Uzbekistan: Mining Industry Of Uzbekistan

MINING INDUSTRY

1. What is the nature and importance of the mining industry in your country?

Uzbekistan's mining industry is one of the country's most important and strategic industries. Uzbekistan is one of the world's largest producers of gold (ranked ninth) and of uranium (ranked seventh). Uzbekistan also produces copper, silver, coal, phosphate, molybdenum, potassium, tungsten, lead, zinc and other minerals.

2. What are the target minerals?

Uzbekistan possesses most types of minerals. Different regions focus on different minerals. For example, Navoi province is famous for its large deposits of gold and uranium and Tashkent province for copper, coal and gold deposits.

3. Which regions are most active?

The most active regions are Navoi, Samarkand and Tashkent provinces.

LEGAL AND REGULATORY STRUCTURE

4. Is the legal system civil or common law-based?

Uzbekistan's legal system is based on civil law, which is similar to the Romano–Germanic system of law.

5. How is the mining industry regulated?

Exploration and development of minerals is regulated under a number of national laws and regulations. Exploration and mining rights are granted on the basis of a subsoil-use licence awarded to the subsoil user, through tenders or direct negotiations, by the State Committee of the Republic of Uzbekistan on Geology and Mineral Resources.

6. What are the principal laws that regulate the mining industry? What are the principal regulatory bodies that administer those laws?

The main act regulating the mining industry is the Law on Subsoil No. 444-II, new edition, dated 13 December 2002 (Subsoil Law). The Subsoil Law provides the fundamental legal framework governing exploration and development of all subsoil resources, including both minerals and oil and gas. The Subsoil Law provides for state licensing and control, rights and obligations, basic rules regarding efficient use of resources, types of subsoil use, duration of subsoil use, and other matters.

The industry is also regulated under a number of other laws and regulations, including the Resolution of the President of Uzbekistan on Terms and Conditions on Granting of Subsoil Use Rights No. PP-649 dated 7 June 2007 (Regulation PP-649), the Tax Code, Land Code, Labour Code and Environment Protection Law. It shall be noted that Regulation PP-649 established a procedure for granting a licence on subsoil-use rights for all subsoil minerals excluding construction materials. Granting subsoil-use rights for exploration and development of deposits of construction materials is regulated by the Resolution of the President of the Republic of Uzbekistan on Terms and Conditions on Granting of Subsoil Use Rights for Deposits of Construction Materials No. PP-1524 dated 2 May 2011. In addition to the above, the Law on Concessions dated 30 August 1995 (Concession Law) provides a legal basis for this form of right to develop mineral resources. However, this law has not yet been widely applied in practice. To date, there have not been any examples of concessions being negotiated and entered for mining projects in Uzbekistan. The difference between the regulatory framework in Uzbekistan and that of other countries is in the absence of any separation between mining and petroleum law and a common approach towards regulation of the mining industry and the oil and gas industry. The confusion is exacerbated by the Law on Production Sharing Agreements dated 7 January 2001 (PSA Law). The PSA Law applies, in addition to the Subsoil Law, in the case of affairs related to the conclusion, execution and termination of PSAs in the exploration and mining of mineral resources in Uzbekistan.

The principal regulatory bodies that administer the laws and regulations related to mining are the State Committee of the Republic of Uzbekistan on Geology and Mineral Resources (Geology Committee), the State Inspectorate of the Republic of Uzbekistan on Control over Industrial Safety of works in Industry, Mining, Geology and Public Utilities Sectors (Industrial Safety Inspectorate) and the State Committee of the Republic of Uzbekistan on Protection of the Environment (Environment Protection Committee).

7. What classification system does the mining industry use for reporting mineral resources and mineral reserves?

Uzbekistan's mineral resource and reserve reporting system is quite different from generally recognised international systems, such as Canada's CIM Standards, Australia's JORC Code or South Africa's SAMREC Code. Uzbekistan, along with many other CIS countries, still uses the former Soviet system for classification of mineral resources and reserves. This categorises mineral concentrations according to the extent to which they have been explored and substantiated, specifically: categories A, B, C1 and C2 and three categories of potential resources P1, P2, P3 and, also, on an economic-value basis, with two categories: balance reserves (commercial reserves) and off-balance reserves (reserves lacking commercial potential).

MINING RIGHTS AND TITLE

8. To what extent does the state control mining rights in your jurisdiction? Can those rights be granted to private parties and to what extent will they have title to minerals in the ground? Are there large areas where the mining rights are held privately or which belong to the owner of the surface rights? Is there a separate legal regime or process for third parties to obtain mining rights in those areas?

Under the Subsoil Law all subsoil resources are owned by the state. Title to minerals passes from the state to the subsoil user on extraction from the ground, pursuant to the terms of the subsoil-use licence. Any transfer of subsoil ownership rights (including the right of use) to a non-state party is subject to approval by the Cabinet of Ministers of the Republic of Uzbekistan (government or Cabinet of Ministers).

Uzbekistan differs from many other countries, where there is private ownership of minerals in the ground and where landlords have title to all mineral resources located under their land plots. All subsoil resources in the ground, until extracted, are owned by the state. Surface rights do not grant rights to natural resources in the ground and, in this way, are clearly distinct from mineral rights.

9. What information and data is publicly available to private parties that wish to engage in exploration and other mining activities? Is there an agency which collects mineral assessment reports from private parties? Must private parties file mineral assessment reports? Does the agency or the government conduct geoscience surveys, which become part of the database? Is the database available online?

Usually, geological data held by the Geological Committee are treated as state secrets and the Geological Committee makes very high-level information publicly available, such as the names of given deposits, their location and respective mineral reserves, as recognised by the state. Usually this information is publicly available through the websites of government agencies such as the Geology Committee, the Agency on Information Support and Foreign Investments Promotion and the annual geological conference, Uzgeoinvest.

Sufficient basic geological data to prepare an aggregated feasibility study (for exploration activities) or a preliminary feasibility study (for mining activities) is provided by the Geology Committee in the course of conducting tenders or direct negotiations for the right to develop a particular deposit or exploration area. This information may be disclosed to investors subject to their signing a confidentiality agreement. A more detailed package of geological information regarding a certain deposit or subsoil area is made available to the licensee after the relevant licence for subsoil-use rights has been granted.

10. What mining rights may private parties acquire? How are these acquired? What obligations does the rights holder have? If exploration or reconnaissance licences are granted, does such tenure give the holder an automatic or preferential right to acquire a mining licence? What are the requirements to convert to a mining licence?

Uzbekistan uses a licensing system for the grant of exploration and mining rights. Therefore, subsoil-use rights are granted on the basis of a subsoil-use licence awarded to the subsoil user on behalf of the Cabinet of Ministers by the Geology Committee. Such licences are usually awarded either through tenders or direct negotiations.

The primary obligations of the mineral rights holder include obligations to:

  • use the allotment only for the purposes stipulated in the licence;
  • comply with standards and rules on technology of conducting subsoil-use operations;
  • comply with the work programmes on development of operations;
  • draw up geological, survey and other documents in the process of the development of mineral deposits, the use of subsoil for other purposes not connected with the mining of minerals and to protect their safety;
  • keep records of the volume and quality of extracted and reserved principal and other jointly deposited mineral resources;
  • preserve extracted but temporarily unused associated subsoil resources;
  • ensure compliance with standards of loss when mining minerals and processing mineral raw materials;
  • not exercise selective extraction of rich blocks within the licensed area;
  • update the Geology Committee on the status of, and changes in reserves of, the principal and other jointly deposited subsoil resources;
  • provide information on the volume of extracted subsoil resources to the Geology Committee;
  • ensure the safety of human life, health and the natural environment;
  • ensure safe execution of work connected with the use of subsoil and taking of measures for the prevention of extraordinary situations, elaboration of plans to eliminate accidents;
  • observe the established procedure for closure and conservation of enterprises for mining of minerals and underground structures not associated with mining of minerals;
  • ensure execution of works connected with planning or terracing of dump slopes and pit edges, as well as erosion preventive measures; and
  • restore land plots and other natural features that have been disturbed as a result of subsoil-use operations to a condition suitable for further use.

Depending on the type of the subsoil use, the licence may include other obligations.

The Subsoil Law and Regulation PP-649 grant the exploration licence holder a right to progress from exploration to mining activity and states that a party or parties that financed the exploration activities on a given deposit shall have an exclusive right to obtain a licence for mining activities on the same deposit. The exploration licence holder is usually treated as the financier of exploration activities and has the exclusive right to progress to mining activities. There is no automatic transfer from exploration to mining licence. The Subsoil Law and the Regulation PP-649 provide that the mining licence must be granted upon the application of the party that financed the exploration activities. The application must be supported by:

  • documents proving that exploration activities on a given deposit were financed by an applicant and disclosing the source of financing;
  • notarised copies of a certificate of incorporation and constitutive documents of the applicant;
  • information on the executive management and shareholders of the applicant; and
  • information on technical and technological capacities of the applicant demonstrating that the applicant is capable of performing the intended activity on development of the deposit and ensuring production, and also information on contractors to be involved in performance of the intended activity. In addition, the Geology Committee may request submission of copies of an applicant's or its contractors' licences and permits for carrying out certain types of activities connected with the subsoil use.

11. What is the regime for the renewal and transfer of mineral licences?

The term of a licence may be extended provided that a subsoil user applies to the Geology Committee not less than six months before expiry of the validity period of a licence. Pursuant to the Subsoil Law, the Geology Committee must take a decision on whether to grant the extension within 30 days of the submission of the extension application. Usually, this decision is closely coordinated with the government. The extension is subject to the subsoil user's compliance with the terms and conditions of the licence and the subsoil user demonstrating that it requires an extension to complete exploration or mining activities on a given deposit.

The Subsoil Law and the Regulation PP-649 are silent on the transfer of licences with respect to exploration activities and only provide such rights with respect to licences for mining mineral resources and licences for use of technogenic mineral generations. The said licences can be transferred (partially or in full) to another party provided that this party undertakes all obligations under the licence. Transfer of licences is carried out by a licence holder submitting an application to the Geology Committee with an indication of the reasons for the transfer. The application shall be supported by the documents confirming that the party to whom the rights under the licence are being transferred meets the licence requirements. The Geology Committee prepares the information related to the licence transfer and coordinates it with the relevant ministries and state agencies. Recommendations of the ministries and state agencies are further submitted to the government regarding the decision whether to approve or reject the transfer of the licence.

12. Is there any distinction in law or practice between the mining rights that may be acquired by domestic parties and those that may be acquired by foreign parties?

Generally, there is no distinction, and foreign individuals and legal entities can directly hold mining rights in Uzbekistan. Uzbekistan has managed to build a powerful mining industry over the past 40 years, thanks to rich uranium and gold deposits. Most of the subsoil deposits are being developed by two major state-owned mining companies or by joint ventures with these companies – Navoi Mining Metallurgical Combine (NMMC) and Almalyk Mining Metallurgical Combine (AMMC). Thus, in practice, priority in providing mining rights with respect to large deposits of strategic minerals, such as gold, silver, copper and uranium are given to these companies. At the same time, the government continues to seek and attract the foreign investors employing innovative technologies and best practices, and there are examples of successful cooperation with large Western and Asian companies.

13. How are mining rights protected? Are foreign arbitration awards in respect of domestic mining disputes freely enforceable in your jurisdiction?

Mining rights may only be suspended, restricted or prematurely terminated in the circumstances specified by the Subsoil Law. Subsoil users are free to choose a judicial body for protection of the rights and they may refer their disputes either to the Uzbek economic courts or foreign arbitrations. Unlike foreign court judgments, foreign arbitral awards shall be recognised in Uzbekistan without retrial on the merits, as Uzbekistan is a party to the 1958 New York Convention On the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Accordingly, a foreign arbitral award obtained in a state that is party to the New York Convention should be recognised and enforced by an Uzbek economic court, subject to the qualifications in the New York Convention and compliance with Uzbek civil procedure and the procedures established by the Uzbek law on commercial arbitration for the enforcement of arbitration decisions.

14. What surface rights may private parties acquire? How are these rights acquired?

For mining purposes and in order to secure mining rights, private parties must acquire the surface rights to relevant land plots. Surface rights as such are usually acquired after the mineral licence has been granted, and at the stage of construction or development of the project to the extent that such surface rights are required. Although the Land Code provides for other types of land rights such as the right of permanent or temporary use, in practice, foreign companies or joint ventures engaged in mining activities are granted a lease-right to land. All land rights must be registered with the local state cadaster authority. In addition, Regulation PP-649 provides that subsoil-use rights become effective upon registration of such rights by the Geology Committee in the state register of the subsoil-use rights. Further, the terms of a licence for mineral extracting activities will provide that the mine allotment must be granted by the Industrial Safety Inspectorate. The right to the use of a land plot is linked to the subsoil-use rights, such that any changes in the title of the subsoil- use rights (transfer or termination) will lead to corresponding changes in the rights to use the land plot.

15. Does the government or do state agencies have the right to participate in mining projects? Is there a local listing requirement for the project company?

Yes, through its state agencies, committees or wholly owned state companies the government participates in mining projects. In fact, currently, most of the subsoil deposits are being developed by two major state-owned mining companies, NMMC and AMMC. Also, the Geology Committee has set up a number of joint ventures with foreign investors for prospecting and exploring potential fields in Uzbekistan.

There is no local listing requirement for the mining project companies in Uzbekistan.

16. Are there provisions in law dealing with government expropriation of licences? What are the compensation provisions?

The Subsoil Law is silent on expropriations of licences by the government. However, the Law on Guarantees and Measures for Protection of Foreign Investors' Rights dated 30 April 1998 (Law on Protection of Foreign Investors' Rights) provides that foreign investments and any other assets of foreign investors located in the Republic of Uzbekistan cannot be nationalised or confiscated, except in the instance of natural disasters, accidents, epidemics and epizootics. In the event of nationalisation in the said circumstances, the government is obliged to provide the affected foreign investor with compensation of an amount equal to the damage caused as a result of such nationalisation. The law further provides that the state shall be a guarantor of timely payment of such compensation to the foreign investor.

17. Are any areas designated as protected areas within your jurisdiction and which are off-limits or specially regulated?

Yes, there are certain areas that have special status and where mining works may be either prohibited (for example, in natural parks) or restricted (for example, in frontier zones and certain types of agricultural land).

To read this Report in full, please click here.

Originally published by Getting the Deal Through.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions