PERÚ- CHINA: Bridging Key Concepts in Mining Tenure


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Expositor: Raul Ferreyra / China Mining 2012 / China, 6 de Noviembre del 2012

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PERÚ- CHINA: Bridging Key Concepts in Mining Tenure

  2. 2. Content(1) Introduction to the Peruvian Mining Legal Framework(2) Mining Tenure(3) Land Access in Peru(4) Other Licenses and Authorizations – Compared(5) Basic Mining Tax Structure(6) Concluding
  3. 3. Introduction to the Peruvian Mining Legal Framework Civil Law country Unitary and decentralized government Non federal governmentPeru Strong private property Institution Latin America Mining Law Model scheme Market-oriented
  4. 4. Mining TenureNatural resources belong to the Nation, the State holds them in trust pursuingsustainable exploitation. Peruvian State grants rights over the natural resourcesby means of the concession system.Concession System Mining Activity Concession Regulated ActivityReconnaissance Not applicable FreeProspecting Not applicable FreeExploration Mining Concession Subject to concession grantingExploitationProcessing Processing Concession Subject to concession grantingAncillary facilities General Labour Concession Subject to concession grantingTransport Transport Concession Subject to concession grantingCommercialization Not applicable
  5. 5. Mining Tenure (cont’d)The Mining Concession• The Mining Concession grants exploration and exploitation rights, within the internal boundaries of the applied area, for metallic or non-metallic substances, subject to further specific permits and authorizations.• It comprises similar rights and obligations as those granted by the Chinese Exploration and Mining Rights, all in
  6. 6. Mining Tenure (cont’d)Conditions to access• There is no pre-qualification in order to be granted a mining concession in Peru.• The access to mining concessions in Peru is not subject to the authority’s discretion but subject to the verification of compliance with certain simple steps.• Nevertheless, certain mineral deposits or projects are reserved for bidding processes, as it is done by the Department of Geology and Mineral Resources of the Chinese State
  7. 7. Mining Tenure (cont’d)Conditions to access (cont’d) Requirement China PeruHave the status of a legal entity, enterprise Requested Not requested,or institution. individuals can apply for mining concessions.Count on specialists according to the Requested Not requestedcategory and class of the geologicalexploration of the project to undertake. (H&S Regulations)Have the equipment and instruments Requested Not requestedneeded for the category and class of thegeological exploration of the project toundertake.Have the quality control systems and work Requested Not requestedsafety management systems needed for thecategory and class of the geological (H&S Regulations)exploration of the project to
  8. 8. Mining Tenure (cont’d)Mining Concession’s Term• Back in 2001 the trend was to lengthen exploration and mining rights’ term. A Sillitoe study for the Metals Mining Agency of Japan, showed that major mineral deposits in the Pacific rim from 1976 to 2001 took an average of 19 years of exploration time and required approximately 9 years to develop.• The unified concession in Peru, Bolivia and Venezuela presented one solution to the short exploration terms problem; another was the retention license regulated in Tanzania and China which allowed a company to hold an area in care and maintenance status for an extended period (e.g. 7-10 years)• Now mining concessions in Peru are granted for an indefinite term, but subject to the condition that they are put into production within a maximum term of 20 years.
  9. 9. Mining Tenure (cont’d)Peru’s Maintenance ObligationsChina’s Maintenance
  10. 10. Mining Tenure (cont’d)Peru’s Reporting ObligationsTitleholders have to provide technical, environmental, financial and health and safety information, on annual and monthly basis. Online
  11. 11. Mining Tenure (cont’d)Legal Security of TenurePeru: Single “licensing” approach Transit Exploration Mining to MiningChina: Multi “licensing” approachExploration
  12. 12. Mining Tenure (cont’d)Concerns related to Security of Tenure China Peru Irrevocable, subject to Duration of 3 Years (Exploration Rights) compliance with the title Maintenance Obligations  Fail to renew the registration.  Apply for mining rights.  Rescind the Exploration Right of the undertaken project.  Breach any reporting obligation.  Default in License fee  Not incurring in minimum and/or Penalty Ability to exploration expenditure. payment for 2 years.cancel the title  Fail to begin construction on the  Not attaining the exploration project within 6 Minimum Production months from the date of when due. exploration license issuance or halting the work-in-progress for 6 consecutive months without a valid
  13. 13. Mining Tenure (cont’d)Concerns related to Security of Tenure (cont’d) China PeruRenewability 2 years each time Not needed Is allowed under the following circumstances and subject to further approval by the competent authority:Transferability Free Upon attaining minimum exploration expenditures; and For corporate reasons such as mergers, spin-offs,
  14. 14. Land Access in Peru Direct negotiation is required Administrative easements are discouraged The mining concession in Peru is different and independent from the surface
  15. 15. Other Licenses and Authorizations - compared China Peru Incorporation of a Peruvian corporate Business Certificate vehicle to carry out mining activities Exploration Right Mining Concession Mining Right Land Use Certificate Agreement with the surface owner Environmental Impact Assessment approval
  16. 16. Other Licenses and Authorizations – compared (Cont’d) China Peru Compliance with Health and Safety Work Safety License regulations Licenses, Permits and Authorizations Others that may apply for project implementation
  17. 17. Basic Mining Tax Structure China Peru Income Tax Income Tax (30%) Mining Royalty Resource Compensation Tax sliding scale (1% - 12%) deductible from Income Tax Special Mining Tax sliding scale (2% - 8.4%) deductible from Income Tax Special Levy to the Mining Sector sliding scale (4% - 13.2%) legal or contractual royalty payments shall be deducted for calculation purposes deductible from Income
  18. 18. Concluding Remarks• Peruvian Mining Tenure has more similarities to Chinese regulation than one may think of;• Nevertheless, It provides freedom to access, hold, and transfer mining properties; and a higher standard of security of tenure;• Peruvian mining regulation fosters certainty, objectivity, and predictability for investors, whether nationals or not;• It is designed to attract foreign investment, guaranteeing compliance with transnational investment law;
  19. 19.