Mining Law Oman

Introduction

The Public Authority of Mining (the “Authority”) is affiliated with the Ministry of Commerce and Industry (the “Ministry”) and aims to develop the mining sector, achieve optimal exploration of mineral resources and invest resources in such a way as to develop goals and economic diversification in Oman. As natural minerals in Oman are property of the state, the Authority is responsible for granting licences for exploration and mining activities as well as implementing and monitoring such activities. The scope of this article focuses on the Authority’s role in supervising all mining-related activities once a licence has been granted.

 

Powers of the Authority Where Mining is Concerned

The Authority was established in accordance with RD 49/14 giving extensive power to the Authority in the governance of mining activities. The powers and prerogatives, allocations and assets of the Ministry have been transferred to the Authority. Although not an exhaustive list, some of the Authority’s powers include the ability to:

• supervise all activities that are related to the exploration of minerals and develop resources; and

• preserve the geological landscape and set out the appropriate controls to protect it.

 

Article 19 of the Mining Law as promulgated by RD 27/03 also stipulates that officials designated by the Authority shall be entitled to:

• access, inspect and examine the mine or quarry at any time during duty hours, provided they do not interrupt or obstruct the operations flow; and

• investigate the mine or quarry status to assess the suitability of the adopted safety and other measures.

Mining Regulation No. 77 of 2010 (the “Regulations”) goes further to specify how officials may monitor mining activities. In accordance with Article 77 of the Regulations, relevant judicial inspectors may:

• enter into the area of the concession or licence at any time during the working hours for the purpose of physically inspecting the work progression and assessing steps taken to ensure the health and safety of workers;

• view and collect production details, mining operation records and accounts during the working hours;

• issue instructions and directions to employees in charge of the mining operations for the purpose of improving the work and specifying violations, if necessary;

• investigate violations committed by the holder of mining concession or licence; and

• review the production reports and the guaranteed and potential mining reserve of the extracted metal and compares the same with the reports submitted to the director as per conditions of the concession or licence.

 

Any failure to adhere to the provisions above shall be considered an explicit breach of the Mining Laws and Regulations and, as such, shall be referred to the relevant judicial department and is subject to penalty. If any licence holder causes obstruction to any official being able to perform their duties by rejecting or delaying their access to the mine or quarry or rejects or delays their required inspection, examination or investigations, they may be liable to a fine not exceeding OMR 5,000.

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Mining Law - Possible Value Addition Requirements

The Government of the Sultanate of Oman's emphasis on diversification and increased role of the non- Oil and Gas sectors in the national economy has recently led to a focus on the mining industry in the country.

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Focus On: Mining in Oman

Oman has vast mineral resources which could provide project opportunities for both foreign companies and Omani companies and individuals. Specifically, Oman’s mineral resources include chromite, copper, dolomite, zinc, limestone, marble, gypsum, silicon, gold, cobalt and iron.

There are several projects either planned or already underway in the mineral sector, including plans to establish a “Minerals-City” to serve as a hub for a number of minerals based downstream processing projects. The Minerals City is planned by Takamul Investment Company, a majority Omani government-owned investment vehicle having Oman Oil Company as the majority shareholder. The projects will include a US$450 million salt/soda ash project in partnership with the Tata group, an Indian business conglomerate. The Minerals City will also include a silicon carbide processing facility at a cost of US $40 million, in partnership with SNAM Abrasives of India.

In addition, Brazil-based Vale International has established a subsidiary in Oman that is constructing a pelletizing plant in Sohar. The plant will produce high grade iron ore pellets that will supply the direct reduction facilities of the steel industry in MENA. Vale is also performing exploration studies in Oman to determine what minerals are suitable for potential development.

Several studies in the mining sector are also underway, including an economic feasibility study on silica and another on the exploitation of gold and copper ores in the Ghaizeen area. Gold in particular has tremendous potential in Oman, which is the only Gulf country with substantial gold reserves other than Saudi Arabia. In fact, the United States Geological Survey estimates that gold production in the Middle East will more than triple in 2009 from 2006 levels.

For those seeking to engage in mining activities in Oman, there is a comprehensive legal framework laid out in Oman’s Mining Law (Royal Decree 27 of 2003). The mining law includes provisions relating to the issuance of mining licenses, dispute resolution in the mining sector and environmental protection.

Joint ventures may be a good option for those seeking to get involved in the mining sector, as local license holders can partner with foreign investors to get the benefit of their technology and resources. In such a case, the Ministry of Commerce and Industry may issue a mining concession or license to an Omani company or individual for a particular site. If the license holder lacks the technology and resources to fully exploit the site, a foreign company can bridge that gap. The parties will enter into a mine exploitation agreement, in which the foreign company will assist with or execute mining operations under the local partner’s license. At a minimum, the Mining Law requires any mine exploitation agreement to include: (i) provisions relating to the payment of fees and taxes, and other financial matters; (ii) provisions relating to environmental conservation; and (iii) a dispute resolution mechanism that complies with the provisions of the Mining Law.

In addition to these minimum provisions, the parties also may consider the inclusion of market disruption clauses that provide for the consequences of any substantial changes in the market for the mining product. This is essential as prices for different minerals can change dramatically over the term of an agreement.

Further, the Mining Law requires that any dispute arising regarding a mining concession or license, or in relation to the drilling or exploitation of a mine, be resolved through arbitration rather than through the courts of Oman or another jurisdiction. The mine exploitation agreement should specify the location, language, governing law and applicable rules of the arbitration.

Oman’s mineral resources are expected to be a large source of revenue and growth for the Omani economy outside the oil and gas sector, presenting a wide array of project opportunities for investors.

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