New Mining Law Issued - Achievement of Major Milestone in Strategic Sector

Introduction

Oman is enriched by a variety of mineral resources including metallic minerals (such as copper, gold, zinc, chromites, cobalt and iron ores) and non-metallic minerals (such as dolomite, limestone, gypsum, silica and ornamental stones).  Indeed, the National Program for Enhancing Diversification (TANFEEDH) recognises that the diversity of Oman’s natural resources “presents the Sultanate a unique competitive advantage in regional and global markets as well as an opportunity to achieve its diversification objectives.”  In addition to well-established companies, four new companies have recently been granted exploration licences for developing copper mining projects at the Al-Batinah coast.

With this in mind, it is not surprising that the mining sector is one of five economic sectors (the others being manufacturing, transport & logistics, tourism and fisheries) which are the focus and key drivers of the Sultanate’s economic diversification ambitions.  TANFEEDH also recognises the importance of local as well as foreign investment to achieve its overall objectives.

It is only a logical step on the diversification journey to assess existing legislation and pass new legislation that aims to facilitate further investment into identified priority sectors.  Accordingly, the Mineral Wealth Law promulgated by Sultani Decree 19/2019 on 13 February 2019 (“New Mining Law”) represents an achievement of a major milestone in the mining sector.  In this article we take a closer look at the New Mining Law to highlight, and provide commentary on, its key provisions.

New Mining Law – what you need to know

Whilst passed on 13 February 2019, the New Mining Law came into effect on 14 March 2019.  The New Mining Law cancelled the mining law promulgated under Sultani Decree 27/2003.

The New Mining Law recognises the Public Authority for Mining (“PAM” or “Authority”) as the competent authority for mining activities.  Article 2 of the New Mining Law states:

“Subject to the provisions of the Economic Zone of Duqm Law, the Authority shall without exception, conclude concession agreements, issue licences related to the exploration, excavation and utilization of raw materials, or carry out any activity related thereto….The Authority also regulates the process of exploration, excavation and utilization of raw materials and exercises control and supervision over everything related thereto to ensure its preservation and good utilization.…”

To perform its functions, the PAM is granted a wide range of powers under the New Mining Law which include:

1. expropriation of property;
2. approving exports of raw materials;
3. inspection rights and right to access sites and obtain samples; and
4. revocation of licences under certain circumstances such as:
• delay in commencement of works by licensee;
• suspension of works by licensee;
• delay in payment of fees, etc.;
• failure by licensee to provide reports;
• obstruction by licensee of employees of PAM;
• violation of terms of licence;
• engaging in unauthorised activities;
• not maintaining books and records by licensee; and
• change of status of licensee (legal form, change of shareholders, merger, etc.)

Under the New Mining Law, the licence periods for exploration and excavation shall be one year, renewable but not exceeding three years, whereas the licence period for utilisation/exploitation is five years (renewable).  The period for concession agreements is between 20 and 30 years.

The New Mining Law also sets out some parameters in terms of royalty and rent payments, such as:

1. financial guarantee of not less than 1% of the value of the cost of the project;
2. annual rental value of not less than 5% of the total production of the raw material used by the licensee; and
3. payment of not less than 1% of the total annual production of raw materials for the development of the local community.

Commentary & conclusions

The introduction of the New Mining Law is a very positive step and enhances legal certainty in the mining sector.  Overall the New Mining Law should encourage investments.  It also provides the PAM with significant powers to ensure that progress is being made and that licence holders carry out their obligations under their licences.  It is often difficult to create the balancing act between facilitation of investments and appropriate oversight from the relevant competent authority (in this case the PAM).  The New Mining Law also anticipates the issuance of secondary/implementing regulations and these are expected to be introduced in the coming months.  Given that the New Mining Law was only recently introduced, the effect and impact it has remains to be seen, but in our view it is a very solid step in the right direction.