Apart from gemstones, Myanmar sits on world-class reserves of metals such as tin, tungsten, gold and copper.
The
Ministry of Mines welcomes foreign investment, but so far big
international players have not made inroads. This leaves room for
medium-sized companies to capitalise on the substantial opportunities –
but they also face the risks associated with investing in an emerging
market.
Mining operations are regulated by the Myanmar Mines Law
of 1994 and its implementing guidelines, the Myanmar Mines Rules of
1996. These regulations lay out the application process for mining
licences; rights and duties of a licence holder; rent and royalties; and
employment conditions for miners.
A new mining law is being
debated, but so far it has not been approved.A foreign mining company
that wants to explore for minerals has to contact the Ministry of Mines
in order to discuss the investment and arrange a field trip. If, after
the field trip, the foreign company decides to proceed, it has to submit
a proposal letter which, among other things, has to state the area it
wants to work in, the minerals it is interested in, intended activities
(prospecting, exploration, feasibility study) and the amount of capital
and technical know-how it will contribute.
The investor then starts to negotiate an “agreement for the exploration and feasibility study” with the ministry’s department of geological survey and mineral exploration.
In this agreement, the investor obliges itself to explore in the designated area, at its own cost, for the minerals specified in the agreement, to pay a so-called dead rent (ie, rent for the land, irrespective of whether the mine is profitable or not) and a signature bonus, and to spend a certain amount per square kilometre of the exploration area (“minimum expenditure”) as business expenses.
At the same time, the investor has to obtain recommendation letters from a number of state and local authorities stating that there are no objections to using the land.
The investor then starts to negotiate an “agreement for the exploration and feasibility study” with the ministry’s department of geological survey and mineral exploration.
In this agreement, the investor obliges itself to explore in the designated area, at its own cost, for the minerals specified in the agreement, to pay a so-called dead rent (ie, rent for the land, irrespective of whether the mine is profitable or not) and a signature bonus, and to spend a certain amount per square kilometre of the exploration area (“minimum expenditure”) as business expenses.
At the same time, the investor has to obtain recommendation letters from a number of state and local authorities stating that there are no objections to using the land.
The department will advise the
investor which entities to obtain the recommendation letters from. This
process, which can take several months, has been criticised by foreign
mining companies as too slow.The ministry appears to no longer require
the investor to obtain an investment permit from the Myanmar Investment
Commission for the exploration phase. Once the investor incorporaties a
company in Myanmar and signs the agreement with the department, the
ministry issues the exploration licence.
A separate exploration
(and later, production) licence is necessary for each kind of mineral
that the investor is interested in. If an exploration licence is held by
a local company that intends to form a joint venture with a foreigner,
the ministry now appears to allow the transfer of the licence to the
joint venture company.
If exploration is successful, the Myanmar subsidiary of the investor will enter into a production-sharing contract with state-owned Mining Enterprise No 1, No 2 or No 3 (depending on the mineral), and obtain an investment permit from the Myanmar Investment Commission and a production licence from the ministry.
Between 1 percent and 7.5pc of the sales proceeds are to be paid to the ministry as royalty. Furthermore, part of the production (negotiable, rule of thumb: 35pc) goes to Mining Enterprise No 1, No 2 or No 3, either in cash or in kind. In the future, the ministry may also allow profit-sharing arrangements (in contrast to production sharing).
If exploration is successful, the Myanmar subsidiary of the investor will enter into a production-sharing contract with state-owned Mining Enterprise No 1, No 2 or No 3 (depending on the mineral), and obtain an investment permit from the Myanmar Investment Commission and a production licence from the ministry.
Between 1 percent and 7.5pc of the sales proceeds are to be paid to the ministry as royalty. Furthermore, part of the production (negotiable, rule of thumb: 35pc) goes to Mining Enterprise No 1, No 2 or No 3, either in cash or in kind. In the future, the ministry may also allow profit-sharing arrangements (in contrast to production sharing).
source: The Myanmar Times
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