New Legislation Paves The Way For Mining Pledge

Introduction

Pursuant to a recent mining legislation reform, the new Finnish Mining Act (621/2011) (the "Mining Act") together with certain decrees has been introduced in Finland. From the financing perspective, of particular interest in the Mining Act and the relevant decree are the provisions on pledges over both mining permits and exploration permits (collectively mining pledges). As one of the new features, such provisions allow the grant of both first and second ranking mining pledges, which may be practicable e.g. in large mining projects involving both bank and debt capital financing. Further, pursuant to the revised provisions, the previously experienced uncertainties in respect of the establishment of an effective mining pledge have been overcome. Generally speaking, the mining pledge can nowadays be considered as an effective and bankable security.

The Mining Act entered into force on 1 July 2011 and revoked the previous mining act of 1965. It is further expected that the new Finnish Mining Decree (the "Mining Decree"), which includes among other things more detailed pledge provisions, will enter into force in May 2012 at the latest.1 For more information on the mining legislation reform generally, please see our Legal Alert "Summary of the Essential Provisions and Amendments of the New Finnish Mining Act" (11/2011).

Rights covered by the mining pledge

As a background, the Finnish mining legislation follows (instead of a concession or land owner system) a system based on exploration permits (previously claim rights) and mining permits (previously mining rights). An exploration permit allows its holder to exercise ore prospecting in the given area and to a priority in obtaining a mining permit. The mining permit, on the other hand, allows its holder to extract ore or minerals from the ground and thereby receive title to them. Generally, the relevant rights under both an exploration permit and mining permit are considered proprietary rights that may, among other things, be transferred or pledged to a third party.

It should be noted that the mining and claim rights established pursuant to the previous mining acts of 1965 and 1943 remain in full force and effect despite the latest reform. The same applies to the previously established mining pledges over such rights. In broad terms, the legal effects associated with such rights are very close to the ones associated with the new mining and exploration permits.

Further, the Mining Act...