2. Key issues for governments
The legal basis for management of a country’s mineral resources typically operates on three levels:
General principles are established in a country’s constitution;
Sectoral rules are prescribed in a specific law approved by parliament. Typically, this includes details of the state’s role, security of title, freedom to operate on a commercial basis, access to mineral resources, requirements relating to social and environmental protection, and fiscal terms. The following issues relating to licencing should ideally be detailed and prescribed in the law:
The exclusivity of mineral rights (licences and leases);
Objective and non-discretionary criteria to evaluate applications;
Security of tenure, especially in the transition from exploration to mining; and
Geometric and cartographic rules for the delimitation and positioning of mineral rights.
Provisions that may need periodic adjustments (such as technical requirements, administrative procedures, and administrative fees) are typically set out in regulations or decrees.
See the Extractives Hub topic Mining Legislation and Regulations for more detail on these elements of the legislative framework, and how they work together to create a robust governance framework.
Security of tenure
Security of tenure is defined as the legal protection afforded to tenants, reinforcing the the legal right to continue living in or using a building, land, etc. that is rented from the owner: the legal right to continue living in or using a building, land, etc. that is rented from the ownerlegal right to continue using a rented or leased right or property.
Mining investments are risky; only one out of every 1,000 exploration projects is likely to be successful. Security of tenure is therefore particularly important in mineral rights.
In most countries, mineral rights are divided into exploration licences and mining leases. Exploration licences give holders the right to explore and evaluate the economic exploitation of any mineral resource that potentially exist within the granted area. If an economic resource is confirmed, the exploration licence may be converted into a mining licence. It is during this transition that risks may arise.
Addressing security of tenure is essential because it is difficult to attract investments for mineral exploration if there is a risk that the discoverer of ore deposits will not receive exploitation rights and will thus not recover the capital invested in exploration. For this reason, one of the fundamental priorities for investors is to be guaranteed access to exploit any discovered minerals (“discoverer rights”). This is normally provided through two principles which should be clearly established in the legal and regulatory framework:
Granting overlapping licences
In some countries, holders can obtain overlapping exploration licences, with each licence valid for a different mineral substance or group of substances. The rationale for this practice is to promote simultaneous exploration for different types of minerals. In practice, it can present serious difficulties, because two or more minerals are frequently present in the same deposit or hosted in the same rock, making separate exploitation impossible.
For this reason, in countries where an overlap is allowed in exploration licences, it is normally prohibited for mining licences. Only the first holder (from among several overlapped licences) asking for the transformation of a licence from exploration to mining has the right to be granted a mining licence. This approach makes exploration riskier for the titleholders of overlapping leases, because the basic principles of discoverer rights are not respected, thus affecting security of tenure.
In addition, from a technical point of view, it is unlikely that overlapping licences for different mineral types encourage diversified and wider exploration. Modern exploration techniques can detect many types of ore. However, these are expensive and are unlikely to be applied unless the holder has a guarantee of access to exploitation rights.
Exploitation/mining rights should be given for a sufficiently long period of time and should be able to be renewed until termination of economic reserves of the mineral. In general, mining rights are granted for periods of up to 25–50 years and are renewable one or several times. The termination of a mining right at the end of an arbitrary period may have unintended negative consequences, discouraging reinvestment and forcing mine closure even when a deposit can be economically exploited. For this reason, some countries do not have terms for mining rights; they last for as long as the holder continues to comply with the applicable requirements.
Reinforcing security of tenure
Given the importance of security of tenure, some governments take steps to reinforce this right, with a view to increasing sector attractiveness for investors. Regulatory steps taken to achieve this have been:
The case of Peru: Providing security of tenure to investors
The evolution of the Peruvian mining sector has been among the most impressive in Latin America, achieving two decades with continuous growth since the implementation of the new legal regime and new computerised cadastre in 1993. By granting a single licence for both exploration and exploitation, Peru provides perhaps the greatest security for holders under its single concession system, which avoids the transformation procedure from the exploration licence to the mining licence and absolutely guarantees the rights of the discoverer.
Today, Peru produces over 2.3 million tonnes of copper, and the GDP contribution of the mineral sector has increased from less than two percent in 1993 to over six percent today.
It should be noted, however, that this automatic transition does not confer the right to start mining operations without approval and submission and approval of related environmental and social plans.
To view Peru’s policy and legislation and for additional data and country analysis, see the Extractive Hub’s country information section.
A basic principle applied in successful mining economies has been the development of a strong institutional framework. A key factor is the need for institutional separation between administrative responsibility for granting mineral licenses, the control of mining activity, and the generation of geological infrastructure. These functions are complementary, but practical experience shows that the system is more efficient and the risk lower for the investor if they are undertaken by separate entities.
To address these challenges, different governments around the world have adopted a variety of organisational solutions to administer mineral rights cadastres:
In some countries, the cadastre agency is an independent department inside the ministry or state institution responsible for the mining sector. In others, the cadastre is an agency external to the ministry but reporting directly to the Minister. In each of these cases, the granting regime is defined as “administrative.”
In other countries, the desire to ensure maximum institutional transparency and to avoid the concentration of decision-making power inside a single ministry has led to a split in cadastral management between two different ministries. For example, procedures for the granting of mineral rights could be developed and overseen by both the Ministries of Mines and Justice. Such regimes are defined as “adjudicative.”
However, the effectiveness of a cadastre depends less on following predefined organisational models, than on respect for the institutional separation between administrative functions. Regardless of the type of organisational model adopted, it is important to ensure that each institution’s role and responsibilities are clearly defined in an operational framework that is adapted to the local context. However, some basic prerequisites should be considered:
To support coordination between the cadastre and other agencies focused on geological infrastructure, control and inspectorate or environmental monitoring, the cadastre should be linked to the ministry responsible for the management of the mining sector;
To avoid technical interference and unnecessary operational interactions, the cadastre should be hierarchically independent from the Geological Survey and mining inspectorate or environmental monitoring agencies, regardless of the need for coordination; and
To guarantee objectivity, transparency, equity, and fairness in decisions affecting the granting of mineral rights and avoid conflict of interest, the cadastre should be independent from any state entity authorised to hold, explore, develop, operate, or dispose of mining properties.
The illustration below shows a commonly adopted scheme.
For more information, see th
Mandate and functions of a mineral cadastre
As the agency responsible for the administration of mineral rights, the mineral rights cadastre is typically responsible for:
Receiving applications for new licences, as well as requests for renewal, extension, reduction, transfer, and abandonment, and initiating procedures for the revocation, cancellation, or expiration of licences.
Evaluating applications and making decisions to grant or refuse them.
Liaising between the state and license holders or applicants on any question related to mineral rights;
Chronologically recording new applications in an official registry;
Producing updated cadastral maps on which existing minerals rights, pending applications, and areas restricted for mining activities are correctly plotted;
Verifying that licences do not overlap;
Keeping cadastral maps and registries open and accessible for public consultation;
Acting as a technical referee in disputes between holders about the location of areas granted;
Organisation and execution of tender bids for granting, when required; and
Collecting administrative fees and annual rental fees.
Consistent with these functions and duties and the need for institutional separation, the mineral rights cadastre should not:
Take care of geological and metallogenic information.
Develop control activities related to the technical aspects of exploitation, ore processing or production.
Monitor health, safety or environmental impacts.
Be responsible for setting and collecting royalty payments.
Evaluate technical, production or environmental reports.
For more information on the recommended structure and function of mineral inspection regimes, see the relevant topic information.
The relationship between mineral rights cadastre and other cadastres
In addition to the mineral rights cadastre, countries may have other cadastres managing different types of land-use. These include hydrocarbon rights (oil and gas), land cadastres, and forestry concessions. In many countries, there is insufficient clarity as to how different cadastre types should be interacting with one another.
From a government perspective, it is generally advisable that different cadastres exchange information. Today, this is easily achieved through Geographic Information Systems (GIS) and data transfer through the internet. This allows for complete and multi-sectoral information on land-use and facilitates the process of land-use planning.
However, data and information exchange should not interfere in the functioning of each cadastre. In many countries. mineral, oil and gas rights are independent from surface or land ownership rights. This implies that the mineral rights cadastre does not consider land-use and land ownership as preconditions for the granting of mineral rights. Clearly, access to land for exploration or mining activities will not take place without consent of the landowner, but such consent relates only to access, not to the actual granting of the right. This is a generally, though not universally, accepted principle. In some places, such as several states in the United States, mineral rights belong to the landowner.
Normally, similar arrangements apply to both solid minerals and fluid hydrocarbons. Solid hydrocarbons such as coal or bitumen schist are generally included in mineral legislation, because the exploitation techniques for these products are similar to those of other minerals. On the other hand, non-solid hydrocarbons (oil and gas) are generally regulated under a separate regime, with different rules for the granting of rights. As a result, oil and gas are normally excluded from the mineral rights cadastre, and both types of licences can overlap.
In some instances, such as Mauritania, countries have formed a single directorate to host both minerals and hydrocarbon cadastres. The two organisations work as separate units and follow different rules. However, they share common infrastructure such as topographic and geodetic information.