Turkey has recently amended its mining regulations in order to attract more domestic and foreign private investors in the industry. The amendments made are criticized particularly by the environmental groups for removing the environmental controls drastically and by domestic mining investors for being radically open to foreign investors. This Newsletter deals with some of the important aspects of the recently enacted pieces of legislation.
Principle laws and regulations on mining
The mining industry in Turkey is regulated by the Turkish Mining Law , which was amended recently by an amending law (all together referred to as “Amended Mining Law”) and regulations issued thereunder. The Amended Mining Law aims to attract more private and particularly foreign investment in mining exploration and operation activities. Some of the advantages for investors brought about by the recent regulatory developments are as follows:
a.Most of the administrative powers previously shared by various administrative departments and Ministries are combined and entrusted with one authorized body namely the Mining Affairs General Directorate of the Ministry of Energy and Natural Resources (“General Directorate”) in order to reduce the bureaucratic difficulties in the permission and licencing process.
b.Licensing procedure is simplified and the periods for granting permissions are shortened. In addition, some of the mining activities are excluded from the Environmental Impact Assessment and for those activities that require Environmental Impact Assessment, the time period for the process is shortened up to three months.
c.The fees to be paid by licence-holders are reduced.
d.Expropriation of privately-owned lands for mining activities is possible pursuant the public benefit decision of the Ministry.
e.Limitations in relation to mining activities on certain types of land are removed.
Law No 3213 dated 15 June 1985
Law No: 177 dated 5 June 2004
Regulation Concerning the Implementation of the Mining Law dated 3 February 2005 and the Regulation Concerning the Mining Permits dated 21 June 2005
Mining rights and title in Turkey
Mining rights and minerals are exclusively owned by the state. The ownership of the minerals in Turkey is not subject to the ownership of the relevant land. The State, under the mining legislation, delegates its rights to explore and operate to individuals or legal entities by issuing licences for a determined period of time in return for a payment of royalty. Mining rights with respect to certain types of mines, however, belong to state or state enterprises.
The licences for mining rights are granted to the Turkish citizens, legal entities established under Turkish laws and some authorized public bodies. Companies established under Turkish law according to the provisions of the Turkish Commercial Code are Turkish companies even if they are established by foreign persons with a 100% foreign capital. Consequently, there is not any distinction between the mining rights that may be acquired by local investors and those that may be acquired by foreign investors provided that the foreign investors establish a company in Turkey under Turkish law.
Duties and royalties
The Amended Mining Law distinguishes five groups of minerals. Pursuant this classification the royalty amount to be paid to the state differs.
A royalty of 4% of the pit-head sale price for the groups 1 and 5, 2% for the other groups has to be paid. The royalty amount to be with respect to the mining activities realized on state-owned lands is 30% more. If the state-owned land has also a forest status and is more than 5 hectares, licence-holders have to pay forest fees subject to the decision of the Forest General Directorate of the Ministry of Environment and Forest without paying the additional 30%.
Types of mining licences
There are two types of licences: exploration licence and operation licence. The right of priority in licence applications is determined according to the date of application. Licences become valid in the date of registration to the Mining Registrar. Transfers, successions, sequestrations, pledges, mortgages and expirations are required to be registered in the Mining Registrar.
The exploration licence is a certificate granting the right to explore on a determined land. The exploration licence is granted following the submission of the necessary documents, licence fee and licence guaranty fee within 15 days following the application. The exploration licence is granted for 3 years which can be subject to an extension of 2 years for Group 4 minerals. The exploration licence-holder, by the end of the second year, has to submit an exploration activity report.
The operation licence is a certificate granting the right to operate the mine. The exploration licence-holder has to apply for an operation licence before the end of the term of exploration licence. The term of operation licence is at least 10 years, which can be subject to an extension.
The operation licence-holder has to submit to the General Directorate, technical documents, a sales information form and an activity information form related to the operation activity conducted during the previous year by the end of April of each year. One mining engineer has to be employed as a technical supervisor.
Licences are subject to an application fee, annual licence fee to be determined by the Ministry of Finance every year and a guaranty fee in the amount of 0,3% of the annual licence fee per hectare.
The Amended Mining Law provides an advantage to the license-holders of not paying 50% of the royalty if the extracted ores are processed in Turkey, in other words if there is an additional value.
Environment, safety and health issues
Environmental Law No. 2872, Environmental Impact Assessment Regulation and Labour Law No. 4857 are the principle regulations governing mining activities. There are many other regulations enacted based on those principle regulations which are applicable to mining industry.
Further to the amendments made in the Mining Law, most of the mining activities are excluded from the Environmental Impact Assessment and for those mining activities, which require Environmental Impact Assessment, the related procedures shall be completed within three months.
The issue of allocation of environmentally sensitive areas such as forest areas, hunting areas, special protection areas, national parks, agriculture areas as well as cultural protection areas, coastal areas, tourism regions and military forbidden zones granting of licenses for activities to be carried out in such areas are specifically regulated. As a part of reducing the bureaucracy in the grant of mining rights, the General Directorate is given the authority to designate and delineate such areas. The new regulations do not require any further permission for exploration activities to be conducted in such areas. A notification to the relevant authorities (such as relevant forest directorate) shall suffice. Mining operation activities in such areas shall, however, be subject to additional permissions and Environmental Impact Assessment.
This Newsletter provides a short update on the significant issues of Turkish mining law. The information provided is not intended to serve as a legal advice. Before taking any action or relying on the information given, addressees of this Memorandum should seek specific advice on the matters which concern them.