Mining Law 2021 a Practical Cross-Border Insight Into Mining Law Eighth Edition

Mining Law 2021 A practical cross-border insight into mining law Eighth Edition

Featuring contributions from:

ALRUD Law Firm Holland & Hart LLP RB Abogados Anderson Mōri & Tomotsune Jincheng Tongda & Neal Law Firm Reindorf Chambers Brooks and Knights Legal Consultants Lawson Lundell LLP Rubio Leguía Normand Cruz Marcelo & Tenefrancia Marval O’Farrell Mairal Wintertons Legal Practitioners Eric Silwamba, Jalasi and Linyama Milbank LLP World Association of Mining Lawyers (WAOML) Legal Practitioners Nupen Staude de Vries Inc. ISBN 978-1-83918-070-5 ISSN 2052-5427

Published by

59 Tanner Street London SE1 3PL United Kingdom Mining Law 2021 +44 207 3 67 0720 [email protected] www.iclg.com Eighth Edition

Consulting Group Publisher Rory Smith

Editor Nicholas Catlin

Senior Editor Contributing Editor: Sam Friend Andrew Emrich Head of Production Suzie Levy Holland & Hart LLP

Chief Media Officer Fraser Allan

CEO Jason Byles

Printed by Ashford Colour Press Ltd.

Cover image www.istockphoto.com

Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. Table of Contents

Expert Chapters

Trade and Regulatory Developments Impacting the Mining Industry 1 Andrew Emrich, Holland & Hart LLP

World Association of Mining Lawyers (WAOML): An Overview 4 World Association of Mining Lawyers (WAOML)

Q&A Chapters

Argentina Philippines 6 Marval O’Farrell Mairal: Luis E. Lucero 72 Cruz Marcelo & Tenefrancia: Patricia A. O. Bunye & Alpheus D. Macalalad Canada 15 Lawson Lundell LLP: Khaled Abdel-Barr & Russia Karen MacMillan 80 ALRUD Law Firm: Andrey Zharskiy & Timur Akhundov

China South Africa 27 Jincheng Tongda & Neal Law Firm: 87 Nupen Staude de Vries Inc.: Lili Nupen, Guohua (Annie) Wu & Yingnan (Jason) Li Nicole Limberis-Ritchie & Chantal Murdock

Ghana United Kingdom 34 Reindorf Chambers: Fui S. Tsikata & 94 Milbank LLP: John Dewar & Emily Whittaker Dominic Dziewornu Quashigah USA Japan 105 Holland & Hart LLP: Karol L. Kahalley 41 Anderson Mōri & Tomotsune: Hiroaki Takahashi Zambia Mexico 114 Eric Silwamba, Jalasi and Linyama Legal 49 RB Abogados: Enrique R. del Bosque Practitioners: Joseph Alexander Jalasi, Jr. & Eric Suwilanji Silwamba, S.C. Nigeria 58 Brooks and Knights Legal Consultants: Zimbabwe Adetayo Adetuyi & Nnanke Williams 122 Wintertons Legal Practitioners: Nikita Madya

Peru 64 Rubio Leguía Normand: Xennia Forno & Miguel Ángel Soto Welcome

From the Publisher

Dear Reader, Welcome to the eighth edition of ICLG – Mining Law, published by Global Legal Group. This publication provides corporate counsel and international practitioners with comprehensive jurisdiction-by-jurisdiction guidance to mining laws and regulations around the world, and is also available at www.iclg.com. This year, the opening chapter covers recent trade and regulatory developments affecting the mining sector, while an industry chapter provides an overview of the World Association of Mining Lawyers. The question and answer chapters, which in this edition cover 15 jurisdictions, provide detailed answers to common questions raised by professionals dealing with mining laws and regulations. As always, this publication has been written by leading mining lawyers and industry specialists, for whose invaluable contributions the editors and publishers are extremely grateful. Global Legal Group would also like to extend special thanks to contributing editor Andrew Emrich of Holland & Hart LLP for his leadership, support and expertise in bringing this project to fruition.

Rory Smith Consulting Group Publisher International Comparative Legal Guides Welcome Chapter 1 1

Trade and Regulatory Developments Impacting the Mining Industry

Holland & Hart LLP Andrew Emrich

Introduction Customs Tariff Commission also announced a list of 79 products that would be excluded from retaliatory Chinese tariffs from Many of the recent protectionist and de-regulation trends that May 19, 2020 to May 12, 2021. Of special interest to the mining were put in motion over the past several years came into sharper sector, this list includes rare earth ores, silver and gold ores and focus in 2020. Several multilateral trade agreements were rati- concentrates, and some nickel and aluminum alloy products. fied and the brewing trade war between the world’s two largest As the trade rules were clarified on the North American economies – the United States and China – began to de-esca- continent and tensions have relaxed somewhat between China late. Other significant nationalist developments, including the and the U.S., uncertainty arose elsewhere as a result of Brexit United Kingdom’s formal withdrawal from the European Union and the world’s reaction to the health crisis. Britain formally (Brexit), brought somewhat greater clarity to the county’s path withdrew from the EU on January 31, 2020 and entered a nearly forward even as many legal and economic questions impacting year-long transition period during which the UK remains subject the UK’s mining industry – and those of its trading partners – to EU laws. While the EU remains the UK’s largest trading are yet to be answered. partner, the UK mining industry will increasingly look for new However, any expectation of calmer trade and regulatory investments and partnerships with other mining countries, winds were abruptly challenged by the onset of the worldwide with perhaps China, the U.S., and Australia as likely targets. COVID-19 pandemic and the resulting closures of any number Similarly, the UK now has more flexibility through its domestic of mines and manufacturing plants across the globe. How the law to address the specific needs of its mining interests. mining sector and the rest of the world recovers from these The world’s economic reaction to the pandemic remains in unprecedented economic disruptions promises to be a lead story the early stages and the longer-term consequences remain uncer- in the coming year. tain. Activity at many mines was curtailed or even suspended in an effort to limit the transmission of the virus among mine Trade Developments workers and to respond to decreased customer demand (especially in the manufacturing sector) and depressed prices for most Within the last year, the U.S. and Canada joined Mexico in rati- commodities, except precious metals. fying the United States–Mexico–Canada Agreement (USMCA) Other impacts were less predictable. By way of example, and thereby reset the rules of trade on the North American Australian iron ore mining firms are poised to increase exports continent. The USMCA, which entered into force in July 2020, to China and elsewhere to address a COVID-19 related produc- requires car manufacturers to produce 75 per cent of each auto- tion shortfall in Brazil. This boon to the Australian mining mobile’s content from the North American continent (up from industry may, however, be impacted by the Australian govern- the current 62.5 per cent requirement under the previous North ment’s push for an inquiry into China’s role in the outbreak and American Free Trade Agreement – NAFTA). The agreement subsequent worldwide transmission of the virus. This proposed also requires 70 per cent of each vehicle’s steel and aluminum to inquiry has been linked to China’s recent threat to impose originate in North America. The U.S. and Canadian aluminum tariffs on Australian barley and a partial boycott of Australian producers are likely to be winners in the near term as Mexico beef imports. Miners were concerned these tensions might spill seeks to increase the percentage of unwrought aluminum alloy it over into Australia’s mineral exports. Time will tell how far the imports from its North American neighbours from the current COVID-19 fallout extends beyond the global decrease in most 44 per cent to 70 per cent. The U.S. also hopes to leverage mining activity in 2020. the USMCA to facilitate increased exports of American coal through ports in British Columbia to customers in Asia. Regulatory Changes In early 2020, China and the U.S. reached the first step in checking their bilateral trade war which had been brewing for The U.S. regulatory streamlining initiatives continued apace 18 months. The so-called “phase one deal” would have the U.S. over the past year. The U.S. Environmental Protection Agency reduce tariffs from 15 to 7.5 per cent on roughly $120 billion of (EPA) has finalised its new regulations governing greenhouse Chinese products, while leaving in place tariffs on $250 billion gas (GHG) emissions from domestic utilities – the Affordable of Chinese products. China in turn agreed to purchase at least Clean Energy Rule – to the benefit of America’s coal producers. $200 billion worth of U.S. goods and services over the next two Even as the ACE Rule is subject to a legal challenge in the years (above a 2017 baseline of $186 billion). In May 2020, the District of Columbia Circuit Court of Appeals, EPA’s regulatory two countries reaffirmed their intent to move forward with the focus has turned to clarifying the scope of jurisdictional waters phase one agreement despite new friction between the countries for which U.S. miners and other interests are required to obtain occasioned by the COVID-19 pandemic. China’s State Council federal permits.

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London 2 Trade and Regulatory Developments

In June 2020, the EPA and the U.S. Army Corps of Engineers legal challenges to jurisdictional projects. This proposal, which is jointly issued the “Navigable Waters Protection Rule”, a new scheduled to go into effect in September of 2020, is expected to regulation that clarifies, and limits, the scope of federal jurisdic- expedite the environmental permitting process for U.S. mining tion over waters within the U.S. Under this new regulation, the projects that are subject to federal regulatory jurisdiction. statutory term “waters of the U.S.” is streamlined to include only In an effort to help jump-start the U.S. economy following four specific categories of waters, each of which has a nexus to the COVID-19 related shutdowns, President Trump issued navigation. Waters which fall outside one of these specific catego- Executive Order 13927 in June entitled “Accelerating the ries will no longer be federally regulated, but will instead be left to Nation’s Economic Recovery From the COVID-19 Emergency the regulatory oversight of the state in which they are located. By by Expediting Infrastructure Investments and Other Activities”. shifting the regulatory focus away from bodies of water that are EO 13927 directs federal agencies, including the Departments of not connected in some way to navigation, the new rule is expected Transportation, Defense, Agriculture, and the Interior “to use all to expedite the permitting process for new mines and mine emergency and other authorities to expedite work on, and comple- expansions. The Navigable Waters Protection Rule, which was tion of” projects within their respective jurisdictions. While not supported by national and state mining associations, now faces a enforceable by parties outside the federal government, EO 13927 series of legal challenges from environmental organisations and is just one part of the current Administration’s effort to encourage others who believe the rule is too limited in scope. and expedite the development of major infrastructure projects. In another significant regulatory effort expected to aid the The mining industry is among the likely beneficiaries of this U.S. mining industry, the Council on Environmental Quality broader federal infrastructure initiative, as the demand for copper, (CEQ) issued a proposed regulation in early 2020 to significantly zinc, and metallurgical coal (among other minerals) is expected to streamline the environmental review process under the National increase to meet growing construction needs. Environmental Policy Act (NEPA). As the U.S. environmental law with perhaps the broadest scope, NEPA impacts nearly every The Year Ahead U.S. mining project located on federal lands or involved in the extraction of federal minerals, including coal, gold, silver, copper, The coming year is likely to be marked in large measure by how iron ore, uranium, molybdenum, and rare earth mines. Mining well the world economy recovers from the COVID-19 pandemic. projects subject to NEPA’s scope are subject to a comprehensive Miners hope demand for their products will increase as manu- environmental review by the federal permitting agency. CEQ’s facturing, construction, travel, and consumer spending begin to proposal represents the first significant revision to the agen- stabilise following the wide-scale commercial shutdowns in the cy’s regulations in 42 years. The proposal would shorten the first half of 2020. Governmental initiatives that directly or indi- time period and page limits of agencies’ environmental analyses, rectly boost the mining sector are expected to be considered in clarify which projects are subject to NEPA review, and circum- many jurisdictions. Time will tell whether mining interests will scribe the environmental effects which must be considered. The benefit from the development of new trade alliances and the new regulation would also clarify the scope of judicial review for stabilisation of existing ones.

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London Holland & Hart LLP 3

Andrew Emrich helps clients develop their energy and natural resources projects through a multi-faceted strategy involving litigation, permitting, and regulatory compliance. He has represented clients in significant litigation in the areas of mining, oil and gas, and renewable energy projects. On the permitting side, Andrew advances his clients’ projects through focused strategies to obtain expeditious and defensible permitting and regulatory approvals. When necessary, he helps clients challenge and reverse agency regulations and permitting decisions that unduly burden mining projects and energy development.

Holland & Hart LLP Tel: +1 303 290 1621 555 17th Street, Suite 3200 Email: [email protected] Denver, CO 80202 URL: www.hollandhart.com USA

Holland & Hart lawyers have worked alongside mining companies for more than 60 years. Our specialised, multi-disciplinary team helps mining companies at every stage of the mining lifecycle. From complex debt and equity financing options to mergers, acquisitions, and joint ventures, to title matters, to regulatory approvals for final reclamation – even responding to mine accidents and emergencies with our Workplace Safety Emergency Response Team – we have a deep understanding of the business, regulatory, and environmental challenges faced by mining industry stakeholders. www.hollandhart.com

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London 4 Chapter 2

World Association of Mining Lawyers (WAOML): An Overview

World Association of Mining Lawyers (WAOML)

In 2014, leading lawyers in the natural resources sector from government-mandated shutdowns to disrupted supply chains. Europe and the Americas came together to found the World The implementation of measures to ensure the safety of work- Association of Mining Lawyers (WAOML). Established as a forces and increased focus on social responsibilities are likely membership organisation, WAOML aims to advance its members’ to form key aspects of operational plans as mining companies knowledge of mineral regulation worldwide by providing a global adjust to this new world. The sector is also under increasing forum for the discussion and debate of legal issues faced by pressure to respond to concerns – both at the investor and soci- today’s mining industry. The Association is currently managed by etal level – around environmental, social and governance (ESG) an Advisory Council, a 17-member body with diverse geographic performance. As an unintended by-product of COVID-19, ESG distribution, which includes in-house counsel from interna- rating agencies are increasingly looking at the social perfor- tional mining companies such as Anglo American, AngloGold mance of companies, including their treatment of employees, Ashanti, Barrick, Endeavour Mining, Eurasian Resources Group, subcontractors and local communities. This evolution in social Glencore, IAMGOLD, Navoi Mining, Newmont and Nordgold, impact evaluation is expected to become a mainstay in future as well as partners from well-known law firms such as Carey, ESG ratings of companies. With the EU’s Conflict Mineral Chammas & Marcheteau, Fasken, Kimathi & Partners, Lawson Regulations and the London Metal Exchange’s Responsible Lundell, Simmons & Simmons and Vieira de Almeida. Sourcing Regulations taking effect in 2021, mining companies At the heart of the Association’s work is the Annual WAOML are increasingly moving from voluntary reporting standards Conference – a two-day event which focuses on stimulating to regulatory ones. The next year will bring challenges as to discussion and debate around the increasing legal and policy what is considered as ‘compliance’ and what third-party auditing challenges faced by the global natural resources sector. The issues will arise on ESG reporting for mining companies. In conference brings together leading professionals, academics and response to these issues, WAOML is planning to develop a series policy makers, allowing delegates to exchange ideas and discuss of webinars in collaboration with its corporate members, spon- the range of regulatory matters relevant to mineral exploration sors and associated organisations. Bringing together viewpoints and mining, whilst forming and strengthening professional rela- from around the world, the webinar series will aim to shine a tionships across a global network. The event takes place in a new light on the lessons learnt from the impact of COVID-19, as well country each year. To date, events have been hosted in London as other pertinent issues of relevance to mining and exploration (UK), Chantilly (France), Toledo (Spain), Sintra (Portugal) and companies, their in-house counsel and private practitioners with Marrakech (Morocco). Since the first event in 2015, attendance a focus on natural resources. has increased year-on-year and in 2019, WAOML welcomed 117 The Association will also continue to develop its model delegates from more than 35 different countries – making it the mineral regulations. This is part of a concerted effort by largest and most successful conference to date. WAOML to stimulate debate and discussion with policy makers Of course, even the best-laid plans have been disrupted by the and industry stakeholders, in order to structure a healthy mining historic events of 2020. The impact of the global COVID-19 industry, where communities, the environment, government and pandemic has been felt in all corners of the world. The effect mining companies are treated fairly and the appropriate regula- on our industry, though considerable, has been overshadowed tory tools are used to secure investor, government and commu- by the wider economic and societal damage that the pandemic nity interests. In 2015, at WAOML’s inaugural conference, has caused. With this in mind, WAOML made the difficult but delegates engaged with the Association’s Advisory Council to necessary decision to take a hiatus from its Annual Conference discuss the potential for a model piece of legislation, and in 2016, in 2020. Part of what makes the WAOML event so unique is WAOML released the first draft of what would later become the the opportunity to meet with colleagues and peers from around WAOML Miners’ and Investors’ Model Mining Code (MMC). the world, to share in the different perspectives and insights of The law was structured around 12 key principles, including: a diverse group of attendees, whilst enjoying the relaxed and appropriate licence allocation; the right to mine; a social licence welcoming environment the conference strives to offer. For to operate; balanced environmental approvals; state encour- these reasons, the Association opted to preserve the planned agement of mine development; unfettered priority to land and conference programme for a future two-day event, rather than surface rights; and fiscal stability. In 2017, at the third Annual make the move to a virtual or online meeting series. WAOML Conference, additional draft provisions for the MMC However, the work of the Association and the natural were proposed which focused specifically on transparency resources sector itself has not stopped during this global crisis. and anti-corruption measures. The latest draft regulations In these times, challenges, both old and new, remain for the produced by WAOML were the Small-Scale Mining Regulations mining industry. COVID-19 has raised unique hurdles – from (SSM Regulations) – presented as part of a wider discussion of

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London World Association of Mining Lawyers (WAOML) 5

artisanal and small-scale mining at the 2019 Annual Conference. As part of WAOML’s mission to enhance the understanding Attendees heard from leading subject-matter experts from the of legal matters in the global natural resources space, the Organisation for Economic Co-operation and Development, Association aims to engage young professionals in the early Alliance for Responsible Mining and Solidaridad, in-house stages of their careers, allowing them to gain insight from counsel with large-scale mining companies whose operations senior industry experts. In 2021, the Association will resume its co-exist with artisanal miners, and the President of CONAPEM Student Engagement Initiative which provides financial support – Burkina Faso’s corporation of artisanal and small-scale miners for students from mineral law and policy programmes to attend (ASMs). The SSM Regulations were aimed at contributing to the WAOML Annual Conference. Since WAOML’s inaugural ongoing efforts to formalise and regulate the ASM sector and conference in 2015, students from the University of Dundee’s a final form of the regulations is anticipated in advance of Mineral Law and Policy LL.M. have attended the two-day event, the 2021 Annual Conference. WAOML undertakes extensive and in 2019 the Initiative was expanded further, providing engagement with a wide range of industry participants in rela- support for individuals studying at Queen Mary, University of tion to each aspect of its model mineral regulations, so as to London, who joined their peers from Dundee at the confer- ensure that the documents are intelligently critiqued. As a result ence in Marrakech. In 2021, the Student Engagement Initiative of this process, the MMC has developed into a workable piece Committee, with the generous support of conference sponsors, of legislation which limits the role of discretion and provides is committed to expanding student engagement still further a strong template for governments to use in their own mining by collaborating with other universities and institutions. It is laws and regulations. To date, it has been used by stakeholders hoped that over the coming years, WAOML will be able to host in countries such as Papua New Guinea, Australia and Brazil in students from Canada, the US, South America, Australia and order to engage with authorities on the drafting of new laws and South Africa, as well as additional participants from Europe. regulations. It is hoped that, over time, the accompanying regu- WAOML is a not-for-profit organisation, the work of which lations will prove to be a similarly useful tool. would not be possible without the generous, ongoing support of Looking ahead to next year, it is hoped that by 2021 WAOML, its sponsors, the continued efforts of the Association’s Advisory and the world in general, will be able to return to a way of life Council, the commitment of its members and the contributions that, though not the same as before, more closely resembles our of those who share their expertise each year as speakers at the pre-pandemic ways. The 2021 Annual Conference is scheduled WAOML Conference. WAOML membership is open to all to take place from 30th May–1st June 2021 and will be hosted in those in the legal profession, whether working in private prac- Dubrovnik, Croatia. The conference programme will involve tice or in-house with a mining or service company, as well as discussions on a range of issues, including: development agree- those involved in policy, consultancy and civil society with a ments and stability; lending by development finance institutions focus on the mining sector. and multilateral lending institutions; parent company liabilities; joint venture agreements; community engagement at mine Further Information closure; occupational health and safety regulatory and criminal The World Association of Mining Lawyers (WAOML) is located liability; and climate change. Attendees will also hear the reflec- at 125 Old Broad Street, London EC2N 1AR, United Kingdom. tions of mining company promotors and the legal concerns that For any enquiries, please email [email protected] or call +44 20 plague in-house counsel. 7947 4416.

The World Association of Mining Lawyers (WAOML) was established in 2014 in order to provide a forum for the exchange of ideas, discussion and debate of mineral law and policy, so as to develop and form sensible regulatory guidance for the natural resources sector. Through the global participation of leading law professionals, policy makers, governments, civil society organisations and researchers, WAOML provides a platform for informed discussions and debates aimed at addressing the increasing regulatory challenges faced in the global raw materials industry. The Association is a membership organisation, open to all in the legal profession, whether in private practice or in-house with a mining or service company. www.waoml.com

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London 6 Chapter 3 Argentina Argentina

Marval O’Farrell Mairal Luis E. Lucero

12 Relevant Authorities and Legislation 1.3 Describe any other sources of law affecting the mining industry.

1.1 What regulates mining law? Argentina is a civil law jurisdiction; thus, mandatory laws have as their source the decisions of legislative powers at National, Mining law in Argentina is mainly contained in two sets of Provincial and local levels, and international treaties where rules: the National Code of Mining (NCOM), which has been those treaties are ratified by an act of Congress, and regulating passed by the National Congress as provided for by the National rules are issued (if necessary). Court decisions are sources of Constitution; and the Provincial Codes of Procedures (PCPs) law on very rare occasions, so it would be fair to describe them passed by each Province. The NCOM mainly regulates: (i) the as not being sources of law. As with any other industry, mining ways to acquire mineral exploration and mining rights; (ii) the is affected by a wide variety of statutes and regulations in areas contents of such exploration rights (characterised as “explora- as varied as tax, labour, safety, environmental, and others. A tion permits” – EPs) and of such mining rights (characterised as law of particular interest to the mining industry is National “mining concessions” – MCs); (iii) a limited number of contrac- Act No. 24,196, which created a Mining Investment Regime tual rules as to MCs dealing with leasing, usufruct and liens that that provides for a set of tax benefits for the industry, the most allow MCs to serve as collateral; and (iv) environmental obliga- remarkable being a tax and foreign exchange regime stability tions and procedures that apply to all stages of mineral explo- guarantee for the lifetime of a mining project, up to 30 years. ration and mining, including sanctions that apply where those This guarantee is acquired by filing with the relevant National obligations are violated. The PCPs regulate the procedures that authority the feasibility study (FS) for the project, which are followed before the Provincial mining authorities. This dual must follow the guidelines of the authority – any FS prepared set of rules is the consequence of two Constitutional provisions following the industry standard would comfortably comply with whereby (i) on the one hand, the National Congress was to pass those guidelines. the NCOM, and (ii) on the other hand, the mineral resources belong to the Provincial states and therefore they administer the application of the NCOM through their own administrative or 22 Recent Political Developments judicial Provincial branches of power. 2.1 Are there any recent political developments affecting the mining industry? 1.2 Which Government body/ies administer the mining industry? At the time of writing, Alberto Fernández is the president of Argentina. As to the mining industry itself, the President has Because of the Federal nature of the political division adopted shown his support for the development of the country’s mining by the National Constitution, there is dual regulation of the potential. That said, the Provincial governments also play a mining industry – both National (or Federal) and Provincial. significant role in the day-to-day business life of the industry. This is derived from the fact (see question 1.1 above) that, as per Section 124 of the Argentine Constitution, “Provinces have the original domain of natural resources located in their terri- 2.2 Are there any specific steps the mining industry is tory”; hence, each Province has the power to administer, grant taking in light of these developments? rights and regulate the mining industry in its territory. The industry then has to follow regulations issued by the National We do not perceive any particular steps being taken by the mining Government and also by Provincial Governments. industry at this time. The industry Chamber, however, has been Rights are granted by Provincial authorities, following the developing actions enhancing the industry’s public percep- NCOM provisions and the Provincial procedural regulations. tion, the most important of which has been to join the initia- Permits to develop and operate a mine are also granted by tive of the Mining Association of Canada “Towards Sustainable National and Provincial authorities and, in certain areas, also by Mining” (TSM). This initiative establishes international quality local authorities (municipalities or city councils). and control standards to guarantee responsible, trustworthy and transparent mining activity. The TSM initiative consists of a set of tools and indicators to drive good performance and ensure that the main risks of mining are managed properly.

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London Marval O’Farrell Mairal 7

In addition, the TSM initiative allows mining companies to land that is neither subject to an EP nor covered by another MC. turn high-level environmental and social commitments into Because EPs grant exclusive rights, discoveries made by third action on the ground, providing communities with valuable parties in areas covered by EPs benefit only the holder of the EP. information on how operations are faring in important areas As to the exploration activities themselves, the NCOM does not such as community outreach, tailings management and biodiver- contain indications or directions as to the way the exploration is sity. The Chamber encourages the participation of its members to be carried out. However, a minimum exploration plan must in the TSM initiative. be included in the application and must be complied with by the respective explorer. The EP covers all mineral substances; 32 Mechanics of Acquisition of Rights there is no need to identify any particular substance in an EP. The application must naturally comply with all procedural rules 3.1 What rights are required to conduct in the relevant Province. An exploration fee must normally be reconnaissance? paid at the time an application of relatively unsubstantial importance is filed. EPs include the right to request that the mining authority grant all easements necessary to undertake the appro- The NCOM provides, in Section 31, rules that apply to airborne priate exploration work. reconnaissance, which is thereby governed differently to exploration carried out with on-the-ground methods. In airborne EPs under Section 31, the maximum surface the permit may 3.3 What rights are required to conduct mining? cover is 40,000 km2 and the maximum term is 120 days. The application is dealt with by the mining authority in a fast-track As indicated above, to be able to request an MC, it is not neces- procedure that includes a filing with the aeronautical authority; sary to make the discovery under the umbrella of an EP. The failure of such filing leads to automatic denial of the application. NCOM allows for the existence of MCs with complete disregard to the actual existence of a feasible mining deposit; if the appli- 3.2 What rights are required to conduct exploration? cant complies with the requirements of the NCOM, the State must grant the requested MC. Under the NCOM, to apply for an MC, the applicant is required EPs are granted following a complex and somewhat impractical to file with the mining authority a “statement of discovery” process through which the applicant is granted by a Provincial (SOD) (NCOM, Sections 28, 29 and 30). A SOD is the starting mining authority the exclusive right to explore a certain area to point of the proceedings leading to the granting of the MC; the be identified in the application. The area of the EP is granted intended beneficiary must make a filing with the mining authority on the basis of “units”. A unit is defined as a 500-hectare block. indicating, among other data, the place where minerals have been Each EP may be composed of up to 20 units. The maximum discovered. A sample of the respective mineral substances must area which can be covered by an EP is, hence, 10,000 hectares. be attached to the filing. However, under the NCOM, evidence The maximum number of EPs that any person (individual or of the actual existence of the mineral substance referred to in the corporate) may hold in one Province is 20. Therefore, any SOD may only be required by the authority in the case that third mining company may hold, at any given time, up to 200,000 parties oppose the granting of the MC. The SOD must be regis- hectares per Province. EPs are granted for a limited period, tered by the mining authority in a specific ledger. Mining rights which is determined under the NCOM depending on the are exclusive, and granted on a “first come, first served” basis. number of units the respective EP is composed of. The times- Following the filing of the request, the main steps towards the cale starts at 150 days for an EP composed of a single unit. Such creation and registration of the MC are the following: term is increased on the basis of 50 days per additional unit ■ The carrying out of certain exploration works (Labor Legal ) granted. Consequently, the maximum period for a 20-unit EP is – in practical terms, a trench – the purpose of which is to 1,100 days. Furthermore, the NCOM determines that upon the determine the direction and inclination of the vein. The expiration of a 300-day term following the granting of the EP, NCOM still provides for this Labor Legal to have a length the holder of the EP must “release” half of the respective area, of 10 metres. excluding four units. Upon the expiration of a term of 700 days ■ The determination of the number of units the conces- following the granting of the EP, an area equal to half of the sion will be composed of. While EPs are divided into remaining area – excluding, again, four units – must be released. units, MCs are instead organised on the basis of “exploita- The areas to be released can therefore be calculated pursuant to tion units” ( pertenencias). An MC, therefore, is formed by the following formulae: a number of pertenencias which basically depends on the ■ RA1=(TA–4)/2 number of individuals claiming the discovery. At the same ■ RA2=((TA–RA1)–4)/2 time, the NCOM provides for pertenencias of several sizes, Where: depending on the mineral substances which are involved ■ RA1 (Released Area 1) is the area to be released 300 days (e.g., pertenencias for the mining of coal are larger than those after the granting of the EP. for the mining of gold) as well as the type of mineralisa- ■ TA is the Total Area granted in the EPs. tion (vein or porphyry). The basic pertenencia is determined ■ RA2 (Released Area 2) is the area to be released 700 days on the basis of a rectangle of 200 metres by 300 metres. after the granting of the EP. Consequently, in the granting of the MC, the mining The specific areas to be released are determined by the holder authority is called on to make a determination of the size of the EP, who must identify them to the respective mining and number of pertenencias. authority. Failure of the holder to do so entitles the mining ■ The carrying out of a survey of the area of the future MC, authority itself to determine the released areas. It is important which is to be completed under the supervision of the to note that the existence of an EP is not a condition prece- mining authority. dent to the granting of an MC. In other words, an MC may be ■ The registration, with the mining authority, of the above- obtained whether or not the miner made the discovery under mentioned survey. A copy of the registration of this survey the protection of an EP, provided that the discovery is made in serves as a title deed.

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3.4 Are different procedures applicable to different 4.4 Are there requirements for ownership by minerals and on different types of land? indigenous persons or entities?

The NCOM classifies minerals into three categories: No, there are no requirements for ownership by indigenous (i) First-category minerals belong exclusively to the peoples or entities of mining rights. Government in whose territory they are located, for which the land is only an accessory to, and which can only be 4.5 Does the State have free carry rights or options to exploited by means of, MCs (NCOM, Section 2). acquire shareholdings? (ii) Second-category minerals are those that, due to their lesser importance, belong to the landowner, and are considered “substances subject to concessions preferably granted to No, the State does not have any free carry rights or options to landowners”. This category also includes minerals which, acquire shareholdings. due to the conditions of their deposits, are of common use, known as “common use substances” (NCOM, Section 2). 52 Processing, Refining, Beneficiation and (iii) Third-category minerals belong solely to the landowner; no Export one else may exploit them without the landowner’s consent, except where those minerals have been deemed of public 5.1 Are there special regulatory provisions relating to use (NCOM, Section 2). Productions of a stony or earthy processing, refining and further beneficiation of mined nature and, in general, all minerals used as construction minerals? and ornamental materials which form quarries, are classified as third-category minerals (NCOM, Section 5). There are no special regulatory provisions relating to processing, refining and further beneficiation other than those permitting 3.5 Are different procedures applicable to natural oil requirements that are common to all industries, which vary and gas? depending on the relevant domestic Provincial jurisdiction.

Yes, Argentina has a very well-developed statute regulating oil 5.2 Are there restrictions on the export of minerals and and gas exploration and exploitation. The first set of rules to levies payable in respect thereof? regulate oil and gas was, from 1887, the NCOM. Once oil was found in Argentina in 1907, some tax reserve laws and decrees There are no restrictions on the export of minerals, except for were also made applicable to oil exploration and exploitation. restrictions that apply to uranium and thorium. Under Sections In 1935, through Law No. 12,161 a new chapter was included 209 and 210 of the NCOM, domestic sales of both minerals are in the NCOM to regulate the legal regime of petroleum and subject to right of first refusal vested in the National nuclear fluid hydrocarbons. In 1967, Law No. 17319 (currently in force, agency (the Comisión Nacional de Energía Atómica) and exports of as amended) was enacted; this legislation set an independent both minerals are subject to approval by the same agency; such statute regulating oil and gas in Argentina. authorisation is subject to the prior satisfaction of domestic needs. Additionally, exports of certain minerals are currently subject 42 Foreign Ownership and Indigenous to an export duty that is set at 12% (although this percentage is Ownership Requirements and Restrictions a contested issue) of the Free On Board (FOB) value. For some minerals, like lithium, that percentage has a cap of AR$3 per USD 4.1 What types of entity can own reconnaissance, of the FOB value. exploration and mining rights? 62 Transfer and Encumbrance According to Section 7 of the NCOM, individuals and legal entities are entitled to be granted EPs, operate MCs and dispose of 6.1 Are there restrictions on the transfer of rights to MCs as owners under the provisions of such Code. conduct reconnaissance, exploration and mining?

4.2 Can the entity owning the rights be a foreign entity Although the NCOM does not expressly allow the transfer of or owned (directly or indirectly) by a foreign entity and EPs, there is no legal impediment for the transfer thereof (either are there special rules for foreign applicants? direct – for example, through the sale of the EP; or indirect – for example, through the change of control of the title holder) Yes. Foreigners, as well as legal entities created and organised and no governmental consent is required to proceed with the abroad, are entitled to own exploration and mining rights to the transfer. The transfer instrument must be filed with the mining same extent as nationals are. Restrictions apply to the surface authority if there is a change of title holder (but not in case of rights that foreigners are entitled to own, but these restrictions a change of control), in order for the transfer to be enforceable do not apply to mining rights. vis-à-vis third parties.

6.2 Are the rights to conduct reconnaissance, 4.3 Are there any change of control restrictions exploration and mining capable of being mortgaged or applicable? otherwise secured to raise finance?

No, there are no change of control restrictions on mining rights. Yes. There are no restrictions on the use of those rights as collateral, like any other legal right. In particular, MCs are deemed by

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the NCOM to be real estate property (Section 12) and, as such, However, EPs include the right to request that the mining they are subject to the creation of mortgages as many sections authority grant all easements necessary to undertake appropriate in the Code so provide (see, e.g., Sections 218 and 219, among exploration work. many others). Likewise, MCs provide for the granting of easements and rights-of-way as they may be required to establish the infra- 72 Dealing in Rights by Means of structure to develop the operation. Consequently, easements Transferring Subdivisions, Ceding Undivided are the most effective way to secure access to the land necessary to build processing facilities, construction and permanent Shares and Mining of Mixed Minerals camps, housing and recreation facilities, etc. Easements may also be used to secure access to water fields. In addition to the 7.1 Are rights to conduct reconnaissance, exploration MC, miners might resort to other statutes for protection; in fact, and mining capable of being subdivided? easements may also be established under the general rules of the Civil and Commercial Code (CCC) which, in certain situations, Neither EPs nor MCs can be divided below the minimum surface could be of help since, under the NCOM, two different standards set forth in the NCOM. However, if the total surface of either an apply to an easement application: (i) if the easement area sought EP or an MC is such that, after their division, the resulting prop- by the application is located within the EC, the application shall erties meet the minimum surface, the division is possible. be granted subject only to the satisfaction of the compensation payments to the respective landowner; (ii) however, if the area sought by the easement application is located in – or expands 7.2 Are rights to conduct reconnaissance, exploration beyond – the limits of the EC, the applicant must prove to the and mining capable of being held in undivided shares? mining authority that the granting of the easement is necessary to conduct a commercially sound exploitation of the mine. Yes. Both EPs and MCs can be held by two or more individuals Considering the foregoing, in certain given situations it may in condominium. The rules of such condominium are set forth be useful to obtain easements or rights-of-way directly from in the NCOM under the structure of a compañía de minas (NCOM, the affected landowner, settling with him the price to be paid Sections 286 to 316). However, the ideal way to structure such as compensation, and agreeing to have the easement or right- joint ventures is through the contribution of the rights into an of-way governed by the CCC rather than by the NCOM. Under incorporated legal entity. this scenario, the participation of the mining authority may not be necessary. Note, however, that this legal structure is pred- icated on obtaining the full agreement of the parties. Under 7.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary the CCC, the power to create the easement corresponds to the minerals? owner, whereas under the NCOM the power to create the easement belongs to the mining authority. Other legal statutes might also become relevant; for instance, National Law No. Yes. EPs and MCs entitle the holder to explore and potentially 19552, which sets forth a complete regime for easements neces- mine all minerals of the category applied for (see question 3.4 sary for the construction and operation of power lines. above).

8.2 What obligations does the holder of a 7.4 Is the holder of a right to conduct reconnaissance, reconnaissance right, exploration right or mining right exploration and mining entitled to exercise rights also have vis-à-vis the landowner or lawful occupier? over residue deposits on the land concerned?

The holder of an EP or of an MC must compensate the land- Assuming the area where a residue deposit is located is free of owner, or provide sufficient guarantee that compensation shall any rights, the holder of an EP or MC shall have the rights that be paid. The NCOM includes a very brief rule whereby the land- the EP and the MC grant over such residue deposit. However, owner must be compensated for “the value of the pieces of land” note that waste from mines is included in the second category. subject to occupation by the miner. As mining occurs in areas where the land has a relatively insignificant value, arguments 7.5 Are there any special rules relating to offshore about the value of the compensation are common. exploration and mining? The actual payment of the compensation may not defer the exercise of the right to use the land, provided the miner produces There are no specific rules that apply to offshore mining. If a guarantee that compensation shall be paid when fixed. If there were such kind of operation – of which Argentina has had agreement is not reached between the landowner and the miner, none so far – the usual rules of the NCOM would apply. Because a judge will resolve the conflict. of rules applying to Provincial territorial limits, depending on how far from the coast the operations were to be carried out, the 8.3 What rights of expropriation exist? right to explore or to mine would have to be applied for through the Provincial or National authorities. The MC gives the mine owner the right to force the surface landowner to sell such land. The right is subject to no require- 82 Rights to Use Surface of Land ments other than the decision of the mine owner to proceed with the acquisition, but is limited to an area equal to one pert- 8.1 Does the holder of a right to conduct enencia of 200 metres by 300 metres. If the needs of the oper- reconnaissance, exploration or mining automatically ation require that the area to be acquired be expanded, such a own the right to use the surface of land? need or convenience must be alleged by the beneficiary of the MC and sufficient proof must be filed to the satisfaction of the No, the holder of an EP or MC does not own the surface of land. specific mining authority.

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As in the case of easements, if agreement is not reached (ii) Public Hearings between the landowner and the miner over the value to be paid, Pursuant to Section 268 of the NCOM, the competent authority a judge will resolve the conflict. is bound to provide information concerning the application of the environmental provisions, but it does not set forth the mech- 92 Environmental anisms for public hearings and inquiries within the framework of approval of the EIR. Nevertheless, the General Environmental 9.1 What environmental authorisations are required Act provides for a mandatory (non-binding) public participa- in order to conduct reconnaissance, exploration and tion stage in the process of approval of projects that could affect mining operations? the environment (Section 20 of Law No. 25675) and most of the Provinces have adopted some sort of initiative in this regard following the requirements of the General Environmental Act. Section 41 of the Argentine Constitution provides that “the In sum, depending on the type of project at issue and its possible Federal Government shall issue rules on minimum environmental impact on the environment, a public hearing must be called. protection standards” and “all Provinces, shall issue the provi- However, the conclusions of public hearings in most juris- sions necessary to supplement such rules without affecting local dictions are not binding upon the enforcement authority when jurisdictions”. issuing the EID, though in general they must be considered, as Mining prospecting, exploration, exploitation, development, the approval of mining projects against the will of the popu- preparation, extraction and storage of minerals, including all activ- lation will usually lead to problems for its effective execution. ities related to the closure of the mine, the processes of grinding, milling, benefit, pelletisation, sinterisation, briquetting, primary (iii) Other Environmental Regulations elaboration, burning, foundry, refining, sawing, engraving, These include: (a) National rules regarding the protection of polishing and other processes that may arise from new technol- archaeological and paleontological heritage (Law No. 25743 and ogies and the disposal of waste of any kind, shall comply with Decree No. 1022/2004); (b) Provincial rules on effluents, use the minimum environmental standards, applicable throughout of toxic substances, soil protection, among others; (c) Law No. Argentina, included in Title 2 of the NCOM (Section 249). 26331 on “minimum requirements for the protection of native Provinces issue supplementary rules and proceedings with the forests”; (d) Law No. 25688, which states the minimum envi- purpose of applying such minimum standards. These Provincial ronmental requirements for water preservation and rational regulations (or Municipal, as the case may be) shall not diminish use thereof; (e) Law No. 26639 on Minimum Standards for the the standards set by the NCOM but may establish more demanding Protection of Glaciers; and (f) it is also important to mention requirements. that some Provinces, under the heading of mining environ- The following are the main requirements that must be met in mental regulation, have enacted legislation to prohibit metallif- order to conduct reconnaissance, exploration and mining opera- erous mining in a direct manner, or, in an indirect manner, by tions in Argentina: means of the prohibition of the use of cyanide and other chemical substances in metal mining. (i) Environmental Impact Declaration (EID) No mining activities may be conducted without prior approval, by the competent authority, of the Environmental Impact Report 9.2 What provisions need to be made for storage of (EIR) by means of the EID. The EID must be updated every tailings and other waste products and for the closure of two years. mines? The National mining rules are supplemented by the San Carlos de Bariloche Act, approved by the Mining Federal Council on The storage of tailings and waste products must comply with August 16, 1996 (MFC Act). This Act set forth the minimum general environmental rules, the NCOM and the rules set by technical requirements that EIRs must contain according to the the Province where the storage or transport of such waste takes corresponding stage of the project, as well as the standards on place. Hazardous wastes are regulated by Law No. 24051 and the quality of water, soil and air. Since the MFC Act is not a by Decree No. 831/9. This legislation provides strict control regulation passed by the Argentine Congress, the Provinces are over the life cycle of waste by means of surveillance of all not bound to comply with those standards. However, in prac- parties involved in the activities at hand, following the princi- tice, most Provinces follow the MFC Act as minimum standards. ples of the “Basel Convention on the Control of Transboundary As regards environmental insurance, mining activities are Movements of Hazardous Wastes and Their Disposal”, approved considered risky activities for the environment by Resolution by Law No. 23922. No. 177/2007 (Section 2 and Exhibit I) issued by the former Tailings and waste resulting from excavation and mineral Secretariat of Environment and Sustainable Development. extraction stages involving earth and rock movements are not Thus, all human or legal entities performing activities which considered hazardous. However, in the mineral processing stage are hazardous or risky for the environment and its ecosys- which may involve activities of casting, refining, or certain chem- tems shall contract insurance for an adequate amount to guar- ical procedures for separating metal from rocks, among others, antee the financing of possible repair works, to comply with waste listed as hazardous waste may be generated. In this case, Section 22 of the General Environmental Act. This insurance the individual in charge of the undertaking must comply with the can be: (a) bonding insurance for Environmental Damage of requirements stated by this law. Collective Incidence; (b) insurance policies with Risk Transfer; or (c) other financial instruments or insurance plans approved 9.3 What are the closure obligations of the holder of a by the Secretary of the Environment and Development within reconnaissance right, exploration right or mining right? the Government of the General Secretariat of the Presidency of the Nation, and by the Insurance Superintendence of the Nation. The environmental aspects involved in the closure of mines are focused on guaranteeing the health and safety of the population

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and minimising possible environmental damages. Thus, it is pertaining to their lands”. Aboriginal communities must partic- necessary to perform activities leading to the avoidance of such ipate (whenever possible) in the benefits generated by the activ- unwanted consequences, and it is appropriate to implement, ities and receive fair compensation for any damages caused as a during the development of the activities, the reduction of waste, consequence of such activities. the efficient use of chemical substances, the partial and progres- In this regard, National Law No. 23,302 (regulated by National sive restoration of the sites and their reforestation, the creation Decree No. 155/89) established that: (i) aboriginal communities of funds allowing the performance of repairing activities upon must be awarded the land they inhabit or in nearby areas that termination of the operations, among other measures. are appropriate to conduct their economic activity and enhance Even though neither the environmental system of the NCOM development; (ii) allocation of land to aboriginal communities nor the Provincial legislation specifically regulates environ- shall be without charge and over State-owned land; and (iii) to be mental matters related to the closure of mines, there are several awarded land pursuant to Law No. 23,302, communities must be regulations that impose the need for conducting a plan for mine previously registered to be recognised as aboriginal communities. closure in order to avoid or mitigate any environmental impact National Law No. 26160 (as amended) has declared an emer- that the termination of the mining activities may cause. gency status – until 2021 – in connection with the land of the As mine closure is another stage of the mining project, it is aboriginal communities, and ordered that surveys be conducted part of the environmental approval and auditing process set forth to correctly identify the land occupied by aboriginal commu- in the NCOM, and therefore, it is subject to the environmental nities. In the meantime, all eviction processes of members of protection rules described previously (see question 9.1 above). aboriginal communities have been suspended. Additionally, the MFC Act establishes rules regarding the content of the EIR regarding termination abandonment of the 112 Health and Safety exploitation, and Control after the termination of the operations. Similarly, the Mining Investments Law, Section XXIII, chapter 11.1 What legislation governs health and safety in VII, regarding “Environmental Conservation” states that: “In mining? order to prevent and restore environmental impacts, the company must have special reserves to such extent. The amount of the annual reserve depends on the criteria of the company; however, Health and safety in mining is governed by: (i) the NCOM; (ii) up to 5% of the aggregated costs of the operation are deductible labour legislation; and (iii) applicable Provincial legislation. from income tax.” 11.2 Are there obligations imposed upon owners, employers, managers and employees in relation to 9.4 Are there any zoning or planning requirements health and safety? applicable to the exercise of a reconnaissance, exploration or mining right? The amendment of the Constitution in 1994 created a supra-legal All the land in Argentina is available for the performance of obligation to repair the environment affected upon the occur- mining exploration and exploitation. However, there are some rence of environmental damage (Section 41 of the Argentine exceptions to this rule. National Parks Law No. 22,351 and Decree Constitution). The General Environmental Act provides for a No. 2,148/1990 create reserve areas where mining exploitation is system of aggravated strict environmental liability. Strict liability implies that the presumed author of the offensive event, in order not allowed. Similar rules related to the protection of Provincial to be exempted from liability, must prove not only the fault of natural areas and their wild environments have been enacted by the victim or a third party for whom they have no responsibility, some Provinces, especially to control metalliferous mining, such but also the adoption of all measures leading to the avoidance of as: (i) the Province of Santa Cruz; (ii) the Province of Buenos Aires; damage. (iii) the Province of Chubut; and (iv) the Province of Neuquén. In turn, the NCOM provides that people who conduct mining activities are liable for “any environmental damage that may arise 102 Native Title and Land Rights due to non-compliance” with the mining environmental system set forth therein, regardless of whether such damage is caused 10.1 Does the holding of native title or other statutory directly by the person in charge, his dependants, contractors or surface use rights have an impact upon reconnaissance, subcontractors, or whether such damage is caused by the risk or exploration or mining operations? defect of such activities. In the event that the person conducting the activity is not the holder of the mining right, this person The National Constitution acknowledges the possession and will be severally liable for the damages caused by those persons property of the land traditionally occupied by aboriginal authorised by him to perform the activity within the limits of the communities or indigenous people (Section 75, subsection 17 mining area (Section 248). of the National Constitution). Additionally, in 2000 Argentina Regardless of the foregoing, the principle of strict liability for ratified International Labour Organization (ILO) Convention environmental damages is applicable to damages caused by the No. 169 by National Law No. 24071, which recognises indig- risk or failure of the mining activities, in which case the miner enous and tribal people’s rights in independent countries. may be exempted from liability by evidencing the negligence of Pursuant to Section 15 of ILO Convention No. 169, “the rights the damaged party or a third party for which the miner is not of the peoples concerned to the natural resources pertaining to bound to be liable. their lands shall be specially safeguarded. These rights include Liability arising from environmental damage caused by mining the right of these peoples to participate in the use, manage- is not limited to compensation to the damaged party. It also ment and conservation of these resources”. Furthermore, if the includes the obligation to mitigate the damage and “rehabilitate, subsoil resources belong to the State, as is the case in Argentina, restore or repair the damage, as the case may be” (NCOM, Section the Government must establish consulting procedures for the 263), according to Section 41 of the Argentine Constitution, affected communities before “undertaking or permitting any which establishes that environmental damage “entails the obli- programs for the exploration or exploitation of such resources gation to repair”.

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Regarding civil liability, pursuant to Section 161 of the NCOM, 132 Constitutional Law the owner of a mine is responsible for the damage caused to third parties even when the damage is caused by accidents or an act of God. 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and mining? 11.3 Are there any unique requirements affecting the mining industry in light of the coronavirus (COVID-19) Yes. In fact, the rights provided by the NCOM and the Provincial pandemic? procedural rules must comply with both the Provincial constitution of the Province that is the host of the relevant project The mining industry was declared an essential activity, and or operation, and the rules of the National Constitution. In thus exempted from complying with the “social, preventive turn, Provincial constitutions must all be in harmony with the and mandatory isolation” established by Decree of Need and National Constitution. The ultimate authorities to interpret what Urgency No. 297/20 issued by the National executive branch of a Provincial constitution says are the Provincial Supreme Courts; power, through two regulations: (i) Administrative Decision No. as for the National Constitution, it is the National Supreme Court. 429/20 (published in the Official Gazette on March 20, 2020), which provided the following exemption: “Industries that carry out continuous processes whose interruption involves structural 13.2 Are there any State investment treaties which are damage to the production lines and / or the machinery, may applicable? request authorisation from the Ministry of Industry, Knowledge Economy and External Commercial Management to continue Yes, the Argentine Government has executed 61 Bilateral their production with minimum activities and staff”; and (ii) Investment Treaties (BITs) with other countries. These interna- Administrative Decision 450/20 (published in the Official tional treaties were signed by the Executive Branch and most of Gazette on March 3, 2020), which directly excluded from “isola- them have been expressly ratified by laws enacted by the National tion” the “Activities related to forestry and mining production, Congress. Currently, 49 of those BITs are in force. In addition, distribution and marketing”. Argentina has executed the “Convention on the Settlement of Even though the mining industry is exempted from social, Investment Disputes between States and Nationals of Other preventive and mandatory isolation, it has to comply with safety States” and the “Protocol of Colonia for the Promotion and protocols to protect workers and prevent the spread of COVID-19. Reciprocal Protection of Investments in MERCOSUR” (Law Some Provinces have approved their own protocol – in general, No. 24891). those protocols implement: (i) safety, hygiene, health and biosafety standards; and (ii) special measures in connection with the trans- 142 Taxes and Royalties portation of workers. In addition, the Mining Secretariat issued Resolution No. 14.1 Are there any special rules applicable to taxation of 36/2020 (published in the Official Gazette on June 29, 2020), exploration and mining entities? which approved the “Adaptation of the National Social Mining Plan” to serve vulnerable communities linked to mining activity, Under Section 213 of the NCOM, mines are awarded through in light of the COVID-19 pandemic. the payment of an annual fee per pertenencia, established by The beneficiaries of this Plan (the Provinces, Municipalities the National Congress and paid to the National Government and/or other entities) shall present their proposals before the or the Provinces, according to the location of the mines. The Mining Secretariat, which will evaluate them and decide whether fee must be paid in advance in two equal parts, in two semes- or not to grant them. The Plan will grant funds for the imple- ters: on June 30 and December 31 of every year. Furthermore, mentation of training activities and for the development of invest- the fee must be paid from the day that the mine is registered, ments in mining microenterprise ventures, among other eligible with or without the survey being performed (Section 216 of the activities. NCOM). However, Section 224 of the NCOM establishes that the discoverer is exempted from the payment of annual fees for 122 Administrative Aspects a three-year term.

12.1 Is there a central titles registration office? 14.2 Are there royalties payable to the State over and above any taxes? Yes, there is a central titles registration office at Provincial level. There is no such office for the whole Argentine territory. Yes, Provinces are entitled to (and almost all do) impose royalties, which are set forth through a Provincial act of congress 12.2 Is there a system of appeals against administrative and collected by either the mining authority or the Provincial decisions in terms of the relevant mining legislation? internal revenue authority. The royalties are based on the value of ores actually mined, and are set at rates that vary from 0% Yes. All administrative decisions (whether relating to mining to 3%. At that time, the rates are applied to the “pit-head” or otherwise) are subject to control by the judicial system. value of the minerals, calculated starting from the sales price Requirements to take decisions by administrative agents to and applying deductions for costs incurred in all steps of bene- the court system vary from Province to Province and between ficiation, storage, transportation and marketing. Provinces that Provincial systems and the National system, but the review of have adhered to the Mining Investment Regime referred to in such decisions is a valid principle country-wide. question 1.3 above have adopted a maximum rate of 3% of the “pit-head” value; the costs that can be deducted from the sales price to reach the “pit-head” value are set forth in the Mining Investment Regime (Section 22 bis of Law No. 24,196).

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152 Regional and Local Rules and Laws amparo minero (amparo is the Spanish for “protection”. Therefore, the amparo minero is the set of conditions which “protect” the concession. Hereinafter, “amparo”). The amparo regime has 15.1 Are there any local provincial or municipal laws that changed since the enactment of the NCOM. The original regime need to be taken account of by a mining company over was essentially structured on the basis of the obligation to work and above National Legislation? the mine for a minimum of 230 days per calendar year, with a crew composed of a minimum of four workers. The system, however, Yes, there are a large number of Provincial and even Municipal evolved. The main change was introduced in 1919. It was further rules and laws that need to be taken into account when planning materially amended both in 1980 and in 1995. As a result of the explorations and, mainly, construction and operation activities. amendments, the amparo is now composed of two obligations: Permitting is a complicated process and it involves dealing with (a) Payment to the Provincial mining authority of the annual a wide variety of statutes and the respective enforcement agen- fee described in question 14.1 above. The amounts involved cies, at the three levels of Government. Most remarkably, the are generally not material. This obligation is deemed to environmental permit that allows the building and operation of evidence the mine owner’s will to continue its operation a project (the environmental impact declaration – “DIA” by its rather than evidence of its financial or economic substance. Spanish acronym) is issued by a Provincial authority. (b) The making, in developing the deposit, of a minimum investment pursuant to a plan which must be filed by the 15.2 Are there any regional rules, protocols, policies or MC holder within one year from the filing of the petition laws relating to several countries in the particular region to proceed with the survey of the MC. The amount to be that need to be taken account of by an exploration or invested may not be less than 300 times the amount of the mining company? annual fee applicable to the concession. 100% of the investment must be made in the first five years of the investment The only case is the Mining Integration Treaty signed by Argentina plan. Furthermore, 20% must be invested in the first year and Chile in 1997, whereby the countries agreed to implement in and 20% in the second year. There are no specific require- their territories measures to facilitate the development and opera- ments with respect to the remaining 60%, which could be tion of mines within a certain area next to the border shared by the invested in the fifth year. A follow-up report must be filed two countries – the third-longest in the world, at over 5,000 km. with the mining authority within three months following the end of each of the annual periods covered by the respec- 162 Cancellation, Abandonment and tive investment plan. In two specific sections (Section 216, last paragraph, and Relinquishment Section 218), the NCOM defines the situations which could result in the forfeiture of an MC. The first is default on the obli- 16.1 Are there any provisions in mining laws entitling the gation to pay the mining annual fee. In such case, the forfei- holder of a right to abandon it either totally or partially? ture occurs if the payments are in arrears upon the expiration of a 45-day period counted from the delivery of a notice by the Yes. As per Section 222 of the Mining Code, MCs can be with- mining authority, which notice may be issued only if the MC is drawn by the concessionaire through a direct and spontaneous in arrears at the expiration of a two-month period following the act which demonstrates to the Mining Authority the decision end of the relevant annual period in which the annual fee is due. not to pursue the mining works. A written declaration must be As to the obligations arising from the investment plan, forfei- filed with the Mining Authority, 20 days before the abandon- ture may be declared by the mining authority in eight different ment, indicating the mine’s name, the mineral, the substance situations which are set forth in Section 218. All of them are exploited and the stage of the work. related to the fulfilment of the obligations under the investment The petition will be registered and published so as to allow plan, or to the breach of the reporting obligations. In these preferred creditors and mortgagees to request the public sale of cases, the forfeiture requires 30 days’ prior written notice from the mine in order to recover their debt or the adjudication of the the mining authority and a 15-day period to file whatever allega- mine. Notwithstanding, the concessionaire must comply with tions the title owner might think appropriate to excuse himself certain obligations to maintain his right, such as the payment of from the non-performance of which he is accused. the annual fee and compliance with the investment plan. If none of the opportunities given to an MC owner to remedy his default under the amparo is duly used and the forfeiture of the 16.2 Are there obligations upon the holder of an EC is declared by the mining authority, the consequence is that exploration right or a mining right to relinquish a part the MC is declared vacant. thereof after a certain period of time? In addition, Section 225 of the NCOM establishes that, where a mine has been inactive for more than four years, the mining authority shall summon the MC owner to file an activation or Please see a detailed explanation of the obligation to partially reactivation plan within a term of six months; failure to file relinquish EPs in question 3.2 above. As to MCs, they are the plan or failure to complete it shall result in the MC being awarded for unlimited time and there is no obligation to relin- declared vacant. quish any part of them. An MC declared vacant by the mining authority is registered as such. The consequence is that any interested party may apply 16.3 Are there any entitlements in the law for the State for it, provided that: (i) all registered secured creditors are given to cancel an exploration or mining right on the basis of priority over other parties; (ii) the requesting party must pay the failure to comply with conditions? defaulted annual fee, if due; and (iii) the defaulting miner may not apply for the vacant MC until a year has elapsed since the Yes, that is the case for MCs. The NCOM sets forth a set of obli- registration of its vacancy. gations or requirements to be met in order for an MC to be maintained on a perpetual basis. This set of conditions is known as:

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Luis E. Lucero is a partner at Marval O’Farrell Mairal, where he heads the Mining Group. He is also an expert in project finance, complex litigation, arbitration and corporate matters. With a law degree from the Universidad de Buenos Aires in 1983, and having completed a postgraduate course in Business Law from the Universidad Argentina de la Empresa, Luis has taken many more specialised courses such as: the Program of Instruction for Lawyers, Harvard Law School; Global Issues in Corporate Mining Strategy and Government Policy at the University of Dundee; and the Lex Mundi Institute Business Management Program at the University of Cambridge Judge Business School. He led workshops at the Centre for Energy, Petroleum, Mineral Law and Policy at the University of Dundee, UK, where he was an Honorary Lecturer. He is a member of the International Bar Association, the American Bar Association and the World Initiative of Mining Lawyers.

Marval O’Farrell Mairal Tel: +54 11 4310 0240 Av. Leandro N. Alem 882 Email: [email protected] C1001AAQ URL: www.marval.com Buenos Aires Argentina

Marval O’Farrell Mairal is the largest and most prestigious full-service law firm in Argentina. Founded in 1923, it has over 300 lawyers covering legal services ranging from corporate, banking, tax, natural resources, energy, compliance, white-collar crime and others, to a trademarks and patents agency. It is the Argentine member of Lex Mundi, the most highly regarded and largest network of international law firms. It has a representative office in New York, and has received an impressive number of international awards for the excellence of its professionals and services. www.marval.com

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Canada Canada

Khaled Abdel-Barr

Lawson Lundell LLP Karen MacMillan

12 Relevant Authorities and Legislation to the final disposal of reactor and mine waste), mineral activities related to federal Crown corporations, and mineral activities on federal lands and in offshore areas. The manufacture, sale, use, 1.1 What regulates mining law? storage and transportation of explosives used in exploration and mining also all fall within federal jurisdiction. These are regulated Canada is a constitutional monarchy, a parliamentary democracy under the Explosives Act (Canada). Federal jurisdiction also covers and a federation comprised of 10 provinces and three territories. the export, import and transit across Canada of rough diamonds, Canada’s judiciary is independent of the legislative and executive which is regulated under the Export and Import of Rough Diamonds branches of government. Responsibilities and functions under Act. The federal Extractive Sector Transparency Measures Act creates this democratic structure are distributed through a federal system stringent reporting standards for Canadian oil, gas and mining of parliamentary government whereby the federal or central companies, in order to implement Canada’s international commit- government shares governing responsibilities and functions with ments in combatting domestic and foreign corruption. All (i) enti- the provincial and territorial governments pursuant to the divi- ties that are listed on a stock exchange in Canada; and (ii) entities sion of powers under the Constitution Act, 1867 (see question 13.1). that have a place of business in Canada, do business in Canada or The Prime Minister, elected by the public, is the head of govern- have assets in Canada and that meet certain thresholds must report ment in Canada. payments including taxes, royalties, fees, production entitlements, Certain areas within the federal government’s jurisdiction may bonuses, dividends and infrastructure improvement payments affect a mining project, for example: Aboriginal rights; trade and of 100,000 Canadian dollars or more, in the aggregate, to local commerce; railways; nuclear energy; and environmental matters and foreign governments; as of 2017, this includes sums paid to that involve matters of federal jurisdiction, such as fisheries. Aboriginal governments. However, most of the areas which will affect a mining project are Any mining disclosure (whether oral or written, and including within the provincial governments’ jurisdiction. presentations to investors and disclosure on a mining company’s website) made available to the public in Canada is governed by 1.2 Which Government body/ies administer the mining National Instrument 43-101, Standards for Disclosure in Mineral industry? Projects. This instrument was developed by the Canadian Securities Administrators and is administered by the relevant provincial and territorial securities commissions. Pursuant to the division of powers under the Constitution Act, 1867, both the federal government and the provincial or territorial governments regulate mining activity in Canada (see ques- 1.3 Describe any other sources of law affecting the tion 13.1). Exploration, development and extraction of mineral mining industry. resources, and the construction, management, reclamation and closure of mine sites are all primarily within the jurisdic- The areas of contract law and tort law are generally regulated by tion of the provinces of Canada, the Yukon and the Northwest the provinces pursuant to their “property and civil rights” powers Territories (with some exceptions). In Nunavut and certain areas delineated under the Constitution Act, 1867. These bodies of law of the Northwest Territories, public lands and natural resources are mostly “common law” (i.e., “judge-made” law, rather than law are governed and administered by the federal government. Other created under legislation by Parliament or legislatures). Common than Nunavut, each province and territory has its own mining law can be superseded or changed by subsequent legislation. legislation and mineral tenure system, though certain mineral Québec, unlike the other provinces, is governed by civil law. rights in the Northwest Territories are administered by the federal Civil law is a codified law that is written into statutes (e.g. the Civil government. The provinces and territories (other than Nunavut) Code of Québec) which are then strictly interpreted by the courts. own the majority of the mineral rights in Canada, though mineral rights may also be held by private entities, by Aboriginal groups 22 Recent Political Developments and by the federal government. In Nunavut, mineral rights are owned by the federal government, by Aboriginal groups or by private entities. 2.1 Are there any recent political developments affecting the mining industry? Federal government involvement in the regulation of mining operations is limited to those undertakings that fall within federal jurisdiction. These specific undertakings include uranium in the In March 2019, the Government of Canada announced the release context of the nuclear fuel cycle (i.e., from exploration through of the Canadian Minerals and Metals Plan (CMMP), which is a

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forward-looking framework, jointly authored by mining minis- Prospector’s licences (or their equivalent) can be obtained in ters across the country. The CMMP aims to address systematic the majority of jurisdictions by contacting the applicable provin- challenges and issues in the mining industry, with a focus on: cial or territorial governmental authority, completing the requi- competitiveness; the participation of Indigenous Peoples; commu- site form and paying a small fee. In most cases, prospector’s nity benefits; respect for the environment; scientific and tech- licences expire after a period of time (for example, one year in nological innovation; and global leadership. The first CMMP British Columbia), but can be renewed. Action Plan, intended to be the first of a series of action plans Prospector’s licence requirements differ from jurisdiction designed to operationalise the CMMP, was released in March to jurisdiction. In general, the government does not have the 2020. The 2020 Action Plan proposes strategising approaches discretion to refuse to issue a licence; prospector’s licences are and programmes and initiatives to enhance the Canadian mining granted automatically if the applicant meets the statutory criteria. industry’s economic development and competitiveness, advance However, it should be noted that a prospector’s licence can be the participation of Indigenous Peoples in the mining industry, cancelled or suspended for a contravention of applicable mining protect the environment, encourage scientific and technological legislation. innovation, deliver benefits for communities located near mining In the Northwest Territories and Nunavut, a prospector may activities and strengthen Canada’s position as a world leader in the also obtain a “prospecting permit”, which grants the holder exclu- industry. Further CMMP Action Plans will be released in 2021 sive rights to explore and have mineral claims recorded within the and 2022, with subsequent editions following every three years, assigned boundaries of a given permit area for a specified period of enabling Canada to adjust its approach and respond to future time. Similarly, in Saskatchewan, holders of permits issued by the opportunities. Minister of Environment are granted the exclusive right to explore In August 2019, the new federal Impact Assessment Act came into the lands in question and subsequently can convert the permit into force, replacing the previous Canadian Environmental Assessment a mineral claim. Act, 2012 (see section 9). Under the Impact Assessment Act, the Reconnaissance right requirements are less stringent in the Canadian Environmental Assessment Agency will be continued Yukon, Alberta, Saskatchewan and Newfoundland and Labrador, as the Impact Assessment Agency of Canada and will now be the as one can conduct certain prospecting activities without a single agency responsible for the management and coordination licence or other formal registration. of federal impact assessments. A recent trend in many Canadian jurisdictions has been 3.2 What rights are required to conduct exploration? the movement away from traditional ground-staking regimes towards more modern electronic mineral tenure registries. Provinces such as British Columbia, Ontario, Saskatchewan and In Canada, any significant exploration by a prospector will New Brunswick have replaced their respective requirements for require that prospector to hold the mineral rights to the area physical staking of mineral claims with electronic registration of interest. Mineral rights are obtained by “staking” a mineral regimes. In Nunavut and the Northwest Territories, mining claim, or “licence” or “permit” in some jurisdictions. The legislation amendments have been proposed to allow for the permitted methods for staking a claim vary from jurisdiction introduction of online mining rights administration systems. to jurisdiction, and include physically staking a claim on the These developments have had the effect of reducing the cost of ground, on a map or through an online computer registration staking mineral claims in these jurisdictions, which may indicate system. Applicable fees and documents are often required to a willingness to allow for more speculative staking of claims. complete the staking and recordation process and in some juris- See question 11.3 for a discussion of recent political develop- dictions (for example, the Yukon), there may be a requirement to ments related to the COVID-19 pandemic. notify or engage with Aboriginal groups prior to recordation or prior to conducting exploration programmes on recorded claims. The provinces and territories (other than Nunavut) each have 2.2 Are there any specific steps the mining industry is their own mineral tenure system, though certain mineral rights taking in light of these developments? in the Northwest Territories are administered by the federal government. Nunavut (except with respect to Inuit-owned The mining industry is a significant stakeholder and has been an lands) utilises a mineral titles system administered by the federal active participant in consultations regarding the development of government. the new environmental assessment regime. With respect to federally owned lands within the provinces, the federal Public Lands Mineral Regulations regulate the issuance 32 Mechanics of Acquisition of Rights of exploration and mining rights (in the form of a lease). The federal regulations differ from the provincial systems in that they 3.1 What rights are required to conduct reconnaissance? provide for a competitive bidding process for mineral claims. In order to retain a mineral claim, prescribed amounts of work must be conducted thereon. In addition to exploration, Reconnaissance right requirements in Canada vary by jurisdic- an “assessment report” describing the exploration and its costs tion. In the Northwest Territories, Nunavut, British Columbia, must be filed each year with the relevant mining recorder. If the Manitoba, New Brunswick and Prince Edward Island, both prescribed exploration costs are not incurred, most jurisdictions individuals and companies are required to obtain a prospec- permit a claim holder to pay an amount of money in lieu of incur- tor’s licence from the applicable provincial or territorial govern- ring exploration costs. If the assessment report is not filed, or if ment in order to engage in prospecting for minerals, subject to money is not paid in lieu, the claim will be forfeited by the holder. certain exceptions. There are similar requirements in Ontario The duration of a claim will differ from jurisdiction to jurisdic- and Québec, though those provinces do not directly issue pros- tion. In some jurisdictions (such as British Columbia), a mineral pector’s licences to corporations. In Nova Scotia, individuals claim may be renewed indefinitely. In other jurisdictions, a and companies are required to register as a prospector and pay mineral claim may only be held for a limited period of time. For the prescribed fees, but no “licence” is required for preliminary example, in the Northwest Territories and Nunavut, a mineral exploration with no ground disturbance. claim may be held for a maximum of 10 years and after such time,

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it will expire, unless it has been converted into a lease or an exten- 3.4 Are different procedures applicable to different sion has been granted by the relevant mining recorder. minerals and on different types of land? In general, a mineral claim or licence only entitles the holder to the right to conduct exploration and not any additional mining Generally speaking, there are different sets of rules depending operations, subject to certain exceptions. The Yukon is an excep- on the type of substances being mined, and there are varying tion to this general proposition. requirements depending on the type of land under which the A mineral claim holder will generally have rights of access to minerals are located. explore the claim; however, if the surface is privately owned, a The rules governing hard rock minerals (including precious notice to, or an agreement with, the surface owner will usually metals), placer minerals, coal and industrial minerals are often be required. The legislation in most provinces and territories set out in different legislation. The federal Export and Import of provides for some form of tribunal or other dispute resolution Rough Diamonds Act provides for controls on the export, import mechanism to resolve disputes between the holders of mineral or transit of rough diamonds across Canada, and for a certifi- claims and surface rights owners (see question 8.2). If there are cation scheme for the export of rough diamonds, which was parties who hold other rights to the land, notice to such parties established to meet Canada’s obligations under the Kimberley may also be required. Process adopted by the United Nations General Assembly in The above describes the situation where minerals are held by 2000. The regulation of uranium and thorium includes addi- the applicable government. However, minerals may also be held tional rules with respect to their production, refinement and by private entities and originate from either Crown grants or treatment. These rules are within federal jurisdiction for patents or freehold tenures that were issued as part and parcel of purposes of national security and to fulfil Canada’s international another type of grant, such as historic railway grants. The owner obligations in respect of such minerals. of such privately held minerals is entitled to conduct reconnais- There are also varying regimes depending on the owner of sance and exploration activities and develop those minerals, the land under which the minerals are located. The surface land provided that he or she obtains the necessary surface access (in may be owned by a private entity, by Aboriginal groups or by the cases where the surface is separately held). Crown, and may be subject to Aboriginal rights. In some cases, Aboriginal groups may hold the surface rights Where there is private ownership of the land, the recorded and/or mineral rights, in which case it is necessary to negotiate holder of the mineral claim will usually be required either to: with the applicable Aboriginal group the terms on which one (i) issue a notice of access to the surface owner; (ii) come to can access the lands and conduct exploration activities thereon. an agreement for access with the landowner; or (iii) obtain an Surface access may take the form of a licence or exploration lease order from the provincial or territorial authority. Generally, and exploration activities may be governed by an exploration the recorded holder of the mineral claim will also be required agreement. to compensate the surface rights owner for the access granted. Depending on the jurisdiction, where the parties cannot agree, 3.3 What rights are required to conduct mining? compensation may be determined either by a dispute resolution mechanism provided for in the legislation, by reference to the Generally, mineral claims must be replaced by mining leases prior competent tribunal, or by application to court. Exceptionally, to commencing mining activities, the Yukon being an exception. in Québec, where an agreement cannot be reached, the holder A mining lease is a longer-term and more secure form of tenure of mining rights will then have to resort directly to expropria- than a mineral claim. tion procedures. Mining leases permit full exploitation of the resource (subject Aboriginal groups may also own the land over which the to obtaining other required permits and authorisations for mining minerals are found. Where this is the case, permission for access activities) and, depending on the jurisdiction, generally have a must be acquired from the Aboriginal group. For example, term of 10 to 30 years and provide that rent is payable annually to Inuit-owned lands in Nunavut require that surface access be the government that issued the lease. Mining leases are renewable obtained from the Regional Inuit Association and may require for further periods, provided annual rent is paid and the terms a licence or lease. and conditions of the lease are complied with. With respect to Crown-owned land, a recorded holder of the The same comment as set forth above regarding privately held mineral claim or lease will generally be permitted to access the minerals is applicable to mining activities. surface of the land for the purposes of mining activities, though A mineral operator must acquire a government permit land-use permits or leases may be required in some instances. approving the proposed mining project. For a major mining oper- However, where land is subject to Aboriginal rights, Crown ation, the mineral operator will be required to submit a detailed consultation and accommodation of the affected Aboriginal mining plan and reclamation plan, and may also be required to groups will dictate access rights and requirements of mining submit an environmental assessment (see question 9.1). proponents. The extent of consultation and accommodation Where Aboriginal groups hold the surface rights and/or will vary depending on the affected groups and their recognised mineral rights, land tenure may take the form of a lease and the rights. While consultation and accommodation is a Crown obli- right to develop the minerals may take the form of a production gation, it is often the practice of mining companies to negotiate lease. The Aboriginal group and mining company will frequently impact and benefit agreements with Aboriginal groups in order negotiate another agreement in parallel with these agreements: to obtain community support for the project. an impact and benefit agreement. This agreement offers a negotiated means to mitigate detrimental impacts of the project and 3.5 Are different procedures applicable to natural oil to provide economic benefits for the Aboriginal group and its and gas? members. It documents the basis on which the mining company has acquired its “social licence to operate”. In Canada, oil and gas licences or leases, which provide the holder with the right to produce oil and gas, are issued by the provinces

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and territories (and the federal government, with respect to stage of production, with exemptions from the policy if the Nunavut) through a competitive bidding process. This differs project is de facto Canadian-controlled or if Canadian partners from the first-come, first-served basis on which mineral rights cannot be found. are obtained. In 2015, the federal government granted the first exemption since the policy was implemented in 1987. An Australian 42 Foreign Ownership and Indigenous company was allowed majority ownership of a uranium mine in Ownership Requirements and Restrictions Newfoundland and Labrador. The company was able to demonstrate that there were no Canadian partners interested in developing a proposed mining project. 4.1 What types of entity can own reconnaissance, Canada is a party to the Canada and European Union Comprehensive exploration and mining rights? Economic and Trade Agreement (CETA) and the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In jurisdictions where a prospector’s licence is required, indi- Notwithstanding the terms of these treaties, the Non-Resident viduals who have reached the age of majority, and corporations, Ownership Policy in the Uranium Mining Sector will continue to may generally apply for and hold such a licence. Ontario and apply. Canada has lodged reservations under both treaties such Québec are exceptions, in that they do not directly issue pros- that exemptions from the Non-Resident Ownership Policy in the pector’s licences to corporations. Some jurisdictions, such as Uranium Mining Sector are only available where Canadian partic- British Columbia and Prince Edward Island, specify that part- ipants in the ownership of the property are unavailable. nerships may also hold a licence.

4.3 Are there any change of control restrictions 4.2 Can the entity owning the rights be a foreign entity applicable? or owned (directly or indirectly) by a foreign entity and are there special rules for foreign applicants? The “net benefit review” and “national security review” rules discussed in question 4.2 apply in all instances where a non-Ca- Individuals and corporations are generally entitled to hold mining nadian acquires control, directly or indirectly, of a Canadian rights. In some jurisdictions, however, such as the Northwest business. Territories and Nunavut, partnerships and limited partnerships In addition, proposed foreign investment may be subject to are not permitted to acquire mineral claims or mining leases in review by the Canadian Competition Bureau under the federal their name. Competition Act. Where each of certain thresholds are met, a Generally, there are few restrictions on mining rights being proposed investment requires pre-merger notification and either directly or indirectly owned by a foreign entity. Most jurisdic- approval or expiry of a statutory waiting period before the trans- tions require corporations to be registered or otherwise author- action may go forward. The Canadian Competition Bureau also ised to carry on business in the jurisdiction in order to acquire has jurisdiction to review and challenge all mergers within one a prospector’s licence (or the equivalent). The Northwest year of completion on the grounds that the transaction will result Territories previously imposed Canadian citizenship and owner- in a substantial lessening or prevention of competition. ship requirements on the grant of mining leases, but these restrictions no longer exist. If an acquisition of an operating Canadian mining busi- 4.4 Are there requirements for ownership by ness exceeds certain financial thresholds, it will be subject to indigenous persons or entities? government review under the Investment Canada Act (ICA). The review threshold is approximately 1.6 billion Canadian dollars Please see question 10.1 regarding Aboriginal and treaty rights in enterprise value for investments to directly acquire control of the Aboriginal peoples of Canada. of a Canadian business by trade agreement investors that are non-state-owned enterprises. The review threshold is approxi- 4.5 Does the State have free carry rights or options to mately 1.0 billion Canadian dollars for WTO investors that are acquire shareholdings? non-state-owned enterprises. The review threshold is approximately 428 million Canadian dollars in asset value for direct investments by WTO investors that are state-owned enterprises. No, it does not. The threshold for review is much lower for investors or vendors residing in non-WTO member countries (5 million Canadian 52 Processing, Refining, Beneficiation and dollars in asset value for direct investments and 50 million Export Canadian dollars in asset value for indirect transactions). In general, a proposed transaction that meets the review threshold 5.1 Are there special regulatory provisions relating to cannot be completed until the federal Minister of Industry has processing, refining and further beneficiation of mined made a determination that the proposed transaction is likely to minerals? be of net benefit to Canada. This ministerial review requirement does not apply to acquisitions of exploration properties or Mineral processing, refining and further beneficiation will non-producing mines. In addition, the Canadian government generally be subject to the same legislative regimes that apply to has reserved the right to review any transaction if it considers mineral exploration and mineral extraction, as the provincial, that the investment could be injurious to national security. territorial and federal statutes regulate all stages of the mining There are special rules applicable to uranium mining. Federal process. If mineral processing will be undertaken at the mine government policy (the Non-Resident Ownership Policy in the site, it will have been approved through the mine permit applica- Uranium Mining Sector) requires a minimum of 51% Canadian tion and the environmental assessment process, where applicable. ownership in uranium mining properties which are at the first

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The majority of jurisdictions do not require mineral processing is that it be in writing and executed by the holder of the claim. to occur within the province or territory of extraction. Nova Several jurisdictions are more stringent and require the use of a Scotia is an exception to that general proposition, in that prescribed form to validate a transfer, and in Nova Scotia, the under Nova Scotia law no person can remove ore to a place for transfer of an exploration licence (akin to a mineral claim) is also processing outside of Canada unless an exemption is obtained contingent upon the consent of the mining registrar. Transfers from the appropriate Minister. Similarly, the Ontario Mining Act of mineral claims in British Columbia are completed by the trans- provides that, unless an exemption has been obtained, ores and feror and transferee through the online mineral title system. minerals extracted in that province must be treated and refined Mining leases are generally transferable. The transferability of in Canada. In New Brunswick and Newfoundland and Labrador, the lease will be governed by the terms of the lease in question and the government may make an order requiring minerals to be applicable legislation. A common requirement is that the transfer processed within the province. In Saskatchewan, lease holders agreement be in writing and signed by the holder of the interest. may not export quarriable minerals in their natural or unpro- In addition, in some jurisdictions, including, for example, Ontario cessed state without the written permission of the Minister of and Nova Scotia, government consent is required in order to Mineral Resources, and diamonds must be presented for valua- transfer a mining lease. tion at facilities located in Saskatchewan before they are removed Another general requirement related to the transfer of a from the processing facility or sold. Some jurisdictions, such mineral claim or mining lease is that the transfer must be recorded as Manitoba, encourage the beneficiation of minerals inside the in a prescribed office. In some jurisdictions, recordation of the province by providing tax deductions that are permitted only for mining lease is not required but is permitted. the processing of minerals within the province. Other than as noted above, there is no general prohibition on 6.2 Are the rights to conduct reconnaissance, the export of un-beneficiated minerals. However, there are miner- exploration and mining capable of being mortgaged or al-specific exceptions. Pursuant to the Nuclear Non-Proliferation otherwise secured to raise finance? Import and Export Control Regulations, uranium may not be exported unless the Canadian Nuclear Safety Commission grants a licence. Generally speaking, in Canada, indebtedness may be secured by Similarly, diamonds may not be exported unless they have been all types of real and personal property under the real and personal issued a Kimberley Process Certificate and the transaction has property security regimes of each of the provinces and territo- been reported to the federal Minister of Natural Resources. ries and by virtue of the common law. The nature of the charge granted to secure such indebtedness, for example, whether a 5.2 Are there restrictions on the export of minerals and mortgage, charge, pledge or other, will need to be considered in levies payable in respect thereof? each circumstance. There is some uncertainty as to whether a prospector’s licence Canada is a party to a number of international agreements relating can be charged as security for indebtedness. to wastes and recyclable materials, pursuant to which it has various It is possible to create a charge against a mineral claim or mining obligations on trans-boundary movements of hazardous wastes lease. In some jurisdictions, consent of the applicable govern- and hazardous recyclable materials. mental authority will be required, however, such as in Ontario, In addition to Canada’s international obligations, the federal where a mining lease cannot be mortgaged, charged, or made Export and Import Permits Act provides permitting requirements subject to a debenture, unless the applicable Minister consents in and associated fees for the export of goods listed on the Export writing to the transaction. Control List (a list of controlled goods). The Export and Import Security documents granting such a charge are typically regis- Permits Act provides authority to the Governor in Council to estab- tered in the applicable mining registries against the mineral lish and amend the Export Control List for certain prescribed claims or mining leases, whose registration will serve as notice purposes. Notably, one such purpose is to ensure that actions to third parties of the grant of the charge. In many jurisdictions, taken to promote the processing in Canada of a natural resource registration of documents purporting to charge mineral claims produced in Canada are not rendered ineffective by unrestricted or mining leases is permissive; while in other jurisdictions, regis- exportation. Currently, uranium is a controlled substance on the tration is mandatory in order to be given effect. Generally, the Export Control List where certain characteristics are present. It is applicable legislation does not set a scheme of priorities for regis- important to refer to the Guide to Canada’s Export Controls and tered and unregistered charges or between them. Whether the to the Export Control List for any amendments that may affect security document validly and effectively creates a mortgage or the products being exported. charge is a matter determined by the common law. Further, the Export and Import of Rough Diamonds Act restricts the export, import and transit across Canada of rough diamonds, 72 Dealing in Rights by Means of while the Nuclear Non-Proliferation Import and Export Control Transferring Subdivisions, Ceding Undivided Regulations require a licence issued by the Canadian Nuclear Shares and Mining of Mixed Minerals Safety Commission for the export of uranium. 7.1 Are rights to conduct reconnaissance, exploration 62 Transfer and Encumbrance and mining capable of being subdivided?

6.1 Are there restrictions on the transfer of rights to A prospector’s licence cannot be subdivided. conduct reconnaissance, exploration and mining? In some jurisdictions, a mineral claim may be subdivided. For example, in British Columbia, which uses electronic mapping for In general, prospector’s licences are not transferable. mineral claims, claims made up of two or more mineral “cells” Mineral claims are transferable, though the transfer is often can be subdivided into claims that are no less than one cell in size. subject to provincial, territorial, and federal legislative require- With respect to the subdivision of mining leases, the state of ments. A general precondition to the transfer of a mineral claim the law is not uniform across Canada. Subdivision of mining

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leases is not possible in British Columbia; however, an application 7.4 Is the holder of a right to conduct reconnaissance, can be made to reduce the land area subject to the lease, which will exploration and mining entitled to exercise rights also reduce the lease rental payments. Where subdivision of mining over residue deposits on the land concerned? leases is permitted, the rules governing the subdivision vary by province and territory. The entitlement to tailings and waste dumps depends on a determination of whether such materials belong to the mineral owner 7.2 Are rights to conduct reconnaissance, exploration or the surface owner. Some provinces expressly address the and mining capable of being held in undivided shares? rights over tailings and waste dumps in legislation. For example, in British Columbia, tailings and waste dumps become part of Mining activity in Canada can be structured in a variety of ways. the rights to a mineral or placer claim. A common structure is through a joint venture. Joint ventures In provinces and territories where residue deposits such as can be formed through a variety of legal vehicles, including part- tailings and waste dumps are not explicitly dealt with in legisla- nerships, corporations and unincorporated joint ventures. tion, the instrument that separates mineral rights from surface Partnerships are governed by provincial and territorial legis- rights must be interpreted in order to determine the rights over lation. General partnerships are generally defined as the rela- such materials. tionship between two or more persons carrying on a business in common with a view to profit. Limited partnerships are a type of 7.5 Are there any special rules relating to offshore partnership created amongst partners of different classes: limited exploration and mining? partners, who typically are not engaged in the management or control of the business and who, subject to certain exceptions, Pursuant to international law, Canada has exclusive sovereignty have limited liability in respect of the debts and liabilities of the over the territorial sea (12 nautical miles seaward from the low partnership; and general partners, who operate and manage the water line along the coast) and the exclusive right to explore business of the partnership and have unlimited liability. In some and exploit the mineral resources of the continental shelf (the jurisdictions, such as the Northwest Territories and Nunavut, area extending beyond the territorial sea to the outer edge of partnerships and limited partnerships are not permitted to acquire the continental margin, or to a distance of 200 nautical miles mineral claims or mining leases in their name. from the low water line, whichever distance is greater). Canada Parties may incorporate a corporation to conduct a joint has made partial submissions to the Commission on the Limits venture project. Usually, the joint venture property and assets of the Continental Shelf, pursuant to Section 76(8) of the United are transferred to, and held by, the corporation and a share- Nations Convention on the Law of the Sea, and in 2018 established holders’ agreement will govern the conduct and management a joint task force with Denmark and Greenland to explore of the joint venture corporation. Joint venture corporations boundary issues including the delineation of an extended conti- are governed by the provincial, territorial or federal legislation nental shelf beyond the 200-nautical-mile limit in the Arctic. under which the corporation was incorporated. The Oceans Act (Canada) provides that provincial laws do not Unincorporated joint ventures are formed and governed by a apply to the territorial sea or the continental shelf with respect contract. A benefit of the unincorporated joint venture is that to minerals or other non-living natural resources, unless regula- parties to the contract have considerable flexibility in setting out tions are enacted to make provincial laws apply. the terms of an agreement. Typically, the joint venture prop- Unlike in the oil and gas sector, there is no federal legisla- erty is held by one of the joint venture parties on behalf of the tion currently in place that provides for the issuance of offshore joint venture and operations are managed by one of the joint mining rights. venture parties or, in some cases, a third party. In some cases, depending on the applicable legislation, the property and/or 82 Rights to Use Surface of Land assets may be held as tenants in common. Income and losses of the mining activity conducted by unincorporated joint ventures are computed and taxed in the hands of the individual joint 8.1 Does the holder of a right to conduct venture parties. reconnaissance, exploration or mining automatically own the right to use the surface of land?

7.3 Is the holder of rights to explore for or mine a Most often, pursuant to the applicable mining legislation, the primary mineral entitled to explore or mine for secondary minerals? holder of a prospecting permit will automatically be permitted to access the surface where the Crown holds the underlying mineral rights. Where the surface rights are privately held, the miner will The applicable legislation under which the mineral tenure in either be required to issue a notice of access, come to an agreement question has been obtained will often circumscribe the minerals with the surface owner or seek a court order. A right to compen- that the tenure covers (e.g. hard rock minerals, placer minerals, sation for entry and damage caused to the property is generally coal or industrial minerals). For example, in British Columbia, provided for in the applicable mining or surface rights legisla- the Mineral Tenure Act regulates the exploration and, in part, tion. The applicable legislation usually contains dispute-resolution the development and mining of hard rock minerals and placer provisions to resolve disputes between a mineral rights holder and minerals, and the definition of what constitute “minerals” is the surface owner. very broad. Similarly, a holder of a placer claim is entitled to In Prince Edward Island, Nova Scotia, Saskatchewan, the explore for placer minerals. Other examples include the British Northwest Territories and Nunavut (other than Inuit-owned Columbia Coal Act that regulates the exploration and production lands), surface rights are not automatically granted as part of a of coal, and the British Columbia Land Act that regulates earth, mineral claim or lease. A land-use permit may be required for any soil, sand, gravel, rock and other natural substances used for a work under a mineral claim. Work conducted on a lease will also construction purpose. require a land-use permit or a surface lease. On Inuit-owned lands, a licence or lease may be required to gain access to the surface.

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8.2 What obligations does the holder of a In June 2019, the Government of Canada passed a new federal reconnaissance right, exploration right or mining right Impact Assessment Act to replace existing federal environmental have vis-à-vis the landowner or lawful occupier? assessment legislation. The new Act and associated regulations came into force in August 2019. The new Act created a single As most mining activity in Canada occurs outside of population Impact Assessment Agency with the mandate to conduct and settlements, mineral operators usually deal primarily with the decide upon environmental assessments on behalf of the federal Crown, rather than with private owners. In situations where a government. A wider range of effects will also be considered mineral operator wants to enter privately held land, the operator’s in the impact assessment and final approval process – including obligations are set out in applicable legislation and the common impacts on health, society, gender, climate change, Aboriginal law (and civil law in Québec). Generally, a mineral operator peoples, jobs, and the economy. Further, there is a reduction must either obtain the permission of the owner to enter their in the time limit for panel-reviewed projects. Projects will be land, often in the form of a lease, or obtain an order from the reviewed by a panel within 600 days, as opposed to the previous prescribed authority allowing the operator to proceed without turnaround time of 24 months. Smaller projects with fewer the owner’s permission. However, in British Columbia, permis- assessment requirements will be reviewed within 300 days. The sion from the owner is not a necessary requirement. Under the Impact Assessment Act also introduced a new Planning Phase, Mineral Tenure Act, an operator cannot begin mining activity intended to assist the Impact Assessment Agency in deciding unless the operator first serves notice to the owner of the surface. whether to carry out an assessment, whether to coordinate with The general common law rule requires the mineral owner other jurisdictions or agencies (such as a provincial government, to use his or her property so as not to injure his or her neigh- federal authority or Indigenous governing body) and what the bour, the surface owner. Legislation also addresses the rights as scope of the assessment will be. between mineral owners and surface owners. For example, in British Columbia, an operator is liable to compensate the owner 9.2 What provisions need to be made for storage of of a surface area for loss or damage caused by a mining operation. tailings and other waste products and for the closure of mines?

8.3 What rights of expropriation exist? Mining projects must comply with both provincial and federal environmental legislation. Generally, provincial legislation will In every Canadian jurisdiction, pursuant to the applicable legis- set requirements for the storage of tailings and other waste lation, the Crown is authorised to expropriate lands or interests products. in land. Depending on the legislation of the relevant jurisdic- For example, following the failure of a tailings storage facility tion, this authority of the Crown may enable a mineral owner to in 2014, British Columbia updated its Health, Safety and Reclamation acquire surface rights. For example, under the British Columbia Code for Mines in British Columbia to require mines to develop and Mining Right of Way Act, a miner has a right to expropriate private maintain a tailings management system that includes regular land for access to a mine site where the owner of the land, or a audits. Managers are required to retain an engineer of record to person with an interest in the land, does not grant a right of way. ensure that the mine’s tailings storage facility has been designed In exceptional circumstances, mineral rights have been effec- and constructed in accordance with the applicable guidelines, tively expropriated by the Crown, though, in such cases, compen- standards and regulations. The manager and engineer of record sation has generally been paid. must report any unresolved safety issues to the Chief Inspector of Mines. 92 Environmental At the federal level, the Government of Canada may be responsible for regulatory decisions specific to tailings management if 9.1 What environmental authorisations are required they involve uranium tailings, navigable waters, fish-bearing in order to conduct reconnaissance, exploration and waters and fisheries, environmental matters of international and mining operations? inter-provincial concern or federal lands. The Minister of the Environment and Climate Change is required by the Canadian In most Canadian jurisdictions, there are statutorily prescribed Environmental Protection Act to establish and publish a national environmental assessment requirements that apply to certain inventory of releases of pollutants, including substances that are classes of projects that are over a certain threshold size. Most transported to waste rock storage areas and tailings-impound- major mining projects trigger the impact assessment requirement areas. ments. For example, the British Columbia Environmental Assessment The approval of mine closure plans to rehabilitate and restore Act requires an environmental assessment of any proposed new properties after the completion of mining operations is provided mine that will have a production capacity equal to or greater than for in the mining legislation of most Canadian jurisdictions. 75,000 tonnes per year of mineral ore. Most jurisdictions require financial security or a guarantee and While the process is not uniform across Canada, in some juris- an approved closure plan to be filed prior to the mine produc- dictions there may be a requirement for a public hearing. Other tion. Certain jurisdictions require the closure plan to be filed environmental authorisations or permits issued by provincial or prior to any exploration activities being undertaken. territorial governments may be required. In addition to the aforementioned potential environmental 9.3 What are the closure obligations of the holder of a assessment, the federal government may also conduct an envi- reconnaissance right, exploration right or mining right? ronmental assessment if a proposed project is of a prescribed type or size. In certain circumstances, the federal legislation allows the Minister of Environment and Climate Change to Generally, the provincial government will need to approve reha- make a decision on a project based upon a provincial assessment bilitation, restoration, reclamation or closure plan submissions process, thus making it possible to avoid redundant assessments. prior to any mining activities, pursuant to provincial mining laws

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and regulations. Upon the closure of operations, the approved implementing legislation in accordance with the UN Declaration plans must be executed so as to restore the site to an acceptable on the Rights of Indigenous Peoples. condition. Partly in recognition of the aforementioned UN Declaration, Additionally, in certain jurisdictions, the closure of mining the Canadian government recently launched a national engage- activities may be subject to contaminated site remediation ment with Canada’s Aboriginal peoples to help develop a obligations. Recognition and Implementation of (Indigenous) Rights Framework. This framework, if and when implemented, would help ensure that the starting premise for all federal government 9.4 Are there any zoning or planning requirements applicable to the exercise of a reconnaissance, action is the recognition of Indigenous rights. exploration or mining right? 112 Health and Safety In most jurisdictions, the development of a mine will require mine plans to be submitted and approved. In some jurisdic- 11.1 What legislation governs health and safety in tions, this is done in conjunction with the environmental assess- mining? ment process; in others, mine planning and permitting requires a separate process under a separate regulator. In general, worker health and safety falls within provincial juris- In some jurisdictions, specific reserves for areas of land, such diction unless the subject matter of the undertaking falls within as agricultural or environmental reserves, will require additional federal jurisdiction. For example, federal government employees authorisations or approvals for proposed undertakings that fall are governed under the Government Employees Compensation Act. outside the specified uses. In circumstances where a mining Generally this Act is administered by provincial and territorial project is located within the boundaries of a municipality or workers’ compensation boards and commissions. other local government, the applicable municipal laws such as The federal government also has jurisdiction over competency zoning bylaws will need to be adhered to. of workers dealing with uranium and thorium. The qualifica- tions and training of certain workers who deal with uranium and 102 Native Title and Land Rights thorium are governed by the federal Nuclear Safety and Control Act. The Act also creates offences relating to inadequate staffing and 10.1 Does the holding of native title or other statutory work practices at a uranium or thorium mine. surface use rights have an impact upon reconnaissance, Each province and territory in Canada has its own workers’ exploration or mining operations? compensation board or commission, although the Northwest Territories and Nunavut have a combined workers’ compensation board. These boards or commissions generally provide a In Canada, the Constitution Act, 1982 protects Aboriginal and treaty preventative function by administering occupational health and rights of the Aboriginal peoples of Canada. Aboriginal rights safety laws, and an administrative function by administering themselves are not strictly defined. The Supreme Court of Canada insurance schemes for injured workers. has defined these rights in relation to a spectrum dependent on the Some provinces and territories also have legislation and regu- degree of connection with the land, the highest level of right being lations that specifically apply to the mining industry in addi- Aboriginal title. Aboriginal rights can also be defined by treaty. tion to workers’ compensation legislation. For example, British Where Aboriginal rights remain undefined, they can continue Columbia has the Health, Safety and Reclamation Code for Mines in to exist until a treaty is reached with the Crown or until they are British Columbia (Code), which applies to both exploration and proven by claimants and defined by the courts. production mine sites in British Columbia. The Code sets out A 2014 Supreme Court of Canada decision, Tsilhqot’in Nation v. obligations for owners to develop a health and safety programme, British Columbia, provided the first declaration of Aboriginal title and to establish a joint management worker health and safety in Canada, over a limited area of land. The potential impact of committee. In addition, the Code prescribes reporting require- the decision on mining companies remains unclear, given the ments for accidents, deaths and dangerous occurrences and the very specific facts on which the decision was based. maximum hours of work at a mine site. In certain circumstances, the Crown owes a duty to consult with the Aboriginal peoples and to accommodate them where appropriate, even where Aboriginal rights have not been proven. 11.2 Are there obligations imposed upon owners, The extent of consultation and accommodation required of the employers, managers and employees in relation to Crown will vary depending on the circumstances. The impact health and safety? of consultation obligations and Aboriginal rights with respect to reconnaissance, exploration and mining operations rights will Generally, the governing health and safety legislation of the thus depend on the individual circumstances of a given case. province or territory where the work is conducted will impose In May 2016, Canada officially removed its objector status to obligations on owners, supervisors and employees. While these the UN Declaration on the Rights of Indigenous Peoples and obligations are not uniform across the country, in general, mine announced its intent to adopt and implement the Declaration owners are obligated to ensure that applicable laws and regu- in accordance with the Canadian Constitution. In November lations are followed, and to take all reasonable precautions to 2019, British Columbia passed the Declaration on the Rights of ensure the health and safety of employees. Supervisors generally Indigenous Peoples Act, in order to affirm the application of the have a duty to ensure that proper training is given to employees Declaration to the laws of British Columbia, contribute to the on site, and to ensure the safety and well-being of employees. implementation of the Declaration and to support the affirma- Employees have an obligation to inform supervisors of any tion of, and develop relationships with, Indigenous governing potential risks or dangers on the worksite, as well as to protect bodies. British Columbia is the first province in Canada to start their own personal health and safety (see question 11.1).

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11.3 Are there any unique requirements affecting the 132 Constitutional Law mining industry in light of the coronavirus (COVID-19) pandemic? 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and mining? The mining industry has been significantly affected by the COVID-19 pandemic. Governments and regulatory bodies in Canada have generally been quick to respond with measures The jurisdictional powers of both levels of government, provin- intended to limit the spread of the virus. cial and federal, are set out in the Constitution Act, 1867. The In light of the pandemic, governments across Canada have Constitution Act, 1867 provides the federal government with imposed varying levels of restrictions on operations, and limited the power to create laws in relation to trade and commerce, permitted activities to certain “essential services”. In provinces banking, navigation and shipping, sea coasts and inland fish- such as British Columbia, Ontario and Québec, mining operations eries, as well as other matters. On the other hand, the provincial and mineral exploration were classified as essential services and legislatures have the power to create laws in relation to property allowed to continue, subject to compliance with health and safety and civil rights (including laws relating to property, contracts orders and recommendations. Equally, in other provinces, such and torts), natural resources, and local works and undertakings, as Alberta, mining operations and mineral exploration were not among other matters. There are, however, some matters that among the classes of business which were ordered to close. fall within the purview of both federal and provincial jurisdic- In many jurisdictions, regulators have announced relief meas- tions. In such a case, each level of government may create laws ures extending the time limit for filing the requisite expenditures in respect of a particular subject matter insofar as it relates to needed to maintain mineral claims in good standing. For example, their jurisdiction. For example, both the federal and provincial in British Columbia, the time limit for filing a statement of explo- governments have their own form of environmental legislation. ration and development work or making payment in lieu on any The federal government may regulate approvals for a proposed mineral or coal claim becoming due in 2020 or 2021, has been mine in an effort to protect fish, and the province may regulate extended to December 31, 2021. Similarly, in Ontario, the Ministry that same proposed mine for reasons relating to emissions that of Energy, Northern Development and Mines has announced that could pollute the environment. Federal and provincial statutes it will be granting exclusion orders to any claim holders with claim which deal with the same subject matter may co-exist, though if anniversary dates on or prior to December 31, 2020. there is conflict or inconsistency between federal and provincial Recently, jurisdictions such as British Columbia and Ontario law, in the sense of impossibility of dual compliance or frustra- have released sector-specific guidelines regarding workplace safety tion of federal purpose, the federal statute prevails. during COVID-19, which set out “best practices” for employers of Canada’s three territories, the Yukon, Northwest Territories workers in the mining sector as those jurisdictions slowly ease the and Nunavut, do not yet have provincial status and are at restrictions that were put in place to limit the spread of COVID-19. different stages in terms of devolution of powers to their territo- The pandemic-related requirements and other effects on the rial government from the federal government. Their legislative mining industry resulting from COVID-19 are evolving rapidly in powers are enumerated in specific federal statutes (the Yukon response to the pandemic, and the above information is therefore Act, the Northwest Territories Act and the Nunavut Act). From a subject to change. practical perspective, the territorial legislative powers are quite similar to those of the provinces under the Constitution Act, 1867, but the relevant statute must be consulted in each case. 122 Administrative Aspects

12.1 Is there a central titles registration office? 13.2 Are there any State investment treaties which are applicable?

There is no central titles registration office in Canada. With Please refer to question 4.2 with regard to the Investment Canada Act. the exception of Nunavut, which is primarily regulated by the Federal Department of Aboriginal Affairs and Northern Development Canada, and the Northwest Territories, which is 142 Taxes and Royalties regulated by both the federal and territorial governments, each of the provinces and territories is responsible for issuing pros- 14.1 Are there any special rules applicable to taxation of pector’s permits (if applicable) and registering mineral titles. exploration and mining entities?

12.2 Is there a system of appeals against administrative In Canada, there are both federal and provincial statutes that decisions in terms of the relevant mining legislation? provide a number of deductions, allowances, and credits to a taxpayer engaged in qualifying mining activities, and to a taxpayer who invests in certain mining companies. A specific All provinces and territories provide for some form of dispute-res- tax incentive that is unique to the resource sector in Canada, olution mechanism in their respective mining legislation. In found in the Income Tax Act (Canada) (ITA), is the use of flow- general, all decisions made by a tribunal or official carrying out a through shares, which enables junior mining companies to statutory function are subject to judicial review by the courts in the raise money for exploration and development by providing the relevant jurisdiction. investor with tax relief in exchange for their investment. Costs Certain provinces, including Manitoba, Ontario, Newfoundland incurred for the purpose of determining the existence, location, and Labrador, and New Brunswick, have created distinct tribu- extent or quality of an oil, gas or mineral resource in Canada are nals that are separate from the department in charge of adminis- characterised as “Canadian exploration expenses” (CEE) under tering the mining legislation. Other provinces (including British the ITA. A taxpayer can deduct from their reported income up Columbia) have internal dispute resolution systems with appeals to 100% of its cumulative CEE. However, accordingly, they to the courts. are left with CEE deductions which they are unable to use.

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Flow-through shares allow corporations to monetise expenses However, other jurisdictions have not followed suit in adopting that they are unable to use by entering into an agreement with similar laws, and developments in British Columbia have taken an investor, whereby the investor subscribes for shares of the a different direction. In a 2013 British Columbia Court of company and the company agrees to use the subscription Appeal decision, municipal laws were found to be subordinate proceeds to incur qualifying CEE which it then renounces to to conflicting mining legislation. The court held that municipal the investor. Under the ITA, the CEE are deemed to have been bylaws that frustrated the terms of the British Columbia Mines incurred by the holder of the flow-through shares rather than Act permits, issued by the British Columbia Ministry of Energy, the mining company, so the investor is able to deduct the CEE Mines and Petroleum Resources, were invalid. from the investor’s income for tax purposes. Additionally, the ITA and certain provincial statutes offer 15.2 Are there any regional rules, protocols, policies or other investment tax credits to taxpayers for certain types of laws relating to several countries in the particular region mining-related expenditure. The Mineral Exploration Tax that need to be taken account of by an exploration or Credit (METC) is a 15% credit in flow-through shares that can mining company? be claimed on specified CEE. While the METC was initially intended to be temporary, it has been announced that eligibility Canada’s free trade agreements reduce the costs of exporting will be extended until March 2024. In January 2017, the Canada Canadian mined minerals and related value-added products. Revenue Agency updated its “Guidelines for determining the Such agreements should be taken into account by exploration or tax treatment of certain exploration expenses” to confirm that mining companies, as they can result in incentives for establishing costs associated with environmental studies and community production in Canada. consultations undertaken to meet a legal or informal require- Canada has entered into a number of bilateral Foreign Investment ment to obtain a permit are eligible for treatment as CEE. Promotion and Protection Agreements (FIPAs) aimed at encouraging reciprocal investment in each country that is party to the agree- 14.2 Are there royalties payable to the State over and ment. For example, under the Canada-China FIPA, both coun- above any taxes? tries agree to a most-favoured-nation commitment, which ensures that investors from both countries are not discriminated against There are a range of additional taxes imposed by the prov- relative to other foreign investors. The effect of this agreement inces and territories on mining operations within their bound- in Canada is that Chinese state-owned enterprises (SOEs) seeking aries. Ontario, Québec, Manitoba and Newfoundland and investment in Canada will be treated on a merit basis, with consid- Labrador impose a profits tax ranging generally from 5% to 20%. erations of business orientation and the extent of political influ- British Columbia, Alberta, Saskatchewan, Nova Scotia and New ence over their affairs constituting significant factors. Brunswick generally impose taxes based on a combination of net The FIPA also provides for protections to both prospective revenue, net profits and/or production from mining operations. and existing investments by allowing investors to benefit from The remaining jurisdictions, other than Prince Edward Island, protections found in their home country. Under the FIPA, impose graduated royalties where the royalty rate increases with Canadian investments will benefit from Canadian protection revenue, running as high as 14%. The foregoing is applicable to measures against risks of investor discrimination, expropriation most minerals, but taxes or royalties on certain minerals, including without compensation and arbitrary decisions from the govern- coal, potash and uranium, are sometimes dealt with differently. ment, among others. In addition, the FIPA provides that disputes that affect foreign 152 Regional and Local Rules and Laws investment, including those concerning resource development and environmental issues, will be dealt with through international arbitration as opposed to domestic courts. 15.1 Are there any local provincial or municipal laws that However, the FIPA does not affect the Government of need to be taken account of by a mining company over and above National Legislation? Canada’s ability to review or reject investments from China for reasons of national interest. “Net benefit” decisions under the Investment Canada Act are expressly excluded from the FIPA. Generally speaking, a mining company will be governed by Canada has ratified the CPTPP, a multilateral trade agree- federal and provincial laws in respect of its projects. Provincial ment that currently includes 10 other countries: Australia; Brunei legislation that should be considered by mining companies Darussalam; Chile; Japan; Malaysia; Mexico; New Zealand; is discussed in several of the above sections. There may also Peru; Singapore; and Vietnam. In January 2017, the U.S. with- be circumstances where municipal laws can affect a proposed drew from the predecessor to the CPTPP, the Trans-Pacific mining project. For example, if a proposed operation is located Partnership (TPP). The remaining signatories to the TPP agreed within municipal boundaries, applicable municipal laws such as in November 2017 on core elements of the CPTPP. The CPTPP, zoning laws and property taxes will need to be adhered to. the text of which was finalised in January 2018, will gradually It should be noted that Québec has amended its Mining Act eliminate tariffs on Canadian mineral exports and, in general, and related regulations in order to provide municipalities with increase certainty, transparency, and foreign investment protec- more legislatively prescribed powers in relation to mining explo- tions for Canadian mining companies. ration and projects. If a mining company has acquired a right Some legislation in Canada allows compliance with similar on municipal land, the amendments provide that a claim holder legislation in foreign jurisdictions to substitute for compli- must notify the relevant municipality before beginning explo- ance in Canada. For example, the recent federal Extractive Sector ration work on the claim, and satisfy additional public consul- Transparency Measures Act allows payment reporting requirements tation requirements before applying for a mining lease, subject of certain other jurisdictions to be satisfied in lieu of compliance to certain conditions. They also require mining lease holders to with the Canadian statute, at the discretion of the Minister of establish a monitoring committee in order to foster the involve- Natural Resources. ment of the local community.

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162 Cancellation, Abandonment and to submit reports respecting the assessment work completed, or fail to make annual lease rental payments. Generally, the cancel- Relinquishment lation of the mineral claim will take effect immediately upon the failure of the recorded holder to comply with the completion of, 16.1 Are there any provisions in mining laws entitling the the reporting on, or the payment in lieu of, assessment work. With holder of a right to abandon it either totally or partially? respect to mining leases, the provincial or territorial authority will more commonly issue a notice of cancellation, either affording the Generally, recorded holders may abandon mineral claims and recorded holder a grace period to comply with the requirement or surrender mining leases upon notice or application to the to enquire into the grounds for cancellation. provincial or territorial governing body. The procedure by Additionally, mineral claims and mining leases may also be which a recorded holder may do so differs from one province cancelled for breach of the provincial or territorial mining legis- or territory to the next. For example, in British Columbia, the lation, and on various grounds set out in such legislation. A recorded holder wishing to abandon a claim or surrender a lease common ground for cancellation is the misrepresentation of must register a discharge with the chief gold commissioner, the assessment work performed on the claim, though additional while in Manitoba a notice of abandonment must be filed along grounds may be found in different jurisdictions. For example, with reports, plans and statistical data. in Saskatchewan, there is a further ground for cancellation of a Further, recorded holders may also apply for a reduction of mineral claim or mining lease where an environmental assess- claim areas, effectively entitling them to partially abandon their ment determines that the development should not proceed. In claim or lease. Where such reduction is permitted, the method such cases, the legislation itself often provides a procedure for by which the area shall be reduced, and the requirements for cancellation and review of the decision. In most instances, a a reduction, vary by province and territory. For example, in notice of breach will be issued first, providing the recorded British Columbia, the reduced claim area must comply with the holder with a grace period to comply with the requirement, following requirements: (i) it must consist of at least one cell; (ii) following which the provincial or territorial authority may order if there are two or more cells they must be adjoining; and (iii) the the cancellation where the recorded holder has not complied. reduced area cannot result in open areas within the cell claim. However, in some instances, mineral claims may be cancelled In Saskatchewan, there is also a requirement that the reduced without prior notice to the recorded holder. For example, in area’s total length not exceed six times its total width. Manitoba the provincial authority may cancel a mineral claim or Upon abandonment or surrender, all minerals covered by mining lease without prior notice if it is satisfied that the claim the mineral claim or lease revert back to the government or the was recorded as a result of a material misrepresentation in the holder of the underlying rights. The recorded holder may remove application to record the claim or lease. chattels and fixtures from the land abandoned or surrendered; Cancellation proceedings are subject to judicial review by the however, authorisation to do so is required in certain jurisdic- courts. Please refer to question 12.2 for further discussion on tions, including Prince Edward Island. Further, timelines may reviewing ministerial decisions. be imposed for the removal of such property, such as in British Columbia, where the last recorded holder must remove all prop- Note erty within one year after the abandonment. This chapter is not a compendium of Canadian mining law, as the topic is simply too large for the scope of this chapter. 16.2 Are there obligations upon the holder of an Canadian mining law is location-dependent, and there are many, exploration right or a mining right to relinquish a part many locations: 10 provinces and three territories, each with its thereof after a certain period of time? own laws and, within each province or territory, Aboriginal land claim settlement areas or reserves; areas in which the surface In most jurisdictions, mineral claims may be renewed indefi- is owned by the Crown or by Aboriginal groups or privately; nitely from term to term until a lease is obtained or the claim is and areas in which the minerals are owned by the Crown or abandoned. However, in certain jurisdictions, mineral claims by Aboriginal groups or privately. Canadian mining law is also extinguish upon the expiration of a defined term. In Nunavut commodity-dependent, with different laws applicable to hard and the Northwest Territories, for example, the duration of a rock minerals, coal, industrial minerals, petroleum and natural mineral claim is 10 years from the date it is recorded unless it gas, uranium, etc. is converted into a lease (subject to certain rights of extension). As a cautionary note, all of that which is set forth above is intended to be indicative only. Even where topics are discussed 16.3 Are there any entitlements in the law for the State in some detail, they are not intended to be complete, and nothing to cancel an exploration or mining right on the basis of in this chapter should be relied upon as legal advice. failure to comply with conditions? Acknowledgment Relevant provincial and territorial mining ministries may cancel The authors would like to acknowledge the assistance of their mineral claims and mining leases where a recorded holder is in colleague Patrick Thomson in the preparation of this chapter. breach of an obligation under the applicable legislation. Mineral claims and mining leases are most commonly cancelled where recorded holders either fail to complete the required assessment work, fail to make payments in lieu of assessment work, fail

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Khaled Abdel-Barr practises corporate/commercial and mining law, advising on a broad range of mining-related matters both domestically and internationally, including: mergers and acquisitions; debt and equity financings; corporate structuring and reorganisations; the negotiation of commercial arrangements such as earn-in, joint venture, strategic alliance and royalty agreements; mineral title review; and providing legal support to clients throughout all phases of the mining cycle from exploration, development, operations, production and expansion, to reclamation and mine closure. Khaled also advises clients in the energy sector, having significant experience dealing with contractual issues in connection with the purchase and sale of energy and other energy-related transactions.

Lawson Lundell LLP Tel: +1 604 631 9233 Suite 1600 Cathedral Place Email: [email protected] 925 West Georgia Street URL: www.lawsonlundell.com Vancouver Canada

Karen MacMillan practises corporate and commercial law, with an emphasis on asset-level purchase and sale transactions and commercial arrangements in the mining sector including procurement, construction and engineering, joint ventures and other strategic arrangements. She has represented domestic and foreign-based clients in the mining industry on general business law matters involving domestic and cross-border transactions. Karen’s experience includes advising on licensing arrangements, corporate and contractual joint venture arrangements, negotiating debt and equity financings, and negotiating and documenting major resource project-development agreements as well as asset and share-purchase-and-sale transactions. She also regularly advises clients in the energy sector in connection with major power generation projects and a variety of related commercial/contracting matters.

Lawson Lundell LLP Tel: +1 604 631 9160 Suite 1600 Cathedral Place Email: [email protected] 925 West Georgia Street URL: www.lawsonlundell.com Vancouver Canada

Lawson Lundell LLP is a leading Canadian business law firm known for our We are widely ranked by international legal publications, including being practical, strategic approach to legal and business problems. With offices recognised as the top regional law firm in Canada by Chambers Canada in Vancouver, Calgary and Yellowknife, we reside in the key access points and as the top firm in British Columbia, Alberta and the North by Canadian to the rich natural resources of western and northern Canada. Lawson Lawyer magazine for three consecutive voting periods. Our mining group Lundell has a long-established Canadian and international mining prac- and its lawyers are also ranked in Chambers Canada and Chambers Global tice that spans the range of legal services required by mining companies in the area of Natural Resources: Mining (Canada) and in Chambers Latin around the world. Our clients range from junior companies carrying on America for Projects: Mining: Leading Canadian Firms (Latin America-wide). early-stage exploration, to international companies with investments and www.lawsonlundell.com projects spread across the globe. We have an experienced project development team that is actively involved from early-stage exploration and tenure acquisition through development, permitting, operations and closure of projects. Our experienced mining finance team is focused on raising capital and on mergers and acquisitions activity.

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China China

Guohua (Annie) Wu

Jincheng Tongda & Neal Law Firm Yingnan (Jason) Li

12 Relevant Authorities and Legislation of Fang Guan Fu. To implement the Fang Guan Fu policy in the mining industry, the government must be committed to facilitating the investment process, modernising its management 1.1 What regulates mining law? system and ensuring freedom in trade of mining products, all of which are expected to further open up the Chinese mining The Mineral Resources Law (“MRL”) is the national law governing industry and boost its development. the prospection for and extraction from mines in China and the To further implement the Fang Guan Fu policy, and thereby registration of mining rights. The MRL was promulgated by the reform the mining right assignment system, the MNR published a Standing Committee of the National People’s Congress on March revised draft of the MRL (“Revised Draft”) for public comments 19, 1986 and amended in 1996 and 2009, respectively. on December 17, 2019. The comment period ended on January 15, 2020. It is still unclear when the Revised Draft will be submitted to the Standing Committee for review and comment. 1.2 Which Government body/ies administer the mining industry? 2.2 Are there any specific steps the mining industry is The Ministry of Natural Resources (“MNR”) and its local bureaus taking in light of these developments? are the primary governmental bodies administering the mining industry, together with other ministries and departments that regu- On December 7, 2019, the MNR published the Opinion of the late further aspects of said industry. For example, the Ministry of Ministry of Natural Resources on Several Matters Concerning Ecology and Environment (“MEE”) is responsible for environ- Promoting the Reform of Mineral Resources Administration (for mental protection, and the Ministry of Commerce is responsible Trial Implementation) (“Opinion”). It was based on a two-year for regulating the import and export of mineral products. pilot implementation, in six provinces, of the Reform Plan for Mining Rights Assignment, published by the State Council in 2017. It is viewed by the MNR as a bigger step towards a more 1.3 Describe any other sources of law affecting the mining industry. comprehensive implementation of the Fang Guan Fu policy. The Opinion also echoed many of the proposals in the Revised Draft, and therefore effectively brings the substantial part of Other sources of law affecting the mining industry include the Revised Draft into effect before it is officially promulgated. rules, regulations and guidelines issued by: the State Council, In general, highlights of the Opinion include: for example, the Measures for the Administration of Transfer of 1. Mining rights can only be assigned by governments through Mineral Exploration Rights and Mining Rights; local People’s a public bidding or tender offer process (“招拍挂 ”), unless Congresses and their standing committees at various govern- the projects are key construction projects approved by the mental levels, for example, the Administrative Regulations State Council, or projects related to prospecting and extrac- on Mineral Resources in Beijing; and central-level ministries, tion of rare earth and radioactive minerals, in which case commissions, and agencies under the direct supervision of the mining rights are allowed to be assigned by the MNR State Council, for example, the Administrative Rules on the through contracts. Shanghai Mining Rights Market. 2. The administration patterns for different minerals are further specified. According to the Opinion, the following 22 Recent Political Developments 14 minerals must be registered with the MNR: oil; natural gas; shale gas; natural gas hydrate; radioactive minerals; tung- 2.1 Are there any recent political developments sten; rare earth; tin; antimony; molybdenum; cobalt; lithium; affecting the mining industry? and lepidolite. The mining rights of other minerals will be registered with provincial or lower-level governments. In June 2019, the State Council reiterated the government’s focus 3. The term for prospecting rights has been extended from on “reforms to delegate power, streamline administration, and three years to five years. The term for each extension is five optimise government services” (“Fang Guan Fu” or “放管服”) years. in its video conference on improving investment quality. This 4. The requirements for setting up an oil or gas company have has become one of the major tasks of the Chinese government been significantly relaxed. Before the Opinion, approval since 2015, when Premier Li Keqiang first brought up the notion needed to be granted by the State Council in order to

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conduct prospecting and mining of oil and gas in main- Once the local government approves the application, it will land China. In the past 40 years or so, the State Council issue a land use permit. has only approved four oil companies. According to the ■ For agricultural land, a holder of mining rights must submit Opinion, any company registered in China with net assets of an application to the local land resources administrative over CNY 300 million is qualified to apply for prospecting body. Then the administrative body will formulate a land and mining of oil and gas. Despite that, the Opinion also conversion plan (to convert agricultural land into construc- reminds applicants that, in order to conduct the prospecting tion land, because agricultural land in China cannot be and extracting activities, they must meet mining safety and directly expropriated by the government), a land expropria- environmental protection requirements and possess suffi- tion plan, a land supply plan, and a farmland provision plan. cient technical capacity for mining and prospecting. All of these plans must be approved by the local govern- 5. If the prospectors have found economically recoverable ment. After such approvals are issued, the local government reserves of oil and gas, they can commence extraction activi- will issue a land use permit. ties after reporting to the competent administrators. Before the Opinion, the prospecting rights and extraction rights for 3.5 Are different procedures applicable to natural oil oil and gas were governed under two different systems and and gas? prospectors had to apply for extraction rights separately.

32 Mechanics of Acquisition of Rights Yes. The biggest difference is that, according to the Opinion, oil, gas, and 12 other minerals are considered to be strategically important to the country. Therefore, investors must apply to, and 3.1 What rights are required to conduct register with, the MNR for assignment of mining rights for these reconnaissance? minerals; in contrast, for other minerals, investors can register with provincial governments or lower levels of government. In China, mining rights are divided into prospection rights and extraction rights. Under Chinese law, prospection rights are 42 Foreign Ownership and Indigenous similar to the concepts of reconnaissance and exploration rights. Ownership Requirements and Restrictions In China, mining rights are, in most cases, assigned to applicants through a public bidding or tender offer process. According to the Draft Mining Rights Assignment Management Regulation 4.1 What types of entity can own reconnaissance, exploration and mining rights? issued by the Ministry of Natural Resources in March 2019, assignment of mining rights must be conducted through a public bidding or tender offer process, except in the following three Mining rights can only be owned by corporate entities. special cases: 1. the State Council has selected a specific entity to prospect 4.2 Can the entity owning the rights be a foreign entity and explore the mine, in which case, the natural resources or owned (directly or indirectly) by a foreign entity and department is allowed to assign the mining rights by are there special rules for foreign applicants? contract; 2. the cost for prospection is wholly covered by governmental Yes, to both questions. A foreign entity can own mining rights in expenditure; and China. However, foreign investors are prohibited from investing, 3. a prospector applies for the mining rights for the same mine. directly or indirectly, in prospecting or extracting tungsten, rare earth and radioactive minerals based on the 2020 edition 3.2 What rights are required to conduct exploration? of the Special Administrative Measures for Access of Foreign Investment (“Negative List”). Before 2020, foreign investors See question 3.1. could only invest in oil and gas in the form of equity or co-operative joint ventures with Chinese entities. They are allowed to set up a wholly-owned foreign enterprise as the investment platform 3.3 What rights are required to conduct mining? now that the Opinion has come into effect.

The extraction right is required to conduct mining. 4.3 Are there any change of control restrictions applicable? 3.4 Are different procedures applicable to different minerals and on different types of land? Except for the restrictions mentioned in question 4.2, there are no other restrictions on foreign ownership. Yes. For example, procedures for prospecting for and extracting oil and natural gas are different from those for solid minerals. 4.4 Are there requirements for ownership by Such differences are elaborated under question 3.5. indigenous persons or entities? Procedures differ depending on whether the land used for mining is urban land or agricultural land. This is not applicable in China. On a very high level, for example, the procedures for applying to use land for mining are as follows: ■ For urban land, a holder of mining rights must submit an 4.5 Does the State have free carry rights or options to application to the local land resources administrative body acquire shareholdings? for a land use permit. After a preliminary review, the local land resources administrative body will forward the applica- Ownership of mineral resources is vested in the State. tion to the local government for consideration and approval.

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52 Processing, Refining, Beneficiation and 6.2 Are the rights to conduct reconnaissance, exploration and mining capable of being mortgaged or Export otherwise secured to raise finance?

5.1 Are there special regulatory provisions relating to Yes, mining rights can be mortgaged. According to the Tentative processing, refining and further beneficiation of mined minerals? Regulations on the Administration of Assignment and Transfer of Mining Right (the “Tentative Regulations”), to set a mortgage on mining rights, mining rights holders must submit application The National Development and Reform Commission (“NDRC”) materials, including but not limited to the mortgage contract and promulgated the 2019 Guiding Catalogue for Industrial mining permits, to the permit issuance bureau and go through Restructuring (“2019 Catalogue”) on October 30, 2019 to replace certain record filing procedures. the 2011 Catalogue. The 2019 Catalogue sets out restrictions It should be noted, however, that the Tentative Regulations on the extraction and processing of mineral resources in China. do not specify the record filing procedures and requirements, There are three categories of industrial project in the Catalogue: which leaves a gap for interpretations by local authorities. We encouraged projects; restricted projects; and obsolete projects. recommend that foreign investors pay special attention to local According to the NDRC, investors are not allowed to invest in implementation rules and policies in the provinces where their new restricted or obsolete projects; the existing projects must be mining projects are located. either upgraded or terminated. For example, restricted projects For example, Gansu Province and Shandong Province do not include: (i) production of certain petrochemical products, such accept applications for record filings of mortgages for the benefit as certain pesticides and nitrogen fertilisers; (ii) extracting and of third parties, which means that mortgagors must be mining smelting tungsten, tin and antimony; and (iii) exploring gulch- rights holders in these two provinces. In addition, in certain gold in forest, farmland and river areas. provinces, mortgagees must be banks (in Shandong Province, mortgagees must be State-owned banks) or other qualified finan- 5.2 Are there restrictions on the export of minerals and cial institutions. Finally, requirements for application materials levies payable in respect thereof? also differ significantly from region to region.

According to the Catalogue of Commodities subject to the 72 Dealing in Rights by Means of Administration of Export Licences for 2020, an exporter of Transferring Subdivisions, Ceding Undivided coal, crude oil, and refined oil (excluding lubricating oil) must Shares and Mining of Mixed Minerals first apply to the Quota & Licence Administrative Bureau of Commerce (the “Bureau”) for an export quota and then apply 7.1 Are rights to conduct reconnaissance, exploration to the Bureau for an export licence after the export quota is and mining capable of being subdivided? approved; an exporter of rare earth minerals, tin and tin products, tungsten and tungsten products, molybdenum and molybdenum products, antimony and antimony products, indium and Mining rights cannot be subdivided in China. indium products, coke, lubricating oil, and fluorspar must apply to the Bureau for an export licence. 7.2 Are rights to conduct reconnaissance, exploration Generally, customs duties apply to the export of mineral and mining capable of being held in undivided shares? resources. Consignors of exported goods must pay customs duties. Mining rights cannot be held in undivided shares in China. 62 Transfer and Encumbrance 7.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary 6.1 Are there restrictions on the transfer of rights to minerals? conduct reconnaissance, exploration and mining? Currently, there are no laws or regulations on the exploration or The following conditions must be met before transferring a mining of secondary minerals. prospection permit: 1. Two years have passed since the permit was granted, or mineral resources were found. 7.4 Is the holder of a right to conduct reconnaissance, 2. A certain level of minimum investment has been made. exploration and mining entitled to exercise rights also over residue deposits on the land concerned? 3. There is no dispute over transfer rights. 4. Consideration for the rights has been paid. 5. Any other conditions stipulated by the MNR. A mining rights holder has more of an obligation than a right The following conditions must be met before transferring an to deal with residue deposits, tailings and mine dumps. A extraction permit: mining rights holder must register with the local environmental 1. One year has passed since extraction commenced. protection bureau for pollution discharge, formulate a pollution 2. There are no disputes over transfer rights. control plan, and install certain facilities in order to ensure that 3. Consideration for the extraction right has been paid. residue deposits, tailings, and mine dumps do not pose consid- 4. Any other conditions stipulated by the MNR. erable risks to the public and the environment. A mining rights Additionally, the transferee must meet the same qualifica- holder failing to comply with these obligations may be fined or tion requirements that the applicant for the prospecting for or forced to temporarily shut down the mine. extraction of the mineral resources is subject to.

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7.5 Are there any special rules relating to offshore in accordance with the restoration plan formulated prior to the exploration and mining? issuance of the mining permit. The new system is expected to give holders of mining rights more discretion on how to use the funds and reduce their finan- Yes. The Law on the Exploration and Development of Deep cial burdens. In the meantime, the government has strengthened Seabed Resources regulates the prospecting for and extraction of enforcement on the supervision and inspection of the restoration resources located at the seabed, ocean floor and subsoil outside of the mine’s geological environment; those who do not comply the jurisdiction of China and other countries. The Regulations with these regulations will face more stringent consequences. on Sino-Foreign Cooperation in the Exploration of Offshore Consequences for failing to comply with environment restora- Petroleum Resources regulate the exploration and extraction of tion obligations include but are not limited to: fines; rejection of offshore petroleum resources through cooperation between the extensions of mining permits; being black-listed on the “Credit China National Offshore Oil Corporation and foreign entities. China” website; and environmental public interest lawsuits. 82 Rights to Use Surface of Land 9.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right? 8.1 Does the holder of a right to conduct reconnaissance, exploration or mining automatically own the right to use the surface of land? The following procedures must be completed: 1. filing an application for closing the mine with the same No, a mining rights holder does not automatically own the right governmental authority which originally approved the to use the land’s surface. In fact, mining rights and the right to establishment of the mine (“Approving Authority”); own and use land are two separate and independent rights and 2. submitting for approval by the Approving Authority the are regulated under different legal regimes. geological report of the mine to be closed; and 3. after the geological report is approved: preparing, compiling and submitting a mine closing report to the Approving 8.2 What obligations does the holder of a Authority. reconnaissance right, exploration right or mining right After the mine closing report is approved, the following work have vis-à-vis the landowner or lawful occupier? must be completed: 1. classifying and sorting out the geological survey and A mining rights holder cannot encroach on the rights of the mining information, and submitting the geological report landowner or lawful occupier. and mine closing report and other related materials; and 2. completing the remaining work related to labour safety, 8.3 What rights of expropriation exist? water and soil conservation, land reclamation and environmental protection pursuant to the approved mine closing report, and paying in full any outstanding charges. As mentioned under question 3.4, if a piece of land used for mining is agricultural land, the mining rights holder must apply to the local government for the expropriation of that piece of land. 9.4 Are there any zoning or planning requirements applicable to the exercise of a reconnaissance, exploration or mining right? 92 Environmental

There are zoning and planning requirements for the prospecting 9.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and for and extraction of mineral resources at the national, provincial, mining operations? municipal and county levels. The exercise of mining rights must comply with the zoning and planning requirements at all levels. An environmental impact assessment (“EIA”) must be conducted for construction projects affecting the environment. An EIA is 102 Native Title and Land Rights subject to approval or filing procedures from local bureaus of the MEE. One notable change, which the Standing Committee of 10.1 Does the holding of native title or other statutory the National Congress made to the EIA Law in December 2018, surface use rights have an impact upon reconnaissance, is that the constructors are allowed to prepare the EIA forms and exploration or mining operations? reports by themselves if they are fully capable of doing so. In the past, constructors were required to engage a qualified EIA insti- This is not applicable in China. tution to prepare the forms and reports for them. This move is believed to have prompted the EIA institutions in the market to 112 Health and Safety improve their service quality and further lighten the burden of constructors. 11.1 What legislation governs health and safety in mining? 9.2 What provisions need to be made for storage of tailings and other waste products and for the closure of Health in mining is mainly regulated under the Mine Safety mines? Law and Regulations for the Implementation of Mine Safety Law. Safety in mining is mainly regulated under the Law on the China implemented a restoration fund system in November 2017. Prevention and Control of Occupational Diseases. A holder of mining rights may use the fund at its own discretion

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11.2 Are there obligations imposed upon owners, 13.2 Are there any State investment treaties which are employers, managers and employees in relation to applicable? health and safety? No. As of the publication of this chapter, we are not aware of Yes. any investment treaties that China has joined which specifically As to safety, holders of mining rights must have in place facil- address mining investment matters. However, there are a few ities that can ensure safety in production, establish a system of bilateral investment treaties between China and other countries safety management, take effective measures to improve working covering mining activities and investments in the mining industry, conditions for workers and staff, and strengthen safety control such as the Agreement on the Promotion and Mutual Protection of in mines. Managers must be responsible for safe production in Investment between China and Canada, the Free Trade Agreement mines and must have special knowledge and the capability to between China and the Republic of Chile, and the Free Trade ensure safe production and handle accidents. Employees must Agreement between China and the Republic of Peru. possess specialised knowledge of and experience in work safety. As to health, employers must ensure that working conditions 142 Taxes and Royalties meet national standards and requirements for occupational health and take measures to ensure that workers are protected 14.1 Are there any special rules applicable to taxation of from occupational diseases. exploration and mining entities?

11.3 Are there any unique requirements affecting the The Standing Committee of the National People’s Congress mining industry in light of the coronavirus (COVID-19) published the Law on Resource Tax (“Resource Tax Law”), pandemic? which will be effective from September 1, 2020. According to the Resource Tax Law, basic resource tax rates (as a percentage Yes. In January and February 2020, the National Coal Mine of gross sales) for certain mineral resources are as follows: Safety Administration issued several notices and regulations to ■ crude oil: 6%; prevent the spread of coronavirus in the mining industry. For ■ natural gas: 6%; example, some of these regulations include: ■ coking coal and other coal: 2%–10%; 1. Mining companies must set up examination points at the ■ iron (concentrate): 1%–9%; entrances and exits of the mining sites, and must take and ■ gold (bullion): 2%–6%; record each employee’s temperature. ■ copper and nickel (concentrate): 2%–10%; 2. Mining companies are recommended to adopt “staggered ■ graphite (concentrate): 3%–12%; working days”. ■ diatomite (concentrate): 1%–12%; and 3. Mining companies must keep the offices and mining ■ kaolin (ore): 1%–12%. tunnels well-ventilated and ensure they are disinfected regularly (alcohol as a disinfectant is not allowed). 14.2 Are there royalties payable to the State over and above any taxes? 122 Administrative Aspects According to the Mineral Royalties Reform Plan promulgated on 12.1 Is there a central titles registration office? April 20, 2017, an applicant for mining rights must pay mineral royalties to the State. The MNR is the central titles registration authority. Royalties are calculated as follows: 1. the price offered by the winning bidder if the mining rights 12.2 Is there a system of appeals against administrative are assigned by auction; decisions in terms of the relevant mining legislation? 2. the price (not necessarily the highest) offered by the winning tenderer if the mining rights are assigned by tender; or 3. the valuation of the mining rights or the market bench- There is no appeals system specifically promulgated for mining mark price for mining rights of similar conditions (which- matters only. Those wishing to challenge administrative deci- ever is higher) if the mining rights are assigned by written sions can either seek an administrative review or an administra- agreements between the permit holder and government tive lawsuit in the usual manner where an actionable cause of authorities. action arises. However, according to the Law of Administrative Review, if the subject matter is the ownership of natural resources or the 152 Regional and Local Rules and Laws right to use natural resources, an administrative review must first be initiated. 15.1 Are there any local provincial or municipal laws that need to be taken account of by a mining company over and above National Legislation? 132 Constitutional Law

Yes. Local legislatures have the authority to stipulate special 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and rules and regulations governing local activities. See also the mining? discussion in question 1.3.

The Mineral Resources Law covers all of these rights.

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15.2 Are there any regional rules, protocols, policies or 16.2 Are there obligations upon the holder of an laws relating to several countries in the particular region exploration right or a mining right to relinquish a part that need to be taken account of by an exploration or thereof after a certain period of time? mining company? Please see our answers under questions 16.1 and 9.3. This is not applicable in China.

16.3 Are there any entitlements in the law for the State 162 Cancellation, Abandonment and to cancel an exploration or mining right on the basis of Relinquishment failure to comply with conditions?

16.1 Are there any provisions in mining laws entitling the Yes. Among others, any of the following circumstances may holder of a right to abandon it either totally or partially? lead to the revocation of exploration or extraction permits: (i) a failure to pay royalties or register changes to the range of mines We are not aware of any provisions in Chinese mining laws enti- or major minerals or name of the mining entity; (ii) refusal to tling rights holders to surrender these rights in part or in their cooperate with governmental authorities on supervision and entirety. Having said that, under Chinese law, any rights, unless inspection; or (iii) acts of fraud. otherwise prohibited by law, can be abandoned in part or in their entirety. Therefore, we are of the view that mining rights can be surrendered, provided that the surrender of rights does not result in a failure to fulfil the obligations assumed at the time such rights are granted. Additionally, a holder of mining rights intending to abandon those rights or close a mine must follow the procedures discussed in question 9.3.

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Guohua (Annie) Wu is a Senior Partner and heads up JT&N’s Outbound Investment practice. Experienced in a variety of corporate legal matters, Ms. Wu is a recognised authority on cross-border mergers & acquisitions, corporate finance, joint ventures and private equity transactions. She is widely regarded for the extraordinary breadth of experience and commercial acumen which define her practice. Ms. Wu works directly with the client’s leadership, providing critical insights and advice that enables her clients to obtain substantially improved commercial terms and legal protections. Ms. Wu has deep expertise in a broad range of industrial sectors, including Energy, Projects, Natural Resources, and Mining. Her recent transactional experience encompasses a variety of energy and natural resources industry sectors, including upstream, transportation and midstream, coal and other natural resource mining, renewables and clean energy, and power generation. Ms. Wu’s clients include some of the largest funds and industrial companies in China and the world.

Jincheng Tongda & Neal Law Firm Tel: +86 10 5706 8021 10th Floor, China World Tower A Email: [email protected] No. 1 Jianguo Menwai Avenue URL: www.jtnfa.com Beijing China

Yingnan (Jason) Li is a JT&N Senior Associate in the firm’s Beijing office, whose corporate practice encompasses mergers & acquisitions and private equity. Mr. Li has significant experience in a broad range of industrial sectors, including Mining, Energy Projects, and Natural Resources.

Jincheng Tongda & Neal Law Firm Tel: +86 10 5706 8333 10th Floor, China World Tower A Email: [email protected] No. 1 Jianguo Menwai Avenue URL: www.jtnfa.com Beijing China

Jincheng Tongda & Neal Law Firm (JT&N) was founded in Beijing in 1992. advancements in scope, capacity and achievements. Our practices and With nearly three decades of experience, JT&N has distinguished itself as attorneys are frequently recommended as authorities in their respective a leader in multiple areas of legal practice, both international and domestic, fields by legal publications such as Chambers Global and Asia Pacific Guides, focused on furnishing first-class legal services efficiently, economically, The Legal 500, Asia Legal Business, ALM’s China Law & Practice, Euromoney’s and with the highest standard of performance. Today, JT&N has grown Asialaw Profiles and Asialaw Leading Lawyers, and Euromoney’s IFLR1000. to become one of the largest and most respected full-service law firms in www.jtnfa.com China, with hundreds of highly qualified and talented attorneys in 11 offices located in key urban centres across the country, including the provincial capitals of Chengdu, Hefei, Jinan, Shenyang, Xi’an, Hangzhou, and Nanjing, as well as the major metropolitan commercial centres of Shanghai and Shenzhen, our main office in Beijing, and an overseas office in Tokyo. JT&N is in the top tier of Chinese full-service law firms, and our Projects and Energy practice is an obvious strength, evidencing year-on-year

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London 34 Chapter 6 Ghana Ghana

Fui S. Tsikata

Reindorf Chambers Dominic Dziewornu Quashigah

12 Relevant Authorities and Legislation was established with an expressed objective of, among other things, monetising the value of Government revenue from mining. The Fund is to be resourced through income gener- 1.1 What regulates mining law? ated from the country’s equity interest in mining companies, mineral royalties and other related income from mining oper- The Minerals and Mining Act, 2006 (Act 703) (as amended by the ations. The provisions of Act 978 empower the Fund to create Minerals and Mining (Amendment) Act, 2015 (Act 900) and the and hold equity interests in a special purpose vehicle (“SPV”) Minerals Commission Act, 1993 (Act 450) are the principal enact- in any jurisdiction, procure the listing of the SPV on repu- ments setting out the framework of mining law. They express table stock exchanges, assign or transfer rights to its sources of the basic position that minerals in their natural state are owned income and to grant security over its assets. The Government by the State. They also outline the licensing scheme for mineral is reported to be engaged in negotiations with an entity called operations, the incidence of the various mineral rights and the Agyapa Royalties Limited (“Agyapa”) in a proposed transaction powers of the principal regulatory institutions. The following in terms of which the Government would receive an upfront pieces of subordinate legislation add detail in specific areas to the payment of monies in exchange for Agyapa acquiring rights to regime set out in the principal legislation: (a) Minerals and Mining future royalties to be generated from certain identified compa- (General) Regulations, 2012 (L.I. 2173); (b) Minerals and Mining nies in Ghana who have been granted mining leases. (Support Services) Regulations, 2012 (L.I. 2174); (c) Minerals and Mining (Compensation and Settlement) Regulations (L.I. Amendments to Act 703 2175); (d) Minerals and Mining (Licensing) Regulations, 2012 The Minerals and Mining (Amendment) Act, 2019 (Act 995) (L.I. 2176); (e) Minerals and Mining (Explosives) Regulations, introduced amendments to the Minerals and Mining Act, 2006 2012 (L.I. 2177); and (f) Minerals and Mining (Health, Safety and (Act 703), including that which seeks to prevent foreigners from Technical) Regulations, 2012 (L.I. 2182). providing mining support services to small-scale miners and imposes stiff punishment for the sale or purchase of minerals 1.2 Which Government body/ies administer the mining without a licence and for the facilitation of small-scale mining industry? by foreigners. We understand further amendments are proposed to Act 703 which would reduce the duration of a development agreement with the Government from 15 to 5 years, introduce The sector Minister, currently the Minister for Lands and Natural gender considerations into employment in the mining sector, Resources, and the Minerals Commission are the Government and provide stiffer punishment for aiding foreigners to evade bodies with primary responsibility for administering the mining the restrictions on their involvement in small-scale mining. No industry. bill has yet been published in respect of these proposals and until that is done, the legislative process, which includes the gazetting 1.3 Describe any other sources of law affecting the of such bill and its laying before Parliament to undergo consider- mining industry. ation and three readings, would not have commenced.

Environmental legislation, including that relating to forest International accreditation for local refineries protection, water bodies and water use, tax legislation, customary The Chamber of Mines proposes to assist mineral refineries in law relating to land tenure, the law of corporations, contract law the country to receive international accreditation so as to help and administrative law principles concerning the exercise of market their products. The object is to reduce the reliance of governmental power, are all relevant to the mining industry. mining companies in Ghana on foreign refineries and thereby save the country the costs of foreign exchange. 22 Recent Political Developments 2.2 Are there any specific steps the mining industry is 2.1 Are there any recent political developments taking in light of these developments? affecting the mining industry? None that we are aware of. Monetisation of mineral royalties Pursuant to the Minerals Income Investment Fund Act, 2018 (Act 978), the Minerals Income Investment Fund (“the Fund”)

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32 Mechanics of Acquisition of Rights is required to contribute at least US$200,000 to the equity of the entity and the Ghanaian partner must hold not less than 10% of the equity. A foreign investor in a business that it solely owns 3.1 What rights are required to conduct is required under Act 865 to invest a minimum of US$500,000. reconnaissance? The minimum capital requirement may be met in cash or capital goods relevant to the investment. A foreign investor cannot The rights required are: (a) a reconnaissance licence; and (b) a engage in operations relating to industrial minerals unless it restricted reconnaissance licence to engage in reconnaissance commits in its proposed programme to invest at least US$10 in relation to an “industrial mineral”, i.e. “basalt, clay, granite, million in the operations. gravel, gypsum, laterite, limestone, marble, rock, sand, sand- stone, slate talc, salt and other minerals as the Minister may 4.3 Are there any change of control restrictions from time to time declare, by notice published in the Gazette, to applicable? be industrial minerals”.

A person who intends to become the controller of an entity which 3.2 What rights are required to conduct exploration? directly or indirectly holds mineral rights is required to obtain a “no objection” notice from the Minister of Lands and Natural The rights required are: (a) a prospecting licence; and (b) a Resources before becoming such controller. A controller is restricted prospecting licence to engage in prospecting for defined to mean “a person who, either alone or with an asso- industrial minerals. ciate or associates, is entitled to exercise, or control the exercise of more than twenty per cent of the voting power at any general meeting of the mining company or of another company of which 3.3 What rights are required to conduct mining? it is a subsidiary”. The entity and the exiting shareholder are also required to notify the Minister, respectively, of the change in The rights required to conduct mining are: (a) a mining lease; control of the company or of ceasing to be controller. (b) a restricted mining lease to engage in mining for an industrial mineral; and (c) a small-scale mining licence for the conduct of small-scale mining. The mining lease permits its holder to 4.4 Are there requirements for ownership by indigenous persons or entities? engage in reconnaissance and prospecting.

A small-scale mining licence may only be granted to a citizen of 3.4 Are different procedures applicable to different Ghana who is at least 18 years old, and is registered by the office minerals and on different types of land? of the Minerals Commission in an area designated as a small- scale mining area. No, although there are different eligibility criteria for different A person who is not a citizen may not apply for a mineral right rights. In particular, non-Ghanaians are prohibited from in respect of industrial minerals unless the proposed investment engaging in small-scale mining. The threshold for engaging in in the mineral operations is US$10 million or above. industrial mineral operations is higher for non-Ghanaians than for Ghanaians. 4.5 Does the State have free carry rights or options to acquire shareholdings? 3.5 Are different procedures applicable to natural oil and gas? The State is entitled to 10% free carried interest in an entity engaged in mining. This does not preclude the Government Yes, different procedures apply. from any other or further participation in mineral operations that may be agreed with the holder of the mineral. 42 Foreign Ownership and Indigenous Additionally, the Minister may, by notice in writing to a mining Ownership Requirements and Restrictions company, require the company to issue to the State a “special share” in the company for no consideration. The special share is meant to give the Government, inter alia, the power to veto 4.1 What types of entity can own reconnaissance, exploration and mining rights? decisions relating to the liquidation of the company or disposal of the whole or a material part of its assets. To the best of our knowledge, since this provision was first introduced, the special Save for small-scale mining rights which can be granted to indi- share has only been taken on one occasion in the context of the vidual Ghanaians, only corporate bodies incorporated in Ghana State reducing its interest in a company in which it previously under Ghanaian law can hold mineral rights. held majority shares.

4.2 Can the entity owning the rights be a foreign entity 52 Processing, Refining, Beneficiation and or owned (directly or indirectly) by a foreign entity and Export are there special rules for foreign applicants?

5.1 Are there special regulatory provisions relating to Foreign entities cannot directly hold mineral rights, though enti- processing, refining and further beneficiation of mined ties they incorporate in Ghana can hold mineral rights. The minerals? Ghana Investment Promotion Centre Act, 2013 (Act 865) has minimum investment requirements for non-Ghanaians. Where The Minerals and Mining Act requires a licence from the Minister the foreign investor has a Ghanaian partner, the foreign investor for the sale, export or other disposal of a mineral. Under the

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Minerals and Mining (General) Regulations, 2012 (L.I. 2173), an involved in the venture to be allotted shares in the corporate application by a holder of a mining lease for a licence to export, entity which holds the mineral rights. sell or dispose of gold or other precious minerals produced by the holder must be accompanied by a refining contract and a sales 7.3 Is the holder of rights to explore for or mine a and marketing agreement. primary mineral entitled to explore or mine for secondary Holders of small-scale licences for mining precious minerals are minerals? required to export their minerals through the Precious Minerals Marketing Company (“PMMC”) or any other licensed exporter. A holder of a mineral right cannot explore for or mine a mineral An application by a person other than a holder of a mining that is not the subject of the mineral right. If the holder desires lease, to purchase and export, sell or dispose of gold or other to explore for or mine any other mineral, the person must apply precious minerals, requires the applicant to satisfy the Minister to the Minister to amend the right to include such other mineral. that the minerals will be refined or polished in Ghana or that only refined or polished minerals will be purchased for export, or that a percentage of the minerals will be supplied to local 7.4 Is the holder of a right to conduct reconnaissance, users. In practice, as there is very little refinery capacity in exploration and mining entitled to exercise rights also Ghana, this requirement is hardly enforced. over residue deposits on the land concerned?

5.2 Are there restrictions on the export of minerals and A mineral right holder is only entitled to exercise rights in respect levies payable in respect thereof? of the minerals to which its licence relates. To exercise rights over residue deposits (tailings), additional rights are required. The shipment of diamonds is subject to certification under the Kimberley Process Certificate Act, 2003 (Act 652). 7.5 Are there any special rules relating to offshore exploration and mining? 62 Transfer and Encumbrance No, there are not. 6.1 Are there restrictions on the transfer of rights to conduct reconnaissance, exploration and mining? 82 Rights to Use Surface of Land

A transfer, assignment, mortgage, or encumbrance of a mineral 8.1 Does the holder of a right to conduct right or any dealing in relation to a mineral right requires the reconnaissance, exploration or mining automatically prior written approval of the Minister. The approval should own the right to use the surface of land? not be unreasonably withheld or given subject to unreasonable conditions. Further, the Minister is required to communicate a The holder of a mineral right is entitled to enter onto the land for decision on the application within 30 days of receipt of the appli- the conduct of the mineral operations. However, it is required cation; otherwise, the Minister, upon request from the applicant, to exercise its rights subject to the surface rights of the owner or must give reasons for failing to do so. occupier of the land.

6.2 Are the rights to conduct reconnaissance, 8.2 What obligations does the holder of a exploration and mining capable of being mortgaged or reconnaissance right, exploration right or mining right otherwise secured to raise finance? have vis-à-vis the landowner or lawful occupier?

A reconnaissance, prospecting or mining right may be mort- The holder of a mineral right is required to exercise the rights gaged or secured, subject to the approval of the Minister. If the granted subject to the surface rights of the owner or occupier of mortgagor defaults and the mortgagee forecloses, the mortgagee the land. The owner or lawful occupier of land retains the right acquires the mineral rights subject to the approval of the Minister. to graze livestock upon or to cultivate the surface of the land if the grazing or cultivation does not interfere with the mineral 72 Dealing in Rights by Means of operations in the area. Transferring Subdivisions, Ceding Undivided The holder of a mineral right is also required to compensate the owner or lawful occupier for the disturbance of the surface Shares and Mining of Mixed Minerals rights of the owner or lawful occupier. The compensation may be monetary or by way of resettlement, the cost of which shall 7.1 Are rights to conduct reconnaissance, exploration be borne by the mineral right holder. Where people have to be and mining capable of being subdivided? displaced, there is a constitutional obligation to resettle them.

Reconnaissance, prospecting and mining rights may be subdi- 8.3 What rights of expropriation exist? vided with the approval of the Minister.

Where land is required to secure the development or utilisa- 7.2 Are rights to conduct reconnaissance, exploration tion of a mineral resource, the President may acquire the land or and mining capable of being held in undivided shares? authorise its occupation and use subject to the prompt payment of fair and adequate compensation. Mineral rights may be held in undivided shares. However, given Act 703 also gives the Minister the power of pre-emption in the requirement of local incorporation referred to in response respect of all minerals raised, won or obtained in Ghana. The to question 3.1 above, the general practice is for those jointly exercise of this power is subject to the constitutional provisions

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regulating expropriation and to the terms of agreements entered requires the written consent of the Minister to conduct its oper- into with mineral rights holders. In any case, that power has ations: (a) within 100 metres of any forest reserve, river, stream, not, to the best of our knowledge, been exercised in more than building, installation, reservoir or dam, public road, railway or 30 years. area appropriated for a railway; (b) within 30 metres of a pylon; and (c) in an area occupied by a market, burial ground, cemetery 92 Environmental or Government office, or situated within a town or village or set apart for, used, appropriated or dedicated to a public purpose. 9.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and 102 Native Title and Land Rights mining operations? 10.1 Does the holding of native title or other statutory An environmental permit is required in order to undertake surface use rights have an impact upon reconnaissance, reconnaissance, exploration and mineral operations. exploration or mining operations?

In Ghana, land is mostly owned by individuals, extended fami- 9.2 What provisions need to be made for storage of tailings and other waste products and for the closure of lies and communities presided over by chiefs who hold the land mines? in trust for their members. These members are entitled to exercise surface rights over and appropriate portions of these lands in accordance with customary law. They must be compensated by The manager of a mine is required to comply with the provisions the mineral rights holder for interference with their rights. The of L.I. 2182. These contain obligations relating to the construc- right to compensation includes compensation for: (a) deprivation tion and location of tailings and waste product storage facilities. of the use or particular use of the natural surface of the land or L.I. 2182 contains provisions relating to mine closure. These part of the land; (b) loss of or damage to property; (c) loss of include obligations to ensure that tailings storage facilities are earnings or sustenance suffered by the owner or lawful occupier stabilised in the long term. of land under cultivation having due regard to the nature of their The Environmental Assessment Regulations, 1999 (L.I. 1652) interest in the land; and (d) loss of expected income, depending require that there be (a) a reclamation plan, and (b) a bond on the nature of crops on the land and their life expectancy. No to secure implementation of the work plan approved by the claim for compensation lies in respect of the value of a mineral. Environmental Protection Agency. 112 Health and Safety 9.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right? 11.1 What legislation governs health and safety in mining? A reconnaissance or prospecting licence requires the holder to comply with terms which typically include an obligation to The Minerals and Mining (Health, Safety and Technical) rehabilitate the land. In respect of a mining lease, the holder is Regulations, 2012 (L.I. 2182). required, before closing a mine site, to satisfy the Chief Inspector of Mines that each source of potential pollution and component of the mining operation that is to be closed is designed to be 11.2 Are there obligations imposed upon owners, stable in the long term. employers, managers and employees in relation to The holder of a mining lease is required to: (a) ensure that health and safety? discharge/emission of polluted water, air or dust does not occur from the closed mine site; (b) submit a mine closure plan to the Yes. Some of their obligations are summarised below: Inspectorate Division of the Minerals Commission for approval; (1) The owner of a mine, manager of a mine or a holder of and (c) within 12 months after the closure of the mine, rehabil- a small-scale mining licence is required to ensure that itate mining areas which are no longer required for the mining changing rooms are: (a) provided near to man riding shafts operations. on the surface of an underground mine; (b) provided at locations near to a work area of a surface mine, with separate provisions for males and females; and (c) proportionate 9.4 Are there any zoning or planning requirements applicable to the exercise of a reconnaissance, in size to the number of persons employed in the mine. exploration or mining right? The holder of a mining or restricted mining lease is also required to, with the approval of the Chief Inspector and prior to the commencement of mining operations, appoint In respect of mining, the Local Governance Act, 2016 (Act 936) a certified manager for the mine. prohibits the carrying out of any physical development without (2) Persons working in a mine are required to co-operate with a permit granted by the District Planning Authority. A “phys- the manager of the mine or the holder of a small-scale ical development” is defined under Act 936 as “carrying out of mining licence in respect of the mine in the discharge of building, engineering, mining or other operations on, in, under the relevant obligations under L.I. 2182. However, an or over land, or the material change in the existing use of land employee is not liable for a contravention of L.I. 2182 where or building and includes sub-division of land, the disposal of the employee acts at the direction of a supervisor. waste on land including the discharge of effluent into a body of (3) Employees are also required to remove other persons still or running water and the erection of advertisement or other whom they are aware of having been unknowingly exposed hoarding”. to excessive amounts of toxic gas or fumes, dust or harmful In the standard mineral right agreement, the holder is prohib- temperatures and immediately inform the manager of the ited from conducting any operations in a sacred area. It further mine of the circumstances of the exposure. The manager

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is required to take further steps necessary to ensure the 13.2 Are there any State investment treaties which are safety and health of each person who has been or may applicable? subsequently be exposed to the conditions specified, and to rectify and prevent a recurrence of those conditions. Ghana has signed and ratified investment treaties with China, Denmark, Germany, Malaysia, the Netherlands, Switzerland 11.3 Are there any unique requirements affecting the and the United Kingdom. Generally, these provide protection mining industry in light of the coronavirus (COVID-19) to the investments of persons from the contracting parties. pandemic? 142 Taxes and Royalties Given the importance of the mining sector to the Ghanaian economy, mining was listed as an essential service and therefore 14.1 Are there any special rules applicable to taxation of exempted from the lockdown imposed by the Government of exploration and mining entities? Ghana in the months of March and April 2020. Mining companies have therefore been able to operate during the lockdown, Yes, these rules are provided under sections 77 to 86 of the though they have had to implement additional health and safety Income Tax Act, 2015 (Act 896). Act 896 treats income from controls. mineral operations separately from other sources of income and imposes a mineral income tax at the rate of 35% on profits from 122 Administrative Aspects mineral operations. In ascertaining the assessable income of a person from mineral operations, (a) each separate mineral opera- 12.1 Is there a central titles registration office? tion is treated as an independent business, and (b) the tax liability for the business is required to be calculated independently for The Minerals Commission is required to and does maintain a each year of assessment. For income tax purposes, a mineral register of mineral rights in which it records applications, grants, operation pertaining to each mine and a mineral operation with variations and dealings in assignments, transfers, suspensions a shared processing facility constitute separate mineral opera- and cancellations of mineral rights. The register is open to public tions which are required to be taxed separately. inspection on payment of a prescribed fee and members of the public may, upon request to the Commission and on payment of 14.2 Are there royalties payable to the State over and the prescribed fee, be provided a copy of the records. above any taxes? Further, the interest in minerals conveyed by a grant is required to be stamped and registered within 21 days of being granted with Yes, royalties are payable at the rate of 5% of gross revenue. either the Land Registry or the Land Title Registry (depending on the area in which the mineral right is located). Copies of the stamped and registered documents are required to be provided to 152 Regional and Local Rules and Laws the Minerals Commission. 15.1 Are there any local provincial or municipal laws that need to be taken account of by a mining company over 12.2 Is there a system of appeals against administrative and above National Legislation? decisions in terms of the relevant mining legislation? Property rates are chargeable by local government bodies under The prerogative remedies known to the administrative law of the Local Governance Act, 2016 (Act 936). common law jurisdictions are available under Ghanaian law. These are available to enforce constitutional duties of candour and fairness imposed on public officers. 15.2 Are there any regional rules, protocols, policies or In addition, there are specific statutory appeal mechanisms laws relating to several countries in the particular region that need to be taken account of by an exploration or applicable in defined circumstances. mining company? 132 Constitutional Law The Economic Community of West African States (“ECOWAS”) Directive on the Harmonisation of Guiding Principles and Policies 13.1 Is there a constitution which has an impact upon in the Mining Sector prescribes a set of rules and guiding principles rights to conduct reconnaissance, exploration and to Member States of the Economic Community of West African mining? States. Further, the ECOWAS Common External Tariff, which is scheduled to the Customs Act, 2015 (Act 891) as amended by the Yes. Under the Constitution, 1992, “every mineral in its natural Customs (Amendment) Act, 2015 (Act 905), exempts machinery, state in, under or upon any land in Ghana, rivers, streams, water appliances and apparatus designed for use in mining and dredging courses throughout Ghana, the exclusive economic zone and any from the payment of Value Added Tax on importation. area covered by the territorial sea or continental shelf is the property of the Republic of Ghana…” and is vested in the President 162 Cancellation, Abandonment and who holds it on behalf of, and in trust for, the people of Ghana. Grants of rights to exploit minerals are subject to ratifica- Relinquishment tion by Parliament and have been held by the Supreme Court in the recent unreported case of The Republic v. High Court, General 16.1 Are there any provisions in mining laws entitling the Jurisdiction (6), Accra; Ex Parte Attorney-General (Exton Cubic Group holder of a right to abandon it either totally or partially? Ltd, Interested Party) [Civil Motion Number J5/40/2018] to be void and of no legal effect unless and until ratified by Parliament. There is provision for the surrender (abandonment) of a mineral

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right whether in whole or in part. A holder of a mineral right institution or agency in the issuance of permits or in carrying out who wishes to surrender the land subject to the mineral right is a lawful activity resulted in delay by the holder in the discharge required to apply to the Minister for a certificate of surrender no of an obligation under the prospecting licence. The period of later than two months before the date on which the holder wishes the relief shall not exceed 12 months and shall be subject to such the surrender to take effect. A certificate will not be granted, inter other conditions that the Minister thinks fit. alia, if the holder (a) is in default of its obligations, or (b) does not A block is equivalent to 21 hectares or 0.21 square kilometres. satisfy the Minister that it will surrender the area in a condition which is “safe and accords with good mining practice”. 16.3 Are there any entitlements in the law for the State to cancel an exploration or mining right on the basis of 16.2 Are there obligations upon the holder of an failure to comply with conditions? exploration right or a mining right to relinquish a part thereof after a certain period of time? The State has a right to cancel or suspend a mineral right for the holder’s non-compliance with law or obligations under the In respect of an exploration or prospecting licence, the holder agreement granting the mineral right. Prior to exercising a right is required, prior to or at the expiration of the initial term, to to suspend or cancel a mineral right, the Minister is required surrender no less than half the number of blocks of the pros- to give notice to the holder requiring the holder to remedy the pecting area, so long as a minimum of 125 blocks remain subject breach complained of within a reasonable period, not being less to the licence and the blocks form not more than three discrete than 120 days in the case of a mining lease or restricted mining areas, each consisting of (a) a single block, or (b) a number of lease, or 60 days in the case of another mineral right. Where blocks each having a side in common with at least one other the breach cannot be remedied, the holder is required to show block in that area. Relief may be granted either in whole or in cause to the reasonable satisfaction of the Minister as to why the part against this requirement if the holder of the prospecting mineral right should not be suspended or cancelled. licence satisfies the Minister that delay by a Government

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Fui S. Tsikata is Senior Partner at Reindorf Chambers and plays an active supervisory role in much of the firm’s work. He has been a practising lawyer for over 40 years. He has significant experience working on mineral law and policy issues in Africa. He regularly advises clients on the regulatory regime applicable to their investments in Ghana. He taught at the Faculty of Law of the University of Ghana, Legon for almost 30 years.

Reindorf Chambers Tel: +233 302 249 564 20 Jones Nelson Road +233 302 225 674 Adabraka Email: [email protected] Accra URL: www.reindorfchambers.com Ghana

Dominic Dziewornu Quashigah is a Senior Associate at Reindorf Chambers and has been a practising lawyer with the firm since 2010. He has, in his years at the firm, been involved in advising local and international clients on matters of Ghanaian law. He works on transactions and dispute resolution.

Reindorf Chambers Tel: +233 244 815 981 20 Jones Nelson Road Email: [email protected] Adabraka URL: www.reindorfchambers.com Accra Ghana

Reindorf Chambers, based in Accra, Ghana, advises and represents a wide range of clients mainly in the areas of mining, energy, corporate/commercial law, infrastructure, project finance, banking, tax, employment law/ labour relations and dispute resolution. It is a member of the DLA Piper Africa Group, which is a part of the DLA Piper Group, an alliance of legal practices operating across Africa, Asia, Europe, the Middle East and the United States of America. www.reindorfchambers.com

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Japan Japan

Anderson Mōri & Tomotsune Hiroaki Takahashi

12 Relevant Authorities and Legislation on Special Measures for Pollution Caused by the Metal Mining Industry, etc. (Act No. 26 of 1973) applies to prevent pollution caused by metal mining businesses specifically. 1.1 What regulates mining law? Further, other general statutes such as the Electricity Business Act (Act No. 170 of 1964), the Industrial Safety and Health Act The basic statute regulating mining activities is the Mining Act (Act No. 57 of 1972), the Air Pollution Act (Act No. 97 of 1968), (Act No. 289 of 1950) (the “Act”), the purpose of which is to the Water Pollution Prevention Act (Act No. 138 of 1970), the provide a basis for a system of mining which can contribute to Soil Contamination Countermeasures Act (Act No. 53 of 2002), the improvement of public welfare through the development of the Noise Regulations Act (Act No. 98 of 1968), etc. may apply mineral resources in a reasonable manner (Article 1 of the Act). to a mining business, depending on the situation. Given that mineral resources are deemed to be critical materials for the national economy, the rights to prospect for and extract 22 Recent Political Developments them should belong to the most appropriate persons eligible to do so rather than the landowners. The Act grants mining rights 2.1 Are there any recent political developments to certain eligible persons (separate to the landowners) whereby affecting the mining industry? holders of mining rights are granted the exclusive privilege of developing mineral resources whilst being obliged to immediately commence relevant mining activities and to prevent asso- The most important political developments affecting the mining ciated pollution. industry in the last decade were manifested in an amend- Further, with respect to mining and exploration on or below ment to the Act in 2011 (which went into effect in 2012) (the the ocean floor in the high seas not subject to the sovereignty “Amendment Act”), which remains the only amendment in the of any country, the Act on Interim Measures for Deep Seabed Act’s 70-year history. The rapidly increasing demand for global Mining (Act No. 64 of 1982) (the “DSM Act”) will apply and energy in both emerging and developed economies had created the DSM Act requires persons who wish to engage in such unprecedented international competition for natural resources in deep seabed mining processes (including exploration) to obtain the years leading up to the Amendment Act. Among other examples, as observed in China’s restriction on its rare-earth exports approval (“kyoka”) from the Ministry of Economy, Trade and Industry (the “METI”). since 2010, the so-called rise in “resource nationalism” and the resulting difficulties in maintaining supplies of certain minerals are matters of national concern in Japan. Also, innovation in 1.2 Which Government body/ies administer the mining mining techniques had enabled new types of mining to be under- industry? taken deep underground or within the ocean floor. Accordingly, the Government and the METI amended the Act with the objec- The Act and the DSM Act provide the Minister of the METI tive of maintaining domestic resources amid the fiercely compet- with the authority to conduct administrative functions such as itive environment for resource development in and outside the granting mining rights or approving the disposal of the same, country, and to ensure that resource development is conducted organising bidding procedures for choosing specific devel- by the appropriate and qualified persons. opers for specified minerals, and generally supervising holders Further, more generally, the Government has amended the of mining rights. The Act provides for the delegation of such Foreign Exchange and Foreign Trade Act (effective from June authority to each local bureau of the METI where applications 2020) with the aim of promoting foreign direct investment regarding mining rights should be made. (“FDI”) conducive to sound economic growth, as well as ensuring minimal review of FDI that could pose risks to national security. This has been implemented by lowering the threshold for 1.3 Describe any other sources of law affecting the the prior notification requirement in connection with the acqui- mining industry. sition of equity interests in domestic listed companies engaging in certain regulated businesses, including mining businesses, on Generally, to operate mining businesses, the Mine Safety Act uranium, oil and natural gas, from the current 10% to 1%, while (Act No. 70 of 1949) (the “MS Act”) can be applied in terms certain exceptions from the prior notification requirement have of preventing both injuries to employees and mining pollution. been adopted subject to certain conditions. In addition, with respect to metal mining businesses, the Act

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2.2 Are there any specific steps the mining industry is 3.4 Are different procedures applicable to different taking in light of these developments? minerals and on different types of land?

Since the Amendment Act enforced: (i) a specific requirement As stated above in question 2.2, the Amendment Act provides for of technical capability and financial credibility for the grant of distinct procedures for “specified minerals” (“Specified Minerals”) mining rights; (ii) a new public bidding procedure rather than a and minerals other than Specified Minerals (“Non-Specified “first-to-file” policy with respect to “Specified Minerals” such Minerals”). as oil, natural gas, certain ocean floor minerals and asphalt; and With respect to Non-Specified Minerals, those who wish to (iii) a new approval system for exploration programmes using conduct mining are required to apply to the METI for approval, any seismic or other specified methods, the number of appli- and approval shall be granted on a “first-to-file” basis to applicants cations for granting mining rights has reduced by approxi- who meet the eligibility requirements, including having sufficient mately 20% compared to the period before the Amendment Act financial and technical capability. Applicants who are granted (according to the public material of the METI). This trend is approval for the creation of mining rights are required to: (i) generally believed to be a positive indication that only appro- register the rights at the mining registry for those rights to become priate persons having sufficient technical and financial capa- effective; (ii) file an operational plan with the METI for its author- bility can apply for mining rights. isation prior to commencing mining activities; and (iii) commence mining activities within six months after the registration. 32 Mechanics of Acquisition of Rights On the other hand, Specified Minerals (which are defined as “oil, combustible natural gases and other materials important for the national economy”) are defined in three categories: (i) hydro- 3.1 What rights are required to conduct thermal polymetallic ores on or below the ocean floor (gold, copper, reconnaissance? lead, bismuth, tin, antimony, zinc, iron, iron sulphide, manganese, tungsten, molybdenum, nickel, cobalt, uranium, thorium The Act provides for “mining rights” (“kog yo-ken”), “mining lease and barite); (ii) sedimentary deposit ores on or below the ocean rights” (“soko-ken”) and “exploration” (“tansa”) conducted by floor (copper, lead, zinc, iron, manganese, tungsten, molybdenum, prescribed methods only. Conducting “reconnaissance” will not nickel and cobalt); and (iii) asphalt. Given that these minerals are be subject to the regulations under the Act unless it also consti- deemed to be particularly important for the national economy, tutes “exploration” as described in question 3.2 below. a stable supply is critically required. Thus, the Amendment Act introduced a new application procedure, whereby the METI desig- 3.2 What rights are required to conduct exploration? nates “Specified Areas” where Specified Minerals can be found, applications solicited for mining rights for the Specified Minerals, and such rights granted to the applicant deemed by the METI Initially, the Act did not specifically regulate “exploration” to be the most appropriate (by assessing whether the criteria for itself. However, given the recent (and disorderly) exploration approval have been met). Once applicants are granted mining which has taken place, especially of the ocean floor by foreign rights under the foregoing process, the same process applies as that entities equipped with innovative exploration techniques, the of Non-Specified Minerals for registration, operational plan filing Amendment Act has established a new exploration approval and the commencement of mining activities. system whereby those who desire to undertake “exploration There are no different procedures applicable to different types for minerals without digging” by “continuously using seismic of land under the Act. methods, electronic or magnetic methods or intensive sampling methods within the exclusive economic zone (“EEZ”), a sea area relating to a continental shelf or territorial waters or 3.5 Are different procedures applicable to natural oil inland waters” will be required to apply for approval to do so and gas? in advance. However, even if exploration by certain methods is permitted, the Act does not recognise such status as a specific As detailed in question 3.4 above, oil and combustible natural right as it does for mining rights. gases are Specified Minerals and are therefore subject to a distinct procedure for the grant of mining rights. 3.3 What rights are required to conduct mining? 42 Foreign Ownership and Indigenous To conduct mining, mining rights are required. The Act Ownership Requirements and Restrictions defines mining rights as “prospecting rights” (“shikutsu-ken”) and “digging rights” (“saikutsu-ken”). Prospecting rights are 4.1 What types of entity can own reconnaissance, generally regarded to be the rights to dig a mining area as a exploration and mining rights? trial to determine the existence, the quality and the possibility for digging minerals, whereas digging rights are rights to dig a The Act provides that no legal person other than individuals mining area on a commercial basis. of Japanese nationality or corporations incorporated under On the other hand, to conduct mining in a mining area where Japanese law may hold mining rights. others hold mining rights, mining lease rights are required. Both mining rights (prospecting rights and digging rights) 4.2 Can the entity owning the rights be a foreign entity and mining lease rights are deemed “property rights” under the or owned (directly or indirectly) by a foreign entity and Act and are subject to the approval of the METI as stated below. are there special rules for foreign applicants?

Other than the regulation stated in question 4.1 above, there are no further provisions concerning the nationality of a shareholder.

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Thus, a foreign entity is generally able to set up a wholly-owned As stated in question 3.2 above, certain types of exploration are subsidiary or a jointly-owned subsidiary with other entities under subject to the approval of the METI. However, the Act does not Japanese law to hold the requisite mining rights, and in practice we recognise approved exploration to be akin to a grant of property have seen a number of foreign mining companies do so success- rights, and therefore there is no system of transfer or registration fully. Provided, however, that where the owned entity engages in of that approved exploration status. mining businesses on “uranium or other nuclear material, oil or natural gas”, acquisition of shares in such entity is, in principle, 6.2 Are the rights to conduct reconnaissance, subject to prior notification to the Minister of Finance and the exploration and mining capable of being mortgaged or METI via the Bank of Japan pursuant to the Foreign Exchange otherwise secured to raise finance? and Foreign Trade Act unless certain exemptions apply. It is possible that digging rights (“saikutsu-ken”) of Specified or 4.3 Are there any change of control restrictions Non-Specified Resources can be mortgaged to secure financial applicable? obligations, whereas prospecting rights (“shikutsu-ken”) cannot be mortgaged in this manner. Creation of a mortgage will not No. As stated in question 4.2 above, there are no restrictions on become effective until such mortgage is registered. ultimate shareholders so long as the holder of the mining right is a corporation incorporated under Japanese law unless the rele- 72 Dealing in Rights by Means of vant entity engages in mining businesses in the uranium, oil or Transferring Subdivisions, Ceding Undivided natural gas industry. Shares and Mining of Mixed Minerals

4.4 Are there requirements for ownership by 7.1 Are rights to conduct reconnaissance, exploration indigenous persons or entities? and mining capable of being subdivided?

No, this is not applicable. The Act prohibits two or more mining rights from being created in the same mining area. However, holders of digging rights 4.5 Does the State have free carry rights or options to (“saikutsu-ken”) for Non-Specified Minerals may apply for acquire shareholdings? approval to divide up a certain mining area.

No, this is not applicable. 7.2 Are rights to conduct reconnaissance, exploration and mining capable of being held in undivided shares? 52 Processing, Refining, Beneficiation and Export Yes, this is possible in respect of mining rights. If two or more persons jointly apply for a grant of mining rights, each person 5.1 Are there special regulatory provisions relating to will be granted an undivided portion of one mining right. In processing, refining and further beneficiation of mined addition, if one holder of a mining right transfers a portion minerals? thereof to a third party, such third party may acquire the undivided portion of the mining right if the transfer is approved by the METI. No, this is not applicable.

7.3 Is the holder of rights to explore for or mine a primary 5.2 Are there restrictions on the export of minerals and mineral entitled to explore or mine for secondary minerals? levies payable in respect thereof?

Those who wish to mine two or more kinds of mineral in the For the purpose of national security, the Foreign Exchange and same mining area are required to apply for mining rights in Foreign Trade Control Act (Act No. 228 of 1949) and the Export respect of each mineral under the Act. Holders of mining rights Trade Control Order (Cabinet No. 378 of 1949) have required are only entitled to mine for secondary minerals if they have also potential exporters to seek and receive the approval (“kyoka”) or been granted mining rights for those minerals. the authorisation (“shonin”) of the METI for the export of stipulated goods, materials and products, including minerals listed in the separate tables of that Order. Accordingly, those who intend to 7.4 Is the holder of a right to conduct reconnaissance, export minerals should confirm whether those minerals are listed. exploration and mining entitled to exercise rights also over residue deposits on the land concerned? 62 Transfer and Encumbrance Yes. The holder of mining rights is entitled to exercise them 6.1 Are there restrictions on the transfer of rights to over residue deposits on the relevant land so long as such residue conduct reconnaissance, exploration and mining? deposits are of the same mineral for which the METI approval is granted. Mining rights may not be transferred without the approval of the METI. The same approval requirements as for the grant of mining 7.5 Are there any special rules relating to offshore rights, including the financial and technical capability of the trans- exploration and mining? feree, will apply to transferees. Further, a transfer of mining rights will not become effective until registration of transfer is completed. As stated in question 3.2 above, the Amendment Act provides

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for a new approval system for mineral exploration without 92 Environmental mining by specific methods within the EEZ, a sea area relating to a continental shelf or territorial waters. Further, as stated in question 1.1 above, with respect to 9.1 What environmental authorisations are required mining and exploration on or below the ocean floor in the high in order to conduct reconnaissance, exploration and mining operations? seas not subject to the sovereignty of any country, the DSM Act applies and requires persons who wish to conduct deep seabed mining or exploration to obtain the approval of the METI. The Mine Safety Act (the “MS Act”) is the main statute to prevent both harm to mine employees and mining pollution. In order to 82 Rights to Use Surface of Land enforce the MS Act, “Mine/Explosives Supervisors” (“Kozan- Kayaku-rui-Kanrikan-zuke”) are placed in the Headquarters of the METI and nine Industrial Security Supervisory Departments 8.1 Does the holder of a right to conduct (“Sangyo-Hoan-Kantoku-bu”) (the “ISSD”) have been created as reconnaissance, exploration or mining automatically own the right to use the surface of land? local divisions to administer the MS Act. In addition, the MS Act has placed mining supervisors (“komu- kansakan”) in the METI and in each local ISSD, who have the No. Since mining rights are categorised separately from rights authority to require holders of mining rights or other related to use the surface of the land, the holder of the rights will need parties to provide information required for the supervision of to separately obtain the rights to use the surface of the relevant security, to access mines or any ancillary facilities and to act as mining area, such as ownership rights (“syoyu-ken”), superficies judicial police (“shiho-keisatsu-in”) for purposes of criminal proce- right (“chijo-ken”) or leasehold rights (“chinshayu-ken”). dures under the Act. Further, Mine Safety Councils are located in the Headquarters 8.2 What obligations does the holder of a of the METI and local ISSDs to investigate and consider impor- reconnaissance right, exploration right or mining right tant matters regarding mining safety. A “Mine Safety System have vis-à-vis the landowner or lawful occupier? Review Subcommittee” has been set up separately from “Mine Safety Councils”. The Mine Safety System Review Subcommittee As stated in question 8.1 above, since holders of mining rights was established to investigate and consider technical policies for need to obtain rights to use the surface of the mining area, they mine safety. need to acquire the ownership rights from or be granted a super- General environmental statutes such as the Industrial Safety ficies right or leasehold right by the relevant landowner. and Health Act, the Air Pollution Act, the Water Pollution The Act provides for the following obligations of the mining Prevention Act, the Soil Contamination Countermeasures Act, right holders: etc. are enforced by supervisory authorities such as the Labour (i) When an application for the grant of mining rights is made, if Minister, the Prefectural Labour Directors, the Environment the exercise of mining rights causes any inconvenience to the Minister and the Prefectural Governors. use of the relevant land, the METI will be required to notify the landowner of such application for approval, and to give 9.2 What provisions need to be made for storage of the owner an opportunity (within a reasonable time frame) tailings and other waste products and for the closure of to submit a written opinion. If so ordered by the METI, the mines? applicant is required to submit a document setting out the name and address of the landowner. No specific procedures are required to be taken under the Act. (ii) Applicants for mining rights or holders of mining rights or mining lease rights may access land owned by others upon obtaining the approval of the METI. The METI will be 9.3 What are the closure obligations of the holder of a required to notify the landowner of such application for reconnaissance right, exploration right or mining right? access, and to give the owner an opportunity (within a reasonable time frame) to submit a written opinion. If appli- The holder of the mining right is required to register the extinc- cants obtain such approval and wish to access the land, they tion of such mining right due to relinquishment. Upon the regis- are required to notify the landowner or the lawful occupier tration, the extinction of the mining right becomes effective. in advance. (iii) Holders of mining rights may compulsorily use or acquire 9.4 Are there any zoning or planning requirements the land owned by others for certain specific purposes, such applicable to the exercise of a reconnaissance, as to open a pithead or well, install machinery for mining, exploration or mining right? open a railroad or a track, etc., if approval of the METI is received. The METI will be required to notify the landowner The Act provides the following requirements for the mining area: or the lawful occupier of such application for approval, and ■ Boundaries of mining areas shall be established by straight to provide such owner or occupier with the opportunity to lines, and outer limits shall be directly below the bounda- attend and present its opinion in a public process. ries on the surface of the Earth. ■ The total surface area of a coal, oil, asphalt or combustible 8.3 What rights of expropriation exist? natural gas mining area shall not be less than 15 hectares; that of a limestone, dolomite, silica, feldspar, agalmato- Expropriation under the Act is limited to expropriation “without lite, talc or fireclay mining area shall not be less than one digging” using seismic methods, electronic or magnetic methods hectare; and mining areas for other minerals shall not be or intensive sampling methods. Thus, permitted expropriation less than three hectares. However, this shall not apply to does not automatically include rights to use the land. placer mining.

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■ The total surface area of a mining area shall not exceed ■ to take necessary measures to protect mineral resources from 350 hectares. However, this shall not apply where the total sinking, collapse, flooding, protrusion of gas, explosion of surface area must unavoidably be larger to allow for the gas or coal dust, spontaneous ignition, and mine fires; reasonable development of minerals. ■ to take necessary measures for the maintenance of ■ In areas where the Environmental Dispute Coordination machines, appliances, buildings, structures and other facil- Commission finds it is not appropriate to mine minerals ities in accordance with the classification of workplaces in due to the public interest in general, or agriculture, forestry and outside the mine; and other industries, and the creation of a mining right of ■ to take necessary measures for the prevention of mine pollu- specified minerals is prohibited (hereinafter referred to as tion with regard to the treatment of gas, dust, rock dump, a “mining prohibition area”), no mining area can be estab- slag, mine water, wastewater, and mineral smoke and excava- lished for the specified minerals. tion of land; ■ In the case of a prohibition pursuant to the preceding ■ to provide mining workers with safety education necessary paragraph, if the Environmental Dispute Coordination for their work; Commission finds that the mining of the minerals spec- ■o not t use or install machinery, equipment, explosives or ified by the preceding paragraph in a mining prohibition other materials that are highly dangerous; area has become substantially adverse to public welfare, ■ to ensure that the safety of mining rights holders, buildings, the commission may recommend that the Minister of the structures and other facilities used in mining are maintained; METI dispose of the mining right by which such mining ■ to notify the Director-General of the ISSD of the construc- takes place in the mining prohibition area, pursuant to the tion plan when they intend to carry out construction work provision of Article 53 of the Act. for the installation or alteration of buildings, structures or ■ More than two mining rights shall not be created in the other facilities used in mining; same mining area; provided, however, that this shall not ■ to take certain prescribed measures with respect to the waste apply where the subject minerals are minerals that occur in stone or slag accumulated and mine tunnels, etc. even after different types of ore deposit or as specified in Article 46. they have transferred or renounced them; ■ to investigate the current status of the mine and record and 102 Native Title and Land Rights preserve the results when commencing mining or other activities; ■ to establish safety regulations with regard to the meas- 10.1 Does the holding of native title or other statutory ures necessary for safety to be taken in accordance with the surface use rights have an impact upon reconnaissance, current state of the mine and notify the METI; exploration or mining operations? ■ to appoint a safety supervisor and a work supervisor and notify the ISSD thereof; Generally, no native title or other statutory surface use rights ■ to establish a safety committee for mines in order to inves- have any impact on exploration or mining operations. However, tigate and deliberate important safety matters, to cooperate the Act empowers the METI to reject an application on the with the safety supervisor and the safety manager in the following grounds: “When the mining of minerals in mining execution of safety duties, and to have them make recom- application areas is found to … disrupt the protection of cultural mendations; and properties, parks or hot spring resources, or impair the interests ■o not t dismiss or otherwise disadvantageously treat mining of agriculture, forestry and other industries, and be extremely employees on the grounds that they exercise their statutory adverse to public welfare.” right to take necessary measures, including the suspension of the work, to avoid a hazard based on his/her judgment. 112 Health and Safety The MS Act imposes upon mine employees the obligation to observe the matters necessary for (i) the prevention of harm to 11.1 What legislation governs health and safety in persons in mines, and (ii) the maintenance of facilities, in accord- mining? ance with the measures taken by the holders of the mining right.

The MS Act governs health and safety for employees in mining. 11.3 Are there any unique requirements affecting the mining industry in light of the coronavirus (COVID-19) pandemic? 11.2 Are there obligations imposed upon owners, employers, managers and employees in relation to health and safety? A State of Emergency was declared in April 2020 and lifted the following month. The Government has promulgated and implemented various special measures to prevent infectious diseases The MS Act imposes the following obligations upon holders of from spreading, and to mitigate economic damage to almost all mining rights and mining lease rights: types of industry. However, there have been no specific require- ■ to take necessary measures to prevent harm to persons in ments affecting the mining industry in relation to the COVID-19 mines with regard to: (i) cave-ins, collapse, flood, protru- pandemic so far. sion of gas, explosion of gas or coal dust, spontaneous ignition, and underground fire; (ii) treatment of gas, dust, rock dump, slag, mine water, wastewater, and mineral smoke; 122 Administrative Aspects and (iii) use of machinery, appliances (excluding sanitary protective equipment; the same shall apply hereinafter) 12.1 Is there a central titles registration office? and structures, and handling of explosives and other materials, power and fire; Yes. Each prefecture maintains a mining registry where each of ■ to take necessary measures for ensuring aeration related to the (i) digging rights register, (ii) prospecting rights register, and hygiene and rescue in the event of a disaster; (iii) mining area maps are disclosed to the public.

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12.2 Is there a system of appeals against administrative 152 Regional and Local Rules and Laws decisions in terms of the relevant mining legislation?

15.1 Are there any local provincial or municipal laws that Yes. The Act provides for administrative procedures to appeal need to be taken account of by a mining company over any disposition by the Director of a Regional Bureau of the METI. and above National Legislation? Any judicial action for rescission of a disposition pursuant to the Act may not be filed before the determination of such an admin- Generally, there are no local provincial or municipal laws that istrative appeal. specifically need to be taken into account. However, there may be local ordinances (“jorei”) to be considered when conducting 132 Constitutional Law mining depending on the municipality.

13.1 Is there a constitution which has an impact upon 15.2 Are there any regional rules, protocols, policies or rights to conduct reconnaissance, exploration and laws relating to several countries in the particular region mining? that need to be taken account of by an exploration or mining company? No, there is no specific provision of the Constitution which has any impact on rights to conduct exploration or mining. No, there are no regional rules, protocols, policies or laws relating to Japan and its neighbouring countries that need to be 13.2 Are there any State investment treaties which are taken into account. applicable? 162 Cancellation, Abandonment and There are no State investment treaties other than the treaties Relinquishment between Japan and South Korea regarding the joint development of the continental shelf between those countries. 16.1 Are there any provisions in mining laws entitling the holder of a right to abandon it either totally or partially? 142 Taxes and Royalties Yes. The Act assumes that a holder of mining rights may abandon 14.1 Are there any special rules applicable to taxation of or waive them, and has certain provisions, such as procedures exploration and mining entities? for the protection of a mortgagee and of holders of mining lease rights, once the holder does so. The following taxes are payable on mining activities: (i) Application Fees and Registration Tax 16.2 Are there obligations upon the holder of an Prescribed application fees are levied upon the application exploration right or a mining right to relinquish a part for the creation, transfer or amendment of mining rights. thereof after a certain period of time? Also, a separate registration tax is levied upon the application for registration of the creation, transfer or amendment The Act provides that a holder of a mining lease right with fees of mining rights. attached may not relinquish such right unless he/she gives six (ii) Mining Area Tax (“ ”) Koku-zei months’ notice or pays six months’ lease fees unless the purpose The following local tax is levied: of such mining lease right cannot be pursued due to a natural ■ Mining area for prospecting rights: 200 yen per annum disaster or any other unavoidable reason. per 10,000 m2. ■ Mining area for digging rights: 400 yen per annum per 10,000 m2. 16.3 Are there any entitlements in the law for the State ■ Sand mining area (both for prospecting and digging to cancel an exploration or mining right on the basis of rights): 200 yen per annum per 10,000 m2. failure to comply with conditions? ■ Mining area for oil and combustible natural gas: two-thirds of the above fees. Yes. The Minister of the METI is required to decrease the rele- (iii) Mining Tax (“Kosan-zei”): to be levied by each municipality vant portion of the mining area or rescind the mining rights if upon holders of mining rights either of the following events occurs: ■ A mine earning more than 2 million yen per month: 1% ■ the mining of minerals is found to be harmful to health, (standard rate) of the sale price of minerals extracted destroy facilities for public use (or any equivalent facility), (1.2% maximum rate). hinder the protection of cultural properties, parks or hot ■ A mine earning 2 million yen or less per month: 0.7% spring resources, or impair the interests of agriculture, (standard rate) of the sale price of minerals extracted forestry and other industries, and be extremely adverse to (0.9% maximum rate). the public welfare; or ■ the mining of certain minerals significantly interferes with the mining of others and there is no other way to eliminate 14.2 Are there royalties payable to the State over and above any taxes? such interference. Further, the Minister of the METI is entitled to rescind the mining rights if any of the following events occur: There are no royalties other than the taxes noted in question ■ a holder of a mining right or a director of the corporation 14.1 above. having a mining right commits certain crimes under the

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Act or the MS Act and two years have not passed since the ■ a holder of a mining right does not commence activities enforcement of any criminal sanction was completed; within six months after the registration; ■ a holder of a mining right does not comply with certain ■ a holder of a mining right conducts mining activities not in orders of the METI for the increase/decrease of a mining accordance with his/her filed operational plan; or area or for the application of digging rights; ■ a holder of a mining right does not comply with an order ■a person who has acquired a mining right due to inheritance, of the METI to suspend its mining pursuant to the Act or etc. does not file with the METI within three months a certain order of the ISSD under the MS Act. thereafter; ■ a person who has acquired a mining right due to inheritance, etc. but is notified by the METI that he/she fails to fulfil eligibility requirements does not transfer such mining right;

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Hiroaki Takahashi is a partner at Anderson Mōri & Tomotsune. Hiroaki practises corporate/commercial/finance and mining law, advising on a broad range of mining-related transactions both domestically and internationally, including mergers and acquisitions, debt and equity financings, mineral title review and providing legal support to clients throughout all phases of the mining cycle. He has deep expertise in a broad range of industrial sectors including Energy, Projects, Natural Resources and Mining.

Anderson Mōri & Tomotsune Tel: +81 3 6775 1032 Otemachi Park Building Email: [email protected] 1-1-1 Otemachi, Chiyoda-ku URL: www.amt-law.com Tokyo 100-8136 Japan

Anderson Mōri & Tomotsune is a full-service law firm and one of the largest Our main office in Tokyo is supported by our offices in Osaka, Nagoya, international firms in Japan, best known for serving overseas companies Beijing, Shanghai, Singapore, Ho Chi Minh City and Bangkok, as well as a doing business in Japan since the early 1950s. Jakarta desk. Our firm provides an extraordinarily powerful value proposition. Housing a www.amt-law.com wide range of synergistic practices under one roof, our combined expertise enables us to deliver comprehensive advice on virtually all legal issues that may arise from a corporate transaction, including those related to: mining law; developments of various mines; mining company mergers and acquisitions, joint ventures and reorganisations; finance for mining companies; capital markets and restructuring/insolvency in the extractive industries; and litigation/arbitration. The majority of our lawyers are bilingual and experienced in communicating, drafting and negotiating across borders and around the globe.

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Mexico Mexico

RB Abogados Enrique R. del Bosque

12 Relevant Authorities and Legislation of Labour and Social Welfare); the States’ Public Registries of Real Estate; and the National Agrarian Registry.

1.1 What regulates mining law? 1.3 Describe any other sources of law affecting the mining industry. The Mexican Mining Law, its Regulation (collectively, the Mining Law) and Article 27 of the Mexican Constitution regulate mining issues; in particular, the exploration, exploitation All the applicable laws and other norms and regulations are and beneficiation of minerals or substances which in veins, mentioned in question 1.1 above. These laws affect the industry, strata, masses or beds constitute deposits of which the nature as they regulate the activities that mining companies conduct is different from the components of land. The Mining Law in order to stake, maintain, explore and exploit mining conces- and Mexican Constitution also provide for the mining of: salt sions, and to process and commercialise minerals and the use directly formed by marine waters from actual seas – surface or and enjoyment of the land where the mining concessions are underground, naturally or artificially – and salts and by-prod- located; they also regulate environmental aspects in connection ucts thereof. The exceptions are as follows: petroleum and other with the exploration and exploitation of mining concessions. solid hydrocarbons, liquid or gaseous, which are also found Other sources of law affecting the mining industry are: interna- underground; radioactive minerals; substances contained in tional treaties; administrative regulations on Federal Laws; and suspension or dissolution by groundwater, provided they do not court resolutions. come from a mineral deposit different from the components of the land; rocks or decomposed products that can only be used 22 Recent Political Developments for the manufacturing of construction materials or are intended for this purpose; and products derived from the decomposition 2.1 Are there any recent political developments of rocks when their exploitation is through opencast work and affecting the mining industry? salt formed in endorheic basins. The application of the Mining Law is the responsibility of the The new President has not shown a significant interest in the Federal Executive (President’s Office) through the Ministry of mining industry. The President is concerned about the damage Economy. The following laws govern all activities that are ancil- that mining activity could cause to the environment and to the lary to mining activities: the Mexican Constitution; the Federal indigenous and/or agrarian communities living where such Environmental Law; the Federal Waters Law; the Federal Agrarian activity is conducted. We therefore believe that an environ- Law (the “Agrarian Law”) (social tenure of most of the land where mental survey into mining activity will be forthcoming, as well mining projects are located); the Federal Tax Code; State Civil as consultation with indigenous communities. Please refer to Codes applicable to land tenure; the Federal Commercial Code; question 4.4. Federal Army Regulations for the storage, transport and use of explosives; Federal Labour Laws; Municipal regulations for the use of land; and Federal Environmental Norms. 2.2 Are there any specific steps the mining industry is taking in light of these developments?

1.2 Which Government body/ies administer the mining Participants in the mining industry are acting through the industry? Mexican Chamber of Mines and other organisations to build a stronger relationship with the Government and Congress, the The Dirección General de Minas (Mexican Mines Bureau – “MMB”), aim being to secure better conditions for the industry and support formed under the Ministry of Economy, administers the mining from the Government, in areas such as: (i) reducing the insecurity industry in Mexico. Notwithstanding the foregoing, there are that some parts of the country have experienced, and that have other Government bodies that can also administer regulatory affected mining activity; (ii) proposing an immediate review of regimes relating to mining activities: Secretaría del Medio Ambiente investment in mining; (iii) achieving clear and stable rules relating y Recursos Naturales (Environment Ministry); Comisión Nacional to consultation with indigenous communities; and (iv) prompting del Agua (Waters Commission); Secretaría de la Defensa Nacional the tax authorities to refund value-added tax; among others. (Army Ministry); Secretaría del Trabajo y Previsión Social (Ministry

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32 Mechanics of Acquisition of Rights 3.5 Are different procedures applicable to natural oil and gas?

3.1 What rights are required to conduct reconnaissance? Gas derived from the exploitation of mineral coal, oil and solid or liquid or gaseous hydrocarbons is reserved for the exclusive exploitation of the Mexican Federal Government. Understanding reconnaissance as the preceding stage to conducting minimum exploration activities prior to the issuance of a mining concession, informal permission from the 42 Foreign Ownership and Indigenous landowner where the mining concession is located, or where the Ownership Requirements and Restrictions area is proposed to be located, is required in order to conduct such activities. In the case that the areas of reconnaissance are 4.1 What types of entity can own reconnaissance, already covered by an existing mining concession, the permis- exploration and mining rights? sion of the existing mining concessionaire is also needed. Only Mexican companies registered before the RPM can own 3.2 What rights are required to conduct exploration? rights to explore and exploit mining concessions. In the capital of the aforementioned companies, foreign investment can participate up to 100%. These companies must be incorporated under In order to conduct exploration activities, a mining concession Mexican law, have their corporate domicile within the country, is required to cover the proposed exploration area; or a written and their corporate purpose shall include the exploration or agreement to explore the area, executed with the recorded owner exploitation of minerals and substances subject to the Mining of the mining concession before the Public Registry of Mining Law. These companies must be recorded before the PRM. (“PRM”) (formalised before a Mexican public notary and regis- Also, social entities which are not commercial companies and tered at the PRM), is needed. In addition, permission or an which do not allow foreign investment participation can own agreement executed with the owner or possessor of the land mining rights, such as Communities and (groups of indi- where the mining concession is located, and an Environmental Ejidos viduals or communities to whom social land is granted). Impact Manifest authorised by the Environmental Authority, are needed. A mining concession allows its holder to conduct exploration, 4.2 Can the entity owning the rights be a foreign entity exploitation, mining and development activities. or owned (directly or indirectly) by a foreign entity and are there special rules for foreign applicants?

3.3 What rights are required to conduct mining? Foreign entities cannot directly own mining concessions – this must be done through their Mexican subsidiaries. As mentioned In order to conduct exploitation activities, a mining concession above, the mining industry places no limits on participation by is required to cover the proposed exploitation area; or a written foreigners in the ownership of Mexican mining companies; agreement to exploit the area, executed with the recorded owner Mexican mining companies may be 100% owned by foreign of the mining concession before the PRM (formalised before a investors, which can be either individuals or entities. Mexican Mexican public notary and registered at the PRM), is needed. In mining companies that are 100% (or less) owned by foreigners are addition, permission or an agreement executed with the owner considered Mexican entities and have the same rights as a Mexican or possessor of the land where the mining concession is located, doing business. an Environmental Impact Manifest authorised by the rele- Notwithstanding the foregoing, a transfer to an unqualified vant Environmental Authority, and permission from the Army person (foreign entity) can be done, when it occurs pursuant to a Ministry to store, transport and use explosives, are needed. court resolution ordering the debtor (concessionaire) to pay a debt If the mining concessions are located in a forest reserve, a or if it derives from inheritance, and provided further that the change of use of the land is required. rights are then transferred to a capable party (a Mexican individual A water concession is needed for activities beyond the extrac- or a Mexican company) within 365 calendar days of the date the tion of minerals, such as for a processing plant, and a permit court resolution was issued. for the discharge of water is also required in cases where such Mexican companies with foreign investment shall be registered processing activities are conducted in the mine. in the Foreign Investment Registry, notify the Mexican Foreign Investment Authority of changes in the company capital, and shall 3.4 Are different procedures applicable to different provide periodic reports (this is mainly for statistical purposes); minerals and on different types of land? this has no impact on an application for a mining concession.

Different procedures are applicable to radioactive minerals, 4.3 Are there any change of control restrictions which are reserved for exploration and exploitation by the applicable? Mexican Federal Government. Please also refer to question 3.5 below. Radioactive minerals are reserved for exploration and No such restrictions apply. exploitation by the Federal State. Regarding the types of land, in Mexico there is: private land; Government-owned land (Federal, State and Municipal); and 4.4 Are there requirements for ownership by social land (Ejido and Communal). Please refer to question 8.1 indigenous persons or entities? below. In the acquisition of mining concessions, if there are simultaneous applications for the acquisition of a mining concession, indigenous

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communities living where the relevant mining concession is procedure for preparation, design, construction, operation and located have preferred rights to acquire the mining concession. post-operation of mine tailings dams. The Mexican Government has subscribed to, among other trea- For the exploration and exploitation of tailings, no mining ties, the Indigenous and Tribal Peoples Convention (Convention concession is required. No. 169 – ILO). In accordance with this Convention and other There are no specific rules under the Mining Law for the treaties, Mexico recognises the human rights of indigenous people ownership of tailings. If tailings result from the ore benefici- grouped in communities. Some of these treaties state that the ated by the mining concession holder, they belong to the mining issuance of mining concessions is subject to a “Consultation with concession holder. In the case of tailings derived from the bene- Indigenous Peoples and Communities”. However, there are no ficiation of ore in a third party’s beneficiation plant, it usually local laws or local rules (“legislation”) that include mechanisms belongs to the owner of the beneficiation plant. to implement the consultation, therefore the MMB has not imple- In Mexico, there are ancient mining works that produced tail- mented the consultation while granting mining concessions. ings. Those tailings have no relationship with today’s mining Notwithstanding the foregoing, recently, a constitutional concessions; for these, in accordance with civil law (Código Civil rights protection claim (Amparo) was filed by an Ejido composed Federal ), they belong to the owner of the land where such tail- of members of an indigenous community located in the State ings are located. of Puebla, against the MMB, the Ministry of Economy and the Furthermore, dumps (terreros), in accordance with the Mexican President. In its claim, the Ejido demanded the cancellation Mining Law, belong to the mining concession holder, unless it of mining concessions granted to a mining company for not is evident that a particular terrero comes from another mining having conducted a prior consultation, using as grounds for the concession. demanded cancellation that the aforementioned treaties were There are no restrictions on the beneficiation of minerals in a signed by Mexico and then ratified by the Senate, converting different location from where the minerals were extracted. them into enforceable, applicable laws, as provided in the Mexican There are no provisions which prohibit the export of unben- Constitution. The Ejido therefore demanded that the Mexican eficiated minerals. Local beneficiators do not have pre-emptive Congress amend the Mining Law to include consultation with rights to beneficiate minerals. indigenous communities as a requirement for the grant of mining concessions. A District Court on Civil, Administrative and 5.2 Are there restrictions on the export of minerals and Labour Amparo Proceedings and Federal Lawsuits in the State of levies payable in respect thereof? Puebla, Mexico resolved that: the Mexican Federal Congress shall amend the Mining Law to incorporate provisions on the right to consultation and to obtain the free and informed consent of indig- In general terms, there are no restrictions. All import and enous people and Communities. export processes require a permit. However, in order to export Additionally, the MMB, the Economy Ministry and the iron, gold, silver and copper minerals, the producing-exporting President were ordered to cancel two mining concession titles that company or individual must be registered in a Mining Sectorial they had granted in 2003 and 2009, respectively, whose surface Registry for the exportation of such minerals. areas were partially located on land owned by Ejidos who have For the exportation of iron, exporters are required to be the self-determined as an indigenous community. A recurso de revisión owners or the operators of the mining concession from where proceeding was brought against the abovementioned indigenous the minerals are extracted. In the event that the exporters community’s Amparo by the mining company affected, in order to are the operators of a mining concession, they must have an revert the Amparo resolution. exploitation agreement duly recorded before the PRM. In addition to the Indigenous and Tribal People’s Convention, the Mexican Government has subscribed to further international 62 Transfer and Encumbrance standards on the rights of indigenous communities, including: ■ Fund for the Development of the Indigenous Peoples of 6.1 Are there restrictions on the transfer of rights to Latin America and the Caribbean. conduct reconnaissance, exploration and mining? ■ Performance Standards on Environmental and Social Sustainability of the International Financing Corporation. There are no restrictions whatsoever on the transfer of mining ■ Equator Principles. concessions and rights thereto. Agreements assigning, or gener- ating rights over, mining concessions must be notarised. The 4.5 Does the State have free carry rights or options to transfer of mining concessions or rights thereunder shall produce acquire shareholdings? legal effects against third parties, the Ministry of Economy and other governmental authorities upon their registration before the No, it does not. PRM. Owners of mining concessions shall only be recognised as such once they are recorded as concessionaires before the PRM. A transfer or assignment will be null and void when made to an 52 Processing, Refining, Beneficiation and unqualified person under the Mining Law. Export Notwithstanding the foregoing, a transfer to an unqualified person (foreign entity) can be done, when it occurs pursuant to 5.1 Are there special regulatory provisions relating to a court resolution ordering the debtor (concessionaire) to pay a processing, refining and further beneficiation of mined debt or if it derives from inheritance, and provided further that minerals? the rights are then transferred to a capable party (a Mexican individual or a Mexican company) within 365 calendar days of the There are environmental laws, rules and Technical Norms date the court resolution was issued. (Normas Oficiales Mexicanas – “NOMs”) to comply with in order Government consent is not required in order to transfer a to build and operate plants for the processing and beneficia- mining concession, or in the event of a change of control in tion of mined minerals. NOM-141-SEMARNAT-2003 sets the terms of its holder or parent.

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6.2 Are the rights to conduct reconnaissance, Mexican laws, whereas activities in the continental shelf shall be exploration and mining capable of being mortgaged or conducted in accordance with international treaties. otherwise secured to raise finance? 82 Rights to Use Surface of Land Mining concessions and rights can be pledged and even mortgaged as a guarantee to raise finance. All guarantees over rights of 8.1 Does the holder of a right to conduct mining concessions must be registered at the PRM in order to have reconnaissance, exploration or mining automatically full effect before third parties. Creditors often require the regis- own the right to use the surface of land? tration of guarantees over mining concessions with the Movable Guarantees Registry (Registro Único de Garantías Mobiliarias). The mining rights covered under a mining concession do not include direct ownership or possession rights over the surface 72 Dealing in Rights by Means of where a mining concession is located. Transferring Subdivisions, Ceding Undivided The use of the land may be obtained through direct ownership Shares and Mining of Mixed Minerals or possession of land (e.g. lease agreements, temporary occupation agreements, easement agreements, or expropriation through an administrative proceeding). 7.1 Are rights to conduct reconnaissance, exploration The Mexican Constitution recognises the following surface and mining capable of being subdivided? rights: A. Bienes Comunales (social land granted to indigenous Yes. Co-ownership of a mining concession (where co-owner- communities). ship grants different percentages to the co-holders) may exist. B. Ejidos. A percentage of a mining concession may be transferred to a C. National Land. third party through an assignment agreement. Co-holders shall D. Zonas Federales (federal areas, beaches and riverbeds). have the right of first refusal to acquire the transferable interest. E. Private Property. A mining concession also may be subdivided through The Agrarian Law governs the property rights mentioned an administrative proceeding conducted before the MMB. in sections A to C above. Said land can be legally occupied or Deriving from this subdivision, it may result in one or more acquired by private parties as provided in the Agrarian Law. mining concessions. A mining concession holder may acquire all property rights mentioned above. Typically, the consideration payable for the land 7.2 Are rights to conduct reconnaissance, exploration is agreed between the parties. The Mining Law provides the rules and mining capable of being held in undivided shares? under which a mining concession holder may require the expropriation or the temporary occupation of the land when it does not reach an agreement with the landowner. In case of expropriation If a mining concession is held by two or more parties through a by the Mexican Government, the consideration is payable based joint venture, the rules of the joint venture shall apply. If no joint on an appraisal made by an agency of the Mexican Government. venture rules exist, the right is undivided. A mining concession may be co-owned by: Mexican Commercial Companies; Mexican individuals; and social entities. 8.2 What obligations does the holder of a reconnaissance right, exploration right or mining right have vis-à-vis the landowner or lawful occupier? 7.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary minerals? In accordance with the Mining Law, the mining activities should be preferred over any other use or exploitation of the land where the mining concessions are located (except in the case of explo- A mining concession holder may explore and exploit all minerals ration and exploitation of oil and other hydrocarbons and the and/or substances specified in Article 4 of the Mining Law, performance of power generation activities; such activities shall except for those reserved to be exploited by the Mexican Federal be preferred over the mining activities. In the case that a mining Government as mentioned in questions 3.4 and 3.5 above. concession and an assignation for the exploitation of oil and a mining concession coexist, the mining concession holder must 7.4 Is the holder of a right to conduct reconnaissance, comply with certain technical specifications). Therefore, the exploration and mining entitled to exercise rights also Mining Law provides the rules under which a mining concession over residue deposits on the land concerned? holder may require the expropriation or the temporary occupation of the land when it does not reach an agreement with the land Please refer to the answer to question 5.1 above. owner. In case of expropriation, the consideration is payable based on an appraisal made by an agency of the Mexican Government. The company has the right to explore and exploit the minerals 7.5 Are there any special rules relating to offshore underground because of the mining concession rights granted by exploration and mining? the Federal Government (underground rights); surface rights are honoured to third parties as explained in question 8.1. Under Yes, there are special rules. It is necessary to comply with all rules the Mining Law, there is no obligation for the holder of a mining governing sea shores, lake shores, water deposits and rivers. right to share any rights over the exploration or exploitation with Regarding mining activities in the exclusive economic zones the landowners or lawful occupier, but somehow a legal consent and the continental shelf, Mexico is party to several international should exist between the two of them to be able to prove legally treaties which determine, together with the Mexican Constitution, to the Environmental Authorities that the concessionaire or the the limits of exclusive economic zones. Mining activities in the operator of a mining concession has the legal occupancy of the exclusive economic zones shall be governed in accordance with surface rights and the legal use of the land. It is also important to

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have a social licence in order to develop the project in harmony 9.2 What provisions need to be made for storage of with the community. tailings and other waste products and for the closure of It should also be noted that the Ministry of Economy may mines? revoke the temporary occupation agreement or revert the surface expropriated in the following cases: Regarding the restrictions on storage of tailings or waste dams, (i) if the mining works to develop are not started within the NOM-141-SEMARNAT-2003 establishes the procedure for char- 365 days following the issuance of the relevant resolution; acterising the tailings, as well as the specifications and criteria for (ii) if the mining works are suspended for a year or more; the characterisation and preparation of the site, project, construc- (iii) if the surface granted is destined to a use other than mining tion, operation and post-operation of tailings dams. activities; These facilities are inspected by the authorities quite often; (iv) if the concession holders or the operator of the mining there are no specific time periods for such inspections. concession do not pay the consideration determined In addition, there is an obligation: to get a permit from the PPA in the relevant resolution of temporary occupation or authority; in certain cases, to submit a Risk Assessment; to register expropriation; the Hazardous Waste Management Plan; to have environmental (v) if the mining concession is nullified or cancelled; and insurance; and to provide notice to the authority in case of emer- (vi) by a court resolution. gencies, accidents or loss of hazardous waste. For the closure of mines, there are two different forms of 8.3 What rights of expropriation exist? closure: 1. Closure notification for hazardous waste control. 2. Closing Programme for the operation of the mine. In accordance with the Mining Law, the holder of a mining The first one needs the authorisation of the Contaminated Soil concession, or its operator with an agreement duly recorded Remediation Programme. The second needs the authorisation of before the PRM, may require the expropriation of the surface the Closure and the Closing Programme. where the mining concession is located, under the rules stated in the Mexican Expropriation Law. If the expropriation is of land owned by Ejidos or Agrarian Communities, the process is carried 9.3 What are the closure obligations of the holder of a out before the Agrarian Authorities and under the rules of the reconnaissance right, exploration right or mining right? Agrarian Law. Please also refer to question 8.2 above. There are a number of obligations to comply with for the closure 92 Environmental of a mine. However, the specifications depend on the Closing Programme authorised by the Environmental Authority for the 9.1 What environmental authorisations are required specific mine. Basically, the obligations relate to: safety (stability in order to conduct reconnaissance, exploration and of the land where mining activities were conducted); the closing mining operations? of all the entrances to underground mines; and control of hazardous material and waste. Remediation works are performed in Mexico just in case there Each stage requires an authorisation and is subject to different is soil contamination. Otherwise, a refurbishing process must be requirements. performed. Those responsible for activities that involve gener- The prospective and exploration stage requires a Preventive ation and management of hazardous materials and waste that Report where it is established that the activities undertaken cause contamination of sites, are required to carry out remedi- comply with NOM-120-SEMARNAT-2010, which sets the spec- ation works. ifications for environmental protection for direct mining explo- If hazardous substances considered highly risky activities are ration activities. used during the exploitation phase, it is necessary to have envi- The operation stage requires the submission of an ronmental risk insurance, which will be required in the corre- Environmental Impact Statement (“MIA”) and a request for sponding resolution of the Environmental Impact Assessment, authorisation of Change of Use on Forest Land (“CUSTF”), or as a condition to start operating activities. Three types of insur- qualification for the benefit of the Secretarial Agreement, which ance or guarantee may be required: (i) if hazardous substances establishes the possibility of a unified process through the pres- are used; (ii) if hazardous waste is generated; and (iii) another, entation of the Unified Technical Paper (“DTU”). contained in the resolutions of the environmental impact author- In any case, the MIA or the DTU must contain a risk assess- isation, for the fulfilment of obligations. ment because the operation stage is considered a high-risk activity. Also, it is necessary to prove compliance with NOM-141. In case of the leaching of gold, silver and copper, it is necessary to prove 9.4 Are there any zoning or planning requirements compliance with NOM-155 and NOM-159. applicable to the exercise of a reconnaissance, For the operation stage, it is also necessary to register as a exploration or mining right? hazardous waste generator, and to register a Hazardous Waste Management Plan according to NOM-157 and a Programme for Yes, there are zoning requirements for nature-protected areas, the Prevention of Accidents (“PPA”). For air emissions issues, which are defined under Mexican environmental laws. a Single Environmental Licence (“LAU”) and a Report on Releases and Transfers of Pollutants (“COA”) are required. It is 102 Native Title and Land Rights also necessary to prove compliance with the Emissions Standards (NOM-043 for particulate matters; and NOM-085 for combus- 10.1 Does the holding of native title or other statutory tion and other matters). surface use rights have an impact upon reconnaissance, exploration or mining operations?

Please refer to the answer to question 4.4.

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Native titles to land are described in question 8.1 and for each case of non-compliance or misrepresentation in the information title there are different types of rights over the land use, such as provided, work centres that endanger the health of their workers common land use, parcel land (lots), human settlement or land may be shut down. These measures will remain in force until squatters (possessors). the health contingency is declared concluded by the Federal All the land native titles and surface rights have to be legally Government Authorities. acquired or occupied in order to have access to the land for exploration and/or exploitation for mining purposes when the 122 Administrative Aspects activities are conducted by a different entity than one of those mentioned in points A and B of question 8.1 above. 12.1 Is there a central titles registration office? The possession by Communities and Ejido groups of the surface where a mining concession is located may be transferred to private entities. The consent of those groups is needed to Yes. The central titles registration office is the PRM, which conduct mining activities where those groups own or possess depends on the MMB. the land where mining activities will be conducted. In accordance with the Mining Law, all acts, agreements and contracts related to the transmission of mining concessions and 112 Health and Safety rights thereto shall be registered before the PRM. Promises to execute an agreement, liens, contractual obligations, royalties affecting mining concessions, etc. must also be registered before 11.1 What legislation governs health and safety in this Registry. mining? In addition, certain agreements for use of the land where mining concessions are located (temporary occupation agree- The principal health, safety and labour laws pertaining to the ments, easement agreements, etc.) may be registered before the mining industry are: PRM. The surface covered by such agreements shall be entirely ■ Federal Labour Law. covered by a mining concession in order for these kinds of agree- ■ Federal Social Security Law. ment to be registered before this Registry. ■ Federal Regulations on Safety, Health and Work Any person may consult the PRM and request, at their expense, Environment. certified copies of their entries and documents that relate to ■ NOM-023-STPS-2012 on Underground and Open Pit them, and confirmation of the absence of a registration or subse- Mines – Safety and Health Conditions at Work. quent entries in relation to a particular entry. Furthermore, any ■ NOM-032-STPS-2008 on Security for Underground Coal person may request from the PRM, at their expense, the issu- Mines. ance of official certificates stating the validity, term of exist- ■ The principal regulatory entity is the Ministry of Labour ence, recorded holders, agreements and liens affecting a specific and Social Welfare. mining concession.

11.2 Are there obligations imposed upon owners, 12.2 Is there a system of appeals against administrative employers, managers and employees in relation to decisions in terms of the relevant mining legislation? health and safety? The concessionaires may take a Review Action (an administra- The main obligations fall on the operator of the mining project. tive appeal) against resolutions of the relevant authorities that Usually, the operator is a Mexican mining company which, they may consider illegal. Also, concessionaires have the right through the management, must comply with safety and health to appeal any unlawful act made by the authority before Mexican dispositions. In case of negligence of the management to courts. provide safe and healthy conditions as provided by law, the Board In the case that an action was brought to the MMB, the Bureau Members may be personally responsible for the damages suffered may rule on the ratification, revocation or modification of the by workers or third parties in the mine. This responsibility may resolution appealed through the Review Action. This proceeding result in criminal charges. shall be conducted in terms of the Federal Law of Administrative Procedure (Ley Federal del Procedimiento Administrativo). 11.3 Are there any unique requirements affecting the In the case of proceedings brought by concessionaires through mining industry in light of the coronavirus (COVID-19) courts, the court is the institution that shall rule on the action pandemic? made by the authority. A court proceeding is feasible against the resolution by the MMB of the Review Action. On 18 May 2020, the Mexican Federal Government issued the “Technical Guidelines for Health Safety in the Work 132 Constitutional Law Environment as part of the strategy to resume social, educa- tional and economic activities” (the “Technical Guidelines”) 13.1 Is there a constitution which has an impact upon in order to achieve an orderly and gradual reopening of work rights to conduct reconnaissance, exploration and activities in the mining industry and other Mexican indus- mining? tries considered essential. In accordance with the Technical Guidelines and in order to resume activities, mining compa- Article 27, paragraphs 4 and 6 of the Mexican Constitution state nies must prepare protocols to mitigate COVID-19 in their that the Mexican Nation is the owner of minerals and substances work spaces, prioritising the protection of their employees and that, in veins, ledges, masses or beds, constitute deposits the avoiding potential incidences of contagion. Either the Ministry nature of which is different from the components of the earth. of Labour and Social Welfare or the Federal Commission for The use and exploitation of these minerals and substances spec- Protection against Health Risks may inspect mining facilities to ified in the Mexican Constitution and in the Mining Law, in its verify that such protocols exist and have been complied with; in Article 4, as mentioned hereinabove, may be granted through

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a mining concession to Mexican individuals and companies Finally, mining concession holders that do not perform and organised under the laws of Mexico. verify exploration and/or exploitation works during two consec- The Mexican Constitution protects the owners and/or oper- utive years, during the first 11 years of seniority counted from ators of mining concessions, through all Mexican Authorities, their issuance, shall pay, on a semi-annual basis, an additional from unlawful acts which may harm the rights of a legal owner 50% of the corresponding Governmental Mining Duties in or the operator of a mining concession. accordance with the quotas stated in the Federal Duties Law, or 100% if the concession’s seniority is over 11 years. 13.2 Are there any State investment treaties which are applicable? 14.2 Are there royalties payable to the State over and above any taxes? The Mexican State has several bilateral and multilateral agreements with other countries that contemplate certain matters Please refer to question 14.1 above. related to the mining industry: Likewise, in accordance with the Mining Law, mining conces- (i) USMCA. The U.S.–Mexico–Canada Agreement sions may be granted exclusively to Mexican persons or to Mexican (“USMCA”) officially entered into force on 1 July 2020. companies, and through assignations (for mining concessions, The wording of this new Agreement does not contemplate held by the Government, which, once they are explored, are sold taxes to be imposed on the exportation and importation of to private entities by way of auctions) from the Mexican Geological the minerals provided in the Mining Law. Service (“SGM”); the owner of such assignations depends on the The USMCA replaces the North American Free Trade Mexican Federal Government. Agreement (“NAFTA”), whose purpose, alongside other Once a title document for a mining concession acquired from commercial treaties, was to eliminate most of the duties the SGM is issued, this title document shall state the royalty imposed on the exportation and importation of goods. amount payable to the Mexican Government as consideration for (ii) Mexico and Japan Free Trade Agreement. Under this the exploration activities and discoveries made by the SGM. This agreement, Mexican companies have a zero rate for the royalty is payable to the SGM. exportation of up to 95% of the goods exported to Japan, Concessionaires that own mining concessions derived from including, among others, minerals. assignations of the SGM must submit semi-annual reports In the coming years, Mexico will reduce duties on up to containing works and production in the mining lot covered by the 44% of goods imported from Japan – among others, goods mining concession, and these affect the payment of the royalties with electronic and steel components. payable to the SGM. (iii) Mexico and Chile Free Trade Agreement. The agreement provides the opportunity to participate as a supplier 152 Regional and Local Rules and Laws of mining industry inputs, with a tax rate of 0% between the parties on chemical products for the flotation of minerals 15.1 Are there any local provincial or municipal laws that and for other processes performed in the mining industry, need to be taken account of by a mining company over including leachates, depressants, foaming agents, floccu- and above National Legislation? lants, sodium cyanide, sodium pentasulfide, among others. No, there are not. Exploration, exploitation and beneficiation 142 Taxes and Royalties of ore activities ruled by the Mining Law, which is Federal, are, like all mining activities, listed in the catalogue of activities 14.1 Are there any special rules applicable to taxation of ruled by the Federal Environmental Law. However, ancillary exploration and mining entities? activities of mining companies which are not under the aforementioned catalogue are ruled by local legislation. Yes, a special mining duty is payable in accordance with the Notwithstanding the foregoing, an ecological tax approved Mining Law and the Federal Duties Law. Mining concession- in 2016 by the State Congress of Zacatecas applies as of 2017. aires must pay, on a semi-annual basis, Governmental Mining The ecological tax affects, among others, mining companies Duties, the payable amounts of which depend on: (i) the date on conducting exploration and exploitation activities. Zacatecas which the title document of a mining concession was registered State is the largest silver producer in Mexico. Mining activities before the PRM (the older the mining concession, the higher the and the environmental laws are governed by Federal laws; there- Governmental Mining Duties); and (ii) the surface (number of fore, the Zacatecas environmental tax has been challenged by hectares) of the mining concession. companies, unions and even the Mexican Federal Government; Furthermore, in accordance with Article 268 of the Federal however, the Mexican Supreme Court (Suprema Corte de Justicia de Duties Law, holders of mining concessions shall pay, on a yearly la Nación) has validated its legality. basis, 7.5% of the positive difference that results from the income of the sale of the minerals extracted from a mining concession 15.2 Are there any regional rules, protocols, policies or minus the authorised deductions (the “Governmental Royalty”). laws relating to several countries in the particular region Payment of this Governmental Royalty must be made before 31 that need to be taken account of by an exploration or March of the year following that in which the sale of minerals mining company? happened. In accordance with Article 270 of the Federal Duties Law, in No, there are not. However, please refer to the answer to ques- addition to the abovementioned Governmental Royalty, mining tion 4.4 with regard to consultation with indigenous peoples and concession holders that commercialise gold, silver or platinum communities. shall pay, on a yearly basis, a 0.5% duty on the income from the sale of such minerals (the “Extraordinary Governmental Royalty”).

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162 Cancellation, Abandonment and 16.3 Are there any entitlements in the law for the State to cancel an exploration or mining right on the basis of Relinquishment failure to comply with conditions?

16.1 Are there any provisions in mining laws entitling the The Mexican State may only cancel a mining concession through holder of a right to abandon it either totally or partially? the corresponding administrative proceeding in the case that the concession holder: (i) exploits minerals or substances not Yes; in accordance with Article 19 of the Mining Law, a mining specified in Article 4 of the Federal Mining Law; (ii) does not concession holder is entitled either to abandon its mining conces- pay the consideration and the royalties payable to the SGM if it sion or to reduce it. In each case, an administrative proceeding acquired its mining concession from the SGM (please refer to the shall be conducted before the MMB. answer to question 14.2 above); (iii) is no longer entitled to own mining concessions (i.e. a Mexican company becomes a foreign 16.2 Are there obligations upon the holder of an company); (iv) does not properly comply with the Governmental exploration right or a mining right to relinquish a part Mining Duties payable in accordance with the Mining Law and thereof after a certain period of time? the Federal Duties Law (please refer to the answer to question 14.1 above); or (v) does not perform and verify exploration and/ No, there are not. However, it should be noted that a mining or exploitation works through the filing of work assessment concession has a term of existence of 50 years, which may be reports. Also, it should be noted that concession holders that extended for an additional period of 50 years, at the request of its conduct exploitation of coal shall comply with certain additional concessionaire through the relevant administrative proceeding rules and, in case of non-compliance with them, the MMB may conducted before the MMB. Upon expiration of its term of be entitled to cancel such mining concessions. existence, the mining concession shall be cancelled. A judicial resolution may also order the cancellation of mining concessions. Please refer to the answer to question 4.4 above.

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Enrique R. del Bosque was born in Mexico City. He obtained his Law Degree from the Instituto Tecnológico Autónomo de México (“ITAM”) in 1985, and a Diploma in Business and Law from Washington State University in 1986. He gained a Diploma of NAFTA Training undertaken at ITAM in collaboration with the Ministry of Economy. In 1994, Enrique obtained a Tax Law Diploma from the Universidad Nacional Autónoma de México. He went on to complete the Negotiation and Leadership Program at Harvard Law School in 2013. Enrique’s work positions include: ■ Luismin – law student, 1982–1985, practising general corporate and finance law, mining law and transactions. ■ Creel García-Cuellar y Muggenburg Abogados – Associate Lawyer, 1986–1993, practising general corporate and finance law, mining law, transactions and joint ventures. ■ RB Abogados – Founding Partner, 1993 to date, practising corporate and business law, mining law, transactions law, mergers and acquisitions, joint ventures, and banking and securities law. Enrique has also held a variety of positions at academic institutions, including: ■ Professor, “Corporations”, ITAM Law School, 1987–1995. ■ Professor, “Corporate Law”, ITAM MBA School, 1998–2001. ■ Professor, “Corporate and Transactions Law” Master’s Degree, ITAM Law School, 2002 to date. Enrique speaks Spanish and English. Representative clients include: Pan American Silver Corp.; Franco Nevada; Silver Standard Resources Inc. (SSR); Great Panther Silver Limited; Americas Gold and Silver Corp; Starcore International Mines; Excellon Resources Inc.; Santa Cruz Silver Mining; Barksdale Resources; Kootenay Silver; Korean Boleo Corporation; LSNikko Copper; Candente Gold Corp; Telson Resources Inc.; etc. For further information, please visit: http://rbmexicolaw.com/selected-professional-profiles.

RB Abogados Tel: +52 55 5682 0303 Insurgentes Sur 1787 piso 6 Email: [email protected] Colonia Guadalupe Inn URL: www.rbmexicolaw.com Mexico City, C.P. 01020 Mexico

RB Abogados was founded in 1993 by Enrique R. del Bosque, who had previ- prior experience at law firms focused in commercial transactions, foreign ously worked for four years at the Mexican mining group Luismin, which investment, corporate law, etc. All of our lawyers speak fluent English and was subsequently sold to Silver Wheaton and then to Goldcorp. For eight have English writing skills. years, Enrique R. del Bosque worked as a Corporate and Transactional Our main objective is to provide legal security to investors participating in lawyer at one of the largest Mexican law firms. the Mexican mining industry (i.e., controlling Mexican subsidiaries, share- Since its foundation, RB Abogados has focused on counselling mining holders of Mexican subsidiaries’ parent companies, and banks and financial transactions mainly conducted by Canadian mining companies, whilst institutions as lenders/investors). also specialising in: incorporating Mexican companies to be able to acquire www.rbmexicolaw.com mining properties; conducting due diligence on properties and/or mining companies; structuring deals to acquire mining properties, mining concessions/land/assets, and/or mining companies or joint ventures; and granting guarantees to finance projects or raise funds at TSX and NYSE. The firm also focuses on mining obligation compliance. RB Abogados’ lawyers studied at the most prestigious Mexican Universities. Many started as students in the law firm and now have become very experienced transactional lawyers focused on mining transactions; others have

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London 58 Chapter 9 Nigeria Nigeria

Adetayo Adetuyi

Brooks and Knights Legal Consultants Nnanke Williams

12 Relevant Authorities and Legislation 2.2 Are there any specific steps the mining industry is taking in light of these developments?

1.1 What regulates mining law? The Federal Government, on 3 March 2020, inaugurated a Ministerial Technical Committee on the formulation of a frame- Mining is regulated by the Constitution of the Federal Republic work for sustainable development and growth of the metals of Nigeria, 1999 (as amended), the Nigerian Minerals and Mining industry in Nigeria as part of the ongoing efforts to diversify the Act, 2007 (the Mining Act) and the Nigerian Minerals and economy away from oil and gas, and also reiterated its support Mining Regulations, 2011 (the Mining Regulations). for the small-scale and artisanal miners in the country with the flag-off of the Presidential Artisanal Gold Mining Development 1.2 Which Government body/ies administer the mining Initiative (PAGMI) in the Yauri Local Government Area of industry? Kebbi State on 22 February 2020.

The Ministry of Mines and Steel Development, the Mining 32 Mechanics of Acquisition of Rights Cadastre Office (MCO), the Mines Inspectorate Department (MID) and the Mines Environmental Compliance Department 3.1 What rights are required to conduct (MECD) are the Government bodies administering the Nigerian reconnaissance? mining industry. The Mining Act prescribes that a reconnaissance permit is 1.3 Describe any other sources of law affecting the required to gain access to, enter on or fly over any land within mining industry. Nigeria to search for or obtain samples of mineral resources. A reconnaissance permit is not transferable, has a validity of The Environmental Impact Assessment Act, 1992, the Land Use one year, renewable on an annual basis, and is granted by the Act, 1978, the Nigerian (Export Incentives and Miscellaneous Director General of the MCO. Provisions) Act, the National Environmental Standards and Regulations Enforcement Agency (Establishment) Act, 2007, 3.2 What rights are required to conduct exploration? the Explosives Act, the Nuclear Safety and Radiation Protection Act, the Companies Income Tax Act and the Finance Act, 2020 A valid exploration licence is required to conduct exploration of are other sources of law affecting the mining industry. mineral resources in Nigeria and grants the licence holder the exclusive right to conduct exploration on the land within the 22 Recent Political Developments areas of his licence.

2.1 Are there any recent political developments 3.3 What rights are required to conduct mining? affecting the mining industry?

Revenue from Nigeria’s oil and gas industry constitutes a major A small-scale mining lease or mining lease is required to conduct part of the Federal Government’s revenue stream. The emer- mining in Nigeria. gence of the coronavirus pandemic, which has affected businesses all over the world and is also responsible for a recent 3.4 Are different procedures applicable to different crash in the price of crude, has caused Nigeria to shift focus to minerals and on different types of land? other sectors, including the mining industry. Nigeria expects its mining sector to grow to 3% of GDP within the next five Different procedures are applicable to quarries and water use. years from its current 0.3%, as the Government seeks to diver- A quarry lease is granted to mine naturally occurring quarriable sify the economy away from oil. Thus, as part of efforts to diver- materials, including asbestos, china clay, fuller’s earth, gypsum, sify its economy, the country has listed gold, lead, zinc, lime- marble, etc. A water use permit is granted to obtain and use stone and coal among seven strategic minerals it has identified water during mining operations. for investment.

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3.5 Are different procedures applicable to natural oil 52 Processing, Refining, Beneficiation and and gas? Export

Oil and gas mining are regulated primarily by the Petroleum 5.1 Are there special regulatory provisions relating to Act, 1969 and the Associated Gas Re-injection Act. Other laws processing, refining and further beneficiation of mined include the Oil in Navigable Waters Act and the Petroleum minerals? (Drilling and Production) Regulations, 1969. To engage in the business of mineral processing, an applicant is 42 Foreign Ownership and Indigenous required to obtain a mineral processing permit from the Mines Ownership Requirements and Restrictions Inspectorate Department.

4.1 What types of entity can own reconnaissance, 5.2 Are there restrictions on the export of minerals and exploration and mining rights? levies payable in respect thereof?

To own a reconnaissance, exploration and mining right, an An export permit is required to export minerals for commer- entity is required to be: cial purposes or for the purpose of analysis or experiment, or (a) a citizen of Nigeria with legal capacity and who has not as a scientific specimen. However, only holders of a mineral been convicted of a criminal offence; title or holders of licences to possess and purchase minerals are (b) a company registered in Nigeria; or eligible to apply for the permit to export minerals for commer- (c) a mining co-operative. cial purposes. Holders of reconnaissance permits and explora- In addition to the above, the holder of a reconnaissance tion licences are not permitted to obtain export permits. permit can apply for an exploration licence, while the holder of an exploration licence can apply for a small-scale mining lease. Only entities incorporated in Nigeria, or other legal entities 62 Transfer and Encumbrance that have demonstrated that a commercial quantity of mineral resources exists in the area for which application is made and, in 6.1 Are there restrictions on the transfer of rights to addition, have fulfilled all the conditions attached to the explo- conduct reconnaissance, exploration and mining? ration licence in respect of the subject area of the application, can apply for a mining lease. Reconnaissance permits are not transferable. All other rights (exploration licence, mining lease, quarry lease, small-scale 4.2 Can the entity owning the rights be a foreign entity mining lease, or a water use permit) are transferable, however, or owned (directly or indirectly) by a foreign entity and with the approval of the Minister in writing and subject to regis- are there special rules for foreign applicants? tration of the transfer with the MCO or any security interest. Where the transfer is to be made to an affiliate, the approval of the MCO is not required so long as the obligations of the affil- A foreign entity cannot directly own mining rights in Nigeria. iate are guaranteed by the assignor or by a parent company. However, a foreign entity may own mining rights indirectly by holding shares in an entity incorporated in Nigeria for the purpose of carrying out mining activities. 6.2 Are the rights to conduct reconnaissance, exploration and mining capable of being mortgaged or otherwise secured to raise finance? 4.3 Are there any change of control restrictions applicable? The Mining Regulations define “Transfer of Mineral Title” to include assignment, mortgage, pledge, sub-lease, charge or There are no change of control restrictions applicable to the hypothecation. Thus, other than a reconnaissance permit which mining industry. is not transferable, the other mineral titles are capable of being mortgaged or otherwise secured to raise financing subject to the 4.4 Are there requirements for ownership by written consent of the Minister. indigenous persons or entities? 72 Dealing in Rights by Means of Only Nigerian citizens with legal capacity who have not been Transferring Subdivisions, Ceding Undivided convicted of a criminal offence can own reconnaissance, explo- Shares and Mining of Mixed Minerals ration and mining rights in Nigeria. As regards legal entities, see response to question 4.1 above. 7.1 Are rights to conduct reconnaissance, exploration and mining capable of being subdivided? 4.5 Does the State have free carry rights or options to acquire shareholdings? There are no specific rules relating to subdivision of the rights to conduct reconnaissance, exploration or mining. However, a The State does not have free carry rights or options to acquire licensee (apart from a reconnaissance permit which is generally shareholdings under Nigerian mining law. not transferable) is able to transfer (by way of assignment, mortgage, pledge, sub-lease, charge or hypothecation) a part of his mineral rights to a third party with the Minister’s consent.

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7.2 Are rights to conduct reconnaissance, exploration 8.3 What rights of expropriation exist? and mining capable of being held in undivided shares? The Mining Act prioritises the use of land for mining operations Given the requirement of incorporation referred to in response over other uses of land, and regards it as constituting an over- to question 4.1 above, those who intend to jointly hold a mineral riding public interest within the meaning of the Land Use Act. title will need to hold shares in the corporate entity holding the Where a mining lease, a small-scale mining lease or a quarry mineral rights. lease is granted over land subject to an existing and valid statutory or customary right of occupancy, the Governor of the State 7.3 Is the holder of rights to explore for or mine a within which such rights are granted is empowered to revoke primary mineral entitled to explore or mine for secondary such right of occupancy in accordance with the provisions of minerals? Section 28 of the Land Use Act.

The holder of a mineral title is entitled to explore or mine for the 92 Environmental group of minerals that has been identified in the permit or licence granted by the Minister and only for those substances, except 9.1 What environmental authorisations are required security minerals. Security minerals include radioactive minerals in order to conduct reconnaissance, exploration and which contain, by weight, at least one-twentieth of 1% (0.05%) of mining operations? uranium, thorium, or any combination thereof including, but not limited to, monazite, sand and other ores containing carbonite, Prior to the commencement of any development work or mining pitch blend, and other ores containing uranium. operations, holders of mineral titles are mandated to submit to the MECD environmental impact assessment statements, envi- 7.4 Is the holder of a right to conduct reconnaissance, ronmental protection and rehabilitation plans, and mitigation exploration and mining entitled to exercise rights also plans approved by the Federal Ministry of Environment. over residue deposits on the land concerned? 9.2 What provisions need to be made for storage of The holders of a mining lease, small-scale mining lease and tailings and other waste products and for the closure of quarry lease are entitled to exercise rights over residue deposits mines? on the land concerned. The Mining Act allows for the deposit of tailings in any natural 7.5 Are there any special rules relating to offshore watercourse, subject to the requirements of the Mining Regulations. exploration and mining? Under the Mining Regulations, an application to deposit tailings shall be in the prescribed form under the Regulations and any permit issued to deposit shall specify the maximum amount There are no special rules relating to offshore exploration and of tailing which may be deposited in a natural watercourse by mining. the permit holder. Mine operators and title holders are expected to provide an effective management system for tailings storage 82 Rights to Use Surface of Land throughout the period of operation, and to ensure the protection of the general public in their storage operations. 8.1 Does the holder of a right to conduct No dumping operations shall be undertaken without issuing reconnaissance, exploration or mining automatically a notice of at least 30 days and obtaining the approval of the own the right to use the surface of land? MID. Mineral title holders are expected to prepare mine waste disposal plans, establish water retention and treatment tech- The holder of mineral rights is entitled to enter onto the land niques suitable for relevant mine sites, and ensure safe manage- to the conduct reconnaissance, exploration or mining opera- ment of contaminated runoff and groundwater contamination. tions, subject to the satisfaction of surface rights’ compensation requirements entitled to the owner or occupier of the land. 9.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right? 8.2 What obligations does the holder of a reconnaissance right, exploration right or mining right Generally, any mineral title holder who intends to close or have vis-à-vis the landowner or lawful occupier? abandon a mineral title area shall apply to the MECD, in writing, not less than three months before the intended closure or aban- The holder of a reconnaissance right, exploration right or donment, for a partial or complete closure or abandonment of mining right has an obligation to pay to the landowner or occu- such area, and send copies of the application to the MID and pier: an annual surface rent; and reasonable compensation for MCO. Closure applications should be accompanied by an audit any disturbance of his surface rights, damage to the surface of report on the environment surrounding the mine site, which is his land, or destruction of any crop, economic tree, building or prepared by an independent person. A holder of a mining lease work damaged, removed or destroyed. The holder of a mineral intending to abandon or permanently cease production on a title is also obligated to make good any damage caused to the mine site shall notify the MID, the MECD and the MCO in the surface and to carry out reconnaissance, exploration or mining prescribed form, three months before abandonment. operations in an environmentally friendly manner.

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An applicant for closure of a mining area shall ensure that it 11.3 Are there any unique requirements affecting the has adhered to all the conditions in the relevant Environmental mining industry in light of the coronavirus (COVID-19) Impact Assessment Statement, the Environmental Protection pandemic? and Rehabilitation Plan of the Mining Act, and the Mining Regulations. There are no unique requirements affecting the mining industry in light of the COVID-19 pandemic. However, movement restric- 9.4 Are there any zoning or planning requirements tions instituted in various states, as well as the breakdown of global applicable to the exercise of a reconnaissance, supply chain activities, have affected mine operations, as with exploration or mining right? many other sectors within the Nigerian economy.

There are no zoning or planning requirements applicable to the 122 Administrative Aspects exercise of a reconnaissance, exploration or mining right. 12.1 Is there a central titles registration office? 102 Native Title and Land Rights Titles to land leased for mining purposes must be registered at 10.1 Does the holding of native title or other statutory the relevant State Land Registry. The Mining Act provides for surface use rights have an impact upon reconnaissance, the maintenance of registers by the MCO, including a register exploration or mining operations? of reconnaissance permits, a register of exploration licences, a register of mining leases, a register of small-scale mining leases, There is no concept of native title under Nigerian law. However, a register of water use permits and a register of quarry leases. the holder of a mineral title is mandated, under the Mining Act, to pay to the owner or occupier of any land within the title 12.2 Is there a system of appeals against administrative area, subject to a state lease or right of occupancy, a reasonable decisions in terms of the relevant mining legislation? compensation for surface rent or for any damage done to the surface of the land, or damage to economic crops, trees, buildings or works. Compensation is also to be made to the owner or There is no system of appeals against administrative decisions occupier of land within the title area for removal or destruction under the mining legislation. However, judicial review is gener- of crops, economic trees, buildings or works. Such compensa- ally applicable in respect of any public law decisions. tion shall be paid on the basis of the ownership or development of the land and anybody who suffers any damage, loss or distur- 132 Constitutional Law bance of his right by reason of the mining operations shall be entitled to be paid adequate compensation which shall be deter- 13.1 Is there a constitution which has an impact upon mined from the particular circumstances in question. rights to conduct reconnaissance, exploration and mining? 112 Health and Safety The Nigerian Constitution provides that the entire property in 11.1 What legislation governs health and safety in and control of all minerals, mineral oils and natural resources mining? under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria, shall Part IV of the Mining Regulations governs health and safety in vest in the Government of the Federation and shall be arranged mining. in such manner as may be prescribed by the National Assembly. The National Assembly passed the Mining Act, granting rights for the exploration and exploitation of minerals in Nigeria. 11.2 Are there obligations imposed upon owners, employers, managers and employees in relation to health and safety? 13.2 Are there any State investment treaties which are applicable? Mine operators have recording and reporting obligations with respect to accidents, dangerous occurrences and diseases on Nigeria is a signatory to several multilateral and bilateral invest- mine sites. They are expected to prepare mine plans which ment treaties which protect foreign investors operating in contain information on potential health hazards to be encoun- Nigeria, including those operating within the mining sector. tered in mining activities as well as proposed mitigation plans. These treaties include the Convention on the Recognition The Regulations contain health, safety and environmental obli- and Enforcement of Foreign Arbitral Awards, the Multilateral gations for surface and underground mine workings, lifting Investment Guarantee Agency Convention, and the Treaty machines and lifting tackles, windings, haulage and transport on the International Centre for the Settlement of Investment systems (including locomotives, trackless vehicles, mine roads, Disputes. Nigeria has also entered into various bilateral invest- driving or operation of mine vehicles, conveyors, etc). The mine ment agreements with countries such as China, South Korea and manager is also to ensure that all accessible parts of the mine are Turkey, to facilitate the development of its mining sector. ventilated in a manner adequate to clear noxious fumes and to keep those parts in a fit state for persons to work or pass through.

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142 Taxes and Royalties 162 Cancellation, Abandonment and Relinquishment 14.1 Are there any special rules applicable to taxation of exploration and mining entities? 16.1 Are there any provisions in mining laws entitling the holder of a right to abandon it either totally or partially? Companies and enterprises engaged in mining operations are subject to a special fiscal regime under the Mining Act. Mineral A mineral title holder may apply to the MCO to surrender its title holders are entitled to deduct, from their assessable profits, title. The MCO shall approve, in writing, an application for a capital allowance of 95% of qualifying capital expenditure as surrender of title, when it is satisfied that: the application is well as all certified exploration, development and processing complete; the surrender will not affect any liability incurred by costs, including the costs of feasibility studies and infrastruc- the title holder before the surrender of the title, including any ture. Losses may also be deducted for a period of up to four environmental obligations; and all rents due and fees prescribed, years after the loss was incurred. Mineral title holders are also if any, have been paid by the title holder. Within 30 days of granted a tax relief from the date they commenced operations receiving the surrender notice, the applicant shall surrender the up to three years afterward, and subject to an extension by the original title document and the title shall lapse. Minister for one further period of two years.

16.2 Are there obligations upon the holder of an 14.2 Are there royalties payable to the State over and exploration right or a mining right to relinquish a part above any taxes? thereof after a certain period of time?

Minerals obtained in the course of exploration and mining oper- A mining lease title holder may, at any time during the term of ations are liable to royalties under the Mining Act. The schedule the lease, apply to the Minister in the prescribed form to relin- of royalties payable for each mineral is available here: https:// quish part or all of the lease area. No part of the lease area www.minesandsteel.gov.ng/wp-content/uploads/2016/07/ subject to an attachment by a court may be relinquished. The ROYALTY-RATES.pdf. written consent of all persons having interest registered against the mining lease shall be obtained and delivered to the MCO 152 Regional and Local Rules and Laws before any relinquishment right is granted.

15.1 Are there any local provincial or municipal laws that 16.3 Are there any entitlements in the law for the State need to be taken account of by a mining company over to cancel an exploration or mining right on the basis of and above National Legislation? failure to comply with conditions?

There are no local provincial or municipal laws on mining, as Failure to comply with conditions of a grant of title is a ground regulating mines and minerals comes exclusively under the for the revocation of such grant, subject to the written approval purview of the Federal Government. However, mining opera- of the Minister. tors may consider State environmental protection laws as part of their mining operations.

15.2 Are there any regional rules, protocols, policies or laws relating to several countries in the particular region that need to be taken account of by an exploration or mining company?

There are no regional rules, protocols, policies or laws relating to countries in the West African region that are directly applicable to mining.

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Adetayo Adetuyi is a Senior Consultant with Brooks and Knights Legal Consultants. Adetayo has particular expertise in energy project development, including advising sponsors, operators and investors on a wide range of transactions involving the development of offshore oil and gas exploration and production facilities, floating production storage and offloading (FPSO) units, gas processing facilities, utilities, real estate and infrastructure and tax-related issues. Prior to joining Brooks and Knights, Adetayo worked with a leading law firm in Lagos and also as in-house counsel to an Independent Power Plant (IPP) developer. He is an avid author and has been published in acclaimed legal and business publications and websites including Chambers Global Practice Guides, Financial Regulation International, Lexology, Mondaq, Africa Analyst and Energy Central.

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Nnanke Williams is a Senior Consultant at Brooks and Knights Legal Consultants (BKLC). She is an expert in energy, environment and policy issues. She also works with BKLC’s clients on corporate, commercial and finance matters. Before joining BKLC, Nnanke worked in a leading law firm in Lagos where she was a key member of the Energy & Project and Corporate & Commercial teams. She has worked as an energy and environmental policy analyst in Nigeria and the United States and was part of a marine logistics company. She is a prolific author and her work has been widely published in acclaimed legal and business publications and websites including Chambers Global Practice Guides, Financial Regulation International, Lexology, Mondaq, Africa Analyst, Energy Central and the African Academic Network on Internet Policy.

Brooks and Knights Legal Consultants Tel: +234 813 810 0210 4 Alh Kanike Close Email: [email protected] Ikoyi 101233 URL: www.brooksandknights.com Lagos Nigeria

Brooks and Knights Legal Consultants (BKLC) is a provider of legal advi- attorneys with experience in commercial legal practice and policy advo- sory and policy consulting services in Nigeria to individuals, corporates, cacy and we ensure that our clients are afforded the full scope of our NGOs and Government entities. We provide expert advice and bespoke consultancy expertise. solutions to both local and foreign clients on all their legal, business and www.brooksandknights.com policy issues. At BKLC we work to make sure that our clients are engaged, informed and promptly updated on all matters affecting their business and policy interests. We bring a well-developed and highly focused approach to business and it is our belief that by coming alongside our clients we are able to develop bespoke and client-oriented solutions. BKLC consultants are trained

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Xennia Forno

Rubio Leguía Normand Miguel Ángel Soto

12 Relevant Authorities and Legislation ■ the Regulations on Mining Safety and Occupational Health, approved by Supreme Decree 024-2016-EM; ■ the Regulations on Environmental Protection for Mining- 1.1 What regulates mining law? Metallurgic Activities, approved by Supreme Decree 040-2014-EM; The Republic of Peru is a unitary state under the civil law system. ■ the Environmental Regulations for Mining Exploration The Natural Resources chapter of the Peruvian Constitution Activities, approved by Supreme Decree 042-2017-EM; states that mineral resources are property of the Nation and the ■ the Mine Closure Law, Law 28090; Peruvian State is sovereign in their administration. The govern- ■ the Regulations on Mine Closure, approved by Supreme ment may establish by law the conditions for granting mining Decree 033-2005-EM; activities rights and titles to individuals and legal entities. ■ the Regulations on Citizen Participation for Mining Based on this, the Single Revised Text of the General Mining Activities, approved by Supreme Decree 028-2008-EM; and Law, approved by Supreme Decree 014-92-EM (General Mining ■ the Right to Prior Consultation to Indigenous and Law), contains the main provisions regarding the execution and Tribal Peoples Law, recognised in Convention 169 of the development of mining activities in Peru, such as the procedure International Labour Organization (ILO), Law 29785 and to obtain a secure and clear mining title as well as the condi- its Regulations, approved by Supreme Decree 001-2012-MC. tions of tenure. 22 Recent Political Developments 1.2 Which Government body/ies administer the mining industry? 2.1 Are there any recent political developments affecting the mining industry? The mining industry is divided into four segments according to production and processing capacity. The jurisdiction of mining Encouragement of new explorations and the reduction of proce- activities comprises, for the medium- and large-scale segments dures and processes (permitting) are two of the main goals of the industry, a system administered by central government, for the next few years. In fact, the government is working to and for the small-scale and artisanal segments, systems admin- increase the attractiveness of the mining sector through, among istered by each region. Therefore, the mining industry is regu- others, a regulatory review. lated by both central government and regional governments. In September 2019, a high-level commission was created, Furthermore, several authorities, including the Ministry of aimed at improving mining activities, comprised by technocrats Energy and Mines, the Water National Authority, among others, from the private sector and civil society. grant licences and permits that allow the performance of mining activities. 2.2 Are there any specific steps the mining industry is taking in light of these developments? 1.3 Describe any other sources of law affecting the mining industry. In June 2020, the final report of the high-level commission was released. Based on this document, regulatory improvements In addition to the General Mining Law, the principal laws affecting are being promoted and work is underway to update and iden- the mining industry are: tify necessary changes in current legislation, with a regulatory ■ the Foreign Investment Promotion Law, Legislative Decree impact analysis and a participatory regulatory process. 662; Many of the aforementioned improvements will entail the ■ the Framework Law for the Growth of Private Investment, simplification of procedures in order to make it easier to obtain Legislative Decree 757; permits without losing their effectiveness. Furthermore, as part ■ the Regulations for the General Mining Law, Supreme of this regulatory optimisation, it will strengthen confidence Decree 03-94-EM; between communities, government and private companies, ■ the Regulations for Mining Procedures, approved by Supreme reducing the asymmetry of information. Decree 018-92-EM;

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32 Mechanics of Acquisition of Rights minimum level of production or the payment of a penalty fee if applicable. Failure to pay the licence fees or penalty for two consecutive years will result in the forfeiture of the concession. 3.1 What rights are required to conduct Regarding the attainment of a minimum level of production, reconnaissance? it is equivalent to one tax unit (approximately US$1,250) per year per hectare granted for metallic minerals, and 10% of one tax unit The performance of geological surveys and prospecting activ- (US$125) per year per hectare for non-metallic minerals. The ities does not require any special governmental authorisation minimum production must be attained no later than the 10th year other than compliance with general environmental and civil following the year in which the title to the mining concession was laws related to surface land access and respect for priority rights. granted. Failure to attain production will trigger an obligation to pay a penalty equivalent to 2% of minimum production, until 3.2 What rights are required to conduct exploration? the year in which the minimum level of production is attained. If production is not attained until the 15th year after the year in which the title to the mining concession was granted, there is an Exploration – as well as exploitation – activities can only be obligation to pay a penalty equivalent to 5% of minimum produc- performed by individuals or legal entities that have obtained a tion, until the year in which minimum production is attained; if mining concession. Concessions are classified as metallic and production is not attained until the 20th year, there is an obliga- non-metallic, according to the class of mineral substance, and tion to pay a penalty equivalent to 10% of minimum production, are granted for an indefinite term subject to the: (a) achievement until the year in which minimum production is attained. The of a minimum annual level of production or investment (from penalty would be avoided if the investments made are equivalent th the 10 year since being granted); and (b) payment of an annual to 10 times the penalty amount. fee (please refer to question 3.3 below). Finally, if production is not attained until the 30th year after The mining concession does not grant its holder rights over the year in which the title to the mining concession was granted, surface land. Therefore, concessionaires are required to acquire the mining concession will be terminated. said surface rights directly from the State or from private parties in order to execute their activities. 3.4 Are different procedures applicable to different minerals and on different types of land? 3.3 What rights are required to conduct mining? No, the same procedure is applicable to metallic and non-me- The following mining rights are required to conduct mining tallic mining concessions. activities: Furthermore, mining concessions may not be granted in: (i) urban areas, unless expressly authorised by law; and (ii) Mining Right Scope Protected Natural Areas or their buffer zones, unless authorised Mining concession Performance exploration by the competent authority (the Peruvian Service for Natural and exploitation activities Protected Areas). of metallic or non-metallic minerals in a determined 3.5 Are different procedures applicable to natural oil area (with a minimum exten- and gas? sion of 100 hectares and a maximum of 1,000 hectares). Yes, different procedures and legislation are applicable to oil Processing concession Performance of physical and gas. and/or chemical procedures required for extraction, 42 Foreign Ownership and Indigenous concentration, smelting and/ Ownership Requirements and Restrictions or refining.

General works concession Auxiliary activities or 4.1 What types of entity can own reconnaissance, complementary services, exploration and mining rights? such as ventilation, drainage, lifting, or extraction for two or more mining conces- The Peruvian Constitution guarantees equal treatment of sions granted to different foreign and national investors, as well as free ownership of concessionaires. foreign currency. In that sense, mining concessions are granted to individuals or legal entities, whether national or foreign, Mineral transport concession Required for massive and without any distinction or privilege. continuous transportation of However, the only exception is established by the article minerals via unconventional 71° of the Peruvian Constitution, which bans foreigners from methods, such as conveyor acquiring mines and other assets, whether individually or in belts, pipelines, or aerial partnership, directly or indirectly, within 50 kilometres from tramways. the border, under penalty of losing the right acquired illegally. Notwithstanding the abovementioned, through a Supreme As indicated above, general obligations applicable to mining Decree approved by the Council of Ministers of State, this concessionaires include the payment of an annual licence fee prohibition may be withdrawn provided that the investment is by 30 June of each year of US$3 per hectare, in order to keep considered to be of public need (such as in the case of mining the mining concession in good standing, as well as to attain a activities).

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4.2 Can the entity owning the rights be a foreign entity process, refine and carry out further beneficiation of mined or owned (directly or indirectly) by a foreign entity and minerals, it is necessary to obtain a processing concession. are there special rules for foreign applicants? According to the General Mining Law, the processing concession grants its holder the right to extract or concentrate the valu- Any foreign-owned entity, whether direct or indirect, is entitled able part of an aggregate of rootless minerals and/or to melt, to request and hold mining concessions, and there are no special purify or refine metals, by means of a set of physical, chemical rules for foreign applicants. However, the only restriction is and/or physicochemical processes. the acquisition of assets within 50 kilometres from the border (please refer to question 4.1 above). 5.2 Are there restrictions on the export of minerals and levies payable in respect thereof? 4.3 Are there any change of control restrictions applicable? There are no restrictions on buying, selling or exporting minerals. In addition, pursuant to the General Mining Law, the As of the date of this submission, change of control restrictions commercialisation of minerals across the country and abroad are not applicable to the mining industry. is free and does not require the granting of a concession or any However, on November 19, 2019, a new merger control governmental authorisation. Domestic and foreign companies regime was enacted in Peru by means of an Urgency Decree. are subject to the same rules on commercial matters associated This regime will come into effect in March 2021. It must be with minerals. taken into consideration that the regime will only be applicable to the merger or acquisition of two or more companies, the crea- 62 Transfer and Encumbrance tion of a joint venture or the acquisition of operative or produc- tive assets, given that the acts subject to the merger control are 6.1 Are there restrictions on the transfer of rights to those that meet the following two thresholds: (i) the combined conduct reconnaissance, exploration and mining? gross sales of the companies involved in the concentration are equal to or greater than 118,000 Peruvian Tax Units (approxi- No governmental authorisation is required to transfer mining mately US$150 million); and (ii) the gross sales of at least two concessions. Furthermore, with respect to a change of control companies involved in the concentration are equal to or greater of the mining holder or its parent, it is not required to obtain than 18,000 Peruvian Tax Units (approximately US$23 million). government consent before this occurs. However, the only exception is established by the Peruvian 4.4 Are there requirements for ownership by Constitution, which bans foreign nationals from acquiring indigenous persons or entities? mining concessions, whether individually or in partnership, directly or indirectly, within 50 kilometres of an international There are no specific requirements for ownership of mining border (please refer to question 4.1 above). rights by indigenous persons, groups or entities. 6.2 Are the rights to conduct reconnaissance, exploration and mining capable of being mortgaged or 4.5 Does the State have free carry rights or options to otherwise secured to raise finance? acquire shareholdings?

Pursuant to the General Mining Law, a mining concession can The State does not have free carry rights or options to acquire be used as security to guarantee an obligation, on its own or shareholdings in mining companies or other entities that conduct with a third party, through a mining mortgage agreement, which mining in Peru. constitutes a lien over the concessions during the term of such In fact, pursuant to the Constitution, the Peruvian economic agreement to secure financing for the holder or as security for a model is based on a free market economy and the subsidiary role creditor to whom the holder owes a debt. The mortgage agree- of the State. Authorised solely by an express law of Congress, ment must be registered in the public registry in order to ensure the State would only engage in economic activities, directly or its legality, validity and enforceability. indirectly, for reasons of high public interest or manifest national It should be noted that the mining mortgage does not orig- convenience. inate from the dispossession of the concession. The debtor In that regard, neither the government nor state agencies are or guarantor mortgage at all times remains in possession of entitled to participate in mining projects, as they benefit from the the mortgaged concessions, as there is a possibility of judicial established taxes and mining obligations that the holders of the enforcement of the guarantee (taking possession of the creditor mining concessions must fulfil. Also, there are no local listing against the mortgaged mining concession for breach of the obli- requirements established for the project company in order to carry gation of the debtor). The mortgage covers the principal debt, out mining activities. interest accrued, insurance premiums paid by the creditor and court costs. 52 Processing, Refining, Beneficiation and The mortgage extends to all parts of the mortgaged property, Export their accessories, and the amount of insurance compensation and expropriation, unless otherwise agreed. Unless otherwise 5.1 Are there special regulatory provisions relating to provided, a mining mortgage also affects buildings, facilities processing, refining and further beneficiation of mined and other articles intended for the mining concession. minerals?

As mentioned above (please refer to question 3.3), in order to

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72 Dealing in Rights by Means of executing an easement agreement whereby the concessionaire is granted the right to enter, explore and exploit the concession Transferring Subdivisions, Ceding Undivided located under the surface rights, or through any other agreement Shares and Mining of Mixed Minerals that grants the right to use the surface land for mining activities.

7.1 Are rights to conduct reconnaissance, exploration 8.2 What obligations does the holder of a and mining capable of being subdivided? reconnaissance right, exploration right or mining right have vis-à-vis the landowner or lawful occupier? The area of the mining concession may be divided into grids of no less than 100 hectares. To that effect, the application filed by Given that the holder of a mining concession does not have the holder of the concession shall be sufficient. If the mining rights over land, the landowner’s property or rights of an occu- concession is mortgaged or encumbered, the authorisation and pier must be respected. consent of the creditor or holder of any such creditor rights is required. 8.3 What rights of expropriation exist?

7.2 Are rights to conduct reconnaissance, exploration and mining capable of being held in undivided shares? Expropriation is limited to events of national security, or in case of public interest and necessity, as specifically declared by law. Its only beneficiary may be the State. It is not applicable to the A mining concession may not be held by multiple parties or mining industry. holders. According to the General Mining Law, a limited liability mining company shall be mandatorily incorporated when, due to a 92 Environmental claim, succession, transfer or any other right, two or more entities become holders of a mining concession, unless the parties decide to establish a company under the General Corporations Law. 9.1 What environmental authorisations are required The limited liability mining company is a legal entity governed in order to conduct reconnaissance, exploration and mining operations? by private law, and through the act of its incorporation, it becomes the sole holder of the concession that gave rise thereto. The performance of geological surveys and prospecting activities does not require authorisation. 7.3 Is the holder of rights to explore for or mine a However, regarding exploration activities, the holder is primary mineral entitled to explore or mine for secondary required to seek the following authorisations from the Ministry minerals? of Energy and Mines:

In Peru, a holder of a mining concession is entitled to explore Environmental for or mine any mineral granted (metallic or non-metallic, Project Authorisation depending on the kind of concession). Environmental ■ A maximum of 20 drilling platforms; Technical Sheet or 7.4 Is the holder of a right to conduct reconnaissance, ■ a maximum affected area of 10 exploration and mining entitled to exercise rights also hectares (includes platforms, over residue deposits on the land concerned? trenches, auxiliary instalments and access points). No, the mining concession does not grant rights over the surface Environmental ■ A maximum of 40 drilling platforms; lands within its boundaries. Impact Statement ■ a maximum affected area of 10 Furthermore, it is necessary to obtain an authorisation to hectares (includes platforms, exploit residue deposits qualified as environmental liabilities in trenches, auxiliary instalments and order to guarantee the reclamation of the area. access points); or ■ the execution of tunnels that jointly 7.5 Are there any special rules relating to offshore comprise a maximum of 100 metres exploration and mining? in length. Semi-Detailed ■ A maximum of 700 drilling There are no special rules relating to offshore exploration and Environmental platforms; mining, except the extent of the concession, which can be up to Impact Assessment ■ an affected area of more than 10,000 hectares. 10 hectares (includes platforms, trenches, auxiliary instalments and 82 Rights to Use Surface of Land access points); or ■ the execution of tunnels that jointly 8.1 Does the holder of a right to conduct comprise more than 100 metres in reconnaissance, exploration or mining automatically length. own the right to use the surface of land? To conduct mining exploitation and processing activities, a The mining concession does not grant its holder rights over Detailed Environmental Impact Assessment must be filed before surface land. Therefore, rights over said land must be obtained the national environmental agency (SENACE) for its approval. by acquiring property through a transfer agreement or by

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Please note that after the approval of the environmental author- indigenous peoples live. In case of a negative response from isation, the mining authority authorises the commencement of native communities, such event does not cancel or terminate mining activities (exploration, exploitation and/or processing). the mining rights and does not mean that the mining authority would deny the approval of the authorisation. 9.2 What provisions need to be made for storage of tailings and other waste products and for the closure of 112 Health and Safety mines? 11.1 What legislation governs health and safety in The environmental provisions to be made for storage of tailings mining? are part of the Detailed Environmental Impact Assessment. On the other hand, technical provisions are approved by the mining Law 29,783, the Occupational Safety and Health at Work Law authority as part of the authorisation to start mining activities and its regulation approved by Supreme Decree 005-2012-TR, and operate the processing plant. are the general regulations on Health and Safety matters appli- Also, the mining holder must file a Mine Closure Plan at least cable to all industries. The mining industry has a specific regula- one year after the mining project’s Detailed Environmental tion in the Mining Occupational Health and Safety Regulation, Impact Assessment is approved. The plan conforms to technical approved by Supreme Decree 024-2016-EM. Health and safety and legal actions aimed at developing measures to be taken to regulations are administered and supervised by the National rehabilitate the area used or disturbed by mining activities in order Superintendence of Labour Inspection – SUNAFIL (workers) to achieve an ecosystem that is healthy and suitable for the devel- and OSINERGMIN (mining facilities). opment of life and preservation of the landscape. Guarantees must be provided on behalf of the authority for covering the 11.2 Are there obligations imposed upon owners, costs of rehabilitation measures for the periods of final closure employers, managers and employees in relation to and post-closure. For this purpose, the authority accepts bonds, health and safety? performance bonds, trusts, pledges and mortgages. Health and safety regulations in mining impose general and 9.3 What are the closure obligations of the holder of a specific obligations on all stakeholders. In fact, employers are reconnaissance right, exploration right or mining right? responsible for the management of health and safety at work and for implementing all the necessary activities and training For the exploration activities, the mine closure plan is part of in connection with this management, including training the corresponding environmental authorisation (please refer to programmes and their follow-up. Employers must, inter alia, question 9.1 above). permanently undertake activities to improve existing levels of As a general rule, the rehabilitation measures must be devel- protection, ensure that staff undergo medical examinations oped once the activities are complete in each facility of the explo- before, during and at the end of a working relationship, train ration project (i.e.: platforms, trenches, auxiliary instalments and workers, establish internal health and safety regulations to be access points) and it is not necessary put in place guarantees. distributed to all workers, and establish a chart of risks present Regarding exploitation and processing activities, please refer at the workplace for display where it is clearly visible. to question 9.2 above. 11.3 Are there any unique requirements affecting the 9.4 Are there any zoning or planning requirements mining industry in light of the coronavirus (COVID-19) applicable to the exercise of a reconnaissance, pandemic? exploration or mining right? There are no specific requirements for the mining industry. It is not permitted to carry out geological surveys and pros- However, as part of the measures adopted by the government pecting activities in urban zones, archaeological areas or other to protect the health and safety of workers, employers have an restricted areas, unless authorised by the competent authority. obligation to manage the continuation of work in a way that Furthermore, mining concessions (allowing exploration and best protects the health of their workers. Furthermore, they exploitation) may not be granted in: (i) urban areas, unless develop an action plan for the surveillance, containment and expressly authorised by law; and (ii) Protected Natural Areas or care of new COVID-19 cases in workplaces, such as mining their buffer zones, unless authorised by the competent authority. operations. This plan includes measures such as screening for symptoms of COVID-19, testing, and contact tracing to detect 102 Native Title and Land Rights infected workers earlier and exclude them from the workplace, thus preventing disease transmission and subsequent outbreaks. 10.1 Does the holding of native title or other statutory surface use rights have an impact upon reconnaissance, 122 Administrative Aspects exploration or mining operations? 12.1 Is there a central titles registration office? The Right to Prior Consultation has been part of our legal system since 1995, upon the signing of ILO Convention 169, but In Peru, the Instituto Geológico Minero y Metalúrgico (INGEMMET) its internal implementation was completed in 2011. has a database which includes the mining rights cadastre with As to mining activities, the consultation shall be related all mining titles, and is available online (geocatmin.ingemmet. to the measures which enable or authorise the starting of the gob.pe). Although the database includes geological, geochem- exploration, exploitation, and mining processing activities (not ical and geophysical surveys, geological risk assessments, the mining concession) within the geographical area where

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geodynamic studies, satellite images, etc., all of the information Exploration expenses at the minimum production stage may that the INGEMMET makes available should be used for refer- be fully deducted in the fiscal year or amortised as from that ence purposes only. fiscal year at the rate of an annual percentage based on the probable life of the mine, at the mine holder’s own discretion. Development and preparation expenses that allow for the 12.2 Is there a system of appeals against administrative decisions in terms of the relevant mining legislation? exploitation of a deposit for more than one fiscal year may be fully deducted in the fiscal year when they are incurred or amortised in that fiscal year and in the following years, up to two As a general rule, all administrative decisions are to be subject additional years at most, at the holder’s own discretion. to a dual administrative instance. A decision from a first instance may be appealed for review by the second administrative instance which is of a higher level. Also, a decision of the 14.2 Are there royalties payable to the State over and second administrative instance may be challenged in a judicial above any taxes? process before Peruvian courts and tribunals. In relation to mining activities, most of the decisions of In addition to the taxes applicable to any other economic activity the first administrative instance are reviewed by the Mining in Peru, mining producers are subject to a mining royalty and Council, an administrative court. contributions to regulatory agencies. Mining title holders are required to pay a mining royalty to 132 Constitutional Law the Peruvian government for the exploitation of metallic and non-metallic resources. The amount of the royalty is payable 13.1 Is there a constitution which has an impact upon on a quarterly basis and applies on income with marginal rates rights to conduct reconnaissance, exploration and ranging between 1% and 12%. The minimum amount payable mining? for the mining royalty cannot be less than 1% of the revenue generated from the sales of the calendar quarter. The aforementioned payment will be deductible as an expense The Natural Resources chapter of the Peruvian Constitution for income tax purposes in the fiscal year in which such payments provides that mineral resources are property of the Nation and are made. the Peruvian State is sovereign in their administration. The On the other hand, since 2014, mining title holders are government establishes by law the conditions for granting required to pay a contribution to the regulatory agencies in charge exploration and exploitation rights and titles to individuals and of supervising mining activities: OEFA (environment); and legal entities. OSINERGMIN (health and safety). The amount of the contribution is payable on a monthly basis and is calculated on the basis 13.2 Are there any State investment treaties which are of monthly sales at rates of 0.11% for each one. applicable? 152 Regional and Local Rules and Laws In recent years, Peru has executed more than 30 Free Trade Agreements with countries from the Americas, Asia and Europe, 15.1 Are there any local provincial or municipal laws that which investment chapters establish, among others, protection need to be taken account of by a mining company over against non-commercial risks, such as governmental measures and above National Legislation? and interference that may affect, without cause or reason, the property of the investor. Likewise, said chapters have provided According to Peruvian legislation, local authorities do not have compensatory measures in case of expropriations or meas- powers to rule mining activities. Furthermore, it should be ures tantamount to expropriation (regulatory expropriation or noted that local provincial and municipal rules cannot go against takings), as well as conflict resolution mechanisms between the the Constitution, and laws are required to be issued subject to State and the investor. the national legal framework. 142 Taxes and Royalties 15.2 Are there any regional rules, protocols, policies or laws relating to several countries in the particular region 14.1 Are there any special rules applicable to taxation of that need to be taken account of by an exploration or exploration and mining entities? mining company?

The acquisition value of the concessions (price-paid or claim Pursuant to the Peruvian Constitution, international treaties expenses) will be amortised as from the fiscal year when the and conventions to which Peru is a party apply as domestic legis- minimum production must be accomplished, within a term to lation (please see questions 10.1 and 13.2). be determined by the mining holder, based on the probable life of the deposit, calculating and taking into consideration the 162 Cancellation, Abandonment and proven and probable reserves and the minimum level of production according to law. Relinquishment Prospecting and exploration expenses, until the date when minimum production must be accomplished, can be considered, 16.1 Are there any provisions in mining laws entitling the at the discretion of the mining holder, as part of the acquisi- holder of a right to abandon it either totally or partially? tion value of the concession in order to receive the treatment mentioned above, or can be deducted in the fiscal year in which Mining holders are entitled to abandon mining concessions they are incurred. either totally or partially. If it is partially, the withheld area must not be shorter than a 100-hectare grid.

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16.2 Are there obligations upon the holder of an 16.3 Are there any entitlements in the law for the State exploration right or a mining right to relinquish a part to cancel an exploration or mining right on the basis of thereof after a certain period of time? failure to comply with conditions?

Mining concessions are granted for an indefinite term, as long as Failure to pay the licence fees or penalty for two consecutive all legal obligations to maintain such rights are met (please refer years will result in the cancellation of the mining concession. to question 3.3 above). Also, if the minimum production is not attained until the 30th year after the year in which the title to the mining concession was granted, the mining concession will be cancelled.

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Xennia Forno is a Partner responsible for the Natural Resources: Mining and Environment practice areas, specialising in providing advisory services to both national and foreign companies and public agencies on regulation and contracts. She provides advice on the sponsorship of investment projects, mainly in the mining sector, regarding regulatory, contractual and commercial issues associated with acquisition, development, financing, implementation and closure. She also advises on acquisition of surface rights and dealings with stakeholders linked to the project. Xennia’s professional career has been recognised by the most prestigious international publications, such as Chambers and Partners and The Legal 500, designating her as a leading lawyer in Peru in the field of mining. Her professional advice is complemented by her professorship in Mining and Environmental Law on the undergraduate and graduate programmes at the Pontificia Universidad Católica del Perú and the Universidad Peruana de Ciencias Aplicadas. She also participates in international and national conferences and seminars, the publication of specialised articles, and professional associations.

Rubio Leguía Normand Tel: +51 1208 3000 Av. Dos de Mayo 1321 Email: [email protected] Lima 27 URL: www.rubio.pe Peru

Miguel Ángel Soto is Principal Associate of the Natural Resources: Mining, Environment, Water Resources and Natural Resources: Energy and Hydrocarbons practice areas. He has significant experience in advising mining and energy companies, as well as other players in the sector, including investors, government entities, multilateral organisations and international cooperation agencies. Miguel Ángel also has significant experience in the development of mining and energy projects, including corporate operations, negotiation of agreements, execution of investments and divestments, acquisition and financing of projects and assets, identification and permit management, consulting on compliance with regulatory obligations, as well as in the analysis and management of complex environmental and social aspects linked to the utilisation and management of natural resources.

Rubio Leguía Normand Tel: +51 1208 3000 Av. Dos de Mayo 1321 Email: [email protected] Lima 27 URL: www.rubio.pe Peru

Rubio Leguía Normand’s main focus is not up for debate: its clients’ business. network – Band 1”. The firm also belongs to the Pro Bono Declaration for the The law firm is a leader in Peruvian business law with an undisputed reputa- Americas, and is committed to working for the public good. tion that has always kept the highest ethical standards since it was founded Rubio Leguía Normand has accomplished 40 years in Peru, and is very proud 40 years ago. of its history and the mark that it has left on the country. Since 1980, it has been offering proactive and experienced services led by www.rubio.pe the best minds, with a strong presence in advising companies related to natural resources. With offices in three key cities in Peru, and a team of over 80 lawyers, the firm is driven by meeting its clients’ needs while providing the best solutions at the right time. Furthermore, its lawyers have been recognised by international legal publications such as Chambers and Partners, The Legal 500, IFLR 1000, among others. It is the only Peruvian firm that represents Terralex, an association of 106 independent law firms, globally recognised by Chambers and Partners as “elite

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Patricia A. O. Bunye

Cruz Marcelo & Tenefrancia Alpheus D. Macalalad

12 Relevant Authorities and Legislation Executive Order No. 79 (Institutionalising and Implementing Reforms in the Philippine Mining Sector, Providing Policies and Guidelines to Ensure Environmental Protection and Responsible 1.1 What regulates mining law? Mining in the Utilisation of Mineral Resources) (“EO 79”) instituted reforms such as a review of the performance of existing Philippine mining law is primarily regulated by the Philippine mining operations and cleansing of non-moving mining rights Constitution, which provides that all natural resources are holders, imposed a moratorium against the issuance of mineral owned by the State. National laws, i.e. Republic Act No. 7942 (the agreements (“MAs”) until the enactment of legislation ration- “Philippine Mining Act”) and its implementing rules and regu- alising existing revenue-sharing schemes and mechanisms, lations (“IRR”) (as contained in Department of Environment and constituted the Mining Industry Coordinating Council and Natural Resources (“DENR”) Administrative Order No. (“MICC”), among others. 2010–21), local ordinances and executive issuances on mining must be consistent with the Philippine Constitution. 22 Recent Political Developments

1.2 Which Government body/ies administer the mining 2.1 Are there any recent political developments industry? affecting the mining industry?

The DENR is the primary government agency responsible for The current administration has taken a conservative position the conservation, management, development and proper use of on mining and continues to implement a moratorium on new the country’s environment and natural resources. Line bureaus MAs. However, DENR Administrative Order No. 2018-13 under the DENR, particularly the Mines and Geosciences lifted the moratorium on the acceptance, processing and/ Bureau (“MGB”) and the Environmental Management Bureau or approval of applications for Exploration Permits (“EPs”). (“EMB”), are respectively responsible for the proper manage- DENR Administrative Order No. 2017-10, which imposes a ban ment and disposition of mineral lands and mineral resources on open-pit mining, remains effective. and the implementation of environmental laws. Further, local government units (“LGUs”) also exercise powers that affect 2.2 Are there any specific steps the mining industry is the mining industry pursuant to their mandate to promote the taking in light of these developments? general welfare within their territorial jurisdictions, provided they do not contravene the Philippine Constitution and the Philippine Mining Act. The Chamber of Mines of the Philippines, which is a professional association of the country’s largest mining, quarrying and mineral processing companies, formed with the aim of promoting the 1.3 Describe any other sources of law affecting the responsible exploration, development and utilisation of minerals, mining industry. has been working to lift the ban on open-pit mining, considering that most of the deposits are low-grade and are situated near the Republic Act No. 6969 (the “Toxic Substance and Hazardous surface. The MICC has also recommended the lifting of the ban and Nuclear Wastes Control Act”) regulates the importation, on the open-pit mining method for select minerals under DAO manufacture, processing, distribution, use and disposal of chem- 2017-10. Local mining companies have agreed to commit to the ical substances and mixtures. Republic Act No. 8749 (the “Clean Mining Association of Canada’s “Towards Sustainable Mining” Air Act”) outlines measures to reduce air pollution. Republic Act initiative, which advocates responsible mining. No. 9003 (the “Ecological Solid Waste Management Act”) provides for a systematic ecological solid waste management 32 Mechanics of Acquisition of Rights programme. Republic Act No. 8371 (the “Indigenous Peoples’ Rights Act”) recognises and promotes the rights of indigenous 3.1 What rights are required to conduct communities by requiring their free, prior and informed consent reconnaissance? (“FPIC”) in specified instances relating to mining activities, among others. Republic Act No. 7076 (the “People’s Small- Under the Philippine Mining Act, reconnaissance is subsumed Scale Mining Act of 1991”) promotes viable small-scale mining under exploration, which requires an EP. A holder of an EP is activities.

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granted the right to conduct exploration for all minerals in spec- into with respect to cement raw materials, marble, granite, sand ified areas. Mandatory requirements for EPs include: and gravel and construction aggregates. The Philippine Mining 1. Location map/sketch plan. Act also allows qualified persons to apply for quarry permits for 2. Two-year exploration work programme. building and construction materials located within a maximum 3. Certificate of Environmental Management and Community area of five hectares. Relations Record or Certificate of Exemption. For procedures relating to ancestral lands, please see ques- 4. Environmental Work Program (“EWP”). tion 10.1. 5. EP holders must be: Philippine citizens; Philippine- There are also additional requirements for offshore explora- organised juridical entities with technical and financial tion permit (“OEP”) applications. capabilities to undertake resource development, at least 60% of the capital of which is owned by Philippine citizens; or a 3.5 Are different procedures applicable to natural oil legally organised foreign-owned entity. and gas? 6. Proof of technical competence or financial capacity.

Presidential Decree No. 1857 (the “Oil Exploration and 3.2 What rights are required to conduct exploration? Development Act of 1972”) governs the procedure for natural oil and gas exploration. It provides that such contracts shall See question 3.1. be executed with the Department of Energy (“DOE”), with the approval of the President, and only after due public notice, pre-qualification and public bidding. In the case that bids are 3.3 What rights are required to conduct mining? requested and no bid is submitted, or the bids submitted are rejected by the DOE for being disadvantageous to the govern- Generally, the right to conduct mining is granted under MAs ment, the contract may be concluded through negotiation. or Financial or Technical Assistance Agreements (“FTAAs”). MAs are agreements between a contractor and the govern- 42 Foreign Ownership and Indigenous ment wherein the government grants to the contractor the exclusive right to conduct mining operations within, but not Ownership Requirements and Restrictions title over, the contract area. The requirements for MAs include: 1. Location map/sketch plan. 4.1 What types of entity can own reconnaissance, 2. Three-year development/utilisation work programme. exploration and mining rights? 3. Mining Project Feasibility Study. 4. Complete and final exploration report. Natural and juridical persons may own exploration and mining 5. Certification that mining claims are subsisting. rights. The latter may be in the form of a corporation, partner- 6. Environmental report. ship, association or cooperative. 7. Environmental Compliance Certificate (“ECC”). 8. Approved survey plan. 4.2 Can the entity owning the rights be a foreign entity 9. Environmental Protection and Enhancement Program or owned (directly or indirectly) by a foreign entity and (“EPEP”). are there special rules for foreign applicants? 10. Certificate of Environmental Management and Community Relations Record or Certificate of Exemption. 11. Certificate Precondition from the National Commission Mining is considered a nationalised industry and is limited by on Indigenous Peoples (“NCIP”). the Philippine Constitution to Philippine citizens or corpora- FTAAs may be entered into between a contractor and the tions at least 60% of whose capital is owned by such citizens. government for the large-scale exploration, development and Hence, only Philippine citizens or such corporations may be utilisation of gold, copper, nickel, chromite, lead, zinc and other granted MAs. Nevertheless, non-Philippine nationals or corpo- minerals, except for cement raw materials, marble, granite, sand rations that are 100% foreign-owned may still apply for EPs and and gravel and construction aggregates. Requirements for FTAAs enter into FTAAs. include: 1. Location map/sketch plan. 4.3 Are there any change of control restrictions 2. Two-year exploration work programme. applicable? 3. Posting of bond. 4. Certificate of Environmental Management and Community Certain transactions may be covered by Republic Act No. 10667, Relations Record or Certificate of Exemption. or the Philippine Competition Act. 5.WP. E 6. Approved survey plan. 7. ECC. 4.4 Are there requirements for ownership by 8. EPEP. indigenous persons or entities? 9. Social Development and Management Program. 10. Mining Project Feasibility Study. There are no such requirements. 11. Three-year development/utilisation work programme.

4.5 Does the State have free carry rights or options to 3.4 Are different procedures applicable to different acquire shareholdings? minerals and on different types of land? The State does not hold such rights. Generally, the procedures for different minerals and different types of land are the same. FTAAs, however, may not be entered

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52 Processing, Refining, Beneficiation and it also allows the partial transfer or assignment of these rights to other qualified persons. The transferee may further assign or Export transfer its rights to others likewise qualified. This results in the subdivision of rights to conduct exploration and mining. 5.1 Are there special regulatory provisions relating to processing, refining and further beneficiation of mined minerals? 7.2 Are rights to conduct reconnaissance, exploration and mining capable of being held in undivided shares?

A Minerals Processing Permit (“MPP”) is necessary before engaging in the processing of minerals. MPPs shall be renew- In cases where the permittees or contractors are corporations able for a period of five years but cannot exceed a total term of or partnerships, the rights granted under the permit or contract 25 years. However, in the case of contractors, holders of Quarry belong exclusively to the corporation or partnership to which Permits and Industrial Sand and Gravel Permits, the approved they are given and are not held in undivided shares by those who Work Program for the production period is sufficient to process compose the corporation or partnership. minerals in lieu of MPPs. 7.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary minerals? 5.2 Are there restrictions on the export of minerals and levies payable in respect thereof? The Philippine Mining Act is silent as to a permit holder’s Parties engaged in mineral trading either domestically or inter- right to explore or mine for secondary minerals. However, the nationally must be registered with the Department of Trade and MGB requires permittees and permit holders to indicate in their Industry and accredited by the DENR. Marketing contracts and Annual Mineral Resource/Ore Reserve Inventory Report both sales agreements involving commercial disposition of minerals primary and secondary or accessory minerals. and by-products are subject to approval by the DENR Secretary upon the recommendation of the MGB Director. The approved 7.4 Is the holder of a right to conduct reconnaissance, marketing contracts and sales agreements shall be registered exploration and mining entitled to exercise rights also with the MGB. Further, the sale must be made at the highest over residue deposits on the land concerned? commercially achievable market price and lowest commercially achievable fees under prevailing circumstances. The parties Yes. Permit holders are allowed to manage mine wastes and must also negotiate sales terms and conditions compatible with mill tailings produced by operations, provided that they acquire world market conditions. an ECC from the DENR and an Authority to Construct and For exportation of ores, a permit must be secured from the Operate (“ACO”) from the concerned EMB Regional Office MGB. of the DENR. There are no tax or duty restrictions on the export of minerals. Under the National Internal Revenue Code, export sales, which include export of minerals, are subject to 0% value-added tax. 7.5 Are there any special rules relating to offshore exploration and mining? 62 Transfer and Encumbrance Offshore exploration activities shall be carried out in accordance with the United Nations Convention on the Law of the Sea 6.1 Are there restrictions on the transfer of rights to and in a manner that will not adversely affect the safety of navi- conduct reconnaissance, exploration and mining? gation at sea and will ensure accommodation with other marine activities such as fishing, aquaculture, transportation, etc. EPs, MAs and FTAAs may be transferred with the approval The IRR of the Philippine Mining Act also provide for addi- of the MGB Director (for EP transfer) and the MGB Regional tional requirements for obtaining an OEP. Further, the following Director (for MAs and FTAAs). offshore areas are considered closed to mining applications: 1. offshore areas within 500 metres from the mean low tide 6.2 Are the rights to conduct reconnaissance, level and onshore areas within 200 metres from the mean exploration and mining capable of being mortgaged or low tide level along the coast; and otherwise secured to raise finance? 2. in case of seabed/marine aggregate quarrying, offshore areas less than 1,500 metres from the mean low tide level Yes. These rights are usually expressly stated in the written of land or island(s) and where the seabed depth is less than agreement embodying the right to conduct exploration and 30 metres measured at mean sea level. mining. With regard to MAs, the maximum area that a qualified person may apply for or hold at any one time is as follows: 72 Dealing in Rights by Means of ■ Offshore, in the entire Philippines, beyond 500 metres from the mean low tide level: Transferring Subdivisions, Ceding Undivided 1. for individuals – 50 blocks or approximately 4,050 Shares and Mining of Mixed Minerals hectares; 2. for corporations, partnerships, associations, or coop- 7.1 Are rights to conduct reconnaissance, exploration eratives – 500 blocks or approximately 40,500 hectares; and mining capable of being subdivided? and 3. for the Exclusive Economic Zone – a larger area to be Yes. While the Philippine Mining Act contemplates that a single determined by the Secretary upon the recommenda- qualified person may apply for exploration and mining permits, tion of the MGB Director.

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■ Some of the specific provisions established with regard to An ECC is required prior to the approval of MAs or FTAAs. the conduct of offshore mining are: To secure an ECC, a proponent must prepare and submit an 1. drilling platform(s) shall be enclosed within an oil spill Environmental Impact Statement (“EIS”), which includes base- containment boom; line environmental conditions, impact assessments and proof of 2. only water-based drilling mud/additives shall be used; consultation with stakeholders. 3. the contractor shall utilise the appropriate and efficient mining method with minimal adverse impact(s) on the 9.2 What provisions need to be made for storage of marine environment. The use of a high-pressure water tailings and other waste products and for the closure of jet in the extraction of materials shall be prohibited; mines? 4. on-board mineral processing and laboratory testing/ analysis requiring the use of chemicals shall not be Permittees must first secure clearance from the MGB, without allowed; and prejudice to other required permits from other DENR agen- 5. size reduction processes, such as crushing and grinding, cies, before constructing and operating building tailings or waste shall be prohibited. dams. Permittees are required to establish contingency and emer- The MGB has also issued Memorandum Circular No. 005-16 gency preparedness plans to deal with significant events, which providing for guidelines on offshore mining. are assessed by the MGB prior to issuing the said clearance. For the closure of mines, the Mining Act IRR require 82 Rights to Use Surface of Land that a final mine rehabilitation and decommissioning plan (“FMRDP”) or mine closure plan be integrated into the EPEP 8.1 Does the holder of a right to conduct to be submitted by contractors to the Mine Rehabilitation Fund reconnaissance, exploration or mining automatically Committee, to guide the rehabilitation of excavated, mined-out own the right to use the surface of land? and disturbed areas.

No. The ownership over the surface areas of the land remains 9.3 What are the closure obligations of the holder of a with the landowners. However, permit holders and contrac- reconnaissance right, exploration right or mining right? tors may enter, occupy and explore mining areas or lands after notifying and paying just compensation to landowners, and may exercise easements for ingress and egress necessary to undertake After the termination stage of a mining operation, all open-pit mining activities. work areas, underground workplaces, mine waste and tailings impoundment systems, quarry sites and other mining-disturbed landforms, including those disturbed during exploration, must 8.2 What obligations does the holder of a be progressively rehabilitated according to the FMRDP as reconnaissance right, exploration right or mining right embodied in the ECC and/or EPEP. Additionally, mine site have vis-à-vis the landowner or lawful occupier? decommissioning and rehabilitation shall aim to establish a land use capability that is functional and proximate to the land The holder of a mining right is responsible for any damage to the use prior to the disturbance of the mine area, unless other more property of the landowner, occupant or concessionaire because beneficial land uses are predetermined and agreed in partner- of the mining operations. The amount of compensation may ship with local communities and LGUs. be based on the agreement between the parties or the determination of the Panel of Arbitrators, the body of MGB officers authorised to resolve disputes involving surface owners, occu- 9.4 Are there any zoning or planning requirements applicable to the exercise of a reconnaissance, pants, or claimholders. To guarantee the payment of proper and exploration or mining right? just compensation, the holder of the right shall post a bond with the concerned Regional Office. There are areas under the Philippine Mining Act and its IRR where applications for MAs or FTAAs are not allowed: 8.3 What rights of expropriation exist? 1. in military and other government reservations, except upon prior written clearance by the government agency The Philippine Mining Act provides that contractors’ proper- concerned; ties are generally free from expropriation. However, the govern- 2. near or under public or private buildings, cemeteries, ment may expropriate when the purpose is for public use or in archaeological and historic sites, bridges, highways, water- the interest of national welfare or defence. In such cases, foreign ways, railroads, reservoirs, dams or other infrastructure investors or enterprises shall have the right to remit sums projects, public or private works, including plantations or received as compensation for the expropriated property in the valuable crops, except upon written consent of the govern- currency in which the investment was originally made and at the ment agency or private entity concerned; exchange rate prevailing at the time of remittance. 3. in areas covered by valid and existing mining rights; 4. in areas expressly prohibited by law; 92 Environmental 5. in areas covered by small-scale miners as defined by law, unless they have the prior consent of the small-scale miners, in which case a royalty payment upon the utilisa- 9.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and tion of minerals shall be agreed upon by the parties, said mining operations? royalty forming a trust fund for the socioeconomic development of the community concerned; and 6. in old growth or virgin forests, proclaimed watershed An EWP is required prior to the approval of an application for forest reserves, wilderness areas, mangrove forests, mossy an EP. forests, national parks, provincial/municipal forests, parks,

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greenbelts, game refuge and bird sanctuaries as defined by 4. provide hospitalisation and medical facilities, including the law, and in areas expressly prohibited under the National transportation to the hospital; provide full treatment to Integrated Protected Areas System. employees injured and those suffering from occupation-re- In addition, the following areas were declared closed for lated diseases during the performance of their work; and mineral contracts, concessions, and agreements under EO 79: submit to the MGB Director a Safety and Health Program. 1. prime agricultural lands, in addition to lands covered by the Comprehensive Agrarian Reform Law, including plantations 11.3 Are there any unique requirements affecting the and areas devoted to valuable crops, and strategic agriculture mining industry in light of the coronavirus (COVID-19) and fisheries development zones and fish refuges and sanc- pandemic? tuaries declared as such by the Secretary of the Department of Agriculture; and On 8 May 2020, the DENR-MGB issued Memorandum Order 2. tourism development areas, as identified in the National No. 2020-004 implementing guidelines for the resumption of Tourism Development Plan; and other critical areas, island mining and mineral processing operations during the General ecosystems and impact areas of mining as determined by Community Quarantine period. This Memorandum Order current and existing mapping technologies that the DENR provides for protocols on personal profiling, physical distancing, may identify pursuant to existing laws, rules and regulations. personal hygiene, disinfection and sanitation requirements, and other measures needed to combat the spread of COVID- 102 Native Title and Land Rights 19, including how to manage suspected cases. Mining contractors, permittees and permit holders are also required to provide 10.1 Does the holding of native title or other statutory personal protective equipment and other necessary medical surface use rights have an impact upon reconnaissance, supplies for their employees in the mine/plant site. exploration or mining operations? The issuance strictly prohibits the boarding of any vessel without the necessary authorisation from the Philippine Ports Authority Yes. Indigenous Cultural Communities (“ICCs”) and Indigenous and corresponding clearance from the Quarantine Medical Peoples (“IPs”) are given priority rights in the harvesting, extrac- Officer. Shipments of minerals and mineral by-products are also tion, development or exploitation of natural resources within their subject to additional requirements such as the submission of a ancestral domains. No ancestral land shall be opened for mining Shipment Report indicating the port of origin and the COVID-19 operations without the FPIC of the ICCs and IPs concerned. The test results of the crew. Further, all mining contractors, permit- parties must enter into an agreement with ICCs and IPs indicating tees or permit holders shall adhere to reporting requirements and the royalty payment, which may not be less than 1% of the gross submit pertinent documents as required by the MGB. output. The said royalty shall form part of a trust fund for the Mining companies and export-oriented industries are required socio-economic well-being of the ICCs and IPs. to follow social distancing and community quarantine protocols Further, no MAs, FTAAs, or mining permits shall be granted in in accordance with national regulation and the respective ordi- areas subject to certificates of ancestral domains or ancestral land nances of the LGUs where they operate. They are also expected claims or in areas verified by the Regional Office or other office or to follow pertinent regulations regulating and limiting the opera- agency of the government authorised by law for such purpose as tion of transportation through land, sea and air in accordance with actually occupied by the ICCs under a claim of time-immemorial Republic Act No. 11469 or the Bayanihan to Heal as One Act. possession, except with their FPIC. 122 Administrative Aspects 112 Health and Safety 12.1 Is there a central titles registration office? 11.1 What legislation governs health and safety in mining? The MGB and its regional offices have a Mining Recorder Unit in their respective offices. The Mining Recorder is required to The Philippine Mining Act and its IRR are the principal health maintain registers for permits. and safety laws for the mining industry. DENR Administrative The MGB regularly publishes this data through its official Order No. 2000-98 on Mine Safety and Health Standards also website (http://www.mgb.gov.ph). The information published imposes standards for health, sanitation and mine safety and the includes details on existing EPs, MAs, FTAAs, MPPs, pending penalties for violation thereof. Other health and safety regula- mining applications and pending cases with the Mines Adjudication tions which are also applicable to the mining industry may be Board (“MAB”) and Panel of Arbitrators. found in the Philippine Labour Code.

12.2 Is there a system of appeals against administrative 11.2 Are there obligations imposed upon owners, decisions in terms of the relevant mining legislation? employers, managers and employees in relation to health and safety? Under the Philippine Mining Act, a Panel of Arbitrators in the Regional Office of the DENR has exclusive and original jurisdic- Employers are required, among others, to: tion over disputes involving rights to mining areas, mineral agree- 1. establish a safety and health office; ments or permits and disputes between or among surface owners, 2. make available personal protective equipment in accord- occupants and claimholders/concessionaires. The Panel’s deci- ance with the type of work performed, at no cost to the sion or order is appealable to the MAB. employee; 3. provide training to employees in first aid, mine rescue, firefighting and other safety and health measures and proper job procedures; and

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132 Constitutional Law 152 Regional and Local Rules and Laws

13.1 Is there a constitution which has an impact upon 15.1 Are there any local provincial or municipal laws that rights to conduct reconnaissance, exploration and need to be taken account of by a mining company over mining? and above National Legislation?

Under the Philippine Constitution, the State owns all natural The mining industry is also regulated by the ordinances issued resources, including minerals. The exploration, development by the local legislative bodies of the local government units. and utilisation of mineral resources are under the full control and These ordinances must be confined to the imposition of reason- supervision of the State, which may directly undertake the same able limitations on mining activities conducted within their or enter into co-production, joint venture or production-sharing respective territorial jurisdictions, and must be consistent with agreements with Filipino citizens, or corporations or associa- national laws and regulations. tions at least 60% of whose capital is owned by such citizens. The president of the Philippines may also enter into agreements 15.2 Are there any regional rules, protocols, policies or with foreign-owned corporations involving either technical or laws relating to several countries in the particular region financial assistance for the large-scale exploration, development that need to be taken account of by an exploration or and utilisation of minerals, petroleum and other mineral oils. mining company? Because of the State’s full control and supervision over mining rights, owners of surface rights do not automatically have rights There are none. over mineral resources found within their properties. 162 Cancellation, Abandonment and 13.2 Are there any State investment treaties which are Relinquishment applicable?

16.1 Are there any provisions in mining laws entitling the The Philippines has entered into bilateral investment treaties holder of a right to abandon it either totally or partially? (“BITs”) that generally apply to investments made by foreign nationals of states that are parties to the BITs. Thirty-two of these BITs are presently in force, and typically include provi- Abandonment of mining rights is allowed by the Philippine sions such as the prohibition of the expropriation of invest- Mining Act if the holder deems the mining project to be ments in the Philippines of nationals or permanent residents of economically unviable even after exerting reasonable diligence a contracting state, and the obligation to accord fair and equi- to remedy the cause of the problem. However, abandonment table treatment to foreign investors and investments. They also of the right does not release the holder from his financial, envi- typically contain an investor-state dispute settlement provi- ronmental, legal and fiscal obligations arising from his exercise sion, which allows the nationals or permanent residents of a of the right. contracting state to submit a dispute involving the Philippine government to international arbitration. There is currently no 16.2 Are there obligations upon the holder of an treaty specifically applicable to the mining industry. exploration right or a mining right to relinquish a part thereof after a certain period of time? 142 Taxes and Royalties The holder of an EP must annually relinquish at least 20% of the 14.1 Are there any special rules applicable to taxation of permit area during the first two years of exploration and at least exploration and mining entities? 10% of the remaining permit area annually during the extended exploration period. However, if the permit area is less than 5,000 hectares, the permittee need not relinquish any part thereof. Aside from the payment of income tax, mining entities are also An FTAA is also subject to relinquishment as follows: (i) liable for excise tax and value-added tax on mineral products, at least 25% of the original contract area during the first two which are national taxes, and for customs duties. They are also years of the exploration period and at least 10% of the remaining liable for local business taxes and real property taxes, which are contract area annually during the extended exploration period local taxes. Contractors in MAs and FTAAs are also granted and pre-feasibility study period; (ii) during the exploration or fiscal and non-fiscal incentives. pre-feasibility study period, the contractor shall finally relinquish to the government any portion of the contract area which 14.2 Are there royalties payable to the State over and shall not be necessary for mining operations and which is not above any taxes? covered by any declaration of mining feasibility, provided that each mining area after final relinquishment shall not be more Mining operations within mineral reservations are subject to than 5,000 hectares; and (iii) the contractor may, at its discretion, a royalty paid to the MGB of not less than 5% of the market submit to the concerned DENR Regional Office a declaration value of the gross output of the minerals or mineral products of mining project feasibility over any portion of its contract area extracted or produced from the mineral reservations, exclusive prior to the lapse of the exploration or pre-feasibility period. In of all other taxes. such an event, the contractor shall have the right to continue its mineral exploration or feasibility studies during the exploration and feasibility periods, respectively, in respect of the remaining contract area.

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16.3 Are there any entitlements in the law for the State FTAAs may be cancelled, revoked or terminated, after due to cancel an exploration or mining right on the basis of process, under any of the grounds for the cancellation of an EP, failure to comply with conditions? MA or FTAA. The grounds for the cancellation, revocation and termination Yes. With regard to an EP, the DENR Secretary, MGB Director of an EP, MA or FTAA are: falsehood or omission of facts in or MGB Regional Director concerned may cancel the EP for the application for the above permits which may alter, change or violations by the permittee of the terms and conditions thereof, affect substantially the facts set forth in said statements; non-pay- including the failure to secure the required proof of consultation ment of taxes and fees due to the government for two consec- with or project presentation to the legislative body of the LGU utive years; failure to perform all other obligations, including concerned within one year from the issuance of the permit. abandonment, under the permits or agreements; violation of any MAs may be cancelled, revoked or terminated for the failure of of the terms and conditions of the permits or agreements; and the contractor to comply with the terms and conditions thereof. violation of existing laws, policies and rules and regulations.

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Patricia A. O. Bunye heads Cruz Marcelo & Tenefrancia’s Mining & Natural Resources Department and Energy practice group and is also a Partner in its Intellectual Property Department. She is the Founding President of Diwata-Women in Resource Development, Inc., a non-governmental organisation advocating the responsible development of the Philippines’ wealth in resources, principally through industries such as mining, oil and gas, quarrying and extraction of other mineral resources from the earth for processing. She writes a regular column in the Philippine Resources Journal, a mining, petroleum and energy publication.

Cruz Marcelo & Tenefrancia Tel: +632 8810 5858 9th, 10th, 11th & 12th Floors, One Orion Email: [email protected] 11th Avenue corner University Parkway URL: www.cruzmarcelo.com Bonifacio Global City Metro Manila Philippines

Alpheus D. Macalalad is a Senior Associate in the Mining & Natural Resources Department and Energy practice group of Cruz Marcelo & Tenefrancia. His practice encompasses a broad scope of legal topics involving the Philippine resources sector, ranging from general matters to complex legal issues. Mr. Macalalad regularly provides comprehensive advice to clients regarding corporate restructuring, immigration, labour, indigenous peoples, land acquisition, local government, administrative regulation, intellectual property, and environment, among others, and frequently collaborates with members of the firm’s other departments. He has conducted legal reviews of corporations involved in high- stakes transactions, and has been part of the firm’s handling of controversial cases in the Supreme Court. Mr. Macalalad regularly attends local and international mining and energy events and conferences, such as the Mining Philippines Conference and Exhibition, Annual Mine Safety and Environment Conference, Power and Electricity Conference, Asian Development Bank Annual Clean Energy Forum, Mines and Money Asia, and the Asia Mining Conference.

Cruz Marcelo & Tenefrancia is a top-tier full-service law firm in the Philippines advice honed from a keen understanding of the needs of foreign companies recognised for, among others, its conscientious, proactive, and highly skilled doing business in the Philippines. It also possesses unique proficiencies Mining & Natural Resources team. that allow strategic collaboration with significant industry organisations and It provides excellent legal assistance to mining and exploration compa- agencies. nies at all levels of development involving complex and multifaceted www.cruzmarcelo.com legal issues, such as foreign ownership, partnerships and joint ventures, contracts, compliance and permitting, land acquisition, environment, and ancestral domains. It has also represented clients in both administrative and judicial cases. A multi-disciplinary approach, often involving collaboration with the firm’s other departments, allows the team to effectively service all of its clients’ business needs. The mining and natural resources team has been consistently cited in various international publications for offering concise, relevant and insightful

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Andrey Zharskiy

ALRUD Law Firm Timur Akhundov

12 Relevant Authorities and Legislation 1.3 Describe any other sources of law affecting the mining industry.

1.1 What regulates mining law? In addition to the main laws as listed above, mining issues are regulated by a number of regulations issued by the executive The main legislative acts regulating mining activities in Russia authorities of the Russian Federation. are: Thus, the Government of the Russian Federation determines ■ f Law o the Russian Federation No. 2395-1 dated (ed.) the procedure for establishing and changing the boundaries of August 3, 2018 “On Subsoil” (the “Subsoil Law”); subsoil plots granted for use, as well as regulating the provision ■ Federal Law on Precious Metals and Precious Stones; of preparation, alignment and approval of technical projects ■ Federal Law on Gas Export; for the development of mineral deposits. The Minprirody deter- ■ Federal Law on Continental Shelf of the Russian Federation; mines the procedure for issuing licences for the use of subsoil ■ Federal Law on Production Sharing Agreements; and resources, and determines the lists of subsoil allotments to ■ Federal Law on the Procedure for Making Foreign be transferred for exploration purposes. Rosnedra establishes Investments in Business Entities of Strategic Importance administrative regulations in certain areas related to the mining for the National Defence and Security of the Russian industry; for example, regulation on the issuance and registra- Federation (the “Strategic Law”). tion of licences for the use of subsoil, the renewal of licences and regulation on the changing boundaries of subsoil allot- 1.2 Which Government body/ies administer the mining ments, etc. industry? 22 Recent Political Developments The principal authorities with regulatory oversight over the Russian mining industry include the following: 2.1 Are there any recent political developments ■ The Ministry of Natural Resources and Ecology affecting the mining industry? (“Minprirody”) administers the licensing regime applicable to mining operations and supervises the work of the agen- Because of the existing political and constitutional situation cies and other authorities regulating the mining industry. in Russia, the mining industry and related activities are largely ■ The Federal Agency for Subsoil Use (“Rosnedra”) organises unaffected by any changes related to recent political develop- state geological studies, tenders and auctions for the right ments. However, the recent major diesel fuel spill by Norilsk to use subsoil, issues and revokes Subsoil Licences (see Nickel that polluted rivers in the Arctic area of Russia, resulting question 3.1), and maintains the state cadastre of deposits in Rosprirodnadzor having issued Norilsk Nickel a record fine of and the federal and territorial funds of geological data on nearly 148 billion rubles ($2.1 billion), drew a lot of attention the subsoil. at the political and societal level to the issue of environmental ■ The Federal Supervisory Service for Nature Management pollution, especially that which is caused by major oil, gas and (“Rosprirodnadzor”) supervises compliance by Subsoil mining companies Russia during their activities. Licence-holders with the terms of Subsoil Licences, monitors the environmental protection and the rational use of the subsoil, and performs regular audits of Subsoil 2.2 Are there any specific steps the mining industry is Licence-holders. taking in light of these developments? ■ The Federal Service for Ecological, Technological and Nuclear Supervision (the “Rostekhnadzor”) oversees compli- In response to the increased focus on environmental issues and ance with the industrial safety and ecological standards in prevention of environmental damage, the Russian Parliament the area of subsoil use, conducts ecological expert reviews and Government are considering draft laws that would intro- at federal level and performs regular audits of Subsoil duce new obligations for companies to provide financial security Licence-holders. for oil and fuel spills, and that would strengthen the influence Besides the above, the executive authorities of the constituent of the environmental oversight institutions and the enforcement entities of the Russian Federation, as well as local authorities, measures at their disposal. also take part in regulating the aspects of subsoil use within the scope of their competence.

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32 Mechanics of Acquisition of Rights ■ containing reserves of the following minerals within stated thresholds: ■ oil – extractable amounts starting from 70 million tons; 3.1 What rights are required to conduct ■ natural gas – starting from 50 billion m3; reconnaissance? ■ native gold – starting from 50 tons; and ■ copper – starting from 500,000 tons; Mining activities require a special subsoil licence which is issued ■ located in internal sea waters, territorial sea waters or on by Rosnedra (the “Subsoil Licence”). Considering this, in order the continental shelf of the Russian Federation; or to conduct reconnaissance activities, companies shall obtain a ■ which can only be developed using land designated for Subsoil Licence for a geological survey, including a search and defence and security purposes. evaluation of mineral deposits (the “Survey Licence”). Under Russian law, only a Production Licence or Combined Survey Licences may be granted for a maximum period of Licence can be issued for Federal Significance Plots. Survey five years (up to seven years for survey operations carried out in Licences cannot be issued for such plots. certain regions of Russia, and up to 10 years for offshore fields) If such amounts of extractable minerals as mentioned above and can be extended if needed for completion of the works. are revealed at some time during the exploitation stage, a licence- The plan, volumes and terms of the geological survey within user with foreign participation shall obtain clearance from the the licence terms must be approved by a separate project or special Governmental Committee, which may refuse to give technical project, which is developed by the licence-user and permission for further development of the mineral deposit to approved by Rosnedra. licence-users controlled by a foreign entity. As a general rule, Survey Licences are issued without a tender or auction, based on the application of the candidate. 3.5 Are different procedures applicable to natural oil and gas? 3.2 What rights are required to conduct exploration? In Russian legislation, there is no significant difference in To conduct exploration, it is required to either receive a sepa- Subsoil Licences issued for the development of oil and gas rate licence for exploration and the production of minerals (the deposits. However, it should be kept in mind that each gas or oil “Production Licence”), or to have the combined licence for both Subsoil Licence shall have technical projects for field develop- geological survey, exploration and production (the “Combined ment, which set specific deadlines, methods and types of work Licence”) and proceed to exploration once the geological survey to be performed for each stage of subsoil activities. Technical has been completed. projects for field development differ from other development Production Licences and Combined Licences can be issued projects (for example, exploration projects, well trial operation for a term equal to the life of the project; however, in practice projects, or field conservation projects) in that they have a more they are usually granted for 20- or 25-year terms and can gener- difficult approval procedure and potentially stricter liability for ally be extended provided there are no violations of the licence non-compliance. terms and conditions by the licence-holder. Production Licences and Combined Licences can be granted only through a tender or 42 Foreign Ownership and Indigenous auction, except for specific cases, e.g. for licences in relation to Ownership Requirements and Restrictions strategic deposits included by the Russian Government in a list of strategic deposits that are to be licensed by a decision of the Government without a tender/auction. 4.1 What types of entity can own reconnaissance, exploration and mining rights? Exploration must be conducted in accordance with the project or technical project for exploration. There is a general provision in the Subsoil Law that entrepre- neurs, including participants in a simple partnership, as well as 3.3 What rights are required to conduct mining? foreign citizens and legal entities, can obtain a Subsoil Licence, and thereby acquire the right to conduct mining activities (the The Production Licence or the Combined Licence is required. “subsoil user”). However, due to ancillary requirements for In addition, the legal entity intending to conduct mining activi- subsoil users, in practice the vast majority of subsoil users are ties shall obtain a number of supplementary permits and licences Russian companies (whether owned by Russian persons or by to carry out mining activities in practice (for example, a mining foreign investors). allotment, environmental assessment and permits, project development documentation, licences for conducting hazardous 4.2 Can the entity owning the rights be a foreign entity activities, and a mine surveying licence, etc.). or owned (directly or indirectly) by a foreign entity and are there special rules for foreign applicants? 3.4 Are different procedures applicable to different minerals and on different types of land? As mentioned above, in practice, subsoil users are usually Russian companies, although foreign individuals and entities Russian legislation does not provide any specific procedures for can be their shareholders, subject to a number of restrictions. different types of minerals. However, the legislation identifies Federal Significance Plots may only be operated by Russian certain types of subsoil plots, to which some restrictions apply. legal entities. Besides that, if Federal Significance Plots are The subsoil plots of federal significance (the “Federal located on the continental shelf, then the subsoil user shall have Significance Plots”) are subsoil plots: at least five years of experience in implementing similar offshore ■ containing occurrences of uranium, diamonds, nickel, projects, and the charter capital of such Russian companies shall cobalt, tantalum and other; be more than 50% owned by the state or state corporations.

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If, during the geological study, a deposit is revealed, and it 5.2 Are there restrictions on the export of minerals and meets the Federal Significance Plots criteria, the subsoil user levies payable in respect thereof? with participation of a foreign investor must obtain the prior approval of the Russian Government for further development With a few exceptions, there are no restrictions on the export of of the deposit. If approval is denied, the foreign investor has minerals. There are no export duties on minerals, although there the right to be compensated by the state for certain costs of the are several exceptions (for example: oil; oil products; gas, etc.) geological survey. The export of gas is licensed and only special state-controlled entities hold such licences. 4.3 Are there any change of control restrictions Under the legislation of the Russian Federation, the export applicable? of precious metals (raw or processed) from the territory of the Eurasian Economic Union shall be made on the basis of the As envisaged by the Strategic Law, a transaction, as a result of export licence issued by the Ministry of Industry and Trade. which a foreign private investor (other than a foreign state- The state (i.e., its federal or regional authorities) has the owned enterprise or foreign state) will gain control either directly pre-emptive right to purchase precious metals and gems from or indirectly over a Russian company that has a Subsoil Licence subsoil users. The authorised state bodies acquire precious for the Federal Significance Plot (the “Strategic Company”), metals and gems for the State Fund of Precious Metals and must obtain prior consent from the Government Commission Precious Stones or respective funds of constituting entities of the on Monitoring Foreign Investment. In this matter, the right to Russian Federation. In order to exercise such right, state author- exercise 25% or more voting rights – directly or indirectly – in ities must enter into a preliminary agreement with a subsoil user the subsoil user will constitute existence of foreign control. at least three months prior to the respective purchase, and must If the investors are controlled by foreign states or are estab- provide an advance payment for this. lished in certain offshore jurisdictions, the prior approval of the Governmental Commission is required for the transaction 62 Transfer and Encumbrance if such investors – directly or indirectly – obtain control over 5% of the voting shares in the Strategic Company. State-owned 6.1 Are there restrictions on the transfer of rights to foreign investors are not allowed to own – directly or indirectly – conduct reconnaissance, exploration and mining? 25% or more shares in the Strategic Company (subject to limited exceptions). Subsoil rights cannot be freely sold or otherwise transferred to another entity, except in certain limited circumstances specified 4.4 Are there requirements for ownership by by the Subsoil Law. Those instances comprise, inter alia: indigenous persons or entities? ■ the transfer of subsoil rights from a parent company to its subsidiary and vice versa, and transfer between the subsidi- There are no such special requirements for indigenous persons aries of the same parent company; or entities in Russia. ■ transfer following a merger or consolidation of the licence- holder with or into another company; or ■ transfer following a spin-off or split-off of a new company. 4.5 Does the State have free carry rights or options to Nevertheless, a special decision by Rosnedra is required for acquire shareholdings? such transfer.

In the ordinary course of business, the state may acquire shares 6.2 Are the rights to conduct reconnaissance, in the charter capital of mining companies as well as control exploration and mining capable of being mortgaged or over them through various state-owned companies. Legislation otherwise secured to raise finance? does not envisage any special instrument for the state to acquire shareholdings in mining companies. None of the rights to conduct any mining activities can be subject to a pledge or any other encumbrance. In practice, any 52 Processing, Refining, Beneficiation and encumbrance (if necessary) is implemented in respect of share- Export holdings in the company holding a Subsoil Licence.

5.1 Are there special regulatory provisions relating to 72 Dealing in Rights by Means of processing, refining and further beneficiation of mined minerals? Transferring Subdivisions, Ceding Undivided Shares and Mining of Mixed Minerals In general, no special licences are applicable; however, any subsoil activities require project documentation, which has to be 7.1 Are rights to conduct reconnaissance, exploration approved by Rosnedra. and mining capable of being subdivided? Russian legislation provides for a number of restrictions concerning the processing of precious metals. For example, Given the limited list of reasons for the transfer of the Subsoil refining of precious metals can only be carried out by organi- Licence, any such subdivision or ceding of the mining is not sations included in the list approved by the Government of the envisaged by Russian law. Russian Federation.

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7.2 Are rights to conduct reconnaissance, exploration (iii) the term of the licence, (iv) the parties to the relationship and mining capable of being held in undivided shares? (private parties, public parties or both), (v) the type of relationship (lease, sublease, easement or division of the area), and (vi) the type of land parcel, etc. Russian law does not provide such possibility.

8.3 What rights of expropriation exist? 7.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary minerals? Russian legislation provides for the possibility of state withdrawal of both land and forest plots from private ownership for the As a general rule, the subsoil user is only entitled to explore for purpose of performing any subsoil-related works. The owners or mine the primary mineral in respect of which he was provided of the land plots shall receive the corresponding compensation. with the Subsoil Licence. Therefore, the right to explore or mine secondary minerals should be indicated in the Subsoil Licence. 92 Environmental Otherwise, a separate licence is to be obtained for the secondary minerals. 9.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and mining operations? 7.4 Is the holder of a right to conduct reconnaissance, exploration and mining entitled to exercise rights also over residue deposits on the land concerned? Among other authorisations, in order to perform mining activity, a company must obtain a favourable environmental assessment. Conducting reconnaissance, exploration and mining activities According to Russian legislation, any activity that may have an over residue deposits requires a separate Subsoil Licence, unless adverse impact on the environment (including mining opera- directly indicated in the Subsoil Licence. tions) is subject to special permitting or licensing to allow the specific negative impact on the environment (for example, an air pollution permit, a water pollution permit or a unified environ- 7.5 Are there any special rules relating to offshore mental permit, as applicable). exploration and mining?

9.2 What provisions need to be made for storage of Special requirements are established for the exploration and tailings and other waste products and for the closure of mining of subsoil areas located on the continental shelf or in the mines? territorial seas: the subsoil user must have five years of experience in operating subsoil areas on the Russian continental shelf, and the Russian Federation must have (indirect/direct) control Storage of tailings and other waste products requires a separate over 50% of the share capital of the subsoil user. Subsoil Licence to be obtained. As for the closure of mines, the respective provisions shall be stipulated in the Subsoil Licence. 82 Rights to Use Surface of Land 9.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right? 8.1 Does the holder of a right to conduct reconnaissance, exploration or mining automatically own the right to use the surface of land? In practice, the closure obligations are stipulated in a special technical project and include the obligation of decommissioning No, the right to use the surface of land shall be obtained by the by the end of the licence term and subsequent land reclamation. subsoil user separately from the Subsoil Licence, although the subsoil user does enjoy the priority right to request the provision 9.4 Are there any zoning or planning requirements of land or forest plots. Land or forest plots owned by the state applicable to the exercise of a reconnaissance, are provided to the subsoil user in a lease without an auction, exploration or mining right? as long as they are located within the borders of the licence. The terms of use of privately-owned land plots should be agreed The requirements are contained in the decommissioning tech- with the owners, but the owner should not unreasonably with- nical project. hold such use of land plots. In addition, the state can redeem (expropriate) private land for the purpose of carrying out natural resource activities at the expense of the subsoil user and then 102 Native Title and Land Rights lease this land. 10.1 Does the holding of native title or other statutory surface use rights have an impact upon reconnaissance, 8.2 What obligations does the holder of a exploration or mining operations? reconnaissance right, exploration right or mining right have vis-à-vis the landowner or lawful occupier? With regard to areas of traditional residence and traditional economic activity where a minority of indigenous people and Obligations may vary in accordance with precise terms of agree- other ethnic communities in Russia reside, a special legal regime ments, on the basis of which the land or forest plot is provided may be established for the use of land. In addition, in some for use (rent agreement, servitude). In general, the obligations cases it may be necessary to compensate for the losses suffered depend on a number of factors such as (i) the terms of the agree- by indigenous peoples. ment concluded between the parties, (ii) the terms of servitude,

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112 Health and Safety forming the basis of its legal order. The Constitution has supreme legal force and is directly applicable throughout the Russian Federation. In addition, the Constitution establishes that issues 11.1 What legislation governs health and safety in of possession, use and disposal of land, subsoil, water and other mining? natural resources and legislation on subsoil and environmental protection are in the joint jurisdiction of the Russian Federation All major aspects of mining operations are considered by Russian and the subjects of the Russian Federation. law to be hazardous industrial operations and are, therefore, regulated by the Federal Law on Industrial Safety at Hazardous 13.2 Are there any State investment treaties which are Industrial Facilities. Among other legislation concerning applicable? hazardous production and technical regulation, the Federal Law on Environmental Protection, Technical Regulation Law and Federal Law on Radiation Security of the population can be At the moment, the Russian Federation is not a party to any highlighted. In addition to that, the Russian Labour Code regu- specific state investment treaties applicable to the mining industry. lates general health and safety matters. However, Russia is a party to more than 80 bilateral international treaties on the encouragement and mutual protection of investments. 11.2 Are there obligations imposed upon owners, employers, managers and employees in relation to health and safety? 142 Taxes and Royalties

Employers shall follow safety regulations and instructions, and 14.1 Are there any special rules applicable to taxation of exploration and mining entities? managers must receive special training. As for the owners, their main obligation is to insure their liability for causing damage to third parties, along with holding briefings, ensuring safe Under the general rule, organisations and individual entre- working conditions, etc. preneurs recognised as users of subsoil under Russian law are obliged to pay mineral extraction tax, which is a federal tax, in addition to other taxes (profit tax, VAT and so on). 11.3 Are there any unique requirements affecting the mining industry in light of the coronavirus (COVID-19) pandemic? 14.2 Are there royalties payable to the State over and above any taxes? There are no specific requirements affecting the mining industry in the context of the coronavirus (COVID-19) pandemic in Russia. Despite the taxation, the fiscal regime for the use of subsoil The Russian Government provides support measures for compa- includes: nies in the sectors of the economy that are most affected by the ■ a bid fee to participate in a tender or auction; coronavirus, but mining companies do not fall into this category. ■ a signing bonus for the award of the Subsoil Licence; However, the Government has stipulated that Subsoil Licences ■ one-time payments provided for the Subsoil Licence; which expire between March 15, 2020 and December 31, 2020 ■ regular payments for the use of the subsoil; are extended for 12 months automatically. ■ an environmental impact fee; and ■ rent under land or forest lease agreements. 122 Administrative Aspects 152 Regional and Local Rules and Laws 12.1 Is there a central titles registration office? 15.1 Are there any local provincial or municipal laws that need to be taken account of by a mining company over The main issuer of Subsoil Licences is Rosnedra, alongside its and above National Legislation? local bodies.

Regions of the Russian Federation may enact their own laws and 12.2 Is there a system of appeals against administrative administrative acts on the matter. However, they only regulate decisions in terms of the relevant mining legislation? local subsoil plots, whereas federal subsoil plots remain under federal legislation. As an example, certain Russian regions enact Depending on the type of dispute, they can be resolved by the their own subsoil laws (e.g., Moscow region, Nizhny Novgorod next higher state authority, arbitrazh court (state commercial region, Republic of Tatarstan, Republic of Komi). In most cases, courts) and courts of general jurisdiction. There is a system of the regional legislation simply adds details to the federal laws courts, which are entitled to decide on appeal. In general, arbi- rather than introducing entirely new region-specific regulations. trazh courts and general jurisdiction appeal courts are authorised to review in appellate proceedings the legality of judicial acts. 15.2 Are there any regional rules, protocols, policies or laws relating to several countries in the particular region 132 Constitutional Law that need to be taken account of by an exploration or mining company? 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and mining? Given that Russia is a party to the Eurasian Economic Union (“EAEU”) and the Commonwealth of Independent States The Constitution is the fundamental law of the Russian Federation, (“CIS”), the respective rules established within these organisations

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or by their party-members will apply. These are primarily rules if in order to sustain the rational use and protection of subsoil set in the Customs Code of the EAEU, the Single Commodity resources, it is impossible or not feasible to suspend the extrac- Nomenclature of Foreign Economic Activity, separate legal acts tion of mineral products, the bodies which have ordered the enacted by the CIS party-members, etc. early termination of the right to use a corresponding subsoil plot may grant the right to short-term (up to one year) use of such 162 Cancellation, Abandonment and a subsoil plot to another legal entity (the operator) until a new Relinquishment subsoil user is appointed.

16.1 Are there any provisions in mining laws entitling the 16.3 Are there any entitlements in the law for the State holder of a right to abandon it either totally or partially? to cancel an exploration or mining right on the basis of failure to comply with conditions? Under the Subsoil Law, the subsoil user may give up the Subsoil Licence. In this case, the licence is fully revoked, and the subsoil Rosnedra may revoke the licence on several grounds, e.g. when the deposit shall be returned to the state. The licence-holder shall subsoil user fails to satisfy or violates material terms of the Subsoil submit a notice of relinquishment of his right to the use of Licence. In practice, this measure is applied in cases where the subsoil in writing to Rosnedra no later than six months prior to subsoil user has failed to eliminate the identified violations. the specified date of relinquishment. Material terms, violation of which may result in revocation of the The legislation does not envisage a partial waiver of a licence. Subsoil Licence, are directly listed in the text of the licence itself. However, in some cases, it is possible to amend the terms of the In practice, the material terms are the deadlines for completing the Subsoil Licence as long as specifically agreed by Rosnedra. various stages of the project, the deadlines for the development of technical documentation, the deadlines for deposits to become operational, etc. 16.2 Are there obligations upon the holder of an exploration right or a mining right to relinquish a part thereof after a certain period of time?

The Russian legislation directly prescribes cases where the holder of a Survey Licence or Production Licence is obliged to relinquish a part thereof after a certain period of time. However,

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Andrey Zharskiy is a Partner at ALRUD. He is Head of the Energy, Natural Resources and Infrastructure Industry Group, and he also heads the Real Estate Practice. Andrey has more than 20 years of experience in legal support of M&A/joint ventures, commercial and infrastructure projects within the energy and mining sectors, advising leading international and Russian companies in respect of their high-profile and large-scale transactions and joint ventures in Russia and abroad. His expertise includes oil & gas downstream and upstream projects, LNG projects, mining projects in Russia and Africa, infrastructure projects and financing matters. Andrey assists clients with all legal issues arising during a project’s implementation, including on regulatory issues related to subsoil use and environment. Chambers Global and Europe, and The Legal 500 rank Andrey in top bands for energy & natural resources practice. The Legal 500 recommends Andrey in PPP and infrastructure projects and real estate/construction.

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Timur Akhundov is a Senior Associate of the Energy, Natural Resources and Infrastructure Practice. Timur has experience in conducting due diligence, and in structuring and support for M&A transactions, particularly in the oil & gas and mining sectors. Timur also has deep expertise in production-related regulatory issues, environment, industrial safety and licensing, and he has crucial experience of consulting clients on the regulatory issues for natural resources and infrastructure industries. Clients praise Timur for his diligence, wide knowledge in many areas of law, his mastery of various foreign languages and his ease of communication.

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ALRUD is one of the leading full-service Russian law firms, serving domestic companies and global commodity traders, engineering and construction and international clients. We stand for high-quality advice, excellent service companies, who have been assisted by ALRUD in respect of their oil, gas and rigorous ethical standards. Established in 1991, ALRUD is widely recog- (including LNG), metal, coal, platinum, gold and other non-ferrous and nised as one of the leading and most reputable Russian law firms. precious metals projects in Russia. ALRUD serves clients across a range of industries, including energy and www.alrud.com natural resources, and mining. The team regularly advise international and Russian clients on corporate (M&A, joint venture), commercial and infrastructure projects within these industries (including oil & gas, downstream and upstream projects, LNG projects, mining projects and infrastructure projects), assisting the clients with all complicated legal issues arising during a project’s implementation. Among ALRUD’s clients are major international and Russian oil and mining companies, leading oil service

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South Africa South Africa

Lili Nupen

Nicole Limberis-Ritchie

Nupen Staude de Vries Inc. Chantal Murdock

12 Relevant Authorities and Legislation ■ NEMA and the specific environmental management Acts; ■ municipal by-laws; and ■ Minerals Act, 1999 (where applicable). 1.1 What regulates mining law? In addition, the Constitution of the Republic of South Africa, 1996 (“Constitution”) is the supreme law of the country, and its Mining law is predominantly regulated by the Mineral and principles guide the interpretation of the applicable legislation. Petroleum Resources Development Act, 2002 (“MPRDA”), The law of contract also often applies in instances where, for read with the Mineral and Petroleum Resources Development example, rights have been sold to third parties, or where access Regulations (“Regulations”) promulgated in terms thereof. The agreements have been concluded with landowners and/or lawful MPRDA must be considered with the National Environmental occupiers of land affected by such rights. Management Act, 1998 (“NEMA”), which is the primary statute Where applicable, the common law may also apply. that regulates the environmental-related aspects of mining. 22 Recent Political Developments 1.2 Which Government body/ies administer the mining industry? 2.1 Are there any recent political developments affecting the mining industry? In terms of the MPRDA, the State is the custodian of all minerals. The Minister of Mineral Resources and Energy The Broad-Based Socio-Economic Empowerment Charter for (“Minister”) has the authority to grant, suspend and cancel the Mining and Minerals Industry, 2018, as amended (“Charter”) mining and/or prospecting rights in respect of those minerals. was published on 27 September 2018 and commenced on 1 March The Department of Mineral Resources and Energy (“DMRE”) 2019, which has resulted in the industry being required to comply is responsible, through both its national and regional offices, with the additional obligations imposed therein. In terms of the for administering and enforcing compliance with the MPRDA. Charter, a holder of a mining right is required annually to report The DMRE is also responsible for administering and enforcing on its compliance, with the first submission due on 31 March 2020. the environmental legislation applicable to the mining industry. This date was subsequently extended as a result of the national State of Disaster declared in response to the COVID-19 outbreak. Another recent development was the amalgamation of the 1.3 Describe any other sources of law affecting the Department of Energy and the Department of Mineral Resources, mining industry. to establish the DMRE, being the regulatory entity which administers applications related to mining and prospecting, and monitors The mining industry is regulated predominantly by the MPRDA, compliance in respect of these activities. with several additional pieces of legislation also finding applica- Furthermore, various amendments to the Regulations were tion, such as the: published on 27 March 2020. These amendments are aimed at ■ Mineral and Petroleum Resources Royalty Act, 2008 providing clarity in respect of a number of procedural issues expe- (“Royalty Act”) and the Mineral and Petroleum Royalty rienced by the industry, and contemplate greater engagement with (Administration) Act, 2008; interested and affected persons throughout the life cycle of the ■ Mining Titles Registration Act, 1967; mine. ■ Diamonds Act, 1986 (“Diamonds Act”); ■ Precious Metals Act, 2005 (“Precious Metals Act”); ■ Mine Health and Safety Act, 1996 (“MHSA”); 2.2 Are there any specific steps the mining industry is ■ Labour Relations Act, 1995; taking in light of these developments? ■ National Water Act, 1998 (“National Water Act”); ■ Spatial Planning and Land Use Management Act, 2013; The mining industry has implemented several changes to the

status quo so as to comply with the Charter and the Regulations. 3.5 Are different procedures applicable to natural oil Significant steps must now be taken to encourage meaningful and gas? economic participation by historically disadvantaged persons; particularly women and youth. Furthermore, enhanced commu- The MPRDA also regulates oil and gas, but these resources have nity engagement is required, particularly in relation to the imple- been distinguished from mineral resources, and are adminis- mentation of Social and Labour Plans, increasing accountability tered by the Petroleum Agency of South Africa. of right holders to interested and affected parties. On 24 December 2019, the Minister published the Draft Upstream Petroleum Resources Development Bill (“Bill”) for 32 Mechanics of Acquisition of Rights comment. The Bill aims to regulate petroleum resources separately from mineral resources, and it is anticipated that once 3.1 What rights are required to conduct the Bill is finalised, the MPRDA will undergo consequential reconnaissance? amendments. The Minister also lifted a moratorium in December 2019 A reconnaissance permit must be obtained from the DMRE in which had been placed on onshore oil and gas exploration, save order to conduct a reconnaissance operation (which contemplates for hydraulic fracturing which is awaiting the finalisation of the any operation carried out for, or in connection with, the search draft legislative framework. for a mineral or petroleum resource by geological, geophysical and photo-geological surveys, which includes any remote sensing 42 Foreign Ownership and Indigenous techniques but does not include prospecting operations save for Ownership Requirements and Restrictions the acquisition and processing of new seismic data). Such permission is valid for one year and is not transferable or renewable. 4.1 What types of entity can own reconnaissance, exploration and mining rights? 3.2 What rights are required to conduct exploration? There are no restrictions on the types of entities that are permitted The MPRDA defines “exploration” and “prospecting” as two to hold rights granted in terms of the MPRDA. Therefore, any different concepts. Exploration contemplates the search for petro- natural or juristic person may hold such rights. leum resources, whereas prospecting contemplates the search for minerals. 4.2 Can the entity owning the rights be a foreign entity Before prospecting may begin, an applicant must apply to or owned (directly or indirectly) by a foreign entity and the DMRE for, and obtain, a prospecting right in terms of the are there special rules for foreign applicants? MPRDA and an environmental authorisation under NEMA. A prospecting right may be granted for a period of 5 years and Yes, provided that the holder of the right complies with the renewed once for a further 3 years. ownership requirements stipulated in terms of the Charter.

3.3 What rights are required to conduct mining? 4.3 Are there any change of control restrictions applicable? Before mining may commence, an applicant must obtain a mining right or mining permit in terms of the MPRDA, as well Any change in the controlling interest of a company that holds as an environmental authorisation in terms of NEMA. a mining or prospecting right in terms of the MPRDA requires A mining right may be granted for a period of up to 30 years, Ministerial consent prior to the implementation of the change. and renewed for further periods, each of which may not exceed The only exclusion is where the change in the controlling 30 years. interest occurs in respect of a listed company. A mining permit may only be granted in instances where the area concerned is less than 5 hectares in extent and can be mined optimally within a period of 2 years. 4.4 Are there requirements for ownership by In addition, the holder of a mining right must ensure that the indigenous persons or entities? designated mining area has been appropriately zoned in terms of the relevant by-laws. The Charter imposes certain ownership requirements on compa- Depending on the nature of the intended activities, a mining nies that hold mining rights granted under the MPRDA. right holder may also need to obtain other licences or permits, The Charter imposes different requirements for existing mining including a water use licence, an atmospheric emissions licence right holders, new mining right applicants, and pending mining and/or a waste management licence. right applicants. If an existing mining right holder, at any stage during the existence of the mining right, had a minimum 26% Black Economic 3.4 Are different procedures applicable to different minerals and on different types of land? Empowerment (“BEE”) shareholding, it will be recognised as compliant with the Charter for the remaining period of the mining right, alternatively until the mining right is renewed or No, there are no different procedures applicable in terms of the transferred to a third party. Pending applications lodged and MPRDA for different minerals and on different types of land. accepted before the commencement of the Charter will require Section 48 of the MPRDA, however, prohibits prospecting a minimum amount of 26% BEE shareholding with a period of or mining in respect of particular land, including: a residential 5 years in which to increase such shareholding to 30%. area; any public road, railway or cemetery; land being used for A new mining right applicant must have, as a minimum, 30% public or government purposes; or certain areas identified by BEE shareholding, which is to be held as follows: the Minister by notice in a Gazette.

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■ 5% non-transferable carried interest to be held by the concerned must undertake that any sale in execution, or any “host community”; other disposal pursuant to the foreclosure of the mortgage, will ■ 5% non-transferable carried interest to be held by “quali- be subject to consent by the Minister. fying employees”; As foreign lenders may not fall within the definition of a ■ 20% effective ownership, in the form of shares, to be held “bank” or be recognised as an approved “financial institution”, by a BEE entrepreneur (5% of which must preferably be Ministerial consent will be required in the event that any encum- for women). brance of the right or a pledge of shares with the company that holds such rights is perfected. 4.5 Does the State have free carry rights or options to acquire shareholdings? 72 Dealing in Rights by Means of Transferring Subdivisions, Ceding Undivided The State does not have free carry rights or options to acquire Shares and Mining of Mixed Minerals shareholding in mining or prospecting rights. 7.1 Are rights to conduct reconnaissance, exploration 52 Processing, Refining, Beneficiation and and mining capable of being subdivided? Export A right granted in terms of the MPRDA may be varied, with 5.1 Are there special regulatory provisions relating to the written consent of the Minister, in order to extend or reduce processing, refining and further beneficiation of mined the area covered by it, or to include (or excise) any additional minerals? minerals or a share of seams covered by such right. As an example, back-to-back applications may be submitted The MPRDA includes provisions that permit the Minister to to the DMRE to obtain Ministerial consent to have an area promote the beneficiation of minerals in South Africa. excised from one right and incorporated into an adjacent right. In order to promote and encourage beneficiation, the Charter This often results in consequential adjustments having to be also provides that mining companies may offset the value of the made to the relevant Environmental Management Programmes, level of beneficiation achieved by the company against its BEE Environmental Authorisations, Social and Labour Plans and ownership requirements. Mining Work Programmes. The Diamonds Act and Precious Metals Act contain local beneficiation requirements, and provide that persons who wish 7.2 Are rights to conduct reconnaissance, exploration to process, refine, beneficiate, sell, import or export precious and mining capable of being held in undivided shares? metals (in unwrought or semi-fabricated form) and unpolished diamonds must first obtain the relevant licence to do so. Rights were often held in undivided shares under the common law. The enactment of the MPRDA has not changed this position. 5.2 Are there restrictions on the export of minerals and levies payable in respect thereof? 7.3 Is the holder of rights to explore for or mine a primary mineral entitled to explore or mine for secondary If a person intends to beneficiate minerals outside of South minerals? Africa, this may be done only once there has been written notice and consultation with the Minister. Furthermore, any The holder of a right is only permitted to mine or prospect for the person who intends to export precious metals and unpolished minerals specifically granted to it as detailed in that right. Should diamonds must obtain the necessary licences issued in terms of the presence of secondary minerals in the land concerned be the Diamonds Act or Precious Metals Act, as applicable. determined, the holder may not extract and/or dispose of them unless it applies for, and is granted, an amendment to its right to 62 Transfer and Encumbrance include these minerals. However, if the holder has been contracted to extract such 6.1 Are there restrictions on the transfer of rights to minerals by the holder of a relevant right, on behalf of that holder conduct reconnaissance, exploration and mining? and for that holder’s benefit, this is permitted.

Mining and prospecting rights may only be transferred with the 7.4 Is the holder of a right to conduct reconnaissance, written consent of the Minister. However, it must be noted that exploration and mining entitled to exercise rights also mining permits and reconnaissance permissions are not trans- over residue deposits on the land concerned? ferable at all. If a residue stockpile is created on land by the holder of the mining 6.2 Are the rights to conduct reconnaissance, right during the course of its operations conducted in terms of the exploration and mining capable of being mortgaged or MPRDA, it will be entitled to process such stockpile, provided otherwise secured to raise finance? that it has received the necessary, inter alia, waste management licence to do so. A right will be required in order to prospect It is possible to encumber a mining or prospecting right to raise or mine a residue deposit, which is a residue stockpile remaining finance; however, the MPRDA generally requires prior consent at the termination, cancellation or expiry of a prospecting right, from the Minister in such instances, unless the lender is a “bank” mining right, mining permit, exploration right, production right as defined in terms of the Banks Act, 1990, or a financial institu- or old order right, which has acceded to the land. tion approved for that purpose. The bank or financial institution

7.5 Are there any special rules relating to offshore There may be a number of additional licences required, exploration and mining? depending on the activities that will be conducted. For example, where water uses as defined in the National Water Act will be triggered, a water use licence is required. The MPRDA does not contain any special rules relating to offshore exploration or mining. 9.2 What provisions need to be made for storage of 82 Rights to Use Surface of Land tailings and other waste products and for the closure of mines?

8.1 Does the holder of a right to conduct reconnaissance, exploration or mining automatically Residue stockpiles and residue deposits are regulated by the own the right to use the surface of land? Waste Act. In order to process and store a “residue stockpile” as defined in terms of the MPRDA, a waste management licence Although the MPRDA does not grant ownership of the surface may be required. If it is intended that a “residue deposit” as of the land to the holder of a mining or prospecting right, it does defined in terms of the MPRDA is to be processed, a mining provide the holder with a statutory right to enter the land to right or permit and a waste management licence will be required. which the right relates together with its employees, after written A waste management licence is also required for the storage of notice, and to bring onto the land any plant, machinery or equip- tailings. In addition, the regulations regarding the planning and ment and build, construct or lay down any surface or under- management of residue stockpiles and residue deposits from a ground infrastructure which may be required for the purpose of prospecting, mining, exploration or production operation, apply. prospecting or mining. Closure is covered below. There is a requirement, prior to being granted a mining or prospecting right, to provide sufficient financial provision to cover the costs of rehabilitation. This 8.2 What obligations does the holder of a financial provision must be assessed annually and, where neces- reconnaissance right, exploration right or mining right sary, increased by the holder. have vis-à-vis the landowner or lawful occupier?

9.3 What are the closure obligations of the holder of a Before a mining or prospecting right or reconnaissance permit is reconnaissance right, exploration right or mining right? granted, the applicant has an obligation to consult with the landowner or lawful occupier. Once the right concerned is granted, the holder thereof must Closure is regulated in terms of NEMA read with the provide the landowner or lawful occupier with at least 21 days’ Environmental Impact Assessment Regulations, the Financial written notice that it intends to come onto the land and commence Provisioning Regulations, and the MPRDA. operations in terms of its rights. To close an operation, an environmental authorisation must Furthermore, the MPRDA contemplates that compensation be obtained, and its requirements fulfilled, before a mine closure may be payable to the landowner or lawful occupier of the land certificate will be issued. Upon closure, a portion of the finan- in question, in the event that he or she has suffered, or is likely cial provision may be retained by the Minister to cover latent and to suffer, loss or damage as a result of the reconnaissance, pros- residual post-closure impacts. pecting or mining operations. The holder of a mining or prospecting right must apply for a There is no automatic legal obligation on the holder of a right closure certificate, within a prescribed period, after: under the MPRDA to make payment of any rental in respect of ■ the right has lapsed, is cancelled or is abandoned; the land. ■ the operations have ceased; or ■ the closure plan has been completed.

8.3 What rights of expropriation exist? 9.4 Are there any zoning or planning requirements applicable to the exercise of a reconnaissance, If it is necessary for the achievement of the objects of the exploration or mining right? MPRDA, and provided that it is in the national interest, the Minister may, in accordance with the Constitution, expropriate The affected land must be correctly zoned before prospecting any land or any right therein and pay compensation in respect or mining activities may commence. The precise requirements thereof to the affected party. differ depending on where the property is situated, as each municipal authority ordinarily has its own by-law and land use 92 Environmental scheme which applies.

9.1 What environmental authorisations are required 102 Native Title and Land Rights in order to conduct reconnaissance, exploration and mining operations? 10.1 Does the holding of native title or other statutory surface use rights have an impact upon reconnaissance, An environmental authorisation is required in terms NEMA exploration or mining operations? before the commencement of any prospecting or mining activities. Often an integrated application is made which includes activi- The court in Baleni & Others v the Minister of Mineral Resources and ties listed in terms of the National Environmental Management: Others, 2019 (2) SA 453 (GP) recognised the rights of people who Waste Act, 2008 (“Waste Act”), which activities require a waste occupy land in terms of any tribal, customary or indigenous management licence.

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law or practice of a tribe as defined in the Interim Protection terms of NEMA, there is a right to appeal the grant or refusal of Informal Land Rights Act, 1996. The court determined that of the related environmental authorisation to the Minister of the consent of a community which occupies such land must be Environment, Forestry and Fisheries. obtained before a mining right may be granted in respect thereof. An appeal should be submitted within 30 days of the affected person gaining knowledge of the relevant decision. 112 Health and Safety 132 Constitutional Law 11.1 What legislation governs health and safety in mining? 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and mining? The Mine Health and Safety Act, 1996 (“MHSA”), read with the regulations promulgated in terms thereof, governs health and safety in mining. The Constitution is the supreme law of South Africa and recognises the importance of security of tenure. Section 25 provides that no one may be deprived of property except in terms of the law 11.2 Are there obligations imposed upon owners, of general application, and no law may permit arbitrary deprivation employers, managers and employees in relation to health and safety? of property. “Property” is not confined to land, but also includes the right to mine or prospect. This means that the Constitution will provide protection to holders of rights and permits, and that Significant obligations are placed on the owners, employers, the holders will not be arbitrarily deprived of their rights unless managers and employees of a mine in relation to the health and same is for a public purpose or in the public interest. safety of the mine. In terms of the MHSA, there are a number of statutory appointments that need to be made in order for the owners, employers, managers and employees of the mine to 13.2 Are there any State investment treaties which are comply with health and safety obligations. Any breach of a duty applicable? contemplated in terms of the MHSA may attract criminal liability. South Africa had concluded several bilateral investment treaties (“ ”) after the abolishment of the apartheid regime in 1994. 11.3 Are there any unique requirements affecting the BITs mining industry in light of the coronavirus (COVID-19) Recently, however, a number of these BITs have been cancelled. pandemic? Instead, it is envisioned that foreign investment will be protected and secured in terms of the Protection of Investment Act, 2015, which came into effect on 13 July 2018. On 15 March 2020, and in response to the outbreak of the COVID-19 pandemic, a national State of Disaster was declared in South Africa. Pursuant thereto, and in order to delay the 142 Taxes and Royalties spread of the virus, the country was placed under national lockdown from 26 March 2020, which saw the implementation of 14.1 Are there any special rules applicable to taxation of restrictions on the movement of people. During this first phase exploration and mining entities? of the lockdown, only “essential mining” was permitted, whilst all other operations were placed in care and maintenance. Since Like all South African companies, mining companies are subject then, the restrictions were gradually lifted, and at present, all to the provisions of the Income Tax Act, 1962. operations have been permitted to resume, provided that the There are, however, special rules applicable to the taxation of mandatory Code of Practice on the Mitigation and Management prospecting and mining companies. In this regard, it is impera- of the COVID-19 Outbreak, prescribed by the Chief Inspector tive that a person who wishes to rely on these rules is the holder of Mines, has been adopted and implemented by the mine. of a prospecting or mining right as contemplated in terms of the MPRDA. 122 Administrative Aspects 14.2 Are there royalties payable to the State over and 12.1 Is there a central titles registration office? above any taxes?

The Mineral and Petroleum Titles Registration Office is the In terms of the Royalty Act, a person is required to pay a royalty central titles office which registers all mining rights, pros- for the benefit of the National Revenue Fund when a mineral pecting rights, amendments, cessions, and bonds relating to (within South Africa) is “transferred”, which includes instances such rights. There is an obligation on the holder of such rights, when the mineral is disposed of, stolen or lost. in terms of the MPRDA, to lodge its rights for registration within prescribed time periods. 152 Regional and Local Rules and Laws

12.2 Is there a system of appeals against administrative 15.1 Are there any local provincial or municipal laws that decisions in terms of the relevant mining legislation? need to be taken account of by a mining company over and above National Legislation? The MPRDA makes provision for appeals to be submitted by any person whose rights or legitimate expectations have been mate- The holder of a right will need to take cognisance of and comply rially and adversely affected, or who is aggrieved by any admin- with all relevant provincial and municipal laws. The applica- istrative decision taken in terms of the MPRDA. Similarly, in bility of these laws will need to be determined on a case-by-case

basis, and will depend on the area in which the operation is to 16.2 Are there obligations upon the holder of an be conducted. For example, municipal by-laws are often prom- exploration right or a mining right to relinquish a part ulgated to regulate noise, traffic and zoning in respect of land thereof after a certain period of time? which falls within its geographical jurisdiction. There is no obligation on the holder of a mining or prospecting 15.2 Are there any regional rules, protocols, policies or right to relinquish a part of a right after a certain period of time. laws relating to several countries in the particular region that need to be taken account of by an exploration or mining company? 16.3 Are there any entitlements in the law for the State to cancel an exploration or mining right on the basis of failure to comply with conditions? The Treaty of the Southern African Development Community (“ ”) should be taken into account, along with rules which SADC The Minister may cancel or suspend a right or permit in circum- contemplate exemptions from certain taxes to assist companies stances where the holder: within South Africa. ■ conducts the operations in contravention of the MPRDA; The intention of the SADC Treaty is to achieve, inter alia, ■ breaches a material term or condition of the relevant right, economic development, growth, alleviation of poverty, and permit or permission; enhancement of the standard and quality of life of people in ■ contravenes any condition in the environmental authorisa- Southern Africa. tion; or ■ has submitted inaccurate, false, fraudulent, incorrect or 162 Cancellation, Abandonment and misleading information for the purposes of the application Relinquishment or in connection with any matter required to be submitted under the MPRDA. 16.1 Are there any provisions in mining laws entitling the The holder must be afforded an opportunity to remedy the holder of a right to abandon it either totally or partially? contravention, breach or failure prior to the Minister cancelling or suspending the right, permit or permission. A holder of a right may abandon a right, wholly or in part. Abandonment does not negate the obligation placed on the holder to apply for a closure certificate.

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Lili Nupen has extensive experience in the environmental and mining legal regulatory arena. Previously, Lili was at Bowmans and a director of Malan Scholes Attorneys. She has a deep understanding of the South African mining industry and enjoys well-established relationships with its regulators. She has practical experience working on transactions involving both international and local mining companies throughout South Africa and Africa.

Nupen Staude de Vries Inc. Tel: +27 83 410 0075 18 Hurlingham Road Email: [email protected] Illovo, Sandton URL: www.nsdv.co.za Johannesburg South Africa

Nicole Limberis-Ritchie is an environmental law expert with experience in the public, civil society and private sectors. Her work spans the suite of environmental and mining legislation and includes air quality, water, biodiversity, coastal management, energy, mining, oil and gas, protected areas and waste management. In her career to date, Nicole has worked at the erstwhile Department of Environmental Affairs in the South African government, at Her Majesty’s Revenue and Customs in the United Kingdom and, most recently, at the Centre for Environmental Rights. She has strengthened relationships with the National Departments of Environmental Affairs, Forestry and Fisheries and the Department of Mineral Resources and Energy, Provincial Departments and agencies responsible for environmental issues, as well as local authority counterparts.

Nupen Staude de Vries Inc. Tel: +27 74 171 9924 18 Hurlingham Road Email: [email protected] Illovo, Sandton URL: www.nsdv.co.za Johannesburg South Africa

Chantal Murdock is a senior associate, with a focus in the mining regulatory practice of Nupen Staude de Vries Inc. She provides clients with advice on regulatory compliance and assists with the compilation and submission of various applications in terms of the MPRDA. Chantal also has experience in the execution and registration of cessions and amendments of mining rights, and has advised clients on litigious matters involving overlapping rights granted under the MPRDA. She completed her LL.B. and LL.M. through the University of Johannesburg and is also admitted as a notary and conveyancer. Chantal previously practised at Hogan Lovells Johannesburg Inc.

Nupen Staude de Vries Inc. Tel: +27 74 920 1924 18 Hurlingham Road Email: [email protected] Illovo, Sandton URL: www.nsdv.co.za Johannesburg South Africa

Nupen Staude de Vries Inc. is a boutique law firm specialising in Mining, Environmental and Construction Law. The firm was established by its directors, who had collectively accumulated many years of experience at both the ‘big five’ South African law firms and international law firms, in domestic and international matters. We are a dedicated team, combining in-depth knowledge and experience with an efficient, solution-oriented approach. We constantly review the latest legal developments in the specialised markets in which our firm operates, to ensure that we are able to advise on, and implement, the most relevant and appropriate solutions to the challenges faced by our clients. We pride ourselves on the deep relationships that we hold with all spheres of government, and have become the ‘go to’ firm for managing key relationships with regulators. www.nsdv.co.za

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John Dewar

Milbank LLP Emily Whittaker

12 Relevant Authorities and Legislation The exploitation of gold and silver is overseen by the Crown Estate and, in Scotland, the Crown Estate Scotland (together, TCE, established through the Crown Estate Acts of 1956 and 1.1 What regulates mining law? 1961) through Wardell Armstrong, the Crown Estate Mineral Agent. TCE also manages the seabed to the 12-nautical-mile Regulation of the mining industry follows the devolution of territorial limit and other rights including non-energy mineral certain powers relating to mining from the government of the rights out to 200 nautical miles in all parts of the UK. In this United Kingdom to the governments of Scotland, Wales and capacity, TCE grants licences for the extraction of marine sand Northern Ireland. As such, some law applies to the whole of the and gravel resources from the seabed, as well as such minerals as UK, while some applies only to a particular part of the UK. salt, potash and polyhalite occurring beneath the seabed. The principal sources of law in the UK are Acts of Parliament The Oil and Gas Authority (OGA), a State-owned company and associated statutory instruments, common law (essentially limited by shares, was formally established as an independent case law) and European Union law with effect in UK domestic law regulator under the Energy Act 2016 and is responsible for the (some of which will be replaced by new domestic law following licensing of offshore and onshore oil and gas operations in the the UK’s withdrawal from the EU). Mineral leases, planning UK, including exploration, production, decommissioning and consents and environmental consents will also contain terms and abandonment. conditions which mine operators need to comply with, and many In Northern Ireland, the Mineral Development Act (Northern of these will be tailored to the particular project and the nature Ireland) 1969 vested most minerals in Northern Ireland in the and location of the operations, imposing, for example, restrictions Department of the Economy. This enables the government of on traffic movements, limits on air and noise emissions and the Northern Ireland to grant exploration and production licences in need to decontaminate and restore the site after closure. its own name. The main exceptions to this right are (a) offshore The UK regulatory regime for mining also varies according to oil and gas deposits which are administered by the OGA, (b) gold the mineral in question. and silver which vest in the Crown, (c) “common” substances (including aggregates, sand and gravel), and (d) minerals which were being worked at the time of the 1969 Act. 1.2 Which Government body/ies administer the mining industry? As well as a licence to exploit minerals, planning consent is required to authorise any development works from the local mineral planning authority (MPA). The Government and to some extent local authorities set the The Health and Safety Executive (HSE), formed in 1975, policy framework within which the mining industry operates. enforces health and safety regulation in England, Wales and The general position under the law of property is that landowners Scotland, together with local authorities and other author- own the minerals beneath their land and are able to license the ised bodies. In Northern Ireland, health and safety regulation right to exploit them to third parties. However, in some cases, all is enforced by the Health and Safety Executive for Northern rights to search for and exploit minerals have been reserved for the Ireland. Crown; for example, all naturally occurring gold and silver (histor- Environmental regulation is undertaken by the national envi- ically referred to as Mines Royal) vest with the Crown, as well as ronmental regulators and, in some respects, the local authorities. oil and gas and all minerals occurring on and beneath the seabed The principal environmental regulator for England (and in some within 200 nautical miles of the coast. Licensing of exploration subject areas across the UK nations) is the Environment Agency and exploitation of these minerals is either conducted on behalf of (EA), formed under the Environment Act 1995; for devolved the Crown or by governmental bodies established for this purpose. matters in Scotland it is the Scottish Environmental Protection The ownership of the majority of unworked coal and coal Agency (SEPA), formed under the Environment Act 1995; in mines in the UK (excluding Northern Ireland) belongs to the Wales it is Natural Resources Wales (NRW) (established in 2013); Coal Authority. The Coal Authority, established under the and in Northern Ireland it is the Northern Ireland Environment Coal Industry Act 1994, is an executive, non-departmental Agency (NIEA), which has been established as an executive public body whose responsibilities include, amongst others, the agency within the Department of Agriculture, Environment and licensing of coal mining operations, the administering of coal Rural Affairs since 2016. Natural England additionally issues mining subsidence damage claims, and bearing the liability for licences under the wildlife and habitats conservation regime, as contaminated mine water caused by historic coal workings. The well as providing specialist input to other bodies. Coal Authority sometimes owns non-coal mines and minerals in coal mining areas.

1.3 Describe any other sources of law affecting the granted since the beginning of 2019, including the Woodhouse mining industry. Colliery site in West Cumbria – the first deep coal mine to be opened since the 1980s, with more new applications underway. However, the Government remains committed to achieving its The principal legislation affecting the mining industry in the commitments in the Paris Agreement on climate change and UK includes: legally binding UK domestic climate change targets for emis- (a) the Coal Industry Act 1994 establishing the Coal Authority sions reduction, which have recently been increased with the and setting out the framework within which the coal ambition of achieving a 100% reduction – compared to the 1990 industry currently operates; figures – by 2050. Furthermore, the COVID-19 pandemic has (b) the Mines and Quarries Act 1954 governing the manage- had a significant impact on coal production, with coal produc- ment and control of mines and quarries; tion in the first quarter of 2020 falling to a record low of 434 (c) the Mining Regulations 2014 replacing and consolidating thousand tonnes, a drop of 27% compared with the same period the previous mine-specific health and safety regulations in 2019. If such trends continue, the Government could achieve into a single set that are centred around major hazards its targets as set out in the Paris Agreement sooner than origi- within the underground mining sector; nally expected. (d) the Health and Safety at Work etc. Act 1974 and a large Foreign Investment: The UK’s public interest intervention regime body of health and safety regulations of general application under the Enterprise Act 2002 allows the Government to inter- across all sectors, which includes the: vene in the merger control process (usually confined to competi- (i) Explosives Regulations 2014; tion review by the CMA or European Commission) when strictly (ii) Control of Substances Hazardous to Health Regulations defined public interest considerations arise in relation to specified 2002; categories of transaction. In 2018, the Government published (iii) Dangerous Substances and Explosive Atmospheres the National Security and Investment White Paper setting out Regulations 2002; and proposals for a new national security review regime. On 22 (iv) Provision and Use of Work Equipment Regulations June 2020, the Government proposed two statutory instru- 1998; ments to strengthen the public interest merger provisions of the (e) the Environmental Permitting (England and Wales) Enterprise Act 2002. The first proposes to lower the thresh- Regulations 2016 and equivalents in the devolved regions; olds that are required be met before the Government can inter- and vene to review investments/mergers relating to artificial intelli- (f) the Town and Country Planning Act 1990. gence, advanced materials, and cryptographic authentication. At As a result of section 3 of the European Union (Withdrawal) the time of writing, such statutory instrument is subject to parlia- Act 2018, EU mining regulations (a form of directly appli- mentary debate and approval before it can become effective. cable EU legislation) have also continued in force after the The second arose following concerns that the Government UK’s exit from the EU on 31 January 2020. This will remain did not have sufficient powers to intervene in mergers or take- the case unless and until they are replaced with new domestic overs of UK incorporated businesses with a critical role in the laws, and domestic law implementing EU directives will be UK’s pandemic response. It came into effect on 23 June 2020 retained on the UK statute book (subject to necessary amend- as an amendment to the Enterprise Act 2002 and provides the ments to ensure its continued efficacy). The extent of legisla- Government with the power to intervene in a transaction if such tive and policy changes occurring post-Brexit is yet to be seen. transaction is relevant to “the need to maintain in the United With respect to health and safety and environmental regulation Kingdom the capability to combat, and to mitigate the effects in particular, the current expectation is that those provisions of, public health emergencies” provided that such transaction deriving from EU law are unlikely to change substantially in the would satisfy the usual UK merger control thresholds. The short term as a result of Brexit, and the UK may be obliged in intention is for such amendment to act as a short-term solution the terms of a subsequent trade deal with the EU to maintain only, with the aim that a more comprehensive set of powers will equivalent standards. be presented in the National Security and Investment Bill (NSI) that is expected later this year. 22 Recent Political Developments The non-petroleum extractive sector is currently not specifically referenced in the UK’s public interest interventions regime 2.1 Are there any recent political developments and is not listed in the Policy Statement attached to the White affecting the mining industry? Paper as one of the core areas likely to be covered by the new foreign direct investment (FDI) regime if it comes into force. Brexit: The impact on the mining industry following the UK’s However, as an area where concerns for public interest have withdrawal from the EU on 31 January 2020 remains to be been identified, mining remains an industry which might in the seen. The industry on average does not expect any significant future be brought within this regime. changes, although some also hope for some relaxation of the regulatory regime and other measures aimed at supporting local 2.2 Are there any specific steps the mining industry is mineral producers. There is, however, the possibility that the taking in light of these developments? mining industry could face some difficulties as a result of labour shortages, resulting from the termination of the EU’s freedom of movement policy, which could have an impact on the cost and Coal: The industry has been quick to applaud what it inter- availability of mine workers. prets as changing attitudes towards coal mining in the UK, Coal: An industry which may benefit the most in conjunction and hopeful voices among the industry commentators have with, if not as a direct result of, Brexit, is coal mining. Despite suggested that this could signify a reversal of the Government’s the Government’s previously announced plans to shut down the policy towards coal. This was further reinforced by the periods remaining coal-fired power stations in the country by 2025, as of surges in the wholesale price of less-polluting gas which made part of the country’s commitment to reduce its carbon footprint, it cheaper for utility companies to generate power from coal, as several new coal licences and planning permissions have been well as the continuing domestic demand for coking coal used in

the steel-making process. However, the Government has made Having the right to conduct reconnaissance or exploration it clear that phasing out the mining and production of coal is works does not automatically grant the right to access the land essential in order to achieve its 2050 goal of carbon neutrality. where the relevant deposit is located. Such rights can only be Indeed, Hargreaves Services, one of the largest remaining oper- obtained directly from the landowner, generally in the form of a ators of surface mines in the UK, has announced plans to termi- lease. Alternatively, the freehold title to the land can be acquired, nate its mining facility and wind down its UK mining operations but this happens relatively rarely in practice, for economic reasons. due to coal’s perceived ‘limited future’; whilst Coelbren, one of Unless categorised as a permitted development, exploration the last open-cast coal mines in South Wales, has been closed by works would typically also require a planning permission, which the Welsh Government’s decision not to issue the project with a will need to be obtained from a local MPA. In some cases, an mining licence on environmental grounds. exploration licence will be issued which is conditional on the Large-scale projects: Outside of fossil fuels, the mining industry licensee obtaining such planning permission. Obtaining plan- has been given impetus with new projects, such as the Woodsmith ning permission will likely require the applicant to undertake an mine in North Yorkshire. The Woodsmith mine is considered environmental impact assessment. to be the largest known high-grade resource of polyhalite (a As well as planning permission, the operator may need one or multi-nutrient fertilizer which combines calcium, magnesium, more environmental permits from the relevant environmental potassium and sulphur) in the world. Sirius Minerals plc – the regulator. original developer of the mine – announced plans to make it fully operational from the end of 2021. However, funding chal- 3.3 What rights are required to conduct mining? lenges resulted in the mine being sold to Anglo American in March 2020. Despite some interference to the project timeline as a result of COVID-19, the project is reportedly on track, and Once exploration works are completed, extraction will require a is expected to employ up to 1,000 people and support an addi- production-type licence form the owner of the mineral resource. tional 1,500 in the wider economy. Nevertheless, the availa- The applicable requirements will depend on the mineral in ques- bility of funding for capital-intensive projects remains the key tion and whether it is Crown- or privately-owned (as described challenge for the non-fossil fuel sector in the UK, and is cited as in question 3.2 above). the main reason for suspension of operations at the Drakelands The licensee will also require continued access to land and mine in Devon, host to the fourth-largest tin-tungsten deposit planning permission for the extraction works. Any environ- in the world, after its operating company – Wolf Minerals (UK) mental permits obtained at the exploration stage are likely to Limited – went into liquidation in late 2018. A new owner has, require variation (see section 9 for more detail on this). however, since acquired control of the mine and announced plans to reopen it in due course. 3.4 Are different procedures applicable to different minerals and on different types of land? 32 Mechanics of Acquisition of Rights Different procedures, as established and enforced by the relevant 3.1 What rights are required to conduct government agency or other public body, will apply to different reconnaissance? publicly-owned minerals, including coal, gold and silver. Even when dealing with the same mineral, the procedure may also Please refer to question 3.2 below. vary depending on whether the licence is sought for onshore or offshore operations. Privately-owned minerals will be accessed on the terms agreed 3.2 What rights are required to conduct exploration? with the relevant landowners and are not subject to any specific procedural requirements. Regardless of the ownership of the The rights required for reconnaissance and exploration will mineral in question, all extractive companies must, however, depend on the type of mineral and its ownership. All minerals in comply with all applicable laws concerning health and safety, the UK are owned privately, apart from those expressly reserved environmental protection and planning when conducting their for the Crown or a specific public authority (such as coal, gold, operations. silver, and the mineral resources on and beneath the seabed within 200 nautical miles of the coast). 3.5 Are different procedures applicable to natural oil For State-owned minerals, the licensing requirements and and gas? procedures will be set out by the competent government authority or public body and are applicable to all prospective licensees in the same way. The process will culminate in the decision to grant The regulatory regime applicable to oil and gas exploration and (or to refuse the grant of) an option, lease or licence for a speci- production in the UK (with the exception of the onshore territory fied period of time and usually subject to certain conditions that of Northern Ireland) and on the UK Continental Shelf (UKCS) the licensee will undertake to fulfil during the term of the grant. is set out in the Petroleum Act 1998. Under the Petroleum Act, The terms of coal licences and oil and gas licences in particular all rights to petroleum including the rights to “search and bore have long been standardised and are set out in model form docu- for, and get” petroleum, are vested in the Crown. Any explo- ments which can be accessed on the Coal Authority and OGA ration or production of petroleum therefore requires a licence websites. In contrast to this, the terms on which privately-owned from the OGA. A separate regime applies to onshore oil and minerals can be exploited will be determined by, and agreed with, gas in Northern Ireland, established under the powers devolved the landowners directly, and are not subject to any country-wide to the Northern Ireland Assembly. regulations (save for health and safety and environmental regula- The OGA issues production licences through competitive tions which apply to the exploration of State- and privately-owned licensing rounds. A requirement for offshore licences is that the minerals in the same way). bidder must promise to maximise the economic recovery of the

UK’s oil and gas resources. The OGA can only accept licence will be determined under the terms of the licence. For example, applications in respect of a formal invitation to apply. The the model clauses for coal licences issued by the Coal Authority process will usually start with publication of the invitation in the require the licensee to notify the Coal Authority of any change of Official Journal of the European Union, with applications only control of the licensee. Such notification will contain the details being submitted at least 90 days later. There may be exceptional of the financial standing and controlling persons of the intended circumstances where it would be reasonable for a company not transferee, the experience and expertise of the transferee and its to have to wait for the next licensing round to get a licence, so controlling persons, as well as the proposals of the transferee the OGA also has an out-of-round application process. It can with regard to the carrying out of future coal mining operations only be used if justified by exceptional circumstances, and is not within the licensed area. On receipt of the notification, the Coal a routine alternative to licensing rounds. Authority may impose such conditions as it thinks fit to ensure Petroleum licences can be held by a single company or by several that the terms of the licence will be complied with. companies working together, though in legal terms there is only If certain turnover/share-of-supply thresholds are exceeded, ever a single licensee; however, it may comprise many companies. the acquisition of a mining company will be caught by the UK’s All companies on a licence share joint and several liability for obli- general merger control regime and may be reviewed by the UK’s gations and liabilities that arise under it. Each licence takes the Competition and Markets Authority (CMA) or, if higher turn- form of a deed, which binds the licensee to obey the licence condi- over thresholds are exceeded, be required to be notified to the tions, regardless of whether or not it is using the licence at any European Commission. (Following the UK’s exit from the EU given moment. on 31 January 2020, from the end of the transition period on Additional requirements apply to onshore high-volume 31 December 2020, the CMA is expected to have jurisdiction hydraulic fracturing (or fracking) operations. In particular, to review larger transactions which are currently notifiable to operators are required to undertake detailed geological studies the European Commission.) If the proposed acquisition raises and submit a Hydraulic Fracture Plant (HFP) to the OGA any national security concerns, a national security assessment (and also the EA) setting out how they propose to control and may also be undertaken at this stage, although as noted in ques- monitor the fracturing process and assess the risk of induced tion 2.1 above, the mining sector is not specifically referenced seismic activity. The HFP must then be approved independently in the UK’s public interest interventions regime and is not listed by both regulators, with the HSE having had the opportunity to in the Policy Statement attached to the Government’s National comment. Consent from the department for Business, Energy Security and Investment White Paper or the statutory instru- & Industrial Strategy (BEIS) will also be required to commence ments proposed by the Government on 22 June 2020 with a hydraulic fracturing operations. view to strengthening the public interest merger provisions of the Enterprise Act 2002, as one of the core areas likely to be 42 Foreign Ownership and Indigenous covered by the new FDI regime if it comes into force, and so Ownership Requirements and Restrictions transactions in respect of purely mining companies, as a rule, seem unlikely to raise such concerns under the FDI regime.

4.1 What types of entity can own reconnaissance, exploration and mining rights? 4.4 Are there requirements for ownership by indigenous persons or entities? There are no formal requirements as to the type of entity which can be granted reconnaissance, exploration and mining rights. There are no indigenous ownership entitlements in the UK.

4.2 Can the entity owning the rights be a foreign entity 4.5 Does the State have free carry rights or options to or owned (directly or indirectly) by a foreign entity and acquire shareholdings? are there special rules for foreign applicants? The Government does not have free carry rights or options to Presently, there are no general restrictions on foreign investment acquire equity interests in mining projects. in the mining sector. (For the current proposal with respect to the regulation of FDI on an economy-wide basis, please refer to 52 Processing, Refining, Beneficiation and the National Security and Investment White Paper published in Export 2018, the statutory instruments proposed by the Government on 22 June 2020 with a view to strengthening the public interest 5.1 Are there special regulatory provisions relating to merger provisions of the Enterprise Act 2002, and the related processing, refining and further beneficiation of mined amendment to the Enterprise Act 2002 which expanded the UK’s minerals? FDI screening controls to include businesses responding to the COVID-19 pandemic, with the consequence that more foreign investments will be subject to review.) Applicable licensing Beneficiation of mined minerals must comply with all applicable requirements will, however, need to be studied for applicants’ environmental and health and safety requirements (see sections residency criteria which may, for example, require that the appli- 9 and 11 for more detail), including restrictions on the manufac- cant is registered as a UK company, has a branch of a foreign ture and use of certain dangerous substances, such as asbestos. company registered at Companies House (which is the registrar for companies in the UK) or has a staffed presence in the UK. 5.2 Are there restrictions on the export of minerals and levies payable in respect thereof? 4.3 Are there any change of control restrictions applicable? For sales within the EU, including in the domestic market, mineral producers currently have specific obligations under the EU legis- Whether there are any restrictions applicable to change of control lation governing the registration, evaluation, authorisation and

restriction of chemicals (REACH). An important exemption to conduct reconnaissance, exploration and mining. However, allows producers to avoid registration provisions under REACH, a licensee will often be able to transfer (by way of sale or assign- provided that the minerals, ores, ore concentrates, raw and ment) a part of the licence to another person, with the licen- processed natural gas, crude oil and coal that they produce occur sor’s consent. In such cases, it will be important to establish the in nature and are not chemically modified. Otherwise, registration liability regime as between the old and the new licensees and is mandatory in order to place any of the above on the EU market. whether they would be jointly and severally liable for any viola- Importantly, after the UK’s withdrawal from the EU on 31 tion of the terms of the licence. January 2020, following the end of the transition period on 31 Any transfer of a licence (or any part thereof) will also raise December 2020, EU legislation will no longer apply to the UK. questions concerning the continued use of (i) the land where Although it will be replaced by a UK REACH regime, current EU the relevant operations are being conducted, and (ii) the permits REACH authorisations granted to UK-based companies will no obtained prior to transfer, which will need to be addressed with longer exist. In order to be able to continue to export substances the relevant third parties. subject to REACH to customers in the EU/EEA area, UK-based producers have the option of appointing a representative located 7.2 Are rights to conduct reconnaissance, exploration in the EU to register on their behalf, or EU-based customers and mining capable of being held in undivided shares? may register as importers. The intention is for the UK REACH regime to mirror the EU system as closely as possible, maintaining existing standards of health and environmental protection. This will depend on the licence sought. For example, licences In the unlikely scenario that the item is listed on the UK Strategic issued by the Coal Authority can be held by a single company or Export Controls List (e.g., as a dual-use item which can be used for by several working together. Importantly, all companies named both civilian and military applications), an export licence will be on such licence will share joint and several liability for obliga- required, which will be issued by the Export Control Joint Unit. tions and liabilities that arise under it. There are no export levies due to the Government. Levies payable in third countries will depend on the destination country, 7.3 Is the holder of rights to explore for or mine a the type of goods, their origin and value. primary mineral entitled to explore or mine for secondary minerals? 62 Transfer and Encumbrance There is no presumption that the holder of rights to explore for 6.1 Are there restrictions on the transfer of rights to or mine a primary mineral will be entitled to the same in respect conduct reconnaissance, exploration and mining? of secondary minerals found in the same area. Unless specifically included in the terms of the original licence (which is not For publicly-owned mineral resources, there will generally be common), a separate grant from the owner of the secondary a formal process to arrange for the licence to be transferred or mineral (whether private or public) will therefore need to be assigned to another entity, in full or in part, administered by the sought. For example, holders of coal licences can obtain further competent government authority or other public body. licences from the Coal Authority for adjacent activities such as Where the rights to conduct reconnaissance, exploration or coal bed methane extraction, abandoned mine methane extrac- mining were granted by a private landowner, the terms on which tion, mine water heat recovery and deep energy exploitation. such rights were granted will need to be consulted for any restrictions on their assignment. 7.4 Is the holder of a right to conduct reconnaissance, exploration and mining entitled to exercise rights also over residue deposits on the land concerned? 6.2 Are the rights to conduct reconnaissance, exploration and mining capable of being mortgaged or otherwise secured to raise finance? Similarly, the holder of a right to conduct reconnaissance, exploration and mining will not be automatically entitled to exercise Under the Law of Property Act 1925, the definition of “Land” these rights over any residue deposit and other residue stock- includes mines and minerals on or under the land. This means piles. While such rights can in principle be provided in the that an interest in mines and minerals can be mortgaged or terms of a licence, this would not be common. otherwise secured to raise finance (subject to any restrictions conferred by the right on which such interest is held). 7.5 Are there any special rules relating to offshore The interest in mines and minerals should, however, be distin- exploration and mining? guished from the rights to conduct reconnaissance, exploration and mining works which generally take the form of a licence. Offshore operations in UK territorial waters and on the UKCS The ability to use the latter as security will depend on the terms are subject to additional requirements with a view to preserving of the instrument conferring such rights. the marine environment. Oil and gas operators are required to submit and implement 72 Dealing in Rights by Means of a “safety case” document to the OGA in accordance with the Transferring Subdivisions, Ceding Undivided requirements of the EU Offshore Safety Directive 2013 and Shares and Mining of Mixed Minerals implementing UK regulations for offshore installations and wells. TCE is the body responsible for licensing the extraction of marine sand and gravel resources which are widely used in 7.1 Are rights to conduct reconnaissance, exploration construction projects, as well as for coastal protection and land and mining capable of being subdivided? reclamation, whereas coal deposits are managed by the Coal Authority (both onshore and offshore). There are no specific rules relating to subdivision of the rights

82 Rights to Use Surface of Land The Opencast Coal Act 1958 grants the Coal Authority the power to compulsorily purchase the temporary right to land containing mineral deposits, although it has been rare for it to 8.1 Does the holder of a right to conduct do so. Under the Acquisition of Land Act 1981, it is possible reconnaissance, exploration or mining automatically for a Compulsory Purchase Order to include provision for the own the right to use the surface of land? digging and carrying away of minerals by statutory undertakers, where this is necessary for construction work. The right to use the surface of land is to be distinguished from Planning permission must be obtained from the local plan- the right to conduct reconnaissance, exploration or mining, and ning authority before mining activity is commenced. If permis- will need to be applied for separately. This can be particularly sion is refused and mining activity has already taken place, a cumbersome on the prospective licensee where the landowner is claim can be made under the Town and Country Planning Act not the same as the government authority or other public body 1990 revocation provisions for such activity to cease. Any losses which granted the licence. incurred as a result of stopping the mining activity may be recov- As an exception, holders of licences to conduct high- ered by making a claim to the local planning authority under the volume hydraulic fracturing do have a statutory right under the Town and Country Planning Act 1990. Petroleum Act 1998 to access reserves located deep under neighbouring land over which the licensee does not have a private 92 Environmental right of access. In other cases, attempts to access without landowner permission will constitute a trespass and may lead to court action for damages and/or an injunction. 9.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and mining operations? 8.2 What obligations does the holder of a reconnaissance right, exploration right or mining right Onshore, a number of activities carried out as part of mining oper- have vis-à-vis the landowner or lawful occupier? ations will require an environmental permit. The Environmental Permitting (England and Wales) Regulations 2016 (EPR) require The lease or other document pursuant to which the licensee was a permit to crush, grind or reduce minerals, except for the cutting granted access to the land will specify the obligations owed to of stone, or the grading, screening or heating of clay, sand or any the landowner as agreed between the parties. These obligations other naturally occurring mineral other than coal, or where it is will typically include the payment of rent or royalties, the obliga- unlikely to result in the release of particulate matter into the air tion to ensure adequate support for the surface and make good or underground. A permit will also be required to discharge any any damage caused to the surface, and others. pollutants to the water environment, manage radioactive mate- General principles of the law of nuisance will also apply to the rials, operate combustion facilities or discharge groundwater use of land as a mine or quarry. Examples of mining activities and, importantly, an environmental permit for a mining waste capable of creating a nuisance include the emission of dust or operation will be required in order to manage extractive waste, noxious fumes, the discharge of polluting effluents into a river, as outlined in question 9.2 below. the creation of noise and vibration, and the projection of debris These permits will cover emissions to the air and water, energy by blasting. Affected landowners may in these circumstances efficiency, and the need to have in place proper environmental bring a claim for an injunction and, in some cases, damages management systems. Permits are only awarded to applicants against the mine operator. Complaints of noise and dust emis- who can satisfy the regulator that they are a suitable person to sions may also cause the relevant environmental regulator to hold and comply with the ongoing requirements of such a licence. investigate whether permit conditions have been breached. There are annual subsistence fees, and the environmental regu- The emission of smoke or fumes and the lack of proper lator will conduct inspections and has powers to prosecute or fencing of abandoned and disused mines and quarries are, in take a range of other actions for breach, which in some cases certain circumstances, a statutory nuisance in relation to which involves the right to suspend operations and/or revoke a permit. the local authority may issue an abatement notice requiring the Conservation legislation protects certain species and habi- nuisance to cease. If the impacts of the nuisance affect several tats, which a mine may need a licence in order to disturb. This people in the vicinity, the nuisance may also constitute a public legislation includes the Wildlife and Countryside Act 1981, the nuisance. Conservation of Habitats and Species Regulations 2017 (which consolidated and updated the Conservation of Habitats and 8.3 What rights of expropriation exist? Species Regulations 2010), the Protection of Badgers Act 1992 and the Offshore Marine Conservation (Natural Habitats, & c.) Regulations 2017 (which consolidated and updated the Offshore It is possible for land, and rights for mining and extraction, to Marine Conservation (Natural Habitats, & c.) Regulations 2007). be obtained using compulsory acquisition. In each case, land- Abstraction of surface and/or groundwater, including as owners whose land has been acquired, or who have suffered as part of dewatering the mine, will require an abstraction licence a result of the acquisition, may be entitled to be paid compensa- under the Water Resources Act 1991. Separate consents must be tion, as assessed by a specialist tribunal. obtained from the local sewerage undertaker for liquid effluents In England and Wales, rights over land (but not freehold inter- disposed of into the sewage network. Additionally, the current ests) can be acquired under the Mines (Working Facilities and process sometimes requires the purchase of carbon allowances Support) Act 1966. To do so, an application must be submitted to cover emissions under the EU Emissions Trading System. In to the Government, which in turn will instigate proceedings in keeping with the UK’s 2050 goal of carbon neutrality, following the High Court. The court will not grant rights under the 1966 the UK’s exit from the EU on 31 January 2020, the Government Act unless it can be proven that to do so would be “expedient in has proposed a new UK Emissions Trading System to replace the national interest”. the EU’s carbon trading variant.

The storage of certain hazardous substances on site will addi- a risk of pollution and to return the site to a satisfactory state. tionally require hazardous substances planning consents to be The procedure for this will be outlined in a detailed closure plan obtained from the local planning authority. agreed by the environmental regulator dealing with rehabilita- Planning consents may contain additional requirements and tion, after-closure procedures and monitoring. restrictions with regard to environmental impacts such as noise and dust levels. 9.4 Are there any zoning or planning requirements For offshore oil and gas operations, there are some differences applicable to the exercise of a reconnaissance, to the permitting regime which, for example, require permits exploration or mining right? from BEIS for discharges of oil or chemicals to the marine environment, and to vent or flare natural gas. In England and Wales, planning permission is required for the carrying out of mining operations. Express planning permis- 9.2 What provisions need to be made for storage of sion is granted by the local MPA. In England, the MPA is the tailings and other waste products and for the closure of county planning authority in respect of a site in a non-metropol- mines? itan county and the local planning authority in respect of a site in a metropolitan district or London borough. In Wales, the local Most mining operations will require a permit to manage extrac- planning authority is also the MPA. tive waste as a waste management operation, and some will include Applications for planning permission must be taken in accord- operating a mining waste facility. The need for a permit stems ance with the relevant development plan unless (amongst other from the EU Mining Waste Directive (2006/21/EC) under which things) there are material considerations that indicate other- operators must take necessary measures to ensure that extractive wise. There is no definition of “material considerations” and waste is managed in a controlled manner without endangering the MPA has a wide discretion in determining this. Guidance human health or harming the environment. During the Brexit published by the Ministry of Housing, Communities and Local transition period, this directive will continue to operate in the UK. Government confirms that planning is concerned with land use A mining waste environmental permit is required to cover all in the public interest, so that the protection of purely private waste streams generated by the mining operation, with the excep- interests (e.g. impact on the value of neighbouring property or tion of waste unrelated to extraction, such as domestic waste from loss of private rights to light) could not be material considera- on-site worker facilities. A permit may also be necessary for any tions. In England, the National Planning Policy Framework, wastes accumulated or stored at the site which contain naturally which sets out the Government’s planning policy and has a occurring radioactivity above a minimum level (NORMS). section on facilitating the sustainable use of minerals, is a mate- The requirements for both types of permit are set out in the rial consideration that must be taken into account where it is Environmental Permitting (England and Wales) Regulations relevant to a planning application. 2016. Higher requirements apply to mining waste facilities cate- In planning for mineral extraction, MPAs are encouraged to gorised as posing a high-level hazard (Category A) or which designate (i) “Specific Sites”, where viable resources are known involve hazardous as opposed to non-hazardous or inert waste. to exist, landowners are supportive of minerals development Operators must, as part of their permit application, prepare a and the proposal is likely to be acceptable in planning terms, (ii) waste management plan, including classification of all extractive “Preferred Areas”, which are areas of known resources where waste streams in accordance with EU methods, and including a planning permission might reasonably be anticipated, and (iii) closure plan for the facility. Operators mush also use best avail- “Areas of Search”, where knowledge of mineral resources may able techniques (BAT) for the minimisation of environmental be less certain but within which planning permission may be impacts from their operations, which may change over time granted. Such areas may also include adjacent land for the essen- due to technological progress. Guidance on BAT for mining tial operations associated with mineral extraction. waste facilities is set out in the EU BAT Reference Document Planning permissions granted for the working of minerals will (BREF), which is periodically revised and may result in permits usually include conditions, which can regulate how the develop- being updated. ment is carried out and which will usually impose restoration Under the Mines Regulations 2014, there is also an obligation and aftercare requirements. Conditions will, crucially, deter- to build tips in such a way as to avoid instability or movement mine the life of the mineral planning permission by imposing a that could risk the health and safety of any person. This requires time limit. If permission is refused, there is a right of appeal to the mine operator to ensure that a competent person carries out central Government, which also has the power to recover juris- an appraisal at appropriate intervals. If, following this, there is diction of certain applications and appeals where it considers deemed to be a risk, a geotechnical specialist is required to carry them to conflict with national policy in important ways or be out an assessment. nationally significant. Separate rules apply in Scotland and Northern Ireland. 9.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right? 102 Native Title and Land Rights

There is no statutory framework which is generally applicable. 10.1 Does the holding of native title or other statutory Rather, this is addressed through a combination of the condi- surface use rights have an impact upon reconnaissance, exploration or mining operations? tions of the relevant consents and permits held and any provisions within property agreements. Planning permissions are likely to include site restoration There is no concept of native title in English law. Other grounds programmes that need to be complied with. may exist, however, on which third parties will be able to claim To surrender certain environmental permits, including those access to the surface of land, such as rights of way (public or for mining waste operations, the operator will need to satisfy private), easements and agreements of the landowner with elec- the regulator that necessary measures have been taken to avoid tricity and other utility providers.

112 Health and Safety improvement notice (failure to comply with which may itself result in fines and prosecution). Since the entry into force of the Corporate Manslaughter and Corporate Homicide Act 2007, 11.1 What legislation governs health and safety in companies can also be held criminally liable for serious failures mining? in the management of health and safety which result in a fatality.

The Mines Regulations 2014 and the Quarries Regulations 1999 11.3 Are there any unique requirements affecting the (QR) constitute the primary legislation governing health and mining industry in light of the coronavirus (COVID-19) safety in mining operations. pandemic? The legislation governing health and safety in the workplace applies to mining operations. The principal legislation is the Health and Safety at Work etc. Act 1974, and beneath it are The COVID-19 pandemic has had a visible impact on the mining several sets of regulations governing individual aspects of worker industry. Since March 2020, the average share prices of listed health and safety such as handling work equipment, hazardous mining companies have dropped by around 10%, and individual substances and explosives, managing the risk of fire, explosion mining companies have seen their market value fall by as much and other incidents. Breach of health and safety regulations is a as 30–50%. Predictions based on earnings before interest, taxes, criminal offence for which mine operators may face prosecution. depreciation, and amortisation (EBITDA) suggest that, globally, Under the 1974 Act, every employer has a duty to ensure that, the mining industry may lose as much as $200 billion in earn- so far as is reasonably practicable, the health, safety and welfare of ings in 2020 compared with the same period in 2019. Shortage employees and others in the employer’s workplace are protected. of supplies, lack of labour, and governmental restrictions have all All employers with five or more employees must have a written contributed to difficulties faced by the mining industry, and these health and safety policy, which must be brought to the notice of all challenges are only compounded by the additional requirements employees. Criminal liability arises for breach of regulation and that mining operations must now follow in order to comply with may result in prosecution. COVID-19 guidance. In light of the pandemic, the Government In response to the COVID-19 pandemic, the Government published a set of Site Operating Procedures (SOP) in May 2020. published a set of Site Operating Procedures (SOP), which mining These outlined various measures that employers should take on sites must adhere to (see question 11.3 below). their worksites, including: ■ introducing one-way flow-through areas and floor mark- ings to maintain social distancing (where possible); 11.2 Are there obligations imposed upon owners, ■ maintaining social distancing and avoiding surface trans- employers, managers and employees in relation to missions when goods enter and leave the site; health and safety? ■ ensuring workers who have symptoms or who live with others who show symptoms stay at home and are tested; and The entity in day-to-day control of safety at the mine will most ■ where site visits are required, ensuring customers, visitors likely be the entity acting as the mine operator. Where this is a and contractors are aware of how to maintain safety and different entity from the mine owner, the mine owner is respon- proper social distancing. sible under health and safety regulation to take care to appoint Given the critical role that mining companies play in protecting a suitable operator and to exercise a degree of continuing over- jobs, offering accommodation and health services to employees sight of health and safety management by that operator. This and the community, and meeting community needs, a fine balance may, for example, entail periodic meetings with the operator and must be struck between adhering to government guidance and the provision of reports and notification to the owner where allowing mining companies to carry out their usual operations. issues or incidents arise. The QR place most duties on the “operator”, being the person 122 Administrative Aspects with overall control of the working of a quarry. However, the quarry owner must not permit another person to be the operator 12.1 Is there a central titles registration office? of the quarry unless that person is suitable and has sufficient resources to be able to operate the quarry safely. The operator then has general duties to ensure health and safety at the quarry, A register of interests in land in England and Wales, including including producing a “health and safety document”. any registered interests acquired or granted for mining purposes, An employer also owes its employees a duty of care in employ- is kept by the Land Registry, which is the central title regis- ment law, which means that it should take all steps which are tration office in the UK. Importantly, however, the registra- reasonably possible to ensure the health, safety and wellbeing tion of mines and minerals held apart from the surface is not of its employees. The requirements under an employer’s duty of compulsory, and so, unless the minerals constitute the surface care are wide-ranging and include in particular: or outcrop (which would trigger the usual rules regarding ■ clearly defining jobs and undertaking risk assessments; compulsory registration that apply to the surface), they can ■ ensuring a safe work environment; be transferred or leased without any registration implica- ■ providing adequate training and feedback on performance; tions. Following a thorough review of this area of law (and, in ■ ensuring that staff do not work excessive hours; particular, the Land Registration Act 2002) over recent years, ■ providing areas for rest and relaxation; the Law Commission has advocated in favour of making the ■ providing communication channels for employees to raise registration of all mines and minerals compulsory. This reflects concerns; and the desire for the register to reveal a complete picture of land ■ consulting employees on issues which concern them. ownership. The Law Commission received the Government’s The failure of an employer to properly discharge its duties interim response to its proposals in January 2019, which indi- to employees may result in liability for negligence, vicarious cates that such recommendations are likely to be accepted. liability or strict liability for the employer, as well as criminal Some mineral owners have already pursued voluntary regis- prosecution by the HSE and/or the issue of a prohibition or tration of their interests, and it is not uncommon to encounter

separate titles for underground mines and minerals. In granting 14.2 Are there royalties payable to the State over and such titles, the Land Registry will not necessarily notify the above any taxes? owner of the surface title that the separate mines and minerals title has been created. There are no royalties payable to the Government over and Registration of minerals can often be problematic, as the above any taxes. Royalties in the form of payment for the right conventional conveyancing procedure for surface land will rarely to work the minerals may, however, be specified in the agree- be sufficient to allow the grant of an absolute title to mines and ments with TCE or private landowners. In particular, the rights minerals. Specialist advice will usually be sought. to extract minerals from the seabed within the 12-nautical-mile Information about individual licences and other rights territorial limit are granted by TCE subject to the payment of granted by the Government authorities and other public bodies royalties. can often be found on their respective websites or obtained by making an enquiry. The British Geological Survey, through its “BritPits” data- 152 Regional and Local Rules and Laws base, also holds extensive information on mines and quarries in the UK. This information includes details of the name of the 15.1 Are there any local provincial or municipal laws that mines and quarries, their location and address, the geology and need to be taken account of by a mining company over mineral commodities produced, the name of the operator and and above National Legislation? the responsible MPA. Scotland, Wales and Northern Ireland can pass their own laws and further regulations within the powers devolved to their respec- 12.2 Is there a system of appeals against administrative decisions in terms of the relevant mining legislation? tive parliamentary assemblies. These powers generally include the licensing and oversight of exploration and mining activities onshore in the respective territories and will need to be consulted. Available appeal routes will depend on the type of administra- County councils’ and other local authorities’ roles will typically tive decision and the public authority that adopted it. In each be limited to preparing development plans for the relevant area case, applicable legislation will first need to be checked for any and reviewing and granting planning permissions. statutory provisions providing for appeals. Otherwise, judicial review is generally available in respect of public law decisions (although, as a remedy of last resort, any statutory appeal right 15.2 Are there any regional rules, protocols, policies or may need to be exercised first). laws relating to several countries in the particular region that need to be taken account of by an exploration or mining company? 132 Constitutional Law Although the UK left the EU on 31 January 2020, until the end 13.1 Is there a constitution which has an impact upon of the transition period or such earlier time when domestic laws rights to conduct reconnaissance, exploration and mining? are passed to replace the EU legislation transposed into the UK legal systems, all of the EU legislation applicable to exploration The UK does not have a formally-adopted written constitution. and mining activities will continue to apply. Its constitutional framework is formed around a number of The UK is also a party to the regional Convention for the fundamental acts and principles which formulate the country’s Protection of the Marine Environment of the North-East body politic. The framework governing the rights of reconnais- Atlantic (OSPAR Convention), which was adopted in 1992 sance, exploration and mining is set out in the mining legisla- together with a Final Declaration and an Action Plan. The tion and case law. OSPAR Convention deals with such areas as prevention and elimination of pollution from various sources, assessment of the 13.2 Are there any State investment treaties which are quality of the marine environment, and protection and conserva- applicable? tion of the ecosystems and biological diversity of the marine area.

The UK is party to over 100 bilateral and multilateral investment 162 Cancellation, Abandonment and treaties with other States which provide protections to foreign Relinquishment investors operating in the UK. These treaties are governed by public international law and provide companies with additional 16.1 Are there any provisions in mining laws entitling the protections that are independent of any protections afforded by holder of a right to abandon it either totally or partially? domestic laws and contractual relationships. Full texts of the UK’s current investment treaties are available While there is no general prohibition on surrendering the right online and can be accessed from multiple sources, including the to explore for or mine minerals, the exact procedure will depend Foreign & Commonwealth Office website. on the type of licence and the authority which granted the right in question in the first place. 142 Taxes and Royalties Surrender of coal licences for exploration and mining, for example, is provided for under the model licence documents and 14.1 Are there any special rules applicable to taxation of requires a month’s notice from the licensee. exploration and mining entities? Environmental permits received in connection with mining operations can also be surrendered in full or in part. In some cases, Within the UK’s taxation regime, there are no special rules however, a fee will be payable to process a surrender application. applicable to mining companies (in contrast to the oil and gas sector, which is subject to a distinct taxation regime).

Generally, there is no legal requirement or practice for the holder Failure to comply with the licence conditions is a ground for of an exploration or mining right to surrender a part thereof revocation of the licence or refusal to extend it for a new term. (other than in petroleum licences for offshore exploration, which Termination is usually not automatic but requires a notice from are outside the scope of this review). In case of a privately granted the competent authority or other public body to remedy the licence, its terms will need to be consulted, however, for any breach within a specific period of time, failing which the licence unusual or onerous requirements. can be revoked without further compensation. Planning, environmental and other permits obtained in connection with exploration and mining operations will also be subject to various conditions, and non-compliance with those conditions will be a ground for cancellation of the relevant permits.

John Dewar is a partner in the London office of Milbank LLP and a member of the firm’s Global Project, Energy and Infrastructure Finance Group. John is widely recognised as a leading individual in his field by a number of journals, among them: Chambers UK (which designated him among the first tier of Project Finance lawyers in the UK); Chambers Global; The Legal 500; and the Who’s Who of Project Finance. He has built an extremely broad practice and outstanding reputation for advising on the most innovative and significant “market-first” transactions around the world. His practice focuses on advising parties in the development and financing of mining and metals, oil and gas, natural resources, independent power, renewable energy, telecommunications, satellite and other infrastructure projects. He has particular expertise in multi-sourced financings, including those involving multilateral and export credit agencies and Islamic institutions.

Milbank LLP Tel: +44 20 7615 3004 10 Gresham Street Email: [email protected] London EC2V 7JD URL: www.milbank.com United Kingdom

Emily Whittaker is an associate in the London office of Milbank LLP and a member of the firm’s Global Project, Energy and Infrastructure Finance Group. Emily has assisted with advising lenders and sponsors on a range of financing transactions, including energy, infrastructure and mining projects. She has strong experience working on a number of cross-border transactions involving commercial lenders, export credit agencies and development finance institutions, and has worked on some of the largest mining projects across the world. Her transactional experience includes advising on the US$4.4 billion Oyu Tolgoi Copper and Gold Mining Project in Mongolia, the Platreef Gold-Nickel- Copper Mine Project in South Africa, and the Sangdong Tungsten Mine Project in the Republic of Korea.

Milbank LLP Tel: +44 20 7615 3148 10 Gresham Street Email: [email protected] London EC2V 7JD URL: www.milbank.com United Kingdom

Milbank LLP is a leading international law firm that provides innovative legal From a first-of-its-kind toll road in Latin America, to a wireless telecom services to clients around the world. Founded in New York 150 years ago, build-out in Southeast Asia, to the largest wind and solar farms in the world, Milbank has offices in Beijing, Frankfurt, Hong Kong, London, Los Angeles, clients recognise our Project, Energy and Infrastructure Finance Group as Munich, São Paulo, Seoul, Singapore, Tokyo and Washington, D.C. Milbank’s the leading choice for the financing and development of the most critical lawyers collaborate across practices and offices to help the world’s leading and pioneering infrastructure projects across the globe. Over the past three commercial, financial and industrial enterprises, as well as institutions, years, Milbank has closed more than 140 project financings, which raised individuals and governments, achieve their strategic objectives. Project more than US$125 billion for infrastructure projects worldwide. Finance is among our firm’s core practice areas and our Project, Energy and www.milbank.com Infrastructure Finance Group comprises more than 100 dedicated Project, Energy and Infrastructure Finance attorneys, including 20 partners, in our offices worldwide. We operate on an integrated basis with project finance teams in each of our offices in the US, Frankfurt, Hong Kong, London, São Paulo, Seoul, Singapore, and Tokyo.

USA USA

Holland & Hart LLP Karol L. Kahalley

12 Relevant Authorities and Legislation and environmental compliance are regulated by applicable federal and state laws, and in some cases local zoning ordinances.

1.1 What regulates mining law? 1.3 Describe any other sources of law affecting the mining industry. 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 constitu- The Federal Land Policy and Management Act of 1976 (FLPMA), tions, statutes, administrative regulations or ordinances, and 43 U.S.C. §§ 1701–1787, governs federal land use, including judicial common law. The US Constitution and federal laws are access to, and exercise of, mining rights on lands administered the supreme law of the land, generally pre-empting conflicting by the BLM and the US Forest Service (USFS). FLPMA recog- state and local laws. In many legal areas, the different author- nises ‘the Nation’s need for domestic sources of minerals’, 43 ities have concurrent jurisdiction, requiring regulated enti- U.S.C. § 1701(a)(12), and provides that FLPMA shall not impair ties to comply with multiple levels of regulation. Mining on GML rights, including, but not limited to, rights of ingress and federal lands, for example, is generally subject to multiple layers egress. 43 U.S.C. § 1732(b). However, FLPMA also provides of concurrent federal, state, and local statutes and administra- that mining authorisations must not ‘result in unnecessary or tive regulations. Increasingly, the executive branch of the federal undue degradation of public lands’. 43 C.F.R. § 3809.411(d)(3) Government has made use of Presidential Executive Orders to (iii); see also 43 U.S.C. § 1732(b). BLM and USFS have prom- impact mining policy and procedure. ulgated extensive FLPMA mining regulations. See, e.g., 36 C.F.R. §§ 228.1–228.116, 43 C.F.R. §§ 3000.0-5-3936.40. The National Environmental Policy Act (NEPA), 42 U.S.C. §§ 4321- 1.2 Which Government body/ies administer the mining 4370m-12, requires federal agencies to prepare an environmental industry? impact statement (EIS) for all major federal actions significantly affecting the quality of the human environment. Mining oper- Federal and state Governments have developed comprehen- ations on federal lands or with a federal nexus generally will sive mining regulatory schemes. Although the US is a common involve an EIS or a less intensive environmental assessment law nation, practising US mining law often resembles prac- (EA) examining environmental impacts. The NEPA process tising mining law in civil law countries because the regulatory involves consideration of other substantive environmental stat- schemes are set out in detailed codifications. See, e.g., 43 C.F.R. utes. Other Government statutes affect mining with regard to §§ 3000.0-5-3936.40 (US Bureau of Land Management (BLM) the following: solid and hazardous material disposal and trans- minerals management regulations). However, these mining law portation; reclamation; clean water and air; toxic substances; codifications are subject to precedential interpretation by courts historic and cultural preservation; and endangered species. pursuant to common law principles (and in some situations by The US Securities and Exchange Commission (SEC) regu- quasi-judicial administrative bodies). US mining law may origi- lates mineral resources and reserves reporting by entities subject nate from federal, state, and local laws, including constitutions, to SEC filing and reporting requirements. The SEC’s reporting statutes, administrative regulations or ordinances, and judicial classification system is based on the SEC’s 1992 Industry Guide and administrative body common law. 7, which provides for declaration only of proven and probable Determining which level of Government has jurisdiction over reserves. On October 31, 2018, the SEC adopted amendments to mining activities largely depends on surface and mineral owner- modernise the property disclosure requirements for mining regis- ship. A substantial amount of mining in the US occurs on federal trants which more closely align with current industry and global lands where the federal Government owns both the surface and regulatory practices and standards, including the Committee mineral estates. Federal law primarily governs mineral owner- for Reserves International Reporting Standards. Under the ship, operations, and environmental compliance, with state and new rules, Guide 7 has been replaced with a new subpart of local Governments having concurrent or independent authority Regulation S-K which, among other new requirements aimed at over certain aspects of federal land mining projects (e.g. permit- protecting investors, requires mining registrants to disclose both ting, water rights and access authorisations). If the resource mineral resources and mineral reserves and to support all disclo- occurs on private land, estate ownership is a matter of state sures with a technical report prepared by qualified persons with contract law, but operations and environmental compliance are mining expertise. The SEC adopted a two-year transition period still regulated by applicable federal and state laws. Estate owner- with the initial compliance year beginning on or after January 1, ship on state-owned land is regulated by state law, and operations 2021, but registrants may voluntarily comply immediately.

22 Recent Political Developments a. mine plan of operations; b. reclamation plan, bonding and permits; c. air quality permits; 2.1 Are there any recent political developments d. water pollution permits (pollutant discharge elimination affecting the mining industry? system discharge permit, storm water pollution prevention plan, spill prevention control and countermeasure plan); The United States Congress is intensifying efforts to increase e. dam safety permits; domestic mining and processing of strategic minerals. The f. artificial pond permits; American Critical Minerals Exploration and Innovation Act now g. hazardous waste materials storage and transfer permits; moving through Congress would allocate more than $2 billion h. well drilling permits; over a 10-year period to research and development of strategic i. road use and access authorisations, right-of-way authorisa- minerals. The proposed legislation also aims to streamline the tions; and mine permit review process. j. water rights. The legislation comes on the heels of several efforts during the Trump administration to focus on strategic minerals. Pursuant 3.2 What rights are required to conduct exploration? to Executive Order 13817, President Trump outlined a federal policy to reduce the country’s dependency on the importation of minerals considered critical to the security and prosperity of See the response to question 3.1. the United States. He directed the Secretary of the Interior, in coordination with the Department of Defense and other execu- 3.3 What rights are required to conduct mining? tive branch agencies, to identify such critical minerals based on the following criteria: ‘(i) a non-fuel mineral or mineral material essential to the economic and national security of the United See the response to question 3.1. States, (ii) the supply chain of which is vulnerable to disruption, and (iii) that serves an essential function in the manufacturing 3.4 Are different procedures applicable to different of a product, the absence of which would have significant conse- minerals and on different types of land? quences for our economy or our national security.’ On May 18, 2018, the Department of the Interior published the final list of The General Mining Law of 1872 (GML), 30 U.S.C. §§ 21–54, critical minerals which includes uranium. Final List of Critical 611–615, as amended, is the principal law governing locatable Minerals 2018, 83 Fed. Reg. 23,295 (May 18, 2018). minerals on federal lands. The GML affords US citizens the The Executive Order further directed implementation of opportunity to explore for, discover and purchase certain valu- the critical mineral policy to: (a) identify new sources of crit- able mineral deposits on federal lands open for mineral entry. ical minerals; (b) increase activity at all levels of the supply Locatable minerals include non-metallic minerals (fluorspar, chain, including exploration, mining, concentration, separa- mica, certain limestones and gypsum, tantalum, heavy minerals tion, alloying, recycling, and reprocessing of critical minerals; in placer form, and gemstones) and metallic minerals including (c) ensure that miners and producers have electronic access to gold, silver, lead, copper, zinc, and nickel. Locating these mineral the most advanced topographic, geologic, and geophysical data deposits entitles the locator to certain possessory interests: within the U.S. territory to the extent permitted by law; and (d) unpatented mining claims, which provide the locator an exclu- streamline leasing and permitting processes to expedite explosive possessory interest in surface and subsurface lands and the ration, production, processing, reprocessing, recycling, and right to develop the minerals; and patented mining claims, which domestic refining of critical minerals. pass title from the federal Government to the locator, converting the property to private land. However, a mining patent morato- 2.2 Are there any specific steps the mining industry is rium has been in place since 1994 and no new patents are being taking in light of these developments? issued. The GML affords US citizens the opportunity to explore for, discover and purchase certain valuable mineral deposits on Several US-based strategic minerals companies are poised to federal lands open for mineral entry. The process for developing develop uranium, lithium, rare earths and other strategic mineral locatable mineral rights on federal lands involves: projects. 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 32 Mechanics of Acquisition of Rights of developing a successful mine, and that the claims can be mined and marketed at a profit; 3.1 What rights are required to conduct b. physically locating mining claims by posting notice and reconnaissance? marking claim boundaries; c. recording mining claims by filing a location certificate with In order to conduct reconnaissance, miners must demonstrate the proper BLM state office within 90 days of the location that they hold a right to access the minerals. Such rights may be date and recording pursuant to county requirements; based on fee ownership, lease or contracting of privately owned d. maintaining the claim through assessment work, paying an minerals, or through locations, leases, or contracts of federal annual maintenance fee, and filing of affidavits; and and/or state-owned mineral. Where the surface and minerals e. additional requirements for mineral patents (as mentioned have been severed, surface access rights may need to be demon- above, there is a moratorium on patents). strated as well. The Materials Disposal Act of 1947, 30 U.S.C. §§ 601–615, as Depending on the proposed level of mining activity, permits amended, provides for the disposal of common minerals found and licences required to conduct mining activities may include: on federal lands, including, but not limited to, cinders, clay, gravel,

pumice, sand or stone, or other materials used for agriculture, application with the federal agency office with jurisdiction over animal husbandry, building, abrasion, construction, landscaping the affected land. Depending on the type of permit or lease and similar uses. These minerals may be sold through compet- applied for, applicants may be required to: itive bids, non-competitive bids in certain circumstances or a. make rental payments; through free use by Government entities and non-profit entities. b. file an exploration plan; The Mineral Lands Leasing Act of 1920, 30 U.S.C. §§ 181–287, c. make royalty payments based on production; or as amended, establishes a prospecting permit and leasing system d. furnish a bond covering closure and reclamation costs. for all deposits of coal, phosphate, sodium, potassium, oil, gas, These permits and leases are often subject to conditions and oil shale, and gilsonite on lands owned by the United States, stipulations directed at protecting resource values. including National Forests. In addition, sulphur deposits found States have separate statutory and regulatory requirements for on public lands in Louisiana and New Mexico are leasable, as oil and gas leasing. are geothermal steam and associated geothermal resources, Oil and gas mineral rights may be held privately and rights to uranium, and hardrock mineral resources. These same deposits such interest are typically available by purchase or lease. found in some acquired federal lands, including acquired forest lands, are leasable. 42 Foreign Ownership and Indigenous Acquired lands are those obtained by the federal Government Ownership Requirements and Restrictions from private owners through purchase, condemnation, or gift, or by exchange. These lands are not subject to location. However, the Mineral Leasing Act for Acquired Lands of 1947, 30 U.S.C. 4.1 What types of entity can own reconnaissance, exploration and mining rights? §§ 351–360, authorises the leasing of coal, phosphate, oil and gas, oil shale, sodium, potassium, and sulphur found in acquired lands. Leasing is also allowed for those minerals that would be The GML and Mineral Lands Leasing Act require that mine considered locatable if found on the public domain, as well as claimants, permittees and lessees be US citizens. A ‘citizen’ can geothermal resources. include a US-incorporated entity, incorporated in any state in Areas designated as national parks, national monuments, most the US. Reclamation Act project areas, military reservations, wilderness areas, and wild and scenic river corridors are generally not 4.2 Can the entity owning the rights be a foreign entity open to mining locations and leases. Project proponents should or owned (directly or indirectly) by a foreign entity and research mineral access when considering exploration activities are there special rules for foreign applicants? on federal lands. Prospecting and mining are prohibited after an area is incor- The GML requires that mine claimants, permittees and lessees porated into the National Park System; rights acquired prior to must be US citizens. A ‘citizen’ can include a US-incorporated an area’s inclusion into the system may remain valid if prop- entity that is wholly owned by non-US entities or corpora- erly located and maintained, but will be subject to control of the tions. There generally are no restrictions on foreign acquisition National Park Service which regulates use of privately owned of these types of US mining rights through parent-subsidiary reserved and other mineral interests on lands within the bounda- corporate structures. The Mineral Lands Leasing Act, Mineral ries of the National Park System in addition to controlling surface Leasing Act for Acquired Lands and Reorganization Plan No. 3 and subsurface uses of both patented and unpatented claims. require that the holder of a mineral lease or prospecting permit National Recreation Areas are generally closed to mineral loca- must be a citizen of the United States. 30 U.S.C. § 181, 352; 43 tions and leasing surface coal mining operations are prohibited C.F.R. § 3502.10(a). Corporations organised under the laws of in these areas. the United States or any state or territory of the US may qualify States have the authority to lease, sell, exchange, or other- to hold leases or prospecting permits. While foreign persons wise manage state-owned mineral lands pursuant to constitu- are permitted to be shareholders, the citizenship of the share- tional or statutory provisions, and as regulated by state boards or holders is significant. The country of citizenship of each share- officers, through either a single agency or a combination of agen- holder must be a country that does not deny similar or like cies. Leasing is the most common method of obtaining mining privileges to U.S. citizens. 30 U.S.C. § 181 (such countries are rights on state mineral land. A few states provide for both mining referred to as ‘non-reciprocal countries’). Disclosure of foreign claims and permits, while others allow prospecting rights under ownership is not required unless it meets the 10% threshold. 43 mineral leases. Some require neither. The purpose is to gener- C.F.R. § 3502.30(b). Therefore, even foreign stockholders from ally allow the applicant to obtain an exclusive right to explore non-reciprocal countries may own less than 10%. untested or undeveloped ground while giving the state some While the GML does not specifically mention corporate eligi- control over mineral activities. Once minerals of value are located bility, the requirement of proof of citizenship refers to a corpo- and described, the applicant typically obtains a preferred right to a ration organised under the laws of the United States or any state mineral lease. In some instances, competitive bidding is required. or territory thereof and an association of persons unincorpo- Rights to privately-owned minerals may be obtained through rated. These requirements have generally been interpreted to purchase, lease or contract. mean that for a corporation, it is the jurisdiction of formation that determines its citizenship, but for unincorporated asso- 3.5 Are different procedures applicable to natural oil ciations such as partnerships and limited liability companies and gas? the entity is disregarded, and the association’s members need to satisfy the citizenship requirement. The interest in mining The Mineral Lands Leasing Act of 1920, 30 U.S.C. §§ 181–287, claims by a person or entity not qualified by citizenship is void- as amended, provides US citizens the opportunity to obtain a able by the United States, rather than void, and such defects may prospecting permit or lease for coal, gas, gilsonite, oil, oil shale, be corrected by conveying the interest to a qualified holder. phosphate, potassium, and sodium deposits on federal lands. Foreign investments are subject to US national security laws. The process for obtaining a permit or lease involves filing an The Committee on Foreign Investment in the US, for example,

is an inter-agency committee chaired by the Secretary of the 62 Transfer and Encumbrance Treasury that has authority to review foreign investments to protect national security and make recommendations to the President to block the same. 50 U.S.C. § 4565. The President 6.1 Are there restrictions on the transfer of rights to may exercise this authority if the President finds that the foreign conduct reconnaissance, exploration and mining? interest might take action impairing national security and other provisions of the law do not provide the President with appro- The transferee must be qualified to hold the interest. See the priate authority to act to protect national security. 50 U.S.C. § responses to questions 4.1 and 4.2. 4565(d)(4). Foreign employees are governed by general US immigration 6.2 Are the rights to conduct reconnaissance, laws and are required to obtain a work visa or other authorisa- exploration and mining capable of being mortgaged or tion. A limited number of visas are available for skilled workers, otherwise secured to raise finance? professionals and non-skilled workers, but these workers must be performing work for which qualified US workers are not Yes, subject to the underlying mineral ownership rights of the available. 8 U.S.C. § 1153(b)(3)(C). Government or private mineral interest owner.

4.3 Are there any change of control restrictions 72 Dealing in Rights by Means of Transferring applicable? Subdivisions, Ceding Undivided Shares and Mining of Mixed Minerals The GML does not contain change of control restrictions. Mineral leases and contracts may contain change of control restrictions by their terms. A change of control in the holder 7.1 Are rights to conduct reconnaissance, exploration and mining capable of being subdivided? of a lease, licence or permit may require federal and state agency approval depending on the type of right involved. Privately held mineral rights and the rights to conduct reconnaissance, exploration and mining on such rights may be subdi- 4.4 Are there requirements for ownership by vided among numerous parties. Rights to conduct such opera- indigenous persons or entities? tions on federal and state mineral interests are governed by the instruments conveying such rights and may or may not permit See the response to question 10.1. subdivision.

4.5 Does the State have free carry rights or options to 7.2 Are rights to conduct reconnaissance, exploration acquire shareholdings? and mining capable of being held in undivided shares?

There are no carry rights or shareholding options under US law. Yes, such rights may be held in undivided shares. 52 Processing, Refining, Beneficiation and 7.3 Is the holder of rights to explore for or mine a Export primary mineral entitled to explore or mine for secondary minerals? 5.1 Are there special regulatory provisions relating to processing, refining and further beneficiation of mined Generally, the holder of a mining claim or lease for a primary minerals? mineral is entitled to extract from a claim/lease those ‘associated minerals’ or secondary minerals which may be econom- There are no specific provisions relating to processing or bene- ically recovered along with the primary mineral(s), unless the ficiating mined minerals in US law except for general environ- Government or private mineral interest owner has expressly mental laws and applicable permitting requirements. reserved such minerals to itself.

5.2 Are there restrictions on the export of minerals and 7.4 Is the holder of a right to conduct reconnaissance, levies payable in respect thereof? exploration and mining entitled to exercise rights also over residue deposits on the land concerned? There are no restrictions or limitations on the sale, import, or export of extracted or processed minerals, unless such minerals Generally, the holder of a mining claim or lease may exercise are deemed a national security risk by the US Department of rights over residue deposits on the land concerned. However, Homeland Security or State Department. For example, projects certain residue deposits may be subject to ownership by another involving the export of particular minerals, such as uranium party and may not be contemplated by a mining lease or other or rare earth elements, can be subject to greater scrutiny when mineral rights instrument. foreign companies are involved. 7.5 Are there any special rules relating to offshore exploration and mining?

Yes. There are special federal and state rules relating to offshore exploration and mining, depending on whether exploration and

mining are taking place in state-owned or federal waters. Generally, granted additional protections to surface owners, which may the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331, et seq., include notice and consent requirements, bonding for reclama- provides the US Bureau of Ocean Energy Management (BOEM) tion, and the payment of damages for surface destruction. with authority to manage minerals on the US outer continental shelf. Minerals may be offered for lease by the BOEM in accord- 8.3 What rights of expropriation exist? ance with federal regulations at 30 C.F.R. Parts 580–582.

82 Rights to Use Surface of Land There is little risk of expropriation of mining operations by Government seizure or political unrest. Rights may only be expropriated following due process and payment of due compen- 8.1 Does the holder of a right to conduct sation to the holder. reconnaissance, exploration or mining automatically own the right to use the surface of land? 92 Environmental Upon making a discovery of valuable minerals, the locator of a federal mining claim receives the ‘exclusive right of posses- 9.1 What environmental authorisations are required in order to conduct reconnaissance, exploration and sion and enjoyment’ of all ‘veins, lodes, and ledges throughout mining operations? their entire depth’ which have apexes within the mining claim. The locator also receives the exclusive right to possess all surface areas within the claim for mining purposes, but the United States NEPA is the principal environmental law implicated by mining retains the right to manage the surface of the property for other on federal lands. NEPA requires federal agencies to take a ‘hard purposes. A locator’s possessory rights are considered vested look’ at the environmental consequences of its projects before property rights in real property with full attributes and benefits action is taken. An agency must prepare an EIS for all major of ownership exercisable against third parties, and these rights federal actions significantly affecting the quality of the human may be sold, transferred and mortgaged. environment. An agency may first prepare an EA to determine Holders of federal and state mineral leases and contracts may whether the effects are significant. If the effects are significant, obtain surface access rights under the terms of the instrument, the agency must prepare the more comprehensive EIS. If the but in some instances additional access rights may have to be effects are insignificant, the agency generally will issue a finding obtained through rights-of-way regulations. of no significant impact, ending the process. NEPA does not Split-estate lands are lands where the ownership of the surface dictate a substantive outcome; however, the analysis generally estate and mineral estate have been severed. In such instances, requires consideration of other substantive environmental stat- surface rights may have been granted to private parties, with the utes and regulations, such as those identified in the response to minerals reserved to the United States. Even where surface and question 1.3 above. NEPA is administered by the federal agency mineral interests are in private ownership, these interests may making the decision that may significantly affect the environment. be held by different parties. When surface rights and mineral Mining projects on federal lands, or that otherwise have a rights are owned by different parties, the mineral rights owner federal nexus, will likely have to go through some level of NEPA (or lessee or locator) has the legal right to use as much of the environmental review. State laws may also require environmental surface as is reasonably necessary to mineral development. analysis. Where analysis is required by different agencies, it may However, the mineral estate owner must show due regard for the be possible to pursue an agreement among the agencies to allow interest of the surface estate owner. In such cases, the mineral the operator to produce one comprehensive environmental review rights holder must comply with notice requirements and other document that all agencies can rely on. state and federal requirements that protect the surface owner, There is no statutory deadline for federal agencies to complete including submission of an adequate bond for reclamation. 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 8.2 What obligations does the holder of a to ensure that the agency considered all relevant factors and had reconnaissance right, exploration right or mining right a rational basis for the decisions made based on the facts found. have vis-à-vis the landowner or lawful occupier? Prosecuting the litigation would extend the project approval time, and if the agency loses, additional time would be required for the Those projects that require NEPA review will be subject to agency to redo its flawed NEPA analysis. In some instances where public notice and comment requirements and the review will mines were proposed in especially sensitive areas, it has taken involve consideration of the project’s cultural, societal and decades to obtain approval. economic impacts. State and local permitting processes also The Clean Air Act regulates air emissions from stationary may require applicants to secure public input. State laws may and mobile sources. The Clean Air Act is administered by the impose a ‘public interest’ standard for projects requiring state Environmental Protection Agency and states with delegated approval. For example, mining operations that require state authority. The Clean Water Act regulates pollutant discharges water rights may need to show that the use of the water is in into the ‘waters of the US, including the territorial seas’. 33 the ‘public interest’, which may include consideration of wildlife, U.S.C. § 1311(a). The Clean Water Act is administered by the fisheries and aquatic habitat values. Environmental Protection Agency, US Army Corps of Engineers, As discussed in question 8.1, the law governing split estates and states with delegated authority. The Endangered Species Act requires both the mineral estate owner and the surface estate requires federal agencies to ensure their actions are not likely to owner to proceed with ‘due regard’ for the other, and to ‘accom- jeopardise the continued existence of any threatened or endan- modate’ the use of the other. The mineral rights owner is gener- gered species or destroy or adversely modify designated critical ally entitled to use as much of the surface and subsurface as is habitat and prohibits the unauthorised taking of such species. ‘reasonably necessary’ to exploit its interest in the minerals, but The US Fish and Wildlife Service and National Marine Fisheries this entitlement must be balanced against the surface owner’s Service administer the Endangered Species Act. right to use his property. Federal and state legislation has

Additional environmental statutes that may impact mining including prohibitions on mining in certain areas and designa- are identified in the response to question 1.3 above. States also tions of specific areas for mining. have a wide range of environmental laws that govern permitting and reclamation on mining projects. 102 Native Title and Land Rights

9.2 What provisions need to be made for storage of 10.1 Does the holding of native title or other statutory tailings and other waste products and for the closure of surface use rights have an impact upon reconnaissance, mines? exploration or mining operations?

A variety of federal and state laws govern the storage of tail- The US contains numerous ‘reservations’ comprised of federal ings and other waste products on mining operations and for lands set aside by treaty, Congressional Act or administrative the closure of mines. In general, a mine plan must provide a directive for specific Native American tribes or Alaska natives. detailed description of how the mine operations will comply Tribal reservation title generally is held by the US in trust for with such requirements. 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 9.3 What are the closure obligations of the holder of a reconnaissance right, exploration right or mining right? the tribal reservations and Alaska native lands requires negotiation with the appropriate administrator, leases with tribes for tribally-owned mineral rights and tribal consent for access FLPMA requires BLM and USFS to prevent ‘unnecessary or rights. Tribes also may acquire land in fee by purchase as any undue degradation’ of public lands. 43 U.S.C. § 1732(b). Casual- private party. Reservations may contain inholdings of private or use hardrock mining operations on BLM lands that will result in Government-owned surface and mineral interests. Therefore, no, or negligible, surface disturbance do not require any recla- title to a particular parcel of lands within reservation boundaries mation planning. Notice-level exploration operations requiring is important to understanding the complex jurisdictional issues less than five acres of surface disturbance must meet BLM recla- that may impact mining. mation standards and provide financial guarantees that the Tribal cultural interests are considered through NEPA and two reclamation will occur. 43 C.F.R. §§ 3809.320, 3809.500(b). specific laws. The National Historic Preservation Act (NHPA), Plan-level operations require a plan of operations that includes 54 U.S.C. § 300101, et seq., requires an analysis that includes social a detailed reclamation plan for closure. 43 C.F.R. §§ 3809.11, and cultural impacts, and may require tribal consultation. Section 3809.401. BLM reclamation standards for closure generally 106 of NHPA requires federal agencies to inventorise historic include saving topsoil for reshaping disturbed areas, erosion and properties on federal lands and lands subject to federal permit- water control measures, toxic materials measures, reshaping and ting, and to consult with interested parties and the State Historic re-vegetation where reasonably practicable, and rehabilitation of Preservation Office. 54 U.S.C. § 306108. The Native Graves fish and wildlife habitat. 43 C.F.R. § 3809.420. Mining in BLM Protection and Repatriation Act, 25 U.S.C. §§ 3001–3013, imposes wilderness study areas additionally requires that surface distur- procedural requirements that apply to inadvertent discovery and bances be ‘reclaimed to the point of being substantially unno- intentional excavation of tribal graves and cultural items on federal ticeable in the area as a whole’. 43 C.F.R. § 3802.0-5(d). or tribal lands. Locatable minerals found on American Indian Mining activities on National Forest lands must be conducted reservations are subject to lease only. Under the Indian Mineral ‘so as to minimise adverse environmental impacts on National Development Act of 1982, 25 U.S.C. §§ 2101–2108, tribes may Forest System surface resources’. 36 C.F.R. § 228.1. Operators enter private negotiations with mineral developers for exploration must take measures that will ‘prevent or control on-site and and extraction, subject to the Interior Secretary’s approval. Tribes off-site damage to the environment and forest surface resources’, also may assert off-reservation rights for fishing and hunting if including erosion control, water run-off control, toxic materials such rights have been granted by treaty or otherwise, and such control, reshaping and re-vegetation where reasonably practicable, rights may impact mining even where operations are not on trib- and rehabilitation of fish and wildlife habitat. 36 C.F.R. § 228.8(g). ally-owned lands. State laws may also include closure and reclamation requirements, including, for example, water and air pollution controls, re-con- 112 Health and Safety touring and re-vegetation, fish and wildlife protections, and reclamation bonding requirements. Mining projects can often address both federal and state requirements through a single closure and 11.1 What legislation governs health and safety in reclamation plan and financial guarantee. mining? Federal and state laws generally require financial guarantees prior to commencing operations to cover closure and reclama- The Federal Mine Safety and Health Act, 30 U.S.C. § 801–966, tion costs. These reclamation bonds ensure that the regulatory requires the Mine Safety and Health Administration (MSHA) to authorities will have sufficient funds to reclaim the mine site if inspect all mines each year to ensure safe and healthy work envi- the permittee fails to complete the reclamation plan approved ronments. 30 U.S.C. § 813. MSHA is prohibited from giving in the permit. advance notice of an inspection, and may enter mine property without a warrant. 30 U.S.C. § 813. MSHA regulations set out detailed safety and health standards for preventing hazardous 9.4 Are there any zoning or planning requirements and unhealthy conditions, including measures addressing fire applicable to the exercise of a reconnaissance, exploration or mining right? prevention, air quality, explosives, aerial tramways, electricity use, personal protection, illumination and others. See, e.g., 30 C.F.R. §§ 56.1–56.20014 (safety and health standards for surface Individual counties and municipalities may impose certain metal and non-metal mines). MSHA regulations also establish zoning requirements on lands subject to their jurisdiction, requirements for: testing, evaluating, and approving mining

products; miner and rescue team training programmes; and 132 Constitutional Law notification of accidents, injuries, and illnesses at the mine. 30 C.F.R. §§ 5.10–36.50, 46.1–49.60, 50.10. 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and 11.2 Are there obligations imposed upon owners, mining? employers, managers and employees in relation to health and safety? The US Constitution and federal laws are the supreme law of the land, generally pre-empting conflicting state and local laws. Yes. Owners, employers, managers and employees all have obli- In many legal areas, the different authorities have concurrent gations under the laws described in question 11.1. jurisdiction, requiring regulated entities to comply with multiple levels of regulation. Mining on federal lands, for example, is 11.3 Are there any unique requirements affecting the generally subject to multiple layers of concurrent federal, state, mining industry in light of the coronavirus (COVID-19) and local statutes and administrative regulations. pandemic?

13.2 Are there any State investment treaties which are Mining has been deemed one of 16 critical infrastructure sectors applicable? identified by the US Department of Homeland Security’s Cybersecurity and Infrastructure Agency, citing the mining indus- Many international treaties of general application apply to mining try’s role in critical manufacturing and the production of medical industry investment by foreign persons into the United States, but equipment. As such, mining operations have not been required none specifically address investment in the mining industry or to shut down operations in light of state and local closure require- trading in various minerals. See the response to question 15.2. ments. However, MSHA has issued a directive indicating that it will abide by the President’s Coronavirus Guidelines for Americans which are based on the Center for Disease Control Interim 142 Taxes and Royalties Guidance for Risk Assessment and Public Health Management of Persons with Potential Coronavirus Disease 2019. Additional state 14.1 Are there any special rules applicable to taxation of and local requirements may impact mining operations. Because exploration and mining entities? MSHA does not have jurisdiction to enforce or implement state and local Governments’ emergency orders, mining companies are There are no federal taxes specific to minerals extraction. General required to consult with such Governments to ensure compliance federal, state, county and municipal taxes apply to mining compa- with workplace requirements. nies, including income taxes, payroll taxes, sales taxes, property On June 4, 2020, President Trump issued Executive Order taxes and use taxes. 13927, ‘Accelerating the Nation’s Economic Recovery from the Federal tax laws generally do not distinguish between COVID-19 Emergency by Expediting Infrastructure Investments domestic and foreign mining operators. However, if a non-US and Other Activities’, 85 Fed. Reg. 35165, which authorises federal citizen acquires real property, the buyer must deposit 10% of the agencies to invoke their emergency authorities to expedite trans- sale’s price in cash with the US Internal Revenue Service as insur- portation, defence and other infrastructure project approvals that ance against the seller’s income tax liability. The cash require- would otherwise be subject to lengthy environmental review. ment can be problematic for a cash-strapped buyer that may have The mining industry is likely to benefit from expedited permit- purchased the mine property with stock. ting of infrastructure projects. However, environmental groups There are no federal tax advantages or incentives specific to have indicated they will challenge projects approved pursuant to mining. the order. There are no federal duties on minerals extraction. Locatable minerals claimants must pay an annual mainte- 122 Administrative Aspects nance fee of $165 per claim in lieu of performing assessment work required pursuant to the GML and FLPMA. 43 C.F.R. §§ 3834.11(a), 3830.21. Failure to perform assessment work or pay 12.1 Is there a central titles registration office? a maintenance fee will open the claim to relocation by a rival claimant as if no location had been made. 43 C.F.R. § 3836.15. No. Land and mineral title records are kept in the Government Certain waivers and deferments apply. office having jurisdiction over the mining rights (e.g., the BLM) Leasable minerals permittees and lessees must pay annual and in the real property records of each county in which the rent based on acreage. The rental rates differ by mineral and property is located. All relevant sources must be consulted to some rates increase over time. 43 C.F.R. § 3504.15. Prospecting determine title. permits automatically terminate if rent is not paid on time; the BLM will notify late lessees that they have 30 days to pay. 43 12.2 Is there a system of appeals against administrative C.F.R. § 3504.17. State laws may also include closure and recla- decisions in terms of the relevant mining legislation? mation requirements, including water and air pollution controls, re-contouring and re-vegetation, fish and wildlife protec- Yes. Appeals may be made to administrative tribunals having tions, and reclamation bonding requirements. Mining projects jurisdiction over a particular agency’s order or decision and ulti- can often address both federal and state requirements through mately to the judicial system. a single closure and reclamation plan and financial guarantee. Local Governments may require that transfer taxes be paid upon the recording of a conveyance of mining properties.

14.2 Are there royalties payable to the State over and on ‘expropriation’ of the investor’s rights, including a prohibi- above any taxes? tion on the NAFTA country implementing measures ‘tantamount to expropriation’ except in accordance with approved criteria, and requiring payment of compensation resulting from There are generally no royalties levied on the extraction of losses incurred by the investor. In November 2018, the three federally owned locatable minerals under the GLO. However, countries executed a new agreement, called the United States– mineral leases generally carry royalty obligations. Many states, Mexico–Canada Agreement (USMCA), to replace NAFTA. however, charge royalties on mineral operations on state-owned The USMCA entered into force in July 2020, and includes more lands and taxes that function like a royalty on all lands, such enforceable labour and environmental standards, intellectual as severance taxes, mine licence taxes, or resource excise taxes. property protections and a new chapter on the digital economy. These functional royalties can differ depending on land ownership and the minerals extracted. 162 Cancellation, Abandonment and 152 Regional and Local Rules and Laws Relinquishment

15.1 Are there any local provincial or municipal laws that 16.1 Are there any provisions in mining laws entitling the need to be taken account of by a mining company over holder of a right to abandon it either totally or partially? and above National Legislation? Under the GML, rights in unpatented mining claims can be As noted above, state and local Governments have concur- abandoned voluntarily or by non-payment of annual mainte- rent or independent authority over certain aspects of mining nance fees. Minerals leased under federal law (energy minerals projects (e.g. permitting, water rights and access authorisations). such as coal), minerals owned by states, and minerals owned by Ownership of state-owned land and minerals is controlled by private entities can only be abandoned in accordance with the state law and varies by state. State laws generally are similar to terms of the lease or other grant from the mineral owner to the federal laws in that title remains with the state until the minerals holder of the right to develop the minerals. All such abandon- are severed pursuant to statutory procedures. State and local laws ments are subject to reclamation and closure requirements. may impose a ‘public interest’ standard for projects requiring state approval. State laws also include permitting requirements and 16.2 Are there obligations upon the holder of an closure and reclamation requirements, including, for example, exploration right or a mining right to relinquish a part water and air pollution controls, re-contouring and re-vegetation, thereof after a certain period of time? fish and wildlife protections, and reclamation bonding requirements. Local permits may be required for certain operations, Under the GML, there is no obligation to relinquish an explo- e.g., truck haulage. Many state laws require financial guarantees ration or mining right after a certain period of time. The terms prior to commencing operations to cover closure and reclama- of federal mineral leases, state mineral leases or private leases tion costs. In addition, some states charge royalties on mineral generally set the term limits of mining rights, but may permit operations on state-owned lands and impose taxes that function rights to continue past an initial or extended term as long as like a royalty on all lands, such as severance taxes, mine licence minerals are continuing to be produced and sold. taxes, or resource excise taxes. Local zoning laws may prohibit or limit mining in certain areas. 16.3 Are there any entitlements in the law for the State to cancel an exploration or mining right on the basis of 15.2 Are there any regional rules, protocols, policies or failure to comply with conditions? laws relating to several countries in the particular region that need to be taken account of by an exploration or mining company? Under the GML, unpatented mining claims may be cancelled for failure to pay annual maintenance fees, or, in some instances, the federal Government can challenge the validity of unpatented The North American Free Trade Agreement (NAFTA) among mining claims for failure to make a valid discovery of a valu- the US, Canada and Mexico, in Chapter 11, required equal treat- able mineral. The terms of federal, state and private leases often ment between the NAFTA country’s own citizens and those contain default provisions allowing cancellation upon failure to from another NAFTA country, and required that the NAFTA comply with conditions of the lease. country protect those investors and their investments. Among the most important protections were the broad prohibitions

Karol L. Kahalley has been an attorney with the firm Holland & Hart LLP in Denver, Colorado for 25 years, and serves as a leader of the firm’s mining team. As a leading expert on US mining law, mineral royalties and tribal law, Ms. Kahalley has successfully represented clients in acquiring mineral properties and developing mining operations throughout the United States, including on federal, state, private and tribal lands. Her work includes hard rock minerals, oil and gas, oil shale, potash, uranium, coal, rare earth minerals, aggregates, and geothermal resources. She is a recognised expert on the creation and interpretation of mineral royalties. Ms. Kahalley has been a lecturer and has 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.

Holland & Hart LLP Tel: +1 303 290 1060 555 17th Street, Suite 3200 Email: [email protected] Denver, CO 80202 URL: www.hollandhart.com USA

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Joseph Alexander Jalasi, Jr.

Eric Silwamba, Jalasi and Linyama Legal Practitioners Eric Suwilanji Silwamba, S.C.

12 Relevant Authorities and Legislation (Royalty) (Remission) Order Statutory Instrument No. 18 of 2000; the Mines and Minerals (Environmental) (Exemption) (Amendment) Order Statutory Instrument No. 31 of 2000; the 1.1 What regulates mining law? Mines and Minerals Development (General) Regulations Statutory Instrument No. 84 of 2008; the Mines and Minerals Development The primary law governing the mining sector in Zambia is the (Prospecting, Mining and Milling of Uranium Ores and other Mines and Minerals Development Act No. 11 of 2015 of the Radioactive Minerals Ores) Regulations Statutory Instrument Laws of Zambia (MMDA) as read together with the Mines and No. 85 of 2008; the Mines and Minerals Development (Mining Minerals Development (Amendment) Act No. 14 of 2016. The Rights and Non-Mining Rights) Order Statutory Instrument No. MMDA became effective on 1st July, 2015 although the date of 27 of 2009; the Mines and Minerals Development (Remission assent is 14th August, 2015. It repealed and replaced the Mines of Mineral Royalties) (Luanshya Copper Mines Plc) Regulations and Minerals Development Act No. 7 of 2008. The MMDA Statutory Instrument No. 66 of 2009; the Mines and Minerals deals with mining rights, licences, large-scale mining in Zambia, Development (Mining Rights and Non-Mining Rights) Order gemstone mining, health and safety, environmental protec- Statutory Instrument No. 26 of 2010; the Mines and Minerals tion, and geological services on analysis, royalties and charges. Development (General) (Amendment) Regulations Statutory Other pieces of legislation, other than the Mines and Minerals Instrument No. 34 of 2012; the Mines and Minerals Development Development Act, include: the Mines Acquisition (Special (General) (Amendment) Regulations Statutory Instrument No. Provisions) Act, Chapter 218, Volume 13 of the Laws of Zambia; 17 of 2013; and the Mines and Minerals Development (General) and the Mines Acquisition (Special Provisions) (No. 2) Act, Regulations Statutory Instrument No. 7 of 2016. Chapter 219, Volume 13 of the Laws of Zambia. The industry is further affected by: Income Tax; the Value Added Tax Act; the Environmental Management Act No. 12 of 2011; the Zambia Development Agency Act of 2006; the 1.2 Which Government body/ies administer the mining industry? Pneumoconiosis Act Chapter 217, Volume 13 of the Laws of Zambia; the Medical Examination of Young Persons (underground work) Act Chapter 216, Volume 13 of the Laws of The mining industry is administered by the Ministry of Mines Zambia; the Workers Compensation Act No. 10 of 1999; the and Minerals Development, previously called Ministry of Mines, National Pension Scheme (Amendment) Act No. 7 of 2015; the Energy and Water Development; specifically by the office of the Industrial and Labour Relations Act Chapter 269, Volume 15 Director of Mines. The MMDA gives primary power to the of the Laws of Zambia; the Ionising Radiation Protection Act Director of Mines, Director of Mines Safety, Director of Mining No. 16 of 2005; the National Health Services Act No. 17 of Cadastre and Director of Geological Survey, while the Minister 2005; the Factories Act Chapter 441, Volume 24 of the Laws of enjoys an appellate and supervisory role over the respective Zambia; the Fire Arms Act Chapter 110, Volume 8 of the Laws of Directors’ actions. Zambia; the Explosives Act Chapter 115, Volume 9 of the Laws The aforementioned departments all have their head offices of Zambia; the Employment Act Chapter 268, Volume 15 of the situated in Lusaka, except the Department of Mine Safety, which Laws of Zambia as read with Employment Act No. 15 of 2015; is situated in Kitwe in the Copperbelt Province. the Apprenticeship Act Chapter 275, Volume 15 of the Laws of Zambia; the Citizenship Empowerment Act 2006 as read with 1.3 Describe any other sources of law affecting the the Citizen Empowerment (Amendment) Act No. 44 of 2010; the mining industry. Zambia Revenue Authority Act; the Zambia Wildlife Act of 2015; the Lands Act; the Land and Deeds Act; and the Arbitration Act. Other than the Mines and Minerals Development Act, the In the event of a dispute, the courts also apply the English princi- Zambian mining industry is also affected by the provisions of: the ples of common law and equity. Mines and Minerals (Trading in Reserved Minerals) Regulations English common law and doctrines of equity are applicable in Statutory Instrument No. 110 of 1995; the Mines and Minerals this jurisdiction. When it gained independence in 1964, Zambia (Application for Mining Rights) Regulations Statutory Instrument inherited the English legal system, and certain pieces of English No. 123 of 1996; the Mines and Minerals (Application for Mining legislation are still applicable to Zambia through the English Rights) (Amendment) Regulations No. 29 of 1997; the Mines Law (Extent of Application) Act, Chapter 11, Volume 2 of the and Minerals (Environmental Protection Fund) Regulations Laws of Zambia. The statutes that were in force in England th Statutory Instrument No. 102 of 1998; the Mines and Minerals on 17 August, 1911, as well as the Northern Rhodesia Order

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in Council, 1911 and the British Acts (Extension) Act, Chapter is required to first acquire a mining right or a mining licence 10, Volume 2 of the Laws of Zambia, which are statutes passed granted under the MMDA. In order to acquire mining rights, after 17th August, 1911, are contained in the schedule. In applying the applicant has to apply for a mining right. The applicant common law to mining, Zambian courts have replicated deci- is required to address the application to the Mining Cadastre sions from Commonwealth and foreign countries with similar Office. The Director of Mining Cadastre may, before issuing a socio-economic conditions. For example, Zambia has looked mining right or mining licence, require that the land over which more frequently to Commonwealth countries like England and the mining right or mining licence is to be issued be properly Australia which have had an equally active mining industry. surveyed in accordance with the provisions of the MMDA. Customary law has some influence with respect to surface rights on land held under customary law tenure. 3.4 Are different procedures applicable to different minerals and on different types of land? 22 Recent Political Developments The procedure is the same for all other types of minerals and 2.1 Are there any recent political developments land held under either state land or customary land. affecting the mining industry?

3.5 Are different procedures applicable to natural oil There have been no political developments per se. However, one and gas? recent development is that the minority shareholder in one of the major mines has petitioned against the Lusaka High Court for winding-up – the minority shareholder being a fully-owned The legal regime regulating natural oil and gas is different. The state enterprise. There has been a general international percep- exploration and production of natural oil and gas is regulated by a tion that the winding-up is camouflage for expropriation. separate piece of legislation known as the Petroleum (Exploration and Production) Act No. 10 of 2008, which repealed and replaced the Petroleum (Exploration and Production) Act No. 13 of 1985. 2.2 Are there any specific steps the mining industry is taking in light of these developments? 42 Foreign Ownership and Indigenous Ownership Requirements and Restrictions There are no specific steps being taken, since the action has been understood to be a mere shareholder dispute peculiar only to the mining company in question. 4.1 What types of entity can own reconnaissance, exploration and mining rights? 32 Mechanics of Acquisition of Rights Both foreign and indigenous entities can own reconnaissance, exploration and mining rights. 3.1 What rights are required to conduct reconnaissance?

In order to conduct reconnaissance, a person must apply to the 4.2 Can the entity owning the rights be a foreign entity or owned (directly or indirectly) by a foreign entity and Director of Mining Cadastre. Section 12 of the MMDA prohibits are there special rules for foreign applicants? any person from undertaking any reconnaissance activity without a mining right, a mineral processing licence or a gold panning certificate. Section 18(2) of the MMDA provides that a holder of A prospecting permit, small-scale mining licence, small-scale a mining right or a mineral processing licence shall, within 180 gemstone licence and an artisan’s mining right cannot be granted days of the grant of the licence, survey and demarcate the area to a person who is not a citizen of Zambia or a company which is covered by the licence in the prescribed manner and register a not a citizen-owned company. According to the MMDA, a citi- pegging certificate at the Mining Cadastre Office. zen-owned company refers to a company where at least 50.1% of its equity is owned by Zambian citizens, and in which the Zambian citizens have significant control of the management 3.2 What rights are required to conduct exploration? of the company. It is important to note that there are no restrictions with In order to acquire prospecting rights, the applicant has to respect to foreign ownership for holders of large-scale mining apply for an exploration licence to the Director of the Mining licences. Cadastre in the prescribed form upon payment of the prescribed fee. The Mining Licence Committee in the Ministry of Mines, 4.3 Are there any change of control restrictions which includes all the directors mentioned in question 1.2 above, applicable? grants an exploration licence to the applicant, within 60 days of the receipt of an application, in the prescribed form, if the application complies with the provisions of the MMDA. An explo- The MMDA prohibits the transfer or assignment of any mining ration licence confers on the holder exclusive rights to carry on right without the approval of the Minister of Mines through the exploration in the exploration area for the minerals specified in office of the Director. In addition, the MMDA requires that the licence, and to do all such other acts and things as are neces- any change in the controlling interest in the holder of a mining sary for, or incidental to, the carrying on of those operations. licence be notified to the Minister not less than 30 days before the date of the effective transfer. Section 67 of MMDA further stipulates that a holder of a 3.3 What rights are required to conduct mining? mining right or mineral processing licence shall not, after the date of the grant of the right or licence, without the prior written A person wishing to conduct mining and dispose of minerals approval of the Minister: register the transfer of any share or

shares in the company to any person, or that person’s nominee, upon payment of statutory fees. Additional approval is required if the effect of doing so would give that person control of the for the export of radioactive minerals. A mineral export company; or enter into an agreement with any person, if the permit requires a mineral analysis and evaluation certificate effect of doing so would be to give that person control of the issued by the Director of the Geological Survey, a verification company. report from the Commissioner General of the Zambia Revenue Authority for the payment of mineral royalties, security clearance by the police, production returns and a mineral right or 4.4 Are there requirements for ownership by indigenous persons or entities? mineral processing certificate for the source of the mineral, or the mineral product.

Section 29 of the MMDA provides restrictive requirements; 62 Transfer and Encumbrance however, these restrictions only apply to artisanal mining, small- scale mining, the mineral trading permit under Section 45(1) and the gold-panning certificate under Section 42(1). These 6.1 Are there restrictions on the transfer of rights to conduct reconnaissance, exploration and mining? cannot be granted to a person who is not a citizen of Zambia or a company which is not a citizen-owned company. Artisanal mining shall only be undertaken by a citizen or a co-operative The MMDA provides for restrictions on the ability to transfer wholly composed of citizens. Small-scale mining shall only be reconnaissance, exploration and mining rights. The transfer of undertaken by a citizen-owned, citizen-influenced or citizen-em- these rights requires the prior consent of the Minister of Mines powered company. An applicant for artisanal mining or small- and the production of a tax clearance certificate. Upon satisfac- scale mining shall not be granted a mining licence in respect of tion of the criteria provided in Section 66, the Minister is obliged radioactive minerals. A mining right over an area between a to grant such consent unless the transferee is disqualified from minimum of two cadastre units and a maximum of 120 cadastre holding a mining right or a non-mining right under the general units in extent shall only be granted to the following companies: provisions of the MMDA. (a) a citizen-influenced company, which has its meaning In addition, we must point out that a change of control of the assigned to it in the Citizens Economic Empowerment Act company, either by way of shares or an agreement whose effect is of 2006; to change control, is subject to approval by the Minister of Mines. (b) a citizen-empowered company, meaning a company where 25–50% of its equity is owned by a citizen; or 6.2 Are the rights to conduct reconnaissance, (c) a citizen-owned company, which has its meaning assigned exploration and mining capable of being mortgaged or to it in the Citizens Economic Empowerment Act of 2006. otherwise secured to raise finance? There are no restrictions for exploration, large-scale mining, mineral processing and mineral import and export permits. The MMDA does not make specific provision for this; however, rights may be assigned to a financial institution subject to 4.5 Does the State have free carry rights or options to approval by the Minister, under the provisions of Section 66 acquire shareholdings? of the MMDA, who has to approve any assignment or encumbrance of any mining or mineral processing licence. Free carry rights or options to acquire do not exist. However, mines that have been previously owned by the Government but 72 Dealing in Rights by Means of sold to international mining houses feature what is referred to Transferring Subdivisions, Ceding Undivided as a ‘golden share’. This is in respect of the minority shares the Shares and Mining of Mixed Minerals state continues to hold in these mines. Under the provisions of Section 27 of the Zambia Development Agency Act No. 11 7.1 Are rights to conduct reconnaissance, exploration of 2006, the Minister of Finance may retain a golden share in a and mining capable of being subdivided? state-owned enterprise.

52 Processing, Refining, Beneficiation and No, they are not. Export 7.2 Are rights to conduct reconnaissance, exploration and mining capable of being held in undivided shares? 5.1 Are there special regulatory provisions relating to processing, refining and further beneficiation of mined minerals? No, they are not.

A licence is required for any person who wishes to undertake the 7.3 Is the holder of rights to explore for or mine a processing of any minerals under Section 38. In addition, under primary mineral entitled to explore or mine for secondary Section 13(2), a person may apply for a mineral trading permit, a minerals? mineral import permit, a mineral export permit and a gold-panning certificate. No, they are not.

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7.5 Are there any special rules relating to offshore Common Market for Eastern and Southern Africa (COMESA exploration and mining? Treaty) and the COMESA Common Investment Area (CCIA) Agreement. Zambia has bilateral investment treaties with the United Kingdom (2009), Mauritius (2015), the Netherlands No, there are not. (2003), the Belgium-Luxembourg Economic Union (2001), China (1996), France (2002), Germany (1996), Egypt (2000), Cuba 82 Rights to Use Surface of Land (2000), and Switzerland (1994). Under Section 69, the Director of Mines may consider the 8.1 Does the holder of a right to conduct nature of mining operations if it is in the best interests of the reconnaissance, exploration or mining automatically Republic that the holders of artisanal or small-scale mining oper- own the right to use the surface of land? ations covering a neighbouring area will be improved by the coordination of the mining operations. This is only with respect to The holder of a right to conduct reconnaissance, exploration or artisanal and small-scale mining operations. mining does not automatically own the right to use the surface of land. However, the holder may have the following rights to use 92 Environmental the surface of land: (a) To enter the mining area and take reasonable measures on 9.1 What environmental authorisations are required or under the surface for the purpose of mining operations. in order to conduct reconnaissance, exploration and (b) To carry on mining operations and to do all such other acts mining operations? and things as are necessary for carrying on those operations. (c) To dispose of any mineral products recovered. The holder of a mining right is required to have environmental (d) To stack or dump any mineral or waste product. authorisation from the Zambia Environmental Management (e) To erect the necessary equipment, plant and buildings for Agency (ZEMA). the purpose of mining, transporting, dressing or treating the minerals recovered in the course of the mining operations. 9.2 What provisions need to be made for storage of tailings and other waste products and for the closure of 8.2 What obligations does the holder of a mines? reconnaissance right, exploration right or mining right have vis-à-vis the landowner or lawful occupier? The Environmental Management Act No. 12 of 2011 provides for the issuance of a waste management licence. The holder of a reconnaissance, exploration or mining right has Section 55(2) of the Environmental Management Act provides an obligation towards the landowner or the lawful occupier, as follows: subject to the mining right, to pay fair and reasonable compensa- The Agency may, upon application, issue a hazardous waste tion for any disturbance of the rights of the occupier, including licence to a person to allow the person to: any damage done to the surface of the land by the operations. (a) generate, pre-treat or treat hazardous waste; Where the holder requires exclusive or other use of the whole (b) handle, transport or store hazardous waste; or any portion of the prospecting or mining area, he has an obli- (c) dispose of hazardous waste; or gation to acquire a lease to use the same as agreed between such (d) transit, trade in or export hazardous waste. holder and the landowner or lawful occupier. This is referred A mine can only be closed upon the issue of a certificate of to as an access agreement. Section 57 of the MMDA, however, abandonment by the mining rights holder. The certificate will provides for exceptions to the above statement. Any dispute state the conditions to be satisfied for the mine to be closed. with respect to compensation between the surface rights holder However, it is important to note that any liability incurred before and holder of a mining right with the consent of the parties, may the date on which the abandonment was effected in respect be resolved by the Director of Mining Cadastre, or the Director of the land, and any legal proceedings that might have been may require the parties to submit to arbitration in accordance commenced or continued in respect of any liability against the with the provisions of the Arbitration Act. holder of a mining licence for the certificate, may be commenced or continued against that applicant. 8.3 What rights of expropriation exist? It is important that insurance and indemnities be identified prior to closure of the mine. The Lands (Compulsory Acquisition) Act allows the President of the Republic of Zambia to compulsorily acquire any real prop- 9.3 What are the closure obligations of the holder of a erty (land), interest and personal property for the public benefit. reconnaissance right, exploration right or mining right? Appropriation under the Constitution is subject to the granting of fair and reasonable compensation. There is also a provision The mining rights holder is expected to give notice of the for an Investment Protection Agreement. discovery of any minerals of possible commercial value, keep The Constitution of Zambia (Amendment) Act No. 2 of 2016 a full and accurate record of the prospecting operations and has made special provision with regard to protection of interna- preserve records for the protection of the environment. The tional investment. In addition, Zambia has, through the provi- removal of any minerals without written permission is prohibited. sions of the Investments Disputes Convention Act Chapter 42, Volume 4 of the Laws of Zambia, domesticated into national law 9.4 Are there any zoning or planning requirements the Convention on the Settlement of Investment Disputes between applicable to the exercise of a reconnaissance, States and Nationals of other States. Zambia has also ratified the exploration or mining right? Southern African Development Community Protocol on Finance and Investment (SADC Protocol), the Treaty Establishing the A zoning map of the abandoned or closed mine is required by

the Director of the Geological Survey. This is a prerequisite to The impact of COVID-19 on employment resulted in the the issuance of a certificate of abandonment. Minister of Labour and Social Security issuing the Employment Code (Exemption) Regulation of 2020, one of whose effects was 102 Native Title and Land Rights the suspension of the following obligations: ■ Grant of annual leave to employees and payment of annual 10.1 Does the holding of native title or other statutory leave benefits by the employer. surface use rights have an impact upon reconnaissance, ■ Payment of basic pay during the period of the forced leave exploration or mining operations? taken by an employee. ■ Payment of severance pay, where the employee’s contract of employment is terminated or has expired, in the following Yes, to the extent that permission is required from appropriate manner: authorities; for example, if the land is a traditional burial site, is ■ Payment of a gratuity on a contract of employment a village with land held under customary tenure, is a national which is for a fixed duration at the rate of not less that heritage site, is located within 90 metres of Government build- 25% of the employee’s basic pay earned during the ings or areas regulated by the Aviation Act, or is a National Park contract period or the retirement benefits provided by or Game Protected Area by the Zambia Wildlife Authority, the relevant social security scheme that the employee Railway Administration, etc. is a member of. ■ Payment of severance package as gratuity at the rate of 112 Health and Safety not less than 25% of the employee’s basic pay earned during the contract period as at the effective date of 11.1 What legislation governs health and safety in termination. mining? ■ Giving of notice of not less than 30 days to the employee or a representative of the employee where an employer The 1969 Mines and Mineral Act gave way for the Government intends to terminate a contract of employment by reason to introduce the Mining Regulations 1971 and the Mining of redundancy. Regulations 1973. Further, these two regulations have been amal- ■ The opportunity to afford the employee or represent- gamated to transform the Guide into the Mining Regulations ative of the employees an opportunity to consult on the booklet currently being used in the copper mining industry. measures to be taken to minimise the termination and the The other Acts referred to also include: the Medical adverse effects on the employee. Examination of Young Persons (Underground Work) Act, ■ Notice of not less than 60 days prior to effecting the termi- Chapter 216 of the Laws of Zambia; the Pneumoconiosis Act, nation, to an authorised officer, of the impending termi- Chapter 217 of the Laws of Zambia; the Occupational Health and nation by reason of redundancy, and submission to that Safety Act No. 36 of 2010; the Workers’ Compensation Act No. authorised officer of information on: the reasons for the 10 of 1999; and either environment-related or general medicine. termination by redundancy; the number of categories of employees likely to be affected; the period within which the redundancy is to be effected; and the nature of the 11.2 Are there obligations imposed upon owners, redundancy package. employers, managers and employees in relation to health and safety? ■ Payment of gratuity at a rate of not less than 25% of the employee’s basic pay earned during the contract period. ■ Payment by an employer to an employee who works in excess The Guide to the Mining Regulations has imposed obligations of 48 hours in a week, of one-and-a-half times the employee’s upon owners, employers, managers and employees regarding hourly rate of pay, which can also be referred to as overtime. health and safety. The Chief Inspector of Mines, under the Mines Safety 122 Administrative Aspects Department (MSD), ensures that the regulations are being followed. Note that any deviations from the regulations call for penalties such as fines or closure of mines. 12.1 Is there a central titles registration office?

11.3 Are there any unique requirements affecting the There is a Central Mining Cadastre Office which is responsible mining industry in light of the coronavirus (COVID-19) for receiving and processing applications for mining rights. pandemic? 12.2 Is there a system of appeals against administrative The outbreak of the coronavirus (COVID-19) pandemic has decisions in terms of the relevant mining legislation? negatively affected the mining industry in Zambia. The Minister of Health issued a law affecting the operations of companies. There is a system of appeals against administrative decisions in The Public Health Act (Laws, Volume 17, Cap. 295), Public terms of the relevant mining legislation. An aggrieved person Health (Infected Areas) (Coronavirus Disease 2019) Regulations may appeal to the Minister of Mines against the decision of the Statutory Instrument No. 22 of 2020, provided for punitive Director of Mining Cadastre, Director of Mines Safety, Director measures on non-compliance with the Regulations. The mining of Mines, Director of Geological Survey or the Mining Licence sector is China’s topmost interest for investing in Zambia and Committee under the MMDA. If said person is not satisfied travel restrictions, shutdowns and port closures have resulted in with the decision made by the Minister, he can appeal to the decreasing demand for minerals. Mining Appeals Tribunal. A person aggrieved with the decision of the Mining Appeals Tribunal can appeal to the High Court.

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132 Constitutional Law 152 Regional and Local Rules and Laws

The Zambian Constitution has an impact upon the rights to The COMESA Treaty and the SADC Protocol need to be taken conduct reconnaissance, exploration and mining. Article 16 of into account at a local level. the Bill of Rights of the Constitution provides for the protection of property from being deprived without just cause. Property 15.2 Are there any regional rules, protocols, policies or includes prospecting rights or mining rights. In addition, the laws relating to several countries in the particular region recent amendments to the Constitution in Article 10 (3) have that need to be taken account of by an exploration or made special provision reconfirming the protection of invest- mining company? ment in Zambia, to promote foreign investment and to protect and guarantee such investments through agreement with inves- Yes, the COMESA Treaty and the SADC Protocol. tors and other countries, and any compulsory acquirement of an investment may only be done under customary international law and is subject to Article 16(1) of the Constitution (Bill of Rights) 162 Cancellation, Abandonment and of 1996 as amended. Relinquishment

16.1 Are there any provisions in mining laws entitling the 13.2 Are there any State investment treaties which are holder of a right to abandon it either totally or partially? applicable?

There is a provision for treaties and for bilateral agreements to The Mines and Minerals Development Act contains a provi- be signed and Zambia has entered into a number of multilateral sion entitling the holder of a right to abandon it either totally or and bilateral treaties. Zambia, as stated earlier in question 8.3 on partially, subject to the licence or permit, upon application to the Director of Mining Cadastre for a certificate of abandonment, expropriation, has entered into a number of bilateral and multi- not later than 90 days before the date on which the holder wishes lateral treaties which include: the Convention on the Settlement the abandonment to have effect. of Investment Disputes between States and Nationals of other States; the SADC Protocol; the COMESA Treaty; and the investment agreement for the COMESA Common Investment Area 16.2 Are there obligations upon the holder of an (CCIA) Agreement. exploration right or a mining right to relinquish a part Zambia has bilateral investment treaties with the United thereof after a certain period of time? Kingdom (2009), Mauritius (2015), the Netherlands (2003), the Belgium-Luxembourg Economic Union (2001), China (1996), Yes, an exploration licence is valid for a period of four years. It France (2002), Germany (1996), Egypt (2000), Cuba (2000), and may be renewed for two further periods not exceeding three Switzerland (1994). years each but the maximum period from the initial grant of the licence shall not exceed 10 years. A holder of an exploration 142 Taxes and Royalties licence shall relinquish 50% of the exploration at each renewal. However, an exploration licence for small-scale exploration and 14.1 Are there any special rules applicable to taxation of gemstones, other than diamonds, is not renewable. exploration and mining entities? 16.3 Are there any entitlements in the law for the State Under the Income Tax Act, the corporate income tax rate appli- to cancel an exploration or mining right on the basis of cable to companies carrying out mining operations will be 30%. failure to comply with conditions? Variable profits tax of up to 15% no longer applies; however, there is a limitation on the deduction of losses to 50% of taxable Under the MMDA, the State has vested powers in the Mining income. Licensing Committee – which consists of the Director of Mines, Withholding tax on dividends declared by a company carrying Director of the Geological Survey, Director of Mines Safety, out mining operations is charged at the rate of 0%. Director of Mining Cadastre and other representatives – to cancel an exploration or mining right on the basis of failure to comply with conditions relating to mining rights or non-mining rights. 14.2 Are there royalties payable to the State over and A mining right may be cancelled in the following circumstances: above any taxes? (a) it contravenes a condition of the mining right or non-mining right; Mineral royalties for holders of mining rights are payable at (b) it fails to comply with any requirement of the MMDA the rate of 5% on base metals (except copper) and energy and relating to the mining right or non-mining right; industrial minerals, and 6% for gemstones and precious metals. (c) it fails to comply with a direction lawfully given under the Where the mineral is copper, the mineral royalty rate will be: 4% MMDA; when the price of copper is less than US$4,500 per tonne; 5% (d) it fails to comply with a condition on which any certificate where the price of copper is more than US$4,500 but less than of abandonment is issued or on which any exemption or US$6,000 per tonne; and 6% where the price of copper is more consent is given under the MMDA; than US$6,000 per tonne.

(e) there is a conviction on account of safety, health or environmental matters; (f) in the case of a large-scale mining licence or large-scale gemstone licence, the holder has failed to carry on mining operations in accordance with the proposed plan of mining operations, and the gross proceeds of the sale of a mineral from an area subject to such licence in each of any three successive years are less than half of the deemed turnover applied to that licence in each of those years; and (g) there is a conviction for the giving of false information on recovery of ores and mineral products, production costs or sale.

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Joseph Alexander Jalasi, Jr. is the Head of the Tax, Mining, Corporate, Banking and Finance Department. He has several years in public litigation as Principal State Advocate in the Attorney General’s Chambers. He is a former Registrar of the Tax Appeals Tribunal. He has several reported cases to his credit in the Zambian Law Reports. Mr. Jalasi served as Chief Policy Analyst, Legal Affairs at State House under the late President Levy Mwanawasa and he served as legal advisor to former President Rupiah Banda. He is a member of the Chartered Institute of Arbitrators of the United Kingdom and is also a qualified legal draftsperson.

Eric Silwamba, Jalasi and Linyama Legal Practitioners Tel: +260 211 256 530 Plot No. 12 at William Burton Place Fax: +260 211 256 372 Chilekwa Mwamba Road Email: [email protected] Off Lubu/Saise Roads, Longacres URL: www.ericsilwambaandco.com Lusaka Zambia

Eric Suwilanji Silwamba, S.C. is the Principal Partner and is a vastly experienced Practitioner who has been conferred with the rank and dignity of State Counsel with 30 years at the Zambian Bar. He has several years’ experience in private practice and has held various public offices. He is the former Minister of Presidential Affairs, Minister of Justice and Government Chief Whip. Mr. Silwamba has had the opportunity of handling some of the most complex and high-profile litigation in Zambia that relates to mining, commercial law, tax, administrative, criminal and constitutional law. He is also a member of the Chartered Institute of Arbitrators of the United Kingdom and a qualified legal draftsperson.

Eric Silwamba, Jalasi and Linyama Legal Practitioners is a Zambian law “In 2019, Eric Silwamba, Jalasi & Linyama Legal Practitioners boosted its firm. The firm has been in existence for over 30 years as Eric Silwamba and cross border capability through its combination with global heavyweight Company. In 2013 it was rebranded to Eric Silwamba, Jalasi and Linyama Dentons. The firm sets out its stall as being full service and it provides Legal Practitioners following the admission to partnership of Joseph Jalasi comprehensive coverage of transactional, regulatory and contentious and Lubinda Linyama. It has, over the years, developed to the level of being matters. The wide-ranging practice is particularly dominant in the M&A, among the top law firms in Zambia. The renowned Chambers and Partners infrastructure and tax areas. Eric Suwilanji Silwamba, who is widely recog- (https://chambers.com) describes the firm as follows: nised as a market-leading litigator, and Joseph Jalasi are noted.” “Clients find this team ‘easy to work with and responsive.’ It is noted for being www.ericsilwambaandco.com ‘dedicated to its work’ and for providing ‘excellent legal services.’ The firm is best known for its dispute resolution practice, and it is actively involved in a range of high-value contentious matters. Alongside the litigation practice, the team also offers services in M&A, regulatory compliance, finance and tax.” International publication The Legal 500 (https://www.legal500.com) describes the firm as follows:

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Wintertons Legal Practitioners Nikita Madya

12 Relevant Authorities and Legislation ■ The Minerals Marketing Corporation of Zimbabwe (MMCZ), which is responsible for the marketing of minerals in Zimbabwe. 1.1 What regulates mining law?

1.3 Describe any other sources of law affecting the Mining law is principally regulated in terms of the Mines and mining industry. Minerals Act [Chapter 21:05] and the regulations made in terms of that Act. These include: ■ the Mining (General) Regulations; The following sources of law affect the mining industry in ■ the Mining (Management and Safety) Regulations; Zimbabwe: ■ the Mining (Health and Sanitation) Regulations; and ■ the Labour Act [Chapter 28:01] – regulates the relation- ■ the Mines and Minerals (Custom Milling Plants) Regulations. ship between employers and their employees as well as Another key piece of legislation in the regulation of Mining their rights thereto. Under it is established the National Law is the Environmental Management Act [Chapter 20:27]. Employment Council for the Mining Industry which, in turn, registered the Collective Bargaining Agreement for the Mining Industry to deal with the mining industry-spe- 1.2 Which Government body/ies administer the mining cific rights of employers and employees; industry? ■ the Environmental Management Act [Chapter 20:27] – ensures that mining takes place in a manner that protects The Mines and Minerals Act, the Minerals Corporation of the environment in a sustainable way; Zimbabwe Act [Chapter 21:04], the Gold Trade Act [Chapter ■ the Explosives Act [Chapter 10:08] – regulates the impor- 21:03], the Precious Stones Act [Chapter 21:06], the Chamber of tation, transportation and use of explosives generally used Mines of Zimbabwe Incorporation (Private) Act [Chapter 21:02], in the mining industry; the Base Minerals Export Control Act [Chapter 21:01] and the ■ the Gold Trade Act [Chapter 21:03] – regulates the trade Environmental Management Act, establish a number of bodies and dealings in gold. It generally prohibits the possession and functionaries administering various aspect of the mining of gold by unauthorised persons; industry. These include: ■ the Water Act [Chapter 20:24] – deals with the use and ■ The President of the country. He has certain responsibilities control of water bodies and the requirements for a water reserved for him in the granting and withdrawal of certain permit needed in mining projects; mining rights especially relating to coal, oil and gas. ■ the Precious Stones Trade Act [Chapter 21:06] – regulates ■ The Ministry of Mines and Mining Development. The the possession of and dealings in precious stones; Minister and the Permanent Secretary in the Ministry have ■ the Chamber of Mines of the Zimbabwe Incorporation various responsibilities that they perform in the Mining (Private) Act [Chapter 21:02] – provides for the incorpo- Industry. ration of the Chamber of Mines of Zimbabwe, and for the ■ The Mining Affairs Board, which is responsible for the dissolution of the previous entity which was the Rhodesia granting or certain mining rights and the withdrawal of same Chamber of Mines. The Chamber of Mines represents the and the approval of certain agreements and transactions. interests of the entire mining industry; ■ Mining Commissioners, who are now being referred to as ■ the Urban Councils Act [Chapter 29:15] – provides for: the Provincial Mining Directors. The Mines and Minerals Act establishment of municipalities and towns and the admin- has not yet been amended to record the change in title. istration of municipalities and towns by local boards, ■ The Environmental Management Authority, which is municipal and town councils; the conferring of town and responsible for granting the environmental impact assess- city status on growth points, municipalities and towns; the ment certificates before mining projects can commence. declaration of local government areas and the administra- ■ The Chamber of Mines, which represents the interests of tion of local government areas by local boards; the confer- the Mining Industry. ring of functions and powers and imposition of duties ■ The National Employment Council for the Mining Industry, upon municipal and town councils and local boards; and which deals with employment and related matters in the the establishment of the Local Government Board and mining industry. provision for the functions thereof;

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■ the Forest Act [Chapter 19:05] – provides for the setting now. The mining industry is generally agreed that the changes aside of State forests and for the protection of private forests, to the mining law regime are overdue. trees and forest produce; establishes a Mining Timber Permit Board to control the cutting and taking of timber for 32 Mechanics of Acquisition of Rights mining purposes; provides for the conservation of timber resources and the compulsory afforestation of private land; 3.1 What rights are required to conduct and regulates and controls the burning of vegetation; reconnaissance? ■ the Roads Act [Chapter 13:18] – provides for the planning, development, construction, rehabilitation and management of the roads network of Zimbabwe, and for the regu- There is no legislation that deals with this in Zimbabwe. The lation of the standards applicable in the planning, design, Ministry of Mines and Mining Development and the geological construction, maintenance and rehabilitation of roads with department may, however, make available information that may due regard to safety and environmental considerations; be required for one to have an understanding of the geology of ■ the Communal Lands Act [Chapter 20:04] – alters and regu- Zimbabwe. lates the occupation and use of Communal Land and affects the manner in which mining rights are acquired; 3.2 What rights are required to conduct exploration? ■ the Exchange Control Act [Chapter 22:05] – confers powers and imposes duties and restrictions in relation to gold, Rights to conduct exploration are conferred by a prospecting currency, securities, exchange transactions, payments and licence/licences upon payment of the appropriate fee prescribed debts, and the import, export, transfer and settlement of in respect of each such licence to the Mining Commissioner. property; Prospecting licences are issued to permanent residents of ■ the Land Acquisition Act [Chapter 20:10] – empowers the Zimbabwe. The holder can exercise these rights or appoint an President and other authorities to acquire land and other agent to exercise them on his behalf. The prospecting licence immovable property compulsorily in certain circumstances; is valid for two years. The prospectors’ licence itself is valid for and to make special provision for the compensation payable five years. Both are renewable. The licence confers the right for agricultural land required for resettlement purposes; of prospecting and searching for any minerals, mineral oils and ■ the Minerals Marketing Corporation of Zimbabwe Act natural gases on land open to prospecting, but not of removing [Chapter 21:04] – regulates the Corporation which is or disposing of any mineral discovered, save for the bona fide mandated to sell the minerals in Zimbabwe; purpose of having it assayed or of determining the nature thereof ■ the Zimbabwe Mining Development Corporation Act or with the permission in writing of the Mining Commissioner [Chapter 21:08] – provides for the establishment, constitution, and pegging. The licence entitles the holder to prospect, peg functions, powers and duties of the Mining Development and register claims in terms of the Act. A registered claim is a Board and regulates the financial affairs of the Zimbabwe mining location where mining activities can take place. Mining Development Corporation; Rights to conduct exploration work can also be conferred ■ the Base Minerals Export Control Act [Chapter 21:01] – through a special grant issued for that purpose. This is usually regulates and controls the export of base minerals from the case in respect of ground that is reserved against prospecting. Zimbabwe; An exclusive prospecting order confers exclusive rights to ■ the Indigenisation and Economic Empowerment Act prospect for specified minerals in any identified location within [Chapter 14:33] – provides for support measures for the Zimbabwe. Exclusive prospective orders are issued for a economic empowerment of indigenous Zimbabweans; and maximum of six years, being renewable for a period of three years. ■ the Zimbabwe Investment Development Agency Act [Chapter 14:38] – deals with investment promotion in the country. 3.3 What rights are required to conduct mining?

22 Recent Political Developments In order to conduct mining operations, one needs to have a registered mining claim(s), a special grant issued for mining purposes, a mining lease or a special mining lease. For ease of 2.1 Are there any recent political developments affecting the mining industry? administration, the holder of a registered mining location or of contiguous registered mining locations can apply to be issued with a mining lease. A mining lease and a special grant gener- There has been a push in Parliament to have the Mines and ally confer longer-term rights which are renewable in terms of Minerals Act amended to take into account the challenges that the Act. have been identified in the existing Act. It is anticipated that once the drafting of the legislation is finalised, a bill will be presented before Parliament for debate. The form and nature of the amend- 3.4 Are different procedures applicable to different ments are still not known but it is anticipated that one of the major minerals and on different types of land? issues to be addressed relates to the porous nature of the registration of mining titles, which has resulted in several disputes The Mines and Minerals Act provides for different proce- between miners, especially those involved in gold mining. dures for certain types of minerals and different types of land. The mining of coal, mineral oils, natural gas and nuclear energy source minerals have rules that are different from other 2.2 Are there any specific steps the mining industry is taking in light of these developments? minerals in terms of the acquisition of the rights. Depending on the type of land, the Mines and Minerals Act provides for different procedures for the acquisition of the mining rights. The mining industry is eagerly awaiting the proposed amend- For instance, with land that is privately owned and is less than ments, as the process has been in the pipeline for many years 100 hectares, the written consent of the owner or the occupier

is required before one can exercise any rights conferred under a No transfer is possible if: prospecting licence, special grant or exclusive prospecting order. ■ the mining location is liable for forfeiture or under attachment; ■ duties, fees, royalties, rentals and other payments in respect 3.5 Are different procedures applicable to natural oil and gas? of the mining location are outstanding with the Mining Commissioner’s office; and/or ■ there are outstanding payments due to the Rural District Different rules apply to the mining of natural oil and gas. Council. According to section 299 of the Mines and Minerals Act, any Transfers can only be made to permanent residents of person wishing to mine for oil or gas has to apply for a special Zimbabwe. In the case where transfer is to be made to non-res- lease, which is granted only by the President or a Minister author- idents, the Mining Commissioner has to receive assurance from ised by the President to do so. the Reserve Bank of Zimbabwe that all exchange control requirements have been fully complied with. On receipt of the fee, the 42 Foreign Ownership and Indigenous Mining Commissioner will then issue the new owner with a new Ownership Requirements and Restrictions certificate of registration. Where the mining title is held in the form of a Special Grant, 4.1 What types of entity can own reconnaissance, transfer is restricted. The Special Grant is issued personally to exploration and mining rights? the holder and cannot be transferred.

Any person can own reconnaissance, exploration and mining 4.4 Are there requirements for ownership by rights. ‘Person’ refers to: indigenous persons or entities? ■ any company incorporated or registered as such under an enactment; The policy on indigenous ownership in the mining sector is ■ any body of persons, corporate or unincorporated; or being scrapped in order to attract investment in the mining ■ any local or other similar authority. sector. It has already been confined to the diamond and platinum sectors since March 2018. 4.2 Can the entity owning the rights be a foreign entity or owned (directly or indirectly) by a foreign entity and 4.5 Does the State have free carry rights or options to are there special rules for foreign applicants? acquire shareholdings?

The amendment to the Indigenisation and Economic This is not provided for in the legislation, but the government Empowerment Act in 2018 allowed foreign entities to own can participate in mining activities through the Zimbabwe 100% mining rights except for platinum and diamond mining. Mining Development Corporation and through joint ventures. A recent development saw the government authorising a foreign In diamond mining, it is actively involved through the Zimbabwe investor in the diamond mining sector to own more than 49% in Consolidated Diamond Company. the diamond company. The legislation to give effect to this has, however, not been put in place. It does appear, though, that the 52 Processing, Refining, Beneficiation and law and practice in the diamond and platinum sectors are not in tandem with other sectors. In all other sectors, foreign entities Export and individuals can own mining rights. 5.1 Are there special regulatory provisions relating to processing, refining and further beneficiation of mined 4.3 Are there any change of control restrictions minerals? applicable?

Beneficiation is encouraged and the government has imposed When any registered mining location or any interest therein is taxes on the export of certain unbeneficiated minerals such as sold or otherwise alienated, the seller or person who so alien- diamonds, platinum and lithium. This is aimed at pushing the ates shall notify the Commissioner of the transaction within 60 mining industry players to invest in beneficiation. days of the date of the transaction. The seller shall provide the following information to the Mining Commissioner: ■ the name of the person to whom such location or interest 5.2 Are there restrictions on the export of minerals and is sold or otherwise alienated; levies payable in respect thereof? ■ the amount of the valuable consideration, if any, agreed upon; and According to the Minerals Marketing Corporation of Zimbabwe ■ the date of the transaction. Act, no person other than the Corporation shall export any The agreement should be registered with the Mining mineral from Zimbabwe except in terms of a contract negotiated Commissioner. Transfer duty is payable by the purchaser on the by the Corporation on behalf of the seller, or when authorised sale at a fee prescribed by Parliament. This duty should be paid to do so by the Corporation subject to such terms and condi- within six months. If payment is partly in cash and partly in tions as the Corporation may impose. A commission is payable shares of a company, the nominal value of the shares shall be to the Corporation for its services promulgated by the Minister used. In the case where payment is contingent upon some future of Mines and Mining Development from time to time in statu- event, the purchaser shall give security to the satisfaction of the tory instruments. Mining Commissioner that he will pay the transfer duty at a fixed rate when the consideration becomes due.

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62 Transfer and Encumbrance 7.5 Are there any special rules relating to offshore exploration and mining?

6.1 Are there restrictions on the transfer of rights to conduct reconnaissance, exploration and mining? There are no rules relating to offshore exploration and mining. Zimbabwe is a landlocked country. The transfer of mineral rights is restricted in the circumstances referred to above. The consent of the relevant officials 82 Rights to Use Surface of Land is required, and, in some cases, a transfer is not possible as the rights are characterised as personal to the holder. 8.1 Does the holder of a right to conduct reconnaissance, exploration or mining automatically own the right to use the surface of land? 6.2 Are the rights to conduct reconnaissance, exploration and mining capable of being mortgaged or otherwise secured to raise finance? Holders of these rights have, subject to any existing rights: ■ the right to the use of any surface within the boundaries thereof for all necessary mining purposes of their location; Yes. However, as mentioned above, the consent of the Mining and, as against the holder of a prospecting licence or of any Commissioners or the Minister is required before this can be other mining location, the right, except as in section 357 done. Where the approval of the Minister or government is of the Mines and Minerals Act provided, to the use of all required to alienate mining rights, the use of the rights as secu- surface within such boundaries; rity to raise capital becomes substantially reduced. The use of ■ the right to use, free of charge, soil, waste rock or indig- mining rights as security is, however, not popular with financial enous grass situated within his location for all necessary institutions at the moment. mining purposes of such location; ■ the right to sell or otherwise dispose of waste rock recov- 72 Dealing in Rights by Means of ered by him from his location in the course of bona fide Transferring Subdivisions, Ceding Undivided mining operations; Shares and Mining of Mixed Minerals ■ the same right of taking water for primary purposes as is possessed by the holder of a prospecting licence; and ■ subject to the Forest Act [Chapter 19:05] and to such condi- 7.1 Are rights to conduct reconnaissance, exploration tions as may be prescribed and on payment to the occupier and mining capable of being subdivided? or, where there is no occupier, the owner of the land in advance of such tariff rate as may be prescribed, the right Depending on the nature of the rights acquired, these can be to take and use for firewood or for the purposes of his subdivided with the consent of the relevant officials. mining location any indigenous wood or timber from land open to prospecting, which is neither Communal Land nor 7.2 Are rights to conduct reconnaissance, exploration land in regard to which a reservation has been made under and mining capable of being held in undivided shares? section 36 or 37 of the Mines and Minerals Act; provided that nothing in this paragraph shall be construed so as to permit a miner to use any wood or timber taken by him for This is possible. The Mines and Minerals Act recognises the firewood elsewhere than on his location or, where his loca- existence of partnerships that are capable of acquiring mining tion is a block forming part of a property, on that property. rights in equal and undivided shares. These are called “mining syndicates” in the Mines and Minerals Act. 8.2 What obligations does the holder of a reconnaissance right, exploration right or mining right 7.3 Is the holder of rights to explore for or mine a have vis-à-vis the landowner or lawful occupier? primary mineral entitled to explore or mine for secondary minerals? The holder of a right: ■ should give notice to the occupier of his intention to exer- Yes. This is possible to the extent that the secondary mineral is cise his rights; not coal, gas or oil, which require a special lease. The secondary ■ cannot interfere with the use of water for primary purposes mineral would require to be declared. If the secondary mineral by the owner or occupier of the land; becomes dominant, one would be expected to make an applica- ■ should pay the occupier for taking and using any wood; tion to convert the block to that of the mineral now predomi- ■ o has t remove any structures that have been erected on the nantly being mined. land after the expiration of the lease; ■ should compensate the occupier who is injuriously affected 7.4 Is the holder of a right to conduct reconnaissance, by the exercise of any such rights; exploration and mining entitled to exercise rights also ■ should notify the occupier of the intention to house/ over residue deposits on the land concerned? accommodate employees on the land; and ■ should allow the occupier to let his livestock graze and to The holder of the rights is entitled to exercise rights over residue cultivate his crops. deposits on the land concerned for so long as one continues to hold the rights over the area, with the exception of coal, oil and 8.3 What rights of expropriation exist? gas, which require a special lease.

In terms of section 324 of the Mines and Minerals Act, the President may, on the recommendation of the Mining Affairs

Board, order the expropriation of a mining location on the control over the activities within their areas of jurisdiction and grounds that it is not being worked at all or is not being adequately are, subject to the provisions of the Regional, Town and Country worked and developed. The owner of the mine would be given a Planning Act, Urban Councils Act and Rural District Councils right to make representations to the Mining Affairs Board before Act, entitled to impose certain requirements on the exercise of a recommendation is made to the President for expropriation. such rights. For instance, a Rural District Council is required to After expropriation, the Mining Affairs Board may dispose of consent to the exercise of any right under a prospecting licence same; and the proceeds thereof, less the costs of conducting the or exclusive prospecting order in a communal area. sale, would be given to the owner. The President may also, in terms of section 398 of the Mines and 102 Native Title and Land Rights Minerals Act, at any time, for the utilisation of any mining location for a purpose beneficial to the public generally, or to any section 10.1 Does the holding of native title or other statutory thereof, acquire either the whole or any portion of such mining surface use rights have an impact upon reconnaissance, location, or limit the rights enjoyed by the owner thereof under this exploration or mining operations? Act. The process for the acquisition would have to be followed. The same rules that apply to privately owned land which is occu- 92 Environmental pied or being used would generally apply in rural areas. Such rights cannot be exercised on cultivated fields in communal 9.1 What environmental authorisations are required areas and, in cases where an occupier of communal land holds in order to conduct reconnaissance, exploration and less than 100 hectares, his written consent is required before mining operations? such rights can be exercised.

Section 97 of the Environmental Management Act lists mining 112 Health and Safety activities as some of the projects that cannot be done without the Environmental Management Agency having approved the 11.1 What legislation governs health and safety in environmental impact assessment report and issued a certificate. mining? The Environmental Impact Assessment Certificate is key to the commencement of mining activities. In addition, the following authorisations would also be required, depending on the operation: The Mining (Management & Safety) Regulations S.I. 109 of ■ Waste Disposal Licence; 1990, and the Mining (Health & Sanitation) Regulations S.I. 185 ■ Effluent Discharge Licence; of 1995 regulate the health and safety issues in mining. ■ Emission Licence; and ■ Import/Export Licence for controlled substances. 11.2 Are there obligations imposed upon owners, employers, managers and employees in relation to health and safety? 9.2 What provisions need to be made for storage of tailings and other waste products and for the closure of mines? Yes. The Mining (Management & Safety) Regulations S.I. 109 of 1990, and the Mining (Health & Sanitation) Regulations One has to include in the environmental impact assessment plan S.I. 185 of 1995 impose obligations on employers, managers details of how the storage of tailings and other waste products and employees in relation to safety. In addition, the Collective will be handled, prior to the approval of the plan and issuance Bargaining Agreement for the Mining Industry imposes, in of the certificate. The proposals shall ensure that this is done in section 30 thereof, the minimum protective clothing that must an environmentally friendly manner. Also included in the plan be given to the employees in a mining operation. would be a decommissioning plan outlining how the area will be rehabilitated and returned to its original state. Unless the 11.3 Are there any unique requirements affecting the Environmental Management Agency is satisfied, the plan will mining industry in light of the coronavirus (COVID-19) not be approved, and no certificate will be issued in order for pandemic? mining activities to commence. The mining industry is a strategic sector in our economy. The 9.3 What are the closure obligations of the holder of a sector was accordingly classified as an essential service and reconnaissance right, exploration right or mining right? miners were allowed to go back to work in the early stages of the lockdown subject to complying with the COVID-19 Regulations. The industry was therefore able to commence operations after a These include restoring the land to its original state by: few weeks of being closed due to the lockdown. ■ filling up any pits; ■ removing any unsafe structures, equipment, disused surface pipes, pump stations and facilities from the site; and 122 Administrative Aspects ■ re-vegetation which will be commenced during the operational stage, etc. 12.1 Is there a central titles registration office?

9.4 Are there any zoning or planning requirements Yes, there is. Much of the information on titles is, however, applicable to the exercise of a reconnaissance, located at the provincial offices under the control of the Mining exploration or mining right? Commissioners, now called Provincial Mining Directors.

The local authorities in both the rural and urban areas have

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12.2 Is there a system of appeals against administrative ■ A rebate of duty shall be granted to a holder of a mining decisions in terms of the relevant mining legislation? location in respect of specified goods which, during a specified period, are imported by a holder for use solely and exclusively for mining development operations by the holder. There is a system of appeals depending on the nature of the deci- ■ A rebate on duty is granted on all capital goods imported for sion made. Anyone aggrieved by the decision of the Provincial mining development operations and during the exploration Mining Director is entitled to appeal against such decision to the phase of a mining project. High Court. In some cases, for instance, in relation to decisions made in terms of section 50 of the Mines and Minerals Act, an appeal lies to the Minister of Mines and Mineral Development. 14.2 Are there royalties payable to the State over and Where the Mining Commissioner has decided the matter as the above any taxes? Mining Commissioner’s Court, an appeal lies with the High Court and thereafter with the Supreme Court. Some decisions There are royalties payable to the State calculated as a percentage made by the Mining Affairs Board are the subject of an appeal of the gross fair market value of minerals produced and sold as to the Administrative Court. In all mining disputes, the High follows: Court of Zimbabwe enjoys original civil jurisdiction unless the ■ Precious Stones – 10%. parties have agreed to have such disputes referred to the Mining ■ Precious Metals – 3.5%. Commissioner’s court. ■ Base Metals – 2%. ■ Industrial Minerals – 2%. 132 Constitutional Law ■ Coal Bed Methane Gas – 2%. ■ Coal – 1%. 13.1 Is there a constitution which has an impact upon rights to conduct reconnaissance, exploration and 152 Regional and Local Rules and Laws mining? 15.1 Are there any local provincial or municipal laws that The Constitution of Zimbabwe protects the right to property. need to be taken account of by a mining company over It guarantees the right of every person to acquire, hold, occupy, and above National Legislation? use, transfer, hypothecate, lease or dispose of all forms of property, either individually or in association with others. Property Yes. There are local laws that would need to be taken into is defined to include any right in property. account depending on the location of the mine. The Rural The Constitution also deals with environmental rights and District Councils Act [Chapter 29:13] allows rural district coun- provides that every person has the right to an environment that cils to charge land development levies on mining location in is not harmful to their health or well-being, to have the envi- their locality. Mining operations would therefore be expected ronment protected against pollution and to secure ecologically to comply with the local by-laws of the local authorities. sustainable development and use of natural resources while promoting economic and social development. The constitu- tionally protected environmental rights would serve to ensure 15.2 Are there any regional rules, protocols, policies or laws relating to several countries in the particular region that mining operations are conducted in a manner that does not that need to be taken account of by an exploration or affect the rights of other citizens. mining company?

13.2 Are there any State investment treaties which are There are none. Regional rules, protocols and policies only have applicable? the force of law in Zimbabwe if incorporated into domestic laws.

Zimbabwe signed a number of bilateral treaties with other coun- 162 Cancellation, Abandonment and tries for the protection of investments from such countries. These Relinquishment treaties would therefore form part of the government-to-government commitments to protecting investments. 16.1 Are there any provisions in mining laws entitling the holder of a right to abandon it either totally or partially? 142 Taxes and Royalties Yes. A holder may abandon his rights upon written application 14.1 Are there any special rules applicable to taxation of to the Board through the Mining Commissioner. exploration and mining entities?

Income tax on mining operations is levied at a flat rate of 15% 16.2 Are there obligations upon the holder of an exploration right or a mining right to relinquish a part for all minerals, and all capital expenditure incurred exclusively thereof after a certain period of time? for mining operations is deductible at a rate of 100%. ■ Mining companies enjoy an indefinite carry-forward of their tax losses. There are none. ■ Investors are allowed to borrow locally for working capital purposes. Offshore borrowings require Reserve Bank approval, and interest paid on borrowings of a debt-to-equity ratio of up to a maximum of three to one is tax-deductible.

16.3 Are there any entitlements in the law for the State If the Minister has reason to believe that a miner: to cancel an exploration or mining right on the basis of ■ has failed, within a reasonable period after commencing failure to comply with conditions? mining operations, to declare any output from his mining location; Yes. There are a number of circumstances under which the State ■ has knowingly rendered a false return or declaration will be entitled to do this. Principally, where there is no compli- regarding the output from his mining location; or ance with the conditions set out in a special grant or mining ■ n has, i relation to his mining location or the output thereof, lease, the Mining Commissioner of the Mining Affairs may take contravened the Gold Trade Act [Chapter 21:03], the action to cancel. Precious Stones Trade Act [Chapter 21:06], or the Minerals If a Mining Commissioner has reason to believe that the Marketing Corporation of Zimbabwe Act [Chapter 21:04], holder of a registered mining location is using wasteful mining whether or not he has been convicted thereof by a court, methods or metallurgical processes, he shall inspect the regis- then the Minister may cause the cancellation of the mining tered mining location forthwith and report to the Board accord- rights. ingly, which can cancel such mining rights.

Mining Law 2021 © Published and reproduced with kind permission by Global Legal Group Ltd, London Wintertons Legal Practitioners 129

Nikita Madya joined the firm on 1 July 2000 and became a Partner on 1 July 2003. He heads the firm’s Energy, Infrastructure and Natural Resources Department and is co-head of the Commercial and Corporate Department. He has a large commercial practice and advises several listed and unlisted companies in relation to acquisitions, mergers, disposals and various types of contracts. He is currently involved in greenfield projects in the energy sector, with work covering all aspects, including the construction elements involved in such projects. He has handled several completed transactions for companies listed on the Zimbabwe Stock Exchange, including share option schemes, rights issues, mandatory offers to minorities, Zimbabwe Stock Exchange Rules compliance and related matters. He has acted and continues to act as local counsel for a number of international law firms handling investment transactions into Zimbabwe. He is also involved in advising local, regional and international financial institutions in various loan transactions.

Wintertons Legal Practitioners Tel: +263 4 250 113/29 Beverly Corner, 11 Selous Avenue Email: [email protected] P.O. Box 452 URL: www.wintertons.co.zw Harare Zimbabwe

Wintertons – formerly Winterton, Holmes and Hill – was founded in 1902 and provides a full array of legal services. Our commitment is to deliver the highest-quality legal services for our clients. We understand the importance of accurately interpreting our clients’ needs and delivering quick, reliable and cost-effective legal advisory and representation services to our clients. We pride ourselves on being a modern, full-service, commercial law firm. Our mixture of youth and experience enables us to maintain stability whilst creating innovative solutions to our customers’ needs. Wintertons has been highly recommended as a Leading Firm in General Business Law and its Partners have been rated consistently as Leading Lawyers by Chambers Global over the past decade. www.wintertons.co.zw

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