Mining in Iraq, Oman and Saudi Arabia
Grahame NelsonPartner, Head of Office – Al Khobar
Thomas CalvertPartner,Head of Corporate Commercial - Iraq
Chelsea PollardAssociate,Corporate Commercial
Omar ShariefTrainee Lawyer,Digital & Data
May AlMahfouzTrainee Lawyer, Corporate Commercial
In line with attempts to diversify their economies, states in the GCC and the Middle East more broadly are turning their eyes towards mining. For example, a number of new projects have been introduced in Oman, Saudi Arabia and Iraq.
As part of Oman’s 2040 Vision, it has targeted mining as one of the key areas to develop. In line with such, it dissolved the Public Authority for Mining in 2020 and transferred its powers to the Ministry of Energy and Minerals (“MEM”). Furthermore, in 2021, the MEM formed a sub-committee, Industry Development of Energy and Minerals, which is focused on the downstream processing of minerals to be used in-country rather than exporting unprocessed raw materials. Since then, the Minerals Development Oman (“MDO”), its state-owned mining and minerals company, announced that it plans to progress on as many as eight projects during 2022. The MEM is currently headed by Salim al-Aufi, who was appointed in June this year.
ProjectsThese projects will focus on a number of upstream developments, including the exploitation of copper, limestone, dolomite, silica and sea salt resources, and downstream manufacturing activities, including the commercialisation of titanium and aluminium alloy products. One of the major projects is the Shaleem Industrial Minerals scheme in Dhofar, which has limestone, dolomite and gypsum reserves. The project area covers 1,500 square kilometres and is subject to a concession agreement between the MDO and the Ministry of Energy and Minerals (the governing body of mining-related activity). Additionally, the Mazoon Mining project, which is a joint venture between MDO and Oman Mining Company, is located in Yanqul in Dhahirah and focuses on copper and gold prospects. Companies interested in partaking in Oman’s mining sector should consider attending the Oman Mining Expo, which is set to take place in 20231.
Regulatory FrameworkMining in Oman is generally regulated by the Mineral Resources Law (Royal Decree No. 19 of 2019), which governs the use of raw materials, and the Executive Regulations of the Mining Law (Minister of Commerce, Industry and Investment Promotion (“MOCIIP”) Decision No. 77 of 2010, as amended by MEM Decision No. 42 of 2022), which stipulates the requisite licenses, agreements and approvals required to operate in Oman. Companies should also be mindful of the requirements for environmental permits from the Ministry of Environment and Climate Affairs (Decision No. 48 of 2017) and the Omanisation requirement for the workforce in the mining sector, which is periodically updated by the Ministry of Labour.
The 2022 amendments to the Executive Regulations relate exclusively to exploitation licenses and, namely, amended article 71, which deals with assigning the license to third parties. The amended article stipulates that to make an assignment, the licensee must first seek the written approval of the MEM. Furthermore, where an exploitation licensee wishes to enter into a subcontract agreement with a third party, it must also obtain the MEM’s written approval.
Saudi Arabia’s Vision 2030 Programme aims to pivot Saudi Arabia’s economy away from its dependence on hydrocarbons. An expanded mining sector is seen as playing an important role in achieving this objective. In 2019, the Ministry of Industry and Mineral Resources was established to regulate the sector.
ProjectsA number of projects are under way involving Ma’aden (Saudi Arabian Mining Company), e.g. Al Jalamid (Phosphate mine and beneficiation plant), Ras Al Khair (Phosphate and aluminium processing complex), Al Ba'itha (Bauxite mine for aluminium project), Az Zabirah (Kaolin and low grade bauxite mine), Zarghat (Magnesite mine), and Al Madina Al Manawara (Magnesite processing facility) as well as operating mines for Gold and Base Metals Projects such as; Mahd Ad Dahab, Bulghah, Sukhaybarat, Al Hajar, Al Amar, Ad Duwayhi, and Jabal Sayid. Maa’aden is also known to have entered into a number of joint ventures.
On 30 October 2022, Saudi Arabia’s Mining Minister announced that Saudi Arabia is planning to auction 5 new mining licences with copper, zinc, lead and iron ore deposits for local and international investors in 2023. The Saudi government estimates that the Kingdom’s unused mineral resources are valued at 5 trillion Riyals (USD 1.33 trillion), including untapped reserves of phosphate, gold, copper, uranium and bauxite.
Most of the new licences have zinc and copper deposits and one also includes lead, copper and silver. The new licences follow another issued recently to a consortium of UK and Saudi companies for zinc and copper deposits.
Regulatory FrameworkIn 2020, a new Mining Investment Law (Mining Law) was issued to replace the Law issued in 2004. One of the principal aims of the new Mining Law (and its Implementing Regulations) is to accelerate foreign investment in the sector.
Certain categories of land are not accessible for mining activities. These are:
Holy sites.
Military installations, or areas reserved for hydrocarbon exploration or operations, unless the relevant minister issues a decision to lift the restriction upon the Minister’s request.
Lands and maritime areas excluded by a decision by the Council of Ministers2.
LicensesThe Mining Law provides for the grant of licenses to cover various mining-related activities. The principal license categories are as follows:
Reconnaissance LicenseA reconnaissance licence is:“a preliminary geological survey which, prior to carrying out exploration activities, is conducted for the identification of geological environment and surface evidence of minerals and ores.”3
A reconnaissance license is issued for a period not exceeding two years for an area designated by the applicant. it may be extended or renewed for a single additional period not exceeding two years4.
A reconnaissance license entitles the licensee to survey and explore the site designated in the license. The licensee shall have a non-exclusive right over the license site to:
Examine the deposits covered by the license and collect samples;
Prospect the area covered by the license, except for areas excluded under this Law;
Use geophysical and geochemical methods, as well as other scientific methods;
Carry out any other reconnaissance activity commonly used in the preliminary examination of lands with potential minerals or ores;
Have access to non-confidential maps and data maintained by the Ministry; and
Any other rights stipulated by the Regulations5.
The license does not entitle the licensee to carry out any type of digging, construct any permanent digging installations, produce minerals for use or sale, use explosives, or damage or remove any vegetation cover; nor does it confer upon him priority or any other right to obtain another license.
Exploration LicenseExploration is: “an extensive search for deposits conducted on any site using geological, geophysical, or geochemical methods, or digging, or any other appropriate method to determine the presence of such deposits, their extent, quantity, quality, and mining viability”6.
An exploration license grants the licensee the following exclusive rights over the license site:
Exploring the minerals covered by the license.
Collecting samples from the license site to determine whether the site contains minerals covered by the license, provided that they are not sold or commercially exploited.
Using any exploration method that precedes commercial production.
Establishing camps as well as facilities necessary for the protection of exploration machinery and equipment.
Using sand, gravel, or similar materials to the extent necessary to achieve the purposes of the license.
Obtaining, during the validity of the exploration license, an exploitation license for areas.
These rights apply within the exploration license site.
Exploitation LicensesExploitation is “the process of extracting ores and minerals, by mining or quarrying, including any direct or indirect activity required to achieve this purpose7. Different types of licenses are available for “exploitation”8. The principal ones are:
Mining licenseThese licenses are available for terms of up to 30 years, but may be renewed for an additional period which of up to 30 years.
The total area of the license site must not exceed 50 square kilometres.
The license is limited to:
Class “A” minerals: metallic minerals, precious and semi-precious stones, and ores that require advanced operations and concentration as classified in the Regulations); and
Class “B” minerals: Non-metallic minerals, industrial minerals, and raw materials, as classified in the Regulations).
Small Mine LicenseA small mines license is available for up to 20 license terms but may be renewed for a further period of up to 20 years The license is limited to Class “A” and Class“B” minerals as specified in the Regulations.
Building Material Quarry LicenseThis category of license may be granted for up to 10 years, renewable for a further period of up to 5 years. The area of the license site cannot exceed one square kilometre.
These licenses are limited to Class “C” minerals: materials used for construction purposes, as classified in the Regulations.
General Purpose LicenseWhere the holder of an exploitation license shall, if he wishes to construct facilities or use land outside the license site to achieve the purposes of the license, it can apply to the Ministry for a general purpose license9.
An exploitation license does not entitle its holder to own any part of the land covered by the license, nor does it give the licensee any other right not expressly provided for in the license10.
The holder of an exploitation license shall, for the purpose of exploiting minerals covered by the license, have the following exclusive rights:
Producing and exploiting minerals covered by the license within the license site, bydigging, polishing, concentration, smelting, and processing.
Transporting and selling minerals and ores in their original condition or after refinement,as specified in the Regulations.
Exporting minerals and ores for commercial purposes.
Exporting non-commercial samples, as specified in the Regulations.
Constructing, operating, and maintaining mines, buildings, laboratories, workshops, pipelines, processing plants, waste disposal dumps, and other facilities necessary to achieve the purposes of the mining activity covered by the license.
Establishing networks of water, electricity, telephone, sewage, rainwater drainage, and pipes, as well as power plants, railways and private roads, upon the Ministry’s written approval.
Conducting surveys and carrying out exploration operations for ores and minerals on the license site after notifying the Ministry.
Using rocks, gravel, sand, and similar materials available at the license site to the extent necessary to achieve the purposes of the license, subject to payment of the prescribed fees.
Using available water resources to carry out the licensee’s operations, in accordance with Article 33 of the Law11.
Federal IraqMining is a significant area of potential investment in Federal Iraq. According to reports, the Iraqi government estimates Iraq’s proven mineral resources to include 10 billion tonnes of phosphates, 8 billion tonnes of limestone, 1.2 billion tonnes of kaolinitic clay stones, 600 million tonnes of native sulphur, 330 million tonnes of dolomite, 130 million tonnes of gypsum and 50 million tonnes of salt mainly in Anbar and Basrah provinces12.
The Ministry of Industry & Minerals has formed a permanent coordination committee to oversee investment in the minerals sector. From a regulatory point of view, before the land is able to be used for mining, a survey must be conducted on the land. In most cases, the state may own land. Usually, the applicant can make a request to state authorities to seek approval to lease the land. The applicant will typically be required to secure a lease and agree to payment of royalties in addition to obtaining the approval of the Ministry of Industry and Minerals to conduct mining activities.
Kurdistan Region of IraqReportedly, the Kurdistan Regional Government (KRG), has been working on drafting a mining law to generate interest in the sector. It is understood to be looking to private sector developers to play a prominent role in investing in and developing the minerals industry. Further, it is reported that a draft non-metals mining law is awaiting ratification by the Kurdistan parliament and a metals mining law will be drafted at a later stage. To date, neither has been ratified.
The Kurdistan Regional authorities claim a high potential for deposits of metals such as iron, chromium, nickel, platinum, gold, copper, barite and zinc in a 15-25 kilometre-wide mountainous belt running across the Kurdistan region. Other areas of the region are likely to be rich in limestone, gypsum, sands, clays, gravel and evaporates13.
For further information, please contact Grahame Nelson, Thomas Calvert or Chelsea Pollard.
Published in November 2022
1 https://omanminingexpo.com/2 Article 6(2)3 Article 1 4 Article 385 Article 396 Article 17 Article 18 Articles 42, 43 and 44.9 Article 4810 Article 4511 Article 4512 https://www.meed.com/iraq-struggles-to-mine-a-rich-vein 13 https://gov.krd/mnr-en/publications/mining/#:~:text=There%20is%20high%20potential%20for,%2C%20clays%2C%20gravel%20and%20evaporates
