Mining Cadastre & Licensing


9. Examples from practice

The examples below describe the evolution of the mining sector in countries where the above principles have been successfully implemented. Although the licensing methodology is slightly different from one country to other, in all the cases the granting is based on "first come, first served principle" as the standard principle. Although there are some exceptions for tender bids, the granted exploration rights are exclusive, the cadastres are open for public consultation and the risks for the transition from exploration to mining have been decreased or even totally removed.

 


 

 

Peru

The evolution of the Peruvian mining sector has been 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. But this automatic transition still does not confer the right to start mining operations without approval of exploitation and related environmental and social plans. Figure 10 shows the immediate impact in exploration investments expressed in millions of US $.

This granting methodology has been extremely attractive for the large scale foreign investment but also medium / small-scale local investments. Even in recent years, when exploration investments decreased sharply around the world due to the economic crisis and the low prices for minerals, investments in Peru have been continued to grow in contrast to global trends.  

 

Figures 11, 12 and 13 show respectively the more recent mining investments in millions of US $, the incomes produced by the mining sector taxes expressed in millions of soles and the employment (number of posts) generated by mining activities.

Figure 12Figure 13

 

 

 

 
 
 
 
 

Argentina

Historically, Argentina’s mining sector has suffered from lack of development, mainly as a consequence of inadequate institutional organization and an obsolete legal framework. Furthermore, the political organization of the country also created obstacles because Argentina is a federal republic, composed of 23 provinces, each of which has its own constitution, ownership of its mineral resources, mining regulations, mineral rights granting procedures, and taxation systems. Under such conditions, mining investments were highly risky because of the political and regulatory heterogeneity and uncertainty (for example, provincial governments had the right to modify their taxation systems at any moment and granting procedures were complex and lengthy), and consequently the security of tenure was low.

In 1993 Argentina’s 23 provinces agreed on a federal pact for the mining sector redefining the role of the state in the mining sector, introducing guarantees for fiscal stability and establishing uniform cadastral rules to guarantee security of tenure. The results of this new policy and technical improvements have generated a sharp increase in the number of foreign companies operating in the country, the development of several world-class deposits and a corresponding increase in investments into the billions of dollars and a proportional increase in exports. Mining activity has dramatically improved the economic situation in some traditionally less developed areas.

 

 

 

1992

2013

PRODUCTION VALUE (US $)

434.000.000

5.960.000.000

EXPORT VALUE (US $)

16.000.000

5.267.000.000

FOREIGN COMPANIES

4

157

EXPLORATION AREAS (Km2)

70.000

183.000

DRILLED METERS FOR EXPLORATION

32.000

320.000

Table 2

Figure 14 and Table 2 show the evolution of the mining sector in Argentina during the two last decades.  In the early 1990s, mining activity in Argentina was restricted from small to medium-size exploitations for borax, uranium, tin, and silver. The production of building materials around the most important urban centres, such as Buenos Aires or Córdoba, represented the bulk of the sector outputs. Today, the Argentinean mining sector is well developed and diversified, contributing significantly to the national economy and, in some provinces, representing the main source of income. This remarkable growth in the mining sector is due to the modernisation of the legal and institutional frameworks. Implementation of the new cadastre, which increased security of tenure, represented the cornerstone for the new regulatory and institutional setup; its contribution to attracting and stimulating investment has been critical.

Democratic Republic of Congo

The Democratic Republic of Congo (DRC) has an enormous mining potential, as evidenced by its position in the history of metals production at the global level. Together with Zambia, the DRC is home to the famous “Copper Belt,” and the country was one of the world’s largest copper producers until the 1970s. Mainly due to conflicts and ineffective sector and investment policies, however, mining production declined sharply during the latter part of the 20th century. However, the country has a tremendous potential, not only for copper, but also for gold, diamonds, base metals, and other minerals and even during the civil wars, a few companies still developed exploration projects in spite of the social and political problems, the lack of clear and transparent procedures for granting licences, and the reduced the security of tenure.

The reform of the mining sector began with the enactment of a new Mineral Law in 2002, which introduced the conceptual basis for a transparent licensing methodology and implementation of a new, computerised Mining Title Registry and Cadastre Service. The implemented reforms immediately produced a positive impact, with an increase in security of tenure. The fact that they coincided with the end of a civil war also helped. Figure 15 shows the evolution of cadastral activity (number of applications for new titles per year) since 1990 and clearly illustrates the immediate positive effects of a combination of socio-political normalisation and cadastre implementation.

 

Madagascar

In the late 1990s, the main mining activity in Madagascar was artisanal, with a few small- to medium-scale operations, all of which had a low impact on the national economy. National institutions were not equipped to deal with large-scale mining; the state needed to adapt to the role required in a developed mining sector. The cadastral activity and the methodology followed for granting mineral rights licences were negatively affected by the shortcomings in the legal system. The enacted legal framework allowed the registration of overlapping applications (with the government having the right to later choose the “appropriate” titleholder), and cadastral files and maps were kept secret from the public. As a result, the granting procedures were highly discretionary, the security of tenure was very low, and the investments were very risky. Thus, despite the favourable geology of the country, investments in exploration were very low.

The reform of the mining sector began with the enactment of a new mining law in 1999, followed immediately by implementation of a new cadastre and new licensing rules, on a first-come, first-served basis with a system of progressive annual surface rental fees. Later, the 2005 amendment to the mining law introduced the option to auction available areas with existing information on mineral resources or reserves. The auctioning process was managed by the cadastre office.

The cadastre was created as an external entity, reporting directly to the minister and economically independent from the ministry budget. The Madagascar Mining Cadastre Bureau is a good example of effective organization, adequate decentralisation, and sustainability. It was created as a decentralised entity, with seven offices (one central office with six regional offices) that were integrated into an autonomous agency (“public company”). Since its creation in 2000, the Madagascar Cadastre, empowered with the capacity to manage its own income, has demonstrated its sustainability by generating enough revenue to hire qualified staff required for the job and to properly develop its cadastral responsibilities. Furthermore, the Madagascar Cadastre demonstrated its functional competence by eliminating cadastral conflicts and with the support of a computerised system, facilitating data management and data exchange between central and regional offices. The opening of the cadastral files to public consultation and the application of objective and transparent cadastral procedures have increased the security of tenure and the attractiveness for investment. This change is clearly reflected in the increase of the number of cadastral activities (granted licenses per year, see Figure 16.  

 

 

 

Unfortunately, this favourable evolution was thwarted by the "coup d'état" that took place in 2009. Since that year the Madagascar mineral rights cadastre has remained closed to receive applications for new licences. In spite of that, investments still were growing (see Figure 17, expressed in billions of US $) as consequence of launching in 2008 two world-class mining projects that were not interrupted.

Additionally, the Madagascar Cadastre has demonstrated its sustainability through expansion (three new decentralised offices opened in 2008) and modernisation of its computing equipment with its own financial sources and without external support.