Mining Law Review

The
Mining Law
Review
Editor
Erik Richer La FlÈche
Law Business Research

The Mining Law Review
The
Mining Law
Review
Editor
Erik Richer La FlÈche
Law Business Research Ltd

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i
Acknowledgements
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ii
CONTENTS
Editor’s Preface ��ix

Erik Richer La Flèche
PART I MINING LAW�� 1–264
Chapter 1 ANGOLA�� 1
João Afonso Fialho and Hugo Moreira
Chapter 2 AZERBAIJAN�� 12
Ilgar Mehti and Nurlan Mammadov
Chapter 3 BRAZIL�� 22
Luiz Fernando Visconti
Chapter 4 CANADA�� 34
Erik Richer La Flèche and David Massé
Chapter 5 DEMOCRATIC REPUBLIC OF THE CONGO�� 44

Emery Mukendi Wafwana, Edmond Cibamba Diata,
Nady Mayifuila, Jonathan van Kempen
and Eric Mumwena Kasonga
Chapter 6 ECUADOR�� 58
Jaime P Zaldumbide and Jerónimo Carcelén
Chapter 7 FINLAND�� 63
Tarja Pirinen
Chapter 8 GHANA�� 73
Innocent Akwayena and Enyonam Dedey-Oke
Chapter 9 MEXICO�� 87
Alberto M Vázquez
v
Contents
Chapter 10 MONGOLIA�� 102

Batzaya Bodikhuu and Enkhtsetseg Nergui
Chapter 11 MOZAMBIQUE�� 115

João Afonso Fialho and Nuno Cabeçadas
Chapter 12 NAMIBIA�� 126

Axel Stritter
Chapter 13 NIGER�� 144

Daouda Samna Soumana
Chapter 14 NIGERIA�� 152

Oladotun Alokolaro
Chapter 15 PERU�� 162

Giannina Assereto
Chapter 16 PHILIPPINES�� 175

Roderick R C Salazar III and Geraldine S Meneses-Terrible
Chapter 17 PORTUGAL�� 191

Rui Botica Santos and Luis Moreira Cortez
Chapter 18 SOUTH AFRICA�� 202

Modisaotsile Matlou
Chapter 19 TANZANIA�� 220

Charles R B Rwechungura, Cyril Pesha
and Pendo Marsha Shamte
Chapter 20 TURKEY�� 229

Safiye Aslı Budak and Merve Nazlı Kaylan
Chapter 21 UNITED STATES�� 241

Robert A Bassett, Karol L Kahalley and David I Stanish
Chapter 22 UZBEKISTAN�� 252

Eldor Mannopov, Anna Snejkova and Ulugbek Abdullaev
vi
Contents
PART II CAPITAL MARKETS�� 267–338
Chapter 23 BRAZIL�� 267

Rodrigo de Campos Vieira
Chapter 24 CANADA�� 271

Erik Richer La Flèche, Raymond McDougall
and David Massé
Chapter 25 MONGOLIA�� 282

Yancy Cottrill and David C Buxbaum
Chapter 26 MOZAMBIQUE�� 294

Jorge Graça, Taciana Peão Lopes, Paulo Ferreira
and Márcio Paulo
Chapter 27 NAMIBIA�� 298

Axel Stritter
Chapter 28 SOUTH AFRICA�� 310

Francois Joubert, Catharine Keene, Robin Beale,
St Elmo Wilken, Christopher Gibson and Itumeleng Mati
Chapter 29 TURKEY�� 321

Safiye Aslı Budak and Merve Nazlı Kaylan
Chapter 30 UNITED KINGDOM�� 329

Kate Ball-Dodd and Connor Cahalane
Appendix 1 ABOUT THE AUTHORS�� 339

Appendix 2 CONTRIBUTING LAW FIRMS’ CONTACT DETAILS��355
vii
editor’s preface
I am pleased to have participated in the preparation of the first edition of The Mining
Law Review. The Review is designed to be a practical, business-focused ‘year in review’
analysis of recent changes and developments, their effects and a look forward at
expected trends.
This book gathers the views of leading mining practitioners from around the
world and I warmly thank all the authors for their work and insights.
The first part of the book is divided into 22 country chapters, each dealing with
mining in a particular jurisdiction. Countries were selected because of the importance of
mining to their economies and to ensure broad geographical representation. Mining is
global but the business of financing mining exploration, development and – to a lesser
extent – production is concentrated in a few countries, Canada and the United Kingdom
being dominant. As a result, the second part of this book includes eight country chapters
focused on financing.
The advantage of a comparative work is that knowledge of the law and
developments and trends in one jurisdiction may assist those in other jurisdictions.
Although the chapters are laid out uniformly for ease of comparison, each author had
complete discretion as to content and emphasis.
After the lost decades of the 1980s and 1990s came the mining boom of the past
decade and the beginning of the ‘Commodities Super-Cycle’. During this time, the price
of industrial minerals and other commodities rose sharply. Needless to say, the mining
boom has resulted in the resurgence of mining and has been a boon to many emerging
economies, particularly in Africa and South America.
Will the super-cycle continue? If one accepts that the root cause of the super-cycle
is China, then the answer is yes and mining has a bright future: China needs minerals to
continue its industrialisation and the rollout of modern cities and infrastructure. While
its stated objective is to build a modern service-oriented economy, China is at best 10 to
15 years away from transiting out of its current intensive mineral consumption phase.
As a result, continued strong demand should sustain prices for the next decade – this
ix
Editor’s Preface
is particularly true for metals little found in China. Thereafter, demand should remain
strong as the world adds an estimated 2 billion to its population by 2050, most of whom
will reside in emerging markets and – if the past is indicative of the future – will want
greatly improved living standards.
The Commodities Super-Cycle has fuelled increased mining activity across
the globe. It has also given rise to the most important trend facing mining: economic
nationalism. Governments, under pressure from their exchequers and populations, want
increased and – perhaps more problematically – immediate economic benefits from
mining. This phenomenon can be observed in post-industrial economies as well as in
emerging ones and across all political lines. No country is immune from this trend.
The long period of sustained high prices for minerals and metals has greatly
increased expectations and mining companies and governments are struggling to
achieve the right balance between competing interests. The question of the day is how
predictably and fairly to share income among various stakeholders: governments, mining
communities, mining companies, their shareholders and employees. This is a very
difficult question and there is no ‘one-size-fits-all solution’.
Mining projects are endeavours of long gestation, which can take 10 years or more
between discovery and commissioning. Mining projects are also very capital-intensive
with a front-ended investment profile. In other words, mining companies invest large
amount of money early but have multi-decade payback horizons and require stable legal
and tax environments in order to attract project capital.
Governments, on the other hand, are subject to shorter-term pressures. Their
budgets are yearly affairs, employees and local communities are impatient, and politicians
are at the mercy of electoral cycles. The tax-receipt profile of mining projects, however,
is predominantly back-ended; that is to say, governments receive the bulk of taxes and
other charges many years after project commissioning and project debt repayment.
The long-term needs of projects for stable legal and tax environments and the
short-term pressures placed on governments for more revenues has led to friction. While
governments have considerable leverage thanks to supply constraints and high prices,
they must nonetheless walk a fine line. They need to be careful not to ‘kill the golden
goose’ while avoiding a ‘race to the bottom’. After all, governments compete with each
other to attract mining projects and mining companies can jurisdiction shop.
Economic nationalism is not limited to raising taxes: it can take other forms,
including governmental or local ownership, benchmark export pricing, minimum in-
country transformation, and export restrictions to ensure supply to local industry.
How can mining companies mitigate risks posed by economic nationalism? One
of the best mitigation strategies is for mining companies to have a strong ‘social licence’.
A social licence may be defined as the acceptance or – better still – the approval of the
community adjacent to a project. A strong social licence is not only effective against
governmental overreach but can also serve as an effective anti-corruption mechanism.
A social licence has to be earned and maintained. This is best achieved through
multi-stakeholder dialogues, local economic involvement, good environmental
performance and social inclusion. Medical clinics, schools, roads, power plants, irrigation
dams and water treatment plants are some of the types of projects carried out by mining
companies as part of their social licence.
x
Editor’s Preface
As you consult this book you will find more on economic nationalism and other
topics apposite to jurisdictions of specific interest to you, and I hope that you will find
this book useful and responsive.
Erik Richer La Flèche

Stikeman Elliott LLP
Montreal
November 2012
xi
Part I
Mining Law
Chapter 1
ANGOLA
João Afonso Fialho and Hugo Moreira 1
I OVERVIEW
While oil is undisputedly Angola’s most important natural resource, the country has
always been recognised for having vast and diverse reserves of other minerals. Since the
first official discovery of diamonds in 1912, the country has been on a path towards
becoming a renowned and prosperous mineral producer in Africa. Although most natural
resource exploration and mining activities were abandoned and discontinued during
nearly 30 years of civil war, which ended in 2002, Angola has continually attracted the
major worldwide players in the sector to invest in the diamond industry, which remained
operational throughout the civil war. More recently, mining investors and entrepreneurs
have been resuming their activities and are exploiting Angola’s wide range of other
valuable natural resources, including iron ore, phosphates, copper, gold and manganese.
Large-scale mining projects in Angola typically involve an international investor
or operator (such as South African, Russian, Australian and American majors) and one
or more local partners. In fact, the Angolan government is very keen to encourage the
participation of Angolan companies in mining projects where these companies lack the
technical and financial capabilities required to launch and operate the projects themselves.
Typically, trading agreements regarding minerals are entered into on a project-by-project
basis, with mineral production being channelled for both the domestic and international
markets.
Although no country may be deemed entirely exempt from political risk, since
the end of the civil war Angola has been consolidating its democracy, and the outcome of
the general elections in August 2012 seems to indicate that the existing political stability
1 João Afonso Fialho is a partner and Hugo Moreira is a senior associate at Miranda Correia
Amendoeira & Associados.
1
Angola
will continue in the coming years, allowing the country to continue its reconstruction,
development and growth activities.
Investors contemplating the implementation of a mining project in Angola
should bear in mind and adequately address areas of concern such as:
a the bureaucracy of the public administration;
b the need for professional training and integration of members of local communities;
c the balance between the employment conditions offered to expatriate personnel
and local personnel;
d the level of security required to protect a mining project’s employees and assets;
and
e the security against theft of minerals produced.
Despite the uncertainty in the current world economy, Angola is endeavouring to step
up the pace of its reconstruction and sustainable growth, notably by attracting more
foreign investment and by developing industries deemed strategic, thus strengthening
the country’s importance in the context of Africa in general, and in the southern region
of the continent in particular. The enactment in 2011 of a new Private Investment Law
and a new Mining Code is a clear example of the Angolan government’s commitment
towards developing and modernising the country’s economy; it provides the backdrop
for the social advancement of Angolan communities living in provinces that have not
been typical investment targets.
II LEGAL FRAMEWORK
Until the enactment of the Mining Code (approved by Law 31/11 of 23 September
2011, which entered into force on 23 December 2011), the Angolan legal framework
applicable to mineral activities was scattered throughout various statutes, including the
1992 Mineral Activities Law, the 1994 Diamond Law, the 1996 Regulations on the Tax
Regime for the Mining Industry and the 1996 Customs Regime for the Mining Industry.
Given the political and administrative organisation of the state and its legal system, all
laws and regulations are issued at state level and apply throughout the country’s territory.
The Mining Code repealed almost all of the industry-specific statutes previously
in force (one of the very few not expressly revoked is the 2003 Foreign Exchange Regime
for the Mining Industry, approved by the National Bank of Angola), and consolidated
in a single piece of legislation the majority of the rules and regulations applicable to the
mining industry and governing mineral operations, while simultaneously updating the
legal regime that had been in effect for nearly two decades. Reference should also be
made to the Private Investment Law, which applies on a subsidiary basis to investments
in the mining industry, and to Presidential Decree 182/10 of 23 August 2010, approving
the diamond marketing strategy.
Despite this comprehensive legal regime, the most significant operational and
economic terms and conditions remain subject to the specific provisions set out in the
contractual instruments for the granting and exercise of mineral rights. For this reason,
the Angolan mineral framework is often described as a contractual system.
2
Angola
In terms of international treaties, the bilateral cooperation treaties for the

mining sector with South Africa and Mozambique (of 2005 and 2009, respectively)
are worth mentioning. Angola is also a party to the Kimberley Process Certification
Scheme (‘the KPCS’), as well as to a number of environment-related international
instruments, such as the Convention on Biodiversity, the Cartagena Protocol, Agenda
21 and the International Convention on Waste, which under the Mining Code are
expressly applicable to mineral activities carried out in the country.
The main regulatory bodies to which the Angolan mining industry is subject
are the Ministry of Geology, Mines and Industry (‘the MGMI’), the National Private
Investment Agency, the Ministry of Finance and the National Bank of Angola (‘the
BNA’).
Holders of mineral rights are subject to various reporting requirements relating
to their activities, covering issues such as personnel statistics, welfare initiatives, and
technical, economic, social and sales data relating to the operations, as well as the impact
of the activities carried out on land occupancy and the environment.
III MINING RIGHTS AND REQUIRED LICENCES AND PERMITS
i Title
Under the Angolan Constitution, mineral resources are the property of the state, which
defines the conditions for access to, exploration, evaluation, mining and marketing
of mineral resources. Said conditions are addressed and developed in the Mining
Code, which applies to all activities in connection with the exploration, evaluation,
reconnaissance, mining and marketing of mineral resources, except for liquid and
gaseous hydrocarbons.
In turn, minerals and mining products mined and extracted in accordance with
the rules of the Mining Code and ancillary legislation are the property of the holders
of the relevant exploration and mining titles as provided for in the relevant concession
contracts.
ii Surface and mining rights

A key principle of the Mining Code is the concept of ‘strategic minerals’. Minerals may be
classified as strategic when this is justified by their economic importance, use for strategic
purposes or specific technical mining aspects. Factors such as rarity, great demand in the
international market, relevant impact on economic growth, significant job creation or
importance to the military industry are also taken into consideration. Diamonds, gold
and radioactive minerals are expressly defined as strategic minerals under the Mining
Code, although the government is entrusted with powers to classify other minerals as
strategic.
One area where the classification of a given mineral as strategic is particularly
relevant relates to the procedure for the granting of mineral rights over said mineral.
Generally speaking, mineral rights are granted pursuant to either a public tender
procedure launched by the MGMI or an application submitted by the concerned party
to the MGMI. The relevance of a given mineral being classified as strategic in this context
3
Angola
is that rights over strategic minerals shall be mandatorily granted pursuant to a public
tender procedure.
The general designation of ‘mineral rights’ covers all type of rights that can be
granted under the Angolan legal framework in connection with minerals (i.e., exploration,
evaluation, reconnaissance, mining and marketing rights). Nothing in the Angolan legal
system imposes any restrictions on mineral rights that can be acquired and exercised by
foreign entities, subject of course to such entities complying with the formalities and
procedures applicable to foreign investors, and to the exercise in Angola of industrial or
business activities by foreign companies. The only exceptions to this principle are that,
under the Mining Code, mineral rights for exploration or mining of minerals for civil
construction may only be granted to Angolan citizens, or to companies organised under
Angolan law in which Angolan citizens hold at least two-thirds of the share capital; and
only Angolan citizens may engage in artisanal mining.
Another innovation brought about by the Mining Code is the adoption of a
single-contract model, under which mineral rights are granted, from the outset, for the
whole of the mineral process. This represents an important change of paradigm and an
increased guarantee for investors, as under the former legal framework mineral projects
were typically subject to two separate contracts: one for exploration, evaluation and
reconnaissance, and another for mining and marketing.
Although both exploration and mining rights are now granted under a single
contract, an exploration title and a mining title need nonetheless to be issued as a
condition for the exercise of the relevant rights. The mineral rights for exploration are
granted for an initial term of up to five years, and two one-year extensions are allowed.
In the event that the initial term and the extensions are not sufficient to prepare and
conclude the technical, economic and financial viability study (‘TEFVS’) required for
the project’s transition to the mining phase, the holder of the mineral rights may request
an exceptional extension, for a maximum of one year, to complete the TEFVS. In turn,
mining rights are granted for a period of up to 35 years and may be extended for one or
more 10-year periods.
To date, no public tender has been launched for the granting of mineral rights
over any strategic mineral, and consequently it is not possible to predict how long such a
procedure will take. It will be, one may suspect, a time-consuming process. As regards the
time frame within which mineral rights are to be granted outside the scope of a public
tender procedure, the Mining Code sets a maximum period of 290 days for the (final)
capital importation licence to be issued by the BNA, counted as from the submission of
the application for the granting of mineral rights.
The general condition to which mineral rights are subject is strict compliance
with the statutory and contractual terms under which said rights are granted and are
to be exercised. In fact, failure by holders of mineral rights to comply with the legal
obligations or those deriving from the contract or concession title qualify as grounds for
termination of the concession contract or for revocation of the concession title.
Investors are granted broad legal guarantees, such as:
a the right to mine the mineral resources discovered during exploration without
any restrictions;
4
Angola
b the right to freely dispose of and market the mining products;

c the right to recover the investment expenses incurred during the exploration
phase; and
d the right to receive compensation for such losses as may result from any actions
limiting the exercise of their mineral rights.
Unlike the former legal framework, which provided that in the event of any disagreement
not resolved amicably, the parties were required to refer it to arbitration in Angola, the
Mining Code does not provide for a particular forum for settlement of disputes.
The Mining Code generally refers to the disputes resolution clause of the relevant
mineral investment contract (typically an arbitration clause). Foreign arbitral awards must
be confirmed and recognised by an Angolan court in order to be enforceable in Angola.
As Angola is not a signatory of the 1958 New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, the confirmation and recognition process is
conducted in accordance with local rules, without involving a review of the merits of
the case.
The Angolan Constitution provides that the courts are independent and cannot
accept any form of interference from any other public body. Their decisions are final
(subject to the appeal process only) and prevail over the decisions of any other entities.
iii Additional permits and licences

Other than the general licences, permits and registrations required to conduct any type
of industrial or business activities in Angola (e.g., tax registration, commercial operations
permit, environmental licence, and foreign investment registration certificate and capital
importation licence, if applicable), the only additional industry-specific document that
foreign or Angolan companies intending to engage in mineral activities are required to
obtain is a ‘mineral registration certificate’, whereby the MGMI attests that the corporate
purpose of the entity in question is connected with the mining industry.
iv Closure and remediation of mining projects

Damage caused by exploration and mining activities entails responsibility on the part of
the exploration or mining titleholder, who is subject to legal sanctions and to the duty of
compensation, regardless of any contractual provisions.
Generally, the mandatory environmental impact assessment study (‘EIAS’)
required for a mineral project to transition into the mining phase already sets out how
the closure of the project will be handled from an environmental standpoint. In addition,
mining titles frequently focus on the actions necessary for recovery and reclamation
purposes (e.g., dismantling and removal of facilities and infrastructures, reforestation,
social rehabilitation or water course restoration).
Holders of mineral rights are further required to set up a legal reserve for the
purposes of mine closing and environmental restoration, in an amount corresponding to
5 per cent of the investment.
5
Angola
IV ENVIRONMENTAL AND SOCIAL CONSIDERATIONS
i Environmental, health and safety regulations

The Mining Code foresees the adoption of industry-specific environmental rules, but
no such regulations have yet been enacted. As a result, mineral activities are subject
to the general laws and regulations on environmental protection, notably the General
Environmental Law, the Law on Biological and Aquatic Resources, the Water Law and
the rules on environmental impact assessments (‘EIAs’).
Similarly, as no industry-specific legislation exists in the fields of health and safety,
the general standards applicable in this regard are those set out in the General Labour
Law, which contains the key principles, requirements, rules and procedures applicable to
the employment of a labour force, and in its ancillary statutes and regulations.
ii Environmental compliance
Pursuant to the Mining Code, an EIAS must be prepared and submitted together with
the TEFVS. The approval of these instruments by the relevant government authorities
is a condition precedent for any mineral project to transition into the mining phase and
for the issuance of the required mining title.
However, under the Decree on Environmental Impact Assessment, any projects
that by their nature, dimension or location bear upon the environmental and social
balance and harmony shall be subject to an EIA. This means that, as regards exploration,
evaluation and research activities, much will depend on the activities in each case. Where
such research work includes the execution of trenches, pits, holes, drilling or perforations,
and any work associated with it, the impact upon the environment may be such that an
EIA may become legally necessary before the mining phase is reached.
All activities and projects that are subject to an EIA procedure are required
to obtain an environmental licence, which must be applied for as soon as the EIA is
concluded. Environmental licensing is divided into a two-stage procedure:
a an installation licence, which authorises the construction of the relevant facilities,
according to the specifications described in the project as approved by the public
body with supervisory authority over the business activity; and
b an operating licence, which is granted after the requirements stated in the EIAS
are met. Consequently, an operating licence may not be granted without a prior
installation licence.
In the event that no formal decision is notified to the applicant within 90 days of the
environmental licence being applied for, the licence is deemed as granted.
iii Third-party rights

The Mining Code contains a number of provisions regarding the rights of local
communities residing in areas where mineral activities are to be carried out, including
the right to be consulted during the preparation of the EIAS and prior to the taking
of decisions that might affect their living conditions or rights. Such consultation is
absolutely mandatory in the event that a mining project is likely to destroy or damage
6
Angola
any assets or cultural or historical heritage belonging to the local community as a

whole.
Holders of mineral rights must relocate, at their expense, any local community
that is displaced by reason of the mineral operations, and all traditions, customs and
practices of local communities must be taken into account in the relocation process. In
the event of relocation of a local community residing in a restricted or protection area,
holders of mineral rights are required to build:
a suitable accommodation; and
b social and community infrastructure, such as schools, health centres, community
centres, temples, and a water supply and other systems, in order to offer conditions
at least equivalent to those of the pre-existing settlements.
Holders of mineral rights are also legally required to give preference to the hiring of
national individuals over expatriates, with special preference being given to members of
local communities.
V OPERATIONS, PROCESSING AND SALE OF MINERALS
i Processing and operations

The Mining Code does not impose specific restrictions on the importation of machinery
and equipment, or services required in connection with exploration and mining. In
addition, holders of mineral rights benefit from a customs duties exemption in the
importation of goods for exclusive and direct use in carrying out mineral exploration,
evaluation, reconnaissance, mining and processing operations. In the interest of protecting
local industries, the above exemption does not apply if goods of the same or a similar
quality (and available for delivery within a reasonable delay), at a price not exceeding by
more than 10 per cent the cost of the imported item, are available in Angola.
Holders of mineral rights for mining and marketing are also granted rights
to dress or process the minerals extracted or produced. One of the elements that the
mining plan forming an integral part of the TEFVS must comprise is a description of
the dressing procedures and, where appropriate, the technology for mineral processing.
The local processing and dressing of minerals is one of the factors that may be taken into
consideration within the context of the granting of tax incentives.
As mentioned in Section IV.iii, supra, holders of mineral rights must give
preference to the hiring of national individuals over expatriates, with special preference
being given to members of local communities. Furthermore, under the Private Investment
Law, companies incorporated for purposes of private investment are required to employ
Angolan workers, guaranteeing them the necessary vocational training, and providing
them with a salary and other employment terms compatible with their qualifications,
any type of discrimination being prohibited. In accordance with the laws in force, such
companies may also employ qualified foreign workers, while complying with a strict plan
for the training or development of Angolan technical staff, or both, with a view to the
progressive filling of those positions by Angolan workers.
A general principle under the Angolan labour laws is that at least 70 per cent of
the workforce of an Angolan or foreign employer that employs more than five workers
7
Angola
must be Angolan nationals. This principle is considered by the Angolan authorities as the
minimum standard for the structuring of a company’s workforce.
In relation to the procurement of services, materials and other goods, holders
of mineral rights are legally required to give preference to Angolan suppliers, provided
that the relevant items’ quality is consistent with the economy, safety and efficiency of
the mineral operations, and that their prices are not more than 10 per cent higher and
their period for delivery is not more than eight business days longer than those of the
imported items.
ii Sale, import and export of extracted or processed minerals

Mining companies are entitled to market mineral resources that are the product of
mining, processing or metallurgical extraction, and are also entitled to participate in the
negotiations and preparation of contracts or agreements for the marketing of minerals
produced in mines located in their concessions.
Specifically as regards strategic minerals, the government may set up one or more
marketing companies, with a view to purchasing minerals directly from the producers, in
an open market regime. If required to create a public reserve, guarantee strategic stocks,
prevent the fall of market prices or for other reasons of public interest, the government
may promote the acquisition of certain types of strategic minerals by the marketing
companies.
The exportation and importation of mineral resources requires the preliminary
approval of the body responsible for the mining sector, and is subject to licensing by
the Ministry of Commerce. As a condition for exportation, all minerals extracted in
Angola shall have a certificate of origin. Angola, as a party to the KPCS, has adopted
the international system of certification of diamonds for exportation. Under the Mining
Code, in cases where the same reasons that led the adoption of the KPCS for diamonds
(including those stated in United Nations General Assembly Resolution 55/56) exist in
relation to other strategic minerals that are to be exported, a similar certificate of origin
shall be issued.
In respect of diamonds, it should be stressed that the enactment of the Mining
Code in 2011 had no material impact on the diamond marketing policy in force, as
defined in Presidential Decree 182/10 of 23 August 2010. This statute did not introduce
significant amendments to the previously existing marketing model, or to the role
and powers of SODIAM, the national company responsible for the organisation and
supervision of the marketing of diamonds in Angola. In fact, in addition to its role as
sole marketing channel, SODIAM is further charged with the role of ‘central purchase
and sale agency’ in respect of the diamonds produced in Angola, as well as with the
institutional organisation and supervision of the whole marketing process. The single
marketing channel model has been maintained and continues to be the basis for diamond
marketing in Angola, as complemented and developed by the Mining Code.
Finally, it should be noted that the exportation of mineral resources legally
extracted and processed, made directly or indirectly by the holder of mineral rights,
shall not be subject to the payment of duties or other customs charges, unlike the
exportation of mineral resources without processing, which shall be subject to a tax on
8
Angola
the exportation of unprocessed minerals at a rate of 5 per cent on the market value of the
mineral in question.
iii Foreign investment

The foreign exchange regime applicable to mining activities in Angola is set out in the
Foreign Exchange Regime for the Mining Industry and in certain provisions of the
Private Investment Law. For all those matters not specifically dealt with in said statutes,
the general Foreign Exchange Law and its ancillary regulations, and instructions and
orders from the BNA, apply.
The settlement of imports and exports of goods, of the receipt and payment of
invisible items of trade and of capital imports and exports by mining companies and
unincorporated joint ventures are to be processed through banks in Angola. The key
exception to this regime is that such entities are allowed to open and keep security
accounts, in the form of escrow accounts, with financial institutions domiciled abroad
for purposes of payment of debt service. It is noteworthy that such accounts may be
funded with part of the revenues from projects relating to the financing obtained.
However, no right to receive and keep outside Angola proceeds from mineral product
sales exists.
Subject to the control of the BNA, mineral investment contracts entitle
foreign investors to benefit from the right to repatriate dividends, in proportion to the
investment, as long as the relevant investor has imported the minimum amount of US$1
million. Capital operations and import of funds are equally subject to foreign exchange
restrictions, even though the regime applicable to each varies. For example, the Governor
of the BNA is entitled to make an assessment on whether, in a given period, the requested
transfer of funds should result in difficulties in the balance of payments, in which case
the BNA may condition or suspend it.
Similarly to the former Private Investment Law, the Private Investment Law now
in force expressly excludes from its scope of application investments in the petroleum
and diamond industries, as well as in connection with financial institutions. In addition,
the new Private Investment Law only applies on a subsidiary basis to investments subject
to ‘specific private investment regimes’ in other industries as provided for in the Law, as
it is the case for the mining industry (whose investment regime is provided for in the
Mining Code).
The investment process in the mining industry is essentially aimed at verifying
that the party concerned possesses the technical and financial capabilities required for
a successful implementation of the envisaged project, and at defining the terms and
conditions under which the relevant mineral rights are to be granted and exercised. As
previously mentioned, the Angolan mineral framework may be described as a contractual
system. In fact, mineral rights are actually granted in the form of a concession contract
negotiated with a negotiations committee appointed by the government and approved
by the relevant governmental body (the MGMI, or the President of the Republic,
depending on the type of minerals in question and the overall amount to be invested).
Although not expressly addressed in the Mining Code, investment in mining
companies operating in Angola also qualifies as a private investment operation, which –
according to the broad interpretation of the Mining Code adopted by the MGMI – is
9
Angola
also not covered by the Private Investment Law, and is thus subject to the provisions on
private investment contained in the Mining Code.
Foreign investors are afforded a significant number of guarantees, including:
a access to Angolan courts and due process of law;
b the payment of a fair and prompt compensation in the event of expropriation or
requisition of their assets;
c professional, banking and trade secrecy;
d non-interference from public authorities in the management of their businesses;
e non-cancellation of licences without the proper judicial or administrative
procedures;
f and the repatriation of profits and dividends.
VI CHARGES
i Fees
Holders of mineral rights are subject to corporate income tax (called industrial tax)
at a lower industry-specific rate of 25 per cent. In determining the taxable income,
exploration costs and contributions to the Mining Development Fund, among others,
are tax-deductible in addition to the tax deductions provided for in the general tax law.
Holders of mineral rights may seek incentives in connection with industrial tax in the
form of other deductible costs, grace periods, investment uplifts or any other type of tax
incentives provided for in the law. The decision of the government to grant incentives is
discretionary. However, favourable consideration is to be given to:
a the use of local suppliers;
b the carrying out of operations in remote and depressed areas;
c the hiring and training of local human resources;
d the cooperation with Angolan scientific or academic institutions;
e the in-country processing of minerals; and
f a significant contribution to increase exports.
In addition, a royalty is levied on the value of extracted mineral resources, at rates as

follows:
a strategic minerals and precious metals and stones – 5 per cent;
b semi-precious stones – 4 per cent;
c metallic minerals – 3 per cent;
d construction materials of mining origin and other minerals – 2 per cent.
Holders of exploration rights are subject to a surface fee, which value varies according
to the size of the concession area, the type of mineral explored and the exploration year
in question, ranging from US$2 to US$40 per square kilometre. In the event of the
extension of the exploration period, these amounts are doubled.
A contribution to the Mining Development Fund is also provided for in the
Mining Code; however, such fund has yet to be formally established.
There is no distinction between the taxes, duties and royalties payable by domestic
and foreign mining companies.
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Angola
VII OUTLOOK AND TRENDS
In early 2012, the Minister of Geology, Mines and Industry of Angola announced the
government’s goal to boost the mining industry, notably by diversifying away from oil
and diamonds. This diversification goal is essentially backed by three instruments:
a the National Geology Plan approved in 2009, the main goals of which are:
• to enhance the mining sector, diversify mineral production, increase
productivity and improve the operational capacities of the public bodies in
connection with the mining sector;
• to improve the knowledge of Angola’s geology and mineral resource potential;
and
• to contribute to the sustainable development of the country;
b the nationwide airborne geological survey that is under way and is essentially
aimed at thoroughly identifying mineral resources reserves existing in Angola,
and at reviving the comprehensive mineral resources survey started by Portuguese
companies in the pre-independence period; and
c the recently enacted Mining Code.
While the results of the above-mentioned airborne survey are expected within a time
frame of three to five years, the existing geological information has been sufficient for
the mineral projects adversely impacted by the civil war, and more recently by the world
financial and economic crisis, to be resumed, and for a number of new projects to be
launched in the last couple of years, with a particular focus on copper and potash.
Currently in Angola, activity within the mining sector and production continue
to grow on an almost daily basis.
11
Chapter 2
AZERBAIJAN
Ilgar Mehti and Nurlan Mammadov 1
I OVERVIEW
According to official government statistics, in 2011 overall direct capital investments in

Azerbaijan’s natural resources industry was approximately US$4.1 billion (both foreign
and domestic investment). Around 90 per cent of this amount is attributable to the oil
and gas sector.2
The non-oil sector of the mining industry is still developing. Azerbaijan produces
a range of metals and industrial minerals, including aluminium, copper, steel and zinc.
More recently, the country started developing its gold mines, and the discovery of some
300,000 ounces of gold every year has been announced in the press.
Additionally, a few large entities, as well as a significant number of small and
medium enterprises, are engaged in sand, gravel, stone and salt extraction and production.
Azerbaijan’s extractive industries, however, are significantly dominated by oil and
gas, which account for more than 50 per cent of the country’s GDP. 3 The bulk of
Azerbaijan’s natural resources law is therefore directed towards the regulation of oil and
gas activities.
Azerbaijan is considered one of the birthplaces of the oil industry in general: it is
claimed that the very first oil well in history, as well as the first offshore oil well, were both
drilled in Azerbaijan. Azerbaijan’s history of oil activities dates back to ancient times.4 In
the early 1900s Azerbaijan was producing more than half of the world’s oil (11 million
1 Ilgar Mehti is managing partner and Nurlan Mammadov is a senior lawyer at Ekvita LLC.
2 State Statistical Committee of Azerbaijan (www.azstat.org/macroeconomy/indexen.php).
3 Ibid.
4 Marco Polo was referring to Baku’s oil in his writings: ‘… stream of oil, in such abundance that
a hundred ships may load there at once.’ Wikipedia (http://en.wikipedia.org/wiki/Petroleum_
industry_in_Azerbaijan).
12
Azerbaijan
tonnes or 212,000 barrels (33,700 cubic metres) of oil per day).5 According to the Oil
and Gas Journal Azerbaijan’s proven oil reserves are estimated at 7 billion barrels (January
2012) and proven natural gas reserves are roughly 30 trillion cubic feet (January 2011).
Today, Azerbaijan produces, on average, more than 1 million barrels of oil per
day. In 2011 Azerbaijan produced a total of 45 million tonnes of oil and 25 million cubic
metres of gas (in 2010 the figures were 50 million tonnes and 26 million cubic metres,
respectively).
The discovery in 1999 of significant amounts of gas in Shah Deniz field (offshore
Azerbaijan) transformed the country into a major gas exporter.
II LEGAL FRAMEWORK
Azerbaijan is a civil law jurisdiction and as such the country’s law is codified. There is,
however, no overarching, unified law (mining law, petroleum law or similar) regulating
the mining industry. Instead, the industry is regulated by miscellaneous laws enacted by
the Parliament as well as various decrees, rules and regulations passed by the President,
the Cabinet of Ministers, the Ministry of Industry and Energy (‘the MIE’), the Ministry
of Ecology and Natural Resources (‘the MENR’) and other relevant government agencies.
The main statutory instrument setting out the legal framework for the mining
industry is the Law on the Subsoil (‘the Subsoil Law’) dated 13 February 1998. The
Subsoil Law determines the main rights and obligations of persons engaged in subsoil
extraction and development, sets the rules for issuing licences, etc.
The Subsoil Law sets out the following main principles of government regulation
of the mining industry:6
a safe, effective and holistic approach in using subsoil;
b protection of the environment;
c expansion and strengthening of subsoil raw materials base;
d transparency in subsoil use;
e creation of a suitable environment to attract investment in subsoil use; and
f ensuring subsoil use in return for due compensation.
The Subsoil Law is not specific to the oil and gas sector alone – its general principles,
and other provisions relating to the issue of licences and permits, are equally applicable
to other sectors as well. The Subsoil Law provides expressly that the regulation of energy
issues will be subject to a specific energy law (Article 3); the Law on Energy was thus
passed on 24 November 1998 (‘the Energy Law’).
The Energy Law further elaborates the main principles of government regulation
as set out in the Subsoil Law. While the Subsoil Law regulates different aspects of mineral
resources, which by definition covers not just oil and gas but also other sectors such as
iron ore, sand and gravel extraction, etc., the Energy Law – as the name suggests – is
more specific to energy resources.
5 Ibid.
6 Article 2.
13
Azerbaijan
Another relevant statutory instrument regulating the energy industry is the Law
on the Use of Energy Resources, dated 30 May 1996. This law, however, is of a general
nature as it sets out the social, economic and legal foundations of the state regulation of
energy resources.
In addition to these enacted legal acts, the legal framework of the oil and gas
industry is significantly influenced by production-sharing agreements (‘PSAs’) – by far the
most common and prevailing form of government concession granting subsoil use rights.
More than 20 PSAs have now been concluded between the State Oil Company of
Azerbaijan Republic (‘SOCAR’) and foreign oil companies (‘FOCs’).
By its nature, a PSA is a commercial contract, although admittedly it has a hybrid
status since, following its execution, a PSA would typically be enacted into law (approved
by the Parliament).
The first and most significant PSA (also described as ‘the contract of the century’)
was concluded in 1994 in relation to the Azeri, Chirag and Guneshli fields (‘the
ACG PSA’). Many subsequent PSAs derive their terms from the ACG PSA, although
occasionally there are significant variations.
The ACG PSA, as well as many other PSAs, contains provisions that broadly
reflect the government’s main principles in regulating the oil and gas industry:
a PSAs and the rights, benefits and privileges granted to FOCs (or, in some cases,
their eligible subcontractors) thereunder prevail over conflicting provisions of any
other laws, rules and regulations of Azerbaijan (except, understandably, for the
Constitution, legal acts adopted via public referenda and international treaties
joined to or concluded by Azerbaijan);7
b if the rights and privileges granted under PSAs are diluted by virtue of any
new legal act, the government of Azerbaijan undertakes to provide reasonable
compensation to FOCs;8
c SOCAR will, by lawful means, assist FOCs in obtaining all required permits,
licences and approval from various government agencies by FOCs in the course
of hydrocarbon or petroleum activities;9
d FOCs (and in some cases, their eligible subcontractors) are entitled to import and
export goods, materials and equipment necessary in hydrocarbon or petroleum
activities free of any customs tariffs and duties;10
e FOCs (and in some cases, their eligible subcontractors) are exempt from payment
of VAT (VAT assessed at zero rate) and pay a different (flat) rate of tax for their
profit gained from hydrocarbon or petroleum activities.11
The operating rules under the PSAs are so unique that they have established a coherent
and reasonably effective regulatory regime operating, for the most part, separately and
7 Article 23.1 of the ACG PSA.

9 Article 3.2(a)(ii); 9.2(b) of the ACG PSA.
10 Article 28, 18.1 of the ACG PSA.
11 Article 12.2, 12.6–12.7 of the ACG PSA.
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Azerbaijan
independently from the main statutory regime set out under the Subsoil Law and the
Energy Law.
Azerbaijan is a signatory to the Energy Charter, the ICSID Convention, the
MIGA Convention, the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards and some other significant international treaties.
i Title
According to the Constitution of the Republic of Azerbaijan,12 all natural resources
belong to the state, without prejudice to the rights and interests of any legal entity or
natural person. Other pertinent laws further confirm that the subsoil belongs to the state
of Azerbaijan13 and that Azerbaijan has ‘exclusive property rights’ to energy resources.14
The vast majority of oil and gas production (more than 90 per cent) is made
offshore in the Azerbaijani sector of the Caspian Sea. For this and other historical
reasons, private ownership of mineral resources and the use of private mining licences
are not common in Azerbaijan.

The dichotomy of statutory regulation described above has influenced the rules pertaining
to the granting of surface and mining rights.
On the one hand, PSAs operate both as the enabling commercial concession
granting the subsoil use rights and as a rather comprehensive set of rules regulating nearly
all aspects of oil and gas extraction and development. On the other hand, the Subsoil
Law and the Energy Law set out separate rules on subsoil licensing. Under the Subsoil
Law,15 both local and foreign persons obtain subsoil use rights on the basis of special
permits (licences) granted following a tender, auction or direct negotiation.16 Under the
Energy Law, the right to extract and develop energy resources may be granted pursuant
to ‘energy contracts’.
While not expressly stated, such references to energy contracts seem to capture
the PSAs. It should, however, be emphasised that Azerbaijan does not have a dedicated
law regulating PSAs, as is the practice in some neighbouring jurisdictions. The Subsoil
Law and the Energy Law are not sufficiently detailed to permit regulation of most PSAs,
which would typically be negotiated and agreed independently.
In the issue of licensing, other notable legal acts are the Resolution No. 111 on
Approval of Cases where a Special Permit (Licence) for Subsoil Use is Granted Pursuant
to Direct Negotiations, issued by the Cabinet of Ministers of the Republic of Azerbaijan
12 Article 14.
13 Article 4 of the Subsoil Law.
14 Article 5 of the Energy Law.
15 Article 13.
16 While the law allows for tenders (open or restricted), in practice, most concessions are granted
via direct negotiations.
15
Azerbaijan
on 30 September 2000 and the Decree No 310 on Measures to Improve the Issuance
of Special Permits (Licences) for Certain Types of Business Activities in the Republic of
Azerbaijan, issued by the President of the Republic of Azerbaijan on 28 March 2000.
Despite all these general rules, however, in practice, most exploration and
production licences are granted in the form of PSAs. Typically, the President would
issue a special Decree or Order nominating SOCAR (or, in limited cases, the MIE) as
the government representative to negotiate or sign a particular PSA. Most PSAs contain
conditions precedent requiring SOCAR or other government representatives (as the case
may be) to implement such actions as may be required to approve PSAs into the law
of the country. Therefore, following the execution of a PSA, SOCAR would, via the
Cabinet of Ministers, submit the recommendation to the Parliament. The Parliament
would then issue a special law approving the PSA and endorsing its unique regulatory
regime.
The time limits for geological survey (exploration) of the subsoil is up to five years,
and for development, up to 25 years.17 These time limits generally match up with the
exploration and production lifecycle of most PSAs. Extensions beyond these terms are
generally prohibited,18 but under the Energy Law such extensions may be documented
via a separate (new) agreement awarded through a new tender.19

Special permits (licences) or other forms of governmental approvals are required in
connection with mining activities. Specifically, all hazardous equipment used in the
mining industry is subject to separate approval by the Ministry of Emergency Situations.
The use of vessels is subject to mandatory approval and certification by Azerbaijan’s State
Maritime Administration acting as the flag state representative. Other specific approvals
and licences may often be required depending on the type and nature of the activity
involved.

The Energy Law mandates development of comprehensive remediation plans that
must be included in energy contracts.20 Remediation works must be undertaken by the
contractor responsible for field development prior to expiry of the contract period.
The respective government agency may require mandatory accumulation of pre-
agreed funds in certain deposit accounts dedicated for remediation works. Alternatively,
the contractor may be requested to provide a bank guarantee for an amount sufficient to
cover its obligations with respect to remediation works.
Most PSAs contain similar – or perhaps more detailed – remediation obligations. It
is common practice to allocate certain funds to an abandonment account or remediation
works at the end of a field’s life cycle.
17 Article 12 of the Subsoil Law.

18 Article 24 of the Energy Law.
19 Ibid.
20 Article 27.
16
Azerbaijan

The Constitution provides for basic guarantees of environmental safety, which include a
right to live in a healthy environment, and a right to demand compensation for damage
caused to one’s property as a result of a breach of environment-related laws. These basic
principles guide and dictate the environmental policy of Azerbaijan.
One of the most important and directive provisions of the Constitution states
that no one can cause more danger or damage to the environment and natural resources
than is allowed by law. Certain norms and regulations, adopted in line with these basic
Constitutional principles, set limitations on pollution of the environment. Likewise, a
number of laws have been passed that generally apply to mining projects.
As previously mentioned, there is no specific law in Azerbaijan that would
comprehensively cover the effect of mining projects on the environment or third parties.
The main laws in this area are the Energy Law and the Law on the Protection of the
Environment, dated 8 June 1999; these laws apply to all energy resources and products,
as well as their extraction and processing activities in Azerbaijan, which includes the
impact of these activities on the environment.
According to applicable laws, all legal entities and individuals are obliged to
maintain the productive use of energy resources, comply with rules on their use, and
refrain from pollution above the limits allowed by law. This obligation also extends to
design, installation and exploitation of energy plant and machinery.
Upon application for obtaining a licence for subsoil use, one of the conditions
for licence issuance is satisfying an ecological assessment carried out by the MENR. The
main purpose of the ecological assessment is to measure the hazard level of the projects
that are ready for commencement – or have already commenced – and affect – or may
affect – state of the environment and health and safety of the population.
The law requires that legal entities or individuals engaged in mining projects
must present mitigation measures for the recovery of the environment from any negative
effects. In some projects of governmental importance, however, the MENR has the right
to free the requesting entity from compulsory requirements of the law for a maximum
of five years.
Along with the measures to be taken to avoid potential threats to the environment
and people’s health and safety, laws also provide for damages already caused to third
parties. In particular, project owners must pay compensation for such damages.
If a project causes death or injury, or damage to a personal property or to the
environment, the owner must bear liability, pay compensation, and mitigate or remove
the consequences of such damage in line with the law. This also applies to events
occurring due to installation, exploitation and technical service of the energy plants as
a part of a project. If the damage caused by the energy plant is proven, the owner must
present reports to an appropriate state authority about the event in order to determine
the amount of compensation due to the affected parties.
Certain types of mining projects require compulsory insurance for potential
damage that may be accidentally caused to the environment, the subsurface or people’s
health and safety. It may be required by laws to keep the insurance for a certain period
when such danger is real, even after termination of the project.
17
Azerbaijan
At the time of writing, there is still no coherent legislation mandating compulsory

environmental insurance, although discussions are ongoing.

According to the Customs Code, a state authority may impose restrictions on importing
to or exporting goods from Azerbaijan, which must be done in accordance with
Azerbaijani law and international agreements. Customs clearance of restricted goods is
also subject to the requirements of Azerbaijani law and international agreements.
The Customs Code lists applicable custom payments. These include customs
duties, import VAT and customs collections.
Customs duties apply based on the requirements of relevant customs procedures.
The Law on Customs Tariffs, dated 20 June 1995, lays down the rules on setting and
applying customs tariffs. According to the Law, such tariffs apply to imported or exported
goods.
Rates of both import and export customs duties are set by the Cabinet of
Ministers. Rate limits of such duties on goods from countries with which Azerbaijan has
a favourable trade regime are set by the Parliament.
The Customs Code regulates import VAT in accordance with the Tax Code. The
amount of payable import VAT is 18 per cent.
Finally, customs collections relate to general administrative work done by the
customs authorities and such fees are set by the appropriate state authority.
The Law on Application of Special Economic Regime to Export-Oriented Oil
and Gas Activities, dated 2 February 2009, provides for privileges for contractors as
well as local and foreign subcontractors involved in such activities. For this purpose, the
activities must relate to oil and gas operations performed outside of Azerbaijan, including
the Azerbaijani sector of the Caspian Sea. Contractors and subcontractors must obtain a
licence for each agreement under which they carry out activities.
Customs regimes under most PSAs differ substantially from the general rules.
In most cases, FOCs and their subcontractors operating under the PSAs are entitled to
import and re-export from Azerbaijan, free of any restrictions and in their own name, all
materials and equipment necessary to their petroleum operations.
PSAs require that contractors give preference to local suppliers with respect to the
purchase of imported materials and equipment where local suppliers are competitive in
price, quality and availability with those available from other sources.21
Contractors, their customers and carriers of both may freely export the portion
of petroleum to which contractors are entitled under the respective PSA.22 Subject to
the foregoing, all imports or exports carried out under the PSAs must comply with
the procedures required by the applicable customs laws and regulations, and be duly
documented, and contractors must pay any customs service or documentation fees.
21 Article 18.1(a) of the ACG PSA.

18
Azerbaijan
Employment of foreign employees in Azerbaijan is generally regulated by the Law

on Labour Migration, dated 28 October 1999. This law allows employment of foreign
nationals, subject to their obtaining work permits, which must be obtained beforehand.
Work permits are not required for heads and deputy heads of foreign companies, their
branches and representative offices, or temporary stays of foreign employees lasting no
longer than three months.
Prior to the end of each year, the Cabinet of Ministers sets a migration quota for
the subsequent year determining the maximum number of foreign employees that can be
engaged in each respective industry. Foreign employees exempted from the work permit
requirement may be employed irrespective of the quota.
Under the PSAs, FOCs and their subcontractors may freely employ such personnel
as, in their opinion, are required for the purpose of carrying out petroleum operations.
PSAs require preference to be given, however, to employing Azerbaijani citizens provided
that they have the required knowledge, qualifications and experience.

Pursuant to Presidential Decree No. 782 on the Improvement of the Rules for the Issuance
of Licences (Special Permits) for Certain Types of Activity, dated 2 September 2002, the
international, inter-city, and intra-city transportation of goods by means of water, air and
motor transport is subject to licensing by the Ministry of Transportation. Transportation
of hazardous substances must be authorised by the Ministry of Emergencies.
No special licence is required for sale, import and export of minerals under the
PSAs.
iii Foreign investment considerations

The Law on Protection of Foreign Investment sets legal and economic principles for
foreign investment in Azerbaijan. According to the Law, legal regimes for foreign
investors may not be less favourable than those available to local investors.23
Foreign investment is fully and unconditionally protected. If investment
conditions worsen because of a change or an amendment to the Azerbaijani law, and
unless such change relates to certain matters (e.g., national security or public order), the
law that existed when an investment was made will continue to apply for 10 years.
The law provides for nationalisation and requisition of foreign investment but,
should this occur, foreign investors are entitled to a reasonable compensation. Foreign
investors are also entitled to reimbursement for losses (including loss of benefit) suffered
due to unlawful acts by the state authorities or their officials.
If an investment is terminated, a foreign investor may receive part of its investment
and related income in the form of money and goods, taking into account a realistic price
on the termination date. Foreign investors may transfer their incomes as well as other
amounts abroad (such as compensation and reimbursement) subject the applicable taxes
and duties.
23 Article 5.
19
Azerbaijan
Similarly, Central Bank Rule No. 12, dated 27 May 2002, dealing with the
currency operations of residents and non-residents, provide for free (i.e., without paying
any taxes and duties) repatriation of investments by foreign companies, branches and
representative offices of foreign companies (Rules 3.2.2.e). The law also allows foreign
employees to transfer their wages abroad subject to paying personal income tax as set by
the Central Bank.
According to the law, rights with regard to exploration and development of
mines are granted to foreign investors on the basis of concessions concluded between
them and the Cabinet of Ministers, and approved by the Parliament. As has already
been mentioned, however, most oil and gas projects in Azerbaijan that involve foreign
investments are regulated by the PSAs.
Most PSAs provide for economic stabilisation rules similar to those previously
described.
VI CHARGES
i Royalties
The Tax Code provides for the payment of a mining tax (royalty) in respect of minerals
extracted on the territory of Azerbaijan, including the Azerbaijani sector of the Caspian
Sea. The royalty is based on the wholesale price at the rate of 26 per cent for crude oil
and 20 per cent for natural gas. Since the royalty is calculated on the basis of wholesale
price, it is considered revenue-based.
ii Taxes
As previously explained, PSAs establish their own standalone and unique statutory regulation
in relation to hydrocarbon activities. This uniqueness expresses itself manifestly in the
regulation of taxation. The benefits and privileges granted under the PSAs are subsequently
detailed in specific tax protocols executed between FOCs and the Tax Authority.
Under the PSAs and the protocols, FOCs pay a flat-rate profit tax (e.g., in the
ACG PSA, of 25 per cent) in connection with their hydrocarbon entitlement. As the
name suggests, the flat profit tax is profit-based. The PSAs typically guarantee that the
profit tax rate remains fixed for the duration of the PSA (30 years in the case of the
ACG PSA). PSAs lay out very detailed tax and accounting procedures relating to taxable
profits, deductible expenses, submission of returns, etc.
As a rule, the PSAs provide total exemption from a number of taxes. According
to the ACG PSA, for example, all FOCs are entitled to full and complete exemption
from all taxes (existing or future) in respect of their hydrocarbon activities except for the
aforementioned flat profit tax. Further, FOCs are entitled to freely repatriate their profits
outside Azerbaijan without payment of any branch remittance tax on profit, interest,
fees and charges in respect of any debt, any royalty, lease payment or management fee. In
other words, the flat profit tax of 25 per cent fully satisfies FOCs’ tax liability in respect
of their hydrocarbon activity under the PSA.
Finally, FOCs engaged in hydrocarbon activity under the PSAs are also exempt
from VAT on all (1) goods, works, and services supplied to or by them, (2) their exports
of oil and gas, and (3) imports of goods, works and services acquired by them.
20
Azerbaijan
Foreign subcontractors providing services to FOCs in connection with hydrocarbon

activities also have certain tax benefits. First, the VAT exemption on goods and services
supplied applies across the entire value chain to the service providers. Second, the gross
payments received for works or services performed in Azerbaijan by foreign subcontractors
are subject to a withholding tax at a rate of 5 per cent.24 Payment of withholding tax
satisfies foreign subcontractors’ corporate (profit) tax liability in Azerbaijan.
iii Duties
There are certain state duties payable with respect to matters requiring governmental
approval (for example, a duty for a construction licence, for certificate of origin, etc).
These duties are generally insignificant.
As previously explained, goods imported to and exported from Azerbaijan
are generally free from any customs duties under the PSAs. Occasionally, certain
administrative processing fees are charged, but such fees also tend to be nominal.
iv Indemnification
Most PSAs, including the ACG PSA, provide for full indemnification of expenditure
(cost recovery) incurred by FOCs in the development stage of the field’s life cycle.
However, costs incurred during exploration activities aimed at discovery of commercially
attractive oil and gas reserves are typically not recoverable. Further, to ensure steady cash
flow, most PSAs provide for a certain cap on cost recovery.
For instance, under the ACG PSA, cost recovery is achieved through use of the
total amount of oil produced (total production). At first, all operating costs for the then-
current year are subject to cost recovery. The remaining portion of total production is
then used to recover capital expenditure, but only up to 50 per cent of the remaining
total production.
Generally, the dichotomy of statutory regulation (PSAs as opposed to general law) is

perhaps the most salient feature of Azerbaijan’s legal framework with respect to the oil
and gas industry.
The benefits and privileges granted under the PSAs have established a unique legal
regime that has so far operated reasonably smoothly compared with other neighbouring
jurisdictions.
PSA regulation in Azerbaijan has survived the period of high and low oil and gas
prices as well as the recent (ongoing) economic recession. It is reasonable to believe that
it will continue to maintain its position as the prevailing form of statutory regulation.
24 Subsequent PSAs have varying levels of taxation – often, 8 per cent.
21
Chapter 3
BRAZIL
Luiz Fernando Visconti 1
I OVERVIEW
Mining in Brazil is a national policy matter. The sector is considered to be a strategic part
of the Brazilian economy and, in addition to the three levels of government, the Brazilian
Constitution also protects the activity.
Mineral resources are abundant in the country. Although many ores remain
unexplored, Brazil has been experiencing an increase in mining activities and production.
Iron ore is the leading export, corresponding to 82 per cent of the overall mineral
production exported. The Carajás Project, located in the state of Pará, is the biggest
iron ore complex in the world. Iron is followed by niobium and gold, which make up
approximately 8 per cent of exports. Other resources include bauxite, silicon, copper and
granite. Brazil is also the second-largest producer of manganese ore in the world.
The state of Minas Gerais is the top mineral producer, with almost half of Brazil’s
mineral extraction taking place within its territory. The state of Pará is ranked second,
accounting for approximately one-quarter of Brazil’s mineral production.
Recently, a series of debates about mining policy have been taking place, and Brazil
is on the verge of changing its mining legislation. Opinions about the new framework
differ and range from criticism to optimism; however, in general, the mining sector
agrees that at least some changes are needed.
II LEGAL FRAMEWORK
Brazilian mining law is strongly Constitution-oriented. The Constitution deals primarily

– or at least consequentially – with mineral resources. Provisions range from mining in
1 Luiz Fernando Visconti is a partner at TozziniFreire Advogados.
22
Brazil
indigenous areas to cooperatives of miners, including the authorisation to quarry within

the territory.
Article 176 of the Constitution provides that every minefield in Brazil is the
property of the federal government. Through different regimes, such as concessions,
authorisations, licences and permissions, individuals or companies may explore mineral
resources, and only the results of mining extraction may be owned by companies or
individuals. It is important to note that individuals cannot apply for mining or
exploitation permits.
The legal nature of mine titles is rather peculiar. Mines are the property of the
state, but the products of mining are private. As a result, mineral resources are strategically
controlled by the federal government, but investments and risks lie with companies and
individuals.
Mining activity is regulated by Decree-Law No. 227, dated 28 February 1967,
known as the Mining Code.
The Mining Code regulates mineral production, beneficiation, distribution and
commercialisation; it also regulates mineral exploration and exploitation. Finally, the
Mining Code provides that mining activity is subject to inspection by the National
Department of Mineral Production (‘DNPM’). DNPM is supervised by the Ministry
of Mines and Energy, through the Secretary of Geology, Mining and Mineral
Transformation. Together, these bodies are in charge of regulating mining activity in the
country, as well as authorising exploration and exploitation.
i Title
Ores are federal property; regardless of whether mines are being exploited, they are all
owned by the state. Along with different types of public assets, ores are classified as public
property with no specific utility (which is the opposite of, for instance, a public building,
whose utility is very clear).
However, it is not an ordinary property right. While ores are owned by the federal
government, their use must be driven by the public interest. Mining rights may therefore
be assigned to private individuals for economic use. A mining right is a limited property
right; companies may explore, use and profit from mineral resources, but cannot sell
mines as if they belonged to them. The right to explore is granted to the individual in
order to exploit that resource and, ultimately, to enrich social welfare.

Surface and mining (underground) rights co-exist in Brazilian mining law. While every
mineral resource in Brazilian territory belongs to the government, property rights are
protected by the Constitution. Therefore, when a private landowner discovers any
mineral resource of economic use within his or her lands, there would appear to be a
conflict between property rights and mining rights. According to Brazilian law, however,
even if ores are found on an individual’s own private property, no citizen has the right to
extract such ore from the soil unless an authorisation for such activity has been granted.
23
Brazil
On the other hand, surface rights are protected, and any mineral exploitation occurring
inside someone’s estate entitles the owner of the land to be rightfully compensated.
This means that the surface rights over any given land do not entitle the owner to
exploit its subsoil.
According to the Mining Code, mining rights are obtained through different
administrative procedures with different timescales. Article 2 of the Mining Code
provides for the different types of mineral licences (mining manifest, authorisation for
exploration, concession for mining, permission for elementary mining, registration for
extraction and licence to mine) as follows.
Mining manifest
An exception to the current regime is the mining manifest. The Constitution of 1934
changed the former regime and established the distinction between the ownership of
land from the right to explore and exploit the land’s mineral resources. Since 1934,
mineral resources belong to the federal government. According to this rule, landowners
can manifest their interest in mining on their own land. Therefore, the mining rights
remain the landowners’ property, but they are still subject to the inspection and control
rules set out by the authorities.
Authorisation for exploration

An authorisation for exploration is a certificate issued by DNPM that allows the holder
to either explore a certain area or transfer the mining right to explore to a third party,
thereby entitling this party to explore the area.
In order to apply for an authorisation for exploration, the applicant must be
Brazilian, an individual entrepreneur (sole proprietor) or mining company.2 The
exploration work must be supervised by a mining engineer or a geologist. Usually,
the certificate has an expiration date of between one to three years, and the term for
exploration works will be settled by DNPM based on the characteristics of the minefield.
Once the certificate is issued, the holder possesses the exploration rights for the
specific area. The title allows the miner to explore the area or to assign it to a third
party (assignment of mining rights). Regardless of the choice the holder makes, some
obligations exist.
Exploration works must start within 60 days of the title being issued; such works
cannot stop or be suspended for more than three consecutive months, or for a total
of 120 non-consecutive days. In addition, the authorisation holder must comply with
every requirement issued by DNPM and facilitate its agents’ periodic inspections. After
the exploration has been carried out and the abundance of the mineral in the region
is known, the authorisation holder must prepare two reports, both of which must be
addressed to the DNPM Director General:
a a final exploration report (‘RFP’); and
b an economic plan for use of the mine.
2 Article 15 of the Mining Code.
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Brazil
Concession for mining

A mining concession is only obtained after exploration has been completed. After approval
from the RFP, the licensee has one year to acquire the concession for exploitation, a
permit that entitles it to extract minerals and grants their economic use.
In order to acquire such permit, an application must be addressed to the Ministry
of Mines and Energy, signed by the applicant, accompanied by a wide range of documents.
The concession may not only be denied due to environmental concern, but also
if the mining activity harms the surrounding community. If this is the case, and the RFP
had already been approved, the government shall compensate the company for all the
costs incurred during exploration.
If the concession is granted, a mining permit is issued. The title gives the holder
the right to exploit the mine, but also encompasses duties and obligations the holder
must comply with.
After the permit is issued, the holder has 90 days to require a writ of entry and the
mining works must start within six months. The mining activity must comply with the
plan approved by DNPM; if not, sanctions can be applied to the licensee.
Other obligations include:
a compliance with every new instruction issued by DNPM;
b supervision of the mining activities by a certified professional;
c not changing the use of the mine;
d ensuring that employees can work safely and with the proper equipment;
e avoiding river diversion or lack of water supply caused by the works;
f ensuring that the company is not liable for any harm towards third parties; and
g avoiding air and water pollution.
Permission for elementary mining

There is also a permit for elementary mining, which is a different regime. This particular
type of mining activity features characteristics that are considered only when the
minefield has certain conditions that do not allow conventional mining works. Because
of the nature, location, dimensions or economic purposes, some minefields are apt to be
exploited regardless of exploration reports.
Licence for mining

A licence for mining encompasses substances listed in Law No. 6.567/78. Sand, clay,
gravel and stone may be extracted without the prior authorisation of an exploration
request, provided that the area is equivalent to 50 hectares.
Once granted, the permit is equivalent to a mining right that cannot be transferred
without DNPM’s authorisation.
Extractions must take place 90 days after permit is issued, and the holder can only
remove the minerals allowed in the title.
25
Brazil

Mining on borders
Mining works along Brazil’s borderlines are a matter that concerns not only the Ministry
of Mines and Energy and DNPM, but also the military. Mining operations are not
allowed to work on minefields that are located within 150 kilometres of Brazilian
borders, unless authorised by the National Security Council.
Law No. 6.634/79 regulates the activities that must be submitted to the approval
of the National Security Council. Any exploration, mining, extraction, exploitation or
use of mineral resources within this area require authorisation.
At least two-thirds of the staff allocated to the region by companies wishing to
work in the area must be Brazilian. In addition, 51 per cent of the company’s capital must
be subscribed by Brazilian citizens. Finally, the administration of the company must be
held by Brazilian citizens, or at the least they must have the predominant managerial
powers.
If a company does not meet the requirements of Law No. 6.634/79, a fine of
up to 20 per cent of the value of the entrepreneurship carried on in the location can be
applied.
Indigenous protected areas

Another issue that merits special attention is mining activities in areas for indigenous
protection.
The Constitution grants indigenous groups permanent indigenous possession of
the lands in which they are settled. However, it also provides the possibility to mine
within these areas once mineral riches are found.
To remedy this apparent conflict of rights, the Constitution establishes conditions
for the exploration of natural resources within indigenous protected areas. Article 231,
Section 3, sets forth that the local native community must be considered in public
hearings, that the National Congress must authorise the mining and that a special law
must be enacted to regulate the activity. However, to date Senate Bill No. 1610/96 has
not yet come into force to regulate the matter, and it is currently under discussion in the
House of Representatives. Therefore, indigenous areas still cannot be explored.

The Constitution provides that whoever explores mineral resources has the legal obligation
to restore the degraded environment in compliance with the regulations issued by the
competent authority.3
When the activity in a determined mine is close to ending, DNPM must be warned,
and the company’s annual mining report must contain such information, updated and
detailed, along with the status of the mines and topography. In general, companies file
a formal requirement with the Ministry of Mines and Energy to reactivate the area once
the mining is over, and subsequent projects are presented before the Ministry of Mines
3 Article 225, Section 2.
26
Brazil
and Energy for approval. Gradually, mining activities start to be replaced by the recovery
of the exploited area.
Limitations on purchasing rural areas

Recent opinions from the office of the Brazilian Attorney General provide a new
interpretation of the law that governs the acquisition of rural areas by Brazilian companies
controlled by foreign individuals or companies. This is a controversial topic that is still
evolving.
i Labour, health and safety regulations

In Brazil, labour relations are a matter of federal law. Therefore, labour rights are
nationally standardised, and the same labour costs and consequences will apply regardless
of an employer’s place of business or place of incorporation. Thus, workers hired to work
in mines qualify for the same social rights as other workers (compensation, holidays,
working hours, working days, equal pay, etc.).
Regarding occupational health and safety, there is a specific regulation for miners:
Regulatory Standard NR 22. The measures set out in this regulation must be applied
jointly with other regulations related to workers’ health and safety protection.
NR 22 deals with the safety and health requirements in mining in detail. Such
rule applies to underground and open-pit mining, alluvial mining, mineral processing
and mineral research, and addresses several aspects, such as:
a workers’ responsibilities and rights;
b workplace organisation;
c circulation and transport of people and materials;
d machinery, equipment, tooling and installations;
e underground openings;
f hydraulic disassembling; and
g emergency operations.
In order to work or render services in Brazil, a foreigner needs to obtain a work visa. The
selection of the proper visa depends on the activities that will be executed in Brazil.
The most common types of visa are:
a temporary visas for employees;
b permanent visas for foreigners who will hold management positions as legal
representatives at Brazilian companies;
c technical visas for foreigners who will not have an employment relationship with
a Brazilian entity, but who will come to Brazil at the service of a foreign entity,
perform technical assistance or provide services under technical cooperation
agreements; and
d business visas for foreigners who will only carry out business activities in Brazil.
All types of work visas must be obtained from the Ministry of Labour by the Brazilian
entity hiring the foreign person. When applying for the work visa, the Brazilian
27
Brazil
company will be required to evidence certain requirements, and provide documents and
information about the company, the foreign person and his or her family.
As an exception, citizens from some South American countries are able to work in
Brazil under a special procedure without a work visa.
Pursuant to the Brazilian Environmental Law, mining activities shall be subject to
environmental licensing, which consists of a public administrative proceeding by means
of which the environmental agency evaluates and authorises the location, installation
and operation of a certain project, considering the applicable legal provisions and the
socio-environmental impacts caused by such activity.
In general, the power to issue environmental licences lies with the state
environmental protection bodies, and in some cases, such power may be delegated by
the states to the municipalities. Furthermore, in certain specific situations, the power to
conduct environmental licensing is assigned to the federal environmental protection body.
Environmental licensing encompasses three distinct and successive phases in
which the environmental feasibility of the project is analysed, and the conditions for the
implementation and operation of the project are established. These phases involve the
issuance of three licences:
a a preliminary licence is granted in the planning phase of the project, approving
its location and design, attesting its environmental feasibility, and establishing the
basic requirements and conditions to be complied with in the upcoming phases
of its implementation;
b an installation licence authorises the installation of the project or activity according
to the specifications contained in the approved plans, programmes and projects,
including the measures for environmental control and other conditions; and
c an operating licence authorises the operation of the project after certification of
effective compliance with the provisions set out in the prior licences, and imposes
the measures for environmental control and conditions for its operation.
During the environmental licensing proceeding, the entrepreneur may be required to

submit environmental studies to support the analysis for the required licences. There are
various types of environmental studies, and the environmental agency entitled to decide
on the licensing shall indicate the study that applies to each specific case.

Licensing of projects causing actual or potential significant environmental impacts,
as may be the case with mining projects, requires a prior environmental impact study
(‘EIA’) and its respective environmental impact report. This study comprises a series of
scientific and technical activities, including:
a environmental assessments;
b identification, measurement and prediction of the impacts to be caused by the
project;
c interpretation and valuation of such impacts; and
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Brazil
d the definition of mitigation measures and monitoring programmes to be

implemented by the entrepreneur during the installation and operation of the
activity.
In the course of the proceeding for the preparation of the EIA, all stakeholders potentially
affected by the project have the chance to participate in the environmental licensing
through public hearings. Their contributions shall be addressed in the EIA and must be
evaluated by the environmental agency during the licensing.
Over the past few years, environmental concerns have risen and public authorities
have taken measures to address this. Plaintiffs propose to discuss the socio-environmental
impacts of enterprises and challenge their feasibility by means of lawsuits. Commonly,
those lawsuits involve not only the mining enterprise, but also the environmental agency
in charge of the environmental licensing, and question the assessments made by such
authority in relation to the feasibility of the project and respective measures to mitigate
or compensate its impacts.
Considering this scenario, the technical quality of the environmental studies,
as well as the adoption of a strategic communication management plan involving the
stakeholders potentially affected by the project, are highly advisable to minimise impacts
and delays in the environmental licensing of the project.

Importers and exporters in Brazil must obtain a Registry and Tracking of Performance
of the Customs Supervision registration granted by the Brazilian customs authorities,
which is necessary to access Siscomex (a computerised integrated foreign trade system)
in order to import or export goods.
Some imports may also be subject to automatic import licensing, or to non-
automatic import licensing issued by a competent authority, based on the tariff
classification of the goods listed according to the Mercosur Common Nomenclature
(‘NCM’) code.
Imports subject to licensing must comply with specific requirements. For
automatic import licensing, the importation is automatically approved provided that the
importer submits the requested data in Siscomex. For non-automatic import licensing,
an import licence is required prior to shipment of the goods to Brazil and must be issued
by a competent authority.
The operations related to the importation of new equipment and machinery in
Brazil must be registered in Siscomex for the purpose of customs control, and some
operations also require non-automatic licensing.
When there is no production of similar equipment or machinery in Brazil,
importers may request a temporary reduction of import tax (usually to 2 per cent)
under an exception known as an ex tarifário for a period of two years, renewable for
an equal period, upon request. All imported equipment and machines that match the
full description of the goods approved under the ex tarifário will be subject to this tariff
reduction.
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Brazil
As a general rule, Brazil does not allow the importation of used equipment and
machinery. Imports of these goods are permitted only in exceptional cases (e.g., when
there is no production of similar goods in Brazil, or when a group of used equipment
and machinery that integrates a whole line of production is imported, provided that
the importer negotiates a compensation agreement with the domestic industry) and
require the issuance of an import licence by the Department of Foreign Trade Operations
(‘DECEX’) of the Brazilian Ministry of Development.

The importation and exportation of extracted or processed minerals are subject to the
general Brazilian customs rules.
However, a significant number of extracted or processed minerals are controlled,
and may be subject to the issuance of an import licence or the approval of an export
registry by a competent authority, based on their characteristics, strategic importance
to the country, commitments in international agreements, and potential risks to the
environment and health.
It is only through a careful analysis of the mineral and its correct tariff classification
that it is possible to identify the specific requirements established by the competent
authorities. The main Brazilian authorities that control the sale, import and export
operations involving minerals are:
a the National Commission of Nuclear Energy (‘CNEN’);
b the Ministry of Science and Technology (‘MCT’);
c the Brazilian Environmental Protection Agency (‘IBAMA’);
d the Ministry of Agriculture;
e the National Agency for Sanitary Surveillance;
f the National Petroleum Agency; and
g DECEX.
For instance, the exportation of uranium ores and its concentrates (classified under
NCM code 2612.10.00) is subject to the approval of CNEN and MCT, prior to their
export; and the importation of mercury (classified under NCM code 2805.40.00) is
subject to the issuance of an import licence by IBAMA, prior to its shipment to Brazil.

There are no relevant restrictions for the inflow of funds into and from Brazil, provided
that foreign exchange transactions are legal and supported by the relevant transaction
documents. However, direct foreign investment and certain financial transactions require
prior registration with the Central Bank of Brazil (‘BACEN’).
The registration of foreign capital with BACEN is provided for by Law
4.131/62 and Law 4.390/64, ensuring equal treatment of foreign and national capital.
Implementing regulations on foreign capital matters are enacted from time to time by
the National Monetary Council and by BACEN.
Foreign capital is defined as goods, machinery and equipment, imported to Brazil
without prior foreign capital disbursements, for the production of goods or services, as
well as financial or monetary resources invested in Brazil for application in economic
30
Brazil
activities, provided that, in both cases, such foreign capital belongs to individuals or
legal entities resident, domiciled or with a head office abroad. The term ‘goods’ has been
defined to include trademarks, patents and technology transfers registered with the
National Industrial Property Institute.
BACEN has created and regulates a system for the declaratory electronic
registration of direct foreign investments. Accordingly, direct foreign investments in
Brazil must be registered electronically through the Module RDE-IED of the online
information system of BACEN – SISBACEN.
Capital investments, repatriations and profit remittances related to foreign capital
duly registered with BACEN may be effected at any time without prior authorisation of
BACEN, subject to compliance with applicable corporate and tax legislation.
In addition, the regulations regarding loan transactions provide that both
individuals and legal entities domiciled in Brazil are allowed to enter into loan transactions
with creditors domiciled abroad, and the corresponding funds may be remitted to Brazil
without prior authorisation from BACEN.
Similarly to direct foreign investment, a declaratory electronic registration with
SISBACEN is also required for cross-border loan transactions, as well as for any issuance
of securities abroad, and foreign financing and leasing transactions with a maturity term
of more than 360 days.
In all these cases, the registration must be affected in the Form RDE-ROF of the
SISBACEN system by the borrower or by the issuer of securities, directly or through a
representative, before the inflow of the corresponding funds into Brazil. After such inflow,
the relevant schedule of payments of such loan transaction or issuance of securities must
be registered in order to allow the remittance abroad of payments of principal, interest,
fees and commissions.
There are no specific restrictions or incentives for foreign investment in Brazilian
mining companies.
VI CHARGES
i Overview
The main charge levied against mining activity is the financial compensation for mineral
exploitation (‘CFEM’). Other charges include the annual hectare fee (‘TAH’) and the
control, monitoring and supervision of exploration, mining, extraction and use of
mineral resources fee (‘TFRM’). Moreover, taxes and fiscal obligations are also due.
ii Royalties
CFEM is regulated by Law No. 7.990/89 and Law No. 8.001/90, and it is charged
gradually depending on the mineral resource extracted. Aluminium, manganese and
potassium, for instance, are levied on 3 per cent of the net sales; iron, fertiliser and coal,
2 per cent; and gems and coloured stones, 0.2 per cent.
Pursuant to Article 1 of Law No. 8.001/90, CFEM is due after the total net
sales have been established and once all transport and insurance expenses have been
deducted. The amount collected is divided between the municipality (65 per cent), the
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Brazil
state (23 per cent), the National Fund for Scientific and Technological Development
(2 per cent) and the Ministry of Mines and Energy (10 per cent).
iii Taxes
In the Brazilian mining business, taxes are key, since the Brazilian tax system is not only
complex but also encompasses a number of specific tax provisions. One example of such
specific provisions relates to pricing. Even though transfer pricing rules allow taxpayers
to elect the best method to calculate pricing, in the mining sector companies are obliged
to use international prices as established by major metals exchanges throughout the
world, as metals are commodities.
In addition, mining production is not subject to federal excise tax due to
constitutional exemption. With regards to state VAT, this tax is normally charged at
rates of 17 per cent, 18 per cent or 19 per cent, depending on the state, and exemptions
apply upon exportation. Other taxes include taxes on total revenue that are levied at a
combined rate of 9.25 per cent. Exports are also exempt from these taxes. With regards
to corporate income taxes, these are levied at a combined rate of 34 per cent, and mining
companies are allowed to deduct all the expenses necessary to the operations, including
those related to exploration and studies on the mining capacity.
iv Duties
Landowners hold surface rights and are entitled to receive three different types of
payments from the miner:
a royalties of 50 per cent of the total amount paid as CFEM to the government
(federal, state and the municipal);
b revenues for land occupation and use, negotiated between landowner and miner;
and
c compensation for damages caused by mining activities, negotiated between
landowner and miner.
v Other fees
Other fees include TAH and, in the states of Minas Gerais, Pará (the biggest ore producers
in Brazil) and Amapá, TFRM.
TAH is paid directly to the Ministry of Mines and Energy and due whenever an
authorisation for an exploration request is filed. It is a progressive fee.
Finally, when an authorisation, concession or licence is granted, the landowner is
also entitled to a share of the profits of the mining.
The Brazilian mining market is on the verge of seeing its legal framework for mining
activity completely changed.
The bills of law to be passed and enacted are known as ‘the new regulatory
framework’. Once in effect, the new regulatory framework will change the sector’s
authorities and charges, as well as the mining regimes.
32
Brazil
The current DNPM is set to be replaced by the National Mining Agency, with the
aims of the decentralisation of regulations, a technical approach to specific matters and
an increase in autonomy and operations. New royalty rules and a new Mining Code are
also under discussion.
Expected changes in the new Mining Code include:
a new laws on the better use of mines;
b different regimes for mines with particular public interests;
c new environmental, health and safety rules; and
d a diminishment of mineral rights speculation.
Another interesting innovation is a mining authorisation that will allow miners to extract
sand, clay, gravel or crushed stone under a different regime. No exploration report will be
required, thereby lowering costs significantly.
Finally, an advisory board is expected to be created to set national policies for the
sector, define specific areas for mineral exploration, set general guidelines for obtaining
mining rights and issue normative resolutions.
The mining community is eager to see the new regulatory framework come into
effect. It is believed that the new law may render a fairer treatment of mining exploration
and ultimately match the public interest of having such a strategic economic sector
well regulated.
33
Chapter 4
CANADA
Erik Richer La Flèche and David Massé 1
I OVERVIEW
Canada is a constitutional monarchy with a Westminster-style parliamentary democracy.

Canada is also a federal state in which legislative authority is constitutionally divided
between the federal government of Canada and the provincial governments of Canada’s
10 provinces. The federal government and the provinces are sovereign within their
respective spheres of competence. Canada also has three sparsely populated northern
territories, but they do not enjoy independent constitutional status and derive their
powers from Canada’s federal government. Legislative powers, including those regarding
certain mining matters, may be transferred by the federal government to its territories
through a process known as ‘devolution’. The devolution process as to mining matters is
complete in connection with Yukon, and continues in connection with the Northwest
Territories and Nunavut. The provinces delegate certain powers to cities and other
municipalities, effectively creating a third level of government.
i Division of powers
The constitutional division of powers in Canada is complex, but as a general rule the
federal government has jurisdiction over matters of national and international importance,
while the provinces have jurisdiction over matters of local importance. For example, the
federal government has authority over trade and commerce, while the provinces have
authority over property law, land use and planning and contract law.
ii Legal systems
Two distinct legal systems exist in Canada. In the largely French-speaking province of
Quebec, private law, including property and contract law, is civil and conceptually similar
1 Erik Richer La Flèche and David Massé are partners at Stikeman Elliott LLP.
34
Canada
to that of France and other continental European countries. The other provinces and the
territories are common law jurisdictions that follow the Anglo-American tradition.
iii Mining
Generally stated, the governments of Canada, the provinces and the territories are
favourably disposed to mining and provide a comparatively stable and well-developed
legal framework for mining.
II LEGAL FRAMEWORK
Jurisdiction over mining in Canada is shared between the federal government of Canada
and the provincial governments of the 10 provinces.
Except for uranium, each province has exclusive power over mineral exploration,
development, conservation and management within its territory irrespective of who
is the owner of the land or minerals. For example, on federal lands situated within a
province, while federal law continues to apply to such lands, it is provincial law that
applies to the exploration and development of minerals.
The governments of Canada and the provinces share jurisdiction over a number
of areas, including the environment and taxation.
Finally, the federal government of Canada has exclusive jurisdiction over some
matters that indirectly affect mining, such as foreign investment and export controls.
The federal government also has exclusive power over mineral exploration, development,
conservation and management within the three territories, although much of this power
has been devolved to the territorial administrations.
Laws directly relating to mining deal with property and land-use planning,
mining rights, the regulation of mining activities, taxation and the environment.
The governments of Canada, the provinces and the territories have each enacted
laws relating to mining, effectively creating multiple distinct regimes. While little
conscious effort has been made at standardisation, these regimes have many common
features and as a result provide a relatively consistent legal approach to mining.
i Title (ownership)
In Canada, lands and minerals that have not been sold or otherwise granted are owned,
subject to aboriginal title, by the Crown (i.e., the federal or provincial governments
acting in the name of Her Majesty the Queen).
Until the early 20th century, governments in Canada when granting land to private
parties would often also grant the ownership of minerals under such lands. Governments
have stopped this practice and have since retained the ownership of minerals. The only
exception is the grant of minerals made in recent decades as part of some aboriginal land
claim settlements.
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Canada
This means in practice that, except in the limited instances of private ownership
resulting from land grants or aboriginal ownership resulting from recent land claim
settlements:
a each province owns the minerals located within its territory provided that such
minerals are not otherwise owned by the government of Canada; and
b Canada owns all minerals under federal lands located in the 10 provinces and
three territories, as well as offshore.

In those instances where land ownership does not confer ownership of the underlying
minerals (the vast majority of cases), one person may hold surface rights (e.g., ownership
of land) while another may hold mining rights (e.g., the right to prospect, explore or
carry out extractive and processing activities).
In such cases, the rights and interests of the holder of the surface rights may
conflict with those of the holder of the mining rights. Mining legislation in each province
or territory, as supplemented by the relevant property law, deals with such conflicts.
As a general rule, the exercise of mining rights may not materially interfere with
the use and enjoyment of surface rights. When they do interfere, the surface rights holder
must be adequately compensated. In those instances where financial compensation is
not an adequate remedy and the surface rights holder is a private party, most Canadian
jurisdictions provide for the holder of the mining rights to acquire the surface rights.
Mining rights in Canada fall into two broad categories, namely ‘claims’ or
exploration licences, and mining leases. A claim or exploration licence grants its holder
the exclusive right for a limited period to carry out exploration work within a designated
area. Exploration work may include overburden removal, exploratory drilling and test
ore extraction and milling. A mining lease allows its holder to carry out extractive and
processing activities on a commercial scale.
There are two systems for acquiring mining rights in Canada, the ‘free-entry’
system and the ‘Crown discretion’ system. The former is the prevalent system and is
in force in all provinces and territories with the exception of Alberta, Nova Scotia and
Prince Edward Island, which use the Crown discretion system.
Under the free-entry system, persons interested in carrying out exploration work
may designate or ‘claim’ on a first-come, first-served basis those areas where they wish to
carry out the work. Such designation will be recognised provided that certain formalities
are met and, most importantly, provided that the area is not already subject to another
person’s similar claim or exploration permit, or is otherwise off limits to mining (e.g., the
area is located within a national park). A claim also entitles its holder the right to obtain a
mining lease. Such right is not subject to governmental discretion if all of the conditions
precedent to issuance have been met.
Under the Crown discretion system, persons interested in carrying out exploration
work must apply to the authorities for the requisite authorisation and the authorities
have discretion (within limits) to approve or decline the application.
36
Canada

Various permits and licences are required at every stage of the mining cycle, and are too
numerous to comprehensively list here. However, they include:
a prospecting permits or licences required in most provinces prior to commencing
prospecting work; and
b environmental permits and licences, as well as surface rights permits and licences
necessary to carry out exploration work (particularly if such work is accompanied
by extensive surface disturbance) or extractive and processing activities under
mining leases.

Most provinces require a closure and rehabilitation plan to be filed prior to commencing
mining activities, including in some cases prior to commencing exploration work.
Financial guarantees are also required to cover all or a substantial part of the plan’s costs.
In addition, annual reporting and periodic plan updates may be required.

The federal government and the provinces each have jurisdiction over environmental
matters. The provinces have the broader jurisdiction by virtue of their general
constitutional power to legislate over mineral exploration, development, conservation
and management. The federal jurisdiction covers discrete matters falling within federal
powers, including matters relating to navigable waters, fisheries, migratory birds, species
at risk and the transportation of dangerous goods. Some provinces have entered into
agreements with the federal government to provide for environmental cooperation in an
attempt to avoid unnecessary duplications, delays and costs.
The regulatory regimes of the governments of Canada and the provinces are
broadly similar and comprise environmental assessment and review procedures to
evaluate the environmental, economic, social and cultural impacts of new mining
projects, including their infrastructure, prohibitions on releases into the environment
(air, water and soil), licence and permit requirements, spill-reporting and clean-up
requirements, environmental emergency preparedness, ministerial powers to issue orders
and statutory offences.
Environmental assessment legislation, depending on the size and scope of the
project proposed, can require the proponent to produce an environmental impact
statement describing the project, analysing the project’s likely effects on the environment,
suggesting mitigating measures where mitigation is possible and describing residual
adverse effects where it is not. Projects that could have significant adverse environmental
impacts are usually submitted to an administrative agency for a structured review that
may lead to the issuance of guidelines or general or specific directions. Major projects
are also generally subject to public review by an independent board or panel, which may
produce recommendations or a final decision.
Health and safety issues are addressed through occupational health and safety
legislation as well as specific legislation for certain types of mining (e.g., coal or uranium
37
Canada
mining). Directors and officers have a duty to take all reasonable care to ensure that the
corporation complies with applicable health and safety laws, and can be held personally
liable.
Directors and officers may be held personally liable for the environmental consequences
of a corporation’s activities, particularly where the director is an inside director (that is,
an officer or employee of the corporation or a major shareholder). Secured lenders who
take no action to control or realise on security are generally not liable for their borrower’s
environmental failures.

The Constitution Act, 1982 recognises and affirms the existing aboriginal and treaty
rights of the aboriginal peoples of Canada, which include the First Nations (Indian),
Inuit and Metis people of Canada. In furtherance of such recognition and affirmation,
Canadian courts have imposed on the federal and provincial governments a general duty
to consult any aboriginal group whose aboriginal and treaty rights may be affected by
a governmental decision, including the grant of permits or licences relating to mining
activity. The duty to consult ‘arises when the Crown has knowledge, real or constructive,
of the potential existence of the aboriginal right or title and contemplates conduct that
might adversely affect it’.
Aboriginal rights are communally held rights to use lands and resources in a
manner consistent with ancestral uses of such lands and resources. These rights may not
be sold or otherwise alienated by the aboriginal group to any person other than the federal
government. aboriginal rights confer exclusive use of the land and resources with respect
to the traditional uses. For example, if an aboriginal group has an aboriginal right to hunt
on certain land, then it has an exclusive right to continue to do so on such land.
Courts have determined that the federal and provincial governments can infringe
on aboriginal rights but there must be a compelling reason to do so, and a mine may be a
sufficiently compelling reason. However, before a government infringes on an aboriginal
right it must consult with the affected aboriginal group and, through such consultation,
mitigate any negative impact. The duty to consult is proportionate to the strength of the
aboriginal right or title, and may be satisfied if there has been a reasonable and good-faith
effort made to consult and reach agreement. The courts have made it clear, however, that
the duty to consult does not impose an obligation to reach agreement. No party has a
veto and both parties must act in good faith.
Although the duty to consult is imposed only on governments, it is now normal
behaviour for a mine proponent to be a participant in the process. In some cases (e.g.,
Alberta through its land management and resource development consultation policy and
guidelines), the private party is required to directly interact with the relevant aboriginal
group, but in most cases the private party will want to be involved in order to mitigate
the risk of a legal challenge by an aboriginal group and the adverse effect that such a
challenge could have on a project. Certain provinces, including Ontario and Quebec,
have proposed amendments to mining legislation that would either incorporate the duty
to consult in mining legislation, or specifically recognise that the mining legislation is to
be interpreted in a manner compatible with the duty to consult aboriginal groups.
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Canada
The best mitigant to any challenge by an aboriginal group is the impact benefit
agreement. This agreement is negotiated between an aboriginal group and a mine
proponent. It is a private contract, which typically provides that, in exchange for support
for the project, access to the mine site and local knowledge (among other things), the
mine proponent will, for example, employ and train members of the community, hire
local subcontractors, fund education and vocational training, pay compensation, open
its capital to community investment and follow certain environmental practices. The
impact benefit agreement is typically preceded by a pre-development agreement, which
essentially governs the period prior to construction and commercial production.
iv Additional considerations
Exceptionally, the federal government has extensive jurisdiction over the mining of
uranium. The source of the federal government’s power is its constitutional power to
make laws for Canada’s ‘peace, order and good government’. An independent federal
regulatory agency, the Canadian Nuclear Safety Commission (‘CNSC’), regulates the use
of nuclear energy and materials, and implements Canada’s non-proliferation obligations.
CNSC licences are required for each phase in the life cycle of a uranium mine: site
preparation and construction, operations, decommissioning and abandonment. The
licensing process is comprehensive, and no licence will be issued unless CNSC is satisfied
that the mine proponent is able to protect health, safety, security and the environment,
and to satisfy Canada’s international non-proliferation obligations.

Mining operations and mineral processing within Canada are subject to comprehensive
legal regimes designed to protect health, safety and the environment. These regimes
have numerous permitting, licensing and continuous compliance requirements. While
increased processing of minerals in Canada is a stated objective of most governments in
Canada, governments have rarely imposed secondary or tertiary processing obligations
on mine operators.

The government of Canada has the constitutional power to regulate international trade
and commerce. Canada favours international trade, including in natural resources, and
is reluctant to impede the free flow of goods. While Canada has an import and export
control regime in place, anchored by the Export and Permits Act, this regime serves
primarily to satisfy Canada’s international obligations and interests, including nuclear
non-proliferation and sanctions imposed by the United Nations.

The Investment Canada Act (‘the ICA’)
The direct acquisition of control of a Canadian mining business by a ‘WTO’ investor
would be reviewable under the ICA if the book value of assets of the target is above a
39
Canada
certain threshold. This threshold is revised every year. In 2012 it was C$330 million. For
direct acquisitions where neither the investor nor the persons who control the vendor
are from WTO countries the threshold is considerably lower (C$5 million). Indirect
acquisitions of control of a mining business by or from WTO investors are exempt from
review.
The relevant test for approval under the ICA is whether the acquisition is of
‘net benefit to Canada’, taking into account a number of factors, including the impact
on employment, capital expenditures, technological development and the level of
resource processing in Canada. The approval of the Industry Minister under the ICA is
often conditional upon the foreign investor’s entering into binding undertakings with
the federal government of Canada (usually in force for three to five years) in which
the investor commits to maintaining one or more of Canadian head office operations,
production levels, participation of Canadians in management, employment levels,
research and development expenditures and capital expenditures with respect to the
Canadian business. Uranium mining is subject to special rules. The basic policy of the
government of Canada is to ensure a minimum level of Canadian ownership of 51 per
cent in uranium mining, although lower levels of Canadian ownership are acceptable if
there is de facto Canadian control or no Canadian partners can be found.
Reviewable investments by state-owned enterprises (‘SOEs’) are subject to
guidelines that essentially require the SOE investor to have a commercial orientation
and to meet Canadian-equivalent corporate governance standards.
Of particular significance in the natural resources sector is the fact that the ICA
may apply to a target business that does not have a strong connection to Canada. For
example, if the target business is a mining company with a head office in Canada that
generates all of its revenue outside Canada, its acquisition may still be considered an
acquisition of a ‘Canadian business’ subject to ICA notification or review.
In addition to the foregoing investment review, the ICA now provides for a
‘national security’ review process for the establishment of a new business, the acquisition
of control of a Canadian business (irrespective of the value of its assets), a minority
(non-controlling) investment in a Canadian business and, in addition, the acquisition
of an entity with some Canadian operations. If the Minister of Industry has reasonable
grounds to believe such establishment, acquisition or investment may be ‘injurious to
national security’, the Federal Cabinet has broad remedial powers, including ordering
that the investment not be implemented, requiring the investor to provide undertakings,
and compelling divestiture of a completed transaction.
The ICA regulations

The ICA regulations do not specifically identify business sectors or activities that
raise national security concerns, nor do they identify factors to be considered by the
government in assessing whether an investment may be injurious to national security.
This is further complicated by the broad application a national security review may
have, catching not just large transactions, but also smaller transactions that fall below
the monetary threshold for general review, minority investments that do not constitute
an acquisition of control and transactions where the target may not have a significant
Canadian presence.
40
Canada
Moreover, there is no formal pre-clearance mechanism. Despite this, for

transactions that are notifiable or reviewable under the general investment process, early
filing of a notification or application for review will trigger a 45 day period during which
the Minister is required to issue a notice of review or possible review. In the absence of
receiving such notice, foreign investors can assume that no national security review will
occur. However, in the case of a minority (non-control) investment, the new national
security regulations that came into force in 2009 provide that the Canadian government
has until 45 days after the closing of the transaction to advise that the investment may
be subject to a national security review. This means that the government is not required
to provide guidance prior to closing, raising the possibility of a divestiture order in the
event a national security concern is identified.
The government has signalled that the purpose of the new national security
mechanism is to ‘ensure that Canada’s sovereignty is not threatened’ and that it should
not be ‘mistaken as a form of protectionism’. There are good reasons, including Canada’s
desire to attract foreign investment and not to provoke restrictions on Canadian
investment abroad, to believe that national security will not be expansively interpreted.
Nevertheless, foreign investors will no doubt be monitoring future investments with
interest.
The Competition Act

The Competition Act (Canada) provides for the pre-notification of larger transactions,
namely acquisitions where the following thresholds are exceeded:
a the ‘size of the parties’ threshold, where the parties to the transaction, together
with their respective affiliates, have assets in Canada, or gross revenues from sales
in, from or into Canada, the book value of which exceeds C$400 million;
b the ‘size of the transaction’ threshold, where the book value of the assets in Canada
being acquired, or the gross annual revenue from sales in or from such assets,
exceeds C$77 million, and
c shareholding thresholds in respect of the acquisition of voting shares in a
corporation or of interests in non-corporate entities.
The parties to a notifiable transaction must make a statutory filing and wait for the
required statutory waiting period prior to closing (unless an advanced ruling certificate
or waiver is received). For transactions that raise potentially significant competition
concerns, the Competition Bureau may, within 30 days of receiving the parties’ statutory
filing, issue a ‘second request’ for additional information. Issuing a second request has
the effect of extending the statutory waiting period until 30 days after the parties have
provided all the information specified and have certified compliance with the second
request. This ‘second request’ merger regime was introduced in Canada in March 2009,
and represents a significant departure from the previous regime and a shift towards a
US-style merger review process. However, for transactions that do not raise material
competition concerns, the Competition Bureau will continue to provide comfort
to merging parties either in the form of an advance ruling certificate or a ‘no-action’
letter along with a waiver of the pre-notification filing. In such situations, the parties
may choose to not make a statutory filing but instead to file only a ‘competitive impact
41
Canada
brief ’ explaining the competitive impact of the transaction, in which they would seek an
advance ruling certificate or a ‘no-action’ letter.
VI CHARGES
i Royalties
All provinces and territories (with the exception of Prince Edward Island) impose mining
taxes or royalties. However, there are significant differences among the provinces and
territories. The differences include the calculation methodology, the applicable rate or
rates and the minerals subject to the mining taxes. There are few mining taxes or royalties
based solely on production or extraction. Most mining taxes or royalties are calculated
on a net smelter return, net mine profit or some other net mine proceeds basis where
some but not all costs (e.g., financing expenses) are taken into account. Mining taxes and
royalties are most often deductible for income tax calculation purposes.
ii Taxes
The federal and provincial governments levy income tax. Residents of Canada are subject
to income tax on their worldwide income. Subject to treaty relief, non-residents of
Canada are subject to withholding tax on Canadian-sourced passive income (e.g., interest,
dividends), and income tax on Canadian-sourced business income and capital gains.
Income is determined each year on an accrual basis. Provincial income tax is calculated
in a manner similar to federal income tax (with some province-specific variations), but at
lower rates that vary from 10 to 16 per cent depending on the province.
Mining exploration is fraught with risk and mining production is capital intensive.
To compensate for this, the Canadian tax system has adopted a number of measures
designed to provide tax relief and encourage mining activity, including:
a favourable deduction of Canadian exploration expenses and Canadian
development expenses;
b accelerated depreciation for certain types of tangible property;
c tax credits for certain intangible property expenses;
d 20-year operating loss carry-forward period;
e indefinite carry-forward for capital losses; and
f flow-through share mechanisms that allow corporations to pass along exploration
and development expenses deductions to their shareholders.
iii Other fees

In addition to administrative fees levied pursuant to mining legislation, mining activities
in Canada are generally subject to the same taxes applicable to other businesses. These
will include federal and provincial payroll taxes, custom duties on the importation of
machinery, equipment and ores and concentrates, land transfer taxes, the federal goods
and service and provincial sales taxes, and regional and municipal property taxes.
42
Canada
Canada is a stable democracy with a well-established rule of law and good infrastructure.
It is extraordinarily well endowed with natural resources. It is also a relatively high-
cost jurisdiction. As long as world demand for minerals remains strong and prices
high, Canada will continue to attract strong interest from foreign investors. This is
particularly true in connection with iron (the Labrador Trough between Quebec and
Newfoundland and Labrador), oil sands (Alberta), uranium and potash (Saskatchewan),
nickel (Newfoundland and Labrador), rare earths (Quebec) and chromite (Ontario).
In order to tap into increased demand for minerals, particularly from China and
India, Quebec and Ontario have each recently announced plans to develop their northern
regions. While the plans have many features in common (e.g., consultation with local
populations, including First Nations and Inuit, creation of very large protected areas,
rational land-use planning over a 25-year horizon), the Ontario plan appears at first
glance less centralised than the Quebec one.
Under the Ontario plan, the First Nations appear to have a greater advisory role.
Among other things, they will be asked to provide their perspectives on protection and
conservation for the purpose of land-use planning, and will be directly involved in the
implementation of land-use planning.
The Quebec plan covers a much larger area than the one in the Ontario plan.
Among other things, it contemplates the creation of a development corporation to
facilitate and monitor mining and infrastructure development in northern Quebec
(i.e., all of Quebec north of the 49th parallel), and the creation of several investment
funds to invest in mining ventures and to fund infrastructure.
Both plans will require considerable infrastructure investment. The intent in both
provinces is to develop infrastructure using public-private partnerships and other schemes
where the private sector shares the burden. Some of the infrastructure investments are
considerable. For example, the current estimated cost of the 800-kilometre freight line
required to transport iron ore from new mines under development in the Labrador
Trough is approximately US$5 billion.
Trends being observed in Canada include the desire of Canada’s federal government
and several provincial governments to ensure that environmental impact assessments
and other regulatory process are finite, and cannot be needlessly delayed by third-party
challenges. The view is that there is sufficient knowledge and experience to mitigate most
(if not all) risks posed by mining and infrastructure development, and that the process
is being abused, thus needlessly increasing project costs and delaying development. In
other words, governments across Canada view natural resource development as being
positive, provided that it has the support of local populations; it is compliant with all
laws, particularly environmental laws; and it is financially beneficial to the province or
territory wherein it is located. This represents a considerable change from the situation
of 10 to 20 years ago, particularly in central and eastern Canada.
43
Chapter 5
DEMOCRATIC REPUBLIC
OF THE CONGO
Emery Mukendi Wafwana, Edmond Cibamba Diata, Nady Mayifuila,
Jonathan van Kempen and Eric Mumwena Kasonga 1
I OVERVIEW
The Democratic Republic of the Congo (‘the DRC’) is immensely rich in natural
resources and holds some of the largest deposits anywhere in the world. The country
holds one-third of the world’s reserves of cobalt and one-tenth of its copper reserves and
contains 80 per cent of world reserves of columbite-tantalite (‘coltan’). The DRC holds
the largest known reserves of diamonds and the largest undeveloped gold deposits in the
world. The country also holds significant reserves of other minerals such as zinc, iron, tin
and uranium. In 2008, the country’s share of world production amounted to 45 per cent
for cobalt, 30 per cent for industrial diamonds and 2 per cent for copper.2
Historically, and after years of armed conflict and political turmoil, foreign
investors are increasingly attracted by natural resources projects in the DRC, particularly
in the mining sector. In order to engage in mining activities, foreign investors can
either apply for and obtain mining rights from the mining registry (‘CAMI’), in which
case they will need to explore to find mineral deposits, or they can enter into joint-
venture agreements with mining title holders, generally state-owned companies such
as Gecamines, which holds areas within which mineral substances have already been
identified. Mining titles available in the DRC are research permits (‘PRs’), exploitation
permits (‘PEs’), and exploitation permits for small-scale mines (‘PEPMs’), and tailing
exploitation permits (‘PERs’). According to the general director of CAMI, there are
exploration activities on 30 per cent of the surface area of the country, through a total
1 Emery Mukendi Wafwana is founding partner, Edmond Cibamba Diata is a partner, and
Nady Mayifuila, Jonathan van Kempen and Eric Mumwena Kasonga are associates at Emery
Mukendi Wafwana & Associés.
2 Promines, ‘Artisanal mining exploitation in the DRC’, Pact Inc, June 2010, p. 21, www.
pactworld.org/galleries/resource-center/PROMINES%20Report%20English.pdf.
44
Democratic Republic of the Congo
of 3,479 research permits; exploitation activity covers 2 per cent, with 462 exploitation
permits and 88 exploitation permits for small-scale mines. Artisanal exploitation covers
only 0.06 per cent of the country, and 9 per cent is reserved for geological research
undertaken by public entities.3
II LEGAL FRAMEWORK4
The DRC is a civil law country, whose private law is based on the 1804 Napoleonic
Civil Code. The general characteristics of the DRC legal system are very similar to legal
systems in force in other French-speaking African countries.
At the apex of the legal system, the Congolese Constitution of 18 February 2006
is the first source of law, which sets fundamental pillars for the regulation of mining
activities. It also provides that the management and regulation of the state’s ownership
is determined by law.
In accordance with the Constitution, the DRC legislator enacted the Law
No. 007/2002 of 11 July 2002 on the Mining Code (‘the Mining Code’) and the
implementation measures of the Mining Code provided in Decree No. 038/2003 of 26
March 2003 on Mining Regulations (‘the Mining Regulations’). Both the Mining Code
and Mining Regulations form the law governing mining activities (together, ‘the mining
legislation’).
In accordance with Article 215 of the Constitution, international treaties and
conventions duly concluded take precedence over national law, provided they are also
applied by the other contracting party. For example, at the international level, the DRC is a
member of numerous international organisations such as the World Trade Organization,
the World Bank Group (including the International Financial Corporation), the
Multilateral Investment Guarantee Agency (‘MIGA’) and the Convention establishing
the International Centre for Settlement of Investment Disputes (‘ICSID’). Furthermore,
the DRC has concluded bilateral investment treaties (‘BITs’) with several countries,5
including the only double-taxation treaty in force with Belgium.6
At the regional level, the DRC is currently a member of the African Union, the
Southern African Development Community, the Economic Community of Central
African States, and the Common Market for Eastern and Southern Africa, and the
International Conference on the Great Lakes Region. In addition, the DRC is a member
3 Jean Felix Mupanda, General Director of CAMI, ‘Prospects for investment in the mining
exploitation in the DRC’, speech at Mining INDABA, Cape Town, 2011.
4 Emery Mukendi Wafwana, Droit minier Vol. I, principes de gestion du domaine minier, Bruylant,
Kinshasa, 2003.
5 BITs concluded with the United States, Switzerland, France and Germany are currently in force
(see UNCTAD, www.unctadxi.org).
6 The double-taxation treaty between the DRC and Belgium was signed on 23 May 2007 and
ratified in Belgium on 13 February 2009. By Law No. 11/023 dated 24 December 2011, the
DRC authorised the ratification of the double-taxation treaty, which entered into force on 24
December 2011, and is applicable to fiscal year 2013.
45
of the Organization for the Harmonization of Business Law in Africa (‘OHADA’).7 It

completed its accession process to OHADA by filing the instrument of accession with the
Government of the Republic of Senegal on 13 July 2012. Consequently, in accordance
with Article 53, Section 2 of the OHADA Treaty, all provisions thereof, regulations and
uniform acts (‘OHADA Law’) came into force in the DRC 60 days after the effective
filing of the instrument of accession (12 September 2012).
Mining activities in the DRC may also be affected by foreign legislations such as
Section 1502 of the US Dodd-Frank Act imposing new disclosure requirements for US
public companies that use conflict minerals from the DRC or adjoining countries;8 the
US Foreign Corrupt Practices Act of 1977;9 or the UK Bribery Act of 2010.10
Finally, mining activities are subject to international voluntary principles that
promote transparency, accountability and good practice. For example, the DRC has
been granted the status of candidate country for the Extractive Industries Transparency
Initiative (‘EITI’) until 1 March 2013, by which time the DRC will be required to have
completed an EITI validation that demonstrates compliance with the 2011 edition of
EITI Rules.11
In the DRC, mining activities are regulated and managed by several political and
administrative entities, as well as technical services that assist such entities.12 Political
entities involved in the implementation of the mining legislation are the President of
the Republic13 and the Minister of Mines,14 and administrative entities are provincial
7 OHADA is an international organisation, created by a Treaty signed in Port-Louis, Mauritius,

on 17 October 1993, in order to strengthen the African legal system, by enacting a secure legal
framework for the conduct of business in Africa. The current member states of OHADA are
Benin, Burkina Faso, Cameroon, Central African Republic, Comoros, the Republic of the
Congo, the Democratic Republic of the Congo, Chad, Ivory Coast, Gabon, Guinea, Guinea
Bissau, Equatorial Guinea, Mali, Niger, Senegal and Togo.
8 Section 1502 of the US Dodd-Frank Act was adopted on 22 August 2012 (www.sec.gov/rules/
final/2012/34-67717.pdf ).
9 US Foreign Corrupt Practices Act of 1977 (www.justice.gov/criminal/fraud/fcpa/docs/fcpa-
english.pdf ).
10 UK Anti-Bribery Act 2010, which came into force on July 2011 (www.legislation.gov.uk).
11 Extraction Industries Transparency Initiative (http://eiti.org/DRCongo).
12 Edmond Cibamba Diata, Cours de droit minier, Université Libre de Kinshasa, 2006–2007.
13 According to Article 9 of the Mining Code, the President of the Republic has the power to
enact the Mining Regulations to implement the Mining Code, to classify, declassify or reclassify
mineral substances as mines or quarry products, to declare, classify or declassify an area as
a prohibited area for mining activities or quarry works or a mineral substance as a reserved
substance and to confirm the reservation of a deposit which is subject to tender pursuant to
a ministerial decree. The President may exercise his or her power under the Mining Code by
decree after having obtained the opinion of the Geology Directorate or CAMI.
14 Article 10 of the Mining Code defines the powers of the minister of mines under the
Mining Code. Its power includes granting or refusal and cancellation of mining; granting of
authorisation to export raw mineral substances; and approval for constitution of mortgages.
46
governors and heads of the provincial authority of mines.15 Technical services to the
mining administration are provided by CAMI, which is a state institution endowed with
legal personality and financial autonomy under the supervision of the Minister of Mines
and minister of finance. CAMI is responsible for registering applications for mining
rights, granting of mining rights, withdrawal, cancellation or expiration of mining rights
and transformation or lease of mining rights.16 In addition, other administrative entities
intervene in the implementation of the Mining Code within well-defined limits, such
as the Geology Directorate,17 the Mines Directorate18 and the Mining Environment
Protection Directorate.19
i Title
The DRC state exercises its permanent sovereignty over soil and subsoil. This principle
is enacted by Article 9 of the Constitution, which provides that ‘the State exercises its
permanent sovereignty over the soil, subsoil, water, forests, air spaces, river, lake and sea
as well as over Congolese territorial seas and continental shelves’. This principle of state
ownership is also recognised in Article 3, Section 1 of the Mining Code, which states
that ‘the deposits of mineral substances, including artificial deposits, underground water
and geothermal deposits on surface or in the subsoil or in water systems of the National
territory are the exclusive, inalienable and imprescriptible property of the State’.
The ownership of the deposits of mineral substances constitutes a real property
right that is separate and distinct from the rights resulting from the surface area.
Therefore, holders of surface rights may not claim any right of ownership over the
deposits of mineral substances contained below the surface area, whereas holders of
mining exploitation rights acquire ownership over all extracted products.
ii Mining rights
The mining legislation envisages different mining rights: PR; PE; PER; and PEPM.20
Mineral prospecting may take place throughout the entire country, except for in certain
protected or restricted areas.21 Any person that wishes to undertake mineral prospecting
must make a preliminary declaration to CAMI. Mining rights are granted following a
procedure set out in the Mining Code.22
All applications for mining rights must be made by eligible individuals or entities.
In accordance with Article 23 of the Mining Code, the following are eligible for mining

20 Article 1.14 of the Mining Code.
47
rights: any individual of age who is a Congolese national or of foreign nationality; any
Congolese legal entity with a registered office in the DRC whose corporate purpose is
mining activities; any foreign legal entity; or any entity carrying out scientific activities.
Artisanal mining is, however reserved to Congolese nationals.23
All applications for mining rights must fulfil the following:
a information must be accurate, required by Article 35 of the Mining Code;
b payment of filing costs, proof of which must be supplied;
c compliance with Articles 28 and 29 of the Mining Code, as to the form and
location of the perimeter;
d the entire perimeter applied for under a PE must be located within the perimeter
of the PR; and
e proof of the applicant’s registration with the new commercial registry, if the
applicant is subject to this legal obligation.24
Once applications are filed and accepted, they are subject to three evaluations: cadastral
evaluation undertaken by CAMI, technical evaluation undertaken by the Mines
Directorate, and environmental evaluation undertaken by the services responsible
for the protection of the mining environment. CAMI centralises the opinions issued
from such evaluations and submits them to the competent authority. Subsequently, the
competent authority renders its decision and submits it to CAMI. In case of a favourable
decision, CAMI registers them, notifies the decision to the applicant, and displays it in
the premises set out in the Mining Regulations. In the event the competent authority
fails to submit its decision within the required time, the decision to grant the mining
right will be deemed to have been granted.
When a decision grants a mining right, CAMI issues a mining title to the applicant
evidencing the right, providing that the relevant annual surface rights have been paid.
The annual surface fees per quadrangle 25 must be paid for the first year, at the latest 30
days after the rights have been granted. Failure to pay within this time frame will render
the mining rights null and void.26
Research permits
A PR is a real property and exclusive right, conveyable and transferable. The right
is evidenced by a mining title called a ‘research certificate’. It is valid for four years,
renewable twice for periods of two years for precious stones, and for five years, renewable
twice for periods of five years for other mineral substances. An entity and its affiliated
companies cannot hold more than 50 PRs.
To apply for a PR, an applicant must follow the procedure set by Articles 35 to
42 of the Mining Code and needs to attach proof of minimum financial capacity to its

25 A surface area of 84,655 hectares.
48
applications; this must be equal to 10 times the total amount of the annual surface rights
fees payable for the last year of the first period of the PR applied for.
The holder of a PR is entitled to obtain renewal of its PR provided that it has not
breached its obligations to maintain the validity of the permit; it submits an exploration
work report for the prior term of validity of its title with the results obtained; and the
renewal application is filed with CAMI at least three months before the PR expires.
At each renewal, the holder of the PR automatically relinquishes 50 per cent of the
perimeter covered by its permit.

Exploitation permits
A PE is a real property and exclusive right, conveyable and transferable. The right is
evidenced by a mining title called an ‘exploitation certificate’. A PE grants its holder the
right to extract the mineral substances for which it is specifically granted. Its term of
validity is 30 years, which is renewable for several terms of 15 years.
To apply for a PE, an application must be filed with CAMI along with the
following attachments:
a a copy of the valid research certificate;
b the report on the outcome of the research work with regard to the nature, the
quality, the volume and the geographical situation of the mineral substances;
c the feasibility study for the exploitation of the deposit;
d the technical framework plan for the development, construction and development
of the mine;
e the environmental impact study (‘EIS’) and the environmental management plan
of the project (‘EMPP’); and
f the report on consultations held with the authorities of the local administrative
entities as well as representatives of the local communities.
An application for a PE will be granted provided that the following conditions are
fulfilled: (1) proof of the existence of a deposit that can be economically exploited, (2)
proof of the applicant’s financial capacity in view of the contemplated exploitation, (3)
prior approval of the draft EIS and EMPP and (4) transfer to the state of 5 per cent of
the shares in the registered capital of the company applying for the PE.
Tailing exploitation permit

A PER is also a real property and exclusive right, conveyable and transferable. The right
is evidenced by a mining title called a ‘tailing exploitation certificate’. It is valid for five
years, and is renewable for several times. The applicant for an exploitation of tailings
prepares the application in accordance with Articles 38 to 42, as complemented by
Articles 74 to 75 of the Mining Code, and is filed with CAMI. The provisions relating
to the filing, instruction, granting, refusal, expiration, renewal and revocation of the PE
also apply to the PER.
Exploitation permit for small-scale mines

A PEPM is a real property and exclusive right, conveyable and transferable and grants its
holder the right to exploit a small mining deposit . The right is evidenced by a mining
title called ‘small-scale mining certificate’ and its term of validity is variable, but may not
49
exceed 10 years, renewals included.27 In addition to the conditions related to the granting
of a PE, the granting of a PEPM is subject to the demonstration of the existence of a
deposit that would not allow economically viable industrial exploitation. In addition, any
foreign national wishing to apply for such a right must set up a Congolese corporation in
association with one or more Congolese nationals, whose participation in the capital of
the corporation must be at least than 25 per cent.28 The provisions related to the filing,
instruction, granting, refusal, expiration, renewal and revocation of the PE apply also to
the PEPM.29

There are no additional permits and licences required for title holders to conduct mining
activities.

The holder of mining rights must provide a financial security for the rehabilitation of
the environment in order to guarantee compliance with the environmental obligations,
in particular to cover the costs of the environmental rehabilitation measures detailed in
the environmental plan. The details of the financial security are specified in the Mining
Regulations.

The mining legislation contains provisions that regulate the environmental, health and
safety aspects of mining activities. Environmental aspects are regulated by the Mining Code
and the Mining Regulations. For safety, hygiene and protection measures, the Mining
Code provides in Article 207 that such measures will be enacted by specific regulations.
International development initiatives such as the EITI (see above) and the Equator
Principles also affect environmental, health and safety aspects of the mining activities in
the DRC.
The environments obligations of title holders depend on the type of mining title.
Prior to commencing exploration works, holders of a PR must prepare a mitigation
and rehabilitation plan that needs to be approved by the DPEM.30 All applicants for
exploitation permits (PE, PER and PEPM) need to submit an EIS and an EMPP,
which need to be approved beforehand by the DPEM.31 The details of the different

29 Articles 105 to 108 of the Mining Code.
50
environmental plans that need to be prepared and approved beforehand are specified in
the Mining Regulations.
The holder of a mining right will be liable for any environmental damages caused
by its activities only to the extent that it did not comply with the terms of its approved
environmental plan or violated any environmental obligations under the Mining Code
or title XVIII of the Mining Regulations.
A title holder is also subject to other environmental obligations such as (1) filing
an annual report in accordance with Article 458 of the Mining Regulations describing,
inter alia, the executed mining works and its environmental effects, (2) performing an
environmental audit in accordance with articles 459 and 460 of the Mining Regulations,
and (3) conducting an environmental audit in the case of closure of the mining site in
accordance with Article 473 of the Mining Regulations.
Furthermore, if mining rights are transferred, the transferor and the transferee
must carry out an environmental audit of the mining site. In accordance with Article 182
of the Mining Code, the title holder who acquires its mining right by transfer will assume
the environmental obligations with regard to the DRC on behalf of the transferor, unless
the transferor has obtained a certificate of discharge of its environmental obligations.

The DRC mining legislation does contain not specific regulations for the protection of
local communities in relation to the exercise of mining rights, but if a mining project
requires the relocation of local communities, this would need to be analysed under the
environmental plan.

As previously explained, deposits of mineral substances are the exclusive property of the
state, which grants to exploitation right holders the ownership of the mineral substances,
which are moveable assets, governed by civil and commercial law.32 Furthermore,
exploitation right holders have the exclusive right to dispose, transport and freely
commercialise the marketable products originating from their perimeters.33
The exploitation right holders are entitled to undertake concentration,
metallurgical or technical processing and transformation operations of mineral substances
extracted from deposits located within their perimeters without the need for any
additional authorisation.34 Subject to Article 10(J) of the Mining Code, the processing
or transformation of mineral substances may be conducted either by the exploitation
right holder or by a processing or transformation entity.35 Any person or entity that
wishes solely to transform mineral substances must apply for and obtain a processing or

33 Articles 64 line d and 88 of the Mining Code.
34 Articles 64 and 82 of the Mining Code.
51
transformation licence, which is governed by specific legislation.36 Although the Mining

Code refers to this specific legislation, this matter is in fact governed by Ministerial Decree
No. 3163/CAB.MIN/MINES/01/2007 of 11 August 2007 regulating the activities of
processing entities and entities for transformation of mineral substances.

Exploitation right holders are entitled to sell their products to customers of their choice
at prices freely negotiated on the domestic or foreign markets.37
Furthermore, exploitation right holders are generally able to freely export all of
their production on international markets of their choice, but they must sign a document
governed by the regulations on change.38 Exportation of raw mineral substances outside
the DRC is, however, subject to an authorisation from the Minister of Mines. Such
authorisation will be granted only if the holder demonstrates that it is not possible to
process or treat the substances in the DRC at a cost that is economically viable for the
mining project, and it also shows the advantages for the DRC if the authorisation is
granted.39

Foreign investments are, in principle, regulated by the Investment Code created by Law
No. 004/2002 of 21 February 2002, which sets the conditions, advantages and general
rules applicable to investments made in the DRC, but mining activities are excluded from
its application and are instead regulated by the mining legislation, which does not subject
foreign investment in the mining sector to any authorisation from the DRC government.
There are no restrictions on the import of capital or on the use of proceeds from
the export or sale of mining products and their conversion into Congolese francs;40
however, the Mining Code specifies that the holder who exports mining substances must
repatriate into its main DRC national account a minimum of 40 per cent of the receipts
from exportation. After having paid the corresponding taxes and charges, the holder
may then transfer revenue and capital for the benefit of non-residents, subject to certain
restrictions. First, the payment for any goods and services to foreign supplies are allowed
only if the holder was unable to find the same goods or services in the same quantity,
quality or price, and under the same conditions, on the Congolese market. Second, the
repayment of advances on shareholders’ accounts are authorised provided that the ratio
of the borrowed funds against stock capital does not exceed 75:25.41
In relation to the financing of mining projects, Articles 543 and 544 of the
Mining Regulations provide that holders are authorised to conclude one or more loan
agreements with foreign lenders provided that the terms and conditions of the loan

38 Article 266, Section 1 of the Mining Code.
52
agreement are similar or more attractive than the ones provided under normal domestic
market conditions. The holder must, however, file three copies of the loan agreement
with the mines directorate within 18 business days of the date of the signature of the loan
agreement for its review.
VI CHARGES
The Mining Code creates a specific, preferential and exhaustive tax and customs regime
applying to mining activities in the DRC. The tax regime is specific because it creates
certain taxes that are specific to mining activities, such as mining royalties or annual
surface area tax. It is preferential because it provides for reduced tax rates and exemptions
with comparison to the standard tax regime. It is also exhaustive because it lists all taxes,
royalties, duties or other fees applicable to mining activities to the exclusion of any other
form of taxation, except more favourable tax or customs provisions entering into force
after the Mining Code.42
The tax and custom regime of the Mining Code is applicable to holders of mining
title, their affiliate companies43 and subcontractors44 that carry out mining activities in
accordance with a contract concluded with the holder of the mining title.45 Furthermore,
the Mining Code provides for specific tax incentives to strengthen the competitiveness of
the mining sector in the DRC.
The tax and customs regime applicable to mining activities is also protected by
a stability clause. In this regard, Article 276 of the Mining Code provides that the state
will guarantee that the provisions of the Mining Code can only be modified if – and
only if – the Mining Code itself is the subject of a legislative amendment adopted by the
parliament. Furthermore, any amendment to the Mining Code adopted by parliament
will only come into force 10 years following its enactment, but more favourable tax and
customs provisions enacted after the date of the Mining Code are immediately applicable
to mining activities as of the date of their entry into force.46
42 Articles 220 and 221 of the Mining Code.

43 By affiliate companies, the Mining Code means, under Article 1.47, a company that holds
directly or indirectly more than 50 per cent of the voting rights in the company holding the
mining title or in the company in which voting rights are held directly or indirectly by the
holder.
44 By subcontractors, the Mining Code means, under Article 1.48, any person supplying
equipment or carrying out works or providing relevant services to the mining title holder within
the context of its mining activities pursuant to its mining title and, in particular, including
the construction of industrial, administrative, sociocultural and other types of infrastructure
necessary for the project, as well as all other services directly related to the mining project.
53
i Royalties
The exploitation right holder is subject to mining royalties on all commercial products as
of the effective date of commencement of the activity.47 Mining royalties serve two goals:
(1) to provide the DRC state with income at the outset of the exploitation, even in the
case that the exploitation makes no profits; and (2) to contribute to the development of
local communities, as part of the royalties are redistributed to communities surrounding
the mining site. Mining royalties are 0.5 per cent for iron or ferrous metal; 2 per cent
for non-ferrous metals; 2.5 per cent for precious metals; 4 per cent for precious stones; 1
per cent for industrial minerals; and 0 per cent for standard construction materials. Solid
hydrocarbons and other substances are not specifically mentioned.48
Mining royalties are due upon the sale of the products and are calculated on the
value of sales made, less the costs of transport, quality control analysis of the commercial
products, insurance and any costs related to the sale transaction.49
Mining royalties are considered as deductible expenses for the determination of
corporate taxable income. Furthermore, according to Article 243 of the Mining Code,
holders of mining titles that sell their products to local processors benefit from a tax credit
equal to one-third of the mining royalties paid on the products sold to a transformation
entity located in the DRC.
ii Taxes
In general, taxes are direct and indirect. Direct taxes are subdivided between (1) asset-
based taxes, which include tax on real property and on vehicles and (2) income-based
taxes, which include tax on rental income, tax on interest and dividends, and professional
taxes, which comprise tax on profits and tax on salaries.
In the case of asset-based taxes, the holder of mining title is liable for tax on real
property in accordance with the general tax law, except on buildings located inside the
perimeter subject of a PR or PE, which are exempt from the tax on real property.50 The
holder of a mining title is liable for tax on vehicles in accordance with the general tax law,
except on vehicles used exclusively for mining activities, which are also exempt.51
The holder of a mining title is liable for the tax on rental income in accordance
with the general tax law, which sets the tax rate at 22 per cent. The holder of a mining
title is obliged to withhold the tax on interests and dividends in accordance with the
general tax law, which sets the tax rate at 20 per cent; however, providing that certain
conditions are met, interest paid by the holder by virtue of loans contracted in foreign
currency abroad are exempt, and, dividends and other distributions made by the holder
of mining titles are taxed at the preferential rate of 10 per cent.52
47 Article 240 of the Mining Code; Articles 523 et seq. of the Mining Regulations.
54
In terms of professional taxes, the holder is liable for a tax on profits, which is
payable on net profits made through its operational activity in the DRC. The Mining
Code provides for a preferential rate of 30 per cent on net profits instead of the general
tax law, which sets the rate at 40 per cent. Net profits consist of profits less all costs
incurred in the production of income during the year, based on general law and the
Mining Code. Specific provisions of the Mining Code provide for tax incentives that will
reduce payable professional taxes such as depreciation up to 60 per cent of the purchase
price of an asset during the first year,53 the potential to carry forward tax loss up the fifth
year following the year of the loss,54 and research and development expenses may be
capitalised during the exploration period and amortised for the first two years following
the granting of the PE.55
Furthermore, the mining title holder is obliged to withhold the tax on salaries in
accordance with general tax law. The mining title holder is also obliged to withhold the
exceptional tax on salaries for expatriate employees at a preferential rate of 10 per cent
instead of the standard rate of 25 per cent.
As an indirect tax, domestic turnover tax (‘ICA’) is payable on the gross amount of
sales of products or services made locally. The seller or service provider is the tax debtor and
adds the amount of ICA to its invoices and repays the collected ICA to the tax authority.
Different rates apply. First, for sales and services rendered by the mining title holder, the
following rates apply: products sold by the mining title holder to a transformation entity
located in the DRC are exempt from ICA; any other sales of products by the mining title
holder within the DRC are taxed at a preferential rate of 10 per cent; services rendered
by the mining title holder are taxed at the standard rate of 18 per cent. Second, for sales
and services rendered to the mining title holder, the following rates apply: a preferential
rate of 5 per cent is a payable by the holder for services rendered to it in connection with
its corporate purpose; and purchases of goods manufactured in the DRC and linked to
the mining activities of the holder are taxed at the rate of 3 per cent.
iii Duties
The Mining Code sets a preferential regime for import duties. In order for the mining
title holder to benefit from this preferential regime, a list, including the number and the
value of the moveable property, equipment, vehicles, mineral substances and other inputs
(which are governed by the preferential regime), needs to be approved by a joint decree
issued by the ministers of mines and finance before commencing the work.56 Prior to the
effective commencement of the exploitation work, importation of goods and products
that are strictly for mining use are subject to import duties at the preferential rate of
2 per cent, but from the effective commencement of exploitation work, importation of
goods and products that are strictly for mining use are subject to import duties at the
preferential rate of 5 per cent. Imports of fuels, lubricants, reagents and consumer goods

55
destined for mining activities are subject to import duties of 3 per cent throughout the
duration of the mining project.
Goods imported under the preferential regime may not be transferred to any
other person without the prior consent of the customs authorities, otherwise the avoided
import duties will need to be paid.57
There are no export duties for the exportation of commercial products in relation
to mining projects;58 however, some royalties and fees are due as remuneration for services
rendered in connection with the export of commercial products or goods for temporary
export for improvement, but may not exceed 1 per cent of their value.
iv Other fees
To cover the costs for the management of mining titles provided by CAMI, mining title
holders are also required to pay fees on the surface area of the mining concession.59 As
provided in Article 196 of the Mining Code, non-payment of the annual surface area
fees in a timely fashion may affect the validity of the mining title. For holders of PRs,
the rates are in Congolese francs, equivalent to US$0.02 per hectare for the first year, to
US$0.03 per hectare for the second year, US$0.035 per hectare for the third year and
US$0.04 per hectare for subsequent years. For holders of PEs, the fees are in Congolese
francs, equivalent to US$0.04 per hectare for the first year, US$0.06 per hectare for
the second year, US$0.07 per hectare for the third year and US$0.08 per hectare for
subsequent years.
The mining sector in the DRC is currently experiencing a period of growth. Following
the adoption of the Mining Code in 2002, the mining authorities have been deliberating
on ways to contribute to the development of the mining sector in order to achieve the
best socio-economic outcomes.
The changes one should expect to see in a near future are related, inter alia, to:
a ways of increasing mining tax revenue in the short term;
b ways of achieving better implementation of the mining legislation;
c strict application of the principles and criteria of the EITI;
d strengthening capacity building for the administrative and specialised services of
the Ministry of Mines to ensure more efficient management of mining rights;
e ensuring control of research activities and mining exploitations;
f provide efficient technical assistance and training to artisanal miners;
g increasing the mining sector’s contribution to the country’s economic development,
through restructuring of state companies;
h improvement of social and environmental conditions in mining areas.

56
After 10 years of existence, the mining legislation will be revised this year. The goal
behind such revision is, according to the DRC mining authorities, to improve it and
correct its shortcomings.
Areas affected by the review will include handling of mining titles and mining
rights, social responsibilities of mining companies, and the percentage compensation to
be paid to the DRC state (the idea being to increase the state participation in mining
companies to compensate for all the fiscal and customs incentives given to mining
companies). The DRC believes60 that this is the only way for it to recover what it loses in
terms of taxes and customs fees not collected because of fiscal exemptions.
The mining authorities also wish to correct a few issues such as difficulties of
local communities in accessing mining properties; inadequate data on geological
infrastructure; the absence of a policy for promoting investment in the absence of
objective conditions of implementation or monitoring of exploration and exploitation
projects; and inadequate tax collection systems.
The mining authorities would also like to see more reforms that address the
proper application of legal principles to improve the governance of the sector and its
contribution to socio-economic development at both national and local levels.
60 Jean Felix Mupanda, General Director of CAMI, speech held at IPAD Mining and
Infrastructure, 2010, Kinshasa, DRC.
57
Chapter 6
ECUADOR
Jaime P Zaldumbide and Jerónimo Carcelén 1
I OVERVIEW
Although mining has taken place in Ecuador since colonial times, the exploitation of
mineral deposits has not played a major role in the country’s economic development.
Over the past five years, however, two very large deposits have been found in
the Ecuadorean Amazon region: a gold deposit (Aurelian-Kinross) and a copper deposit
(Ecuacorrientes, Tongling Nonferrous Metals Group Holdings Co and China Railway
Construction Corp). They involve international projects and, according to the holders of
the mining concessions, require substantial investment in the mining sector.
In connection with these two projects, negotiations for development and
exploitation contracts have concluded with Ecuacorrientes but are ongoing with Kinross;
other companies holding smaller projects are on the list to start negotiations once the
Kinross contract has been executed.
II LEGAL FRAMEWORK
A new Mining Law was enacted in January 2009. The General Regulations to the
Mining Law, the Environmental Mining Regulations and the Regulations for Small-
Scale Mining were issued in November 2009.
The Ministry of Non-Renewable Natural Resources is the authority responsible for
mining planning, and the Mining Regulation and Control Agency is the administrative
entity responsible for supervising mining activities.
1 Jaime P Zaldumbide is a senior partner at Pérez Bustamante & Ponce and Jerónimo Carcelén
is a senior partner of Carcelén & Cia – Abogados.
58
Ecuador
The new law created the state-owned Mining Enterprise, a public entity that
carries out mining activities either by itself or in associations or strategic alliances with
state-owned or private companies.
The Ministry of Non-Renewable Natural Resources is in charge of negotiating the
contracts for the exploitation of minerals.
Provincial or municipal authority does not overlap with the national regulations,
although they do have political influence on exploration and exploitation areas. Therefore,
they must be taken into account within the general business development strategy of the
concessionaires.
In the past, Ecuador has entered into international investment treaties with
different countries whereby it intended to protect the investments of nationals of the
signatory countries. Under such treaties, international arbitration was the selected dispute
resolution mechanism. Pursuant to the principles enshrined in the new Constitution
approved in 2008, however, the Ecuadorean state cannot submit its disputes to a foreign
jurisdiction; therefore, all the treaties providing for international arbitration are being
terminated. The Mining Law only recognises the validity of arbitration proceedings
carried out in Latin America; currently, the jurisdiction stipulated in oil and mining
contracts is Chile under UNCITRAL rules and Ecuadorean law.
i Title
The subsoil is the exclusive property of the Ecuadorean state; it may issue a ‘mining title’
(a formal document equivalent from a legal standpoint to a concession) through the
Ministry of Non-Renewable Natural Resources, which enables its holder to carry out
exploration activities. Exploration and exploitation of minerals are open both to the state
and to private parties.
The initial exploration period may last for up to four years upon the prior
authorisation of the Ministry of Environment through the issuance of an environmental
licence (granted after approval of an environmental impact assessment (‘EIA’) and
management plan). Thereafter, the advanced exploration period may last four additional
years and the economic evaluation period may last for two years.
If the schedules are met, the holder of the mining title has the exclusive right
to pass to the next mining phase. In order to carry out exploitation activities, a service
contract or exploitation contract must be entered into by the state and the concessionaire.
Under service contracts, contractors may only receive compensation or a fee from the
government for the services performed. Although there are no precedents in the mining
area regarding this type of contract, this payment may be received in cash or in kind.
Under exploitation contracts, contractors assume the risk and make their own
investments, and pay royalties and taxes as established in the relevant laws. Those
contracts pertain to all minerals located in the concession area and will establish the legal
framework for development, construction and operation of mining projects.
59
Ecuador

Mining rights are granted by the Ministry of Non-Renewable Natural Resources. In
order to file for a mining right the company must be registered with the Ministry. Mining
concessions for mineral exploration and exploitation are granted through public auction
for areas offered by the Ecuadorean state.
Mining rights are independent of the title to the land on which the concession
is located. Easements may be established for access, construction of camps, electric line
routes, etc. The term of such easements will be concurrent with the concession period.
Mining rights are protected by the Constitution in terms of judicial security of
administrative acts granted by public authorities. There is a restriction on activities by
foreign companies in national border areas, for national security reasons.

Pursuant to the current laws, mining companies must first obtain an authorisation for
the use of water, which is granted by the National Water Secretariat. Permits are usually
granted for the duration of the mining project. Maintenance of rights is subject to payment
of yearly water use fees. There are no current projects for desalination plants for treatment
or self-supply of water or other water management mechanism introduced.

According to the Environmental Regulations for Mining Operations, prior to the closing
and abandonment of a mining property, the contractor or concessionaire must conduct
and environmental audit, which should contain the environmental liabilities found in
the property and the remediation work to be conducted, including social works.
A performance bond needs to be in place guaranteeing the compliance of
the remediation work, which must be submitted for the approval of the Ministry of
Environment.

According to the Constitution and the law, EIAs and environmental audits are mandatory
for all projects that may have an impact on the environment.
Also, extractive industry is forbidden within the territories included in the
National Protected Areas System (which includes national parks, nature reserves,
indigenous territories and protected forests).
There are regulations specific to health and safety in the mining industry.
An environmental assessment is mandatory prior to the execution of any mining activity.
A summary of the permissions process for the approval of EIAs is as follows:
a preparation the terms of reference of the EIA and approval by the competent
authority;
60
Ecuador
b acquisition of an ‘intersection certificate’ from the Ministry of Environment

confirming that the area does not interfere with the National Protected Area
System;
c approval of the EIA, which must include public consultations and presentation
of the EIA, an environmental management plan and a contingency plan for any
communities within the area affected by the project;
d issuance of the environmental licence by the Ministry of Environment once the
EIA is approved by the competent authority or by the Ministry of Environment;
and
e finally, establishment by the concessionaire of a third-party liability insurance
policy to protect third parties from any outcome resulting from the mining
activities that may affect such parties, as well as a ‘performance bond’ that
guarantees compliance with the environmental management plan.
There are no separate permits required for air, water and waste, although there are
independent parameters for each element.
Permits are required prior to the initiation of any mining project, including its
exploration phase. Depending on the project the environmental licence procedure may
take few or several months.
Preparation of the EIA must include a public consultation process in order to hear
all concerns and comments of the community within the area of influence of the project.
The NGOs are also entitled to participate in such consultation process.
Public consultation is a key element prior to approval of the EIA.

A social participation process is mandatory (which is part of the process for obtaining
an environmental licence) before entering into any activity. Non-compliance with this
requirement may lead to suspension of mining activities, or even cancellation of the
exploitation contract.
Social participation processes are regulated by the Citizen Participation Law and
Executive Decree 1040, which regulates Article 28 of the Environmental Law.
A very important consideration is the ‘social licence’, which is implicitly needed to
conduct mining operations in rural areas. Although public consultation is mandatory,
the community’s comments and observations are not binding, but in practical terms, it
will be very difficult to conduct mining activities in a given territory if there is major
opposition from its inhabitants.

There are no limitations for the import of equipment and machinery of the mining
industry neither for the processing of extracted minerals. Regarding the use of foreign
61
Ecuador
labour, there is a limit of 20 per cent of foreign employees in a company – 80 per cent
must be Ecuadoreans.

There are no limitations on the sale, import and export of extracted or processed minerals
under the exploitation contracts.

Foreign investment in the mining sector is permitted, and no previous authorisation is
required. Foreign nationals have the same rights and obligations as Ecuadorean nationals.
Ecuador’s legal currency is the US dollar, and there is a free exchange market in Ecuador.
Remittances abroad are permitted and are subject to 5 per cent tax on the amount
remitted. There is a free export market and companies are entitled to receive and retain
the foreign currency obtained from export sales or for directly servicing the external debt.
VI CHARGES
Mining concessionaires are required to pay the ‘conservation licence’ for each mining
hectare. For the initial exploration period, the conservation licence is equivalent to 2.5
per cent of one basic unified salary (around US$370). For the advanced exploration and
economic evaluation periods, the conservation licence is equivalent to 5 per cent of the
basic unified salary. For the exploitation period, the conservation patent is 10 per cent
thereof. As concerns royalties, the law provides that they must be at least 5 per cent of sales.
15 per cent of company profits must be distributed as follows: 3 per cent among
the workers and the remaining 12 per cent to the state, which will invest it through
sectoral entities for social projects in the area where the mining project is located.
Finally, a legal provision currently in force establishes a tax on windfall profits
obtained by companies that have entered into contracts with the state for exploitation
of non-renewable natural resources. For the purposes of such tax, windfall profits are
deemed to be those earned by the contracting companies from sales of minerals at higher
prices than agreed upon or provided for in the respective contracts. The windfall tax rate
is 70 per cent.
At the time of writing, Kinross was still in the negotiation contract for its mega-gold
mine project with government authorities; negotiations have been ongoing for almost
two years, but a final deal is expected soon. A major problem that confronts the parties is
the application of the windfall profit tax described above. Setting the base price of gold
for the calculation of potential future taxes seems to be the main sticking point of the
deal. Because of this, the government has announced some changes in the regulation to
calculate and apply to the windfall tax.
62
Chapter 7
FINLAND
Tarja Pirinen 1
I OVERVIEW
In Finland, the mining industry has recently been experiencing a new boom with new
projects being developed, new mines being opened and planned, and existing mines
being expanded. Previously, mines were operated by state-owned companies that more or
less closed down their operations in the 1980s. Currently, mines are operated by private
companies and mining entrepreneurs. In most cases, such private companies are Finnish
subsidiaries of foreign mining companies.
In 2011 there were a total of 52 mines or excavations in Finland, which produced
33,262,625 tonnes of ore, the total amount of extracted material being approximately 72
million tonnes.2 In 2010, mining companies reported that they employed about 3,000
people, including their own personnel and subcontractors. In addition, construction of
the mines provides more employment. It has been estimated that mining will employ
as many as 5,200 people in the next decade. Extraction is estimated to increase to
approximately 155 million tonnes and ore mining to a maximum of 68 million tonnes
by 2016.3
Finland has significant potential for new mineral discoveries since geologically it
is located on the Fennoscandian shield, which can be compared with similar shield areas
in Canada and Australia. There are areas that have not been explored at all or only on
a small scale. Finnish society is very stable and the infrastructure that can be utilised in
exploration is very good. There are also good-quality geological databases available and
1 Tarja Pirinen is a partner at Hammarström Puhakka Partners, Attorneys Ltd.

2 Mining Industry Statistics 2011, the Finnish Safety and Chemicals Agency (‘Tukes’).
3 ‘Competitive Edge of the Finnish Retrieval Cluster’, The Research Institute of the Finnish
Economy (‘ETLA’), B252, Helsinki 2011.
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the Geological Survey of Finland provides high-class geological and laboratory services
to exploration and mining companies.
The Finnish government’s mining policy has as its core message that mining has
a significant role in Finland. It has also made around €30 million available in the central
government’s budget for the development of the mining industry. The government also
participates in the construction of infrastructure for the mining projects and supports
technological development under the auspices of the Green Mining programme.
The new Mining Act that came into force on 1 July 2011 has brought new
requirements and procedures, the practical implications of which are yet to be seen.
The new Mining Act and its changes, together with the boom in the mining industry,
have caused the processing of exploration and mining permit applications to take longer
than previously. The environmental authorities are also being loaded with applications
and processes relating to exploration and mining projects. Since mining activities were
virtually closed down for many years in Finland, there has been little training for mining
experts and the current working personnel is ageing, so new training programmes have
had to be developed and commenced in order to increase sufficiency of trained personnel
for mines. Some companies have also trained their personnel themselves. In 2015 the
stringent sulphur limits that will be introduced with regard to Baltic Sea shipping will
increase the export costs of key client industries – metal processing and the chemical
industry – which may threaten their competitiveness in Finland.
II LEGAL FRAMEWORK
The legal system in Finland is civil law based and mining operations are regulated at
a national and EU law level. The main regulations covering exploration and mining
operations are the Mining Act,4 the Government Decree on Mining,5 the Decree of the
Ministry of Employment and the Economy on Hoisting Plants6 and the Government
Decree on Mining Safety.7 Also environmental laws such as the Environmental Protection
Act,8 the Water Act9 and the Waste Act10 are highly relevant to mining operations.
Finland has ratified the ILO 176 Safety and Health in Mines Convention of 1995 and
the Convention on Biological Diversity of 1992. Finland has not, however, ratified the
ILO 169 Indigenous and Tribal Peoples Convention of 1989.
The new Mining Act includes transitional provisions based on which matters
pending with the Ministry of Employment and the Economy prior to 1 July 2011 subject
to the old Mining Act must be handled in compliance with the requirements of the old
Mining Act. Also, the claims and mining permits that were in force prior to the new
4 10.6.2011/621.
5 28.6.2012/391.
6 21.12.2011/1455,
7 29.12.2011/1571.
8 4.2.2000/86.
9 27.5.2011/587.
10 17.6.2011/646.
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Mining Act are subject to the old Mining Act, but there are exceptions to this pursuant to
the transitional provisions of the new Mining Act, which require that certain terms of the
new Mining Act apply to old permits that has an effect, for example, on the collaterals,
fees payable to landowners and reporting obligations. Therefore, mining companies are
currently acting under the obligations of both the old and the new Mining Act.
The most important regulatory agency for the mining industry is Tukes, which
acts as the mining authority under the Mining Act. Tukes grants permits and other
licences under the Mining Act and supervises and enforces compliance with the Mining
Act; however, mining permit matters relating to production of uranium or thorium under
the Mining Act and Nuclear Energy Act are handled and granted by the government.
The Ministry of Employment and the Economy is responsible for generally directing,
surveying and developing operations within the scope of the Mining Act compared to
the operative tasks carried out by Tukes.
An independent regulatory framework called the Fennoscandian Review Board
Standard (‘the FRB Standard’) has been adopted for use by the Finnish Association of
Extractive Resources Industry (‘FinnMin’) and SweMin in Sweden and the Norwegian
Mining and Quarrying Industries (‘Norsk Bergindustri’) in Norway. The FRB Standard
is based on ihe International Template for Public Reporting of Exploration Results,
Mineral Resources and Mineral Reserves, July 2006 prepared by the Committee for
Mineral Reserves International Reporting Standards (‘CRIRSCO’) in order to harmonise
international practice. The FRB Standard is subject to national laws. In addition to the
FRB Standard other reporting standards such as CIM Standards and the JORC Code are
used by mining companies.
i Title
The privilege to exploit the deposit belongs to the finder of the deposit but the state
controls and supervises the mining operations through the granting and supervision of
the exploration permits, gold panning permits and mining permits.
An ore prospecting permit, mining permit and gold panning permit can be
transferred to another party that fulfils the requirements for the permit holder under the
Mining Act (see below). If the transfer of a mining permit relating to the production of
uranium or thorium is at issue the transferee also needs to have a permit for the mining
activities in accordance with the Nuclear Energy Act. A permit holder must apply for the
transfer of the permit from Tukes, which must approve the transfer in the event that all
the requirements set out for a permit holder are fulfilled, the necessary documentation
and confirmations are provided to Tukes, and there is no reason to prohibit the granting
of the permit in the first place.

Prospecting for mining minerals can take place as prospecting work that partly corresponds
to the Finnish everyman’s right (meaning access to the land is free of charge and does not
require the landowner’s permission). An ore prospecting permit is needed, however, if the
ore prospecting cannot take place as mere prospecting work (the conducting of geological
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measurements and making of observations and the taking of minor samples provided
that this does not cause any damage or more than minor inconvenience or disturbance)
and the landowner has not given permission for it. A prospecting permit is also required
if the activity poses any risk to people’s health, general safety or other industrial and
commercial activity, or causes any deterioration of the landscape or environment. Ore
prospecting to locate uranium or thorium always requires an ore prospecting permit. The
permit allows the holder to:
a explore the permitted area as well as the structures and composition of geological
formations; and
b carry out other exploratory operations in order to prepare for mining activities
and in order to locate deposits and investigate their quality, extent and degree of
possible exploitation.
It does not authorise exploitation of the deposit nor does it limit the property owner’s
right to use the area or to dispose of it. An ore prospecting permit allows its holder
to obtain a mining permit, which in turn provides the right to exploit the deposit.
Prospecting of gold deposits through panning in an area owned by the Finnish state
requires a permit for gold panning. From July 2020, gold panning will be permitted in
the Lemmenjoki National Park based on traditional methods only.
The mining operator can obtain title or a right of use to the area needed for
mining activity by contractual means. Alternatively, a party applying for a mining permit
in order to exploit the deposit in question can apply to the government for a redemption
permit for a mining area. This permit may be granted only if the mining project is
based on public need, the level of which is assessed on the basis of the impact of the
mining project on the local and regional economy and employment, and the social
need for supply of the raw material. The property owners nevertheless have a right to
claim redemption of real estate if the mining area or the area auxiliary to the mine cause
significant harm to its use.
A limited right of use or other rights to an area in the ownership of another
party (as an auxiliary area to a mine) can also be granted in the mining permit, unless
otherwise provided by law, and if the auxiliary area meets the requirements set down for
it under the Mining Act. Such a right can be granted only insofar as the placement of
functions planned for the area cannot be otherwise arranged in a satisfactory manner,
and at moderate cost. Auxiliary areas granted under the Mining Act cannot be used for
storage of tailing or gangue; rights to such areas are granted generally for roads, power or
water lines or transportation equipment.
Ore prospecting permits, gold panning permits and mining permits are granted
by Tukes, except for permits related to the production of uranium or thorium, which
are granted by the government. Permits can be applied for by natural persons of age that
reside within the European Economic Area (‘EEA’), who are not bankrupt and whose
competency has not been restricted, or a legal person that is either Finnish or EEA-
incorporated with a registered a branch office in Finland. Government institutions may
also apply for an ore prospecting permit.
An application and the respective exploration or mining project must fulfil the
requirements set out in the Mining Act. The application is handled by the permit authority,
which will request statements on the application from the municipalities, the Centre of
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Economic Development, Transport and the Environment and the responsible authorities
or institutions within the area affected by the activities that are the object of the permit.
The parties involved are reserved an opportunity to lodge complaints concerning the
permit, and parties other than those involved will also be afforded the opportunity to
express their opinions. Any effects caused by the proposed activity on the rights of the Sami
as an indigenous people, to the Skolts and to reindeer herding must also be established
and evaluated in cooperation with the respective representative entities and the applicant.
The permit authority must publicise the application on its noticeboard and, when the
matter is of major significance, in at least one newspaper in general circulation in the
affected area. In addition, the parties and the municipalities involved must be informed
separately. A decision concerning an ore prospecting permit, mining permit, gold panning
permit or redemption permit for a mining area must be issued after public notice. The
time for the processing of permit applications has in recent years become longer and it is
not yet possible to say what the approximate length will be under the new process under
the Mining Act. Currently, there are many applications waiting to be processed at Tukes
and the handling times have recently been two years or longer. Activities based on a permit
cannot be commenced before the permit is legally valid and any required collateral has
been deposited.
Ore prospecting permits are valid for a fixed term but they may be extended
for three years at a time; in total, the permit may remain valid for a maximum of 15
years. Tukes can also decide that an ore prospecting or gold panning permit should
expire if operations have been continuously interrupted, for a reason attributable to the
permit holder, for at least one year. Mining permits remain valid until further notice
and are reviewed at minimum intervals of 10 years; permits may also be issued for a
fixed term of up to 10 years for valid reason. Gold panning permits may be granted for a
maximum term of four years. The validity of a gold panning permit may be extended for
a maximum of three years at a time. A redemption permit for a mining area is valid until
further notice or for a fixed period corresponding to the validity of the mining permit.
Tukes supervises the granting of mining rights, their validity and the permit
holders’ compliance with the requirements of the Mining Act. Its decisions can be
appealed to administrative courts and further to the Supreme Court. The decisions of
the government can be appealed to the Supreme Administrative Court. Compensation
payable to the landowner is defined in the proceedings establishing a mining area.
Decisions made in those proceedings can be appealed to the land court whose decisions
are appealed to the Supreme Court. Damage compensation claims, injunctions and other
temporary procedural remedies, as well as claims under the Penal Code, are handled by
the district courts.

Other permits required for the construction of a mine are, for example, environmental
permits and building permits. A permit according to the Water Act may also be needed
if groundwater is affected by mining operations. Depending on the planning situation
at the location of the project a new land use plan or change of the existing land use plan
may also be necessary. Acquiring materials for the construction of a mine may require
a land extraction permit and separate arrangements such as building easements, and
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servitudes may also be required for example for electricity or water lines. Use and storage
of explosives and certain other materials used in mining are also separately permitted.

The mining operator is obliged to take care of restoring, cleaning up and landscaping the
mining district and the auxiliary area within two years of the end of mining operations;
the safety of the area must also be taken care of. The mining operator must submit
notification in writing to the mining authority immediately after the above tasks have
been finalised, at the latest two years from the end of operations. Tukes will arrange a
final inspection unless this is deemed unnecessary, and compiles an inspection report
thereof. The parties involved will be heard and a statement sought from the respective
municipality and the Centre of Economic Development, Transport and the Environment
and from other responsible authorities or institutions regarding the mining operator’s
accounts and the inspection report compiled on the final inspection. Tukes will make a
decision on the termination of the mining activity once the obligations of the mining
operator relating to the closure have been substantially fulfilled in a manner that protects
public and private interests. Once a decision to terminate mining activity has become
legally valid, the mining operator’s right of use and right of possession to the mining
area and the right of use and other rights to the auxiliary area of the mine based on the
Mining Act are terminated. If the areas have been used based on a redemption permit for
a mining area, the areas in question will be returned to the possession of the landowner,
free of charge.
When an ore prospecting or gold panning permit has expired or been cancelled
the permit holder must immediately take care of restoration, cleaning up, rehabilitation
and removal of temporary constructions and equipment, and restore the area to its
natural status as far as possible. The ore prospecting permit holder must submit a written
notification to Tukes, the respective landowners and other holders of rights once the
required tasks have been completed. A gold panner must make the same notification to
Tukes and the authority or institution responsible for management of the area.
The holder of a prospecting permit, mining permit or gold panning permit is
obliged to compensate in full for any damage and harm caused. The mining permit
holder must deposit financial collateral for the purpose of termination and rehabilitation
measures of mining operations; this collateral must be sufficient considering the nature
and extent of the mining activity, the permit provisions issued for the activity and
collateral required under other legislation. The ore prospecting permit holder must
deposit collateral for the purpose of offsetting potential damage and inconvenience,
as well as performing rehabilitation measures, unless this is deemed unnecessary. Gold
panners must deposit collateral for the purpose of offsetting potential damage and
inconvenience and performing after-care measures.
The permit authority will determine the type and quantity of collateral for
each permit in question, which must be deposited with Tukes. The costs necessary for
performance of the obligations laid down in the Mining Act or the permit in question,
can be paid from the collateral, and the mining authority will release the collateral when
the permit holder has fulfilled its obligations. Partial release of collateral is also possible.
Assignment of a permit will not release the collateral.
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The closure and remediation of a mining operation are also dealt with in the
environmental permit process. The environmental permit includes terms regarding the
closure of a mine: for example, for the restoration of the environment and the prevention
of emissions. Final closure and restorative activities will be confirmed in a closure plan,
which is to be provided to the environmental permit authority for approval prior to the
end of operations. The environmental permit also includes the terms for the financial
assurance of the fulfilment of obligations relating to the closure of the mine.

Development initiatives that relate to and affect mining projects include Finland’s
Minerals Strategy (7 October 2010) and the Green Mining Programme 2011–2016 by
Tekes (Finnish Funding Agency for Technology and Innovation), which aims to make
Finland a pioneering country in terms of eco-efficiency in the mineral industry by 2020.
The programme started in 2011 and has two main themes: new mineral reserves and
intelligent minimum-impact mines.
Mine safety matters are mainly regulated in the Mining Act and the Government
Decree on Mining Safety. Mining activity operators must take special care in relation
to the structural and technical safety of mines, as well as preventing or limiting the
damage caused by accidents. Mining safety is based on requirements set out for the
mining activity operator’s management system and supervision. The construction of a
mine and its productive operations are subject to a mining safety permit by Tukes. The
decree includes more detailed regulations on mining safety arrangements in practice, for
example, planning and building the mines and personnel training requirements. The
Decree of the Ministry of Employment and the Economy on Hoisting Plants sets out the
safety requirements for hoisting equipment.
The Safety at Work Act11 imposes general obligations on employers in order to
improve the working environment and working conditions, ensure and maintain the
working capacity of employees, as well as preventing occupational accidents and diseases,
and eliminating other hazards to the health of employees from work and the working
environment. There are also other statutes that are applicable to mining operations,
for example, the Chemicals Act and statutes concerning safe working conditions and
handling of explosives.
The nature and scope of the environmental review processes depends on the size and nature
of the project and the environmental impact thereof. The granting of an environmental
permit is covered by the Environmental Protection Act. A mining project generally
requires an environmental permit, which is granted by the regional state administrative
agency. Necessary water permits are generally applied for and handled simultaneously
with the environmental permit. Supervision of compliance with environmental
11 23.8.2002/738.
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conditions imposed is carried out by the Centre for Economic Development, Transport
and the Environment.
In order to assess the environmental impact of the planned operation and to hear
the authorities and affected parties prior to applying for a mining permit, the applicant
will likely need to carry out an environmental impact assessment (‘EIA’) in respect of the
area of the mining operation, which is handled by the Centre for Economic Development,
Transport and the Environment. This process usually takes one to two years.
The environmental permit application is reviewed by the permitting authorities and
the parties involved (e.g., landowners, reindeer owners and the respective municipalities)
and other relevant authorities will also be heard. The applicant will have an opportunity
to address any comments made during the hearing process. Based on the environmental
authorities’ own estimates, obtaining an environmental permit for a new project should
take around 10 months but generally it takes about a year and a half because, in most
cases, further information is requested from the applicant. The length of the process is
also dependent on the size of the project and possible objections.
An environmental permit decision can be appealed to Vaasa Administrative Court
and to the Supreme Administrative Court. In both courts, the average time to reach a
decision is currently a year and a half. The permit can include a provision to start the
activities where a permit is appealed against and lacks legal validity. This right to commence
activities without legal validity of a permit must be applied for by the operator.

In the Sami Homeland and in projects implemented outside the Sami Homeland that
are of considerable significance as regards the rights of the Sami as an indigenous people,
the permit authority must – in cooperation with the Sami parliament, the local reindeer
owners’ associations, the authority or institution responsible for management of the area,
and the applicant – establish the possible effects of the activity in accordance with the ore
prospecting permit, mining permit, or gold panning permit on the rights of the Sami, and
consider measures required for decreasing and preventing such damage. In the Skolt area,
the authority will request a statement from a Skolt village meeting concerning assessment
of the effects of activity under the permit on the sources of livelihood and living conditions
of the Skolt people. In special reindeer herding areas, the authority will, in cooperation
with the local reindeer owners’ associations, assess the potential damage to reindeer herding
through activity under the permit.
If the mining operation is located close to the border of Finland and Sweden the project
and its environmental effects will also be evaluated from the Swedish point of view, and
the Finnish-Swedish Frontier Rivers Commission may need to be heard. In addition to
the limitations set out in the Mining Act on the areas as to where mining or exploration
activities are not allowed (such as within 150 metres of a building intended for residential
or work use, or comparable space, and any adjoining private yard) mining operations
may be limited or at least affected by nature protection areas or Natura 2000 European
protection network areas.
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There are no specific limitations for the importation of mining equipment and machinery
into Finland but import is subject to general rules.
There are no specific limitations for the processing of minerals except for mining
and ore-processing operations, which are focused on the production of uranium or
thorium. In addition to the mining permit, such operations require a permit under the
Nuclear Energy Act from the government, which cannot be granted if the municipality
in which the mine or processing plant would be located objects to the permit.
Generally, foreign employees need a residence permit for an employed person if
they wish to work in Finland. A residence permit can be granted based on temporary or
permanent employment. Citizens of EU or EEA countries can freely work in Finland
for a maximum of three months, after which they need to register their right to reside
in Finland (there is, however, no need for a residence permit); they may also need a visa.
Generally, when considering the granting of a residence permit, the needs of the labour
market are taken into account as is the aim of ensuring that those already part of the
labour market are not prevented from finding jobs.

There are specific regulations regarding, for example, precious metals and diamonds,
which are to be followed in order to bring them into the market. The export of uranium
and thorium is regulated in more detail. The EU has concluded bilateral steel agreements
with Russia and Kazakhstan, the quotas of which may affect the import of steel.

There are no foreign exchange controls or other restrictions on the importation of funds
for exploration, on extracting or using the proceeds from the business, and no restrictions
or permit requirements on foreign investments in domestic mining companies or mining
projects.
VI CHARGES
i Royalties
The Finnish government does not impose any royalties on the mining sector.
ii Taxes
Corporations carrying on mining operations in Finland are subject to the general income
taxation rules applicable to all corporations. There are currently no additional taxes for
mining in particular. The goods and services sold in Finland are subject to the general
VAT regulations unless they fall under a specific exemption. A transfer of assets tax is
payable in connection with the purchase of real property.
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iii Duties
There are no mining specific duties in Finland.
iv Other fees
Permit holders must pay annual compensation to landowners in the prospecting area,
mining area and gold panning area. No annual compensation is payable to the Finnish
government.
The annual amount of the ore prospecting fee per property is €20 per hectare per
year for the first four years of validity of the ore prospecting permit. After four years the
fee will increase gradually. After the eleventh year, the fee is fixed at €50. A gold panner
must pay an annual gold panning fee to the authority or institution responsible for
management of the area, in the amount of €50 per hectare.
A mining permit holder must pay an annual excavation fee to landowners whose
properties are within the mining area. The annual amount of the excavation fee per
property is €50 per hectare. If the permit authority has postponed the expiry of the
mining permit prior to mining having started, or if it has been suspended, the excavation
fee is €100 per hectare until mining activities are commenced or resumed. The obligation
to pay an excavation fee commences when the mining permit or the respective decision
for commencing or continuing activities becomes legally valid.
In addition, an excavation fee must be paid of an amount of 0.15 per cent of the
calculated value of mining minerals included in the metal ores excavated and exploited
during the course of the year (calculated based on the respective year’s average price for
the metal and other products exploited from the ore), and taking into consideration the
grounds influencing the financial value of the mining mineral a reasonable compensation
for excavated and exploited mined mineral other than metallic minerals in accordance
with either an agreement between the property owner and the holder of a mining permit
or confirmation by Tukes.
Taking into account the factors influencing the financial value of the by-product,
the mining permit holder must also pay a moderate (if not agreed with the landowner, no
more than 10 per cent) annual property-specific compensation (by-product fee) to each
landowner within the mining area for the benefit gained from by-products of mining
activities that are used for purposes other than mining activity.
The Finnish mining industry and its volumes as well as the mining cluster in its entirety
are expected to continue to grow. The new Mining Act and the related decrees have now
all come into force. The authority’s and court practices following the new rules are yet
to be seen. The mining industry is also going through a transition period with regard to
the regulations, as the mining companies currently follow the regulations of both the old
and the new Mining Act.
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Chapter 8
GHANA
Innocent Akwayena and Enyonam Dedey-Oke 1
I OVERVIEW
Since the 1980s a key objective of Ghana’s mineral sector policy has been to promote
private investment into the mining sector through a liberalised economic system, while
at the same time strengthening the regulatory and monitoring role of the state. In line
with this policy objective, the government has progressively reduced, through outright
privatisation, its shareholding in mining ventures, thereby leaving the management and
operations of these mines to private enterprises. Further, the Mining Law2 currently
permits exemptions from payment of customs import duties and excise taxes on mining
equipment, plant and machinery that are imported exclusively for mining operations.3
The holder of a mining lease is also allowed to capitalise expenditure on reconnaissance
and prospecting approved by the Minister of Lands and Natural Resources (‘the Minister’)
on the advice of the Minerals Commission (‘the Commission’) when the holder starts
development of a commercial find.4 The holder of a mineral right may be granted the
following additional incentives:
a exemption of staff from the payment of income tax on furnished accommodation
at the mine site;
b an immigration quota in respect of the approved number of expatriate personnel;
and
c a personal remittance quota for expatriate personnel free from tax.5
1 Innocent Akwayena is managing consultant and Enyonam Dedey-Oke is a consultant at REM

Law Consultancy.
2 Minerals and Mining Act 2006, Act 703 as amended by the Minerals and Mining Amendment
Act 2010, Act 794.
3 Ibid. Section 29.
4 Ibid. Section 28.
5 Ibid. Section 29.
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Ghana
In line with the policy of encouraging foreign investment in Ghana, the Mining Law
provides an investment dispute settlement procedure for disputes that may arise between
citizens and the Republic, or between foreigners and the Republic. The dispute settlement
provision requires parties to resort to mutual negotiation before referring a dispute to
arbitration.6 Provision is made in the Mining Law and various investment contracts for
both local and international arbitration of disputes between the government and the
holder of a mineral right who is not a citizen of Ghana.
II LEGAL FRAMEWORK
The legislative, regulatory and contractual framework for mining in Ghana is contained in
the 1992 Constitution7 and more specifically in the Mining Law.8 These legal provisions
establish a system of mineral ownership which vests the state with legal ownership of all
minerals occurring in their natural state within Ghana’s land and sea territory, regardless
of who owns the land upon which the minerals are situated. State ownership of minerals
ensures that the state, acting through political officeholders and other public officials,
remains the key participant in the mining industry. The government of Ghana, through
the Minister of Lands and Natural Resources in conjunction with the key regulatory
body, the Minerals Commission, acts on behalf of the government in dealings related to
minerals. Minerals are defined to include ‘any substance in solid or liquid form which
occurs naturally in or on the earth or under the sea bed formed by or subject to geological
process, including building and industrial minerals’;9 and mineral rights include the right
to reconnoitre for minerals, prospect for minerals, and mine or exploit minerals. Apart
from specifying the types of mineral rights that may be granted by the Minister, broad
provisions are made for the manner in which the Minister is required to exercise power
in relation to the negotiation, granting, revocation, suspension and renewal of mineral
rights, and the terms and conditions of each grant.10
6 Ibid. Section 27.

7 Article 257(6) of the 1992 Constitution of Ghana stipulates that every mineral in Ghana in its
natural state in, under or upon any land in Ghana, rivers and the exclusive economic zone, and
any area covered by the territorial waters and continental shelf, is the property of the Republic
of Ghana.
8 Act 703, Section 1 contains a similar provision to that of the Constitution, while Section 9 of
the same Law goes even further to provide that, regardless of any right or title that any person
may have to any land upon which minerals are situated, no person shall conduct reconnaissance
of, prospect for or mine any mineral in Ghana unless he or she has been granted a mineral right
by the Minister of Lands and Natural Resources in the form of a licence or lease, as the case may
be.
9 Act 703, Section 111(1).
10 Ibid., Section 5.
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Ghana
The regime of mineral ownership is clearly distinct from the legal regime for land
tenure in Ghana. In terms of land ownership, there are four broad categories of land and
landowners in Ghana. These are:11
a state or public land that is owned by and vested in the state;
b ‘stool’ or ‘skin’ land that is owned by various traditional communities bound by
kingship ties and held in trust for the communities by the communal leaders;
c family land that is owned collectively by various traditional family groupings and
held in trust for them by the head of the family; and
d private or individual land that is vested in individuals or private entities.
In reality, much of the land in which minerals are situated in Ghana is not public
land. However, since the state owns and grants mineral rights, the grant of such rights
necessarily raises the issue of how to give legal access to the land upon which the mineral
is situated.
The Mining Law deals with this issue by providing that a mineral right granted
by the Minister is sufficient authority for the holder over the land and entitles the holder
to enter the land in respect of which the right is granted.12 This provision gives to the
grantee of a mineral right automatic legal access and a right of entry onto the land,
without the necessity of the grantee obtaining the express permission of the landowner
even when it is not public land that is involved.
Furthermore, the Mining Law anticipates a situation where the landowner
may not acquiesce in the grant of a mineral right in respect of his or her land and
the consequential automatic legal access to that land, and therefore provides that where
any land is required to secure the development of utilisation of a mineral resource,
the government may acquire the land, or authorise its occupation and use under any
applicable enactment for the time being in force.13
i The Minerals Commission

The Minerals Commission is the key mining sector regulatory institution. The
Commission, under the direction of the Minister, is responsible for the regulation,
management and development of mineral resources, and the coordination of policies.
In furtherance of this mandate, the Mining Law specifically requires that the exercise of
the powers of the Minister in relation to any mineral right be exercised on the advice of
the Commission.14
The Commission receives and accesses all applications for mineral rights, and
makes appropriate recommendations to the Minister. It also monitors the implementation
of mineral rights agreements signed between the Minister and grantees of licences.
11 Under the Land Title Registration Law 1986 (PNDC Law 152), Section 19.
12 Act 703, Section 13(9).
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The Commission is required to maintain a public register of all mineral rights,

as well as applications, grants, variations and dealings in and cancellation of mineral
rights.15 The register is open to public inspection for a fee.
The Commission also acts in collaboration with other public departments or
regulatory institutions whose functions have an impact on the mining industry, and
from whom other regulatory permits, approvals or licences may be required for mineral
operations. One of these institutions is the Environmental Protection Agency (‘the EPA’).
ii The EPA
The EPA is the regulatory body charged with the protection and management of the
environment in Ghana.16 It is tasked with enforcing environmental policy and legislation,
and prescribing standards and guidelines for the protection of the environment. The
EPA is also responsible for issuing environmental permits and pollution abatement
notices.17 All companies involved in mineral operations in Ghana are required to apply
for and be issued an environmental permit before they begin mineral operations.18 The
Environmental Assessment Regulations make it mandatory for companies engaged in
the mining industry to conduct an environmental impact assessment (‘EIA’) prior to the
issuance of an environmental permit.19
The Regulations also provide a comprehensive list of issues to be addressed within
an EIA and outline the steps to be followed.
iii Mineral reporting requirements

Holders of licences in relation to mineral operations are required under the Mining Law
to furnish reports to the appropriate public authorities.20 The reporting requirements
vary depending on the type of licence a holder has. The holder of a reconnaissance
licence21 is required to keep complete and accurate records of all activities related to its
operations. These include details of the minerals discovered in the area and results of
obtained geological analyses. The holder must provide details of all records kept in its
quarterly reports and must give a general description of the work done by the company
in the preceding quarter. The report should contain a description accompanied by a
sketch plan of the areas where gold and any other minerals were found, particulars of the
type of minerals found, and the number and weight of samples taken, if any. An annual
report is required to be submitted not later than 60 days after the end of each year in
such form as may be prescribed.

16 Environmental Protection Agency Act 1994, Act 490, Section 2.
17 Ibid.
18 Environmental Impact Assessment Regulations 1999, LI 1652, as amended by LI 1703.
19 An EIA is required for mining and processing of minerals in areas where the mining lease covers
a total area in excess of 10 hectares.
20 These are the Minister, the Head of the Inspectorate Division of the Minerals Commission, the
Chief Executive of the Minerals Commission and the Director of Ghana Geological Survey.
21 Act 703, Sections 31 and 32.
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The holder of a prospecting licence22 is required to provide quarterly, half yearly

and annual reports. The quarterly and half year reports to be submitted must include
information relating to boreholes drilled and strata penetrated (with detailed logs of the
strata). In addition to the above, the half yearly report must also contain a summary of
the results of prospecting operations undertaken within the licence area. The annual
report is to be submitted at the end of the financial year to which the report relates, and
must contain a summary of the results of prospecting operations undertaken and, where
applicable, a description of the proposed operations for the following year.23 The holder
of a mining lease24 is required to submit monthly, half year and annual reports to the
Commission. The monthly report should be detailed and include all records required
to be kept by the company.25 The half yearly report is a summary of the results of the
company’s operations in the lease area as well as records required to be kept under the
law.26 The annual report is a summary of the results of the company’s operations in the
lease area during the financial year and should describe the proposed operations for the
following year, and indicate an estimate of production and revenue to be obtained from
the operations. The licensee is also required to submit a copy of its annual financial
reports, including a balance sheet, profit and loss account and all notes pertaining to the
records duly certified by a qualified accountant who is a member of the Ghana Institute
of Chartered Accountants.
iv Regulation at national level

State regulation of mining companies
Government regulation of mining companies is achieved through the requirement for
ministerial approval of a change in the controller of a mining company; the government’s
right to acquire a special share (‘golden share’) in a company;27 and the government’s
equity28 participation and right of pre-emption of minerals produced in Ghana.29 Since
1994, the Mining Law has been amended to give the government increased regulatory
control over any company that holds a mining lease, or whose subsidiary holds such a
lease or licence under the Mining Law. Any person who intends to become a ‘controller’
of a mining company30 must inform the Minister in writing of his or her intention to
22 Ibid., Sections 34 and 37.

23 Minerals and Mining (General) Regulations 2012, Regulation 16.
24 Ibid. Regulations 39 and 46.
25 Ibid. Regulation 23.
26 Ibid. Records required to be kept are the same as those contained in the monthly report in
Regulation 23(1).
27 Act 703, Section 60.
28 Ibid. Section 43.
29 Ibid. Section 7.
30 ‘Controller’ means any person who, either alone or with any associate or associates, is entitled
to exercise or control the exercise of more than 20 per cent of the voting power at any general
meeting of the mining company or of another company of which it is subsidiary.
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become a controller of the company.31 It is an offence for anyone to become a controller

without the consent of the Minister.
The government, acting through the Minister, is given a right to acquire at any
time a golden share in mining companies for no consideration.32 Such a golden share
may be agreed upon with the company, and is usually a preference share. It may have
attached to it such other rights as may be agreed upon with the company or, in the
absence of such agreement, the rights specifically provided for in the Law.33
The government also has the right to acquire a 10 per cent mandatory free carried
equity interest in mineral operations involving the right to mine or exploit minerals,34 and
has the option of acquiring a further interest as may be mutually agreed upon between
the government and the licensee. Further, the government has a right to pre-empt (i.e.,
purchase or take in-kind) all minerals won or obtained in Ghana. The pre-emptive right
extends to products derived from the refining or treatment of such minerals.
The price payable for minerals or products taken in the exercise of the right of
pre-emption is to be determined by agreement between the parties or, in the absence of a
written agreement, by the open market price of the mineral or product in question. If there
is no written agreement or open market price, the price payable would be determined
by arbitration. Significantly, since the introduction of the policy of liberalisation of the
mining sector in the mid-1980s, the government has never exercised its right to acquire
a golden share in a mining company or to pre-empt any minerals won in Ghana.
i Title
All minerals in Ghana are vested in the Republic and held in trust for the people of
Ghana.35 The government, acting through the Minister, alone has title to underground
minerals and can grant a valid interest in or title to those minerals.36 Title to the minerals
remains vested in the Republic at all times; however, the interest granted or created
may be transferred37 or mortgaged subject to the prior approval by the Minister on the
recommendation of the Minerals Commission.

To qualify for the grant of a mineral right an applicant must be a Ghanaian registered
body corporate established in Ghana under a law in force.38 Foreign registered companies
are therefore not allowed to hold licences within the mining industry without being

34 Ibid. Section 43(1).
35 Constitution, Article 257(1).
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incorporated locally. However, the Minister is empowered to make exemptions from

this qualification upon the advice of the Minerals Commission.39 Prior to making an
application, the prospective applicant must conduct an official search on the concession
map or Mineral Title Register at the Minerals Commission to ascertain whether the
targeted area is unencumbered. Standard application forms would then be obtained from
the Minerals Commission, duly completed and submitted for review.
An applicant for a mineral right is required to disclose technical and financial
information to satisfy the Minerals Commission of its capability to undertake the mineral
project it wants to acquire.40 The standard application form is therefore designed to
disclose background information about the applicant such as address and registered office,
principals (if any), the name and address of its bankers, and its previous record in mining.
Once received, the application is evaluated based on the financial and technical
capability of the applicant. It is required that a notice of the application be given to
the District Assembly for publication and display for a period of 21 days at specified
places in the district and locality where the land to which the application relates is
situated.41 The notice must be accompanied by the sketch plan for the area applied for.
The rationale for the publication of this notice is to ensure that any affected people
are given the opportunity to raise any objections about the application. Based on the
response received, the Minerals Commission technical subcommittee on mineral titles
would consider the application and make its recommendations. If a favourable report
is received, the Minerals Commission will make recommendations to the Minister for
the grant of the appropriate licence. The appropriate licence agreement is then signed
between the Minister and the applicant.
All agreements granting mineral rights are required to be stamped and registered
at the Land Title Registry.42 Additionally, unless specifically exempted by parliament,
contracts involving the grant of rights to exploit minerals must be ratified by parliament.43
Similarly, an assignment, transfer, mortgage or similar dealings in mineral rights also
require the prior approval of the Minister.44
Mining leases are generally granted for a maximum period of 30 years, or such
other term as may be agreed between the parties, subject to renewal.
Although all minerals in Ghana are vested in the government, the land surface is
usually owned by traditional authorities such as stool or skin, family or an individual.
The current legal regime for mining makes no provision for the express permission of the
landowner to be sought in order to gain access to land for purposes of mineral operations.
However, the procedure for accessing applications for mineral rights45 requires that notice
of an application for a mineral right be published in the particular locality to be affected
39 Ibid. Section 5.
42 See the Stamp Duty Act 2006, Act 689, as amended by Act 764, 2008.
45 See Section 2 of the Mineral Regulations of 1962 (LI 231).
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by the grant for a period of 21 days. The publication in the locality is expected to afford
landowners and the local community the opportunity to raise any objections they may
have to the application.
Nonetheless, the Minister is only required to take into consideration any
objections raised in deciding whether to grant the application. In practice, the grant
of compulsory legal access to land for mining purposes often brings the grantees into
conflict with indigenous landowning communities. Such communities view the grants
made by the Minister without their express consent as an intrusion on their legal rights
as the landowners. Consequently, in order to ensure their security of tenure, the grantees
are often compelled to negotiate and enter into some formal or informal arrangements
with the landowner to enable them to gain peaceful entry into the land for purposes of
their mineral operations.
Sometimes, this arrangement takes the form of a land lease that the landowner
purports to grant to the holder of the mineral right. Although it is arguable that such
land leases are legally unnecessary, they have become a practical tool for dealing with the
conflict that exists between grantees of mineral rights and landowners who resist central
government action giving access to their land without their express consent.
Where, as described above, the grantee enters into an agreement with the surface
owners, the term of the lease is negotiable. There is, however, a constitutional restriction
on the maximum term for a foreigner holding title to land in Ghana of 50 years.46 A
Ghanaian, however, can hold title to such lease for a period of 99 years. Both are subject
to renewal.
Protection of mining rights

Mining rights are generally protected in Ghana through the grant of a mineral right in
the form of a licence executed between the Minister and the applicant. The licence is
a contract between the government and the licensee, and usually contains clauses on
the rights and obligations of the licensee and government termination, rights upon
termination and dispute resolution. In the case of a mining lease for the exploitation of
a mineral, an applicant may enter into supplemental agreements with the government,
such as a deed of warranty stability agreement47 or a development agreement.48 These
agreements are generally intended to stabilise and protect large mining projects from
unilateral changes in the legal and fiscal regime pertaining to such investments during
the life of the project.
Restrictions on the acquisition of surface or mining rights by foreign parties

Apart from the constitutional requirement that limits the maximum term of a leasehold
interest granted to a non-Ghanaian citizen to 50 years, there is generally no legal
restriction on the acquisition of surface rights by foreign parties.
Under the Mining Law, mineral rights licences for small-scale mining are limited
to Ghanaian citizens only.
46 Constitution, Article 266.

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The following regulatory authorisations or permits are also required for the exercise of
various categories of mineral operations.
Annual operating permit for minerals operations

This permit is required to be issued annually by the Chief Inspector of Mines to a holder
of a valid mineral right who has also obtained an environmental permit in respect of its
mining operations.
Permit for the diversion of water for mineral operations

This permit is required to be issued by the Water Resources Commission to a licensee of
a mineral right who needs to divert a river or a stream for its mineral operations.
Permit or licence for the export of minerals

This permit is required to be issued by the Minister to permit the export of minerals
from Ghana.
Permit to enter a forest reserve

A permit is required from the Forestry Commission where a proposed mineral licence
area falls within a forest reserve. As a result of increasing environmental awareness of the
negative impact of mining activity, current government policy has shifted towards a total
prohibition on the issuing of permits to new applicants for mining in forest reserves.
Certificate of Regional Lands Commission

This certificate is required under the Constitution49 to confirm that a proposed development
of stool land is consistent with the development plan drawn up by the relevant district
assembly. This certification is therefore required for any mine development on stool land.
Work permits and resident permits

Work permits50 and resident permits51 are issued by the Director of Immigration based
on an approved immigrant quota allowing a holder of a mineral right to engage a specific
number of foreign personnel to reside for a specified period in Ghana for purposes of
engaging in work or employment related to mining operations.
Central bank authorisation under the Import & Export Act (Act 503)
Bank of Ghana authorisation for the export of unprocessed minerals is also required
under Act 503. This authorisation is achieved by the completion of BOG Form A2,
which must be endorsed by an authorised bank in Ghana.

50 See the Immigration Act 2000 (Act 573), Section 13.
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Ghana

During the environmental permit application process, where the EPA determines that
a mining project requires a reclamation plan, the company will be required to post a
performance bond secured partly by a bank guarantee and partly by cash based on an
EPA-approved work plan for the reclamation. In such cases the reclamation and bonding
arrangements are set out in a mine reclamation and security agreement made between
the EPA and the holder of the mineral right.

The Inspectorate Division of the Minerals Commission is the lead agency responsible for
conducting mine inspections and compliance enforcement in the country. The Division,
inter alia, enforces compliance of occupational health and safety regulations, and inspects
and tests mine equipment and machinery so as to ensure their safety and compliance.
An environmental permit is required for all mining projects. The law specifically prohibits
any person from starting any mineral operations unless an environmental permit has been
issued. Mining projects fall within the mandatory requirements for an EIA prior to the
issuance of a permit. The Environmental Assessment Regulations52 specify the issues that
need to be addressed within the EIA. The EPA, upon receipt of an application and any
other relevant information required, screens the application as an initial assessment. In
screening the application, the EPA takes into consideration factors such as the location,
size and likely impact of the undertaking, the technology intended to be used, as well
as any concerns of the general public, and in particular concerns of the local residents.53
An environmental permit is usually issued within 90 days from the date of receipt
of the completed application form. It might take longer in instances where a public
hearing is required, as is the case for large-scale mineral development projects.

Compensation for landowners and lawful occupiers
The owner or lawful occupier of any land in respect of which a mineral right has been
granted and whose surface rights have been disturbed has the legal right to apply to the
licensee for compensation for such disturbance.54 Similarly, compensation may also be
demanded from the licensee for any damage done to the surface of the land, buildings
or works, or to livestock, crops or trees within the area of such mineral operations. The
amount of compensation payable is left to be determined by a negotiated agreement
52 Op. cit. 18.

53 Ibid. Regulation 5.
54 Sections 73 and 74 of Act 703 and the Minerals and Mining (Compensation and Resettlement
Regulations, 2012 (LI 2175) govern issues of compensation and resettlement.
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between the landowner or lawful occupier and the mineral right holder. If the parties
fail to agree on the amount of compensation payable, the matter must be referred to
the Minister for determination in consultation with the Land Valuation Board, which
is a public institution responsible for land valuation. Under new regulations that came
into force in June 2012, detailed procedures have been laid down for giving notice to
persons whose surface rights are affected by the grant of a mineral right, making of claims
for compensation by such persons, principles for assessing compensation payable, and
time limits for payment of agreed compensation and for the determination of disputes
relating to compensation.

There are currently no legal restrictions on the importation of plant, equipment and
machinery for mining purposes. However, new regulations have recently come into force
that require the satisfaction of local content in the procurement of goods and services
by all licensees under the Mining Law. In this regard, holders of licences are required
to submit five-year procurement plans to the Minerals Commission for approval. Such
procurement plans shall reflect the licensees’ obligation to procure goods and services
with Ghanaian content to the maximum extent possible, and consistent with safety,
economy and efficiency. The Minerals Commission is required to publish a procurement
list that specifies goods and services with Ghanaian content that shall be procured locally.
Failure to comply with such local procurement list would make a defaulting licensee
liable to pay to the Commission the full customs duty on the imported item, as well as
a penalty.
Use of foreign labour and services

On the basis of an approved immigration quota, mining companies are permitted
to use foreign labour or expatriates if they satisfy the Minerals Commission that no
Ghanaian has the requisite qualification and experience to occupy the position for which
the expatriate is to be recruited.55 Every applicant for a licence under the Mining Law
is required to submit with its application particulars of proposals with respect to the
recruitment of expatriates, and employment and training of Ghanaians to replace the
expatriates within a specified period. Once the proposals are approved they constitute a
localisation programme. The Commission may approve the employment of additional
expatriates in exceptional circumstances, including instances:
a where specialised technology is required;
b where training of Ghanaians being carried out would require a longer period than
the transition period;
55 See the Minerals and Mining Regulations 2012 (LI 2173), Section 1(6); However, expatriates
cannot be employed in an unskilled or clerical position.
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c where a special project, including a new mine development expansion or

rehabilitation, is to be undertaken, provided that the duration of the project does
not exceed three years; or
d where Ghanaians are transferred to work as expatriates in the company’s operations
in other countries.

Only licensed persons may engage in the export, sale or disposal of a mineral.56 The
Mining Regulations57 set the application procedure for a licence for the export, sale or
disposal of minerals; such application must be accompanied with a refining contract and
a sales and marketing agreement. The licensee is also required to furnish the Minerals
Commission with particulars of the quantity and grade of the minerals to be shipped
before making any shipment, and provide access for samples to be taken by a government-
designated laboratory for assaying purposes.

Under the Mining Law, a licensee who earns foreign exchange from mining operations
may be permitted by the Bank of Ghana to retain, in a designated account, a portion of
the foreign exchange earned for use in acquiring spare parts and other inputs required
for the mining operations.58 It provides further that the Minister of Finance may permit
the holder of a mining lease, where the net earnings from the holder’s mining operations
are in foreign exchange, to open and retain in an account an amount not less than 25 per
cent of the foreign exchange for:
a the acquisition of spare parts, raw materials, and machinery and equipment;
b debt servicing and dividend payment;
c remittance in respect of quotas for expatriate personnel; and
d the transfer of capital in the event of a sale or liquidation of the mining operations.
When opened, such an account is to be held in trust by a trustee bank appointed by

the licensee. A licensee is further guaranteed free transferability of convertible currency
through the Bank of Ghana or, in the case of a net foreign exchange holder, through the
trust account.
Stability and development agreements 59

Under the Mining Law, a stability or a development agreement may be entered into
between the government and the holder of a mining lease. Stability and development
agreements aim at protecting an investor from the adverse impacts of changes in laws.
The validity period for a stability agreement is for a maximum of 15 years, whereas
the law is silent on the maximum validity period for a development agreement, thus
implying that it is negotiable.
56 Act 703, Section 6(1) .

57 See the Minerals and Mining Regulations 2012 (LI 2173).
59 Ibid. Sections 48 and 49.
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Ghana
VI CHARGES
i Royalties
A licensee is required to pay royalties to the state at a flat rate of 5 per cent of total
revenue derived in respect of all minerals won from his or her mining operations. The
royalty payable is based on total revenue earned from the mineral operations.60
ii Taxes
Corporate income tax
The current corporate income tax rate is 35 per cent of net profits. The net profit is
determined after deductions of operating costs, allowable capital expenses and investment
allowances.
Capital gains tax

The capital gains tax rate is 5 per cent payable by any person on gains accruing from
the realisation of a chargeable asset. Chargeable assets are defined to include buildings,
business assets, land, rights, or interest in shares and stocks.
Value added tax (‘VAT’) and national insurance levy (‘NHIS’)

The supply of goods and services by mining companies that are not specifically exempted
under the VAT Act are taxable at the prevailing rate of 12.5 per cent for VAT, and a
further 2.5 per cent for NHIS.
iii Import duties

Currently, plant machinery and equipment imported for use exclusively in mineral
operations that are contained in an approved mining list are exempt from payment of
customs and excise duties.
iv Other charges and fees

Ground rent is payable annually to the owner of the land in respect of which a mineral
licence is granted. The amount payable is related to the size of the licensed area. The rent
is nominal and is currently determined per square acre. If the land in question is stool
land, this rent is paid to the Administrator of Stool Lands who acts as a public trustee for
incomes and revenues due from stool lands.
Consideration fees payable to the Minerals Commission

The Minerals Commission charges various fees for its services relating to its functions
of regulation and management of Ghana’s mineral resources. The fees rates applicable
usually differ for Ghanaian and foreign-controlled companies.61
60 Ibid., Section 25 as amended by the Minerals Royalties Act 2010, Act 794.
61 The current fees applicable to Ghanaian and foreign controlled companies (effective 1
September 2011) can be found at: www.ghana-mining.org/GhanaIMS/LinkClick.aspx?filetick
et=4aAA2XYnBm0%3D&tabid=36.
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Ghana
i Restrictions on foreign exchange withdrawals

The Bank of Ghana, which is the central bank, recently imposed restrictions on foreign
exchange withdrawals in Ghana in an attempt to stem the depreciation of the cedi. The
Bank noted that returns submitted by banks showed insignificant movements in forex
account balances of mining companies, which gave an indication that the companies
have not been releasing foreign exchange into the open market system, thus resulting
in the Bank drawing heavily on its foreign reserves to meet exchange requirements. The
Bank also noted that some mining companies enter into bidding transactions on foreign
exchange with banks under which they sell at the highest offered rate than that prevailing
on the market.
ii Proposed windfall tax

A proposed bill on a 10 per cent windfall tax is being considered for imposition on
mining companies. The introduction of the bill is a response by the government to
domestic stakeholder agitation to increase government revenue derived from mining
operations.
iii General mining fiscal regime review

The government has also embarked on a general review of the mining fiscal regime. The
rationale is to ensure that all mining companies are treated equally. Previously, mining
companies undertaking huge mine development projects could, in addition to the grant
of a mining lease, negotiate specific investment agreements that granted the companies
tax exemptions, lower rates of taxes and other benefits that were not necessarily enjoyed
by all other companies and that resulted in distortions in tax payment calculations. For
example, the Internal Revenue Service Act provides for a maximum 2:1 debt-to-equity
ratio for interest expense on intercompany debt to be deductible from taxable income.
However, some mining companies are subject to higher debt-to-equity ratios that were
negotiated and embodied in specific investment agreements between the companies and
the government. The government’s official position is to renegotiate such agreements with
the beneficiary companies so as to create a level playing field for all mining companies.
In addition, although the Mining Law currently exempts machinery and
equipment imported exclusively for mining operations from payment of import and
excise duties, the government is reviewing the mining list with a view to making it more
local content friendly. The objective is to reduce the loss of government revenue through
import and excise duty exemptions.
86
Chapter 9
MEXICO
Alberto M Vázquez 1
I OVERVIEW
Mexico is one of the largest silver producers in the world. Silver is produced by Mexico’s
primary and secondary silver mines as a by-product of base metal and gold operations.
According to the World Bank, Mexico ranks 12th in the world in terms of GDP and
has the fourth-largest per capita income in Latin America after Argentina, Chile and
Costa Rica.
Mexico has a long history of mining (going back more than 500 years). The
attitude of the government to any mining project generally depends on the area in which
it might be located; in the northern and central parts of Mexico, the mining industry is
in general terms very well established, whereas there is less activity in the south.
Exploration for mineral resources involves a high degree of risk. The cost of
conducting exploration programmes may be substantial and the likelihood of success is
difficult to assess. The prices of metals greatly affect the value of mining companies and
the potential value of their properties and investments, which are generally dependent in
Mexico on the equity markets as their sole source of operating capital.
II LEGAL FRAMEWORK
On 28 April 2005, Mexico’s Mining Law was amended to simplify the regulation of
mining concessions through the merging of the exploration and exploitation regimes
into one single regime; this amendment came into full force and effect on 1 January
2006.
A mining concession is an authorisation granted by the federal government. It
is a unilateral administrative act whereby a specific activity is authorised to be carried
1 Alberto M Vázquez is a partner at Vázquez, Sierra & García SC.
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Mexico
out under particular rules or over public assets. By means of a concession, certain rights
may be exercised during a specified period by an individual or a private legal entity. The
general economic interests of Mexico prevail over the private interests of such individual
or private legal entity.2
Upon the granting of a concession, the government is no longer involved in the
carrying out of the granted activity, which will be performed by an individual or private
legal entity. The main activity that the government performs with respect to granted
concessions is to verify that the concessionaire complies with the obligations set out in
the respective laws.
By means of a mining concession, the Federal Executive (through the Ministry of
Economy) confers the right to explore, exploit and process concessible minerals or other
substances located within an allotted area to either:
a the first applicant with respect to a specific plot of land; or
b in a public bidding procedure, the best offeror with respect to land covered by
cancelled allotments or by mineral reserves that have been disincorporated.
A mining concession may be revoked or cancelled by the government in the case of non-
compliance with the obligations set out in the applicable legal provisions.
Mining concessions have a term of 50 years from the date on which the relevant
title is recorded in the Public Registry of Mining.
It is important to note that the Constitution acknowledges, on the one hand, the
source from which private property over surface land arises, and on the other, the exclusive
right of the government to concede rights for the exploitation, use and utilisation of
mineral resources located within Mexican territory. Article 27 of the Constitution sets
out the following:
Ownership of the lands and waters within the boundaries of the national territory is vested
originally in the Nation, which has had, and has, the right to transfer title thereof to private
persons, thereby constituting private property.
Private property shall not be expropriated except for reasons of public interest and subject to
payment of indemnity.
Therefore, the nation is the original owner of all the lands and waters located within
Mexican territory, and it is only when the nation transfers title thereof to private persons
that ‘private property’ appears.
The third paragraph of Article 27 of the Constitution also states that:
The Nation shall at all times have the right to impose on private property such limitations as
the public interest may demand, as well as the right to regulate, for the benefit of society, the
utilisation of natural resources susceptible of appropriation [...].
As such, the nation may impose certain limitations on private property in order to protect
the public interest, which will always take precedence over private interests. Therefore, if
2 Derecho Minero Mexicano; María Becerra, p. 111; first edition, published by Porrúa SA, Mexico
1963.
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Mexico
mining activities are considered to be matters of a public nature and of public policy, and
as having preferential rights over any other use or utilisation of the land,3 the state may
validly establish any mining activity on private property, in consideration that such creates
various benefits to the community where the industry is established. The state (represented
by the federal government) also has the right to regulate the utilisation of mineral elements
and resources of a nature different to those of the components of the ground.
Article 27 of the Constitution also sets out the concept of differentiation between
private property, and the use and utilisation of natural resources such as mineral resources:
It corresponds to the Nation, the direct domain of all natural resources of the continental platform
and submarine shelves of the islands; of all minerals or substances which in veins, layers, masses or
beds constitute deposits whose nature is different from the components of the ground, such as the
minerals from which metals and metalloids used in industry are extracted; the deposits of precious
stones, rock salt and the salines formed directly by marine waters; the products derived from the
decomposition of the rocks, when their exploitation requires under ground works; the mineral or
organic deposits of materials capable of being utilised as fertilisers [...]
[T]he domain of the Nation is inalienable and imprescriptible, and the exploitation, the
use or utilisation of the resources concerned (minerals), by individuals or entities organised in
accordance with Mexican laws may only be carried out by means of concessions granted by the
Federal Executive in accordance with the rules and conditions set out in the laws. The legal
provisions relative to works of exploitation of the minerals and substances to which paragraph four
refers, shall regulate the execution and proof of works carried out or to be carried out from their
effective date, independently of the date of issuance of the concessions, and the non-observance
thereof shall cause their cancellation.
There is a clear constitutional differentiation between:

a surface land (ground) that may constitute private property when title has been
transferred to private persons (either individuals or legal entities); and
b the right to use, utilise and dispose of mineral resources located within the
Mexican territory, which may only be carried out by individuals or private legal
entities through the granting of concessions for such purposes by the Mexican
government.
As such, a landowner owns not only the surface of its property, but also (with some
limitations), in principle, the matter located under the land,4 as long as no minerals
or substances different from the components of the ground exist. In cases where such
minerals or substances exist, they belong to the nation, which alone is authorised to
grant one or more concessions for their exploration and exploitation. In view of this,
the exploration, exploitation and beneficiation of minerals or substances in veins, layers,
masses or beds that constitute deposits of a nature different to those of the components
of the ground are subject to the concession regime established in Article 27 of the
3 Article 6 of the Mining Law, published in the Official Daily of the Federation on 26 June 1992
(and amended in 1996, 2005 and 2006).
4 Mining Law and Regulations of Mexico, Fausto C Miranda and John C Lacy, p. 23; first edition
1992/1993, Rocky Mountain Mineral Law Foundation.
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Constitution. The Mining Law regulates Article 27 of the Constitution in the area of
mining and is applicable throughout Mexico.
While the Mining Law is the key legislation governing mining activities in
Mexico, other relevant legislation includes:
a the Regulations to the Mining Law (published in the Official Daily of the
Federation on 2 February 1999);
b the Federal Law of Waters (published in the Official Daily of the Federation on
1 December 1992);
c the Federal Labour Law (published in the Official Daily of the Federation on
1 April 1970);
d the Federal Law of Fire Arms and Explosives (published in the Official Daily of
the Federation on 11 January 1972);
e the General Law on Ecological Balance and Environmental Protection (published
in the Official Daily of the Federation on 28 January 1988) and relevant
Regulations; and
f the Federal Law on Metrology and Standards (published in the Official Daily of
the Federation on 1 July 1992).
Only the federal government is authorised to carry out exploration and exploitation of
any radioactive mineral that may be found in Mexican territory.
There is no limit as to any participation of foreign investment in the Mexican
mining industry. Foreign investors may participate in 100 per cent of the capital stock of
Mexican mining companies without the obligation to comply with any formalities other
than those relevant for incorporating a company in Mexico.
i Title
Under Mexican law, mineral resources belong to the nation, and a mining concession
grants rights to mine rather than rights over the surface land where the concession is
located.
A party wishing to apply for a concession must first verify that the concession
is not located within a conservation area that is subject to special environmental
authorisations. An application for a concession must be filed with the mining agency
or mining delegation located closest to the area to which the mining application relates.
Once an application has been filed, the applicant and its mining expert may enter the
land where the concession is located to carry out surveys and other exploratory work.
These works must be filed with the relevant mining authorities within 60 calendar days
of the date of the application.
In certain, very specific cases, mining concessions may also be granted through
public auctions.
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Mining concessions may only be granted to Mexican individuals domiciled in Mexico,
or companies incorporated and validly existing under the laws of Mexico whose objects
are the exploration and exploitation of minerals.
Holders of mining concessions must comply with various obligations, including
the payment of certain mining duties calculated per concession based on the number
of hectares of the concession and the number of years the concession has been in effect.
Failure to pay the mining duties may lead to cancellation of the concession.
Holders of mining concessions must carry out and provide proof of assessment
works in accordance with the terms and conditions set out in the Mining Law and its
Regulations. The Regulations to the Mining Law establish minimum amounts that must
be spent or invested on exploration and exploitation activities. A report must be filed in
May of each year regarding the assessment works carried out in the preceding year. The
mining authorities may impose a fine on the mining concession holder if one or more
proof of assessment works reports is not filed on time.
Concessions may be cancelled in the following circumstances:
a for using the mining concession to carry out the exploitation of minerals or
substances not subject to the Mining Law;
b for failing to perform and prove the assessment works contemplated in the terms
and conditions set out in the Mining Law and its Regulations;
c for failing to pay the mining duties or the discovery premium or economic
consideration, when applicable;
d by a waiver of rights filed by the titleholder or at the request of the titleholder, as
substitution of the mining title, due to a reduction of the surface area covered by
the concession or unification of two or more lots;
e through a decision by a competent court in Mexico;
f for grouping concessions covering non-adjoining mining properties for
the purposes of proving assessment works, when said concessions do not
either constitute a mining or mining-metallurgic unit from the technical and
management standpoint; and
g in order for the holder of a mining concession to lose its legal capacity to be such
holder.
In order to clearly understand the difference between surface owners and holders of
mining concessions located within Mexico, it is necessary to understand the reasons why,
according to Mexican law, the mining concession itself does not grant to its holder any
right over the surface land where the concession is located, and why ownership of real
property itself does not grant to the owner the right to explore or to exploit the mineral
resources that may exist therein.
In the following, we review the relevant concepts within the Mining Law that
regulate the rights granted by mining concessions to their holders with respect to
surface land; and the main characteristics of each of the legal mechanisms that the
Mining Law provides for access, possession, occupation and even ownership of surface
land that might be considered essential for the performance of mining works.
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The different burdens of or limitations to surface land that may be requested by a

mining concessionaire under the Mining Law are expropriation, temporary occupation
and creation of easement.
Expropriation
In general terms, expropriation it is the administrative act whereby the federal government
unilaterally imposes on individuals or private legal entities the transfer of their assets for
compliance with a matter of public interest, in consideration of an indemnity.5
Expropriation also cover the administrative procedure of public law by means of
which the federal government, unilaterally and in the exercise of its sovereignty, legally
proceeds, in particular, against an owner or possessor for the constrained acquisition or
transfer of an asset due to a cause of public interest and by means of a fair indemnification.6
The expropriation procedure may exceptionally be initiated by an individual or
private legal entity (in this case, the holder of a mining concession), when legitimised to
do so by virtue of the Mining Law, which expressly authorises the concessionaire to do so.
According to the Mining Law, expropriation enables the Federal Executive, upon
request of the holder or assignee of a mining concession and subject to payment of the
respective indemnification, to authorise in a presidential decree the mandatory transfer
of land essential to the miner for the carrying out of exploration, exploitation and
beneficiation, as well as for the deposit of dumps, tailings, dross and slag.
Temporary occupation
Temporary occupation is the administrative act whereby the Ministry of Economy (as a
legal entity of the Federal Executive), upon request of the holder or assignee of a mining
concession and by means of an annual indemnification at the expense of the latter,
authorises, for a certain period of time, the temporary use of land that is essential to
carry out exploration, exploitation or beneficiation works, as well as for the deposit of
dumps, tailings, dross and slag.
Whereas in the case of an expropriation the ownership of the surface land is
transferred to the mining concessionaire, in the case of a temporary occupation the
owner of the surface always retains the ownership of the land in question, and is only
dispossessed from the use and occupation of the same during a certain period of time,
in consideration of a determined amount of money to be received every year from the
holder of the mining concession, who in turn is authorised to carry out the mining
activities. Thus, upon the conclusion of the temporary occupation, the material and legal
possession of said land must be reverted to the surface owner.
Easement
In general terms an easement is a lien created over a real estate property in the benefit of
another property of a different owner.
5 Elementos del Derecho Administrativo, Luis H Delgadillo Gutiérrez y Manuel Lucero Espinosa,
p. 99; first edition, published by Editorial Limusa SA.
6 Derecho Administrativo; Andrés Serra Rojas; p. 315; second volume, 13th edition, published by
Editorial Porrúa SA, Mexico 1985.
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Sometimes the easement consists of granting a third party the right to perform
certain acts implying a use of the land, and in other instances it may consist of partially
preventing the owner of the land from exercising its own rights.7
The general content of the easement, as to the benefit or utilisation of the land
by the holder of the mining concession, and the limitation or restriction in the domain
of the servient tenement’s owner, gives ground to several kinds of easements that may be
created depending on the benefit or utilisation pursued.
For the purposes of the Mining Law, an easement may be requested on land
where the mining concession is located, or on adjacent land with respect to which access
is required; or otherwise, to provide a mining concession with services (e.g., water and
electricity supply) required for the performance of the works related to the concession
on such land.
Other mechanisms
In addition to the aforementioned legal mechanisms, which are acknowledged as rights
of the holder of a titled mining concession, a prior right to gain access to the surface land
covering the mining claim also exists: once an application to obtain a mining concession
has been admitted for study, and provided that other legal requirements are met, the
mining authorities shall issue an ‘identification certificate’, valid for a 60-day term, in
order for a mining expert to prepare survey works on the land where the lot is located.
The identification certificate contains a warning (as provided for in the Regulations
to the Mining Law, and in accordance with Article 57, Paragraph II of the Mining
Law) to the effect that any person without mining rights that prevents or hinders the
survey works on the lot that forms the subject matter of the application shall be fined
an amount of between 10 and 2,000 times the general minimum wage in effect in the
Federal District.
Mining concession holders are entitled access surface land, notwithstanding that
such land is private, ejido or communal property.
An ejido property is land that has been provided to a population or that is
incorporated into the ejido regime. Ejido properties are classified as:
a land for human settlement;
b parcelled land; and
c land of common use.
In the case of a private property, the Mining Law sets out the steps to be followed to
obtain a limitation or burden thereon.
In cases where the property to be accessed belongs to an ejido or agrarian
community, the application must be filed before the mining authorities. Once the file is
complete and the legal requirements are met, the file must be transferred to the Ministry
of the Agrarian Reform to continue the process in accordance with Articles 93 to 97 of
the Agrarian Law (and any other related and applicable articles).
7 Compendio de Derecho Civil II; Rafael Rojina Villegas, p. 135. 16th edition, published by
Editorial Porrúa SA, Mexico 1984.
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The Ejidatarios’ Meeting is the ejido body with the authority to classify such land
within the total surface of the land corresponding to the ejido; likewise, it is entitled to
approve the execution of agreements with the purpose of granting the use of common-
use land to third parties.
The rights on land of common use are considered as granted in equal parts to each
ejidatario or ejidataria, unless otherwise determined by the Ejidatarios’ Meeting based on
special circumstances.
The government is authorised to affect ejido or communal properties, but only in
circumstances where the public interest is superior to the social interest of the ejido or
of the community (as in the case of mining), and provided no other alternative land to
cover such needs exists.
Burden or limitation of ejido property

The public interest causes provided by the Mining Law for an ejido or communal property
to be expropriated for mining include:
a the creation and extension of industrial development areas;
b the exploitation of natural resources owned by the nation and the installation of
beneficiation plants related to such exploitations; and
c other causes provided by the Expropriation Law and by other laws.
The Agrarian Law acknowledges the importance of the mining industry, and also the
public interest in the exploitation of minerals located in the subsoil.
The Ministry of the Agrarian Reform is the authority competent to notify an
expropriation to the Ejido Commission. Such notification shall be made:
a through an official communication;
b through a publication in the Official Daily of the Federation; and
c through a publication in the official newspaper of the corresponding state.
In addition, the Agrarian Ministry shall request opinions from the governor of the
corresponding state, the Mixed Agrarian Commission of the entity where the lands are
located and the official (governmental) bank operating with the ejido.
It is also necessary to conduct an inspection visit to determine the veracity of the
data included in the corresponding application for expropriation.
Possibility to freely negotiate

There are great advantages and benefits in the fact that, in Mexico, the concessionaire is
entitled to approach the owner of the surface land where the concession is located, and to
freely negotiate and agree on the terms and conditions under which said concessionaire
may:
a obtain free access to the surface covering the mining concession for the
performance of mining works;
b occupy, use and possess (totally or partially) the surface land necessary to carry out
said works, or to establish those facilities considered important for its operations;
and
c acquire said surface land, totally or partially, through any of contractual
mechanisms of a private nature.
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The contractual means available for such purposes vary according to the applicable
Mexican laws; therefore, we mention only those considered as the most important, or at
least more frequently used, in mining:
a lease agreements;
b commodatum contracts;
c private agreements for the occupation and use of the surface land, or any other
similar purposes; and
d purchase agreements.
The form of the contract or agreement is not as relevant as its main purpose and the clear
determination of the rights and obligations acquired by each of the parties executing the
same.
From the practical standpoint, it is always advisable that the negotiations and
execution of contracts or agreements be made with the owners of the surface land in the
first stages of either the exploration works or the mining project itself given that, in our
experience, some mining companies working in Mexico have faced serious problems and
delays with non-existing agreements, or when trying to obtain such authorisation and
consent in the advanced stages of a project.
Furthermore, a lack of negotiations resulting in the execution of a contract or
agreement with the owner of the surface land may not only cause serious problems
and delays in the work programme, but may also incur costly additional expenses and
excessive lengths of time spent trying to find a solution to the problem.
It should also be noted that resolutions issued by the Mexican authorities upon
conclusion of expropriation, temporary occupation or creation of easement are not final;
the person considering him or herself as harmed by virtue of a resolution may file a revision
remedy in terms of Article 83 (and other related and applicable articles) of the Federal
Law of Administrative Procedure 8 or, if applicable, contest via an amparo proceeding, a
judicial proceeding aimed at protecting the individual guarantees contemplated by the
Constitution.
Those conflicts arising from the interpretation, execution or compliance with
contracts or agreements entered into by private parties (as in the case of a mining
concessionaire and the owner (or owners) of the surface land) shall be submitted to
the competent Mexican courts or, when permitted and agreed upon by the parties,
definitively settled by arbitration or through any of the alternative dispute resolution
means.
Should an administrative procedure declare that the requirements established in
the Mining Law, its Regulations and other applicable legal provisions have been followed,
and that the indemnification is within the prevailing values set out in the respective
appraisal and is actually paid, the revision remedy or the constitutional protection shall
not be granted. In such case, the expropriation, temporary occupation or creation of
easement shall be final, binding and enforceable.
8 Published in the Official Daily of the Federation on 4 August 1994, amended on 19 May 2000.
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Explosives permits
The Federal Law of Fire Arms and Explosives (‘the LFAE’) administers the purchase,
storage and use of explosives in the mining industry; such Law is administered by the
Ministry of National Defence and is considered to be of national security.
Mining companies usually do not use explosives until the advanced exploration
stages. They must obtain an explosives permit before purchasing any explosive, and must
also comply with all of the requirements of the LFAE, including the construction of
special warehouses to store explosives and purchasing explosives only from authorised
distributors that are duly recorded by the Ministry of National Defence. One person will
be responsible for the explosives used by the company, and they must also be recorded
by the Ministry.
Water concessions
Mining companies usually buy water from concessionaires of the area where the
exploration works are being carried out at an early exploration stage.
As the construction or exploitation stage approaches, mining companies must
obtain concessions from the National Water Commission or purchase concessions
previously granted by such authority.
The National Water Commission has a policy of not granting any new concessions;
therefore, mining companies must negotiate with holders of water concessions that have
been previously granted.
Finally, under the Mining Law, mining concessionaires may use water obtained
directly from the mine.

Environmental impact authorisations (‘EIAs’) are granted on a case-by-case basis, and
contain a section devoted to the closure and rehabilitation plan of the mine; such plan
is approved by the environmental authority prior to commencing exploitation activities.
There is no need to provide financial guarantees to cover all or a substantial part of
the plan’s costs. The authority may carry out audits as it considers convenient to verify
compliance with the obligations included in each EIA.

The development projects and prospects of companies in Mexico are subject to Mexican
federal, state and municipal environmental laws, regulations and Official Mexican
Standards (‘NOMs’) for the protection of the environment.
The main environmental legislation applicable to mining projects is the General
Law of Ecological Balance and Environmental Protection (‘the LGEEPA’), of federal
jurisdiction, and its Regulations in Environmental Impact Matters (‘the REIA’), which
are enforced by the Federal Bureau of Environmental Protection (‘the PROFEPA’). Such
authority monitors company compliance with environmental legislation and enforces
Mexican environmental laws, regulations and NOMs.
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If warranted, the PROFEPA may initiate administrative proceedings against

companies that violate environmental laws; in the most extreme cases, such proceedings
may result in the temporary or permanent closure of non-complying facilities; the
revocation of licences, authorisations and permits; and other sanctions such as fines that
can rise up to 3,116,500 pesos. As such, under Article 28 of the LGEEPA, and the REIA,
an EIA must be obtained prior to the initiation of mining exploration and exploitation
activities.
Only in certain exceptions referred to in Article 31 of the LGEEPA, when all
the environmental impacts of an activity are regulated by a NOM, a partial urban
development plan or an ecological ordinance territory programme, or in the case of
constructions inside industrial parks that have already been approved, the Secretariat of
the Environment and Natural Resources (‘SEMARNAT’) can authorise certain activities
without the need to present an environmental impact statement (‘EIS’). In such cases,
a preventive report (‘PR’) will have to be presented instead for evaluation prior to the
initiation of the exploration and exploitation activities, or the processing of minerals.
NOM-120-SEMARNAT-2011 regulates the environmental protection measures
in place for direct mining exploration activities in specific areas (agricultural, farming or
virgin areas of dry climates, etc.), and any mining project that complies with such NOM
in the exploration phases will have to present a PR rather than an EIS.
Any individual that owns or holds real estate in Mexico that has suffered any kind
of pollution must remediate such pollution; this provision is applicable at any stage of
any mining project in Mexico.
Mexican environmental regulations have become increasingly stringent over
the last decade. The entry into force of the North American Free Trade Agreement in
1999 made clear Mexico’s need to reach a balance between the elimination of barriers to
international trade on one hand, and the preservation and protection of the environment
on the other.
Pursuant to the Federal Criminal Code, some crimes against the environment are
sanctioned with prison sentences. In some cases, such crimes are prosecuted under a
PROFEPA action.

In general terms, mining concessions are granted to the first petitioner filing an
application to obtain such mining concession over free land (under the terms set out in
the Mining Law).
The only third-party rights that are recognised are the rights of the owners of
the surface land over which mining concessions are located, and with whom mining
concessionaires must negotiate.
We must also mention that if any free land (in terms of the Mining Law) is
located within the area populated by an indigenous community (and which is different
from an ejido or agrarian community), such indigenous community has a preferential
right to become the mining concessionaire.
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The right of first refusal is limited to the area covered by the land owned by such
indigenous community.
In general terms, mining concessionaires only need to negotiate access agreements
with the owners of the surface land over which their respective mining concessions are
located.
No third party has the right to request, or ask in any manner whatsoever, for
the closure of a process and the abandonment of any mining project, as environmental
concerns are a matter of administrative law. However, on 30 August 2011, certain
amendments to the Federal Civil Procedures Code were published in the Official Daily
of the Federation. These amendments mainly consist in establishing three categories
of collective actions, by means of which 30 or more people claiming injury resulting
from environmental harm, among other things, have sufficient and legitimate interest in
seeking through a civil procedure restitution, economic compensation or suspension of
the activities from which the alleged injury derived.
iv Labour issues
The Federal Labour Law (‘the FLL’) establishes that employees work a maximum of 48
hours per week. If an employee exceeds the number of authorised labour hours per week,
he or she is entitled to receive additional overtime payment.
Employers must register employees with the Mexican Institute of Social Security.
The employer must periodically deposit a sum equivalent to 2 per cent of each
employee’s salary into a banking account as a retirement fund. A housing fund of an
amount equivalent to 3 per cent of the employees’ salary must also be paid by the
employer.
Labour unions are recognised under the FLL in order to protect employees’
interests, and collective labour contracts are signed between the employer and the labour
union; such contracts are reviewed every two years.
The FLL acknowledges three work shifts: day shift (eight hours), night shift (seven
hours) and mixed shift (seven-and-a-half hours). Employees are entitled to one day of
rest with full pay after six labour days.
The FLL establishes different daily wages for each category of service to be
rendered, taking into consideration the respective geographical area where the services
shall be provided. Annual revisions of the salary are also considered in the FLL.
Employees have the right to a yearly vacation, which is not to be less than six
working days. For every year the employee continues to work for the employer, he or
she will receive an additional two working days. After four years, an employee’s vacation
period will increase by only two working days for every additional five years he or she
works for the employer.
Employees have the right to receive a vacation premium of at least 25 per cent of
their salary during such vacation period.
Employees are entitled to participate in the earnings of their employees, based on
the percentage determined by the National Commission for Workers’ Participation in
their Employers’ Earnings.
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Owners of processing plants in Mexico must process at least 10 per cent of their capacity
from small mines.
In terms of foreign labour, there is no restriction on the employment of foreigners
in positions of responsibility (such as management). There is, however, a requirement for
a ratio of at least 10 Mexicans to 1 foreigner to be employed for technical labour.

The Customs Law and the Foreign Trade Law regulate the importation and exportation
of goods. Depending on the type of commodity, there may be additional requisites in
special laws or regulations.
The Customs Law provides the proceedings regarding foreign trade, such as the
entry, exit, custody, storage, handling or holding of commodities. As a consequence,
any person who performs such activities is subject to this Law, including importers
and exporters, as well as their custom representatives, custom brokers, transporters and
possessors of authorised tax warehouses.
The Foreign Trade Law provides the proceedings to be carried out before the
Importation of commodities, especially regarding the compliance with non-tariff
regulations and restrictions.
Recently, foreign trade has become an issue of high importance to the Mexican
government.
In order to avoid illegal practices, such as customs fraud or using Mexico as a base
to export Asian products to the United States, penalties in such matters have become
especially strict.
In July 1988, Mexico converted to the Harmonized Tariff Schedule for
commodity classification and codification, making its import and export classification
system compatible with those of most countries with which it commonly trades.
The Official Gazette published a new Customs Law on 15 December 1995,
which became effective on 1 April 1996. The main purpose of the Law is not only to
provide legal certainty, but also to promote investment and exports and to comply with
the international commitments acquired by Mexico. One of its noteworthy features is
the incorporation of a number of tax rules and operational authorisations on specific
international operations.
A new General Import and Export Tax Law became effective on 1 July 2007. The
most significant changes relate to adjustments made by the Customs Council in terms of
subheading classification.
The Mexican government continues to apply a policy of gradual elimination
of import restrictions. In prior years, import permits (licences) had to be obtained for
most products from the Ministry of Economy. At present, licences are required for only
approximately 1 per cent of items or classifications in the customs tariff.
Regarding the clearance of commodities the most important actions are:
a presenting any commodity before the customs authorities with a customs
declaration;
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b activating the mechanism of automatic selection;

c the customs inspection; and
d the disposition of the goods.
Importers and exporters of commodities must file a customs declaration before

the customs authorities. Such declarations shall include several annexes such as the
commercial invoice of the commodity, documents evidencing compliance of non-tariff
regulations and restrictions (such as capacities, permits and NOMs), as well as those that
allow the identification, review and control of the commodity, and documents regarding
its origin, either to obtain the benefits of free trade agreements or to prove that the
commodity does not originate from a country that performs dumping.
In order to import commodities, it is necessary to register before the General
Customs Administration. In the event of importing a commodity that is sensitive
for national production, importers need an additional registration called a ‘Sectorial
Registry’ registration. Sometimes (e.g., in cases of temporary importation), registration
is not necessary.
Tax benefits that are granted by free trade agreements represent the possibility to
reduce or be exempted from tariffs according to the particular tariff preferential treatment
schedule of each agreement. Despite this, such agreements do not represent the chance to
avoid paying other taxes derived from the importation and exportation itself.
The Customs Law provides a list of goods that are exempted from paying duties
on foreign trade. Such goods include those exempted due to international treaties, or
because of their import for national defence or public safety purposes. Regarding other
kinds of taxes derived from the import, the possibility to obtain an exemption for each
kind of good should be revised separately.
General import or export taxes are calculated considering the customs value of the
commodity. In most importations, the customs value is based on the price that was paid
or the one that should be paid for the commodity, according to the commercial invoice
(the settlement value). If other expenses caused during the importation increase such
value, it would attract cost, insurance and freight rules.
In the event that there is no value, or if the price that has been or should be
paid for commodities cannot be considered as the valuation base, one of the secondary
methods derived from the Agreement on Custom Value of the World Trade Organization
would be applicable.
Currently, there are no legal rules in force or industry codes applying export
restrictions or duties.

Most deals taking place involve Mexican mining companies in which foreign investment
is involved. Although mining concessions may only be granted to Mexican individuals
domiciled in Mexico, or companies incorporated in Mexico, such companies may be
wholly owned by foreign investors; there are no restrictions as concerns foreign investment
in Mexican mining companies. Mexican-incorporated mining companies must also be
recorded with the Public Registry of Commerce of their corporate domicile and with the
Public Registry of Mining.
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Mexican companies with foreign shareholders must register with the National
Registry of Foreign Investments of the Ministry of Economy and renew their registration
on an annual basis.
VI CHARGES
i Royalties
Royalties do not exist in Mexico, except in very specific cases in which the concession
is acquired through a bidding process directly from the government, and such royalty is
directly proposed by the interested party.
Currently, there are no legal rules in force or industry codes applying to royalty
obligations.
ii Taxes
In addition to the mining taxes referred to in Section V, supra, mining activities in Mexico
are generally subject to the same taxes applicable to other businesses. These include:
a federal and local payroll taxes;
b custom duties on the importation of machinery, equipment and ores and
concentrates;
c land transfer taxes;
d federal goods and service and local sales taxes; and
e municipal property taxes.
iii Duties
In general terms, mining concessionaires need only pay mining taxes (duties) that are of
a federal nature as determined in the Federal Law of Duties, and depending on the date
of issuance of the mining concession and, the number of hectares of each concession.
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Chapter 10
MONGOLIA
Batzaya Bodikhuu and Enkhtsetseg Nergui 1
I OVERVIEW
Mongolia has considerable mineral resources that are largely unexplored and unexploited,
and it is estimated that only about 15 to 25 per cent of the country’s total area has
been fully mapped to determine mineral resources,2 which may likely include significant
deposits of uranium, gold, silver and lead.
Enacted in 1988, the Subsoil Law of Mongolia was the first law on minerals in
the country, and since 1990 Mongolia has started to explore and intensively exploit
the mineral resources of the subsoil and develop minerals policies. Between July 1997
and August 2006, Mongolian minerals policies and practices were governed by the
1997 Minerals Law. On 8 July 2006, the parliament enacted the 2006 Minerals Law,
superseding and replacing the 1997 Minerals Law. The 2006 Minerals Law became
effective as of 26 August 2006.
Since its transition into a market economy, Mongolia has pursued an active policy
to attract foreign investment. In 1996, the government declared foreign investment as a
main factor of the economic development of Mongolia3 and, accordingly in 1997, the
Minerals Law of 1994 was amended and restated, encouraging foreign investment into
the minerals sector.
Today the government has adopted a number of long-term programmes to explore
and develop promising mineral deposits, especially of gold, silver, copper, coal and oil.
Foreign investment and direct participation in a wide range of mining-related industries
1 Batzaya Bodikhuu is a partner and Enkhtsetseg Nergui is a senior associate at Anand & Batzaya
Advocates.
2 Ministry of Mineral Resources and Energy.
3 Mongolia National Development Plan of Action 1996–2000.
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Mongolia
are actively encouraged, particularly in connection with the exploration, extraction and
processing of mineral resources.
Today, many of Mongolia’s largest foreign-invested entities have been operating
in the mining sector,4 because there are no major distinctions made between foreign and
domestic companies in the Minerals Law. The current Minerals Law specifies, however,
that only domestically registered foreign companies can have mining licences registered in
their name, which means that foreign investments associated with mining are channelled
through locally established entities.
Certainly, encouragement of foreign investment into the mining sector without
limitation has contributed to the economic development of Mongolia. In 2011, the
mining and quarrying sector accounted for 20.2 per cent of Mongolia’s GDP, 69.6 per
cent of the country’s industrial output and 89.2 per cent of its export revenue,5 and the
sector takes first place in the Mongolian economy.
At present, there are numerous foreign-invested companies and joint venture
operations active in the mining sector in Mongolia including the Erdenet Mine
producing copper concentrate,6 Mongolrostsvetmet7 mining fluorspar and Boroo Gold
Company mining gold ore.8 In particular, deposits of coking coal are currently being
exploited and sold internationally by Tavan Tolgoi LLC, Erdenes Tavan Tolgoi JSC and
Energy Resources LLC and Canadian-invested South Gobi Sands LLC. Oyu Tolgoi,
the largest unexploited copper and gold deposit in the world, is scheduled to begin
operations in early 2013. The investment agreement concluded between the government
and Rio Tinto and Ivanhoe Mines is the largest agreement in the sector.9
II LEGAL FRAMEWORK
The legal framework consists of the Constitution of 1992, the 1988 Law on Subsoil,
and the 2006 Minerals Law. Enacted recently, in May 2012, the Strategic Sector Foreign
Investment Law (‘the SSFIL’)10 set up certain limitations to the foreign ownership of
assets and access to use rights in natural resource extraction among other sectors.11
4 Statistical Yearbook 2011; Statistical Bulletin, December 2011.

5 Statistical Yearbook 2011.
6 Erdenet, Mongolian-Russian joint venture company established in 1978, pursuant to the
intergovernmental agreement between the USSR and the Mongolian People’s Republic.
7 The Russian-Mongolian joint venture Mongolrostsvetmet LLC was established in 1973.
8 Boroo Gold, Canadian-based gold mining and Exploration Company. It is the parent company
for Centerra Gold Mongolia (‘CGM’) and its Boroo Gold Company (‘BGC’), which operate
in Mongolia.
9 Investment agreement is available at www.ot.mn/sites/default/files/documents/Oyu_Tolgoi_
IA_ENG.pdf.
10 The full name of the law is the Law of Mongolia on Regulation of Foreign Investment in
Business Entities Operating in Sectors of Strategic Importance.
11 Article 4.1, 4.2 and 5.1 of the SSFIL.
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The parliament also enacted supplementary implementation and procedural

legislation (the 2006 Implementation Law) to address various technical issues, including
issues on re-registration of exploration licences under the new 2006 Minerals Law.
Under the Constitution, natural resources are the property of the people under
the protection of the state.12 The Constitution, 1988 Subsoil Law, and 2006 Minerals
Law all grant the state exclusive property rights over its mineral resources.13 The Minerals
Law of Mongolia defines three types of mineral deposits – strategic, common and
conventional14 – and the means by which the deposits may be exploited. Subsequent
amendments to the Minerals Law, which were intended to boost foreign investment in
the sector, failed to pass in 2007 and 2008.15
The Nuclear Energy Law was passed in order to regulate all aspects of dealings
with nuclear materials, from uranium exploration and mining to the running of nuclear
reactors. Prior to the enactment of this law, radioactive minerals (i.e., minerals that
contain radioactive isotopes of the uranium or thorium families) were included under
the definition of ‘minerals’ in 2006 Minerals Law.
The Law on the Prohibition against Exploration and Mining in Headwater Areas,
Protected Zones of Water Reservoirs and Forested Areas (widely known as ‘the Long
Name Law’) of 2009 seeks to limit environmental damage caused primarily by placer
gold mining in and around forests and watersheds.
The Law on Banning the Issuance of New Licences for Mineral Exploration was
initiated by the President and adopted by Parliament in 2010. The temporary ban on
issuance of exploration licences was brought in to last from May to December 2010. It
has since been re-extended and will be in effect until at least the end of 2012.
The Ministry of Mining,16 restructured as a result of the division of Ministry
of Mineral Resources and Energy (‘the MMRE’),17 is charged with overseeing geology
and mineral resources policy, including minerals and petroleum, as well as extracting
industry and technology issues, and transparent and responsible mining policy.
Established in 1997,18 the Mineral Resources Authority of Mongolia (‘the
MRAM’)19 is a regulatory body, whose main objectives are to support the development
12 Article 6.1 of the Constitution of Mongolia 1992.

13 Article 6.1 of the Constitution of Mongolia 1992; Article 3 of the Law on Subsoil 1998; Article
5.1 of the Minerals Law 2006.
14 Article 6.1 of the Minerals Law 2006.
15 Nemelt uurchlult oruulah gej baisan tuhai medee, esvel tusul 2007, 2008.
16 Law on Cabinet Structure, 16 August 2012.
17 The MMRE was formed according to the Law on Cabinet Structure dated 17 September 2008.
From 2004 to 2008, mining sector was under the Ministry of Industry and Trade.
18 The MRAM was established in accordance with the 132nd Resolution of the Government of
Mongolia.
19 Under the 1997 law the MRAM was a subordinate agency of the former cabinet level Ministry
of Industry and Trade. In 2006, the Petroleum Authority of Mongolia was merged with the
MRAM, creating the Minerals Resources and Petroleum Authority of Mongolia. In December
2008, the government again made changes to its regulatory bodies in connection with the
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of government policy in the mineral resources sector and to provide investors, customers
and other interested parties with quick, convenient and customer-oriented services.
The Nuclear Energy Authority (‘the NEA’) is the regulatory agency that oversees
the nuclear sector. It reports directly to the Prime Minister and under the Nuclear
Energy Law the agency has been tasked with regulating the nuclear energy sector in
Mongolia, including licensing, inspecting and monitoring. The NEA is assisted in its
duties by an ad hoc committee headed by the Prime Minister and the head of the NEA.
Additional assistance is provided by the Parliamentary Standing Committee and the
Central Intelligence Agency.
The 2006 Minerals Law defines a mineral deposit of strategic importance as a
deposit that may have a potential impact on the national security or the economic and
social development of Mongolia at the national and regional levels, or that generates or
has the potential to generate more than 5 per cent of Mongolia’s GDP in any given year.
The percentage of the state’s equity interest will be determined by an agreement
between the government (acting through a state-owned entity) and the private legal
entity based on the amount of investment made, or deemed to have been made, by the
state. The law provides no guidelines as to how much funding from the state budget is
required to trigger an increase in the state’s maximum equity interest from 34 per cent
to 50 per cent.
i Title
Mineral resources naturally occurring on and under the surface in Mongolia are the
property of the state. The state, as the owner, has the right to grant exploration and
mining rights to private parties as set out in the terms and conditions of the Minerals
Law.20 Exploration and mining activities without licence are prohibited in Mongolia.

A legal person may conduct reconnaissance for minerals without a licence or approval.21All
minerals exploration and exploitation, with the exception of common construction
material, must be conducted under a licence issued by the MRAM, and licences to
conduct exploration and exploitation of uranium are issued separately by the NEA. The
licence holder must be a registered Mongolian legal entity, and no part of the requested
exploration area may overlap with a reserve area or a special purpose territory, or with
an existing licensed area or a licensed area covered by a pending application.22 A person
who meets these requirements may submit an application to the MRAM, which will
review the application within 20 business days of its registration and make a decision on
mineral industry. The MRAM and the Petroleum Authority of Mongolia became separate
subordinate agencies of the Ministry of Mineral Resources and Energy.
21 Article 15 of the Minerals Law 2006.
22 Article 7.1 and 17.2 of the Minerals Law 2006.
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granting or rejecting it, either fully or partly. Under the Minerals Law 2006, minerals
exploration licences are granted on a ‘first-come, first-served’ principle.23
According to the Minerals Law the maximum exploration period is nine years,
and the maximum period for a feasibility and environmental impact study is three years.
The maximum period for mining is 30 years, excluding the exploration and feasibility
study period.
The government may establish a ‘reserve area’ or a ‘special purpose territory’,
either of which may affect the mineral rights of a licensee. A reserve area is an area
previously under licence, which a competent authority takes under state control, thereby
suspending any reconnaissance, exploration or mining activities. A licensee determined
to be within a reserve area is not guaranteed compensation. A special purpose territory is
land taken by an authorised government entity for special public needs. Exploration and
mining are either restricted or prohibited in special purpose territories.24 Compensation
must be given to a licensee for the taking of a special purpose territory.
In accordance with the Subsoil Law and the Minerals Law, the licence holder
must have started use of the subsoil and – as determined in the sole discretion of the
MRAM – have either commenced mining operations or been allowed by MRAM to
continue advance mine development on the licensed area by the end of three years from
the date of expiration of the exploration licence.

In Mongolia, the tonnage and grade of a mineral reserve that has been defined by
exploration activities must be recorded in official archives. Prior to the commencement
of mining activities, the mining licence holder is required to obtain final approval by
obtaining a Mine Commission Act.
After a mineral reserve has been defined and recorded, an exploration licence holder
may apply to the MRAM for a pre-mining agreement. During the term of this agreement,
which may not exceed three years, Mongolian law-compliant final feasibility studies must
be completed, mine facilities developed, and the mine brought into production.
During the pre-mining period, the licence holder is required to obtain a wide
variety of permits for construction, water use, settlement relocation, communications
and chemicals, and to conduct activities related to the development of its feasibility
study, the plan to use the minerals deposit, the construction of the mine and mining.
Upon completion of the pre-mining period, the licence holder must demonstrate to the
MRAM that it has met its legal requirements.

A licence holder is required to take preparatory measures pursuant to the regulations
of the State Professional Inspection Agency (‘the Agency’) prior to closure of a mine.
At least one year prior to a mine closure, the licence holder must inform the Agency by

24 Law on Special Protected Areas 1994.
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official letter that the mine will be closed in whole or in part and that it will implement
the following measures:
a take all necessary measures to ensure safe use of the mine area for public purposes
and reclamation of the environment;
b take preventive measures if the mine claim is dangerous for public use; and
c remove all machinery, equipment and other property from the mining area except
as permitted by local administrative bodies or the Agency.
Licence holders must prepare a detailed map showing dangerous or potentially dangerous
areas created by mining operations by placing necessary warnings and markings in the
vicinity of the mining claim, and submit the map to the Agency and the local governor.

The minerals law regime places various environmental obligations on exploration and
mining licence holders.
Licence holders are required to prepare an environmental protection plan and
environmental impact assessment (‘EIA’) to assess any potential adverse impacts, which
needs to be updated annually to ensure that pollution caused by exploration activities
does not exceed the amount allowable.
A licence holder is obliged to carry out activities providing for the safety of
citizens of the relevant soum or district, and the labour safety and hygiene of employees.
The Safety Regulation for Open-Pit Mining must be followed by all mining companies
operating open-pit mines in Mongolia.
The Law on Occupational Safety and Health 2008 provides the requirements
for safety and health that should be followed by all industries, including mining. If a
company’s activities are proven to have an adverse impact on the health and safety of its
employees, the Agency or other authorised officials may take steps to force the company
to remedy the breaches. If the company fails to do so, it may be ordered to wholly or
partly suspend business activities until the labour safety and sanitation requirements are
satisfied. Additionally, failing to comply with labour safety and sanitation regulations,
causing or concealing an industrial accident or failing to pay adequate compensation
for an industrial accident may result in the imposition of administrative fines. In
extreme cases, criminal sanctions may be imposed for violating the applicable labour law
provisions.
All exploration licence holders must prepare an environmental protection plan and
report annually to the MRAM on its compliance with the terms of these plans, and the
licence holder is required to pay 50 per cent of its yearly environmental reclamation
deposit to the relevant soum budget fund. In the event the mining licence holder does not
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properly conduct reclamation activities, the Minerals Law allows the state to undertake
those activities from the yearly deposit.25
A licence holder may not commence prospecting and exploration operations
without first obtaining written approval from the relevant environmental agency or
commence mining operations without permission.26
All mining projects undertaken in Mongolia are required to conduct a detailed
EIA according to the standards set out in the Environmental Impact Assessment Law.
The detailed EIA, as approved by the Ministry in charge of environmental matters, must
be submitted to the mining commissioning committee prior to the start of commercial
production.
The Long Name Law attempts to prohibit mineral exploration or mining in river
basins and forested areas determined by the government. To date, the government has
listed 1,782 licences subject to review under this law; according to the terms of the law,
existing exploration and mining licences in those areas will be revoked and the licence
holders compensated.

Mongolia is a party to the United Nations Declaration on the Rights of Indigenous
People.
Local governors and representative assemblies may veto an approval of an
exploration licence application27 if the exploration area overlaps grassland, herder or
agrarian owned or possessed land.
As required by the Minerals Law, mining companies must conclude community
development agreements with local authorities on local infrastructure development and
job creation. Also, local people have a right to be involved in community monitoring on
the licence holders’ environmental reclamation compliance.
The uncertain nature of Mongolia’s democracy can complicate foreign investment
projects. The frequent replacement of key personnel at the top levels of Mongolia’s
government has also caused concern, with the changes often accompanied by nationalist
rhetoric and populist promises to secure more control over the country’s assets. Analysts
also complain about the weakness of Mongolia’s political parties and its poor regulatory
capacity.
Corruption may also prove to be a long-term problem. Transparency International
rated Mongolia 116th in its 2010 corruption perception index, up from 120th in 2009
but down from 102nd in 2008.
Information on Mongolian individuals is hard to obtain, making it difficult for
companies to understand the track record, reputation and liabilities of potential business
25 Article 38.1.8 of the Minerals Law 2006.

26 According to Article 35.4 of the Minerals Law, a mining licence holder may commence its
mining activities after it has been accepted by a commission appointed by the MRAM.
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partners. Many domestic news outlets are quietly controlled by politicians who inevitably
have a particular agenda. Allegations of corruption against business people or politicians
often appear in print with no further mention anywhere in the public record. Those
interested have to dig deeper in order to determine which allegations of corruption are
grounded in fact and whether any such claims in the press resulted in legal sanctions.
Lines between the public and private sector also remain blurry, and conflicts of
interest are common. Complicating matters further, investigators in Mongolia cannot
rely on the official public record to identify ownership and control of locally registered
businesses. It is also common to find that company control is quietly exercised by
powerful individuals from Mongolia’s neighbours, Russia and China.

Equipment and machinery are some of the main products imported in Mongolia and
there are no limitations on their import. According to the Custom Tariff Law 2008,
equipments, machinery, raw materials, appliances, petroleum and diesel fuel imported
in accordance with a product-sharing agreement in the oil sector with the government
are exempt from customs duty.28
In accordance with the government policy of encouraging an export-oriented
manufacturing economy, the mining industry is identified as a leading sector. The
Mongolian parliament adopted on 31 January 2008 the ‘Millennium Development
Goals-based Comprehensive National Development Strategy of Mongolia’, a long-term
development strategy paper that called for intensive development of the mining industry
and the exploitation of mineral deposits of strategic importance as one of the priority
areas.
The government has adopted several long-term programmes to search for and
develop promising mineral deposits, especially gold, silver, copper, coal and oil.29 Foreign
investment and direct participation in a wide range of mining-related industries are
actively encouraged, particularly in connection with the exploration, extraction and
processing of mineral resources. Mongolia’s national policies concerning its mineral
sector are continuously under review to ensure that Mongolia remains a favourable
destination for foreign mineral investment, and competitive with other nations.
The Law on Working Abroad and Receiving Workers and Specialists from Abroad
was adopted on 12 April 2001. The purpose of this law is to govern and protect the rights
of Mongolian citizens being sent abroad as well as foreign citizens being employed in
Mongolia.
28 Article 38.1.8 of the Custom Tariff Law 2008.

29 ‘Guiding Directions on the Development of Geology and Mining Sector of Mongolia’ was
approved by the government on 24 May 2002. The government issued a resolution on
the encouragement of gold extraction on 13 April 2009. The ‘gold’ programme has been
implemented since 1991.
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It details the general working conditions of foreign citizens when working in

Mongolia, and states that the company must pay a fee equal to twice the minimum
monthly wage when hiring a foreign citizen. Further, a mineral licence holder must
employ citizens of Mongolia and only a maximum of 10 per cent of its employees may
be foreign citizens.30 If the number of foreign citizens employed exceeds 10 per cent, the
licence holder must pay 10 times the minimum monthly salary31 for each foreign citizen
each month.32 This payment is allocated to the budget of the relevant soum or district and
is disbursed to the educational and health sectors; relevant procedures will be approved
by the Citizens’ Representatives Khural of the relevant soum or district.

There are no restrictions on the sale, import and export of extracted or processed minerals
under Mongolian law. The government prioritises exporting of minerals as intermediate
products and with added value, and such exports are more profitable for the economy
their exporting as raw materials.33
Copper concentrate, molybdenum concentrate, and coal, gold, iron ore, fluorspar
and flotation concentrate were the main exported products in 2010.34 These mineral
products accounted for 94.8 per cent of the export revenue of the country.35

There are no capital movement controls or exchange controls in Mongolia. Investors
and foreign residents are free to exchange the Mongolian tugrug against other currencies
at market rates at any time. Also, there are no controls, restrictions or limits on foreign
participation in the money, capital and forex markets.
Until the enactment of the SSFIL in May 2012, foreign investment in the minerals
sectors was not subject to prior government review and Mongolian law did not expressly
impose any notification or approval requirements upon offshore transactions affecting
strategic sectors of the economy.
According to the SSFIL, the mineral resources sector has been identified as a
strategic sector and when shareholding of a foreign investor in a business entity operating
in this sector exceeds 49 per cent and the amount of the investment exceeds 100 billion
tugrugs (approximately $71.5 million), the parliament must approve or refuse the
investment as submitted by the Cabinet. In other cases, the Cabinet determines whether
to grant a permit.

31 Minimum wage per month becomes 140,400 tugrugs, pursuant to the Resolution No. 01 of
the Tripartite National Committee of Labour and Social Consent, dated 5 April 2011.
33 A complex programme to develop mining and heavy industry in Mongolia in 2010.
34 MMRE, mining production statistic.
35 MRAM and the National Statistical Office.
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Mongolia has signed and ratified bilateral investment treaties with 42 countries,
which specifically enjoin both signatories from expropriatory acts against private property
and investments.
In addition, both the Constitution and Mongolian laws recognise private property
rights and the rights associated with their use and specifically bar the government from
expropriating such assets.36 The government of Mongolia may expropriate any property
or assets on the basis of exclusive public need with due compensation and payment.
Further, according to the Foreign Investment Law, in the event of a request by an
investor intending to undertake an investment project worth at least $20 million or the
equivalent in Mongolian tugrugs in Mongolia, the government may enter into a stability
agreement with such investor as a legal guarantee of a stable environment in which to
conduct business.37
VI CHARGES
Mongolia’s Tax Code specifies several taxes that apply to mining companies: minerals
royalties, general taxes such as corporate income tax, VAT, excise and customs duty, as
well as tax on transport vehicles. Other taxes and charges include payment for purchasing
geological information as well as stamp duties.
Mongolia has entered double-taxation treaties with 35 countries, including
China, Russia, Canada and Korea.38 Foreign companies and investors are subject to the
same legal regime imposed on domestic companies regarding taxes and duties. On 31
July 2012, the government announced that draft laws are currently before parliament to
cancel Mongolia’s double-taxation treaties with Luxembourg, the Netherlands, Kuwait
and the United Arab Emirates.
i Royalties
The Minerals Law provides for a royalty at a base rate of 5 per cent on the sales value of
minerals with the exception of domestically sold coal and common construction minerals
36 Article 16.3 of the Constitution of Mongolia 1992; Article 8 of the Foreign Investment Law
1993.
37 By the agreement of 24 February 1973 between the Government of the Mongolian People’s
Republic (former name) and the Government of USSR, the Mongol-Soviet commercial
partnership ‘MongolRosTsvetMet’ and ‘Erdenet’ was established. This agreement was amended
in 1988, 1991 and 2003. According to the agreement, Mongolia has 51 per cent and Russia have
49 per cent in two joint ventures. In 1998 The Mongolian government, through the Minister
of Finance, made two stability agreements: Stability agreement between the Government of
Mongolia and ‘Tsairt Mineral’ Company (JV of Mongolian and Chinese companies) on 13
May 1998; Stability agreement between the government and ‘Boroo Gold’ Company (JV
of Mongolian and British companies). In 2009, the government entered into an investment
agreement with Turquoise Hill Resources, formerly known as Ivanhoe Mines.
38 Ministry of Foreign Affairs archive.
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that are sold, shipped for sale or otherwise used. The royalty rate for domestically sold
coal and construction minerals is 2.5 per cent.39
The Windfall Profits Tax Law of 2006 imposed a 68 per cent tax on the profits
from gold and copper mining, which attracted widespread criticism of the government for
its failure to realise its commitment to create an open, predictable and fair environment
for foreign direct investment. The windfall profits tax officially ended for all copper
concentrate and gold products in 2011.
To compensate for lost windfall tax revenue, the parliament amended the mineral
royalty rates on 25 November 2010. The new regime imposes a sliding scale of royalties
on a variety of mineral and metal products, which depends on the market price of the
commodity quoted on certain exchanges and the amount of minerals or metal products
processed in Mongolia. The more value added to the products in Mongolia, the less the
increase in the royalty to be levied on those products.
ii Taxes
Business entities established under the laws of Mongolia and their subsidiaries and
representative offices, foreign business entities that have headquarters located in Mongolia
and foreign business entities earning income or making profits in Mongolia and their
representative offices are all subject to income taxation according to the Corporate
Income Tax Law of Mongolia (2006).40
According to the Corporate Income Tax Law, taxable income includes all income
from business activities and income from the renting out or the sale of properties. The
tax rate to be charged against taxable income depends on the total amount of taxable
income and the nature and source of such income: a total annual taxable income below
3 billion tugrugs is taxed at a rate of 10 per cent; and total annual taxable income
exceeding 3 billion tugrugs is taxed at a rate of 300 million tugrugs plus 25 per cent of
the part of income exceeding the threshold.41
The value added tax (‘VAT’) rate is 10 per cent. VAT is imposed on the following
goods, work, and services:
a all types of goods sold in the territory of Mongolia;
b all types of goods exported for the purpose of sale, consumption, or use outside
the territory of Mongolia;
c all types of goods imported for the purpose of sale, consumption, or use in the
territory of Mongolia; and
d work performed and services provided in the territory of Mongolia.42
iii Duties
Prior to 1 January 2011, Mongolia did not impose stamp duty on a direct or indirect
transfer of exploration and mining licences in the Law on Stamp Duties 1993 (Old).

40 Article 5.3 and 5.4 of the Corporate Income Tax Law 2006.
41 Article 17.1 of the Corporate Income Tax Law 2006.
42 Article 7.1 of the Value-Added Tax Law 2006.
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Under the new Law on Stamp Duties 2010, the following types of services with regard
to mining tenements are charged stamp duty of between 50,000 and 7 million tugrugs:
a review of a new application to issue a minerals licence;
b a licence transfer;
c the extension of validity of a licence;
d a licence pledge application;
e a licence transfer in accordance with a licence pledge;
f surrender of a licence area;
g a dispute on licence area boundaries;
h reissuance of lost a licence certificate; and
i other application concerning licences.43
iv Other fees
Under the Minerals Law 2006, holders of mining rights are required to pay a licence fee
annually in respect of mineral exploration and mineral mining rights. Non-compliance
of payment of licence fees is subject to revocation of the mining rights.44
Exploration licence fees

Exploration licence fees are payable for each hectare within the exploration area at the
following rates:45
a $0.10 for the first year of the exploration licence term;
b $0.20 for the second year of such term;
c $0.30 for the third year of such term;
d $1 for each of the fourth to sixth years of such term; and
e $1.50 for each of the seventh to ninth years of such term.
Mining licence fees

An annual minerals mining licence fee is payable for each hectare included in the mining
area at $15. For coal and other common mineral resources, however, the fee is reduced
to $5 for each hectare. The mining licence fee for the first year is payable within 10 days
of approval of the licence application.46
Exploration expenditure
An exploration licence holder is required to undertake reconnaissance and exploratory
work each year with expenses no less than the amounts specified below per hectare of
the licence area: (1) $0.50 for each of the second and third years of the term of the
exploration licence; (2) $1 for each of the fourth to sixth years of such term; and (3)
$1.50 for each of the seventh to ninth years of such term.47
43 Article 25.1.5 of the Law on Stamp Duties 2010.

44 Article 56 and 56.1.2 of the Minerals Law 2006.
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Deposit in environmental protection funds

In order to ensure the discharge of its responsibilities with respect to environmental
protection, a minerals licence holder must deposit funds equal to 50 per cent of its
environmental protection budget for any given year in a special bank account established
by the governor of the relevant soum or district.48 The failure to deposit such funds does
not affect the validity of the relevant minerals licence, but will entitle the government to
take action to recover the funds from the licence holder or to prohibit the licence holder
from continuing with its activities.
According to the National Development Strategy, the mining industry looks to be a

key sector in the Mongolian economy over the next decade. The conversation to change
the Minerals Law 2006 has already started, with several public discussions having been
conducted in the past few years,49 and policymakers have agreed to renew the legal
environment for the mining sector in general. At this time, however, it is unclear when
the Minerals Law will be changed.
48 Article 38.1.8 of the Minerals Law 2006.

49 Tsakhia Elberdorj, President of Mongolia, has initiated a change of minerals law in 2011. A
working group was formed in 2011 and public discussions and research have been carried out.
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Chapter 11
MOZAMBIQUE
João Afonso Fialho and Nuno Cabeçadas 1
I OVERVIEW
On the verge of celebrating 20 years of peace, Mozambique is currently one of Africa’s

rising stars and a hotspot for mineral resources projects. An anticipated GDP growth
rate of 7.5 per cent for 2012 and 8 per cent for 2013 places Mozambique in the top 10
fastest-growing economies in the world and makes it the third-fastest growing country
in Africa, second only to Niger and Angola.
The mining sector plays a pivotal role in Mozambique’s development strategy.
The country is already established as a leading coal player, with huge reserves being
exploited in the central province of Tete. It is expected that by 2020 Mozambique’s coal
production will reach a figure in the region of 100 million tonnes, making it one of the
largest coal producers in the world.
For the past few years, Mozambique has been developing a mineral promotion
programme, primarily aimed at enhancing its depleted foreign exchange reserves. As
a result, some major industry players from South Africa, Russia, Australia, India and
Brazil have acquired interests in mining areas throughout the country, underlying the
importance of the mining sector in Mozambique. In contrast with some of its African
neighbours, Mozambique has so far adopted a rather careful strategy towards Chinese
investment in the mining sector. China does have a presence in some mining ventures,
but it is yet to venture into the most important projects.
The main challenge – which is, at the same time, the biggest risk – that mining
projects will face during the next few years is infrastructure development. A recent
World Bank report concluded that Mozambique will need to invest an annual amount
of $1.7 billion during the next 10 years to match the level of infrastructure development
1 João Afonso Fialho is partner and Nuno Cabeçadas is a senior associate at Miranda Correia
Amendoeira & Associados.
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Mozambique
of other African countries. Some projects are already under way to back and support
the export of the mining output. These projects boost not only the mining sector, but
the country’s economy as a whole, having a significant impact in terms of job creation
and GDP growth. The most visible face of the anchor effect of the mining industry
in Mozambique is the upgrading of the Nacala Corridor Railway, which will greatly
enhance Mozambique’s competitiveness in the region, by connecting the inland to the
port of Nacala, east Africa’s deepest port.
II LEGAL FRAMEWORK
The mining industry is primarily regulated at a national level by nationwide laws (enacted
by the parliament) and implementing regulations (approved by the government). The
Mozambican mining legal framework comprises the following main statutes:
a The Mining Law, enacted by Law 14/2002 of 26 June 2002 – the Mining Law,
together with the Mining Regulations, sets out the legal framework on the
various mineral titles provided for exploiting mineral resources, the formalities
for their concession and respective time periods, as well as the rights offered to
investors who wish to work in the mining sector. The Mining Law is currently
under revision and amendments are expected to be enacted within the next few
months.
b Mining Regulations, approved by Decree 62/2006 of 26 December 2006 – these
further the provisions of the Mining Law and contain the models of each of the
licences, as well as the standard structure of the reports to be issued by licence
holders throughout the term of the licences. Furthermore, it contains the validity
periods of the licences, the rules on renewal and assignment and the grounds for
their cancellation.
c Regulations on Health and Safety for Mineral Activities, enacted by means of
Decree 61/2006 of 26 December 2006 – these set out guidelines and rules for
ensuring the health and safety of employees engaged in mineral operations.
d Environmental Regulations for Mineral Activities, approved by Decree 26/2004
of 20 August 2004 – these establish a set of rules aimed at preventing and
mitigating the adverse environmental effects of mineral activities.
e The Basic Rules on Environmental Management for Mineral Activities, approved
by Ministerial Order 189/2006 of 14 December 2006 – these apply to Level
I activities for environmental licensing purposes, defined as low-scale mineral
activities carried out by individuals or cooperatives, as well as reconnaissance,
prospecting and exploration licences that do not involve mechanical instruments.
f Regulations on Trade of Mineral Products, approved by Decree 20/2011 of 1
June 2011 – these govern the trade of mineral products and the procedures for
obtaining the respective licences.
g Rules and Procedures governing the Registration of Technicians Eligible to Draft
the Prospecting and Exploration Reports and Activities Report under a Mining
Project, approved by Ministerial Order 92/2007 of 11 July – pursuant to this
statute, only the holders of a clearance card (issued by the National Directorate of
Mines) are allowed to sign off the mandatory reports provided for in the Mining
Regulations.
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h The Mining Tax Law, enacted by Law 11/2007 of 27 June 2007 – this sets out
the tax regime and defines the relevant exemptions and tax rates of the mining
production tax.
i The Mining Tax Regulations, enacted by Decree 5/2008 of 9 April 2008 – these
set out the main rules for the assessment of mining production tax and surface
tax.
j Regulations on the Hiring of Expatriates for the Petroleum and Mining Sectors,
approved by Decree 63/2011 of 7 December 2011 – these contain specific rules
for the hiring of expatriate personnel for the petroleum and mining industries.
The main regulatory bodies of the mining industry are the Ministry of Mineral Resources
(‘MIREM’), which is essentially responsible for awarding mining rights, and the
National Directorate of Mines, an administrative entity within MIREM, which oversees
all administrative procedures associated with mineral activities.
As regards international treaties, Mozambique has entered into a bilateral
cooperation treaty with Angola in 2009 and is in the process of approving regulations aimed
at incorporating the Kimberley Process Certification Scheme as local law. Mozambique
is also applying to become a member of the Extractive Industries Transparency Initiative.
i Title
All mineral resources in the soil, subsoil and water are the sole property of the state. This
is a fundamental principle contained in the Mozambican Constitution and replicated in
the Mining Law. Private prospection, exploration and mining of mineral resources can
only be carried out under licence or permits granted by the government.

Pursuant to the current legislation, mineral rights are awarded to the interested party that
submits an application to MIREM. A tender process is only opened if more than one
entity submits an application in respect of the same area. It should be noted, though,
that the draft of the new Mining Law introduces a new awarding system for mineral
rights. Under the proposed new rules, MIREM may decide to open a tender process for
granting mineral rights over areas:
a that have been the object of geological studies and are believed to have mineral
potential;
b in which mining operations have been previously carried out; and
c that have been declared as reserved for mineral activities.
If no tender process is opened, the awarding of mineral rights will be made on a first-
come, first-served basis.
There are five main types of mineral rights in Mozambique:
a reconnaissance licences;
b prospecting and exploration licences;
c mining concessions;
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d mining certificates; and

e mining passes.
A reconnaissance licence permits a holder to survey an area on a non-exclusive basis;

a mining certificate enables a holder to carry out small-scale mining operations; and
a mining pass is issued to Mozambican nationals for unsophisticated, very small-scale
mining activities.
The most important and commonly awarded rights for medium and large-scale
operations are prospecting and exploration licences and mining concessions.
Prospecting and exploration licences permit the holders to access the licensed
areas and carry out all activities ancillary to prospecting and exploration, such as erecting
temporary structures and removing or selling samples and specimens. A prospecting
and exploration licence is exclusive to its holder, is initially valid for five years and may
be extended for up to five further years, after which time a new licence must be sought
or the licence converted into another type of licence – typically, a mining concession.
Prospecting and exploration licences may cover an area of up to 25,000 hectares, which
can be extended by submitting an application request to MIREM setting out the reasons
justifying the extension of the area. Holders of prospecting and exploration licences must
submit annual reports summarising the previous year’s activities and expenditure as well
as a work programme and budget details for the forthcoming year.
Mining concessions permit the holder to extract minerals from the licensed
area and carry out all activities ancillary to extraction, such as erecting structures and
selling the minerals. A mining concession is exclusive to its holder, is initially valid for
up to 25 years and may be extended for up to 25 further years. Mining concessions are
awarded in respect of the area necessary to carry out the operations and are extendable
on application to MIREM. In order to obtain a mining concession, a nominal fee
must be paid and certain information must be provided to MIREM, including a tax
clearance certificate, an economic feasibility study (including a mining production plan)
and details of the applicant’s technical expertise and financial resources to proceed with
extraction (including the experience of personnel in managing the proposed operations).
The mining production plan must include details of the ore deposit, mine site design, the
operations schedule, expected dates for commencement of development and commercial
production as well as environmental, health and safety plans.
It is also important to note that the holder of a mineral title may enter into a
mining contract with the government. There is no objective criteria set out as to when
a mining contract should be entered into but they are often used by the government for
large-scale mining projects. A mining contract can provide for modifications, variations
or exemptions from the various legislative requirements, taxes, custom duties, royalty
payments and expatriate hiring quotas.
As a rule, any Mozambican or foreign individual or corporate entity with legal
capacity is entitled to hold mineral titles, regardless of the nationality of its shareholders,
provided that the applicant provides evidence of technical expertise and financial resources
to undergo mineral operations. There are, however, three restrictions to foreign parties:
a mining certificates and mining passes may only be awarded to Mozambican
individuals;
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b mining concessions may only be awarded to companies incorporated under the

laws of Mozambique, even though said companies may be 100 per cent held by
foreigners;
c mineral products trading licences (outside the scope of a mining concession) may
only be granted to Mozambican nationals.
At present, no further restrictions are set out in the law – currently, the mining framework
does not provide for any obligation of engaging the state or a domestic partner in mining
ventures. Nonetheless, the Law on Public Private Partnerships, Large Scale Projects and
Enterprise Concessions, approved by Law 15/2011 of 10 August 2011 sets out that a
participation right in mineral ventures – between 5 per cent and 20 per cent – must be
reserved to the state or to Mozambican nationals or entities.
As to the protection of mineral rights, it must be stressed that Mozambique has
an independent judicial system and observes the principles of the rule of law and due
process. Mineral right protection and enforcement can be made through the local courts,
although specific knowledge of technical mining issues is not always present. Litigation
in Mozambican courts tends to be an expensive and time-consuming exercise.
One possible alternative to local judicial courts is international arbitration.
Mozambique is a party to the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards of 1958 (‘the New York Convention’), having deposited its instrument
of accession with the Secretary-General of the United Nations on 10 June 1998. As
permitted by the New York Convention, when it acceded thereto Mozambique declared
that it would apply the Convention to the recognition and enforcement of awards made
only in the territory of another contracting state on the basis of reciprocity. Therefore, only
arbitral awards made in contracting states benefit from the more favourable recognition
and enforcement regime provided for in the New York Convention. Awards made in
non-contracting states will have to undergo a (more burdensome) judicial process of
review and confirmation before they can be enforced.

Additional permits and licences are required for the mining phase of the venture and
must be obtained by holders of mining concessions. Before initiating extraction activities
the holder of the Mining Concession must obtain an environmental licence (as further
detailed below) and the right to use and exploit the land – the so-called ‘DUAT’. Both
must be obtained within three years of the date of issue of the mining concession and
prior to the commencement of extraction activities. Development must commence
within two years and production within three years of the grant of the environmental
licence or the DUAT, whichever is later.
The issues around access to the land and award of the respective rights are a topic
of particular concern, as obtaining a DUAT is often a cumbersome and time-consuming
process. It is critical to note that pursuant to both the Mozambican Constitution and
the Land Law – approved by Law 19/97 of 1 October 1997 – all land belongs to the
Mozambican state and cannot be sold, traded, mortgaged, pledged or by any other
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means disposed of – and this is why projects requiring the use of land are subject to the
prior award of a DUAT. The award of DUATs is made:
a by the provincial government, where the mining concession area does not exceed
1,000 hectares;
b by the Minister of Agriculture, for mining concession areas between 1,000 and
10,000 hectares; or
c by the Council of Ministers, where the mining concession area exceeds 10,000
hectares.

Both the Mining Regulations and the Environmental Regulations for Mineral Activities
contain a general principle that holders of mineral titles shall be responsible (upon
closure of the mine) for restoring the site where mineral operations were carried out.
The mineral title holder is required to provide an annual financial bond for activities
classified as Level II or Level III (as further described below), which may take the form of
an insurance policy, bank guarantee or bank deposit. This bond is intended to meet the
decommissioning costs of the operations.

Pursuant to the Regulations on Health and Safety for Mineral Activities, prior to
commencement of mineral operations, holders of mineral titles are required to prepare
and submit security, health and safety plans to MIREM and to the Ministry of Labour,
including (1) risk assessment, (2) potential sources of fire or explosion, (3) use and
maintenance of equipment, (4) working conditions, and (5) measures to prevent risks,
accidents and occupational diseases.
Mineral title holders are subject to several environment-related obligations. For the
purposes of determining the specific applicable environmental requirements, mineral
operations are classified into three different levels according to the scope, scale and
sophistication of the equipment to be used, as follows.
Level I
If the activities carried out are deemed to fall under Level I activities, the holder is merely
subject to the Basic Rules on Environmental Management for Mineral Activities, aimed
at mitigating environmental damages and socio-economic impacts arising from mineral
activities, by ensuring same are carried out through simple methods intended to prevent
air, soil and water pollution, flora and fauna damage, and to protect human health.
Level II
Mineral operations falling under Level II activities, including operations in quarries or
extraction and mining of other mineral resources for construction, as well as exploration
and mining activities involving mechanised equipment, are subject to the submission
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of an environmental management plan and an emergency and risk situation control

programme.
The environmental management plan must comprise a report on the initial
conditions of the area, a monitoring programme, a rehabilitation programme and a
mine decommissioning and closure programme. It also usually includes provisions on
backfilling, levelling and other measures as may be required to restore the land to its
original form. Where approved and signed by the relevant authority, the environmental
management plan is deemed a statement of environmental liability with which the
holder is required to comply.
Level III
Operations falling under Level III activities – typically mining concessions – are subject
to stricter environmental requirements. In particular, prior to commencing operations
the holder of a mining concession needs to obtain an environmental licence issued
by the Ministry for Coordination of Environmental Affairs (‘MICOA’). To obtain an
environmental licence an environmental impact assessment (‘EIA’) is mandatory. The
EIA report that sets out the findings from the EIA will also contain an environmental
management programme, as well as an emergency and risk situation control programme.
The environmental management programme is required to cover a five-year period and
contain an environmental monitoring programme and a mine decommissioning and
closure programme. Therefore, as a rule, the environmental management plan also
includes provisions on backfilling, levelling or other measures as may be required to
restore the land to its original form.
The procedure for obtaining an environmental licence involves a public
consultation process with the local communities and the title holder must ensure
that those local communities are given the opportunity to participate in the decision-
making process. Before the environmental licence is issued, the EIA report must
be approved MICOA following a technical review conducted in coordination with
MIREM. The environmental licence is valid for the period of the corresponding
mining concession, but is subject to review every five years and may be issued
subject to certain recommendations and conditions. In addition, the Environmental
Regulations for Mineral Activities encourage stakeholders to enter into a memorandum
of understanding for a five-year period to provide for the parties’ agreement on the
methods and procedures for the management of environmental, biophysical, social
and economic and cultural matters during the project and on decommissioning.
Furthermore, each year an environmental management report containing the results
of the environmental monitoring, both at a social, economic, cultural and biophysical
level, must be submitted to MICOA.

Local communities affected by the conduct of mineral operations are entitled to
compensation or to be resettled into a new area, or both. Any resettlement shall, to
the maximum extent possible, restore the cultural, social and economic conditions
of the affected communities. For this purpose, a resettlement plan must be prepared
by mineral titles holders in accordance with the provisions of the Resettlement
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Regulations, approved by Decree 31/2012, of 8 August 2012. A specific procedure for

consultation of stakeholders is also provided for in the law. This consultation aims to
assess the local community’s opinion on the mining project, including the expectations
and compensation measures required to implement the project in the target area
(notably in terms of community development projects). The procedure applicable to
the hearing of the local communities is set forth in the Regulations on Consultation
of Local Communities, approved by means of Ministerial Diploma 158/2011 of 15
June 2011.

As regards the import of equipment and machinery, Mozambican law provides for
the existence of several customs regimes, including import, temporary import, export,
temporary export, re-import, re-export, customs transit, transfer, customs warehousing
and industrial free zones.
As a rule, holders of mineral rights benefit from customs (and valued added
tax) exemptions on the import of machinery, equipment and other goods to be used in
mineral operations. When such exemption does not apply (e.g., where the equipment
imported is not for use in mineral operations), the general customs regime applies.
For purposes of computing the customs duties and other charges due on the import
of equipment, machinery and other goods, values stated in foreign currency shall be
converted into the local currency (meticais). Customs duties and other taxes are based
on the Customs Classification of the goods under the Customs Tariff Schedule. Pursuant
to Customs Tariff Schedule, classification is made in accordance with the General
Rules on Interpretation of the Harmonised System of Designation and Codification
of Goods. Also, the customs value on importation of goods is that set out in Article
VII of the General Agreement on Tariffs and Trade of 1994 (‘GATT’) (Mozambique
adopted the WTO Customs Valuation Agreement in 2002). Mozambican law also
states that, regardless of the method of valuation used, the following elements must
always be taken into account for purposes of assessing the customs value: (1) cost of
transportation of the goods until the customs station, (2) manoeuvering costs and (3)
insurance of the goods (i.e., the cost, insurance and freight (‘CIF’) value).
Special rules apply to the employment of expatriate personnel. The rendering of
work in Mozambique by foreigners must take into account both labour and immigration
issues. As a general rule, foreign employees are only entitled to work in Mozambique under
a Mozambican law employment contract entered into with a Mozambican employer –
either a Mozambican company or the Mozambican branch of a foreign company.
The employment contract is subject to a Ministry of Labour authorisation –
which is normally a more cumbersome process – or to a quota regime based on a mere
notification procedure. The statutory regime is primarily set out in the Regulations on
the Hiring of Expatriates for the Petroleum and Mining Sectors.
Pursuant to the aforementioned Regulations, an employer may have a certain
number of expatriate employees depending on the total number of employees at its
service. To this end, the concept of employee also includes directors and branch managers.
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Under this quota regime, in a company with more than 100 employees, 5 per cent may
be expatriates, in a company with more than 10 and less than 100 employees, 8 per
cent may be expatriates and companies with up to 10 employees can only employ one
expatriate. Expatriates hired under the quota regime are subject only to a notification
procedure to the authorities.
The hiring of expatriates in a number that exceeds the relevant expatriate quota is
also possible, but is subject to a special authorisation issued by the Ministry of Labour.
The employer will have to submit an application stating its name, head office and business
sector, the identification of the expatriate in question, his or her job function and the
grounds on which the employer is requesting the authorisation.
Finally, it is important to note that mining contracts entered into between the
government and the holder of mineral rights may provide for the possibility of hiring
expatriates above the quotas established in the general regime. In this case, holders of
mineral titles and their subcontractors are merely required to notify the labour authorities
of the admittance of those expatriates, but they must first obtain the favourable opinion
of the National Directorate of Mines.

The Customs Clearance Regulations, enacted by means of Decree 34/2009 of 6 July
2009, expressly states that mineral products are subject to a special export customs
regime, as provided for in law. Pursuant to the Mining Law, holders of prospecting
and exploration licences are only allowed to export mineral samples for analysis and
testing abroad. Holders of a mining concession, mining certificate or mining permit may
market and process the minerals they produce in the area covered by the title.
The sale, import and export of minerals by entities that do not hold a mineral title
is subject to licensing by MIREM, as provided for in the Regulations on Trade of Mineral
Products. Licences to trade mineral products may only be awarded to Mozambican
nationals.

The Mining Law contains several guarantees to investors in the Mozambican mining
sector, including the safety and legal protection of property over the goods and rights
within the context of the authorised (and implemented) mineral activities. The
principles of limitation of public expropriation and mandatory compensation in cases of
expropriation or confiscation are also provided for. Such guarantees – and any other tax
and customs regimes provided under Mozambican law – are, however, only available to
title holders who directly invest a minimum amount of $50,000. The value of the foreign
direct investment includes costs incurred in the conduct of mineral operations, duly
calculated and confirmed by a competent and recognised auditing firm.
The following may, inter alia, qualify as foreign direct investment:
a freely convertible currency or cash in the case of direct national investment;
b equipment and relevant accessories, materials and other imported goods; and
c the value paid in a freely convertible currency for the acquisition of shares in
a company established in Mozambique (that holds mineral rights) or for the
acquisition of the mineral title in the case of partial or total assignment.
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Holders of mineral rights are required to register the mineral titles with the Central Bank
of Mozambique and, subsequently, provide evidence of the amounts of foreign direct
investment made in the course of the prospecting, exploration or mining for purposes of
securing the guaranties and other incentives to foreign investment.
VI CHARGES
Other than value added tax and customs duties – which apply throughout the entire life
cycle of a mining project – duties, royalties and taxes vary in accordance with the phase
of the mineral operations.
Holders of prospecting and exploration licences are required to pay surface tax of
a fixed amount per square kilometre of land referred to in the licence. Surface tax is levied
on an annual basis and is payable one month prior to the anniversary of the licence.
Holders of prospecting and exploration licences are also subject to corporate income tax
– a profit-based tax – at a 32 per cent rate on any profits they may generate (although
not likely to generate profits during the exploration phase, holders of prospecting
and exploration licences are subject to the rules applicable to the carry forward of
accumulated losses set out in the Corporate Income Tax Law (approved by Law 34/2007
of 31 December 2007) and in the Corporate Income Tax Regulations (enacted by means
of Decree 9/2008, of 16 April 2008).
Holders of mining concessions, in turn, are also required to pay surface tax of a fixed
amount per square kilometre of land referred to in the concession and are further liable to
pay a production tax (royalty) based on the value of the mineral extracted, as follows:
a diamonds – 10 per cent;
b precious metals (gold, plate and platinum) – 10 per cent;
c semi-precious stones – 6 per cent;
d base minerals – 5 per cent; and
e other mineral products – 3 per cent.
The value is calculated based on the price at which the previous consignment of mineral
was sold or, if no mineral has yet been sold, the market value of the mineral. Production
tax is payable at the end of the month during which the mineral was extracted.
Holders of mining concessions are also subject to corporate income tax at the
same 32 per cent rate.
A revision of the Mining Law is currently under way and is expected to be concluded
within the next few months. Industry players have been given the opportunity to
comment on the draft in the context of a public consultation process that the government
decided to carry out.
The main goals that the legislative revision seeks to achieve are the development
of a national mining industry – at exploration or mining and services levels – and the
maximisation of the state’s gains in terms of taxation of deals involving the direct or
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indirect assignment of mineral rights. This is expected to be translated into two new
fundamental sets of rules:
a a strict – some would say severe – local content regime; and
b a new change of control regime that will limit the use of deal structures falling
outside Mozambique’s tax jurisdiction.
The impact of these proposed changes on the country’s mining industry is uncertain.
What does seem to be certain is that Mozambique’s mining potential will continue to
attract the most important companies in the world and new key players are expected
to target the country as new areas for mineral activities are made available by the
government.
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Chapter 12
NAMIBIA
Axel Stritter 1
I OVERVIEW
The Namibian government developed a minerals policy2 to contribute to the creation

of an environment that attracts both foreign and local investment in mining, and the
development of opportunities for the Namibian people to benefit from their country’s
mineral resources in line with the government’s policy on socio-economic upliftment.
In the foreword of the Minerals Policy of Namibia it is stated that: ‘The Government
of the Republic of Namibia is committed to the development of the Namibian mining
industry, as demonstrated in this Mineral Policy, within a free market environment.’ The
Namibian government recognises the significant contribution of the mining sector to
Namibia’s export earnings, public revenues and employment.
In 2011,3 the figures produced by the Central Bureau of Statistics for 2010 showed
that the mining industry directly accounted for 8.8 per cent of GDP (down from 10 per
cent in 2009 according to the Annual Review of the Chamber of Mines of Namibia),
with diamond mining contributing more than non-diamond mining. Mineral products,
excluding cut and polished diamonds, accounted for 54 per cent of Namibia’s total
merchandise exports. The mining sector contributed more to total fixed investment than
any other sector of the economy, including the government, accounting for just under
25 per cent of all fixed investments in Namibia.
It is also estimated that the exploration and mining businesses directly employ in
excess of 14,000 people, and taking into account the multiplier effect for each employee,
this is a significant figure considering Namibia’s total population of approximately
1 Axel Stritter is a partner at Engling, Stritter & Partners.

2 Minerals Policy of Namibia
3 Mark T Dawe, Mining Industry Review for 2011, 22 May 2012
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Namibia
2.3 million. It was estimated that in 2004 every N$1 million increase in mining output
gave rise to a N$1,568 million increase in output elsewhere in the economy.4
On 21 July 2011, the Minister of Finance issued a press release indicating
proposed amendments to the tax laws of Namibia, which were reviewed and set out in a
further press release, issued on 17 August 2011. The Ministry of Finance stated that the
broad principles underlying the proposed amendments are:5
• Contribution of the tax system to incentivize domestic value addition to raw materials and
bring about an appreciable level of industrialization in the economy, particularly in the
natural resources sectors. This in turn is seen to have positive multiple effects on job creation;
• Contribution of the tax system to address equity and the skewness in the distribution of
wealth and social welfare;
• Deepening and diversifying the revenue base for the purpose of strengthening revenue
collection in an environment of increased trade liberalization and regional economic
integration and reduce revenue from the SACU pool;
When introducing these measures Government is taking into consideration the ability to pay by
the tax payer, national competitiveness and efficiency costs to the economy.
The aforementioned review of the proposed tax amendments resulted in the Chamber
of Mines of Namibia calling for a meeting of all industry representative bodies setting
up a Mining Tax Committee, which engaged the Ministry of Finance. In the Mining
Industry Review for 2011, the President of the Chamber of Mines of Namibia states
that he was ‘most encouraged by the open and consultative spirit with which the GRN
[the Government of Namibia] engaged this Chamber’, referring to the consultations
between the Ministry of Finance and the Chamber Tax Committee, which resulted in
the government revising its proposed tax amendments by desisting with its intention to
increase the income tax rate for mining companies and abolishing the value added tax
zero-rating on the export of raw minerals.
In a press release, it is stated that new policy developments would be ‘subjected
to thorough stakeholder consultation to ensure that efficiency costs to the economy and
impact on businesses remain reasonable’.6
The Cabinet at its fifth meeting in 2011 declared certain minerals as controlled
and high-value or strategic minerals and that the right to licences for strategic minerals
(uranium, gold, copper, coal, diamonds and rare earth metals) should only be issued to
state-owned companies, which may enter into joint ventures with interested parties for
exploration and development, but that existing exploration and mining licences would
not be affected. In respect of pending applications for exploration and mining licences,
it was stated that licence holders often seek capital funds in exchange for shareholdings
4 Insight Mining Brief, ‘Ten things everyone in Namibia should understand about the mining
industry’ by Robin Sherbourne, Insight Namibia cc, November 2011.
5 Ministry of Finance, press release, ‘Review of amendments to tax laws and the introduction of
an export levy’, 17 August 2011.
6 Ibid.
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from investors, in which regard it was indicated that conditions might be imposed in
terms of which the licence holders would be required: ‘to give the first rights of refusal of
shareholding to the GRN before they can approach other parties’. The media statement
concluded with a statement that to implement this Cabinet decision, a change in
legislation would be effected.7
i Economic empowerment
Article 23 of the Namibian Constitution prohibits discrimination, except under an act of
parliament expressly providing for the advancement of persons who have been socially,
economically or educationally disadvantaged by past discriminatory laws.
In December 2010, the Chamber of Mines officially presented its proposal
on empowerment in the form of a draft Mining Charter for Sustainable Broad Based
Transformation to the Prime Minister and the Minister of Mines and Energy.
On 19 October 2011, the Cabinet adopted the New Equitable Economic
Empowerment Framework (‘the NEEEF’).8 Legislation is envisaged to be implemented
as per the NEEEF, which does not have the force of law, but is a policy framework.
The NEEEF is based on voluntary business practice but government will use all the
legitimate market mechanisms at its disposal, in the form of procurement programmes
and licensing regimes, to promote transformation and empowerment. The NEEEF
stipulates that companies applying for licences would receive the NEEEF rating and
would be required to score a minimum of 10 points in three of the five empowerment
pillars. These three mandatory pillars would be ownership, management and control,
and skills development.
The Minister of Mines and Energy is entitled to grant mineral licences under
terms and conditions, in addition to those that constitute the terms and conditions that
apply to any mineral licence under the Minerals (Prospecting and Mining) Act of 1992,
and, in some instances in the past, imposed a condition stipulating that the applicant
allocate shares in the entity holding the licence to previously disadvantaged Namibians.
It was not stated what percentage of share ownership would be required to meet this
condition. Whether a condition of this nature can be imposed under the Minerals Act
has not been judicially considered, but this practice has not been followed since about
2010.
In the President’s Report of the Chamber of Mines of Namibia9 it is stated that
the chambers engaged the Prime Minister in respect of the NEEEF, who stated that the
position is flexible in respect of the requirement of ownership by previously disadvantaged
Namibians, on condition that the mining companies: ‘honestly embraced the NEEEF
principles and that the targets would eventually be met’.10
7 See also Section II.i of the Namibia Capital Markets chapter.

8 Government of the Republic of Namibia: Office of the Prime Minister, New Equitable
Economic Empowerment Framework (NEEEF), 19 October 2011.
9 Mining Industry Review for 2011.
10 See also ‘Economic Empowerment‘ in Section II.i of the Namibia Capital Markets chapter.
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ii Local beneficiation
The government intends to introduce an export levy on raw materials, thereby encouraging
local beneficiation. The Chamber of Mines proposed the establishment of a joint Value
Addition Committee to consider this further, to be equally represented by the Ministry
of Mines and Energy, Ministry of Finance and the Chamber of Mines. The President
of the Chamber of Mines stated11 that it is hoped that, on the recommendations of
this committee, an export levy would be introduced at rates ranging between zero and
2 per cent depending on the type of raw materials exported, ‘based on a jointly agreed
assessment of what can realistically be achieved in terms of downstream beneficiation
with each product taken on a case-by-case basis’.
The Minerals Act authorises the Minister of Mines and Energy to impose a
further royalty if the Minister is of the opinion that, inter alia, addition to the value
of the mineral in question is possible in Namibia. The Minister is obliged to afford a
mineral licence holder the opportunity to make representations in respect of an intended
imposition of such royalties prior to implementing same.
II LEGAL FRAMEWORK
The mining industry is mainly regulated in terms of the Minerals Act, which is
administered by the Ministry of Mines and Energy (‘the Minister’) who directs the
activities of the Ministry of Mines and Energy and carries out the functions assigned to
him or her by the Minerals Act; the Minister appoints the Mining Commissioner.
Within the Ministry of Mines and Energy, there exist the directorates of Mines,
Geological Survey, Diamond Affairs, Energy, and Administration and Finance. There is
also a Chief Inspector of Mines and a Diamond Commissioner.
Important further Ministries include the Ministry of Environment and Tourism
(concerning compliance with environmental clearances for prospecting and mining
projects), the Ministry of Finance, the Ministry of Labour (labour relations including
dealings with trade unions and health and safety requirements), the Ministry of Health
and Social Services, and the Ministry of Agriculture, Water & Forestry.
With respect to mining for nuclear fuel minerals, the Atomic Energy Board and
the National Radiation Protection Authority are of relevance.
The main legislation, other than the Minerals Act, concerning mining includes:
a the Constitution of the Republic of Namibia (1990);
b the Diamond Act 13 of 1999;
c the Minerals Development Fund of Namibia Act of 1996 (Act 19 of 1996); and
d the Minerals Policy of Namibia.
The Namibian Stock Exchange (‘the NSX’) has adopted the South African Code for the
Reporting of Exploration Results (‘SAMREC’), which sets out the minimum standards,
recommendations and guidelines for public reporting of exploration results, mineral
resources and mineral reserves in South Africa. The NSX has accepted this code as best
11 Ibid.
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practice at present, but would also accept the JORC and National 43-101 competent
persons reports from Australia and Canada.
In relation to prospecting operations, the holders of mining licences and
prospecting licences are required to keep proper records of, and submit to the Mining
Commissioner, quarterly returns in respect of exclusive prospecting licences, and
biannual reports, in respect of mining licences, concerning inter alia:
a the nature, location and results of all photogeological studies, imaging, geological
mapping, geochemical sampling, geophysical surveying, drilling, pitting and
trenching, sampling and bulk sampling carried on in the course of prospecting
operations;
b the results of all analytical, metallurgical and mineralogical work;
c the interpretation and assessment of the studies, surveys and work referred to
under points (a) and (b) above; and
d the nature, mass or volume and value of any mineral or group of minerals found,
sold or otherwise disposed of and the full names and address of any person to
whom such minerals were sold or otherwise disposed of.
The holder of an exploration licence is further obliged to submit at the end of the
currency of such licence or together with an application for the renewal thereof or with
an application for a mining licence, a report containing the information contained in the
records referred to above and an estimate of the mineral reserves.
The holder of a mining licence would also have to, in respect of any mining
operations, submit monthly returns including:
a the nature, appraisal and results of all mining operations; and
b the nature and mass or volume and value of any mineral or group of minerals won
or mined, sold or otherwise disposed of and the full names and address of any
person to whom such minerals were sold or otherwise disposed of.
The holder of a mining licence is further obliged to submit an annual return containing
a summary of the information contained in the records referred to above, an estimate of
the remaining mineral reserves, and particulars of any proposed mining operations and
prospecting operations during the succeeding year, together with a forecast of the source
of such mining operations in terms of delineated reserves.
i Title
Since the passing of the Minerals Act, the exercise of control over any right in relation to
the reconnaissance or prospecting for any mineral, and its mining and sale or disposal,
vests in the state rather than in the owners of the land.
These rights may be conferred to persons in terms of the Minerals Act in that
the Minister of Mines and Energy issues licences entitling the holders to carry out such
reconnaissance, prospecting or mining operations in the area to which such licence
relates and in respect of the mineral specified in the licence.
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The Minerals Act stipulates that prior written approval from the Minister of
Mines and Energy is required where any mineral licence is transferred, or interest in any
mineral licence is granted, ceded or assigned, or any person is joined as a joint holder.
The transfer of shares in a company that holds mineral licences does not require the
Minister’s approval. A company that is the holder of mineral licences is, however, obliged
to notify the Mining Commissioner of any change in the beneficial owner of more than
5 per cent of the shares issued by such company.
The Minister may grant such licences and renewals thereof on such terms and
conditions as may be determined by him or her, including conditions supplementary to
those contained in the Minerals Act.
Because the prospecting or mining licences confer rights that are more in the
nature of personal rights than real rights, the holder continues to hold the licences only
to the extent that it complies with the provisions of the Minerals Act. These rights can,
therefore, not simply be amended, sold or transferred at the instance of the holder. An
application for a new licence, the renewal thereof or a transfer of the licence requires prior
consent of the Minister, who exercises administrative discretion in granting or refusing
it. That discretion must be properly exercised, acting fairly and reasonably complying
with the requirements imposed by the Minerals Act, the common law and the Namibian
Constitution, failing which, an aggrieved person may seek redress before a competent
court or tribunal.
The Minerals Act provides for the following licences: reconnaissance licences
(‘RLs’), exclusive prospecting licences (‘EPLs’), mineral deposit retention licences
(‘MDRLs’), non-exclusive prospecting licences (‘NEPLs’), mining claims (‘MCs’), and
mining licences (‘MLs’). RLs, EPLs, MDRLs, and MLs are described as ‘mineral licences’.

Acquiring and maintaining surface and mining rights
In order to acquire an EPL or an ML, a formal application is lodged with the Ministry
of Mines and Energy including:
a a plan of the area to which the application relates;
b a geological description of the area of land setting out the minerals applicable,
an estimate of the mineral reserves (in respect of an application for an ML), and
reports that the applicant was required to submit in respect of its prospecting
operations referred to above (in respect of an application for an ML);
c particulars of the condition of the environment;
d an estimate of the effects that the proposed operations or mining operations may
have on the environment and the proposed steps to be taken in order to minimise
or prevent any such effects;
e a technical report on the proposed development, mining and ore treatment
activities (in respect of an application for an ML), particulars of the technical and
financial resources of the applicant to carry on the operations, particulars of the
programme of the prospecting or mining operations, the estimated expenditure
in respect thereof, and a forecast of capital investment, operating cost, income
and profits and particulars of the means of financing (in respect of an application
for an ML).
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MLs are granted for the development and operation of a mine following the discovery
of a commercially viable deposit. Successful applicants must show they have sufficient
technical and financial capacity to develop and operate a mine.
An ML will not be granted:
a in respect of an area larger than an area that in the opinion of the Minister of
Mines and Energy would be required, having regard to the available minerals, to
carry on mining operations;
b if the holder is contravening any provisions of the Minerals Act, or any condition,
direction or order given under such act; or
c unless the Minister is on reasonable grounds satisfied that:
• minerals are contained that may be won or mined in the particular area,
and sold on a profitable basis;
• the proposed programme of mining operations to be carried out and the
expenditure to be expended will ensure efficient, beneficial and timely use
of the mineral in question, and adequate protection of the environment;
and
• the applicant has the technical and financial resources to carry out such
mining operations.
Refusal to grant an ML on any such grounds (except for that in point (a)) is only possible
if the Minister has given notice to the applicant of the grounds of refusal and then given
the holder an opportunity to make representations or required the applicant to remedy
such matter and the applicant failed to make representations or failed to remedy.
Surface rights or land access

The holder of a mineral licence may not exercise any rights conferred on such holder
under the Minerals Act in, or under, any private land12 until such time as (1) the licence
holder has entered into an agreement with the owner of such private land, containing
terms and conditions relating to the payment of compensation, (2) the owner has in
writing waived its right to such compensation, or (3) the licence holder has been granted
an ancillary right under the Minerals Act.
The Minerals Act does not require any kind of land use agreement to be concluded
in respect of state land. Further requirements do need to be adhered to where the mineral
licence area falls within communal land or conservancies.
The holder of an ML may not exercise any rights conferred upon it in, on or
under any town or village, or land comprising a proclaimed road without the prior
permission of the Minister of Mines and Energy, neither may it exercise those rights
within a horizontal distance of 100 metres of any spring, well, borehole, reservoir, dam,
waterworks, perennial stream or pan, building or structure of whatsoever nature, without
the prior permission of the owner of such land.
‘Game parks’, ‘nature reserves’, ‘conservancies’ and ‘wildlife councils’ are dealt
with under the Nature Conservation Ordinance No. 4 of 1975. The Minerals Act and
12 Land other than state land.
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the Nature Conservation Ordinance No. 4 of 1975 do not deal with the interaction
between the two pieces of legislation. The Minerals Act merely refers to ‘state land’; it is
not entirely certain whether the holder of a mining licence within a ‘park’ requires any
kind of authorisation from the Minister of Environment and Tourism in respect of its
mining operations or to erect accessory works.
If a mineral licence is located in a game park or nature reserve, this would affect
the environmental approval process, and more stringent conditions would be imposed in
the environmental contract that the holder of a mineral licence is required to conclude
with the Ministry of Mines and Energy and the Ministry of Environment and Tourism.
It would also have an effect on the required environmental impact assessment (‘EIA’) and
management plan.
It is a condition of every mineral licence that the holder thereof is obliged to
exercise any of its rights reasonably and in such a manner that the rights and interests
of the owner of any land are not adversely affected, except to the extent to which such
owner is compensated.
Mining rights granted subject to conditions

A holder of an ML is entitled to carry on mining operations in the area to which such
licence relates and in respect of the mineral specified in the licence, to carry on in such
mining area any prospecting operations in relation to any mineral or group of minerals,
and to remove any mineral other than a controlled mineral (‘controlled minerals’ include
any mineral that is specified in the nuclear fuel minerals group) for any purpose other
than sale or disposal.
With prior permission from the Mining Commissioner, the holder of an ML
is also entitled to remove any mineral that is not a controlled mineral for any purpose,
including sale or disposal, and carry on such other operations, including the erection or
construction of accessory works, as may reasonably be necessary for, or in connection
with, its mining operations or the sale or disposal of minerals.
The Minister may grant an ML, or the renewal of an ML, on such terms and
conditions as may be determined by him or her, including conditions supplementary to
those contained in the Minerals Act.
Under the Minerals Act, in addition to any term contained in an ML, the holder
must:
a in the employment of employees, give preference to Namibian citizens;
b carry out training programmes;
c make use of products or equipment manufactured or produced in Namibia but
with due regard to the need of ensuring technical and economic efficiency; and
d prepare an EIA for the approval of the Mining Commissioner and an environmental
management plan (‘EMP’).
Duration and validity

A mining licence can be issued for up to 25 years or any shorter period that the Minister
of Mines and Energy feels represents the estimated life of the mine. A licence may be
renewed for further periods, not exceeding 15 years at a time that, in the opinion of the
Minister, represents the estimated remaining life of the mine.
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The Minister may not refuse to grant a renewal of an ML if the holder has complied
with its terms and conditions, and the proposed programme of mining operations. In
addition, the licence holder would also have to have expended the required amount in
respect of such operations.
The Minister must also be satisfied, on reasonable grounds, with the proposed
programme of mining operations or expenditure for such operations, and that the person
concerned has the technical and financial resources to carry out such mining operations.
A renewal of a mining licence would only be granted if the Minister of Mines and
Energy is satisfied that the mineral to which the licence relates can still be won or mined
and sold on a profitable basis; the Minister must also be satisfied with the proposed
mining operations and expenditure to be carried out or expended during the renewal
period.
An exclusive prospecting licence is valid for no more than three years, as may be
determined by the Minister at the time of granting the licence, and may be renewed
for further periods of no longer than two years, and may not be renewed on more than
two occasions, unless the Minister deems it desirable. The Minister must, on reasonable
grounds, be satisfied with the manner in which the programme of prospecting operations
have been carried on, or the expenditure in respect of such operations.
The prospecting area would be reduced to 75 per cent of the area of the original
licence, and 50 per cent in respect of the second and subsequent renewals unless approval
is granted by the Minister for a larger area.
The Minister may not summarily refuse a renewal application on the grounds that
the holder has contravened or failed to comply with any provision of the Minerals Act or
any term and condition of such licence. The Minister must inform the holder by notice
of his or her intention to refuse the application for renewal, setting out the particulars
of such contravention or failure, and requiring the holder to make representations to
the Minister in relation to such failure or to remedy such contravention or failure on or
before the date specified in such notice, and the holder fails to remedy such contravention
or failed to make representations.
In accordance with the Minerals Act, a mineral licence will not expire during the
period in which the application for its renewal is being considered.

The holder of a licence may only hold the licence to the extent that it complies with the
provisions of the Minerals Act.
When it is reasonably necessary for the holder of a mineral licence, a non-
exclusive prospecting licence or mining claim to obtain a right to enter land in order
to carry on operations authorised by its licence on such land,13 but the owner of the
land in question refuses to grant such right, or demands terms and conditions that
are unreasonable, the holder may apply in writing to the Minerals Ancillary Rights
Commission, which is established in terms of the Minerals Act to grant any such right
to the holders of the said licences.
13 Including the right to erect or construct accessory works, and to do anything else in order to
exercise any right conferred upon it by such licence.
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There are no particular restrictions on the surface or mining rights that may be
acquired by foreign parties.

Reference is made to authorisations that are required to be obtained in terms of
environmental and health and safety laws, and which are referred to above and below.

The Minerals Policy of Namibia stipulates that before a mining licence is granted, a final
mine closure plan must exist, together with a funding mechanism that describes how
the company will deal with matters such as groundwater pollution, soil degradation,
wind pollution and infrastructure, which would be achieved by ensuring compliance
of approved environmental management plan contracts. The government is also
investigating the establishment of mandatory mechanisms for the funding of final mine
closure plans (see below).
The Minerals Policy of Namibia stipulates that mineral development may only
commence in ‘protected areas’ (national parks and game reserves) – approximately 13.6
per cent of the land surface of Namibia – when rehabilitation is guaranteed.
The Minerals Act provides that if a mineral licence has been cancelled or has
expired, the Minister may direct the licence holder to take all such steps as may be
necessary to remedy, to the satisfaction of the Minister, any damage caused by any
prospecting operations and mining operations carried on by such holder to the surface
of and the environment in such area.
When mineral licences are issued, the licence holders are required to enter into
environmental contracts with the Ministry of Mines and Energy and the Ministry of
Environment and Tourism, which generally stipulate that the government reserves
the right to demand at any time a guarantee to restore the environment or mitigate
environmental damage, or itself undertake such measures, and recover the costs from the
holder and claim compensation. The licence holder is also obliged to ensure that sufficient
funds are available to affect appropriate rehabilitation of any environmental damage.
In terms of the regulations under the Environmental Management Act of
2007 (Act 7 of 2007), a draft management plan must accompany a licence holder’s
application for an environmental clearance certificate (‘ECC’), which must include, as
far as is reasonably practicable, measures to rehabilitate the environment to its natural or
predetermined state, or to a land use that conforms to the generally accepted principle
of sustainable development.
In the strategic environmental assessment (‘SEA’) of the ‘central Namib Uranium
Rush’,14 it was recommended that uranium mines must be closed and mine sites stabilised
14 In 2009, the Southern African Institute for Environmental Assessment (‘SAIEA’) was contracted
by the government of Namibia, with funding provided by the German government through
the German-Namibian Technical Cooperation Project of the German Federal Institute for
Geosciences and Natural Resources (‘BGR’) and the Geological Survey of Namibia (‘GSN’), to
undertake an SEA for the ‘central Namib Uranium Rush’.
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and rehabilitated in a way that corresponds to established international and national

procedures and standards for mine closure and mine site stabilisation and rehabilitation,
as per international IAEA guidelines and reflected in Namibian regulations.
The Chamber of Mines of Namibia has now drafted the ‘Namibian Mine
Closure Framework’ (‘the NMCF’) for the purpose of providing a guidance for the
Namibian mining industry in how to develop relevant, practical and cost-effective
closure plans and to lay down minimum requirements for the members of the Chamber
bound by its code of conduct and ethics.15 The NMCF was developed by the Chamber’s
Rehabilitation and Closure Committee based on the Australian Strategic Framework
for Mine Closure.16

The pillars of empowerment provided for in the NEEEF include human resources and
skills development, entrepreneurship development and community investment.17
The following legislation is also considered relevant to environmental and health
and safety considerations:
a the Environmental Management Act of 2007 (Act 7 of 2007) (‘EMA’);
b the Mines, the Works and Minerals Ordinance, No. 20 of 1968;
c Regulations promulgated under the previous Labour Act, No. 6 of 1992, relating
to the Health and Safety of employees at work;
d the Atmospheric Pollution Prevention Ordinance, No. 11 of 1976;
e the Hazardous Substances Ordinance, No. 14 of 1974;
f the Nature Conservation Ordinance, No. 4 of 1975;
g the Environment Investment Fund of Namibia Act 2001 (Act No. 13 of 2001);
h the Forestry Act No. 27 of 2004;
i the National Heritage Act 2004 (Act No. 27 of 2004);
j the Atomic Energy and Radiation Protection Act, No. 5 of 2005;
k the Water Act 54 of 1956;
l the Water Resources Management Act, No. 24 of 2004 (yet to come into
operation);
m the Pollution Control and Waste Management Bill (still in draft form);
n the Policy for Prospecting and Mining in Protected Areas and National
Monuments (1999);
o the Draft Management and Development Plan for Namib-Skeleton Coast
National Park (third draft: 28 January 2009); and
p the Policy for the Conservation of Biotic Diversity and Habitat Protection (1994).
15 The Chamber of Mines of Namibia, Namibian Mine Closure Framework – final report, May
2010.
16 ANZMEC/MCA 2000, Australian and New Zealand Minerals and Energy Council, Canberra,
and Minerals Council of Australia, Canberra.
17 See also the discussion of the NEEEF in the Namibia Capital Markets chapter.
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In addition to the terms and conditions of the mineral licence, the holder must prepare
for the approval of the Mining Commissioner:
a an EIA indicating the extent of any pollution of the environment before any
prospecting or mining operations are carried out and an estimate of any pollution
likely to be caused by such operations; and
b if any pollution is likely to be caused, an EMP indicating the proposed steps to
be taken in order to minimise or prevent any pollution of the environment in
consequence of any prospecting or mining operations.
In practice, the Minister has required EIAs for EPLs only in respect of protected areas
and where the EPLs are for certain minerals in respect of which the prospecting activities
have a material impact on the environment. The Environmental Management Act 2007
(Act No. 7 of 2007) provides that a person may not undertake a listed activity18 without
having obtained an ECC.
If a person (‘the proponent’) wishes to undertake a listed activity, the environmental
impact assessment procedure as provided for in the Environmental Impact Assessment
Regulations (‘the EIA Regulations’)19 is triggered.
When applying for an ECC the proponent must conduct an EIA, for which
the proponent must appoint an environmental assessment practitioner (‘EAP’). The
EAP is responsible for undertaking and facilitating the entire assessment process. The
application must be made on the prescribed form. After submitting the application form
to the environmental commissioner, the EAP, on behalf of the proponent:
a conducts an public participation process;
b opens and maintains a register of interested and affected parties (‘IAPs’);
c considers all objections and representations received from IAPs;
d prepares a scoping report;
e gives all registered IAPs an opportunity to comment on the scoping report; and
f submits the scoping report and environmental management plan to the
environmental commissioner.
Upon receipt of a scoping report, the environmental commissioner decides whether a

detailed assessment is required and notifies the proponent of such decision. In the event
that a detailed assessment is not required, the Environmental Commissioner issues the
ECC.
In the event that a detailed assessment is required, the EAP, on behalf of the
proponent, must undertake a detailed EIA.
18 The Minister of Mines and Energy has, in terms of the Environmental Management Act of
2007 (Act 7 of 2007) issued a notice listing activities which may not be undertaken without
an environmental clearance certificate which includes mining and quarrying activities, waste
management, water resource developments, hazardous substances treatment, storage and
handling, and the construction of infrastructure.
19 General Notice 30/2012 (Government Gazette 4878 of 6 February 2012).
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The EIA Regulations contain a number of requirements pertaining to the content

of a scoping report and a full EIA, as well as details regarding the public participation
process. Upon completion of the EIA, registered IAPs are once again afforded an
opportunity to be provided with a copy of the draft EIA and EMP in order to lodge
objections or make representations in the final document(s), which is then lodged with
the Environmental Commissioner for determination. In the event that the commissioner
is satisfied with the application, an ECC will be issued to the proponent.
It is a standard condition of a mineral licence that the licence holder enter into
an environmental contract with the Ministry of Environment and Tourism and the
Ministry of Mines and Energy (‘environmental contracts’).
An environmental contract requires a licence holder to undertake necessary and
adequate steps to ensure that environmental damage is reduced to a minimum and
prevented insofar as is practicable. Generally, environmental contracts stipulate that in
the event of the licence holder not carrying out its obligations, it would be liable for any
environmental damage. A further term that is generally stipulated is that on completion
or suspension of its operations, the holder is obliged to ensure that any effect on the
environment is minimised and that every reasonable and practicable step is undertaken
to ensure that the environment is left in a reasonable state. The licence holder would also
be obliged to submit regular environmental reports every six months.
The Nature Conservation Ordinance No. 4 of 1975 also makes provision for
the control of picking, removal and transportation of protected plants and permits or
licences in regard thereto, and deals with the protection of indigenous plants.
The Minister may, by regulation, under the Forestry Act No. 27 of 2004, declare
any plant or species of plant to be protected and impose conditions under which that
plant will be conserved, cultivated, used or destroyed by any person.

All communal land areas vest in the state in trust for the benefit of the traditional
communities residing in those areas. Every person who wants to carry out any prospecting
or mining operations as contemplated in the Minerals Act on communal land must
notify, prior to the making of any application under the Minerals Act, the chief or
traditional authority of the community and the Communal Land Board, of its intention
to apply as aforementioned.
In the SEA of the central Namib Uranium Rush, it is stated that, while the Policy on
Mining in Protected Areas allows mining and prospecting in Protected Areas, it is also
possible in terms of the Nature Conservation Ordinance No. 4 of 1975 for the Ministry
of Environment and Tourism and the Ministry of Mines and Energy to agree to withdraw
certain areas from mining.
One of the recommendations of this SEA was that certain biodiversity, tourism
and heritage hotspots be given ‘red flag’ status, which means that the area is by default
unavailable for mining or prospecting unless an extraordinary mineral deposit of national
importance is located in the area. This could limit the expansion of the exploration and
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mining operations in respect of certain areas. An EIA and EMP may have to take into
account the recommendations that were made in the SEA.

As previously mentioned, it is a condition of any mineral licence that the holder of
such licence give preference to Namibian citizens who possess appropriate qualifications,
expertise and experience for the purposes of the operations to be carried on in terms of
such mineral licence; carry out training programmes in order to encourage and promote
the development of Namibian citizens employed by such holder; with due regard to the
need to ensure technical and economic efficiency, make use of products or equipment
manufactured or produced, and services available, within Namibia; and cooperate with
other persons involved in the mining industry in order to enable such citizens to develop
skills and technology to render services in the interest of that industry in Namibia.
Affirmative action
The Affirmative Action (Employment) Act, 1998 (Act No. 242 of 1998) requires an
employer with more than 25 employees to prepare and implement an affirmative action
plan, inter alia, specifying measures to be instituted in order to ensure that such persons
are equitably represented in the various positions of employment.
This act provides that the employer must be in possession of a valid affirmative
action compliance certificate if it wants to enter into contracts with or on behalf of the
state or any relevant employer or guarantee, or wants to receive any loan, licence, grant
or concession made, issued, granted or awarded by or on behalf of the state.
The basis of an affirmative action plan is that employers must give preferential
treatment to suitably qualified persons of designated groups (racially disadvantaged
persons, women or disabled persons).
Use of foreign labour

Foreign labourers require an employment permit issued in terms of the Immigration
Control Act 7 of 1993. The Immigration Selection Board will not grant an application
to issue an employment permit unless the expatriate satisfies the board that, inter alia,
the employment concerned is not, or is unlikely to be, employment in which a sufficient
number of persons are already engaged in Namibia.
Beneficiation
See Section I.ii, supra.

The permission of the Mining Commissioner is required to remove any mineral or group
of minerals, for purposes of sale or disposal, and to sell or otherwise dispose of any such
mineral or group of minerals. A specific permission is required in respect of nuclear fuel.
The Hazardous Substances Ordinance 14 of 1974 provides that no person may
sell any hazardous substance, declared as such, unless he is the holder of a licence issued
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by the Permanent Secretary of the Ministry of Health and Social Services, being a licence
to carry on business as a supplier of such substances.
Except when such activity is explicitly authorised by a licence, no person may
import into or export from Namibia; transport of any radiation source or nuclear material
requires notice to be given to the director-general of the National Radiation Protection
Authority, who must give authorisation to perform the act specified in a notification.

Restrictions on movement of capital and currency exchange 20
The Foreign Investment Act No. 27 of 1990 provides that no enterprise, or part of an
undertaking carried on by an enterprise, or interest in or right over any property forming
part of such undertaking, may be expropriated except in accordance with the provisions
of Article 16(2) of the Namibian Constitution.
The state may expropriate property in the public interest subject to the payment
of just compensation, in accordance with requirements and procedures to be determined
by an Act of Parliament.
In terms of Exchange Control Regulations, no Namibian entity may open a
foreign banking account without the prior approval of the Bank of Namibia.
Local commercial banks, as authorised dealers of the Bank of Namibia, may open
single customer foreign currency accounts (‘CFC accounts’) for entities that are involved
in import or export transactions, as well as providers of services. The proceeds of exports
and services may be retained for a limited period whereafter such foreign currency must
be converted to Namibia dollars by the bank. The opening of CFC accounts for any
other purpose requires prior approval from the Bank of Namibia.
VI CHARGES
i Royalties
The Minerals Act makes provision for three different types of royalty.
The first is a royalty levied at a rate as may be determined by the Minister from
time to time: the Minister may impose different percentages of royalties on different
mineral licence holders, irrespective of the type of mineral, without a limitation.
On 1 April 2009, the following rates had been determined:
Percentage of market value of

Group of minerals Holder
minerals leviable as royalty
Precious metals 3% Any
Base and rare metals 3% Any
Semi-precious stones 2% Any
20 Reference is also made to ‘Exchange control requirements‘ in Section II.iii of the Namibia
Capital Markets chapter.
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Percentage of market value of

Group of minerals Holder
minerals leviable as royalty
3% Any
Nuclear fuel minerals
6% Rössing Uranium Mine Ltd
Industrial minerals 2% Any
Non-nuclear fuel minerals 2% Any
A further royalty to be imposed if the Minister is of the opinion that (1) addition to the
value of the mineral in question is possible in Namibia, (2) the minerals are sold at less
than their international market value, or (3) the fees, charges or levies deducted from the
selling price were not in conformity with the rates charged in international markets. The
Minister must afford a mineral licence holder an opportunity to make representations in
respect of an intended imposition of royalties prior to its imposition.
A third royalty, called a ‘windfall royalty’, may be levied if the Minister is of the
opinion that market prices have increased to such an extent that the operations have
become significantly more profitable than similar operations are in normal circumstances;
or new technology or other unforeseen circumstances have made operations significantly
more profitable.
This royalty may only be imposed if the Minister gives notice to the affected
licence holders of the intention to levy this royalty, and afforded them the opportunity
to make representations in respect of proposals relating to the investment of such profits
in new or improved operations or infrastructure.
ii Taxes
Income tax
Mining companies, other than diamond companies, are liable to pay 37.5 per cent
income tax. Diamond mining companies and diamond mining services companies are
required to pay 55 per cent. Natural oil, oil and gas extraction is dealt with separately
under the Petroleum Taxation Act 1991, and would pay 35 per cent plus additional
profits tax, and companies that are not in the mining industry pay 34 per cent income
tax.
Under the Income Tax Third Amendment Act, 2011, the definition of ‘gross
income’ has been amended to include:
Any amount received or accrued from another person as consideration or the open market value by
way of a sale, donation, expropriation, cession, grant or other alienation or transfer of ownership
of a mineral licence as defined in the Minerals (Prospecting and Mining) Act, 1992 (Act No. 33
of 1992), or right to mine minerals in Namibia, and includes a sale of shares in a company for a
licence or right to mine minerals in Namibia.
Income tax would thus be payable on the income that is earned from a sale as aforesaid.
The Namibian Receiver of Revenue has been asked to clarify the extent and meaning of
this provision, as it is not clear whether a subscription of shares would fall within the
ambit of this provision.
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Withholding tax on management services

A withholding (final) tax calculated at the rate of 25 per cent will be levied on all
entertainment, management or consultancy, or directors’ fees payable by a Namibian
resident to a non-resident person without a permanent establishment in Namibia.
Services rendered by the non-resident in Namibia or outside Namibia to the Namibian
resident will be subject to this tax.
This tax has been introduced in terms of the Income Tax Third Amendment Act
2011, and the Namibian Receiver of Revenue has been asked to clarify the effect of
double-taxation agreements with regard to this tax.
Withholding tax on dividends

A company that declares dividends to its non-resident shareholders is required to
withhold and pay a non-resident shareholder’s tax (‘NRST’) at the rate of 10 per cent, if
the foreign shareholder holds at least 25 per cent of the capital of the Namibian company,
and 20 per cent in all other cases, subject to treaty relief.
Value added tax

In terms of the Value-Added Tax Act 2000, VAT is levied at a standard rate of 15 per
cent on the value of a supply of goods or services in the course of furtherance of a
taxable activity carried on by that person in, or partly in, Namibia. The importation of
goods and services are also subject to VAT. Services imported and utilised or consumed
for the making of taxable supplies, however, are not subject to VAT. The Act contains a
list of the supplies of goods or services that are taxed at a zero rate, primarily regarding
exports, and certain goods are exempt from VAT on importation.
iii Other fees

Every mineral licence holder is obliged to exercise any of its rights reasonably and in such
a manner that the rights and interests of the owner of any land are not adversely affected,
except to the extent to which such owner is compensated.
In its amended press release of 17 August 2011, the Ministry of Finance indicated
proposed amendments to the tax laws of Namibia. Other than those that have been
introduced in terms of the Income Tax Third Amendment Act 2011, these include the
intention to introduce an export levy at rates between zero and 2 per cent depending on
the type of raw materials exported calculated on the open market value of the export of
raw minerals.
The Ministry of Finance intends to levy transfer duty on the sale of shares in a
company or membership interest in a close corporation owning immoveable property.
These transactions would be subject to the same rates that are currently applicable when
natural persons or juristic persons acquire immoveable property.
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The current income tax rate of 37.5 per cent in respect of the non-diamond
sector may be amended in future so the rate operates in conjunction with a formula-
based surcharge with the intention of capturing additional mining revenue during more
prosperous economic periods.21
21 Ministry of Finance, press release, ‘Review of amendments to tax laws and the introduction of
an export levy’, 17 August 2011.
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Chapter 13
NIGER
Daouda Samna Soumana 1
I OVERVIEW
Recent years have seen significant development within the Nigérien mining sector. For
more than 40 years, mining was mainly limited to uranium, which accounted for 72 per
cent of the exports out of Niger.
The diversification of the mining partnerships initiated in recent years by the
Republic of Niger has allowed new investors into this sector (due to the opening up of
de facto competition), prospecting for other resources including, gold, phosphates and
coal, and more recently oil and gas. This has led to the arrival of new South African, UK,
Canadian, Russian and Chinese investors.
II LEGAL FRAMEWORK
Mining activity is regulated by a national legal system in Niger, but supranational

regulation also applies.
The main national legal provision is Ordinance No. 2006-26 of 3 August 2006,
amending Ordinance No. 93-13 of 2 March 1993 on mining law (‘the Mining Law’), and
supplemented by Ordinance No. 93-48 of 5 November 1993. In addition, Act No. 2008-
30 of 3 July 2008 grants advantages as regards to investments in large mining projects.
The following laws also apply:
a Decree No. 2006-265-PRN of 18 April 2006 laying down the procedures for the
enforcement of mining law;
b Decree No. 009/MTP of 1969, No.69-13/MPTF of 14 January 1969 on explosive
substances; and
c Order No. 49/MTP/TM of 8 September 1970.
1 Daouda Samna Soumana is a partner at SCPA Mandela.
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At the supranational level, the following West African Economic and Monetary Union
(‘WAEMU’) regulations are relevant:
a the Community Mining Code (Regulation No. 18/2003/CM WAEMU of 23
December 2003);
b Regulation No. 09/98/CM/UEMOA of 20 December 1998, relating to financial
relationships between WAEMU Member States and foreign countries; and
c the Regulation relating to the Community’s solidarity levy.
The provisions of the various OHADA2 Uniform Acts also apply.
i Title
Under Article 2 of the Mining Law, natural mineral or fossil substance deposits contained
in subsoil or existing on the surface are property of the state of Niger and cannot be,
under the provisions of this Act, subject to any form of private ownership.

Article 7 of the Mining Law sets out that any qualified persons (Niger or foreign nationals)
or legal entities – constituted as corporations under Nigérien or foreign law – are able to
prospect, search or to exploit mineral substances.
There are several types of mining licence: exploration licences, prospecting
permits, mining permits (small-scale or large-scale, together ‘operating permits’) or
artisanal mining licences.
The permit allows its holder, within its perimeter and to indefinite depth, the
exclusive right to explore and research the mineral substances for which the permit is
issued. The Minister for Mines will usually decide on any applications.
Applications should indicate:
a the mineral substances for which the permit is sought;
b a description of the defined boundary and the administrative districts concerned;
c the required duration of the licence;
d financial and technical resources of the applicant;
e the amount that the applicant is committed to investing;
f if the application is submitted by a legal person, a certified copy of the power of
attorney or memorandum of understanding;
g the location of the area for which the permit is requested, indicating the vertices
and the limits of the perimeter and geographical points that define them on a map
extract of a scale of 1:200,000;
h the general programme and the timing of the work that the applicant intends to
carry out during the period of the licence;
i the receipt for the payment of the right;
j the mining agreement entered into between the state and the applicant; and
2 Organisation for the Harmonisation of Business Law in Africa.
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Niger
k a commitment to submit to the Director of Mines the programme of work for the
remainder of the current year and before 31 December of each year, the programme
of work for the next year, and the quarterly report of research carried out.
Upon receipt of an application, the Minister has three months to make a decision.
Exploration permits may be granted only for areas that are available, meaning
areas for which there is no prior mining title (but where there may be other authorisations
to prospect). The permit can be extended to cover other substances, but only under the
same conditions. Exploration permits last for three years and the area may not exceed
500 square kilometres in size. They are renewable under certain conditions.
An operating licence entitles its holders to exclusive rights of prospecting, research,
exploitation and the free disposal of mineral substances within the perimeter for which
it is issued. It is issued for a period of five years, renewable for the same periods until the
exhaustion of deposits. On the other hand, the large-scale mining permits are issued for
10 years and are renewable for five-year periods.
When an operating permit is acquired following the grant of an exploration
permit, as is usually the case, it should be entirely situated within the perimeter of the
exploration permit from which it is derived, but it can also in some cases cover partially
several exploration permits of the same holder if the deposit encompasses certain parts
of these permits.
The issuance of an operating permit necessarily results in the creation of a
company in accordance with the provisions of the Uniform Act, and in which the state
is awarded 10 per cent of the capital assets of the operating company.
Exploration permits and operating licences are both transferable, but as a result of
the provisions of the Mining Law and Article 29 of the sample mining agreement, even
indirect assignment of rights or obligations of a mining title is subject to the approval of
the Minister for Mines. In practice, however, as part of their assignment operations, the
mining title holders often flout such a requirement, especially as regards such indirect
transfers as a change of control where shares are transferred among parent companies
whose registered offices are outside Niger. The state of Niger wants, by this provision, to
ensure that the mining title cannot be transferred without consent or knowledge. In the
course of practice, however, this provision is ineffective because no sanctions are foreseen
and often indirect transfer agreements evade the application of state law. Usually, the
parties to the assignment submit to other legislation.

Generally, the use of public infrastructure is free, but the following must be taken into
account:
a The use of the Tahoua–Arlit road for mining operations requires the operating
company to participate in its maintenance (Article 18 of the sample mining
agreement). As such, companies adhere to the maintenance agreement of the
Tahoua–Arlit road, adopted by Decree No. 2002-019/PRN/MEH/AT dated 15
February 2002.
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Niger
b Use of water reserves is permitted by the Ministry of Mines in conjunction

with the Ministry of Hydrology. The mining company submits an operating
programme for use of water reserves to the Minister of Mines for the benefit of
the Ministry of Hydrology; the use of reserved or unused waterfalls is authorised
by a joint order of the Minister of the Environment and the Minister of Mines
(Section 114 of the Mining Act).
Individual mining agreements generally deal with all of these issues.

Under Section 59 of the Mining Law, mining titles established under this ordinance may
be removed by the authority that issued them for any of the following reasons:
a when activity is delayed or suspended for more than a year as regards exploration
and more than two years as concerning operations, or if it is severely restricted,
without any legitimate reason to the detriment of the public interest;
b when a feasibility study demonstrates the existence of a commercially exploitable
deposit within the perimeter of the exploration permit without being followed by
an application for an operating permits within one year;
c for infringement of any of the provisions of this legislation; or
d for any cause of revocation provided for in Section 60 of the Mining Law (dealing
with revocation of a licence.
Withdrawal of a licence can take place only after notice from the Minister of Mines,
taking effect after:
a one month for the prospecting permits;
b two months for the exploration licence and the artisanal mining authorisation;
c three months for the operating permits.

Niger is quite aggressive in its protection of the environment and health with regard
to mining activities. Such legislation includes Act No. 2006-17 of 21 June 2006 on
nuclear safety and security and protection against the dangers of ionising radiation,
whose objective is to regulate the activities and practices related to the use of nuclear
materials and substances, as well as other sources of ionising radiation in all sectors.
It determines the means of reducing the risks resulting from this use and assuring
nuclear safety and security. Decree No. 2007-5321PRN II MSP of 13 December 2007
specifies the conditions whereby this law applies. One could also point to the following
orders:
a Law No. 98-56 of 29 December 1998 establishing a framework for environ
mental management;
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Niger
b Order No. 121MMH, which sets out the safety and hygiene rules to which
holdings of quarries and underground mines are subject, other than those
of solid mineral fuels and developed mining oil by survey, as well as their
dependencies;
c Decree No. 70-31MTPIM I U, which lays down the administrative rules to
which the relevant establishments are subject;
d Order No. 41 1MTPIT II U on the rules for safety and hygiene; and
e Order No. 2661 MSPILCE on the rules controlling authorisation, reporting and
practice of inspections involving ionising radiation sources.
In addition, relating to hygiene, the sanitation code resulting from Ordinance No.
93-13 of 2 March 1993 applies, establishing a hygiene code and other relevant
provisions.
The issuance of an operating permit is subject to possession of a certificate of environmental
compliance. The decision to grant an environmental compliance certificate is issued after
validation of the environmental review.
For any mining project, an environmental review is made by the Nigérien Review
Office, which verifies the compliance of the project with the applicable environmental
standards in Niger.

Mining titles are granted always subject to the respect of third parties rights, meaning
that the owner of a mining right is bound to respect third parties. Consequently, it must
compensate, where necessary, the occupants or rural rights owners.

Although generally, there are no licences or permissions specific to the import of project
equipment or materials (Section 14 of the WAEMU Regulation No. 18/2003/CM/
UEMOA on community adoption of a Mining Code and Article 106 of the Mining
Code), permission to import and use explosives must, however, be sought. The company
must also obtain an exemption certificate for exemption from duties and taxes provided
for in Articles 94 and 95 of the Mining Act.
The question of the use of foreign labour is governed by Article 20 of the sample
mining agreement, which states that incumbents and their subcontractors may hire
expatriate staff for their activities only if there are no qualified Nigérien personnel to
do the same job. The state facilitates the acquisition of permits of stay and permissions
required for expatriate staff (and their families), including entry and exit visa, work
permit and residence permit. The state reserves the right, however, to ban the entry or
residence of nationals from countries hostile to Niger or individuals whose presence
would likely compromise security or public order.
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The conditions of entry and residence of aliens are governed by the Decree
87‑076/PCMS/MI/MAE/C of 18 June 1987, who (at risk of revocation of their visas):
a must be in a possession of a passport bearing a Nigérien visa (which can be
obtained from any Nigérien consulate abroad);
b have an international vaccination certificate; and
c guarantee their return by a return ticket or consignment to the Treasury or Bank
of a sufficient amount to buy the return ticket;
Foreigners over 15 years old must deposit a copy of the residence permit application
with the nearest police station to their residence. In terms of work, contracts of foreign
workers must be approved by the National Agency for the Promotion of Employment
(‘ANPE’).
It should be noted that the Mining Convention provides that companies must
commit to implementing a programme of training and local staff promotion so as to
replace the expatriate staff over the course of time.

Niger is bound to the Republic of Benin through the 1975 Cotonou Agreement treaty
for transit. This agreement follows the 1965 UNCTAD Convention on Transit Trade
of Land-Locked States. In addition to this agreement, Benin is a Member State and
signatory of the WAEMU Treaty.
Under the terms of Articles 28 et seq. of the WAEMU Community Mining Code,
during the course of the validity of operating mining titles, holders of mining titles
benefit from exemption of duties and taxes; the only exception is the static fee payable on
petroleum products. Accordingly, no tax or duty is charged on the export of ore.
In addition, Article 22.2.4 of the Mining Convention provides that ‘[w]hen
exported, products are exempted from all export taxes and duties for the entire period of
validity of mine titles’.
No permission is required for the transport and export of ore.

This question is governed by Regulation No. 09/98/CM/UEMOA, the Mining Law and
the sample mining agreement.
The Mining Law provides in its revised Article 105 that the holder of a mining
title is subject to the regulation of foreign exchange of the Republic of Niger, and that
it may:
a have bank accounts in Niger for the repatriation of the proceeds from sales;
b collect all funds acquired or borrowed abroad, including the revenue from sales of
its production, in Niger.
c transfer the dividends and the capital invested products abroad, as well as the
product of the liquidation or the realisation of their assets; and
d pay foreign suppliers of goods and services required for the conduct of mining
operations.
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The text goes on to state that minerals must be sold in US dollars and that the state
then guarantees to the foreign holder of the mining title free conversion of the national
currency into foreign currencies.
The sample mining agreement provides in Article 24.1 the following:
Subject to the foreign exchange regulations in force in Niger, the State shall give the company, the
mining company, their suppliers and their subcontractors, the following guarantees:
a) free conversion and transfer of funds intended for the payment of debts (principal and
interest) related to mining operations in Niger, to non-Nigérien creditors;
b) free conversion and transfer of net profits to be distributed to non-Nigérien shareholders, after
payment of all duties and taxes payable; and
c) free conversion and transfer of profits and proceeds from liquidation of assets, after payment
of all duties and taxes payable.
Section 24.2 provides the same facilities for expatriate staff of the company, the
operating company, their suppliers and subcontractors applicable to the savings on
wages, on the proceeds of the liquidation of investment in Niger, or on the sale of
personal property.
With regard to Regulation No. 09/98/CM/UEMOA, Article 7 requires the use
of an authorised intermediary (primary banks approved by the Minister of Finance)
for payments abroad, which are subject to a request for authorisation of submitted to
the Minister of Finance, with attached supporting documents showing details of the
operations.
VI CHARGES
Generally, the legislation allows exemptions to companies mining holders from tax and
customs (Articles 28 to 34 of the WAEMU Community Mining Code and the revised
Articles 92 and 93 of the Mining Act), but some rights, taxes and fees remain due during
the course of creation, operating and financing of the company. Such details are set out
in Article 22.2.1 of the Mining Convention, concerning:
a fixed fees in connection with the mining title, at rates fixed by the Budget Act;
b annual area tax, denominated in CFA francs per square kilometre;
c mining fees;
d registration, stamp and land registration fees;
e taxes on the classified factories;
f taxes on industrial and commercial profits;
g tax on income from stocks and shares;
h differential tax on motor vehicles (vignette) (except for mine and quarry machines,
and vehicles specifically used for mining operations);
i single tax on insurance contracts, payable on insurance contracted with companies
based in Niger;
j the statistical royalty (customs tax) payable on petroleum products intended for
the production of energy, extraction, transport and processing of the ore as well as
operation and maintenance of infrastructure, social and health; and
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Niger
k the Community solidarity levy for tool collection, spare parts excluding those
intended for passenger vehicles and for any vehicle for private use, materials and
equipment intended to be integrated permanently in the works.
There is, however, also an exemption from duties and taxes on interest and other products
are used by the operating company for the purpose of equipment or its operation.
Some taxes and fees became due after a certain period of time, such as:
a value added tax (from the date of first production); and
b the contribution of the patents, the apprenticeship tax and the tax on profits
(from three years from the date of first production).
A better system is required in this area in order to allow access to information to foreign
investors. Certainly, the diversification of investors would be wise, but it would also
involve risk when not operated under objective criteria and in the interests of the state.
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Chapter 14
NIGERIA
Oladotun Alokolaro 1
I OVERVIEW
Organised mining in Nigeria commenced in 1903 with the mining of minerals such as
tantalite, columbite and coal. This growth in mining activities necessitated regulation, and
as such in 1946 the Minerals Ordinance was passed, followed by the Coal Ordinance of
1950.2 These enactments provided the basis for the establishment of various government
agencies such as the Nigerian Coal Corporation. The discovery of oil in 1958, and its
almost immediate economic benefit, in conjunction with the nationalisation policy and
the energy crisis of the 1970s, hastened the decline of mining activities in the solid
minerals sector, as the federal government’s attention shifted to the petroleum sector.
In recent times, the government, in its quest to diversify the nation’s economy
through, inter alia, the exploitation of solid minerals, created the Ministry of Solid
Mineral Development, which has now evolved into the Ministry of Mines and Steel
Development (‘the MMSD’). The Ministry has the responsibility of creating policy for
the exploration and exploitation of the numerous mineral resources in Nigeria. In order
to attract foreign direct investment to the solid minerals sector, the federal government
has sought to increase exploration activities through the creation of a National Geological
Survey Agency3 to conduct a comprehensive geophysical survey of the country. It also
created the Mining Cadastre Office (‘the MCO’) for the purposes of administering
1 Oladotun Alokolaro is a senior partner at Advocaat Law Practice.

2 Scoping study on the Nigerian Mining Sector, prepared by the Geological Survey of Denmark
and Greenland in association with the Bureau of Minerals and Petroleum (Greenland), Minre
Associates (Nigeria) and Meyetty Nigeria Limited (Nigeria) October 2011.
3 The Nigerian Geological Survey Agency (‘NGSA’) was established in July 2000 and commenced
operations in May 2003.
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Nigeria
mining titles on an open transparent basis4 and enacted the Nigerian Minerals and
Mining Act of 2007.5 Finally, it introduced the National Mineral and Metals Policy in
20086 and the Minerals and Mining regulations in 2011.7
The continuation of democratic governance in Nigeria has ensured that perceived
political risk arising from political instability, which could hinder the flow of foreign
investment into the solid minerals sector, has been addressed and is no longer a primary
issue. The government has also intensified security efforts, particularly in the northern
region, where there is presently some unrest. In addition, to ensure the viability of mining
projects, the federal government continues to invest heavily in infrastructure projects
such as electricity, improved road networks, revamped rail networks and increased port
capacity in various parts of the country.
The occurrence of solid minerals is widespread across the entire breadth of
Nigeria, with evidence of 34 different minerals in various regions. Some of the known
minerals include the following: gold, coal, bitumen, iron ore, tantalite, columbite, lead,
zinc, sulphides, barytes, cassiterite, gemstones, talc, feldspar and marble.
It is important to understand, however, that the solid minerals sector in Nigeria
is dominated mainly by artisanal and small-scale mining. Large-scale operators, such
as cement manufacturers and construction companies, which do not focus primarily
on mining activities, operate quarries mainly for the production of limestone or stone
aggregates for their own consumption. Except for these two types of operator, much
of the mining in Nigeria is undertaken by smaller operators, with only a few mining
operators exploring metalliferous minerals (gold, lead, zinc and tantalite), industrial
minerals (gypsum, barite, diatomite and bentonite) and gemstones having been engaged
in mining on a larger scale, similar to that of the cement manufacturers and construction
companies.
Recent information from the Ministry of Mines and Steel Development indicates
that about 38 foreign investors holding 421 exploration licences have commenced mining
exploration activities in Nigeria. Some of these investments include investments made by
Australian stock exchange-listed companies such as Energio Limited, which is developing
the Agbaja Iron Ore Project, and Australian Mines Limited, which is developing gold
projects in the Yargarma and Kasele areas, located in the gold province of north-west
Nigeria. There are other notable agreements signifying intent to invest in Nigeria’s solid
minerals sector such as the recent memorandum of understanding executed between the
federal government and Glencore International plc for Glencore to invest $1 billion in
4 The MCO was formed in accordance with the provisions of the Nigerian Minerals and Mining
Act 2007. In 2009 it resumed the issuance of mineral titles after suspending same for the
purposes of a revalidation exercise.
5 The Minerals and Mining Act No. 20 2007 replaced the Minerals and Mining Act of 1999 and
is the principal legislation relating to the management of solid mineral resources in Nigeria.
6 The National Mineral and Metals Policy is a policy document of the MMSD, which provides
guidance on the management of mineral resources and metals.
7 The Minerals and Mining Regulations 2011 provide the guidelines for operations in the solid
minerals sector.
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the Nigerian mining industry. In addition China-based Shenzhen Investment and some
private investors are looking at injecting approximately 7 billion naira into the Zamfara
Minerals Processing factory, in Zamfara State, northern Nigeria.
II LEGAL FRAMEWORK
The principal legislation for the regulation of the mining industry in Nigeria includes
the Minerals and Mining Act of 2007 and the Mineral and Mining Regulations 2011.
This legislation is administered by various government agencies such as the Ministry of
Mines and Steel Development, which has subsumed within it the Mines Inspectorate
Department (‘the MID’), the Mines Environmental Compliance Department
(‘the MECD’) and the MCO. Other important legislation that affects the mining
industry includes the Environmental Impact Assessment Act,8 the Land Use Act,9 the
Explosives Act,10 the Nuclear Safety and Radiation Protection Act,11 and the National
Environmental Standards and Regulations Enforcement Agency (Establishment) Act.12
These are administered by various government agencies and departments, including the
Federal Ministry of Environment, the Nigeria Nuclear Regulatory Agency and the state
government ministries of land and environment.
For the purposes of a legal classification system for reporting mineral resources
and mineral reserves, Nigeria does not have any specific legal code, although mining title
holders are expected to meet the prescribed reporting requirements as provided in the
Minerals and Mining Regulations 2011.13
With respect to international treaty obligations relating to the mining industry,
Nigeria is not a signatory to any mining specific treaty obligations. However, for the
purposes of protecting foreign investments generally, Nigeria is a signatory to several
international treaties, which also apply to the protection of investments in the mining
industry. These treaties include but are not limited to the Convention of the Recognition
and Enforcement of Foreign Arbitral awards, Multilateral Investment Guarantee Agency
(‘MIGA’) Convention and the Treaty on the International Centre for the Settlement
of Investment Disputes. Nigeria has also entered into various bilateral investment
agreements to facilitate the development of its mining sector, notably with countries
such as China, Turkey and South Korea.
8 The Environmental Impact Assessment Act No. 86 of 1992 CAP E12 Laws of the Federation
of Nigeria 2004.
9 The Land Use Act No. 6 1978 CAP L5 Laws of the Federation of Nigeria 2004.
10 The Explosives Act No. 34 1967 CAP E18 Laws of the Federation of Nigeria 2004.
11 The Nuclear Safety and Radiation Act No.19 1995 CAP N142 Laws of the Federation of
Nigeria 2004.
12 The National Environmental Standards and Regulation Enforcement Agency (Establishment)
Act No. 92 2007.
13 Schedule 5 of the Minerals and Mining Regulations 2011.
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i Title
The ownership of all minerals occurring beneath or upon any land in Nigeria including
its continental shelf and territorial waters are vested in the federal government.14 Private
parties may lease mining rights through an application to the MCO. Mining titles are
usually granted on a priority basis but may be granted through competitive bidding. For
the granting of mining titles through competitive bidding, the Minister determines the
areas to be designated for the bidding exercise and these must be areas free of any existing
mineral titles.

The following are the licences that a private party may acquire for the exploration and
exploitation of solid minerals in Nigeria:
a Reconnaissance permit, which allows, on a non-exclusive basis, reconnaissance
activities on all land within Nigeria that is available for mining operations. The
permit is issued and valid for a period of one year and may be renewed upon a
satisfactory application. Although the permit is granted for reconnaissance on
all land in Nigeria available for mining operations, it does not cover land that is
already the subject of a mining exploration licence, small-scale mining lease or
mining lease.
b Exploration licence, which permits the holder to exclusively conduct exploration
activities on land within the area specified on the licence. The area for which
an exploration licence can cover may not exceed an area measuring 200 square
kilometres. The licence is for a three-year term and is renewable for two consecutive
periods of two years each, culminating in a total licence period of seven years.
c Mining lease, which confers on the holder, inter alia, the exclusive occupation
and use of the licence area for the purposes of exploiting mineral resources. The
duration of a mining lease can either be as specified by the applicant or for 25
years, and may be renewed for consecutive 25-year periods subject to satisfactory
compliance with the minimum work obligations and any commitments that may
be specified by the MMSD.
d Small-scale mining leases, which allow the holder of the lease to conduct artisanal
mining operations that do not include the extensive and continued use of
explosives, toxic chemicals or agents. The lease is granted for a period of five years
and may be renewed for another five years.
The foregoing rights, once granted, are protected by the judicial system, which is
independent of both the executive and the legislative arms of government.
The applicants for mineral titles are required to demonstrate to the MCO evidence
of sufficient working capital to conduct mining operations. Upon the grant of the
mining title, holders are under an obligation to carry out exploration and or exploitation
of mining operations in a safe and skilful manner, taking all necessary precautions in
14 Section 1 of Minerals and Mining Act No 20 of 2007.
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respect of safety, environmental degradation and pollution. They are to minimise and
manage any environmental impact resulting from the mining activities and are required
to rehabilitate and reclaim all disturbed land to its natural or predetermined state, or
such state as the laws and or regulations may prescribe. In this regard, an applicant
is required as part of the application for mining rights, to submit an environmental
protection and rehabilitation programme as part of its environmental impact assessment
report to the MECD. The environmental protection and rehabilitation programme must
provide for specific reclamation and rehabilitation actions, citing the estimated cost and
timetable for such rehabilitation. The programme must be approved by the MMSD
before the issuance of any mining title.

In addition to the foregoing, quarry leases are granted for the quarrying of all quarriable
minerals such as asbestos, china clay, gypsum, marble, limestone, sand, stone and gravel.
A quarry lease is granted in respect of an area not exceeding 5 sq/km for a five-year period.
In addition, a water use permit may be granted. This is a right granted to a mining
title holder to obtain water for use in mining exploration and exploitation. The permit is
granted for the period for which the mining title is granted.

A mineral title holder seeking to abandon or cease operations in a leased area is required
to provide notice to the MID and MECD detailing the intended abandonment plan
and the operations of the mine up until the notice for such abandonment or cessation
of operations was issued. Upon receipt of the notice, recommendations are made to the
Minister and, should the title holder still seek to abandon the mining site, it would be
required to seal and cover every mine shaft, make safe all tailings and water retention
areas, and demolish or seal all potentially hazardous buildings, structures, plant or
equipment.
Under mining laws and regulations, every mineral title holder is also required
to contribute to a fund (the Environmental Protection and Rehabilitation Fund) to
guarantee that the environmental obligations of mineral title holders, such as mine
closure and remediation, are met.15

There are a number of regulatory instruments in force that could have a direct impact on
mining projects and these include the following:
a the National Environmental (Mining and Processing of Coal Ores and Industrial
Minerals) Regulations 2009, which seek to minimise pollution from the mining
and processing of coal, ore and industrial minerals;
15 Section 121 of the Nigeria Minerals and Mining Act No. 20 2007.
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Nigeria
b the National Environmental (Permitting and Licensing System) Regulations

2009, which seek to ensure the consistent application of environmental laws,
Regulations and Standards in all sectors of the economy, including the mining
industry and geographical regions; and
c the National Environmental (Access to Genetic Resources and Benefit Sharing)
Regulations 2009, which seek to make provisions for the conservation, monitoring
and control of activities that may have an impact on the ecosystem, exotic species
and genetic resources.
There are no specific health and safety regulations for the mining industry, although the
provisions of the Minerals and Mining Regulations of 2011 require the submission of
health and safety procedures by applicants for licences and permits.
Environmental and social considerations for mining operations in Nigeria are principally
governed by the Nigeria Minerals and Mining Act, the Minerals and Mining Regulations,
the National Environmental Impact Assessment Act,16 National Environmental (Mining
and Processing of Coal Ores and Industrial Minerals) Regulations 2009, the National
Environmental (Permitting and Licensing System) Regulations 2009, the National
Environmental (Noise Standards and Control) Regulations 2009 and the National
Environmental Standards and Regulations Agency (Establishment) Act. These laws
are administered by the MMSD, the Ministry of Environment and the National
Environmental Standards and Regulations Agency. The laws provides that, prior to
embarking on a mining project, a mining title holder must submit an environmental
impact assessment report to the Ministry of Environment for approval. Upon submission
of the report, the Ministry will seek the view of all public stakeholders as to the siting of the
mining project and what adverse effects if any, such a project would have on its immediate
environment. Where there is likely to be a significant impact on the environment with no
possibility of mitigation, the project may be referred for mediation or to a review panel,
which will be the final arbiter as to whether the project will be permitted. Subsequent
to the approval of the Ministry of Environment, the environmental impact assessment
must be submitted to the MECD before the commencement of mining operations or as
the case may be, upon application for renewal of mining titles.
The National Environmental (Mining and Processing of Coal Ores and Industrial
Minerals) Regulations 2009, National Environmental (Permitting and Licensing
System) Regulations 2009, and the National Environmental (Noise Standards and
Control) Regulations 2009 are aimed at minimising environmental pollution from
the mining and processing of coal, ores and industrial minerals. They prescribe the
permitting requirements for mine emissions and noise above specified levels and for the
discharge of effluent from a facility. These regulations are administered by the National
Environmental Standards and Regulations Enforcement Agency. The time frame for the
16 The Environmental Impact Assessment Act No. 86 1997 CAP E12 Laws of the Federation of
Nigeria 2004.
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Nigeria
entire environmental review process for mining projects varies and may take up to one
year.

Mining titles in Nigeria are not granted to cover areas that have been historically deemed
by communities as ‘sacred sites’. Where mining activities affect such sites, the mining
title holder may be liable to pay compensation to the community where such site lies.
Sacred sites are determined by the MCO on the advice of the Mineral Resources and
Environmental Committee. Lawful occupiers of any land that is the subject of a mining
title are entitled to fair compensation for any disturbance of their surface rights and for
any damage done to the land including damage to crops, trees and buildings. Failure to
pay such occupiers compensation may lead to the revocation of a mining title.
The payment of compensation to occupiers of land is also applicable where the land is
compulsorily acquired for mining purposes. It has also been the case that the holder of a
mining title is required to provide security for the payment of compensation in the form
of a deposit or to reimburse the federal government for any compensation paid to any
state government or lawful occupier in respect of any land that is the subject of a mining
title. The lawful occupier of any land within an area subject to a mining lease retains
the right to graze livestock upon, and to cultivate the surface of, the land insofar as the
grazing or cultivation does not interfere with mining operations in the area.
V OPERATIONS, PROCESSING AND SALES OF MINERALS

All machinery and or equipment imported for mining activities are subject to inspection
at the respective port of entry. Such machinery and or equipment are, however, not
subject to payment of customs and import duties; to qualify for the exemption from
payment of customs and import duties, the MID must approve such machinery or
equipment prior to its importation.
Any mining title holder seeking to employ foreigners for its mining operations must
obtain an expatriate quota grant in accordance with the provisions of the Immigration
Act.17 This grant allows a company registered in Nigeria seeking to employ foreigners
to do so. Upon engagement, their terms of employment and welfare are regulated by
the Labour Act.18 The Act, in regulating employment relations and welfare, restricts the
employment of women and prevents children under the age of 16 from working in
underground mines.
17 The Immigration Act CAP 11 Laws of the Federation of Nigeria 2004.

18 Labour Act No. 21 1974 CAP L1 Laws of the Federation of Nigeria 2004.
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Nigeria

Upon commencement of the production of minerals, the mining title holder is
unrestricted from processing and exporting minerals extracted subject to the payment
of the requisite royalties. For the purposes of being able to export the minerals, the
mining title holder must register with the Nigerian Export Promotion Council, obtain
an export clearance from the MMSD (evidence of payment of the requisite royalty must
be presented as a condition for its grant) and comply with any Nigeria Customs Service
requirements. The minerals to be exported must also be inspected by the officials of the
MID before export approval is granted.

For the purposes of mining activities, foreign investors are required to import their
proposed operating funds through an authorised dealer in the autonomous foreign
exchange market established by the Foreign Exchange (Monitoring and Miscellaneous
Provisions) Act.19 The importation of operating funds by these means allows for the
unconditional repatriation to the home country of the title holder of dividends, profits
and interest earned on such funds imported into the country.
In conducting mining operations, the common business structure often adopted
by foreign investors seeking to operate in the mining sector in Nigeria is a limited liability
company, which must be registered in accordance with the provisions of the Companies
and Allied Matters Act, the principal law that regulates businesses in Nigeria.20 Owners
of such mining operations may be able to access financing for their mining operations on
a debt or equity basis, or both, from both local and international lenders.
VI CHARGES
i Royalties
Royalties payable on minerals obtained from mining activities are prescribed by the
Minerals and Mining Regulations of 2011.21 Where minerals are sought to be exported
solely for the purposes of analysis or experiment, the Minister may waive the payment
of royalty on such minerals. Furthermore, the Minister may also defer the payment of
royalties’ payable on minerals for any prescribed period.
ii Taxes
The mining taxation policy in Nigeria prescribes that mining companies are liable to a
corporate tax of 30 per cent on their taxable profits. The corporate tax and royalty rates is
no different for foreign and local mining companies and applies equally to both.
19 The Foreign Exchange (Monitoring and Miscellaneous Provisions) Act No. 17 1995 CAP F34
Laws of the Federation of Nigeria 2004.
20 Section 54 of the Companies and Allied Matters Act CAP 20 Laws of the Federation of Nigeria
2004.
21 Schedule 4 of the Minerals and Mining Regulations 2011.
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Nigeria
iii Other fees

All holders of mining titles are required to pay annual service fees for their titles. In
particular, holders of mining leases are required to pay surface rent at a yearly rate as may
be prescribed by the Minister for their mining operations.
iv Incentives
Mining title holders are also entitled to various tax advantages and incentives and these
are as follows:
a capital allowance of 95 per cent of qualifying expenditure incurred on exploration,
development and processing;
b exemption from customs and import duties on approved plant and machinery,
equipment and accessories imported specifically and exclusively for mining
operations;
c a tax holiday for the first three years of operation, which may be extended for
another two years;
d annual indexation of the unclaimed balance of capital expenditure by 5 per cent;22
e an expatriate quota and resident permit in respect of expatriate quota personnel;
f personal remittance quota personnel for the transfer of external currency out of
Nigeria;
g free transfer of dividends or profits, payment in respect of servicing foreign loans
and foreign capital in the event of sale or liquidation of mining operations, in any
convertible currency;
h freedom from expropriation, nationalisation or acquisition by any government
unless such act is in the national interest or for a public purpose as provided
by law for which the investor shall be entitled to prompt, fair and adequate
compensation; and
i the right to a dispute settlement procedure under the UNCITRAL Rules.
There have been various developments in the mining sector, which have all contributed
to the renewed vigour of investors. The federal government’s efforts to attract investors
to the sector has resulted in the following:
a increased exploration activities since the creation of the Nigerian Geological
Survey Agency;
b the creation of the MCO, which has allowed for the streamlining of mining titles;
c increased capacity of the Ministry of Mines and Steel Development, allowing for
effective execution of designated functions by the various departments; and
d the enactment of relevant laws and regulations such as the Minerals and Mining
Act, the Minerals and Mining Regulations, the National Minerals and Metals
Policy, National Environmental (Mining and Processing of Coal Ores and
22 This is only applicable to mines that commence production within five years of the enactment
of the Minerals and Mining Act.
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Nigeria
Industrial Minerals) Regulations 2009, the National Environmental (Permitting

and Licensing System) Regulations 2009 and the National Environmental
(Noise Standards and Control) Regulations 2009, all of which are required to
regulate mineral exploration and exploitation on a transparent basis and minimise
environmental pollution arising from the mining activities.
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Chapter 15
PERU
Giannina Assereto 1
I OVERVIEW
The current government has defined its policy for the mining sector as ‘modern mining
with social inclusion’, which involves the development of large and medium-scale
mining, as well as small-scale mining within a legal framework that promotes arm’s-
length national and foreign investments, respecting the environment and the people of
the areas affected by mining projects. This current policy also includes the regularisation
of ‘illegal mining’.
The most important current mining projects include BHP Tintaya, owned by
Xstrata Copper plc; Toquepala-Cuajone, owned by Grupo México; Antamina, also
owned by Xstrata Copper plc in association with BHP Billiton and Mitsubishi; Cerro
Verde, owned by Freeport Mac Moran Copper; Yanacocha owned by Buenaventura and
Newmont; Lagunas Norte and Pierina, owned by Barrick Gold Corp; and Cerro Corona
owned by Goldfields.2 In 2011, mining companies invested amounts that exceeded $6
billion in Peru, which greatly exceeds the $1 billion invested in 2000.3
Further, according to the Ministry of Energy and Mines (‘the MEM’), as of
August 2012, the estimated mining investment portfolio comprises 48 main projects,
which include exploration and expansion projects totalling around $53 billion.4
1 Giannina Assereto is a partner at Zuzunaga & Assereto Abogados.

2 Sources: Institutional Portal of the Ministry of Energy and Mines, August 2012: p. 18 of the
2011 Annual Report of the National Society of Mining, Oil and Energy of Peru.
3 Source: p. 18 of the 2011 Annual Report of the National Society of Mining, Oil and Energy of
Peru.
4 Source: Institutional Portal of the Ministry of Energy and Mines, August 2012; the MEM
indicates in its report of Projects Portfolio for 2012, that it is an estimated investment and that
the information has been obtained from the mining title holders.
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The highest risk factor in Peru is the social one; the current government, in
application of Convention 169 of the ILO, has approved the Law of Prior Consultation
in order to inform communities in advance about the legislative or administrative
measures that could affect them, so projects can be executed in a manner facilitating
relations between companies, communities and the state.
II LEGAL FRAMEWORK
The exploitation of natural resources is regulated by the Political Constitution5 and

the Organic Law for the Sustainable Use of Natural Resources,6 which establish that
resources belong to the nation, and the state is sovereign in their exploitation.
These rules, together with the General Mining Law (‘the LGM’),7 the Framework
Law for the Growth of Private Investment and the law granting a Legal Stability Regime
to Foreign Investments, have since the 1990s created a legal framework that favours and
promotes private investment8 in balance with economic growth, population development
and conservation of natural resources and the environment, through the granting of
guarantees. Rules are enacted to establish a quick and transparent system in the granting
of concessions, and the state has relinquished such entrepreneurial work and transferred
it to the private sector.9
The rules include the LGM and its Regulations,10 which establish the main
obligations of mining holders, including the payment of the good-standing fee, the
compliance with the annual minimum production quota, submission of the annual
consolidated statement and the report of sustainable development activities.
The governing body in the sector is the MEM,11 which acts together with the
Ministry of the Environment (‘MINAM’)12 on issues of environmental audit, protected
natural areas, etc.; with the Ministry of Labour and Promotion of Employment (‘the
MTPE’) for the audit on occupational health and safety matters; and, with the Supervisory
Agency of Investment in Energy and Mining (‘OSINERGMIN’) regarding the audit of
mining infrastructure, facilities and operations. Notwithstanding the foregoing, mining
5 The Peruvian Constitution of 1993.

6 Law 26821.
7 Legislative Decree 109, amended by Legislative Decree 708, whose unique revised text was
approved by Supreme Decree No. 014-92-EM.
8 Legislative Decrees 757 and 662.
9 Source: Presentation of the Minister of Energy and Mines PDAC 2012.
10 Supreme Decree 03-94-EM, Decree 018-92-EM, Supreme Decree 055-2010-EM and Supreme
Decree 024-93-EM.
11 Law 29158, Organic Law of the Executive Agency; except in the case of small-scale mining and
non-industrial mining, where the bodies in charge are regional governments, according to their
jurisdiction.
12 For this purpose, MINAM has subordinate institutions, such as the Agency of Environmental
Assessment and Audit (‘OEFA’) and the National Service of Protected Natural Areas
(‘SERNANP’).
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activity also requires other related permits and authorisations, for which it must apply to
other entities (see Section III.iii, infra).
On environmental matters, the legal framework applicable is the General Law
of the Environment;13 the Law of the Environmental Impact Assessment System (‘the
SEIA’)14 and its Regulations;15 the Environmental Regulations for Mining Exploration
Activities16 and the Regulations for Environmental Protection in Mining-Metallurgical
Activity.17
Finally, as previously mentioned, Peru has signed Convention 169 of the ILO and
approved the corresponding law.
i Title
As previously noted, all natural resources within Peruvian territory constitute national
patrimony and minerals belong to the state; this property is non-transferable. Use
of mineral resources is granted to private parties through a system based on mining
concessions.
Mining activities include claiming, prospecting, exploring, exploiting, general
works, beneficiation, transportation of minerals and commercialisation. Except for
claiming, prospecting and commercialisation, a concession is needed in order to develop
any activities.
A mining concession grants its holder the right to develop mining activities in
compliance with certain requirements.
According to Peruvian legislation, mining concessions are real rights, different and
separate from the property (surface) where the concession is located. They are granted by
the Geological Mining and Metallurgical Institute (‘INGEMMET’) upon completion
of an administrative procedure where the technical and legal feasibility of the concession
is assessed. This procedure takes approximately 90 business days from the filing of the
application.18
In order to facilitate fulfilment of any obligations arising from the mining
concessions, they may be grouped into administrative and economic units (‘UEAs’). For
that purpose, concessions must be located within a five-kilometre radius, be of the same
type and nature, and have an approving resolution from INGEMMET.
The only restriction applicable in these cases is to foreigners, who cannot have
access, individually or through associations, to any concessions located within 50
13 Law 28611 and its amendments.

14 Law 27446, and its amendments.
15 Supreme Decree 019-2009-MINAM.
16 Supreme Decree 020-2008-EM.
17 Supreme Decree 016-93-EM, and its amendments.
18 Supreme Decree 018-92-EM and its amendments.
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kilometres of the Peruvian border, except where specific exemptions are granted by the
government.19
According to Peruvian regulations it is not obligatory to register mining
concessions in the Public Property Registry but is recommended, as any further act with
respect to such mining concession will only be opposable to third parties – including the
government – after its registration.20
Mining concessions are transferable between private parties through a transfer
agreement regulated by the LGM.21 They can also be subject to mining assignment and
option agreements as well as to joint ventures.22

According to the Peruvian Civil Code, the ownership of land extends to the respective
surface and the subsoil, but such ownership does not imply a right to exploit any natural
resources of the subsoil, which requires a concession. The surface and the mining
concession may belong to different parties. The titleholder of the mining concession
must obtain permission from the owner of the land to develop mining activities.
The Law of Lands23 regulates the use of land by holders of mining concessions.
According to this law, mining activities require a prior agreement with the owner of the
land or the completion of a mining easement before the MEM.
In the case of an agreement with the owner, although it is not legally required to
register such agreement with the Public Registry, it is recommendable to do so in order
to be able to enforce said rights against third parties. A legal analysis of the property titles
in the area is also recommended, which will determine if the corresponding land is clear
of any liens, encumbrances, etc.
If the relevant agreement is not reached with the owner of the land, the
aforementioned mining easement proceeding before the MEM needs to be started.
The LGM states that holders of mining rights may request authorisation from
the MEM to establish mining easements on the land that are needed to operate mining
projects. The General Directorate of Mining of the MEM (‘the DGM’) is in charge of
the proceeding. In practice, this procedure has seldom been used by mining companies,
as the MEM has been reluctant to authorise such easements in order to avoid any social
unrest.
Other ways to acquire the use of the land is through agreements regulated by
the Civil Code, such as: (1) the establishment of easements (i.e., civil easements, as
opposed to mining easements), which are rights that impose limitations on real property
to benefit another real property; (2) usufructs, which allow the use of the respective
properties, including the revenues generated by such use; and (3) surface rights, which
19 Article 71 of the Peruvian Constitution of 1993.

20 Article 107, 126 and 163 of LGM.
21 Article 164 of the LGM.
22 Articles 165 and 166 of the LGM.
23 Law 26505, amended by Law 26570 and its Regulations, Supreme Decree 011-96-AG, and its
amendments.
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enable the titleholder to construct infrastructure on the land, which will be transferred to
the owner of such land at the end of the agreement. All of these rights can be registered
at the Public Registry and so are opposable to third parties.

Start or restart of mining activities
According to a recent modification of the Regulations of Mining Procedures24 for the
commencement of mining exploration and exploitation activities, the holder must
request a permit from the DGM for the start or restart of activities.
A series of documents must be attached to this request, including (1) the
resolution approving the corresponding environmental impact assessment (‘EIA’); (2) its
work schedule; (3) documents proving that it is the owner of the surface rights or that it
is authorised by the holder of the lands to use them for the mining activities mentioned;
and (4) updated environmental monitoring.
After the corresponding evaluation, the DGM may or may not authorise the start
or restart of activities.
For the start or restart of development (construction), preparation, exploitation
(which includes the mining plan) activities, the amending rule sets out that in addition
to the requirements indicated, the mining holder must submit certain technical
information, including a locational plan of the mine facilities, the mining plan, the
engineering study, the pit design or the mining works design for underground mining,
the dump design, hazardous material storage facilities and electric substations, as well as
the authorisation for the use of explosives, occupational health and safety measures, and
a timetable of activities.
These permits are obtained through the electronic procedures that the MEM has
implemented in its extranet service and the mining holder must be registered in order
to use them.
Others
In addition, the titleholder must consider that Peruvian legislation has established the
obligation to request permits, authorisations or licences for the use of resources for the
development of mining activities or for products required for their execution, such as:
a water rights;
b protecting archaeological remains;
c use and generation of electricity;
d use of hazardous materials;
e use of radioactive material;
f use of restricted chemicals;
g use of explosives; and
h use of hydrocarbons.
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The corresponding law25 establishes objective liabilities related to environmental and
conventional damages caused by ‘risky or dangerous’ activities and subjective liabilities
for damages to the environment by non-risky or non-dangerous activities in cases of
gross negligence or wilful misconduct.
In both cases, the liabilities imply the obligation to adopt measures to restore,
rehabilitate or reclaim any damage and to pay a just and fair indemnification.26
In accordance with the Law on Mine Closures (‘the LCM’) and its regulations,27
within one year of the approval of the EIA, mining projects have the obligation to submit
their closure plan to the MEM. In addition to the thorough consultation included in
the EIA approval process – which must contain specific references to the closure of the
respective mine – closure plans must undergo their own public consultation process before
being approved by the MEM, under which any persons can submit their observations or
concerns in writing and expect them to be considered by the authority in its evaluation.
The LCM states that the implementation of the closure plan must be executed
in a progressive fashion throughout the life of the mine. In order to assure completion
of the closure plan, mining operators must establish a financial guarantee. In addition,
they are obliged to report their progress in the execution of the plan to the MEM every
six months.28 This biannual report keeps the control and follow-up process informed of
environmental impacts, currently assessed by monitoring programmes (performed by
the operator) and environmental audits conducted by the authority.

The environmental legislation establishes limits on how the mining project may interact
with the different components of the environment. The relevant regulations indicate
that the government recognises and protects patrimonial rights and the knowledge,
innovations and traditional practices of farming, native and local communities. Areas
where the value of biodiversity, culture and landscape is significant are protected by means
of natural protected areas. Within these areas and their buffer zones, the environmental
legislation imposes prohibitions or restrictions on certain economic activities in order to
preserve the protected values.29
Two years ago MINAM was created to guide and establish policies for the
protection of the environment, regulate and approve environmental licences, and impose
sanctions on those that infringe the environmental legislation.30 For this final purpose,
25 Law 28611, General Environmental Law.

26 Articles 142, 144 and 145 of the Law 28611, Environmental General Law.
27 Law 29090, amended by Laws 28234 and 28507, and its Regulation, approved by Supreme
Decree 033-2005-EM, amended by Supreme Decrees 035-2066-EM and 045-2006-EM.
28 Article 29 of the Supreme Decree 033-2005-EM.
29 Law 26834 and its Regulation, Supreme Decree 038-2001-AG and its amendments.
30 Legislative Decree 1013, amended by Legislative Decree 1039.
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there is a specific agency within MINAM called the Environmental Assessment and
Oversight Agency.
Peruvian legislation imposes obligations on proponents of mining projects to
evaluate potential environmental and social impacts, and proposes relevant prevention,
mitigation or compensation measures in an EIA, which must be approved by the
relevant authority (in this case, the MEM). This is a condition for the commencement
of the construction (and therefore, operation), or the improvement or expansion of the
project. Where projects entail activities that are regulated by two or more ministries,
the most relevant ministry will oversee the area from which the project will obtain
most of its income.
On 2012, the MEM approved the Occupational Health and Safety Regulation,
which promotes a culture of risk prevention in mining activities and the participation of
employees, employers and the state.31
The Regulation applies to all mining activities without exception and to all related
services, including civil construction, and auxiliary and complementary facilities. Any
person, company – private or public – carrying out mining activities or related activities
must comply with this Regulation, and its Annexes.
Finally, the Occupational Health and Safety at Work Law and its Regulations has
been approved. This Law transfers the competence of supervising the mining companies
in the field of occupational safety and health from OSINERGMIN to the MTPE.32
OSINERGMIN has, however, reserved responsibility for the audit of mining activities
regarding infrastructure, facilities and operations.33
The EIA should address, in reasonable detail (i.e., a feasibility study) the way in which
the projects could interact with the environment. Closure is assessed only at a theoretical
level, it only being necessary to complete the analysis in the mine closure plan (see
Section III.iv, supra).
Public participation is required both before and after the EIA is filed for
approval. Therefore, the organisation of workshops and a public information strategy
are required from the early stages of the EIA process. Public participation is a key factor
in the EIA approval process as it will determine how well informed the stakeholders
are regarding the project, which is an issue of the utmost importance for the evaluators
at the MEM.34 Another procedure also now takes place: the prior consultation (see
Section IV.iii, infra).
The approval process for the EIA before the MEM can take between six and 10
months, taking into account the intervention of other ministries with administrative
authority over project components that are not specifically mining activities (access

32 Law 29783.
33 Law 29901 and OSINERGMIN Res. 185-2012-OS/CD.
34 Supreme Decree 028-2008-EM and Ministerial Resolution 304-2008-MEM/DM.
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road and port construction, etc.) and of the specific environmental areas affected by the
construction or operation of the project (fresh water, coastal waters, air, etc.).
Mining activities must satisfy the LMP regarding mining and metallurgical
effluents and gas emissions,35 and the ECA.36 The LMP and the ECA are environmental
instruments that protect and measure environmental quality and public health.
Any modification to the project (as a consequence of, inter alia, extension of
the area of beneficiation, expansion of the installed capacity or the construction of new
tailing impoundment or leaching facilities) will entail modification of the EIA.37

The Law of Prior Consultation and its Regulations38 aim to develop the content,
principles and procedure of the right of indigenous or native peoples to be consulted on
any new legislative or administrative measures that may affect them directly.
The types of measure that must be consulted are plans, programmes, and projects
of national and regional development, as well as legislative or administrative measures
that may affect their collective rights, physical essence, cultural identity, quality of life or
development.
Andean, native and Amazonian communities are also identified as indigenous or
native people in accordance with legal standards.
The purpose of the consultation is to arrive at an agreement, or gain consent
between the state and indigenous or native people, through a dialogue that guarantees
their inclusion in the decision that is to be taken. The Law does not grant a right of
veto for the communities; the state can make a decision contrary to the view of the
indigenous or native people, but it must take their rights into consideration.

A beneficiation concession is needed to process minerals. The applicant must file an
application in order to obtain a concession that grants its holder the right to process and
concentrate the valuable part of an amount of disseminated minerals and melt, purify
or refine metals. This concession is issued by the DGM after a three-stage administrative
proceeding:
a the petition is evaluated and a notice published;
b the authorisation to build the beneficiation facilities (e.g., metallurgical plant,
leaching facilities, tailings impoundment facilities, if applicable) is issued; and
c the resulting facilities are inspected in order to obtain the authorisation to operate.
35 Supreme Decree 010-2010-MINAM.

36 Supreme Decrees 002-2008-MINAM and 003-2008-MINAM, which regulate the ECA for
water and air, respectively.
37 Article 7.2 of the Supreme Decree 016-93-EM.
38 Law 29785 and Supreme Decree 001-2012-MC.
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The procedure is carried out through the extranet system of the MEM.39
Among others, an important requirement for the application for this concession
is the EIA (see Section IV.i, supra). Additionally, the applicant must prove that it is the
owner of the surface rights of the area that will be occupied by its facilities or that it has
obtained authorisation from the holder thereof. Real estate must be registered with the
Public Registry or the party must have the corresponding notarially recorded instrument.
Any of these documents must indicate the UTM coordinates of the real estate.
An additional proceeding must be followed before the DGM should the
beneficiation concession need to be modified due to:
a expansion of the area;
b expansion of the installed capacity;
c additional installations without expanding the installed capacity;
d a new tailing basin deposit or the expansion of the existing one; or
e a new lixiviation pad or expansion of the existing one.
Although, according to the LGM, it is not mandatory to register beneficiation concessions

in the Public Property Registry, its Regulations establish the contrary.40 In our opinion
such registration is recommended, as any further act with respect to such beneficiation
concession will only be binding on a third party, including the government, after its
registration.41
There are no limitations on the use of foreign labour or services. The hiring of
foreign specialists or consultants is very common, and neither are there limitations on the
execution of internationally used agreements such as EPCM (engineering, procurement,
construction management) or EPC (engineering, procurement and construction).
Under the EPCM, the contractor agrees to provide services to the owner of a
mining project and to manage, administer and supervise the construction of the project
to obtain the final product sought by the owner; in the EPC, however, the purpose is the
delivery of a finished work to the owner of the project. In the EPCM the mining holder
has a direct relationship with the ‘mining contractors’ – the companies that execute the
mining works – whereas in the EPC it relates with them legally.
Mining contractors, according to Peruvian legislation, are those that execute
mining activities (mineral exploration, exploitation, development or beneficiation
works) and they must be registered with the Register of Mining Contractors kept by the
DGM.42
There are three types of import procedures regulated by the General Customs
Law43 relating to the import of equipment and machinery that may be necessary for
mining activities. In order to determine which applies, the purpose of the asset to be
39 Supreme Decree 020-2012-EM and Annex A.

40 Article 38 of Supreme Decree 018-92-EM.
41 Articles 107, 126 and 163 of the LGM.
42 Supreme Decree 005-2008-EM, amended by Supreme Decree 013-2010-EM.
43 Legislative Decree 1053 and its Regulations, Supreme Decree 010-2009-EF.
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imported must be analysed: whether it is import for consumption44 (also called ‘definitive
import’); a temporary import for re-export in the same condition;45 or reimport in the
same condition.46
There are no restrictions on the import of machinery and equipment intended
for mining activities, but there are restrictions on the import of chemical inputs and
supervised products and explosives (see Section III.iii, supra).

The sale of minerals is free, internally and externally, as provided by the LGM and,
as previously indicated, the trading of minerals does not require the granting of any
concession. However, said Law sets out that mineral products must be purchased from
persons authorised to dispose thereof; a purchase from someone who does not have this
authorisation is not claimable and it subjects the buyer to the corresponding liability.
The LGM sets out that the buyer must verify the origin of the mineral products that it
obtains in order to determine that it does not come from illegal sources.47
No restrictions have been established on the export of minerals.48

In Peru, the measures related to promoting and protecting private investments provide
the investor with the ability to enter into tax stability agreements under the Legislative
Decrees 662 and 757 and under the LGM.
In the mining business, the tax stability regime described under the Legislative
Decrees 662 and 757 applies to foreign investors willing to invest a minimum amount of
$10 million in Peru for at least two years. Legal stability applies to the rules of income tax
for the receiving company of the investment, and the rules of income tax on distribution
of dividends apply to the investment company. PROINVERSION49 is the entity that
enters into these legal stability agreements with investors on behalf of the Peruvian state,
which generally last for 10 years.
The tax stability under the LGM consists of freezing, on a certain date, the
tax regime (taxes only) applicable to the investments made in the concessions that
are subject to the respective agreement. No tax rules issued after the ‘stability date’
that are related to the stabilised taxes, or any new taxes imposed will not apply to
said investments. This stability lasts 10 or 15 years depending on the amount of the
investment – 10 years for investment of $2 million, and 15 years for investment of $20
million from new companies and $50 million from existing mining companies. Under
the LGM, the income tax rate is set at the current rate plus two percentage points, and
44 Resolution Nos. 063-2010/SUNAT/A and 491-2010/SUNAT/A.

45 Resolution Nos. 062-2010/SUNAT/A and 579-2010/SUNAT/A.
46 Resolution No. 090-2010/SUNAT/A.
47 Articles 3, 4 and 5 of the LGM.
48 Annex 1 of the Single Text of Products of Prohibited Export was approved by Supreme Decree
070-93-EF, as amended.
49 The Private Investment Promotion Agency.
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the ability to pass on general sales tax and excise tax to third parties is guaranteed, but
the rate is unchanged.
VI CHARGES
i Royalties, taxation and duties

From 1 October 2011, mining companies must pay the following specific taxes, in
addition to the general taxes applicable to legal persons,50 which are all determined on a
quarterly basis over the operating profits of the company:
a the special mining tax, which is taxed at cumulative progressive rates from 2 per
cent to 8.4 per cent;
b the amended legal royalty, which is taxed at cumulative progressive rates from 1
per cent to 12 per cent; and
c the special mining charge, which is taxed at cumulative progressive rate of between
4 per cent and 13.12 per cent.
Once paid, each is deductible as an expense against the income tax of the mining
companies. The latter is applicable to mining companies that voluntarily agree to pay
it and commit to do so by executing the corresponding agreement with the Peruvian
government, this payment having the nature of a public resource originating from
the exploitation of non-renewable natural resources, and being applicable to mining
companies with projects with tax stability agreements in force.
Other taxes include (1) the social security contribution with a tax rate of 9
per cent levied on the salaries of the companies’ employees; (2) the contribution for
administrative regulation that mining companies must pay, which may be no more than
1 per cent of annual turnover, after general sales tax; (3) the employee contribution to
the Supplementary Retirement Fund for Mining, Metallurgical and Steel, which has a
tax rate of 0.5 per cent and is levied on an annual basis on mining companies’ annual net
income before taxes.
Peru has signed agreements with members of the Andean Community of Nations
to avoid double taxation; and there are also agreements in force to avoid double taxation
with the governments of Canada, Brazil and Chile.
Mining concessions holders must pay a good standing fee (‘GSF’) on an annual
basis, from the date of its application, which is equivalent to $3 per hectare per year.
The holders of beneficiation concessions must pay an annual GSF from the date
of its application, which depends on the installed capacity:
a up to 350 MT/day51 – 0.0014 of 1 tax unit (‘UIT’) per MT/day;
b more than 350 MT/day up to 1,000 MT/day – one UIT;
50 Taxes are generally levied at central, regional and local level, and include income tax, the
temporary net assets tax, the financial transactions tax, general sales tax, excise tax, customs
duties, vehicle ownership tax, real property transfer tax and municipal contributions.
51 MT/day refers to the installed treatment capacity and, in the case of expansions, will be paid
only on the increase in capacity.
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Peru
c more than 1,000 MT/day up to 5,000 MT/day – 1.5 UIT; and

d per each 5,000 MT/day in excess – 2.00 UIT,
Non-payment of such fee for two consecutive years will result in the cancellation of the
beneficiation concession.52
ii Other fees
Peruvian legislation contemplates the polluter-pays principle, broadly applied by
international law and according to which the person who pollutes must makes reparations.
According to General Environmental Law the person who causes damage to the
environment must take restorative, rehabilitative or remedial measures or, if that is not
possible, compensate (in environmental terms) for the damages caused, notwithstanding
other administrative, civil or criminal liabilities that may apply.53
The General Environmental Law sets out liabilities for environmental damage
and as a coercive measure, it establishes that the competent regulator may impose fines
of no more than 10,000 UIT.54 On the other hand, the Regulations applicable to mining
activities establish that in case of environmental damage, the fine will be 50 UIT.55
Finally, non-compliance with the environmental provisions in mining exploration,
exploitation and closure matters will be sanctioned by fines from 5 UIT up to 10,000
UIT.56
A Bill was submitted to Congress on the initiative of the Executive Agency on 27 August
2011, and may create the National Environmental Certification Service (‘SENACE’), a
public entity attached to MINAM, which would be in charge of reviewing and approving
detailed EIAs.
The Bill also foresees an exception to the EIA system where such assessments
are expressly excluded by Supreme Decree with the approving vote of the Council of
Ministers. The projects that the Bill considers are those that comprise public or private
or mixed-capital investment projects, of national or multi-regional scope, which involve
activities, constructions or works and other commercial and service activities that may
have a significant impact on the environment.
If this Bill is approved, this new entity will be in charge of the evaluation and
approval of the EIAs of large investment projects and the MEM will no longer be
competent for these cases.
Finally, according to the records of the MEM, there are currently 25 mining
projects at an exploratory stage, including Tia Maria (Grupo México (Southern Copper
52 Legislative Decree 868 that modifies article 46 of the LGM.

53 Articles VII and IX of Law 26811.
54 Article 136.1 of Law 28611.
55 Ministerial Resolution 353-2000-EM-VMM.
56 OSINERGMIN Resolution 211-2009-OS-CD.
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Peru
Corp)), El Galeno (Jianxi Copper), Corani (Bear Creek), Quechua (Mitsui Mining),
Michiquillay (Anglo American), Magistral (Grupo Milpo), Chucapaca (Canteras del
Hallazgo SAC) and La Granja (Rio Tinto).
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Chapter 16
PHILIPPINES
Roderick R C Salazar III and Geraldine S Meneses-Terrible 1
I OVERVIEW
Being naturally endowed with a substantial number of mineral resources,2 the Philippines
has recognised the benefits to be derived by it from mining activities, economic or
otherwise. This fact is supported by a provision of the 1987 Philippine Constitution
allowing the exploration, development and utilisation of mineral resources3 through
the grant of an exploration permit (‘EP’),4 mineral processing permit (‘MPP’) mineral
agreements such as mineral production sharing agreements (‘MPSAs’),5 joint venture
1 Roderick R C Salazar III is co-managing partner and Geraldine S Meneses-Terrible is a senior

associate at Fortun Narvasa & Salazar.
2 Based on Statistics on Philippine Mineral Production as of June 2012 of the Philippine Mines and
Geosciences Bureau (‘the MGB’), the following quantities of metallic minerals were produced
in 2011: (1) gold: 31,120kg; (2) silver: 45,530kg; (3) copper: 63,835 metric tonnes; (4) nickel:
22,794 metric tonnes; (5) metallurgical chromite: 25,483 dry metric tonnes; (6) zinc: 37,354 dry
metric tonnes; and (7) iron ore: 126,177 dry metric tonnes (www.mgb.gov.ph/Files/Statistics/
MetallicProduction.pdf ). MGB also claims that out of the Philippines’ 30 million hectares total
land area, 9 million hectares have been identified as having high mineral potential.
3 Section 2, Article XII of the 1987 Philippine Constitution.
4 Section 20 of the Mining Act provides that an EP grants the right to conduct exploration for
all minerals in specified areas and is recognised under the Mining Act IRR as the initial mode
of entry.
5 Section 31 of the Mining Act IRR defines an MPSA as ‘an agreement wherein the Government
grants to the Contractor the exclusive right to conduct mining operations within, but not
title over, the contract area and shares in the production whether in kind or in value as owner
of the minerals therein. The Contractor shall provide the necessary financing, technology,
management and personnel’.
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agreements (‘JVAs’),6 co-production agreements (‘CPAs’),7 and financial or technical

assistance agreements (‘FTAAs’).8 As of 31 August 2012, the Mines and Geosciences
Bureau (‘the MGB’) reports that there are 340 MPSAs in place covering a total area of
602,630 hectares while there are six FTAAs over a total area of 108,872 hectares. Small-
scale mining permits are granted only to Filipino citizens or cooperatives composed of
Filipino citizens.
Based on the mining industry statistics9 released by the MGB on 2 August
2012, total mining investment in 2011 was $618.5 million and the aggregate mining
investment from 2004 to 2011 has been more than $4 billion.10 Also, the total taxes, fees,
royalties and charges collected from the mining industry as of 2010 amount to around
13 billion pesos.11 Clearly, the mining industry has made significant contributions to the
Philippine economy.
However, with the current policy and pending legislation involving mining,
such figures will definitely change, presumably with an increased contribution from
raised revenue schemes. The Philippine mining industry will remain unsettled until all
uncertainty is resolved by the implementation of new mining policy and legislation.
II LEGAL FRAMEWORK
i Mining legislation
There are three laws governing mining in the Philippines:
a Republic Act No. 7042, otherwise known as the Philippine Mining Act of 1995
(‘the Mining Act’) and its Implementing Rules and Regulations embodied in
Department of Environment and Natural Resources (‘DENR’) Administrative
Order (‘AO’) No. 2010-21 (‘the Mining Act IRR’);
b Republic Act No. 7076 or the People’s Small-Scale Mining Act of 1991 (‘the
Small-Scale Mining Act’);12 and
6 Section 31 of the Mining Act IRR defines a JVA as ‘an agreement where a joint venture
company is organised by the Government and the Contractor with both parties having equity
shares. Aside from earnings in equity, the Government shall be entitled to a share in the gross
output’.
7 Section 31 of the Mining Act IRR defines a CPA as ‘an agreement between the Government
and the Contractor wherein the Government shall provide inputs to the mining operations
other than the mineral resources’.
8 Section 5(ak) of the Mining Act IRR defines an FTAA as ‘a contract involving financial or
technical assistance for large-scale exploration, development and utilisation of mineral
resources’.
9 http://mgb.gov.ph/Files/Statistics/MineralIndustryStatistics.pdf.
10 http://mgb.gov.ph/Files/ItemLinks/ThePhilippineMineralsIndustryAtAGlance.jpg.
11 $319 million at the current exchange rate.
12 Presidential Decree (‘PD’) No. 1899 approved in 1984 establishing a small-scale mining as a
new dimension in mineral development also remains in force albeit at a much reduced level of
implementation.
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Philippines
c Executive Order No. 79 entitled Institutionalising and Implementing Reforms

in the Philippine Mining Sector, Providing Policies and Guidelines to Ensure
Environmental Protection and Responsible Mining in the Utilization of Mineral
Resources (‘the Mining Policy’) and its Implementing Rules and Regulations
embodied in DENR Administrative Order No. 2012-07 (‘the Mining Policy
IRR’).13
The Mining Act is the main mining legislation in the Philippines and governs large-scale
exploration, development and utilisation of mineral resources; the Small-Scale Mining
Act, as its title suggests, regulates small-scale mining and limits the same to Filipino
citizens. The Mining Policy is an executive fiat recently enacted on 6 July 2012. It makes
several innovations on the Mining Act, specifically in the following areas: expansion of
areas closed to mining applications, establishment of mineral reservations, competitive
public bidding for areas open to mining, and compliance with the ‘social acceptability’
requirement of the communities affected. It also calls for the strict implementation of the
provisions of the Small-Scale Mining Act and prohibits the use of mercury in small-scale
mining activities.
Along with the mining laws, the DENR also strictly enforces various
environmental laws through its Environmental Management Bureau (‘the EMB’) to
ensure that the mining industry adheres to the protection of the environment. Some
of the other environmental laws that would have application to the mining industry
relate to the Philippine environmental policy, pollution control, environmental impact
statement (‘EIS’) system and environmental compliance certificate (‘ECC’) system, clean
air policies, and water environmental policies.
The Philippines has not entered into any international treaty involving mining.
ii Regulatory body
The MGB under the DENR is the agency tasked with implementing the Mining Act
and its IRR. It accepts, evaluates, reviews and recommends to the DENR Secretary the
approval of applications for exploration permits and mineral agreements.14
The environmental laws and standards are implemented by the EMB.
The Mining Policy also created a Mining Industry Coordinating Council (‘the
MICC’), which is an interagency body15 tasked, inter alia, with implementing the
Mining Policy and conducting an assessment and review of all mining-related laws, rules
and regulations, issuances and agreements, so as to be able to make recommendations
to improve the allocation of revenues and risk between the government and the mining
sector.16
13 The MICC revised Sections 3, 7 and 9 of the Mining Policy IRR and released the revised
versions of said provisions on 24 September 2012. Such revisions, as of this writing, are pending
approval by the President of the Philippines.
14 Section 9 of the Mining Act.
15 Section 9 of the Mining Policy.
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iii Mineral reporting requirements

The Philippine Mineral Reporting Code (‘the PMRC’) was recently adopted by the MGB
and the Philippine Stock Exchange in setting the minimum standards and requirements
for reporting exploration results, mineral resources and ore reserves. The PMRC
imposes a mandatory system for classification of tonnage and grade estimates according
to geological confidence and technical and economic considerations. The PMRC is
based on the JORC Code (2004) of Australasia and is likewise compatible with the
international codes of Australia, South Africa, the European Union and Canada, neither
is it incompatible with the international reporting template (2006) formulated by the
Committee for Mineral Reserves International Reporting Standard (‘CRIRSCO’).
i Title
The Philippines follows the Regalian Doctrine. Under Section 2, Article XII of the 1987
Constitution, all natural resources, including minerals, are owned by the state. The state
may however, enter into agreements such as MPSAs, FTAAs, CPAs and JVAs for the
exploration, development and utilisation of natural resources.
Title to minerals cannot be transferred to private parties, specifically the permit
holders and mineral agreement grantees. The permits and agreements contain a
stipulation that the grant thereof does not bestow beneficial ownership of the minerals
to the holder or grantee.17
Also, pursuant to the Regalian Doctrine, the state owns all mineral lands that are
considered inalienable.18 Thus, a private individual or entity, whether a Filipino citizen or
otherwise, cannot own mineral lands. Patented titles to mineral lands perfected under the
Philippine Bill of 1902 shall, however, continue to be owned by the grantees thereof.19

Acquisition of mining and surface rights
The procedures for acquisition of mining rights depends upon the type of permit or
agreement applied for.20
EP
To apply for an EP, certain documentary requirements should be submitted to the
MGB regional office (‘RO’). Upon submission of the documentary requirements to the
MGB RO concerned, the application must be evaluated and the area applied for will
be plotted to determine if it conflicts with other mining areas or is within areas closed
17 Sections 22(p) and 39(af ) of the Mining Act IRR.

18 Section 3, Article XII of the 1987 Constitution.
19 Atok Big-Wedge Mining Company v. Hon Intermediate Appellate Court and Saingan, G.R. No.
63528, 9 September 1996.
20 MGB primers for EP, MPP, MPSA and FTAA.
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to mining applications. Should there be no conflict on the area applied for, the MGB
issues an area status clearance, and a notice of application. Upon issuance thereof, the
applicant must secure a certification precondition or certificate of non-overlap from the
NCIP and publish, post or announce the notice of application on the radio. After this
period of publication, the applicant must secure a certification from the DENR Panel
of Arbitrators as to whether any opposition has been filed against the application or an
adverse claim on the area applied for. Should there have been no claim or opposition,
the MGB RO will again evaluate the application and endorse the same to the MGB
Central Office (‘CO’), which will make a final evaluation of the application and approve
or deny the same. Upon approval of the application by the MGB RO after clearance
by the MGB CO, the EP will be numbered, registered and released by the MGB RO
to the applicant, now holder, thereof. Section 7 of the Mining Policy IRR directs the
MGB to issue an approval or disapproval of an EP application within six months from
the date of acceptance thereof. Further, it stated that requirements such as area status
clearance, certificate of non-overlap or certification precondition, certificate of posting
and certificate of (no) adverse claim or protest shall be deemed waived if the government
agency concerned are not able to issue them within the prescribed deadlines.21
MPP
Upon filing of an MPP application by the mining company, the MGB RO makes a
preliminary evaluation of the requirements supporting the application for MPP. If the
project costs less than 200 million pesos, the application will be evaluated and approved
by the MGB RO. If it costs more than 200 million pesos, the application shall be
forwarded to the MGB CO within five days for review. If the MGB CO finds that
the project costs more than 500 million pesos, it will endorse the same to the DENR
Secretary for his or her final evaluation, and approval or denial. The MPP application
will otherwise be evaluated, and approved or denied by the MGB Director. The approved
MPP shall be numbered by the MGB CO and registered with and released by the MGB
RO to the grantee thereof.
MPSA
The MPSA application is carried out in much the same way as that for the EP. Once the
MGB RO has endorsed the application to the MGB CO, however, this body will then
endorse the application to the DENR Secretary for final evaluation and approval or
denial thereof. Upon approval of the application, the MPSA shall be numbered by the
MGB CO and registered and released by the MGB RO to the contractor.
21 Area status clearance should be issued within one month from the date of acceptance; certificate
of non-overlap within three months from date of filing of the application or certification
precondition within six months from date of filing of the application; certificate of posting
within one week of the last day of completion of posting; certificate of (no) adverse claim or
protest within one week from the date of filing of the request.
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However, the Mining Policy has suspended the grant of new mineral agreements
such as the MPSA until legislation rationalising existing revenue-sharing schemes and
mechanisms has taken effect.22
FTAA
The initial application process is again identical to that of EPs and MPSAs. After the
MGB CO has endorsed the application to the DENR Secretary for final review, the
Negotiating Panel23 and the FTAA applicant will then negotiate the terms of the FTAA.
Once the Negotiating Panel is satisfied with the terms and conditions of the proposed
FTAA, it shall recommend its execution and approval to the President. The President will
then approve the FTAA and notify the Congress of such within 30 calendar days. The
approved FTAA will be transmitted to the MGB CO for numbering, and registered and
released by the MGB RO to the contractor.
The new Mining Policy does not include the acceptance of applications for
FTAAs in the moratorium that is presently in place in the Philippines. The new Mining
Policy IRR allows national government-owned mining assets to be the subject of FTAA
applications, which will be awarded through competitive public bidding.24
Validity or term of mining and surface rights

An EP is valid for a period of two years from the date of issuance, but is renewable for
further similar periods, not exceeding a total term of four years for non-metallic mineral
exploration or six years for metallic mineral exploration.25 During the term of the EP,
the feasibility study must be conducted and a declaration of mining project feasibility
(‘DMPF’) filed. If these are not completed in the six-year term, a further extension of
two years may be applied for and granted for the specific purpose of completing the
DMPF.
The term of an MPP is five years from the date of issuance, renewable for further
similar periods but not exceeding a total term of 25 years.26
Both the MPSA and the FTAA have terms not exceeding 25 years from the date
of execution, and are renewable for another term not exceeding 25 years.27
Should the parties fail to agree on the terms of renewal in accordance with the
provisions of the Mining Act, the MPSA or the FTAA will be considered an expired
mining tenement and the grant thereof will be subject to competitive public bidding.
Mining contractors with tenements expiring from 1 September 2012 to 30 April 2013 are

23 The Negotiating Panel is composed of representatives of the DENR, MGB, Board of
Investments or Department of Trade and Industry; National Economic Development
Authority; Department of Finance; DENR’s Field Operations Office; DENR’s Legal and
Legislative Affairs Office; and MGB RO concerned (Section 58 of the Mining Act IRR).
24 Section 7 of the Mining Policy IRR (as revised).
25 Section 21 of the Mining Act and Section 18 of the Mining Act IRR.
26 Section 109 of the Mining Act IRR.
27 Sections 32 and 38 of the Mining Act and Sections 34 and 52 of the Mining Act IRR.
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required to file their renewal applications within 30 calendar days from the effectiveness
of the Mining Policy IRR, whereas mining contractors with tenements expiring after 30
April 2013 are required to file their renewal applications at least six months prior to the
expiry of their mining contracts or agreements.28
How mining rights are protected

During the term of the permits and mineral agreements, the holder or grantee has the
right to conduct the activities allowed therein without interference as long as it complies
with the terms and conditions of the permit or mineral agreement. EP holders are
given the right of first refusal to develop and utilise minerals in their exploration area
upon approval of their declaration of mining project feasibility and effectiveness of new
legislation on mining. Failure to put the area into operation within the period provided
in the EP shall result in automatic loss of the priority right, and the government can open
the areas for bids.29
Restrictions on the surface or mining rights that may be acquired by foreign parties
Only qualified persons are allowed to hold and be granted permits and mineral
agreements. The Mining Act and its IRR defines ‘qualified person’ as:30
[…] any Filipino citizen of legal age and with capacity to contract; or a corporation, partnership,
association or cooperative organised or authorised for the purpose of engaging in mining, with
technical and financial capability to undertake mineral resources development and duly registered
in accordance with law, at least sixty percent (60 per cent) of the capital of which is owned by
Filipino citizens: Provided, that a legally organized foreign-owned corporation shall be deemed
a Qualified Person for purposes of granting an Exploration Permit, FTAA or Mineral Processing
Permit only.
Thus, only Filipino citizens or corporations, partnerships, associations or cooperatives 60

per cent of the capital of which is owned by Filipino citizens are qualified to be granted
an MPSA; however, legally organised foreign-owned corporations are qualified to hold
and be granted EPs, MPPs and FTAAs (see Section V.i and iii, infra).
Maximum allowable areas

For an EP, the maximum area that mining companies may apply for or hold is as follows:
a onshore, in any one province – 200 blocks or approximately 16,200 hectares;
b onshore, in the entire Philippines – 400 blocks or approximately 32,400 hectares;
or
c offshore, in the entire Philippines, beyond 500 metres from the mean low tide
level – for corporations, 1,000 blocks or approximately 81,000 hectares.31
28 Section 3 in relation to Section 9 of the Mining Policy IRR (as revised).

29 Section 7 of the Mining Policy IRR.
30 Section 3(aq) of the Mining Act and Section 5(cg) of the Mining Act IRR.
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The maximum area for an MPSA, however, is:

a onshore, in any one province – 5,000 hectares for metallic minerals and 2,000
hectares for non-metallic minerals per final mining area;
b onshore, in the entire Philippines – 5,000 hectares per final mining area; or
c offshore, in the entire Philippines, beyond 500m from mean low tide level – 500
blocks or approximately 40,500 hectares, and for the Exclusive Economic Zone,
a larger area to be determined by the DENR Secretary upon the recommendation
of the MGB Director.32
The maximum FTAA contract area that may be applied for by or granted to a qualified
person in the whole of the Philippines is:
a 1,000 meridional blocks or approximately 81,000 hectares onshore;
b 4,000 meridional blocks or approximately 324,000 hectares offshore; or
c a combination of 1,000 meridional blocks onshore and 4,000 meridional blocks
offshore.
Capitalisation
The minimum capitalisation requirement for an EP or an MPSA applicant or holder is
2.5 million pesos.33 The applicant or holder of an FTAA is required to have authorised
capital in the amount of $4 million or its Philippine peso equivalent.34 Note also that
an FTAA contractor is required to invest at least $50 million for the infrastructure and
development of the mining area.

Under Section 7 of the Department of Finance Local Finance Circular No. 02-09, in
relation to Sections 147 and 151 of the Local Government Code, an individual or entity
must secure a business permit from the relevant local government unit prior to the
commencement of mining operation.
Further, MPSA and FTAA contractors or grantees are required to obtain an
ECC, a permit to operate air pollution control equipment,36 a wastewater discharge
35
permit,37 a permit to operate electrical and mechanical installation,38 a licence to use and
purchase cyanide,39 a permit to purchase and use explosives,40 a tree-cutting permit and
33 Sections 19(d) and 35 of the Mining Act IRR.
34 Section 53(c) of the Mining Act IRR.
35 Sections 35 and 56 of the Mining Act IRR.
36 DENR AO No. 2000-81.
37 DENR AO No. 2005-10, 16 May 2005.
39 DENR AO No. 1997-39, 23 December 1997.
40 Executive Order No. 58, 1 January 1987 entitled ‘Rationalising Fees and Other Charges on
Firearms, Explosives and Explosive Ingredients, Security Agencies and Security Guards’
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water permit and such other relevant permits as may be required by specific laws relevant
to the nature of the mining project.41

The contractor or permit holder is required to formulate a final mine rehabilitation
(‘FMR’) or decommissioning plan (‘DP’) or a mine closure plan, which will be
integrated to its environmental protection and enhancement programme. The FMR/
DP will consider all possible mine closure scenarios and contain cost estimates for the
implementation of each, taking into consideration expected inflation, technological
advances and the unique circumstances faced by the mining operation. The estimates
shall cover the full extent of work necessary to achieve the objectives of mine closure,
such as decommissioning, rehabilitation, maintenance and monitoring, and employee
and other social costs, including residual care, if necessary, over a 10-year period.42
A Final Mine Rehabilitation and Decommissioning Fund is required to be
established by each operating contractor or permit holder and must be deposited as a
trust fund in a government depository bank and be used solely for the implementation
of the approved FMR or DP.43

Holders of permits and grantees of mineral agreements are required to strictly comply
with all the rules and regulations relating to mine safety and health standards embodied
under DENR Administrative Order No. 2000-98.44
The MGB regional director concerned must conduct a safety inspection of all
installations in mining operations and monitor the safety and health programme of a
contractor or permit holder.
Mining contractors, prior to the development stage of the MPSA or FTAA are required
to obtain an ECC and go through an environmental impact assessment (‘EIA’).45
41 Presidential Decree No. 1067, ‘Water Code of the Philippines’.

43 Section 187-B of the Mining Act IRR.
45 Section 3(h), DENR Administrative Order No. 2003-30: ‘Environmental Impact Assessment
(EIA) – process that involves evaluating and predicting the likely impact of a project (including
cumulative impact) on the environment during construction, commissioning, operation and
abandonment. It also includes designing appropriate preventive, mitigating and enhancement
measures addressing these consequences to protect the environment and the community’s
welfare. The process is undertaken by, among others, the project proponent and/or EIA
Consultant, EMB, a Review Committee, affected communities and other stakeholders.’
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Upon completion of the documentary requirements, the contractor must submit

these to the EMB, which will determine the completeness of the documents. If the
documents are complete, the ECC applicant or contractor will be required to pay the
filing and processing fee and review fund. Thereafter, the application will be referred to a
case officer who will convene the Environmental Impact Assessment Review Committee
(‘the EIARC’) for substantive review, including site inspection. The EIARC will then
prepare and submit its report and recommendation to the EIA chief, who will review it
as well as the process documentation. The EIA chief will endorse the matter to the EMB
director, who will approve or deny the same. If the application is approved, the EIA
Division of the EMB will release the ECC. Alternatively, if the application is denied, the
matter is referred to the DENR Secretary for review and final decision on ECC issuance
or refusal.46
The ECC must be processed within a period of 120 working days from the time
of payment of filing and processing fee.47 The ECC application is deemed automatically
approved if the EMB fails to render a decision on the ECC application within this
period.48
Failure to commence the mining project within five years from issuance of the
ECC will result in its automatic expiration.49
Mining tenement applicants or owners and, in the case of corporations applying for
or holding mining tenements, the officials thereof shall be permanently disqualified from
acquiring mining rights and operating mining projects if they have a record of violation
of environmental standards and have failed to implement remediation measures.50

Prior to the issuance of any permit or mineral agreement, the mining applicant shall
undergo the free and prior informed consent (‘FPIC’) process.51
The FPIC process starts with the endorsement of the project by the MGB to the
NCIP Regional Office concerned, which will then conduct a field-based investigation
(‘FBI’) to ascertain whether the area applied for falls within an ancestral domain. If this
is not the case, the NCIP will issue a certificate of non-overlap, provided that the mining
applicant executes an undertaking for the conduct of FPIC should it later be discovered
that the area does in fact overlap with an ancestral domain.
In the event that an area does overlap with an ancestral domain, the NCIP must
conduct two community assemblies.
During the first, the following matters shall be taken up:
a orientation on IPRA and FPIC process;
b validation of the FBI report and the areas affected;
46 Ibid.
47 Ibid.
48 Section 8.2, DENR Administrative Order No. 2003-30.
49 Section 5.4.3, DENR Administrative Order No. 2003-30.
50 Section 5 of the Mining Policy IRR.
51 Section 59, Indigenous Peoples Rights Act (‘IPRA’).
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c census of IPs, migrant IPs or non-IPs;

d identification and validation of IP elders and leaders;
e determination of the decision-making or consensus-building processes;
f consensus on the involvement of non-government organisations;
g validation of the members of the FPIC team representing the community;
h presentation of the agreed work and financial plan;
i option, selection and invitation of independent experts to conduct EIA or give
their expert opinions;
j arrangements for conflict or dispute resolution mechanisms by the chosen or
elected IP elders or leaders;
k date and place of second community assembly; and
l other matters that may be necessary and pertinent.
Thereafter, a second community assembly will be held to discuss the project and the
concerns of the IPs.
Following the second community assembly, the ICCs and IPs concerned will
discuss the advantages and disadvantages of the proposed mining project. After this, the
duly authorised elders or leaders will communicate their decision to the FPIC team. If
they are amenable to the project, the mining applicant and the ICCs and IPs concerned,
through their community representatives, will negotiate the terms and conditions of their
memorandum of agreement, the provisions of which will be explained to the community
by the FPIC team in a language they speak and understand.
Once the memorandum of agreement is finalised, the ICCs and IPs will issue a
resolution of consent and the applicant will post a bond with the NCIP to answer for
damages that the ICCs and IPs may suffer on account of any violation of the terms and
conditions of the agreement. The NCIP will then issue a certification precondition in
favour of the mining applicant.
Should the project not be acceptable to the ICCs and IPs concerned, a resolution
of non-consent will be prepared, signed and released. The applicant can file for a
reconsideration of this resolution within 15 days of its receipt. If the ICCs and IPs
affirm the resolution of non-consent, no FPIC process for any similar proposal may be
undertaken within six months from its issuance.
Unless specifically stated in the memorandum of agreement with the ICCs and
IPs concerned, the FPIC process is required to be complied with for every stage of the
mining project (i.e., exploration, development and operational stages).52
Republic Act No. 7160, otherwise known as the Local Government Code of 1991 (‘the
Local Government Code’), requires prior consultation with or approval of the local
sanggunian 53concerned prior to implementation of any project or programme that may
52 AO No. 3-2012, Revised Guidelines on FPIC and Related Processes of 2012, which took effect
on May 31, 2012.
53 Legislative body of local government units in the Philippines.
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cause pollution, climate change, depletion of non-renewable resources, loss of crop land,
rangeland, or forest cover and extinction of animal or plant species.
In compliance with the aforesaid provisions of the Local Government Code,
DENR Memorandum Order No. 2004-09 requires mining applicants to present proof
of consultation or project presentation.
Prior approval or endorsement in the form of a resolution or certification by at
least a majority of the local government units concerned is required in support of mining
application for immediate development or utilisation activities and of applications for
approval of the DMPF under the development and construction or operating periods
of mineral agreements such as an MPSA or FTAA. Thus, prior to the development and
operation stages of a mining project, the contractor is required to submit to the MGB
favourable resolutions of the project from a majority of the local government units
concerned.54

Import of equipment and machinery
While the Mining Act and its IRR do not prohibit the importation of equipment
and machinery to be used in mining, a contractor or permit holder is required to give
preference to products, services and technologies produced and offered in the Philippines
of comparable quality; specifically, contractors and permit holders are required to
purchase Philippine household equipment, furniture and food.55
Processing of extracted minerals

There is no law requiring mining contractors to process extracted minerals in the
Philippines only. Individuals or entities that plan to engage in mineral processing apart
from mineral development should, however, be in possession of an MPP.56
The new Mining Policy directs the DENR and other relevant government agencies
to develop a national programme and roadmap, based on the Philippine Development
Plan and a National Industrialisation Plan, for the development of value-adding activities
and downstream industries for strategic metallic ores with an aim of discouraging direct
shipping of ore.57
54 So, if there are three local government units (e.g., province, municipality or barangay (barrio))
affected by the mining activity, the favourable resolutions of two local government units will be
deemed sufficient compliance with the requirements of the Local Government Code.
56 Section 5(be) of the Mining Act IRR.
57 Section 8, EO 79 of the Mining Policy.
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A mining contractor is required to give preference to Filipinos in all types of mining
employment for which they are qualified.58 Employment of foreigners must be limited to
technologies requiring highly specialised training and experience. Foreign executives may
also be employed, provided that a Filipino understudy can be trained for such position.59
Foreigners can hold the positions of mine manager, vice-president for operations or
other equivalent managerial position in charge of mining, milling, quarrying or drilling
operations.60 The MGB Director may also allow foreigners to be employed in mining
operations for a period of no more than one year.61
The foregoing notwithstanding, a mining company holding an MPSA may elect
foreigners to its board of directors in proportion to the foreign equity participation
therein.62 This limitation is not applicable to mining companies holding EPs, MPPs
and FTAAs, as they are allowed to have 100 per cent foreign equity, unlike in mining
companies holding MPSAs where only 40 per cent foreign equity is allowed since
activities conducted under an MPSA are considered partly nationalised.

For minerals extracted pursuant to an MPSA or FTAA, the Mining Act and its IRR
allow the sale of the minerals locally and their exportation, provided that the minerals
and by-products produced are sold at the highest market price and lowest commercially
achievable commissions and related fees under market conditions, and to negotiate for
sales terms and conditions compatible with world market conditions. The contractor may
enter into long-term sales and marketing contracts or foreign exchange and commodity-
hedging contracts for its minerals and mineral products. Marketing contracts and sales
agreements with foreign or local buyers involving commercial disposition of minerals and
by-products shall be subject for approval by the DENR Secretary upon recommendation
of the MGB Director. The approved marketing contracts and sales agreements shall be
registered with the MGB, and must remain confidential.63
The Philippine mining laws do not have a provision regarding the importation
of minerals.

Foreign Investment is defined as ‘an equity investment made by a non-Philippine national’.
If the foreign investment consists of at least 40 per cent of the outstanding capital of a
domestic mining company, this should be registered with the Securities and Exchange
Commission. Further, for foreign investments in the form of foreign exchange or assets
58 Section 39(h) and 56(j) of the Mining Act IRR.

59 Section 39(o) and (p); Section 56(q) and (r) of the Mining Act IRR.
61 Section 141, Mining Act IRR.
62 Section 2-A of Commonwealth Act No. 108 otherwise known as the ‘Anti-Dummy Law’.
63 Sections 33(l) and 56(n) of the Mining Act IRR; Stipulations in standard MPSA and FTAA
contracts.
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actually transferred to the Philippines to be repatriated, it should be registered with the

Central Bank of the Philippines (‘the BSP’).64 Only foreign investments registered with
the BSP are entitled to full repatriation of capital and remittance of dividends or profits
using foreign exchange sources or the local banking system.
Repatriated foreign investment is not subject to tax. In addition, one of the
investment guarantees of the Mining Act to foreign investors is the right to repatriate
the entire proceeds of the liquidation of the foreign investment in the currency in which
the investment was originally made and at the exchange rate prevailing at the time of the
repatriation.65
Earnings from foreign investment may also be remitted in the currency in which
the investment was originally made and at the exchange rate prevailing at the time of
remittance.66 These earnings, which will be in the form of dividends, whether cash or
property, will, however, be subject to tax.
Foreign investments in mining companies are entitled to the following protection:
a freedom from expropriation except for public use or in the interest of national
welfare or defence and upon payment of just compensation;
b freedom from requisition of investment except in the event of war or national
emergency and only for the duration thereof, provided that any just compensation
paid may be remitted in the currency in which the investment was originally
made and at the exchange rate prevailing at the time of remittance; and
c information that is agreed as confidential by the government and the contractor
shall be treated as such during the term of the project.
The Philippines has entered into 30 bilateral investment treaties (‘BITs’) with various
countries, thus obliging it to protect foreign investments including those in mining
projects.67 BITs normally apply to investments brought into, derived from or directly
connected with investments brought into the territory of a contracting state by nationals
or companies of the other contracting state, which are qualified for registration and are
duly registered.68
64 Section 1(e) of Implementing Rules and Regulations of the Foreign Investments Act.
65 Section 229(a) of the Mining Act IRR.
66 Section 229(b) of the Mining Act IRR.
67 www.unctadxi.org/templates; In the list maintained by the United Nations Conference on Trade
and Development (UNCTAD) in its website, the 29 countries with which the Philippines has
entered into BITs are Argentina, Australia, Austria, Bangladesh, Belgium, Cambodia, Canada,
Chile, China, the Czech Republic, Denmark, Finland, France, Germany, Italy, Myanmar, the
Netherlands, Pakistan, Portugal, the Republic of Korea, Romania, the Russian Federation,
Spain, Sweden, Switzerland, Thailand, Turkey and the United Kingdom. Saudi Arabia also lists
the Philippines as among the countries with which it has entered into a BIT.
68 See, for instance, Article II of the Agreement between the United Kingdom and the Republic
of the Philippines for the Promotion and Protection of Investments entered into force on
2 January 1981.
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VI CHARGES
i Royalties, taxes, duties and other fees

The Mining Act imposes a royalty of at least 5 per cent of the market value of the gross
output of the minerals or mineral products extracted or produced from the mineral
reservations, exclusive of all other taxes. Thus, those holding mineral agreements outside
of mineral reservations are not required to pay royalties to the Philippine government.
MPSA contractors pay the 2 per cent excise tax on mineral products based on the
actual market value of its gross output at the time of removal, where they were locally
extracted or produced.69
The other taxes and duties payable by mining companies are the following:
a contractors’ income tax – 32 per cent of taxable income derived during each
taxable year from all sources within and without the Philippines;
b customs duties and fees on imported capital equipment – rates vary as provided
for under the Tariff and Customs Code;
c value-added tax on imported goods and services – 12 per cent of value added;
d withholding tax on interest payments on foreign loans – 15 per cent of interest
payment;
e withholding tax on dividends to foreign stockholders – 15 per cent of a dividend
subject to tax treaty rates, if applicable;
f documentary stamps taxes – rates vary depending on the type of transaction;
g capital gains tax – for stocks not publicly traded, 5 per cent on the first 100,000
peso gain and 10 per cent on the excess gain over 100,000 pesos, for real property,
6 per cent of the selling price or fair market value, whichever is higher;
h royalties to indigenous peoples, if in ancestral lands – minimum of 1 per cent of
the gross output from minerals;
i special allowance and royalty to ICCs and IPs granted pursuant to agreements
entered into by the contractor and concerned parties;
j local business tax – the rates for this vary depending on the local government
concerned;
k real property tax – 2 per cent of the fair market value of the property;
l community tax;
m occupation fees – 50 pesos or 100 pesos per hectare per year, depending on
whether the mining area is in a mineral reservation;
n registration and permit fees – depending on the licence or permit applied for; and
o all other national and local government taxes, royalties and fees as of the effective
date of the FTAA.
Further, an FTAA contractor or grantee is required to pay a basic government share

consisting of all the aforesaid taxes paid for by an MPSA holder and an additional
government share. The additional government share shall be payable after the recovery
period and if the basic government share is less than 50 per cent of the net mining
69 Section 217 of the Mining Act and Section 151 of the National Internal Revenue Code.
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revenue. The additional government share shall be the difference of 50 per cent of the net
mining revenue and the basic government share during the calendar year.70
The EMB may also impose fines and penalty in case of violation of the terms and
conditions of the ECC covering the operations of an MPSA or FTAA. It can also issue
cease-and-desist orders to prevent serious or irreparable damage to the environment.71
With the recent passing of the Mining Policy, the Philippine mining industry is
undergoing changes. The Mining Policy directed the adoption of legislation rationalising
revenue-sharing schemes and mechanisms. Thus, mining companies should expect
an increase in government share as stated above and some variation in the extent of
economic incentives that may be given and availed of. In the meantime, a moratorium
on the acceptance of applications and grant of mineral agreements is in place, except for
FTAAs and permits.
Further, the Mining Policy has added areas that are considered closed to
mining applications given the government’s increasing concern for the protection of
the environment and the shift in concentration to other industries to be developed.
Moreover, it required the review of existing mining operations and of existing mining
contracts and agreements for possible renegotiation of the terms and conditions thereof.
Notably, the Mining Policy granted reprieves to mining companies affected by
local government legislation prohibiting the conduct of mining activities, as it enjoined
local government units to exercise their powers and functions in a manner consistent with
regulations, decisions and policies promulgated by the national government, particularly
the Mining Act and its IRR, with respect to the management, development and proper
utilisation of natural resources.
Given the seemingly stringent provisions of the Mining Policy, the mining
industry is anxiously anticipating how the Mining Policy will finally be implemented.
70 DENR AO No. 2007-12, 20 June 2007. ‘Net mining revenue’ refers to the gross output less
deductible expenses. On the other hand, ‘recovery period’ is defined as a maximum period of
five years or at a date when the aggregate of the net cash flows from the mining operations is
equal to the aggregate of its pre-operating expenses, reckoned from the date of commencement
of commercial production, whichever comes first.
71 Section 16 of DENR AO No. 2003-30.
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Chapter 17
PORTUGAL
Rui Botica Santos and Luis Moreira Cortez 1
I OVERVIEW
Currently, both foreign investment and the mining industry are declared priorities for
the Portuguese government.
With the international crisis, the problem of the Portuguese debt and the
consequent difficulties experienced by Portuguese banks, foreign investment is considered
to be essential for the development of the economy and for the necessary increase of the
Portuguese GDP.
In this regard, mining has been considered one of the areas with more investment
potential in Portugal, and the government (notably the Ministry of the Economy) has
been dedicating very significant attention and resources to the development of mining
projects by private investors.
Very recent significant discoveries in certain areas of the country have attracted the
attention of the media and the general public to the mining industry and, despite some
recent changes to the royalties calculation formulae, which were not to the liking of all
investors, the development of the mining industry has become one of the government’s
priorities.
Regarding the risk factors to be taken into consideration by investors, it must be
stressed that Portugal is a country where the rule of law prevails, in which both political
and legal stability and the independence of the courts are guaranteed. This fact, together
with the increasing attention and support that the government has been giving to the
mining industry (and to its investors), reduces the risk factors that are per se inherent in
mining activities and common to all states where the rule of law prevails.
1 Rui Botica Santos is a senior partner and Luis Moreira Cortez is a senior associate at CRA –
Coelho Ribeiro & Associados.
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The territory of Portugal covers 50 per cent of the Iberian Pyrite Belt (‘the IPB’),
which is considered to be the main metallogenic province of the EU. The IPB is the
primary source of base metals in the EU.
Somincor, a company owned by the Lundin Mining Group, operates the Neves
Corvo mines, which are among the largest European copper mines. They are located in
southern-central Portugal, within the IPB. This copper project is considered to be the
most important mining project in Portugal and one of the most important investments
in Portugal.
In addition to the Neves Corvo and Aljustrel mines (which are both copper and
zinc projects), there are significant mining operations in central Portugal (Panasqueira).
As far as mining projects with short-term potential are concerned, the Petaquilla
investment group has an ongoing gold project in Jales-Gralheira, Colt Resources has a
project in Montemor (gold), and MTI and CPF are currently developing iron projects
in Moncorvo and Carviçais.
Portugal’s mineral potential is considered to be far from being fully exploited. The
local geological resources are diverse and of a complex nature:
a in northern Portugal there are tungsten and tin deposits (associated with the
contact between granite and metal sediments), and also precious metals, and
uranium and lithium deposits;
b northern-central Portugal has a predominance of granitic rocks;
c in southern-central Portugal (in addition to gabbros, diorites, serpentinites,
anorthosites, granodiorites, tonalites and granites), the most important mineral
occurrences are base metals associated with the Cambrian-Ordovician volcanic
sedimentary complex, precious metals, tungsten and tin, as well as the potential
presence of chrome, nickel, cobalt, platinum, and basic and ultra-basic rocks.
Present non-metallic minerals include ornamental rocks and marble, in particular;
d in the south, acid volcanic rocks in the volcanic sedimentary complex form the
metallotect of the polymetallic massive sulphides deposits that are typical of the
IPB; and
e non-metallic resources also include sands, gypsum, clay, kaolin, limestone,
diatomite and salt.
II LEGAL FRAMEWORK
The main legal sources are EU law and national laws. As an EU Member State, Portugal
follows and complies with EU directives and regulations. Since they are part of the
public domain, mineral resources are subject to laws passed in parliament, government
legislation (decree-laws) and secondary legislation (i.e., specific regulations produced
at either government or ministerial level). The ministry with responsibility for this
sector is the Ministry of the Economy, but other ministries such as the Ministry of
Health, the Ministry of the Environment, and the Ministry of Labour and Social
Security, may also have a role whenever the laws or regulations in question impinge
on their areas of responsibility. There are no local or municipal regulations applicable
to mining activity, but administrative acts of a local nature also require local authority
authorisations or licences.
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Mining activity in Portugal is essentially regulated by two laws, both of them

dating from 1990, and which have not been amended since they came into force.
Decree-Law No. 90/90, of 16 March introduces the ‘General Legal Framework
for the Discovery and Use of Geological Resources’.
This Decree-law is complemented by Decree-Law No. 89/90, of 16 March (‘the
Mineral Deposits Regulation’).
There is, however, other complementary legislation that affects mining activity,
including:
a Decree-Law No. 162/90, of 22 May, which approves the General Health and
Safety at Work in Mines and Quarries Regulation;
b Ordinance No. 598/90, of 31 July, as amended by Decree-Law No. 897/95, of
17 July, which establishes the fees payable with regard to the conduct of exploration
for and operation of geological resources;
c Decree-Law No. 544/99, of 13 December, which lays down provisions for the
construction, operation and closure of landfills of waste resulting from the mining
activity;
d Decree- Law No. 69/2000, of 3 May, as amended by Decree- Law No. 197/2005,
of 8 November, which approves the legal framework governing environmental
impact assessments (pursuant to Council Directives 85/337/EEC and 97/11/EC,
and Directive 2003/35/EC of the European Parliament and of the Council);
e Decree-Law No. 194/2000, of 21 August, which transposes Council Directive
96/61/EC, of 24 September, regarding the prevention and control of pollution,
into Portuguese law;
f Ordinance No. 330/2001, of 2 April, which establishes technical rules governing
the structure of the proposed definitions of the scope of the environmental
impact assessment (‘EIA’) of the principal development area, and the technical
rules regarding the structure of EIAs;
g Decree-Law No. 198-A/2001, of 6 July, which establishes the legal framework
governing the environmental rehabilitation of degraded mining areas;
h Decree-Law No. 152/2002, of 23 May, which establishes the legal framework
governing the issue of licences, and the installation, operation, closure and post-
closure maintenance of landfills of waste disposal, and which transposes Council
Directive 1999/31/EC, of 26 April, regarding the deposit of waste in landfills,
into Portuguese law;
i Decree-Law No. 165/2002, of 17 July, which establishes the powers and duties
of the bodies involved in protection against ionising radiation and in general
protection principles, and transposes the corresponding provisions of Council
Directive 96/29/EURATOM, of 13 May, which establishes basic safety standards
for the protection of the health of the general public and workers against the
dangers of ionising radiation, into Portuguese law; and
j Implementing Decree No. 8/2003, of 11 April, which approves the Industrial
Activity Licensing Regulation.
The Ministry of the Economy is the main government body that defines, implements and
evaluates the geological and energy policies, and issues the main administrative decisions
on the licensing, granting and claiming of mining concessions though its Energy and
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Geology General Directorate (‘the DGEG’). The Ministry of Environment is responsible

for matters such as environmental impact and assessment, territorial planning and
regional development policies as well as pollution issues. Labour protection and health
and safety matters fall under the auspices of the Ministry of Labour.
There is no standard classification for public reporting of mineral resources and
reserves. According to international practice, the reporting terminology is as follows:
‘inferred’, ‘indicated’ and ‘measured’ for mineral resources; and ‘probable’ and ‘proved’
for mineral reserves.
i Title
Paragraph 84 of the Portuguese Constitution provides that ‘mineral deposits, mineral
and medicinal water sources and natural subterranean cavities below the ground, save for
such rocks, ordinary earth and other materials as may habitually be used for construction’
belong to the public domain (i.e., to the state).
Therefore, all mineral deposits and occurrences in Portuguese territory and in its
marine exclusive economic zone that, due to their rarity, high specific value or importance
in terms of the industrial application of their content, may be of special interest to the
Portuguese economy (ore deposits, hydro-mineral and geothermal resources) vest in
the state. Mineral masses (rocks and other mineral occurrences not qualified by law as
mineral deposits) can, however, be privately owned.
If a specific geological resource fulfils both classifications, the legal framework that
confers the highest economic importance and permits a better development of all of its
potential benefits is applicable.
Title to mineral deposits cannot be transferred to private parties, but Paragraph 9
of Decree-Law No. 90/1990, of 16 March, provides, with regard to the rights in respect
of resources belonging to the public domain, that the following rights may be granted:
a) Exploration, allowing operations with a view to the discovery of resources and the
determination of their characteristics, until the confirmation of the existence of economic
value;
b) Exploitation, allowing the execution of activities following exploration, i.e. the commercial
exploitation of resources.
The exploratory works may be carried out directly by the state, or granted to private
individuals or companies by means of administrative contracts (licences or concessions).
Recently, and particularly with regard to the commercial exploitation of uranium
(of which there is a legal monopoly), the state has operated via EDM, which is a publicly
owned company.
For the purposes of the confirmation and commercial exploitation of resources,
Portuguese territory and the Portuguese exclusive economic zone are classified as either:
a reserved areas over which there are exploration rights or rights derived from
commercial exploitation licences; or
b the remaining available areas.
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Prospecting and exploration rights, and commercial exploitation rights, can be granted
in respect of both types of area.
The commercial exploitation of mineral resources is subject to the prior issue of
establishment licences, which are issued to the landowner, or to a third party if there is a
prior commercial exploitation contract between the third party and the landowner. The
Ministry of the Economy keeps a record of all identified mineral resources as well as of
prospecting, exploration and commercial exploitation concessions.

Procedures for acquisition of mining rights
Mining rights are acquired through a licence for exploration or concession (exploitation)
contracts with the state.
Applications for exploration and exploitation rights must be submitted to the
DGEG, together with the supporting documentation required by law.
Exploration licence
Once a submitted application has been checked and is found to be in order (i.e., all the
required documents have been submitted, and compliance with the objective conditions
governing the grant of the rights applied for are confirmed), and provided that there are
no reasons to reject the application summarily, the DGEG notifies the applicant to post
a provisional bond.
At this stage the applicant must present at least the following documents:
a an application addressed to the Ministry of the Economy;
b a geographic map that identifies the proposed area;
c a summary description of the application for the exploration and research rights
that identifies the minerals included in the application;
d a general plan of the works to be done;
e the amount of the proposed investment and the type of finance; and
f evidence of the trustworthiness, and technical and financial capacity, of the
applicant.
Once the provisional bond is posted, the application must be published in the Official
Bulletin, national newspapers and newspapers in the proposed concession area, giving
public notice of the application and inviting interested parties to submit substantiated
objections within 30 days.
After this period, the DGEG may request the applicant to provide additional
information regarding the conditions proposed.
Once the procedure has been concluded, the DGEG must, within 90 days,
submit the application, together with its own opinion, to the Minister of the Economy
for a decision.
The Minister of the Economy may order a call for proposals for prospecting
activities in defined areas and with regard to specific resources by means of an open or
limited public tender.
If a public tender or limited tender (among those companies that have expressed
an interest in the area) is launched, the procedure for the grant of prospecting rights may
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take from six to 12 months. Should this not be necessary, the procedure is shorter and
can be completed in just two months from the publication of the application.
Generally, the prospecting and research contract establishes the royalties that will
be payable in the event that an exploration contract is signed.
Experimental concession
If, during or after the expiry of the validity period of an exploration licence, there are
indications of the existence of a mineral deposit in an area, the licence holder may request
the detachment of the area and an experimental concession. Experimental concessions
are usually granted for two years, and allow surveys and works involved in the testing and
surveying of the mineral.
An experimental concession has the advantage of not requiring annual releases
of areas, and is the stage that immediately precedes the granting of an exploration
concession. This stage is not, however, mandatory, and an exploration concession may be
granted without a prior experimental concession.
Exploitation concession
The procedure for the granting of an exploitation concession is similar to the exploration
concession procedure. However, the documents that must be filed with the application
are much more extensive, as the applicant has to prove the existence of a mineral deposit
and compliance with all required conditions.
The following must be submitted in support of the application, in addition to the
documents referred to above with regard to the prospecting and surveying licence:
a a brief description of the mineral deposit;
b an indication of the person responsible for the technical management of the
future operations;
c the applicant’s commercial registry certificate;
d an undertaking signed by the proposed technical manager;
e a detailed report including a description of the mineral deposit, and the drawings
necessary in order to understand the same;
f a topographic map;
g a plan showing the mining and minerallurgic facilities, and the antipollution and
land reinstatement measures to be implemented; and
h a pre-feasibility exploitation study.
A concession can be granted directly, upon application by the interested party, or via a
public tender or some other administrative procedure to that end.
Depending on the type of award (i.e., direct or by public tender), the procedure
takes between six and 18 months.
Conditions for the granting of the rights

Concession contracts provide that the concessionaire assumes the obligation to make
a specified minimum investment and to create jobs. Typically, these investments are
required to be secured by bank guarantees (or some other reliable means, as agreed with
the DGEG).
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Prospectors, operators and grantees of an exploitation concession must commence

the works within three months of the signing of the contract, and must indemnify third
parties with regard to loss and damage directly caused by their activities.
Furthermore, prospectors and operators must:
a work according to the approved plan; and
b implement all prescribed safety measures.
Grantees of an exploitation concession must:

a ensure that there is constant activity on-site, unless otherwise authorised;
b comply with the health and safety at work and environmental protection rules;
c use the resources in accordance with adequate technical norms and in the best
public interest, and refrain from dangerous mining practices;
d whenever possible, and provided that exploitation compatibility exists, to operate
public domain resources with a confirmed economic value in the delineated area;
and
e report data regarding the nature and status of the resource, within the timing
stipulated by the grantor.
Grantees of an experimental exploitation concession must, in addition to the obligations

referred to above, carry out the works to correctly identify the resources within the agreed
terms. A bank guarantee to secure the working programme expenditure is also required.
The amount of the guarantee varies depending on the extent of the investment. The
guarantee is released once the conclusion of the proposed and contractual investment has
been confirmed by the relevant Portuguese authorities.
Term of the award of the rights

Exploration licences are generally granted for an initial period of three years, extendible
for two additional one-year periods. According to the law, the total term of exploration
licences, including extensions, cannot exceed five years, except in certain duly justified
cases.
The law establishes no maximum term for exploitation licences, which usually
have a 30-year term, renewable for an additional 20 years.

The Constitution and the law provide a stable legal framework. Access to the courts is
unrestricted, apart from the usual legal restrictions. The mining sector is supervised by the
Ministry of the Economy and its administrative decisions or penalties may be appealed
against to the Administrative Court. The performance of concessions is governed by the
general law.
Private parties may acquire the right to explore or to exploit the public domain by
administrative contract. Such contracts contain the following provisions:
a mutual rights and obligations;
b the area and identification of the land;
c the commencement and termination dates;
d the renewal conditions;
e the operations programme;
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f the investment plan; and

g other specific legal clauses.
Subject to lease, the private parties may also occupy buildings in the area granted that are
recognised by the government as necessary for the operations.
Private parties that have either previously owned a quarry, or made a quarry
contract with the owner of a mineral mass or spring water, must obtain an establishment
licence and may occupy non-public domain areas that are necessary for the temporary
prospecting and exploration, subject to the payment of rent and a collateral fee. Areas
subject to exploration or exploitation contracts, and surrounding areas may be subject
to public easement.
There is no difference between the rights granted to Portuguese parties and those
granted to foreign parties. Parties that are not resident in the EU must first have been
established in accordance with the law of a Member State of the EU.

In order to conduct exploratory works, concessionaires must conduct a prior
environmental impact study (‘EIS’) in order to obtain an environmental licence.

There are environmental obligations that have to be secured after the closure of a mining
project, particularly environmental recovery obligations.
Depending on the nature of the exploitation, and the areas and infrastructure
covered, the obligations relating to the closure of the mine can be quite demanding, both
technically and financially.
Guarantees to secure mine closure obligations are provided via the creation of a
mine closure fund, to which annual transfers are made in accordance with the closure
costs and the lifetime of the mining project. The contributions to this fund may be
treated as costs for the purposes of the calculation of the mine operator’s net income.
The fund must be subject to restrictions that limit the use of the fund assets to the
purpose for which the fund was created.

The main provision is Decree-Law No. 90/90, which provides that all direct and indirect
safety, health and environmental interests of workers must be protected.
The main regulatory bodies are the Ministry of Labour and Social Security, the
Ministry of Health and the Ministry of the Economy. Decree-Laws Nos. 274/89, 162/90,
441/91, 26/94 and 141/95, 82/99, and Implementing Decree No. 34/92 (regarding
uranium), develop and complement the primary provisions.
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The regulatory bodies are the Ministry of Environment and the Ministry of Labour and
Social Security. The primary legislation is Law No. 11/87, which creates the general legal
framework governing the environment, and Decree-Laws Nos. 90/90 and 88/90, which
are complemented by the following Decree-Laws:
a Decree-Law No. 69/2000 (as amended by the Decree-Laws Nos. 74/2001 and
197/2005);
b Decree-Law No. 209/2008;
c Decree-Laws Nos. 78/2004 and 276/99 (regarding air pollution); and
d Decree-Law No. 251/87 (as amended by Decree-Law No. 292/89) and Decree-
Law No. 182/2006 (regarding noise).
Portugal complies with the EU environment directives and regulations. Mining projects
require environmental permits. Both the operation and closure of geological resources
are subject to technical rules, and environmental protection, sustainability and landscape
recovery measures (i.e., those included in plans approved by authorities such as the
environment and municipal authorities). Decree-Law No. 69/2000, as amended by
Decree-Laws Nos. 74/2001 and 197/2005, provide that mining projects are subject to
an EIA, which includes an EIS, in order to determine the direct and indirect effects
and consequences of the project on the environment, and to recommend sustainable
remedies to compensate for or minimise those effects.
An environmental licence is also required. An environmental licence is an
administrative instrument that ensures that the best industrial techniques available are
used, including remedies to minimise waste production, and air, noise, water and soil
pollution (as per Decree-Law No. 194/2000, which transposes EU Council Directive
96/61/EC into Portuguese law). This licence takes into account the content of the EIA.
The time involved in obtaining a permit varies, but normally takes eight to 12 months.

There is a strong body of equity legislation in Portugal, although there are no specific
legal provisions regarding indigenous, aboriginal, or other currently or previously
disadvantaged, peoples, which affect the acquisition or exercise of mining rights.
There are no other social, environmental and political considerations that could have a
direct impact on mining rights or mining projects.

There are no special provisions or limitations with regard to the import of equipment
and machinery, other than those in the EU Health and Safety Regulation.
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There are also no general restrictions or limitations on the processing, export or

sale of metallic minerals, although the government reserves the right to monitor the
processing, export and sale of metallic minerals for statistical and auditing purposes.
Regarding the use of foreign labour and services, the general Portuguese labour
rules apply, under which a foreigner must be duly authorised to work in Portugal (i.e.,
possess a work visa). There are no specific provisions applicable to mining operations.

There is a specific legal framework governing the mining, sale and export of uranium.
Otherwise, there are no general restrictions or limitations on the import, export or sale
of processed minerals.

There are no restrictions or limitations in Portugal on the imports of funds for mining
activities, or on the use of proceeds from the export or sale of metallic minerals. There are
no restrictions on foreign investment, and no difficulties in capital repatriation. Foreign
investment in mining companies or mining projects is not subject to government review.
Although the government may require evidence of the technical and financial
capacity of the concessionaires of mining projects, the criteria applicable to foreign
investors are the same as those applicable to Portuguese investors.
Depending on the existing programmes, it is possible to obtain financial and
fiscal incentives for the development of mining projects. These projects are managed by
AICEP.2
VI CHARGES
i Royalties
Royalties are defined in the concession agreements entered into by the state and
concessionaires.
Royalties were, until recently, generally calculated on the basis of two calculations,
at the discretion of the state:
a a percentage of the mine head value of the ore (1 per cent to 3 per cent); or
b a percentage of the net smelter return on sales (up to 10 per cent).
The state, however, has changed its approach with regard to royalties, and the government’s
current position is that they should be variable and be calculated in accordance with a
progressive formula linked to the net smelter return on sales, with a minimum of zero
per cent and a maximum of 25 per cent. The higher rates up to 25 per cent apply only to
cases in which the markets operate with speculative prices.
2 www.portugalglobal.pt.
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Portugal
ii Taxes
Two taxes apply directly to the companies under Portuguese Law: corporate income tax
and a municipal tax.
The standard rate of corporate income tax rate is currently 25 per cent. However,
this tax rate may be up to 30 per cent in the case of companies with a taxable income of
over €10 million.
The municipal tax is fixed yearly by the municipal authority and applies to
companies trading within the area of the municipality. The rate of this tax is up to 1.5 per
cent of the company’s taxable income.
iii Duties
There are no specific provisions with regard to the duties applied to minerals.
iv Other fees
Under exploitation contracts, holders of exploitation rights are required to pay a yearly
fee to the state for the duration of the contract. This fee varies in accordance with the
area of the concession.
Other than the change of government policy with regard to the calculation of royalties
(see Section VI.i, supra) (which applies only to new contracts or in the renegotiation of
existing contracts, but is not unilaterally applicable to existing contracts), the government’s
general policy of strategic support of the mining industry has been implemented, and is
expected to continue to be implemented, via the increased flexibility of administrative
procedures and by increasing the technical support provided by the DGEG, rather than
changes to mining law and regulations.
There appear to be no plans to significantly alter the existing laws and regulations.
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Chapter 18
SOUTH AFRICA
Modisaotsile Matlou 1
I OVERVIEW
South Africa has a mature mining industry that started with the discovery of gold and
diamonds in the late 1800s. This mining industry has seen an evolving regulatory framework
over the past 140 or so years. Currently, the South African mining industry is regulated
by a hybrid regulatory regime, which combines features of public administration as well as
private contractual arrangements. At the heart of the regulatory framework is an attempt to
balance mineral development on the one hand as well as the protection of the environment
on the other. This balance is encompassed in the concept of ‘sustainable development’.2
The mining industry has been the cornerstone of the South African economy
and, in fact, is the bedrock upon which the modern South African economy is based.
Government policy in relation to the mining industry in South Africa seeks to, inter alia,
encourage and promote economic development, responsible mining, environmental
protection, transformation of the mining industry (owing to the discriminatory political
system that was in place in South Africa until early 1994) and community development.
Government policy seeks to promote and sustain the mining industry for national benefit
while at the same time encouraging international investment.3
1 Modisaotsile Matlou is a director at ENS (Edward Nathan Sonnenbergs). The author would like
to thank Busani Dhladhla, a candidate attorney in the mining department, for her assistance in
researching this chapter.
2 For a historical discussion of the South African mining industry, see John Lang, Bullion
Johannesburg: Men, Mines and the Challenge of Conflict (Jonathan Ball Publishers, Johannesburg,
1986).
3 The government’s mining and minerals policy was first published in October 1998 in the
White Paper: ‘A Minerals and Mining Policy for South Africa’. This policy led to the passing
and promulgation of the Mineral and Petroleum Resources Development Act 28 of 2002.
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South Africa
According to the 2012 World Investment Report published by the United

Nations Conference on Trade and Development, foreign direct investment into sub-
Saharan Africa jumped by 25 per cent in 2011.4 Foreign direct investment inflow soared
from $29.5 billion in 2010 to $36.9 billion in 2011. In South Africa’s case, foreign direct
investment in 2010 was $1.3 billion and in 2011 it was $5.81 billion, making South
Africa the second-largest foreign direct investment destination on the African continent
after Nigeria in 2011.
In 2002 the legislature passed the Mineral and Petroleum Resources Development
Act 2002 (‘the MPRDA’), the principal regulatory framework for the mining industry.
The MPRDA provides that mineral resources are a common heritage of the
people of South Africa and the state is the custodian of those mineral resources.5 Under
the MPRDA, various types of statutory authorisations are provided for. In the case
of mineral resources (as opposed to petroleum resources) prospecting rights, mining
rights and mining permits are the main titles issued under the MPRDA. Prospecting
and mining rights are limited real rights,6 which are administratively granted by the
state to applicants who meet predetermined requirements. Mining permits are designed
for small-scale and short-term mining operations and are administrative authorisations
issued by the state once the prerequisites are met by an applicant.7
South Africa has a diverse mineral resource portfolio and is home to the largest
platinum group metal deposits and still has significant gold and diamond deposits. In
addition to these, South Africa has a well-established and mature coal mining industry,
as well as an array of base metals and mineral industry. In particular, South Africa has
significant chrome, manganese and iron ore deposits. New and significant mining
projects have been established in the manganese industry, the iron ore industry as well
as the base minerals and metals industries. Between 1995 and 2010, many new mining
projects have been established in South Africa.
Since its readmission into the world community of nations in 1994, South
Africa has concluded a number of bilateral investments treaties as well as other trading
and cooperation agreements with various nations in relation to its mineral resources.
Significant agreements include the following:
Country Type of agreement Subject of agreement Date

India Cooperation agreement Geology and mineral 1999
resource
India Protocol of the Second Geology and mineral 1999
IndoSA Working Group resource
4 See www.unctad.org.
5 Section 3(1) of the MPRDA; see also the fourth clause of the Freedom Charter 1955, which
proclaims that: ‘The National wealth of our country, the heritage of South Africans, shall
be restored to the people; The Mineral wealth beneath the soil ... shall be transferred to the
ownership of the people as a whole.’
6 See Section 5(1) of the MPRDA.
7 See Section 27 of the MPRDA.
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South Africa
Country Type of agreement Subject of agreement Date

People’s Republic of Cooperation agreement Minerals and energy 2007
China
Angola Cooperation agreement Geology and mining 2007
People’s Republic of Letter of intent and Mineral and geology 2008
China cooperation
South Africa has seen keen interest from foreign investors in its mining sector. Notable
recent transactions in this regard include the acquisition of the South African public
company Metorex Limited by a Chinese Consortium led by Jinchuan Group Co Ltd,
the takeover of the South African gold producer, Gold One Africa Limited, by a Chinese
Consortium – as well as significant investments by Australian, American, Indian and
Canadian companies in the South African mining industry.
South Africa is in the top percentile of countries ranked by the ease with which
business is conducted in the respective countries.8 In this regard, South Africa ranks
ahead of world giants such as Russia and China. Consequently, the South African mining
industry is well placed and continues to be well placed for foreign direct investment.
The South African mining industry is subject to the normal risks of investment,
including political risk, social risk, and security of tenure risk. In particular, and owing
to the strength of the organised labour movement in South Africa, South African
employees enjoy protection from employment legislation.9 Second, and owing to the
history of land distribution in South Africa, and the transformational restitution of
land to indigenous South Africans, security of tenure of surface use remains a risk. This
risk can be mitigated by entering into formal land leases and other types of surface use
agreements and arrangements. The other risk that South Africa faces is directly linked to
its administrative system of granting prospecting and mining rights; because applicants
are always subject to the discretion of the regulator, and because of bureaucratic
incapacity, it takes relatively longer for prospecting and mining rights to be issued. This
is a major issue if one looks at countries like Zambia, where a mining licence is granted
in about two months. This is one of the reasons why the South African government is
currently studying the possibility of migrating the regulatory framework to a licensing
system, which would enable the state to grant rights quicker and to respond quicker to
the administrative process.
Allegations of corruption have led to a legal battle between Sishen Iron Ore
Ltd and ICT 69 (Pty) Ltd in the matter of Sishen Iron Ore Company (Pty) Limited and
Another v. Minister of Mineral Resources and Others,10 which is currently pending before
the Supreme Court of Appeals.
8 See www.doingbusiness.org.
9 Employment legislation includes the Labour Relations Act 66 of 1995, the Employment
Equity Act 55 of 1998, the Basic Conditions of Employment Act 75 of 1997 and the Skills
Development Act 97 of 1998.
10 Unreported GNP case No. 28980/10, 20 December 2011.
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South Africa
Perhaps the single most important risk facing South Africa today is under supply
of electricity. The power cuts that characterised the South African mining industry
between 2008 and 2010 cost the mining industry millions of rands.11 Although plans
are afoot to increase the national grid, the reality is that South Africa does not have
much more capacity to provide electricity for new developments. In this regard, it is
increasingly likely that new projects will rely on private–public partnerships for power
generation.
Despite its challenges, and because of its vast mineral resources, South Africa
remains a critical mining destination for international as well as domestic investors.
South Africa also has over 140 years of expertise in the mining industry and some of the
world’s leading professionals in the industry. South Africa also has a relatively developed
infrastructure as well as capacity for project development. These factors make South
Africa an important mining destination.
II LEGAL FRAMEWORK
The South African mining industry is regulated by various pieces of legislation and
regulations. The principal statute is the MPRDA. Some of the more important pieces of
legislation include the Precious Metals Act 2005, the Diamonds Act 1986, the National
Water Act 1998 (‘the NWA’), the National Environmental Management Act, 1998
(‘NEMA’), the National Environmental Management: Air Quality Act 2004 (‘the Air
Quality Act’), the National Environmental Management: Waste Act 2008 (‘the Waste
Act’), the Mineral and Petroleum Resources Royalty Act 2008, (‘the Royalty Act’) the
Mine Health and Safety Act 1996 (‘the MHSA’) and the Mining Titles Registration Act
1967. In addition to these pieces of legislation, and because South African mining law
is not codified, the body of the common law remains applicable.12 In addition, South
Africa has concluded various international treaties relating to mining.
The Department of Mineral Resources (‘the DMR’) is the primary department that
administers the mining industry on behalf of the state. The three important divisions of
the DMR for purposes of mineral regulation are the following: the Directorate, Mineral
Development; the Health and Safety Inspectorate; and the Mining Titles Registration
Office.
All applications for the various types of mining authorisations must be made to
regional office of the DMR and are processed in the regional offices before they are sent
to the Head Office for granting. Once prospecting and mining rights have been granted
and notarially executed, they must be registered at the Mineral and Petroleum Titles
Registration Office. This office serves as a specialised registry in relation only to mining
titles and documents incidental thereto. The Inspectorate of Health and Safety is charged
11 The Impact of the Electricity Price Increases and Rationing of the Economy of South Africa,
HSRC Report 2008.
12 For a discussion of mining law principles in South Africa, see the seminal works Franklin &
Kaplan, The Mining and Mineral Laws of South Africa (Butterworths, 1982) and Dale et al.,
South African Mineral and Petroleum Law (LexisNexis, 2005).
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South Africa
with the responsibility of ensuring that mining operations and mining works are both
safe and healthy.13
Under Sections 21 and 28 of the MPRDA, holders of prospecting and mining
rights are required to submit certain prescribed information in relation to their activities
to the DMR. This information includes prescribed monthly returns regarding mining
and prospecting operations as well as audited annual financial reports and annual reports
in relation to compliance with the requirements to introduce historically disadvantaged
South Africans to the minerals industry (the Black Economic Empowerment (‘BEE’)
requirements). In addition, and in terms of the standard terms and conditions of mining
rights, holders of such rights are required to maintain books, plans and records in regard
to mining operations and to furnish such reports as the DMR may require. Every holder
of a mining right is supposed to furnish monthly returns in accordance with the MPRDA
and also give the DMR plans for future mining activities.
Section 3 of the MPRDA provides that the state, acting through the Minister
of Mineral Resources, shall be the custodian of the nation’s mineral and petroleum
resources. The mining industry is, therefore, regulated at national level. If South Africa
were a federation, the mining industry would be regulated at federal level. However,
because of the constitutional framework of South Africa, in terms of which different
spheres of government have different competences that affect the mining industry,
mining companies must comply with regulations made in each sphere of government.
For instance, in terms of planning legislation, which is a competence of the provincial
(or state) government, mining companies must comply with planning by-laws and
regulations. This position was laid down in the recent judgment of the Constitutional
Court in the case of Maccsand.14 The dispute in Maccsand involved a dispute in the
implementation of legislation at national and provincial levels, which had the effect
of requiring mining companies to comply with onerous regulations administered by
different spheres of government. The court held that the dispute was, in essence, a
cooperative governance issue, which must be resolved in accordance with Chapter 3 of
the Constitution 1996.
i Title
The MPRDA provides that mineral resources are a common heritage of the people of
South Africa and that they belong to the nation. This concept of common heritage and
custodianship creates significant jurisprudential questions since ‘the nation’ is not a legal
person and cannot take ownership of anything.15 The MPRDA came into force on 1 May
2004 and replaced the Minerals Act 1991, in terms of which it was possible for private
individuals to hold mineral rights or title to minerals.
13 The inspectorate is charged with implementing and administering the MHSA.

14 Maccsand (Pty) Limited v. City of Cape Town and Others (CCT 103/11) [2012] ZACC 7; 2012
(4) SA 181 CC.
15 See Dale et al., page MPRDA-121 to 127.
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South Africa
Under the MPRDA it is not possible for individuals to own any title to minerals
since all the titles to all the minerals belong to the nation and the state is the custodian
thereof. Prospecting and mining rights are transferable to either individuals or companies
subject to the consent of the Minister.16

In order for an applicant to be granted prospecting and mining rights, an applicant must
apply in the prescribed manner.17 The applicant must apply at the regional office of the
DMR in the region in which the land to which the application relates is situated. The
essential requirements for applying for a prospecting right are that an applicant must
prove both financial and technical ability to conduct prospecting operations optimally
in accordance with the prospecting work programme. In addition, the applicant must
show that the prospecting operations will not lead to environmental degradation. This
is normally done by way of an environmental management plan, which is approved by
the DMR. The procedure for applying for mining rights is similar to the aforementioned
procedure. The main difference between the two procedures is that in respect of mining
rights, an applicant must also give effect to the BEE requirements and also have a social
and labour plan as part of the application process. The social and labour plan is a document
designed to transform the South African mining industry from its discriminatory past
and to counter the reality that when most mining operations shut down, the host areas
go from being vibrant economies to very marginalised economies – these are referred to
in South Africa as ‘ghost towns’. Mining companies must have programmes designed to
transform and empower employees as well as the host communities from a developmental
as well as a socio-economic point of view to make sure that the host community can
sustain itself after the end of life of the mine.
The MPRDA does not impose deadlines by which the DMR must have granted
prospecting and mining rights. It only has deadlines by which an applicant must have
taken certain administrative steps before its application can be assessed. This is an
inherent weakness in the MPRDA and, consequently, it takes the DMR anything from
a couple of months to a couple of years to grant or refuse applications.
Section 5 of the MPRDA provides that prospecting and mining rights are limited
real rights, binding throughout the world. These rights are notarially executed and are
registrable at the Mineral and Petroleum Titles Registration Office. These rights are subject
to standard terms and conditions that are not negotiable and have been predetermined
by the DMR. By and large, the terms and conditions of prospecting and mining rights
follow the MPRDA provisions but, as can be expected, the terms and conditions tend to
go beyond the statutory provisions.
16 This is provided for in Section 11 of the MPRDA. Section 11 is very difficult to interpret. See
Dale et al. at page MPRDA-161 to 176(7). See also cases cited there.
17 Sections 16 and 17 apply to applications for prospecting rights while Sections 22 and 23 apply
to applications for mining rights.
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South Africa
Prospecting rights are granted for a period of anything between 12 months and
five years. These rights are renewable. Mining rights are granted for a period up to 30
years and are also renewable.
Since prospecting and mining rights are limited real rights, they enjoy all the
benefits of real rights and are attended by the legal incidents attaching to real rights.
For instance, and in terms of the doctrine of constructive notice, once prospecting and
mining rights are registered at the Mineral and Petroleum Titles Registration Office, the
whole world is presumed to know of their existence and registration.
South African law does not impose any restrictions on the acquisition of surface
or mining rights by foreign parties. The only limitation imposed by law is that a holder of
a mining right must have a minimum of 26 per cent BEE shareholding.18 This limitation
is designed to transform the mining industry by introducing historically disadvantaged
South Africans into the mining industry. Apart from this limitation, foreign parties are
not restricted in any way from holding mining rights in South Africa.

There are various additional permits and licences that are required by different types of
mining operations in South Africa. Some permits are sector-specific and others are of
general application.
Depending on the nature and type of the mining operations in question, it may
also be necessary for the holder of the mining rights to obtain a separate environmental
authorisation in terms of the NEMA, as well as various other environmental permissions
(see Section IV, infra). In addition, and in terms of the NWA, the holder of a mining right
requires a water use licence to be able to use water for purposes of mining operations.
Mining companies are required to have a certificate in respect of explosives for
manufacturing site, should they have an explosives manufacturing site. In addition, they
are required to have an explosives licence if they have an explosives magazine.
Depending on their operations, mining companies may also require a nuclear
installation or vessel licence and the certification of registration under the Nuclear
Regulatory Act.
Mining companies are also required by the Air Quality Act to have an atmospheric
emissions licence.
Various provincial and local government town planning laws may also require
mining companies to have a zoning for purposes of mining before they conduct mining
operations on a specified piece of land.19

A holder of a mining right is obliged to have an environmental management programme
that ensures that the mining operations will not result in unacceptable pollution,
ecological degradation or damage to the environment. Second, a holder of a right must
make financial provision for the rehabilitation or management of negative environmental
18 See the Broad-Based Socio-Economic Empowerment Charter, as amended, September 2010.

19 Refer to the Maccsand case; see footnote 13, supra.
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South Africa
impacts caused by mining operations. There are a number of methods that are prescribed
for making the requisite financial provision. A holder may choose to contribute an
amount into an approved environmental rehabilitation trust established in accordance
with Section 37A of the Income Tax Act 1962. A holder may alternatively procure a
financial guarantee from a South African-registered bank or other bank or financial
institution approved by the Director General guaranteeing the financial provision
relating to the environmental management programme. A holder may also deposit the
financial provision into an account specified by the DMR. Last, the holder may use
any method of financial provision that the Director General may approve from time to
time. In practice, mining companies have bought financial instruments from insurance
companies to support their rehabilitation obligations. The DMR has approved some
of these products and mining companies can use them without further dealings with
the DMR. In all other instances where mining companies wish to procure financial
instruments from insurance houses, it is prudent for them to seek prior approval from
the DMR before they do so. The most popular methods of financial provision are the
establishment of the environmental rehabilitation trust or financial guarantees by banks
or registered financial institutions.
The holder of a mining right remains responsible for all environmental liability,
pollution or ecological degradation and the management thereof until the Minister has
issued a closure certificate to the holder concerned;20 for this, the holder must apply to
the Minister. The holder of a mining right can apply for a closure certificate upon the
occurrence of any of the following:
a the lapse, abandonment or cancellation of the mining right in question;
b the cessation of mining operations;
c the relinquishment of any portion of the land on which mining operations
occurred; or
d completion of the prescribed closing plan to which the mining right relates.
If the holder of a right wants to apply for a closure certificate upon the completion
of mining operations, the prescribed closing plan must be completed, after which the
holder must apply for a closure certificate within 180 days. Such application must be
accompanied by a prescribed environmental risk report.
The closure plan must contain the following:
a description of the closure objective and how the objective relates to the operations
and its environmental and social setting;
b a summary of the results of the environmental risk report detailing and identifying
the residual and latent impacts;
c a summary of the results of progressive rehabilitation undertaken;
d a description of the methods to decommission each operation and the mitigation
or management strategy proposed to avoid, minimise and manage residual or
latent impacts;
e details of any long-term management and maintenance expected;
20 Section 43 of the MPRDA.
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South Africa
f details of proposed closure costs and financial provision for monitoring,

maintenance and post-closure management; and
g technical appendices supporting the closure plan.

The MPRDA provides that any prospecting or mining operation must be conducted in
accordance with generally accepted principles of sustainable development. Sustainable
development requires that social, economic and environmental factors be integrated into
planning and implementation of prospecting and mining projects in order to ensure that
exploitation of mineral resources serves present and future generations. The MPRDA
further provides that certain principles set out in NEMA (which include considerations
relevant to sustainable development) serve as a guideline for the interpretation,
administration and implementation of the environmental requirements of the MPRDA.21
The protection of the health and safety of employees and other persons at mines
is provided for in the MHSA and its regulations. An applicant for a prospecting or
mining right must show the ability to comply with the provisions of the MHSA. The
right holder is required to implement the procedures prescribed by the MHSA, which
regulates all matters pertaining to the health and safety of any person at a mine or within
a mining area. The definition of ‘mining area’ and ‘mine’ are sufficiently wide to cover
adjacent and non-adjacent areas on which operations incidental to mining take place.22
In the case of a prospecting right, an applicant must submit an environmental management
plan to the relevant regional manager. The environmental management plan must be
submitted within 60 days from the date on which the regional manager instructs that it
be submitted. In the case of a mining right, an applicant must conduct an environmental
impact assessment and submit an environmental management programme to the
regional manager. Such an environmental management programme must be lodged for
review and approval within 180 days of the date on which the regional manager instructs
that it be submitted.
A holder of a prospecting right cannot commence prospecting operations without
an approved environmental management plan. Similarly, a holder of a mining right
cannot commence mining operations without an approved environmental management
programme. Sometimes prospecting and mining operations require the undertaking of
additional activities that may not commence without prior approval in terms of the
various environmental laws. In terms of NEMA, an environmental authorisation must
be obtained from the Department of Environmental Affairs in order to undertake certain
listed activities.
21 See Section 37 of the MPRDA.

22 See the definition of ‘mining area’ in Section 1 of the MPRDA.
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South Africa
Depending on the nature and size of the activity, either a basic assessment or
scoping and environmental impact assessment must be undertaken in order to obtain
environmental authorisation. The NWA requires that a water use licence be obtained
from the Department of Water Affairs for undertaking certain water uses. A waste
management licence from the Department of Environmental Affairs is required under
the Waste Act in order to undertake waste management activities. Where there will be
a release of atmospheric emissions, an atmospheric emissions licence must be obtained
under the Air Quality Act.
Further to legislation directly related to environmental management, there is
legislation such as the Hazardous Substances Act, 15 of 1973 (‘the HSA’), which governs
matters that may indirectly have an effect on the environment. In terms of the HSA,
a licence is required where certain hazardous substances will be sold, used or installed.

Extensive provision is made for consultation of interested and affected parties.23 The
MPRDA requires an applicant that prepares an environmental management plan
or programme to investigate, assess and evaluate the impact of the proposed mining
operations on the socio-economic conditions of any person who might be directly
affected by mining operations. NEMA requires that the interests, needs and values of
interested and affected parties be taken into account. The concerns raised by interested
and affected parties must be reported on and addressed.
Furthermore, the MPRDA requires that the owner or occupier of the relevant
land be notified and consulted prior to the commencement of mining operations or any
incidental work.
Duty of care
The environmental laws create a duty of care towards the environment to which a
prospecting or mining right applicant or holder must adhere at all times.
Social considerations
The MPRDA recognises the need to promote local and rural development and the social
rise of communities affected by mining. An applicant for a mining right is therefore
required to compile a social and labour plan that includes a human resources development
plan, a local economic development plan, as well as a process for managing downscaling
and retrenchment. The purpose of a social and labour plan is to:
a promote employment and advance the social and economic welfare of all South
Africans;
b contribute to the transformation of the mining industry; and
23 See Bengwenyama Minerals (Pty) Limited and Others v. Genorah Resources (Pty) Limited and
Others 2011 (4) SA 113 (CC) and Meepo v. Kotze and Others 2008 (1) SA 104 (NC) and
Sections 5(4)(c), 16(4)(b) and 24(4)(b).
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South Africa
c ensure that holders of mining rights contribute towards the socio-economic

development of the areas in which they are operating.

There is no general prohibition against the use of foreign labour and service in the
South African mining sector, but the normal human capital restrictions that apply to
the employment of foreigners are applicable in South Africa. For instance, every foreign
person who seeks employment in South Africa must apply for and be granted a work
permit. Generally, work permits are not granted to those jobseekers whose skills are easily
obtainable in South Africa.
The South African economy is regulated by a fairly liberal set of regulations, which
impose a limited number of restrictions. Consequently, there is nothing to stop mining
companies from procuring services from foreign entities or persons. The only limitation
is found in the procurement provisions of the mining charter in terms of which mining
companies must procure 70 per cent of their services from ‘BEE entities’. This means
that foreign services providers who do not have BEE ownership can only participate in
30 per cent of the procurement opportunities available.
Processing of extracted minerals

In relation to the processing of extracted minerals, any operations conducted to process
minerals must comply with the national environmental, water and air quality laws
designed to protect the environment against the adverse effects of mineral processing
operations. This means that any processing operations must have some form of
environmental management authorisation (under the MPRDA or under NEMA), a
water use licence under the NWA as well as an atmospheric emissions licence under the
Air Quality Act.
The processing of precious metals as well as diamonds may require a beneficiation
or similar licence in terms of the Precious Metals Act as well as the Diamonds Act.
Import of equipment and machinery

The Broad-Based Socio-Economic Empowerment Charter applicable to the mining
industry requires international suppliers of capital goods in the mining industry to
contribute 0.5 per cent of their South African annual profits to a social development
fund aimed at developing mining communities. This requirement imposes a restriction
on the ability of the international or multinational suppliers of capital goods in regard to
the enjoyment of the profits they make in South Africa.
In addition to this, and in terms of the Customs and Excise Act,24 multinational
suppliers of capital goods must pay a customs duty, which is a percentage of the value of
the goods.
24 Act No. 91 of 1964.
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South Africa
There is no general regulation regarding the importation of machinery in South

Africa. The South African Bureau of Standards obviously imposes various standards on
all machinery that is imported into the country. Further, all used or second-hand goods
(including machinery) are subject to import control measures.

There is no general restriction in relation to the sale of extracted or processed minerals
in South Africa. The pro forma standard terms and conditions of mining rights in South
Africa have a clause dealing with conditions and disposal of minerals; the holder of the
mining right must dispose of all minerals or products derived from the exploitation of
the minerals at competitive market prices (i.e., non-discriminatory prices or non-export
parity prices).
In addition, the government has made beneficiation of minerals in South Africa
a priority matter. Section 26 of the MPRDA provides that any person who intends to
beneficiate any mineral mined in South Africa outside the country may only do so after
written notice and consultation with the Minister. The intention here is to promote local
beneficiation. In addition to this, there are various tax incentives for local beneficiation.
Concomitantly, mining companies may pay an increased tax rate for beneficiating
minerals abroad.

South Africa has a system of exchange control regulation.25 The system is not unique
to South Africa but very few countries now operate a system of exchange control. The
exchange control regulations in South Africa control the flow of money both in and out
of South Africa. They affect every transaction, regardless of what amount is transferred
and who the sender or recipient of the money is. The Reserve Bank of South Africa is the
repository of the power in relation to exchange control and oversees all capital in and out
flows; it has designated power to authorised dealers to oversee and regulate the market
on behalf of the bank.
The following are the key features of the exchange control regulations: (1) they
apply to transactions of any size; (2) no South African resident may effect a transfer of
money without prior approval; (3) no company or legal entity may effect transfer without
prior approval; (4) only authorised dealers are allowed to effect currency transfer; and (5)
all outward payments may only be made for permissible reasons and under conditions
that are approved by the authorised dealers on behalf of the Reserve Bank.
Although there is no general prohibition of money transfer, all money transfer
transactions are subject to the approval of authorised dealers.
All domestic and foreign investment in South Africa enjoys the same protection.
There are no special features or categories of protection afforded to foreign investment.
In addition to the normal investment protections applicable generally in South Africa,
and under the Royalty Act, the Minister of Finance is empowered to enter into fiscal
25 Exchange control is regulated under the Currency and Exchange Act 9 of 1933 and the
Exchange Control Regulations 1961.
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stability agreements that guarantee investors that the royalty rate applicable at the time of
entering into the stability agreement will remain in place for the term of the investment.
This protection is a usual protection in mineral jurisdictions across the globe.
VI CHARGES
i Royalties
Section 3(2) of the MPRDA provides that the state may determine and levy a fee or
consideration payable by holders of mining companies for the exploitation of the
mineral resources. In 2008, parliament passed the Royalty Act, which gives effect to
Section 3(2)(b) of the MPRDA.26 The Royalty Act thus implements the concept of state
custodianship of mineral resources in that it provides compensation sometimes referred
to as a ‘resource rent’, to the state (as custodian) for the country’s permanent loss of non-
renewable resources.
Section 2 of the Royalty Act provides that a person that wins or recovers a mineral
resource from within South Africa must pay a royalty for the benefit of the National
Revenue Fund in respect of the transfer of that mineral resource, which applies only to
resources recovered in South Africa. The obligation to pay this royalty is only triggered
by first transfer of the mineral resource. The requirement that the mineral resource must
have been won or recovered has the consequence that no royalty will be imposed in
respect of unmined mineral resources in the ground when land is transferred or when
a prospecting right, exploration right, mining right or production right is transferred
because in those circumstances the mineral resources have not yet been won or recovered
from the land.
There is no fixed royalty percentage. Instead, a formula-based royalty is imposed
by Section 4 of the MPRDA. Section 9 provides rollover relief where a mine of which a
mineral stockpile or a residue stockpile forms a part or where such a mineral stockpile
or residue stockpile that, in itself, constitutes a going concern, is disposed of as a going
concern or as part of a going concern that is capable of separate operation.
The Royalty Act does not contain any exemption, set-off or deduction of royalties
that continue to be payable to communities or certain other persons in terms of Item 11
in Schedule II to the MPRDA, against state royalties. The origin of the royalties payable
to communities is that the communities were the holders of the mineral rights in respect
of their land. As such they conferred on mining companies the right to mine for minerals
on their land in return for a royalty, this being achieved in various ways such as mineral
leases or cessions of mining leases.
Item 11 in Schedule II to the MPRDA makes a special arrangement insofar as
communities (and certain other persons) are concerned: royalties payable to communities
continue to be payable notwithstanding that the communities’ mineral rights were
taken away and notwithstanding that the mineral resources that previously vested in the
communities now fall under the custodianship of the state. In essence, therefore, the state
26 See the discussion of the Royalty Act in MO Dale, ‘Mining Law’, Annual Survey of South
African Law, 2007 and in Dale et al. op. cit. at page MPRRA-1 to 33.
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stipulated that the mining companies should, instead of paying the state as custodian of
the mineral rights, pay the state’s creditors – the communities – the royalties of which the
state had deprived the communities and thus now owes to the communities.
Until recently, South African mining companies used to pay private royalties to
the holder of old order mineral rights. Since the old order mineral rights are now extinct,
the basis for paying private royalties has also fallen away.
ii Taxes
In the period between 2002 and 2010, a number of new mining laws have been
introduced or revised. New legislation has been introduced for precious metals and the
existing legislation for diamonds has been amended. The health and safety legislation has
also been amended and the MPRDA has been passed as the new principal regulatory
legislation in the mining industry. In addition, new mineral royalty legislation has also
been passed. All of this necessitated an alignment of the tax legislation to respond to the
new mineral regulatory regime. This resulted in various amendments to the Income Tax
Act 1962 between 2004 and 2011.
Most of the tax provisions for the mining sector are outlined in the Income Tax
Act. Its key provisions are the following:
Income tax
The standard corporate income tax rate for all mining companies except gold miners
averaged 28 per cent between 2008 and 2011. Until recently, mining companies were
also required to pay secondary tax on companies of 10 per cent of the net amounts of
dividends declared. This tax has now been replaced by a withholding tax on dividends
paid to shareholders.
A gold mine’s taxable income is derived from a formula that takes account of the
ratio of profits to revenue. As profits rise, the state takes a larger portion in tax; if the
company makes no profit (or low profits at around 5 per cent of revenues), the state
receives no tax but shareholders can still receive dividends during this time.
Capital expenditure allowance

South African law offers generous capital expenditure allowances to mining companies.
Considerable capital expenditure by mining companies can be fully deducted against tax
including spending on prospecting, mining equipment and shaft sinking, development,
general administration and management prior to commencement of production.
Mining companies are allowed to deduct this capital expenditure in the year in which
they occur. The Income Tax Act also provides further capital allowances for gold mines,
which are deducted against capital expenditure and which serve as an incentive for new
mining development. The allowance is calculated as a percentage of capital expenditure
ranging from 10 to 12 per cent per year, depending on the mine. Mining companies can
also offset against their taxes the obligatory environmental rehabilitation expenditure.
Mining companies can also carry forward any losses for an indefinite period and set these
off against future profits. There are new restrictions on the repatriation of profits.
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Ringfencing
The Income Tax Act has ringfencing provisions that allow capital expenditure in relation
to a mine to be restricted to a taxable income of that mine and not to other mines owned
by the same company. The Minister of Finance can, however, rule that company costs
can be offset against another mine. In such event, mining companies can then transfer
up to 25 per cent of the capital expenditure from unprofitable mines to offset income
from profitable ones.
VAT
Value added tax is applied at the standard rate of 14 per cent but all exports are zero-
rated. Since most mineral production is exported, this means that mining companies not
only pay no VAT on those exports but are also entitled to a refund for all the input taxes
paid by them. This is a major gain for gold and diamond companies, for instance, who
export virtually 100 per cent of their products.
Diamonds
As part of the government’s beneficiation strategy, and to promote local beneficiation,
there is a 5 per cent export duty on rough diamonds that are being exported for processing.
iii Duties
Mining companies pay normal duties (such as transfer duty for the transfer of prospecting
and mining rights), custom duty for importing goods and the like.
iv Other fees
Holders of mining rights are required to pay the royalty in terms of the Royalty Act.
In addition, holders of rights are expected to make financial resources available to
implement their social and labour plans.
In addition to this, and in terms of the regulations to the MPRDA, various fees
are payable in respect of applications for rights, administrative appeals in terms of the
MPRDA, prospecting fees, renewal fees and the like.
VII OUTLOOK AND TRENDS 27
i Size of the industry

The mining sector accounts for over 7 per cent of the country’s GDP, it provides
employment to close to 500,000 workers and has mineral resources estimated at $2.5
trillion, the largest in the world.28
27 The following is an abridged version of an article by Modisaotsile Matlou published as ‘South

African Update – Investing in South Africa’s Mining Industry’ by the Institute for the Study of
Cross-Border Investment and M&A; http://xbma.org/forum/south-african-update-investing-
in-south-africas-mining-industry/
28 See ‘Facts and Figures of the South African Mining Industry (2010, 2012)’, published by the
Chamber of Mines.
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South Africa
South Africa’s mining industry’s income in 2010 was 424 billion rand, while
expenditure was 441 billion rand: 228.4 billion rand was spent on purchases and
operating costs; 78.4 billion rand was paid on salaries and wages for mine employees;
49 billion rand on capital expenditure; 17.1 billion rand in tax; 16.2 billion rand in
dividends, 38 billion rand on depreciation and impairments and 13 billion rand on
interest. The Chamber of Mines of South Africa (‘the Chamber’) estimates that only
about 34 billion rand or 8 per cent of the total expenditure is moved offshore. 29
ii Main resources (minerals)30

The main minerals are gold, platinum group metals, silver, iron ore, manganese, nickel,
coal, chrome and copper. In addition to these, there are mineral deposits of rare earths,
andalusite, base minerals and metals.
South Africa is home to about 80 per cent of the world’s proven platinum and
manganese reserves. South Africa’s fluorspar reserves exceed 30 million tonnes; this is
the third-largest reserve in the world and accounts for around 30 per cent of the western
world’s and about 10 per cent of all known reserves. Also to be found in South Africa
are the following:
a 9 per cent of the world’s iron ore reserves;
b 80 per cent of the world’s known manganese ore deposits;
c 8.5 per cent of the world’s nickel reserves;
d 3.5 per cent of global deposits of zinc;
e 22.1 per cent of the world’s known zircon reserves;
f approximately one-third of the world’s vanadium ore reserves;
g about 40 per cent of the world’s reserves of vermiculite ore.
The Richards Bay titanium reserves are the fourth-largest in the world, and silver is an
important constituent to be found in gold and platinum ores in South Africa and in the
ores of the base metals (zinc, lead and copper).
iii Main players

The Chamber is a prominent industry employers’ organisation, which exists to serve its
members and promote their interests. The members of the Chamber include financial
corporations, contractors, associations and mining companies (Anglo American,
Anglogold Ashanti, BHP Billiton, Harmony, De Beers, Gold Fields and Lonmin, etc.).
iv Investment climate 31
According to the Chamber, in the first half of 2011, steel production stood at an
annualised 1.5 billion tonnes, and is likely to be a record production year.32
29 Ibid. See also the official website of the South African government www.info.gov.za/aboutsa/
minerals and www.southafrica.info/business/economy.
30 See www.bullion.org.za/content/?pagename=Education&pid=81.
31 Ibid.
32 See ‘Facts and Figures of the South African Mining Industry’ 2012.
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South Africa
Nearly 100 per cent of South Africa’s cement and building aggregates are made
locally and 80 per cent of the country’s steel is made locally from locally mined iron
ore, chrome, manganese and coking coal using furnaces that are 95 per cent powered by
electricity from coal-fired power stations (the 20 per cent imported steel is speciality steel
products not made locally). Over 30 per cent of the country’s liquid fuels are produced
within the country from locally mined coal and 95 per cent of electricity is generated in
power plants that use locally mined coal.
Most domestic chemicals, fertilisers, waxes, polymers and plastics are fabricated
using locally mined minerals and coal and 20 per cent of the world’s platinum catalytic
converters are made in South Africa. The Chamber estimates that another 200 billion rand
in sales value and 150,000 jobs can be attributed to the local downstream beneficiation
sectors. All South Africa’s gold and platinum group metals are refined locally and more
than 50 per cent of diamonds by value are sold locally into the downstream diamond
cutting and polishing industry.
v Nationalisation
The calls by the Youth League of the African National Congress for the nationalisation of
mines were arguably the most talked-about issue relating to mining during the past year.33
The ANC directed a team to look into the merits of nationalisation and the team’s report
effectively ruled it out and called for a possible increase in mining taxes.34 Nationalisation
is not government policy and the Chamber, which represents most of the players in the
mining industry, opposes it. The Chamber is committed to working towards finding the
best alternatives. On the balance of evidence, nationalisation will not take place.
vi Noteworthy projects
Gold One 35
Gold One’s flagship operation is the Modder East mine, the first new mine to be built
in South Africa’s gold-rich East Rand region in 28 years. With a currently defined ore
reserve of 1.53 million ounces at 4.0 grams per tonne and a 13-year life of mine. The
mine’s first tonne of gold was poured in May 2010, 10 months after its commissioning.
At the end of the 2010 financial year, the mine recorded a maiden profit of A$19.35
million before taxation. For 2011, Gold One anticipates increasing gold production by
80 per cent and has forecast annual production of 120,000 ounces.
Kalagadi manganese 36
Kalagadi Resources is in the process of establishing a manganese mine, coupled with a
sinter plant, near Hotazel in the Northern Cape. The main shaft has holed through the
lateral developments to the ventilation shaft at a depth of 281 metres, the production
level of the 11 billion rand project, on which only equity funding has so far been spent.
33 See the ANCYL’s ‘Towards the Transfer of Mineral Wealth’ document, August 2010.
34 See the ANC’s ‘State Intervention In the Minerals Sector’ document, March 2012.
35 See www.gold1.co.za.
36 See www.kalahariresources.co.za
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South Africa
The project includes Kalagadi constructing a high-carbon ferro-manganese smelter in

Coega’s industrial development zone near Port Elizabeth, which will create the steel-
making ingredient ready for consignment to foreign and local factories.
The three-million-tonne-a-year mine will provide the ore for the production of
2.4 million tonnes a year of sinter, 700,000 tonnes of which will be sent to the ferro-
manganese smelter and 1.7 million tonnes a year of which will be marketed. The smelter
will have a capacity to produce 320,000 tonnes per year of high-carbon ferro-manganese.
Commissioning is scheduled for the third quarter of 2012, with the mine, sinter plant
and smelter expected to employ 2,200 people. Kalagadi is targeting a 50 per cent female
employee complement. Kalagadi has secured both rail and port capacity from Transnet
Freight Rail and power supply from Eskom. Kalagadi is currently generating its own
power for the project from diesel-fuelled generator sets.
Chinese entrance
At the 2011 Mining Ministers Forum in Tianjin, the Minister assured potential Chinese
investors that South Africa offers a competitive mining sector. ‘[...] my government is
committed to creating a favourable and globally competitive mining sector in South Africa’.
According to the Chamber, in 2010, global diamond retail sales rose by 2.5 per
cent to $60 billion, global jewellery sales rose by 7 per cent to $150 billion and polished
diamond prices improved by about 6 per cent. The strong price recovery was driven by
restocking and a rebound in the global diamond market, particularly with the rise in
polished demand from China and India.37
Most of the recovery and growth in global steel production is attributable to
China’s phenomenal growth with non-Chinese production not yet recovering to pre-
crisis levels. China is currently producing 46.5 per cent of global steel, driven by its own
substantial industrialisation and urbanisation requirements.
37 See ‘Facts and Figures of the South African Mining Industry’ 2010.
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Chapter 19
TANZANIA
Charles R B Rwechungura, Cyril Pesha and Pendo Marsha Shamte 1
I OVERVIEW
i The Tanzania Mineral Policy of 2009

The Tanzania Mineral Policy of 2009 was formulated as a result of an evaluation
conducted during the 10 years of implementation of the Mineral Policy of 1997. The
Mineral Policy of 2009 aims at:
a strengthening integration of the mineral sector with other sectors of the economy;
b improving the economic environment for investment;
c maximising benefits from mining;
d improving the legal environment;
e strengthening the capacity for administration of the mineral sector;
f developing small-scale mining operations;
g promoting and facilitating the addition of value to minerals; and
h strengthening environmental management.
The government remains the regulator and facilitator of the mineral sector, and will
participate strategically in mining projects.
ii Ownership of mines, licences and projects

An individual or an entity can own mineral rights in Tanzania either:
a by conducting exploration or mining operations under a mineral right granted
under the Mining Act 2010 (‘the Mining Act’) and the Mineral Rights Regulations.
Mineral rights are in the form of primary mining licences, prospecting licences,
1 Charles R B Rwechungura is the managing partner, Cyril Pesha is a principal partner and
Pendo Marsha Shamte is an associate at CRB Africa Legal.
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mining licences and special mining licences, all of which entitle the holder to
ownership of the gold extracted from the relevant licence area; or
b buying minerals from a licensed broker or an authorised miner.
It is mandatory to apply for and obtain one of these licences from the Ministry of Energy
and Minerals (‘the MEM’) in order to prospect for and mine gold. The nature of the
various mineral rights granted under the licences is as follows:
a Primary mining licences are granted to Tanzanian small-scale mining operations.
Primary mining licences for all minerals cannot be granted to an individual,
partnership or body corporate unless the individual is a Tanzanian citizen or, in
the case of a partnership, it is composed exclusively of Tanzanian citizens or, in
the case of a company or body corporate, its members and directors are Tanzanian
citizens and control over the company, both direct and indirect, is exercised from
within Tanzania by persons who are all citizens of Tanzania. However, under a
farm-in agreement, a non-Tanzanian person or a foreign-owned company can
prospect for gold in a primary mining licence area.
b Under Tanzanian law, prospecting licences may be granted to eligible individual
persons, groups of persons or corporate entities. Both Tanzanian and non-
Tanzanian nationals and entities are eligible for the grant of prospecting licences.
The Mining Act confers upon a prospecting licence holder the exclusive right to
carry on prospecting operations in the prospecting area for minerals to which the
licences apply.
c Under Tanzanian law, mining licences and special mining licences may be granted
to eligible individual persons, groups of persons or corporate entities. Both
Tanzanian and non-Tanzanian nationals and entities are eligible for the grant of
mining licences. Once the mining licences and special mining licences have been
issued to an individual or an entity, mining operations can commence, and the
individual or entity becomes the owner of the minerals extracted (it should be
noted that a royalty of 4 per cent of the gross value of mined gold is payable to
the government).
iii Division of mineral rights

In Tanzania, mineral rights are divided as follows:
a Division A – prospecting licences and retention licences;
b Division B – special mining licences and mining licences;
c Division C – primary mining licences; and
d Division D – processing, smelting and refining licences.
iv Notable developments
To date, there have been no significant trading agreements regarding minerals in Tanzania.
Large-scale mining companies may enter into agreements with the government
that guarantee the fiscal stability of a long-term mining project with respect to the
range and applicable rates of royalties, taxes, duties, fees and other fiscal taxes, and the
manner in which liability thereof is calculated (‘development agreements’). Development
agreements acquire legislative effect upon execution, and any tax concessions contained
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therein will also acquire legislative effect without any further requirement. However, the
government is currently seeking to renegotiate mining contracts, and in future this will
no longer be the case.
It is not mandatory under the law that the government have shares in mining
companies. However, the law does contemplate that the government, through the
Minister for Energy and Minerals (‘the Minister’), may enter into a mining development
agreement with the holder of, or an applicant for, a special mining licence.
II LEGAL FRAMEWORK
i Legislation
The mining industry in Tanzania is principally governed by the Mining Act, as well as
various regulations made under the Mining Act, as follows:
a the Mining (Mineral Rights) Regulations;
b the Mining (Mineral Trading) Regulations;
c the Mining (Mineral Beneficiation) Regulations;
d the Mining (Environmental Management and Protection) Regulations;
e the Mining (Radioactive Minerals) Regulations; and
f the Mining (Safety, Occupational Health and Environment Protection)
Regulations.
Other laws that impact on the industry include the various tax laws, labour and industrial
relations laws and environmental laws.
ii International treaties
Tanzania is a signatory to various international treaties and conventions, but none has
direct relevance to the mining industry. The Convention on Recognition and Enforcement
of Foreign Arbitral Awards (the New York Convention of 1958) is relevant in respect of
all foreign investors. Although Tanzania has not adopted any provisions based on the
UNCITRAL Model Law, the Tanzania Investment Act 1997 allows investors to adopt,
among others, the UNCITRAL rules and procedures.
iii Regulatory agencies

The mining industry is regulated at the national level.
The MEM is the overall supervisor of the minerals and energy sector in Tanzania.
There is a Commissioner for Minerals (‘the Commissioner’) within the Ministry
appointed by the President; the Commissioner supervises and regulates the proper
and effectual carrying out of the provisions of the Mining Act. There is also a Mining
Advisory Committee constituted pursuant to the Mining Act, which is responsible for
advising the Minister on matters concerning the mining sector generally.
iv Mineral reporting requirements

The holders of any mineral rights have to submit quarterly and annual reports to the
relevant authorities. Primary mining licence holders have to submit quarterly reports to
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the Zonal Mines Officer. Prospecting licence holders are required to submit quarterly
and annual financial reports to the Commissioner within three months of the end of
each financial year. Mining licence and special mining licence holders are required to
submit quarterly reports to the Minister.
i Title
The government has the title to underground minerals, but the title to the minerals can
be transferred to any individual or entity in Tanzania (see Section I.ii, supra, for further
information). Mineral rights can also be transferred from one individual or entity to
another by applying for the transfer to the Commissioner and paying a fee of US$200
for transfer of a primary mining licence, US$500 for a transfer of shares in a primary
mining licence and US$3,000 for transfer of mineral rights other than those granted
under a primary mining licence.

Private parties as prescribed in the Land Act 1999 may acquire surface rights. All land
in Tanzania is public land vested in the President, who grants (via the Commissioner for
Lands) rights of occupancy of specified periods of 33, 66 or 99 years, subject to renewal.
There is a central land registry in which all title deeds for granted rights of occupancies are
registered. One copy of the title deed is kept at the registry and the other remains in the
possession of the owner. Any mortgages or charges, or similar third-party rights against
the property, or transfers of the right of occupancy, are endorsed on the two copies of
the title deeds and provide ready proof of the position. There are zonal land registries,
which are administratively answerable to the central land registry. The Commissioner for
Lands is the principal administrative officer and adviser to the government with respect
to land matters, and he or she is a presidential appointee. Some land is also owned under
customary rights, but it remains held for purposes of surface use only. Foreigners may
hold land only for the purpose of investment.
Application for mineral rights

Mineral rights are applied at the relevant issuing authorities. Applications for primary
mining licences have to be made to the Zonal Mines Officer at the Zonal Mines Office
and a fee of US$35 is applicable. There is no specific time on how long it takes for the
primary mining licence to be granted. Primary mining licences are granted for a period
of seven years.
Application for prospecting licences are made to the Commissioner for Minerals
at the MEM and a fee of US$300 is applicable. There is no specific time on how long
it takes for prospecting licences to be granted. Prospecting licences are granted for four
years for the initial period and can be renewed twice: three years for the second period
and two years for the third period.
Applications for mining licences and special mining licences are made to the
Minister at the MEM and a fee of US$2,000 and US$5,000 respectively. Again, the
law does not specify the timetable for mining licences or special mining licences to be
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granted. The maximum initial period for which mining licences and SMLs may be
granted is 10 years. The Minister may renew mining licences or special mining licences
for a period not exceeding 10 years.

Further permits are required from the relevant authorities to export minerals and
gemstones. Such permits include:
a export permits for minerals and samples of minerals;
b export permits for minerals from a gem trade fair;
c export permits for processed, smelted and refined minerals; and
d special export permits for minerals that are given to non-residents of Tanzania.

The Mining (Safety, Occupational Health and Environment Protection) Regulations
2010, prior to a mine closure, requires every holder of a special mining licence or mining
licence to prepare and submit a mine closure plan to the Chief Inspector of Mines, which
must contain the following:
a a programme to reclaim and rehabilitate land and water courses to an acceptable
use that considers previous and potential use;
b a programme to support socio-economic activities to provide an alternative
livelihood to local communities beyond the mine life;
c comments of the district authorities and surrounding local communities or a
district mine closure committee;
d the cost of providing statutory and any other benefits to employees beyond the
mine life; and
e the cost of reclaiming and rehabilitating the mining area in the event that the
mine is closed.
The Minister may require a licence holder to post rehabilitation bonds, in the form of
escrow accounts, capital bonds, insurance or bank guarantee bonds, pledging and assets,
or any other form of bond.

The principal environmental, health and safety laws are contained in the Mining
(Safety, Occupational Health and Environment Protection) Regulations 2010. The
Chief Inspector of Mines appointed pursuant to the Mining Act and working under the
Commissioner administers the environmental, health and safety laws. The Environmental
Management Act No. 20 of 2004 is also relevant. Schedule 3 to this Act lists mining
as an investment sector activity that is subject to an environmental impact assessment
prior to commencement of work. Section 232 of the Act elevates the Environmental
Management Act above the provisions of the regulations issued pursuant to the Mining
Act. It stipulates that if the provisions of the Environmental Management Act are in
conflict or otherwise are inconsistent with the provisions of any other law relating to
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environmental management, the provisions of the Environmental Management Act

shall prevail to the extent of such inconsistency.
All applications for special mining licences, mining licences or gemstone mining licences
must be accompanied by an environmental impact statement and an environmental
management plan. The Minister may reject an application if the application for a licence
is submitted without an environmental impact statement or environmental management
plan if the applicant is not exempted. Within seven days of the date of submitting the
application, applicants are obliged to publish their environmental impact statement in
the prescribed manner. The licensing authority shall not issue a licence until the expiry
of at least 60 days from the date of the application. The licence holder is obliged to
submit a report reviewing the progress and status of the environmental management
plan or amendment within two years of grant or renewals, and thereafter at intervals not
exceeding five years.
iii Third-party rights and additional considerations

The rights conferred by a mineral right have to be exercised reasonably and may not be
exercised so as to injure the interests of any owner or occupier of the land to which those
rights extend.
The lawful occupier of land in a mining area may not erect any building or
structure in the area without the consent of the registered holder of the mineral rights
concerned, but if the Minister considers that the consent is being unreasonably withheld,
he or she may give consent to the lawful occupier to do so.
Where, in the course of prospecting or mining operations, any disturbance of the
rights of the lawful occupier of any land or damage to any crops, trees, buildings, stock
or works thereon is caused, the registered holder of the mineral right by virtue of which
the operations are carried out is liable to pay the lawful occupier fair and reasonable
compensation.
Where the rights conferred by a mineral right cannot reasonably be exercised
without injuring the interests of any owner or occupier of the land to which those rights
extend, the mineral right holder has to:
a advise the owner or occupier of the land to vacate the area, and consult the
relevant local government authority on an amendment of the land use plan; or
b submit a proposed plan on compensation, relocation and resettlement of the
owner or occupier of the land as per the Land Act.
The procedures established under the Land Act and the Village Land Act with regard
to establishing the market value of land shall apply in determining fair and reasonable
compensation of land.
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There are no restrictions on the importation of machinery and equipment required for
mining activities. The Mining Act provides for the sale or processing of minerals outside
Tanzania only by authorised dealers.
Foreign labour is restricted only in the sense that a foreigner can only be employed
as an expatriate. A foreign employee has to apply for and obtain a Class B resident permit.

The Mining Act prohibits any person from selling or disposing of, or exporting, any raw
gold or gemstone unless that person is an authorised dealer. However, the authorised
dealer must obtain a permit from the Commissioner before it can export, sell or otherwise
dispose of any minerals within or outside of Tanzania.

There is no restriction on the importation of funds to finance mining activities, or on the
use of the export proceeds from mining products. Tanzania enjoys a highly liberalised
foreign exchange regime. There is complete market freedom, foreign exchange at market
prices is available and domestic foreign currency accounts can be opened, and there
is no restriction on current account transactions. However, the Bank of Tanzania still
regulates the establishment of offshore bank accounts by residents. Locally incorporated
companies wishing to establish offshore bank accounts for purposes of depositing export
proceeds or foreign loan proceeds must apply to the Bank of Tanzania for its approval.
VI CHARGES
i Royalties
The law requires all authorised miners to pay a royalty to the government on the gross
value of minerals produced under their licences at the rates shown below:
a uranium – 5 per cent;
b gemstones and diamonds – 5 per cent;
c metallic minerals such as copper, gold, silver and platinum group minerals – 4 per
cent;
d gems – 1 per cent; and
e other minerals, including building materials, salt, all minerals within the industrial
minerals group – 3 per cent.
ii Taxes
Withholding tax on dividends
Withholding tax on dividends is set at a rate of 10 per cent. Other sectors pay withholding
tax on dividends at a rate of 20 per cent, except for companies holding certificates of
incentives issued by the Tanzania Investment Centre, which pay the same rate as mining
companies.
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Withholding tax on interest

Withholding tax on the interest on foreign loans is set at a rate of 15 per cent and accrued
interest is deemed a payment; therefore, withholding tax thereon is payable.
Withholding tax on payments for technical services and on management fees

The withholding tax on these is capped at the following rates:
a 3 per cent, where the technical service fee or the management fee does not exceed
2 per cent of the amount claimed as a deduction from income in respect of
operating expenses incurred in mining operations; and
b 20 per cent for any excess amount.
Value added tax

Value added tax (VAT) special relief has recently been limited to cover only exploration
and prospecting activities, while excise duty exemptions have been abolished following
the 2009 proposed budget review. These amendments are due to be enacted into law
shortly after being approved by parliament.
iii Duties
There is a special fiscal regime for mining companies as detailed below.
US dollars accounting
Mining companies may opt to maintain their accounts in US dollars, and their tax
liability will be assessed and calculated in US dollars.
Customs duty on imports of mining equipment and supplies

Import duties under the terms of the Customs Tariff Act on a mining company or its
subcontractors are at a zero per cent rate during exploration and in the first year of
operation; thereafter, they will not exceed 5 per cent.
Corporate income tax

Corporate tax is payable under the Income Tax Act 2004 at a rate not exceeding 30 per
cent. Income is computed in the manner set out in the Income Tax Act (as amended
from time to time).
Depreciation allowance for capital expenditure

Depreciation shall be deducted at the rate of 100 per cent on capital expenditure for
exploration and development.
Loss carry forward

Losses may be carried forward indefinitely until recovered against income.
Expenditure on another licence area

Expenditure on prospecting and mining operations in respect of another licence area may,
for the purpose of ascertaining taxable income, be treated as though it were expenditure
incurred in respect of the mining licences.
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iv Other fees
Annual rents payable for all mineral rights other than minerals under Division D are as
follows:
a for a prospecting licence for metallic minerals, energy minerals and kimberlitic
diamonds for initial period – US$100 per square kilometre;
b for a prospecting licence for building material – US$100 per square kilometre;
c for a prospecting licence for gemstones excluding kimberlitic diamonds – US$100
per square kilometre;
d for first renewal of a prospecting licence – US$150 per square kilometre;
e for second renewal of a prospecting licence – US$200 per square kilometre;
f for a retention licence – US$2,000 per square kilometre;
g for a special mining licence – US$5,000 per square kilometre;
h for a mining licence for metallic minerals, energy minerals, gemstones and
kimberlitic diamonds – US$3,000 per square kilometre; and
i for a mining licence for building materials and industrial minerals – US$2,000
per square kilometre.
Annual rents for minerals under Division D are as follows:

a for a primary mining licence for all mineral rights other than gold, kimberlitic
diamonds and gemstones (subject to a minimum of US$25 for each licensed area
having less than 2 hectares) – US$7 per hectare; and
b for a primary mining licence for gold, kimberlitic diamonds or gemstones (subject
to a minimum of US$51 for each licensed area having less than 2 hectares) –
US$2,000 per hectare.
Global leading companies in the mining industry are acquiring mineral rights in Tanzania.
The conversion of primary mining licences to prospecting licences, mining licences and
special mining licences also enables foreign-owned companies to hold mineral rights.
There is more interest in the tailing processing industry and subsequent applications for
processing licences.
There are new mining operations by Shanta Gold in Chunya, Mgusu, Songea and
Singida areas in Tanzania. Canaco Resources also has a mining project in Handeni in the
Tanga region of Tanzania. Many mergers and acquisitions of smaller mining companies
and their mineral rights by leading global mining companies have also taken place.
There has also been a recent change on fee rates for annual rents and applications,
which has previously been covered in this chapter.
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Chapter 20
TURKEY
Safiye Aslı Budak and Merve Nazlı Kaylan 1
I OVERVIEW
With its natural resources and active business environment, the Turkish mining sector
is increasingly attractive to investors. In May, 2012, the Turkish Ministry of Energy and
Natural Resources (‘the Ministry’) noted that mining contributed 40.88 per cent of the
overall investment in 2012, and was ranked as the second-largest area of investment. The
Turkish government has also acknowledged the increasing foreign and local interest in
the sector by enacting certain amendments to the existing legislation, and has for the first
time provided governmental incentives (as further detailed below). As is the case for most
sectors in Turkey, the government welcomes foreign investment in the mining sector.
With the aid of the recent amendments in the legislation and governmental incentives,
the mining industry is expected to prosper in 2012.
II LEGAL FRAMEWORK
The principal regulatory body that governs the mining sector is the General Directorate
of Mining Affairs (‘the GDMA’), a unit of the Ministry. The GDMA regulates mining
activities, and issues relevant mining licences and permits for different areas of mining
activities. The GDMA is also responsible for keeping the records of the Mining Registry
in accordance with the Regulation Regarding the Implementation of the Mining
Activities (‘the Implementation Regulation’). According to Article 38 of the Mining
Law, all mining rights and any other rights attached thereto must be registered with
the Mining Registry. The Mining Registry further maintains all technical and financial
details of the mining rights and activities that are conducted at different mining sites.
1 Safiye Aslı Budak is a partner and Merve Nazlı Kaylan is an associate at Hergüner Bilgen Özeke
Attorney Partnership.
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Even though it is a ‘public’ registry, the Mining Law provides that the records kept by
the Mining Registry may be reviewed only by ‘concerned persons’. The Implementation
Regulation specifies these concerned persons as holders of the relevant mining licences,
or potential buyers of the licence.
The main piece of legislation governing activities in the mining industry is Mining
Law No. 3213 (‘the Mining Law’). The Mining Law has been amended a number
of times, most significantly in 2004 and 2010. The Mining Law sets out the general
principles and procedures applicable to the exploration and exploitation of minerals,
the permission and licensing frameworks, and other general issues regarding mines and
mining activities.
The Mining Law intends to unify all of the regulations regarding the extraction of
the vast majority of minerals that have economic and commercial worth, but petroleum,
natural gas, geothermal and water resources are excluded from its scope. The Mining
Law applies to all minerals found naturally on the earth or in the water. Petroleum and
natural gas are regulated respectively under Petroleum Law No. 6826 and Natural Gas
Law No. 4646. Activities concerning petroleum and natural gas are regulated by the
Energy Market Regulatory Authority. Geothermal and water resources are subject to
Geothermal Resources and Natural Mineral Water Law No. 5686, and are regulated by
the Ministry and the GDMA.
Details of the procedures outlined in the Mining Law are regulated under the
Regulation Regarding the Implementation of the Mining Activities. The Implementation
Regulation comprehensively covers licence and certificate applications, exploration and
exploitation activities, mining activities, and other procedures referred to under the
Mining Law.
In addition to the main legislation, a number of laws and regulations related to
the environmental aspects of the mining industry are in force, including Environment
Law No. 2872 (‘the Environment Law’) and the Environmental Impact Assessment
(‘the EIA’) Regulation and the Environment Permit and Licence Regulation; and the
Regulation on Reinstatement of Lands Disrupted Due to Mining Activities, Forest
Law No. 6831, the Regulation on Implementation of Article 16 of the Forest Law,
the Regulation on Control of Excavation, Construction and Demolition Wastes, the
Environment Inspection Regulation, the Regulation on Classification, Packaging and
Labelling of Hazardous Chemicals and their Products, the Regulation on Restrictions
on the Production, Sale and Use of Certain Hazardous Substances and Mixtures, the
Regulation on Preparation and Distribution of Security Information Forms in Relation
to Hazardous Substances and Mixtures, the Regulation on Inventory and Control of
Chemicals, the Subterranean Waters Law and the By-laws on Subterranean Waters.
Health and security conditions of employees working at mining sites are ensured by
the Labour Code, the Regulation on the Health and Safety Conditions in Underground
and Surface Mine Enterprises, as well as the Regulation on Health and Safety Conditions
in Mining Exploration Enterprises through Drilling (collectively, ‘the Health and Safety
Regulations’). These regulations focus primarily on the employer’s obligations to protect
the health and security conditions of its employees.
In addition to these pieces of legislation, there are various international treaties
and agreements between the Turkish government and foreign governments. These are
generally in specific form in respect to the types of mine, investment and the area.
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i Title
As in other civil law countries, in Turkey, the state has exclusive and imprescriptible
ownership of mineral resources. The Mining Law provides that land does not grant
ownership over the mines that are located on the land. Mineral or mining rights are
separate from surface rights, and are not obtained through the standard method of
acquiring property, but through a unilateral administrative state act, namely, the issuance
of mining licences entitling the holders to explore and exploit minerals for a specific
period of time.

If privately owned land is necessary for the conduct of the exploitation activities, and the
owner of the land and the licence holder cannot reach an agreement, the Ministry may
expropriate such land in accordance with the Turkish Expropriation Law, and in due
consideration of the general public interest.
In addition, the holder of an exploration or exploitation licence may also request
the establishment of a servitude or usufruct right over the privately owned land during
the licence period by applying to the Ministry. The scope of these rights must be limited
to the purposes of mining activities, and the licence holder must vacate the land after
having rehabilitated its environment. In addition, if the field is damaged during the
activities, the licence holder must pay an indemnification determined by the judicial
authorities to the owner of the land, and to leave the field in a condition fit for use.
The Mining Law prohibits foreign companies from direct engagement in the
Turkish mining sector. Both the mining rights – exploration licences and exploitation
licences – may only be granted to Turkish citizens, Turkish legal entities or competent
governmental authorities. Nevertheless, legal entities established in accordance with the
provisions of the Turkish Commercial Code are considered to be Turkish legal entities
even if 100 per cent of the share capital of such companies is held by foreign investors;
this allows foreign mining companies to indirectly engage in mining activities in Turkey
through a Turkish subsidiary.
The steps to obtain mining rights vary depending on the groups of mines. The
licences or documents that exploration activities necessitate vary according to the
group of the concerned minerals.2 While fifth group minerals necessitate exploration
2 First group minerals are (a) sand and gravel used in construction and road building, and (b)
brick and clay; second group minerals are (a) aggregate (composite), crushed stones or rocks that
are used after a rock milling process, such as calcite, limestone and granite, and (b) stones that
are produced in blocks, such as marble; third group minerals include salts that are dissolved in
the sea, lake and spring water, carbon dioxide (except for geothermal, natural gas and areas that
have petroleum), hydrogen sulphur (except that falling under the provisions of Petroleum Law
No. 6326 and dated 7 March 1954), gas and water, used for various purposes and containing
the fourth group minerals dissolved therein, and which are not within the scope of Law No.
5686; fourth group minerals are (a) industrial raw materials, (b) energy raw materials and
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certificates, second group, as well as third, fourth and sixth group minerals necessitate
exploration licences. For first group and second group minerals, it is possible to apply
directly for an exploitation licence. Licences are granted on a first-come, first-served
basis, and a licence issued for a specific group of minerals does not provide any rights for
other mineral groups. The term of an exploration licence depends on the mineral group
for which it is issued.
Applications for the licence must be made to the GDMA, and must include a
form with the geographical coordinates of the area in question, and a receipt evidencing
the payment of the application fee, plus a signed undertaking form. If an application
is rejected or is deemed invalid, the application fee will not be returned, and the area
subject to the application will become available for other applications. Following an
initial application filed with the GDMA, the licence holder has two months in which to
provide a project report that includes a detailed time schedule for the exploration process
and other necessary documentation to the GDMA, as well as to pay the licence fee
and security deposit. If the project involves exploration activities within environmentally
sensitive areas, coastal areas, protected areas and areas in proximity to military zones, the
applicant will be granted a period of one year in which to obtain the necessary approvals
from the relevant authorities, provided that the licence fee and security deposit are paid
within the initial two-month period.
The security deposit is calculated at 1 per cent of the annual licence fee, per
hectare. The total security amount must be at least 10,000 Turkish lira. If the applicant
fails to pay the fee or the security deposit, the area that is subject to the application will
summarily become available to other applicants.
Licences for the same mineral group may not be granted for overlapping areas,
but licences of different mineral groups may be granted, even for overlapping areas,
provided that the acquired rights of the relevant licence holders are protected. Licences
become effective on the date they are registered with the Mine Registry.
The Mining Law sets out three different phases of the mining exploration
process. The first year from the granting of the exploration licence is considered as the
initial exploration period. Before the expiry of the initial exploration period, licence
holders will have to prepare mining exploration project reports confirming that all
exploration activities have been completed in line with the timetable provided in the
project report. After submitting the report, the licence holder will enjoy a period of
general exploration, during which global geological characteristics of the reserve will be
determined. Thereafter, the licence holder must prepare a report setting out the activities
being conducted, otherwise, the related licence will be cancelled. During this period, the
licence holder provides the GDMA with a detailed annual report on the proven reserve,
as well as the investment costs in connection with the exploration activities carried out.
This provision is designed to ensure that the market players are active participants in
mining activities, instead of failing to invest, or acting as ‘phantom licence holders’.
(c) metallic minerals; fifth group minerals are precious and semi-precious minerals; and sixth
group minerals are radioactive minerals and other radioactive materials.
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During the exploration licence period, the GDMA may grant permission for the
production and sale of minerals worth up to 10 per cent of the proven reserve to licence
holders that comply with the relevant exploration activity reports. Nevertheless, the goal
of the production activity must be limited to technological studies, development, pilot
studies and market research.
By the end of the exploration period the exploration licence holder needs to have
applied for an exploitation licence. If the holder does not apply for an exploitation licence
at the end of the exploration licence term, the exploration licence will be terminated
and the security deposit returned. The exploitation licence will only be granted over
the proven, probable and possible reserve area detected during the exploration period.
Holders of exploitation licences may continue their exploration activities within the
licensed area. Any licensed areas covered by the exploration licence that may not be
turned into proven and probable reserves within the time limits set out in the Mining
Law for each group of minerals are simply removed from the licensed area.
In order to commence the exploitation activities, the exploitation licence holder
must obtain an exploitation permit, which can only be granted over a proven reserve
area. An exploitation licence covers the area in which the mining activities will be
generally conducted, and provides the legal right to use the licensed area (e.g., conducting
exploration activities), whereas, the operation permit gives the exploitation licence holder
the right to operate a specific mine.
Once the necessary permits for the operation of a mine have been issued, an
exploitation permit will be granted. The holder of the exploitation permit must
commence the operation of the mine within a year of the date of the issuance of the
exploitation permit. If not, the holder of the exploitation permit must pay an annual
state royalty of 10 per cent of the production quantity specified in the project report.
A licence holder is considered to have discovered the mines that have been declared
as proven reserves in the technical reports prepared during the term of exploration and
exploitation licences; a certificate of discovery may be issued to the licence holder upon
request. If a mine is operated by someone other than the person who discovered it,
the discovery rights that have accrued over the ores that have been produced from this
field will be paid to the rightful holder of such right by the persons performing the
productions in this field to the end of June each year; this is called a discovery right,
which amounts to 1 per cent of the annual per quarry sales price. The discovery right
expires when the proven reserves run out.
iii Closure of mining projects

Pursuant to the Mining Law and the Implementation Regulation, a mining licence may
be revoked by the GDMA, inter alia, on the following conditions:
a violation of the provisions with respect to the EIA procedure, workplace opening
and operation licence, ownership rights or distance requirements with respect to
buildings and lands, three times within a period of three years;
b preventing implementation of the Mining Law, and acquiring rights through
having made false or misleading declarations, three times within a period of three
years;
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c non-compliance with the additional guarantee payment requirements as may be

requested by the GDMA;
d failure to submit the exploration reports (preliminary, general or detailed
exploration activity reports) by the due dates;
e failure to obtain the necessary permits required under Article 7 of the Mining
Law to conduct exploitation activities; and,
f failure in production activities (except for force majeure events and unexpected
circumstances) during a term of a minimum of three years out of a five-year
period, in total, as follows – (1) non-production; or (2) production of less than
10 per cent of the annual production threshold.
Upon the occurrence of such event, the GDMA is entitled to confiscate the performance
bond, revoke the licences and halt the activities.

Employment in mining activities requires special attention. In this respect, the Labour
Code regulates certain issues relating to mining activities (the calculation of mining
employees’ work hours, minimum age limit for male employees, and prohibition of
female employees of all ages from working in mines). Furthermore, the Health and
Safety Regulations provide minimum standards for the health and safety conditions of
employees working in mine enterprises, depending on the type of activity conducted
within a specific mine.
In order to ensure the safety and health of workers, both regulations impose a
similar set of measures to be implemented by the employers. Some of these measures are
listed as follows:
a workplaces must be designed, constructed, equipped, commissioned, operated
and maintained in such a way that workers are able to perform the work assigned
to them without endangering their safety and health or the safety and health of
other workers;
b the operation of workplaces must be under the supervision of a person in charge;
c specific works involving special risk must be performed only by competent staff
and carried out in accordance with the instructions given;
d all safety instructions must be prepared in a way that is comprehensible to all the
workers concerned;
e appropriate first-aid facilities must be provided; and
f relevant safety drills must be performed regularly.
As a general rule, mining activities in Turkey are subject to strict environmental
regulations to ensure that no environmental pollution or damage will occur due to such
activities. Prior to the commencement of mining activities, and upon the issuance of
the respective mining licences, the mining companies are obligated to undergo detailed
environmental processes and obtain various permits and licences depending on the scope
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of the activity. Mining licence holders are further required to take all steps necessary to
reinstate and rehabilitate the lands that are disrupted through the mining activities on
their cessation. Only upon determination by the respective authorities that the respective
lands have been completely reinstated will the sum that was deposited as a guarantee for
environmental compliance be returned to the licence holder.
Apart from the following permits, other specific permits and licences are required
with respect to mining in areas such as forests, wild life protection zones and pasture
lands. There may also be some additional requirements regarding chemicals.
Environmental impact assessments

According to the Environment Law and the EIA Regulations, facilities conducting
certain activities indicated in the EIA Regulation must carry out an EIA. If a facility’s
activity falls within the scope of Annex I or Annex II of the EIA Regulation, then it will
be subject to an EIA procedure (including preparation of an EIA report or a project
presentation file, depending on the activity).3
For projects within the scope of Annex I of the EIA Regulation, an EIA report
must be prepared and submitted to the Ministry of Environment and Forestry (‘the
MoE’) for approval. The MoE will then decide whether the relevant facility’s impact on
the environment is acceptable within the framework of the applicable legislation.
For projects within the scope of Annex II of the EIA Regulation (projects that are
subject to election and assessment criteria), an EIA presentation file must be submitted
to the MoE or relevant authority, which will assess whether preparation of an EIA report
is required for the specific project. If an EIA procedure is not required, the applicant may
directly commence its activities.
Following the relevant filing, the MoE or relevant authority decides whether the
facility’s impact on the environment is acceptable within the framework of the applicable
laws and regulations. In practice, the EIA process may be lengthy, but the Mining Law
provides for a maximum time limit within which the EIA process must be finalised
by the respective state authorities: three months following the application. It should,
nevertheless, be emphasised that the legislation does not foresee any sanctions for non-
3 The following mining-related activities are listed under Annex I of the EIA Regulation: (1) open
pit exploitation and ore preparation facilities located over at least 25 hectares of land; (2) coal
extraction and ore preparation facilities by way of open exploitation procedure, located over
150 hectares of land; (3) ore enrichment facilities by way of biological, chemical, electrolytic or
heat treatment procedures; and (4) asbestos mineral-related facilities, and enrichment facilities.
The following mining-related activities are listed under Annex II of the EIA Regulation: (1)
extraction of minerals (that are not included within the scope of Annex I); (2) extraction and
storage of methane gas in an amount of at least 1 million cubic metres per year; (3) facilities for
extraction, storage and processing of carbon dioxide and other gases with a minimum capacity
of 10,000 cubic metres per year; (4) ore preparation and enrichment facilities (that have not
been included within the scope of Annex I); and (5) following the exploration activities, incisive
exploration activities over 500 cubic metres per hectare and mineral exploration drilling over a
total area of 5,000 square metres.
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compliance of the respective authorities with such time limit; thus, in practice such
three-month target is often not met by the respective authorities.
As per the EIA Regulation, the legal entity that is granted an exemption from the
EIA procedure will be observed by the MoE to determine whether it is duly performing
its undertakings. Such a legal entity is obliged to submit an audit report to the relevant
authority with respect to the commencement, construction, operation and post-operation
periods. As per the Mining Law, the facilities that commence activities without a positive
EIA decision or exemption will be closed, and the surety will be forfeited. Violation of
the permit requirements three times will result in the revocation of the licence.
Environment permits
The Environment Permit and Licence Regulation sets out the procedures under the
Environment Law to obtain the permits and licences for activities listed in Annexes 1
and 2 of the Regulation. Under the Environment Permit and Licence Regulations, the
environment permit covers the emission, discharge, noise control, deep sea discharge and
hazardous waste discharge; and the environment licence refers to the technical sufficiency
in relation to the collection, recycling and disposal of waste.
The environment permit and licence certificate is a unified ‘umbrella’ certificate
within the context of the Environment Permit and Licence Regulations. Facilities that
are listed in the Annexes of the Environment Permit and Licence Regulations must
obtain either an environment permit or an environment permit and licence, depending
on the scope of their activities.
The applicant must initially file an application with the Regional Directorate of
the MoE for a temporary activities certificate, valid for a term of one year. The temporary
activities certificate is required for the temporary activities of the facility prior to the
issuance of the environment permit or the environment permit and licence. Within
six months of the issuance of the temporary activities certificate, the applicant must
finalise the actual application process for the issuance of the environment permit or the
environment permit and licence.
Excavation, construction and demolition wastes

Producers of excavation soil and construction or demolition wastes are required to obtain
the necessary permission from the administrative authorities prior to commencement
of their activities and generation of waste. Waste producers are obligated to transport
the wastes produced with vehicles with transportation permits. Furthermore, producers
of excavation soil and construction or demolition waste (if the amount of such wastes
exceeds 2 tonnes) are required to obtain a waste transportation and acceptance certificate
in relation to the transportation and storage of waste, and request provision of a temporary
collection container on site.
Taking into consideration the physical nature of mining activities, mining
companies are required to comply with the Construction Wastes Regulation to the
extent that they are involved in construction, excavation or demolition work within
their facilities.
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Environment inspection requirements

Under the Environment Law, facilities that may endanger the environment as a result
of their activities are required to establish an environment management department
and employ an environment manager, or procure relevant environmental services from
certified entities.

Generally, there are no specific indigenous or community issues that need be addressed
with respect to mining in Turkey. However, it must be emphasised that in Turkey, mining
activities are likely to create public sensitivity and attract press and public attention.
Therefore, potential reputational risks must also be taken into consideration.
In connection with such opposition risks, one should expect that administrative
lawsuits may be filed by interested parties for the revocation of permits issued in
connection with mining activities, including positive EIAs or EIA exemptions. As the
issuance of such permits is one of the preconditions for the issuance of a mining licence,
there may be risks associated with the revocation of such permits, such as forfeiture of the
any guarantee and termination of the actual exploration or exploitation licences.

Import and export activities require the acquisition of certain permits in Turkey based
on the nature of the exported or imported goods. Additionally, importation of certain
products is subject to the acquisition of a licence. Licence requirements may either arise
from the nature of the goods, or the countries from which the goods are imported to
Turkey.
Pursuant to the Regulation on Importation, all real and legal persons holding
a Turkish tax number or persons who do not have a legal personality but who may be
engaged in legal transactions may conduct importation transactions. Some additional
conditions may be enacted under the relevant legislation of certain goods. Turkey has
recently adopted a standardisation policy with the aim of bringing import legislation
in line with EU legislation. A number of communiqués are published annually by the
authority concerned that list the characteristics that every good to be imported into
Turkey must bear for the protection of the public safety, health, environment and
consumers. Accordingly, every good is subject to the eligibility review before being
imported into Turkey, and must acquire a certificate confirming that the goods have
eligibility for importation or a control certificate.
As a general note, equipment, machinery and other goods that are imported for
mining activities are subject to general customs procedures in which they should be
evaluated separately. However, based on the assumption that some explosive substances
may also be required, there are some additional health and safety requirements for their
importation.
Most importantly, pursuant to the Parliamentary Decree on Situations on
Exemptions and Exceptions of Customs Duties No. 2000/53, capital goods and other
equipment imported into Turkey for the reasons of economic activity are exempted from
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customs duties; this explicitly states that the mining activities are within the scope of the
exemption. The capital goods and equipment should have been used for at least the past
12 months within their country of domicile, and should also be used for the same purpose
in Turkey. Likewise, any foreign entity wishing to benefit from this exemption must fully
terminate their activities in their country of domicile and transfer those to Turkey. Also,
the activities should be transferred to Turkey within six months of termination in the
country of domicile.
Also, for mining investments benefiting from governmental incentives (which
are provided for the first time) machinery and equipment that is being imported for the
purpose of mining activities will be exempt from customs duties. In general, the Turkish
incentive system tends to categorise investments under four groups: general, regional,
large-scale and strategic. Apart from these special types of incentive, investments can
benefit from general incentives in the event that they are over the 1 million Turkish lira
threshold.
Work permits for foreigners are regulated under Law No. 4817 and the Work
Permit Regulation. Foreigners are required to obtain a work permit before they commence
working in Turkey unless otherwise provided under bilateral or multilateral agreements
to which Turkey is a party, or they are exempt from obtaining a work permit under Law
No. 4817. There is no provision that provides an exemption to mine employees, or
which sets out any special provision for the sector.

There are several minerals that are mined within Turkish boundaries, and exported to
foreign countries in order to be processed or used in industry. The Turkish government
has now attempted to increase the processing and utilisation of mined minerals within
Turkey as well as for export. For this purpose, there is no generally implemented
limitation or restriction in the amount of the minerals, but the relevant authorities may,
at any time, implement restrictions for health and safety reasons, if a facility endangers
the environment.
According to the Decree on Protection of the Value of the Turkish Currency No.
32, the import and export of the precious mines (gold, silver, platinum and palladium)
is legal. For standard, unprocessed precious metals, only members of the Precious Metals
Exchange and the Central Bank of Turkey are entitled to export. With regard to the sale
and purchase of precious metals, stones and goods, their sale and purchase is legal. In
general, the sale and purchase of the precious metals that have been mined or in any
way produced from an ore mine in Turkey are subject to regulations and conditions to
be determined by the Istanbul Gold Exchange. Accordingly, the Central Bank of Turkey
and the precious metal intermediary agencies can follow the purchase and sale operations
of their unprocessed mines only through the Istanbul Gold Exchange.

Please refer to Section II of the Turkey Capital Markets chapter.
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VI CHARGES
In consideration for the licence granted, the licence holder shall pay a royalty to the
state at a certain rate on all minerals produced by the licence holder in the licensed area.
The royalty share is determined as 2 per cent of the per quarry sales price for the fourth
group of minerals (except for gold, silver and platinum) and 4 per cent for the third,
fifth and sixth group of minerals and gold, silver and platinum. As to the first group, and
paragraph (a) of the second group minerals,4 their quarry sales price should be accepted
as their sized sale price,5 and the royalty will be 45 per cent of this amount. In addition,
for the rest of the second group minerals, the royalty varies between 1 per cent and 2 per
cent. The royalty is calculated in proportion to the sales revenue amount declared by the
licence holder. Consequently, these declarations are controlled by the Ministry.
The Mining Law provides that mining activities may benefit from certain
investment incentives determined by the Council of Ministers. The Mining Law also
offers an incentive for producers who process their minerals in facilities located in Turkey
by exempting them from 50 per cent of the royalty.
For mining activities in fields owned by the state, the licence-holder is obliged to
pay an increased royalty of a further 30 per cent. The Council of Ministers may apply the
maximum of a 25 per cent discount in the royalty rates in certain situations, for example,
depending on the type of mineral or the region of production.
Moreover, if mining activities are performed within municipality borders, licence
holders are obliged to pay 0.2 per cent of the per quarry sales price to the relevant
municipality.
Pursuant to the sectoral analysis conducted by the Prime Ministry Investment Support
and Promotion Agency (which provides general information to foreign investors about
Turkey) in July, 2010: ‘Turkey holds 2.5 per cent of the global industrial mineral reserves,
72 per cent of global boron reserves, 33 per cent of global marble reserves, 20 per cent
of global bentonite reserves, and more than half of the global pearlite reserves.’ Further,
pursuant to this data, many of the minerals that are mined out of Turkish reserves are
used as raw materials in the manufacturing industry, as well as being exported. Marble
and boron are the leading mining export materials of Turkey.
Pursuant to recent investigations of the Istanbul Union of Mine Exporters, the
mined exports have, for the first time, exceeded the $400 million threshold and reached
$411.8 million in June, 2012. It is correct to say that Turkey, having at least 77 of the
90 types minerals that are traded worldwide, is not reaching its full potential in terms of
mining. Mine processing numbers lag behind export numbers, which end up outside the
normal use of mined out minerals, instead of being used in Turkish industry. The Turkish
4 See footnote 2, supra.

5 This term refers to ‘boyutlandırılmış fiyat’ under the Mining Law and means the processed
minerals rather than raw minerals.
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Turkey
government is now discussing whether to impose amendments to increase the local use
of minerals as raw materials in the Turkish manufacturing industry.
From a general perspective, the players in the mining sector comprise both local
and foreign investors. Pursuant to the Ministry of Finance, the total number of foreign
investment companies in the mining sector was 627 between 1954 and 2011, and this
number increases in each year. When compared with recent years, the Turkish mining
sector is now more liberal and privatised and, therefore, welcomes foreign investment in
every way possible.
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Chapter 21
UNITED STATES
Robert A Bassett, Karol L Kahalley and David I Stanish 1
I OVERVIEW
i Government policy towards mining and international investment

The US government values the mining industry for its production of domestic raw
materials, strategic minerals and high-wage jobs, despite its reputation for creating a
burdensome permitting and environmental regulatory regime. Federal, state and local
governments receive billions of dollars annually in taxes, royalties and fees from the
mining industry. The United States seeks and attracts international investment, including
financial investment and direct investment in mining operations.
US law generally permits foreign investments in US industries, including mining.
The US government places few restrictions on such investments, unless they are deemed
to have national security implications. Projects involving the export of particular
minerals, such as uranium or rare earth elements, can receive greater scrutiny when
foreign companies are involved. Foreign investors are increasingly looking to the United
States as a secure source of investment in mineral projects and to obtain reliable sources
of minerals. According to Canada’s Natural Resources Department, over 12 per cent of
Canada’s mining assets abroad are now located in the United States, while South Korean
state utilities and steelmills, and Japanese trading houses and power generators, have
sought equity in thermal and coking coalmines to secure long-term supply.
ii Risk factors
Security of title and tenure for mining claims, leases and licences is key to attracting
foreign investment in US mining. There is little risk of expropriation of mining
operations by government seizure or political unrest. The US political landscape is
1 Robert A Bassett is a partner, Karol L Kahalley is of counsel and David I Stanish is an associate
at Holland & Hart, LLP.
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United States
characterised by inaction in the area of mining law reform; Congress has been working
towards comprehensive mining law reform for many decades, but the General Mining
Law has remained relatively unchanged since its passage in 1872. Thus, there is little risk
that title to land for mining operations will be threatened by government intervention as
long as all required fees, rentals and royalties are paid in a timely manner.
Perhaps the biggest risk in US mining ventures is the delay caused by the
environmental review, compliance and permitting of a project. These steps can be very
costly and time-consuming, and even without protracted litigation, it is not unusual
for a major mining project to require in excess of 10 years to obtain all the necessary
environmental approvals.
iii Mine ownership

Ownership of the US mining industry is in private hands: there are no government-
owned mines or mining companies. Many companies operating US mines are based
in the United States, such as Newmont Mining Corporation (gold), Peabody Energy
Corporation (coal), US Steel (iron ore) and Freeport-McMoRan (copper). Many other
operations in the United States are owned by foreign companies, including Barrick
Gold’s numerous mines (gold) and Rio Tinto’s subsidiaries such as Kennecott Utah
Copper Corporation (copper-molydbenum).
iv Significant trading agreements concerning minerals

Many international treaties of general application apply to mining industry investment
by foreign persons into the United States, but none specifically address investments in
the mining industry or trading in various minerals. However, one failed transaction of
note was the attempted acquisition by Chinese National Offshore Oil Corporation of
the rare earth element at Mountain Pass, California (then owned by Unocal), which was
blocked by the US government on national security grounds in 2005.
v Notable developments
Most major US mining deals in 2011 focused on energy minerals, such as Alpha Natural
Resources’ acquisition of Massey Energy (coal) and Energy Fuel’s acquisition of Denison
Mines Corp’s US assets (uranium). Many smaller mergers or acquisitions also occurred,
including Newmont’s acquisition of Fronteer Gold and Cliffs Natural Resources’
acquisition of Consolidated Thompson Iron Mines (taconite). In addition, many new
mining projects are in development in the US, such as IC Potash’s mine in New Mexico
(potash) and Augusta Resources’ Rosemont mine in Arizona (copper).
II LEGAL FRAMEWORK
i Introduction
The US legal system consists of many levels of codified and uncodified federal, state
and local laws. The government’s regulatory authority at each level may originate from
constitutions, statutes, administrative regulations or ordinances, and judicial common
law. The US Constitution and federal laws are the supreme law of the land, generally
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United States
pre-empting conflicting state and local laws. In many legal areas, the different authorities
have concurrent jurisdiction, requiring regulated entities to comply with multiple levels
of regulation. Mining on federal lands, for example, is generally subject to multiple layers
of concurrent federal, state and local statutes and administrative regulations.
Federal and state governments have developed comprehensive mining regulatory
schemes. Although the United States is a common law nation, practising US mining
law often resembles practising mining law in civil law countries because the regulatory
schemes are set out in detailed codifications.2 However, these mining law codifications are
subject to precedential interpretation by courts pursuant to common law principles (and
in some situations by quasi-judicial administrative bodies). As such, US mining law may
originate from federal, state and local laws, including constitutions, statutes, administrative
regulations or ordinances, and judicial and administrative body common law.
Determining which level of government has jurisdiction over mining activities
largely depends on surface and mineral ownership. A substantial amount of mining in
the United States occurs on federal lands where the federal government owns both the
surface and mineral estates. Federal law primarily governs mineral ownership, operations
and environmental compliance, with state and local governments having concurrent
or independent authority over certain aspects of federal land mining projects (e.g.,
permitting, water rights and access authorisations). If the resource occurs on private
land, estate ownership is a matter of state contract law, but operations and environmental
compliance are still regulated by applicable federal and state laws. Estate ownership on
state-owned land is regulated by state law, and operations and environmental compliance
are regulated by applicable federal and state laws.
ii Regulation of the mining industry

The General Mining Law of 1872 (‘the GML’)3 is the principal law governing locatable
minerals on federal lands. The GML affords US citizens the opportunity to explore
for, discover and purchase certain valuable mineral deposits on federal lands open for
mineral entry. Locatable minerals include non-metallics (asphaltum, bog iron, cement,
diamonds, feldspar, granite, marble, salt, slate, umber, uranium, etc.), and metallic
minerals including copper, gold, lead, nickel, silver and zinc. Locating these mineral
deposits entitles the locator to certain possessory interests:
a unpatented mining claims, which provide the locator an exclusive possessory
interest in surface and subsurface lands, and the right to develop the minerals; and
b patented mining claims, which pass title from the federal government to the
locator, converting the property to private land. However, a mining patent
moratorium has been in place since 1994 and no new patents are being issued.
2 See, e.g., 43 CFR Sections 3000.0-3936.40 (US Bureau of Land Management (‘BLM’)
minerals management regulations).
3 30 USC Sections 21 to 54, and Sections 611 to 615, as amended.
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United States
The Federal Land Policy and Management Act of 1976 (‘FLPMA’)4 governs federal land
use, including access to and exercise of GML rights on lands administered by BLM
and the US Forest Service (‘USFS’). FLPMA recognises ‘the Nation’s need for domestic
sources of minerals’,5 and provides that FPLMA shall not impair GML rights, including,
but not limited to, rights of ingress and egress.6 However, FLPMA also provides that
mining authorisations must not ‘result in unnecessary or undue degradation of public
lands’.7 BLM and USFS have promulgated extensive FPLMA mining regulations.8
The National Environmental Policy Act (‘NEPA’),9 requires federal agencies
to prepare an environmental impact statement (‘EIS’) for all major federal actions
significantly affecting the quality of the human environment. Mining operations on
federal lands or with a federal nexus generally will involve an EIS or a less intensive
environmental assessment (‘EA’) examining environmental impacts. The NEPA process
will involve consideration of other substantive environmental statutes.
The United States Securities and Exchange Commission (‘the SEC’) regulates
mineral resources and reserves reporting by entities subject to SEC filing and reporting
requirements. The SEC’s reporting classification system is based on the SEC’s 1992
‘Industry Guide 7’, which provides for declaration only of proven and probable reserves.
The SEC generally does not recognise other reporting codes, such as the Committee
for Mineral Reserves International Reporting Standards, which provide additional
disclosures and which are used by many other mineral-producing nations.
i Title
In the United States, land generally can be severed into surface and subsurface estates,
creating a split estate where the surface and mineral rights can be held by different
parties. The ability to sever the unified estate depends on land ownership. Federal land
mineral interests are regulated by federal law, and title cannot be transferred to private
citizens until the minerals have been severed. Under the GML, locatable mineral claims
may be patented, transferring title to the locator, but there has been a patent moratorium
in place since 1994. Unpatented GML claims provide the locator exclusive possessory
surface and mineral interests, but the locator does not obtain title to the mineral estate.
Ownership of state-land minerals is controlled by state law and varies by state. State
laws generally are similar to federal laws, in that title remains with the state until the
minerals are severed pursuant to statutory procedures. Severance of private land estates
is governed by state law, and generally private citizens are free to split their surface and
mineral estates.
4 43 USC Sections 1701 to 1787.

5 43 USC Section 1701(a)(12).
6 43 USC Section 1732(b).
7 43 CFR Section 3809.411(d)(3); see also 43 USC Section 1732(b).
8 See, e.g., 36 CFR Sections 228.1-228.110; 43 CFR Sections 3000.0-3936.40.
9 42 USC Sections 4321-4370.
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United States
Once the mineral estate is severed and enters the private market, title to the
minerals can be bought, sold, leased or rented as a matter of contract law, subject to
reservations in the severance document and applicable laws. The federal government,
particularly in the western United States, may have reserved the mineral estate to itself
when it transferred ownership of the surface lands to private citizens or state governments,
which could affect the surface owners’ ability to alienate the minerals.

The process for developing locatable minerals rights on federal lands under the GML
involves:
a discovery of a ‘valuable mineral deposit’, which under federal law means that a
prudent person would be justified in developing the deposit with a reasonable
prospect of developing a successful mine, and that the claims can be mined and
marketed at a profit;
b locating mining claims by posting notice and marking claim boundaries;
c recording mining claims by filing a location certificate with the proper BLM
state office within 90 days of the location date and recording pursuant to county
requirements;
d maintaining the claim through assessment work or paying an annual maintenance
fee; and
e additional requirements for mineral patents (as mentioned above, there is a
moratorium on patents).
The Mineral Lands Leasing Act of 192010 provides US citizens the opportunity to
obtain a prospecting permit or lease for coal, gas, gilsonite, oil, oil shale, phosphate,
potassium and sodium deposits on federal lands. The process for obtaining a permit or
lease involves filing an application with the federal agency office with jurisdiction over
the affected land. Depending on the type of permit or lease applied for, applicants may
be required to:
a pay rental payments;
b file an exploration plan;
c pay royalty payments based on production; or
d furnish a bond covering closure and reclamation costs.
These permits and leases are often subject to conditions and stipulations directed at
protecting resource values.
The Materials Disposal Act of 194711 provides for the disposal of common
minerals found on federal lands, including, but not limited to, cinders, clay, gravel,
pumice, sand or stone, or other materials used for agriculture, animal husbandry,
building, abrasion, construction, landscaping and similar uses. These minerals may be
10 30 USC Sections 181 to 287, as amended,

11 30 USC Sections 601 to 615, as amended.
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United States
sold through competitive bids, non-competitive bids in certain circumstances or through

free use by government entities and non-profit entities.
Although the GML and Mineral Lands Leasing Act require mine claimants,
permittees and lessees be US citizens, a ‘citizen’ can include a US incorporated entity that
is wholly owned by non-US entities or corporations. There generally are no restrictions
on foreign acquisition of these types of US mining rights through parent-subsidiary
corporate structures.

Additional permits and licences required to conduct mining activities may include:
a a mine plan of operations;
b a reclamation plan and permits;
c air quality permits;
d water pollution permits (pollutant discharge elimination system permit, storm
water pollution prevention plan, spill prevention control and countermeasure
plan);
e dam safety permits;
f artificial pond permits;
g hazardous waste materials storage and transfer permits;
h well drilling permits;
i road use and access authorisations;
j right-of-way authorisations; and
k water rights.

FLPMA requires BLM and the USFS to prevent ‘unnecessary or undue degradation’ of
public lands.12 Casual use hardrock mining operations on BLM lands that will result in
no or negligible surface disturbance do not require any reclamation planning. Notice-
level exploration operations requiring less than five acres of surface disturbance must
meet BLM reclamation standards and provide financial guarantees that the reclamation
will occur.13 Plan-level operations require a plan of operations that includes a detailed
reclamation plan.14 BLM reclamation standards include saving topsoil for reshaping
disturbed areas, erosion and water control measures, toxic materials measures, reshaping
and revegetation where reasonably practicable, and rehabilitation of fish and wildlife
habitat.15 Mining in BLM wilderness study areas additionally requires surface disturbances
be ‘reclaimed to the point of being substantially unnoticeable in the area as a whole’.16
12 43 USC Section 1732(b).

13 43 CFR Sections 3809.320, 3809.500(b).
14 43 CFR Sections 3809.11, 3809.401.
15 43 CFR Section 3809.420.
16 43 CFR Section 3802.0-5(d).
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United States
Mining activities on National Forest lands must be conducted ‘so as to minimise

adverse environmental impacts on National Forest System surface resources’.17 Operators
must take measures that will ‘prevent or control on-site and off-site damage to the
environment and forest surface resources’, including erosion control, water run-off
control, toxic materials control, reshaping and revegetation where reasonably practicable,
and rehabilitation of fish and wildlife habitat.18
State laws may also include closure and reclamation requirements, including,
for example, water and air pollution controls, recontouring and revegetation, fish and
wildlife protections, and reclamation bonding requirements. Mining projects can often
address both federal and state requirements through a single closure and reclamation
plan and financial guarantee.

NEPA is the principal environmental law implicated by mining on federal lands. NEPA
requires federal agencies to take a ‘hard look’ at the environmental consequences of
projects before action is taken. An agency must prepare an EIS for all major federal
actions significantly affecting the quality of the human environment. An agency may first
prepare an EA to determine whether the effects are significant. If the effects are significant,
the agency must prepare the more comprehensive EIS. If the effects are insignificant,
the agency generally will issue a finding of no significant impact, ending the process.
NEPA does not dictate a substantive outcome; however, the analysis generally requires
consideration of other substantive environmental statutes and regulations, including
the Clean Air Act,19 the Clean Water Act20 and the Endangered Species Act.21 NEPA is
administered by the federal agency making the decision that may significantly affect the
environment.
The Clean Air Act regulates air emissions from stationary and mobile sources. The
Clean Air Act is administered by the Environmental Protection Agency and states with
delegated authority. The Clean Water Act regulates pollutant discharges into the ‘waters
of the United States, including the territorial seas’.22 The Clean Water Act is administered
by the Environmental Protection Agency, US Army Corps of Engineers and states with
delegated authority. The Endangered Species Act requires federal agencies to ensure
their actions are not likely to jeopardize the continued existence of any threatened or
endangered species, or to destroy or adversely modify designated critical habitat, and
prohibits the unauthorised taking of such species. The US Fish and Wildlife Service and
National Marine Fisheries Service administer the Endangered Species Act.
17 36 CFR Section 228.1.

18 36 CFR Section 228.8(g).
22 33 USC Section 1311(a).
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United States
The Federal Mine Safety and Health Act23 requires the Mine Safety and Health
Administration (‘MSHA’) to inspect all mines each year to ensure safe and healthy work
environments.24 MSHA is prohibited from giving advance notice of an inspection, and
may enter mine property without a warrant.25 MSHA regulations set out detailed safety
and health standards for preventing hazardous and unhealthy conditions, including
measures addressing fire prevention, air quality, explosives, aerial tramways, electricity
use, personal protection, illumination and others.26 MSHA regulations also establish
requirements for testing, evaluating and approving mining products; miner and rescue
team training programmes; and notification of accidents, injuries and illnesses at the
mine.27
Currently, there are no specific mining sustainable development regulations in the
US. However, issues of socio-economic impacts, cumulative effects and environmental
impacts often are addressed during a NEPA review.
Mining projects on federal lands, or that otherwise have a federal nexus, likely will have
to go through some level of NEPA environmental review. State laws may also require
environmental analysis. Where analysis is required by different agencies, it may be
possible to pursue an agreement among the agencies to allow the operator to produce
one comprehensive environmental review document that all agencies can rely on.
There is no statutory deadline for federal agencies to complete their NEPA review.
Small mine project reviews may take in excess of a year to complete. Larger project
reviews likely will take longer. Third parties may sue the federal agency completing the
review to ensure that the agency considered all relevant factors and rationally related the
decisions made to the facts found. Prosecuting the litigation would extend the project
approval time, and if the agency loses, additional time would be required for the agency
to redo its flawed NEPA analysis. In some instances where mines were proposed in
especially sensitive areas, it has taken decades to obtain approval.

The US contains numerous reservations comprised of federal lands set aside by treaty
or administrative directive for specific native American tribes or Alaska natives. Tribal
reservation title generally is held by the United States in trust for the tribes, and the US
Bureau of Indian Affairs administers the reservations. Alaska native lands are owned
and administered by Alaska native corporations. Mineral development within the
tribal reservations and Alaska native lands requires negotiation with the appropriate
administrator.

24 30 USC Section 813.
26 See, e.g., 30 CFR Sections 56.1-56.20014 (safety and health standards for surface metal and
non-metal mines).
27 30 CFR Sections 5.10-36.50, 46.1-49.60, 50.10.
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United States
Tribal cultural interests are considered through NEPA, the National Historic
Preservation Act (‘the NHPA’),28 and the Native Graves Protection and Repatriation Act
(‘NAGPRA’).29 NEPA analysis will include social and cultural impacts, and may require
tribal consultation. Section 106 of the NHPA requires federal agencies to inventorise
historic properties on federal lands and lands subject to federal permitting, and to consult
with interested parties and the State Historic Preservation Office. 16 USC Section 470f
NAGPRA imposes procedural requirements that apply to inadvertent discovery and
intentional excavation of tribal graves and cultural items on federal or tribal lands.
Not all federal lands are open to mineral entry, including national parks, national
monuments, most Reclamation Act project areas, military reservations, wilderness areas,
and wild and scenic river corridors. Project proponents should research mineral access
when considering exploration activities on federal lands.
Federal mining laws do not require community engagement or corporate
responsibility. Those projects that require NEPA review, however, will be subject to
public notice and comment requirements, and the review will involve consideration of
the project’s cultural, societal and economic impacts. State laws may impose a ‘public
interest’ standard for projects requiring state approval. For example, mining operations
that require state water rights may need to show that the use of the water is in the ‘public
interest’, which may include consideration of wildlife, fisheries and aquatic habitat values.

US mining laws do not restrict or limit importing mining equipment or machinery. If the
equipment has dual military-civilian use, it is on the Commercial Control List and may
be licensable by the Department of Commerce pursuant to the Export Administration
Regulations30.
Foreign employees are governed by general US immigration laws and are required
to obtain a work visa or other authorisation. A limited number of visas are available
for skilled workers, professionals and non-skilled workers, but these workers must be
performing work for which qualified US workers are not available.31

There are no restrictions or limitations on the sale, import or export of extracted or
processed minerals, unless deemed a national security risk by the US Department of
Homeland Security or State Department.

29 25 USC Section 3001 to 3013.
30 15 CFR Sections 730.1, 774 Supp. No. 1.
31 8 USC Section 1153(b)(3)(C).
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United States

US mining laws generally do not restrict or limit foreign investment. As discussed
in Section III.ii, supra, although there is a US citizenship requirement for obtaining
locatable and leasable minerals on federal lands, foreign companies are free to rely on a
US subsidiary to secure such rights.
Foreign investments are subject to US national security laws. The Committee
on Foreign Investment in the United States, for example, is an inter-agency committee
chaired by the Secretary of the Treasury that has authority to review foreign investments
to protect national security, and make recommendations to the President to block the
same.32 The President may exercise this authority if the President finds that the foreign
interest might take action impairing national security, and other provisions of the law do
not provide the President with appropriate authority to act to protect national security.33
VI CHARGES
i Royalties
There are generally no royalties levied on the extraction of federally owned minerals,
with the exception of fuel minerals and other minerals governed by the Mineral Leasing
Act. Many states, however, charge royalties on mineral operations on state-owned lands
and taxes that function like a royalty on all lands, such as severance taxes, mine licence
taxes or resource excise taxes. These functional royalties can differ depending on land
ownership and the minerals extracted.
ii Tax considerations
There are no federal taxes specific to minerals extraction (see above regarding state mining
taxes as functional royalties). General federal, state, county and municipal taxes apply to
mining companies, including income taxes, payroll taxes, sales taxes, property taxes and
use taxes.
Federal tax laws generally do not distinguish between domestic and foreign mining
operators. However, if a non-US citizen acquires real property, the buyer must deposit
10 per cent of the sale’s price in cash with the US Internal Revenue Service as insurance
against the seller’s income tax liability. The cash requirement can be problematic for a
cash-strapped buyer that may have purchased the mine property with stock.
There are no federal tax advantages or incentives specific to mining.
iii Duties
There are no federal duties on minerals extraction.
32 50 USC Appendix Section 2170.

33 50 USC Appendix Section 2170(d)(4).
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United States
iv Indemnification
Locatable minerals claimants must pay an annual maintenance fee of $140 per claim in
lieu of performing assessment work required pursuant to GML and FLPMA.34 Failure to
perform assessment work or pay maintenance fees will open the claim to relocation by a
rival claimant as if no location had been made.35 Certain waivers and deferments apply.
Leasable minerals permittees and lessees must pay annual rent based on acreage.
The rental rates differ by mineral and some rates increase over time.36 Prospecting permits
automatically terminate if rent is not paid on time; BLM will notify late lessees that they
have 30 days to pay.37
State laws may also include closure and reclamation requirements, including water
and air pollution controls, recontouring and revegetation, fish and wildlife protections,
and reclamation bonding requirements. Mining projects often can address both federal
and state requirements through a single closure and reclamation plan and financial
guarantee.
Federal and state laws generally require financial guarantees prior to commencing
operations to cover closure and reclamation costs. These reclamation bonds ensure
that the regulatory authorities will have sufficient funds to reclaim the mine site if the
permittee fails to complete the reclamation plan approved in the permit.
Mining stands out in the US economy as a producer of long-term, high-wage jobs. The
mining industry is predicted to account for over 128,000 US jobs (new positions and
replacements) by 2019. Significant gains in the mining industry are due in large part
to the increased value of mineral production in the US in recent years. US domestic
metal production increased 23 per cent in 2011. The value of non-metallic minerals also
showed growth, although at a smaller rate of 3 per cent, and significantly, for the first
time in several years an increase in value occurred in that sector.
Despite these trends, the United States remains dependent on foreign sources for
more than 50 per cent of domestic consumption of 43 mineral commodities in 2011. As
a result, legislation has been introduced in Congress aimed at encouraging more efficient
and expedited development of strategic minerals on public lands.
Through its participation in the Extractive Industries Transparency Initiative (‘the
EITI’), the United States has joined 35 additional countries in a global effort to improve
transparency and accountability in the mining industry. Participation in the EITI could
further elevate public scrutiny of land use and the environmental impacts of mining for
the US mining industry.
34 43 CFR Sections 3834.11(a), 3830.21.

35 43 CFR Section 3836.15.
36 43 CFR Section 3504.15.
37 43 CFR Section 3504.17.
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Chapter 22
UZBEKISTAN
Eldor Mannopov, Anna Snejkova and Ulugbek Abdullaev 1
I OVERVIEW
Uzbekistan is rich in mineral resources and precious metals, including gold, copper,
lead, molybdenum, silver, tungsten and zinc. Metallurgy is one of the largest domestic
industries, and the most-mined minerals are copper, uranium and gold. There are two
dominant state mining enterprises: the Almalyk Mining and Metallurgy Complex
(‘AGMK’) and the Navoi Mining and Metallurgy Complex (‘NGMK’).
The Uzbek government attaches great importance to the mining industry, and
most of the mining projects in Uzbekistan are carried out by AGMK and NGMK. The
government also strives to attract more foreign investment by creating a favourable
investment climate; however, no allocation of big mining projects to foreign investors
has occurred recently. Nevertheless, it seems that foreign investment will be particularly
welcomed for the exploration and development of solid minerals mining projects
involving deep processing of minerals.2
Under Uzbek law, all subsoil is strictly under public ownership. The state holds
title to all subsoil, and all types of subsoil use are subject to licensing.3
Any review of the Uzbek mining industry will involve consideration of AGMK
and NGMK. AGMK is Uzbekistan’s only copper producer, and also produces 90 per
cent of the country’s silver and 20 per cent of its gold. NGMK is the only uranium
producer in Uzbekistan, and also produces 80 per cent Uzbekistan’s gold. AGMK carries
out geological explorations of non-ferrous metals and associated minerals in Uzbekistan,
as well as supplementary exploration and exploitation surveys of precious metal fields.
1 Eldor Mannopov is a managing partner, Anna Snejkova is an associate and Ulugbek Abdullaev
is a junior associate at Avent Advokat.
2 Decree of the Cabinet of Ministers No. 142 dated 26 May 2008.
3 For more information on licensing, see Section III.ii, infra.
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Uzbekistan
NGMK carries out explorations of precious metals, uranium and associated natural
resources within the entire territory of Uzbekistan.
AGMK recently accepted Outotec GmbH’s proposal to implement a project to
construct a sulphuric acid shop at its copper smelting plant; the new shop would have
a capacity to produce 500,000 tonnes of sulphuric acid a year. Among other projects,
AGMK is planning to start new mining projects, and to reconstruct and expand existing
projects; in total, AGMK has 15 projects scheduled for the period running up to 2015, at
a total cost equivalent to $798 million. Similarly, from 2012 to 2020 NGMK is reported
to be investing in the development of gold and uranium production, and an expansion
of raw bases up to $3.2 billion.
Regarding uranium production, NGMK has been cooperating with Nukem Inc
on uranium supply since 1992. According to the 1992 agreement, the US firm had the
exclusive right on the supply of Uzbek uranium until 2011. However, it was recently
announced that this arrangement may be extended. In 2011, NGMK concluded a
10‑year off-take agreement for uranium with ITOCHU (Japan).
One of the latest foreign investment agreements was signed in 2008 between a
South Korean investor and the State Geology Committee to carry out exploration and
subsequent mining works of quartz and quartzite. The agreement led to the establishment
of a joint venture that commenced production of technical silicon in August 2012.
II LEGAL FRAMEWORK
The mining industry is generally regulated by international agreements of Uzbekistan,

laws, presidential and governmental decrees, as well as other by-laws (instructions,
standards, etc.). Uzbekistan is not a signatory to any specific international treaties on
mining. The primary law on the field is the Law on Subsoil,4 which lays down the basic
legal principles on mining and regulates principal issues of possession, use and disposal
of the subsoil. The general structure and directions of regulation over the mining sector
are usually initiated by presidential decrees, and then incorporated into more detailed
decrees of the Cabinet of Ministers (government).
All subsoil operations in Uzbekistan are subject to licensing. There are several
regulations on licensing depending on what underground mineral is located in the
subsoil. These regulate the conditions, requirements and procedure of licensing. All
taxation questions are regulated principally by the Tax Code.
There are three groups of regulatory bodies in the mining industry: the Cabinet
of Ministers, local government bodies and specially authorised bodies.5 The Cabinet of
Ministers is the primary regulating body in the industry. It decides on the award of subsoil
to mining companies, and adopts policies for the development of the mining sector and
licensing procedures, in addition to other matters. Local government bodies carry out
supervising functions over the use and conservation of resources, and the prevention
of unauthorised use of subsoil. The specially authorised bodies are the following
4 Law of the Republic of Uzbekistan No. 2018-XII ‘On Subsoil’ (new edition) dated 23
September 1994.
5 Article 7 of the Law on Subsoil.
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Uzbekistan
three agencies: the State Committee on geology and mineral resources (‘the Geology
Committee’), the State Committee on nature protection (‘the Nature Committee’)
and the State Inspectorate for geological studies, safety in mining industry under the
Cabinet of Ministers (‘the Inspectorate’). Among them, the Geology Committee is the
main executive body responsible for the development of mining policies, and is also the
licensing and compliance monitoring body. The Nature Committee coordinates issues
of environmental protection, standards for mining operations and waste management.
The Inspectorate carries out functions related to control over compliance with technical
rules and regulations.
i Title
It is a general principle under Uzbek law that the title to underground minerals and to
the land belongs to the state. Nevertheless, a limited range of rights to the subsoil can
vest in private entities.
The law also grants limited mining rights to land-users in relation to allotted
land plots. A peculiarity of Uzbek law is that land can be allotted only together with a
permanent fixture (existing or projected) on it. In essence, a person acquires property
rights in relation to the immoveable property and also acquires certain rights (but not
title) on the land. Land-users are allowed to mine within the boundaries of the land
allotted to them, provided that the available minerals are not included in the state balance
of mineral deposits and the mining does not involve any explosive works.6
Subsoil title generally vests in the state. Furthermore, the law places a prohibition
on the sale, purchase, gifting, inheriting, depositing, pledging or disposal of the subsoil
in other forms. Under Uzbek law, the transfer of rights is possible only by two means,
namely through the award of a public tender or through the conclusion of a product
sharing agreement (‘PSA’). In practice, mining rights are usually awarded after a tender
rather than through a PSA.

Licensing
All types of subsoil use are subject to licensing under Uzbek law.7 As a rule, each
type of subsoil use requires the obtaining of a special licence.8 Nevertheless, there is
no limitation on the number of licences that the same person may obtain.9 Under the
licensing regulations, both legal and natural persons are entitled to apply for usage rights
on subsoil.10 The licence term for mining and use of technogenic mineral formations
depends on the term established based on a feasibility study.

8 Section 2 of the Decree PP-649, Section 3, Decree PP-1524.
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Uzbekistan
Licences are issued pursuant to the results of public tenders or direct negotiations.11
A public tendering may last eight months, or more, depending on the project. First,
the licensing body publishes information on the tendering three months in advance
of the closing date (six months for big projects). The interested parties prepare and
submit documents, pay the participation fee and register for the tender. Within 20
days of submission, they are notified as to whether their documents have been accepted
or rejected for participation (shortlist). Provided that they are accepted, participants
receive relevant geological and other information on the subsoil, and simultaneously
sign a confidentiality agreement. Each participant shall then prepare and submit
consolidated technical and economic calculations (if applying for a geological study),
and a pre-feasibility study, together with information on the financial capabilities of
the participant, within the term specified by the tender documentation. The tender
commission examines the calculations, pre-feasibility study and financial information,
and decides within 20 calendar days on the awarding of the tender. The decision of the
tender commission is subject to approval by the government within 30 calendar days.
After the government’s approval is given, the licence shall be issued to the winner within
the following 30 calendar days.
Mining rights protection

The law guarantees the right of the subsoil user to operate without interference from state
bodies. The right to remedy against the damages (including lost profit) resulting from
such interference (i.e., unreasonable limitation, suspension or termination of the right
to use the subsoil) is also guaranteed.12 Such company may apply to court for relevant
compensation or other type of remedy.
There are also additional guarantees for subsoil users that have financed the
geological exploration of mineral resources.13 They shall have the exclusive right to obtain
licences to mining on the explored field. If the financing person chooses to reject the
guaranteed mining right, such right is provided to another person following a public
tendering in accordance with the general provisions, and the expenses of the financing
person are subject to compensation by the person that acquires the right to mining.14

In addition to the licensing requirements, there are several other permits and procedures
that precede mining operations.15 Once the licence is granted (see above), the licensee
should also obtain a report on the estimated reserves of minerals (duly approved by the
State Resource Committee). The mineral deposit is then transferred to the licence holder
for industrial exploitation. The licence holder also needs to prepare and have the project

14 Section 32 of the Decree PP-1524.
15 Section 3 of the Law Uniform Rules of Subsoil Protection for Development of Mineral
Deposits, Annex 4 to Decree of the Cabinet of Ministers No. 20 dated 13 January 1997.
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Uzbekistan
for the construction, renovation or expansion of the mining enterprise approved by the
controlling bodies and passed by state environmental experts.
In order to obtain land usage rights, the licence holder needs to obtain the mining
allotment from the Inspectorate and duly register its right of usage to the land with the
cadastre bodies. If applicable, the licensee may also need to obtain a permit for special
use of water or water consumption.

Both the liquidation and conservation of mining enterprises are usually carried out on
the basis of a special technical project16 that has to be approved and agreed to by the
Inspectorate and any interested bodies.17

Environmental regulations
Currently there is no special law on environmental requirements for mining activities.
In general, irrespective of the type of activity, all companies must comply with the
environmental regulations. The legal basis for environmental control is laid down by
the Law on Environmental Protection. Compliance with environmental regulations is
supervised by the Cabinet of Ministers and the Nature Committee.18
In cases where harm is caused to the environment (e.g., unintended use, subsoil
pollution by chemicals, fertility deterioration), the right to use the land may be revoked
by the state.19 Moreover, any company involved in an activity that produces waste (in
the course of extraction or processing) must comply with sanitary and environmental
standards, monitor levels of waste that are hazardous for the environment and people,
provide conditions for safe waste utilisation and avoid waste disposal within unauthorised
territories.20 More detailed rules are elaborated in the Uniform Rules of Subsoil Protection
for Development of Mineral Deposits. According to these rules, a company involved in
mining must, at its own expense, conduct recultivation of the land after termination of
all works on all lands suitable for farming, forestry or any other agricultural activity, or
for the fishing industry. It is the company’s responsibility to maintain necessary facilities
and equipment for the prevention, control and remediation of waste products. Besides,
it is strictly forbidden to start mining works if a company does not operate the above-
mentioned facilities.21

17 Section 7 of Uniform Rule 20.
18 Articles 9, 11 of the Law on Environmental Protection, dated 9 December 1992.
19 Article 36 of the Land Code.
20 Article 15 of the Law on Wastes, dated 5 April 2002.
21 Sections 3, 9, 10 and 12 of the Uniform Rules of Subsoil Protection for Development of
Mineral Deposits, dated 13 January 1997.
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Uzbekistan
Health and safety regulations

Uzbek law does not segregate health and safety regulations depending on the company’s
type of activity. Therefore, all types of health and safety regulations and other correlated
legislative instruments have to be observed by mining companies. In 2009 special rules
were adopted for labour accidents. According to the present rules, an employer insures
its liability for any harm that may be caused to an employee’s health as a result of a
work-related injury, professional illness or other damage caused during the employee’s
employment.22
Supervision by the regulatory bodies administering the observance of laws on
safety precautions may be divided into external and internal control. External control is
performed by the Cabinet of Ministers,23 and the Ministry of Labour and Social Protection
of Population, while internal control is carried out by the company’s employees or trade
union, or both.24
Health regulations
The labour law requires the employer to provide preliminary (pre-employment)
and periodical (throughout employment) medical examinations for some groups of
employees. Such medical examination is compulsory for the following groups:25
a underage employees;
b male employees over the age of 60 and female employees over the age of 55;
c disabled people; and
d people working under challenging environments, during the night and in work
related to transportation.
The frequency of such periodical medical examinations depends on the character of the
employee’s professional duties under the employment agreement and the position he or
she holds. Such medical examination is regulated by order of the Minister of Healthcare.
Employees engaged in mining activities are required to be medically examined by a
physician, neurologist, ophthalmologist, surgeon, psychiatrist, STD specialist and
skin specialist. However, it is vital for employers to take into consideration the fact
that there may be other employees whose duties correlate to mining in some way (e.g.,
transportation, supply works).26 For the purpose of provision of medical services to
employees, the employer may freely enter into a contract with a competent medical
institution of its choice. At present, the health insurance system is underdeveloped in
Uzbekistan due to the absence of any specific law regulating this field. However, based
22 Section 3 of the Rules on Compulsory State Insurance of Employer’s Civil Liability, No. 177,
dated 24 June 2009.
23 Article 3 of the Law on Labour Safety, dated 6 May 1993.
24 Articles 22 and 23 of the Law on Labour Safety.
25 Article 214 of the Labour Code of the Republic of Uzbekistan, dated 21 December 1995.
26 Order of the Minister of Healthcare No. 300 on Improvement of Preliminary Medical
Examination at Hiring and Periodical Medical Examination of the Employees, dated 6 June
2000, registered by the Ministry of Justice No. 937, dated 26 June 2000.
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Uzbekistan
on a company’s internal policy, it is possible to apply on a voluntary basis to an insurance

company to provide the company’s employees with health insurance under a scheme that
runs for a period of one year only.27
Safety regulations
Any company operating in Uzbekistan, irrespective of its type of activity, has to observe
health and safety rules. In cases where the number of employees equals or exceeds 50
persons, the employer must establish a special department or position responsible for
health and safety compliance. Moreover, if the company possesses 50 or more vehicles,
an analogous department for traffic safety must be organised within the company. In
cases where the number of employees or vehicles is less than 50, the employer may
assign such duty to one of its senior managers.28 The specialists in the health and safety
department and traffic safety department are responsible for internally controlling the
observance of the health and safety rules by the employees.
All employees of the company must be properly informed by the employer on
labour conditions and professional risks before conclusion of the employment agreement,
or while they are on transfer to another position within the company.29 Moreover, the
employer has an obligation to hold regular training sessions on accident prevention,
and occupational sanitary, fire protection and other health and safety rules. It is strictly
forbidden to allow employees to start work without their attending such training or
without their passing an internal health and safety exam held by the employer.30 In
practice, the employee must sign the register journal before starting work. The employee’s
signature shows his or her understanding of his or her personal duties, and of any risks in
the event of failure to observe safety rules while performing his or her duties.
Taking into consideration that sites of mining activities are classified as hazardous
production facilities,31 any company involved in mining applies for civil liability
insurance against risks to the environment, and the life, health and property of third
parties.32
Before acceptance by an insurance scheme, the company’s activity is subject to
examination in order to establish its hazardous classification level. Identification of the
level of hazard is performed by an expert body upon the company’s application in an
27 Article 4 of the Law on Insurance Activit’.

28 Article 14 of the Law on Labour Safety, dated 6 June 1993.
29 Article 211 of the Labour Code.
30 Article 19 of the Law on Labour Safety.
31 Article 4 of the Law on Industrial Safety of Dangerous Production Facilities, dated 28
September 2006.
32 Regulation No. 271 on the Order of Compulsory Insurance of Civil Liability for the Infliction
of Harm to the Life, Health and (or) Property of Other Persons and Environment in Case of
the Accident at Dangerous Production Facility, dated 10 December 2008.
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Uzbekistan
order prescribed by the Inspectorate. The maximum term for inspection of the mining
project by the expert body is three months.33

There is no possibility for the application of third-party rights (including the rights
of indigenous peoples) or other similar rights. The law guarantees the freedom of a
company’s activity as long as it is not prohibited by Uzbek law.34
It is important to consider that the law imposes criminal liability for environmental
pollution and failure to arrange adequate measures for liquidation of environmental
accidents. Criminal liability is also imposed in the event of failure to follow health and
safety precautions.35
Since 2008, public control over environmental issues has been implemented
by the Environmental Movement of Uzbekistan. The aims of this body are regional
environmental supervision, the enhancement of citizens’ legal knowledge and the
prevention of environmental accidents.
Currently, there is an initiative to implement a new Law on Environmental
Control. It is anticipated that the new Law will enable the performance of more specific
environmental supervision over companies’ observance of environmental protection and
waste control, and the formation of additional supervising bodies under state control.36

Uzbekistan is not a party to any WTO instruments but it participates in regional
agreements, such as the CIS. Under Uzbek law, international agreements prevail over
national legislation.
In general, equipment and machinery being imported need to go through customs
clearance, obligatory certification and licensing under Uzbek customs regulations.
Equipment and machinery can be imported under the temporary import regime
or for free circulation (permanent import regime). The former has a maximum two-year
time limitation; after the expiry of such period, the customs regime should be changed to
another one. Temporary import is useful for short-term projects. In addition, economic
33 Sections 3, 17 and 19 of the Regulation No. 271 on the Order of Identification of Hazardous
Production Facilities.
34 Articles 19 and 23 of the Law on Guarantees of Economic Activity Freedom, dated 25 May
2000.
35 Articles 193 to 196 and 257 of the Criminal Code, dated 22 September 1994.
36 The Instruction of the President of the Republic of Uzbekistan on Measures for Implementation
of Democratic Reforms’ Further Extension and Civil Society Formation in the Field of
Formation and Development of Civil Society Institutions, No. P-3562, dated 14 January 2011.
259
Uzbekistan
policy measures (e.g., import duties, quotas) are usually not applied to temporarily
imported goods. As to duties, the importer shall pay all due customs duties. In order to
temporarily import equipment and machinery, the importer has to obtain the permission
of the customs body.
The permanent import regime represents full import and requires full payment of
customs duties and charges. However, upon completion of the project, if the company
wishes to export its equipment and machinery out of the country, it may have to obtain
permission for the export of used equipment.37
Customs clearance generally involves the following payments: customs duty, VAT,
excise tax and customs clearance fees. If the country of origin is one of the 10 CIS
countries that are a party to the free trade zone agreement, customs duty does not apply.
There also other relevant customs privileges in the form of exemption from customs
duties, such as the following:38
a technological equipment imported by foreign investors and Uzbek enterprises with
a foreign investment share equal to at least 30 per cent if the property is imported
for their own production needs (does not usually extend to consumables);
b goods imported by foreign companies with a total FDI into the economy of
Uzbekistan of more than $50 million, provided that the imported goods are of
their own manufacturing;
c goods, works and services designed for the fulfilment of works under a PSA and
imported into Uzbekistan in accordance with the project documentation by
foreign investors or other persons involved in the execution of such works; and
d technological equipment imported into Uzbekistan according to the list approved
in accordance with the law (usually by the Cabinet of Ministers), as well as
components and spare parts thereto.
Certain goods are also subject to certification. If there is an intergovernmental agreement

on the recognition of certificates of Uzbekistan with the country of origin, the certificate
issued by the manufacturer shall suffice. If there is no such agreement, the certification is
carried out by the national certification agencies.
Depending on the type of goods (such as equipment using radioactive substances),
a special import licence may apply.
For goods originating from one of the 45 countries to which Uzbekistan
provides most-favoured-nation treatment, customs duties are paid according to the rates
established by the law. If the country of origin is not a country with most-favoured-
nation treatment, customs duties are paid at a double rate.
Extracted minerals have to be prepared for shipping and processing in accordance
with the requirements of the project, applicable state standards and technical conditions.
Extracted minerals supplied to the consumer, or for processing, must be regarded as the
final product of mining, subject to strict control and accounting in accordance with the
37 Section 3 of the Presidential Decree PP-26.

38 Article 33 of the Law on Customs Tariffs.
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Uzbekistan
Law on Subsoil. Technical specifications for the supply of mineral resources must be duly
coordinated with and approved by any interested bodies.
Regulations generally require the exercise of due care upon processing to ensure
that the quality of the extracted minerals does not deteriorate.39
As to the use of foreign labour, the law requires work permits both for the
employer (‘right to employ foreign labour’) and the employee (‘right to work’) issued by
the Agency on Foreign Labour Migration. Work permits are issued for up to a one-year
period and can be extended. The employer needs such permission if it is a legal entity
incorporated under Uzbek law.40 If a foreign company operates under its own name or
through a company incorporated in any jurisdiction outside Uzbekistan, such permits
are not required.
Regarding the engagement of the services of foreign companies, the law does not
restrict such engagement and qualifies it as the import of services. The law requires such
import contracts to be executed in writing, and registered with a bank.

The sale, import and export of minerals are subject to general rules of contracting and
import-export operations unless specific provisions are envisaged by the mining project
documentation or the PSA. Mining companies generally exercise freedom of contracting
and sale of minerals unless specific provisions and limitations are stipulated by the
project documentation or the PSA and other agreements. Specific types of products that
are regarded as strategic resources (e.g., uranium, gold) are also subject to export licences.

For the purposes of works execution under a PSA, the investor must have a special
banking account on the territory of Uzbekistan, or in its own country, specialised only
in the mentioned types of works.
There are currency limitations. For example, domestic companies cannot affect
payments with each other in a foreign currency, including to their accounts outside
of the country. In addition, control of foreign currency in Uzbekistan is rather strict;
foreign currency is generally sold by the foreign exchange market or banks.
Contracts involving movement of capital are subject to registration by the Central
Bank of Uzbekistan.
Foreign investors in the mining industry enjoy the general investment protection
offered by Uzbek law, and there is no special legislative act for mining investors. Foreign
investment laws guarantee:
a protection against discrimination;
b protection against effects of certain changes in legislation worsening the investing
conditions existing on the date of investment for a 10-year period;
c protection against nationalisation; and
d protection of the rights to profit repatriation and access to information.
39 For the applicable health and safety regulations upon processing, see Section IV, supra.
40 Section 4 of Regulation No. 408.
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Uzbekistan
Additional guarantees, such as government guarantees, state project financing, special

tax and payment regimes, are provided on the basis of special governmental decrees.
It is common practice that any major investment projects in Uzbekistan are generally
implemented by issuance of special decrees.
VI CHARGES
Tax issues in Uzbekistan are governed by the Tax Code of the Republic of Uzbekistan
effective from 1 January 2008.
The Uzbekistan taxation system mainly falls under two headings: taxes and other
compulsory payments. The Tax Code envisages the following definitions:
a ‘taxes’ are compulsory cash (monetary) payments levied in certain amounts and
have regular, non-recoverable and non-repayable conditions; and
b ‘other compulsory payments’ are compulsory cash (monetary) payments to state
funds, customs duties as well as state duty (stamp duty), the payment of which is a
condition for legal actions performed by authorised bodies and officials, including
provision of certain rights, or the issuance of licences and other permits.
The following taxes are applied in Uzbekistan:

a profit tax;
b personal income tax;
c value added tax;
d excise tax;
e taxes and special payments for subsoil users;
f water use tax;
g property tax;
h land tax;
i infrastructure development tax; and
j individual tax for consuming fuel for vehicles.
The following compulsory payments are applied in Uzbekistan:

a mandatory payments to social funds, such as unified social payments, social
security contributions to the Pension Fund and compulsory deductions for the
Pension Fund;
b mandatory payments to the Republican Road Fund, such as compulsory
contributions and charges to the Fund;
c state duty;
d customs duties; and
e charges on retail business for certain types of goods and services.
The Tax Code

The Tax Code provides the following tax regimes: the standard tax regime and the
simplified tax regime.
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Uzbekistan
Standard tax regime

The standard tax regime envisages the payment by companies of all the aforementioned
taxes and compulsory payments. It should also be noted that operation under the
standard tax regime does not require companies to meet certain specific requirements
under the Tax Code.
Taxes and special payments for subsoil users

In accordance with the Tax Code, subsoil users pay the following taxes and special
payments:
a subsoil use tax;
b tax on excess profit;
c bonuses (subscription and commercial discovery).
Subsoil use tax

Subsoil use taxpayers are subsoil users that extract mineral resources from subsoil,
useful components from minerals or man-made mineral formations; and carry out the
processing of mineral resources with the extraction of mineral components.
The tax base for subsoil use tax is determined based on the cost of the volume
of extracted (mined) finished product (Vmineral produced ), calculated on the weighted average
realisation price (P) for a reporting period:
Tax base = Vmineral produced * P, where P = V sale in cash

V sale in kind
V sale in cash is realisation volumes in cash expression (i.e., cash proceeds) and V sale in
kind is a realisation volume in natural expression (i.e., quantity of metal sold).
Once the tax base is calculated, it will be multiplied by the tax rate established by
the legislation. The tax rate may differ depending on the type of mineral.
Tax on excess profit

Excess profit taxpayers are subsoil users carrying out extraction of certain mineral deposits
(mineral components) and legal entities carrying out the production of certain types of
products from mineral deposits. Companies working under PSA provisions do not pay
the tax on excess profit.
The taxable base is a net excess profit determined as the difference between
the excess profit amount and all other applicable taxes and obligatory payments (e.g.,
payments to the Pension Fund, Road Fund, school education and tax for subsoil use).
The list of minerals and types of product taxed on the excess profit tax method of
tax calculation and other related issues are established by the Ministry of Finance, and
the rates are envisaged in the annual presidential decrees.
Bonuses
Bonuses are one-time payments made by subsoil users. Subsoil users pay the following
bonuses: subscription and commercial discovery.
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Uzbekistan
Subscription bonus
The subscription bonus is a one-time fixed payment by the subsoil user for the right
to carry out his or her activity in prospecting and exploration of mineral resources on
the basis of the relevant licence. The amount of the bonus is set by annual presidential
decrees.
Commercial discovery bonus

The commercial discovery bonus is a payment for each commercial discovery of mineral
deposits on a subsoil plot specified in the relevant licence, including discovery of mineral
resources due to conducting additional exploration works that discover an increase in
the initially established extracting resources. The amount of the bonus for commercial
discovery shall be determined based on the taxable base and an established rate. The
taxable base is equal to the cost of the volume of minable mineral resources, which is
calculated based on commodity exchange prices established at an international stock
exchange from a source of data determined by an authorised state body. In the event of
the absence of such price on the world market, the authorised body determines the cost
of extracted mineral resources. In practice, the volume of minable mineral resources is
approved by the State Resource Committee. Once the taxable base is established, it will
be calculated by the tax rate established by annual presidential decrees.
The parliament sets the types of applicable taxes through laws, while the specific
rates of taxes and compulsory payments are set annually by means of presidential decrees.
Other taxes payable by subsoil users

Subsoil users also pay corporate tax (presently 9 per cent) and VAT (20 per cent).
The new edition of the Tax Code came into effect as of January 2008. The key purpose
of the new Tax Code was to codify all legal acts relating to taxes into a single document,
which should help to avoid possible contradictions between various legal acts that
regulate tax issues.
In the past, the general trend has been to reduce the rates of certain direct taxes
(e.g., profit tax and personal income tax) to encourage economic growth and foreign
direct investment. However, it should be noted that many problems still occur in the
application of indirect taxes and customs duties.
264
Part II
Capital Markets
Chapter 23
BRAZIL
Rodrigo de Campos Vieira 1
I INTRODUCTION
Except for a few large companies (specifically, Vale and MMX), the Brazilian experience
of capitalising mining companies is elementary in comparison to some other countries
with large and developed mining industries. Historically, it is common for Brazilian
junior mining companies to be capitalised by a parent company incorporated and
listed abroad, and preferably in countries such as Canada and Australia where there is
a tradition in financing mining ventures through capital markets. There are a number
of companies with assets in Brazil controlled by such listed junior companies that raise
funds for projects offshore and fund their subsidiaries through capital contributions.
Nevertheless, this increasing presence of junior companies in Brazil may trigger
greater interest in capitalising through the local capital markets. Some pre-operational
companies are considering registering, or have already registered, as publicly held
companies before the securities commission (‘CVM’), and have listed their shares in the
stock exchange to quickly benefit from opportunities to launch their IPOs as soon as a
more positive macroeconomic scenario permits.
Since 2010 the mining industry has experienced, on a global scale, a huge decline
in capital markets deals. Large mining and metals companies are pretty much focused
on maintaining profitable operations by reducing their operational costs and increasing
efficiency, aiming at reducing financial costs to roll over existing debts. Risk aversion amid
market volatility has closed the door for a number of early stage projects that could have
considered an IPO to fund their strategies. One particular Brazilian start‑up focused on
an iron ore project with integrated logistics shelved its IPO last August due to ‘economic
uncertainties in the local and foreign markets in the last months, not favourable to the
1 Rodrigo de Campos Vieira is a partner at TozziniFreire Advogados.
267
Brazil
offer of shares’. A few days later, the same company announced a private placement of
shares in the amount of US$300 million.
II CAPITAL RAISING
i General overview of the legal framework

There are no distinct requirements for a capital raising for mining activities in Brazil.
Early stage junior companies may be required to present a feasibility study before issuing
securities locally in accordance with CVM regulations. Listed mining companies will
be subject to the same disclosure and governance requirements as any other Brazilian
listed company in accordance with applicable regulations and the listing rules of the
BMF&Bovespa.
Although there are no restrictions on foreign investment in mining activities,
the Brazilian congress shall shortly vote on a new regulatory framework for the mining
sector. There is a lot of speculation about potential changes to the current rules regarding
the granting of exploration and mining permits, and in particular regarding potential
bids for concessions of new areas. It is expected by the market that the royalties paid by
mining companies will increase, following the example of the states of Minas Gerais and
Pará, which have recently imposed a new contribution over revenues of some mining
companies in exchange for their government duty of inspecting mining activities.
In addition, a technical report approved by the Federal Attorney General in 2010
and subsequently executed by the Brazilian government (AGU/GQ 001-2008) has
provided a new interpretation of the law that governs the acquisition of rural areas by
Brazilian companies controlled by foreign individuals or companies (Law 5.709/71 and
Decree 74.965/74). According to the technical report, a Brazilian company controlled
by a foreign individual or company will be subject to restrictions on the acquisition or
leasing of rural properties above 50 exploitation modules (one module varies from 10
to 100 hectares) or areas equivalent to 25 per cent of the related municipality territory.
Acquisition of the largest areas now depends on prior governmental authorisation.
ii Market overview
Global funds, including hedge funds and private equity funds with experience of
mining sector risks and long-term return investments, are the natural investors for
mining ventures in Brazil when junior companies are considered. Foreign-listed mining
companies have an increasing interest in companies with projects in Brazil. Asian steel
makers are also seeking investment opportunities as regards iron ore, not only to secure
raw material but also to hedge their supply bought from other companies and countries.
iii Structural considerations

The Brazilian National Bank for Economic and Social Development (‘BNDES’) is the
main source of funds for projects in Brazil and has played a crucial role in providing
funds for mining companies to date. It is likely that new projects will also count on
BNDES, whether as a creditor or a partner. Thus, any debt or equity offer in Brazil
should be structured considering the role of BNDES.
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Brazil
iv Tax considerations
There are no special tax incentives for the mining sector. On the contrary, as explained
above, the current trend is the discussion of an increase in the royalties to be paid by
mining companies. From an investor perspective, there are also no special tax benefits
when any investments are made in the mining sector.
Investments in the Brazilian financial and capital markets by a foreign investor
may be made through the inflow of funds in Brazil in accordance with the National
Monetary Council (‘CMN’) Resolution No. 2,689, dated 26 January 2000. This
Resolution allows foreign investors to invest in the financial instruments and securities
available to Brazilian residents.
There are certain tax benefits for foreign investments under Resolution No. 2,689,
provided that the investment is not made through a tax haven jurisdiction.2
Accordingly, the applicable withholding income tax rates levied on transactions
carried out by such investors are:
a 10 per cent on income and earnings arising from stock funds, swap transactions
and futures on the over-the-counter market; and
b 15 per cent in other cases, including fixed yield investments.
Additionally, investors investing under Resolution No. 2,689 (‘2,689 investors’) are
exempt from taxation on the capital gains earned:
a on transactions carried out in stocks, futures and commodities exchanges, except
in relation to combined transactions that permit a fixed yield result; or
b on transactions with gold on the over-the-counter market.
2,689 investors are also subject to a zero rate of withholding income tax on income
arising from specific infrastructure debentures and investment funds that apply in such
debentures, provided some requirements are met relating to the proper recognition as
an infrastructure project by the Brazilian government of the project to be funded with
debentures. Individuals resident in Brazil also benefit from the zero rate of withholding
income tax on infrastructure debentures and investment funds that apply in such
debentures.
In addition, investments made in governmental bonds and private equity funds
also benefit from a reduction to a zero rate of withholding income tax.
As a general rule, except for the 2,689 investors, non-resident investors are subject
to the same rules applicable to Brazilian residents.
In relation to investments in financial and capital markets, the tax rules may differ
in cases where the investment is considered a fixed or variable-income investment.
2 A tax haven jurisdiction is defined by the law as a country or jurisdiction that does not impose
income tax; imposes income tax at a rate that is lower than 20 per cent; imposes restrictions
on the disclosure of the shareholding composition or on the ownership of investments; or does
not disclose beneficial ownership, even if such investors obtain the registrations under CMN
Resolution No. 2.689. In this case, the foreign investor will be subject to the same taxation
rules applicable to Brazilian residents.
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Income derived from fixed-yield investments, such as debentures, are subject to

withholding income tax at rates decreasing from 22.5 per cent to 15 per cent; the rates
vary depending on the timing of the investment.
On the other hand, investments that are classified as variable-income investments
– which are, generally, gains earned on transactions carried out on a stock exchange,
mercantile and futures exchanges or equivalents (i.e., gains with stocks on the stock
exchange) – are subject to income tax at a rate of 15 per cent (except for day-trade
transactions, whose rate is 20 per cent). Additionally, a withholding income tax of 0.005
per cent on the value of the operation shall be applied on all operations carried out on
Brazilian stock exchanges as an advanced payment of the 15 per cent income tax due.
Any capital gain earned by a foreign investor upon the sale, transfer or disposition
of rights or assets situated in Brazil is subject to withholding income tax at a 15 per
cent tax rate, or 25 per cent in cases where the beneficiary is resident in a tax haven
jurisdiction.
III DEVELOPMENTS
While there are currently no relevant developments that may be mentioned, as the
macroeconomic scenarios improve and there is a clear trend on commodities recovering
recent prices, we believe that some Brazilian companies will be more active in raising
funds, and that the local capital markets will be one of the considered sources. We do
not anticipate any relevant movement in the short term, but are confident that more
developments will occur in the medium term.
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Chapter 24
CANADA
Erik Richer La Flèche, Raymond McDougall and David Massé 1
I INTRODUCTION
More mining companies are listed on the Toronto Stock Exchange (‘the TSX’) and the
TSX Venture Exchange (‘the TSXV’) than on any other stock market in the world. As
at 31 December 2011, 58 per cent of the world’s publicly listed mining companies were
listed on the TSX or the TSXV. Each year, more equity capital is raised in Canada for
mining exploration and development than in any other capital market, and over the past
decade, each year approximately 80 per cent of the world’s mining equity transactions
have been Canadian capital markets transactions.
This is the case even though many of the companies listed in Canada have all or
nearly all of their mining and exploration activities outside Canada. Canada’s mining
capital markets are comprised of Canadian issuers with projects in Canada and abroad,
and foreign issuers with projects in Canada or with no affiliation to Canada other than
their Canadian listing. Canada is where the world comes to finance mining exploration
and development.
As an overview of the Canadian securities regulatory system, in general, regulatory
standards imposed by Canadian securities regulators and stock exchanges are typically
comparable to US standards (although when it comes to mineral disclosure, Canada and
the US have very different rules). The most important thing to understand about the
structure of the Canadian securities regulatory framework, however, is that it is largely
the responsibility of the governments of Canada’s 10 provinces and three territories.
As a result, Canada has no national securities law and no national securities regulator.
Rather, the laws themselves are provincial and territorial, and many substantive aspects of
securities regulation, such as registration and prospectus requirements, and exemptions
1 Erik Richer La Flèche, Raymond McDougall and David Massé are partners at Stikeman Elliott
LLP.
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and continuous disclosure requirements, are harmonised through the use of ‘national
instruments’ or ‘national policies’, which are adopted by each of the provincial and
territorial regulators. In addition, the national electronic filing system (‘SEDAR’) and the
passport system encourage regulators to delegate responsibilities to one another, effectively
creating a system of ‘one-stop shopping’ for issuers and registrants for most issues.
As the home jurisdiction for the TSX and the principal regulator for a majority of
Canadian reporting issuers, the Ontario Securities Commission (‘the OSC’) has generally
taken a more active role in the development of securities law in Canada through the
introduction of various regulatory instruments, policies and rules. As such, the OSC
tends to exercise a very broad regulatory and disciplinary jurisdiction, and is arguably
the nearest equivalent in Canada to the Securities and Exchange Commission in the US.
Given the importance of mining in the Canadian capital markets, the OSC is active
in the formulation and application of mining disclosure rules in Canada. In addition,
given that many mining and exploration companies are based in Vancouver, the British
Columbia Securities Commission (‘the BCSC’) is also active in this area.
Canada’s mining capital markets benefit from the presence of a large community
of bankers, lawyers, engineers and other professionals with deep experience in mining
activities.
There have been a number of notable acquisitions of listed Canadian mining
companies in 2011 and 2012, including the acquisition of Equinox Minerals Ltd by
Barrick Gold Corporation, the acquisition of Consolidated Thomson Iron Mines Ltd by
Cliffs Natural Resources Ltd, the acquisition of Anvil Mining Ltd by Minmetals and the
acquisition of Minefinders Corporation Ltd by Pan American Silver Corp.
While there have been difficulties finding equity for mineral exploration and
development projects through ‘plain vanilla’ equity financings in 2011, the Canadian
capital markets remained relatively active in the mining sector in 2011. According to the
TSX, 90 per cent of all mining equity financings were done on the TSX and TSXV in
2011, making up nearly 40 per cent of all mining equity capital raised. For the period
from 1 January 2012 to 31 July 2012, there were 87 new listings of mining companies
on the TSX and TSXV, and a total of 889 financings by mining companies listed on the
TSX and TSXV, with C$6.4 billion of equity capital raised during such period.
II CAPITAL RAISING

Capital raising in the Canadian capital markets is governed in particular by the securities
laws and regulations of each of the provinces and territories of Canada, the rules of the
stock exchange applicable to listed companies and the corporate law applicable to the
issuer.
Prospectus offerings and private placements

The securities laws and regulations provide that distribution of shares, debt securities
and other securities must be preceded by the filing of a prospectus to be cleared with the
principal securities regulator of the issuer, which is typically the regulator of the province
where the head office of the issuer is located. Subsequent to an initial public offering or
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listing, issuers can proceed with follow-on offerings in an efficient manner through the use
of short-form prospectuses that incorporate by reference the latest financial statements
and other continuous disclosure documents of the issuer. Issuers in the Canadian capital
markets have also made extensive use of a public offering financing method known as
a ‘bought deal’, whereby underwriters commit to purchase an entire offering at a fixed
price immediately before the offering is announced and before any marketing efforts,
thereby providing a quick and efficient method to raise capital without execution risk.
There are exemptions from the prospectus requirements of Canadian securities laws
that allow capital to be raised on a private placement basis. These are applicable whether
or not the issuer is based in Canada. For example, distributions of securities to investors
who qualify as ‘accredited investors’ and purchases of securities for cash at a purchase
price of at least C$150,000 are exempt from the requirement to file a prospectus. These
two exemptions in particular have allowed the Canadian ‘exempt market’ for distribution
of securities to thrive. The relevant criteria to satisfy the definition of ‘accredited investor’
and the C$150,000 thresholds for prospectus exemptions are currently under review in
order to address concerns relating to the continuing adequacy of these criteria and their
impact on the protection of investors active in the exempt market.
In addition to prospectus requirements, any individual or entity who is in the
business of trading in securities must be registered as a dealer, subject to exemptions.
There are exemptions that apply to, among other circumstances, distributions in Canada
of securities of non-Canadian entities by non-Canadian dealers who are registered in a
similar capacity in their jurisdictions.
In addition to obtaining a listing in connection with an initial public offering,
mining projects can also obtain a listing through a reverse takeover pursuant to which an
existing listed shell company acquires a mineral project in consideration for the issuance
of a number of shares that results in the existing owners of the project controlling the
listed company.
Continuous disclosure requirements

Once a company completes an initial public offering by way of a prospectus filed in
a province of Canada, or lists it shares on a Canadian stock exchange, such company
becomes a ‘reporting issuer’ under applicable securities laws and is subject to continuous
disclosure requirements.
The Ontario Securities Commission has stated that, as a general principle, the
purpose of continuous disclosure is to promote equality of opportunity for all investors
in the market. Disclosure achieves this by advising the investors, promptly, of all of
the material facts that might reasonably affect an investment decision. The filing of a
prospectus is the first link in the chain of disclosure, but it must be followed up with
the continuous reporting of information and developments that might affect investment
decisions.
Two kinds of reporting are required under Canada’s continuous disclosure regime:
‘periodic’ and ‘timely’. Periodic reporting requires the reporting issuer to prepare and file
continuous disclosure documents such as financial statements, management’s discussion
and analysis, proxy circulars and annual information forms. Timely reporting provisions
require the reporting issuer to disclose material changes as they occur through press
releases and material change reports. Reporting issuers are also required to file business
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acquisition reports and material contracts in a timely fashion. ‘Reporting insiders’, a

category that includes members of senior management or the board, key personnel and
significant shareholders, must also report trades in the reporting issuer’s securities, as well
as interests in related financial instruments and changes in economic exposure, to the
reporting issuer, generally within five days.
Disclosure for mineral projects

Although the Canadian capital markets, the TSX and TSXV continue to lead global
mining equity finance, this pre-eminent position could have been permanently ended
by the infamous Bre-X scandal in 1997. In an effort to restore confidence in Canadian
capital markets following Bre-X, the Canadian securities regulators, stock exchanges and
mining industry participants worked together to introduce new regulatory standards.
The result was National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (‘NI 43-101’), which provides specific rules for mining disclosure. Canadian
and foreign mining companies accessing the Canadian capital markets, whether by way
of a public offering or through the exempt market, are of course subject to the general
regime of securities laws applicable to all issuers, but in addition they must adhere to NI
43-101. Accordingly, in this chapter we will deal primarily with NI 43-101.
NI 43-101 applies to all disclosure, written and oral, made in Canada by every
issuer (all private and public companies) with respect to a ‘mineral project’ on each
property ‘material’ to such issuer. A ‘mineral project’ means ‘any exploration, development
or production activity, including a royalty interest or similar interest in these activities, in
respect of diamonds, natural solid inorganic material, or natural solid fossilized organic
material including base and precious metals, coal and industrial minerals’.
The disclosure regime under NI 43-101 is founded upon three fundamental
pillars:
a disclosure standards – rules prohibiting certain mineral disclosure and prescribing
mineral disclosure standards;
b qualified persons – rules requiring that a ‘qualified person’ (who, in many
circumstances, must be ‘independent’, but for established producing issuers need
not be independent) prepare or supervise all of an issuer’s disclosure of scientific
and technical information relating to each mineral project on a property material
to the issuer. In most instances, the qualified person must certify the disclosure
and will be liable for any misrepresentations; and
c technical reports – the requirement that all scientific and technical information
relating to a mineral project on each property material to the issuer contained in
a prospectus (or another type of disclosure document set out in NI 43-101) be
based upon and supported by a technical report in prescribed form (a ‘technical
report’) authored and certified by a qualified person (who again for established
producing issuers need not be independent).
Disclosure standards
Under NI 43-101, the general principle is that an issuer may only make disclosure of
a quantity and grade of mineralised material if such disclosure describes the material
within certain categories of either ‘mineral reserves’ or ‘mineral resources’. Mineral
resources are defined within categories based upon the level of confidence and certainty
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as to the quantity and grade of the material being described, where ‘inferred resources’
are the least certain, ‘indicated resources’ reflect greater confidence based upon more
extensive exploration results and ‘measured resources’ are most certain based upon even
more comprehensive results and data. Mineral reserves are mineral resources to which
feasibility-level economic analysis has been applied, such that on the basis of at least a
‘preliminary feasibility study’, the mineral resources have been shown to have economic
feasibility. Mineral reserves are defined in two categories, ‘probable reserves’ and ‘proven
reserves’, again relating to the level of certainty of the material being described.
The introduction of these categories resulted in a level of standardisation in
mineral disclosure from one company to the next. On the other hand, it is important to
recognise that all such categorisations are nonetheless the result of determinations made
by the qualified persons generating the disclosure, having regard to all relevant factors in
light of the given facts, including geology, metallurgy and a host of other considerations.
As a result, while there may be some level of comparability (for example, comparing
indicated resources of silver at one deposit compared to indicated resources of silver
at another), a variety of factors may also make any such comparison one of apples to
oranges, rather than apples to apples.
In general, disclosure of quantities and grades can only be made if stated with
attribution to any of the five categories of reserves and resources.
There are disclosure exemptions, one of which is for ‘exploration targets’. This
exemption is very narrow and must follow the strict guidelines set out in NI 43-101. An
issuer may make disclosure of a potential quantity and grade of a mineral deposit that is
to be the target of further exploration if:
a the issuer expresses the estimate of the quantity and grade in terms of ranges for
both quantity and grade;
b the issuer explains how the estimate was made; and
c the disclosure includes a statement to the effect that ‘the potential quantity and
grade is conceptual in nature, there has been insufficient exploration to define
a mineral resource and it is uncertain if further exploration will result in the
exploration target being delineated as a mineral resource’.
Another exemption is that issuers may make disclosure of mineral reserves and mineral
resources in accordance with certain sets of disclosure standards accepted in other
countries. While certain international codes, such as the JORC Code, are very similar
to NI 43-101 and typically require little to no reconciliation, other codes are less similar
and reconciliation with NI 43-101 is more complicated.
Qualified persons
NI 43-101 introduced the requirement that all disclosure of a scientific or technical
nature (including resources and reserves) disclosed by an issuer in respect of a mineral
project on any of its material properties be based on information either prepared by, or
the preparation of which has been supervised by, a qualified person. Under NI 43-101,
a ‘qualified person’ means an individual who:
a is an accredited engineer or geoscientist;
b has at least five years of experience in mineral exploration, mine development or
operation or mineral project assessment;
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c has experience relevant to the subject matter of the mineral project and the
technical report in respect thereof;
d is in good standing with a self-regulatory professional organisation acceptable
under NI 43-101; and
e in the case of a professional organisation in a foreign jurisdiction, has a certain
minimum membership designation.
If the disclosure described above is written disclosure, the qualified person must be
identified in the disclosure and must disclose how he or she verified the data.
Technical reports are required to be prepared by or under the supervision of one or
more qualified persons, and such qualified persons are required to sign and file with the
securities regulatory authorities a certification and consent. In addition, in connection
with the preparation of a technical report, at least one qualified person responsible for
preparing or supervising the preparation of such technical report must complete a current
personal inspection of the property that is the subject of the technical report.
Qualified persons must complete certifications and consents (addressed to the
applicable securities regulatory authorities) to each technical report before it is filed on
SEDAR. When filing a technical report, if the information in the technical report is also
included in a disclosure document, the qualified person must also complete and file a
consent confirming that the qualified person has read the disclosure, and that it fairly
and accurately represents the information in the technical report.
The general rule in NI 43-101 is that qualified persons are required to be
‘independent’ of an issuer, but a non-independent qualified person is entitled to act for
a ‘producing issuer’. A producing issuer is an issuer that has had gross revenues derived
from mining of at least C$30 million in its most recently completed financial year and
at least C$90 million aggregate in the three most recently completed financial years. For
the purposes of NI 43-101, a qualified person is ‘independent’ of the issuer ‘if there is no
circumstance that could, in the opinion of a reasonable person aware of all relevant facts,
interfere with the qualified person’s judgment regarding the preparation of the technical
report’.
Technical reports
Technical reports are of fundamental importance in Canada, as the information they
contain will form the basis of all of the issuer’s disclosure about its material mineral
projects. Subject to certain narrow exemptions, technical reports are required to be
prepared by qualified persons who are independent of the issuer (and accordingly, the
preparation of technical reports can have a significant impact on the timeline of any
listing or financing transaction).
An issuer is required to prepare and file a technical report in the circumstances set
out in NI 43-101. In general terms, NI 43-101 requires an issuer to file a technical report
to support disclosure of scientific or technical information in any of a number of public
disclosure documents, notably:
a a prospectus;
b an annual information form;
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c a management information circular in which such information is presented and

describing a transaction in which securities are to be issued; and
d a takeover bid circular in which a first time disclosure is made of a preliminary
assessment, mineral reserves or mineral resources in respect of a property material
to the offeror and in which the offeror is offering its securities as consideration in
the bid.
Usually, the technical report must be filed not later than the time the disclosure document
containing the information it supports is filed or made available to the public.
An issuer is also required to prepare and file a technical report to support disclosure
in a press release or other written disclosure where such disclosure is either:
a a first time disclosure of a preliminary assessment, mineral reserves or mineral
resources on a property material to the issuer and where such disclosure constitutes
a material change in respect of the affairs of the issuer; or
b a change in a preliminary assessment, mineral reserves or mineral resources on a
property material to the issuer and where such disclosure constitutes a material
change in respect of the affairs of the issuer.
However, an important distinction to be made in respect of press releases is that the

technical report is to be filed within 45 days of the issuance of the press release.
The form and content of technical reports are prescribed in Form 43-101F1.
Technical reports are all required to exactly follow the form requirements (headings,
contents). Additionally, technical reports are required to be prepared for a mineral
project on each property ‘material to an issuer’.
A key issue in respect of the technical report requirement is the meaning of the
phrase ‘material to an issuer’. Essentially, the determination of what is ‘material’ to an
issuer is a determination to be made by management of the issuer, and not by a securities
regulator. It is a determination to be made ‘in the context of the issuer’s overall business
and financial condition, taking into account qualitative and quantitative factors, assessed
in respect of the issuer as a whole’. In other words, materiality in the context of technical
reports will clearly be specific to a given issuer and its own circumstances – what would
be material to one issuer may not be material to another.
In the context of public offering transactions by way of prospectus, the securities
regulatory authority or regulator (each a ‘securities commission’) in the relevant Canadian
jurisdictions and the TSX or TSXV will review and may comment upon the preliminary
prospectus. The contents of technical reports will also be subject to detailed review and
comment by the securities commissions and the applicable stock exchange. Geological
and mining engineers with significant expertise and experience in mineral disclosure
matters on staff with the stock exchanges and certain securities commissions in particular
will examine, in detail, an issuer’s technical reports and mineral disclosure. An issuer will
be required to file an amended and restated technical report to address all comments,
and, given that the issuer’s prospectus disclosure will be based upon the technical report,
significant amendments and restatements can result from a review. Typically, NI 43-
101 experienced legal counsel will be engaged directly with the qualified person and
the issuer in the preparation of the technical report well in advance of filing it with the
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securities commissions and applicable stock exchange, in order to minimise regulatory

comments and issues, deficiencies and time delays.
Corresponding with the high level of activity by exploration and mining issuers
in the Canadian capital markets, the securities commissions and stock exchanges have
also increased their own levels of activity. As mineral disclosure reviews and comments
are occurring at an unprecedented level of frequency and detail, it is important that
issuers focus on NI 43-101 and the quality of their mineral disclosure from the outset
in connection with all of their continuous disclosure filings, and when preparing for any
Canadian capital markets or public company transaction.
Foreign investment
The direct acquisition of control of a Canadian mining business by a ‘WTO’ investor
would be reviewable under the Investment Canada Act (‘the ICA’) if the book value of
assets of the target is above a certain threshold. This threshold is revised every year. In
2012 it was C$330 million. For direct acquisitions where neither the investor nor the
persons who control the vendor are WTO countries the threshold is considerably lower
(C$5 million). Indirect acquisitions of control of a mining business by or from WTO
investors are exempt from review.2
ii Market overview
Canada’s two principal stock exchanges, the TSX and the TSXV, cater to the needs of
domestic as well as foreign mining concerns. The TSX is Canada’s stock exchange for
large capitalisation issuers. The TSXV attracts companies with smaller capitalisations.
There are also alternative trading systems and smaller stock exchanges providing a certain
level of competition to the TSX and TSXV.
The investors that are generally active in the Canadian capital markets include
institutional money managers, pension funds, exchange-traded funds, mutual funds,
hedge funds and arbitrage funds. A number of these funds are focused solely on the
mining and resource sectors. In addition, retail investors are actively involved in Canada’s
capital markets and public offerings. Canadian underwriters will typically allocate to
retail investors a relatively significant proportion of a public offering compared to the
established practice in other markets such as the UK or US capital markets.

Structural considerations relating to capital raising in Canada will typically revolve
around the choice of a debt or equity investment, together with an evaluation of the
tax residency of the issuer, and the resulting application of withholding taxes on any
dividends or interest being paid to the non-Canadian investors. The different treatment
of debt and equity investments and related Canadian tax rules pertaining to deduction
of interest and taxation of dividends, capital gains and interest payments in the hands
of the recipient is outside of the scope of this chapter. However, summary information
2 Additional information relating to the ICA and foreign investment restrictions in Canada is
provided in Section V.iii of the Canada Mining Law chapter.
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relating to withholding taxes on interest payments and dividends by Canadian mining

companies to non-Canadian residents is discussed below.
In addition, important structural considerations apply at the time of the
acquisition of a publicly listed Canadian company, which can be achieved by acquiring
the shares of the company from its shareholders or by acquiring all or a portion of the
project and other business assets from the company.
The principal non-tax reason for preferring an asset purchase in Canada is the
ability to choose the assets to be acquired (although tax attributes cannot be purchased
from the company) and the liabilities to be assumed (although certain liabilities may
flow by operation of law to the buyer, such as environmental liability, which generally
flows with the land and, in most jurisdictions, collective agreements relating to unionised
employees). Share sales also have a number of non-tax advantages, including simplicity
from a conveyancing perspective, fewer third-party consents and simplicity in dealing
with employees.
The sale of all or substantially all of the assets of a Canadian company will require
prior shareholder approval. Accordingly, it is typical for the acquisition of a publicly
listed Canadian company to be effected through the purchase of its stock through a
takeover bid made to its public shareholders, or a plan of arrangement, the Canadian
equivalent of the UK ‘scheme of arrangement’.
Mining exploration is fraught with risk and mining production is capital intensive.
To compensate for this, the Canadian tax system has adopted a number of measures
designed to provide tax relief to companies engaged in the mining sector, including:
a favourable deduction of Canadian exploration expenses and Canadian
development expenses;
b accelerated depreciation for certain types of tangible property;
c tax credits for certain intangible property expenses;
d 20-year operating loss carry-forward period; and
e indefinite carry forward for capital losses.
In addition, tax advantages are provided to investors in Canadian resources companies.

In particular, flow-through shares, a form of equity financing, allow an issuer to issue new
shares to investors at a higher price than it would ordinarily receive for similar shares.
While there are a number of requirements and conditions to be satisfied, essentially, the
investors and the company agree that the investors will purchase flow-through shares,
the company will incur expenditures on Canadian exploration expenses within a specific
period, and the company will renounce such expenses in favour of the investors, for
their use. Investors are paying a premium for flow-through shares because they acquire
and deduct some of the company’s Canadian exploration expenses (and in some cases
Canadian development expenses), thereby reducing their Canadian taxes. Flow-through
shares financing is typically conducted by companies that do not have taxable income
and therefore have no immediate need to deduct the expenses.
In addition, a number of relevant tax structuring considerations apply to the
acquisition of a Canadian mining company. From a tax perspective, a share purchase is
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the sole means of permitting a buyer to preserve significant tax attributes of the target
company, such as tax-loss carry forwards and other tax accounts. The share purchase will
result in a change of control for income tax purposes, and will thus trigger a taxation
year-end and an obligation to file a tax return in respect of such year, and will also result
in restrictions on the utilisation of certain tax attributes of the company in the future. An
asset purchase transaction, on the other hand, will permit the allocation of the purchase
price among the purchased assets – inventory (full deductibility); depreciable capital
property and tax goodwill (partial deductibility through ‘tax depreciation’); and non-
depreciable capital property (e.g., land).
In either case, a foreign purchaser will typically establish a subsidiary company
incorporated in a Canadian jurisdiction to act as the acquisition vehicle. The use of a
Canadian acquisition vehicle is beneficial for three basic reasons:
a to facilitate the deduction of any interest expense associated with the bid financing
against the Canadian target’s income;
b in most cases, to maximise the amount of funds that can be repatriated from
Canada to a foreign jurisdiction free of Canadian withholding tax; and
c in the case of a share acquisition, to possibly accommodate a tax cost step-up of
the Canadian target’s non-depreciable capital property (e.g., shares of a subsidiary
company and other capital assets).
Canada does not provide for tax returns on a consolidated basis (as in the US) and does
not otherwise provide group relief. Accordingly, if the Canadian acquisition vehicle is
capitalised with any interest-bearing debt (either third-party debt or debt from within
the corporate group), the Canadian acquisition vehicle and Canadian target company
are often amalgamated immediately following the completion of the acquisition so that
the interest expense on the debt can be used to offset or shelter the income generated by
the business.
To this end, Canadian thin-capitalisation rules restrict or limit the deduction
of interest paid by Canadian companies to ‘specified non-residents’ to the extent that
the ratio of interest-bearing debt owed to such specified non-residents exceeds equity
(basically retained earnings, contributed surplus and capital) by more than two to one.
A non-public company may generally return or repatriate cross-border capital to
a non-resident shareholder free of Canadian withholding tax and there is no requirement
that income be returned before capital. However, any such return of capital is subject to
applicable corporate solvency tests and may impact thin-capitalisation limitations (see
above).
There is no Canadian withholding tax on interest paid by a Canadian resident to
foreign arm’s-length lenders (provided the interest is not participatory). Interest paid to a
non-arm’s length lender is subject to Canadian withholding tax at a rate of 25 per cent,
but this rate may be reduced under the terms of an applicable income tax convention or
treaty (the withholding tax rate on interest is typically reduced to 10 per cent under the
terms of a majority of Canada’s international tax treaties).
A dividend paid by a Canadian company to a non-resident shareholder is subject
to Canadian withholding tax at the rate of 25 per cent, but this rate may be reduced
under the terms of an applicable income tax convention or treaty (the withholding tax
rate on dividends is typically reduced to 5 per cent in circumstances where the non-
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resident shareholder owns a significant or controlling interest in the Canadian company

paying the dividend).
The majority of Canada’s reciprocal tax treaties provide favourable tax withholding
rules in respect of distributions and other payments received from Canadian companies,
and possibly relief from capital gains tax upon a disposition of the shares of a Canadian
company that derives its value principally from real property interests situated in Canada
where such property is property in which the business of the Canadian company is carried
on. Therefore, a foreign investor, after considering its broader multinational network
of companies, may wish to consider structuring its investment in Canada through a
jurisdiction that has a favourable tax treaty with Canada.
III DEVELOPMENTS
As a result of a number of factors, including the economic turmoil within Europe,

concerns over the ability of China to continue to grow at the pace experienced in prior
years and risk aversion in the market, a number of investors have reduced their exposure
to commodities and volatile mining stocks. Mining companies have therefore been forced
to look at alternative sources of capital in order to pursue exploration and development.
Alternative financing options have recently included royalty and streaming
arrangements, pre-payments against off-take commitments, high-yield debt, equity
investment from strategic investors and joint venture arrangements with strategic
investors resulting in dilution at the project level instead of dilution at the equity level.
Private equity funds have also become more active in the resources sector, which has
typically not been seen as a good fit for the private equity model.
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Chapter 25
MONGOLIA
Yancy Cottrill and David C Buxbaum 1
I INTRODUCTION
At the beginning of 2012 there appeared to be no limit to the growth of the mining
capital markets in Mongolia. After the Mongolian Stock Exchange (‘the MSE’) and the
London Stock Exchange (‘the LSE’) entered into a partnership in April 2011, the MSE
began to show signs of attaining international standards,2 and major publications were
heralding Mongolia as the fasting-growing economy of the next decade.3 There appeared
to be nothing that could prevent the country from becoming the favourite place for
foreign investment, with the mining industry at the forefront; Mongolia had seized the
claim of best frontier market for investors.4
However, the optimism surrounding the mining capital markets was dampened
by the passing of a new law in May 2012 relating to foreign investment. On 24 May
2012, the Mongolian government promulgated the new Law on Regulation of Foreign
Investment in Economic Entities Operating in Sectors of Strategic Importance (‘the
Law on Regulation of Foreign Investment’)5 on the back of a major deal that would
1 Yancy Cottrill is an attorney and David C Buxbaum is senior counsel at Anderson & Anderson
LLP.
2 ‘LSE signs agreement to restructure, develop Mongolian Stock Exchange’; staff writer, Banking
Business Review, 19 January 2011: http://ecnandexchanges.banking-business-review.com/news/
lse-signs-agreement-to-restructure-develop-mongolian-stock-exchange-190111; ‘Mongolian
Stock Exchange making changes’; News.mn, 23 September 2011: http://english.news.mn/
content/80870.shtml.
3 ‘Mine, all mine’; The Economist, 21 January 2012: www.economist.com/node/21543113.
4 ‘Mongolia tops charts in risky frontier markets’; Emma Boyde, Financial Times, 27 May 2012:
www.ft.com/intl/cms/s/0/d40c5492-a4c4-11e1-9908-00144feabdc0.html#axzz25HUhiZGb.
5 Available at www.bcmongolia.org/images/Laws-of-Mongolia/filaw.pdf.
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have transferred the majority of SouthGobi Resources to the Aluminum Corporation

of China Limited (‘Chalco’).6 This single act has forced investors to once again view the
Mongolian mining capital markets with the same scepticism afforded other emerging
markets.
While the Law on Regulation of Foreign Investment does not prohibit foreign
investment, it does place restraints on certain strategic sectors, including mining.7 With
uncertainty existing regarding government approval and the application of the Law,
investors are waiting for clarification of the Law, or for amendments that will remove the
requirement of government approval.8 Due to its negative impact on the country’s once-
promising capital market, the government is currently rethinking the Law.9
Despite the uncertainty in the mining capital markets in Mongolia, optimism
does remain. The new Law on Regulation of Foreign Investment also has positive aspects
that help, rather than hinder, investment in the mining capital markets. The new Law
does not remove the favourable tax exemptions and preferences afforded by the Foreign
Investment Law to foreign investors in mining and, while it does hamper efficiency,
it does not prohibit foreign investors from becoming majority shareholders in any
sector.
This optimism also extends to hopes that the newly elected government will
finally pass the new Securities Market Law, which has been under consideration for
the past six years.10 The new Securities Market Law will allow for companies to dual
list on the MSE, makes a clear distinction between legal versus beneficial ownership
(allowing for custodial, trustee and broker services), and will strengthen the disclosure
and transparency requirements.11 The new Securities Market Law, which is expected to
be passed this year or in early 2013, will set the MSE on a path to potentially become
on par with exchanges in more advanced jurisdictions.12 In the meantime, initial public
offerings in Mongolia are expected to increase.
IPOs in Mongolia were expected to boom in 2012; unfortunately, the much-
anticipated public offering of Erdenes Tavan Tolgoi (‘ETT’) (a state-owned company
that holds one of the world’s largest coking-coal deposits), which was expected to lead this
6 Mongolia passes watered-down foreign investment law; Terrence Edwards, Reuters, 18 May 2012:
http://uk.reuters.com/article/2012/05/18/mongolia-mining-idUKL4E8GI3HV20120518.
7 Op. cit. 5.
8 Mongolian Mining Drops to Record Low on Investment Rule Concerns; Patrick Boehler,
Bloomberg, 25 Jun 2012: www.bloomberg.com/news/2012-06-25/mongolian-mining-drops-
to-record-low-on-investment-rule-concerns.html.
9 ‘Mongolia opens talks on investment laws’; David Pilling, Financial Times, 29 May 2012: www.
ft.com/intl/cms/s/0/3215c23a-a98e-11e1-9972-00144feabdc0.html#axzz25HUhiZGb.
10 Mongolia’s new securities markets law; John Viverito et al., thedeal.com, 11 April 2012: www.
thedeal.com/content/regulatory/mongolias-new-securities-markets-law.php.
11 Id.
12 Mongolia’s draft securities law explained; News.mn, 29 May 2012: http://english.news.mn/
content/109386.shtml.
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boom, has been pushed back until early 2013.13 The passing of the Law on Regulation
of Foreign Investment, and the resulting political uncertainty and downturn in mining
capital markets, have also pushed the predicted boom back.14
The most notable IPO offered in the mining sector in 2012 was E-Trans Logistics
JSC (‘ETR’), which operates a cargo-loading terminal in Zamyn-Uud on the southern
border of Mongolia.15 The IPO of ETR was a huge success, with market demand for
shares exceeding market supply by an estimated 41.6 per cent.16 ETR is currently rated
as the most successful IPO listed on the MSE since 2005.17
Altain Khuder, a Mongolian iron ore mining company that owns the Tayan Nuur
iron ore mine, plans to raise US$300 million by an IPO on the Hong Kong Stock
Exchange.18 The IPO is scheduled for the fourth quarter of 2012.19
While the mining capital markets in Mongolia are down during the first half
of 2012, they should rebound going into 2013. However, 2013 could surpass the
expectations that were once so high for 2012 under the following conditions:20
a the new coalition government (which formed on 20 August)21 can address
investors’ concerns about the Law on Regulation of Foreign Investment;
b the government-issued ban on exploration licences is not extended;
c the new Securities Market Law is passed; and
d ETT finally issues an IPO, as expected.
13 ‘‘Minegolia’ Struggles With IPOs’; David Winning, The Wall Street Journal, 22 May 2012:
http://blogs.wsj.com/deals/2012/05/22/minegolia-struggles-with-ipos.
14 ‘Foreign firms dig deep for Mongolia’s commodity riches’; Jonathan Kaiman, The Guardian, 20
August 2012: www.guardian.co.uk/world/2012/aug/20/mongolia-boom-commodity-riches.
15 First IPO of the Year was Successfully Traded; InfoMongolia.com, 24 April 2012: www.
infomongolia.com/ct/ci/3871/First%20Mongolian%20IPO%20of%20the%20year%20
was%20successfully%20traded.
16 Id.
17 Mongolian Stock Exchange – IPO Showcase: www.mse.mn/content/show/id/30.
18 UPDATE 1-Mongolia iron ore miner in $300 mln Hong Kong IPO-source; Denny Thomas et
al., Reuters, 23 May 2012: http://uk.reuters.com/article/2012/05/23/mongolia-miningipo-
idUKL4E8GN19N20120523.
19 Op. cit. 13.
20 Ban on exploration license issuance will not be extended; Business-Mongolia.com, 31 August 2012:
www.business-mongolia.com/mongolia/2012/08/31/ban-on-exploration-license-issuance-
will-not-be-extended; ‘In Mongolia, a New, Penned-In Wealth’; Dan Levin, New York Times, 26
June 2012: www.nytimes.com/2012/06/27/world/asia/mongolias-coal-deposits-draw-neighbors-
attention.html?pagewanted=all.
21 ‘Coalition Government of Mongolia Now Complete’; E Dari, The UB Post, 22 August 2012:
http://ubpost.mongolnews.mn/?p=671.
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II CAPITAL RAISING

The drafted new Securities Market Law addresses the faults existing within the current
Security Markets Law, which has been in place since 1994.22 The new Law is expected to
be passed in late 2012 or early 2013.23 Once passed, it will open up the mining capital
markets to expansion.
The current Security Markets Law requires companies wishing to issue securities
to be registered in Mongolia.24 This deters foreign companies registered in another
country from registering securities on the MSE as a secondary listing. The new Security
Markets Law will eliminate this problem by allowing foreign companies to dual list on
the MSE without having to incorporate in Mongolia.25
Another restriction in the existing Security Markets Law is that custodial, trustee
or beneficiary rights to securities are not recognised. At present, only registered holders
of securities are legally recognised, which deprives mining companies from being able
to use broker, trustee or custodial services to trade their shares. This antiquated system
of securities ownership recognition will be remedied under the new Law. Article 23 of
the draft Law provides for a system common in more developed stock exchanges, which
allows for securities broker, trustee and custodial services.26
The current regulations regarding IPOs are found in Article 6 of the Securities
Market Law.27 An IPO can be made either publicly or privately. If it is a public offering,
then the issuer must register with the Federal Regulatory Commission (‘the FRC’) and
submit a registration statement.28 The registration statement must include:
a the name and address of the issuer and underwriter, the names of members of the
board of directors and a copy of the certificate of incorporation;
b the financial statements of the issuer for the last three years verified by an
independent auditor (if the issuer or company has been in existence for more
than one year);
c the type, amount, face value, term of issue and a sample of the security; and
d documents verifying the financial position of the issuer, a list of major contracts
entered into with other parties and the viability of the issue of securities.29
22 Op. cit. 10.

23 Id.
24 Securities Market Law, Article 4(2), (2003) (Mongolia), available at: www.amcham.mn/laws/
security%20law.pdf.
25 Security Markets Law Draft, Article 15, (2011) (Mongolia), available at: www.bcmongolia.org/
laws.
26 Id. at Article 23.
27 Op. cit. 24 at Article 6.
28 Id.
29 Id.
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Mongolia
The registration must be approved by the board of directors of the issuer before it is
submitted to the Securities Committee.30 The Committee will declare the registration
statement valid or reject it within 30 days of receiving it.31 Once accepted, an issuer may
list its securities directly on the primary market or through an underwriter.32
The advances proposed by the draft Securities Market Law will modernise the
MSE and enable it to compete on the world stage. The mining sector drives the stock
exchange in Mongolia; therefore, it is imperative that the changes in the Securities Market
Law take place for the mining capital markets to grow. The passing of this Law, coupled
with the implementation of the changes suggested as a result of the MSE’s partnership
with the LSE, should boost the mining capital markets in late 2012 or early 2013.
The biggest restriction for investors in the Mongolian mining sector has certainly
been the Law on Regulation of Foreign Investment. The Mongolian Ministry of Foreign
Affairs dubbed the passing of the Law in an official press release as the ‘golden middle’,
whereby the interests of both investors and Mongolia will be protected.33
The Law was passed just prior to Chalco’s bid to become the majority shareholder
in SouthGobi (see Section I, supra).34 It was widely rumoured that the reason behind the
Law was to prevent a Chinese company from taking control over Mongolian minerals.
If this was indeed the case, then it succeeded; the deal was abandoned just three months
after the Law was passed.35
The Law on Regulation of Foreign Investment applies to foreign investors in the
mining sector under four conditions:
a a foreign-owned entity wishing to make an investment in an entity already
operating in Mongolia;
b a foreign-owned entity wishing to operate in a strategic sector or undertake a
transaction (as defined in Article 6) with an entity in a strategic sector;
c a new foreign-owned company wishing to acquire shares in a strategic entity; and
d if the shares of a foreign investor exceed 49 per cent of strategic entity and the
investment is more than 100 billion tugriks.36
A foreign investor meeting the conditions of one of these four categories must seek
government approval for the transaction.37
The sectors identified as strategic are mining; banking and finance; and media,
information and communications.38 Article 4 of the Law on Regulation of Foreign
30 Id.
31 Id.
32 Id.
33 Op. cit. 5.
34 ‘Chalco ends Mongolia coal bid’; Stefan Wagstyl, Financial Times, 3 September 2012: http://
blogs.ft.com/beyond-brics/2012/09/03/chalco-ends-mongolia-coal-bid.
35 Id.
37 Op. cit. 5.
38 Op. cit. 5 at Article 5.1.
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Mongolia
Investment states that foreign investors in these strategic sectors must receive government
approval to purchase more than 49 per cent of a company’s shares.39 This additional
burden of seeking government approval to gain a majority interest in the mining sector
is a new restriction.
A further burden placed on foreign investors in the mining sector as a result of
the Law on Regulation of Foreign Investment is that an entity operating in this strategic
sector must give priority to Mongolians in procuring goods, works and services.40 This
provision has been largely overshadowed in the media due to the impact of Article 4’s
effect on the Chalco deal, but its nationalist intent is much more apparent. Furthermore,
Article 4 is much less clear about how to comply with its provision, simply stating that
‘the Government shall adopt the rules for priority rights’.41
ii Market overview
The mining sector drives the capital markets in Mongolia. While every citizen holds
shares in ETT (the government passed a resolution in 2010 that gave every citizen 1,072
shares in the company), in other cases the investors vary. The market is considered to be
a frontier market, and thus attracts investors seeking high rewards and willing to take on
the associated risks.42 Recent studies suggest that Mongolia is a safer bet than previously
thought. Mongolia is ranked ninth (out of 25) in Behre Dolbear’s 2012 Ranking of
Countries for Mining Investment43 (up from 11th in 2011). In addition, according to
the United Nations Conference on Trade and Development World Investment rankings
of countries’ success in attracting foreign direct investment, Mongolia ranked eighth in
the world in 2012.44
The interest of venture capitalists in the Mongolian market has gained momentum
with the expected passing of the new Securities Market Law and the possibility for
companies to dual or triple list on the MSE.45 The following foreign-exchange listed
companies that operate or have assets in Mongolia could take advantage of this
change:
a Mongolian Mining Corporation;
b Mongolia Energy Corporation Limited;
c Prophecy Coal Corp;
d SouthGobi Resources Ltd;

41 Id.
42 ‘Frontier Markets: Investing Around Asia’s Edges’; Brian McLeod, Asia Venture Capital Journal,
15 February 2012: www.avcj.com/avcj/analysis/2152524/frontier-markets-investing-asia-s-
edges.
43 Behr Dolbear 2012 Ranking of Countries for Mining Investment, available at: www.dolbear.
com/news-resources/documents.
44 United Nations Conference on Trade and Development World Investment Report 2012, p. 29,
available at: www.unctad.org/en/PublicationsLibrary/wir2012_embargoed_en.pdf.
45 Op cit. 10.
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e Aspire Mining Ltd;

f Xanadu Mines Ltd; and
g Petro Matad Ltd.46
The success of the mining sector is also attracting investors to the services and
infrastructure industry, which is supporting the growth of the mining sector. In February
2012, it was reported that Mongolia’s first private equity firm, Mongolia Opportunities
Partners, had targeted 30 to 40 companies that indirectly provide services to the mining
sector for investment.47 This strategy may be a more convenient option for investors
seeking to benefit from the mining boom and to gain a majority share in a company
without the added burden of getting government approval under the Law on Regulation
of Foreign Investment.
The countries with the most foreign direct investment in Mongolia are China
and Canada;48 China’s need to find a source of commodities outside its borders is well
documented,49 while Canadian company Turquoise Hill Resources (formerly Ivanhoe
Mines) led the mineral exploration surge in Mongolia.50 The Netherlands, Korea and
the Virgin Islands are the other countries on the list of the top five countries providing
foreign direct investment in Mongolia.51
Korea and China account for 68 per cent of the total foreign-invested companies
in Mongolia. Mongolia’s efforts to attract investors from Russia, Japan and the US in
recent years appear to have been successful;52 along with Korea and China, they complete
the top five countries with the most foreign-invested companies in Mongolia.53
46 Id.
47 Op. cit. 42.
48 Foreign Investment and Foreign Trade Association of Mongolia – Investment Environment,
available at: www.investmongolia.com/fifta/env.php?eid=4.
49 ‘China, rich with coal, seeks more next door in Mongolia to meet its energy needs’; Andrew
Higgins, The Washington Post, 17 July 2011: www.washingtonpost.com/world/asia-pacific/china-
rich-with-coal-seeks-more-next-door-in-mongolia-to-meet-its-energy-needs/2011/07/01/
gIQADIncII_story.html.
50 Turquoise Hill Resources history available at: www.ivanhoemines.com/s/Oyu_Tolgoi.asp?
ReportID=379190.
51 Op. cit. 48.
52 U.S. investment helps boost Mongolia’s development: president; English.news.cn., 10 July 2012:
http://news.xinhuanet.com/english/world/2012-07/10/c_131704630.htm; ‘Mongolia, N. Korea
look to Russia’; Jargalsaikhan Mendee, Bangkok Post, 28 June 2012: www.bangkokpost.com/
news/local/309651/mongolia-n-korea-look-to-russia; Mongolia is successfully starting to engage
Japan into strategic and economic partnership; Frontier Securities: www.frontier.mn/index.php/
research/daily-report/308-mongolia-is-successfully-starting-to-engage-japan-into-strategic-and-
economic-partnership.
53 US Embassy in Ulaanbaatar 2012 Mongolia Investment Climate Statement, p. 87, available at:
www.nambc.org/docs/NAMBC-2012-mongolia-investment-climate.pdf.
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After its communist regime ended in the early 1990s, Russia has begun to rebuild
its bonds with Mongolia.54 It plans to invest in the extension of the Trans-Mongolian
railway, which will help exports of coal to Russia, Japan and South Korea.55
Mongolia has also targeted the US in order to attract US direct investment into
Mongolia’s mining sector.56 During a visit in July by the US Secretary of State, Mongolia’s
President stated that US investment has boosted the mining sector in his country,57 while
the US Secretary of State expressed her willingness to encourage American companies to
invest in and become more involved in economic engagement in Mongolia.58
Finally, Mongolia has sought Japanese investment in the mining sector, and
in infrastructure that will benefit the mining sector.59 Japan and Mongolian mining
companies are signing bilateral cooperation agreements to improve the railroads that
transport minerals, and to build power plants at the site of mines.60 Japan has also loaned
Mongolia US$270 million to build a new airport, which will allow the use of bigger
aircraft that can transport selected high-value minerals and lessen Mongolia’s dependency
on its railway system.61
In general, Mongolia is actively seeking to bring in investors from many of the top
economies in the world to boost its mining capital markets. With the expected passing
of the Securities Market Law in late 2012 or 2013, companies who are already active in
Mongolia will join the markets as well. All Mongolia’s efforts will result in the country
continuing to be ranked as one of the best mining capital markets for investors in the
future.

The considerations that must be taken into account when structuring a transaction to
raise capital are specified in the Law on Regulation of Foreign Investment. Under Article
6, government approval is required for all transactions in the mining sector that involve
54 ‘Mongolia, N. Korea look to Russia’; Bangkok Post, Jargalsaikhan Mendee, 28 June 2012: www.
bangkokpost.com/news/local/309651/mongolia-n-korea-look-to-russia.
55 Asian Cargo Hitching Ride on Trans-Siberian Railway; Asahi Shimbun, News.mn, 24
August 2012: http://english.news.mn/content/117955.shtml; ‘Mongolia, N. Korea look to
Russia’; Bangkok Post, Jargalsaikhan Mendee, 28 June 2012: www.bangkokpost.com/news/
local/309651/mongolia-n-korea-look-to-russia.
56 Op. cit. 52.
57 Id.
58 Secretary Clinton praises Mongolia’s democracy, emphasizes need for expansion of bilateral economic,
trade and commercial ties; North American-Mongolia Business Council: www.nambc.org.
59 Mongolia is successfully starting to engage Japan into strategic and economic partnership; Frontier
Securities: www.frontier.mn/index.php/research/daily-report/308-mongolia-is-successfully-starting-
to-engage-japan-into-strategic-and-economic-partnership.
60 Id.
61 Mongolia’s Ulaanbaatar to Have New International Airport; 2point6billion.com, 23 May 2011:
www.2point6billion.com/news/2011/05/23/mongolias-ulaanbaatar-to-have-new-international-
airport-9339.html.
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foreign investors.62 The level of approval will depend upon the dollar amount of the
investment and the percentage of shares in the mining company that are at stake.63
Transactions listed under Article 6 will require a permit, thereby allowing the
government to monitor the control of foreign-invested companies in Mongolia’s strategic
sectors (including the mining sector). Such transactions include the following:
a acquiring one-third or more of the shares of a company in the mining sector; or
b controlling a company in one the following ways:
• conferring an unconditional right for the election of the executive management,
the majority of the joint executive management and the board of directors of
an entity in the mining sector;
• ensuring the rights to veto a decision of the management of an entity in the
mining sector;
• conferring rights to enforce the directions of the management of an entity
operating in the mining sector, determine its decisions and exercise its
economic activities;
• any transaction likely to result in the buyer’s and the seller’s monopoly in the
commercialisation of raw materials and their products on the international
and Mongolian markets;
• any transaction likely to directly or indirectly have an impact on the market or
the price of Mongolian mining products for export; or
• any transaction whose conclusion would result in a decrease of shares of the
company that is operating in the mining sector by itself, or any persons and
third parties having a common interest with that investor.64
This permit requirement under the new Law may cause significant delay in obtaining
approval for foreign investment, although this remains to be seen; the government has
yet to adopt a detailed regulation regarding the receipt and discussion of applications in
order to make a decision on granting permits.65
Individuals wishing to undertake a transaction listed under Article 6 must submit
an application to the state administrative body responsible for foreign investment
through an entity operating in the strategic sector and registered in Mongolia.66 While
the permit process is currently unclear in regard to its overall effect on transactions in the
mining sector, it is certain to them slow down to some degree, and this should be taken
into consideration when structuring a transaction.
As previously stated, if a transaction involves a foreign investor purchasing in
excess of 49 per cent of the shares in a mining entity, and the amount of the investment
is over 100 billion tugriks, such transaction will need to be approved by Mongolia’s

63 Id.
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Mongolia
parliament (see Section II.i, supra).67 This should also be taken into account when
structuring a capital raising transaction.
One potential hurdle for investors in Mongolia’s mining capital markets is the Law
on Regulation of Foreign Investment requirement that both foreign and domestic entities
operating in the mining sector give priority to Mongolian nationals when procuring
goods, works or services.68 However, since the government has yet to provide rules for
these priority rights, compliance with this requirement remains a little ambiguous at this
time.
Mongolia offers a number of tax advantages for foreign investors wishing to engage in
the mining industry. A number of tax preferences and exemptions existed under the
Foreign Investment Law.69 Foreign-invested companies in the mining sector may benefit
from exemptions on certain types of machinery used as registered capital and certain
customs duties, and may also receive tax preferences.
Most reports in the media about the new Law on Regulation of Foreign Investment
have focused on its requirement to obtain government approval to become a majority
shareholder in a mining company while ignoring its positive aspects: the new Law does
not strip foreign investors in the mining sector of the advantageous tax exemptions
available under the Foreign Investment Law, including an exemption from custom
duties and sales tax on technological equipment and machinery that forms part of the
registered capital.70 This exemption is especially advantageous to companies engaged in
the mining sector, as it is equipment-intensive; being allowed to include technological
equipment and machinery in the registered capital will clearly have a very positive impact
on companies’ balance sheets.
A further advantage offered by the Foreign Investment Law to foreign investors
investing in the mining and processing of mineral resources (with the exception of
precious metals) is by means of a tax preference. The Law affords foreign investors an
exemption from corporate tax for five years, and an additional 50 per cent tax relief after
the expiration of the initial five-year period.71 Foreign investors in the mining industry
who reinvest the income earned in the mining operation will receive tax deduction equal
to the amount of the income reinvested.72
Domestically, Mongolia’s government and parliament are considering waiving
or lowering value added tax to encourage local production in the minerals and food
products sectors.73 The percentage of VAT for businesses is assessed according to profits;

68 Id.
69 Foreign Investment Law (1993) (Mongolia) available at: www.bcmongolia.org/images/Laws-
of-Mongolia/fil%20updated%20august%202012.pdf.
70 Id. at Article 19(1).
71 Op. cit. 69 at Article 20(2).
72 Op. cit. 69 at Article 20(4).
73 Op. cit. 53, p. 77.
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Mongolia
businesses with profits of up to 3 billion tugriks are taxed at 10 per cent and those earning
above that benchmark are taxed at 25 per cent.74 Unfortunately, parliament revoked the
10 per cent VAT exemption that used to apply to equipment used to bring a mine into
production (this excludes equipment used in the production of highly processed mining
products).75
III DEVELOPMENTS
While the future of the Mongolian mining capital markets is currently unclear, one
thing is certain: every citizen in Mongolia has a vested interest in its success. Under
a 2010 government resolution, every Mongolian was given 1,072 shares in ETT. The
government is currently dealing with the effect of passing its Resolution No. 39, Matters
Regarding Tavan Tolgoi Coal Deposit, as more than half of the population have applied
to sell their shares back to the government.76
No other country can claim to have just under half of its population as participating
members in its mining capital market, and in this respect, Mongolia is unique. This will
focus media attention within the borders of Mongolia on the MSE, and on the mining
sector in particular. Having an engaged and educated public with an interest in the
mining capital markets will benefit the country as a whole in the future.
By turning voters into shareholders, the government has elevated the status of
the mining capital markets domestically. Thus, bills that improve the mining capital
markets, such as the draft Securities Market Law, have an even better chance of being
passed later this year.
2013 is a presidential election year and, due to the strong ties that have been
forged between the mining capital markets and politics, the way is clear to use the dual
or triple issuance of the ETT IPO to political advantage.
A new government was elected in June, and a new Prime Minister confirmed
in August.77 The effect on the mining capital markets due to the resulting uncertainty
during these months became evident in the quashing of the Chalco deal.78 While the
government maintains that the Foreign Investment Law was not passed to keep foreign
entities from owning Mongolia’s natural resources, the recent appointment of a renowned
resource nationalist as the Minister of Mining has done little to dispel these fears.79
74 Id.
75 Id.
76 1.5 Million People Wanted to Sell Their Shares; M.A.D. Investment Solutions, 21 June 2012:
www.mad-mongolia.com/news/mongolia-news/1-5-million-people-wanted-to-sell-their-
shares-11218.
77 Mongolia gets new PM, ends weeks of uncertainty; Michael Kohn, Reuters, 10 August 2012:
www.reuters.com/article/2012/08/10/us-mongolia-elections-idUSBRE8790QA20120810.
78 Op. cit. 34.
79 Op. cit. 77.
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Mongolia
Nambaryn Enkhbayar, Mongolia’s former President, was recently jailed on

charges of misuse of power while he was in office.80 He received a prison sentence81
for the illegal privatisation of a hotel and a newspaper, as well as for misusing property
that was intended as a donation to a monastery.82 This act is rumoured to have been
politically motivated, and compounds uncertainty about a stable investing environment
in Mongolia.83
Developments that would be brought about by the passing of the new Securities
Market Law include rules on insider trading and other unethical actions.84 The new Law
also expands the powers of the FRC to allow it to punish ethics violations, even if they
are not classified as being violations of a criminal nature.85 These two additions to the
Securities Market Law, once passed, will afford the FRC flexibility in regulating ethics in
Mongolia’s developing capital market.86
80 ‘Former Mongolian President Jailed’; Financial Times, Simon Rabinovitch, 3 August 2012:
www.ft.com/intl/cms/s/0/6eda527e-dd48-11e1-8fdc-00144feab49a.html#axzz25YBFwWnX.
81 Mongolia ex-leader Nambar Enkhbayar jailed; BBC News, 3 August 2012: www.bbc.co.uk/
news/world-asia-19107293.
82 Id.
83 Op. cit. 80.
84 Op. cit. 25 at Articles 80-87.
86 Interview with B Bold (chair of the MSE), in the ‘Improving standards’ chapter in The Report
Mongolia 2012, p. 72.
293
Chapter 26
MOZAMBIQUE
Jorge Graça, Taciana Peão Lopes, Paulo Ferreira and Márcio Paulo 1
I INTRODUCTION
Mozambique’s capital and financial markets remain small and undeveloped, but
this situation is gradually starting to change in order to match the rapid growth and
development of the country in the past decade.
This is also reflected in mining activity, which has not yet reported any notable
deals, financings or IPOs except for the acquisition of equity in the share capital of
the Mozambican mining company Rio Tinto Limitada. However, the relatively recently
enacted Law 15/2011 (entering into force on 10 August 2011), establishing the
regulations for the process of contracting, implementing and monitoring undertakings of
public-private partnerships (‘PPPs’), large-scale projects (‘LSPs’) and business concessions
(‘BCs’), and its Regulations, approved by Decree 16/2012 (entering into force on the 4
July 2012), provides that the financial benefits for the country from each PPP, LSP or
BC undertaking must be expressly referred to in the contract to be concluded between
the contracting party and the contracted party. The requirement now exists for project
companies to sell to Mozambican individuals – preferably via the stock exchange – a
percentage of the project companies’ capital ranging between 5 per cent and 20 per cent.
It is hoped that these provisions will boost the capital and financial markets in the near
future for mining activities in Mozambique.
It should further be mentioned that there is ongoing investment in mining activity,
which has been financed mainly by foreign investment, so Mozambican investment
capital is currently limited, in terms of private individual investors and Mozambican
entities.
1 Jorge Graça is the managing partner, Taciana Peão Lopes is a partner, and Paulo Ferreira and
Márcio Paulo are associates at CGA – Couto, Graça & Associados.
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In this context, the main forms of capital market investments in mining activities
are foreign direct investment, financing through financial institutions and even project
finance.
Given the fact that Mozambique has little infrastructure, and what it has is often
damaged, those undertaking mining projects face high costs as the investment will reflect
these limitations. The aforementioned financial conditions under Law 15/2011 may also
be regarded as a cost associated with the project.
II CAPITAL RAISING

The principal corporate and securities requirements are generally governed by the
Mozambican Civil Code, which classifies securities as personal guarantees and real
guarantees. Personal guarantees are created by individuals or entities, pursuant to which
they personally secure the fulfilment of certain obligations by their own patrimony.
In this case, the enforceability of such securities will depend on the availability of the
guarantor’s patrimony. As examples of personal guarantees for securing own or third
parties’ obligations assumed in terms of certain agreements, a suretyship, a comfort letter
or a bank guarantee are permitted by the Mozambican Law, although the general regime
does not contemplate the comfort letter and the bank guarantee as typical personal
guarantees and, therefore, does not regulate such guarantees in detail.
On the other hand, real guarantees that are regulated are pledges of moveable
assets and rights, and mortgages of immoveable assets. Real guarantees may assure a
priority of the respective security interest in favour of the lender, provided that such
security has been registered in its favour. However, there is no such mechanism for
personal securities that would assure the priority of the lender’s security interest, hence
personal securities are not registered.
Personal securities and pledges over moveable assets are perfected when the
respective document or contract creating security is entered into, or (in case of a pledge)
the pledged assets or the document granting exclusive disposal of the assets to the
creditor of the pledged assets. Securities over immoveable assets are perfected when they
are registered with the relevant registration offices.
There are notary and registration costs for perfection of securities that cannot be
avoided or minimised, and such costs are calculated in accordance with a determined
formula prescribed by law, based on the amount guaranteed by the securities that are
created.
With respect to corporate law requirements relating to capital raisings, a company
may have recourse to internal funding (through its own shareholders) or external funding
(through third parties). The internal funding of the company may take place by means
of supplementary capital subscriptions and shareholders’ loans, and funding through
third parties may assume the form of simple loans or project finance. It is also possible to
increase equity and share capital and to obtain bond loans.
In the mining sector, the exploration of a mining project by a company falls
within the scope of Law 15/2011, which contains provisions concerning the securities to
be created over assets that have been allocated to the exploration of the mining activity
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by a project company. In accordance with Law 15/2011, certain public assets (such as
the land granted for exploring the project and the subsoil) cannot be subject to any form
of security; however, the exploited minerals, as well as the proceeds of the sale of such
minerals, can be subject to security, in particular, pledges.
If the project capital has been raised through a project finance model, the proceeds
of the mining activity may be subject to securities (pledges, in particular); given the social
and economic context of Mozambique, a simple form of project finance may not be
feasible, so it may be necessary to create other forms of direct and indirect securities,
such as the step-in rights, in the exploration of the mining activity, as the proceeds of the
activity may be revealed as insufficient for securing the lender’s position.
ii Market overview
Given the lack of technical and financial resources – as well as experience in the management
and undertaking of mining activities – from Mozambican natural and legal persons, the
vast majority of investors in the country are foreign mining companies with global coverage
and vast experience in the sector. The new provisions of Law 15/2011, regarding the sale of
a defined company share to Mozambican individuals, are also of relevance here.

The main considerations to be taken into account relate to the aforementioned provisions
of Law 15/2011 and its respective regulations regarding the financial benefits of the
undertaking for the country, in particular the reservation for Mozambican persons of
the share capital of the undertaking or joint venture equity; the payment of capital
gains taxes on the transfer or sale of shares of the share capital, titles and licences whose
value depends on a right to explore natural resources; and applicable exchange control
provisions, notably in respect to repatriation of foreign capital.
Law 13/2007 of 27 June provides certain fiscal benefits for mining and petroleum
activities. In terms of mining, this law provides that mining undertakings benefit, for
five years as of the date of commencement of the mining exploitation, from exemption
of customs duties due on the import of equipment for mining reconnaissance or
exploration, classified under class K of the customs tariff and expressly referred to in the
annex to Law 13/2007.
Such imports also benefit, for the same period of time, from an exemption on
VAT and excise duties, as provided under Law 15/2002 of 26 June.
These benefits are granted only when the goods to be imported are not produced
in Mozambican territory, and their production in Mozambique does not fulfil the
particular needs or characteristics inherent in the nature of the activity to be developed
and explored.
To apply for these benefits, applicants need to (1) have been authorised by the
competent authority to undertake mining activities; (2) be registered with the Tax
Authority Department and have a taxpayer number; (3) have organised accounting,
as per the provisions of the Code of Corporate Income Tax; and (4) have no fiscal
infringements on their record.
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There is no distinction between taxes payable by domestic parties and those

payable by foreign parties. Moreover, Mozambique has bilateral treaties for the avoidance
of double taxation with the following countries:
a Portugal (Resolution No. 9/91 of 20 December, as amended by Resolution No.
34/2008 of 16 October);
b Mauritius (Resolution No. 54/98 of 12 November);
c Italy (Resolution No. 27/99 of 8 September);
d the United Arab Emirates (Resolution No. 10/2004 of 14 April);
e Macao (Resolution No. 33/2008 of 16 October); and
f South Africa (Resolution No. 35/2008 of 30 December).
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Chapter 27
NAMIBIA
Axel Stritter 1
I INTRODUCTION
i Brief overview of the capital market

The capital market for listing mining companies in Namibia is the Namibian Stock
Exchange (‘the NSX’). At present there are no primary listed mining companies, but
a number of entities are dual-listed on the NSX, such as B2Gold, Anglo-American
plc, Deep Yellow Ltd, Paladin Energy Ltd, Trans Hex Group Ltd and Xemplar Energy
Corporation. The NSX has made shares listed on foreign exchanges available locally in
the form of depository receipts, thereby promoting trading locally in respect of B2Gold.
It is anticipated that Paladin Energy Ltd will follow suit.
Foreign capital markets (mainly the Australian Stock Exchange (‘the ASX’), the
Toronto Stock Exchange (‘the TSX’) and the Alternative Investment Market of the
London Stock Exchange) are generally utilised to raise funding where the ultimate
holding company of the Namibian subsidiary holding the mineral licences would be
listed.
ii Notable transactions
In April 2012, Taurus Mineral Limited acquired control of Extract Resources Limited
(‘Extract Resources’). Extract Resources is developing the Husab Project in Namibia,
which is the world’s fourth-largest known uranium-only deposit. Taurus Mineral Limited
is controlled by CGNPC Uranium Resources Co, Ltd (a wholly owned subsidiary of the
state-owned China Guangdong Nuclear Power Holding Corporation, a nuclear power
producer with material interests in nuclear fuels procurement and production), and the
China-Africa Development Fund (an equity investment fund controlled by the China
Development Bank Corporation, with a focus on investments in Africa).
1 Axel Stritter is a partner at Engling, Stritter & Partners.
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Namibia
Extract Resources was listed on the ASX, TSX and NSX, and was removed from
the official list of ASX Limited on 16 April 2012 following the compulsory acquisition
by Taurus Minerals Limited.
In June 2012, Glencore International acquired control of Rosh Pinah Zinc
Corporation Ltd (‘Rosh Pinah’) from a subsidiary of Exxaro Resources Limited. Rosh
Pinah is an underground zinc and lead mine situated in south-western Namibia.
At the end of 2011, B2Gold, a Vancouver-based gold producer that trades on the
TSX, OTCQX and NSX, acquired a 92 per cent interest in the Otjikoto gold project
(located 300km north of Windhoek) by completing a business combination with Auryx
Gold whereby B2Gold Corp acquired all the Auryx shares in exchange for B2Gold shares
by way of a statutory plan of arrangement. According to B2Gold’s website, the Otjikoto
gold mine will commence production in late 2014 based on current projections, and has
the potential to be built as an open-pit gold mine capable of producing approximately
100,000 ounces of gold annually, with a potential 10-year mine life.2
II CAPITAL RAISING

The regulatory framework for the Namibian capital market is mainly governed by the
Companies Act 2004 (Act 28 of 2004) (‘the Companies Act 2004’), which contains
provisions relating to takeovers, schemes of arrangement and public offerings; and
the listing requirements of the NSX, which contain, among other matters, provisions
governing the initial listing requirements, and disclosure and notification obligations.
In terms of the Stock Exchanges Control Act 1 of 1985, the executive committee has
delegated its authority in relation to the application of listings requirements to the
listings committee.
The NSX listing requirements provide for continuing obligations of disclosure and
notification, with additional requirements regarding the listing of ‘mineral companies’,
including additional disclosure obligations. The listing requirements refer to ‘mineral
companies’, which include exploration companies and mining companies.
Listing requirements applicable specifically to exploration companies include that
the applicant is require to undertake, or propose to undertake, exploration, demonstrate to
the satisfaction of the NSX that the applicant’s management have satisfactory experience
in exploration, and demonstrate to the satisfaction of the NSX that the applicant is
entitled to explore for the relevant minerals.
In addition to the relevant listings requirements applicable to pre-listings
statements, listing particulars, and prospectuses or circulars, additional information
and documentation must be included in such documents where they are required to be
prepared by exploration companies, including a competent person’s report.
The NSX has adopted, as best practice, the South African Code for the Reporting
of Exploration Results (‘the SAMREC Code’), which sets out the minimum standards,
recommendations and guidelines for public reporting of exploration results, mineral
2 www.b2gold.com.
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resources and mineral reserves in South Africa. The NSX would accept the JORC and
National 43-101 competent persons reports from Australia and Canada. Competent
persons reporting in terms of the listing requirements must comply with the SAMREC
Code. A competent person is defined as someone who is professionally qualified, and a
member of good standing of an appropriate professional association, institution or body
that is acceptable to the listings committee and the Chamber of Mines of Namibia. As
part of the NSX approval process, the NSX would refer all competent persons’ reports to
the Namibian mining and exploration evaluation committee (an independent technical
readers’ panel) for assessment and comment.
The competent person’s report is required to contain certain information,
including:
a a statement detailing exploration and mining results;
b a statement regarding the issuer’s mineral resources and reserves, such as an
estimate of the volumes, tonnages and grades of minerals; and
c a statement that an environmental management programme as required by the
Minerals Act has been approved, containing:
• a summary of anticipated future environmental liabilities and their planned
funding;
• a list of mineral rights, with the legal ownership verified by the competent
person;
• a statement naming the laboratory used for assaying (disclosing accreditation

thereof );
• the nature, quality and appropriateness of the assaying and laboratory
procedures used; and
• a statement or estimate of the exploration or mining funding requirements
for at least two years following the publication of the report, the exploration
expenditure incurred to date and budgeted for, and the projected adequacy of
capital raised for exploration and mining purposes.
In respect of the listing of a mining company, the applicant must demonstrate to the
satisfaction of the NSX that the applicant’s management have satisfactory experience in
mining.
In respect of mining companies, the competent person’s report must contain,
among other things, the status of environmental or rehabilitation matters that may have
an impact on valuation, disclosing:
a the impact of environmental restoration liabilities;
b particulars on mineral resource estimates;
c volume and capacity estimates for processing;
d requirements in respect of metallurgical factors or assumptions; and
e cost, revenue, funding and historical information.
The report must also include annualised forecast free cash flow mining valuation
numbers, and all key criteria and assumptions made in arriving at such valuation, which
shall include that portion of the life of the mine, stated in years, as determined by the
competent person for valuation purposes (for which there are reasonable prospects that
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the mineral reserves and mineral resources can sustain the relevant life of the mine cash
flow), and for each such life-of-mine year, information including:
a expected run-of-mine tonnage (to be defined) and grade to be mined;
b revenue receivable per final defined product unit sold and in total (for the year);
c capital expenditure, differentiating between initial, new and ongoing capital
expenditure; and
d an estimate of all funding requirements and funding movements, differentiating
between debt, equity and internal resources.
In addition to other requirements under the listings requirements, announcements

by exploration and mining companies must comply with the SAMREC Code where
applicable, and insofar as they relate or refer to a competent person’s report, must be
approved in writing in advance of publication by the relevant competent person; if the
competent person is not, in the opinion of the NSX, independent of the issuer, the
nature of the relationship or interest must also be clearly disclosed.
The NSX listing requirements provide that a listed company may only undertake
a specific issue for cash subject to satisfactory compliance with certain requirements,
including that if the issue is to related parties (i.e., a material shareholder), such issue shall
be subject to the issuer providing its equity securities holders with a fair and reasonable
statement from an independent professional expert acceptable to the NSX indicating
whether the issue is fair and reasonable to equity securities holders (excluding the related
parties if they are equity securities holders) of the issuer.
A listed company may only undertake a general issue for cash subject to satisfactory
compliance with certain requirements, which include the condition that the equity
securities must be issued to public shareholders, as defined in the listing requirements,
and not to related parties.
The Companies Act 2004

Raising capital under the Companies Act 2004 for the purposes of funding mining
activities is required to comply with the provisions relating to disclosure requirements.
Rights issue
A company can make an offer to its existing shareholders to subscribe for shares to be
issued by the company, which may be a renounceable or a non-renounceable rights offer.
The type of disclosure required to accompany the offer would depend on whether it is
a renounceable rights offer, allowing the offeree to renounce and offer the shares in the
open market.
When a company offers its shares for subscription to the public, a prospectus is
required to be issued.
Every prospectus must contain a fair representation of the state of the affairs of
the company. The prospectus must state the matters specified, and set out the reports
referred to, in the relevant provisions of the Companies Act, 2004 that, in respect of
mining companies (including companies engaged in prospecting operations), include
the additional requirement of a report by an expert containing information such as:
a survey, drilling and borehole results;
b ore reserves;
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c an interpretation of the information available with reference to the viability of the

project; and
d a statement by the directors of the plans for reaching the production stage,
including information regarding capital expenditure.
Private placements
An offer to subscribe for shares to specific invitees, which is not calculated to result in the
shares becoming available to persons other than those to whom such an offer is made,
would not be regarded to constitute an offer to the public and as such would not require
to be accompanied by a prospectus.
Scheme of arrangements
A mechanism for takeovers is found in the provisions of the Companies Act, 2004
regarding schemes of arrangement.
The company would bring an application to court to obtain an order that a
shareholders’ meeting be convened for the purpose of considering – and, if deemed
fit, agreeing to – the scheme of arrangement. If such scheme is agreed to by a majority
representing three-quarters of the votes exercisable by the shareholders, the arrangement
would be, if sanctioned by the court, binding on all the shareholders and also on the
company.
Takeover offers
A scheme involving the making of an offer by the offeror for acquiring shares of the
offeree company that will have the effect of vesting the control of the offeree company
directly or indirectly in the offeror, or of the offeror acquiring all the shares, or all the
shares of a particular class, of the offeree company, is required to comply with the
provisions concerning takeover schemes.
Any offer made in the course of or in connection with any individual negotiation
with any shareholder for the acquisition of any such shares would, however, not be
subject to these provisions.
The offeror would deliver a takeover statement to the offeree company, whose
directors would have to deliver a takeover statement to the shareholders of the offeree
company containing particulars such as an opinion of the directors as to the fairness of
the offer stating all the relevant information material to the assessment of the value of the
shares of the offeree company.
The Exchange Control Regulations

The Exchange Control Regulations made in terms of the Currency and Exchanges Act
1933 (Act No. 9 of 1933) contain a number of restrictions in respect of:
a Namibia-resident persons holding foreign currency in local bank accounts;
b Namibia-resident persons holding offshore bank accounts;
c Namibia-resident persons transacting business in foreign currency;
d the furnishing of loans to Namibia-resident persons by non-resident persons; and
e the acquisition of shares by a non-resident person in a Namibian company.
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Namibia
A non-resident person (including a juristic person) acquiring shares in a Namibian

company is required to have a local bank endorse the share certificates that relate thereto
as having been issued to a ‘non-resident’. The proceeds of a sale of such shares may, subject
to such an endorsement having been effected, be transferred out of Namibia without the
necessity of a further approval from the central bank, the Bank of Namibia Ltd.
No formal exchange control approval is required for the remittance of a dividend
declared in a non-quoted Namibian company and accruing to non-resident shareholders.
The local bank, however, needs to be furnished with annual financial statements of the
local company and an independent auditor’s certificate confirming that the funds are
available to pay such a dividend.
Restrictions on foreign investment

There are no particular restrictions on foreign investment other than what is stated herein
regarding exchange control restrictions, strategic minerals and empowerment.
Mineral licences (reconnaissance licences, exclusive prospecting licences, mineral
deposit retention licences and mining licences) may be issued to a Namibian citizen (if
a natural person), a company or close corporation that is incorporated in Namibia, or
a foreign company that has been issued with a certificate of registration in terms of the
Companies Act, 2004 (which Act replaced the Companies Act, 1973) by registering its
memorandum with the registrar of companies in Namibia.
Generally, mineral licences would be held by a Namibian company. Foreign
companies or individual persons may hold shares in such a Namibian company.
In 2011, the Cabinet declared certain minerals to be controlled and high value
minerals or strategic minerals, and stated that the right to own licences for the strategic
minerals (uranium, gold, copper, coal, diamonds and rare earth metals) should only be
issued to a state-owned company, which may enter into joint ventures with interested
parties for exploration and development, but that existing exploration and mining
licences would not be affected. In respect of pending applications for exploration and
mining licences, it was stated that licence holders often seek capital funds in exchange for
shareholding from investors, in which regard it was indicated that conditions might be
imposed in terms of which the licence holders would be required ‘to give the first rights
of refusal of shareholding to the GRN [Government of the Republic of Namibia] before
they can approach other parties’. The media statement concluded with a statement that a
change in legislation would be effected to implement this Cabinet decision.3 There have
so far not been any such changes in legislation.
The Foreign Investments Act 27 of 1990, in respect of ‘business activities of
foreign nationals’, provides that a foreign national may invest and engage in any business
activity in Namibia that any Namibian may undertake; and that, for the purposes of any
law governing the establishment and carrying on of any business activity or the taxation
of the income, or any other aspect, of any business activity, a foreign national shall not
3 Minister of Mines and Energy, Honourable Isak Katali, ‘Towards Public-Private Partnership in
the Mining Sector of Namibia’, 10 May 2011.
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Namibia
be in different position from any Namibian, except as may be otherwise provided by the
Foreign Investments Act 27 of 1990.
The Foreign Investments Act 27 of 1990 does stipulate that no foreign national
engaged in a business activity or intending to commence a business activity in Namibia
shall be required to:
a provide for the participation of the government, or any Namibian as shareholder
or as partner, in such business; or
b provide for the transfer of such business to the government or any Namibian,
provided that it may be a condition of any licence or other authorisation to,
or any agreement with, a foreign national for the grant of rights over natural
resources that the government shall be entitled to, or may acquire an interest in,
any enterprise to be formed for the exploitation of such rights.
Epangelo Mining Company (Pty) Ltd (‘Epangelo’), a state-owned company, has been
incorporated with the object of participating in the minerals industry, and is presently
engaging holders of mineral licences, and negotiating and concluding transactions
concerning its participation in such mining projects. There is currently no legislation in
place that requires the specific participation of a state-owned enterprise. According to
announcements made by companies listed on the ASX and TSX, there is one instance
where Epangelo is negotiating a participation interest of 10 per cent on commercial arm’s-
length terms in respect of a major mining concern, and another transaction in respect
of an exploration company in respect of which Epangelo would acquire 10 per cent in
a newly formed company that would hold the mining licence should the exploration
operations result in a mining licence being applied for and granted. Epangelo would
not be required to contribute to the costs of the prospecting operations, and would
further be granted an option to acquire an additional 10 per cent interest in the mining
company by paying to the exploration company an amount equal to 10 per cent of all
costs associated with the exploration and development of the mineral deposit, which
would be funded from dividends that Epangelo would receive from the mining company.
It is expected that the Minister of Mines and Energy may introduce a condition
providing for the participation of Epangelo when granting applications for mineral
licences or renewals or transfers thereof. Whether current legislation authorises the
Minister to impose such a condition has not been judicially tested.
Economic empowerment
Article 23 of the Namibian Constitution prohibits discrimination, except under an act of
parliament expressly providing for the advancement of persons who have been socially,
economically or educationally disadvantaged by past discriminatory laws.
In December 2010, the Chamber of Mines officially presented its proposal
on empowerment in the form of a draft Mining Charter for Sustainable Broad Based
Transformation to the Prime Minister and the Minister of Mines and Energy.
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Namibia
On 19 October 2011, the Cabinet of the Republic of Namibia adopted the New
Equitable Economic Empowerment Framework (‘the NEEEF’).4 Legislation is envisaged
to be implemented as per the NEEEF, which does not have the force of law but is a policy
framework.
It is stated that the NEEEF will be based on voluntary business practice, but that
the government would use all the legitimate market mechanisms at its disposal, in the
form of procurement programmes and licensing regimes, to promote transformation
and empowerment. The NEEEF stipulates that companies applying for licences would
receive NEEEF rating and would be required to score a minimum of 10 points in three
of the five empowerment pillars. These three mandatory pillars would be ownership,
management and control, and skills development (described below). A total of 20 points
would be achieved in respect of each of the five empowerment pillars, and in order to be
considered as ‘empowered’, businesses would be required to achieve at least 50 out of the
total 100 points. The criteria for meeting the requirements to be allocated these points
are set out in the NEEEF.
The Minister of Mines and Energy is entitled to grant mineral licences under
terms and conditions in addition to the ordinary statutory terms and conditions, and
in some instances in the past has imposed a condition stipulating that the applicant is
required to allocate shares in the entity holding the licence to previously disadvantaged
Namibians. It was not stated what percentage of share ownership would be required to
meet this condition. Whether a condition of this nature can be imposed in terms of the
Minerals Act has not been judicially considered. This practice ceased to be followed from
around 2010.
The five pillars of empowerment aimed at achieving the empowerment objectives
are as follows:
Ownership
According to the President’s Report of the Chamber of Mines of Namibia,5 the Chamber
engaged the Prime Minister, who stated that his position is flexible in respect of the
requirement of ownership by previously disadvantaged Namibians, on condition that
the mining companies ‘honestly embraced the NEEEF principles and that the targets
would eventually be met’.
The NEEEF also provides that ‘In sectors where previously disadvantaged
Namibian individuals do not have the resources to participate in a meaningful way,
the Government may choose to participate as a transformation partner.’ It seems that
Epangelo acquiring equity in the entities that hold mineral licences may be considered
to constitute such a transformation partner.
It is also stated that employee share ownership programmes would be recognised
for the purposes of rating entities in their implementation of empowerment measures as
per the NEEEF.
4 Government of the Republic of Namibia: Office of the Prime Minister, New Equitable
Economic Empowerment Framework (NEEEF), 19 October 2011.
5 Mining Industry Review for 2011.
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Namibia
In addition, it is stipulated that previously disadvantaged Namibian individuals

would be given financial and other assistance to buy into existing Namibian businesses
on commercial terms to be negotiated between the buyers and sellers.
Shares held through the NSX by previously disadvantaged Namibians would be
recognised for purposes of the NEEEF.
Management control and employment equity

The NEEEF stipulates its aim as being that Namibia’s management structures and business
workforces more accurately reflect the demographics of the country’s population.
Human resources and skills development

The intention is to introduce a training levy by Namibia’s National Training Authority
in respect of businesses above a certain size calculated as a percentage of a company’s
gross wage bill to be spent on practical training and skills development. Companies that
already devote such an amount on training may apply to be exempt from this levy.
Entrepreneurship development
Businesses would be scored in proportion to the degree to which they assist businesses
owned by previously disadvantaged Namibians through procurement, mentorship, joint
ventures and other initiatives.
Community investment
Businesses of a certain size would be required to devote at least 1 per cent of after-tax
profits to community investment.
ii Market overview
A considerable portion of companies holding exploration licences raise capital via initial
public offerings on international stock exchanges (sometimes dual-listed on the NSX),
or by raising capital on such exchanges via established exploration or mining companies
listed on such exchanges who acquired a controlling interest in Namibian entities holding
the Namibian mineral licences.
Prior to the takeover of Extract Resources and its Husab uranium project (see
Section I.ii, supra), institutional investors held an indirect interest in the project.
A large portion of investors will be existing mining concerns who acquire equity
in entities conducting prospecting operations. Earn-in agreements regarding exploration
projects are not uncommon.

The financing of larger mining projects is based on a combination of debt and equity
financing. Third parties who have an interest in a particular resource will become
strategic equity partners in the development of a project, providing additional funding
by subscribing for shares in the company holding the mineral licences. Such a strategic
partner would enter into an offtake agreement securing cash flows for the purposes of,
inter alia, servicing the debt, which would also reassure financiers in securing repayment
of the funds that are advanced.
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Namibia
In respect of debt financing, and specifically project financing for prospecting and
mining operations, it must be noted that the security trust or agent structures that are
based on English law are problematic for enforcement in Namibia, and that what has
been suggested in their stead is a structure in respect of which the security to be given by
the borrower would be held by a company that is registered solely for that purpose. This
company would guarantee the obligations of the borrower in favour of the lenders, and
the borrower would indemnify the company in respect of any payments that it would
be required to make in terms of its guarantee(s) to the lenders. If the borrower defaults,
the lenders would call up the guarantee, and the company would be able to enforce
the security should the borrower not be able to perform in terms of the indemnity,
and utilise the proceeds of execution on the securities to effect payment in terms of the
guarantees to the lenders.
Exchange control requirements

While permission is generally granted for residents to raise foreign loans, it is necessary
for prior approval to be obtained from the Bank of Namibia Ltd. Interest repayments
must be at arm’s length. The objective of the control is not to restrict borrowing abroad,
but to ensure that the repayment and servicing of loans do not disrupt the balance
of payments, and to ensure that the level of interest rates paid is reasonable in terms
of prevailing international rates. The interest that is payable on foreign loans is freely
transferable, provided the facility agreement in terms of which such interest is paid has
been approved.
When non-resident shareholders advance funding to a Namibian company, that
entity would need to meet the exchange control requirement of a debt-to-equity ratio of
3:1. ‘Debt’ means the total non-resident shareholder loans, and ‘equity’ the total share
capital including any premium paid in respect of all shares, unless the Bank of Namibia
Ltd grants a concession in this regard (e.g., allowing a reasonable transition period to
comply with the prescribed ratio).
The above-mentioned exchange control restrictions do not apply to shares that are
traded on the NSX and purchased through an authorised dealer.
The Namibian Competition Commission

The Competition Act 2003 (Act 2 of 2003) provides that a merger occurs when one or
more undertakings directly or indirectly acquire or establish direct or indirect control
over the whole or part of the business of another undertaking.
An ‘undertaking’ is defined in Section 1 of the Competition Act, 2003 as:
Any business carried on for gain or reward by an individual, a body corporate, an unincorporated
body of persons or a trust in the production, supply or distribution of goods or the provision of
any service.
Where a capital raising results in a change of control that falls within the definition of a
merger, the Namibian Competition Commission’s (‘the Commission’) approval would
be required prior to implementation of such a transaction. The Commission also views
a change of control in a company that conducts prospecting operations to constitute a
merger notwithstanding the fact that the business of such a company, strictly speaking,
does not fall within the definition of an undertaking. Since the Competition Act 2003
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refers to indirect acquisitions of control, and stipulates that it applies to all economic
activity within Namibia or having an effect in Namibia, a change of control occurring
at the level of a foreign holding company would also trigger the requirement of prior
approval from the Commission.
The Commission has been asked to consider its views in respect of transactions
under which a security interest in an asset is granted to a financier who acquires the asset
in the event of default by the borrower, ensuring that the bank can take effective control
over the specific assets or business interest of the borrower, including management
control over the specific entity.
Technically, these kinds of financial transactions would result in the acquisition
of an interest in the assets or the business of another company at the time of sale or
default by such company, and as such would fall within the ambit of the merger control
provisions. An acquiring party will acquire control over the business, part of the business
or business assets wherein no control was exercised previously, and a merger notification
would be required.
In July 2012, the Commission stated that it may adopt the approach that
notification is not required in respect of transactions where a bank acquires an asset or
controlling interest in an undertaking in the ordinary course of its business in providing
finance based on security, subject to the following conditions:
a The Commission would not require notification of the transaction at the point
that the parties enter into the financing agreement.
b Similarly, if upon default by the undertaking the bank takes control of the asset
or controlling interest in that undertaking, with the intention to safeguard its
investment or sell on to another undertaking or person to recover its finance, a
notification would not be required.
c However, if the bank fails to dispose of the assets or the controlling interest within
a period of 12 months, notification would be required upon the expiry of the
12-month period.
d This 12-month period commences only when the bank assumes control over the
security interest.
e The expiry of this period in itself will trigger notification of that acquisition.
f In seeking an extension of this period, the institution concerned bears the onus of
providing a substantial basis for non-disposal of the asset or control over the firm
in question. The Commission would then exercise its discretion in granting such
an extension on a case-by-case basis.
g Failure to notify the transaction upon expiry of the 12-month period or the
extended period will be construed as an implementation of a merger.
The Commission, however, also stated that it may require the bank, other relevant
institution or parties involved in financing transactions to inform the Commission
when they acquire control as referred to above, and that these approaches, if adopted
by the Commission, would inform the approach the Commission is likely to take in
respect of these transactions. The Commission would also reserve its right to review such
transactions if any competition or public interest concerns arise.
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Namibia
If a company in Namibia distributes any dividend to a non-resident person, non-resident
shareholder’s tax must be deducted from such dividend at the rate of 10 per cent if the
foreign shareholder holds at least 25 per cent of the capital of the Namibian company,
and 20 per cent in all other cases, subject to treaty relief.6
III DEVELOPMENTS
Reference is made to trends and expected developments in the future including:

a the Cabinet’s statement on strategic minerals, in respect of which it had been
stated that changes in legislation would be effected to implement its decisions
with regard thereto, and Epangelo’s involvement;
b the NEEEF framework document for economic empowerment;
c the statement of the Namibian Competition Commission in respect of lenders
taking security in respect of the borrower’s assets; and
d the tax amendments referred to in the Namibia Mining Law chapter.
6 Additional information regarding tax-related matters in Namibia is provided in Section VI.ii of

the Namibia Mining Law chapter.
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Chapter 28
SOUTH AFRICA
Francois Joubert, Catharine Keene, Robin Beale, St Elmo Wilken,
Christopher Gibson and Itumeleng Mati 1
I INTRODUCTION
South Africa is regarded as one of the world leaders in the mining industry and is widely
known for its abundance of mineral resources. South Africa has the largest reserves of
manganese and platinum group metals, and among the largest reserves of gold, diamonds,
chromite ore and vanadium.2
The country contributes substantially to the global production of almost all
mineral groups, and as a result South African mining companies are key players in the
global industry. Total reserves in the country remain some of the world’s most valuable,
with an estimated worth that exceeds 20 trillion rand.3
The country’s mining sector contributes about 8 per cent to gross domestic
product, which increases to 18 per cent when the indirect effect of mining on the
economy is taken into account.4
As a result, mining and its related industries are still critical to socio-economic
development in South Africa. The mining sector accounts for an estimated 33 per cent of
the market capitalisation of the Johannesburg Stock Exchange (‘the JSE’) and continues
to be one of the key attractions for foreign direct investment in the country. Market
capitalisation in June 2011 of the top 39 South African mining companies amounted to
1 Francois Joubert, Catharine Keene, Robin Beale and St Elmo Wilken are directors, Christopher
Gibson is a senior associate, and Itumeleng Mati is a candidate attorney at Tabacks Attorneys
and Corporate Law Advisors.
2 According to the U.S. Geological Survey, 2012, Mineral commodity summaries 2012: U.S.
Geological Survey, p. 198.
3 According to the South Africa Yearbook 2011/12, 19th edition, published by GCIS, available at:
www.gcis.gov.za/sites/default/files/docs/resourcecentre/yearbook/2011/04_Credits.pdf.
4 Ibid.
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929 billion rand, composed of 40 per cent platinum, 25 per cent gold and 35 per cent
diversified miners.5
The growth of secondary and tertiary industries has led to a decline in the relative
contribution of the mining industry to South Africa’s GDP during the past 10 to 20 years.
Despite this, the industry remains a cornerstone of the economy, making a significant
contribution to economic activity, job creation and foreign exchange earnings.
According to Statistics South Africa,6 the total volume of mining production
(including all mineral groups) was 94.4 (base: 2005=100)7 in July 2012. This resulted in
an actual year-on-year mining production increase of 4.2 per cent for the three months
ended July 2012 compared with the three months ended July 2011. The total mineral
sales at current prices (in million rand) during the period from 2006 to 2012 increased
from 193,589.50 rand in 2006 to 370,724.60 rand at the end of 2011.
II CAPITAL MARKETS AND CAPITAL RAISING
i Capital markets overview

South Africa has a well-regulated and sophisticated banking and financial sector able to
compete internationally in providing a comprehensive range of competitive financial
services, project-based structured debt finance, loan and equity-leveraging products to
the domestic market, as well as active trading markets in a variety of bonds and derivative
instruments, including a rapidly developing market in exchange traded funds. Both
South African and other Africa-based mining concerns are serviced by the banking
sector in South Africa, with many local banks having branched out in recent years into
5 SA Mine: Review of trends in the South African mining industry. Compiled by PwC.
6 Statistical Release P2041: Mining: Production and Sales (Preliminary), July 2014, published by
Statistics South Africa (‘Stats SA’). Stats SA publishes monthly mining production indices and
mineral sales figures on the information furnished by the Department of Mineral Resources
(‘the DMR’). The monthly mining production and sales survey is conducted by the DMR, and
covers all mining establishments operating in the South African economy. This survey covers
mining establishments conducting activities regarding the extracting, dressing and beneficiating
of minerals occurring naturally (e.g., solids such as coal and ores). The results of this survey are
used to calculate the volume of mining production indices in order to estimate the GDP and
its components, which in turn are used to develop and monitor government policy. Data in the
July 2012 release is presented by mineral group and mineral.
7 In accordance with international practice, the indices are usually re-based every five years
to a new base year. The current base year of the index of the volume of mining production
is 2005=100. Both actual and seasonally adjusted figures are presented. Due to mining
production figures being available earlier than mineral sales figures, mining production indices
are published one month earlier than mineral sales. The value of mineral sales is calculated,
in general, on a free-on-rail basis (free-on-rail relates to goods sold on the local market where
no railage or road transport costs are involved) or free-on-board basis (free-on-board relates to
goods destined for the export market; railage, road transport and docking charges are involved,
but no charges are made for the transport by sea).
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surrounding southern African countries and further afield into central and east Africa in
order to cater to the needs of an increasingly multinational mining and mining-related
sector with their head offices in South Africa.
Many of the larger mining companies carrying on business in South Africa are
public companies, the shares of which are traded on the JSE and in some instances also
on other foreign exchanges, particularly London and New York. The JSE, which traces
its history from the earliest days of the discovery of gold and diamonds in South Africa,
is based in Johannesburg and is currently the only recognised stock exchange in South
Africa. As with any stock exchange, in providing a regulated public trading platform
for shares and other securities, the JSE facilitates the ability of local companies to access
capital in the domestic market.
The JSE admits shares for listing on either the Main Board or its Alternative
Exchange (‘the AltX’). The AltX is a parallel market focused on good quality small and
medium-sized growth companies. The AltX provides smaller companies not yet qualified
to list on the Main Board with a clear growth path and access to capital. The AltX has
been developed for:
a entrepreneurs who run small or medium-sized businesses and require capital for
growth;
b investors who are looking for fresh and exciting opportunities; and
c companies who wish to issue new shares, raise funds, widen their investment base
and have their shares traded on a regulated market.
Both listings boards on the JSE stipulate minimum requirements for admission to listing,
with the requirements for a listing on the Main Board being more onerous than for a
listing on the AltX.
The majority of the JSE’s market capitalisation is based on companies listed on
the Main Board, with a significant portion of its market capitalisation being attributable
to mining companies.
It should be noted that South Africa through its central bank, the South African
Reserve Bank (‘SARB’) historically applied relatively strict exchange controls over capital
flows into and from South Africa, although such controls have in recent years been
noticeably relaxed, particularly in relation to Africa-based investments from South
Africa. Exchange controls contributed to most domestically generated institutional
and corporate capital being forced in the past to remain onshore, channelled into local
development and infrastructure projects, with this weight of funds remaining a strong
driver in sustaining domestic appetite for new capital projects despite an easing of such
controls.
While foreign direct investment per se is not restricted, South African residents
(natural and corporate) are required, with limited specific exceptions, to obtain express
prior exchange control approval from SARB for capital transfers outside the Common
Monetary Area (South Africa, Namibia, Lesotho and Swaziland). Once obtained, all
capital, dividends and income due to the foreign shareholders can ordinarily be freely
repatriated through normal banking channels.
In addition, a ‘thin-capitalisation’ rule applies to restrict local borrowings
by resident companies with foreign shareholders to 100 per cent of the shareholder
investment (‘effective capital’) in the local entity, as determined in terms of a formula
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that takes into account the percentage local shareholder interest in such entity. Foreign
shareholder funds would include paid-up equity capital, preference shares, undistributed
profits, loans by non-resident shareholders and, in certain circumstances, the non-
resident shareholders’ trade credit.
Where local financial assistance is required by the local foreign-owned entity in
excess of the limit, SARB approval must be obtained for such increased local borrowings.
All dealings by members of the public with SARB and its exchange control department
are conducted through designated authorised dealers, which include the four major
commercial banks in South Africa and most of the foreign banks who have established
operations in the country.
It should be noted that the rate of interest on foreign-currency loans to resident
South African companies chargeable by its foreign shareholders is ordinarily capped by
SARB at the rate at which such funds would generally be able to borrowed by corporates
in the domestic market of that currency and for rand-denominated loans at the South
African prime rate plus 2 per cent. The fiscal authorities have announced that an interest
withholding tax of 15 per cent on foreign shareholder loans will be introduced from 1
January 2013. Controlled foreign companies (‘CFCs’) are moreover subject to certain
transfer pricing rules.
ii Capital raising
Companies may offer shares or other securities (such as debentures) to the public in South
Africa in order to raise capital. All public offerings of company securities are regulated
in terms of Chapter 4 of the ‘new’ Companies Act, Act 71 of 2008 (as amended) (‘the
Companies Act’), which aims to protect investors by ensuring that they are provided
with adequate and accurate information relating to the state of affairs and prospects of a
company before they subscribe for or purchase its securities.8
The Companies Act distinguishes between three types of public offerings:
a initial public offerings, where an offer is made for the first time to the public to
subscribe for a company’s securities;
b primary offerings, where an offer is made to the public by the company of its own
securities, or those of a company in the same group or of a proposed merger or
amalgamation partner; and
c secondary offerings, where an offer is made to the public of a company’s securities,
by or on behalf of a person other than the company Itself.
Which persons constitute the public is widely defined and all offers to members of the
public of both listed and unlisted securities are required to comply with Section 100 of
the Companies Act, which requires, inter alia, the publication of a prospectus containing
all the information that an investor may reasonably require or which may be relevant
to enable it to evaluate the financial position, profits and losses, assets and liabilities,
cash flow and prospects of the company concerned. Offers to the public of JSE-listed
securities (or securities intended to be listed on the JSE) must furthermore comply with
8 F Cassim et al., Contemporary Company Law, 2nd edition, 2012, Juta and Co Ltd, p. 649.
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the JSE listings requirements and, if applicable, any more stringent requirements of any
other stock exchange on which such shares are or will be listed.
The Companies Act provides that persons involved in compiling and issuing a
prospectus may be held personally liable for any loss caused to any person as a result of
incorrect, misleading or inaccurate information contained therein.
iii Institutional and regulatory considerations

The Mineral Policy and Promotion Branch of the Department of Mineral Resources is
responsible for formulating and promoting mineral-related policies that will encourage
investment in the mining and minerals industry, making South Africa attractive to
investors while ensuring that environmental management forms an integral part of the
ongoing exploitation of mineral resources.
The Mine Health and Safety Inspectorate is responsible for implementing mine
health and safety legislation. The Mineral Regulation Branch regulates the mining and
minerals industry to achieve transformation and contribute to sustainable development.
Mining and minerals policy is based on the principles of the Freedom Charter,
according to which the mineral wealth beneath the soil will be transferred to the
ownership of the people as a whole.
The Mineral and Petroleum Resources Development Act, No. 28 of 2002
(as amended) (‘the MPRDA) has opened doors for the substantial and meaningful
participation of historically disadvantaged South Africans in the exploration and
exploitation of mineral resources.
The MPRDA enshrines the principle of equal access to mineral resources irrespective
of race, gender or creed. Section 100 of the MPRDA provides for the development of the
Broad-Based Socio-Economic Empowerment Charter (popularly known as ‘the Mining
Charter’). The introduction of the Mining Charter in 2002 was aimed at transforming
the mining industry in order to redress historical imbalances engendered by the historic
apartheid policy, so that the industry is consistent with the changes in South Africa’s
overall transformation of its social, political and economic landscape.
In 2010, the Department of Mineral Resources concluded an assessment of the
progress of the industry’s transformation against the Mining Charter objectives. The
racial ownership pattern of the country’s mining assets had remained largely unchanged,
with only 8.9 per cent black ownership attained by 2009, against the target of 15 per
cent. The reviewed Mining Charter, launched in September 2010, seeks to correct this,
placing emphasis on 26 per cent of South Africa’s mining assets being black economic
empowerment-compliant by 2014.
In essence, the law therefore requires that initially at least 15 per cent of the
voting rights and economic rights vest directly or indirectly in persons who qualify as
historically disadvantaged persons (‘HDPs’) and further prescribes that by 2014 at least
26 per cent of such rights vest in HDPs.
HDPs, for the purposes of mining, are black, coloured, Indian and Chinese
persons. Legal entities, in respect of which 51 per cent of the equity is owned by HDPs,
are viewed as a black person.
Historical inequalities resulted in HDP investors generally being economically
disadvantaged, and seldom able afford to pay the market value for the equity in the entity
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holding the relevant prospecting or mining right. This is currently still the case for many
HDPs, who are still rarely in a position to contribute to the funding required for the
purposes of exploration and mining.
As a result, most HDPs have to secure funding from the entity in which they
invest, co-shareholders or through third-party funding. In almost all circumstances, the
funding is at very beneficial rates of interest, or attracts no interest rate at all. For as long
as investment is subject to funding, the right to dividends is normally curtailed, but
may not be curtailed to such an extent that there is no dividend flowing to the HDP.
In practice, this means that the HDP investor in a mining entity is usually entitled to a
‘trickle’ dividend of at least 5 per cent of the dividends that it would have earned had the
investment been fully paid up.
The Companies Act specifically makes provision for such funding by the company
itself and permits the issue of shares not fully paid up to be held in trust. Although the
Companies Act also provides for the sterilisation of dividend and voting rights during
this period, the requirements of the Department of Mineral Resources prescribe that
voting rights and rights to dividends cannot be so limited.
Companies run the risk of being penalised by, inter alia, revocation of their
mineral rights, for failure to comply with the Charter requirements.
The rate of tax payable by companies is 28 per cent of taxable income. This rate may vary
depending upon the type of mineral that is mined.
In addition, mining companies are subject to a royalty of up to 7 per cent on
minerals transferred.
In calculating a mining company’s taxable income, capital expenditure is
deductible against mining receipts.
Dividends distributed by a mining company to a non-resident company are
subject to a withholding tax of 15 per cent of the dividends distributed. This rate is
subject to reduction in terms of certain double taxation agreements. South Africa has an
extensive network of such agreements.
Gold mining companies are, for the 2012 tax year, taxed at a rate of tax determined
by the following formula:9
Y = 34 – 170
X
Prior to April 2012, a secondary tax on companies, levied on dividends paid by resident
South African companies at the rate of 10 per cent, was applicable. From 1 April 2012,
the shareholders receiving the dividend will be liable to pay a 15 per cent dividend
withholding tax, which is required to be deducted at source by the company and paid
over to the revenue authorities on behalf of the shareholders.
Capital recoupments by gold mining companies are taxed at the normal company
rate of tax or the average rate of normal tax, whichever is higher.
9 Where Y is the percentage to be determined and X represents the ratio expressed as a percentage
that the taxable income from gold mining bears to the income from gold mining.
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Oil and gas companies are taxed for the 2012 tax year at the following rates:
a resident companies – 28 per cent of taxable income; and
b branches of foreign companies – rate varies between 28 per cent and 31 per cent
of taxable income.
Tax incentives
The South African government has embarked on an initiative to create incentives for
renewable energy production, more efficient use of energy technology, as well as for the
reduction of emissions. The Income Tax Act, No. 58 of 1962, as amended (‘the Income
Tax Act’) has been amended to provide for these incentives, as well as to provide for
incentives relating to the deductions allowable in respect of expenditure incurred by a
mining company in compliance with its environmental obligations.
Section 12I of the Income Tax Act provides tax incentives for energy efficiency
and energy savings technology implementation. The incentive supports greenfield
investments (new industrial projects that utilise new and unused manufacturing assets)
and brownfield investments (the expansion and upgrade of existing industrial projects
that are energy efficient). The incentive offers a tax saving in respect of energy efficiency
as well as a training allowance of 36,000 rand per employee (up to a total of 30 million
rand).
The incentive also offers 900 million rand in respect of a greenfield project with
preferred status, and 550 million rand in respect of a greenfield project without preferred
status. A brownfield project with preferred status is eligible for a 550 million rand
allowance, and a brownfield project without preferred status is eligible for an amount of
350 million rand.
Preferred status is dependent on whether the project, inter alia:
a will utilise a process of innovation in order to improve production time and
improve product quality;
b can show an energy efficiency of at least 12.5 per cent or the project will make use
of energy-efficient equipment;
c will acquire at least 10 per cent of its raw materials, products and services from
small, medium and micro enterprises;
d will create direct full-time employment; and
e is located in an industrial development zone.
There are a maximum of 10 points, which are measured by an independent measurement

and verification body.
The incentive is not available to mining itself; rather, it is available to projects
associated with mining, such as beneficiation projects (including smelters, desalination
or other water treatment facilities).
The incentive is aimed at assisting the government’s National Industrial Policy
Framework and diversifying the country’s industrial output. To this end, an amount of
21 billion rand has been made available by the government for the Section 12I incentive,
which amount translates into 75 billion rand of additional deductions. The capital
allowance covers the cost of any building, plant or machinery acquired by the company
carrying on an industrial project within South Africa. The allowance is in addition to any
other deductions allowable under the Income Tax Act. By way of example, in respect of
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any plant or equipment acquired for and brought into use in an industrial policy project,
a company will, in addition, be entitled to depreciate the plant and equipment over a
period of four years at annual rates of 40:20:20:20. This results in the incentive providing
for tax deductions, in the tax year in which the manufacturing facility is brought into
use, being as much as 150 per cent of the amount of investment in it.
A company in South Africa that is involved in the production of renewable
energy can also claim a deduction in respect of the cost of the machinery, plant and
implements used in the production of renewable energy. In order to claim the deduction
the generation of electricity must be from wind, sunlight, gravitational water forces,
biomass comprising of organic wastes, landfill gas, heat or steam, or geothermal heat
plants. A further deduction available is the deduction in respect of Section 12K of the
Income Tax Act, which provides for an exemption in respect of amounts received from
the sale of a certified emission reduction certificate, provided that the company selling
the certificate has been approved as carrying on a clean development project.
The Income Tax Act, in addition to the above ‘green deductions’, provides for
deductions in respect of income derived from mining operations. Section 15 of the
Income Tax Act allows for a deduction from income derived by the taxpayer from
mining operations and includes any expenditure incurred by the taxpayer on prospecting
operations.
Furthermore, in terms of the MPRDA, mining companies must make financial
provision for the rehabilitation or management of negative environmental impacts
resulting from their mining activities.
The taxpayer is required to assess annually its environmental liability and increase
the financial provision for the remediation of environmental damage. Payments made
in respect of the financial provision for remediation of environmental damage may be
deducted by the taxpayer under Section 37A of the Income Tax Act.
The taxpayer, in complying with its obligations in terms of environmental laws, is
able to deduct an allowance in respect of costs incurred by the company for environmental
expenditure in terms of Section 37B of the Income Tax Act.
The allowance can be claimed by the taxpayer for environmental recycling assets,
pollution control and environmental waste disposal assets, which include costs incurred
for air, water and solid waste disposal sites, dams, dumps, reservoirs or similar structures
and improvements thereto.
Energy production in South Africa relies heavily on South Africa’s coal fired power
stations, placing South Africa among the top 20 carbon-emitting countries in the world.
As a result, the government has proposed a carbon tax of 120 rand per tonne of carbon
dioxide equivalent for emissions above the thresholds to compel voluntary reductions in
harmful greenhouse gas emissions.
The levy is expected to come into effect in 2013 or 2014, and will increase by
10 per cent a year to 2020. However, the proposed carbon tax may place too heavy a
burden on key sectors such as mining, which are already under pressure from the rising
cost of electricity in South Africa. As such, the Treasury has proposed a 60 per cent tax-
free threshold on annual carbon emissions for the electricity, petroleum, iron, steel and
aluminium sectors.
The increasing cost of electricity in South Africa, together with the unreliable
supply of electricity from South Africa’s state-owned power generator, Eskom, and the
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proposed carbon tax, have resulted in mining companies seeking alternative sources of
electricity supply and generation for their operations. The long-term financial benefits
of renewable energy production are starting to play a role in South Africa’s decision-
making process, especially with regards to the Section 12I tax incentive for greenfield and
brownfield industrial projects.
III DEVELOPMENTS AND FUTURE OUTLOOK
i Market developments and trends

One of the top-rated South African companies focusing on analysing companies carrying
on business in developing markets, recently reported that in June 2011, the market
capitalisation of the top 39 South African mining companies was 929 billion rand. Of
this amount, some 40 per cent is attributable to platinum mining companies, 25 per cent
to gold mining companies and 35 per cent to diversified mining companies.10
Recently, Mining Weekly Online11 reported that in 2011 the South African
mining industry focused largely on improving operating efficiencies and rationalising
capital to meet capital expenditure requirements. In the latter part of 2012, liquidity
improved, which resulted in financial institutions being less cautious about their lending
practices in respect of exploration and expansion projects. The rise in commodity prices
and more efficient company expenditure management have also resulted in an increase
in operating cash flows during the first half of 2012.
ii Risk considerations in respect of environment, current developments and trends

Environment
Throughout 2011 and 2012, environmental matters have continued to feature
prominently on the agendas of mining companies and regulatory authorities. The most
contentious issues are acid mine drainage (‘AMD’), allocations of water use licences and
environmental legacy problems. The South African Parliamentary Portfolio Committee
on Mineral Resources recently conducted public hearings on AMD and other related
environmental legacy problems. This resulted in the government’s commitment to finding
solutions to manage AMD, but also to step up regulatory compliance and enforcement.
Of great concern is the unresolved matter of legislative duplication between
the MPRDA and the National Environmental Management Act, No. 107 of 1998 (as
amended) (‘the NEMA’). The uncertainty about whether the NEMA and its regulations
apply to mining in addition to the MPRDA has a negative effect on the operational
activities of the industry. This matter has recently arisen in the Constitutional Court in
the Maccsand case.12
The decision by the Constitutional Court in the Maccsand judgment provided
legal clarity in respect to whether land needs to be zoned, under the relevant provincial
10 SA Mine: Review of trends in the South African mining industry, compiled by PwC.
11 www.miningweekly.com.
12 Maccsand (Pty) Ltd v. City of Cape Town and Others 2012 (4) SA 181 (CC).
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South Africa
planning laws, for mining purposes prior to commencement of mining operations and
despite a mining right having already been granted in terms of the MPRDA.
The Constitutional Court found that the national law and the provincial law
served different purposes, and that although there was an overlap between the MPRDA,
which regulates mining on land, and the provincial zoning planning legislation, which
regulates the use of land, this overlap did not constitute an ‘impermissible intrusion
by one sphere into the area of another’, and that therefore in the case of a mining
rightholder’s mining operations, mining could not take place until the land in question
had been appropriately re-zoned.
Investors, when completing their due diligence or bankable feasibility processes
in respect of mining operations that are yet to commence, should therefore consider the
implications of the Maccsand judgment, and the potential interdict the mine may face
from an affected third party should the land itself not be correctly zoned.
A growing concern for mining companies operating in South Africa is the
potential liability in respect of South Africa’s environmental laws, which follow the
international polluter-pays, strict liability and precautionary principles. NEMA also
provides that directors or even shareholders of a company could be held jointly, severally
or even criminally liable for degradation of the environment.
In a recent court case, the directors and employees of a listed coal mining company
were charged in terms of the NEMA, the National Water Act, Act 36 of 1998, as well as
the environmental provisions of the MPRDA, for failing to comply with all regulatory
compliance requirements relating to a mandatory environmental impact assessment and
the use of water for mining-related activities, where no authorisation had been issued
under the National Water Act for such activity.
It is therefore imperative that directors and employees recognise the importance
of the South African environmental laws, and the potential liability relating to direct or
indirect environmental damage
Sociopolitical issues
Another hotly debated issue is the call by the Youth League of the African National
Congress for the nationalisation of mines in South Africa. This debate arguably resulted
in one of the most contentious issues relating to the mining industry during the year.
However, senior government officials, including the Minister of Mineral Resources,
has continued to maintain that nationalisation is not government policy, and that the
government currently has no intention to nationalise any mines.
Labour issues
Negotiations in 2012 regarding wages and other conditions of employment resulted in
volatile strikes at various mines, and especially hitting platinum producers hardest. The
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number of strikes in the country, and strikes in the mining industry, generated a high
degree of media interest, primarily because of the Lonmin13 strike.
A disturbing trend has emerged in industrial relations in the mining industry that
threatens the fabric of South Africa’s well-entrenched industrial relations and employment
law system. It started with an illegal strike at Impala Platinum14 that led to the mass
dismissal of mine workers. Subsequently, the Lonmin miners mirrored the demands of
the Impala Platinum workers, and similarly proceeded to engage in unprotected strike
action.
The recent spate of industrial action in South Africa flouts the existing industrial
relations and regulation systems, insofar as it seems as though mine workers have chosen
not to be represented by trade unions, and do not consider themselves to be bound by
agreements concluded by their traditional collective bargaining agents.
The events at the Lonmin mine have set a precedent in industrial relations.
However, it should be noted that the circumvention of the proper procedure for
negotiating wages will itself prove to be an unsustainable practice in the long term. The
mining industry is able to pay its workforce up to a certain amount, after which a further
increase in wages can only be maintained by reducing the number of workers. When
proper channels of dispute resolution are followed, and if trade unions and bargaining
counsel are involved in wage negotiations, job security should be easily obtained by
reaching reasonable conclusions that take the concerns of all the parties involved into
account.
13 Lonmin PLC traded on the JSE (code LOLMI) as well as the London Stock Exchange (code
LMI).
14 Impala Platinum Holdings Limited, listed on the JSE (code IMP).
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Chapter 29
TURKEY
Safiye Aslı Budak and Merve Nazlı Kaylan 1
I INTRODUCTION
In recent years, mining investment has increased and now plays a significant role in the
Turkish economy. More than 70 types of mineral are found in Turkey, nearly all of which
attract investors, but those that are categorised as ‘precious metals’ are generally of the
highest interest. Since the business of mining was rapidly growing and each day became
more liberalised, the Turkish government considered taking measures in order to regulate
the precious metals sector, and in July 2005, the Istanbul Gold Exchange (‘the IGE’) was
established.
Following the establishment of the IGE, the unlisted trade of gold has been
prohibited, and a fair and competitive marketplace has been provided for investors.
Likewise, the competition between Turkish gold mine investors and foreign gold mine
investors has increased. It should also be noted that since the IGE provides certain
standards for gold to be traded on the metals exchange, the overall quality within the
sector has increased and been standardised.
The duties of the IGE include the determination of reference prices for precious
metals, provision of integration to national and international markets, preparation of
relevant legislation, taking measures in the event that any problems occur in the exchange
and provision of precious metal markets.
1 Safiye Aslı Budak is a partner and Merve Nazlı Kaylan is an associate at Hergüner Bilgen Özeke
Attorney Partnership.
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II CAPITAL RAISING

Turkish Commercial Code
The main piece of legislation governing incorporation and operation of corporations
is the Turkish Commercial Code and its secondary legislation. There are certain
requirements with respect to shares, capital, organs and registration, depending on the
type of partnership. There are also ordinary partnerships (e.g., joint ventures) that are
not subject to strict requirements in respect of incorporation and operations due to the
nature of the work to be conducted, and also due to some legal requirements. Investors
in the mining capital markets are either in the form of joint stock corporations (‘JSCs’)
or limited liability partnerships (‘LLPs’).
A JSC is a legal entity suited for large operations. It is mandatory for entities
such as holding companies, telecom companies, banks, financial institutions, brokerage
houses and insurance companies to be incorporated as a JSC under specific legislations
in certain circumstances. A JSC is the only type of company that can make a public
offering. LLPs, however, cannot engage in certain activities, such as insurance, banking,
brokerage services, and cannot make a public offering.
There are two methods of public offerings: through a share capital increase or
through a public offering of the current shares. In either instance, and following the
public offering, the Capital Markets Board and the Istanbul Stock Exchange must be
informed of the sale results. The Istanbul Stock Exchange evaluates the sale results, and
decides in which market the publicly held company can act, and enables the company to
trade in that market. The Istanbul Stock Exchange is an equity exchange in the form of
a public legal entity, which is established by the authorisation of the respective Ministry
upon the recommendation of Capital Markets Board, organised under the principles
specified in special laws, and is authorised to ensure the smooth trading of securities and
other capital market instruments in a safe and stable manner, under free and competitive
terms. The means of exchange are limited to equity exchanges, but are not limited to
mines or metals.
The IGE legislation

The main pieces of legislation that led to the establishment of the IGE, and which
regulate the trade of the precious metals, are Law No. 1567 on Protection of the Value
of Turkish Currency (‘Law No. 1567’) and Decree No. 32 on the Protection of the
Value of Turkish Currency (‘Decree No. 32’). In addition, the Regulation on the IGE
(‘the IGE Regulation’), the Regulation on Establishment and Working Principles of
the Precious Metal Exchanges, the Regulation regarding Principles concerning Precious
Metal Exchange Intermediary Institutions and Incorporation of the Precious Metal
Exchange Brokerage Houses, the Regulation on Precious Metals Lending Market, and
the Regulation on the Diamond and Precious Stones Market, are among the secondary
legislation.
Pursuant to Law No. 1567 and Decree No. 32, gold, silver, platinum and
palladium (in any form) are defined as ‘precious metals’, whereas, diamonds, crystals,
emeralds, rubies, topaz, sapphire, chrysolite and pearls (in any form) are defined as
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‘precious stones’. In addition, the following determinations are made based on the form
and the purity of the precious metals.
Gold Silver Platinum Palladium

Standard unprocessed Standard unprocessed Standard unprocessed Standard unprocessed
gold: gold bars or ingots, silver: silver bars, ingots platinum: platinum palladium: palladium
with a minimum purity or granules with a purity bars or ingots, with a bars or ingots, with a
of 995‰, the qualities of of at least 99.9%, the minimum purity of minimum purity of
which are determined by qualities of which are 99.95%, the qualities of 99.95%, the qualities of
the Undersecretariat of determined by the which are determined by which are determined by
the Treasury Undersecretariat of the the Undersecretariat of the Undersecretariat of
Treasury the Treasury the Treasury
Non-standard Non-standard Non-standard Non-standard
unprocessed gold: gold unprocessed silver: silver unprocessed platinum: unprocessed palladium:
bars, ingots, dore bars, bars, ingots, dore bars, platinum bars, ingots, palladium bars, ingots,
granules, powder and granules, powder and dore bars, granules, dore bars, granules,
scraps with a purity less scraps with a purity less powder and scraps with a powder and scraps purity
than 995‰ than 99.9% purity less than 99.95% less than 99.95%
Processed gold: gold that Processed silver: silver Processed platinum: Processed palladium:
is crafted into ornaments that is crafted into platinum that is crafted palladium that is crafted
or jewellery ornaments or jewellery into ornaments or into ornaments or
jewellery jewellery
Pursuant to Decree No. 32, the exportation of standard unprocessed precious metals can
only be made by the Central Bank of Turkey and members of the IGE. Furthermore,
the IGE is also authorised for the sale and purchase activities of the precious metals (in
any form) that are mined from ore in Turkey. In addition, the physical exchange of the
precious metals between the member institutions, as well as the storage of the precious
metals on behalf of the member institutions, is also made by the IGE.
As to the precious stones, the IGE is determined as to the import and export
authority of unprocessed diamonds. This authority includes examination of the imported
or exported diamonds in respect of the Kimberley Processes Certification Scheme, the
provision of such certificates, and receipt of confirmation with respect to such certificates
from other participant countries.
Pursuant to the IGE Regulation and the Regulation regarding Principles
concerning Precious Metal Exchange Intermediary Institutions and Incorporation of
the Precious Metal Exchange Brokerage Houses, only intermediary institutions granted
membership certificates by the IGE can trade in the market. Provided that the permission
of the Undersecretariat of Treasury is gained, and other requirements of the board of
directors of the IGE are met, these intermediary institutions are as follows:
a banks;
b authorised corporations;
c precious metal exchange brokerage houses (‘brokerage houses’);
d joint stock corporations that produce and trade precious metals; and
e Turkish branches of foreign corporations.
All these institutions (except for brokerage houses) must apply to the Undersecreteriat
of the Treasury in order to trade in the market and must hold an activity licence.
Authorised corporations and JSCs that produce and trade precious metals must provide
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relevant documentation in respect to the financial and criminal records (if any) of
their shareholders, authorised signatories, auditors and directors when they file such
application with the Undersecreteriat of Treasury. In addition, the minimum paid-in
capital for JSCs producing and trading precious metals must be at least 500,000 Turkish
lira, and they must have at least three years’ prior experience in the precious metal
production and trade business. This minimum paid-in capital requirement also applies
to authorised corporations.
If any corporation resident in a foreign country is granted with an activity licence
by the authorised institution of the relevant country in respect to the production, sale
and trade of the precious metals, membership with the IGE is possible only if it has a
branch in Turkey, and receives permission from the Undersecreteriat of the Treasury.
As a general rule, following receipt of the Undersecreteriat of Treasury’s activity
licence, an application to the IGE must be filed within 60 days in order to receive an IGE
membership certificate; otherwise, the activity licence is deemed invalid.
It should also be noted that the Central Bank of Turkey is a natural member
of the IGE. Furthermore, intermediary institutions other than banks and authorised
corporations cannot engage in effective purchases and sales, other than their activities
within the IGE.
There are specific addition requirements for brokerage houses set out under
Article 4 of the Regulation regarding Principles concerning Precious Metal Exchange
Intermediary Institutions and Incorporation of the Precious Metal Exchange Brokerage
Houses. Brokerage houses must:
a be incorporated as a JSC;
b have all share certificates registered as share certificates in return for cash;
c have the term ‘kıymetli madenler’ (precious metals) in their corporate titles;
d have articles of association in accordance with the provisions of Regulation
regarding Principles concerning the Precious Metal Exchange Intermediary
Institutions and Incorporation of the Precious Metal Exchange Brokerage Houses;
e have incorporators that comply with the aforementioned Regulation (these are
generally in relation to financial and criminal records); and
f have at least two of its real person or legal entity incorporators holding a minimum
of three years’ experience in precious metal production or trade, and shareholders
who qualify under this requirement should hold at least 50 per cent of its shares.
The incorporation of brokerage houses is subject to the prior permission of the

Undersecreteriat of Treasury; registration of the incorporation with the relevant Trade
Registry follows this permission. Subsequently, within 180 days of the permission of the
Undersecreteriat of Treasury, an application must be filed with the same authority for the
activity licence. In addition, the activity licence will be deemed invalid if the brokerage
house fails to apply to the IGE for membership.
Members must provide two types of collateral in order to trade, which must be
deposited with a bank approved by the IGE, in the forms of either cash, letter of credit,
precious metals and treasury bonds or bills. These are:
a risk collateral, which tends to cover possible damages that may arise from failure
to fulfil liabilities towards other members and the IGE; and
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b trading collateral, which is required for trading, and determines the daily trade
limit of the relevant member.
These forms of collateral will be returned in the event that termination of membership is
requested, provided that there are no outstanding liabilities of the member making the
request.
ii Market overview
There are three markets open for trade under the IGE:
a the Precious Metals Market, where spot transactions are made concerning
standard, non-standard and processed gold, silver and platinum that are subject
to trade;
b the Precious Metals Lending Market, where lending and certification transactions
are made; and
c the Diamond and Precious Stones Market, where diamonds and precious metals
are subject to trade.
Pursuant to the recent statements of the IAB, there are currently 86 members of the
Precious Metals Market consisting of 22 banks, 34 authorised corporations, 20 precious
metals intermediary institutions and 10 JSCs, as well as the Turkish branches of foreign
corporations that produce and trade precious metals.
As to the Precious Metals Lending Market, there are currently nine members
consisting of eight banks and one JSC, as well as Turkish branches of foreign corporations
that produce and trade precious metals.
Likewise, in the Diamond and Precious Stones Market, there are currently 121
members, of which 67 are jewellers.
II TAX CONSIDERATIONS
Turkish tax legislation provides widespread preferential regimes, exemptions and

reductions to different taxable matters at different rates. These are mainly set out under
specific pieces of legislation regulating relevant sectors.
The major tax categories applicable to project companies are income taxes,
corporate taxes and value added taxes. These are respectively set out under (1) Law No.
193 on Income Tax; (2) Law No. 5520 on Corporate Tax and (3) Law No. 3065 on
Value Added Tax.
Corporate tax and value added tax rates are determined under the relevant
legislation at 18 per cent and 20 per cent, respectively; these are fixed rates and are not
subject to any distinction on a tax basis. Pursuant to Article 103 of the Corporate Tax
Law, however, the corporate tax rate differs based from the tax basis of between 15 per
cent and 35 per cent. Likewise, the withholding tax rate is 15 per cent, which may, in
some cases, be subject to reduction by means of double-taxation agreements.
The shareholding structure of a taxpayer must be considered when exemptions
and reductions under a double-taxation agreement are in question (e.g., when a foreign
investor benefits from the reduced corporate tax rates provided under a double-taxation
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agreement, and which require a given percentage of shares to be held by one party). Aside
from this point, taxable matters are generally evaluated individually.
i State incentives
State incentives are currently governed by two main pieces of legislation. The new
incentive package has been introduced by:
a Council of Ministers Decree No. 2012/3305 on State Aid regarding Investments
(‘the Decree’); and
b Communiqué No. 2012/1 on the Implementation of the Decree on State Aid
regarding Investments (‘the Communiqué’).
The following incentive elements are determined through the Decree, as follows:
a reduced tax rate;
b value added tax exemption;
c subsidy on the share of insurance premiums to be paid by employers;
d customs duty exemption;
e interest subsidy;
f allocation of an investment site;
g withholding income tax subsidy (only for investments in region VI – see below);
h insurance premium subsidy (only for investments in region VI – see below); and
i value added tax refund.
The aforementioned incentives are granted upon acquisition of an investment incentive

certificate, and future incentive certificates will contain these incentive elements, by
default.
Incentive elements, other than general incentives, will differ on a regional basis.
In addition, there are different incentives for investments that fall within the scope of
large-scale investments or strategic investments.
As a general remark, investments that benefit from state incentives as per the
Decree and the Communiqué cannot additionally benefit from any other incentive to be
provided by other governmental authorities. In contrast, investments that benefit from
any other state incentive or aid cannot apply for these kinds of state incentives.
ii General incentives
Among the aforementioned incentive elements, value added tax exemptions and
customs duty exemptions are determined to be general incentives, and will apply to
all investments, subject to general conditions, regardless of region and sector (except
for investment subjects that are not considered to be within the scope of the incentives
and do not meet the required conditions). In addition, the new state incentives include
withholding income tax subsidy for investments in region VI, and subsidy on the share
of insurance premiums to be paid by employers for shipyard construction.
Above all, in order for an investment to benefit from an incentive, the minimum
fixed investment threshold must be met. For investments in regions I and II, this amount
is at least 1 million Turkish lira, and for investments in regions III, IV, V and VI, this
amount must be at least 500,000 Turkish lira. There are some other requirements, such as
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minimum capacity and fixed investment amounts. The term ‘fixed investment amount’
refers to the total amount of investment expenses including land, building, construction,
machinery and equipment expenses.
Specifically, if the investment is to be conducted through the leasing method,
the total amount of the machinery and the equipment subject to the lease should be
a minimum of 200,000 Turkish lira concerning each of the leasing firms. In addition,
there are also some specific requirements in the event that an investor decides to realise
the investment through intellectual property rights, such as technology and know-how.
iii Incentives by region

The Decree features regional classifications that take into consideration the levels of
socio-economic development of provinces, which are as follows:
Region I Ankara, Antalya, Bursa, Eskişehir, İstanbul, İzmir, Kocaeli, Muğla

Adana, Aydın, Bolu, Çanakkale (excluding Bozcaada and Gökçeada), Denizli, Edirne,
Region II Isparta, Kayseri, Kırklareli, Konya, Sakarya, Tekirdağ, Yalova
Balıkesir, Bilecik, Burdur, Gaziantep, Karabük, Karaman, Manisa, Mersin, Samsun,
Region III Trabzon, Uşak, Zonguldak,
Afyonkarahisar, Amasya, Artvin, Bartın, Çorum, Düzce, Elazığ, Erzincan, Hatay,
Region IV Kastamonu, Kırıkkale, Kırşehir, Kütahya
Adıyaman, Aksaray, Bayburt, Çankırı, Erzurum, Giresun, Gümüşhane, Kahramanmaraş,
Region V Kilis, Niğde, Ordu, Osmaniye, Sinop, Malatya, Nevşehir, Rize, Sivas
Ağrı, Ardahan, Batman, Bingöl, Bitlis, Diyarbakır, Hakkari, Iğdır, Kars, Mardin, Muş,
Region VI Siirt, Şanlıurfa, Şırnak, Van, Bozcaada and Gökçeada
There are different thresholds and requirements for different kinds of investments
concerning each region. As an example, for the metal goods sector, the minimum fixed
investment amount must be as follows:
Region I Region II Region III Region IV Region V Region VI

4 million 3 million 1 million 1 million 1 million 500,000
Turkish lira Turkish lira Turkish lira Turkish lira Turkish lira Turkish lira
Investors will enjoy customs duty and value added tax exemptions, reduced tax rate,
investment site allocation, and subsidy on the employer’s share of insurance premiums,
and interest subsidy in regions III, IV, V and VI. Also, for region VI, investors may also
benefit from withholding income tax and insurance premium subsidy.
As a general note, group mine and stone chips investments, as well as mine
processing and extraction investments to be made in Istanbul, cannot benefit from
regional investments.
iv Incentives for large-scale investments

Pursuant to the Decree, large-scale investments are listed under Annex III of the Decree
provided that they also fall within the scope of Article 32A of Corporate Tax Code
No. 5520. The list under Annex III includes investments concerning metal production,
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which refers to investments regarding production of the final metal from the ores or
concentration of the mines under Group IV(c) of the Mining Law.
Large-scale investments enjoy customs duties and value added tax exemption,
reduced tax rates, investment site allocation, and subsidy on the employer’s share of
insurance premiums. In addition to these investments in the region VI, they may also
benefit from withholding income tax subsidy and insurance premium subsidy.
v Investments for strategic investments

An investment would fall within the scope of a strategic investment in the event that all
of the following conditions are met:
a the minimum fixed investment amount must be at least 50,000 Turkish lira;
b domestic production capacity, in respect of the investment, must be less than the
export amount;
c with respect to the principles to be provided by the Ministry of Finance, the
added value to be provided by such investment must be at least 40 per cent;
d the import amount pertaining to the previous year concerning the investment
must be more than $50 million.
The same rates of taxes apply to foreigners, if a taxable event occurs.
III DEVELOPMENTS
Turkey’s mining industry has recently undergone dramatic changes. The Mining Law No.
3213, which was enacted on 15 June 1985, has so far been subject to several amendments,
and has opened up the mining industry to private and international investment. Vigorous
growth in gold mining necessitated restructuring in the gold sector, and the IGE was a
significant milestone in the integration of gold into the financial system. Due to this
stability and competitiveness, the interest of foreign and local investors in the mining
sector has increased. At least three new mines have opened solely in the gold mining
sector. Foreign investors have especially shown their interest in the Turkish mining sector
recently by subscribing 40 per cent of the Koza Altın İşletmeleri AŞ’s shares at the initial
public offering. In addition to Koza, there are currently two other mining companies
trading on the Istanbul Stock Exchange: Metro Altın İşletmeciliği İnşaat Sanayi ve
Ticaret AŞ and Park Elektrik Üretim Madencilik Sanayi ve Ticaret AŞ.
Additionally, the total number of mining licences has increased remarkably as a
result of state incentives providing broad advantages to various sectors, the mining sector
included. This trend not only increases the value of the Turkish mining sector, but also
results in new findings, thereby encouraging investors to seek new ores.
Due to its geopolitical situation, Turkey also attracts eastern consumers. Given
the high costs of transportation in the mining sector, eastern and neighbouring countries
increasingly opt to purchase unprocessed metals from Turkey. Being one of the safest
countries in the eastern mining business, and benefiting from rich resources and
a regulated market, Turkey is positioned to sustain investor attraction, and to realise
increasing growth, during the coming years.
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Chapter 30
UNITED KINGDOM
Kate Ball-Dodd and Connor Cahalane 1
I INTRODUCTION
The UK remains a leading destination for mining companies seeking to have their
shares traded on a public stock exchange. As at 31 August 2012, there were 40 mining
companies admitted to trading on the London Stock Exchange’s Main Market, with
a combined market capitalisation of over £233 billion, including many of the world’s
largest mining groups by market capitalisation. The London Stock Exchange’s growth
market, AIM, continues to be a popular listing venue for the mining sector, with 143
mining companies admitted to trading as at 31 August 2012 with a combined market
capitalisation of approximately £6 billion. In June 2012, ICAP plc acquired the PLUS
Stock Exchange plc (formerly known as OFEX), the operator of two primary markets in
the UK, the PLUS-listed market for listed securities and the PLUS-quoted market for
unlisted securities. As of 31 August 2012, there were 15 mining companies admitted
to trading on the PLUS Stock Exchange, with a combined market capitalisation of
approximately £30 million.
During 2011, a total of 24 new mining companies were admitted to trading on
the Main Market and AIM, including the initial public offers of Glencore International
plc, an integrated commodities producer and marketer, and Polymetal International plc,
a gold and silver producer with operations in Russia and Kazakhstan. As the global
economic crisis, and in particular the European sovereign debt crisis, continues to affect
global capital markets, the first half of 2012 has seen just one new mining company
admitted to the Main Market, Nord Gold NV, a gold producer with operations in Africa
and Siberia, which in January 2012 completed an admission of global depository receipts
to the standard segment of the Official List. In June 2012, Polyus Gold International plc
1 Kate Ball-Dodd is a partner and Connor Cahalane is a senior associate at Mayer Brown
International LLP.
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transferred its listing from the standard segment to the premium segment of the Official
List. During the eight-month period to 31 August 2012, 10 new mining companies
were admitted to AIM. Notable among the new AIM admissions was Rare Earths Global
Limited, a Chinese mining services group, which completed a placing and admission to
AIM in March 2012 and had a market capitalisation of £256 million as at 31 August
2012.2
II CAPITAL RAISING

Under the UK listing regime, different admission criteria and listing rules will apply
depending on whether a company is seeking to have its shares (or other securities)
admitted to a regulated market governed by the EU Prospectus Directive,3 such as the
Main Market or the PLUS-listed market, or to AIM, which has a more flexible regulatory
structure.
Official List
In order to be admitted to the Main Market or the PLUS-listed market, a company must
first apply to the UK Listing Authority (‘the UKLA’), a division of the UK’s Financial
Services Authority, to join the Official List.
Mineral companies
For the purposes of the Listing Rules (‘LR’), which set out the admission requirements
for the Official List, a mineral company is a company with material mineral projects (not
just those whose principal activity is the extraction of mineral resources). The materiality
of projects is assessed having regard to all the company’s mineral projects relative to the
company and its group as a whole. Mineral projects include exploration, development,
planning or production activities (including royalty interests) in respect of minerals,
including:
a metallic ore, including processed ores such as concentrates and tailings;
b industrial minerals (otherwise known as non-metallic minerals), including stone
such as construction aggregates, fertilisers, abrasives and insulants;
c gemstones;
d hydrocarbons, including crude oil, natural gas (whether the hydrocarbon is
extracted from conventional or unconventional reservoirs, the latter to include oil
shales, oil sands, gas shales and coal bed methane) and oil shales; and
e solid fuels, including coal and peat.
2 Source for Main Market and AIM statistics is the London Stock Exchange website, www.
londonstockexchange.com. Source for PLUS statistics is the PLUS Stock Exchange website,
www.plus-sx.com.
3 EU Prospectus Directive (2003/71/EC).
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Admission requirements
The Official List is divided into two segments: standard listings and premium listings.
A standard listing is one that satisfies the minimum requirements laid down by the
EU Prospectus Directive. A premium listing denotes a listing that meets more stringent
criteria that are not required by the EU Prospectus Directive but that are seen as providing
additional investor protections. A mineral company may apply for either a premium or
standard listing provided it complies with the relevant admission requirements.
Standard listing
A mineral company seeking a standard listing must comply with the general admission
requirements set out in the LR.4 These include a requirement that the company is duly
incorporated (either within the UK or, if a non-UK company, in the company’s place of
incorporation), and that the securities must be free from any transfer restrictions (subject
to certain exceptions5 ). If the company is making an offer of new securities, any necessary
constitutional, statutory or other consents required must be obtained prior to listing.6
The expected market capitalisation of the securities to be listed must be at least £700,000
in the case of shares and £200,000 in the case of debt securities. While the UKLA has a
discretion to admit a company with a lower market capitalisation if it is satisfied there
will be an adequate market, from a practical perspective it is likely that the market
capitalisation would need to be significantly higher for a listing to be economical.7 While
there is no requirement for a company seeking a standard listing to confirm to the UKLA
that it has sufficient working capital to meet the requirements of the business for the next
12 months, if the company is also producing a prospectus (which is likely to be the case
– see below), it will be required to include a working capital statement in the prospectus
confirming whether the business has sufficient working capital for that period.
Premium listing
If a mineral company is seeking an admission of its shares to the premium segment of
the Official List, in addition to the minimum requirements applicable to all listings set
out above, the company must confirm to the UKLA that it has sufficient working capital
available to meet the requirements of the business for the next 12 months.8 At least 25
per cent of the class of the company’s shares to be listed in the premium segment must
be in the hands of the public in one or more EEA countries at the time of admission.
Where the company is already listed in a non-EEA country, shareholders in that country
may be taken into account. For this purpose, ‘public’ means shareholders other than
those holding 5 per cent or more of the class of shares being admitted, and also excludes
shares held by the directors of the company or any persons connected to the directors.
4 LR 2.
5 LR 2.2.4R. For example, this does not prevent the company’s shareholders from entering into
agreements among themselves restricting their ability to transfer shares.
6 LR2.2.2(3)R.
7 LR 2.2.7R and LR 2.2.8G.
8 LR 6.1.16R.
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Mineral companies are exempt from the premium listing requirement (which
would otherwise apply) to have published or filed audited accounts that cover at least three
full years, and also do not need to have at least 75 per cent of their business supported
by a historic revenue earning record.9 The rationale for this is that mineral companies are
subject to their own specific eligibility requirements, which are discussed below.
Prospectus
As well as complying with the above admission requirements, a company seeking
admission to the Official List (to the standard or premium segment) or making a public
offer of securities in the UK must publish a prospectus setting out sufficient information
to enable investors to make an informed assessment of the assets and liabilities, financial
position, profits and losses, and prospects of the company.10 The company must
also confirm in the prospectus whether is has sufficient working capital to meet the
requirements of the business for the next 12 months. The prospectus must be submitted
for review by the UKLA, which will assess whether the document complies with the
disclosure requirements set out in the Prospectus Rules (‘PR’). A prospectus must not
be published unless it is approved by the UKLA.11 In the case of an offer of shares, the
company and its directors must take responsibility for the contents of the prospectus,
and may be liable for any inaccurate or misleading information in the document or for
failure to comply with the relevant disclosure standards.12
Specific eligibility requirements for mineral companies

If a mineral company seeking admission to the Official List (to the standard or premium
segment) does not hold a controlling interest in a majority by value of the properties,
fields, mines or other assets in which it has invested, the company must be able to
demonstrate to the UKLA that it has a reasonable spread of direct interests in mineral
resources and has rights to participate actively in their extraction, whether by voting or
through other rights that give it influence in decisions over the timing and method of
extraction of those resources.13
Specific content prospectus requirements for mineral companies

In March 2011, the European Securities and Markets Authority (‘ESMA’) published
an updated edition of its recommendations for the consistent implementation of the
EU Prospectus Directive, with revised recommendations as to the content requirements
9 LR 6.1.8 and 6.1.9.

10 Section 87A(2), Financial Services and Markets Act 2000.
11 A company that has its home Member State in another Member State may also have a prospectus
approved by the competent authority in that jurisdiction and seek to have the prospectus
‘passported’ into the UK pursuant to Articles 17 and 18 of the EU Prospectus Directive.
12 PR 5.5.
13 LR 6.1.10.
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for prospectuses published by mineral companies.14 When reviewing a prospectus, the

UKLA will take into account these recommendations, which in effect supplement the
requirements of the LR and PR.
The recommendations recognise that mineral companies are distinct from other
companies in that a key factor in the assessment of their value relates to their reserves and
resources. The recommendations seek to ensure that appropriate levels of transparency
and assurance over the reserves and resources figures are made available to investors
by setting out a framework for the additional disclosure of reserves and resources
information, including the following information segmented using a unit of account
appropriate to the scale of the company’s operations (rather than on a per-asset basis):
a details of mineral resources and, where applicable, reserves and exploration results
and prospects;
b anticipated mine life and exploration potential or similar duration of commercial
activity in extracting reserves;
c an indication of the duration and main terms of any licences or concessions,
and legal, economic and environmental conditions for exploring and developing
those licences or concessions;
d indications of the current and anticipated progress of mineral exploration or
extraction, or both, and processing, including a discussion of the accessibility of
the deposit; and
e an explanation of any exceptional factors that have influenced the foregoing
items.
Competent persons report

A competent persons report (‘CPR’) is also required for all initial public offering
prospectuses regardless of how long the company has been a mineral company. A CPR
may also be required for secondary issues, but not where the company has previously
published a CPR and has continued to update the market regarding its resources, reserves,
results and prospects in accordance with one of the recognised reporting standards.
The CPR must be prepared by a person who possesses the required competency
requirements, either by satisfying the requirements of the applicable codes or organisation
set out in the recommendations, or by being a professionally qualified member of an
appropriate recognised association or institution with at least five years of relevant
experience.
The content requirements for the CPR are set out in the ESMA 2011
recommendations. These requirements vary depending on whether the CPR relates to a
company with oil and gas projects, or a company with mining projects. The CPR must
be dated not more than six months prior to the date of the prospectus, and the company
must confirm that no material changes have occurred since the date of the CPR that
would make it misleading. A list of acceptable internationally recognised reporting and
14 ESMA update of the Committee of European Securities Regulators’ recommendations for the
consistent implementation of Commission Regulation (EC) No. 809/2004 implementing the
Prospectus Directive (23 March 2011).
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valuation standards is also set out in the recommendations. The mining reporting codes
are aligned with the Committee for Mineral Reserves International Reporting Standards
(and do not include US SEC Industry Guide 7 on mining, or the Russian or Chinese
standards).
Depository receipts
Companies incorporated outside the EU seeking admission to the Main Market often
choose to do so through an issue of depository receipts, as a direct investment in their
shares may be less attractive to international investors. Depository receipts are negotiable
instruments that represent an ownership interest in a specified number of the company’s
shares. The underlying shares are issued to a depository, which in turn issues depository
receipts to investors. Depository receipts may only be admitted to the Official List
through a standard listing.
AIM
AIM is the London Stock Exchange’s market for smaller and growing companies. Due
to its status as an ‘exchange regulated market’ for the purposes of the EU Prospectus
Directive, AIM is governed by a more flexible regulatory regime than the Main Market.
Role of the nomad

While admission to the Main Market and the Official List is regulated by the UKLA,
the London Stock Exchange oversees the regulation of AIM and compliance with the
AIM Rules. Each company seeking admission to AIM must appoint a corporate finance
adviser that has been approved by the London Stock Exchange to act as a nominated
adviser or ‘nomad’. The company’s nomad is responsible for assessing whether the
company is an appropriate applicant for AIM, and for advising and guiding the company
on its responsibilities under the AIM Rules.
Admission requirements
Unlike the Official List, there are generally no minimum market capitalisation
requirements for a company seeking admission to AIM. However, investment companies
must raise a minimum of £3 million in cash through an equity fundraising to be eligible
for admission to AIM.15
There are also no minimum requirements as to the applicant company’s trading
history or the number of shares in public hands. The shares must however be freely
transferable and eligible for electronic settlement.
Fast-track admission to AIM

Companies that are already listed on certain overseas exchanges may qualify for AIM’s
fast-track admission process, in which case the company will not be required to produce
15 Rule 8, AIM Rules for Companies. For this purpose an ‘investing company’ is any company
that has as its primary business or objective the investing of its funds in securities businesses or
assets of any description.
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United Kingdom
an admission document.16 To be eligible for fast-track admission, a company must have

its securities traded on an AIM designated market17 for at least the last 18 months, and
should also have substantially traded in the same form during this period.
Admission document
A company seeking admission to AIM (other than a fast-track applicant) is required
to publish an admission document. The company’s nomad will be responsible for
assessing whether the admission document complies with the content requirements
set out in the AIM Rules. While these requirements are less onerous than those that
apply to a prospectus, a company preparing an admission document is subject to a
general requirement to disclose any information that the company reasonably considers
necessary to enable investors to form a full understanding of the assets and liabilities,
financial position, profits and losses, and prospects of the applicant and its securities for
which admission is being sought, the rights attaching to those securities and any other
matter contained in the admission document.18
Due to the less onerous disclosure requirements, and as the admission document
is reviewed and approved by the company’s nomad rather than the UKLA, the process
and timetable for admission to AIM can often be shorter and more flexible than the
process for admission to the Official List.
Prospectus requirement for AIM companies

Although AIM is not a regulated market for the purposes of the EU Prospectus Directive,
where a company seeking admission to AIM is also making an offer of its securities to the
public in the UK, the admission document may also need to be approved as a prospectus
by the UKLA unless it can avail of an applicable exemption. Where a company is offering
its shares through a private placement, it will usually seek to rely on an exemption
available for offers addressed solely to qualified investors, or fewer than 150 natural or
legal persons per EU Member State (i.e., other than qualified investors).
Specific content requirements for mineral companies

In addition to the general requirements set out in the AIM Rules, a mining company
seeking admission to AIM is required to comply with the AIM Guidance Note for
Mining, Oil and Gas Companies (‘the Guidance Note’).19
The Guidance Note states that nomads are expected to conduct full due diligence
on mining companies seeking admission to AIM, including by carrying out site visits
16 However, as with any company seeking admission to AIM, a fast-track applicant may be
required to produce a prospectus under the EU Prospectus Directive where, for example, an
offer of securities is made to the public and no relevant exemption is applicable.
17 These include the Australian Securities Exchange, Deutsche Börse Group, NYSE Euronext,
Johannesburg Stock Exchange, NASDAQ, NYSE, NASDAQ OMX Stockholm, Swiss
Exchange, TMX Group and the UKLA Official List.
18 Schedule 2(k), AIM Rules for Companies.
19 AIM Guidance Note for Mining, Oil and Gas Companies (June 2009).
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United Kingdom
and personal inspections of the physical assets where it is practical to do so. A formal
legal opinion from an appropriate legal adviser is also required on the incorporation
status of the company and any relevant subsidiaries, as well as the company’s title to its
assets and the validity of any licences.
Competent persons report

A mining company seeking admission to AIM is required to include in its admission
document a CPR on all its material assets and liabilities. The CPR must comply with
the disclosure requirements set out in the Guidance Note and the company’s nomad is
responsible for ensuring that the scope of the CPR is appropriate having regard to the
applicant’s assets and liabilities.
The CPR must be prepared no more than six months prior to the date of the
admission document by a person who meets the minimum requirements for competent
persons set out in the Guidance Note. These require the competent person to be a
professionally qualified member of an appropriate association, independent of the
applicant and to have at least five years of relevant experience.
Where information is extracted from the CPR for inclusion elsewhere in the
admission document, that information must be presented in a manner that is not
misleading and provides a balanced view. The Guidance Note also requires that the
competent person must review the information contained elsewhere in the admission
document that relates to the information in the CPR, and confirm in writing to the
applicant and the nomad that the information is accurate, balanced, complete and not
inconsistent with the CPR.
Lock-ins for new mining companies

The Guidance Note and the AIM Rules require that, where a mining company seeking
admission to AIM has not been independent and earning revenue for at least two years,
all related parties (which include the directors and any shareholders holding 10 per cent
or more of the voting rights) and applicable employees must agree not to dispose of any
interest in the company’s securities for at least one year from the date of admission to
AIM.
ii Tax considerations
Provided that a company is subject to UK tax, whether by being tax-resident in the UK
or by another means, the UK tax regime does not distinguish between domestic mining
companies and overseas mining companies.
The basic UK tax regime for mining companies is similar to that for other
companies – the main rate of corporation tax is 24 per cent (set to reduce to 23 per cent
from 1 April 2013, and then to 22 per cent from 1 April 2014), there is no limit on
the period for which tax losses can be carried forward and set off against future profits
(provided that they are incurred in the same trade that suffered the losses), and the usual
withholding taxes regime applies. In broad terms, withholding tax applies (subject to
any applicable double tax treaty and certain other exemptions) to overseas interest and
royalty payments. There is no withholding tax on dividends.
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United Kingdom
The usual capital allowances regime for long-life assets (8 per cent writing down
allowance per annum), and plant and machinery (18 per cent writing down allowance
per annum), applies to mining companies. In addition, persons engaged in mining
activities can benefit from the mineral extraction allowance, which is a form of capital
allowance available to those who carry on a mineral extraction trade (a trade consisting
of, or including, the working of a source of mineral deposits) and incur qualifying
expenditure. Qualifying expenditure for these purposes can include expenditure on
mineral exploration and access, and expenditure on acquiring mineral assets (defined
as mineral deposits, land comprising mineral deposits, or interests in or rights over such
deposits or land).
A major advantage offered to mining companies by the UK is that there are no
specific mining or mineral taxes (although excise duty is payable on mineral oils, at
varying rates, unless an exemption applies). There is also, generally, no VAT on exports.
However, mining companies’ activities may render them subject to the following indirect
taxes:
a climate change levy – a tax on energy, with a variable rate depending on the
nature of the fuel used;
b aggregates levy – a tax on the commercial exploitation (which includes both
extraction and importation) of gravel, sand and rock, currently charged at £2 per
tonne – this is subject to various exemptions, including exemptions for spoil from
any process by which coal or another specified substance has been separated from
other rock after being extracted from that rock, and for spoil from the smelting or
refining of metal; and
c landfill tax – a tax on the disposal of waste to landfill, currently charged at the
standard rate of £64 per tonne or the lower rate of £2.50 per tonne, depending
on the material being disposed of; there is an exemption for the disposal of
naturally occurring materials extracted from the earth during commercial mining
or quarrying operations, provided that such material has not been subjected to
and does not result from a non-qualifying process carried out between extraction
and disposal.
Apart from the mineral extraction allowance, there are no special allowances or incentives
for persons engaged in mining activities, or their investors or lenders.
III DEVELOPMENTS
On 1 October 2012, ESMA published a consultation paper seeking views on proposed

further amendments to its recommendations regarding mineral companies. These
include proposed amendments to the definition of ‘material mining projects’ to clarify
that materiality should be assessed from the point of view of the investor; and projects
will be material where evaluation of the resources (and, where applicable, the reserves
or exploration results, or both) that the projects seek to exploit is necessary to enable
investors to make an informed assessment of the prospects of the issuer. In addition,
ESMA proposes to establish a rebuttable presumption within the definition of materiality
that mineral projects can be material both where the projects seek to extract minerals for
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their resale value as commodities; or the minerals are extracted to supply (without resale
to third parties) an input into an industrial production process (which includes but is
not limited to the example of stone extracted in the cement and aggregates industry) and
there is uncertainty as to either the existence of the resources in the quantities required
or the technical feasibility of their recovery.
The consultation paper also sets out a proposal to amend certain of the existing
exemptions from the requirement to publish a CPR, including a new exemption for non-
equity securities (other than depositary receipts over shares).
ESMA expects to publish revised recommendations during the second quarter of
2013.
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Appendix 1
ABOUT THE AUTHORS
ULUGBEK ABDULLAEV
Avent Advokat
Ulugbek Abdullaev has been a junior associate with Avent Advokat since 2011. He is a
graduate of Westminster International University in Tashkent (BA in commercial law),
and his main focus is on commercial, M&A, foreign employment and contract law.
INNOCENT AKWAYENA
REM Law Consultancy
Innocent Akwayena is a resources, energy and mining law expert. He holds an LLM in
natural resources law (with specialisations in mineral law, policy and economics) from the
University of Dundee. He was the principal legal counsel for the Minerals Commission
from 1992 to 1999, and has been actively involved in key mining and energy sector
legal and regulatory projects in Ghana since 1994. As a graduate intern at the Economic
and Legal Advisory Services Division of the Commonwealth Secretariat in London,
in 1998, he participated in the drafting of mining legislation for two Commonwealth
countries. He founded REM Law Consultancy in 2000, and his practice has focused
on representing multinational companies undertaking resource development projects in
Ghana and the West African subregion. Since 2006 he has been listed on a yearly basis
in Who’s Who Legal as one of the world’s leading mining lawyers.
OLADOTUN ALOKOLARO
Advocaat Law Practice
Oladotun Alokolaro is a qualified lawyer practising energy and natural recourses law and
policy with the law firm of Advocaat Law Practice in Lagos.
He holds an LLB from the University of Buckingham, an LLM from the Centre
for Energy Petroleum Mineral Law and Policy at the University of Dundee, and a BL
from the Nigerian Law School. He started his legal career with the law firms of Law
Union and Templars before becoming a partner at Advocaat Law Practice.
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About the Authors
Mr Alokolaro regularly advises clients across the entire spectrum of the energy
industry in Nigeria: oil and gas, mining and electricity. He has written several articles
including ‘The Reform of Public Mining Institutions in Nigeria’, ‘Attracting Foreign
Direct Investments to the Solid Minerals Sector in Nigeria’, ‘Contracting Issues under
the Nigeria Electricity Supply Industry’ and ‘The Nigeria Gas Master Plan’.
GIANNINA ASSERETO
Zuzunaga & Assereto Abogados
Giannina Assereto is a partner of the mining and environmental area of Zuzunaga &
Assereto Abogados since 2008; she has over 15 years’ experience in the mining and
environmental fields, advising the largest companies in Peru or working in them.
Ms Assereto graduated from the University of Lima, and was professor at the
Law School of the Peruvian University of Applied Sciences (2009) and at the Centre of
Continuous Education of the Pontifical Catholic University of Peru (2010).
She was an associate at Osterling Law Firm (from 1997 to 1998 and 2005 to
2008); a senior lawyer at Hochschild Mining plc (1998 to 2001); and was a member of
the group of advisers to the Presidency of the Council of Ministers of Peru and the Head
of the Secretariat of the Council of Ministers (from 2001 to 2002).
KATE BALL-DODD
Mayer Brown International LLP
Kate Ball-Dodd is a partner in the corporate department of Mayer Brown International
LLP. She has a wide-ranging corporate practice that encompasses corporate finance,
mergers and acquisitions (including public takeovers), equity fund raisings, joint
ventures and corporate governance. She advises a number of quoted companies and
financial intermediaries on the UKLA Listing Rules and Disclosure and Transparency
Rules, the Prospectus Rules, the AIM Rules, the Takeover Code and general company
law. Kate speaks regularly at external conferences on corporate governance and takeovers.
ROBERT A BASSETT
Holland & Hart, LLP
Robert A Bassett is the mining team leader at Holland & Hart, LLP in Denver, Colorado,
a full-service law firm with offices throughout the western US and in Washington, DC.
Holland & Hart has one of the largest mining law practice groups in the nation. Mr
Bassett has nearly 30 years of experience in mining law, and provides clients with practical
solutions for financing and developing mining projects.
Mr Bassett has published numerous articles for the Rocky Mountain Mineral Law
Foundation, where he chairs the International Committee and the International Bar
Association Section on Energy and Natural Resources Law, where he coordinated the
Model Mine Development Agreement Project.
Mr Bassett is an adjunct professor at the University of Denver College of Law in
international mining law and policy, and has been a lecturer at the Centre for Energy,
Petroleum and Mineral Law and Policy at the University of Dundee.
340
About the Authors
ROBIN BEALE
Tabacks Attorneys and Corporate Law Advisors
Robin Beale is a director at Tabacks. He is an admitted attorney and obtained his BA and
LLB degrees from the University of Cape Town, his LLM (in tax) from the University of
South Africa and his PhD degree from the University of the Witwatersrand.
BATZAYA BODIKHUU
Anand & Batzaya Advocates
Batzaya Bodikhuu has experience in a variety of practice areas, including mining project,
mergers and acquisitions, infrastructure and natural resources sectors, as well as general
corporate transactional and dispute resolution. Mr Batzaya has been named by Chambers
Asia since 2008, Chambers Global in 2009 as an expert in the field of M&A, natural
resources and dispute resolution, and has been acknowledged in the Asia-Pacific Legal
500 in the field of project finance. He has represented a number of major financial
institutions, governments, and multinational corporations such as Credit Swiss HK
Limited and Morgan Stanley, Mitsui & Co, and China Railway Resource Corporation,
Russian Railway, EBRD, IFC, World Bank, Visa International Corporation (USA), Asia
Pacific Breweries limited (Singapore) and the Mongolian European Business Council.
Mr Batzaya received his LLB from the West University of Timisoara School
of Law in Romania in 2000 and his LLM in 2003 from the National University of
Mongolia. He is a member of the Mongolian Bar Association.
SAFIYE ASLI BUDAK

Hergüner Bilgen Özeke Attorney Partnership
Safiye Aslı Budak is a partner specialising in Hergüner Bilgen Özeke’s corporate practice
at its Ankara office. She has been with the firm since 2007. Her previous experience
includes being general counsel at MNG Group; internal auditor at MAN Türkiye AŞ;
partner in Reisoğlu Ensari Budak law firm, Ankara; and associate at Reisoğlu Kuntalp
Ensari law firm, Ankara.
She provides legal counselling and business advice in general corporate law, project
financings, especially within the areas of mergers, acquisitions, joint ventures, securities
transactions, and foreign investment. She also participated in extensive negotiations with
government and private counterparties.
DAVID C BUXBAUM
Anderson & Anderson LLP
David C Buxbaum has been active in China since 1972 and Mongolia since 1992; his
work in the energy field spans a spectrum that includes coal-fired power plants, mining,
oil and gas, and nuclear power. He has been Honorary Counsel to the Independent
Power Producers Forum since 2000.
Mr Buxbaum, who is active in the securities market in the United States and
elsewhere, worked with attorneys at the Ulaanbaatar office to assist the Trade And
Development Bank to offer their bonds on the Singapore Stock Exchange, and helped
two Canadian corporations, with investments in Mongolia, to go public on one of the
Canadian exchanges.
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About the Authors
NUNO CABEÇADAS
Miranda Correia Amendoeira & Associados
A graduate of the Coimbra University Law School (2002), Nuno Cabeçadas completed
part of his final year at law school at the Law School of the Università Degli Studi di
Milano in Milan.
He began working as a trainee lawyer in the Lisbon office of Miranda Correia
Amendoeira & Associados in 2002. During this period, he provided legal counsel to
several oil and mining companies, in addition to advising clients on foreign investment
and international tax planning matters in several jurisdictions.
Mr Cabeçadas was on secondment to the Mozambican office of Miranda Alliance
between 2004 and 2010. In Mozambique, he continued to work on energy and mining
matters, where he was involved in several mining projects, including the drafting and
negotiation of mining contracts, regulatory work, due diligence exercises and advice to
international mining companies.
He returned to the Miranda Lisbon office in 2010 and focuses his practice on
energy, mining and project finance. Mr Cabeçadas is a regular contributor to several
newspapers and legal bulletins, and has published articles on several fields of law.
CONNOR CAHALANE
Mayer Brown International LLP
Connor is a senior associate in the corporate department of Mayer Brown International
LLP. He advises on international and UK corporate and commercial transactions with
particular experience in public and private mergers and acquisitions and equity capital
markets work for corporate clients and financial institutions. Connor also advises on
general company law and corporate governance matters.
JERÓNIMO CARCELÉN
Carcélen & Cia – Abogados
Jerónimo Carcelén is a senior partner of Carcelén & Cia, a firm that has entered into
a strategic alliance with Pérez Bustamante & Ponce to promote natural resources legal
advice in both Chile and Ecuador.
Mr Carcelén graduated from Pontificia Universidad Católica de Chile with an
LLM in international legal studies from the Georgetown University Law Center. He is
admitted to practise law in Chile and Ecuador. Professor of Mining Law at Universidad
Diego Portales, Mr Carcelén has focused his professional career in mining policies and
regulations, including consultancy to governments and international organisations,
as well as legal advice to mining clients on foreign investment; acquisition of mining
companies and projects; and negotiation of contracts related to project financing,
construction, rights of way and energy.
EDMOND CIBAMBA DIATA

Emery Mukendi Wafwana & Associés
Edmond Cibamba Diata is managing partner of the Johannesburg office of Emery
Mukendi Wafwana & Associés. He is a lawyer admitted to the Bar of Kinshasa/Matete,
a certified mining and quarries agent, and a foreign legal consultant in Johannesburg.
342
About the Authors
LUIS MOREIRA CORTEZ

CRA – Coelho Ribeiro & Associados
Luis Moreira Cortez has been a senior associate at Coelho Ribeiro e Associados since
2007. His main practice areas are commercial and corporate law, mining law, sports law
and air law.
YANCY COTTRILL
Anderson & Anderson LLP
Yancy Cottrill, an attorney working in the Ulaanbaatar office of Anderson & Anderson
LLP, is admitted to the New York Bar and is an LLM graduate from the Central European
University in Budapest. He has published law review articles on topics ranging from
human rights abuses to the applicability of UCC Article 6 in the emerging markets of
post-communist countries.
Mr Cottrill has helped to draft a joint venture agreement for the first credit rating
agency in Mongolia; helped to draft shareholders’ agreements and share sale and transfer
agreements for Mongolian mining companies; and edited a newsletter on the status of
the Securities Market Law in Mongolia.
ENYONAM DEDEY-OKE
REM Law Consultancy
Enyonam Dedey-Oke holds an LLM in energy and environmental law from the Tulane
University School of Law. She joined REM Law as an associate legal counsel in 2006.
Prior to that, she had researched extensively with the Legal Resource Centre in Accra
where she participated in field research and data gathering in tax and natural resources.
Since joining REM Law Ms Dedey-Oke has been involved in providing legal advice
on corporate transactions relating to the legal and regulatory framework of the mining
industry in Ghana. She has extensive experience in corporate transactions and compliance
work.
ENKHTSETSEG NERGUI
Anand & Batzaya Advocates
Enkhtsetseg Nergui is senior associate at the firm and has extensive experience in a variety
of practice areas, including natural resources, energy, M&A, lending and structured
finance, as well as general corporate transactional and advisory work, and specialises in
environmental law and policy, and resources transactions law and policy. She has been
involved in a number of mining, energy, other natural resource sectors and development
issues. In her work with and for governments, international organisations, NGOs,
and industry, she has negotiated agreements, developed policies and projects, drafted
regulations, conducted legal research, designed and managed projects, and developed
manuals and guidebooks.
Ms Enkhtsetseg earned her master’s degree in 2008 from the Graduate School
of Law at Nagoya University. She received her undergraduate degree in 2001 from
Ulaanbaatar-Erdem University.
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About the Authors
PAULO FERREIRA
CGA – Couto, Graça & Associados
Paulo Ferreira has six years of litigation experience in the areas of civil, commercial,
labour, administrative and arbitration. He has recently joined the energy, natural
resources and infrastructure department and has been active in the areas of energy, mines
and natural resources.
JOÃO AFONSO FIALHO

João Afonso Fialho is head of the mining, commercial and corporate practice group
at Miranda, Correia, Amendoeira & Associados. He has been involved in numerous
large investment projects in the jurisdictions covered by the Miranda Alliance in areas
such as oil and gas, banking, real estate, diamonds and mining, maritime and shipping,
telecommunications and infrastructures.
Particularly in relation to mining activities, Mr Fialho has advised foreign
investors in the negotiation of diamonds and base metals concessions, including the
negotiation of concession contracts, joint venture agreements, performance of legal due
diligence, services agreements, farm-in and farm-out agreements, execution of contracts
with suppliers, termination of concessions and relinquishment of mining areas.
He has also advised various state entities and international mining companies in
the drafting and discussion of mining statutes and ancillary regulations.
CHRISTOPHER GIBSON
Christopher is a senior associate at Tabacks. He is an admitted attorney and obtained his
LLB degree from the University of the Witwatersrand.
JORGE GRAÇA
Jorge Graça has 37 years of experience in the law in Mozambique. He started his career as
legal adviser to the government of Mozambique, where he held positions such as national
director of public service organisation, secretary of the council of ministers; adviser to the
President of the Republic in government and local government matters; deputy director
of the local government elections office; inspector to public administrations. He was also
a member of the Assembly of the Republic.
In 1996 he founded the firm and since then has been advising on matters such
as public and private corporate legal matters; concessions, PPP, project finance and
relevant contracts; legal due diligences to companies and public institutions in various
sectors; business licensing of companies in various sectors; incorporation, mergers
and acquisitions and conversions of companies; foreign investment applications;
international and national funding agreements and related securities; legalisation of
corporations assets; legal matters at the Assembly of Republic, review of law projects
and its elaboration; public sector reform strategies and its legal instruments; and public
regulation and procurement.
344
About the Authors
FRANCOIS JOUBERT
Francois Joubert is a director at Tabacks. He is an admitted attorney and obtained his
BProc law from the University of Pretoria and his master’s degree (in geography and
environmental management) from the University of Johannesburg, respectively.
KAROL KAHALLEY
Holland & Hart, LLP
Karol Kahalley has been a mining attorney with the firm of Holland & Hart, LLP in
Denver, Colorado, for 17 years. As a leading expert on US mining law, Ms Kahalley has
successfully represented clients in acquiring mineral properties and developing mining
operations throughout the United States, including on tribal lands. Her work includes
hardrock minerals, oil and gas, oil shale, potash, uranium, coal, rare earth minerals and
geothermal resources. She is a recognised expert on the creation and interpretation of
mining royalties.
Ms Kahalley has been a lecturer at and published numerous articles for the Rocky
Mountain Mineral Law Foundation. She is an adjunct professor at the University of
Denver College of Law in international mining law and policy.
MERVE NAZLI KAYLAN

Hergüner Bilgen Özeke Attorney Partnership
Merve Nazlı Kaylan is an associate in the projects department of Hergüner Bilgen Özeke
Attorney Partnership. Ms Kaylan graduated from the Bilkent University School of
Law, attended the Cambridge Law Studio in 2009 and worked for several consulting
companies and law offices, and in Ankara as legal trainee, prior to joining the firm in
2010. Ms Kaylan practises all aspects of project work, and specialises in mergers and
acquisitions, privatisations, and infrastructure and energy projects.
CATHARINE KEENE
Catharine Keene is a director at Tabacks. She is an admitted attorney and obtained
her BA and LLB degrees (with distinction) from the University of Cape Town and the
University of the Witwatersrand, respectively.
TACIANA PEÃO LOPES

Taciana Peão Lopes has 10 years of experience providing legal and regulatory advice
to private companies, government agencies and state-owned corporations throughout
Mozambique. She has a solid understanding of public law in Mozambique, which
experience includes initiatives such as BOT, BOOT, project financing, and public tenders
in areas of mining, energy, oil and gas, transport, port, rail, tourism and commercial
infrastructure.
Her main area of work is energy, mining, oil and gas legislation and she is an
expert on concession matters related to these sectors.
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About the Authors
Ms Lopes has also a strong academic background providing training in arbitration

and commercial law and has been a researcher with several publications related to judicial
reforms and policies, and legislation drafting.
NURLAN MAMMADOV
Ekvita LLC
Nurlan Mammadov has studied law (LLB) and international law (LLM) in the United
Kingdom, at the University of Sheffield and the University of Nottingham respectively.
He has experience in an Azerbaijani state authority and international professional services
companies. He specialises in contract, migration and corporate laws.
ELDOR MANNOPOV
Avent Advokat
Eldor Mannopov is a managing partner at Avent Advokat. He is also a senior lecturer at
Westminster International University in Tashkent. He is a graduate of the University of
Durham (LLB in law with economics and LLM in international trade and commercial
law). His areas of interest include corporate, commercial, tax, energy and construction
law.
DAVID MASSÉ
David Massé is a partner in the Montreal office of Stikeman Elliott and a member of the
corporate and global mining groups. He specialises in mergers and acquisitions, securities
and corporate finance, and acts for mining companies and underwriters in connection
with mergers and acquisitions, corporate finance, joint ventures and mining development
projects. He has been counsel to sellers, purchasers and financial advisers in various mergers,
acquisitions, divestitures, spin-offs and reorganisations. He also frequently acts as counsel
to issuers and underwriters in public and private domestic and international offerings,
and advises TSX-listed issuers on regulatory compliance matters, corporate governance and
continuous disclosure obligations. He was recognised by the publication The Best Lawyers
in Canada as a leading practitioner in the area of securities laws.
Mr Massé worked in the London office of Stikeman Elliott in 2007 and 2008. He
is a director of the Cercle finance et placement du Québec, a networking organisation
for Quebec public companies and bankers, analysts, advisers and other professionals
involved in Quebec’s financial markets. He is a member of the Quebec Bar and a member
of the Young Bar Association of Montreal.
ITUMELENG MATI
Itumeleng Mati is a candidate attorney at Tabacks. He obtained his BCom and LLB
degrees from the University of Pretoria.
MODISAOTSILE MATLOU
ENS (Edward Nathan Sonnenbergs)
Modisaotsile Matlou is a director at ENS and has 12 years’ experience. He currently
practises as an attorney in the mining department and specialises in the field of mining law.
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About the Authors
He acts for a wide range of mining companies in all mineral commodity sectors,
including the base and precious metals, coal, rare earths, sand, as well as diamonds
sectors. He acts for listed as well as unlisted mining and exploration companies. He also
acts for financial institutions with regard to resource finance projects.
Mr Matlou’s practice experience includes all aspects of regulatory work in the
mining and petroleum (upstream) industries, as well as aspects of acquisitions and
corporate restructuring, as well as BEE transactions. He also advises concerning royalties
in the mining sector. He has experience ranging from start-up exploration projects to
well-established mining projects.
He co-authored the 2005 to 2009 mining law chapters of the Annual Survey of
South African Law, as well as numerous articles in the field of mining law for various
leading publications. He regularly presents papers at conferences and seminars in the field
of mining law. He is an instructor at the Black Lawyers’ Association and is a member of
the Section on Energy, Environment, Natural Resources, and Infrastructure Law of the
International Bar Association. Mr Matlou is recognised as a leading mining lawyer and
was rated as ‘recommended’ in tier 1 of the mining section of the Legal 500 in 2010.
He is also a former advocate of the High Court of South Africa as well as member of the
Johannesburg Bar.
He heads up the firm’s mining department and is ranked as a recommended
lawyer for mining law in South Africa by the 2012 Legal 500.
NADY MAYIFUILA
Nady Mayifuila is an associate at Emery Mukendi Wafwana & Associés, and office
manager of the New York office. She is a lawyer admitted to practise at the New York Bar.
RAYMOND McDOUGALL
Raymond McDougall is a partner in Stikeman Elliott’s global mining group in Toronto.
His practice is focused primarily on securities-related matters, including financings and
mergers and acquisitions. His clients include public companies and Canadian securities
dealers.
Mr McDougall is recognised by The Best Lawyers in Canada 2013 for his expertise
in Natural Resources Law, Chambers Global’s 2012 The World’s Leading Lawyers for
Business as an ‘up and coming’ lawyer in energy and natural resources, The Canadian
Legal Lexpert Directory 2012 as leading practitioner in the mining sector and as a leading
mining lawyer in The International Who’s Who of Mining Lawyers 2011.
Mr McDougall is a member of the Law Society of Upper Canada, the Canadian
Bar Association and the Ontario Bar Association. In connection with his mining
industry experience, he is a member of the Canadian Institute of Mining (Metal Mining
Division and Toronto Branch) and the Rocky Mountain Mineral Law Foundation. Mr
McDougall is the editor of the firm’s mining law blog (www.canadianmininglaw.com).
347
About the Authors
ILGAR MEHTI
Ekvita LLC
Ilgar Mehti is managing partner of Ekvita LLC, which specialises in legal and tax
consulting services. He has practised law as a lead in-house lawyer in a multinational
energy company and as associate lawyer in a major international law firm.
Mr Mehti holds bachelor’s and master’s degrees in law from Baku State University
as well as an LLM from Northwestern University Law School in the United States.
He is fluent in Azeri, English, Russian and Turkish.
GERALDINE MENESES-TERRIBLE
Fortun Narvasa & Salazar
Geraldine Meneses-Terrible completed her bachelor of arts in public administration at
the University of the Philippines, Diliman and bachelor of law at San Beda College. She
was admitted to the Philippine Bar in 2008. She specialises in corporate law, litigation
and mining.
HUGO MOREIRA
Hugo Moreira is a senior associate at the firm, which he joined in 2003. He is a graduate
of the Lisbon Lusíada University Law School (1999) and was admitted to the Bar in
2002.
Mr Moreira was previously an associate at Rogério Tavares, Baltazar Mendes &
Associados, where he specialised in commercial and corporate law, and litigation.
He has postgraduate degrees in commercial and corporate law from the Lisbon
Law School of the Portuguese Catholic University (2003), and legal and economic
translation from the Languages and Administration College (2008).
His practice focuses on commercial, corporate, mining, and civil aviation law,
having been consistently involved in most of the firm’s assignments and projects in these
fields in Portugal and in Africa.
EMERY MUKENDI WAFWANA

Emery Mukendi Wafwana is a leading mining lawyer in the DRC and in French-speaking
Africa. He was nominated by The International Who’s Who of Mining Lawyers 2012 as a
legal expert in mining law. His main areas of practice include mining and hydrocarbon
law, electrical power law, energy law, investment law, corporate law, OHADA law, and
legal evaluation of projects. Mr Mukendi Wafwana led the team in charge of drafting the
Mining Code (2002), the Decree related to the establishment of the Mining Registry and
defended the drafted Mining Code before the DRC parliament. He has advised many
clients from all around the world on many high-profile M&A and exploitation projects in
natural resources in the DRC and French-speaking African countries.
ERIC MUMWENA KASONGA

Eric Mumwena Kasonga is an associate at Emery Mukendi Wafwana & Associés, and is
admitted to practise at the Lubumbashi Bar.
348
About the Authors
MÁRCIO PAULO
Márcio Paulo has six years of experience in the corporate and banking practice. He has
recently joined the energy, natural resources and infrastructure department and has been
active in the areas of energy, mines and natural resources.
CYRIL PESHA
CRB Africa Legal
Cyril Pesha is an advocate, and banking and corporate law consultant, with specialisations
extending through development banking, insurance, capital markets and securities, civil
litigation and debt recovery competencies. He was exposed to mining law as head of
department of mining in Tanzania Legal Corporation in the 1980s, before diversifying
into development banking as in-house counsel in Tanzania and East Africa, including
advising hands-on investments in mining, and structuring of securities for mining and
other loans. He has given several opinions in oil and gas and mining law at the instance
of financiers and foreign law firms and has, in the last three years, participated in the
preparation of articles on mining and oil and gas in industry magazines. He has attended
energy and mining conventions, including the Indaba in 2011 and Perth Commonwealth
Business Forum in 2011. He is a graduate of the University of Dar es Salaam with
postgraduate qualifications from the University of Amsterdam.
TARJA PIRINEN
Hammarström Puhakka Partners, Attorneys Ltd
Attorney-at-Law, partner, Tarja Pirinen joined Hammarström Puhakka Partners,
Attorneys Ltd in November 2012. Prior to joining Hammarström Puhakka Partners she
worked at another leading Finnish law firm and before that in a New York-based law
firm in Helsinki. She has also worked at a law firm in New York. Ms Pirinen specialises
in mining law and assists mining companies in all phases of their exploration and mining
projects. She has assisted several international mining companies in acquisitions and
transactions within the mining sector as well as in contractual arrangements and the legal
questions relating to mining projects and the management of rights under mining law.
ERIK RICHER LA FLÈCHE

Erik Richer La Flèche is a partner in the Montreal office of Stikeman Elliott
specialising in commercial transactions in Canada and abroad, including
capital and natural resource projects, mining, PPPs and project finance. He
has led large projects in more than 25 countries. From 1981 to 1984 he was
seconded to Anderson Mōri Tomotsune (Tokyo). He is currently involved in an
aluminium smelter expansion (Quebec, Canada), a port (Africa), wind farms (Quebec,
Canada), a hospital (Canada), a mine (Canada), a railroad (Asia Minor) and a high
voltage transmission line (Canada–US). He is included in Legal Media Group’s Expert
Guide to the World’s Leading Banking Finance and Transactional Attorney in the project
finance sector; Legal Media Group’s Expert Guide to the World’s Leading Energy Lawyers;
The International Who’s Who of Public Procurement Lawyers; Who’s Who Legal Canada;
Chambers Global’s Guide to The World’s Leading Lawyers for Business; IFLR1000 Guide
349
About the Authors
to the World’s Leading Financial Law Firms; and The Best Lawyers in Canada. He is a
founding shareholder and director of Cordiant Capital Inc, and the adviser to the
Canada Investment Fund for Africa and four loan funds that have raised in aggregate of
more than US$2 billion for investment in emerging markets. He is also the director of
a number of start-ups and Canadian subsidiaries of Japanese and French multinationals.
He regularly advises governments, and lectures on foreign investments, natural resources
and infrastructure. He has been a member of the Quebec Bar since 1979 and of the
Ontario Bar since 1986.
CHARLES R B RWECHUNGURA
CRB Africa Legal
Charles R B Rwechungura is an advocate and corporate law consultant in Tanzania,
managing the law firm CRB Africa Legal.
Since late 2006, he has focused on the mining sector in addition to his
specialisation in banking, project finance, capital markets and securities, insolvencies
and selected commercial litigation. He has provided important services to mining
companies, including conducting mineral rights due diligences and giving legal opinions,
negotiating joint venture agreements, advising on acquisition of mineral rights and
mining businesses, and acting for companies as retained counsel. He has vast experience
in project finance and capital markets in the mining industry, especially in giving mineral
rights opinions as Tanzanian counsel to several mining companies seeking to raise money
on overseas exchanges and restructuring of loans.
Mr Rwechungura has been actively involved in the mining sector legal regulatory
reforms. He was one of the consultants who wrote the Mining Policy and the resultant
Mining Act of 1998, and participated in several stakeholders’ conferences that preceded
the passage of the new 2010 Act. He attends and often makes presentations at international
mining conferences, such as the Indaba and annual mining summits in Toronto.
RODERICK R C SALAZAR III

Fortun Narvasa & Salazar
Roderick R C Salazar obtained his bachelor of arts in economics and bachelor of law
degrees at the University of the Philippines, Diliman, and was admitted to the Philippine
Bar in 1988. With a law practice spanning 25 years, he counsels foreign and domestic
clients and specialises in corporate law, commercial law, mining law, taxation, real
estate law, securities and alternative dispute resolution. He is a member of the Law
Association for Asia and the Pacific, the International Bar Association, the Inter-Pacific
Bar Association, the Philippine Bar Association, Intellectual Property Law Association of
the Philippines, Canadian Chamber of Commerce. He serves as the corporate secretary
of the Australian-New Zealand Chamber of Commerce (Phils.) and the chairman of the
Legal Committee of the Chamber of Mines of the Philippines. He was also included in
the 2010 edition of the International Who’s Who of Mining Lawyers for the Philippines.
He was ranked as a leading lawyer in natural resources and mining by Chambers Global
2011 and is highly recommended as a leading lawyer in projects, energy and natural
resources by Chambers Asia-Pacific 2012. He is a lecturer on corporation law, property
law, partnership, agency and trust in three Philippine law schools.
350
About the Authors
DAOUDA SAMNA SOUMANA

SCPA Mandela
Daouda Samna Soumana is a partner and co-founder of SCPA Mandela. He has practised
law for the past 13 years.
He has been involved in numerous major investment projects in Niger and west
Africa and is also a member of several professional bodies, including the Association for
the Fight against Corruption, the Nigérien section of Transparency International.
RUI BOTICA SANTOS

CRA – Coelho Ribeiro & Associados
Rui Botica Santos has been the senior partner at Coelho Ribeiro & Associados since
1998. He is also the founding partner of CRA Timor, a law firm that has operated in
East Timor since 2006.
Mr Santos is admitted to the roll of advocates in three jurisdictions: Portugal,
Brazil and East Timor.
He holds a law degree and a postgraduate degree in community studies, both
from the University of Lisbon. He also has a certificate in a mining law short course
– domestic and international issues – issued by the Rocky Mountain Mineral Law
Foundation (US, May 2009).
Mr Santos is also a master honoris causa of the ISDE – Instituto Superior de
Derecho y Economia (Spain), where he is also an invited lecturer at the masters LLM in
international sports law, and has also lectured on negotiation, mediation and arbitration
since 2007. In addition, he has lectured on insolvencies at the Nova Fórum – Instituto
de Formação de Executivos, Faculty of Economics workshop at the Universidade Nova
de Lisboa.
Mr Santos is an official arbitrator at the Court of Arbitration for Sport (headquarters
in Lausanne) and at the Fédération Internationale de l’Automobile (headquarters in Paris).
His main practice areas are natural resourses and dispute resolution.
PENDO MARSHA SHAMTE

CRB Africa Legal
Pendo Marsha Shamte is an associate at CRB Africa Legal. She is an advocate and a
corporate law consultant in Tanzania. She has worked on the firm’s mining, environment,
energy and gas portfolios since 2010. She also works on the banking, project finance and
capital markets portfolios.
Ms Shamte has worked with the partners of the firm in helping investors to
establish a corporate presence in Tanzania, conducting mineral rights due diligence
reviews, giving binding opinions for various purposes, advising in the negotiation of
joint venture agreements and acting as Tanzanian counsel.
ANNA SNEJKOVA
Avent Advokat
Anna Snejkova has been an associate with Avent Advokat since 2009. She is a graduate of
Westminster International University in Tashkent (BA in commercial law) and specialises
in commercial, labour and civil litigation.
351
About the Authors
DAVID STANISH
Holland & Hart, LLP
David Stanish is an associate in the energy, environment and natural resources practice
group of Holland & Hart, LLP in Boise, Idaho. He represents mining and natural
resources clients in state and federal courts regarding environmental, natural resources,
public lands and administrative law matters. He further counsels clients on environmental
due diligence matters and project permitting, primarily for mining, industrial, agriculture
and grazing companies.
Mr Stanish has published numerous articles in the Rocky Mountain Mineral
Law Foundation water law newsletter and has contributed to natural resources-related
publications in the American Bar Association, Idaho Statesman and Conservation
Biology journals.
AXEL STRITTER
Engling, Stritter & Partners
Axel Stritter holds BA and LLB degrees from the University of Stellenbosch and is an
admitted attorney and notary of the High Court of Namibia.
He is a partner at Engling, Stritter & Partners and concentrates primarily on
mining, corporate and commercial work, and has gained extensive experience in mining
projects and associated infrastructure challenges pertaining to power and water, and
related environmental matters.
Mr Stritter advises on all aspects of general corporate law, including mergers
and acquisitions, and regulatory aspects, and on transactions in various other sectors,
including telecommunications.
He is frequently engaged in conducting due diligence reviews for exploration
companies, preparing legal reports and opinions on mineral interests for purposes of
acquisitions and takeovers, capital raisings and initial public offerings.
He has worked on a number of infrastructure transactions, and advised bidders
and lenders in respect thereof, including a bid for a seawater desalination project in
Namibia on a BOOT basis.
JONATHAN VAN KEMPEN

Jonathan van Kempen is an associate at Emery Mukendi Wafwana & Associés, and is
admitted to practise at the New York and the Brussels Bars.
ALBERTO M VÁZQUEZ
Vázquez, Sierra & García SC
Alberto M Vázquez is a graduate of Universidad La Salle, where he obtained his law
degree in 1996 with a thesis entitled ‘Expropriation as a Right Derived from Mining
Concessions’.
With more than 20 years of experience, his practice is focused on corporate law,
mining, migration, foreign investments and community relationships.
Mr Vázquez is involved in the establishment of Mexican companies and the
corporate management of mercantile companies, as well as drafting agreements in
general and representing important corporate foreign groups with business in Mexico.
352
About the Authors
In relation to mining issues, he has carried out important negotiations to access

superficial lands where concessions are located; in addition, he has vast experience in
drafting and negotiating contracts that involve mining concession rights, as well as in
dealing with mining corporations in general and building community relationships.
Mr Vázquez is also a skilled lawyer in migration matters, including the obtainment
of immigration documents for foreign executives from different jurisdictions who have
come to work in Mexico.
He is an active partner of the Mexican Mining, Metallurgy and Geology Engineer
Association AC, and is a member of work groups organised by the Mexican Mining
Chamber (CAMIMEX) and the General Direction of Mining Promotion in the Ministry
of the Economy.
He has been invited as a speaker to local and international seminars related to
mining law issues, and has written several articles for magazines specialising in mining
and environmental law.
Mr Vázquez has also been recognised by Who’s Who Legal as one of the world’s
leading practitioners in the mining sector.
Vázquez, Sierra & García SC was named the mining law firm of the year in the
ACQ Global Awards 2012. The firm is also a member of the Chamber of the Americas,
with offices in Denver, Colorado.
RODRIGO DE CAMPOS VIEIRA

TozziniFreire Advogados
Working in the capital markets and banking practices at TozziniFreire Advogados,
Rodrigo de Campos Vieira has in-depth expertise advising on fundraising transactions
in the financial and capital markets, import and export issues, securitisations, investment
funds organisation and derivatives transactions.
Mr Vieira also worked for four years as general counsel at Ferrous Resources.
He is a graduate of the Law School of Faculdade Milton Campos. He specialised
in business management at the Business School São Paulo and the Fundação Dom
Cabral. He attended the mining agreements course at the Centre for Energy, Petroleum
and Mineral Law and Policy organised by the University of Dundee in 2012.
LUIZ FERNANDO VISCONTI

TozziniFreire Advogados
Luiz Fernando Visconti is one of the leaders of TozziniFreire Advogados’ mining practice
group. With significant industry experience, particularly in regulatory issues related to
mining and contracts, he has participated in several projects, including a number of
complex greenfield projects. He also has extensive expertise in administrative litigation
before the regulatory mining authority, DNPM (the National Department of Mineral
Production), judicial litigation, and arbitration involving both domestic and international
companies.
He is a graduate of the Law School of Pontifícia Universidade Católica de São
Paulo, and holds a postgraduate degree in corporate law from the same institution.
He also studied at the Academy of American and International Law within the Center
for American and International Law in Texas. In addition, he attended the mining
353
About the Authors
agreements course at the Centre for Energy, Petroleum and Mineral Law and Policy,
organised by the University of Dundee.
ST ELMO WILKEN
St Elmo Wilken is a director at Tabacks. He is an admitted attorney and obtained his
BCom and LLB degrees from the Nelson Mandela Metropolitan University. He also
holds an LLM (in corporate law) from the University of Johannesburg. St Elmo is also
a notary public.
JAIME P ZALDUMBIDE
Pérez Bustamante & Ponce
Jaime P Zaldumbide is a partner at Pérez Bustamante & Ponce, a firm that has entered
into a strategic alliance with Carcelén & Cia to promote natural resources legal advice in
both Ecuador and Chile.
Mr Zaldumbide obtained his bachelor’s degree in political science in 1981 and his
doctorate in law in 1983 from the Catholic University of Quito. In 2005 he obtained a
master’s degree in environmental law from the University of the Basque Country in San
Sebastian, Spain. He has also attended several postgraduate programmes in the United
States. In 2009, he attended the Global Course on Integrated Approaches to Sustainable
Development Practice from the Earth Institute at Columbia University.
After working as an associate lawyer at Pérez Bustamante & Ponce, he became a
partner in 1996, and in 2005 he was appointed as its managing partner, a position he
held until 2008.
Between 1991 and 1996, he worked as chief counsel of Kerr McGee Oil and Gas
Corporation in Quito (currently Anadarko). He also served as private secretary to the
Ministry of Energy and Mines of Ecuador from 1984 to 1987.
He is a member of the Quito Bar Association, the Association of International
Petroleum Negotiators (AIPN), and former vice-president the board of directors of
CEDA (Ecuadorean Center of Environmental Law). He also served as member of the
board of directors of the Chamber of Industries of Quito.
Mr Zaldumbide is an Arbitrator of the Construction Chamber of Quito
Arbitration Center. He also represents the firm before RIELA (Inter-American Network
of Environmental Legislation Specialists), which involves only one law firm per country.
He speaks Spanish and English.
354
Appendix 2
CONTRIBUTING LAW FIRMS’

CONTACT DETAILS
ADVOCAAT LAW PRACTICE ANDERSON & ANDERSON LLP

3rd Floor, Law Union House Suite 1008
14 Hughes Avenue, Alagomeji 10th Floor, Grand Plaza
Yaba, Lagos Enkhtaivan Ave 46
Nigeria Bayangol District
Tel: +234 1 453 1004 Ulaanbaatar 210628
Fax: +234 1 271 4044 Mongolia
ola.alokolaro@advocaat-law.com Tel: +976 7011 9339
www.advocaat-law.com Fax: +976 7011 9669
anderson.mongolia@anallp.com
ANAND & BATZAYA ADVOCATES www.anallp.com
10F Metro Business Centre
Sukhbaatar Street AVENT ADVOKAT
Sukhbaatar District 50/59a Oybek Street
Ulaanbaatar 210646 Tashkent city 100015
Mongolia Uzbekistan
Tel: +976 11 32 94 42 Tel: +998 71 150 31 05
Fax: +976 70 11 94 42 Fax: +998 71 150 31 04
batzaya@anand-advocates.mn emannopov@avent.uz
enkhee@anand-advocates.mn asnejkova@avent.uz
www.anand-advocates.mn uabdullaev@avent.uz
www.avent.uz
355
Contact Details
CARCELÉN & CIA – ABOGADOS CRB AFRICA LEGAL

Av Apoquindo No. 3200, piso 8 6th Floor, Amani Place
Las Condes Ohio Street
Santiago PO Box 79958
Chile Dar es Salaam
Tel +562 760 5050 Tanzania
jcarcelen@carcelen.cl Tel: +255 222 135 637
www.carcelen.cl Fax: +255 222 135 638
c.rwechungura@crbafricalegal.com
CGA – COUTO, GRAÇA c.pesha@crbafricalegal.com
& ASSOCIADOS p.shamte@crbafricalegal.com
Av Kim Il Sung 961 www.crbafricalegal.com
Maputo
Mozambique EKVITA LLC
Tel: +258 21 486438 44 C Jabbarli Str
Fax: +258 21 486441 Caspian Plaza-1, Third Floor
jgraca@cga.co.mz 1065 Baku
tplopes@cga.co.mz Azerbaijan
pferreira@cga.co.mz Tel: +994 12 497 33 95
mpaulo@cga.co.mz Fax: +994 12 497 33 09
www.cga.co.mz ilgar.mehti@ekvita.com
nurlan.mammadov@ekvita.com
CRA – COELHO RIBEIRO www.ekvita.com
& ASSOCIADOS
Av Eng Duarte Pacheco EMERY MUKENDI WAFWANA
Emp das Amoreiras, Torre II, 13º A & ASSOCIÉS
1099-042 Lisbon Croisement du Boulevard du 30 juin et
Portugal de l’Avenue Batetela
Tel: +351 21 383 90 60 Crown Tower, 7th Floor, Suite 701-702
Fax: +351 21 385 32 02 Kinshasa/Gombe
rui.santos@cralaw.com BP 14379 Kin I
luis.cortez@cralaw.com Democratic Republic of the Congo
www.cralaw.com Tel: +243 99 99 15247
ewafwana@cabemery.org
etshidiata@cabemery.org
mayifuila@cabemery.org
vankempen@cabemery.org
emumwena@cabemery.org
www.cabemery.org
356
Contact Details
ENGLING, STRITTER HERGÜNER BILGEN ÖZEKE

& PARTNERS ATTORNEY PARTNERSHIP
12 Love Street Suleyman Seba Cad
PO Box 43 Siraevler 55, Akaretler
Windhoek 34357 Besiktas-Istanbul
Namibia Turkey
Tel: +264 61 38 33 00 Tel: +90 212 310 1800
Fax: +264 61 23 00 11 Fax: +90 212 310 1899
axel.stritter@englinglaw.com.na abudak@herguner.av.tr
www.englinglaw.com.na nkaylan@herguner.av.tr
www.herguner.av.tr
ENS (EDWARD NATHAN
SONNENBERGS) HOLLAND & HART, LLP
150 West Street 6380 South Fiddlers Green Circle,
Sandown Suite 500
Sandton Greenwood Village
South Africa Colorado 80111
Tel: +27 11 269 7667 United States
Fax: +27 11 269 7899 Tel: +1 303 290 1600
omatlou@ens.co.za Fax: +1 303 290 1606
www.ens.co.za bbassett@hollandhart.com
kkahalley@hollandhart.com
FORTUN NARVASA & SALAZAR distanish@hollandhart.com
23rd Floor Multinational Bancorporation www.hollandhart.com
Centre
6805 Ayala Avenue MAYER BROWN
Makati City INTERNATIONAL LLP
Philippines 1227 201 Bishopsgate
Tel: +632 812 8670 London EC2M 3AF
Fax: +632 812 7199 United Kingdom
rrcsalazar@fnslaw.com.ph Tel: +44 20 3130 3000
gsmeneses@fnslaw.com.ph Fax: +44 20 3130 3001
www.fnslaw.com.ph kball-dodd@mayerbrown.com
ccahalane@mayerbrown.com
HAMMARSTRÖM PUHAKKA www.mayerbrown.com
PARTNERS, ATTORNEYS LTD
Bulevardi 1
00100 Helsinki
Finland
Tel: +358 9 474 21
Fax: +358 9 474 2222
www.hpplaw.fi
357
Contact Details
MIRANDA CORREIA STIKEMAN ELLIOTT LLP

AMENDOEIRA & ASSOCIADOS 1155 René-Lévesque Blvd West
Rua Soeiro Pereira Gomes, L1 40th Floor
1600-196 Lisbon Montreal, QC H3B 3V2
Portugal Canada
Tel: +351 217 814 800 Tel: +1 514 397 3000
Fax: +351 217 814 802 Fax: +1 514 397 3222
joao.fialho@mirandalawfirm.com
5300 Commerce Court West
hugo.moreira@mirandalawfirm.com
199 Bay Street
nuno.cabecadas@mirandalawfirm.com
Toronto, ON M5L 1B9
www.mirandalawfirm.com
Tel: +1 416 869 5500
Fax: +1 416 947 0866
PÉREZ BUSTAMANTE & PONCE
ericherlafleche@stikeman.com
Avenue Republica de El Salvador 1082 y
dmasse@stikeman.com
Naciones Unidas
rmcdougall@stikeman.com
Edificio Mansión Blanca
www.stikeman.com
Quito
Ecuador
Tel: +593 2 400 700 TABACKS ATTORNEYS AND
Fax: +593 2 400 7881 CORPORATE LAW ADVISORS
jzaldumbide@pbplaw.com 13 Eton Road
www.pbplaw.com Parktown
2193 Johannesburg
Gauteng
REM LAW CONSULTANCY
South Africa
No. 15 Kofi Annan Avenue
Tel: +27 11 358 7700
North Legon Residential Area
Fax: +27 11 358 7800
Accra
fj@tabacks.com
Ghana
rb@tabacks.com
Tel: +233 26 608 0658/9/
www.tabacks.com
+233 20 813 4843
Fax: +233 302 522658
info@remlawgh.com TOZZINIFREIRE ADVOGADOS
ededey@remlawgh.com Rua Borges Lagoa
www.remlawgh.com 1328 Vila Clementino
04038 904 São Paulo
Brazil
SCPA MANDELA
Tel: +55 11 5086 5000
468 Av des Djermakoy
Fax: +55 11 5086 5555
PO Box 12 040
rvieira@tozzinifreire.com.br
Niamey
lvisconti@tozzinifreire.com.br
Niger
www.tozzinifreire.com.br
Tel: +227 9698 8919
Fax: +227 2075 5092
mandelav@intnet.ne
358
Contact Details
VÁZQUEZ, SIERRA & GARCÍA SC ZUZUNAGA & ASSERETO

Paseo de las Palmas No. 755–902 ABOGADOS
Col Lomas de Chapultepec Av Larco 1301, Oficina 1601
Distrito Federal Miraflores, Lima
11000 Peru
Mexico Tel: +511 219 4170
Tel: +52 55 5540 3020 Fax: +511 219 4177
Fax: +52 55 5540 3435 gassereto@zyaabogados.com
avazquez@avazquezabogados.com www.zyaabogados.com
www.avazquezabogados.com
359

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PART I MINING LAW����������������������������������������������������� 1–264

Chapter 5 DEMOCRATIC REPUBLIC OF THE CONGO����������������� 44

Chapter 10 MONGOLIA������������������������������������������������������������������������� 102

Chapter 11 MOZAMBIQUE������������������������������������������������������������������� 115

Chapter 12 NAMIBIA������������������������������������������������������������������������������ 126

Chapter 13 NIGER���������������������������������������������������������������������������������� 144

Chapter 14 NIGERIA������������������������������������������������������������������������������� 152

Chapter 15 PERU������������������������������������������������������������������������������������� 162

Chapter 16 PHILIPPINES����������������������������������������������������������������������� 175

Chapter 17 PORTUGAL�������������������������������������������������������������������������� 191

Chapter 18 SOUTH AFRICA������������������������������������������������������������������ 202

Chapter 19 TANZANIA��������������������������������������������������������������������������� 220

Chapter 20 TURKEY������������������������������������������������������������������������������� 229

Chapter 21 UNITED STATES���������������������������������������������������������������� 241

PART I MINING LAW�� 1–264

Chapter 5 DEMOCRATIC REPUBLIC OF THE CONGO�� 44

Chapter 10 MONGOLIA�� 102

Chapter 11 MOZAMBIQUE�� 115

Chapter 12 NAMIBIA�� 126

Chapter 13 NIGER�� 144

Chapter 14 NIGERIA�� 152

Chapter 15 PERU�� 162

Chapter 16 PHILIPPINES�� 175

Chapter 17 PORTUGAL�� 191

Chapter 18 SOUTH AFRICA�� 202

Chapter 19 TANZANIA�� 220

Chapter 20 TURKEY�� 229

Chapter 21 UNITED STATES�� 241

Chapter 22 UZBEKISTAN�� 252

PART II CAPITAL MARKETS�� 267–338

Chapter 23 BRAZIL�� 267

Chapter 24 CANADA�� 271

Chapter 25 MONGOLIA�� 282

Chapter 26 MOZAMBIQUE�� 294

Chapter 27 NAMIBIA�� 298

Chapter 28 SOUTH AFRICA�� 310

Chapter 29 TURKEY�� 321

Chapter 30 UNITED KINGDOM�� 329

Appendix 1 ABOUT THE AUTHORS�� 339