Mining

The Code on Subsoil and Subsoil Use (‘SSU Code’), which was adopted on 27 December 2017 and became effective on 29 June 2018, is the main legislative act governing the mining industry.

The SSU Code regulates matters such as:

• access to geological data;
• the grant of mineral titles through the introduction of a licensing regime (instead of contracts);
• requirements for licence holders and project documents;
• licence transfers and change of control over licence holders;
• the treatment of technical mineral formations and use of subsoil space;
• mine closures and reclamation; and
• reporting.

The SSU Code was elaborated based on best practices set out in the Western Australian Mining Act and Canadian mining laws. For example, the SSU Code for the first time introduced the ‘first come, first served’ approach to granting exploration and mining licences in Kazakhstan.

The SSU Code applies to:

• exploration and mining licences; and
• exploration and/or mining contracts concluded under the previous enacted laws (1996 Law on Subsoil and Subsoil Use and 2010 Law on Subsoil and Subsoil Use).

There are several government resolutions and an extensive list of orders of the Ministry of Industry and Construction (MIC) which regulate specific issues and procedures in the mining sphere. For instance, such orders:

• regulate the procedures for:
• • applying for and granting mining titles; and
  • reporting on the fulfilment of licence obligations; and
• establish rules on the provision of financial security for mine closure and reclamation.

The last major changes to the mining laws were implemented with the introduction of the SSU Code.

The SSU Code is periodically amended. The most recent amendments to the mining regulations were introduced by Law 121-VIII on Making Changes and Additions to Some Legislative Acts of Kazakhstan, dated 8 July 2024.

Depending on the sphere of activity, the mining industry is generally affected by legislative acts such as the following:

• the Business Code of 29 October 2015;
• the Environmental Code of 2 January 2021;
• the Land Code of 20 June 2003;
• the Tax Code of 25 December 2017;
• the Law on Precious Metals and Precious Stones of 14 January 2016;
• the Law on Permits and Notifications of 16 May 2014;
• the Law on Civil Protection (Safety Law) of 11 April 2014; and
• the Law on Industrial Policy of 27 December 2021.

Kazakhstan is a signatory to:

• the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards;
• the Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States;
• the Energy Charter Treaty; and
• the Agreement on the Promotion and Reciprocal Protection of Investments in the Member States of the Eurasian Economic Community.

Moreover, Kazakhstan is a party to bilateral investment treaties with approximately 50 countries, establishing guarantees for the protection of investment activities. The texts of these treaties can differ in relation to:

• the definition of an ‘investor’;
• the definition of the object of investment;
• the protected rights of an investor; and
• the procedure for investment protection.

Nevertheless, all treaties stipulate the right of an investor to resort to international investment arbitration in order to protect its rights and investment.

Kazakhstan is also a member of:

• the Eurasian Investment Agreement; and
• the World Trade Organization.

Depending on the type of mineral (eg, solid minerals, aggregates, hydrocarbons or uranium) and the type of operation, the following authorities are responsible for governing the minig industry:

• The MIC is responsible for:
• • setting state policy in the mining industry;
  • granting and revoking exploration and mining licences; and
  • overseeing compliance by licence holders with the conditions of the licence and with the relevant provisions of the SSU Code.
• The Ministry of Energy is responsible for:
• • setting state policy in the hydrocarbon and uranium industries;
  • concluding and terminating exploration and/or production contracts for hydrocarbons and production contracts for uranium; and
  • overseeing parties’ compliance with the conditions of their contracts.
• The Committee of Geology:
• • grants licences for geological surveys and licences for the use of subsoil space;
  • monitors compliance with the legal requirements related to the storage and safekeeping of drill cores, samples and other geological information; and
  • is generally responsible for the aggregation and provision of geological information to interested parties.
• Local executive bodies (‘akimats’):
• • grant surface rights to land that is the subject of exploration and to mining areas;
  • grant and revoke licences for artisanal mining;
  • grant and revoke mining licences for industrial minerals; and
  • oversee compliance with the licence conditions and provisions of the SSU Code by the holders of such licences.

The general approach of the regulator is to promote geological exploration and increase investment in this industry. To achieve these objectives, Kazakhstan implemented the SSU Code, thereby opening up the state territory for exploration on a ‘first come, first served’ basis. More than 2,700 new licences have been granted since the enactment of the SSU Code with about 800 junior exploration companies currently active in Kazakhstan.

However, the ongoing reforms initiated as part of the transition to the SSU Code are progressing slowly. Anticipated developments include:

• the accessibility of all regions in the country for exploration activities;
• a complete transition to the online issuance of licences through the MIC’s web portal (almost done); and
• the enforcement of environmental standards for polluting entities.

In his September 2023 state of the nation address, President Kassym-Jomart Tokayev gave instructions to develop a comprehensive plan for the energy transition minerals industry. At the end of 2023, the MIC approved the Comprehensive Plan for the Development of the Rare and Rare Earth Metals Industry for 2024-2028.

Many of the deposits currently being mined either:

• were operational during Soviet times; or
• utilise deposits discovered during that era.

Some operations still employ technology and management practices from that period. Since Kazakhstan gained independence in 1991, the lack of greenfield exploration and investment has hindered the sector’s development, preventing Kazakhstan from establishing a significant pipeline of new projects.

Despite possessing a substantial quantity of mineral resources, Kazakhstan scored 65th out of 84 in 2021 and 79th out of 86 in the Fraser Institute’s Annual Survey of Mining Companies in 2023, reflecting its relatively low level of attractiveness among mining regions. Although it was the highest-ranked Asian jurisdiction in terms of mining policy, the country performed poorly with regard to its:

• legal system (77% negative responses);
• taxation regime (67% negative responses);
• labour regulations (67% negative responses); and
• geological database (67% negative responses).

According to officials, since the Code on Subsoil and Subsoil Use (‘SSU Code’) was implemented, investments in solid mineral exploration by private companies have increased significantly, totalling KZT 357 billion from 2018 to 2023.

In September 2023, due to the depletion of solid mineral reserves, the president gave instructions to increase the geological survey area to 2.2 million square kilometres by 2026.

Kazakhstan has approximately 8,000 different deposits of solid minerals, aggregates and hydrocarbons, according to the state’s records. In the last 30 years, more than 200 deposits of base, precious and ferrous metals have been discovered.

Kazakhstan is a prominent producer of diverse minerals and currently holds the top position globally for the mining of:

• uranium;
• chromite;
• coal;
• iron;
• steel;
• copper;
• manganese;
• bauxite;
• tungsten;
• silver;
• lead;
• titan;
• gold; and
• zinc.

Moreover, Kazakhstan produces approximately 18 of the 34 essential raw materials identified by the European Union as crucial for:

• batteries;
• electric vehicles;
• solar panels; and
• other components in the renewable energy sector.

These materials include:

• bismuth;
• gallium;
• rare earth elements;
• silicon;
• vanadium;
• tungsten;
• lithium;
• indium; and
• cobalt.

The gold mining industry of Kazakhstan is mainly represented by small and medium-sized deposits by the standards of the industry.

According to the SSU Code, the following subsoil areas are defined as ‘strategic subsoil plots’:

• Plots that contain geological reserves of:
• • oil in a volume of more than 50 million tons; or
  • natural gas in a volume of more than 15 billion cubic metres;
• Plots located in the Kazakhstan sector of the Caspian Sea; or
• Plots that contain a uranium deposit.

Solid minerals are not deemed to be strategic, except uranium.

Pursuant to the SSU Code, the government – represented by the National Atomic Company Kazatomprom JSC (KAP) – has a priority right over other persons and organisations, including those with pre-emptive rights by operation of Kazakhstan law or contract, to acquire:

• a disposed subsoil use right (or an interest therein) in relation to a strategic subsoil plot;
• objects related to the subsoil use right in relation to the strategic subsoil plot; and
• shares and other securities associated with such subsoil use right which are traded on a regulated market.

On 6 April 2024, Kazakhstan introduced amendments to its legislative framework regarding the export of raw materials through the adoption of Law 71-VIII on Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Business Matters.

One of the significant changes introduced by Law 71-VIII is a requirement, effective from 9 October 2024, for producers of domestic raw materials to supply these materials to domestic manufacturing enterprises. This is to be done through supply agreements, provided that the producer is included on the Supply List of Domestic Raw Materials.

Inclusion on the list is based on applications submitted by manufacturing enterprises to the authorised body that oversees industry incentives – currently the Ministry of Industry and Construction (MIC). A producer may be excluded from the list if:

• it has been in operation for less than three years; or
• its production volume is below a threshold yet to be determined by the MIC.

Once included on the list, a producer must supply a volume of raw materials proportionate to the total volume produced in Kazakhstan. The supply agreements must involve the producer, the domestic manufacturing enterprise and the MIC, using a pre-approved form that is still to be finalised.

Pricing under these agreements must not be lower than the minimum export price available to the producer for the respective raw material. Producers included on the list can export raw materials based on a licence issued by the MIC. This export licence is contingent upon the producer entering into and fulfilling a supply agreement. Export licences are granted subject to the compliance of manufacturing enterprises with the supply agreements during the preceding period.

The MIC is developing bylaws related to these amendments, including:

• a list of domestic raw materials and their producers;
• the form that the supply agreement will take; and
• rules and regulations for compliance monitoring.

In other words, these amendments include a ban on the export of what are referred to as ‘raw materials’, unless certain conditions are met. Specifically, producers of raw materials must sell their materials to domestic manufacturing enterprises. Only after these domestic supply obligations have been fulfilled through supply agreements can producers obtain an export licence to sell the remaining raw materials abroad.

The mining industry has two main types of key players:

• private companies, including:
• • Eurasian Resources Group;
  • Kazzinc;
  • Qarmet (previously known as ArcelorMittal);
  • Kaz Minerals;
  • Kazakhmys;
  • Rio Tinto;
  • Glencore; and
  • Fortescue; and
• quasi-state companies, including:
• • Qazgeology JSC;
  • Tau-Ken Samruk JSC; and
  • KAP.

According to their 2022 results, the following companies were among the nation’s highest taxpayers:

• Kaz Minerals Aktogay: KZT 145.9 billion.
• Kazakhmys: KZT 109.3 billion.
• ArcelorMittal (currently Qarmet): KZT 102.5 billion.
• SSGPO (a subsidiary of ERG): KZT 99.3 billion.
• Kazzinc: KZT 91.3 billion.
• Kaz Minerals Bozshakol: KZT 88.8 billion.
• Kazchrome (a subsidiary of ERG): KZT 72 billion.

According to the SSU Code, alongside exploration and mining licences, separate licences are issued for:

• geological surveys of subsoil;
• subsoil space use; and
• artisanal mining (only for Kazakh citizens).

According to the Code on Subsoil and Subsoil Use (‘SSU Code’), exploration activities can be conducted under licences for geological surveys of subsoil, exploration and mining:

• Geological survey licence: This grants the right to conduct geological and geophysical surveys, as well as prospecting and evaluation of underground water resources, for a period of three years. However, it does not provide exclusive rights.
• Exploration licence: This grants the holder the exclusive right to use a subsoil plot for the exploration of solid minerals. This includes:
• • the search for solid mineral deposits; and
  • the assessment of their resources and reserves for potential extraction.
• Mining licence: This grants the holder the right to carry out operational exploration and mining of minerals from the subsoil site. These licences define the scope and exclusivity of rights for geological and mining activities.

The SSU Code and other legislative acts (eg, the Law on Specially Protected Natural Areas dated 7 July 2006):

• prohibit or restrict subsoil use operations in certain types of areas – for example:
• • land that falls under the auspices of the water fund;
  • land designated for the needs of defence and national security;
  • protected natural territories; and
  • townsites; and
• permit only specific types of subsoil use operations.

Only subsoil plots included in the State Subsoil Fund Management Programme are available for obtaining subsoil use licences (except for licences obtained through the preferential regime, which was in effect until 29 June 2023).

The applicant must:

• submit an application along with the relevant documents in Kazakh and Russian; and
• fulfil the requirements of the SSU Code – for example, the availability of financial and professional capabilities. Meeting the professional capability requirements involves having a geology or geophysics specialist either employed by the applicant or engaged through a service agreement. Meeting the financial capability requirements involves providing evidence of the availability of sufficient funds to cover the required minimum exploration costs – for example:
• • a copy of a loan agreement; or
  • a statement of the balance and movement of money in a bank account.

Under the standard process for granting an exploration licence, applications are considered by the Ministry of Industry and Construction (MIC) under the ‘first come, first served’ principle. Applications for exploration licences for the same block are reviewed by the MIC in order of receipt. A later application will be evaluated only if the initial application is denied.

For newly added territories to the State Subsoil Fund Management Programme, there is a one-month initial period starting from the date on which applications can be filed. If multiple applications are submitted for the same block(s) during this period, an auction will be held among the applicants.

The MIC will:

• consider the application for an exploration licence within 10 business days; and
• in the absence of grounds for refusal, send a notification requesting the applicant to provide reclamation surety. Reclamation surety must be lodged no later than 40 business days from the date of notification received by the applicant from the MIC. The MIC will refuse to grant the licence should this deadline be missed by the applicant.

There are no general restrictions on foreign companies holding exploration or mining rights. Any individual and legal entity (whether national or foreign) can hold exploration or mining rights, subject to compliance with the requirements of the SSU Code.

Upon obtaining an exploration licence, a signature bonus is paid.

Also, the holders of exploration licences commit to the fulfilment of other financial obligations. Please see question 3.7.

An exploration right is granted under an exploration licence for six years.

The term of an exploration licence may be extended once for an additional five consecutive years, subject to the following key conditions:

• An application for extension is submitted before the expiration of the initial term;
• There are no uncured breaches in terms of rental fees and minimum expenditures at the time of submission of the application; and
• If the licence initially covered more than nine blocks, the licence holder relinquishes at least 40% of the blocks by the time of the application.

The extension request must be submitted to the MIC in the sixth year of the exploration licence’s tenure.

The MIC will:

• consider the application within 15 business days; and
• either approve the extension or refuse it.

The main obligations of a holder of an exploration licence are as follows:

• to pay the signature bonus within 10 business days following issue of the licence;
• to pay annual rental fees for covered blocks, set out in the table below:

• Period	Fee rates for one block (minimum calculated indexes (MCI))
  During the first 36 months	15
  From 37 to 60 months	23
  From 61 to 84 months	32
  From the 85th month of validity of the exploration licence onwards	60

• to comply with annual minimum expenditures, set out below:

• One block	Two to five blocks	Six to 10 blocks	Additionally for each subsequent block within a territory comprising more than 10 blocks
  Years 1-3
  1,200	1,800	2,300	120
  Years 4-6
  1,200	2,300	3,500	180
  Years 7-8
  1,800	3,500	5,800	230
  Years 9-10
  2,300	5,800	8,000	350
  Year 11
  3,500	8,000	11,500	460

• to provide security for the performance of abandonment works (see question 4.11); and
• to submit the following reports annually:
• • a report on compliance with the licence obligations;
  • a report on the purchased GWS and the level of local content therein;
  • a report on persons and/or organisations that directly or indirectly control the holder of the licence; and
  • a geological report.

The reports must cover the previous calendar year and be submitted by no later than 30 April each year.

Yes, as mentioned in question 3.6, the licence holder must relinquish at least 40% of the blocks by the time of the application for renewal of exploration licences if the licence initially covered more than nine blocks.

The subsoil use contract may also include a requirement to relinquish part of the subsoil site during the exploration stage.

The SSU Code prohibits the transfer of title to exploration licences (or a part thereof) during the first year of the term of a licence. There are no other restrictions on the transfer of exploration licences.

Any transfer of exploration or mining titles (rights) under a licence or contract to a third party requires the prior consent of the MIC. Consent is also required for a transfer of shares in an entity holding exploration or mining titles or its direct or indirect parent companies up to the ultimate beneficial owner. Indirect interests may be in the form of:

• stocks;
• participatory interests; or
• other forms of equity shares in legal entities or unincorporated organisations, whether commercial or non-commercial in nature.

The SSU Code, however, provides for 14 cases in which no consent is required – for example:

• intra-group transfers of shares;
• transfers of less than 1% shares; and
• stock exchange transactions.

One of the key objectives of the approval process is to ensure that the transfer of the title or objects complies with an interest of national security.

A transaction (transfer) involving the sale of subsoil use rights is liable to value-added tax (VAT) at a rate of 12%. In practice, the parties to such transactions prefer to use share deal structures, as the sale of shares in local companies is exempt from VAT.

Yes, a subsoil user that discovers and evaluates a deposit of solid minerals under an exploration licence has the exclusive right to obtain a mining licence on a priority basis.

This right may be exercised at any time during the validity term of the exploration licence.

A mining right is granted by the Ministry of Industry and Construction (MIC) under a mining licence in respect of all types of minerals, except uranium. For industrial minerals (eg, stones and aggregates), mining rights are granted by local authorities (‘akimats’).

Prior to 29 June 2018, mining rights were granted through production contracts or combined exploration and production contracts, which remain in effect until expiry.

Mining rights are granted on application through the conversion of an exploration licence, under the ‘first come, first served’ principle or through action bidding.

According to the transitional provisions of the Code on Subsoil and Subsoil Use (‘SSU Code’), an auction procedure applies to the areas of terminated mining contracts concluded before the enactment of the SSU Code. The government is keen to extend the transitional provisions of the code to apply auction procedures for the grant of mining licences to the following areas:

• areas with reserves on state records which were not mined or evaluated during the Soviet era;
• areas of terminated or invalidated exploration contracts concluded before the enactment of the SSU Code;
• areas of revoked or invalidated exploration or mining licences issued under the SSU Code on a priority basis (without a competitive process) to:
• • national state-owned companies; or
  • participants in programmes for the support of industrial and innovative business; and
• areas of revoked or invalidated exploration or mining licences issued under the SSU Code upon conversion of the contracts concluded before the enactment of the SSU Code (conversion of a contract-based regime into a licence-based regime).

The standard process for obtaining a mining licence on application after completion of the exploration stage is very similar to that for obtaining exploration rights, with the following differences, whereby the applicant is required, among other formalities, to:

• indicate the mining area in the prescribed form of a rectangle, four-sided figure or polygon with a minimal number of angles;
• provide a report on its performance of its exploration licence obligations;
• provide an agreement on socio-economic support for the local population, if the requested mining area fully or partially belongs to lands of settlements or adjacent territories within 1 kilometre; and
• provide a report on resources and reserves prepared by a competent person in accordance with the SSU Code.

The other key difference is that the process of granting the mining right does not involve the lodgement of a reclamation surety by the applicant. This surety must be lodged after the mining licence has been granted but before the commencement of mining operations on the ground.

However, the process for granting the mining right does include a prior environmental and industrial safety expert review of:

• the mining plan; and
• the mine closure plan.

Thereafter, the application is reviewed by the MIC for compliance with formal and national security requirements and the requested mining area is reviewed by the Committee of Geology, a process which should take no more than 23 business days in total. The MIC will then notify the applicant to undergo an environmental and industrial safety expert review of the mining plan and mine closure plan and obtain an environmental permit within one year (this may be extended, if justified by the applicant).

The MIC must issue a mining licence within five business of receipt of the environmental permit by the applicant.

Upon the grant of a mining licence, the holder of the licence is prohibited from commencing on-the-ground mining operations until the reclamation surety has been lodged in the prescribed form.

Upon obtaining a mining licence, a signature bonus is paid.

Also, the holders of mining licences are subject to:

• other financial obligations, such as:
• • the annual payment of rental fees; and
  • an annual minimum expenditure obligation; and
• additional obligations, such as:
• • local content obligations;
  • research and development obligations; and
  • training obligations.

The annual rental fee is 450 minimum calculated indexes (MCI) per square kilometre, payable from the first month of the mining licence.

The annual minimum expenditures on mining operations are not progressive; they depend on the size of the mining plot area and are specified in the mining licence. These requirements are set out in the SSU Code at the following rates:

A mining right is granted under a mining licence for 25 years. The term of the mining licence may be extended for a period not exceeding the initial licence term. The number of possible extensions of the mining licence is unlimited.

The application for extension must be submitted to the MIC in the prescribed form at least four years before the expiry of the licence term. The MIC will consider the application within 10 business days of receipt.

Please see question 3.4.

In Kazakhstan, there are no specially protected communities, such as indigenous peoples.

Please see question 1.5.

The only requirement in the sphere of solid minerals is that mining right to a uranium deposit:

• may only be granted to National Atomic Company Kazatomprom JSC (KAP); and
• can subsequently be transferred to an investor or joint venture, although at least 50% of the direct or indirect interest must remain with KAP.

Please see question 3.9.

Yes, exploration and mining rights may be:

• pledged under the conditions set out in the SSU Code; or
• encumbered in other ways.

However, a pledge of an exploration licence during the first year of the licence term is prohibited.

Other than other types of encumbrances, a pledge of mineral rights or a share thereof:

• requires registration with the MIC; and
• becomes valid from the moment of registration.

A subsoil user has the right to surrender the entire mining area at any point before the mining licence expires by submitting an appropriate application to the MIC.

The SSU Code sets out clear requirements on mine closure and reclamation, requiring subsoil users to:

• prepare and submit reclamation plans prior to the grant of a mining licence; and
• provide financial security for reclamation (for both exploration and mining licences) before commencing operations.

There are explicit rules relating to the reclamation and rehabilitation of mined lands, including in the case of advanced exploration activities where massive soil movement is involved; these were drafted taking into account the international guidelines. The activities performed as part of mine closure and reclamation are governed by the Land and Environmental Codes.

The SSU Code sets out common requirements for financial assurance which is provided to secure the fulfilment of the subsoil user’s obligation to perform the reclamation. These requirements are further detailed in the articles specifically relating to exploration and mining operations. The financial assurance can be provided in one of three forms:

• a pledge of a dedicated bank account for the benefit of the state;
• an insurance bond; or
• a bank (local or foreign) or corporate guarantee, to be provided by a publicly traded company.

Foreign banks and public companies must have a minimum credit rating.

All instruments are provided to the MIC and are held by it until the discharge of the subsoil user’s obligations. There are statutorily approved templates of all financial assurance instruments, each of which provides that the termination or amendment of the instrument may be performed only with the permission of the state body that holds the assurance, which ensures the intended use of the funds.

Under the law, a subsoil use contract or a subsoil use licence only evidences the subsoil user’s entitlement to the subsoil, but does not provide for any surface rights (known in Kazakhstan as ‘land use rights’); the latter must be obtained separately. Effectively, the holder of an exploration licence has an access right to the surface, but no activity on the surface is allowed until the land use rights have been granted.

The Land Code sets out the grounds and conditions for granting land use rights to a land block according to the types of operations for subsoil use. Under the Land Code, local executive authorities (‘akimats’) reserve certain lands for different purposes, including for subsoil use operations. Temporary use rights can be granted for the purposes of conducting exploration or mining operations for the entire duration of the tenement.

The holder of the exploration licence must:

• obtain an easement for the land surface, which is granted by an akimat (for either public or private lands); or
• make a commercial arrangement with a private landowner and/or user to conduct exploration works on private lands.

If the establishment of an easement makes it impossible to continue using the surface of the land, the landowner/user is entitled to:

• claim a buyout of the land plot by the public authority which established the easement; or
• request the provision of an equivalent or different land plot, in which case all related expenses are covered by the subsoil user.

In order to conduct mining operations, a lease must be obtained in respect of the land surface within the boundaries of a mining area. The lease can be granted either:

• by the akimat; or
• by way of a sub-lease with a private owner, if the land is not agricultural.

Please see question 5.2.

There is no concept of native title in Kazakhstan law.

Pursuant to Article 25 of the Code on Subsoil and Subsoil Use, there are 10 types of land on which subsoil use operations are prohibited, save for limited exceptions. Please see question 3.1.

In January 2021, the new Environmental Code was adopted, setting out the environmental requirements for subsoil use activities. In addition, other specific obligations are laid out in:

• the Code on Subsoil and Subsoil Use (SSU Code); and
• the Water Code of 9 July 2003.

As part of the recent reforms to environmental legislation, the environmental requirements were reshaped to comply with modern international practice. The SSU Code and the Environmental Code stipulate that any exploration or mining operations may be commenced only:

• upon the completion of an environmental impact assessment (EIA); or
• where it is concluded that an EIA is not required based on the results of the screening, the obtaining of the relevant environmental permit and/or the positive opinion of a positive review by the state environmental expert, depending on the type of activity planned.

As a result:

• the requirements related to exploration and mining have become more stringent; and
• procedures are now more complicated and often more time consuming.

Exploration activities are conducted on the basis of an exploration plan, which may be subject to state environmental review. Before the commencement of mining operations, all subsoil users must prepare:

• a mining plan, which is subject to industrial safety authority consent and in certain cases may require the consent of the water authorities; and
• a liquidation plan, which is subject to state environmental review and industrial safety review.

Conducting mining operations also requires environmental permits, which determine annual limits for:

• emissions;
• water use; and
• water discharge.

The above requirements do not depend on the type of mineral or the location of the activity.

Mining activities require an environmental permit. The Environmental Code sets out the lists of activities and quantitative criteria according to which facilities are categorised as Category I, II or III, depending on whether they have a significant, moderate or insignificant negative impact on the environment, respectively. Obtaining an environmental permit is mandatory for the construction and/or operation of Category I or II facilities. In contrast, Category III facilities can be constructed and operated by submitting a notification to the relevant permitting authority.

Generally, exploration activities under the exploration licences fall under Category IV (objects that have a minimal negative impact on the environment) that do not require an environmental permit.

There are two types of environmental permits:

• integrated environmental permits; and
• environmental impact permits.

The environmental permits for Category I facilities are issued by the Committee for Environmental Regulation and Control, a subordinate entity of the Ministry of Environment and Natural Resources or its territorial departments (for Category II – by local executive authorities) in electronic form through the e-government web portal.

Kazakh law also provides for sets of special requirements for certain types of works performed as part of subsoil use.

Please see question 4.11.

The consequences of breaching environmental protections depends on the act committed – although Kazakh law more often provides for liability in the form of a fixed fine for acts committed against the environment.

Kazakh law also provides for criminal liability for violations of environmental safety. However, criminal liability is rarely involved in practice.

The Environmental Authority oversees adherence to environmental regulations. This authority:

• conducts company inspections under conditions outlined in the Business Code; and
• may also perform inspections on behalf of the public prosecutor.

The Environmental Authority or the courts can impose administrative penalties, while criminal penalties are exclusively imposed by the courts. Today, there is a growing trend in the development of Kazakhstan’s legislation towards an increase in fines and the amount of punishment for violation of natural conditions in Kazakhstan.

The regulator’s general approach is that subsoil use operations can cause significant harm to the environment. Therefore, a new Environmental Code has been adopted. The new code is much stricter in terms of environmental approvals and the applicable timeframes. Based on the practices of the Organisation for Economic Co-operation and Development, it sets out more sophisticated and usually lengthier procedures and more stringent requirements.

Key novelties of the Environmental Code aimed at reducing the impact of operations on the environment include:

• best available technologies in environmental management, environmental monitoring and control; and
• the ‘polluter pays’ principle.

According to interpretation of this principle in Kazakhstan, a polluter:

• is financially responsible for the environmental damage it causes; and
• must take measures to mitigate the damage.

Also, Kazakhstan is in the process of formulating a new Water Code aimed at safeguarding and conserving water resources. The implementation of new water standards, driven by concerns over water scarcity in Central Asia, has the potential to impact the mining industry.

In accordance with Law 188-V on Civil Protection dated 11 April 2014, mining companies must manage health and safety measures according to the design documents related to mining operations that are subject to industrial safety expert examination.

Moreover, a general mechanism is specified in the Labour Code in relation to all labour-related matters, including health and safety. The labour legislation requires employers to take all measures to guarantee the health and safety of employees while performing their duties. Such measures include legal, social and economic, organisational and technical, sanitary and hygiene, medical, preventive and rehabilitative measures, among others. Employers must:

• provide employees with a safe workplace and protective equipment; and
• obtain mandatory insurance coverage.

In addition, the Labour Code requires employers to:

• ensure that all necessary training, instruction and knowledge testing of personnel on health and safety matters takes place; and
• provide them with the documentation required to ensure the safe conduct of production processes.

All workers (including subcontractors and contractors’ employees) who are directly involved in dangerous fields of work must regularly obtain various certifications.

In urgent situations, as a rule, the Prosecutor’s Office will apply to the relevant state bodies to conduct an unscheduled inspection at the accident site. In this case, the mining company will be obliged to provide all necessary information.

Violations of health and safety conditions may result in administrative or criminal liability, depending on the damage suffered.

Violations of the requirements on the safe conduct of work in industries and mining that do not inadvertently cause serious harm to health will incur administrative liability, punishable by a fine of between 10 and 100 monthly calculation indexes (MCI), depending on the size of the company.

Violations of safety regulations committed by a person who was responsible for ensuring compliance are punishable as follows:

• where they inadvertently cause moderate harm to health:
• • a fine of up to 160 MCI or correctional labour in the same amount;
  • involvement in public works for up to 160 hours; or
  • arrest for up to 40 days;
• in case of serious harm to health:
• • a fine of up to 200 MCI or correctional labour in the same amount;
  • community service for up to 200 hours; or
  • arrest for up to 50 days;
• in case of the death of a person through negligence, a restriction of liberty or imprisonment for five years; and
• in case of the death of two or more persons through negligence, a restriction of liberty or imprisonment for seven years.

Implementing international health protection and safety standards, while considering internal requirements, is the optimal approach for mining companies. This ensures compliance with regulatory requirements and enhances overall safety.

Safety work is carried out in five main respects:

• improving preventive security;
• enhancing information and communication;
• upgrading technical training for personnel, fostering personal growth and improving knowledge in safety and environmental management through training;
• managing contractor security; and
• eliminating unsafe behaviour among employees and contractors.

The main state body that is responsible for the enforcement of health and safety obligations is the Industrial Safety Committee under the Ministry of Emergency Situations.

If the issue concerns an employee and the safety of his or her working conditions, the labour inspectorate of the Ministry of Labor and Social Protection of the Population may also play a role.

The main tasks of the Industrial Safety Committee are to participate in:

• the formation and implementation of state policy in the field of industrial safety; and
• the implementation of state supervision in the field of industrial safety at hazardous production facilities in the mining, metallurgy, oil and gas production, petrochemical, chemical and other industries.

The purpose of industrial safety is to prevent man-made accidents at hazardous production facilities that pose a threat to the safety of citizens and the environment, which can potentially lead to a man-made disaster.

Pursuant to Article 278.27 of the Code on Subsoil and Subsoil Use, until 29 June 2023, the holders of mining licences producing solid minerals with a metal content exceeding 30% were obliged to process no less than half of the total amount of minerals produced during a calendar year in Kazakhstan.

Today, mining companies have the rights to conclude a processing agreement. Under a processing agreement, if the holder of a mining licence plans to establish new facilities for processing solid minerals or seeks to expand or modernise current ones, and the investment surpasses 7 million maximum calculated indexes, the subsoil user is eligible to enter into a special processing agreement.

This agreement, contingent upon negotiation outcomes, may offer investment incentives, including tax benefits.

Moreover, if the volume of initial geological reserves exceeds 100 million tons of oil or 50 billion cubic metres of natural gas, the provisions of the exploration and production contract for such a field must contain conditions for the provision of extracted hydrocarbons for processing enterprises in the territory of Kazakhstan on contractual terms.

Please also see question 2.3.

According to the Precious Metals Law, the National Bank has the primary option to buy locally or internationally refined gold from the mineral owner, necessitating approval from the National Bank before exporting. The National Bank consistently exercises this preference.

Furthermore, subsoil users must seek approval from local refining plants before exporting gold from Kazakhstan for processing abroad.

Simultaneously, authorities can impose temporary restrictions, such as:

• prohibiting the export of specific minerals; or
• imposing high export tariffs.

Specific subsoil use taxes in Kazakhstan include:

• a signature bonus – a one-off fee payable to the state for the subsoil use right. The initial amounts of this tax are determined in the Tax Code. The final amount of the signature bonus must be set out in the subsoil use contract or licence;
• rental fees;
• mineral extraction tax (MET), which is levied on the physical volume of minerals extracted. MET is paid separately at specific rates for each type of extracted mineral, ranging from 0% to 21.06%. MET is calculated based on the taxable volume of redeemed mineral reserves; and
• reimbursement of historical costs – subsoil users holding mineral titles under subsoil use contracts granted before the enactment of the Code on Subsoil and Subsoil Use (‘SSU Code’) must compensate the state for expenses relating to historical geological exploration. The amount of expenses to be compensated by subsoil users is set out in an agreement entered into between the subsoil user and the Committee of Geology. This obligation is generally not applicable to holders of mineral titles under licences granted after the enactment of the SSU Code.

There are no tax incentives provided, but Kazakhstan has investment policies and frameworks in place to encourage and regulate foreign investments. For more investment mechanisms, please see question 9.3.

In order to optimise tax obligations, a subsoil user can conclude an investment agreement with the government and in return, the subsoil user will receive tax and other benefits.

Ordinary investment projects: These include the establishment of new manufacturing facilities and the expansion or renewal of existing facilities, including through public-private partnerships and concession projects.

Advantages include:

• customs duty exemptions on technological equipment and its components and spare parts;
• import value-added tax (VAT) exemptions; and
• government grants.

Investment priority projects: These include:

• the establishment of new manufacturing facilities with a value of at least 2 million minimum calculated indexes (MCI); and
• the expansion and/or renewal of existing manufacturing facilities with a value of at least 5 million.

Advantages include:

• customs duty exemptions;
• import VAT exemptions;
• government grants;
• a 100% corporate income tax reduction on income;
• the application of a 0 co-efficient on land tax for the establishment of new manufacturing facilities for 10 years; and
• the application of a 0 co-efficient on property tax for eight years.

Special investment projects: These are projects operated by:

• members of special economic zones;
• the owners of free warehouses (customs regime); or
• parties to agreements with the government on the industrial assembly of motor vehicles.

Advantages include:

• an exemption from import customs duties; and
• exemptions from VAT when importing goods as part of finished products produced in the territory of a special economic zone or free warehouse.

Investment commitments agreements: Companies may enter into investment commitment agreements with the government if they:

• meet certain criteria, such as being export-oriented and a major tax player; and
• anticipate investing at least 75 million MCI.

Such an agreement grants the benefit of tax stability for 10 years.

The tax law of Kazakhstan is currently evolving, with frequent changes and additions being made.

The most recent changes to the mineral extraction tax, including an increase in the tax rates, were implemented on 1 January 2023. The government is preparing a new draft Tax Code, which could introduce significant changes to Kazakhstan’s taxation system.

Mostly, mining disputes are heard in Kazakhstan’s courts.

Kazakhstan’s court system has three levels:

• Supreme Court: The Supreme Court stands at the top of the judicial hierarchy in Kazakhstan. It serves as the ultimate court of appeal for cases decided by lower courts and in certain types of disputes it also serves as the first court to hear cases. For example, it handles cases that challenge actions or decisions of:
• • the Central Election Commission; and
  • the Central Referendum Commission.
• Regional courts of appeal and the Courts of Appeal of Astana, Almaty and Shymkent cities: Under their organisational structure, judicial panels are constituted to address substantive matters and other legal issues. The courts of appeal are responsible for reviewing decisions issued by the courts of first instance, examining them for both legality and fairness to ensure the integrity of the judicial process.
• The district and equivalent courts: Kazakhstan’s judicial system incorporates specialised district courts with the status of local city and district courts. These specialised courts encompass the following (of relevance to mining companies):
• • Specialised economic courts: These courts preside over disputes involving legal entities or individual entrepreneurs.
  • Specialised administrative courts: These courts handle claims challenging decisions made by state bodies and officials.
  • Administrative offence courts: These courts address cases related to administrative offences.
  • Criminal courts: These courts oversee criminal cases.

The Code on Subsoil and Subsoil Use clearly stipulates which actions and decision of the authorities may be appealed. At the same time, the new Administrative Procedural and Process-Related Code (APPC), enacted on 1 July 2021, regulates the procedures for appeal against any administrative act of a state body.

According to the APPC, administrative procedures and proceedings must be carried out based on uniform principles, among which the following are worthy of particular attention:

• Principle of priority of rights: All doubts, contradictions and ambiguities in the Kazakh legislation on administrative procedures will be interpreted in favour of the participant in the administrative procedure.
• Principle of prohibition of abuse of formal requirements: Administrative bodies and officials are prohibited from:
• • refusing to implement, restricting or denying the rights of a participant in an administrative procedure; or
  • imposing on a participant a duty to comply with requirements that are not established by Kazakh law.
• Protection of the right to trust: The trust of the participant in an administrative procedure in the activities of the administrative body or official is protected by law.

The APPC implies that the subject of an administrative procedure will always have the right:

• to be heard before any decision is made; and
• to appeal a negative decision to a higher authority.

One of the largest disputes in the field of environmental legislation began in 2022 and continues to this day.

In a contentious development, the Atyrau regional department of Kazakhstan’s Ministry of Environmental Protection issued a demand that NCOC, a major energy consortium, pay a substantial fine of KZT 2.3 trillion.

This penalty stems from alleged compliance infractions uncovered during recent inspections. In response, NCOC petitioned the regional administrative court in Atyrau to nullify both the inspection results and the imposed fine.

According to reports from Energy Monitor, a prominent social networking channel in Kazakhstan’s energy sector, NCOC argues that the premature disclosure of inspection findings by the department undermines their legal validity. It maintains that Kazakh law mandates the confidentiality of such findings until all legal avenues for appeal have been exhausted.

The most significant change occurred in June 2018, when the current Code on Subsoil and Subsoil Use (‘SSU Code’) came into effect. This legislative reform substantially improved the approach to subsoil management and the relationship between the state and subsoil users. There have been no significant further changes since. However, within the Kazakhstani community, there are still experts who oppose the reform and attempt to challenge the new regulatory approaches established by the 2018 reform.

Additionally, in his address to the Parliament and the government dated 1 September 2023, the president noticed that it is important to transform the public management of the mining sector in order to:

• enhance the mining reforms introduced by the SSU Code; and
• expand geological and geophysical survey by the government from the current 1.5 million square kilometres (km²) to at least 2.2 million km² by 2026.

Achieving this target may require changes to the SSU Code and other relevant regulatory acts.

Kazakhstan is developing a new Water Code designed to protect and preserve water resources, driven by concerns over water scarcity in Central Asia. The introduction of updated water standards could potentially affect the mining industry.

At present, ongoing reforms as part of the transition to the SSU Code are progressing slowly. Anticipated changes include:

• nationwide access for exploration activities;
• full adoption of online licensing via the Ministry of Industry and Construction’s (MIC) web portal; and
• the enforcement of environmental regulations against polluting entities.

However, legislative revisions are being enacted without active involvement from industry representatives. Recent amendments have retained State Reserve Commission (GKZ) standards beyond 1 January 2024, alongside the CRIRSCO reporting standards introduced in the 2018 reform. Mineral reserves validated according to CRIRSCO standards will undergo additional evaluation by the Geology Committee of the GKZ before inclusion in the unified cadastral of the state subsoil fund for future mining operations. The government has reinstated Soviet-era requirements governing the minimum scope and methods of exploration work, which were previously abolished under the 2018 reform with the adoption of the SSU Code.

In December 2023, the president called for a mechanism to ensure a consistent supply of primary metals for domestic manufacturers. Parliament and the government are actively amending the Industrial Law to go beyond securing primary metal supply.

Proposed amendments potentially include:

• prohibiting raw material exports; and
• mandating all producers to sell locally at competitively set prices.

The definition of ‘raw materials’ remains unclear, subject to future clarification by the Ministry of Industry and Construction through bylaw regulations. Additionally, mechanisms for determining competitive pricing are yet to be detailed.

Producers may apply for export licences contingent upon the fulfilment of obligations to supply raw materials to domestic manufacturing enterprises.

Before starting any business activities in Kazakhstan, it is essential to conduct a thorough assessment of the regulatory policies of the existing legislation and potential future changes. The government is working on the development of:

• the new Construction Code;
• the new Water Code;
• a law on the gas and chemical industry; and
• a new Tax Code.

Please also see question 11.2.