March 14, 2019

Oman adopts new Mining Law

Oman's long-awaited new Mining Law* comes into effect on 14 March 2019, bringing in hopes of attracting new investment and revitalising its mining industry. The mining industry has been targeted as one of five key sectors to drive Oman's economic growth and diversification. Concurrent with the passage of the new Mining Law, the Public Authority for Mining ("PAM") announced the identification of new mining projects and initiatives with an investment value of over $2 billion. The new Mining Law provides a far more robust framework for the mining sector intended to provide more incentives, transparency and certainty to investors, while at the same time balancing the PAM's oversight role, the interests of local communities, the prioritisation of local employment, the protection of the environment and the enforcement of investment commitments. This article outlines the key developments of the new law.

The new Mining Law is a welcome development to the mining industry in Oman

Upon the effective date of the new Mining Law on 14 March 2019, the prior law of 2003** is cancelled and all laws that contradict its provisions shall not be effective.  However, all existing licences and agreements shall continue to have effect. 

The Role of the Public Authority for Mining

The Mining Law aligns the law with the existing regulatory framework, as it recognizes the PAM, which was established in 2014 to regulate the sector – as the competent mining authority.

The competencies of the PAM are more clearly outlined in the new Minerals Law. It is granted broad regulatory and supervisory powers, including the right to issue exploration, prospecting and exploitation licences and mining concessions, to conduct inspections of mining activities, to ensure compliance by the licence holder with the terms of the licence and enforcement powers in the event of any non-compliance. It also has the authority to seize private property from land owners in the name of the public interest, if there is a belief that the property may contain significant mineral wealth that may be of benefit to the national economy.

Licensing and Concessions

Licences for exploration and prospecting may be granted for one year terms, renewable for similar periods up to three years. The licence period for exploitation is up to five years, renewable for additional similar periods. Concession agreements for large deposits may be granted for periods between 20 and 30 years.

License holders may no longer hold on to their licenses without performing their obligations. The PAM has greater authority to terminate the licence if the licence holder fails to conduct the licensed activities or make the required investments within specified time periods. PAM may also terminate the licence if the license holders fails to pay amounts due to the government or transfers its licence without approval or otherwise breaches the terms of the licence or the law.

License holders have reporting obligations to the PAM, such as submission of monthly reports on extraction, inventory and sales, and quarterly reports on employees, processing, development and operations, as well as notifying PAM of any changes to their shareholding structure.

It is strictly prohibited to carry out any mining activities without having a licence issued by PAM. Person carrying out mining activities without a licence are subject to penalties, confiscation of any produced minerals as well as possible criminal liability. 

Royalties, rent and other payments amended to incentivize investments

The financial obligations for license holders and concessionaires have been revised. There are no set royalties or rent payments. The stated intent is to incentivise investments by establishing flexible royalty and rent payments that are tied to the economics of the project. The law does however set parameters, requiring license-holders to pay:

  • a minimum of 5% of the annual output of their mining activities in royalties (as opposed to a maximum of 10% under the old law);
  • rent payments to be determined by PAM;
  • a financial guarantee amounting to 1% of the value of the budget allocated by the licence holder for their exploration and mining operations; and
  • a contribution of 1% of the value of the annual output of its mining activities to support the local community in the area surrounding the relevant site.

Spurring investment 

Adoption of the Mining Law is a welcome development that will hopefully spur new investment in the industry. Investments need certainty, and the mining industry has been somewhat stalled while investors waited for the new law to be adopted.

At the same time, PAM has been deliberate in drafting the new law, reportedly considering mining sector regulatory frameworks from around the world. Adoption of the new mining law demonstrates the Government's understanding that the legal and regulatory framework needed to evolve in order to attract new investments, while also protecting the public's interest.

Within one year from the Mining Law coming into effect, investors should expect that correlated regulations will be also be adopted by PAM to compete the new regulatory framework. 

 

 

*Mineral Wealth Law promulgated by Royal Decree No. 19/2019 on 13 February 2019 (the "Mining Law")

**Promulgated by Royal Decree No. 27/2003