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Thursday, 16 January 2020

Madbouly issues executive regulations for amended Mineral Resources Act

LEGISLATION WATCH- Mineral Resources exec regs issued: Prime Minister Moustafa Madbouly has issued the executive regulations for the amended Mineral Resources Act, cabinet said in a statement. The regs confirm that the changes cap royalty payments at 20% of the value of annual production, and introduce a minimum of 5%. They outline the responsibilities of a newly-established committee that will advise on the royalty rate for each raw material separately, as well as a new authority that will take the power to issue and control licenses away from governorates.

The new committee will meet four times a year to decide on any changes in rates that might come from legislative amendments, resolve mining disputes, and decide which materials are eligible for export. The authority, meanwhile, will act as a supervisory body charged with enforcing the law.

Other important changes: We previously noted that the changes abolish the old 16k sqm area licensing limit, allowing the authority to issue licenses to areas of unlimited size. Mining firms will have to pay 6% of annual production to the home governorate. Unlike the previous legislation where governorates had the power to amend the percentage of production every four years, the amendments place this power in the hands of the prime minister, with governorates now only able to request changes. Licenses can also be renewed for more than one term, and another important new stipulation splits contracts into separate exploration and extraction contracts.

Background: Industry players and top miners have lauded the changes for making Egypt’s mining sector more attractive for investors. The royalty model introduced is in accordance with global standards and is a welcome change from the mandated revenue split between the investor and the Egyptian Mineral Resource Authority (EMRA), top executives of Aton Resources, Thani Stratex, and Resolute Egypt said in a piece they wrote for Enterprise when the Oil Ministry first floated the idea of changing the law. Since then, we have been picking up reports with broadly good things to say about the changes (here, here, and here).

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