SAUDI ARABIA MINING REGULATION
Saudi Arabia is the largest country in the Middle East. It is surrounded by Jordan and Iraq to the north, Kuwait to the northeast, Qatar, Bahrain and the United Arab Emirates to the east, Oman to the southeast and Yemen in the South. The country hosts several mines, including gold, zinc, kaolin, phosphate, bauxite and magnesite mines (some with base metal credits). At least one major mining company (Barrick) is developing a mine in the country (a copper deposit) and another (Alcoa) has a joint venture in the aluminum sector.
Saudi Arabia embarked on a reform program to diversify its economy and reduce its dependency of the country on hydrocarbons. In the mineral sector, this program resulted in a new mining code in 2004. The result has been increased competition (and cooperation) with the Saudi Arabia Mining Company (Ma’aden), which was formed by Royal Decree in 1997 to facilitate the development of Saudi Arabia's mineral resources. It was originally wholly-owned by the Saudi Government before its shares were floated on the Saudi Stock Exchange (Tadawul) in 2008. Both the Barrick project and the Alcoa project are in joint venture with Ma’aden.
PRINCIPAL LEGISLATION AND REGULATOR
The principal minerals legislation in Saudi Arabia is the Mining Investment Law (MIL), Royal Decree No. M/47 (4 October 2004) and the Executive Regulations (ER), which are administered by the Ministry of Petroleum and Mineral Resources (Ministry). The MIL provides that all mineral resources are State property (Art. 2, MIL). Foreign companies may participate equally in the acquisition of mineral titles. There are regulations that also apply to the sector. Environmental matters are governed by the MIL and the General Environmental Law, which requires an EIA for all mining projects.
GRANT AND FORMS OF MINERAL TITLE
The MIL contemplates, among other licences, reconnaissance, exploration, mining, small scale mining and quarry licences. Set out below are the key elements of some of these licences:
- Reconnaissance Licence: The licence is issued for a period of two years (Art. 31, MIL) and may be renewed for a further period of two years (Art. 37, ER); it does not confer the exclusive right to an Exploration Licence and is non-exclusive. The MIL suggests that a Reconnaissance Licence may be necessary in order to access non-confidential data held by the Ministry (Art. 32(5), MIL).
- Exploration Licence: The Licence is an exclusive licence insofar as the covered minerals are concerned and provides the right to obtain an Exploitation Licence upon proving an exploitable discovery (Art. 35, MIL). It is granted for a period of up to five years and may be renewed at the discretion of the Ministry for an additional period of up to five years. Note that a holder is required to deliver any drill core to the Minister that is obtained from the licence area (Art. 36, MIL). The maximum size of an Exploration Licence area is 100 km2 (Art. 38, ER). There are minimum expenditures obligations, which are specified in Appendix 1 of the ER.
- Mining Licence: A Mining Licence (the primary Exploitation Licence of foreign interest) is issued for a period of up to 30 years and renewable for a similar period (Art. 44, MIL). The holder must have the technical and financial competence to carry out the contemplated work (Art. 11, MIL). The licence carries the right to exploit the minerals covered and to carry out any direct or indirect activities to achieve the exploitation (Art. 37, MIL).
Transfers are only permitted on consent of the Minister (Art. 13, MIL); consent can also be obtained to mortgage a licence (Art. 14, MIL).
A work programme must form part of the Exploitation Licence application process and licence holders are also under an obligation to conduct a feasibility study prior to the commencement of operations.
Agreements must be sought with landowners for access to private land and compensation. In the absence of an agreement the Minister may establish a committee to determine the terms of access and related compensation.
Fees and surface rentals apply, alongside standard taxation obligations.
Mining projects are categorised as Category 3 under the applicable EIA provisions meaning that they are expected to have serious negative effects on man and the environment. As such, they require a comprehensive environmental impact assessment prepared by a qualified consulting firm. The Ministry is to consider in granting environmental approval the nature and magnitude of the intended activity and the existence of similar projects at the site or similar sites; the extent of depletion of natural resources by the installation, particularly agricultural lands and mineral resources; the location of the installation and the nature of the surrounding environment and nearby residential habitats; and the type of power used. Where needed, surface rights can be compelled by order of the Minister (Art. 23, MIL).
See Saudi Arabia Environmental Regulation.