Turkey is a country with vast natural resources, including energy raw materials, metallic mines, natural stones, and industrial raw materials. The mining sector is highly relevant to the economic activity, accounting for US$5.6 billion and 2.6% of the export value in 2021. Gold, silver, copper, chrome, lignite, and coals are the mines and minerals that are important for Turkey. According to the Turkish Gold Miners Association, Turkey is the largest gold producer in Europe, with 27 tons of gold and 421 tons produced in the last 21 years. Turkey also owns 70% of the world’s boron reserves. The essential continental borate deposits are found in Turkey and in the following countries: USA, Argentina, Chile, Peru, and China.
According to Article 168 of the Turkish Constitution, natural wealth and resources are under the jurisdiction and disposal of the State. The right to search and exploit them belongs to the State. Therefore, the Turkish State has exclusive ownership and disposition over all natural resources, including mines and minerals, without regard to ownership of the real property where these natural resources are located. However, the State may transfer its mining rights to real or legal persons for a certain period via licenses. Every year, the licensees would have to pay a royalty ranging from 1% to 15% of the total annual sales of the mine.
1. Legal Framework
The Turkish Mining Act (Act) is the primary legislation in Turkey that sets out the rules and principles of mining activities. The Act has been amended several times in recent years to maintain sustainability . Generally, the relevant regulations are enacted within the framework of harmonization with the European Union legislation. In other words, the mining regime of Turkey is based on a civil law system, and the primary regulations are the following ones:
- Mining Regulation: Provides for the implementation of the Act;
- Mining Activities Permit Regulation: Regulates the permit system of the relevant public authorities for mining activities;
- Mining Regulation on the Transfer of Mining Areas and Licences: Sets out the rules for transferring the mining rights; and
- Mining Tender Regulation: Regulates the principles and rules of tender processes for mining areas.
In addition to the stated regulations, there are other regulations regarding the mining activities’ environmental, health, and safety aspects, which may apply where required.
2. Relevant authorities
The main governmental authority is the Ministry of Energy and Natural Resources (Enerji ve Tabii Kaynaklar Bakanlığı), which regulates mining activities and licenses. Furthermore, the authorized government agency, which is primarily responsible for the administration of mining activities and issuance of mining licenses, is General Directorate of Mining and Petroleum Affairs(Maden ve Petrol İşleri Genel Müdürlüğü MAPEG). MAPEG is responsible for keeping records of technical and financial issues related to all mining rights and activities via the mining registry.
The following are also responsible for the conduct of other mining activities:
- The General Directorate of Mineral Research and Exploration
- The Turkish Coal Enterprises Institution
- The Turkish Hard Coal Authority
3. Mining rights
3.1. Mining rights and licenses
According to the Mining Act, all kinds of substances, except for petroleum, natural gas, geothermal, and water sources naturally found on earth and in springs with economic and commercial value, are considered minerals. The types of licenses and related procedures vary according to the mine groups.
Minerals shall be licensed under the groups listed below:
- Group I: Construction minerals such as sands, gravel, and clays;
- Group II: Decorative stones such as marbles and granites;
- Group III: Salts and gases other than natural gas;
- Group IV: Industrial raw materials, energy raw materials, and metallic materials, including gold and silver;
- Group V: Precious and semi-precious minerals such as diamonds.
An approved environmental impact assessment (EIA) must be procured before any license or permit for mining activities.
There are two types of licenses: (i) exploration licenses, and (ii) operation licenses. Licensees have exclusive rights to explore for specific minerals within the specified license area with exploration licenses. Furthermore, to conduct mining operations, “operating license” should be obtained. Applicants must meet technical and financial requirements to obtain mining licenses and relevant permits. If these qualifications are not met, MAPEG gives applicants an additional three months to comply with the requirements.
The license issued for one group of mines does not provide rights for another group of mines. According to the data for 2022, the exploration license base price is approximately US$160, while the operating license base price is US$1,600.
3.2. Discovery rights
Suppose a resource or reserve is found while carrying out activities within the scope of the license in the mining act, the discovered mines would be reported as “reserves” in the technical reports. The licensees would be identified as “finders” and granted a document of discovery which gives the right holder to ask for the discovery fee, which is 1% of the ex-mine sales price. Discovery rights must be registered in the Mine Registry for information purposes. On the other hand, the discovery right is not bound by any licenses. Therefore, that right can be transferred with or without licenses.
3.3. Exploration rights
Exploration rights are granted with an exploration license for mineral exploration activities in a specific area. An exploration license is taken with tender or by application, depending on the kind of mine group applied.
MAPEG actively controls the mining activities, and if the licensee does not comply with mining regulations, their exploration licenses might be revoked, or they might be subjected to administrative fines.
As per the Mining Regulation, the exploration period has three stages as follows:
- Pre-exploration period;
- General exploration period; and
- Detailed exploration period.
Generally, the issuance of the exploration period for all mines is one year. Furthermore, group IV has a general exploration period of two years in mines and one year in other groups, and they have four years of a detailed search.
A discovery report, a pre-exploration report, financial adequacy documents, and the exploration license fee must be attached to each license application. Applicants must obtain permits from the relevant agencies (forestry, environmental, labor, occupational health and safety, etc.).
3.4. Operational rights
Operational rights allow the licensee to process mines it extracts through the operating license. According to the mining legislation, different license areas and durations vary according to the mining groups. After the mining operation license, an operation permit must be obtained to carry out the activities shown in the mine operation project. The operation permit proves that all the permits have been obtained for the mines within the mine operation license area, and there is no obstacle to mine production. Operation permits are usually issued for the term of the operation license.
To obtain an operation license, the applicant is expected to apply to the administration that may be responsible for the mining site in question, as described above. Applicants should apply to MAPEG again for a work permit with the necessary documents after obtaining permission from the relevant administration.
The financial adequacy amounts specified for mineral operation licenses in 2022 are as follows:
- US$155 for Group I (a) and US$55 for Group I (b)
- US$28 for Group II (a), USD $39 for Group II (b), and US$28 for Group II (c)
- US$5 for Group III
- US4 for Group IV (a), (b), (c), and US$2 for Group IV (ç)
- US$10 for Group V
4. Foreign ownership and ownership requirements
Mining licenses are especially given on behalf of real or legal persons. Only Turkish citizens and the companies established under Turkish laws specifically for mining purposes are entitled to hold mining rights. In other words, foreign investors can benefit from the same mining rights if they establish a mining company in Turkey. On the other hand, foreigners and foreign companies cannot hold mining licenses.
5. State royalties
In exchange for providing mineral rights to related companies, the Government receives “state royalties.” The license-holder must pay a royalty to the State for the extracted minerals. Those royalties are the portion paid by the licensee to the State from the mine production revenue. If the designated mining area is not producing, the payment to the State shall not be less than the minimum license fee. The state royalties may vary from 1% to 15% of the value of the mines.
The value of the raw materials determines the royalty rate. The rates are as follows:
- Group I (a): 4%
- Group I (b): 4%
- Group II (a) and (c): 4%
- Group II (b): 4.5%
- Group III: 1% for spring salts and 5% for the remaining minerals
- Group IV: the rate for gold, silver, platinum, copper, zinc, lead, chromium, aluminum, and uranium oxide is calculated based on the matrix provided in the Mining Act, 8% for radioactive minerals and other radioactive matters except for uranium oxide, and 2% for other minerals; and
- Group V: 4%
6. Cancellation, abandonment, and relinquishment of exploration or mining rights
The Mining Law provides the licensee with the right to apply for renunciation. In such cases, the licensee who wants to leave the mine must take the necessary safety measures on site and submit the required information and documents to MAPEG within one year.
In addition, MAPEG has the right to revoke licenses or apply administrative fines if the required permits have not been obtained, required documents have not been submitted as per the regulations, and license fees have not been paid at all or on time.
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The dollar exchange rate determined by the Central Bank of the Republic of Turkey on 22.07.2022, the date of the article, has been considered.