The Law Firm of Hazim Al Madani Attorneys and Legal Consultants

Permitting The Issuance Of Mining Licenses For Gold And Precious Metals To Foreign Investors In The Kingdom of Saudi Arabia

The amendments included several different topics aimed at developing investment in the mining sector, giving opportunities to foreign companies to invest in this sector, and reducing the financial compensation imposed by the ministry, in order to increase contribution to the national economy, by enabling investors to benefit from the Kingdom’s natural resources for all the stages of this industry, starting from exploration to mining and the intermediate industries accompanying them, for the purpose of maximizing economic and social returns in a way that contributes to generating ample job opportunities for Saudi cadres, and strengthening the trade balance.

The New Amendments To The Law Included The Following:

  1. The law authorized the Ministry of Energy, Industry and Mineral Resources to establish companies owned by the ministry with the aim of providing technical competencies, financial and modern technical resources, as well as controlling oversight to ensure financial compliance, and achieve optimal exploitation of mineral wealth.
  2. Developing the beneficiary’s journey and employing technologies to serve the sector, by evaluating all requirements for obtaining mining licenses, after verifying the availability of technical sufficiency and financial ability in accordance with Article 11 of the law.
  3. Increasing the percentage of governance in the mining sector, by checking standards and verifying their availability in the best and optimal manner, in accordance with the requirements and conditions of the mining investment law, on the basis of which mining licenses are granted to applicants.
  4. Obligating holders of the exploitation license in the mining sector to provide a financial guarantee for rehabilitation and closure, based on the text of Article 11 of the law.
  5. Allowing the investor to mortgage the licenses granted to him and to change the company’s management after notifying the Ministry and without requiring its permission, in accordance with Article 14 of the law.
  6. Amendments have been received for holders of mining licenses in the mining sector, such as licenses for exploitation, material collection, reconnaissance or exploration, by submitting an environmental study to the area to be invested in for the development of local communities, rehabilitation and closure, bearing in mind that the provisions of this amendment will apply not only to applicants for new licenses, but also for holders of current licenses based on the provisions of Article 27 of the law.
  7. Allowing the issuance of a mining license to exploit Class A minerals in small mines such as gold and precious stones. The state will obtain from the licensee exempt from income tax a financial consideration of (25%) of the net income annually or the equivalent of income tax, whichever is less, with a deduction of the percentage of zakat due from that, and this license is granted to the applicant for a period of 5 years and renewed for another 5 years, and the renewal periods do not exceed 15 years in general, in accordance with Article 55 of the new amendments to the law, knowing that the instructions also apply to other exploitation licenses, whether The license to exploit a raw materials quarry, or a building materials quarry exploitation license, with easing the procedures for issuing mining licenses to small investors, was in accordance with Article 34 of the law.
  8. Establishing a committee by a decision of the Council of Ministers that will serve as a regulative instrument by which their tasks shall be the following:
  • Separating between government agencies with regard to granting mining licenses on state lands.
  • Deciding on the powers of granting licenses to the lands offered for mining investment in the country.
  1. Determining the lands excluded from the application of the new law on them, as well as the lands that require the prior approval issued by the Ministry before granting an exploitation license, or discovering them, or even reserving them for mining investment activities, such as lands occupied by holy, historical and archaeological sites, or those on which cities, streets and railways are built. And pipelines, public roads, or other places where mining investment is not permitted, as well as lands, marine areas, pastures and forests, which are decided to be excluded from the application of the provisions of this law by virtue of a decision issued by the Council of Ministers.
  2. Pricing unpriced minerals that have no fixed price according to the value equal to the value of the mineral or mineral substance and its derivatives that were mentioned in the new amendments in accordance with Article 56 of the law, where pricing is carried out through a committee that is formed and constituted by a decision of the Council of Ministers, knowing that the provisions of this article have previously stipulated, before being amended, that pricing is carried out by a specialized committee to be formed by the Ministry.
  3. The new amendments increase the financial penalties imposed on non-compliant licensees and violators of the provisions and articles of the law and its executive regulations, by a fine of up to (one million riyals), and the confiscation of funds resulting from their mining investment activity, as well as minerals, the license granted to them, and the equipment and machinery used in the activity of mining and its confiscation, in accordance with Article 59 of the new amendments to the law, while the penalty stipulated in accordance with the provisions of the law before its amendment did not exceed an amount of (one hundred thousand riyals), and the confiscation of funds resulting from the activity, as well as the equipment and machinery used in the mining activity.
  4. The new amendments confirmed the prohibition of the licensee from owning, using, selling or disposing of any radioactive materials discovered in the lands where the mining investment activity is practiced. They also required the licensee to inform the Ministry immediately in the event of discovery of such materials in accordance with Article 62 of the law.
  5. Establishing a mining fund at the Ministry of Energy, Industry and Mineral Resources to achieve sustainable financing for mining investment activities, by supporting exploration and exploitation operations, rehabilitating abandoned mines, providing sufficient and required funding for companies specialized in mining investment, and supporting them with all means of support and continuous financing, and training and development of qualified cadres. Specialized in mining activities in the Kingdom.

Accordingly, the desired and hoped-for results from these amendments are to become compatible with the aspirations of the National Industries and Logistics Development Program, in order to transform the Kingdom into a leading industrial power and a global logistical platform in the promising areas of growth in order to achieve the Kingdom’s Vision 2030 by developing legislation and financial empowerment through the establishment of a fund, governance of the mining sector, enhancing transparency and investor confidence, achieving sustainability and preserving the environment, and reducing financial compensation for the purpose of encouraging investors to invest in this sector.

It is expected that these amendments will have a positive impact on the mining sector, which will make it the third pillar in the Saudi industry, and it is expected that it will increase its contribution to the gross domestic product, in addition to increasing job opportunities in the sector, depending on the demand and the required domestic demand, and benefiting from exporting to global markets.

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