NATIONAL MINERAL

POLICY
1995

GOVERNMENT OF PAKISTAN
Ministry of Petroleum & Natural Resources

(September 1995)
 PREFACE

The Government of Pakistan for many years has been attempting to

formulate a National Mineral Policy. Despite pledges made by the governments
in the Sixth and Seventh Five year Plans, a Mineral Policy could not be
announced.

Since its induction into office in October 1993, the Government of Prime
Minister Benazir Bhutto has taken bold initiatives on a number of fundamental
issues facing the national economy especially in the power, oil and gas and
telecommunication sectors and has announced policies which have attracted
large scale private investment to Pakistan. Taking note of our substantial mineral
potential, the Government also assigned special attention to the Mineral Sector
to facilitate the inflow of substantial local and foreign investment.

The formulation of National Mineral Policy required a clear perception of

the demands of the industry and also of the aspirations of the Provincial
Governments who constitutionally own this natural resource. Extensive
consultations, spread over a period of nine months, were therefore held
commencing with an International Conference on Mining in Pakistan in October
1994 which was inaugurated by the Prime Minister and its concluding session
was chaired by the President of Pakistan. The Conference was well attended by
senior executives from International mining companies and Federal and
Provincial governments. The Conference was followed by setting up of a broad
based Task Force on Minerals which submitted recommendations keeping in
view the concerns of the industry as well as of the governments and the
prevailing international practices.

The recommendations of the Task Force on Minerals were debated at a

Workshop, attended by the representatives of the Federal and Provincial
governmental agencies, which are concerned with its implementation. The
modified recommendations were further reviewed at two interprovincial meetings
attended by all the four Provincial Chief Ministers and the concerned Federal
Ministers. The National Mineral Policy having consensus of all the provinces has
now been approved by the Federal Cabinet for announcement.

Anwar Saifullah Khan

Minister for Petroleum and
Natural Resources
Government of Pakistan

September 1995
 Government of Pakistan

NATIONAL MINERAL POLICY

September, 1995

1. Objectives

1.1 The available geological information provides ample evidence that Pakistan
could be blessed with large or even world class mineral deposits as are existing in
similar geological environments elsewhere in the world. Mining activity in Pakistan is,
however, confined to industrial and construction minerals and contributes less than one
percent of Pakistan’s Gross Domestic Product (GDP). This mineral potential can be well
utilized for sustainable socio-economic development of local population in mineral
bearing areas. The Government of Pakistan is therefore launching a major policy
initiative in order to expand mineral sector activity mainly through private investment and
thereby enhance the contribution made by this economic activity to GDP and also lend
support to the social uplift programmes.

1.2 In seeking to attract both foreign and local private risk capital to Pakistan’s
mineral sector, the Government wishes to satisfy several important objectives. The most
significant benefits to be derived from an expansion of mineral sector activities are:

expansion of employment opportunities; enhancement of skills;

sustained development of mineral bearing area; expanded
business opportunities for local industries; increased revenue
flow to the Provincial and Federal Governments; technology
transfer; regional infrastructure development and an improved
data base of Pakistan’s mineral resources.

2. Constitutional Position on Minerals

2.1 Minerals are a provincial subject under the Constitution, except oil, gas and
nuclear minerals and those occurring in special areas (FATA and NA). Provincial
Government are responsible for development and exploitation of minerals which fall in
their domain. In line with this Constitutional frame work, the Federal and Provincial
Governments have jointly set out in this document Pakistan’s first National Mineral
Policy which provides for appropriate institutional arrangements, a modern regulatory
framework, an equitable and internationally competitive fiscal regime and a programme
to expand Pakistan’s geological database.

2.2 The provisions of Mineral Policy distinctly convey the message that focus of all
activities and decision making is at the Provincial level while the Federation would
provide requisite support and advice to the Provinces to take up the challenge of
achieving sustainable benefit from the development of non-renewable mineral
resources.
3. Consultative and Regulatory Framework

3.1 Mining has many peculiarities of its own including quite a wide span of effects over
other sectors requiring established consultative mechanisms for achieving optimal
benefits of mineral resources. Long gestation period of over a decade which is generally
spent in exploration of a mineral deposit and still longer period for its exploitation, require
a fairly stable and equitable regulatory regime. With these characteristics in view, the
Federal and Provincial Governments have agreed to put in place the requisite
framework.

3.2 Mineral Investment Facilitation Authority (MIFA)

3.2.1 A Mineral Investment Facilitation Authority (MIFA) will be set up in each Province
(including AJK, and Special Areas i.e. FATA & NA). The membership of MIFA will be
as follows:

• Chief Minister of the Province (Federal Minister

Incharge in case of AJK & NA and Governor
NWFP in case of FATA) Chairperson
• Minister for Mineral Development Vice-Chairperson
• Chief Secretary/Additional Chief Secretary (Dev) Member
• Secretary Mineral Development Department Member
• Secretary Finance Department Member
• Secretary Works Department Member
• Secretary Forest Department Member
• Chairperson of the Provincial Mineral
Development Corporation Member
• Representative of Environmental Protection Agency Member
• Two representatives of Business Community
nominated by Chief Minister Members

3.2.2 The Department of Mineral Development will serve as the Secretariat of MIFA.
Provincial Government may change the composition or the functions of MIFA to the
extent considered necessary by it. MIFA may coopt or request presence of a
representative of any government department for a particular meeting.

3.2.3 Each MIFA will execute the following functions:

(i) Regular monitoring and direction of mineral related activities and mineral
programmes of the Government and public sector in the Province.
(ii) Periodic review of implementation of the new regulatory regime and
functioning of the administrative set-up in the Province.
(iii) Review progress of approvals from the relevant agencies on grant and
working of concession and other related development issues and direct
for any specific support to the investors required for mineral exploration
and development (such as access to land, private or public and
communication).
(iv) Introduce measures to promote use of local goods and services, create
opportunities for appropriate education and training of nationals in
modern mining skills.
 (v) Perform as appellate forum for resolution of disputes of specified nature
between Licensing Authority and the investors of specified projects or
categories.
(vi) Promote establishment of secondary and tertiary processing facilities
within Pakistan.
(vii) Arrange and approve mineral portfolios for attracting private investment.
(viii) Ensure adequate protection of the environment.
(ix) Any other function assigned by the Chief Minister (Federal Minister
Incharge in case of Special Areas).

3.2.4 MIFA may also request, if considered necessary, for the participation or
assistance of the Federal Government in negotiation of mineral agreements by the
Provincial Government with foreign investors.

3.3 Provincial Departments of Mineral Development

3.3.1 Given the increasing importance being placed on mineral activities and in order
to adequately respond to the administrative demands of the sectors, each mineral rich
province will establish a separate Department of Mineral Development under a separate
Secretary with the following functions:-

(i) Development of Mineral Resources.

(ii) Consideration of applications and grant of licenses and leases.
(iii) Regulating and monitoring mining operations and activities in the
mineral sector, including collection of royalties.
(iv) Negotiating mineral agreements and consulting the Federal Government
when considered necessary by MIFA.
(v) Facilitating access to private or public lands and reserve forest areas for
the purpose of mineral exploration or development of minerals
resources.
(vi) Maintenance of up-to-date master plans showing positions of all
exploration licenses and leases granted, renewals, assignments and
surrenders of mineral titles, relinquishment of acreage etc and make this
information public through regular publication of complete details in the
official gazette.

3.3.2 Each Department of Mineral Development will consist of a Licensing Division

and Exploration Promotion Division. The Directorate of Mineral Development, existing in
a Province may serve as a nucleus for the establishing of Licensing Division.

3.3.3 Adequate funding will be allocated by the Provincial Governments to equip and
staff their Departments of Mineral Development.

3.3.4 Licensing Division

3.3.4.1 Licensing Division will be properly equipped with modern surveying instruments,
a technical library with up-to-date reports, set of topographical, geological maps, aerial
photographs and satellite imageries of the Province and adequate transport to enable it
properly discharge its supervisory responsibilities.
3.3.4.2 The deficiencies in the existing staff of the Directorate of Mineral Development
will be made up by:

a) recruitment of highly qualified and experienced staff in various

disciplines of mineral exploration, development, environmental
protection, mineral economics and law;
b) imparting practical on-the-job training in large mines / mineral
processing plants;
c) sending staff abroad for short duration courses in mineral development,
management of regulatory regime, mineral economics, including
minerals sales contracts, protection of environment and socio-economic
development of mining areas and regulation of mineral agreements; and
d) prescribing training provision in the mineral agreement entered with
foreign investors.

3.3.5 Exploration Promotion Division

3.3.5.1 Exploration Promotion Division will be staffed and equipped to carry out regional
investigations and exploration, necessary for promotion of mineral prospects and for
preparation of project portfolios. This Division may initially draw man-power and facilities
from public sector agencies, which would onward play only promotional role. Exploration
Promotion Division will:

(i) Provide competent interface with teams of international investors.

(ii) Generate its own geodata and carry out geological mapping of priority
areas, identify mineral prospects with or without assistance from
Geological Survey of Pakistan (GSP) and donor agencies for exploration
promotion.
(iii) Compile, evaluate and disseminate geodata and make available
geological and geographical maps and serve as sales point for GSP
publications, maps and reports.
(iv) Provide advisory services to industry.
(v) Feed and receive all critical geodata to or from Geodata Centre of
Pakistan.
(vi) Perform any other function assigned by the Chief Minister.
(vii) Not be involved in mining activity.

4. Mineral Investment Facilitation Board (MIFB)

4.1 The Federal Government can play an important role in the development of mineral
resources, not only in the context of fiscal polices but also in international contacts with
donor agencies and negotiation of mineral agreements. A political consultative forum, by
the name of Mineral Investment Facilitation Board will therefore be established under the
chairpersonship of the Prime Minister. The membership of MIFB will be as follows:-

• Prime Minister Chairperson

• Federal Minister for Petroleum & Natural Resources Vice-Chairperson
• Governor NWFP Member
• Chief Minister, Punjab Member
• Chief Minister, Sindh Member
• Chief Minister, NWFP Member
 • Chief Minister, Baluchistan Member
• Federal Minister for Finance Member
• Federal Ministers for Special Areas,
(AJK, FATA & NA) Members
• Chairman Board of Investment Member
• Deputy Chairman Planning Commission Member

4.2 The Ministry of Petroleum & Natural Resources will serve as the Secretariat of
MIFB. In case the Prime Minister is unable to chair the meeting of the Board, the
meeting will be chaired by the Vice-Chairperson. However, the Prime Minister may be
requested to chair at least one meeting in a year. In case a Chief Minister cannot attend
any meeting, he may nominate the Minister for Mineral Development to attend the same.
Where an agenda item concerns a Federal or Provincial agency, the head of that agency
would be invited to the concerned meeting.

4.3 MIFB will advise authorities concerned on appropriate action to:-

(i) Encourage flow of investments in mineral sector, review proposals

for its enhancement and make recommendations to the concerned
agencies.
(ii) Assist the Provincial Governments in selection/preparation of
suitable mineral sector portfolios for introduction by the provinces to
donor agencies and investors.
(iii) Advise on fiscal and taxation policies and federal tariff for mineral
sector for its international competitiveness.
(iv) Establish annual priority of geoscience mapping and surveys based
on requirements of industry and priorities advised by the MIFAs.
(v) Assist the provinces in development of skilled manpower and
infrastructure as per their priorities by arranging financial
assistance including foreign/donors assistance.

4.4 The MIFB scope can be amended/expanded as and when considered necessary
and agreed to by this inter-provincial consultative forum.

5. Public Sector Mineral Corporations

5.1 There are a number of mineral sector corporation at the federal and provincial
levels with a pool of technical skills and equipment. It has been decided to privatize the
government corporations, but so long as they are in existence, the skilled man-power
and equipment available in the public sector corporations shall be utilized for
promotional activity on promising areas with the express purpose of attracting private
investment in the detailed mineral exploration and development. This pool of expertise in
the public sector may also be made a part of provincial Departments of Mineral
Development. No new mineral corporations would, however, be set up in the mineral
sector.

5.2 The Federal and Provincial Government will provide grants to the respective
corporation for the promotional tasks on priority minerals or priority areas, as are
assigned to them. These corporation may retain a minority share in joint venture mineral
projects to be managed by the private sector; local or foreign.
6. Geological Survey of Pakistan (GSP)

6.1 Availability of geological, geophysical and geochemical maps and reliable geodata
are a prerequisite to large scale mineral exploration. Geological Surveys of Pakistan
(GSP) is charged with this responsibility and has also competent manpower available to
undertake the same. GSP will be strengthened as the central organization for geological,
geophysical and geochemical mapping, geodata generation and research.

6.2 GSP will concentrate on the following functions:-

(i) Expedite publication of geological, geophysical and geochemical data

and maps already available. GSP will not be required to obtain
clearances from other agencies like Survey of Pakistan or the
Printing Corporation of Pakistan (PCP).
(ii) Produce 1:250,000 geological maps of the whole country and
1:50,000 maps, supported by reports, for the whole country
commencing with priority areas as identified by the provinces.
(iii) Operate an open-file system so that unpublished raw data is also
made available to the investors on charge basis.
(iv) Undertake fast track integrated geological, geophysical, geochemical
and tectonic surveys, generate and disseminate basic data on
potentially prospective areas as per priorities determined by MIFAs.
Mineral exploration would be a minimal activity of GSP and only to
support its regional surveys.
(v) Execute mutually agreed collaborative projects with private sector
and Provincial Governments if approved by MIFA, on cost
reimbursable or sharing basis.
(vi) Help the provinces in generation of geological data.

7. Geo-Data Center of Pakistan (GDCP)

7.1 A Geodata Center of Pakistan (GDCP) will be established as an autonomous body

of the Ministry of the Petroleum and Natural Resources with the active support of donors
and of the Governments which shall be governed by a broad based council, headed by
Director General, Geological Survey of Pakistan.

7.2 GDCP will perform the following functions:-

(i) Collect, store, update and manage geodata of the whole country in a
standardized system and its unrestricted dissemination to provinces
and the industry.
(ii) Create a centralized digital map production and distribution facility.
(iii) Arrange on-the-job training of its own staff in geodata
management/data automation and dissemination.
(iv) Obtain non-confidential mineral concession, exploration and
production data from the provinces for incorporation in the data pool.

8. New Regulatory Regime

8.1 The existing regulatory regime is being revised and updated to change some
features which have been considered unattractive to investors and to put in place a set
of rules which are internationally competitive. The new rules would meet the concerns of
the investors on such matters as transparency, criteria for dealing with applications and
the grant of licenses and leases, expeditious decision making process, security of
tenure, provision of adequate information on mineral titles, independent dispute
resolution mechanism etc., and to equitably meet the objectives of the investors as well
as aspirations of the Governments. The guidelines agreed to by the Federal and
Provincial Governments for drafting of new rules or amendment to existing rules are as
follows:

8.2 The Mining Concession Rules will provide for four types of mineral titles, namely;
Reconnaissance License, Exploration License, Mineral Deposit Retention License and
Mining Lease.

8.3 Reconnaissance License (RL)

To enable the mining companies to reconnoiter large areas in a short span of

time using modern techniques of satellite imagery, aerial photographs, aeromagnetic
and regional geochemical surveys, an RL will be granted over an era of 100 to 10,000
sq.km. in respect of a mineral or a group of minerals. Unless stipulated otherwise, the
license will be non-exclusive for a period of 12 months and will not be renewable.
However, the licensee will have the right to an exploration license over 10% of the area
held under an RL provided that the criteria for the grant of such a license and other
requirements of the law are met. The Licensing Authority will take a decision on the
application for an RL within 120 days from the date of filing of complete application. The
application fee for an RL will be Rs. 15,000. The licensee will be obligated to carry out
an approved work programme and comply with other conditions of the RL.

8.4 Exploration License (EL)

8.4.1 An exploration license will be granted over an area not exceeding 1,000 sq.km.
for a period not exceeding three years where the applicants meets the specified criteria.
The application must provide adequate information about the applicant, description and
a sketch map of the area, work programme and expenditure to be undertaken and
technical and financial resources available to the applicant.

8.4.2 Subject to satisfactory completion of work programme and compliance with other
conditions of the EL, it will be renewed for a period not exceeding three years over 50%
of the area of the original EL. Where it can be demonstrated that a further extension is
necessary for the completion of full feasibility study prior to applying for a mining lease,
the EL will be renewed over 50% of the area held for a period not exceeding 3 years.
The applicant will be obligated to submit, with the application, a work programme and
give valid reasons for such a renewal. The application for an EL or its renewal shall be
granted/refused within 120 days from the date of filing of complete application.

8.4.3 Application fees for EL will be Rs. 25,000 and fee for each renewal will be Rs.
50,000. In addition, rent of the land over which the license is granted will have to be
paid. The rent will increase progressively each year.

8.4.4 Where more than one application are made in respect of the same area, the
Licensing Authority shall make a decision on the grant of an EL to one of the applicants
on the basis of the best minimum work Programme submitted and other financial terms
offered and demonstrable technical and financial competence to execute the work
programme and meet the other obligations of the EL, regardless of the order in which
the applications were received.

8.4.5 The EL shall not, during the first two years of its term, be assigned or transferred
by the Licensee to any party, other than to an affiliate. Assignments to an affiliate will be
subject to the prior approval of the Licensing Authority.

8.4.6 The Licensee shall have the right, after a period of two years, to assign or transfer
all or part of its interest in the EL to any third party subject to the prior written consent of
the Licensing Authority. Such consent shall not be withheld except for good reasons, for
example, where the Licensing Authority is reasonably satisfied that the proposed
assignee does not meet the criteria for the grant of an EL; the proposed assignee is
unwilling to provide an unconditional undertaking to assume all the obligations of the
assignor, or to comply with any reasonable condition of the assignment; or the
assignment or transfer is reasonably considered by the Licensing Authority to be against
the national interest.

8.5 Mineral Deposit Retention License (MDRL)

8.5.1 On completion of a full feasibility study, if the holder of an EL can demonstrate

that the deposit, though potentially viable, cannot be commercially developed, due to
depressed metal/mineral prices utilizing proven technology or with financing on
commercial terms which are reflective of current market conditions for other mining
projects, he may, within 180 days before the expiry of the EL, apply for a Mineral Deposit
Retention License (MDRL). The application must be accompanied with full justification
and data and the prescribed fee. The applicant for an MDRL will have to demonstrate
that the exploration operation had progressed as far as practicable and that the applicant
is able and willing to comply with the conditions of the MDRL and has complied with the
terms and condition of the EL.

8.5.2 The application fee for an MDRL or its renewal will be Rs. 100,000 each and the
licensee shall, in respect of the MDRL Area, pay in advance, for each year, the rent
applicable for the corresponding period of the EL.

8.5.3 The application for an MDRL will be considered within 180 days and may be
granted for a period not exceeding two years subject to specified conditions. It may be
renewed for a period not exceeding one year subject to payment of a renewal fee and
land rent. However, the licensee must justify annually to the Licensing Authority the
basis for continuation of renewal of the MDRL. The data generated by the licensee will
be placed on an open file and the feasibility study will be placed on a confidential file at
the office of the relevant Licensing Authority and will be open to bona-fide interested
third parties for inspection.

8.5.4 In the event of another company applying for a mining lease over a deposit
covered by MDRL, the licensee will have the right of first refusal to obtain a mining
lease. If the licensee is unable to match the terms offered by the third party, the MDRL
shall stand terminated.
8.6 Mining Lease (ML)

8.6.1 The holder of an EL or an MDRL may apply for a mining lease over an area
subject to a maximum of 250 sq. km. within his EL or MDRL in respect of the
mineral/minerals discovered. The application shall be accompanied by detailed
information including technical and financial resources available for development of the
mine, work programme for development and operation of the mine, production schedule,
financing plan, environmental protection plans, proposals for procurement and use of
local goods and services, training of nationals and the prescribed application fee. The
application will be considered, in accordance with specified criteria, within 120 days after
receipt of the application or receipt of any additional information requested. The license
will remain valid while the application is under consideration.

8.6.2 The Licensing Authority shall not unreasonably refuse an application for the grant
of an ML. Where the Licensing Authority considers that the applicant has satisfied the
specified criteria for assessment and grant of an ML, the ML will be granted. The
Licensing Authority will not refuse an application by a licensee for an ML unless the
Authority has notified the applicant of the proposal to refuse the ML and has given the
applicant a reasonable opportunity to modify the proposals or mining plans or make
representation or otherwise remove the grounds for refusal.

8.6.3 The application fee for an ML or its renewal will be Rs. 100,000 each and the land
rent will be Rs. 3,000 per sq.km./ year to be paid in advance each year.

8.6.4 The ML will be granted for the lesser of a period of 30 years or the estimated life
of the mine. An ML may be renewed for a period not exceeding 10 years or the life of the
mine whichever is lesser in the light of the circumstances prevailing at that time.

8.6.5 Where an application for a mining lease is made by an applicant not holding an
EL or MDRL, the decision will be made within 180 days, unless extended further upto
180 days by the Government. The lessee will be obligated to carry out mining operations
in accordance with good international mining industry practice, provide acceptable
working conditions and take measures to protect health, safety and welfare of
employees and the environment. The lessee will be required to commence mining
operations within six months of the grant in accordance with the approved mine
development plan.

8.6.6 A lessee shall have the right to assign an ML with prior consent of the Licensing
Authority. Such consent will not be unreasonably withheld or delayed, if the proposed
assignee meets certain specified criteria and conditions similar to those applicable for
assignments of ELs.

8.6.7 A lessee shall have the right to market and export minerals or mineral products
subject to satisfaction of the internal requirements of Pakistan. The price to be paid for
any minerals or mineral products purchased by the Government shall be the fair market
price. The fair market price shall be determined by agreement on the basis of specified
criteria and failing agreement, by reference to a mutually acceptable expert or to
arbitrators.
8.6.8 Details of various categories of mineral titles, their duration, application and
renewal fees and rentals and time within which decisions will be taken are tabulated in
the annexed Tables I & II.

8.7 Environment

8.7.1 With the increasing focus on the environment and international obligations,
Pakistan, in common with other countries, wishes to pursue an approach of sustainable
development consistent with environmental priorities. Companies will be expected to
ensure that their mining operations are carried out in an environmentally acceptable and
safe manner and that such operations are properly monitored.

8.7.2 Accordingly, mining companies will be obligated to take adequate steps to

prevent and minimize environmental damage and to make good any damage caused,
during and on completion of mining operations; submit to the Government an
environmental impact assessment (EIA) and environmental management plans for each
stage of their operations; carry out site rehabilitation as necessary; comply with
applicable laws and internationally acceptable environmental standards; and ensure
adequate compensation for injury to persons or damage to property caused by the
effects of mining operations.

8.7.3 Mining companies will also be required to submit to the Licensing Authority
periodic environmental reports detailing the measures taken by them for compliance with
environmental requirements.

8.8 Performance Guarantee

An applicant for grant or renewal of EL, MDRL, or ML will be required to provide,

at the time of the grant or renewal a guarantee, in a form satisfactory to the Licensing
Authority, to ensure performance of the licensee’s or obligations. Such guarantee may
be a bank or parent company guarantee.

8.9 Right Conferred

The holder of an EL, MDRL or ML, subject to payment of dues and compliance
with obligations, shall have certain exclusive rights under the title including, for example,
the right to enter upon the licensed/leased area (subject to the rights of surface owners)
and to carry out exploration/mining operations in accordance with the terms of the
license/lease and applicable laws and to remove the ore/concentrate from the leased
area. Detailed rights and obligations of licensee/lessee will be spelled out in the law
governing the grant of mining titles.

8.10 Termination

A license or lease will only be terminated on the occurrence of certain specified

events, for example, breach or non-performance of the terms, bankruptcy of the licensee
or lessee, misrepresentation etc. The events will be specified in the relevant Rules.
8.11 Grant of Mineral Titles to Foreign Nationals

Foreign companies will be free to apply for and be granted licenses without the
need for incorporation locally. However, no mining lease will be given until the foreign
company is incorporated locally.

8.12 Mineral Agreement

8.12.1 The Provincial Governments may enter into an agreement with an investor,
within the framework of the law, to stabilize the terms or to predetermine procedures with
respect to certain matters relating to the carrying out of operation under a license/lease,
if government is satisfied that substantial foreign investment in exploration and mining
operations is likely to be made and it is desirable in the interest of the development of
mineral resources, to do so. The Federal Government may also become signatory to
such an agreement, if so requested by a Provincial Government, after independently
examining viability of the project and credit worthiness of the party.

8.12.2 The agreement may cover, for example, the right of the licensee to obtain a
mining lease, assignment rights, the circumstances in which a license or lease may be
terminated or cancelled, the valuation of minerals on an arms-length basis, the levying of
additional profit tax and additional royalty, in case agreed and its terms, the
circumstances and conditions on which rights of pre-emption to minerals may be
exercised by the government, the settlement of disputes through a mutually agreeable
sole expert or through international arbitration etc.

8.13 Arbitration

Any question or dispute between a foreign investor and the government

arising out of or in connection with the terms of an agreement or of a granted mineral
title shall be settled amicably. Failing an amicable settlement within a reasonable period,
such dispute shall be submitted to the International Centre for Settlement of Investment
Disputes (ICSID) for arbitration. Disputes solely involving Pakistani parties will be settled
by arbitration in Pakistan and under the provisions of the Pakistan arbitration laws.

8.14 Joint Application

A license/lease may be granted jointly to two or more persons with respect to

an area where such an application is made jointly and the liability of the applicants under
the license/lease in such a case will be joint and several.

8.15 Area not Available for Grant of Mineral Rights

Mineral rights over areas of historical interest, national or public parks and
gardens, cemeteries, defence sensitive/strategic sites etc or such other areas as may be
specified will not be available. The Provincial Governments will identify all such areas so
that prospective investors are aware at the time of filing their applications whether the
area applied for is available for licensing.
8.16 Competitive Bids

The Licensing Authority may awards ELs and MLs over free acreage through a
process of competitive public bids or selected tenders.

8.17 Public Notice of Grant of Licenses etc.

Notice of all grants, renewals, assignments, surrender and revocation of mineral

titles and relinquishment of acreage will be published promptly in the Official Gazette,
with details of the area and of the companies to whom the license/lease/assignment etc.
is granted.

8.18 Proprietary Rights over Data

All geodata obtained by a licensee/lessee shall be a property of the Licensing

Authority and shall be deposited at such offices and at such intervals as are specified in
the Rules.

9. Fiscal Regime

9.1 The Overall Fiscal Package

9.1.1 The Federal and Provincial Governments have agreed to adopt and maintain a
joint approach towards the fiscal terms which are applied to mining operations so as to
ensure that on overall basis it yields a level of return to the investor which is
commensurate with the risk and internationally competitive, and as well provides
equitable “take” for the Provincial and Federal Governments through royalties on
minerals and federal income from mining ventures.

9.1.2 The fiscal regime, including royalty, would be structured to have a progressive
character to allow exploration of less profitable mineral deposits.

9.2 Income Tax

9.2.1 Rate of Corporate Tax

The Government has embarked upon a progressive reduction in the effective

rate of corporate tax. In fiscal year 1997/98 the applicable rate of tax will be 30% for
public companies listed on a Stock Exchange in Pakistan and 35% for private or non-
resident companies. Mining companies will, of course, enjoy these reduced rates.

9.2.2 Minimum Corporate Tax

A minimum amount of corporate tax is payable annually at the rate of 0.5% of

the declared turnover. However, in any year when the corporate tax payable exceeds
this amount, the minimum tax will not be charged.

9.2.3 Development Expenditure Deduction and Loss Carry Forward

Expenditure incurred on exploration operations qualify for immediate deduction

in the determination of taxable income. Expenditure incurred for project development
operations will be allowed deduction at a rate of 25% p.a. In line with international
practice, the depletion allowance will no longer apply.

9.2.4 Ring-Fencing

A mining company will be assessed for income tax on the entirety of its mining
operations in Pakistan.

9.3 Withholding Taxes

9.3.1 Dividends

Except where lower rates are specified in Pakistan’s double taxation treaties, the
withholding tax levied on dividends paid from mining profits to non-resident corporate
shareholders will be set at 7.5% but adjustable against final tax liability.

9.3.2 Non-Resident Contractors

The rate of withholding tax on non-resident contractors engaged in mining
operations will be 6% of the payments made to them. This will represent their full and
final tax liability.

9.3.3 Interest

Interest paid to non-residents in respect of availed approved loans is exempt

from withholding tax.

9.4 Other Taxes

9.4.1 Sales Tax

No sales tax will be levied on minerals which are exported.

9.4.2 Additional Profits Tax

For certain large-scale mining operations undertaken by foreign investors, where

the anticipated size and nature of the mining operations are such as to involve a large
investment and portend considerable economic and social benefits over a long period of
time, the Government may require the investors to negotiate and enter into a mining
agreement containing a provision for the levying of an additional profits tax (APT). The
APT on an agreed would be payable only when the project achieves the agreed
threshold level of profitability.

9.4.3 Zakat

Non muslims and non-resident shareholders of a company are exempt from the
requirement to pay Zakat on dividends.
9.5 Concessions on Imports

9.5.1 For Mining Companies and Mineral Based Industry

During exploration of mines and until the commencement of commercial

production, customs duty @ 5% and no sales tax, shall be levied on machinery,
equipment and spares necessarily and exclusively imported by a mining company, its
contractors and sub-contractors for use in their mineral exploration and development
operation or by an entrepreneur for settling up a specified mineral based industry.
Machinery, equipment and spares imported by a company for use in mining operation
after the date of first commercial production shall be subjected to customs duty at the
rate of 10% on the import value of the items. A negative list of items to which above
provisions will not apply, shall be drawn up by CBR in consultation with the ministries of
Petroleum and Natural Resources and Industries & Production.

9.5.2 For Local Manufacturers of Mining Machinery

In order to encourage local manufacture of machinery and equipment needed by

the mining industry, raw material will be subjected to customs duty at the rate of 10%
with 15% sales tax but on components and machinery customs duty at the rate of 10%
with no sales tax, will be levied if imported by local manufacturers for mining machinery
and equipment for mining operations only.

10. Royalty

10.1 Coal, Construction and Industrial Minerals

The current rates of royalties in the Provinces for coal, construction and industrial
minerals are being retained as such since these minerals are primarily of interest to local
mining companies, for sale in the domestic market.

10.2 Other Minerals

For all other minerals, a simplified and uniform royalty system is being introduced
in all the Provinces. Royalty will be charged ad valorem on the gross sales value
determined on a third-party (arms-length) basis. The rates of royalties are:

(i) Precious Stones 10%

(ii) Precious Metals & Semi-Precious Stones 3%
(iii) Base Metals 2%
(iv) Others (other than i, ii, iii above) 1%

10.3 Royalty Determination and Payment

10.3.1 Royalty will be calculated at the first point where the mineral is sold or otherwise
disposed of, without any deduction from gross value.

10.3.2 Royalty will be assessed and paid on a monthly basis.

10.3.3 In order to encourage investment in marginal or low grade mineral deposits, as
well as the maintenance of mineral production in years of difficult cash flow, the
Provincial Governments may adopt special royalty provisions which would allow them to
reduce, defer or waive royalty payments on certain projects or minerals on certain terms
and condition in specified circumstances.

10.3.4 Enhanced Royalty rates may be negotiated under an agreement with the investor
of a mining project which would apply only when the project achieves the agreed
threshold level of profitability.

10.3.5 Stocked minerals and by-products will not be subjected to royalty payment until
sold.

10.4 Royalty in Lieu of Local Levies etc.

Except for royalty, there will be no other Provincial or local levies or taxes
imposed on minerals or mining operations. The claims of local bodies for any levy on
minerals will be satisfied by the Provincial Governments from royalty collections.

11. Joint Ventures with Local Enterprises

There will be no mandatory State participation. However, the Governments will

encourage joint ventures between foreign and local private investors. Such joint ventures
could also be entered into with agencies of the Federal and Provincial Governments.

12. Development of Infrastructure

Mechanisms will be developed to provide infrastructure support in special

circumstances and under certain terms and conditions; for example, for the development
of a large marginal grade mineral deposit which is capable of being economically
developed only with such support.

13. Small-Scale Mining

13.1 Investment in small-scale mining (capital employed less than Rs. 300 million) will
be confined to Pakistani nationals.

13.2 To improve the working of small-scale mining:-

(i) The Provincial Inspectorates of Mines will provide basic personal safety
equipment to small-scale mine operators on a no-profit-no-loss basis.
Failure by the mine operators to acquire the prescribed safety
equipment may result in closure of their operations.
(ii) Corporate merger of small-scale mine operators will be encouraged.
(iii) Provincial Inspectorates of Mines will monitor the working of small-scale
mines and ensure compliance with the provisions of the Mines Act and
of environmental protection laws. Penalties will be imposed for violation
of these provisions.
(iv) Small-scale mines will be required to carry out or participate in
collective environmental rehabilitation programmes introduced by
regulatory agency.
13.3 Small-scale mining operators will be expected to make appropriate contributions
towards upgrading the social infrastructure of the area where they are operating.

14. Social Development Contributions

14.1 Mining companies would contribute to the social uplift of local population by
contributing annually Rupee equivalent of US $ 5,000/license/lease and after the
commencement of commercial production double that amount for on the job vocational
training of local population in training institutes.

14.2 In order to give lasting benefits to the local population of the area, mining
companies would pledge annually Rupee equivalent of US $ 10,000 for construction and
self sustained maintenance of welfare projects like school, dispensaries, drinking water
supply, roads etc.

14.3 Mining companies would participate in the Government efforts to sustain the
development level of mineral bearing areas, on depletion of mineral resource.

14.4 The licensing authority may enforce that small scale mine operators will also
make a contribution in the uplift of the social infrastructure of the area where they
operate.

15. Linkages with other Sectors

15.1 In order to develop skills in the various disciplines required in the mining sector,
companies involved in medium and large-scale mining operations will be required to
provide to specified number of facilities as agreed to with the Provincial Government for
technical education and on the job training, either in Pakistan or abroad.

15.2 Similarly, in order to develop meaningful backward and forward linkages with
other sectors of the economy, mining companies will be required to utilize in their
operations Pakistani goods and services, to the extent available on competitive basis
with international supplies. Secondary and tertiary processing of the ores within Pakistan
will be encouraged to the extent practicable.

16. Miscellaneous Matters

16.1 Protection from Expropriation

The Protection of Economic Reforms Act 1992, provides that no foreign

industrial or commercial enterprises established or owned in any form by a foreign or
Pakistani investor shall be compulsorily acquired or taken over by the Government. The
mining sector will equally have this protection.

16.2 Repatriation of Capital and Profits

The Foreign Private Investment (Promotion and Protection) Act, 1976,

guarantees that a foreign investor in an industrial undertaking may at any time repatriate
capital and profits. This includes mining ventures.
16.3 Insurance

Mining operators will be allowed to insure their assets and risks with international
insurance companies.

16.4 Formalization of Mineral Policy

The respective Federal and Provincial Ministries/Department will undertake

necessary administrative measures and amendments to relevant mining and fiscal laws
to give full effect to the provisions of this Policy.
 Table - I
Broad Terms for Mineral Titles

Validity Decision
Period Renewals Area within
S.No Category Size Sq. Km. Years Years Deletion Days*
1. Reconnaissance License 100- 10,000 One Nil 90% on 120
– Non-exclusive and application
non-renewable unless for
stipulated otherwise in exploration
the R.L. license
2. Exploration License Not- Three 120
(EL) (Note- 1). exceeding
- Exclusively right to 1,000
explore all minerals
specified in EL.

- First Renewal Three 50% 120

- Second Renewal Three 50% of the 120
remaining
area
3. Mineral Deposit Not exceeding Two One Nil 180
Retention License [On area of Expl-
account of unfavour- oration Lice-
able economics to nse held by
develop] (Note- 2) Applicant
4. Mining Lease 120 (a)**
(Note- 3) Max 250 Thirty Ten - 180 (b)**

Note – 1 Exploration License cannot be assigned within the first two years. Renewable
subject to fulfillment of working obligations.
Note – 2 If a third party makes an offer to develop an area, MDRL shall stand terminated
unless the holder matches the offer.
Note – 3 The lessee shall have the right to assign the lease with prior approval of the
Licensing Authority.
Note – 4 Application to all types of licenses / leases. There shall be a minimum
investment/work programme for RL, EL, MDRL and minimum production
commitment for ML.
* To be reckoned from the date of filing of complete application. In case of direct
application for ML (without EL or MDRL), the decision will be made within 180
days, unless extended further upto 180 days by the Government.

** (a) For holder of EL or MDRL.

(b) For applicant not holding EL or MDRL.
 Table – II

Application Fee and Land Rent

Rent
Application Renewal Fee Rupees Period
S. No Category Fee Rupees Rupees Sq. Km. Years
1. Reconnaissance License 15,000 Not Renewable - -

2. Exploration License 25,000 250 Years 1 - 3

750 Year 4
- First Renewal 50,000 1,000 Year 5
1,250 Year 6

- Second Renewal 50,000 2,000 Year 7

2,250 Year 8
3.000 Year 9

3. Mineral Deposit
Retention License 100,000 100,000 3,000 2+1
4. Mining Lease 100,000 100,000 3,000 30 + 10

Note:

1- The Mining Concession Rules may provide that all grants, revocations,
assignments renewals and surrenders of mineral titles shall be published
in the official gazette forthwith with complete details.

2- Foreign companies may be provided right to arbitration by International

Centre for Settlement of Investment Disputes.

3- Mineral Concession Rules may also have enabling provision to allow the
licensing authority to enter into an agreement in case a foreign mining
company so desires in consultation with MIFA and MIFB.

4- The Provincial Governments may, after consultation amongst themselves,

suggest changes which they may consider appropriate.