Executive Regulations for the New Mineral Resources Law
On 24 June 2015, the Prime Minister issued a decree enacting the Executive Regulations[1] of the Mineral Resources Law, around six months after the Law itself was issued in December 2014.[2] The Executive Regulations clarified many aspects that were left out in the Law, including specific conditions and requirements that must be fulfilled in order to gain exploration and exploitation licenses, the value of annual rent and royalty that must be paid for mines, quarries and salt pans, and the division of regulatory power between the Egyptian Mineral Resources Authority and the relevant governorates on which these sites exist.
Background
As detailed in the January 2015 issue of the
Egypt Legal Update, the Mineral Resources Law (the “
Law”) represented the first significant legislative development with regards to mineral resources since the 1950s. The Law dealt with mines, quarries and salt pans, setting out different provisions for each, and included a broad concept of mineral resources in general.
The Executive Regulations, which were published two weeks after the deadline set for them in the 2014 Law, contain details on many subject matters that were outlined in the Law, such as requirements for exploration and exploitation licenses.
General Provisions
The Executive Regulations detail the necessary procedures and requirements for obtaining different types of licenses such as exploitation and exploration licenses, as well as the procedures for specific requests such as requests to obtain samples for laboratory analysis and requests to export mineral resources.
| The Regulations list detailed procedures related to different types of licenses, including the cost of each, the information that must be provided, which contain documents that prove the qualifications of the applicant and provide details related to the mine or quarry |
As in the Law, the Regulations distinguish between two competent governmental authorities that requests to obtain licenses must be submitted to. In the case of mines, the Regulations emphasize that the Egyptian Mineral Resources Authority (“
EMRA”) will function as the supervising authority. In the case of quarries and salt pans, however, the relevant governorate in which the quarry or saltpan is located will function as the competent authority, with EMRA playing various roles in terms of technical supervision and oversight.
The Executive Regulations list the detailed procedures related to different types of licenses, including the cost of each, the information that must be provided by the applicant, including documents proving the qualifications of the applicant and providing details related to the mine or quarry in question.
In general, the Regulations require the approval of the Ministry of Defense for the issuance of any license. This applies both to lands owned by the armed forces as well as lands owned by any other public entity. Furthermore, the Executive Regulations stipulate that exploration and exploitation of areas falling within the mandate of the Ministry of Defense will be conducted by entities that are subject to the control of the Ministry. In addition to the Ministry of Defense’s approval, the Regulations require special approval for several types of land, such as natural protectorates/reserve, antiquities’ area, or if the area subject to the license falls within the borders of a city or a village, or if it is adjacent to railways or pipelines, etc. For all such areas, the Regulations require the approval of the relevant authorities for a license to be issued.
EMRA’s Role
The role of EMRA in the new legislative structure is of extreme importance. As mentioned, EMRA is the sole authority responsible for licenses and permits related to minerals. This includes the responsibility to prepare the forms of at least 21 different types of licenses/permits listed in the Executive Regulations, as well as any other type that may need to be prepared in the future. While EMRA still maintains a technical role in regulating quarries and salt pans as well, this is done in conjunction with (and to some extent incidentally to) the regulatory power exercised by the relevant governorate in which the quarry or the saltpan is located.
It is worth noting here that it may have been more advisable, in order not to duplicate the administrative effort and not to cause regulatory confusion for the license applicants and holders to have only one authority (preferably EMRA) be in charge of all regulation and supervision relating to mines, quarries and salt pans. For instance, the Regulations require EMRA to prepare and maintain a database that contains very detailed information about each applicant, as well as a database that includes information about the areas subject to mining, as well as updates regarding their value. While the Regulations stipulate that EMRA will only do so for mines, and that the governorates will do the same for the quarries, this may include a significant duplication of effort and may not be the best way to capitalize on the acquired know-how related to information systems and record-keeping that will have already been done by EMRA.
The Executive Regulations allow EMRA to create companies specialized in exploitation and exploration of mines, quarries or salt pans. These can be wholly-owned by EMRA, or in partnership with other entities, as long as public funds represent at least 25% of the relevant company. The Regulations do not mention specific guarantees to ensure that EMRA deals with these companies on an arms-length-basis and that they do not gain any advantage over other private investors in terms of securing licenses and permits.
Mining Licenses
Exploration License
An application for a mine exploration license must be presented to EMRA, along with documents and information listed out in the Executive Regulations. After confirming that EMRA and other parties do not have specific rights over the area in question, the license application is presented to a special committee, which has to evaluate the application within three months based on criteria detailed in the Regulations, including: precedence (in order of application date), prior activities, financial and technical qualifications, added value to the mineral resource, the nature of the project (whether it’s an existing or a new project).
Once an exploration license is approved, a license holder must pay an annual rent fee in the amount of 5000 EGP/Km
2, an amount that may be changed by a ministerial decision every four years. Furthermore, an exploration license holder must present a report on the status and results of exploration every quarter.
| On July 15th, the Prime Minister issued a decision specifying the method for offering mines and selecting from applicants. The 24-page Charter delves into different ways of choosing applicants, including through public bids, limited bids or direct agreements |
In accordance with the Mineral Resources Law, the Executive Regulations distinguish between the procedures for exploitation licenses according to the area in question. For areas that are below one Km
2, the Regulations only require the approval of EMRA’s board of directors, on the condition that not more than one license be issued to the same person. For areas between 1-16 Km
2, the license is issued by a ministerial decision after the approval of EMRA’s board for a period of two years, renewable only for one equal period.
The Regulations specify that EMRA may determine that an area subject to exploration contains mineral resources in sufficient quantities, and that the exploration license holder must therefore apply for an exploitation license. Should the license holder fail to apply for the exploitation license within a month, EMRA may refuse to renew his exploration license or terminate it altogether. Notably, the December 2014 Mineral Resources Law stipulates that exploitation and exploration licenses in specific will not be bound by the Bids and Tenders Law (also known as the Government Procurement Law).
On the 15
th of July, the Prime Minister issued a further decision specifying precisely the method by which mines are offered, and the method by which applicants are chosen.
[3] The 24-page Charter delves into different ways of choosing applicants, including through public bids, limited bids or direct agreements, among other processes. The same Charter details the obligations of bidders, the necessary insurance, as well as regulations related to the sale of minerals through public bids.
Exploitation Licenses
As detailed in the Mineral Resources Law, a license for the exploitation of a mine must be preceded by an exploration license for the same area or for part of it. While the approval process is similar to that of the exploration license, the Regulations specify that a license holder must commence exploitation within a month of the license approval, and that he may not halt operations for three consecutive months, or prove lack of seriousness for a period of six months. However, the Regulations do not specify the consequences flowing from these situations.
According to the Regulations, an exploitation license holder may, upon EMRA’s approval, be granted a temporary suspension of license. This may be useful in case the application holder is facing technical difficulties that prevent him/her from efficiently exploiting the area subject to the license.
In accordance with the Mineral Resources Law, the Executive Regulations also provide details of the sums that must be paid by a license holder. This includes an annual rent of 10,000 EGP/Km
2 for holders of an exploitation license, in addition to a royalty which ranges between 5-9% of the annual value of the mine’s production, depending on the type of extracted mineral. Finally, the license holder must pay an additional 1% of the annual production value to the governorate on which the area subject to the license is located.
The Executive Regulations spell out the rights and duties of the exploitation license holder. For instance, the licensee may erect necessary buildings and infrastructure and sell the mineral subject to the license. On the other hand, the Regulations require the licensee to provide a variety of information related to its financial standing, to the progress of exploitation, and other aspects of the project. Furthermore, the Regulations require the licensee to permit the erection of infrastructure on the relevant area, to allow EMRA’s employees to enter and conduct relevant scientific experiments, and to terminate exploitation if antiquities are found in the licensed area.
Licenses for Quarries and Salt Pans
While mine-related licenses were supervised and processed wholly through EMRA, the situation is a bit more complex for quarries, with EMRA and the relevant governorate in which the quarry is located sharing different supervisory roles. Applications for licenses related to quarries are made directly to the relevant governorate. Nonetheless, a joint committee between EMRA and the governorate is tasked with conducting a technical visit to the quarry and determining whether it should be classified as a quarry or a mine. Under the Law, EMRA is to determine the technical requirements necessary for a license to be given, and is also to technically supervise the exploitation of the quarry. As opposed to mines, the relevant governorate is required under the Regulations to obtain all required permits from different government entities, functioning effectively as a one-stop-shop for quarry licenses.
| While EMRA and the relevant governorates share regulatory power over quarries, the parameters of the mandate of each entity may cause some confusion for license holders |
The Mineral Resources Law does not require (or regulate) exploration licenses for quarries. Hence, the newly released Executive Regulations only deal with the exploitation and operation of quarries. The Regulations specify the annual rent that must be paid by the license holder which varies from 3 – 9 EGP/Km
2 depending on the type of mineral extracted (e.g. 3 EGP/Km
2 of sand, 9 EGP/Km
2 of granite). According to the Regulations, 25% of the annual rent must be paid in advance (in the case of some companies such as cement and glass companies), with the rent value subject to modification every four years with the approval of the Prime Minister. The Regulations also specify the percentage of royalty payable to the governorate, setting it at 13% of the annual value of production for all types of quarries.
While EMRA and the relevant governorates share regulatory power over quarries, the parameters of the mandate of each entity may cause some confusion for license holders. For instance, Articles 40, 41 and 45 stipulate that a licensee may not violate the “conditions of operation” and may not use the license specified for one material (e.g. sand) for the production of another (e.g. granite). It is unclear, however, who will be the entity that determines whether the licensee in fact violated any of these conditions. For instance, Article 45(1) (conditions of operation) specifies that a license holder may not perform certain tasks that are considered by EMRA or by the relevant governorate to pose a threat to its employees. Article 48 of the Regulations specifies that if a quarry licensee violates any of its provisions or fails to pay due sums for more than 60 days, the governorate preserves the right to terminate the license. This may create unnecessary confusion due to the duplication of regulators.
The possible regulatory confusion and duplication of effort is clearer when it comes to licensing salt pans. The Law stipulated that licenses for the exploitation of salt pans shall be issued by the governorate after the approval of EMRA, based on conditions specified in the Executive Regulations. The Regulations indeed contain a number of technical requirements related to the type of preparation required and the necessary infrastructure for the operation of salt pans. For some requirements, however, the approval of both EMRA and the relevant governorate is required. The Regulations do not detail how each approval will differ from the other, and whether it will be based on a different set of requirements.
The Regulations stipulate that a holder of a preparation license for a salt pan shall pay an annual rent fee of 100’000 EGP during preparation phase, which is increased to 120’000 during the production phase. Similar to mines and quarries, a 1% social development contribution must be paid directly to the governorate.
Export
Exporting minerals and products of mines, quarries or salt pans requires an approval by EMRA. It is to be noted that EMRA is in charge of approval of export even for quarries and salt pans, two areas which are generally jointly regulated by EMRA and the governorates in which they exist. Moreover, the Regulations stipulate that EMRA may prohibit the exporting of extracted minerals and products in their primary form if it deems it to have a strategic or industrial value.
Conclusion
The Executive Regulations of the Mineral Resources Law come as a necessary step in developing an archaic legislative framework that has remained largely intact for sixty years. The Executive Regulations of this particular law are of special importance because the December 2014 Law had left out many areas to be determined by the regulations. This included procedures for license applications, the amounts of royalties and other sums, as well as detailed information related to the regulation of export.
While in general the Regulations provide necessary details and sufficient clarity, one main complication arises from the overlap and duplication between regulators. While the Regulations (and the Law) are clear in stating that EMRA will be responsible for regulating mines, there is insufficient clarity on the specific jurisdiction of EMRA and the relevant governorate when it comes to quarries and salt pans. This lack of precision may cause regulatory confusion for investors, who will be forced to deal with multiple supervisory entities.
[1] Prime Minister's Decree No. 1657/2015 enacting the Executive Regulations of the Mineral Resources Law, Official Gazette, Issue No. 25 (bis) (f), 24 June 2015.
[2] Presidential Decree-Law No. 198/2014 issuing the Mineral Resources Law, Official Gazette, Issue No. 49 (bis) (a), 9 December 2014.
[3] Prime Minister's Decree No. 1966/2015, Official Gazette, Issue No. 28 (bis) (d), 15 July 2015.
On 24 June 2015, the Prime Minister issued a decree enacting the Executive Regulations[1] of the Mineral Resources Law, around six months after the Law itself was issued in December 2014.[2] The Executive Regulations clarified many aspects that were left out in the Law, including specific conditions and requirements that must be fulfilled in order to gain exploration and exploitation licenses, the value of annual rent and royalty that must be paid for mines, quarries and salt pans, and the division of regulatory power between the Egyptian Mineral Resources Authority and the relevant governorates on which these sites exist.
Background
As detailed in the January 2015 issue of the
Egypt Legal Update, the Mineral Resources Law (the “
Law”) represented the first significant legislative development with regards to mineral resources since the 1950s. The Law dealt with mines, quarries and salt pans, setting out different provisions for each, and included a broad concept of mineral resources in general.
The Executive Regulations, which were published two weeks after the deadline set for them in the 2014 Law, contain details on many subject matters that were outlined in the Law, such as requirements for exploration and exploitation licenses.
General Provisions
The Executive Regulations detail the necessary procedures and requirements for obtaining different types of licenses such as exploitation and exploration licenses, as well as the procedures for specific requests such as requests to obtain samples for laboratory analysis and requests to export mineral resources.
| The Regulations list detailed procedures related to different types of licenses, including the cost of each, the information that must be provided, which contain documents that prove the qualifications of the applicant and provide details related to the mine or quarry |
As in the Law, the Regulations distinguish between two competent governmental authorities that requests to obtain licenses must be submitted to. In the case of mines, the Regulations emphasize that the Egyptian Mineral Resources Authority (“
EMRA”) will function as the supervising authority. In the case of quarries and salt pans, however, the relevant governorate in which the quarry or saltpan is located will function as the competent authority, with EMRA playing various roles in terms of technical supervision and oversight.
The Executive Regulations list the detailed procedures related to different types of licenses, including the cost of each, the information that must be provided by the applicant, including documents proving the qualifications of the applicant and providing details related to the mine or quarry in question.
In general, the Regulations require the approval of the Ministry of Defense for the issuance of any license. This applies both to lands owned by the armed forces as well as lands owned by any other public entity. Furthermore, the Executive Regulations stipulate that exploration and exploitation of areas falling within the mandate of the Ministry of Defense will be conducted by entities that are subject to the control of the Ministry. In addition to the Ministry of Defense’s approval, the Regulations require special approval for several types of land, such as natural protectorates/reserve, antiquities’ area, or if the area subject to the license falls within the borders of a city or a village, or if it is adjacent to railways or pipelines, etc. For all such areas, the Regulations require the approval of the relevant authorities for a license to be issued.
EMRA’s Role
The role of EMRA in the new legislative structure is of extreme importance. As mentioned, EMRA is the sole authority responsible for licenses and permits related to minerals. This includes the responsibility to prepare the forms of at least 21 different types of licenses/permits listed in the Executive Regulations, as well as any other type that may need to be prepared in the future. While EMRA still maintains a technical role in regulating quarries and salt pans as well, this is done in conjunction with (and to some extent incidentally to) the regulatory power exercised by the relevant governorate in which the quarry or the saltpan is located.
It is worth noting here that it may have been more advisable, in order not to duplicate the administrative effort and not to cause regulatory confusion for the license applicants and holders to have only one authority (preferably EMRA) be in charge of all regulation and supervision relating to mines, quarries and salt pans. For instance, the Regulations require EMRA to prepare and maintain a database that contains very detailed information about each applicant, as well as a database that includes information about the areas subject to mining, as well as updates regarding their value. While the Regulations stipulate that EMRA will only do so for mines, and that the governorates will do the same for the quarries, this may include a significant duplication of effort and may not be the best way to capitalize on the acquired know-how related to information systems and record-keeping that will have already been done by EMRA.
The Executive Regulations allow EMRA to create companies specialized in exploitation and exploration of mines, quarries or salt pans. These can be wholly-owned by EMRA, or in partnership with other entities, as long as public funds represent at least 25% of the relevant company. The Regulations do not mention specific guarantees to ensure that EMRA deals with these companies on an arms-length-basis and that they do not gain any advantage over other private investors in terms of securing licenses and permits.
Mining Licenses
Exploration License
An application for a mine exploration license must be presented to EMRA, along with documents and information listed out in the Executive Regulations. After confirming that EMRA and other parties do not have specific rights over the area in question, the license application is presented to a special committee, which has to evaluate the application within three months based on criteria detailed in the Regulations, including: precedence (in order of application date), prior activities, financial and technical qualifications, added value to the mineral resource, the nature of the project (whether it’s an existing or a new project).
Once an exploration license is approved, a license holder must pay an annual rent fee in the amount of 5000 EGP/Km
2, an amount that may be changed by a ministerial decision every four years. Furthermore, an exploration license holder must present a report on the status and results of exploration every quarter.
| On July 15th, the Prime Minister issued a decision specifying the method for offering mines and selecting from applicants. The 24-page Charter delves into different ways of choosing applicants, including through public bids, limited bids or direct agreements |
In accordance with the Mineral Resources Law, the Executive Regulations distinguish between the procedures for exploitation licenses according to the area in question. For areas that are below one Km
2, the Regulations only require the approval of EMRA’s board of directors, on the condition that not more than one license be issued to the same person. For areas between 1-16 Km
2, the license is issued by a ministerial decision after the approval of EMRA’s board for a period of two years, renewable only for one equal period.
The Regulations specify that EMRA may determine that an area subject to exploration contains mineral resources in sufficient quantities, and that the exploration license holder must therefore apply for an exploitation license. Should the license holder fail to apply for the exploitation license within a month, EMRA may refuse to renew his exploration license or terminate it altogether. Notably, the December 2014 Mineral Resources Law stipulates that exploitation and exploration licenses in specific will not be bound by the Bids and Tenders Law (also known as the Government Procurement Law).
On the 15
th of July, the Prime Minister issued a further decision specifying precisely the method by which mines are offered, and the method by which applicants are chosen.
[3] The 24-page Charter delves into different ways of choosing applicants, including through public bids, limited bids or direct agreements, among other processes. The same Charter details the obligations of bidders, the necessary insurance, as well as regulations related to the sale of minerals through public bids.
Exploitation Licenses
As detailed in the Mineral Resources Law, a license for the exploitation of a mine must be preceded by an exploration license for the same area or for part of it. While the approval process is similar to that of the exploration license, the Regulations specify that a license holder must commence exploitation within a month of the license approval, and that he may not halt operations for three consecutive months, or prove lack of seriousness for a period of six months. However, the Regulations do not specify the consequences flowing from these situations.
According to the Regulations, an exploitation license holder may, upon EMRA’s approval, be granted a temporary suspension of license. This may be useful in case the application holder is facing technical difficulties that prevent him/her from efficiently exploiting the area subject to the license.
In accordance with the Mineral Resources Law, the Executive Regulations also provide details of the sums that must be paid by a license holder. This includes an annual rent of 10,000 EGP/Km
2 for holders of an exploitation license, in addition to a royalty which ranges between 5-9% of the annual value of the mine’s production, depending on the type of extracted mineral. Finally, the license holder must pay an additional 1% of the annual production value to the governorate on which the area subject to the license is located.
The Executive Regulations spell out the rights and duties of the exploitation license holder. For instance, the licensee may erect necessary buildings and infrastructure and sell the mineral subject to the license. On the other hand, the Regulations require the licensee to provide a variety of information related to its financial standing, to the progress of exploitation, and other aspects of the project. Furthermore, the Regulations require the licensee to permit the erection of infrastructure on the relevant area, to allow EMRA’s employees to enter and conduct relevant scientific experiments, and to terminate exploitation if antiquities are found in the licensed area.
Licenses for Quarries and Salt Pans
While mine-related licenses were supervised and processed wholly through EMRA, the situation is a bit more complex for quarries, with EMRA and the relevant governorate in which the quarry is located sharing different supervisory roles. Applications for licenses related to quarries are made directly to the relevant governorate. Nonetheless, a joint committee between EMRA and the governorate is tasked with conducting a technical visit to the quarry and determining whether it should be classified as a quarry or a mine. Under the Law, EMRA is to determine the technical requirements necessary for a license to be given, and is also to technically supervise the exploitation of the quarry. As opposed to mines, the relevant governorate is required under the Regulations to obtain all required permits from different government entities, functioning effectively as a one-stop-shop for quarry licenses.
| While EMRA and the relevant governorates share regulatory power over quarries, the parameters of the mandate of each entity may cause some confusion for license holders |
The Mineral Resources Law does not require (or regulate) exploration licenses for quarries. Hence, the newly released Executive Regulations only deal with the exploitation and operation of quarries. The Regulations specify the annual rent that must be paid by the license holder which varies from 3 – 9 EGP/Km
2 depending on the type of mineral extracted (e.g. 3 EGP/Km
2 of sand, 9 EGP/Km
2 of granite). According to the Regulations, 25% of the annual rent must be paid in advance (in the case of some companies such as cement and glass companies), with the rent value subject to modification every four years with the approval of the Prime Minister. The Regulations also specify the percentage of royalty payable to the governorate, setting it at 13% of the annual value of production for all types of quarries.
While EMRA and the relevant governorates share regulatory power over quarries, the parameters of the mandate of each entity may cause some confusion for license holders. For instance, Articles 40, 41 and 45 stipulate that a licensee may not violate the “conditions of operation” and may not use the license specified for one material (e.g. sand) for the production of another (e.g. granite). It is unclear, however, who will be the entity that determines whether the licensee in fact violated any of these conditions. For instance, Article 45(1) (conditions of operation) specifies that a license holder may not perform certain tasks that are considered by EMRA or by the relevant governorate to pose a threat to its employees. Article 48 of the Regulations specifies that if a quarry licensee violates any of its provisions or fails to pay due sums for more than 60 days, the governorate preserves the right to terminate the license. This may create unnecessary confusion due to the duplication of regulators.
The possible regulatory confusion and duplication of effort is clearer when it comes to licensing salt pans. The Law stipulated that licenses for the exploitation of salt pans shall be issued by the governorate after the approval of EMRA, based on conditions specified in the Executive Regulations. The Regulations indeed contain a number of technical requirements related to the type of preparation required and the necessary infrastructure for the operation of salt pans. For some requirements, however, the approval of both EMRA and the relevant governorate is required. The Regulations do not detail how each approval will differ from the other, and whether it will be based on a different set of requirements.
The Regulations stipulate that a holder of a preparation license for a salt pan shall pay an annual rent fee of 100’000 EGP during preparation phase, which is increased to 120’000 during the production phase. Similar to mines and quarries, a 1% social development contribution must be paid directly to the governorate.
Export
Exporting minerals and products of mines, quarries or salt pans requires an approval by EMRA. It is to be noted that EMRA is in charge of approval of export even for quarries and salt pans, two areas which are generally jointly regulated by EMRA and the governorates in which they exist. Moreover, the Regulations stipulate that EMRA may prohibit the exporting of extracted minerals and products in their primary form if it deems it to have a strategic or industrial value.
Conclusion
The Executive Regulations of the Mineral Resources Law come as a necessary step in developing an archaic legislative framework that has remained largely intact for sixty years. The Executive Regulations of this particular law are of special importance because the December 2014 Law had left out many areas to be determined by the regulations. This included procedures for license applications, the amounts of royalties and other sums, as well as detailed information related to the regulation of export.
While in general the Regulations provide necessary details and sufficient clarity, one main complication arises from the overlap and duplication between regulators. While the Regulations (and the Law) are clear in stating that EMRA will be responsible for regulating mines, there is insufficient clarity on the specific jurisdiction of EMRA and the relevant governorate when it comes to quarries and salt pans. This lack of precision may cause regulatory confusion for investors, who will be forced to deal with multiple supervisory entities.
[1] Prime Minister's Decree No. 1657/2015 enacting the Executive Regulations of the Mineral Resources Law, Official Gazette, Issue No. 25 (bis) (f), 24 June 2015.
[2] Presidential Decree-Law No. 198/2014 issuing the Mineral Resources Law, Official Gazette, Issue No. 49 (bis) (a), 9 December 2014.
[3] Prime Minister's Decree No. 1966/2015, Official Gazette, Issue No. 28 (bis) (d), 15 July 2015.