Monday, October 5, 2015

Mining and Mineral Activities in Oman

Together the Mining Law and Executive Regulations govern mining activities in Oman. There are various types of mining licence which include: (1) exploration; (2) drilling; (3) mining of which there are six categories; (4) sustenance; and (5) mining concession. Any license holder has the right to carry out exploration, drilling, development or mining operation in accordance with the license issued, as outlined in the Client Bulletin. The Ministry of Commerce and Industry is responsible for granting licenses and also suspension and cancellation of any right to mining.

The Applicable Laws in Relation to Mining and Mineral Activities in Oman 

The laws applicable to mining in Oman are contained in the Mining Law Royal Decree 27 of 2003 (the “Mining Law”) and the Executive Regulations issued pursuant to the Mining Law Ministerial Decision No. 77 of 2010 (the “Executive Regulations”).

Granting of Mining License

According to Article 2 of the Mining Law, minerals in the Sultanate of Oman are property of the state and the concession for any mining activity is granted only by virtue of law.  The Mining Law provides that MOCI is the responsible body for granting licenses for exploration, drilling, extraction, mining, subsistence mining and disposal of minerals.

In accordance with Article 5 of the Mining Law, a mining concession or license for mining activities may only be granted to:

  1. an Omani company, a foreign company or a branch of a foreign company registered in Oman under the Commercial Companies Law (Royal Decree 4 of 1974) (the “CCL”); or
  2. an Omani individual, competent to do business and not having been declared bankrupt unless he has been rehabilitated.
Types of Mining License

The Executive Regulations provide for the following types of licenses/concessions:
  • Exploration License;
  • Drilling License;
  • Mining License (six categories);
  • Sustenance License; and
  • Mining Concession.
Each of the above licenses has a duration of five years which can be renewed thereafter on an annual basis depending on the quantity of the raw material intended to be exploited and “the size of the investment” (Article 32 of the Executive Regulations).

Rights and Liabilities of License Holder

A license holder would need to comply with Article 10 of the Mining Law. Article 10 of the Mining law provides that the license holder must comply with the following functions:
  1. carry out the exploration, drilling, development or mining operation in accordance with the license issued to him and the procedures provided in the Executive Regulations;

  2. spend in the exploration or mining area or related work an amount of money not less than the amount specified in the license.  However, if such amount is not spent in full, the balance shall be spent according to the provisions of the Executive Regulations;

  3. employ and train Omani national pursuant to what is stipulated in the license;

  4. promptly carry out any directions issued to him by the Director in relation to the operations specified in the license to secure safety and protection of the environment;

  5. notify the Director in advance of his intention to commence the implementation of any of the operations specified in the license or stopping work thereon;

  6. notify the Director of the discovery of any mineral ore of a potential economic value within 30 days of such discovery and conduct within a period of one year of such notification or with a period determined by the Minister a feasibility study to determine whether such discovery may be commercially exploited and notify the Minister promptly of the result of such study; and

  7. not remove, without a written permit from the Director, any mineral from the exploration area except for the purpose of analyzing such mineral or determining its value or testing it pursuant to the provisions of the Executive Regulations.”
Article 4 of the Mining Law further provides that the owner of the land or its legal holder or the license holder may also use the building materials found on such land in building or road construction or for agricultural purposes provided that such use shall not jeopardise third-party rights.

Timeframe for Obtaining the Mining License

The Mining Law does not prescribe a timeframe within which the Directorate General of Minerals is required to issue a mining license.  Generally, an application for a preliminary license/permit may take up to six months to process.

Suspension or Cancellation of License

The MOCI has the power to suspend or cancel the right to mining, if the licensee violates the provisions of the Mining Law or the agreement for mining exploitation or if he fails to pay any amount payable by him.  Further, the right to mining may be suspended or cancelled after the concerned party has been notified in writing of its failure and a period of 60 days has passed without the party correcting the violation or agreeing to pay a suitable amount acceptable to the Directorate General of Minerals if the violation is irreparable.

Control and Inspection

The MOCI shall have the power to enter, inspect and examine any mine or quarry at any time during the working hours without hindrance of their operations.  The MOCI may also conduct necessary investigations pertaining to the prevailing conditions or circumstances in the mine or quarry.

Taxes and Duties in Mining Sector

Article 118 of the new Income Tax Law (Royal Decree 28 of 2009) exempts income earned by an Omani company licensed to conduct mining activities in accordance with the Mining Law.  The exemption from tax will be for a period of five years from the date of commencement of production or business, renewable, if required, for a further period not exceeding five years.  The renewal will be made by a decision by the Minister of Finance in accordance with the rules endorsed by the Financial Affairs and Energy Resources Council.