A LEGAL OVERWIEV TO THE MINING INDUSTRY

Turkey has recently amended its mining regulations for attracting more domestic and foreign private investors in the industry. Some environmental groups criticized this amendment regarding the elimination of the environmental controls substantially and some domestic mining investors critized it for being radically open to foreign investors.

The Ministry of Energy and Natural Resources has jurisdiction over the mining industry in Turkey. The State is vested with exclusive rights over all minerals in Turkey. Individuals or corporations with legal status in Turkey may apply for, obtain, and hold, permits granting exploration and mining rights in Turkey. Licenses and permits in the Turkish mining sector are regulated under; the Mining Law (numbered 3213 and dated June 15, 1985), the Regulation of Mining Activities(dated November, 6, 2010)) and the Mining Activities Permit Regulation (dated June 21, 2005). On June 10, 2010 an amendment to the Mining Law was also enacted. The primary aim of the amendment to the Turkish Mining Law was to satisfy certain environmental objections raised by the Constitutional Court and to remove ambiguities concerning the interpretation of mining legislation between state departments.

Under the Turkish Mining Law, mines are divided into six groups which are subject to different terms and conditions on licensing principals and procedures. The licenses determined in the Mining Law are granted for a specific group of mines among those six groups and a license received for a specific group may not provide a right to its holder for the other groups. However, the Mining Law allows for multiple licenses involving different categories of minerals in the same area.

Types of Licenses

There are three types of licenses granted for prospecting and operating mines under the laws of Turkey, as follows; (i) prospecting license, enabling its holder to carry out prospecting activities in a specific area; (ii) operation license, enabling its holder to carry out operational activities within the same area as stated in the prospecting license; and (iii) operation permit, enabling its holder to operate a specific mine as specified in the operation license.

Prospecting Licenses

A prospecting license is issued for mineral exploration activities in a specific area. Prospecting activities can be defined as all mining activities other than those carried out for production. As an exception, the prospecting licensee shall have a right to carry out production and sale activities in respect of maximum 10% of the proved mine reserves within the prospecting license period in the event that the prospecting licensee applies to the General Directorate of Mining Affairs with the prospecting activity report.

An application for a prospecting license is generally made to the General Directorate of Mining Affairs. Holders of prospecting licenses are obliged to submit a prospecting activity report to the General Directorate of Mining Affairs within one of obtaining a pre-prospecting license. The term of a prospecting license is two years for gold mining and for the other Groups this period is one year. In case of the license owner satisfy their obligations it will create a right for an additional 4 years of detailed prospection term.

Operation Licenses and Permits

An operation license may be granted to the holder of a prospecting license for the proved, potential and feasible mine reserve area determined during the prospecting period for a period of at least ten years upon the submission of a feasibility study or development plan to the General Directorate of Mining Affairs. The term of the operation license may be extended for at least 5 years upon the application of the holder of the prospecting license and operation license with a new operation project however, such term cannot exceed sixty years. The Council of Ministers is authorized to grant an extension more than sixty years. Production is generally required to maintain and extend the license. The rate of production required in some cases has been minimal.

The holder of an operation license must apply to the General Directorate of Mining Affairs to obtain necessary permits within three months of the issuance date of the operation license. Within fifteen days from the issuance of the required permits, the holder of the operation license is granted an operation permit. Such permit is granted only for the proved mine reserves area which is determined during the prospecting period. Operation activities must be started to be carried out within one year from the issuance of the operation permit. The term of an operation permit is the same as the term of an underlying operation license and in case an extension is granted to an operation license, the term of such permits is also extended accordingly.

Government Royalties

Turkish mining law provides for different royalty percentages for different groups of mines. The royalty for gold, silver and platinum was increased to 4% under the amendments to the Mining Law effective June 24, 2010. Royalty are calculated based on annual total sales. In the event that mining activities are conducted within state-owned land, the licence-holder is obliged to pay an additional 30% royalty, but will not be required to pay for leasing state-owned land for its mining activities.

Permitting

Turkish mining and related laws and regulations require permits for different activities, including any type of surface disturbance in government forest areas and full mine permitting. At the exploration stage, the primary permit required pertains to drilling. Generally, there is no permit necessary if the drill program is not in excess of a total of 5,000 meters. If it exceeds 5,000 meters, an environmental impact report will be required. Typically, a time frame of approximately six months is required to have a report prepared and approved. If any drill holes will be located in government forests, then a special permit will be required from the Department of Forestry. Recent amendments to Turkish mining law have been passed to resolve ambiguities in the area of environmental permitting, which had been causing delays in certain exploration and development activities in Turkey.

Mine permitting is undertaken as part of and following the preparation of a feasibility study, and incorporates all necessary environmental planning for such operations, including precautionary methods to be employed during mining, and reclamations methods subsequent to mine closure. This process is involved and may take up to a year or more for all necessary reports to be completed and approved.

ATTORNEY BARAN UMUT BAYCAN