NOTES ON MINING

Turkey 2011 | EXECUTIVE GUIDE | REVIEW: MINING LAW

Baran Umut Baycan from Baycan Law Office comments on recent changes to legislation concerning investment in the mining sector.

Turkey has recently amended its mining regulations to attract more domestic and foreign private investors into the industry. Some environmental groups criticized this amendment regarding the substantial elimination of environmental controls, while some domestic mining investors criticized it for being radically open to foreign investors.

The Ministry of Energy and Natural Resources has jurisdiction over the mining industry in Turkey. The state is vested with exclusive rights over all minerals in Turkey. Individuals or corporations with legal status in Turkey may apply for, obtain, and hold permits granting exploration and mining rights in Turkey. Licenses and permits in the Turkish mining sector are regulated under the Mining Law (numbered 3213 and dated June 15, 1985), the Regulation of Mining Activities (dated November, 6, 2010), and the Mining Activities Permit Regulation (dated June 21, 2005). On June 10, 2010 an amendment to the Mining Law was also enacted. The primary aim of the amendment to the Turkish Mining Law was to satisfy certain environmental objections raised by the Constitutional Court and to remove ambiguities concerning the interpretation of mining legislation between state departments.

Under the Turkish Mining Law, mines are divided into six groups, which are subject to different terms and conditions on licensing principles and procedures. The licenses determined in the Mining Law are granted for a specific group of mines among those six groups and a license received for a specific group may not provide a right to its holder for the other groups. However, the Mining Law allows for multiple licenses involving different categories of minerals in the same area.

Types of Licenses

Prospecting Licenses

A prospecting license is issued for mineral exploration activities in a specific area. Prospecting activities can be defined as all mining activities other than those carried out for production. As an exception, the prospecting licensee shall have the right to carry out production and sale activities in respect of a maximum 10% of the proven mine reserves within the prospecting license period in the event that the prospecting licensee applies to the General Directorate of Mining Affairs with the prospecting activity report.

An application for a prospecting license is generally made to the General Directorate of Mining Affairs. Holders of prospecting licenses are obliged to submit a prospecting activity report to the General Directorate of Mining Affairs within one year of obtaining a pre-prospecting license. The term of a prospecting license is two years for gold mining and for the other groups this period is one year. Should the license owner satisfy their obligations, it will create the right for an additional four years of detailed prospecting.

Operation Licenses & Permits

An operation license may be granted to the holder of a prospecting license for a proven, potential, and feasible mine reserve area determined during the prospecting period for a period of at least 10 years upon the submission of a feasibility study or development plan to the General Directorate of Mining Affairs. The term of the operation license may be extended for at least five years upon the application of the holder of the prospecting license and operation license with a new operation project. However, such a term cannot exceed 60 years. The Council of Ministers is authorized to grant an extension of more than 60 years. Production is generally required to maintain and extend the license. The rate of production required in some cases has been minimal.

The holder of an operation license must apply to the General Directorate of Mining Affairs to obtain the necessary permits within three months of the issuance date of the operation license. Within 15 days from the issuance of the required permits, the holder of the operation license is granted an operation permit. Such a permit is granted only for the proved mine reserves area that is determined during the prospecting period. Operation activities must start to be carried out within one year from the issuance of the operation permit. The term of an operation permit is the same as the term of an underlying operation license, and should an extension be granted to an operation license the term of such permits is also extended accordingly.

Government Royalties

Turkish mining law provides for different royalty percentages for different groups of mines. The royalty for gold, silver, and platinum was increased to 4% under amendments to the Mining Law effective June 24, 2010. Royalties are calculated based on annual total sales. In the event that mining activities are conducted within state-owned land, the license-holder is obliged to pay an additional 30% royalty, but will not be required to pay for leasing state-owned land for mining activities.

Permits

Turkish mining and related laws and regulations require permits for different activities, including any type of surface disturbance in government forest areas and full mine permissions. At the exploration stage, the primary permit required pertains to drilling. Generally, there is no permit necessary if the drill program is not in excess of a total of 5,000 meters. If it exceeds 5,000 meters, an environmental impact report will be required. Typically, a time frame of approximately six months is required to have a report prepared and approved. If any drill holes are to be located in government forests, then a special permit will be required from the Department of Forestry. Recent amendments to Turkish mining law have been passed to resolve ambiguities in the area of environmental permits, which had been causing delays in certain exploration and development activities in Turkey.

Mine permissions are undertaken as part of and following the preparation of a feasibility study that incorporates all necessary environmental planning for such operations, including precautionary methods to be employed during mining, and reclamation methods subsequent to mine closure. This process is involved and may take up to a year or more for all necessary reports to be completed and approved.

TBY would like to thank Baycan Law Office for compiling this analysis.