Owing to its geological structure, Turkey has a variety of mining resources and according to the statistics, share of mining in Turkish GDP is 1,5 % as of 2014. Moreover, export rates of certain minerals have been increasing year by year. Turkey's potential in mining sector attracts also the interest of foreign investors. Pursuant to the statistics, amount of foreign direct investments in mining sector has been increasing since 2010.
An overview of Turkish Mining Legislation and Legal Reforms
In Turkish Mining Law, the Mining Code ("Code") numbered 3123 that entered into force in 1985 and amended in 2010 and 2015 is the main legislation regulating the permits and procedures for mining activities.
Amendments in the Code introduced in 2015 are mostly concerning the penalties and measures against infringements. Accordingly, such measures in case of a violation of the liabilities set forth by the Code have been sharpened. Some essential provisions are as follows;
- Mining permits and discovering rights can be transferred and the transfer fees shall be paid as double the amount of the mining permit fee, on the date of transfer. Transfer of mining permits and discovering rights are subject to the confirmation of the Council of Ministers.
- All mining activities within the frame of this Code shall be operated by obtaining a letter of authority.
- In case of production without a "raw material production permit", the production permit is canceled.
Essential reforms to the said Code was also made in 2004 and 2010 with an aim to attract more private and foreign investment to the mining sector. These amendments were roughly as follows;
- Procedures for the licensing and permissions have been accelerated and minimized by gathering the major part of administrative powers in one institution.
- Private-owned lands can be expropriated for mining activities in the name of the Treasury.
- Restrictions for mining activities have been removed for certain areas.
Foreign real and legal persons within the frame of Mining Law
There are two different systems in the world, with regard to the ownership of mines: accession system, in which the land's owner has also the property of the mines. The land's owner disposes of discovery and operation rights of such mines directly in his/her property.
In the second system, the mines are in State property, independent from the land's owner. This is the system that Turkish Mining Law adopted, where mines are owned by Turkish government. Hence, permission or consent of the land's owner is not required for the issuance of mining license. Rights to explore and operate the mines can be granted by the State to third persons against payment of a royalty, upon a license.
The Code also regulates the legal status of foreign legal and real persons regarding their mining rights. As per the respective regulations, mining rights can be granted to Turkish Citizens, the companies with legal personality which are incorporated in accordance with Turkish Laws provided that mining activities are included in their articles of association. Only one legal entity or real person can obtain mining rights. In other words, a certain mining right cannot be granted to more than one person/entity at the same time.
Since a company established in Turkey with foreign shareholder(s) shall be considered as a Turkish company, such companies are entitled to obtain mining rights. On the other side, a foreigner or a company incorporated abroad is not entitled with such right at the current status.
How to obtain a mining license in Turkey?
Market activities in Turkish mining sector are divided into two categories as exploration and operation. Mineral exploration activities, apart from the explorations in the areas stated in the Code, are not subject to the license. Applications for exploration license shall be submitted to the competent authorities. Licenses become valid on the date of registration with the Mining Registrar. Transfers, successions, sequestrations, pledges, mortgages and expirations are required to be registered with the Mining Registrar as well.
Conditions of operation license may vary depending on the category of minerals. The exploration license-holder has to apply for a new license before the end of the term of the current license. The operation license may be issued for a term of at least 10 years, which can be subject to an extension.
The required documents for operation license shall be submitted to the Mining Affairs General Directorate of the Ministry of Energy and Natural Resources ("General Directorate") within the application period determined in the Mining legislation.
Incentives for investors in mining sector
Investment incentives for mining have been regulated in the Code and it is specified that the investors in the sector may benefit from the incentives, as determined by the Council of Ministers. However, some activities are excluded from incentives.
It is worthy of note that investors which provide added value by processing the minerals manufactured by themselves within their facilities in Turkey are exempted from 50% of the State's shares.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.