The Sultanate of Oman has adopted a new Mineral Wealth Law following the promulgation of the Royal Decree No. 19/2019. The new law came into effect on 14 March 2019 (i.e. 30 days after its publication in the Official Gazette no.1281 on 13 February 2019). It repealed the previous Mining Law promulgated by Royal Decree No. 27/2003, as amended, in its entirety.This long-awaited law consists of 70 articles and is divided into five parts. An executive regulation should be released by the Public Authority for Mining (PAM) within one year to complete the provisions of the new law. Until then,the previous executive regulation shall remain applicable. As per the CEO of PAM, “There are three key advantages linked to the new legislation: firstly, it expedites the process of obtaining mining licenses,the awarding of concession blocks against competitive bidding, and the processing of applications for no-objection certificates in a time-bound fashion. Secondly, it outlaws illegal mining activities and demands that allmining operations be carried out in a professional manner. Thirdly, it greatlystrengthens the ability of the PAM to manage the sector in a supportive way.”Themining industry is currently a key focus for Oman, having been identified as apotential driver of growth in an increasingly diversified economy. Therefore,there was an urgent need to establish a robust legal framework for the miningsector, providing to investors more incentives, guarantees, transparency andcertainty.TheSultanate's diverse mineral resources includes chromite, dolomite, zinc,limestone, gypsum, silica, copper, gold, cobalt and iron.Thenew legislation reaffirms the sovereign ownership of the Sultanate of thenatural underground resources located within its territory, includingterritorial waters, the exclusive economic zone and the continental shelf(Article 2).ThePublic Authority for Mining, which was established by Royal Decree No. 49/2014,is considered the exclusive entity in charge of issuing the different mininglicences and to conclude the concession agreements with the investors (Article3).Thecompetencies of the PAM are more clearly outlined in the new Law. It is grantedbroad regulatory and supervisory powers, including the right to issueprospecting, exploration and exploitation licences as well as miningconcessions, to conduct inspections of mining activities, to ensure complianceby the licence holders with the terms of the licence and enforcement powers inthe event of any non-compliance.Adistinction is drawn between licences and concession agreements, by consideringthat mining rights for any perimeter exceeding five square kilometres (5 km²)should be granted solely via a concession agreement (Article 4).The law sets out criteria for identifying, appropriating and exploiting mining areas of economic feasibility and offering them for investment and developmentin a competitive tender based on the principles of transparency and fairness.
SpecificProvisions for Licensing Mineral Rights
A number of legal provisions under the new law govern the relation between the PAM and the licence holders (Articles 36-43).
Three different licences or permits are regulated under the law: (i) Licence for prospection, (ii) Licence for exploration and (iii) Licence for exploitation. Prospecting for mineral materials is intended to test the surface or the subsurface of the earth, by using geological and geophysical methods for the identification of different minerals, while exploration in the context of the present law relates to the extraction operations for locating or proving mineral deposit. Finally, exploitation is understood as the act of extracting mineral resources with the aim of producing them on large scale.
Under the regime of licences, the holders are requested to submit a financial guarantee (such as a letter of guarantee issued by a bank) of 1% of the total estimated cost of the operation. Besides, the licence holder should pay an annual rent and a royalty. The royalty amount should not be less than 5% of the value of the annual production for the extracted ore. Furthermore, under the new regime, the licence holder is required to pay the equivalent of 1% of the annual production towards a corporate social responsibility (CSR) fund, which will be administered by a professionally-run government agency on behalf of the investors.
The licence holders or beneficiaries should present repeatedly reports of technical nature to the PAM and should keep regular registers detailing the quantities fore extracted and their corresponding qualities or properties. They are not authorized to sub-let the perimeter granted by PAM and may not assign or relinquish it to any other party.
On the other hand, the licence holder has the right to erect temporary buildings, plants, installations, equipment and to construct roads. Also, holders of prospection and exploration licences are allowed to export mineral samples for the purposes of analysis and testing.
A mining license may be revoked, cancelled in the case of non-compliance with the obligations set out in the law, the bankruptcy of the licensee, providing in correct or false information or forged documents to the Authority, etc. Articles 31, 32 and 33 enumerate respectively the causes to revoke, to suspend and to cancel the exploitation licence.
Specific Provisions for Mining Concession Agreements
Concession agreements for large deposits shall be granted upon approval of the PAM’s Board and ultimately authorised by virtue of a Royal Decree. Their duration shall be not less than twenty (20) years and not more than thirty (30) years while the granted perimeter for each mining concession should be not less than five (5)square kilometres (Article 44).
Licence holders are required to submit a detailed environmental assessment of the concession perimeter, the associated risks inherent to mining operations and the means for protection as well as the rehabilitation plan. They should make evidence of their technical and financial capacities.
Additionally, license applicants are required to pay a financial guarantee of not less than1% of the total project cost before the issuance of the license. Licensees must also pay annual rent and royalties, which shall not be less than 5% on the annual value of the extracted minerals.
During the concession agreement, it shall be prohibited to seize any of the investor’s machinery, equipment, working tools, vehicles, etc. and any such act shall be considered as void and illegal.
The same prohibition imposed on license holders to sub-let the perimeter granted by PAM or its relinquishment to any other party apply mutatis mutandis to the concession agreements.
Penalties for violation of the law
While the law features many provisions to encourage investment in the mining sector, it also stipulates penalties for actions detrimental to the sound commercialisation of Oman’s mineral wealth (Articles 59-68). For example, those found engaging in mining activities without a valid license are subject to imprisonment ranging between one year and three years, in addition to fines extending from RO 20,000 to RO 100,000. Also, those who willingly extract the ores from outside the licensed perimeter are subject to imprisonment and a fine extending from RO 50,000 to RO 150,000.
In all cases, all equipment, tools and vehicles used in such illegal activity in addition to all extracted ores shall be confiscated. Double the value of the extracted ore(s) shall be paid to the PAM.
Written by: Dr. MinasKhatchadourian, Consultant