Amendments to the Mineral Resources

On 7 August 2019, a law was published amending the Mineral Resources Law of 2014 (the “Law”).[1] The amendment was reportedly aimed at incentivizing new investments in the mining sector, as it applies the special and additional incentives contained in the 2017 Investment Law to projects operating in the mining, quarrying, and saltpans fields. However, the bulk of the amendment relates to the division of roles between the Egyptian Mineral Resources Authority (“EMRA”), and the governorate in which the mine/quarry is located and is merely a matter of substitution of defined terms. Importantly, the amendment also places a cap on the royalties imposed for mining and quarrying at 20% of annual production, where only a minimum threshold of 5% existed previously.

Background

In 2014, the Mineral Resources Law came out to replace an archaic legal framework that governed mines and quarries up to that moment. The aim of the new Law was to increase the financial returns from the mining sector to the state through amending rental values, royalties and fees for mines and quarries, the amounts of which had stayed in stagnation since the 1950s. The Law was also devised in hopes that it would attract investments, revive the sector, and satisfy local needs from mineral resources. EMRA was assigned to regulate the exploration and exploitation of mining ores and supervise their extraction, with certain competencies delegated to the jurisdiction of the governorates where the M, quarry, or saltpan is located. Permits were to be issued on two phases: exploration and exploitation; with separate fees that are determined depending on renting space and the type of extracted substance. A main drawback of the Law was that it created an overlap between the jurisdiction and supervisory powers of EMRA and the relevant governorates. While EMRA was designated as the authority in charge of regulating exploration and exploitation, it exercises this role in coordination with the governorates especially when it comes to quarries and saltpans, while it might have been better if supervision over the entire sector was delegated to EMRA alone so that investors would only have to deal with one supervising entity. Other criticisms directed to the Law related to the increase in imposed royalties and fees as well as requiring approvals prior to exportation and the related fees in what was seen as an additional burden to license holders.

The Amendment

• Terms and Definitions

Issued by virtue of Law No. 145 of 2019 (the “Amendment”)[2] introduces and defines certain terms, such as ‘relevant body’, which now replaces the governorates as the entity with joint power along with EMRA. However, according to the introduced definition, ‘relevant body’ still refers to the governorate with respect to quarries and saltpans that fall within the governorate’s geographical boundaries; and refers to the New Urban Communities Authority (“NUCA”) with respect to quarries and saltpans located within the latter’s jurisdiction. Similarly, ‘relevant authority’ is defined as the minister in charge of issuing exploration and exploitation permits for mining material, and the governor or Head of NUCA, as the case may be, with respect to the issuance of quarrying and saltpan materials. The bulk of the amended provisions thus merely replace governorate, and relevant minister with the terms relevant body and relevant authority. Other than that, the Amendment expands the definition of ‘mining material’ to include any other materials which the relevant minister determines in a decree, the definition of ‘quarrying material’ has been tweaked, and ‘mines and quarries’ have been defined as those the total surface area of which does not exceed 16 square kilometres. In this respect, the relevant body issues exploitation permits for mines and quarries of sizes below that threshold up to 15 years of exploitation. Permits for the exploitation of mines and quarries that exceed 16 km² can only be issued by virtue of a law, and so is the case for precious metal and precious stone mines regardless of their size.

• Rent and Royalties

With respect to rent value, the Amendment states that EMRA’s board may now amend said value according to the mine’s size every three years instead of every four years with respect to mining material according to this provision prior to amendment. A security deposit equal to the rental value for one year is now limited to exploitation permits. In addition, where previously royalties for the exploitation of mining material were required to exceed 5% of annual raw production without a cap, the Amendment states that royalties must lie between 5% to 20% of said value. The provision concerning the exploitation of quarrying and saltpan materials was similarly amended.

• Permits

The duration for mine exploration permits can now be extended beyond the original two-year period for two similar periods, as opposed to one similar period previously, and could potentially be extended for a third period if reasonable technical justification is presented to and accepted by EMRA. Where the issuance of exploitation permits for quarries in agricultural land was absolutely prohibited previously, the Amendment introduces an exception to this prohibition if the approval of the Ministry of Agriculture is procured. As for exploitation permits for natural or industrial saltpans, a 15-year limit on their duration was lifted.

• Investment Incentives

The Amendment provides that the activities regulated under the Mineral Resources Law could be undertaken under the investment zones regime provided in Investment Law No. 72 of 2017. In addition, projects that undertake mineral resources activities now enjoy the general, special and additional incentives contained in Articles 10 to 13 of the Investment Law. However, the Amendment does not clarify whether some of these incentives are limited to newly established projects as is the case under the Investment Law.   [1] Law No. 198/2014 on Mineral Resources, Official Gazette, Issue No. 49 (bis) (a), 9 December 2014. [2] Law No. 149/2019 amending certain provisions of Law No. 198/2014 on Mineral Resources, Official Gazette, Issue No. 31 (bis) (w), 7 August 2019.