Mining Concessions under Large Scale Mining

Overview

Mining concessions for large scale mining undertakings in Pakistan are governed by a comprehensive set of regulations that ensure the orderly, safe, and environmentally responsible extraction of mineral resources. A “Large Scale Mining Undertaking” refers to mining projects involving a capital investment of more than Rs. 300 million and is governed by specific rules under the mining legislation. This article provides detailed information on the application process for mining leases and exploration licenses, particularly focusing on the legal requirements and procedural steps.

Mining Lease

Rule 47: Application for Mining Lease

  1. Eligibility:
    • Only a body corporate formed under the laws of Pakistan can apply for a mining lease.
  2. Application Submission:
    • Applications must be submitted in person to the Licensing Authority or the Director General Mines and Minerals, Punjab, or their representative.
  3. Application Requirements:
    • Company Details: The application must include the company’s name, incorporation and registration details, full names, addresses, and nationalities of directors and officers, and details of any person owning more than 5% of the issued share capital.
    • Topographical and Geological Description: A detailed description of the boundaries of the land area related to the application, including a plan showing its location with reference to coordinates and identifiable physical features.
    • Area Limit: The application should cover an area not exceeding 250 square kilometers.
    • Technical and Financial Resources: Details demonstrating the applicant’s technical and financial resources, including relevant contractual agreements.
    • Feasibility Studies and Operational Plans: Accompanying feasibility studies and detailed plans for the development and operation of the mine, including:
      • The anticipated date to start profitable operations.
      • The capacity of production and scale of operations.
      • Overall recovery of ore and mineral products.
      • Nature of the products.
    • Environmental Impact Assessment (EIA): As per the Environmental Protection Act 1997, including measures for pollution prevention, waste treatment and disposal, land reclamation, protection of water sources, and environmental monitoring.
    • Risk Management: Identification of risks involved in mining and proposals for their control or elimination.
    • Financial Forecasts: Detailed forecasts of capital investment, operating costs, revenues, and sources and extent of financing.
    • Infrastructure Requirements: Expected infrastructure requirements.
    • Lease Period: The period for which the lease is required.
    • Additional Information: Any other documents and information as required by the Licensing Authority.
  4. Application Fee:
    • The application must be accompanied by a fee of Rs. 200,000, credited to the account “CO 3808 Receipts under the Mines and Oil-fields and Mineral Development Act 01 Receipts from rents and royalties, annual fees, charges, fees, application fee, cost of plans, etc.”
  5. Foreign Entities:
    • Applications from aliens or companies incorporated outside Pakistan are subject to Rule 99, which requires such licenses or leases to be granted or assigned to a company incorporated in Pakistan for receiving and working the license or lease.

Exploration License

Rule 24: Application for Exploration Licence

  1. Eligibility:
    • Applications can be made by individuals or companies. For individuals, full personal details are required. For companies, incorporation details, and information about directors and major shareholders must be provided.
  2. Application Requirements:
    • Topographical and Geological Description: A detailed description of the boundaries of the land area related to the application, including a plan showing its location with reference to coordinates and identifiable physical features.
    • Geological Description: Comprehensive geological details of the land area, identifying the potential for mineralization and the specific minerals for which the license is sought.
    • Exploration Program: Details of the proposed exploration operations, estimated expenditure, and timelines.
    • Environmental Impact: Measures to prevent or minimize adverse environmental effects of the proposed exploration operations.
    • Technical and Financial Resources: Details demonstrating the applicant’s technical and financial resources, including relevant contractual agreements.
    • License Period: The period for which the license is required, not exceeding three years.
    • Additional Information: Any other documents as required by the Licensing Authority.
  3. Application Fee:
    • The application must be accompanied by a fee of Rs. 100,000, credited to the account “CO 3808 Receipts under the Mines and Oil-fields and Mineral Development Act 01 Receipts from rents and royalties, annual fees, charges, fees, application fee, cost of plans, etc.”
  4. Foreign Entities:
    • Similar to mining leases, applications from aliens or companies incorporated outside Pakistan must comply with Rule 99, requiring the license to be assigned to a company incorporated in Pakistan.

Mining Concessions under Small Scale Mining

Overview

Mining concessions for small scale mining in Punjab are governed by the Punjab Mining Concession Rules, 2002. These regulations aim to streamline the process for granting mining rights, ensure transparency, and mitigate corruption. This article provides detailed information on the procedures, challenges, and reforms related to small scale mining concessions, particularly focusing on the recent notification dated 22nd February 2023, which addresses significant issues within the sector.

Recent Notification Highlights

The notification from the Mines & Mineral Department of Punjab addresses several critical issues and introduces reforms to improve the granting process of mining concessions under small scale mining. The following key points are highlighted:

  1. Lack of Hefty Capital Investment Requirement:
    • Small scale mining concessions do not generally require substantial capital investment or the establishment of industrial infrastructure. This makes it accessible to smaller entities but also necessitates stringent regulation to prevent misuse.
  2. Pending Applications:
    • Applications for prospecting licenses dating back to 2001 remain undecided, leading to idle areas and loss of potential benefits to the local population and public exchequer. This backlog underscores the need for a more efficient and transparent processing system.
  3. Issues of Corruption and Mismanagement:
    • The principle of “first come, first served” is not being adhered to, which has led to corrupt practices. Furthermore, the process for granting iron ore concessions has been manipulated to avoid competitive bidding, allowing exploitation under the guise of mining similar minerals.
  4. Transparency and Competitive Bidding:
    • To counter these issues, the notification mandates that the following minerals be granted through competitive bidding or sealed tenders instead of the application basis: Argillaceous Clay, Ball Clay, Barytes, Basalt, Bauxite, Bentonite, Brine, Calcite, Celestite, Chalk, China Clay, Coal, Diorite, Dolomite, Fireclay, Fuller Earth, Granite, Gravel, Gypsum, Iron Ore, Lake Salt, Laterite, Limestone, Marble, Ocher, Ordinary Sand, Quartzite, Rock Salt, Sandstone, Shale, Silica Sand, Slate Stone, Tar Sand, Tuff, and Potash Brine, as well as any other mineral mentioned in Schedule 3 of the Punjab Mining Concession Rules, 2002.

Application Process for Small Scale Mining Concessions

The process for obtaining a mining lease or prospecting license under small scale mining involves several steps to ensure proper vetting and compliance with the legal framework:

  1. Application Submission:
    • Applicants must submit their applications in person to the Licensing Authority or Director General Mines and Minerals, Punjab, using the prescribed forms.
  2. Required Information:
    • Applications must include detailed information about the applicant, including:
      • For individuals: Full name, nationality, date of birth, postal and residential address.
      • For companies: Name, incorporation details, information about directors and major shareholders.
    • A topographical and geological description of the land area, including coordinates and identifiable physical features.
    • A comprehensive geological description identifying the potential for mineralization and specific minerals targeted.
  3. Operational and Financial Plans:
    • Detailed exploration and mining plans, including estimated expenditures and timelines.
    • Environmental impact assessments and measures to minimize adverse effects.
    • Proof of technical and financial capability, with relevant contractual agreements if applicable.
  4. Competitive Bidding:
    • The recent notification emphasizes that concessions for specific minerals must be granted through competitive bidding or sealed tenders to enhance transparency and fairness.
  5. Application Fee:
    • The application must be accompanied by a fee, which is credited to a designated government account.
  6. Foreign Entities:
    • Applications from foreign individuals or companies must comply with Rule 99, requiring licenses to be granted to companies incorporated in Pakistan.

Procedure to Grant Leases for Excavation of Minor Minerals

Overview

The process for granting leases for the excavation of minor minerals in Punjab is governed by a transparent and structured procedure aimed at ensuring fair competition and optimal utilization of mineral resources. Minor minerals, including ordinary sand, sandstone, siltstone, slate stone, and gravel, are vital for various construction and industrial activities. This article outlines the detailed procedure for obtaining leases for these minerals through open auction, as stipulated by the Mines & Minerals Department.

Definition of Minor Minerals

Minor minerals encompass a variety of materials commonly used in construction and other industries. These include:

  • Ordinary Sand
  • Sandstone
  • Siltstone
  • Slate Stone
  • Gravel

Additionally, the government may declare other minerals as minor minerals as needed.

Mode of Granting Leases

The primary mode of granting leases for minor minerals is through an open auction process. This ensures transparency and competitive bidding, preventing arbitrary allocation of mineral resources.

Auction Procedure

  1. Auction Committee:
    • The open auction for minor minerals is conducted in the respective districts where the minerals are located.
    • Each auction is overseen by an Auction Committee headed by the Additional District Collector of the respective district.
    • The Assistant Director Mines & Minerals or Deputy Director Mines & Minerals acts as the Secretary of the District Auction Committee.
  2. Lease Duration:
    • The lease for ordinary sand and gravel is granted for a period of two years.
    • The lease for sandstone and slate stone is granted for a period of three years.
  3. Registration for Auction Participation:
    • Individuals interested in obtaining leases for minor minerals must register at least one day before the date of the open auction at the relevant field office.
    • The following documents are required for registration:
      • Attested copy of the Computerized National Identity Card (CNIC).
      • Attested copy of the National Tax Number (NTN).
      • A Call Deposit Receipt (C.D.R.) of Rs. 50,000/- from any scheduled bank in favour of the Director General Mines & Minerals, Punjab, Lahore.
  4. Advertisement and Notification:
    • The schedule of the auction, including full details, is advertised in two leading daily newspapers and published on the Mines & Minerals Department’s website.
    • The auction notice includes the reserve price of each block/zone and other relevant details.
  5. Participation in Auction:
    • Any registered person can participate in the auction as per the published schedule.
    • If an individual is interested in a mineral-bearing area not included in the auction schedule, they can submit an application to the Licensing Authority or the respective field office to include the area in the auction.

Bidding Process and Payment

  1. Bid Submission:
    • The successful bidder for ordinary sand and gravel must pay 25% of the bid amount in the form of a C.D.R. or pay order from any scheduled bank at the fall of the hammer.
    • For sandstone and slate stone, 1/6th of the bid amount must be paid at the fall of the hammer.
  2. Approval and Security Deposit:
    • Upon approval of the bid by the Licensing Authority, the successful bidder must deposit 15% of the bid amount as security. This can be in the form of a C.D.R., Term Deposit Receipt (T.D.R.), or Defense Saving Certificate (D.S.C.).
    • The remaining bid amount is payable in six equal monthly installments.
  3. Default and Consequences:
    • If a successful bidder defaults on an installment payment, they are blacklisted, their security deposit is forfeited, and their lease is cancelled.

Procedure for Granting Leases for Large Scale Mining

Overview

The Government of Punjab’s Directorate General of Mines & Minerals has established a comprehensive procedure for granting leases for large scale mining. This process, governed by the Punjab Mining Concession Rules, 2002, ensures that mining operations are conducted responsibly, transparently, and in compliance with all legal and environmental regulations. This article provides a detailed overview of the application process, including required documentation and legal provisions.

Application Process for Large Scale Mining Lease

1. Submission of Application

Applicants must submit a formal application to the Directorate General Mines & Minerals, Punjab, using the prescribed application form. This form is comprehensive and requires detailed information about the applicant and the proposed mining activities.

A. Particulars of the Applicant

  • Individual Applicants:
    • Name
    • Nationality
    • Date of Birth
    • Residential and Postal Addresses
    • Phone Number and Email
  • Firms:
    • Name of the Company
    • Address and Postal Address
    • Details of Shareholding, including the names, CNICs, nationalities, and shareholdings of partners
  • Private/Public Limited Companies:
    • Name of the Company
    • Postal Address
    • Nature of Business
    • Paid-up and Authorized Capital
    • Net Equity
    • Details of Shareholding for those holding more than 5%
  • Representative Details:
    • Name, Designation, Email Address, Phone Number, and Specimen Signature of the company’s representative for correspondence

B. Payment Details

  • Purpose of Fee
  • Amount (Rs.)
  • Treasury Challan Number
  • Date and Treasury/Bank details

2. Particulars of the Applied for Area

  • Mineral and Concession Type:
    • Specify the mineral for which the mining lease or exploration license is required.
    • Type of Mineral Concession being applied for (e.g., exploration license, mining lease).
  • Proposed Industrial Unit:
    • Proposed Production Capacity
    • Estimated Cost
    • End Products
  • Survey Coordinates:
    • Detailed coordinates of the area to be leased, marked on a map.
  • Total Applied Area:
    • Indicate the total area in acres and square kilometers.
  • Location and District:
    • Provide specific location details, including the district and topographic sheet number.
  • Existing Mining Concessions:
    • List details of any existing mining concessions held under large scale mining, including Lease/License ID, Date of Grant, and Date of Expiry.

3. Required Documents

Applicants must annex the following documents, duly attested, with the application form:

  • Sketch Plan of the applied area (15 copies)
  • CNIC copies for individuals, partners (for firms), and directors (for companies)
  • Original receipted copy of treasury challan
  • Certificate of ownership of immovable property
  • Copy of partnership deed and registration certificate (for firms)
  • Bank statements for the last three years
  • Memorandum and Articles of Association (for companies)
  • Registration certificate with the Securities and Exchange Commission of Pakistan (SECP)
  • Income Tax Returns (latest)
  • Audited financial statements for the last three years
  • Certificate of non-blacklisting by any government department
  • Affidavit in case of assignment
  • Feasibility report
  • Geological map (1:50,000 for exploration license, 1:20,000 with three cross sections for mining lease)
  • Topographic map at a scale of 1:50,000
  • Proposed Environmental Management Plan (Draft Initial Environmental Examination [IEE] or Environmental Impact Assessment [EIA])
  • Details of technical experts engaged along with their profiles
  • Project experience and past performance of the company
  • Base business case of the project

Legal Provisions

The application form is guided by several key legal provisions from the Punjab Mining Concession Rules, 2002:

  • Rule 187 (1): Grants the power to issue this application procedure.
  • Rule 185: Addresses the appeal process for disputes related to the application or lease conditions.
  • Declaration and Undertaking: Applicants must declare the accuracy of the information provided and undertake to abstain from activities affecting Pakistan’s sovereignty or security. Any violation may lead to the cancellation of the license/lease.

Procedure for Granting Prospecting Licenses and Mining Leases for Large Scale Mining

Overview

The Government of Punjab, through the Directorate General of Mines and Minerals, provides a structured application process for obtaining prospecting licenses and mining leases for large scale mining. This process, governed by the Punjab Mining Concession Rules, 2002, ensures transparency, legal compliance, and responsible mining practices. This article details the application procedure, required documentation, and legal provisions contained in the application form.

Application Process for Prospecting License or Mining Lease

1. Submission of Application

Applicants must submit a formal application to the Directorate General Mines & Minerals, Punjab, using the prescribed application form. The application must be comprehensive, including detailed information about the applicant and the proposed mining activities.

A. Particulars of the Applicant

  • Individual Applicants:
    • Name: Full name of the applicant.
    • Address: Residential and postal address.
    • Nationality: Nationality of the applicant.
    • NIC Number: National Identity Card number with an attested photocopy.
    • Occupation: Occupation of the applicant.
    • Financial Capability: Documentary evidence of financial capability.
  • Firms:
    • Name of Partners: Names, NIC numbers, nationalities, and shareholding percentages of all partners.
    • Registered Address: Official address of the firm.
    • Financial Capability: Documentary evidence of financial capability.
    • Documents: Attested copies of NICs of partners, registration certificate, and authenticated copy of the partnership deed.
  • Private/Public Limited Companies:
    • Principal Place of Business: Address of the principal place of business.
    • Nature of Business: Description of the business nature.
    • Capital: Paid-up and authorized capital.
    • Directors: Names, NIC numbers, nationalities, and shareholding percentages of all directors.
    • Documents: Authenticated copies of the Memorandum and Articles of Association, a list of all shareholders showing the extent of shareholding, and attested copies of NICs of the directors.

B. Particulars of the Applied Area

  • Mineral and Concession Type:
    • The specific mineral for which the prospecting license or mining lease is required.
    • Title of the mining concession.
    • The period for which the license/lease is required.
  • Size and Location:
    • Detailed description of the area, including size and location, with reference to the Survey of Pakistan map.
  • Existing Mining Concessions:
    • Details of any existing mining concessions held in Punjab.
  • Technical Experts:
    • Names and qualifications of technical experts or advisers engaged by the applicant.
  • Foreign Companies:
    • If the application is by a company incorporated outside Pakistan, full particulars of the company to be incorporated in Pakistan must be provided, including similar details as specified for local companies and technical experts.

C. Payment Details

  • Fees:
    • Application fee, cost of plan, and record examination fee (if applicable).
    • Details of the treasury challan, including amount, T.C. number, date, and treasury/bank details.

D. Additional Documentation

Applicants must annex the following documents with the application form:

  • Sketch plan of the applied area (15 copies).
  • CNIC copies for individuals, partners (for firms), and directors (for companies).
  • Original receipted copy of the treasury challan.
  • Certificate of ownership of immovable property.
  • Partnership deed and registration certificate (for firms).
  • Bank statements for the last three years.
  • Memorandum and Articles of Association (for companies).
  • Registration certificate with the Securities and Exchange Commission of Pakistan (SECP).
  • Income tax returns (latest).
  • Audited financial statements for the last three years.
  • Certificate of non-blacklisting by any government department.
  • Affidavit in case of assignment.
  • Feasibility report.
  • Geological map (1:50,000 for exploration license, 1:20,000 with three cross-sections for mining lease).
  • Topographic map at a scale of 1:50,000.
  • Proposed Environmental Management Plan (Draft Initial Environmental Examination [IEE] or Environmental Impact Assessment [EIA]).
  • Details of technical experts and their profiles.
  • Project experience and past performance of the company.
  • Base business case of the project.

E. Special Remarks and Assignments

  • Any special remarks or additional information that the applicant deems relevant.
  • In case of assignment of the mining concession, signatures and thumb impressions of both the assignor and assignee in the presence of an officer.

Legal Provisions

The application form and the associated process are guided by several key legal provisions from the Punjab Mining Concession Rules, 2002:

  • Rule 95 (1): Governs the requirement for submitting an application for a prospecting license or mining lease.
  • Rule 185: Provides the appeal process for disputes related to the application or lease conditions.
  • Declaration and Undertaking: Applicants must declare the accuracy of the provided information and undertake to abstain from activities affecting Pakistan’s sovereignty or security. Any violation may lead to the cancellation of the license/lease.

    Frequently Asked Questions about Mining Concessions

    What are Minor and Major minerals?

    Minor minerals include materials such as sand, gravel, sandstone, and siltstone. These are typically used for construction and are less complex in terms of extraction and processing compared to major minerals. Major minerals, on the other hand, encompass resources like coal, iron ore, gypsum, limestone, and bauxite. These minerals require significant investment and infrastructure for extraction and are crucial for various industrial processes.

    What are the responsibilities of the Licensing Authority?

    The Licensing Authority plays a critical role in the regulation and management of mining concessions. Their responsibilities include:

    • Granting and Regulating Concessions: Issuing licenses and leases for mining activities and ensuring compliance with legal and regulatory standards.
    • Periodic Monitoring: Conducting regular inspections and assessments of mining operations through field offices to ensure compliance with environmental and operational standards.
    • Litigation Defence: Representing the government in legal disputes in the High Court and Apex Court to protect governmental interests.
    • Auction Oversight: Monitoring the activities of auction committees that grant mining concessions and making decisions on bids based on the potential of the mining areas.

    What is the difference between Large Scale Mining and Small Scale Mining?

    Large scale mining refers to substantial mining projects, typically involving foreign investors or local entrepreneurs, with an investment of PKR 300 million or more. These projects often require significant infrastructure, advanced technology, and substantial financial resources. Small scale mining, however, involves projects with investments less than PKR 300 million. These projects are generally simpler, with less extensive infrastructure and investment requirements.

    What is the mode of grant of surface minerals under Small Scale Mining?

    Surface minerals such as silica sand, fireclay, and bentonite are granted through an open auction process. This process involves publicizing the auction in the press to ensure transparency and fair competition. Leases granted through this process are typically for a period of five years and are renewable for additional five-year terms based on the satisfactory performance of the concessionaires.

    What is Dead Rent?

    Dead rent is a fixed payment that a lessee must pay on a mining lease. It ensures a minimum payment to the government irrespective of the production levels. If the royalty (based on mineral extraction) exceeds the dead rent, the higher amount is payable. Essentially, the lessee pays either the royalty or the dead rent, whichever is higher.

    What is Royalty?

    Royalty is a non-tax receipt paid by the lessee or licensee based on the quantity of minerals dispatched from the leased or licensed area. The rates for royalty are specified under rules 65, 66, and 141 of the Punjab Mining Concession Rules, 2002, and are periodically notified by the government. This ensures that the government receives a fair share of the revenues generated from the extraction of its mineral resources.

    What is Surface Rent?

    Surface rent is the payment made by the lessee or licensee for the use of land that belongs to a private individual. This rent compensates the landowner for the use of their land for mining activities, ensuring that their property rights are respected and remunerated.

    For more detailed information or assistance with mining concessions, please consult Josh and Mak International.

By The Josh and Mak Team

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