Mining Law Kazakhstan 2016

1 Relevant Authorities and Legislation

1.1 What regulates mining law?

The principal legislative act governing mining activities in the Republic of Kazakhstan ("RoK") is the RoK Law on Subsoil and Subsoil Use dated 24 June 2010 No. 291-IV (the "Subsoil Law").

There are also numerous Decrees of the RoK Government and orders of the ministers of (i) energy, or (ii) investment and development which regulate specific issues in subsoil use.

Mining activities are regulated through the award of mining contracts (until August 1999 this was through the award of a licence with the further conclusion of a mining contract), which are obtained either through competitive procedures or through direct negotiations for (i) certain RoK national companies (depending on the type of mineral according to allocation of responsibilities), or (ii) holders of the exploration right that made the commercial discovery and assessed it as confirmed by state expertise.

Broadly, regulation for mining can be categorised by reference to specific minerals as follows:

solid minerals (gold, silver, coal, etc.); oil and gas; and commonly occurring minerals (sand, clay, etc.). Please note, unless otherwise stated, we have not addressed oil and gas and commonly occurring minerals in this chapter.

1.2 Which Government body/ies administer the mining industry?

Depending on the category of minerals, there are three so-called competent authorities (the "Competent Authority"), specifically:

the Ministry of Investment and Development (the "MID") regulates solid minerals contracts (f/k/a the Ministry of Industry and New Technologies from 12 March 2010 to 6 August 2014; before 12 March 2010 known as the Ministry of Energy and Mineral Resources); the Ministry of Energy regulates oil and gas, coal and uranium (f/k/a the Ministry of Oil and Gas from 12 March 2010 to 6 August 2014; before 12 March 2010 known as the Ministry of Energy and Mineral Resources); and the regional akimats regulate commonly occurring minerals. The MID also supervises the mining industry through its subordinate, the Committee on Geology and Subsoil Use (the "Geology Committee"). The Geology Committee has regional departments called TsentrKazNedra (for central territories), ZapKazNedra (for western territories), SevKazNedra (for northern territories), VostKazNedra (for eastern territories) and YuzhKazNedra (for southern territories).

The issues of (i) local content in goods, works, services and staff, and (ii) procurement of solid minerals subsoil users are resolved by the MID taking into consideration the view of the National Agency on Development of Local Content JSC ("NADLoC").

1.3 Describe any other sources of law affecting the mining industry.

Depending on the sphere of activities, the mining industry is affected by the following legislative acts:

the RoK Tax Code dated 10 December 2008 (the "Tax Code"); the RoK Labour Code dated 15 May 2007; the RoK Environmental Code dated 9 January 2007; the RoK Land Code of RoK dated 20 June 2003 (the "Land Code"); the RoK Water Code of RoK dated 9 July 2003; the RoK Law on Architecture, Town-Shipping and Construction Activities dated 16 July 2001; the RoK Law on Permits and Notifications dated 16 May 2014; the RoK Custom Code dated 30 June 2010 No. 296-IV and the Customs Code of the Customs Union (Annex to the Agreement on the Customs Code of the Customs Union dated 27 November 2009 No. 17) (customs issues); and the Rules of Procurement of Goods, Works and Services at Performance of Subsoil Use Operations approved by the RoK Government Decree dated 14 February 2014 No. 133, and so on. 2 Mechanics of Acquisition of Rights

2.1 What rights are required to conduct reconnaissance?

There is no notion of "reconnaissance" in Kazakhstan law; instead the term "exploration" is used, which includes (i) prospecting works, and (ii) assessment of commercial discovery. See our response to question 2.2.

2.2 What rights are required to conduct exploration?

(i) Subsoil use and land plot lease contracts

First of all, to conduct exploration, an individual or an entity must have a subsoil use right. Such rights are deemed to be granted upon the Competent Authority's signing of a contract ("subsoil use contract") for the right of (i) exploration, or (ii) production, or (iii) combined exploration and production.

During the preparation of the subsoil use contract, the Geology Committee issues a geological allotment for the territory to be explored.

Also, a relevant project on exploration works or on assessment of commercial discovery shall be elaborated by a relevant licensed organisation and be considered and approved by the ecological authority (if the project on assessment of commercial discovery includes pilot production, then approvals of sanitary-epidemiological and industrial safety authorities are also required), as well as by the Geology Committee.

If the exploration right is granted in simplified order, then the subsoil user approves the exploration project by itself and sends it to the Geology Committee.

Further, execution of a subsoil use contract is an unconditional ground for granting the land use right by regional akimats. Such land use right is confirmed by signing a land plot lease agreement with the land authorities.

(ii) Licences

To carry out exploration works, depending on the method, the following licences may be required:

a licence on drilling works; a licence on handling explosives; a construction licence (for construction of a mine, a processing plant, infrastructure, etc.); or a licence on the application of chemicals and other agents, etc. A holder of a subsoil use right can either obtain such licences on its own or hire contractors which have the relevant licences.

2.3 What rights are required to conduct mining?

Please note that there is no legal notion of "mining" in Kazakh law; instead, the terms "production" or "extraction" are used for determining the commercial development of the deposits and extraction of the minerals.

In general, the requirements are the same as mentioned in our response to question 2.2, except for the following:

the subsoil use contract for (i) production, or (ii) combined exploration and production with a relevant amendment thereto allows the holder of the subsoil use right to conduct production; instead of the geological allotment, a mining allotment must be obtained; instead of an exploration project, a production project must be elaborated and approved by the authorities; and the holder of the subsoil use right must obtain a licence for the exploitation of mining activities. 2.4 Are different procedures applicable to different minerals and on different types of land?

No, generally the procedures are the same, save for a number of special licences required for carrying out activities with the production, storage or processing of radioactive ores.

2.5 Are different procedures applicable to natural oil and gas?

Generally, the same procedures are applicable to the exploration and production of natural gas and oil.

3 Foreign Ownership and Indigenous Ownership Requirements and Restrictions

3.1 Are there special rules for foreign applicants?

No, there are no special rules for foreign applicants. According to Article 3.1 (Sphere of Application of this Law) of the Subsoil Law, foreign individuals and foreign entities, as well as persons without citizenship, have the same rights and carry obligations equal to those borne by citizens and legal entities of Kazakhstan, unless otherwise set out by the laws of Kazakhstan.

3.2 Are there any change of control restrictions applicable?

The Subsoil Law contains the definition of objects connected to the subsoil use right (the "Objects"), which are:

shares in subsoil users (including when issuing for IPO); shares in parent companies of the subsoil users, provided that the principal activity of such parent companies is connected to subsoil use in Kazakhstan; or securities confirming the ownership rights to the abovementioned shares or securities convertible into the above-stated shares. Under Article 12.2 (State's Pre-emptive and Priority Rights in Subsoil Use Sphere) of the Subsoil Law, with regard to deposits of strategic significance (the list of such deposits is approved by the RoK Government Decree dated 4 October 2011 No. 1137), the State has the priority right to acquire (i) subsoil use right (in full or in part), or (ii) the Objects.

Any transaction that alienates the subsoil use right (in full or in part) or Objects is subject to the prior obtainment of (i) a waiver of the State's priority right (the "Waiver") with regard to deposits of...