Published on : 05 Nov 2017
1. What are the recent developments in the exploration and extraction of mineral resources in the United Arab Emirates?
Response: Mineral resources in the United Arab Emirates (the UAE) are separated into three essential classifications: rocks; sands and soil; and metals. The exploration and exploitation of minerals are only confined to rocks and sands. Whereby, rocks are utilized for construction whereas, limestone, sand, marl, gypsum are utilized to manufacture cement.
The mining sector in UAE has turned out to be a standout amongst the most promising production sectors such as oil fields. It isn’t surprising that in coming future minerals of the UAE will pull potential investors around the globe.
UAE has a long list of minerals ranging from copper mines, gypsum to the extraction of metals and valuable stones. The main minerals that are explored and extracted in the country are:
- Raw steel.
- dead-burned dolomite; and
- quicklime and hydrated lime;
- hydraulic Cement;
The Emirate of Fujaira h is bestowed with minerals and the mining business or related ventures are major wellsprings of income and are the spine of Fujairah economy. In 2014 the total production of minerals in the emirate was about 102 million Mt. tons. Out of which 80% was used in the country and rest 20% was exported to the neighboring countries such as India, Bahrain, Qatar, and Kuwait.
Organizations around the globe have effectively invested in the mining sector in UAE. Generally, Indian companies mainly invest in the exploration and exploitation of chrome and precious metals. Further, Dubai Gold center a company incorporated in Dubai Multi Commodity Centre (the DMCC) has traded more than US$70 billion of gold in 2013-14, which is almost twice the amount traded in 2011-12.
Dubai Diamond Exchange (the DDE), a subsidiary of DMCC and a leading diamond trader worldwide. In 2016, DDE imported $12.4 billion worth rough diamonds and $13.2 billion was re-exported. In 2006, DDE was made the sole gateway for imports and exports polished diamonds in the UAE.
Aluminium smelting is increasing in UAE with prospects of building up the world’s biggest aluminum smelter in Abu Dhabi and Dubai. But the core of the UAE’s aluminum ventures remains solely inside its own borders. Emirates Global Aluminium PJSC is the major producers of aluminum in the country. It is an aluminum conglomerate with interests in alumina/bauxite and essential aluminum smelting. The company has produced 2.5 million tonnes of hot metal in 2015. However, the most noteworthy investment is based on a Joint Development Agreement (the JDA) between Mubadala, owned by Abu Dhabi Government and DubaL with a capacity of 1.2 million tonnes a year.
In 2014, Ministry of Energy participated in the Middle East and North Africa (the MENA) mining conference, one of the largest conference in the Middle East and North Africa. The conference aimed at emphasizing the importance of mining sector in economic development and effective ways to provide sufficient investment climate in lieu of supporting the exploitation and exploration of mineral resources in the Middle East and North Africa.
On 12th April 2017, Fujairah Natural Resources Corporation representing UAE participated in the 23rd meeting of Advisory Committee of Mineral resources Sector at Arab Industrial Development and Mining Organization (the AIDMO). During the session, the participants discussed the arrangements for 5th International forum for industrial rocks and mining, organizational activities os Mineral Resources Department as a part of 14th International Arab Mineral Resources Conference held at Saudi Arabia. The participants further discussed the 15th International Arab Mineral Resources Conference to held in 2018.
2. What is the regulatory framework for the exploration and extraction of mineral resources in UAE?
Regulatory Framework for Mining Industry in UAE
UAE federal mining law is still in the planning phase. His Highness Sheikh Mohammad Al Maktoum has confirmed that the law will regulate the exploitation and exploration of minerals and the investments around the globe in the mineral industry.
However, companies incorporated in free zones are regulated by the laws and regulations promulgated by the free zone authority. For example, DMCC has framed DMCC rules for Risk-Based Due Diligence in the Gold and Precious metals supply chain (DMCC rules for RBD-GPM).
Pursuant to Article 23 of the UAE Federal Constitution, the natural resources and wealth in each emirate are considered as a public property of the Emirate and the society should be responsible for the protection and proper exploitation of such natural resources and wealth. The ministry mainly focuses on sustainable development in petroleum and mineral resources. The Ministry was formed pursuant to Federal Decree Number 3 of 2004 (the Ministry of Energy Decree) by a merger between Ministry of Petroleum and Mineral Resources and Ministry of Electricity and Water (the FEWA)
However, at emirates level, DMCC authority being the control authority regulates the companies incorporated in DMCC and undertaking non-financial activities which include specifically jewelry, precious metals, stones, and traders.
In the Emirate of Fujairah, Fujairah National Corporation Resources (the FNRC) was established in 2009 in the emirate of Fujairah. The corporation is concerned with the policies with regards to natural resources in accordance with the requirements set out in Economic and Social Development Programs. FNRC is also concerned with national and international investments in the mining sector.
3. How are rights to the mineral resources held, and who holds those rights? Are they held by the property holder? Are mineral rights severable from the general ownership of the property? Must they be registered? Also, clarify what proportion of interests is privately owned and state-owned?
Response: The rights of mineral resources are held by the UAE government which can exploit them or assign their exploitation to third parties, subject to prior approval. Consequently, exploitation of such resources requires permits from UAE Ministry of Energy or other relevant ministries prior to exploration.
4. What are the key features of the leases, licenses or concessions that are issued under the regulatory regime? Can these rights be leased by the right-holder?
Lease/Licence/Concession Term - Is there a time limit on the permissible length of these rights? How long is a typical lease, license or concession period? How can the period be extended?
The concession agreements for exploration of minerals are private arrangements between parties and the UAE government thus, are not shared with or disclosed in the public domain.
The parties agreeing to commercial terms mentioned in the concession agreement pay a license fee or sharing bonus. Additionally, the host government also seek royalties depending upon the gross revenue generated from net income, both of which are based on the amount of production and price of goods sold.
Concession holder will be held liable if there is any deviation from what is mentioned in the concession agreement. Companies must strictly adhere to the concession terms and apart from that must adhere to the following:
- A company must obtain a license prior to establishing a project and must according to Article 4 of Federal Law Number 24 of 1999, obtain environmental impact assessment (the EIA).
- In accordance with Article 71 of Federal Law Number 24 of 1999, any person causing damage, intentionally or by way of negligence will be held liable for all the cost or any compensation thereof.
Restrictions - Are there any restrictions on obtaining these rights, for example relating to age, bankruptcy or on foreign applicants?
The terms of concession agreements are a private arrangement between parties thus, the restrictions are not out in the public domain. Generally, the most common restrictions are on equity participation, foreign ownership, control on the project company.
5. How are such leases, licenses or concessions awarded?
Concessions are granted by the government with bid participants upon signing a private concession agreement.
(A) What are the main ongoing requirements for environmental protection? Please include the principal laws, requirements, and policies with respect to mining in the UAE. Please also consider third party rights and the general requirements for closure and remediation of a mining project.
Response: The Federal Law Number 24 of 1999 for the Protection and Development of the Environment (the Environment Law) which aims at protecting and conserving the quality and natural balance of the environment. The Federal Environment Agency(the FEA) is the regulatory authority established to facilitate proper functioning of the law.
The law does not specifically mention any provision with respect to mining, however, it gives the power to FEA to overlook all the activities which contribute directly or indirectly in damaging, disturbing the natural resources or soil.
Further, the Federal Natural Resources Corporation of Fujairah (the FNRC) is committed to sustainable development of mining industry which is in line with the UAE government initiative “green growth”. FNRC has recently launched ‘Labaik’ service which includes the country’s strategic plan of 2021 and Fujairah master plan of 2040.
7. Health and Safety Factors Relevant to Mining Industry in UAE
(A) What are the main ongoing requirements for compliance with health and safety regulations? Please clarify the principal laws, requirements, and policies with respect to mining in UAE.
Response: The UAE ministry has passed several ministerial resolutions with regards to health and safety in hazardous areas as follows:
The Ministerial Resolution Number 4/1 for 1981 on defining works that are hazardous or in which it is permissible to reduce the legally decided working hours, states that workers will not be made to work for more than seven hours if they work in mines and quarries and other hazardous industries.
The Ministerial Resolution 5/1 for 1981 strictly prohibits minors under the age of seventeen to work in mines and quarries or other excavation works.
The Ministerial Resolution 6/1 for 1981 restricts to employ women to work in mines and quarries and other related industries.
The Ministerial Resolution 37/2 for 1982 regarding the level of medical attention, mandates the employer to provide proper medical facilities to employees working in hazardous industries.
The Ministerial Resolution 32 for 1982 on determining prevention means and measures to protect workers from work-related hazards, mandates the employer to provide suitable means for protection to protect workers from hazardous occupational diseases that can happen during working hours.
8. Foreign Ownership - Are there any restrictions concerning the foreign investment in and ownership of companies engaged in the exploration and extraction of mineral resources?
Response: The foreign owner can only hold 49% percent of shareholding in a mining company incorporated in the mainland, however, a company incorporated in the free zone can be held by foreign owner without any capping to the share percentage.
9. Processing and Sale of Mineral Resources in UAE - Are there any restrictions or limitations on the processing of extracted mineral resources? Please also state whether there are restrictions or limitations on the import of equipment, machinery or services required in connection with mining activities in UAE.
Response: At the national level there is no specific law which restricts the extraction of minerals resources, however, at emirates level, DMCC has issued DMCC rules for Risk-Based Due Diligence in the Gold and Precious Metals Supply Chain (the DMCC rules for RBD-GPM). The rules do not specifically impose any restrictions and limitation with regards to extraction of gold and precious metals, whereas, it forces accredited members to undertake on-site visits and to maintain proper records on mine activities.
10. Are there any restrictions or limitations on the sale, export or import of extracted or processed minerals in UAE?
Response: UAE does not impose any restrictions or limitations on the sale, export or import of extracted minerals, however, there are certain goods banned in the country such as goods from boycotted countries or goods from Israeli origin.
Further companies incorporated in DMCC must take prior permission from the regulatory authority while importing precious metals such as pearls, diamonds, or rough diamonds.
11. Taxation in UAE - What payments, such as taxes or royalties, are payable by interest holders to the government?
Response: Interest holders do not pay any taxes or royalties to the government.
12. Does the government derive any other economic benefits from the exploration and extraction of the mineral resources? Please include details on how tax issues apply to joint-venture arrangements.
Response: There are no other pertinent and/or direct economic advantages to the government from exploration and extraction of mineral resources.
13. What taxes and duties apply on the import and export of mineral resources? Please list the main taxes and duties, and state whether there are any tax advantages or incentives available to private parties engaged in mining activities.
Response: Cross-border transactions are not explicitly controlled. The Customs Bureau in each emirate (city) actualizes control as provided by Federal Customs Authority and applies customs laws mentioned under GCC customs union agreement of 2003 which provides:
- 5% customs in GCC for imports on CIF (Cost, Freight, and insurance);
- free zones are exempted for import duty;
- no export duty in UAE;
- single entry custom duty for items imported in UAE or any other GCC and are exported to other GCC.
14. Reform - Are there any plans for changes to the legal and regulatory framework?
Response: As mentioned above, the regulatory framework for the mining industry is still at a development stage, the UAE Ministry of Energy is currently drafting the first mining law. It is anticipated that this first and new mining law in UAE will increase investments within the mining sector and further ensure sustainable development in the mining industry.
Details of Regulatory Authorities
Response: Name Ministry of Energy
Address. P.O Box 59, Abu Dhabi – United Arab Emirates
Fax: +971 -2 -619001
The main responsibilities of the ministry is to establish policies and regulations with prior consultation of stakeholders in order to ensure sustainable development in the energy sector and to meet the international standards and to represent country’s interests in mineral resources.