Ministry of Miens and Petroleum Legal Directorate

1. Ministry of Miens and PetroleumLegal Directorate SayedZamanHshemi MoMP Legal Director January 2014

2. Vision and Mission • Development of a sound regulatory framework • Developing Ministry procedures and systems for implementation of the new law, • Development of a Coal Law • Promotion of the legislative framework to investors

3. Rationale for a new Legal Frame work The 2009 Mining Law does not supportthe national objective for a self-sustainable Afghanistan • Provides zero guarantees for large-scale investors in exploration and prevents the Government from signing any significant deals such as Hajigak • Resulted in negligible investment in exploration compared to global spending in other countries • Creates major problems for Afghan companies. As a result, most domestic mining is illegal and taxes and royalties are not paid to the Government

4. Guiding principles of 2012 Law • To allow the Government to develop the sector through private investment; Government-run operations allowed • To give the Government flexible legal instruments to maximise the value of Afghanistan’s mineral sector in line with Government strategic objectives and market conditions • To protect the interests of the Government by studying and considering the experience of other relevant countries • To have a law in line with international conventions, so that Afghanistan can compete not only within the region but with countries like Australia and Canada

5. Consultative process • More than 2 years work on improving the 2009 Law • Consultations with a large number of national and international specialists - geologists, mining engineers, mineral economists, mineral lawyers, environmental and social experts • Consulted with IMC • Consulted with local civil society organisations • Consulted with Afghan private sector • Presented to international development partners • Published information on the Ministry website

6. The basics of 2012 Law • No of articles: 116 • Application: reconnaissance, exploration, exploitation, sale and export of minerals • Purposes: • to make proper use of mineral resources in Afghanistan; • to govern and manage all mineral activities; • to support national economic self-sustainability; • to ensure optimal benefits for the nation; • to support sustainable development; • topromote investment and social development.

7. Types of licenses in 2009 Law • 11 types of licenses • Exploration licenses, Ordinary Exploitation Licenses, Small Exploitation Licenses, Medium-scale Exploitation Licenses, Authorizations for Quarry Exploration, Authorizations for Temporary Quarry Exploitation, Authorizations for Permanent Quarry Exploitation, Authorizations for Tailings Exploitation, Authorizations for Artisanal Exploitation, Authorizations for the treatment, Processing, Transformation, transportation or trading of Minerals, and Infrastructure. • Ill-defined requirements, terms and conditions • High administrative burden for Government • Classification of licenses based on $$$ value of investment, which is highly unreliable.

8. Types of licenses in 2012 Law • 5 clearly defined types of licenses, classification based of required area • Reconnaissance: airborne over large areas, no drilling allowed, 2 years non-renewable. The government obtains expensive geological studies for free. • Exploration: for initial 3 years over 250 sq. km., renewable to a total of 9 years. Requirement to return areas to Government after Y3, so that companies are forced to invest fast and not tie up the land. • Exploitation license: - initial term of max. 30 years over 50 sq. km., renewable. • Small scale mining: initial term of max. 10 years over 100 ha, renewable. Designed to encourage growth of domestic mining sector. • Artisanal mining: initial term of 5 years over 1 ha, renewable. Reserved for Afghans only and designed to encourage job creation for the poor.

9. Key institutions and their roles • Cabinet: approves all large scale mining investment agreed through Minerals Contracts • IMC: same composition • Wider range of duties, including: endorsement of all licenses and their management apart from artisanal and small-scale mining; monitoring of any bidding process; facilitating internal Government coordination and recommending policy and regulatory measures to increase Afghanistan’s competitiveness. • NEPA: no mining is allowed without NEPA’s approval. • MoMP– charged with the administration of the Law.

10. Protection of communities • The 2009 is silent on social provisions • The 2012 Law requires of mining companies to agree and sign Community Development Agreements supporting the development and training of communities around mining sites • In addition to the socio-economic benefits, this will be a strong conflict-prevention mechanism

11. Fiscal matters • All issues to do with tax referred to Ministry of Finance • All issues to do with royalty rates, surface rents and other mining fees shall be detailed in forthcoming Regulations, which have to be approved by Cabinet

12. Thank You