Mining

Mines, as a form of natural resource, belong to the Turkish state and are not subject to private ownership regardless of their geological location (in land, or in, on or under the continental shelf or under water, including under rivers, lakes, inland seas and coastal waters). The Mining Law categorizes mines into five groups based on their chemical, physical and mineralogical specifications and area of use. Turkish individuals or companies incorporated in Turkey may engage in mining activities provided that they obtain the necessary mining licenses and permits from the General Directorate of Mining and Petroleum Affairs. The articles of association of the license/permit applicant company must meet certain conditions set forth under the licensing regime.

The Mining Law provides an extensive permitting regime, which divides the development of a mine into three unique stages: exploration, operation and production. The exploration stage permit covers preliminary assessment of the mineral reserves underground. At the end of this stage, the license holder must either convert the exploration permit into an operation license or leave the field. The operation stage is where the permit holder undertakes, on a field with proven reserves, all preparatory work to commence ore production. During the operation stage, other necessary governmental authorizations and permits required for mining activities must be obtained. These authorizations usually include an “Environmental Impact Assessment Affirmative Decision” from the Ministry of Environment and/or a forestry permit from the Ministry of Forestry.  The production stage may start only after the mine is technically ready for the operations. Technical readiness is evaluated by the General Directorate of Mining and Petroleum Affairs and, if the evaluation is affirmative, the mine is certified by issuance of an operation permit. Production must commence within one year following the operation permit’s issuance otherwise the General Directorate of Mining and Petroleum Affairs will cancel the permit.

Licenses and/or permits are transferrable to third parties who also meet the relevant eligibility criteria. In addition, the secondary legislation requires the Ministry of Energy’s approval to share transfers exceeding 10 percent of a license holder.

The Mining Law also allows license holders to enter into mine lease agreements, known as “royalty agreements” that are subject to Ministry of Energy approval. Under a royalty agreement, the operation license holder transfers the right to operate the mine to a third party contractor for a specific period in consideration of a certain agreed upon compensation. Royalty agreements for coal mines are not allowed unless the license holder is a public institution or its affiliate.

Failure to comply with the requirements of the Mining Law may result in administrative fines. Depending on the compliance issue other fines, calculated proportional to: (i) the amount of license fee or other related amounts (e.g. letter of guarantee), (ii) the state’s share on the ore extracted and/or (iii) the amount of revenue generated as a result of the failure, may be charged.