROFO 6,022,848.00 2,729.09 ANDROY 3,096,687.56 1,403.18 ANOSY 48,039,543.11 21,767.79 ATSINANANA 32,459,844.00 14,708.28 BETSIBOKA 32,328.00 14.65 BOENI 11,226,984.00 5,087.20 BONGOLAVA 140,088.00 63.48 DIANA 753,900.00 341.61 IHOROMBE 4,913,856.00 2,226.58 ITASY 1,082,988.00 490.73 MELAKY 6,203,458.55 2,810.93 MENABE 4,813,210.91 2,180.97 SAVA 2,197,164.00 995.58 SOFIA 19,844,004.00 8,991.76 VAKINANKARATRA 14,049,300.00 6,366.05 TOTAL 210,637,254.01 95,444.42

The Minings Administration fees yet to be repaid are mainly for the share of the municipalities that do not have a bank account dedicated to the municipality registered with BCMM, and for which the details are still pending.

Participatory budget In compliance with the provisions mentioned in sections 3.7 and 3.8 of the EITI standards 2013, the use of mining revenues in municipalities and regions applying the participatory budget has been highlighted in the frame of the reconciliation.

The participatory budget is a process and an instrument giving the population the possibility to determine the use of public resources (as a part of or as the overall investement budget for the local community).

The table below presents the total resources and the use for each local community, the details of which are categorised as investment and operating resources, but also in investment and operating use. The amounts which are not provided are the uses non-reported by the municipalities.

EY | 14 Reconciliation report EITI Fiscal Year 2013

Mining Resources Uses Municipality / Région company in MGA in USD in MGA in USD Municipality of AMBATOVY Ambohibary - 11,000,000.00 4,984.34 11,000,004.00 4 984,35 MORAMANGA HOLCIM Municipality of Ibity 62,525,896.00 28,331.87 Not provided Not provided HOLCIM Municipality of Tritriva 23,180,072.00 10,503.41 Not provided Not provided Municipality of Not provided Not HOLCIM 13,101,534.38 5,936.60 Andranomanelatra provided Municipality of KRAOMA 27,836,406.13 12,613.29 27,325,521.56 12 381,80 Antsiafabositra Municipality of KRAOMA 12,845,346.00 5,820.51 12,800,000.00 5 799,96 Maevatanana II Municipality of KRAOMA 10,728,575.73 4,861.36 10,728,575.73 4 861,36 Antanimbary Municipality of Ampasy QMM 937,525,556.00 424,813.68 937,525,556.00 424 813,68 Nahampoana Municipality of QMM 627,877,907.10 284,505.44 627,337,149.65 284 260,41 Mandromodromotra Total 1,726,621,293,34 782,370.51 1,626,716,806.94 737,101.56

EY | 15 Reconciliation report EITI Fiscal Year 2013

Recommendations

Follow-up of previous recommendations

RECEPIENT RECOMMENDATIONS - Reinforce the sensitization of the mining and oil companies, and of the public Administration, to guarantee the integration of the EITI process EITI and to ease data collection. - Exclude companies that have undergone dissolution during the reconciliation period. Companies and - Implement a system at the Tax Administration and company levels that Public will enable to distinguish the revenues by sector of the same company administrations in - Design a procedure for the follow-up of the regimes applicable to mining general companies. - Strengthen the reliability of the data in the canvas: tracking of the filling guide, support from a competent person during the preparation Mining and upstream workshop, availability of all supporting document, presence of a oil companies dedicated contact person during the reviews within the companies, etc. - Certify the canvas by an independent auditor. - Implement within the Treasury a system for identifying the paying Treasury, Ministry of companies when redistributing the payments to the decentralised Decentralisation, authorities. Regions and - Provide the decentralised authorities with a system that will enable them Municipalities to follow-up on the revenues. Customs - Update the database of the information on the companies and the Directorateand SRI 7 mapping of the old and new NIFs8. - Within BCMM, inform the decentralised authorities on the details of the BCMM9, Ministry of repaid FAM10and link payments to real owners after the disposal or the Decentralisation, transfer of the mining titles. Regions and - Within the decentralised authorities, perform a follow-up of the Municipalities payments from the mining companies in the sector and create a bank account. - Provide exhaustive information related to the payments of taxes, duties Tax administration and other fees by the companies such as : paying company, period, principal tax amount, fines and penalties, etc. EDBM11 and the - Centralise the database for the delivery of visa and resident card at the Ministry of the EDBM or the Ministry of the Interior with all the information about the Interior inquirer or the employer to facilitate the tracking of information.

7SRI : Service de Renseignements des Immatriculations (Registration Information Service) 8 NIF : Numéro d’Identification Fiscale (Tax Identification Number) 9 BCMM : Bureau des Cadastres Miniers de Madagascar (Mining Registry Office) 10 FAM : Frais d’Administration Minière (Mining Administration Fees) 11 EDBM : Economic Development Board of Madagascar

EY | 16 Reconciliation report EITI Fiscal Year 2013

New recommendations following the reconciliation

RECIPIENT RECOMMENDATIONS

The Administration - Implement a centralised and updated database of all the existing and its divisions companies and an electronically-accessible archive of the data. Treasury, Ministry of - Provide in each BTR12all information related to the receipt of payments. the Decentralisation, Regions and Municipalities - Set up a database that will provide the coordinates of the Customs Customs Directorate broker and of the final beneficiary. INSTAT, Ministry of - Perform an annual study of the actual contribution of the mining and Economy, Ministry in upstream oil sectors after an update of the structure. charge of the extractive sector

12 BTR : Bons de Transfert de Recettes (Revenues Transfer Coupons)

EY | 17 Reconciliation report EITI Fiscal Year 2013

EY | 18 Reconciliation report EITI Fiscal Year 2013

Summary

Presentation of the assignment ...... 1 Context and purpose of the report...... 1 Scope and approach ...... 1 Materiality-defined scope ...... 2 Update of the Materiality rate ...... 2 Background information ...... 2 Overview of the extractive sector ...... 2 Governance of the extractive sector...... 3 Legal and tax framework ...... 4 Situational analysis of the licensing procedures ...... 4 Licenses records ...... 5 Information on the beneficial ownership ...... 5 Disclosure of the oil contracts ...... 5 Financial relationships between the government and State-owned companies ...... 6 Contribution of the extractive sector to the economy ...... 6 Main outcome of the reconciliation ...... 8 Analysis of the results ...... 8 Entities from Group A ...... 8 Entities from Group B ...... 11 Entities from Group C ...... 11 Other results ...... 12 Donations ...... 12 Social expenditures ...... 12 Participatory budget ...... 14 Recommendations ...... 16 1 Presentation of the assignment ...... 27 1.1 Context and purpose of the report ...... 27 1.1.1 EITI worldwide and in Madagascar ...... 27 1.1.2 Purpose of the EITI report ...... 29 1.2 Context of work ...... 30 1.2.1 Scope ...... 30 a) Standards related to the Reconciler’s work ...... 30 b) Standards related to the extractive companies’ canvas ...... 30 c) Standards related to the administration’s canvas ...... 30 1.2.2 Reconciler’s procedures ...... 30 1.2.3 Methodological approach ...... 32 1.2.4 Limitations of the works ...... 33 1.2.5 Coverage ...... 33 1.2.6 Fiscal year ...... 34 1.2.7 Type of flow ...... 34

EY | 19 Reconciliation report EITI Fiscal Year 2013

1.2.8 Entity type ...... 34 1.2.9 Thresholds ...... 34 1.2.10 Update of the coverage rate ...... 35 1.2.11 Discrepancies and adjustments ...... 36 1.2.12 Exchange rate ...... 36 1.2.13 Companies included in the reconciliation ...... 36 2 Background information ...... 39 2.1 Overview on the formal extractive sector ...... 39 2.1.1 The mining sector ...... 39 2.1.2 The upstream oil sector ...... 40 2.2 Overview of the small mines and informal mining activities ...... 42 2.2.1 Definition and weight of the small-scale mining ...... 42 2.2.2 Results of the studies on the informal extractive sector ...... 42 2.2.3 The case of gold...... 43 2.3 Governance of the sector: key actors ...... 45 2.3.1 The mining sector ...... 45 2.3.2 The upstream oil sector ...... 45 2.4 Legal framework ...... 45 2.4.1 The mining sector ...... 45 2.4.2 The upstream oil sector ...... 46 2.5 Tax framework ...... 47 2.5.1 Comparative table ...... 47 2.5.2 Specificities for State taxes and local taxes ...... 48 2.6 Royalties and rebates ...... 49 2.7 Administration and training fees ...... 50 2.8 Current state of the licensing procedures ...... 52 2.8.1 Mining sector ...... 52 2.8.2 Upstream oil sector ...... 54 2.9 Registry of licences and permits ...... 55 2.9.1 Reiterating the standard ...... 55 2.9.2 Situation in Madagascar ...... 55 2.10 Information on the beneficial ownership of the extractive companies ...... 55 2.10.1 Reiterating the standard ...... 55 2.10.2 Situation in Madagascar ...... 55 2.11 Disclosure of oil contracts ...... 59 2.11.1 Reiterating the standard ...... 59 2.11.2 Situation in Madagascar ...... 59 2.12 Financial relationships between the government and State-owned companies .60 2.12.1 Reiterating the standard ...... 61 2.12.2 Situation in Madagascar ...... 61 2.13 Contribution of the extractive sector to the economy ...... 61 2.13.1 Contribution to the GDP ...... 61

EY | 20 Reconciliation report EITI Fiscal Year 2013

2.13.2 Contribution to foreign direct investments ...... 62 2.13.3 Contribution of the total tax revenues ...... 63 2.13.4 Contribution in terms of employment ...... 64 2.14 Exported quantities ...... 64 3 Results of the reconciliation ...... 66 3.1 Total flows and total residual discrepancy ...... 66 3.2 Entities in Group A ...... 66 3.2.1 Schedule of the payment flows per company, with amounts paid, amounts received and discrepancies ...... 66 3.2.2 Comments ...... 84 3.3 Entities from Group B ...... 90 3.3.1 Schedule of the payment flows per company, within the public entities in thousands MGA 90 3.3.2 Comments ...... 91 3.4 Entities of Group C ...... 92 3.4.1 Schedule of the payment flows per company, at the public entities in thousands MGA 92 3.4.2 Comments ...... 93 4 Other results ...... 94 4.1 Donations-related results ...... 94 4.1.1 QIT MADAGASCAR MINERALS S.A...... 94 4.1.2 AMBATOVY PROJECT ...... 94 4.1.3 MADAGASCAR OIL ...... 96 4.1.4 TOLIARA SANDS ...... 97 4.1.5 HOLCIM...... 97 4.1.6 MADAGASCAR CONSOLIDATED MINING ...... 97 4.1.7 TANTALUM RARE EARTH (MALAGASY) ...... 98 4.1.8 KRAOMA ...... 98 4.1.9 MAINLAND MINING LTD ...... 99 4.1.10 MADA-AUST...... 99 4.1.11 SAPETRO...... 99 4.2 Results related to the social expenditures ...... 100 4.2.1 MAINLAND MINING...... 100 4.2.2 AMBATOVY PROJECT ...... 100 4.2.3 QIT MADAGASCAR MINERALS S.A...... 101 4.2.4 EAX ...... 103 4.2.5 SAPETRO ...... 103 4.3 Results with the decentralised authorities ...... 104 4.3.1 Mining rebates ...... 104 4.3.2 Mining Administration fees ...... 106 4.3.3 Property taxes on built property (IFPB) ...... 108 4.3.4 Property tax on land (IFT) ...... 109 4.3.5 Use of the funds received by the authorities that apply the participatory bydget...... 109

EY | 21 Reconciliation report EITI Fiscal Year 2013

5 Observations et recommendations ...... 113 5.1 Follow-up of previous recommendations ...... 113 5.1.1 Recommendations for EITI ...... 113 5.1.2 General recommendations (companies and administrations) ...... 114 5.1.3 Recommendations for the mining and upstream oil companies concerned by the reconciliation ...... 115 5.1.4 Recommendations for the administrations and its subdivisions ...... 117 5.1.5 Recommendations for the Department of Customs and Intelligence Service of Registrations (SRI) ...... 119 5.1.6 Recommendations for the BCMM, Ministry of Decentralisation, regions and municipalities 120 5.1.7 Recommendations for the Tax Administration ...... 121 5.1.8 Recommendations for the EDBM and the Ministry of the Interior ...... 122 5.2 General recommendations following the reconciliation...... 122 5.2.1 Recommendations for the administration and its subdivisions ...... 122 5.2.2 For the Treasury, the Ministry of Decentralisation, the Regions and the Municipalities 123 5.2.3 For the customs directorate ...... 124 5.2.4 For the INSTAT, the Ministry of Economy, the Ministry in charge of the extractive sector 124 6 Annexes ...... 125

EY | 22 Reconciliation report EITI Fiscal Year 2013

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List of abbreviations

ACRONYM MEANING Public entities: ANDEA Autorité Nationale de l’Eau et de l’Assainissement ADEMA Aéroport de Madagascar BCMM Bureau du Cadastre Minier de Madagascar Cnaps Caisse Nationale pour la Prévoyance Sociale DGE Direction des Grandes Entreprises DGI Direction Générale des Impôts DIR Direction Interrégionale des Mines DRI Direction Régionale des Impôts EDBM Economic Development Board of Madagascar EITI Extractive Industries Transparency Initiative ENEMPSI Enquête Nationale sur l’Emploi et le Secteur Informel ITIE Initiative de la Transparence des Industries Extractives OMERT Office Malagasy d'Etudes et de Régulation des Télécommunications OMNIS Office des Mines Nationales et des Industries Stratégiques ONE Office National pour l’Environnement OSIE Organisation Sanitaire Inter-Entreprise SONAPAR Société Nationale de Participation SPAT Société du port à gestion autonome de Toamasina SRE Service Régional des Entreprises SMMC Société de Manutention de Marchandises Conventionnelles Mining companies : AMSA Ambatovy Minerals Société Anonyme COMINA Compagnie Minière d’Andriamena DMSA Dynatec Madagascar Société Anonyme KRAOMA Kraomita Malagasy MOIL Madagascar Oil MCM Madagascar Consolidated Mining QMM Qit Madagascar Minerals WISCO WUHAN Iron and Steel Co Guanxin PAM Pan African Mining Oil companies : EMEPML ExxonMobil Exploration and Production Madagascar Limited EMEPMML ExxonMobil Exploration and Production Madagascar Majunga Limited EMEPNML ExxonMobil Exploration and Production Northern Madagascar Limited SAPETRO South Atlantic Petroleum BP SAS EAX East African Exploration Madagascar Taxes : AERP Autorisation Exclusive de Réservation de Périmètre DA Droit d'accise DD Droit de douanes FAM Frais d'administration minière HTVA Hors TVA IBS Impôts sur les bénéfices des sociétés IFPB Impôts fonciers sur la propriété bâtie

EY | 24 EITI Reconciliation report Fiscal Year 2013

ACRONYM MEANING IFT Impôts fonciers sur les terrains IR Impôts sur les revenus IRCM Impôts sur les revenus des capitaux mobiliers IRSA Impôts sur les revenus salariaux et assimilés IPVI Impôts sur les plus-values immobilières REU Redevance sur les eaux usées TAFB Taxe annexe à l'IFPB TFT Taxe forfaitaire sur le transfert TP Taxe professionnelle TPF Taxe de publicité foncière TVA Taxe sur la valeur ajoutée TVST Taxe sur les véhicules de tourisme des entreprises ENR Entreprises non résidentes Texts and Laws: LGIM Loi sur les Grands Investissements Miniers Others: AC Avis de crédit AD Avis de débit AMIT Association Médicale Inter-Entreprises de Tananarive CAD Commissionnaire agrée en douane CNUCED Conférence des Nations Unies pour le Commerce et le Développement Corp. Corporation CPP Contrat de Partage de production CTD Collectivités territoriales décentralisées DAU Déclaration administrative unique ISRS International Standards on Related Services Km Kilomètre Ltd Limited MECIE Mise en Compatibilité des Investissements avec l’Environnement MGA Malagasy Ariary NIF Numéro d'identité fiscale OMSI Organisation Médico-Sociale Inter-professionnelle OV Ordre de Virement PDI Projet de Développement Intégré PV Procès-Verbal S.A Société Anonyme SARLU Société A Responsabilité Limitée Unipersonnelle SMIMO Service Médical Inter-Entreprises Moramanga SE Secrétaire Exécutif USD Dollar des Etats-Unis d'Amérique

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1 Presentation of the assignment

1.1 Context and purpose of the report

1.1.1 EITI worldwide and in Madagascar

1.1.1.1 EITI worldwide

EITI, or Extractive Industries Transparency Initiative, has been officially founded in London in 2003. This initiative was the result of a coalition of governments, companies, civil society organisations, investors and international organizations. It establishes a standard enabling the companies of the extractive industry to publish the payments they made to the State, and for the governments to disclose their revenues. It aims to reinforce the governance by improving transparency and accountability in the extractive sector. It is financed by a multi-donor fund in place since 2004, to which many governments (British, German, Dutch, Norwegian, and French) contribute and it is managed by the World Bank. The diversity of this coalition is represented in the Board of Directors. The latter is assisted by a General Secretary who materialises his political decisions and coordinates the international efforts aiming to implement EITI. For a country to take part in the EITI, two steps are required : first, acquiring the status of candidate country, followed by the recognition of compliance to EITI standards. These steps are both under membership conditions and principles that are to be respected by each country wishing to take part in the initiative. The integration within EITI generally brings many advantages to the member country : governance capacity development, improvement of the international credibility and the investment climate, demonstrated willingness to fight against corruption, and a lasting commitment to good governance.

EITI International has adopted and published a new standard, edition 2013, at the International EITI Conference held in Sydney in May 2013. Applying this norm in its entirety is compulsory starting from 2014.

1.1.1.2 EITI in Madagascar

Madagascar expressed the desire to take part in the EITI process by meeting the membership conditions and principles. For this purpose, Madagascar was accepted as an EITI candidate country in 2008. A first communication and dissemination of information on the payments was made. A Multiparty National Group was established, consisting of members from all extractive regions (Regional Committees), and the Central Region.The group and the board are tripartite, with representatives of the civil society, the Administration and the extractive companies. The National Committee represents the Board of Directors of the Multiparty National Group.

In October 2011, the Board of Directors suspended Madagascar from its status of candidate country, due to a lack of international recognition of the government. The suspension prevailed until the national situation was to be resolved. However, the Council trusted the Multiparty Group to go on implementing EITI and produce a reconciliation report according to the new standards. To this end, the National Committee of EITI Madagascar ordered a reconciliation report of the financial flows between the State and the key taxpayers in the extractive industry for the fiscal year 2012. The new report, prepared by Ernst & Young in 2012, was presented to the Board of Directors, who after seeing

EY | 27 EITI Reconciliation report Fiscal Year 2013 all these efforts, decided to extend the suspension of Madagascar instead of excluding the country. This extension enabled Madagascar to be among the countries implementing the EITI.

The Board of Directors of EITI decided, on June 6th 2014, to lift the suspension of Madagascar and to reestablish its status of Candidate country. The Council noted the commitment of the new Malagasy government to implement the EITI standard. They were glad that the required structures for an efficient implementation of the EITI was in place and could be sustained. The reintegration of Madagascar as a Candidate country was granted under certain conditions. In compliance with the EITI standard, Madagascar must publish each year EITI reports compliant to the requirements of EITI so as to keep its status of Candidate country.

The National Committee has decided to order 2 reports for the reconciliation of 2014 for the fiscal year 2012 and 2013, prepared by Ernst & Young. For the current report, the new requirements outlined by EITI 201313, of which a summarised table is presented below, are applicable:

N° Requirements Application 1 EITI requires an efficient follow-up by the multiparty group (National Committee EITI) Compulsory

EITI requires a regular and timely publication of the data: the EITI reports must include the 2 Compulsory data that are not of the two previous fiscal years.

EITI requires that the EITI reports also include contextual information about the extractive industries : - summary of the legal and tax regime Compulsory - an overview of the extractive industry in the country Compulsory - the contribution of the extractive industries in the economy Compulsory - the information on production in quantity and in value Compulsory 3 - the form of participation of the State in the extractive industries Compulsory - the allocation of the revenue from the extractive industries Compulsory - the management of the revenue from the extractive sector Compulsory - the licences and permits registry Compulsory - the licensing procedure for the mining licences Compulsory - the beneficial owners of the extractive companies Suggested - the oil contracts Suggested EITI requires the publication of a reconciliation report that outlines, in an entire and exhaustive manner, all the significant payments received by the State from the extractive sector : - complete definition of the taxes, and other revenues that should be included in the report Compulsory 4 definition - attributions of infrastructures or barter trade arrangements (if applicable) Compulsory - social expenditures (according to the social commitment required from the company) Compulsory - transfer of funds between State-owned companies and other State departments Compulsory - subnational payments and transfers Compulsory EITI requires a methodology and a process of reliable statement and verification, in line 5 Compulsory with the international standards, when the independent reconciler prepares the report. EITI requires that the EITI reports be reader-friendly, promoted, and useful to public 6 Compulsory discussion. EITI requires of the Multiparty Groupe (National Committee) to adopt measures in order to 7 act in line with the lessons learnt and assess the results and the impact of the Compulsory implementation of EITI.

13Source : eiti-madagascar.org

EY | 28 EITI Reconciliation report Fiscal Year 2013

1.1.2 Purpose of the EITI report

The Terms of Reference describe the purpose of the assignment as performing reconciliation of the financial flows between the State and the main extractive industries (mining and upstream oil companies) in Madagascar for the fiscal year 2013. In compliance with the terms of reference, the services requested from the Reconciler include specific services, which are :

Specific services required from the Reconciler as per the terms of reference

► Verify if the assumptions of the materiality process of 2011 are compatible with the realities of 2013 ; ► Collect and compile information from the selected companies and from the related administration offices; ► Perform the reconciliation of the figures reported by the extractive industries and by the State; ► Analyse the differences; ► Compare the information related to the transactions in the Regions and the Municipalities beneficiaries and those reported by the taxpaying companies, and explain the differences ; ► Provide in the report the current state of the licensing procedures of 2013; ► Give the current state of the mining and upstream oil contracts and/or licences available in the public field, in Madagascar ; ► Assess the contribution of the extractive sector in 2012 compared to the overall economy for the same period by referring to the GDP. This comparison will also be tax-wise; ► Give an overview of the contribution of the extractive sector to the overall tax revenues of the country; ► Disclose the exported production per product and for each company during 2012 and also per region if applicable; ► Provide specific information about the State-owned companies or those where the State owns shares, as well as information related to the ownership of the extractive companies; ► Provide a summary of the donations to public entities from the mining and oil companies; ► Organise consulting workshops of the National Committee ; ► Publish and disseminate the report and the information; ► Prepare extracts of the reports for local, regional, national and international publishing purposes; ► Translate the EITI report into English.

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1.2 Context of work

1.2.1 Scope

1.2.1.1 Verification standards

a) Standards related to the Reconciler’s work We conducted our works based on the International Standard on Related Services: ISRS 4400 related to the « Engagements to perform agreed-upon procedures regarding financial information » and the standard ISRS 4410 related to « Compilation Engagements ».In accordance with these standards, our intervention does not constitute an audit, nor a limited review of revenues from the mining and upstream oil sectors. Auditing and certifying the transmitted data do not fall within the scope of our work. Likewise, our intervention was not designed to detect errors, fraud or irregularities. As the auditor provides only a report on the findings based on the agreed-upon procedures, he does not express any level of insurance. The recipients of the report will themselves assess the procedures and the findings of the auditor, and draw their own conclusions from the auditor’s work.

b) Standards related to the extractive companies’ canvas Collecting a certification of the auditors of the companies involved in the reconciliation is included in the scope of our work. This document should enable to complete the work on the basis of reliable data. However, without the certification of canvas, reliability procedures were undertaken by the Reconciler, including the control of supporting documents. Regarding the reconciliation for the fiscal year 2013, 15 companies out of 34 receiving the reconciliation have provided the certification from their auditors and 13 were not audited. Further details are provided in the annexes. The companies are bound to submit their Financial Statements to the Tax Administration. However, the auditor’s certification on the accounts is not compulsory for certain types of companies as provided by the current legislation in Madagascar.

c) Standards related to the administration’s canvas

Regarding the certification of public accounts, a study by Ernst & Young in 2012 showed that a process for independent certification of the administration's canvas according to international standards was yet to be designed. Reliability procedures were undertaken by the Reconciler, including the control of supporting documents.

1.2.2 Reconciler’s procedures

It is the Reconciler’s responsibility to: ► collect and compile the data received from mining and upstream oil companies and from administrations, based on the canvas and/or statements given to him; ► Check the consistency of the financial flows completed by these entities with the adopted repository form, “the canvas” of reporting; ► Check the reliability of data contained in these canvases and/or statements with the analysis of the procedures of their registration and the supporting documents (returns, payment vouchers, etc) ; ► Perform a reconciliation of the compiled data ;

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► Perform an analysis of information discrepancies, provide an explanation on the discrepancies and if applicable, make appropriate recommendations based on weaknesses noted and in reference to good practices in other countries to address them.

It should be noted that our data collection works are not limited to the receipt of the canvas and its annexes.To overcome the lack of certification of accounts of some companies and the administration, work has been carried out to improve the reliability of the data collected: • An understanding of the system of financial flows: for each financial flow (taxes, duties, fees,…) listed on the canvas, we reconstructed the flow of funds paid by the company, through the receiving entities (primary bank, treasury…) to the final beneficiary for the monitoring of traceability of the revenues collected by the State. A diagram showing the most significant financial flows is provided in the annexes ; • A verification of supporting documents : concerning the numerical data on the canvas and its annexes, we have tested their reliability (accuracy of amounts, correct allocation period, non- existence of duplicates or omission, etc.) by reviewing a sample or all of the supporting documents (return, receipt of payment or voucher, bank debit notice, etc.) for the significant payment flows of each reconciled company following the verification threshold predefined at the point 1.2.9.1 ; • An analysis of the recording procedures of financial flows in the canvas and its annexes: we reviewed the correct classification of financial flows by their nature while ensuring the objective of comparability and consolidation of the data from all concerned entities (company, State and its divisions). An arithmetic verification of the total amount put in the canvas compared to the details in the canvas was made as well as a control of the consistency of the information recorded in the annexes with the supporting documents ; • Payments confirmation from entities receiving the funds: payments made to public entities such as Large Companies Directorate, Customs, Directorate of Mines, Regions and some municipalities, etc. are directly paid to the Treasury’s account, that is their manager. Each entity has proof of payment from the extractive companies (transfer order, copies of checks, etc.) but only the Treasury can attest to the effectiveness of the payment. We have collected the references of the Revenues Transfer Voucher (Bordereau de Transfert des Recettes, BTR) and the credit notice from each entity and then returned them to the Treasury for payment confirmation. The funds of entities such as the BCMM, OMNIS, ANDEA, ONE, and OMERT are held at primary banks. • Data reconciliation and analysis of the discrepancies: the data collected from the extractive companies and the State have been reconciled and showed discrepancies. Each stakeholder has been asked to explain these discrepancies. Corrections to these discrepancies were made, justified by supporting documents and accepted by both parties. The remaining discrepancies are related to information that was not tracked by the other stakeholder, or of which we did not get any explanation.

In particular, it is asked of the auditor to take into account, in addition to financial flows, all donations and social expenditures from extractive companies for the State and its subdivisions on one hand, and to highlight financial information concerning the regions and municipalities on the other hand. We must submit, in a consolidated then disaggregated form by company, for each type of considered EITI income, the reported income flows paid by mining companies, as well as the reported income flows received by the State.

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Details of the methodological approach used to execute the engagement are presented in the following section « Methodological approach» of the Reconciler.

1.2.3 Methodological approach

In accordance with the terms of reference, the methodological approach for the reconciliation engagement is presented in the diagram below:

Phase 1: Preliminary analysis 1.1 Preliminary review of the contextual information collection strategy 1.2 Determination of the payment field and elaboration of the reconciliation canvas 1.3 Materiality process: determination of the companies selected for the reconciliation 1.4 Analysis of the credibility of the data 1.5 Validation of the National Committee

Deliverables: Reporting canvas (tax and non-tax part) / Initial report

Phase 2: Collection of the data to be reconciled 2.1 Kickoff meeting with the stakeholders for launching the engagement 2.2 Data collection from the extractive companies 2.3 Data collection from the State

Phase 3: Initial reconciliation 3.1 Reconciliation of the data received 3.2 Collection and analysis of the data regarding the contextual information

Deliverable: Report for the initial reconciliation

Phase 4: Investigating discrepancies and drafting the report 4.1 Collection of the explanations of the lack of information 4.2 Evaluation and follow-up of previous recommendations 4.3 Situation of the licensing process 4.4 Preparation of the draft report 4.5 Presentation of the draft report to the National Committee

Deliverable: Draft report

Phase 5: Final report 5.1 Organisation of a consultation workshop 5.2 Publication of the report and information dissemination 5.3 Elaboration of excerpts of the report for local, regional, and national publishing purposes 5.4 Approval and translation of the report and excerpts from the report

Deliverables: Final report and excerpts from the report

Comments regarding the methodological approach: ► Details of the above methodological approach are presented in the annexes. ► Regarding the materiality process: In accordance with the Terms of reference, the definition of the scope of reconciliation consists of a prior exhaustive inventory of the extractive companies having paid above 5,000 USD to the BCMM and the OMNIS during the fiscal year 2012. From a list of extractive companies in the

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scope of reconciliation, the data collection has been performed per entity according to the Tax Indentification Number (NIF) and the Statistical Number (STAT) of each entity. Note that the NIF and the STAT enable the public entities such as the General Directorate of Taxes and the Customs to identify a tax payer at their level and also the related payments.

1.2.4 Limitations of the works

Our data collection was limited due to barriers we faced, which were : • The Tax Identification Numbers (NIF) of 9 natural persons and 3 legal persons were not found within the Tax Administration nor with other data sources from the State (Research and Investigation Service of the Tax General Directorate, Customs Directorate…) during the materiality process; • The unavailability of some data, whether at the company or State level (supporting documents of returns, of payments,…); • The absence of a digitalised database, for some Directorates and divisions of the State, hinders them from ensuring the completeness of the data received on the payments made by extractive industries; • the existence of defaulting companies, that did not receive the reconciliation, which led to unreconciled discrepancies; • the reshuffle of the staff within the Administration following the change of the governement has resulted to blockages and delays in the data collection.

Moreover, our intervention consists only of the collection, the reconciliation of the data and analysis of the discrepancies. We are not supposed to express our opinion on the quality of the information and of estimations, or perform investigations in case of fraud suspicion.

However, inspite of these limitations, we estimate having performed satisfactory and correct reconciliation of the data.

1.2.5 Coverage

In accordance with the Terms of reference, the reconciliation will cover the significant payments flow from the extractive industries in the mining and upstream oil sectors.

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1.2.6 Fiscal year

The fiscal year concerned by the reconciliation is 2013. Thus, it concerns the payments made by the extractive industries to the State related to the fiscal year 2013, regardless of when they were paid. We note the following exceptions: · for the payment of penalties and tax ajustments, the date of payment will be considered over the fiscal years to which they are related to; · payments made outside of the date of the reconciliation engagement but related to the fiscal year 2013 are not taken into account in this report.

1.2.7 Type of flow

The flows considered by the National Committee that fall within the scope of the reconciliation are classified in five categories, as cited below: ► State taxes ► Segment revenues ► Other payments ► Withholding taxes ► voluntary contributions in kind and in cash

The details per flow type are presented in the annexes.

1.2.8 Entity type In accordance with the Terms of reference, the entities concerned by the EITI report are the extractive industries in the mining and upstream oil sector. However, the significant payment flows recorded in the name of the individuals, but whose mining licenses are actually the property of companies included in the reconciliation and whose payments are exercised by the companies are taken into account. At the same time, natural persons responsible for significant payment flows are included in the coverage threshold for the reconciliation.

1.2.9 Thresholds 1.2.9.1 Verification threshold of the financial flows We have performed the verification of the reliability of the data and information in the reporting canvas on the basis of, at least, the following audit thresholds: ► A materiality threshold set at 1% of the total value of the annual amounts paid for each mining or upstream oil company. A materiality threshold is a limit beyond which potential errors, misstatement or omissions are considered as problematic. It is the amount above which the judgement of an informed reader could be altered regarding the statements of the revenues. ► A tolerable error of 50% of the materiality threshold. The tolerable error threshold is the maximum error in a selected population that the auditor is willing to accept when concluding that the sampling results reached the audit objective. Thus, the amount of taxes, fees, and charges exceeding 50% of the materiality threshold were subject to a verification of the supporting documents for the selected samples (returns and payment receipts) up to 50% of the supporting documents. ► A nominal error threshold of 5% of the materiality threshold.

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1.2.9.2 Materiality threshold and coverage rate validated by the National Committee

On the basis of the materiality process performed by EY, the National Committee decided to keep the extent of the EITI report of 2013 to 34 companies including two natural persons having made significant payments. In conclusion, considering the 34 companies and two natural persons from group A, the coverage rate of the EITI report of 2013 reaches 97.53% of the revenues of the State for 2013 and the materiality threshold is USD 79,226.53.

As a reminder, the companies included in the scope of the reconciliation are classified into 3 categories, which are: • Group A: the companies of which the accumulated payments to the administrations reach 97% of the significant flows received by the State. The companies included in this group were subject to the reconciliation, by comparing, via a canvas, the data collected from the companies with the data given by the administration. • Group B: the companies of which the accumulated payments to the administration are between 97% and 98% of the significant flows received by the State. Each of the companies included in this group did not have to fill out the reconciliation canvas, but was subject to a one-sided disaggregated statement by the administrations that received the payments from them. • Group C: the companies of which the accumulated payments to the administrations are between 98% and 100% of the significant flows received by the State. The companies included in this group did not have to fill out the reconciliation canvas, but were subject to a one-sided aggregated statement by the State.

Regarding this matter, EITI rules provide that, in case the Multiparty Groupe agrees to define specific materiality thresholds, it has to specify the options that were considered and the justification of the establishement of the threshold at a certain level.

Hereafter the table approved by the National Committee:

Characteristics Coverage rate to 97.5% Fiscal Year 2013 Group A 34 Number Group B 5 of entities per group Group C 63 Total 102 Materiality threshold (USD) 79,226.53 Coverage rate 97.53%

The chart of methodology that led to the assumptions validated by the National Committee is presented in the annexes.

1.2.10 Update of the coverage rate While collecting the data from the companies, we noted that the data from the adminsitration during the materiality process should be completed by non-recurring and specific payments such as : the Tax on International Financial Transfer (Taxe Forfaitaire sur les Transferts, TFT), fines and penalties, non- refunded VAT, documents registration fees, etc.

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32 companies out of the 34 included in the scope of the materiality filled out their EITI statement canvas. The two companies that did not receive the reconciliation or did not fill out and/or signed the canvas within the time limit: 017. OPHIR ENERGY 030. RED GRANITI MADAGASCAR S.A.R.L.

The materiality threshold has been reviewed and set at USD 79,331.12, as opposed the initial figure of USD 79,226.53. The coverage rate was brought to 99.12% instead of 97.53% as per the table below.

Characteristics Scope of the report Initial materiality Updated materiality Fiscal Year 2013 threshold threshold Number Group A 34 34 of entities Group B 5 5 per group Group C 63 63 Total 102 102 Materiality threshold (USD) 79,226.53 79,331.12 Coverage rate 97.53% 99.12%

1.2.11 Discrepancies and adjustments

In general, the following types of discrepancies are met during the reconciliation: ► Resolved discrepancies related to the reconciled discrepancies and the supporting documents of which were submitted to us after the signature of the canvas; ► The adjustments made on the taxes that were not reconciled because the value was low and/or the reconciliable data were not available to this day. These are the statements without counterpart of the health organisations (OSIE, OSTIE, AMIT, FUNHECE, OMSI, OMIT, SMIMO), car tax, technical visits, non-refunded VAT, etc. Note that we have checked, in accordance with the predefined audit threshold, the reliability of the data and related documents with the companies; ► Residual discrepancies or remaining discrepancies after the correction of the canvas of the State and the ones of the companies for the amounts of the resolved discrepancies and adjustments of the statements without counterpart.

The comments on the discrepancies are related to the residual discrepancies in this document. It is necessary to note that there are three kinds of residual discrepancies which are: ► Explained discrepancy, but the other party cannot bring corrections to this day (case of the FAM on the sold licenses recorded at BCMM to the name of the seller) ; ► Discrepancy not acknowledged by the other party ; ► Discrepancy unexplained at the moment of the report. These different types of discrepancies are commented in the report when appropriate.

1.2.12 Exchange rate

The exchange rate used for the report is the average rate from the Central Bank of Madagascar for 2013 where 1 USD is equivalent to MGA 2,206.91.

1.2.13 Companies included in the reconciliation

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The outcome of the materiality process identified the 102 entities to be included in the 2013 EITI report. These are the entities whose payments are significant, exceeding or equal to USD 5,000 and are classified in groups according to their size as presented below:

1.2.13.1 Entities in Group A The 34 entities in this group were subject to the reconciliation whereby data was collected from such entities and subsequently compared to the data collected from the administrations via a canvas. The list is presented below:

Sociétés Sociétés 001. PROJET AMBATOVY 018. MADAGASCAR CHROMIUM COMPANY LTD S.A.R.L.U 002. HOLCIM 019. UNIVERSAL EXPLORATION MADAGASCAR S.A.R.L. 003. MADAGASCAR OIL 020. URAMAD S.A 004. OPHIR ENERGY 021. STERLING ENERGY LTD 005. QIT MADAGASCAR MINERALS S.A. 022. TULLOW MCAR 006. GOLD SAND S.A.R.L. 023. TOLIARA SANDS S.A.R.L. 007. EXXON MOBIL 024. TANTALUM RARE EARTH (MALAGASY) S.A.R.L.U 008. KRAOMA S.A. 025. SAPETRO 009. MAINLAND MINING LTD S.A.R.L.U 026. MADAGASCAR CONSOLIDATED MINING S.A. 010. GALLOIS Etablissement 027. LABRADOR MADAGASCAR - 011. NIKO RESSOURCES [ENERMAD] 028. MINERAL PRODUCTS INTERNATIONAL GROUP S.A.R.L. 012. GROUPE PAM 029. AMICOH RESOURCES 013. MADA-AUST S.A.R.L. 030. RED GRANITI MADAGASCAR S.A.R.L. 014. MADAGASCAR MINING RESOURCES LTD S.A.R.L. 031. TANETY LAVA S.A.R.L. 015. MADAGASCAR INTERNATIONAL TAK MINING S.A.R.L. 032. GRANITEX S.A.R.L. 016. CALIBRA RESOURCES & ENGINEERS MADAGASCAR 033. EAX /CANDAX S.A.R.L.U 034. MADAGASCAR RESSOURCES S.A.R.L. 017. NOVA RESOURCES S.A.R.L.U

Note: As for the companies, 2 of them have not filled out the canvas on time and thus, did not take part in the report, namely: OPHIR ENERGY and RED GRANITI MADAGASCAR S.A.R.L.However, they were kept in the scope of the report. Consequently, the data from the State related to these companies shows a discrepancy.

As for the administrations : ► We did not obtain the information related to the Port fees, the municipal and regional royalties and the maritime and inland waterways royalties from MICTSL ; ► At the date of this report, the exhaustive information on the non-refunded VAT for some companies were yet to be obtained from the Tax.

Data which we did not get from the administration were included in the report as a unilateral statement of the extractive entities and generated discrepancies.

The summary table for the canvas and the certificate from the auditor of the companies in group A and the administration is presented in the Annexes.

1.2.13.2 Entities in Group B The entities included in this group do not have to fill out the reconciliation canvas, but are subject to a disaggregated unilateral statement from the administration to whom they paid taxes. 5 entities are in group B. They are presented in the following table:

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Companies 035. MADAGASCAR WISCO GUANGXIN KAM WAH RESSOURCES S.A.U. 036. CLASSIC REAL STONES S.A.R.L. 037. FARASANDS S.A.R.L. 038. INTERNATIONAL MINING CORPORATION LTD S.A.R.L. 039. RECHERCHES MINIERES DE MADAGASCAR S.A.R.L.

1.2.13.3 Entities in Group C The entities in this group do not have to fill out the reconciliation canvas, but are subject to an aggregated unilateral statement from the State. 63 entities are in group C. They are presented in the following table :

Companies Companies 040. INDUSTRIE MINIERE SINO-AFRIQUE S.A.R.L. 080. ACCESS MADAGASCAR S.A.R.L. 041. ACCRINGTON MINERALS S.A. 080. MANAMPISOA RALANDIRANTO Marie Bernadette 042. MINVEST MADAGASCAR S.A.U. 082. CONCORDANT RESOURCE SURVEY CORPORATION S.A.R.L.U. 043. PROCHIMAD 083. UNIVERSAL GEMS S.A.R.L. 044. BLUE GOLD RESOURCES "MADAGASCAR" S.A 084. SOGEMINE S.A.R.L. 045. RAHERIMANDIMBY Rija Tantely Andriantiana 046. IRON ORE CORPORATION OF MADAGASCAR 085. RANDRIANASOLO Clarisse Marie Emilie S.A.R.L. 086. ARSENE LOUYS & Cie Sa 047. COPAX RESOURCES S.A.R.L. 087. SMGI - SOCIETE MINIERE DE LA GRANDE ILE 048. AVANA RESOURCES S.A.R.L.U. 088. BEBY RASOLOMALALA 049. MAZOTO MINERALS S.A.R.L. 089. MADAGASCAR INVESTIMENT COMPANY S.A.R.L. 050. CAPRICORN ENTERPRISES MADAGASCAR (C.E.M) 090. INTERNATIONAL MINING DEVELOPMENT LTD S.A.R.L. S.A.R.L. 051. TANETY ZINA S.A.R.L. 091. MIRANA Lynda Eliane / Gros Center 052. MADA GONDWANA S.A.R.L. 092. ANDRIAKOTO Norolala Jenny 053. SIAM S.A.R.L. 093. RATSIMBAZAFY Jean Kinne 054. LE QUARTZ - 094. CHAUMAD S.A.R.L. 055. VATOSOA MINING S.A. 095. MINERAL DEVELOPMENT MADAGASCAR 056. SINBAD RESOURCES S.A.R.L. 096. RAZANAKONDEVO Benjamin 057. SAKAMENA GOLD S.A.U. 097. TAFITA MINING S.A.R.L. 058. BLUE SUN MINING COMPANY S.A 098. RANAIVOARIMANANA Ionjaniaina 059. ORIENTAL MINING S.A.R.L.U 099. RABEZORO Anjarisitraka 060. NAN TIN POLYCHROME S.A. 100. RAKOTOMAROLAHY Jean Pierre 061. RASAMIZAFINDROSOA Dauphin 101. MADAGASCAR ENERGY CORPORATION S.A.R.L. 062. SP GROUP S.A.R.L. 102. GEMS INDUSTRY CORPORATION - 063. MINERAL RESOURCES of MADAGASCAR S.A.R.L. 064. SOCIETE MALGACHE DU GRAPHITE S.A. 065. SHANDI S.A.R.L. 066. SOMIDA S.A. 067. MILLENIUM STAR S.A.R.L. 068. BRIGHT STAR EXPLORATION S.A 069. ETABLISSEMENT RENE IZOUARD 070. RABETRENA Roland 071. FINEBRIDGE (AFRICA) MINING LTD S.A.R.L. 072. LEMURIA S.A.R.L. 073. SOCIETE LATVIA MADAGASCAR S.A.R.L. 074. COAL MINING MADAGASCAR S.A.R.L. 075. MADCORE MADAGASCAR S.A.R.L.U. 076. WORLD GEMS COMPANY S.A.R.L. 077. HOLA FIRM S.A.R.L. 078. LA TERRASSE S.A.R.L. 079. SUCCESSION RASAMOEL Jean Baptiste -

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2 Background information

2.1 Overview on the formal extractive sector

2.1.1 The mining sector

2.1.1.1 Potentials in Madagascar

Madagascar has great potentials in terms of minerals. We can find the following : • Non-metal minerals : these are those used for construction purposes and for public works, such as sands, clay, marble (Ambatofinandrahana), etc. ; • Industrial use minerals : these are the minerals such as iron (Soalala, Bekisopa, Fasintsara), cobalt, nickel (Ambatovy, Valozoro), chromium (Ranomena, Andriamena, Mahakiry), manganese, vanadium, titanium, zirconium, ilmenite (Fort-Dauphin, Ranobe), etc. ; • Base metals : copper, lead, coal, lignite, bauxite (Manantenina, Analavory, Marangaka), aluminium, tin, etc. ; • Precious metals : mainly gold (Andavakoera), silver or platinum ; • Precious and semi-precious stones : beryl, sapphire, emerald, ruby, rose quartz, topaz, tourmaline, amethyst, aquamarine, etc. ; • Strategic minerals : radioactive minerals such as mercury, lithium, magnesium, radium and rare earths ; • Mineral waters : minerals from drinking water.

2.1.1.2 Main ongoing or planned projects

Identification forms are presented in annexes for the companies in Group A. The current main industrial ongoing or forecasted indusctrial scale projects include: • QMM, which operates ilmenite and zirsill in the region of Fort-Dauphin. The site is composed of the mine, the mill, the separation plant and the power generation plant. Later on, the project was completed by a port, Ehoala ; • The project Ambatovy, operating nickel and cobalt, and composed by the mine in Moramanga, from the pipeline crossing many locations and reaching Tamatave, where the processing plant is. The products are exported from the port of Tamatave; • KRAOMA, a State-owned company operating chromium ; • Wisco, and its interests tied to the iron of Soalala ; • Madagascar Consolidated Mining and PAM Sakoa, whose interest in the Coal of Sakoa prompted a pre-feasibility study phase currently underway; • Toliara Sands, whose Exploration Permit has been changed into an Operating License in 2011, and who is currently in the stage of the Environmental Impact Study for the operation of ilmenite in Ranobe; • Mainland, who is interested in the ilmenite on the east coast of Madagascar and who is currently in the environmental impact assessment phase; • Aziana, who holds licences related to the bauxite of Manantenina, near Fort-Dauphin

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• Holcim, who exploits pozzolana, clan and cipolin while producing cement for the local market. This company, present for more than 50 years now, operates in Antsirabe and Tamatave.

2.1.2 The upstream oil sector Madagascar has 988 000 km2 of onshore and offshore sedimentary basin fit for hydrocarbon exploration which are mainly spread on the northeast and western coasts. Today, 445 000 km2 were subject to research reviews, which is equivalent to a 45% coverage rate.

Sixteen international oil companies signed 23 contracts with OMNIS for hydrocarbons exploration and operation, regarding 17 onshore blocks and 6 offshore ones. The number of available blocks is 229, 225 of which are offshore and 4 are onshore. A promotional campaign and international calls for tender will be made soon regarding these blocks.

The various ongoing projects in Madagascar are presented in the table below and in the map in the following page:

Block name Related company Antsiranana (onshore) Afren / Oyster Ambilobe (offshore) Sterling Energy / Pura Vida Antsohihy (onshore) Madagascar Northern Petroleum Company Ampasindava (offshore) ExxonMobil Madagascar / Sterling Energy Majunga profond (offshore) ExxonMobil Madagascar / British Gas / Petro Vietnam / Seoul Korea Cap Saint-André (offshore) ExxonMobil Madagascar Bekodoka (onshore) Madagascar Petroleum Energy Bemolanga (onshore) Total Exploration / Madagascar Oil SA Tambohorano (onshore) Varun Energy Melaky (onshore) Essar Energy Holding Limited Tsimiroro (onshore) Madagascar Oil SA Manambolo (onshore) Madagascar Oil SA Granx Prix (offshore) OMV Exploration & Production / Niko Oil / Enermad Belo profond (offshore) South Atlantic Petroleum / Marex Morondava (onshore) Madagascar Oil SA Manandaza (onshore) Madagascar Oil SA Manja (onshore) Amicoh Corporation Mandabe (onshore) Tullow Oil Morombe (onshore) Essar Exploration & Production Limited Berenty (onshore) Tullow Oil Toliary (onshore) Madagascar Southern Petroleum Company Sakaraha (onshore) Madagascar International Exploration Bezaha (onshore) Petromad

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2.2 Overview of the small mines and informal mining activities

2.2.1 Definition and weight of the small-scale mining

The mining code of 2005 defines small-scale or artisanal mining as being: « Traditional methods using mainly manual tools and applied human or animal effort for the extraction of minerals from the soil or subsoil. » Small-scale operators are defined as « those working in underground and open pit mines […] using craft techniques without processing the minerals at the extraction site ». Thus, gold-washers are included in this category.

Small-scale mining is often done by small-scale operators that do not hold mining titles, thus adding an informal characteristic to this kind of operation. These are mainly related to gold and precious or semi- precious stones (ruby, emerald, sapphire, amethyst, topaz, tourmaline, etc.).

2.2.2 Results of the studies on the informal extractive sector

2.2.2.1 Information from the World Bank

In its Compendium of policy notes for Madagascar (published in May 2014), the World Bank estimated that 500,000 people worked in the artisanal mining sector in the late 90s, which makes it one of the most significant employers before the textile sector, but behind the agricultural one. Moreover, the suspension of the issue of new licences in 2009 has pushed many operators to go informal. Indeed, the number of PRE has gone from 1,500 in 2008 to less than 500 in 2012.

2.2.2.2 ENEMPSI information for 2012

The National Employment and Informal Sector Survey (ENEMPSI) performed in 2012 by INSTAT14has defined quantitative and qualitative indicators that now enable an analysis of the employment market and informal sector in Madagascar. The presented results are related to the conditions of activities related to Individual Production Units (IPU)15, the characteristics of the labour force and employment in the IPU, the production, the insertion and the competition of the IPU, the relationship between the informal sector and the State and lastly the issues and perspectives of the informal sector, in particular for the branch of the mining extractive industry.

In 2012, in Madagascar, the Individual Production Units « IPU » (excluding agriculture, farmin, hunting and fishing) are estimated to 2,268,900 units. Most of these Individual Production Units « IPU » (99.9%) are classified as informal production units. Thus, in the IPU, there are neither written contracts, nor paid leaves nor social security for the workers.

INSTAT’s study has shown that: • The mining extractive industry branch represents 8% of all these IPU: 13.3% are observed in the urban area, and 86.7% in the rural area.

14Enquête Nationale sur l’Emploi et le Secteur Informel – Enempsi 2012, Novembre 2013, vol 1 15 The Individual Production Units (Unités de Production Individuelles, « UPI ») are considered as « informal » as: they do not have a Statistical Identification Number, or they do not have an accounting system with an administrative value.

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• The main reason motivating the creation of IPU in the mining extractive sector is the increase of revenue (54%) for small-scale operators, who face the impossibility of finding a formal job or the « family tradition ». • IPUs last in average 8.7 years; at the date of our study, they have existed for 6.8 years in average. Indeed, IPUs that existed long ago are characterised by a particular or traditional know-how (transformation, design activities). Conversely, the « young » IPUs are ones whose activities do not necessarily require extensive capital. • 70.7% of the share capital of the branch of the mining extraction is funded by savings. • The share of employees is low in the IPU, as job creation remains limited (3.9% in the mining extraction of IPUs). • Men workers outweigh women in the informal extractive branch. • 44% of those who are active in this branch are aged under 26. • Those who are active in this branch have had in average 3.1 years of study.

2.2.3 The case of gold

Even though the exportation of gold is prohibited, tons of it are extracted from Malagasy soil and illegally exported. The local media regularly reports seizures of precious metals at airports and border crossings. However, it is difficult to get information on these events from the Malagasy authorities.

At the international level, estimations can be made by comparing the trade balances per country and per product. According to the UNCTAD (United Nations Conference on Trade and Development), whose data is presented below, it is estimated that the value of import of Malagasy gold to the United Arab Emirates is, respectively, 9.8 million (approximately 327 kg) and 16.3 million USD (approximately 543 kg) in 2012 and 2013. Based upond this partial data, that only regards the United Arab Emirates, it is possible to estimate that the State and the local communities have lost an income of 326,000 USD, equivalent to more than 720 million MGA in 2013 that corresponds to non-received royalties.

The same source has provided an estimation of the value of gold exported from Madagascar as exceeding 18 million USD (approximately 600 kg) in 2012, with a peak of 56.5 million USD (approximately 1.8 ton) in 2011 based upon this information. Thus, it is possible to estimate that the State and the local communities have lost an income of 360,000 USD, equivalent to more than 790 million MGA in 2012, which corresponds to non-received royalties.

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Export of gold from Madagascar to the rest of the world from 2005 to 2013, in thousands USD (Source : unctadstat.unctad.org) Note: “(5)” in front of figures in the table means that it is an estimation

Gold importation made by the United Arab Emirates from Madagascar from 2005 to 2013, in thousands USD (Source : unctadstat.unctad.org) Note: “(5)” in front of figures in the table means that it is an estimation

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2.3 Governance of the sector: key actors

2.3.1 The mining sector

Here are the main key actors in the mining governance:

► The Ministry in charge of Mines (Ministry of Mines in 2012 and 2013, within the Ministry of Strategic Resources in 2014): in charge of the design, the execution and the follow-up of the government policy with regards to mining. ► The BCMM : this industrial and commercial public bureau aims to manage the mining licences and authorisations, from their request to their expiry date ; ► The Gold Agency (Agence de l’Or) ; ► The Mine Police is mainly in charge of tracking, on one hand, of the circulation, illegal custody and commercialisation of mining products, and on the other hand, of all mining violations as provided in the Mining Code. ► The Decentralised Territorial Units, beneficiaries of the rebates and the place of interaction of the communities.

Moreover, we note that many mining operators gathered within the Chamber of Mines of Madagascar, which is recognized as an association, with goals «to encourage, to promote and protect the mining investments in Madagascar while developping good business professional ethics in the mining sector.»

2.3.2 The upstream oil sector

The main key actors in the governance of upstream oil are:

► The Ministry in charge of Hydrocarbons (Ministry of Hydrocarbons in 2012 and 2013, included in the Ministry of Strategic Resources in 2014) : it is in charge of the design, the execution and the follow-up of the government’s policy in terms of hydrocarbons ; ► The OMNIS, as a technical body, in charge of the regulation ; ► The OMNIS, as a national society, in charge of the contracts with the international oil companies.

The companies in the sector are gathered in the Association Professionnelle des Pétroliers Amont de Madagascar (APPAM) which is the Professional Association of Upstream Oil Operators of Madagascar.

2.4 Legal framework

2.4.1 The mining sector

In Madagascar, the mining sector is mainly governed by the law n°99-022 of August 19th 1999 establishing the Mining Code. Later, this law has been completed by:

► The law n°2005-021 of October 17th 2005 ; ► The decree n°2006-910 of December 19th 2006 setting the implementing arrangements;

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► The interministerial decree n°21985-2007 of December 20th 2007 setting the recovery arrangements for the mining royalties and rebates. This legal setting forms the common law of the mining sector in Madagascar. The Mining Code does not provide for the participation of the State in the mining companies.

In addition to the common law, Madagascar also has two specific legislations: ► The Framework agreement, signed between the Malagasy State and the Rio Tinto Group. Promulgated in the Official Journal, it specifically governs the ilmenite exploitation project of QMM S.A in the Anosy region. It also provides for the participation of the State in the project via the OMNIS, who has 20% of the share capital; ► The Large-Scale Mining Investment Law : it regards, on one hand, the law 2001-31 of October 8th 2002, otherwise known as LGIM, modified by the law n°2005-021 of August 2nd 2005, and on the other hand, by the decree n°2003-784 of January 8th 2003 setting the terms of application. This law applies to any company meeting the stipulated application eligibility conditions, namely the amount of investment amounting to MGA 50 billion. This law does not provide for the participation of the State in the mining companies. To this day, only Ambatovy project is governed by this law. Moreover many non-sectoral laws such as the Environment Charter, the various Finance Acts and the MECIE decree (Mise en Compatibilité des Investissements avec l’Environnement) are also applicable to the mining sector.

It is planned that the Mining Code will be subject to a reform in 2014-2015. The government announced one of the key measures, which is the creation of a national mining company.

2.4.2 The upstream oil sector

The upstream oil sector is governed by two main sectoral laws, which are the Law n°96-018 of September 4th 1996 establishing the Oil Code in one hand, and the decree n°97-740 related to the mining exploration and operation titles, and the transport of hydrocarbons, on the other hand.

Based on the principle that « hydrocarbons deposits are not likely to be subject to private appropriation », companies wishing to operate in the upstream oil sector are to sign a contract with OMNIS. It can be a Petroleum Sharing Contract (PSC) or a joint-venture contract. The related mining title is delivered following a decree of the President of the Republic. These contracts form an integral part of the tax regime applicable to the sector. OMNIS thus helps its contracting partner in the latter’s relationship with authorities and local administrations, and provides the available data and information related to the framework of the contract. Moreover many non-sectoral laws such as the Environment Charter, the various Finance Acts and the decree MECIE (Mise en Compatibilité des Investissements avec l’Environnement) are also applicable to the sector.

It is worth noting that the revision of the Oil Code is currently under study. Specifically, it is working towards: updating the Oil Code to the standards of neighbouring countries, such as East Africa; making it more attractive for investors; adapting it to the situation of the upstream oil sector in Madagascar – the shift towards exploitation is planned at short and medium term for Madagascar Oil; and allowing a clear and fair redistribution of resource royalties.

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2.5 Tax framework

2.5.1 Comparative table

The Tax framework of the mining sector is presented in the Mining Code, or the Oil Code and the General Tax Code for the common law. The special regimes of the mining sector (Framework Agreement and LGIM) have their own tax framework, which can refer to the General Tax Code. Below is a presentation of the flows:

COMMON LAW (CGI, MINING QMM AMBATOVY CODE, OIL CODE) TAXES/DUTIES (FRAMEWORK (LGIM) Finance Acts 2012 and AGREEMENT) 2013 10% : 6th to the 10th 25% : AMSA and year of actual 2012 : 21% subcontractors 2013 : 20% INCOME TAX (IR) exploitation 10% : DMSA and Oil Sector : 0% (included in 15% : until the expiry of subcontractors IDH) the privileged tax regime DIRECT TAX ON HYDROCARBONS (IDH, oil 2012 : 21% N/A N/A sector only, production 2013 : 20% phase) TAX ON INTERNATIONAL Mining sector : 10% FINANCIAL TRANSFERS Works : 3,50% Services : 15,75% 4,5% Oil Sector : 0% (included in (TFT) /NON-RESIDENTS IDH) INCOME TAX (IRNR) COMBINED TAX N/A N/A 5% For national expatriates : 2012 : Rate in line with the Rate in line with the - Up to Ar 250,000 = 0 common law, without common law, without - Part exceeding Ar 250 000 WAGES INCOME TAX exceeding 35% for exceeding 35% for = 21% (IRSA) expatriates expatriates 2013 : - Up to Ar 250,000 = 0 - Part exceeding Ar 250 000 = 20% TAXES ON INCOME FROM 2012 : 21% 10% 10% 2013 : 20% MOVABLE CAPITAL Oil sector : 0% (included in (IRCM) IDH) TAXES ON REAL ESTATE Rate in line with the Rate in line with the 2012 : 21% GAINS (IPVI) common law common law 2013 : 20% VALUE ADDED TAX (TVA) 0% 20% 20% Fixed duties : Emphyteutic leases : Duty for company 2 000 Ar reduced rate of 50% creation of continuance; capital Proportional duties : TRANSFER AND Share capital duty : de 0% to 2% not 2% : commercial lease REGISTRATION FEES subscription duty of exceeding 10 million 1% : protected tenancy QMM : 1% MGA 0,5% :Documents for company creation of Other documents : 0% continuance

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COMMON LAW (CGI, MINING QMM AMBATOVY CODE, OIL CODE) TAXES/DUTIES (FRAMEWORK (LGIM) Finance Acts 2012 and AGREEMENT) 2013 Any other documents related to the above : 0% PROPERTY TAXES ON Not-Submitted 1% 1% LANDS (IFT) 1%. PROPERTY TAX ON 3% Not exceeding 200 5 à 10% BUILT PROPERTY (IFPB) million MGA per year 1% TAFPB 2% Not exceeding 200 Repealed million MGA per year TAXES ON INSCURANCE 4% 4 % 4% CONTRACTS (risks) 1) Mining sector : Royalties : 0,60% Rebates : 1,40%

2) For crude oil : - Between 8 % and 20% ROYALTIES AND In line with the mining In line with the mining according to the daily REBATES sector common law sector common law production in barrels

3) For the natural gas - Between 5% and 10% according to the daily production in cube meters Set by the BCMM (mining ADMINISTRATION FEES Set by the BCMM Set by the BCMM sector) and OMNIS (oil sector)

2.5.2 Specificities for State taxes and local taxes

The main specificities allowed by the specific regulations in the framework of the investments incentives in the mining sector are: ► Within the Framework Agreement: ► Lowered rate of the Income Tax and the taxes on income from movable capital (IRCM); ► Decrease of the taxable base for the Tax on International Financial Transfers; ► 0% VAT; ► Exemption for the registration fees ; ► Unique rate for the Tax on Insurance Contracts ; ► Decrease of the rate for the Property Tax on built property ; ► Stability of the tax framework.

► In the framework of the LGIM : ► Decrease of the taxable base for the Tax on International Financial Transfers ; ► The right to be refunded with the VAT credit;

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► Lowering of the rate and an upper limit for the registration fees; ► Lowering the rate and an upper limit for the Property Tax on built property ► Stability of the tax framework.

In the oil sector, a unique tax exempting from three other taxes is applied during the production phase. During the exploration phase, the tax regime is that of the common law, provided by the General Tax Code.

2.6 Royalties and rebates

2.6.1.1 In the mining sector

The Mining Code provides that the rates for royalties and rebates are respectively set to 0.6% and 1.4% of the value of the products at their initial sale. They also apply to the special legal regime of the mining sector. The allocation of the rebates between the decentralised authorities was subject to the following precisions as per the Interministerial decree No. 8887/2014 of February 21th 2014: ► 60% for the extracting communities; ► 25% for the communities in the location of the transformation and processing entities, in proportion of the transformation or processing level made in these disctricts; ► 15% for the communities other than those previously mentioned and in which other components of the mining project are located. The Decree also states that the share of rebates intended for the non-existent categories of communities are to be shared equally between other categories. In practice, this measure applies to Autonomous Provinces, which to this day are not yet implemented.

2.6.1.2 In the oil sector

The Oil Code provides that the royalties shall be between 8% and 20% for crude oil, and between 5% and 20% for natural gas.

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2.7 Administration and training fees

In the mining sector, the administration fees are those received by the State and intended to act as a contribution of private operators towards the development of the mining sector in Madagascar. The Mining Administration Fees (FAM) by square are levied by the BCMM as a refund of the services and management costs for the rights associated to the mining licences. They are annually paid by any owner of a mining square and a mining licence holder. The amount is set by annual decree for each licence category.

In the same way, in the oil sector, the Administration and Training Fees are paid on a regular basis as a legal requirement by the mining title holder. The fees are levied by OMNIS as a refund for the services and management costs associated to the oil contracts.

The chart in the next page shows the various administrations to which taxes, duties and fees are paid for the mining sector and the allocation of the revenues.

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2.8 Current state of the licensing procedures

2.8.1 Mining sector

The different types of mining titles are presented in the following table: Mining titles Squares 16 Validity Purpose AERP : Exclusive 3 months Ground reconnaissance 38 400 which is Authorization for Perimeter to confirm geological 15 000 Km2 Not renewable Reservation and ore-deposits models 8 years renewable Research Prospection PRE : Permits Restricted to once or several 256 which is 100 Km2 Exploitation Small-scale Miners times for four (4) years 5 years 25 600 which is 10 PR : Research Permit Renewable twice for Research Prospection 000 Km2 three (3) years each 2560 which is 40 years renewable once (1) or several Research Prospection PE : Exploitation Permit 1 000 Km2 times for twenty Exploitation (20) years

The procedures for granting mining titles, which remain unchanged compared to 2011, are presented in the graph in the next page, made on the basis of the information given by the Ministry of Mines.

During the related period, the extractive sector was subject to a licensing freeze, pursuant to the note of Council No. 34/2011-PM/SGG/SC, signed by the General Secretary of the Government. This freeze led to the prohibition of granting of new permits from the date of the release of the note, April 6th 2011. Moreover, the letter No. 682/MMH signed by the Minister of Mines and Hydrocarbons on May 31st 2011 has suspended Permits for small scale operators (PRE). The suspension period covered by this letter started on September 8th 2009 and to is yet to be lifted to this day.

16Geometrical setting on the surface of the earth, representing the basic unit of space in which the rights are conferred by the permits. Each side of the square is six hundred and twenty five meters (625 m).

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Mining licensing procedures Step 3 : Processing of files Study of files Signature of the techcnical advice, elaboration and signature of the draft decree in Malagasy and French (if approved), elaboration of the refusal document (if not approved), signature of the decree/decision by competent authorities, verification of the consistency between the decree and the "Traitement Alpha" (TAN), validation and signature of the title Etape 4 : Delivery of mining titles Verification of the payment of Step 1 : Submission of the administration fees : 3/4 and the request 1/4 Reception of the Recording registry of delivered request, admissibility licences check, delivery of the Delivery of the original title and payment order, of the the decree receipts of payment, Etape 2 : Confirmation coding and processing Filing the copies of the titles of the requests, update Reception of additional of the mining map documents for the file, the receipt of the remittance of the file and receipt for the related fees, verification of the completeness of the file and the required number of copies, update of the mining map if the folder is complete, delivery of the refusal letter and additional documents required if uncomplete file

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2.8.2 Upstream oil sector

There is no change in the procedure of the signature of an oil contract as compared to 2011; it is presented in the following chart:

Procedure for the signature of an oil contract

1 2 3 •Promotional campaign •Issuance of a notice of an •Submission of offers by International Tender interested oil companies

4 5 6 •Study of the offer by the •Negotiations •Conclusion and signature OMNIS of the contract between the OMNIS and the company winning of the offer

7 8 9 •Request for approval of •Request of allocation of •Approval of the contract the oil contrat by the the hydrocarbon mining by the President of the OMNIS to the President title by the OMNIS to the Republic and enactment of the Republic President of the Republic of the Presidential Decree approving the oil contract

10 •Attribution of the mining title and enactment of the Presidential Decree granting the hydrocarbon mining title

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2.9 Registry of licences and permits

2.9.1 Reiterating the standard

As provided by the EITI requirement No. 3.9, Madagascar has the responsibility to hold a public registry or cadaster system with updated and complete information, related to the licence holders, the coordinates of the related area, the date of the request and issuance of the licence, as well as its duration, and in the case of exploitation licences, the produced raw materials.

2.9.2 Situation in Madagascar

Regarding the mining sector, a registry is available with the Mining Cadastre Office (BCMM). Available on demand, the coordinates of the mining squares, the request and delivery date, etc., can be consulted. The addresses and details of the permit holders are not disclosed for the sake of the confidentiality of personal information principle, and are often not up to date. Moreover, in some cases, delays have been noted in the update of the registry in case of disposal of the licences.

Regarding the oil sector, such registry is non-existent. However, the website of OMNIS, via a map that is reproduced in this report, discloses the available blocks and the blocks on which contracts are signed with OMNIS. The names of the signing parties of the contracts are also available.

2.10 Information on the beneficial ownership of the extractive companies

2.10.1 Reiterating the standard

The EITI requirement EITI No. 3.11 provides for the implementation of a publicly available register of the beneficial owners of the corporate entities that bid for, operate or invest in extractive assets, including the identities of their beneficial owner(s) and the level of ownership. A beneficial owner in respect to a company is defined as the natural person(s) who directly or indirectly ultimately owns or controls the corporate entity holding the licence in Madagascar.

The same requirement recommends that where such registers do not exist or are incomplete, it is requested from companies participating in the EITI process to provide this information for inclusion in the EITI Report.

2.10.2 Situation in Madagascar

A register of owners does not publicly exist in Madagascar. Inded, the Trade Register within the Trade Court records only the name of the direct shareholders of the Limited Companies.

The information on the beneficial ownership given by the companies in group A that accepted their disclosure are presented in the table in the next pages. It is to be noted that filling out the information on the owners as a last resort was not compulsory in the canvas of the companies, but it was only

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Information on the beneficial ownership of the extractive companies in the scope of the EITI report 2014 (Source: canvas filled out by the companies)

Are any of the Shareholder at last shareholder companies Direct shareholders with the Companies resort (natural or legal listed ? Which ones ? percentage of the shares person) Provide the name of the stock exchange. ExxonMobil 100% ExxonMobil Madagascar 100% ExxonMobil NO Exploration and Ventures BV Madagascar Ventures BV Production Madagascar Limited MAINLAND MINING Hong Kong Sino Africa Hong Kong Sino Africa N/D Resources Investment Ltd - Resources Investment 100% Ltd - 100% Holcim (Madagascar) Holcim Outre-mer (99,64%) Holcim Ltd (Legal N/D S.A. Holcim Réunion (0,35 %) person) Divers minoritaires (0,01%) TOLIARA SANDS MADAGASCAR MINERAL WORLD TITANIUM YES (ASX:WTR) SARL FIELDS LIMITED - 100% RESOURCES TANTALUM RARE N/D Tantalum Holding N/D EARTH MALAGASY Mauritius STERLING ENERGY N/A N/A N/A (UK) Succursale AMBATOVY MADAGASCAR MINERAL MADAGASCAR MINERAL SHERRITT MINERALS S.A. INVESTMENTS Ltd(MMI): 40% INVESTMENTS INTERNATIONAL (AMSA) SUMMIT AMBATOVY MINERALS Ltd(MMI)/SHERRITT CORPORATION: INVESTMENT B.V. (SAMRI) : INTERNATIONAL TORONTO STOCK 27.5% CORPORATION EXCHANGE KOREA RESSOURCES SUMMIT AMBATOVY CORPORATION(KORES): 27.5% MINERALS INVESTMENT SUMITOMO SNC - LAVALIN MADAGASCAR B.V.(SAMRI)/SUMITOMO CORPORATION: TOKYO VENTURE INC. : 5% CORPORATION STOCK EXCHANGE KOREA RESSOURCES CORPORATION SNC - LAVALIN INC.: SNC - LAVALIN TORONTO STOCK MADAGASCAR VENTURE EXCHANGE INC. /SNC - LAVALIN INC CALIBRA RESOURCE SOCIETE HENGSHENG MINING SOCIETE HENGSHENG YES. HENGSHENG AND ENGINEERS GROUP Ltd (HMG) MINING GROUP Ltd MINING GROUP Ltd MADAGASCAR. (HMG) (HMG).BVI ETABLISSEMENTS N/A N/A N/A GALLOIS S. A. PAM MADAGASCAR PAN AFRICAN MINING CORP: PAN AFRICAN MINING NO SA 99.952 % CORP PAM SAKOA COAL SA PAN AFRICAN MINING CORP: PAN AFRICAN MINING NO 99.7 % CORP

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Are any of the Shareholder at last shareholder companies Direct shareholders with the Companies resort (natural or legal listed ? Which ones ? percentage of the shares person) Provide the name of the stock exchange. MADAGASCAR YOXFORD HOLDINGS LTD: 80% YOSFORD HOLDINGS NO CONSOLIDATED NASSCO: 20% LTD MINING S.A. MADAGASCAR OIL SA Benchmark Advantage Fund N/A Madagascar Oil Limited, Ltd: 39.02%, the mother company of Outrider Management LLC: Madagascar Oil SA is 22.84%, listed on the AIM London SEP African Ventures Limited Stock Exchange (formerly Persistency Capital LLC): 20.10%, The John Paul DEJORIA Family Trust: 5.78%, RAB Capital: 1.79% M'PUMALANGA TAHL (Mauritius) Mining Groupe TATA AFRICA N/D MINING RESOURCES Projects Limited 100% HOLDINGS PTY LIMITED S.A.U TATA INTERNATIONAL QIT MADAGASCAR RIOTINTO 80% et RIO TINTO RIO TINTO (London MINERALS SA ETAT MALAGASY 20% Stock Exchange ou LES) (représenté par Omnis) SOUTH ATLANTIC MARTIN TRASCHEL 100% MARTIN TRASCHEL NO PETROLEUM BP SAS 100% TANETY LAVA SARL Blue Sky Corporation, Maurice: AZIANA LIMITED, AZIANA LIMITED, 99 % Australie Australia Stock Exchange (ASX) TOTAL E&P TOTAL SA 100% TOTAL SA TOTAL SA - Paris et MADAGASCAR New-York EAST AFRICAN East African Exploration : 90% AFREN, PLC, détient AFREN is listed on the EXPLORATION Compagnie pétrolière Anglaise 100% London Stock Exchange MADAGASCAR LTD OYSTER Energy : 10% (LSE) PROCHIMAD MINES UPB INTERNATINAL: 33.90% ANDRIANTSITOHAINA NO ET CARRIERES SEPCM: 15% Charles: 50% PROCHIMAD: 0.90% ANDRIANTSITOHAINA Naina: 0.10% Jean Michel GIRAUD: 0,10% CLASSIC REAL Auzonz Mining Private Limited: Auzonz Mining Private N/D STONES 90% Limited: 90% Jamnadas Divias Kumar: 5% Jamnadas Divias Kumar: Shantilac Elesh : 5% 5% Shantilac Elesh : 5% UNIVERSAL IPR Universal limited: 100% Indian Pacific Resources N/A EXPLORATION Ltd MADAGASCAR SARL ACCESS CLEROUX Denise, DESLANDES CLEROUX Denise, N/A MADAGASCAR Jean Pierre DESLANDES Jean Pierre

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Are any of the Shareholder at last shareholder companies Direct shareholders with the Companies resort (natural or legal listed ? Which ones ? percentage of the shares person) Provide the name of the stock exchange. MADAGASCAR MALAGASY SANDS NR.2 ltd : WORLD TITANIUM NO RESSOURCES SARL 100% RESOURCES RED GRANITI RED GRANITI France : 99% RED GRANITI France : NO MADAGASCAR SARL 99%

2.11 Disclosure of oil contracts

2.11.1 Reiterating the standard

According to EITI standards No. 3.10, the report has to document the policy of the government in terms of disclosure of the contracts and permits setting the prospection or exploitation conditions of oil, gas and minerals. The relevant legal provisions, the actual disclosure practice and the planned reforms or in progress are to be included in the report with an overview of the contracts.

2.11.2 Situation in Madagascar

2.11.2.1 Disclosure policy

Regarding the government’s policy in terms of contracts and licences disclosure, it appears that the Oil Code does not provide for specific dispositions on the conditions of the conclusion or the disclosure of oil contracts. Only the presidential decree approving the oil contract and the standard contract are available.

The production sharing contract, governing the relationships between the State and the companies, includes a confidentiality clause representing the government policy in terms of contracts disclosure. Thus, the article 36.5 of the onshore standard contract provides that « None of the parties shall disclose any information related to Oil Operations to any person, organisation, affiliated company, employees, consultants, subcontractors, bank or financial institution without prior signing a confidentiality agreement allowing to keep the strictly confidential information, unless required by the law.»

In practice, OMNIS confirmed that: ► The disclosure, at present, is not possible unless legal requirement is obtained, following an agreement with oil companies. ► The current confidentiality of oil contracts should be one of the subjects addressed in the Oil Code reform.

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2.11.2.2 Overview of oil contracts

An overview of the standard contracts, onshore and offshore, is available on the website of OMNIS, at the following address: http://www.omnis.mg/en/download-contracts-models

A brief summary of the contracts is presented below:

Key elements of an oil contract

The production sharing contract is established for the following reasons:

► The oil resources in the soil and subsoil of the malagasy territory, on the sea floors and in territorial seas, in the exclusive economic zone and on the continental shelf, are owned by the malagasy State ; ► No legal entity can carry activities in the national mining industry, unless an association wth OMNIS as custodian of a mining title is signed ; ► No activity related to the exploration, the production, the transformation and the transportation of Hydrocarbons in the national mining industry can be undertaken unless authorized by an oil contract with OMNIS.

It defines the terms and conditions according to which the Operator will undertake the Oil Operations. Any right and obligation related to the contract and any forecasted or current oil activity conducted within the Contract will also be undertaken in accordance with any possible amendment done to the Contract and to the malagasy law.

The production sharing contract is composed of 46 articles and 6 annexes.

It is established according to the main clauses as follows : - Obligation of exploration minimum works (article 8) - Program of the exploration works and budgets (article 10) - Assistance of OMNIS (article 17) - Recovery of oil costs (article 23) - Oil profit sharing (article 24) - Customs provisions (article 28) - Tax provisions (article 29) - Production bonus (article 31)

The production sharing contract comprises the following annexes : - Annexe A : Map of the Contractual Scope - Annexe B : Accounting and financial procedures - Annexe C : Association contracts for the contractors - Annexe D : Bank guarantee - Annexe E : Guarantee from the mother company for each Contractor - Annexe F : Information and reports

2.12 Financial relationships between the government and State-owned companies

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2.12.1 Reiterating the standard

According to the EITI standard No. 3.6, the report must include the prevailing rules and practices regarding the financial relationships between the government and state-owned enterprises (SOEs), e.g. the rules and practices governing transfers of funds between State-owned companies and the state, retained earnings, reinvestment and third-party financing.

Moreover, disclosures from State-owned companies on their quasi-fiscal expenditures such as payments for social services, public infrastructure, fuel subsidies and national debt servicing on fuels are also required in the report.

2.12.2 Situation in Madagascar

Until September 2014, the regime of State-owned companies was set by an old law, the Law n°67-007 of June 28th 1967 related to the participation of the State and other public entities in public limited companies and in semi-public companies. The State as a shareholder must always be represented in the Board of Directors. From September 2014 on, a law currently in the process of promulgation states the separation between the State as a « public power » and the State as a « shareholder », so as to avoid the interference of the State in the management of the companies. The undertaken measures aim to give more weight to the Pubic Treasury in comparison to other representatives of the State in the Boards of Directors, and to further the inclusion of territorial communities.

Within the context of the EITI report, Kraomita Malagasy (Kraoma) SA, in which the State owns 97% of shares, was identified as the only State-owned company meeting the definition adopted by the National Committee. Oil companies in which the State is a shareholder by means of OMNIS are not considered as State-owned Companies because the share of the State, set at 20%, does not reach the majority in the share capital.

Regardless of the public participation in its capital, KRAOMA is a public limited company under the law on commercial companies. It is worth noting that KRAOMA, having participated in the EITI process since the first report, has the same obligation as the other extractive companies under the framework of EITI. KRAOMA did not pay any dividend to the State for 2012.

2.13 Contribution of the extractive sector to the economy

2.13.1 Contribution to the GDP

As per the requirement No. 3.4 of the EITI standards, the report must disclose, when available, information about the contribution of the extractive industries to the economy for the fiscal year covered by the EITI Report. The table below presents the data about the contribution of the extractive sector to the GDP of Madagascar, collected from the INSTAT and the General Directorate of Economy, the GDP defined as an economic indicator of the produced wealth per year in the country, calculated from the added value of each sector.

EY | 61 EITI Reconciliation report Fiscal Year 2013

(Source: INSTAT, General Directorate of Economy) (In billion MGA) CURRENT PRICES 2012 2013 Added Value of the extractive industry 40.44 62.09 GDP 19900 21552 CONSTANT PRICES (1984) 2012 2013 Added Value of the extractive industry 6.89 22.00 GDP 548.18 556.68 WEIGHT OF THE EXTRACTIVE BRANCH IN THE GDP 2012 2013 Weight in the GDP (in %) 0.7 2.12

The table indicated a 2.12% contribution of the extractive sector to the GDP in 2013. This information, however, has limited significance as it partially and unfaithfully reflects the new productive or intermediate consumption or price structures that have since evolved over the past 20 years. Indeed, the INSTAT database comprises a series of yearly adjustments to the extractive branch structure in 1984. For example, the oil sub-branch was not yet integrated in the database of 1984. However, this data is the only official one as there were no recent and reliable studies on the contribution of the extractive sector to the GDP during the period concerned by the report.

From 2012 to 2013, we note a significant raise of the weight of the mining sector in the GDP (0.7% in 2012 to 2.12 % in 2013). This was quite constant for the last ten years (0.1% of contribution per year with a slight improvement in 2012 and 0.2% in 2011). This results from the cumulative effect of the launch of the operations of QMM (earlier) and Ambatovy during this period.

2012 and 2013 are major inflexion periods in the economy, and reflect the first structural adjustments in the real economy. The mining branch ceases to be an auxiliary sector and becomes a growing pillar in the real domestic economy. This weight is significant during this period as most of the companies are still in the prospection phase and do not yet generate gross operating profit. This qualitative weight change of the extractive branch in 2012-2013 shows how important the new extracting companies – which just entered in the production phase – are for the economy.

2.13.2 Contribution to foreign direct investments

Due to a lack of reliable estimation of the contribution of the extractive sector to the economy, the economic contribution can also be measured by the flows of foreign direct investments (FDI). The table below shows that in 2012, the extractive sector represented more than 40% of the received FDI flows, according to a study of the Central Bank of Madagascar. A decrease in FDI compared with those dating from 2008 to 2010 is noted since the beginning of the exploitation phase for QMM and the Ambatovy Project.

(In billion MGA)

First semester Description 2007 2008 2009 2010 2011 2012 2013

EY | 62 EITI Reconciliation report Fiscal Year 2013

FDI amounts in the 886.20 1,637.50 2,069.80 1,360.00 1,000.60 750.50 312.00 extractive activities FDI total 1,456.90 1,914.80 2,532.50 1,689.10 1,639.90 1,783.40 718.20 amount Weight of the extractive 61% 86% 82% 81% 61% 42% 43% sector FDI in the total FDI

Source: Study on the Foreign Direct Investments in Madagascar, Central Bank of Madagascar, January 2014

2.13.3 Contribution of the total tax revenues

The table and the chart below present the contribution of the extractive companies to the total tax revenues in Madagascar:

(in thousands MGA) Description 2012 2013 Variation

Amount of tax revenues received by the DGI from 92,770,615.23 210,994,011.99 127% the companies of Groups A, B and C

Total amount of tax revenues of the DGI 1,214,396,969.17 1,276,735,530.00 5%

Contribution of the extractive sector to the tax revenues in 2013

Montant des recettes fiscales reçues par la DGI en provenance des entreprises des Groupes A, B et C Montant des recettes fiscales totales de la DGI

86%

14%

EY | 63 EITI Reconciliation report Fiscal Year 2013

Thus, the tax revenue of the extractive sector in 2013 represent 14% of the total revenues received by the General Tax Directorate (DGI). This percentage is double of the percentage of 2012. In value, the amount of taxes paid by the companies of group A increased to 127% compared to 2012.

2.13.4 Contribution in terms of employment

For the years under review within the EITI framework, there is no official statistics or reliable study results on the contribution of the overall formal extractive sector in terms of direct or indirect employment. The data from the statements made by the companies in Group A gives an overview of the number of their direct employees. Linked with the number of workers affiliated to CNAPS, they can be used to estimate the weight of the formal extractive sector, inspite of some flaws that could skew the results, namely the companies that are not CNAPS-affiliated, though registered to the tax office. Indeed, the companies and the employees must be affiliated at the CNAPS. Thus, 0.8% of the CNAPS-affiliated employees work for a company of Group A in 2013. The weakness of these figures should nevertheless be put into perspective as the great industrial mining projects can generate leverage effects, namely the indirect jobs via subcontractors.

Description 2013 Number of workers in Group A 4,600 Number of CNAPS-affiliated workers 576,048 Percentage of workers of Group A compared to 0.8% the total number of CNAPS-affiliated workers

2.14 Exported quantities

As required by the new EITI standard n°3, the contextual information, including the information about the production of exporting companies, form an integral part of the reconciliation report.

The exporting extractive companies have disclosed the total volume production, the value of the production of raw material, as well as the total volume of export and the value of these exports per raw material for the fiscal year 2013.

The table below, prepared on the basis of statements from exporting companies, present the quantity of exported products per company in 2013 (in tonnes).

SOURCE COMPANY NATURE OF Region of PRODUCED EXPORTED VALUE OF COMPANIES THE origin QUANTITY QUANTITY EXPORTEDPRODUCTS PRODUCTS (in tonnes) (in tonnes) (in MGA) GALLOIS Atsinanana Graphite 3,832.95 4,192.85 10,382,662,339.00 Etablissement Vakinankaratra Poozzole 65,000.00 N/A N/A HOLCIM Vakinankaratra Cipolin 164,718.00 N/A N/A Vakinankaratra Clay 29,751.00 N/A N/A MADAGASCAR Betsiboka Rocks 1.50 N/A N/A MINING Sofia-

EY | 64 EITI Reconciliation report Fiscal Year 2013

RESOURCES LTD Alaotra S.A.R.L. Mangoro Vatovavy Soil 2.20 N/A N/A fitovinany Dolomite 3,730.00 N/A N/A PROCHIMAD Amoron'i Mania Calcite 200.00 N/A N/A Kaolin 200.00 N/A N/A Alaotra Sulphate 65,410.00 68,570.00 29,295,987,646.85 PROJET Mangoro Ammonium AMBATOVY Atsinanana Cobalt 2,083.00 2,067.00 121,458,684,432.28 Nickel 2,514.00 25,507.56 803,024,114,385.96 RED GRANITI Atsimo MADAGASCAR Labradorites 3,591.45 2,989.92 N/D Andrefana S.A.R.L. Rocheux 59,085.00 61,000.00 KRAOMA S.A. Betsiboka 45,013,034,580.00 Concentrate 58,100.00 49,000.00 QIT Zircon Anosy 31,345.00 31,345.00 43,682,262,165.09 MADAGASCAR Concentrate MINERALS S.A. Anosy Ilmenite 530,421.00 530,421.00 167,523,336,557.73 GRANITEX Manjakandriana Granit 3,240.00 3,078.00 270,613,069.73 S.A.R.L.

EY | 65 EITI Reconciliation report Fiscal Year 2013 3 Results of the reconciliation

3.1 Total flows and total residual discrepancy

The EITI report – Fiscal Year 2013 covers a total amount of MGA 427.68 billion equivalent to USD 193.80 million. The details of the flows received by the State, per entities group are presented in the following table:

Amount of flows Amount of flows Entities group Number of entities received by the State received by the State (in thousands USD) (in thousands USD) A 34 423,926,956.46 192,090.73 B 5 734,327.68 332.74 C 63 3,017,479.03 1,367.29 Total 102 427,678,763.17 193,790.76

The table below shows that the percentage of the residual discrepancy for group A is 2.42% of the total flows received by the State:

Total amount Amount of the Total amount paid by the Total residual received by the total residual Currency companies discrepancy administrations discrepancy (in thousands) (in thousands) (in thousands) (in %) MGA 434,175,403.01 423,926,956.46 10,248,446.55 2.42% USD 196,734.53 192,090.73 4,643.80

3.2 Entities in Group A17

3.2.1 Schedule of the payment flows per company, with amounts paid, amounts received and discrepancies

Reading principle: The tables below mention remainders that were not intended to be in the canvas. These categories were created to save some space through the aggregation of certain kinds of payments. Aggregated payments under this header are detailed in Annexes as well as the USD version of the tables.

17Companies of which the cumulated payment to the administrations, reach 97% of the significant flows received by the State. The companies included in this group will be subject to reconciliation through the data collection from the companies, and the confrontation of these with the data collected from the administrations via a canvas.

EY | 66 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 001. PROJET AMBATOVY 002. HOLCIM 003. MADAGASCAR OIL 004. OPHIR ENERGY 005. QIT MADAGASCAR MINERALS S.A. Resid Residual Received Residual Received ual Paid by Received Residual Residual Paid by the Received by Paid by the Paid by Paid by the Received by Type of payment discrepanci by the discrepan by the discre the by the discrepanci discrepanci entity the State entity the entity entity the State es State cies State panci entity State es es es Export fees ------Import fees 440.15 440.15 - 16.39 16.39 ------Lease registration fees 19.33 11.00 8.33 - - - 15.90 15.90 - - - - 2.06 2.06 - Custom duties and taxes on 3,170.38 1,555.13 1,615.25 3,074.37 3,813.62 -739.25 42.18 25.51 16.67 - - - 2,342.30 1,768.50 573.80 oil products (TPP) Income taxes (IR) - - - 1,852.18 2,010.36 -158.18 0.27 0.27 - - 0.32 -0.32 - - - Non-resident IR or TFT 9,137.88 9,137.69 0.19 1,435.44 1,335.57 99.87 ------3,475.35 2,677.94 797.41 State taxes remainders 62.13 540.59 -478.46 10,985.52 12,640.36 -1,654.85 86.01 56.27 29.73 - 178.04 -178.04 7.14 7.14 - Unrecovered VAT 11,191.33 11,191.33 - 22.48 22.48 - 7,730.37 7,730.37 ------Non-refunded VAT 146,548.25 124,006.74 22,541.50 ------

A - State taxes 170,569.44 146,882.62 23,686.81 17,386.38 19,838.78 -2,452.40 7,874.73 7,828.32 46.40 - 178.36 -178.36 5,826.84 4,455.63 1,371.21

Property tax on built - - - 9.03 9.03 ------property (IFPB) Property tax on land (IFT) 20.03 20.03 - 10.67 10.67 ------Local taxes remainders - - - 3.49 3.49 ------Mining rebates - - - 83.61 83.61 ------2,925.80 2,925.80 -0.00 Taxing charges - - - 58.80 58.80 ------

B - Local taxes 20.03 20.03 - 165.61 165.61 ------2,925.80 2,925.80 -0.00

Mining Administration fees 433.20 433.20 - 36.84 35.01 1.83 ------355.39 355.39 - Administration fees paid to ------1,627.60 1,627.60 - - 10,316.87 -10,316.87 - - - OMNIS Training fees paid to OMNIS ------551.73 551.73 ------Port 3,530.65 3,744.25 -213.60 971.99 971.99 ------Royalties on wastewaters ------(REU) Segmented remainders 746.58 745.91 0.67 840.07 840.07 - 28.80 28.80 - - - - 1,411.48 1,453.48 -41.99 C - Segmented fees, duties 4,710.43 4,923.36 -212.93 1,848.90 1,847.07 1.83 2,208.12 2,208.12 - - 10,316.87 -10,316.87 1,766.87 1,808.87 -41.99 and royalties Other common payments (nature and amount 16.85 16.85 ------2.65 2.65 - provided in annexes) (Note b) Other segmented payments (nature and amount 14.80 14.80 ------provided in annexes)(Note b) Alien’s identity card 558.22 558.22 - 3.57 3.57 ------Visa application 224.34 224.34 - 0.88 0.88 - 0.78 0.78 - - - - 6.45 6.45 - Permits release fees ------Processing fees (BCMM) ------Penalties 4,192.91 4,195.58 -2.67 95.41 131.11 -35.70 2,864.58 2,864.58 - - 191.76 -191.76 0.20 0.20 - Other payments remainders ------

EY | 67 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 001. PROJET AMBATOVY 002. HOLCIM 003. MADAGASCAR OIL 004. OPHIR ENERGY 005. QIT MADAGASCAR MINERALS S.A. Resid Residual Received Residual Received ual Paid by Received Residual Residual Paid by the Received by Paid by the Paid by Paid by the Received by Type of payment discrepanci by the discrepan by the discre the by the discrepanci discrepanci entity the State entity the entity entity the State es State cies State panci entity State es es es D - Other payments 5,007.12 5,009.79 -2.67 99.86 135.56 -35.70 2,865.36 2,865.36 - - 191.76 -191.76 9.31 9.31 - CNAPS 3,737.88 3,737.88 - 226.40 226.40 - 141.88 141.88 - - - - 873.38 872.56 0.82 Taxes on wage income and 34,846.11 34,846.11 - 646.15 647.30 -1.15 644.05 644.05 - - - - 4,320.45 4,320.45 - similar (IRSA) Withheld at source 3,062.29 3,062.29 - 54.65 54.65 - 201.12 201.12 - - - - 31.92 31.92 - remainders

E - Withheld at source 41,646.28 41,646.28 - 927.19 928.34 -1.15 987.05 987.05 - - - - 5,225.76 5,224.93 0.82 In kind (Expert evaluation or 402.33 402.33 - 47.13 47.13 - 129.39 129.39 - - - - 87.83 87.83 - supporting documents) Cash ------27.60 27.60 - - - - 1,553.83 1,553.83 -

F - Donations 402.33 402.33 - 47.13 47.13 - 156.98 156.98 - - - - 1,641.66 1,641.66 -

Revenues on the State- owned companies’s share of ------production Revenues on the government’s share of ------production G - Government’s share of ------production (Oil companies) Discovery premiums paid to ------the State Production premiums paid to ------the State Signature premiums paid to ------the State

H - Various premiums ------

Social expenses in kind (Expert evaluation or 3,448.41 3,448.41 ------supporting documents) Cash social expenses ------2,303.36 2,303.36 - I - Social expenses required by law or by an agreement 3,448.41 3,448.41 ------2,303.36 2,303.36 - with the government Minerals transport fees paid to the State or an entity of ------the State J - Transport fees ------TOTAL GENERAL 225,804.03 202,332.82 23,471.21 20,475.06 22,962.49 -2,487.42 14,092.24 14,045.84 46.40 - 10,687.00 -10,687.00 19,699.60 18,369.56 1,330.04

EY | 68 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 009. MAINLAND MINING LTD 006. GOLD SAND S.A.R.L. 007. EXXON MOBIL 008. KRAOMA S.A. 010. GALLOIS Etablissement S.A.R.L.U Received Received Received Received Received Paid by Residual Paid by Residual Paid by Residual Paid by Residual Paid by Residual Type of payment by the by the by the by the by the the entity discrepancies the entity discrepancies the entity discrepancies the entity discrepancies the entity discrepancies State State State State State Export fees ------89.74 89.74 - - - - 2.36 - 2.36 Import fees ------0.31 - 0.31 Lease registration fees ------0.49 0.49 - Custom duties and taxes on ------119.78 119.78 - - - - 152.72 148.87 3.85 oil products (TPP) Income taxes (IR) 0.64 0.64 - 0.30 0.30 - 33.14 33.14 - 35.41 35.41 - 287.89 287.89 - Non-resident IR or TFT ------232.06 236.30 -4.24 State taxes remainders 0.05 0.05 - 11.84 11.86 -0.02 344.11 344.11 - 0.00 0.00 - 320.05 308.27 11.78 Unrecovered VAT - - - 277.85 277.85 - - - - 183.27 183.27 - 16.35 16.35 - Non-refunded VAT ------5,392.34 5,392.34 - - - - 81.15 - 81.15

A - State taxes 0.69 0.69 - 289.99 290.01 -0.02 5,979.12 5,979.12 - 218.68 218.68 - 1,093.38 998.17 95.21

Property tax on built ------10.85 10.85 ------property (IFPB) Property tax on land (IFT) ------0.01 0.01 ------Local taxes remainders 0.66 0.66 - - - - 2.76 2.76 ------Mining rebates ------166.96 166.96 - - - - 13.21 11.32 1.90 Taxing charges ------4.21 4.21 -

B - Local taxes 0.66 0.66 - - - - 180.59 180.59 - - - - 17.42 15.53 1.90

Mining Administration fees 1,469.55 2,232.06 -762.51 - - - 408.59 410.00 -1.41 1,640.63 1,640.63 - 258.48 258.48 - Administration fees paid to - - - 1,192.71 1,192.64 0.07 ------OMNIS Training fees paid to OMNIS - - - 559.00 558.94 0.06 ------Port ------630.64 630.64 ------Royalties on wastewaters ------(REU) Segmented remainders ------442.02 442.02 - - - - 33.82 33.00 0.82 C - Segmented fees, duties 1,469.55 2,232.06 -762.51 1,751.71 1,751.59 0.12 1,481.24 1,482.65 -1.41 1,640.63 1,640.63 - 292.30 291.48 0.82 and royalties Other common payments (nature and amount provided ------0.57 0.57 - 0.61 0.61 - in annexes) (Note b) Other segmented payments (nature and amount provided ------1.69 1.69 - - - - in annexes)(Note b) Alien’s identity card - - - 0.65 0.65 ------Visa application - - - 0.15 0.15 - 0.86 0.86 - 27.22 27.22 - - - - Permits release fees ------Processing fees (BCMM) ------2.25 - 2.25 ------Penalties - - - 12.19 12.19 - 0.04 0.04 - 13.47 13.47 - 2.01 0.51 1.50 Other payments remainders ------

D - Other payments - - - 12.99 12.99 - 3.15 0.90 2.25 42.95 42.95 - 2.63 1.13 1.50 CNAPS 0.46 0.46 - 5.58 5.58 - 447.37 447.37 - 30.68 30.68 - 165.82 135.30 30.51

EY | 69 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 009. MAINLAND MINING LTD 006. GOLD SAND S.A.R.L. 007. EXXON MOBIL 008. KRAOMA S.A. 010. GALLOIS Etablissement S.A.R.L.U Received Received Received Received Received Paid by Residual Paid by Residual Paid by Residual Paid by Residual Paid by Residual Type of payment by the by the by the by the by the the entity discrepancies the entity discrepancies the entity discrepancies the entity discrepancies the entity discrepancies State State State State State Taxes on wage income and - - - 251.59 251.59 - 688.55 688.55 - 23.56 23.56 - 127.08 127.08 - similar (IRSA) Withheld at source - - - 9.84 9.84 - 67.99 67.99 - 9.20 9.20 - 9.28 9.28 - remainders

E - Withheld at source 0.46 0.46 - 267.02 267.02 - 1,203.90 1,203.90 - 63.44 63.44 - 302.18 271.67 30.51

In kind (Expert evaluation or ------0.29 0.29 - - - - supporting documents) Cash ------15.89 15.89 - 12.53 12.53 - - - -

F - Donations ------15.89 15.89 - 12.82 12.82 - - - -

Revenues on the State- owned companies’s share of ------production Revenues on the government’s share of ------production G - Government’s share of ------production (Oil companies) Discovery premiums paid to ------the State Production premiums paid to ------the State Signature premiums paid to ------the State H - Various premiums ------

Social expenses in kind (Expert evaluation or ------supporting documents) Cash social expenses ------3,497.50 3,497.50 - - - - I - Social expenses required by law or by an agreement ------3,497.50 3,497.50 - - - - with the government Minerals transport fees paid to the State or an entity of ------the State J - Transport fees ------GRAND TOTAL 1,471.37 2,233.88 -762.51 2,321.71 2,321.61 0.10 8,863.90 8,863.06 0.84 5,476.01 5,476.01 - 1,707.92 1,577.97 129.94

EY | 70 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 015. MADAGASCAR 014. MADAGASCAR MINING 011. NIKO RESSOURCES [ENERMAD] 012. GROUPE PAM 013. MADA-AUST S.A.R.L. INTERNATIONAL TAK MINING RESOURCES LTD S.A.R.L. S.A.R.L. Paid by Received Paid by Received Paid Received Paid Received Paid Received Residual Residual Residual Residual Residual Type of payment the by the the by the by the by the by the by the by the by the discrepancies discrepancies discrepancies discrepancies discrepancies entity State entity State entity State entity State entity State Export fees ------Import fees ------Lease registration fees 1.90 1.90 ------Custom duties and taxes - - - 401.90 259.69 142.21 ------on oil products (TPP) Income taxes (IR) 0.10 0.10 - 0.30 0.20 0.10 10.15 6.99 3.16 0.10 0.10 - 0.10 0.10 - Non-resident IR or TFT ------State taxes remainders - - - 14.50 14.53 -0.02 1.03 1.03 -0.00 0.01 - 0.01 0.01 0.01 - Unrecovered VAT - - - 138.21 138.21 ------Non-refunded VAT ------

A - State taxes 2.00 2.00 - 554.91 412.62 142.28 11.18 8.02 3.16 0.11 0.10 0.01 0.11 0.11 -

Property tax on built ------property (IFPB) Property tax on land (IFT) ------Local taxes remainders ------Mining rebates ------Taxing charges ------

B - Local taxes ------

Mining Administration - - - 2,303.85 2,303.85 - 692.54 692.54 - 775.20 774.53 0.67 772.42 772.42 - fees Administration fees paid 383.81 383.81 ------to OMNIS Training fees paid to 388.60 388.60 ------OMNIS Port ------Royalties on wastewaters ------(REU) Segmented remainders 155.39 155.39 - 22.00 22.00 - 0.46 0.46 - 0.33 0.33 - - - - C - Segmented fees, 927.81 927.81 - 2,325.85 2,325.85 - 693.00 693.00 - 775.53 774.86 0.67 772.42 772.42 - duties and royalties Other common payments (nature and amount ------0.80 0.80 - 0.32 0.32 - provided in annexes) (Note b) Other segmented payments (nature and ------28.56 29.67 -1.11 6.42 8.98 -2.56 amount provided in annexes)(Note b) Alien’s identity card - - - 2.83 2.83 ------Visa application - - - 0.35 0.35 ------Permits release fees ------Processing fees (BCMM) ------

EY | 71 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 015. MADAGASCAR 014. MADAGASCAR MINING 011. NIKO RESSOURCES [ENERMAD] 012. GROUPE PAM 013. MADA-AUST S.A.R.L. INTERNATIONAL TAK MINING RESOURCES LTD S.A.R.L. S.A.R.L. Paid by Received Paid by Received Paid Received Paid Received Paid Received Residual Residual Residual Residual Residual Type of payment the by the the by the by the by the by the by the by the by the discrepancies discrepancies discrepancies discrepancies discrepancies entity State entity State entity State entity State entity State Penalties 0.10 0.10 - 184.98 184.95 0.04 ------Other payments ------remainders

D - Other payments 0.10 0.10 - 188.16 188.12 0.04 - - - 29.36 30.47 -1.11 6.74 9.30 -2.56

CNAPS 4.36 4.36 - 70.04 893.53 -823.49 24.78 24.78 ------Taxes on wage income 108.67 108.67 - 142.57 142.57 - 85.26 85.26 ------and similar (IRSA) Withheld at source 31.10 31.10 - 19.07 19.07 - 8.63 8.63 ------remainders

E - Withheld at source 144.13 144.13 - 231.68 1,055.16 -823.49 118.67 118.67 ------

In kind (Expert evaluation ------or supporting documents) Cash ------8.41 8.41 ------

F - Donations ------8.41 8.41 ------

Revenues on the State- owned companies’s share ------of production Revenues on the government’s share of ------production G - Government’s share of production (Oil ------companies) Discovery premiums paid ------to the State Production premiums paid ------to the State Signature premiums paid ------to the State

H - Various premiums ------

Social expenses in kind (Expert evaluation or ------supporting documents) Cash social expenses ------I - Social expenses required by law or by an ------agreement with the government Minerals transport fees paid to the State or an ------entity of the State

EY | 72 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 015. MADAGASCAR 014. MADAGASCAR MINING 011. NIKO RESSOURCES [ENERMAD] 012. GROUPE PAM 013. MADA-AUST S.A.R.L. INTERNATIONAL TAK MINING RESOURCES LTD S.A.R.L. S.A.R.L. Paid by Received Paid by Received Paid Received Paid Received Paid Received Residual Residual Residual Residual Residual Type of payment the by the the by the by the by the by the by the by the by the discrepancies discrepancies discrepancies discrepancies discrepancies entity State entity State entity State entity State entity State J - Transport fees ------TOTAL GENERAL 1,074.03 1,074.03 - 3,300.59 3,981.75 -681.16 831.25 828.10 3.16 805.01 805.42 -0.42 779.28 781.84 -2.56

EY | 73 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 016. CALIBRA RESOURCES & 018. MADAGASCAR CHROMIUM 019. UNIVERSAL EXPLORATION 017. NOVA RESOURCES S.A.R.L.U 020. URAMAD S.A ENGINEERS MADAGASCAR S.A.R.L.U COMPANY LTD S.A.R.L.U MADAGASCAR S.A.R.L. Paid Received Paid Received Paid by Received Paid Received Paid Received Type of Residual Residual Residual Residual Residual by the by the by the by the the by the by the by the by the by the payment discrepancies discrepancies discrepancies discrepancies discrepancies entity State entity State entity State entity State entity State Export fees ------Import fees ------Lease - - - 55.45 1.74 53.71 ------registration fees Custom duties and taxes on oil ------112.02 95.64 16.38 - - - products (TPP) Income taxes (IR) 0.32 0.43 -0.11 13.26 13.26 - 0.10 0.10 - 0.10 0.10 - 0.32 0.32 - Non-resident IR ------or TFT State taxes 4.23 4.23 - 167.20 - 167.20 0.01 - 0.01 275.19 212.65 62.54 - 0.00 -0.00 remainders Unrecovered VAT ------Non-refunded ------VAT A - State taxes 4.55 4.66 -0.11 235.91 15.01 220.91 0.11 0.10 0.01 387.31 308.39 78.92 0.32 0.32 -0.00

Property tax on built property ------(IFPB) Property tax on ------land (IFT) Local taxes ------remainders Mining rebates ------Taxing charges ------

B - Local taxes ------Mining Administration 307.30 307.30 - 624.79 619.62 5.17 1,500.46 1,632.70 -132.24 192.00 192.00 - 504.54 504.54 - fees Administration fees paid to ------OMNIS Training fees paid ------to OMNIS Port ------Royalties on wastewaters ------(REU) Segmented ------remainders C - Segmented fees, duties and 307.30 307.30 - 624.79 619.62 5.17 1,500.46 1,632.70 -132.24 192.00 192.00 - 504.54 504.54 - royalties

EY | 74 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 016. CALIBRA RESOURCES & 018. MADAGASCAR CHROMIUM 019. UNIVERSAL EXPLORATION 017. NOVA RESOURCES S.A.R.L.U 020. URAMAD S.A ENGINEERS MADAGASCAR S.A.R.L.U COMPANY LTD S.A.R.L.U MADAGASCAR S.A.R.L. Paid Received Paid Received Paid by Received Paid Received Paid Received Type of Residual Residual Residual Residual Residual by the by the by the by the the by the by the by the by the by the payment discrepancies discrepancies discrepancies discrepancies discrepancies entity State entity State entity State entity State entity State Other common payments (nature and amount ------0.49 0.49 ------provided in annexes) (Note b) Other segmented payments (nature and amount - - - 5.35 - 5.35 12.25 - 12.25 ------provided in annexes)(Note b) Alien’s identity ------card Visa application ------Permits release ------fees Processing fees ------(BCMM) Penalties - 0.10 -0.10 2.69 0.10 2.59 7.06 2.35 4.71 0.30 0.30 - - - - Other payments ------remainders D - Other - 0.10 -0.10 8.04 0.10 7.94 19.80 2.84 16.96 0.30 0.30 - - - - payments CNAPS - - - 0.16 - 0.16 - - - 13.79 13.79 - - - - Taxes on wage income and ------52.77 52.77 - - - - similar (IRSA) Withheld at source - - - 0.06 0.06 ------remainders E - Withheld at - - - 0.23 0.06 0.16 - - - 66.56 66.56 - - - - source In kind (Expert evaluation or ------supporting documents) Cash ------

F - Donations ------

Revenues on the State-owned companies’s ------share of production Revenues on the government’s ------share of production

EY | 75 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 016. CALIBRA RESOURCES & 018. MADAGASCAR CHROMIUM 019. UNIVERSAL EXPLORATION 017. NOVA RESOURCES S.A.R.L.U 020. URAMAD S.A ENGINEERS MADAGASCAR S.A.R.L.U COMPANY LTD S.A.R.L.U MADAGASCAR S.A.R.L. Paid Received Paid Received Paid by Received Paid Received Paid Received Type of Residual Residual Residual Residual Residual by the by the by the by the the by the by the by the by the by the payment discrepancies discrepancies discrepancies discrepancies discrepancies entity State entity State entity State entity State entity State G - Government’s share of ------production (Oil companies) Discovery premiums paid to ------the State Production premiums paid to ------the State Signature premiums paid to ------the State H - Various ------premiums Social expenses in kind (Expert evaluation or ------supporting documents) Cash social ------expenses I - Social expenses required by law ------or by an agreement with the government Minerals transport fees paid to the State ------or an entity of the State J - Transport ------fees TOTAL 311.85 312.06 -0.21 868.97 634.79 234.18 1 520.38 1 635.65 -115.27 646.18 567.25 78.92 504.86 504.87 -0.00 GENERAL

EY | 76 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 024. TANTALUM RARE EARTH 021. STERLING ENERGY LTD 022. TULLOW MADAGASCAR 023. TOLIARA SANDS S.A.R.L. 025. ROC OIL/SAPETRO (MALAGASY) S.A.R.L.U Paid Received Received Paid Received Paid Received Paid Received Residual Paid by Residual Residual Residual Residual Type of payment by the by the by the by the by the by the by the by the by the discrepancies the entity discrepancies discrepancies discrepancies discrepancies entity State State entity State entity State entity State Export fees ------Import fees ------Lease registration fees 0.88 - 0.88 - - - 4.77 - 4.77 ------Custom duties and taxes on oil products - - - - 0.41 -0.41 13.02 4.21 8.81 3.71 3.71 - - - - (TPP) Income taxes (IR) - - - 0.32 0.32 - 0.43 0.82 -0.39 7.82 7.82 - - - - Non-resident IR or TFT ------State taxes remainders 0.10 0.10 - - 0.49 -0.49 88.15 74.02 14.14 8.52 12.59 -4.07 - - - Unrecovered VAT - - - 117,355.73 117,355.73 - - - - 15.44 15.44 - - - - Non-refunded VAT ------

A - State taxes 0.98 0.10 0.88 117,356.05 117,356.94 -0.89 106.37 79.05 27.32 35.49 39.56 -4.07 - - -

Property tax on built ------property (IFPB) Property tax on land ------(IFT) Local taxes remainders ------Mining rebates ------Taxing charges ------

B - Local taxes ------Mining Administration ------65.16 65.16 - 137.86 137.86 - - - - fees Administration fees 311.62 311.62 - 257.47 257.47 ------220.69 220.69 - paid to OMNIS Training fees paid to 110.35 110.35 - 128.62 128.62 ------275.86 275.86 - OMNIS Port ------Royalties on ------wastewaters (REU) Segmented remainders ------0.99 0.99 ------C - Segmented fees, 421.96 421.96 - 386.09 386.09 - 66.15 66.15 - 137.86 137.86 - 496.55 496.55 - duties and royalties Other common payments (nature and ------amount provided in annexes) (Note b) Other segmented payments (nature and ------amount provided in annexes)(Note b) Alien’s identity card ------Visa application ------Permits release fees ------

EY | 77 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 024. TANTALUM RARE EARTH 021. STERLING ENERGY LTD 022. TULLOW MADAGASCAR 023. TOLIARA SANDS S.A.R.L. 025. ROC OIL/SAPETRO (MALAGASY) S.A.R.L.U Paid Received Received Paid Received Paid Received Paid Received Residual Paid by Residual Residual Residual Residual Type of payment by the by the by the by the by the by the by the by the by the discrepancies the entity discrepancies discrepancies discrepancies discrepancies entity State State entity State entity State entity State Processing fees ------(BCMM) Penalties - - - 652.20 652.20 - - 0.43 -0.43 88.94 88.42 0.52 - - - Other payments ------remainders D - Other payments - - - 652.20 652.20 - - 0.43 -0.43 88.94 88.42 0.52 - - -

CNAPS - - - 2.62 2.60 0.03 30.52 30.52 - 80.16 44.38 35.78 - - - Taxes on wage income - - - 4.81 4.81 - 260.80 260.80 - 134.51 134.51 - - - - and similar (IRSA) Withheld at source - - - 1.46 1.46 - 22.94 22.94 ------remainders

E - Withheld at source - - - 8.90 8.87 0.03 314.26 314.26 - 214.67 178.89 35.78 - - -

In kind (Expert evaluation or ------42.31 42.31 ------supporting documents) Cash ------9.16 9.16 - 30.00 30.00 - 0.90 0.90 -

F - Donations ------51.46 51.46 - 30.00 30.00 - 0.90 0.90 -

Revenues on the State- owned companies’s ------share of production Revenues on the government’s share of ------production G - Government’s share of production ------(Oil companies) Discovery premiums ------paid to the State Production premiums ------paid to the State Signature premiums ------paid to the State H - Various premiums ------

Social expenses in kind (Expert evaluation or ------185.52 185.52 - supporting documents) Cash social expenses ------I - Social expenses required by law or by ------185.52 185.52 - an agreement with the government

EY | 78 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 024. TANTALUM RARE EARTH 021. STERLING ENERGY LTD 022. TULLOW MADAGASCAR 023. TOLIARA SANDS S.A.R.L. 025. ROC OIL/SAPETRO (MALAGASY) S.A.R.L.U Paid Received Received Paid Received Paid Received Paid Received Residual Paid by Residual Residual Residual Residual Type of payment by the by the by the by the by the by the by the by the by the discrepancies the entity discrepancies discrepancies discrepancies discrepancies entity State State entity State entity State entity State Minerals transport fees paid to the State or an ------entity of the State J - Transport fees ------TOTAL GENERAL 422.94 422.06 0.88 118,403.24 118,404.10 -0.86 538.25 511.36 26.89 506.96 474.73 32.23 682.97 682.97 -

EY | 79 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 026. MADAGASCAR CONSOLIDATED 028. MINERAL PRODUCTS 030. RED GRANITI MADAGASCAR 027. LABRADOR MADAGASCAR 029. AMICOH RESOURCES MINING S.A. INTERNATIONAL GROUP S.A.R.L. S.A.R.L. Paid Paid Received Paid Received Paid Received Paid Received Received Residual Residual Residual Residual by Residual Type of payment by the by the by the by the by the by the by the by the by the discrepancies discrepancies discrepancies discrepancies the discrepancies entity State entity State entity State entity State State entity Export fees ------Import fees ------Lease registration fees 0.46 0.46 ------Custom duties and taxes on oil ------37.50 25.31 12.19 - 45.01 -45.01 products (TPP) Income taxes (IR) 2.72 2.72 - 130.60 130.60 - 0.10 0.10 - 0.32 0.32 - - 21.52 -21.52 Non-resident IR or TFT ------0.39 -0.39 State taxes remainders 26.48 26.49 -0.01 211.43 210.53 0.90 0.01 - 0.01 136.27 69.48 66.79 - 136.19 -136.19 Unrecovered VAT 3.15 3.15 ------Non-refunded VAT ------

A - State taxes 32.82 32.83 -0.01 342.03 341.13 0.90 0.11 0.10 0.01 174.09 95.11 78.98 - 203.12 -203.12

Property tax on built property ------(IFPB) Property tax on land (IFT) ------Local taxes remainders ------Mining rebates - - - 8.84 1.56 7.28 ------Taxing charges ------

B - Local taxes - - - 8.84 1.56 7.28 ------

Mining Administration fees 332.02 332.02 - 28.72 28.72 - 356.04 356.04 - 179.34 191.53 -12.19 - - - Administration fees paid to ------OMNIS Training fees paid to OMNIS ------Port ------Royalties on wastewaters ------(REU) Segmented remainders - - - 3.79 0.67 3.12 - - - 0.05 - 0.05 - 0.70 -0.70 C - Segmented fees, duties 332.02 332.02 - 32.51 29.39 3.12 356.04 356.04 - 179.39 191.53 -12.14 - 0.70 -0.70 and royalties Other common payments (nature and amount provided 0.53 0.53 - - - - 0.17 0.17 ------in annexes) (Note b) Other segmented payments (nature and amount provided ------11.05 - 11.05 - - - - 0.00 -0.00 in annexes)(Note b) Alien’s identity card ------Droit de visa ------6.62 - 6.62 - - - Permits release fees ------Processing fees (BCMM) 7.72 7.98 -0.26 ------Penalties 0.47 0.47 ------5.10 5.10 -0.00 - 0.42 -0.42 Other payments remainders ------

D - Other payments 8.73 8.99 -0.26 - - - 11.21 0.17 11.05 11.72 5.10 6.62 - 0.43 -0.43

EY | 80 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 026. MADAGASCAR CONSOLIDATED 028. MINERAL PRODUCTS 030. RED GRANITI MADAGASCAR 027. LABRADOR MADAGASCAR 029. AMICOH RESOURCES MINING S.A. INTERNATIONAL GROUP S.A.R.L. S.A.R.L. Paid Paid Received Paid Received Paid Received Paid Received Received Residual Residual Residual Residual by Residual Type of payment by the by the by the by the by the by the by the by the by the discrepancies discrepancies discrepancies discrepancies the discrepancies entity State entity State entity State entity State State entity CNAPS 10.84 10.84 -0.00 10.32 10.32 - - - - 59.85 59.85 - - 24.56 -24.56 Taxes on wage income and 22.18 22.18 - 6.50 6.50 - - - - 116.32 116.32 - - 58.44 -58.44 similar (IRSA) Withheld at source remainders 5.08 5.08 - 2.40 2.40 - - - - 16.92 16.92 - - - -

E - Withheld at source 38.10 38.10 -0.00 19.21 19.21 - - - - 193.09 193.09 - - 83.00 -83.00

In kind (Expert evaluation or 20.14 20.14 ------supporting documents) Cash 15.98 15.98 ------

F - Donations 36.12 36.12 ------

Revenues on the State-owned companies’s share of ------production Revenues on the government’s share of ------production G - Government’s share of ------production (Oil companies) Discovery premiums paidto ------the State Production premiums paid to ------the State Signature premiums paid to ------the State

H - Various premiums ------

Social expenses in kind (Expert evaluation or supporting ------documents) Cash social expenses ------I - Social expenses required by law or by an agreement ------with the government Minerals transport fees paid to the State or an entity of the ------State J - Transport fees ------TOTAL GENERAL 447.79 448.06 -0.27 402.59 391.29 11.30 367.37 356.30 11.06 558.29 484.83 73.46 - 287.25 -287.25

EY | 81 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 034. MADAGASCAR 031. TANETY LAVA S.A.R.L. 032. GRANITEX S.A.R.L. 033. EAX /CANDAX RESSOURCES S.A.R.L. Total Total Residu Receiv Total Paid Residual Paid by Receive Residual Paid by Receive Paid by Received Residual Paid by Residual Received by al ed by by the entity discrepanci Type of payment the d by the discrepan the d by the the by the discrepa the discrepa the State discrep the es entity State cies entity State entity State ncies entity ncies ancies State Export fees - - - 6.18 2.14 4.04 ------98.29 91.89 6.40 Import fees ------456.85 456.54 0.31 Lease registration fees ------101.23 33.55 67.68 Custom duties and taxes on oil 4.50 4.50 - - 28.61 -28.61 ------9,474.37 7,898.50 1,575.88 products (TPP) Income taxes (IR) 0.32 0.32 - 1.05 1.05 - 0.10 - 0.10 0.32 0.31 0.01 2,378.78 2,555.94 -177.16 Non-resident IR or TFT ------14,280.74 13,387.89 892.85 State taxes remainders 46.22 20.75 25.46 - 142.23 -142.23 - - - 2.36 2.36 - 12,798.57 15,014.37 -2,215.80 Unrecovered VAT ------136,934.19 136,934.19 - Non-refunded VAT ------152,021.74 129,399.09 22,622.65

A - State taxes 51.03 25.57 25.46 7.23 174.03 -166.80 0.10 - 0.10 2.68 2.67 0.01 328,544.75 305,771.95 22,772.81

Property tax on built property ------19.89 19.89 - (IFPB) Property tax on land (IFT) ------30.72 30.72 - Local taxes remainders ------6.91 6.91 - Mining rebates - - - 3.24 3.24 ------3,201.67 3,192.49 9.18 Taxing charges - - - 3.00 3.00 ------66.01 66.01 -

B - Local taxes - - - 6.24 6.24 ------3,325.20 3,316.02 9.18

Mining Administration fees 227.01 260.04 -33.03 22.08 27.54 -5.45 - - - 172.32 172.32 - 13,796.34 14,735.50 -939.16 Administration fees paid to OMNIS ------132.34 132.34 - - - - 4,126.24 14,443.05 -10,316.81 Training fees paid to OMNIS ------55.06 55.06 - - - - 2,069.22 2,069.16 0.06 Port ------5,133.27 5,346.88 -213.60 Royalties on wastewaters (REU) ------Segmented remainders 0.10 - 0.10 4.29 4.32 -0.03 16.48 16.48 - - 0.09 -0.09 3,706.65 3,744.69 -38.05 C - Segmented fees, duties and 227.11 260.04 -32.93 26.37 31.86 -5.49 203.88 203.88 - 172.32 172.41 -0.09 28,831.72 40,339.29 -11,507.57 royalties Other common payments (nature and amount provided in annexes) ------23.00 23.00 - (Note b) Other segmented payments (nature and amount provided in - - - - 1.08 -1.08 ------80.12 56.22 23.91 annexes)(Note b) Alien’s identity card ------565.27 565.27 - Visa application ------267.65 261.03 6.62 Permits release fees ------Processing fees (BCMM) - - - - 2.42 -2.42 ------9.97 10.40 -0.43 Penalties 0.40 0.34 0.05 1.10 1.10 - 0.10 - 0.10 - - - 8,124.24 8,345.83 -221.59 Other payments remainders ------

D - Other payments 0.40 0.34 0.05 1.10 4.61 -3.50 0.10 - 0.10 - - - 9,070.26 9,261.75 -191.49

CNAPS 42.38 42.38 - - - - 2.76 2.76 - - - - 5,982.02 6,762.77 -780.75

EY | 82 EITI Reconciliation report Fiscal Year 2013

(in millions MGA) 034. MADAGASCAR 031. TANETY LAVA S.A.R.L. 032. GRANITEX S.A.R.L. 033. EAX /CANDAX RESSOURCES S.A.R.L. Total Total Residu Receiv Total Paid Residual Paid by Receive Residual Paid by Receive Paid by Received Residual Paid by Residual Received by al ed by by the entity discrepanci Type of payment the d by the discrepan the d by the the by the discrepa the discrepa the State discrep the es entity State cies entity State entity State ncies entity ncies ancies State Taxes on wage income and similar 80.53 74.68 5.85 - - - 46.00 46.00 - - - - 42,608.47 42,662.20 -53.74 (IRSA) Withheld at source remainders 21.44 21.44 ------3,575.39 3,575.39 -

E - Withheld at source 144.35 138.50 5.85 - - - 48.76 48.76 - - - - 52,165.88 53,000.37 -834.48

In kind (Expert evaluation or ------729.41 729.41 - supporting documents) Cash ------1,674.29 1,674.29 -

F - Donations ------2,403.70 2,403.70 -

Revenues on the State-owned ------companies’s share of production Revenues on the government’s ------share of production G - Government’s share of ------production (Oil companies) Discovery premiums paid to the ------State Production premiums paid to the ------State Signature premiums paid to the ------State

H - Various premiums ------

Social expenses in kind (Expert evaluation or supporting ------3,633.93 3,633.93 - documents) Cash social expenses ------399.10 399.10 - - - - 6,199.96 6,199.96 - I - Social expenses required by law or by an agreement with the ------399.10 399.10 - - - - 9,833.89 9,833.89 - government Minerals transport fees paid to the ------State or an entity of the State J - Transport fees ------TOTAL GENERAL 422.89 424.46 -1.57 40.94 216.73 -175.79 651.94 651.74 0.20 175.00 175.08 -0.08 434,175.40 423,926.96 10,248.45

EY | 83 EITI Reconciliation report Fiscal Year 2013

3.2.2 Comments

3.2.2.1 Regarding the significant flows per type of payment The following charts present the total payment flows from the extractive companies to the public entities for the fiscal year 2013 :

Payment flows received in 2013 per type of payment

TVA non remboursée

17% Impôts sur les revenus 31% salariaux et assimilés (IRSA) 3% 3% TVA non récupérée 4%

Frais d’administration 10% minière 32% Frais d’administration payé à l'OMNIS IR non résident ou TFT

Autres paiements

The total flows received by the State from the extractive industries for the fiscal year 2013 amounts to MGA 423.93 billion which is USD 192.10 million.

As shown in the above chart, the most significant flows are essentially the non-refunded VAT which represents 31%, the unrecovered VAT which represents 32%, the Taxes on wage income and similar (IRSA) which represents 10%, the Mining administration fees representing 4%, the net VAT which is 4%, and other payments which are 17% of the payment flows received by the State.

► The Non-refunded VAT18 by the State to the extractive companies, for the fiscal year 2013 amounts to MGA 129.40 billion which is USD 58.63 million. 96% of these flows were generated by the Ambatovy project. ► The Unrecovered VAT by the companies from the tax administrations amounts to MGA 136.93 billion, which is USD 62.05 million. TULLOW Madagascar generated 86% of these flows, the Ambatovy project 8% and Madagascar Oil 6%. ► L’IRSA paid to the State by the extractive companies for the fiscal year 2013 amounts to MGA 42.66 billion which is USD 19.33 million. 82% of these flows were from the Ambatovy project and 10% from QMM. ► The Mining Administration fees (FAM) amounts to MGA 14.74 billion which is USD 6.68 million. The extractive companies that contributed most to this flow are PAM Madagascar, Goldsand, Madagascar Chromium Company, and Mainland.

18 VAT for which a request of reimbursement was presented to the State but the request was rejected.

EY | 84 EITI Reconciliation report Fiscal Year 2013

► The Mining Administration Fees (FAM) amounts to MGA 14.44 billion which is USD 6.54 million mostly from OPHIR ENERGY for 71%, Madagascar Oil for 11% and the group EXXON Mobil for 8%. ► The Non-resident IR or TFT paid by the extractive industries is MGA 13.39 billion equivalent to USD 6.07 million, mainly from Ambatovy project for 68%, QMM for 20% and HOLCIM for 10%.

The Other payments include the flows that individually represent less than 3% of the total flows received by the State.

Note on the non-refunded VAT In a letter dated January 22nd 2015, addressed to the Minister attached to the Presidency in charge of the Strategic Resources, the Minister of Finances and Budget has precised the status of many requests of VAT refund submitted by the extractive companies for the fiscal year 2013. The letter reports on the refunds approved by the Tax General Directorate, especially during the last quarter of 2014, for a total amount of MGA 90.47 billion, which is USD 40.99 million.

3.2.2.2 The significant flows per public entity The following charts present the total of the payment flows paid by the extractive companies for the main public entities or the administrations and their branches. The details per type of payment per public entity are presented in the annexes.

Payment flow per public entity

Direction Général des 2% 4% Impôts (DGI) 2% 9% BCMM 3% Douane

OMNIS 80% CNAPS

Autres entités

As seen in the above chart, the main payment flows were paid to the Tax General Directorate representing 80% for MGA 339.95 billion which is USD 154.04 million. The flows paid to the DGI are mostly the State Taxes (non-refunded TVA, unrecovered VAT, TFT, IR etc.) and the payment of taxes withheld at source (IRSA).

3.2.2.3 Regarding the statements without counterpart by the State During our reconciliation works, some payment flows were considered as being statements without counterpart on the State’s side where the unilateral statements of the extractive industries were

EY | 85 EITI Reconciliation report Fiscal Year 2013 taken into account. As a result, to cancel the discrepancy, an adjustment of the corresponding amount has been made to the information from the State. We have classified as statements without counterpart, the payment flows to the entities of which the concerned flows are: ► Very different and/or collected by various companies (health contribution, …); ► Non-traceable per company within the administration (Alien’s identity card…); ► Traceable only within the companies by their nature (unrecovered VAT, social expenditures, donations…); ► Small and uncollected (car tax…).

Statement without counterpart from the State

4%2% 6% TVA non récupérée

Dépenses sociales en numéraire Organisation sanitaire 88% d'entreprise Autres paiements

The total of the statements without counterpart of the State for the fiscal year 2013 is MGA 146.53 billion which is USD 66.40 million.

As illustrated above, the statements without counterpart are mostly the unrecovered VAT representing 88% of the flows mainly from TULLOW Madagascar for 86%, the cash social expenditures that represent 4%, other health organizations representing 2% and of the flows and other payments representing 6% of the statements without counterpart at the State.

3.2.2.4 Regarding the residual discrepancy

It is to be noted that a negative discrepancy means that the State has reported more revenues than the payments made by the companies. Conversely, a discrepancy is positive when the companies have reported payments superior to the revenues received by the State.

Following our reconciliation, the total amount of the residual discrepancy amount to MGA 10.25 billion which is USD 4.64 million for the fiscal year 2013, representing 2.42% of the total revenues received by the State.

The table below presents the details of the discrepancies: (in million MGA) Amount paid by Amounts Residual Residual Residual the extractive received by discrepanc discrepancie Type of tax discrepanc companies the State ies s (source: ies (1) (2) (1)-(2) companies)

EY | 86 EITI Reconciliation report Fiscal Year 2013

(source: State) Non-refunded VAT 152,021.74 129,399.09 22,622.65 0.00 22,622.65 Custom duties and taxes on oil products (TPP) 9,474.37 7,898.50 1,575.88 -574.69 2,150.57 Non-resident IR or TFT 14,280.74 13,387.89 892.85 -326.92 1,219.78 Net VAT (due VAT) 0.00 0.00 0.00 0.00 0.00 CNAPS 5,982.02 6,762.77 -780.75 -847.23 66.48 Mining Administration fees 13,796.34 14,735.50 -939.16 -31.59 -907.57 - Administration fees paid to OMNIS 4,126.24 14,443.05 -10,316.87 0.07 10,316.81 Other non significant payments 234,493.94 237,300.16 -2,806.22 -3,980.28 1,174.07 TOTAL 434,175.40 423,926.96 10,248.45 -16,077.59 26,326.04

(in million USD) Amount paid by Amounts Residual Residual Residual the extractive received by discrepanc discrepanc discrepancie Type of tax companies the State ies ies s (source: (source: (1) (2) companies) (1)-(2) State) Non-refunded VAT 68.88 58.63 10.25 0.00 10.25 Custom duties and taxes on oil products (TPP) 4.29 3.58 0.71 -0.26 0.97 Non-resident IR or TFT 6.47 6.07 0.40 -0.15 0.55 Net VAT (due VAT) 0.00 0.00 0.00 0.00 0.00 CNAPS 2.71 3.06 -0.35 -0.38 0.03 Mining Administration fees 6.25 6.68 -0.43 -0.01 -0.41 Administration fees paid to OMNIS 1.87 6.54 -4.67 -4.67 0.00 Other non significant payments 106.25 107.53 -1.27 -1.80 0.53 TOTAL 196.73 192.09 4.64 -7.29 11.93

OPHIR ENERGY and RED GRANITI MADAGASCAR S.A.R.L. did not fill out their canvas within the time limit. Thus, the information from the State will be considered as residual discrepancies on the company’s side. The total information from the State regarding these companies amount to MGA 10,974.25 million equivalent to USD 4.97 million.

Statement by the Statement by the COMPANY State State (in million MGA) (in million USD) 017.OPHIRENERGY 10,687.00 4.84 030.REDGRANITIMADAGASCARS.A.R.L. 287.25 0.13 TOTAL 10,974.25 4.97

The explanation and breakdown of the significant discrepancies are provided below:

► Non-refunded VAT The Non-refunded VAT generated a total positive discrepancy of MGA 22.62 billion equivalent to USD 10.25 million. The related information, mainly those of the Ambatovy project for 99%, was not traced with the Tax Administration.

► Custom duties and taxes on oil products (TPP) Custom duties and taxes on oil products (TPP) have shown a positive discrepancy of MGA 1,575.88 million which is USD 0.71 million for the benefit of the companies. The discrepancy is mainly composed of negative discrepancies from the companies amounting to MGA 574.69 million and positive discrepancies from the State for MGA 2,150.57 million. It is worth noting that the negative discrepancies are related to the flows that were traced with the Customs, but not identified with the companies and the positive discrepancies are those traced with the companies but not found with the Customs.

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This discrepancy is mainly composed of the discrepancies traced during the reconciliations of the information from the customs and the following companies: Ambatovy project, HOLCIM, QMM, Group PAM, the details of which are presented in the following table:

(in MGA) Elements traced at the Elements traced with Residual customs, but not with the companies, but not Company discrepancy the company with the customs (1) (2) (2 – 1) PROJET AMBATOVY (252,174,645.00) 1,867,425,457.14 1,615,250,812.14 HOLCIM (905,524,801.00) 166,276,946.00 (739,247,855.00) QIT MADAGASCAR MINERALS S.A. 658,860,223.00 (85,063,896.00) 573,796,327.00 GROUP PAM - 142,208,662.00 142,208,662.00 Other companies (75,852,563.00) 59,720,020.56 (16,132,542.44) TOTAL (574,691,786.00) 2,150,567,189.70 1,575,875,403.70

► Non-resident IR or TFT The Non-resident IR or TFT showed a positive discrepancy of MGA 892.85 million equivalent to USD 0.40 million in favour of the companies, of which most of the discrepancy is from QMM for MGA 797.41 million which is 89% of the total discrepancy.

► Due VAT (net TVA) The net VAT generated a total negative discrepancy of MGA 226.94 million equivalent to USD 0.10 million mainly from OPHIR ENERGYfor 78%. They have not provided the canvas during the reconciliation.

► CNAPS CNAPS has generated a total negative discrepancy of 780.75 million which is USD 0.35 million corresponding mainly to the contributions paid and were not reconciled with the data of the group PAM, especially those of PAM SAKOA.

► Mining Administration fees (FAM) The mining administration fees paid to the BCMM have shown a total negative discrepancy of MGA 939.16 million equivalent to USD 0.43 million to the benefit of the State.

This discrepancy is mainly composed, on one hand, by mining administration fees traced with the BCMM and is also related to the companies that did not provide filled out and/or signed canvas which are OPHIR ENERGY and RED GRANITI MADAGASCAR S.A.R.L. On the other hand, a negative discrepancy has been noted regarding the payments of mining administration fees related to licences that were disposed at the time of the reconciliation, but within the BCMM, they are still recorded to the name of the seller. The details are provided below: - Licence purchased by BAO MA SARL for MGA 762.50 million but still recorded under GOLDSAND SARL ; - Licence purchased by SINBAD for MGA 333.15 million but still recorded under CALIBRA RESOURCES MINERALS ; - Licence purchased by a natural person named Zisy Davida Michel for MGA 132 million but still recorded under MADAGASCAR CHROMIUM COMPANY.

► VAT on import and VAT on oil products (TVP) The VAT on import and VAT on oil products (TVP) generated a total negative discrepancy of MGA 2,138.94 million equivalent to USD 0.97 million mostly for HOLCIM with a negative discrepancy of MGA 1,590.96 million equivalent to USD 0.721 million which is 84%.

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► Administration fees paid to OMNIS The administration fees paid to OMNIS generated a total negative discrepancy of MGA 10,316.81 million equivalent to USD 4.67 million. This discrepancy is mainly for the administration fees recorded at the OMNIS for OPHIR ENERGY, who did not provide the canvas during the reconciliation.

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3.3 Entities from Group B 19

3.3.1 Schedule of the payment flows per company, within the public entities in thousands MGA (in thousands MGA) PAYMENT FLOW MINES NAME OF THE COMPANY CUSTOM MICTSL/ MININT BCMM OMNIS DIRECTORA DGI ONE OMERT ANDEA CNAPS TOTAL S SMMC ER TE Legal persons – Mining 590,831.86 - - 114,155.03 311.36 4,590.80 - - - 24,438.63 - 734,327.68 companies MADAGASCAR WISCO GUANGXIN KAM WAH 74,409.60 - - 97,190.40 - - - - - 200.00 - 171,800.00 RESSOURCES S.A.U. CLASSIC REAL STONES 193,959.70 - - 15,118.64 311.36 4,590.80 - - - 24,238.63 - 238,219.13 S.A.R.L. FARASANDS S.A.R.L. 142,164.00 - - 1,300.00 ------143,464.00 INTERNATIONAL MINING 141,668.16 - - 100.00 ------141,768.16 CORPORATION LTD S.A.R.L. RECHERCHES MINIERES DE 38,630.40 - - 446.00 ------39,076.40 MADAGASCAR S.A.R.L. Total payment flows 590,831.86 - - 114,155.03 311.36 4,590.80 - - - 24,438.63 - 734,327.68

19 The companies whose cumulated payment were between 97% and 98% of the significant flows perceived by the State. Each of these companies in this group won’t have to fill out a reconciliation canvas, but will be subject to a disaggregated unilateral statement from the administrations that received the payments.

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3.3.2 Comments

The payment flows from the extractive companies of group B amount to MGA 743.32 million equivalent to USD 0.33 million. This amount is mainly related to the Mining administration fees paid to BCMM totaling MGA 590.83 million equivalent to USD 0.26 million.

As noted in the chart below, the main flows for the extractive companies of group B are the mining administration fees paid to the BCMM amounting to MGA 734.33 million which is USD 0.33 million.

(in thousands MGA)

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3.4 Entities of Group C20

3.4.1 Schedule of the payment flows per company, at the public entities in thousands MGA (In thousands MGA) PAYMENT FLOWS MINES Category BCMM OMNIS DIRECTORA DGI CUSTOMS ONE OMERT MICTSL ANDE CNAPS MININ TOTAL TE /SMMC A TER 332,328.4 Mining companies 2,576,598.49 - 26,513.76 22,639.06 7,287.42 - - - 52,111.89 - 3,017,479.02 0 327,309.8 Legal persons 2,237,092.33 - 26,513.76 22,639.06 2,932.52 - - - 52,111.89 - 2,668,599.36 0 Natural persons 339,506.16 - - 5,018.60 - 4,354.90 - - - - - 348,879.66 332,328.4 Total payment flows 2,576,598.49 - 26,513.76 22,639.06 7,287.42 - - - 52,111.89 - 3,017,479.02 0

20Companies, whose cumulated payment to the administration are between 98% and 100% of the significant flows received by the State. The companies included in this group don’t have the obligation to fill out the reconciliation canvas, but will be subject to an agregated unilateral statement filled out by the State.

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3.4.2 Comments

The total payment flows of the extractive companies from group C amount to MGA 3.02 billion which is USD 1.37 million.

This amount is mainly related to the mining administration fees paid to the BCMM amounting to MGA 2.58 billion which is USD 1.17 million.

Flux de paiement Groupe C

3,000,000.00

2,500,000.00

2,000,000.00

1,500,000.00

1,000,000.00

500,000.00

-

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4 Other results

4.1 Donations-related results

In accordance with the Terms of reference for the reconciliation of 2014, the multiparty Groupe defines donation as:« any cash and in-kind transfers from mining and oil companies. It is to be noted that the following shall not be considered as donations: - Sponsorships that are within communication activities; - Environmental and social requirements defined by the clear specifications of a governmental entity ; - Ports, roads, railways and other infrastructures used for mining or oil operations. Even though the local population benefits from these infrastructures, they shall not in any case be considered as donations. By contrast, routing infrastructures made by mining companies for strictly public usage as well as social infrastructures constructions, free of charge, are considered as donations. »

Donations from exctractive companies can be cash or in kind.

For 2013, the total of the donations amounts to MGA 2.40 billion which is USD 1.09 million, MGA 1,658.40 million of which is cash and MGA 745.30 million in kind.

The tables below present the details of the donations for the fiscal year 2013.

4.1.1 QIT MADAGASCAR MINERALS S.A. Description Beneficiary Amounts MGA Amounts USD Cash donations Transfer Clairefontaine Community 880,385,680.14 398,922.33 Prestation ASOS DRSP Community 183,043,800.00 82,941.22 Compensation for fishers at Libanona Community 100,000,000.00 45,312.22 SODEXO Community 90,392,356.19 40,958.79 Support to a sport association Community 72,592,194.49 32,893.14 Construction Community 68,085,482.46 30,851.05 Trainings Community 49,031,175.00 22,217.12 Support to community association Community 32,486,302.52 14,720.27 Scholarship and schooling aid Community 25,146,000.00 11,394.21 Policemen wages Community 17,171,770.00 7,780.91 Commemoration of the abolition of slavery Community 9,213,715.92 4,174.94 Support to a musical association Community 8,984,730.74 4,071.18 Miscellaneous donations Community 7,210,126.16 3,267.07 Reforestation Community 3,982,000.00 1,804.33 Various donations to the community Community 2,760,155.00 1,250.69 Tourism Community 1,700,000.00 770.31 Tools and equipements Community 1,641,112.00 743.62 SUBTOTAL 1,553,826,600.62 704,073.39 Donations in kind Tools and equipements Community 46,237,090.40 20,951.05 Goodies Community 14,543,220.00 6,589.86 Various sports materials Community 10,437,000.00 4,729.24 IT equipment Community 5,920,000.00 2,682.48 Purchase of zebus Community 4,900,000.00 2,220.30 Foodstuffs Community 2,912,000.00 1,319.49 Miscellaneous Community 2,881,320.00 1,305.59 SUBTOTAL 87,830,630.40 39,798.01 TOTAL 1,641,657,231.02 743,871.40

4.1.2 AMBATOVY PROJECT

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4.1.2.1 DYNATECMADAGASCAR S.A Description Beneficiary Amounts MGA Amounts USD Donations in kind Reading materials and supplies CISCO Brickaville 102,290,187.50 46,349.97 Dump truck rental Urban Municipality of Toamasina 44,797,917.00 20,298.93 Urban Municipality of 3 months waste removal 41,737,500.00 18,912.19 Moramanga Pencils CISCO Toamasina II 36,693,700.00 16,626.73 Scanner CANON DR 6030C, TOTAL General Directorate, Land 35,573,560.00 16,119.17 Station TOPCON Service of Antananarivo Rehabilitation and construction, school garden, Community nutrition District of Moramanga 29,342,650.00 13,295.81 project Primary Public School of Backpacks Moramanga, Brickaville, 19,461,775.00 8,818.56 Toamasina 20 bags of ciments SPA 40MG cpr/20, Tanandava Population 11,882,459.00 5,384.21 Médicaments Director’s chair, Printer HP Laser Employment office of 11,780,500.00 5,338.01 1415FNW Moramanga Vocational highschool of 07 sets of desktop computers 8,529,500.00 3,864.91 Toamasina 2000l of fuel/100 jerry cans of 20l Rural Municipality of Ambatovola 8,440,000.00 3,824.35 CSBII Rurale Municipality of Polycrystalline modules 110wc 7,196,000.00 3,260.67 Ambinaninony 25% Downpayment- fuel and Suburb Municipality of 4,768,000.00 2,160.48 lubricants Toamasina 02 nylon meshes of 9,50mx4m, galva Fokontany Anivorano Est 3,808,920.00 1725.91 pole 03 plastic trash cans, 50 plastic chairs Urban Municipality of Brickaville 3,031,666.50 1373.72 Sports equipment, 04 sets of jerseys Fokontany Dépôt 2,165,800.00 981.37 2nd regiment of military 6 bags of rice /10l of oil 1,698,400.00 769.58 engineering Waterspout galva, TOP_30NP University of Toamasina 1,660,680.00 752.49 Office desk Fokontany Beforona 1,557,000.00 705.51 1 table and 4 office chairs Fokontany Fanovana 1,557,000.00 705.51 Vocational highschool of 04 gorges of pinewood 4m 1,420,000.00 643.43 Moramanga Ambatovy furnitures assembling Assembling of furniture 1,303,000.00 590.42 CFA Brickaville Event of the Gendarmerie School Sign for the event 1,000,000.00 453.12 Tensiometer Vaseq Laubry Population of Moramanga 891,800.00 404.09 Tensiometer Vaquez laubry classi Population TAILINGS 445,900.00 202.05 25l Iceboxes Fokontany of Tanandava 150,333.00 68.12 Purchase of supplies for the health PAPS Vohitrambo 126,000.00 57.09 contest of 2012 Vohitrambato TOTAL 383,310,248.00 173,686.40

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4.1.2.2 AMBATOVY MINERALS Description Beneficiaries Amounts MGA Amounts USD Donations in kind Emergency aid AMBLARNGRA Commune Ambalarondra 4 670 500,00 2 116,31 Emergency aid Brickaville Municipality of Brickaville 2 729 500,00 1 236,80 District of Brickaville/HIV AIDS awareness Soccer, basket ball, trophy 2 251 800,00 1 020,34 raising 25 bags of ciment CSB2 Ranomafana Est 2 248 310,00 1 018,76 Rehabilitation Municipality of Ranomafana 2 100 000,00 951,56 06 pannes of 5m CSB2 Ranomafana Est 1 805 244,06 818,00 Rehabilitation of the train Municipality of Rurale Morarano Gare 1 460 000,00 661,56 station office Emergency aid MAROFODY Municipality of Marofody 819 200,00 371,20 Emergency aid Ranomafana Municipality of Ranomafana 496 400,00 224,93 Est NGO Fandrosoana Municipality of 12 metal sheets 2m50 0,25 436 666,67 197,86 ambatovola 19 017 TOTAL 8 617,31 620,73

4.1.3 MADAGASCAR OIL Description Beneficiaries Amounts MGA Amounts USD Cash donations Financial contribution FRAM FRAM teacher Ankisatra 15,960,000.00 7,231.83 BNGRC contribution to the Menabe BNGRC 6,615,000.00 2,997.40 Region Financial contribution paramed Ankisatra Paramed Ankisatra 2,160,000.00 978.74 Financial contribution paramed Ankisatra Paramed Ankisatra 2,160,000.00 978.74 Showcase Miandrivazo PCN°654 Miandrivazo 700,000.00 317.19 SUBTOTAL 27,595,000.00 12,503.91 Donations in kind Wateraid – 1st part of the drinking water Municipality of Beravina 50,400,000.00 22,837.36 Beravina Adminstrative map of Madagascar, school Municipality of 16,023,060.00 7,260.40 materials, candies and biscuits Betsipolotra Purchases for the celebration of the Municipality of 9,132,543.25 4,138.16 Independence day 26th June 2013 Ankondromena Pharmacie principale, CEPE candidates Municipality of travel, glasses, cataract surgery, school 8,027,000.00 3,637.21 Ankondromena kit transportation ADAMM - Municipality of Belinta, building Municipality of Belinta 8,002,748.00 3,626.22 rehabilitation ADAMM – Rural Municipality of Municipality of 7,604,811.00 3,445.91 Manandaza – well Manandaza India fountain installation in Folakara, Fokontany Folakara 7,556,915.00 3,424.21 Transportation, Toys Contribution to the municipality of Municipality of 4,242,249.00 1,922.26 Masoarivo and CEG Masoarivo ADAMM - Municipality of Analaiva – public Municipality of Analaiva 4,003,011.00 1,813.85 market place ADAMM - Municipality of Andimaky public Municipality of 4,002,885.00 1,813.80 market Andimaky ADAMM - Municipality of Begidro – school Municipality of Begidro 4,000,000.00 1,812.49 rehabilitation ADAMM - Municipality of Bemahatazana – Municipality of 3,801,782.00 1,722.67 Gendarmerie office Bemahatazana School supplies, candies Municipality of Andramy 2,203,600.00 998.50 School supplies, candies Municipality of Soaloka 386,380.00 175.08

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Description Beneficiaries Amounts MGA Amounts USD SUBTOTAL 129,386,984.25 58,628.12 TOTAL 156,981,984.25 71,132.03

4.1.4 TOLIARA SANDS Description Beneficiaries Amounts MGA Amounts USD Cash donations Support for the Association ADFA ADFA 9,157,563.32 4,149.50 SUBTOTAL 9,157,563.32 4,149.50 Donations in kind Donations for the victims of the cyclone COMMUNITY 35,805,932.66 16,224.46 Haruna NGO BEL AVENIR ONG BEL AVENIR 5,750,000.00 2,605.45 NGO HONKO donation ONG HONKO 750,000.00 339.84 SUBTOTAL 42,305,932.66 19,169.76 TOTAL 51,463,495.98 23,319.25

4.1.5 HOLCIM Description Beneficiaries Amounts MGA Amounts USD Donations in kind Cement for the construction of a public Wildlife Conservation building to the environmental Campus of 28,887,119.93 13,089.40 Society Masoala Park in Maroantsetra Volunteering day of the employees of HOLCIM for the sanitation and ENDA-OI 7,708,723.20 3,492.99 rehabilitation in the court yard of the EPP Isotry Ambodifiakarana Cement for the construction works of 3 CEG CARION 3,191,448.29 1,446.12 classrooms Cement for the construction works of houses for the village of the 17th ASA 2,596,980.00 1,176.75 graduates Cement for the construction of a bridge AVOTR'ANDRAMASINA 1,575,282.65 713.80 Ankorona above Sisaony River Cement EGEXTRA 1,269,385.98 575.19 Cement for the sanitation works and the rehabilitation of the court yard of the EPP CUA 1,163,455.00 527.19 Isotry Ambodifiakarana Cement for the construction works for a clinic within a school of 500 students and MADA FON'NY ANKIZY 485,737.56 220.10 for the rehabilitation and upgrading works on a thatched cottage Cement Macons School 247,335.61 112.07 TOTAL 47,125,468.23 21,353.60

4.1.6 MADAGASCAR CONSOLIDATED MINING Description Beneficiaries Amounts MGA Amounts USD Cash donations Cellule de Prévention et de Gestion Donations for the victims of the des Urgences (CPGU) Prime 11,000,000.00 4,984.34 cyclone Haruna Minister’s office – Mahazoarivo Donations for the rehabilitation of Association FIHAMI 4,982,940.00 2,257.88 the EPP Saint Augustin SUBTOTAL 15,982,940.00 7,242.23 Donations in kind Donation of a water supply system Village of Sakamasay - District of 18,612,100.00 8,433.56 to the village de Sakamasay Betioky Sud Donations of furnitures to FFM (Filan-kevitry ny Fampihavanana FFM office in Ampefiloha 1,526,700.00 691.78 Malagasy)

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SUBTOTAL 20,138,800.00 9,125.34 TOTAL 36,121,740.00 16,367.56

4.1.7 TANTALUM RARE EARTH (MALAGASY) Description Beneficiaries Amounts MGA Amounts USD Cash donations Donation for the reconstruction of FJKM ANTSIRABE 17,000,000.00 7,703.08 FJKM ANTSIRABE Donation to FJKM FIFALIANA FJKM FIFALIANA 13,000,000.00 5,890.59 TOTAL 30,000,000.00 13,593.67

4.1.8 KRAOMA Amounts Description Beneficiaries Amounts MGA USD Cash donations Participation to the social component or the Project TREASURY DIANA 13,750,000.00 6,230.43 Betsiaka in the DIANA Region Donations to the social component in the company Employees 987,640.00 447.52 Prizes for the best students EPP Ampefiloha 314,000.00 142.28 Participation to the fundraising of the Association VATO Association VATO 200,000.00 90.62 Donation to the Chancellor RALITERA Chancellor 200,000.00 90.62 Participation to the oral health promotion Ministry of Health 130,000.00 58.91 Ministry of Civil Cash donations 90,000.00 40.78 Service Fokontany Participation to the social component in the Fokontany 90,000.00 40.78 Ampefiloha Donation to the patients at the hospital HJRA 85,000.00 38.52 Participation to the social component of the association NY HAVANA MIRAY 26,000.00 11.78 NY HAVANA MIRAY HINA HINA Cash donation for support Orchidée Blanche 20,000.00 9.06 TOTAL 15,892,640.00 7,201.31

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4.1.9 MAINLAND MINING LTD Description Beneficiaries Amounts MGA Amounts USD Cash donations Financial support to the inaugural Région Antsinanana 10,000,000.00 4,531.22 activities Municipality of Participation to a feast in Ambodisaina Amboditandroho/Fokontany 1,400,000.00 634.37 Ambodisaina For the ANAED ANAED 500,000.00 226.56 Fokontany Support for the victims (sinistered) Mahasoa/Municipality of 200,000.00 90.62 Fénérive Est Rurale Municipality of Participation to the travel for the women 150,000.00 67.97 Ampasimbe Manantsatrana Rurale Municipality of For the customs 130,000.00 58.91 Ampasimbe Manantsatrana Rurale Municipality of Women of Anjahambe 80,000.00 36.25 Ampasimbe Manantsatrana Participation to the Independance day Manakara 50,000.00 22.66 celebration Rurale Municipality of For the JORO 10,000.00 4.53 Ampasimbe Manantsatrana Condolences Fénérive Est 5,000.00 2.27 SUBTOTAL 12,525,000.00 5,675.36 Donations in kind Betsa 60 litres, star Juice 3 packs, candies Rurale Municipality of 199,000.00 90.17 10 bags Ampasimbe Manantsatrana Municipality of 5 bouttles of oil, 5 bags of candies, 5 bags Antehiroka/Fokontany 95,060.00 43.07 of 5kg Rice, 20 packs of biscuits Antanetibe SUBTOTAL 294,060.00 133.25 TOTAL 12,819,060.00 5,808.60

4.1.10 MADA-AUST Description Beneficiaries Amounts MGA Amounts USD Cash donations Support to the doctors in the South East Region ADFA 6,727,130.00 3,048.21 Development support for the South region REGION,SUD 1,680,000.00 761.25 TOTAL , 8,407,130.00 3,809.46

4.1.11 SAPETRO Description Beneficiaries Amounts MGA Amounts USD Cash donations Direction Régionale eau et forêt Participation to the World Water Day 500,000.00 226.56 (Regional Directorate) Per diems (fuel) Menabe Region 400,000.00 181.25 TOTAL 900,000.00 407.81

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4.2 Results related to the social expenditures

In accordance with the new EITI standard, version of July 11th 2013, :« material social expenditures by companies are mandated by law or the contract with the government that governs the extractive investment, the EITI Report must disclose and, where possible, reconcile these transactions and where reconciliation is not feasible, the EITI Report should include the unilateral disclosures of these transactions by the concerned companies and/or government.» For the fiscal year 2013, the total social expenditures disclosed by the extractive companies amount to MGA 4,489 billion which is equivalent to USD 4.46 million, of which MGA 6.39 million is cash and MGA 3.45 billion in kind. The tables below disclose the details of the social expenditures made by the companies for the fiscal year 2013.

4.2.1 MAINLAND MINING References of the law or the contract Description Beneficiaries Amounts MGA Amounts USD with the gouvernment Cash social expenditures Rehabilitation RN5 SMATP Not provided 2,439,896,936.57 1,105,571.56 Rehabilitation RN5 BMCE Not provided 906,400,000.00 410,710.00 Rehabilitation RN5 MTPM Not provided 151,200,000.00 68,512.08 TOTAL 3,497,496,936.57 1,584,793.64

4.2.2 AMBATOVY PROJECT

4.2.2.1 DYNATEC MADAGASCAR References of the law or the Description Beneficiaries Amounts MGA Amounts USD contract with the gouvernment Social expenditures in kind Construction bazar be Population Toamasina Not provided 3,192,800,621.48 1,446,728.97 Construction gouvernement Not provided Population along the poultry projects and ZEREN NH3 89,773,108.11 40,678.19 Pipeline project Clothes, supplies, materials, Not provided PAPS Vohitrambato 66,700,750.74 30,223.59 divers 10 teachers’ desks, 10 tables, Not provided EPP Vohitrambato 38,747,000.00 17,557.13 Toboggan Tongue blade, Ibex caps b/24, 10 Not provided tests malaria, 100 sarcleuses a PAPS Ambohibary 16,606,927.00 7,524.97 riz, 60 acides benzoïque/salicylique Ambatovy Employees Not provided 1250 t-shirts and Communities 8,475,000.00 3,840.21 TMM_BRK_MGA 02 pendrives 4gb, full set of Population of Marovato Not provided 2,281,600.00 1,033.84 desktop computeur – DELL Vohitrambato PAPS TAILINGS Not provided 100 plastic 20 l jerry cans 2,270,000.00 1,028.59 Fokontany Tanandava Relocation Comitee Not provided 40 raincoats- polo shirts 2,180,160.00 987.88 (VHT and MVT) Centre de santé Not provided 540 bags of powder soap kiln 1,503,720.00 681.37 Vohitrambato TOTAL 3,421,338,887.33 1,550,284.74

4.2.2.2 AMBATOVY MINERALS

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References of the law or the Description Beneficiaries Amounts MGA Amounts USD contract with the gouvernment Social expenditures in kind FOKONTANY Seranatsara FKT Seranatsara Not provided 11,086,827.00 5,023.69 PAPS Mangetana, Not provided PAPS Mangetana, Municipality of 4,658,750.00 2,110.98 Municipality of Anivorano Anivorano Municipality of Municipality of Not provided Seranantsara, District of Seranantsara, District of 4,279,000.00 1,938.91 Brickaville Brickaville District of Not provided District of Brickaville/HIV Brickaville/VIH SIDA's 3,295,100.00 1,493.08 AIDS awareness-raising awareness-raising District of Not provided District of Brickaville/HIV Brickaville/HIV AIDS 1,557,200.00 705.60 AIDS awareness-raising awareness-raising Municipality of Municipality of Not provided Seranantsara, District of Seranantsara, District 878,750.15 398.18 Brickaville de Brickaville FKT Seranatsara FKT Seranatsara Not provided 685,499.92 310.62 PAPS Mangetana, Not provided PAPS Mangetana, Municipality of 504,166.67 228.45 Municipality of Anivorano Anivorano Municipality of Not provided Municipality of Ampasimbe 127,488.00 57.77 Ampasimbe TOTAL 27,072,781.73 12,267.28

4.2.3 QIT MADAGASCAR MINERALS S.A. References of the law Description Beneficiaries or the contract with Amounts MGA Amounts USD the gouvernment Cash social expenditures Miscellaneous Community 600,782,967.21 272,228.12 Construction Community 507,562,943.66 229,988.06 Community Memorandum of Project FAFAFI (PDI) 312,134,200.00 141,434.95 Understanding Community Memorandum of PRESTATION MANOA 274,382,800.00 124,328.95 Understanding Community Memorandum of Project WATER AID 164,929,945.00 74,733.43 Understanding Community Memorandum of Project ASOS (PDI) 87,389,500.00 39,598.13 Understanding Community Memorandum of Project APEA (PDI) 80,000,000.00 36,249.78 Understanding Community Memorandum of Project HIMO 64,792,715.00 29,359.02 Understanding AGRIVET Community 60,853,810.30 27,574.21 Community Memorandum of Project COGEMA 42,000,000.00 19,031.13 Understanding Community Memorandum of PRESTATION CARA 38,757,190.90 17,561.75 Understanding Community Memorandum of Project FIMPIAP 19,026,273.00 8,621.23 Understanding Community Memorandum of PRESTATION MBG 17,359,400.00 7,865.93 Understanding Community Memorandum of Project KADAHA 13,033,020.00 5,905.55 Understanding Community Memorandum of Project ECG 6,848,891.00 3,103.38 Understanding Miscellaneous for training Community 6,591,000.00 2,986.53

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Wages of the guard Community 5,048,505.06 2,287.59 Purchase of zebus Community 1,220,000.00 552.81 Support to the community Community 417,500.00 189.18 association Foodstuff Community 231,000.00 104.67 TOTAL 2,303,361,661.13 1,043,704.39

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4.2.4 EAX References of the law or the contract Amounts Description Beneficiaries Amounts MGA with the USD gouvernment Cash social expenses Construction of Municipality of AMBILOBE. 107PROJECTS2 101,547,120.15 46,013.26 administration offices District of AMBILOBE 6581PO Municipality of 107PROJECTS3 School Construction AMBODIBONARA. District of 81,668,641.80 37,005.88 3181PO AMBILOBE Construction of aMunicipality of BERAMANJA. 107PROJECTS4 38,555,973.45 17,470.57 Primary School District of AMBILOBE 3881PO Municipality of 107PROJECTS4 School Construction d’AMPONDRALAVA. 37,961,671.20 17,201.28 3882PO District d'AMBILOBE Municipality of Construction of 107PROJECTS4 BEMANEVIKY. District of 33,017,391.60 14,960.91 administration offices 5577PO AMBANJA School with restrooms Municipality of ANJIABE. 107PROJECTS4 31,124,049.20 14,103.00 Construction District of AMBILOBE 4070PO School with restrooms Municipality of 107PROJECTS2 Construction ANTSOHIMBONDRONA. 29,973,589.59 13,581.70 7248PO District of AMBILOBE School with restrooms Municipality of MANTALY. 107PROJECTS2 28,983,143.94 13,132.91 Construction District d'AMBILOBE 7245PO Fokontany of Construction of MANONGALAZA 107PROJECTS4 16,271,973.00 7,373.19 administration offices DIEGO SUAREZ. 4550PO ANTSIRANANA TOTAL 399,103,553.93 180,842.70

4.2.5 SAPETRO References of the law or the Description Beneficiaries Amounts MGA Amounts USD contract with the gouvernment Cash social expenses Bush proof MELAKY REGION Not provided 111,579,162.69 50,559.00 Bush proof MELAKY REGION Not provided 52,314,801.55 23,705.00 Association Vony MELAKY REGION Not provided 6,195,000.00 2,807.09 : 50% downpayment AEP MELAKY REGION Not provided 5,257,713.00 2,382.39 Lambokely NGO FANOITRA: balance for the MELAKY REGION Not provided 4,043,830.00 1,832.35 construction of AEP Lambokely Assignment for the monitoring MELAKY REGION Not provided and follow-up of the drilling in the 1,880,750.00 852.21 Melaky resion Librairie Saint Paul MELAKY REGION Not provided 1,400,000.00 634.37 NGO FANOITRA : settlement MELAKY REGION Not provided 1,118,413.00 506.78 Association Vony MELAKY REGION Not provided 1,105,059.08 500.73 NGO FANOITRA : Well testing MELAKY REGION Not provided 568,050.00 257.40 Institut Pasteur MELAKY REGION Not provided 56,000.00 25.37 TOTAL 185,518,779.32 84,062.68

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4.3 Results with the decentralised authorities

The decentralised authorities, such as regions and municipalities, receive mining rebates and administration fees, property taxes on built property and property taxes on lands. These are the main payment flows received by these authorities in 2013.

4.3.1 Mining rebates

Mining rebates are local taxes due on the value of mining products at their first sale. They are paid by the mining companies during the exploitation phase.

Mining rebates are calculated by using a percentage of the quantities exported by the mining companies.

Hereafter the distribution rate for the received mining rebates: ► 60 % for the municipality ► 30% for the region ► 10 % for the autonomous province (currently in a suspense account within the Treasury)

We have obtained the information from the Mines Directorate regarding the rebates collected from the 4 companies who are in their exploitation phase during the fiscal year 2013: HOLCIM, QMM, MAINLAND and ETS GALLOIS.

The following tables display the reconciliation of the rebates paid by the mining companies and the amounts received by the municipalities and the regions, in MGA and in USD. (in MGA) Amounts received by Mining Amounts paid by Municipality/Region the Discrepancies company the company municipalities/regions Municipality of Ampasimadinika Tamatave ETS GALLOIS 1,556,747.28 1,556,747.28 - Région Tamatave ETS GALLOIS 1,454,904.00 1,454,904.00 - Municipality of Sahamatevina Tamatave ETS GALLOIS 1,323,962.64 1,323,962.64 - Province Tamatave ETS GALLOIS 484,968.00 484,968.00 - Municipality of Anjahamana Tamatave ETS GALLOIS 29,098.08 29,098.08 - Municipality of Ibity HOLCIM 31,823,518.00 31,720,156.00 103,362.00 Région Vakinankaratra HOLCIM 25,084,104.00 - 25,084,104.00 Municipality of Tritriva HOLCIM 12,558,078.00 12,558,078.00 - Municipality of Rurale d’Andranomanelatra HOLCIM 5,786,611.00 10,613,799.00 (4,827,188.00) Municipality of Brieville KRAOMA 76,776,030.00 - 76,776,030.00 Région Betsiboka KRAOMA 50,088,746.00 - 50,088,746.00 Municipality of Andriamena KRAOMA 23,401,462.00 - 23,401,462.00 Province Autonome Mahajanga KRAOMA 16,696,248.80 - 16,696,248.80 Région Anosy QMM 885,257,742.79 990,881,852.00 (105,624,109.21) Municipality of Ampasy Nahampoana QMM 885,257,742.79 918,225,555.00 (32,967,812.21) Municipality of Mandromodromotra QMM 442,628,871.40 460,392,679.68 (17,763,808.28) Municipality of Fort Dauphin QMM 442,628,871.40 502,848,636.00 (60,219,764.60) 2 902 837 Total 2,932,090,435.68 (29,252,729.50) 706,18

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(in USD) Amounts received by Mining Amounts paid by Municipality/Region the Discrepancies company the company municipalities/regions Municipality of Ampasimadinika Tamatave ETS GALLOIS 705.40 705.40 - Région Tamatave ETS GALLOIS 659.25 659.25 - Municipality of Sahamatevina Tamatave ETS GALLOIS 599.92 599.92 - Province Tamatave ETS GALLOIS 219.75 219.75 - Municipality of Anjahamana Tamatave ETS GALLOIS 13.18 13.18 - Municipality of Ibity HOLCIM 14,419.94 14,373.11 46.84 Région Vakinankaratra HOLCIM 11,366.17 - 11,366.17 Municipality of Tritriva HOLCIM 5,690.34 5,690.34 - Municipality of Rurale d’Andranomanelatra HOLCIM 2,622.04 4,809.35 (2,187.31) Municipality of Brieville KRAOMA 34,788.93 - 34,788.93 Région Betsiboka KRAOMA 22,696.32 - 22,696.32 Municipality of Andriamena KRAOMA 10,603.72 - 10,603.72 Province Autonome Mahajanga KRAOMA 7,565.44 - 7,565.44 Région Anosy QMM 401,129.97 448,990.60 (47,860.63) Municipality of Ampasy Nahampoana QMM 401,129.97 416,068.42 (14,938.45) Municipality of Mandromodromotra QMM 200,564.99 208,614.16 (8,049.18) Municipality of Fort Dauphin QMM 200,564.99 227,851.90 (27,286.91) Total 1,315,340.32 1,328,595.38 (13,255.06)

The main discrepancies are related to the following locations:

a) Municipality of Andranomanelatra beneficiary of the payments made by HOLCIM MADAGASCAR SA. The amount of MGA 4,827,188.00 is a rebate paid by HOLCIM in 2012 but was received by the authority only in 2013 ;

b) Région Vakinankaratra beneficiary of the payments made by HOLCIM. We could not trace the details of the payments received by the region;

c) Region of Anosy, municipality of Ampasy Nahampoana, municipality of Mandromodromotra and municipality of Fort Dauphin, beneficiaries of the rebates payments made by QMM part of which was not reconciled with the authorities, due to unsufficient supporting documentation and payments that were not traced with the municipalities;

Discrepancies were noted at each stage of the reconciliation of the rebates from QMM, details are provided below: A B C D E Treasury of Autonomous QMM Mines Minicipalities Taolagnaro Province 2,950,859,142.65 2,925,802,266.02 3,114,380,224.00 2,872,348,722.68 326,230,761.00 A-B A-C C-D-E Discrepancies 25,056,876.63 -163,521,081.35 -84,199,259.68

d) The Autonomous Province of Mahajanga, Region Betsiboka, Municipality of Brieville Municipality of Andriamena beneficiary of the paiement of KRAOMA. The discrepancies were mainly due to the fact that the authorities beneficiaries of the mining rebates confirmed that they did not receive the mining rebates in 2013.

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4.3.2 Mining Administration fees

The Mining Administration fees presented hereafter regard the shares due to the municipalities and the regions related to the administration fees paid by the mining companies from group A.

4.3.2.1 Administration fees paid by the BCMM to the decentralised authorities as for the fiscal year 2013 for the mining companies from group A (MGA and USD):

Amounts Amounts received by received by the Total amounts received the municipalities regions Companies (In (In thousands (In thousands (In thousands MGA) thousands MGA) MGA) MGA) PROJET AMBATOVY 38,105.45 22,228.18 60,333.63 27.34 CALIBRA RESOURCES & ENGINEERS 32,999.28 19,249.58 52,248.86 23.68 MADAGASCAR S.A.R.L.U GALLOIS Etablissement 17,059.68 9,951.48 27,011.16 12.24 GOLD SAND S.A.R.L. 168,315.16 98,183.84 266,499.00 120.76 KRAOMA S.A. 35,608.70 20,771.74 56,380.45 25.55 LABRADOR MADAGASCAR - 3,446.40 2,010.40 5,456.80 2.47 MADA-AUST S.A.R.L. 81,451.36 47,513.29 128,964.65 58.44 MADAGASCAR CHROMIUM COMPANY LTD 146,373.77 85,384.70 231,758.47 105.01 S.A.R.L.U MADAGASCAR CONSOLIDATED MINING S.A. 38,545.52 22,484.89 61,030.41 27.65 MADAGASCAR INTERNATIONAL TAK MINING 86,283.43 50,332.00 136,615.43 61.90 S.A.R.L. MADAGASCAR MINING RESOURCES LTD 80,434.01 46,919.84 127,353.85 57.71 S.A.R.L. MADAGASCAR RESSOURCES S.A.R.L. 20,678.40 12,062.40 32,740.80 14.84 MAINLAND MINING LTD S.A.R.L.U 164,284.61 95,832.69 260,117.30 117.86 MINERAL PRODUCTS INTERNATIONAL GROUP 38,211.70 22,290.16 60,501.85 27.41 S.A.R.L. NOVA RESOURCES S.A.R.L.U 63,766.98 37,197.41 100,964.39 45.75 GROUPE PAM 22,060.80 12,868.80 34,929.60 15.83 QIT MADAGASCAR MINERALS S.A. 20,175.05 11,768.78 31,943.83 14.47 RED GRANITI MADAGASCAR S.A.R.L. 3,963.26 2,311.90 6,275.17 2.84 TANETY LAVA S.A.R.L. 22,716.07 13,251.04 35,967.11 16.30 TANTALUM RARE EARTH (MALAGASY) 15,271.86 8,908.59 24,180.45 10.96 S.A.R.L.U TOLIARA SANDS S.A.R.L. 7,819.20 4,561.20 12,380.40 5.61 UNIVERSAL EXPLORATION MADAGASCAR 20,743.02 12,100.10 32,843.12 14.88 S.A.R.L. URAMAD S.A 48,183.67 28,107.14 76,290.82 34.57 TOTAL 1,176,497.38 686,290.14 1,862,787.52 844.07

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4.3.2.2 Administration fees of which the payments to the municipalities are still pending

The table below presents the mining administration fees paid by the permit holders companies from group A, but not paid in accordance with the allocation defined by the law.

Amount of which the payment is still pending Company (In thousands MGA) (In thousands USD) ACCESS MADAGASCAR S.A.R.L. 1,293.12 0.59 AMBATOVY MINERALS S.A. 10,007.89 4.53 CALIBRA RESOURCES & ENGINEERS MADAGASCAR S.A.R.L.U 3,877.20 1.76 CLASSIC REAL STONES S.A.R.L. 2,040.66 0.92 DYNATEC MADAGASCAR S.A 441.73 0.20 FARASANDS S.A.R.L. 9,710.25 4.40 GALLOIS Etablissement 13,957.92 6.32 GOLD SAND S.A.R.L. 7,031.34 3.19 HOLCIM Industrie S.A. 2,067.84 0.94 INTERNATIONAL MINING CORPORATION LTD S.A.R.L. 2,564.69 1.16 MADA-AUST S.A.R.L. 1,653.35 0.75 MADAGASCAR CHROMIUM COMPANY LTD S.A.R.L.U 14,623.03 6.63 MADAGASCAR CONSOLIDATED MINING S.A. 172.42 0.08 MADAGASCAR INTERNATIONAL TAK MINING S.A.R.L. 1,993.56 0.90 MADAGASCAR MINING RESOURCES LTD S.A.R.L. 8,168.21 3.70 MADAGASCAR WISCO GUANGXIN KAM WAH RESSOURCES S.A.U. 5,305.73 2.40 MAINLAND MINING LTD S.A.R.L.U 32,058.05 14.53 MINERAL PRODUCTS INTERNATIONAL GROUP S.A.R.L. 2,478.48 1.12 MINVEST MADAGASCAR S.A.U. 4,913.86 2.23 NOVA RESOURCES S.A.R.L.U 10,587.42 4.80 PROCHIMAD MINES & CARRIERES "P.M.C" SA 3,317.16 1.50 PROCHIMAD S.A. 452.34 0.20 QIT MADAGASCAR MINERALS S.A. 53,748.79 24.35 RED GRANITI MADAGASCAR S.A.R.L. 689.28 0.31 TANETY LAVA S.A.R.L. 3,459.10 1.57 TANTALUM RARE EARTH (MALAGASY) S.A.R.L.U 1,270.86 0.58 UNIVERSAL EXPLORATION MADAGASCAR S.A.R.L. 2,003.22 0.91 URAMAD S.A 10,749.77 4.87 TOTAL 210,637.25 95.44

4.3.2.3 FAM kept in a suspense account within the BCMM for the other beneficiaries

The shares intended for the following beneficiaries are kept in the bank account of BCMM: ► Autonomous Province, ► Gold Agency, ► Mine and Environment Police, ► Mines National Committee. The shares that are yet to be paid to the Autonomous Provinces and the Mines National Commitee are kept in a suspense account within the BCMM as these structures are not actually set up. Moreover, the shares of the FAM of 2013 that is intended to the Gold Agency are managed by BCMM on behalf of the Gold Agency and the shares of the Mine and Environment Police are managed by the Ministry of Mines on their behalf. We have not received a certified statement from the BCMM confirming that these funds are available in their bank account.

The allocation per entity is detailed in the table below:

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Mines Mines and Autonomous National Gold Environment Total province 5% Commitee Agency 2% Police 8% Paying company 5% (In (In thousands (In (In (In (In thousands MGA) thousands thousands thousands thousands MGA) MGA) MGA) MGA) USD) PROJET AMBATOVY 4,354.01 6,966.42 4,354.01 1,741.60 17,416.04 7.89 CALIBRA RESOURCES & ENGINEERS 1,615.50 2,584.80 1,615.50 646.20 6,462.00 2.93 MADAGASCAR S.A.R.L.U GALLOIS Etablissement 5,815.80 9,305.28 5,815.80 2,326.32 23,263.20 10.54 GOLD SAND S.A.R.L. 2,929.73 4,687.56 2,929.73 1,171.89 11,718.90 5.31 HOLCIM Industrie S.A. 861.60 1,378.56 861.60 344.64 3,446.40 1.56 MADA-AUST S.A.R.L. 688.90 1,102.23 688.90 275.56 2,755.58 1.25 MADAGASCAR CHROMIUM 6,092.93 9,748.69 6,092.93 2,437.17 24,371.72 11.04 COMPANY LTD S.A.R.L.U MADAGASCAR CONSOLIDATED 71.84 114.94 71.84 28.74 287.36 0.13 MINING S.A. MADAGASCAR INTERNATIONAL TAK 830.65 1,329.04 830.65 332.26 3,322.60 1.51 MINING S.A.R.L. MADAGASCAR MINING RESOURCES 3,403.42 5,445.47 3,403.42 1,361.37 13,613.68 6.17 LTD S.A.R.L. MAINLAND MINING LTD S.A.R.L.U 13,357.52 21,372.03 13,357.52 5,343.01 53,430.08 24.21 MINERAL PRODUCTS 1,032.70 1,652.32 1,032.70 413.08 4,130.80 1.87 INTERNATIONAL GROUP S.A.R.L. NOVA RESOURCES S.A.R.L.U 4,411.43 7,058.28 4,411.43 1,764.57 17,645.70 8.00 QIT MADAGASCAR MINERALS S.A. 22,395.33 35,832.53 22,395.33 8,958.13 89,581.32 40.59 RED GRANITI MADAGASCAR S.A.R.L. 287.20 459.52 287.20 114.88 1,148.80 0.52 TANETY LAVA S.A.R.L. 1,441.29 2,306.06 1,441.29 576.52 5,765.16 2.61 TANTALUM RARE EARTH 529.53 847.24 529.53 211.81 2,118.10 0.96 (MALAGASY) S.A.R.L.U UNIVERSAL EXPLORATION 834.68 1,335.48 834.68 333.87 3,338.70 1.51 MADAGASCAR S.A.R.L. URAMAD S.A 4,479.07 7,166.51 4,479.07 1,791.63 17,916.28 8.12 TOTAL 75,433.10 120,692.97 75,433.10 30,173.24 301,732.42 136.72

4.3.3 Property taxes on built property (IFPB)

Property taxes on built property that were paid by HOLCIM et KRAOMA, and were reconciled are detailed as follows:

Amounts paid by Amounts paid by Municipality/Region Company the company the company (In MGA) (In USD) Commune Rurale Ampanefy KRAOMA 80,000.00 36,25 Urban Municipality of d'Antananarivo KRAOMA 2,620,162.00 1 187,25 Municipality of Brieville KRAOMA 8,153,500.00 3 694,53 TOTAL 10 853 662,00 4,918.03

We have noted non-significant discrepancies during the reconciliation. (In MGA) Amounts received by Amounts paid Municipality/Region Company the Discrepancies by the company municipalities/regions Municipality of Brieville KRAOMA 8,153,500.00 8,149,500.00 4,000.00 TOTAL 8,153,500.00 8,149,500.00 4,000.00

(In USD) Amounts received by Amounts paid Municipality/Region Company the Discrepancies by the company municipalities/regions Municipality of Brieville KRAOMA 3,694.53 3,692.72 1.81 TOTAL 3,694.53 3,692.72 1.81

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4.3.4 Property tax on land (IFT)

The property taxes on lands that were paid by HOLCIM, following our reconciliation works are presented below: (In MGA) Amounts paid by Amounts received by the Municipality/Region Discrepancies the company municipalities/regions Rural Municipality of Ibity 10,672,719.00 10,672,719.00 0.00 TOTAL 10,672,719.00 10,672,719.00 0.00

(In USD) Amounts paid by Amounts received by the Municipality/Region Discrepancies the company municipalities/regions Rural Municipality of Ibity 4,836.05 4,836.05 0.00 TOTAL 4,836.05 4,836.05 0.00

The property taxes on lands that were paid by DYNATEC MADAGASCAR and KRAOMA are presented as follows:

Amounts paid by Amounts paid by Municipality/Region Company the company (in the company (in MGA) USD) Municipality of Ampanefy KRAOMA S.A. 14,800.00 6.71 Municipality of Fanandrana DYNATEC MADAGASCAR S.A 4,516,914.00 2,046.71 Municipality of Fanandrana DYNATEC MADAGASCAR S.A 4,516,914.00 2,046.71 TOTAL 9,048,628.00 4,100.13

4.3.5 Use of the funds received by the authorities that apply the participatory bydget

In accordance with the provisions in the sections 3.7 and 3.8 of the EITI standard of 2013, the use of these revenues within the municipalities and regions practicing the participatory budget was highlighted in the reconciliation.

The participatory budget is a process as well as an instrument with which the population can determine how the public resources will be used, mainly as a part of or as the overall investment budget of the local community.

Thus, the reconciliation report displays the sharing of the revenues put in the State budget and from the extractive industries, as well as the information regarding the use of these funds to the benefiting entities.

During the fiscal year 2013, the participatory budget has been collected for the regions and the municipalities that benefit from the payment flows of the following main mining companies that are currently in their exploitation phase: AMBATOVY MINERALS, HOLCIM, QMM and KRAOMA.

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4.3.5.1 Participatory budget : Municipality of Ambohibary – District of Moramanga (AMSA) (In MGA) Resources Use Caption Amount Caption Amount Property tax on land (IFT) 2010- 2011 for AMBATOVY paid in 11,000,000.00 Operating expenses (wages, supplies) 6,221,988.00 2013 Litigation costs for a land in the 1,900,000.00 Municpality of Ambohibary CNAPS contribution for the 4th 1,317,216.00 quarter Wages of piece-worker for the 843,800.00 construction of the stadium wall Purchase of rubble for the construction of the Ambohibary 717,000.00 Stadium TOTAL 11,000,000.00 TOTAL 11,000,004.00

4.3.5.2 Participatory budget: Ibity Tritriva Andranomanelatra (HOLCIM)

The municipalities could not provide the details regarding the uses for the two fiscal years.

Authority: Ibity Year: 2012 - 2013 (In MGA) Resources Use Caption Amount Caption Amount 30,805,740.0 Mining rebates 2012 Wages of the municipality personnel 0 31,720,156.0 City of constables, « poste fixe, quartier Mining rebates 2013 0 mobile » wages of constables 62,525,896.0 TOTAL TOTAL 0.00 0

Authority: Tritriva Year: 2012 - 2013 (In MGA) Resources Use Caption Amount Caption Amount 10,621,994.0 Mining rebates 2012 Municipality’s account 0 12,558,078.0 Wages, school rehabilitation, “piste inter- Mining rebates 2013 0 fokontany” 23,180,072.0 TOTAL TOTAL 0.00 0

Authority: Andranomanelatra Year: 2012 - 2013 (In MGA) Resources Use Caption Amount Caption Amount 10,613,799.0 Mining rebates 2013 Operating budget 0 Wages, Electricity, Wages of high school Mining administration fees 2,487,735.38 teachers 13,101,534.3 TOTAL TOTAL 0.00 8

The authorities have only mentioned the use of the payment flows but did not provide accurate amounts regarding the payment flows from HOLCIM.

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4.3.5.3 Participatory budget : Municipality of Antsiafabositra Antanimbary Maevatanana II (KRAOMA)

Authority: Municipality of Antsiafabositra Year: 2013 (In MGA) Resources Use Caption Amount Caption Amount Construction of 2 classroms for Mining Administration fees 27,836,406.13 12,053,499.00 the CEG Ampotaka 4 months salary for the personnel 9,162,022.56 Purchase of 163 metal sheets for the construction of the Townhall 4,890,000.00 building Contributions for the 1,220,000.00 construction of the Ward office TOTAL 27,836,406.13 TOTAL 27,325,521.56

Authority: Municipality of Maevatanana II Year: 2013 (In MGA) Resources Use Caption Amount Caption Amount Mining Administration fees 12,845,346.00 Unpaid wages 12,800,000.00 TOTAL 12,845,346.00 TOTAL 12,800,000.00

Authority: Municipality of Antanimbary Year: 2013 (In MGA) Resources Use Caption Amount Caption Amount Mining Administration fees 10,728,575.73 Wages and duty allowance 4,700,000.00 Contribution for the construction 4,000,000.00 of the slaughterhouse Rehabilitation and extension of 1,603,000.00 the Townhall building Other operating expenses of the Rural Municipality (Office 425,575.73 supplies, fuel, etc.) TOTAL 10,728,575.73 TOTAL 10,728,575.73

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4.3.5.4 Participatory budget: Rural Municipality of Ampasy Nahampoana (QMM) (In MGA) Resources Use Caption Amount Caption Amount Sundry maintenance (Townhall Free-pass 9,300,000.00 5,803,430.00 building, EPP, nursery) Generator maintenance and fuel 1,316,400.00 Tools and equipment 833,700.00 Road maintenance 645,000.00 Water (Municipality and hospital) 481,194.00 Airtime 220,276.00 SUBTOTAL 9,300,000.00 SUBTOTAL 9,300,000.00 Sundry constructions (feed mill, Rebates 918,225,556.00 370,761,893.00 high school, stables) Additional asphalting, road rehabilitaion, improvement, 276,363,674.00 water system Purchase of ferlilizer, feed 148,279,925.00 Personnel wage, consultant 96,320,064.00 Sundry acquisitions (motorbikes, 26,500,000.00 oil press, husker) SUBTOTAL 918,225,556.00 SUBTOTAL 918,225,556.00 Gear rental for the earthwork of Donations for construction - land 10,000,000.00 10,000,000.00 a footbal field SUBTOTAL 10,000,000.00 SUBTOTAL 10,000,000.00 TOTAL 937,525,556.00 TOTAL 937,525,556.00

4.3.5.5 Participatory budget: Municipality of Mandromodromotra (QMM) (in MGA) Resources Use Caption Amount Caption Amount 460,392,679.6 353,413,692.5 Mining rebates QMM Road construction and improvement 8 5 173,418,455.0 Operating grant 12,000,000.00 Wages, sundry indemnities, health 0 Reception (meeting, independence day, Test fees (AIRTEL) 4,320,000.00 33,285,330.00 new year) Various administrative taxes Sundry supports (schooling, social, (civil status, état civil, terms 646,653.20 30,808,563.00 sports) of service) Fuel, vehicle maintenance (motorbike) 17,778,000.00 Balance 2012 brought 150,518,574.2 Tools and supplies, office furniture 11,326,420.00 forward 2 Operating expenses, electricity 5,052,000.00 Bank charges, petty cash 1,954,689.10 Participation OPCI (municipality 300,000.00 association) 627,877,907.1 627,337,149.6 TOTAL TOTAL 0 5

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5 Observations et recommendations

The follow-up on the previous recommendations as well as the new recommendations following the reconciliation of 2013 are presented hereafter.

5.1 Follow-up of previous recommendations

5.1.1 Recommendations for EITI Section Observations Recommendations Follow-up Willingness of the Mining companies often We believe that mutual Recommendation extractive companies to find it difficult to make dialogues, respect and maintained. be part of the available any part of trust between the Tax reconciliation information and data Administration and the We sensed the lack of related to paid taxes. extractive companies are trust during our crucial for transparency. interventions while Their behaviour, Thus we recommend that collecting the although voluntary to the these principles be information and while EITI process, can be observed over time by performing the described as the extractive companies verification of the contradictory. Indeed a and the public supporting persistent distrust, administrations as of documentations within justified or not, for the now to ensure the extractive Tax Administration or its integration of the EITI companies. third parties is usually process. constated. Mining companies fear that their information generates harmful problems or polemics that may affect their brand, reputation or interests, or that it will be used for purposes other than transparency. Improvement of the A company included in We recommend the EITI Recommendation scope of reconciliation the scope of to exclude from the maintained. reconciliation has been reconciliation companies OPHIR MADAGASCAR subject of a takeover by that are already was dissolved in 2013. another company at a dissolved at the time of We could not obtain date subsequent to the reconciliation. information related to period of reconciliation. this company. Thus we encountered difficulties in obtaining a canvas completed and signed by an appropriate official. The former employees of the sold company, the only people with a good knowledge of its payments and activities, are no longer available, while those of the acquiring company are

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Section Observations Recommendations Follow-up hesitant about signing a document that they cannot certify in terms of accuracy, due to lack of complete and accurate information.

5.1.2 General recommendations (companies and administrations)

Section Observations Recommendations Follow-up Distinction of revenues Some companies We recommend, for the Recommendation by sector for companies included in the scope of companies and the State, maintained. with several activities reconciliation carry to implement a system of several activities, registration that including those related to distinguishes the extractive activities. revenues from each sector of activity of a They have a NIF company. registered at the tax authorities. Declarations and payments related to these companies, all activities combined, are linked to that number.

Therefore, for some taxes and duties declarations, it was impossible to distinct payments related to mining activities from other activities not included in the reconciliation (as for the IRSA). Indeed, the tax administration data does not distinguish payments by activity. Implementation of Mining companies with We recommend, for the Recommendation means of monitoring voluntary participation in State and companies, to maintained. customs and tax the EITI process benefit implement procedures from specific tax and systems specific to the that will ensure the customs rules. However, mining industry application of rules payments of custom duties and import VAT specific to mining that do not conform to companies. their specific rules were still found. These mistakes might be due to a lack of knowledge of the specific rules applicable to their projects. Payments of these companies are based on

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Section Observations Recommendations Follow-up freight bills that do not specify the nature of the cleared goods. In addition, some statements were not available during the audit of reconciliation which would normally determine whether the exoneration can be applied.

5.1.3 Recommendations for the mining and upstream oil companies concerned by the reconciliation

Section Observations Recommendations Follow up Reliability and A filling guide was We recommend each Recommendations availability of data for provided to the concerned company to : maintained. the reconciliation companies with the canvas. A workshop for - Look at the filling The companies selected the preparation of the guide prior to the in the scope of the establishment of the mission took place. The reconciliation for 2013 canvas calendar was have submitted the communicated and the - Be represented by an canvas on time. We have dates of intervention adequate and noted an improvement in were agreed in advance competent individual the filling out of the with company officials. to fill the canvas at canvas and the However, we noticed that the workshop for the availability of the contact preparation of the sometimes the data filled persons. mission of was not exhaustive and reconciliation most of the canvas was The newly selected changed following the - To improve its companies seem to be constatation of mistakes internal organization lagging behind in or omissions by the for the availability on transmitting Reconciler. time of data and information. supporting Also, we had to face the documents unavailability of several interlocutors and delays, many times, of the date of interventions on field of the Reconciler for some companies. Certification of the The prior reliability of the We recommend each Recommendation canvas by ancanvas by an company to certify the maintained. independent auditor independent auditor is canvas and its annexes not yet effective. as well as the financial We did not obtain statements during the canvases from Indeed, a reconciliation intervention of its independent auditors. made by an independent independent auditors. auditor on amounts However, for the reported and/or paid by It should be noted that companies listed in the the entity and/or the the financial statements annexes, we have

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Section Observations Recommendations Follow up administration with and the canvas of the received the cerfication those accounted, should report are independent from the auditors. be a prerequisite for documents; one refers to reconciliation; and if the financial situation, applicable, the and the other on tax Reconciler could directly situation. collect and exhaustively establish the amount of taxes, duties and charges reported and paid.

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5.1.4 Recommendations for the administrations and its subdivisions

5.1.4.1 For each Directorate of the Administration

Section Observations Recommendations Follow up Access to information Meetings for information We recommend theRecommandation and awareness of the and awareness of each involvement of the maintained. executive staff department Directorates of the representative of the Administration in We recommend to EITI ro Administration were educating their staff at raise the awareness organized by the EITI to all levels. regarding the bring all stakeholders to reconciliation the same level of assignment for the key information and to contact persons within ensure proper conduct of the administration. the work during the collection. However, we noted that the awareness of the Administration to join the EITI process has not reached the executive staff of some departments of the Administration, despite the appointment of dedicated interlocutors to facilitate the collection. Thus, some members of the executive staff are suspicious or even hostile to the auditors and required the dispatch of a formal letter to their respective directors, so that they can give their consent to the disclosure of information, despite the note from the Ministry of Finance. This situation created an issue to collect the data on time.

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5.1.4.2 For the Treasury, the Ministry of Decentralisation, the regions and municipalities

Section Observations Recommendations Follow up Traceability of cash The disparity in Recommendation inflows from mining distribution methods of maintained. We recommend setting revenues as provided by the cash inflows of up a system that the regulations in force mining royalties, rebates improves the traceability and mining of cash inflows administration fees to distributed to the the various entities beneficiaries of the concerned compared to revenues under the that provided by the regulations in force. For Mining Code and its each final beneficiary, implementing sub-accounts specifically regulations do not dedicated to each type of provide traceability and income, including a consistency in the definition of the management of mining procedures for the revenues received by transmission of mining and decentralised corresponding administrations supporting documents, (municipalities, regions), could be implemented for especially with the many example. beneficiaries of the revenues. Reliability of data issued Data received from the We recommend : Recommendations by decentralised Administration has been ► To the maintained. communities amended several times. Treasury : This could be partially - To accompany each due to a lack of payment with a familiarity of the used detailed statement software for registration tracing the origin and of revenues and the nature of the nonexistence of an revenues; adequate system of - To inform the revenue registration and archival officials of the of supporting municipality and documents. region on the different Indeed, we found that types of income to be some members of the received from administrative and extractive industries financial staff of with their frequency municipalities and and payment circuit; regions have not mastered the notion of ► To the Ministry liquidity and the reading of Decentralisation: of a bank statement. - To organize training on Thus, they rarely track cash accounting for the collection of the revenue officials of revenues that they the State for a better receive, which prevent monitoring of the cash them from knowing the flows; origin and nature of their revenues.

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Section Observations Recommendations Follow up These situations delayed ► To the region the collection of data and and municipalities: information. - To set up a system of data recording and archival of reliable supporting document Reconciliation of Rebates are collectively We recommend theRecommandation companies’ data with paid by non-state decentralised authorities maintained. that of non-state entities, such as the to get a workable state entities’ management company of for the audit and the Port of Toamasina monitoring of their MICTSL, to the revenues. concerned decentralised communities. The document sent to them does not enable the conduct of an audit of payments made by company. It is therefore tedious to perform a reconciliation with the mining and oil companies’ data.

5.1.5 Recommendations for the Department of Customs and Intelligence Service of Registrations (SRI)

Section Observations Recommendations Follow up Update of the database Data collection will be We recommend : Recommendations on the companies conducted by entity, and ► To the SRI : maintained. for that the Tax- To keep up-to-date the Identification Number information in their (NIF) of each mining and possession; oil entity is necessary. - To reset the However, information at correlation table with the SRI has not been the Customs that updated, making it would link the new NIF difficult to collect data of each company with from the Administration. the old ones. At the Customs, the NIF of extractive industries ► To the Customs: recorded in its database - To educate importers is not consistent with the to inform their current one found at the SRI. This NIF in their could be linked to declaration; different changes of NIF - To update and clean up of the companies in its database. recent years or an imputation error. In fact a single company can be found in the SIGTAS

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Section Observations Recommendations Follow up database with a similar name but a different NIF. Therefore, we proceeded to identify the companies through the imports list.

5.1.6 Recommendations for the BCMM, Ministry of Decentralisation, regions and municipalities

Section Observations Recommendations Follow up Traceability of the FAM Mining Administration We recommend : Recommendations distribution by company Fees paid by the ► To the BCMM : maintained. at the municipalities and companies are registered - To notify the regions in the BCMM system. The beneficiary entities in distribution to the advance by letter various beneficiaries, remittances in their including regions and favor with relevant municipalities, details, such as the depending on the period covered by the definition of operating FAM, date of dispatch, perimeter, is amount transferred, automatically calculated company or person by internal software at a who paid the FAM given date. - To approach The parts of the municipalities/regions beneficiary whose parts are held in municipalities/regions a suspense account for are directly sent to their lack of bank account respective accounts, information. without prior notice from the BCMM. ► To In addition, the parts of municipalities/regi municipalities/regions on: that do not have a bank - To file with the BCMM account deposited with the account number of the BCMM are the automatically kept in a municipality/region suspense account, while duly approved by the the municipality or Ministry of region is not alerted Decentralisation, about the situation. - Ensure at the BCMM These situations create the effective payments at the subdivisions of the of FAM by the State a failure in the operators within its monitoring, scope so that they can management and claim their rightful traceability of their funds part. if they do not track the bank cashing. Actual ownership and Various sold and We recommend theRecommendation payment of mining transferred permits are BCMM to distinguish maintained. administration fees still registered in the payment flows by actual name of the sellers in the

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Section Observations Recommendations Follow up BCMM database. owner during the work of Treatment at its level is reconciliation. in progress. This situation created difficulties for the materiality assessment as well as for the work of reconciliation. Indeed, gaps identified in the mining administration fees mainly result from the fact that payments made by the actual owners of the mining permits are registered in the name of the former owners.

5.1.7 Recommendations for the Tax Administration

Section Observations Recommendations Follow up Attachment of It was particularly We recommend the tax Recommendation registration fees paid to difficult to reconcile centres to directly attach maintained. reporting companies registration fees (DE) of all taxes and duties 2011 of some companies cashed by the tax with the tax administration to administration data. individuals or legal Indeed, for some tax entities that actually centres, the DE were not made the payment. This registered in the name of could enable an the paying company but exhaustive statement of linked to the NIF of the their tax situation. main receptor of the administration that cashed them. Reliability of data at the Tax administration data We recommend each Recommendations Tax Administration has been amended entity of the tax maintained. several times. Indeed, administration : the periods to which the ► To properly payments are attached inform the period of are not always properly attachment of each or sufficiently payment in the knowledgeable in the recording software. used software. This observation was ► To fill in the particularly noted for same information nonrecurrent taxes such system all data related as fines and penalties, to a company. the flat rate tax on Transfer (TFT) or the nonresident income tax (IRNR) at the DGE and

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Section Observations Recommendations Follow up some taxes at the SRE and tax centres. Moreover, VAT refunds are manually processed and are not reported in the DGE computer software. These facts delayed the information collection.

5.1.8 Recommendations for the EDBM and the Ministry of the Interior

Section Observations Recommendations Follow up Establishment of a Data on fees issuing visa We recommend : Recommendations monitoring tool for visa and resident cards could maintained. fees and resident cards not be identified by ► Centralizing company at the EDBM data on the fees for the and the Ministry of the issuance of visas and Interior. Indeed, their resident cards either at database does not sort the EDBM or at the by company. Data is Ministry of the Interior, recorded by visa category and registration ► Recording all number. However, the information (name, manual records with the address, date of company names are payment, amount paid, available, but it would duration, Employer require taking the Company…) regarding information one by one. the expatriate and the Nevertheless, we were employer company in able to verify the the database, payment vouchers of fees for issuing visa and ► A software resident cards from the setting to analyze the reconciled companies. issuance of visa and resident cards by company.

5.2 General recommendations following the reconciliation

5.2.1 Recommendations for the administration and its subdivisions

Section Observations Recommendations

Reliability of the information for Obtaining the information related We recommend each Directorate: the reconciliation to the payments made by the ► To acquire an adequate extractive industries to the software in order to record Interregional Directorate of Mines data ; of Antananarivo has been difficult. The data collection was delayed ► To set up a database of because there is no digitalized relevant information such as

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Section Observations Recommendations

database but manual registers the Company name, the type were used, making it impossible to of flow (rebates, taxes,…), the ensure the completeness of the period, the payment payments made by the extractive reference ; industries. At the same time, payments made ► To regularly update the by extractive companies were not information in their hands; taken into account due to the fact that data related to the revenues ► To implement an archiving collected by the Interregional system ; Mines Directorate of Toamasina from January to March 2012 was lost, and there is not any appropriate archiving system. Follow up of information related to We have requested the information We recommend each Directorate: non refunded VAT related to the non refunded VAT for ► To set up a database of the the mining and oil companies from information related to the the Large Enterprise Department VAT that is yet to be refunded (DGE). per company; The DGE has redirected our request to the Ministry of Finance. ► To ensure that information is However, we had difficulties regularly followed upon and obtaining the information. Some updated. information could not be traced back.

5.2.2 For the Treasury, the Ministry of Decentralisation, the Regions and the Municipalities

Section Observations Recommendations

Traceability of the payments Cashing confirmations were made We recommend each SRE and tax received from the extractive with the General Revenues of centre : industries Antananarivo (RGA) via Revenue Transfers Vouchers (BTR). These ► To mention in each BTR with BTRs are provided by the Regional accuracy all the information business tax departments (SRE) such as the name of the and tax centres. taxpayer, the nature of the However, we noted that the names tax, the amount, the related of the corporate taxpayers, the fiscal year and the payment amount, and the nature of the date. taxes paid are not mentioned in the BTRs. The total amount of taxes received each month is mentioned. Thus, it was impossible for us to trace the amounts paid by the mining and oil companies to the SREs and tax centres in the BTRs claimed by the RGA.

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5.2.3 For the customs directorate

Section Observations Recommendations

Monitoring of the customs duty, The tax identification numbers We recommend the Customs taxes on oil products and VAT on (NIF) of the extractive companies Directorate to include the import paid by the extractive were used to collect the references of the representative as companies information from the customs well as the final beneficiary in the directorate. database (NIF of the company). The recording of the information in the system SYDONIA is based upon references of the declarant mentioned in the single administrative document (DAU). This situation has caused difficulties during our reconciliation work. Some companies use subcontractors for dealing with their export and import transactions. Thus, the transactions are recorded by the customs Directorate under the names of the subcontractors and not under the name of the final beneficiary. Because of this, the completeness of the payments made by extractive industries cannot be ensured.

5.2.4 For the INSTAT, the Ministry of Economy, the Ministry in charge of the extractive sector

Section Observations Recommendations

Analysis of the economic There is not yet reliable information We recommend the Ministry in contribution of the extractive related to the contribution of the charge of the extractive sector, the sector mining sector. These statistics Ministry of Economy and the would be important decision- INSTAT : making tools, particularly to help debate on the reforms on the ► To perform an annual study on legislation of the extractive sector. the actual contribution of the mining and upstream oil sectors after updating the structure.

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6 Annexes

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