The New Mining Regulation ("Regulation") which was prepared within the scope of the Mining Code No. 3212 entered into force with Official Gazette dated 21.09.2017 and numbered 30187. The Regulation determines the procedures and principles for granting the rights to real persons and legal entities by the Ministry of Energy and Natural Resources (the "Ministry") for the purpose of searching, operating, developing and producing of mineral resources in accordance with national interests for a determined period.
The Regulation has detailed arrangement on licensing transactions and operating activities and for the first time, the royalty right owner has been defined in the Regulation. A summary of changes and novelties introduced with the Regulation is below;
- The procedure and the documents required for general application and application for exploration permit/license are determined in detail. Following the payment of the tender price of the applicants who are entitled to obtain the exploration license/certificate through tender process or through first application, the documents determined in the Regulation must be submitted to the General Directorate of Mining Affairs ("GDMA") within 2 months starting from the date of the application.
- The financial capability for operating license applications has been regulated in the Regulation as at least twenty percent of the total amount of the investment stated in the mining operation project. The operation project, which includes the conformity plan with the environment or commitment to it and which is prepared in accordance with the Annex of the Regulation shall be submitted to the GDMA by the license holder. The document concerning the financial capability and the document showing that the operating license base amount has been deposited to the account of the related accounting unit in order to register as revenue to the general budget shall be submitted to the GDMA.
Another significant point about the operating license is that GDMA has been given the authority to unilaterally determine the minimum annual production amount in the project, taking into account the criteria such as mineral types, reserve amount grade/quality, production area and operating permission field.License holders shall be imposed an administrative fine in case the production is not made at the licensed areas more than 3 years of the last five years prior to the detection date, or the total production amount is less than 10% of the annual production declared in the Project and in case this wrongful act would be repeated, the license shall be canceled, excluding force majeure situations. If it is declared in the operating project to operate in order to reach the mine within 3 years, the sanction shall not be applied.
- Chapter eight of the Regulation introduces novelties with regard to the mine conveying and the conveying receipt. Accordingly, in case of direct sales from the mine at the licensed areas, using the conveying receipt issued by the GDMA for primary conveyance up to storage yards, crushing-screening plant or enrichment facilities has been made obligatory. In case of direct sales, if there is a weighing machine on the shipping routes, the weighing machine receipt should also be added.
A delivery note issued in accordance with the Tax Procedural Code numbered 213 may be used, in case of the sales out of the storage yard or secondary conveyance. The Regulation also determines that it is not possible to deliver more than specified amount and out of purpose during the exploration period, otherwise the activities shall be stopped and the conveyance receipts shall be taken back.
- According to the Regulation, the license holder should notify the GDMA about the necessary information of the real persons or legal entities who will perform the activities and the starting and ending dates of the activities within one month. In case of production and/or conveyance at the area, the permit holder is also obliged to submit to the GDMA the operating activity and the operating activity report for the previous year and the production map until the end of April every year. If these obligations are not fulfilled, the production activities shall be stopped until they are fulfilled.
- The Regulation regulates that a share transfer concerning 10% or more of the shares of the legal entity holding the mining license, which could lead to changes in the partnership structure of the legal entity shall be pre-approved by the Ministry. In addition, it is compulsory to inform the GDMA on the royalty agreements and the amendments made to these agreements, transfer and transition transactions, and to annotate these changes to the mine register for information purposes.
- In the event that the mining activities are carried out with underground operation method, the Regulation obliges to obtain the necessary permissions for the above ground facilities related to the underground mining activities.
* Mine exploration permits are subjected to the permission of Directorate of Provincial Food, Agriculture and Livestock in order to carry out prospecting activity in pastureland, and prospecting activities in agricultural areas are subjected to the public interest decision to be taken from the Ministry in accordance with the Soil Preservation and Land Utilization Code numbered 5403.
- One of the most fundamental novelties introduced by the Regulation is the royalty holder and royalty agreements. The definition of the royalty right owner has been made for the first time with the Regulation and the obligation to prepare the production map for the royalty right owners has been introduced. In addition, while the conveyance receipt could only be issued to the license holders in accordance with the abolished Regulation Regarding the Implementation of the Mining Activities ("Abolished Regulation"), the new Regulation ensures that royalty right owners can also receive conveyance receipt independently from the licensees.
- While there is no specific condition regulated in the Abolished Regulation for the transfer of mine licenses, there has been a requirement as an important change that the transferee shall submit a commitment with regards to the acceptation of the current royalty agreement about transfer of mining license with royalty holder.
The royalty agreements to be signed between license holders and third parties are subject to the permission of the Ministry.
The royalty agreements which are annotated to the mine registry shall only be deleted in case both parties request the deletion of the annotation together.
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.