Uzbekistan: Uzbekistan Approves State Program For The Development Of Mineral Resources

Uzbek Presidential Resolution No. 4401, "On measures to further improve the geological study of the subsoil and implement the State Program for the Development and Reproduction of the Mineral Resource Base for 2020–2021", dated July 23, aims to improve geological studies of the subsoil and implement a state program to develop the country's mineral resources.

In particular, as indicated in the resolution, the State Committee for Geology (hereinafter – "Goscomgeology"), with the assistance of international consulting companies, has developed a strategy for the development of the mineral resource base, taking into account modern international standards and high-level foreign experience.

The resolution approves the State Program for the Development and Reproduction of the Mineral Resource Base for 2020–2021, which envisages bringing the proportion of the search for promising mineral resources areas to 35% in 2020 and to 40% in 2021. This program includes parameters for increasing groundwater reserves and summary parameters for the growth of projected resources and mineral reserves. It is expected that the increase in forecast resources (P1 + P2) of gold will be 150 tons in 2020 and 300 tons in 2021, and the forecast of the growth in reserves (C1 + C2) is 40 tons in 2020 and 2021; the increase in silver resources will be 150 tons in 2020 and 300 tons in 2021, and the forecast for the increase in silver reserves is 123 tons and 127 tons, respectively.

Copper resources are forecast to increase by 148 tons in 2020 and 155 tons in 2021, and the growth in reserves by 40 tons and 41 tons, respectively. The main increase in gold and silver is forecast to come from the Kyzylkum geological and economic region, which boasts Muruntau, one of the largest gold deposits in the world. Navoi Mining and Metallurgical Complex (Navoi MMC) is the main producer operating in this region. Information on the plans of the government for Navoi MMC's transformation and privatization is available here.

The roadmap for the further improvement of exploration, study and development of the subsoil, as well as increasing the investment attractiveness of the mining and geological sector for 2019-2020, has been approved.

Thus, by October 1, 2019, a procedure should be developed according to which specific geological objects under state-owned Navoi MMC, the uranium mining and processing enterprise, as well as Almalyk MMC JSC, are allocated separately, and the new promising areas and mineral deposits identified by Goscomgeology will be offered to potential investors.

At least once a year Goscomgeology will put together a portfolio of investment proposals for prospecting and exploring mineral resources in specific areas, as well as for organizing mining at the fields. Goscomgeology will take care of this in coordination with the Ministry of Economy and Industry. This information will be posted on the official websites of the designated state authorities and will be spread in other possible ways, including during business events and roadshows abroad. These measures will help to attract potential investors.

The Cabinet of Ministers has been instructed to take government decisions within two months, providing for:

  1. the approval of the list of geological objects assigned to the resource base of the state-owned enterprise Navoi MMC and Almalyk MMC JSC;
  2. the improvement of the procedure for issuing licenses for the right to use subsoil areas containing strategically important types of minerals1, including:

    • simplification of the procedure for issuing licenses for the right to use subsoil areas containing strategically important types of mineral resources, including by reducing the duplicate stages of the examination and coordination of the necessary documents with the authorized bodies;
    • issuance of licenses for the right to use subsoil areas containing strategically important types of minerals within a period not exceeding 30 working days.

Goscomgeology is assigned with the following tasks:

  1. within two months, to ensure for each facility included in the state program the development of schedules, including the definition of specific dates and organizations responsible for:

    • approval of geological assignments, design and estimate documentation for geological exploration;
    • carrying out geological exploration to calculate projected resources and mineral reserves.
  2. starting from 2020, with the assistance of leading foreign consulting companies and experts, to provide for the introduction of international standards for the preparation of reports on the results of geological exploration and approval of mineral reserves in accordance with the JORC Code, as well as training and certification of qualified specialists of Goscomgeology;
  3. to ensure, within the framework of the state program, the creation of a bank of digital information on archived materials of the State Geological Fund, in order to facilitate access to digitized geological information, ensuring its openness and transparency.

Within the framework of the Resolution, Goscomgeology was entrusted with developing a draft resolution of the President of the Republic of Uzbekistan on further improving the system of attracting investments for the development of strategically important types of solid minerals, providing for:

  • the introduction of international practice for the management and implementation of investment projects in the mining and geological sphere, providing for the establishment of forms and conditions for cooperation on the basis of a license agreement;
  • the revision of the subscription bonus rates for the right to explore and search for minerals. The amount of the bonus is determined by annual presidential decrees and for the current month comprises about US$256,320 for the right to search for and explore hydrocarbon and gold deposits; about US$25,632 for precious (except for gold), rare and precious metals; about US$12,815 for other ore minerals, about US$2,560 for non-metallic minerals;2
  • the optimization of tax rates for the subsoil use of the main types of strategically important solid minerals, taking into account the application of international standards in the mining sector. Currently, the tax rate on the subsoil use of gold and silver is 25%, which is one of the highest rates in the world. This fact and the determination of this rate on an annual basis does not inspire investors with confidence in the stability and predictability of the tax regime for subsoil use in Uzbekistan;
  • the payment by foreign investors of all types of taxes and obligatory payments in the manner established by Uzbek law;
  • the guaranteeing of the immutability of tax legislation for the entire period of the project.

In addition, a working group was established to coordinate the implementation of the strategy for the development of the mineral resources base of the Republic of Uzbekistan under the leadership of Jamshid Kuchkarov, the deputy prime minister and minister of finance.

Footnotes

  1. Precious, non-ferrous, rare and rare earth metals, hydrocarbons, coal, uranium are considered as strategically important types of minerals (PP-3550 "On measures to improve the procedure for conducting an examination of pre-project, project, tender documentation and contracts").
  2. Presidential Resolution "On the forecast of the main macroeconomic indicators and parameters of the State Budget of the Republic of Uzbekistan for 2019 and budget guidelines for 2020-2021" PP-4086 dated December 26, 2018.

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