Mining in Turkey – now and then

By IM Staff
Published: Saturday, 26 September 2015

Turkey’s mineral diversity is well known and the country is home to some of the world’s leading producers of borates, soda ash and magnesite. However, political uncertainty and recent instability in Turkey’s mining legislation has hindered its development as a mining nation, Aykut Karaca, IM Correspondent, explains.

Turkey has a rich and long history of mining and hosts some of the world’s most complex geology, resulting from the opening and closure of several paleo-oceans and the amalgamation of continents with abundant magmatic, volcanic and tectonic activity. 

These geological events created a land mass with a diverse array of minerals, although less favourable for oil and gas. Despite not being one of wealthiest countries in terms of total mineral reserves or production, Turkey is said to be around tenth in the world for mineral diversity. It hosts 2.5% of the world’s industrial minerals, 1% of its coal, 4% of its marble and natural stone and about 0.6% of its metallic mineral reserves. In addition, Turkey has over 70% of global borates reserves and is set to become the largest producer of natural soda ash in Europe by 2018. Yet much of the country’s mineral wealth is considered untapped. Most of eastern and southeastern Turkey is underexplored due to the threat of terrorism in these areas since the 1980s. 

Turkey1 

Turkey has a long history of mining, but its fortunes as a mining nation
have waxed and waned in step with global conflicts, mineral prices and
government policy. (Source: twak)   

 

Turkey’s history of formal mining regulation dates back to the mid-nineteenth century, during the time of the Ottoman Empire. Records of mining legislation exist from 1858 and the number of regulations governing the sector increased rapidly over the ensuing 50 years. More than 100 mining licences were awarded to local and foreign miners between 1870 and 1899 and the country’s mineral output doubled between 1900 and 1911 before declining significantly during the First World War. After the establishment of the Republic of Turkey in 1923, the country decided to take steps to industrialise its mining sector. The General Directorate of Mineral Research and Exploration was established in 1935 and Turkey’s first modern mining law (Law number: 6309) was passed in 1954. This was revised by Law No: 3213 in 1985. 

Today, mining and exploration in Turkey are regulated by the following principal laws:

• Mining Law No. 3213, 15 June 1985 (amended in 2005 by Law No. 5177 and in 2010 by Law No. 5995);

• Regulation on Mining Activity Permits, published in Official Gazette No.25852, 21 June 2005;

• Regulation on the Implementation of Mining Activities, published in Official Gazette No.27751, 6 November 2010;

• Amendment to the Mining Law No. 6592 (Amendment Law), 18 February 2015.

Ismet Kasapoglu, head of the mining council at The Union of Chambers and Commodity Exchanges of Turkey, says that because mining is a long-term business, there should be regulatory stability in the sector. "Sometimes, the exploration phase can be up to 10 years and operating phases can last up to 100 years. [Therefore], mining legislation must not be subject to [frequent] changes." 

Speaking earlier this year, Kasapoglu noted that the mining law passed in 1954 stood for 31 years until it was replaced by an updated version in 1985. "On the other hand, we had four changes [to the mining] law in the last 10 years. That is an indication that the government does not understand the mining sector well enough," he said. Since Kasapoglu made these comments, a further amendment to the Turkish mining law was made on 18 February 2015, taking the number of revisions in the last decade to five.

However, mining’s importance to Turkey’s economic development is recognised by the country’s government. According to a report by the Ministry of Energy and Natural Resources of Turkey, mining has the potential to generate employment twice that of the service sector and 17 times more than the energy sector.

Some of the most significant changes in Turkey’s mining law were made in 2010. The aims were to bring the mining law in line with international standards, offer incentives to attract more investors, and protect licences from the licence traders and small scale and artisanal miners. 

The country’s exploration and exploitation licencing regime was amended to ensure greater investment commitment and sufficient professional and financial ability to perform mining and exploration activities. Licencing became stricter, with more details required to obtain exploration rights. It is no longer possible to hold large areas under licence in Turkey while conducting only minimal amounts of exploration. These changes were made by the Regulation on the Implementation of Mining Activities published on 6 November 2010 and were widely applauded by foreign investors, although there were some complaints from domestic mining companies.

Because the amendment came at the same time as a significant rise in the global gold price, a number of international mining groups moved into the country following the passing of the regulation.

Turkey2 

Capricious legislation from the Turkish government has been
blamed for holding back the Turkey’s mining sector (pictured:
Grand National Assembly of Turkey, Ankara. Source: brewbooks)

The 2012 mining circular

Turkey’s mining industry was shaken unexpectedly by the publication of a circular from the Prime Minister, Recep Tayyip Erdogan, in July 2012. The official circular (2012/15) stated that: "Public institutions and organisations (except for municipalities and special provincial administrations) and corporations in which more than 50% of assets are publicly held must get permission from the Ministry Office before selling, leasing, bartering, allocating and transferring etc., any real-estate properties to any institutions, organisations, foundations or associations."

Up until June 2012, licences for exploration and exploitation of minerals had been issued by the General Directorate of Mining Affairs under the Energy and Natural Resources Ministry (as per the Mining Law No. 3213, subject to additional permits where required, such as from the Forestry and Water Affairs Ministries). Under the July 2012 circular, there is now an extra step in the permitting process for mining or exploration – gaining permission from the Prime Minister’s office. 

At first, the mining sector was unable to comprehend the impact of this circular as there was insufficient detail on its requirements and scope, but soon many licence applications became stuck and several were refused at the level of the Prime Minister’s office, without clear reasons being given. Some operating licences were even cancelled as permits were not issued on time, due to the delays caused by government bureaucracy. Prior to the implementation of the new licencing regime, the number of licences issued annually was about at 10,000. This number declined to 1,407 in 2012 and by 2013, permitting had almost stalled, with just 84 licences being issued. 

The Deputy Chairman of the Republican People’s Party (CHP), Umut Oran, stated in March 2014 that the number of licence applications waiting to be approved by the Prime Minister’s office had risen to 12,000 in the 640 days since the circular was announced. Normally, the permitting process would have taken about 15 days for exploration licences and up to two months for operating licences at the General Directorate of Mining Affairs. But the country’s mining sector has been paralysed as a result of the 2012 circular, which has had a knock on effect on other industries, such as the mining services and mineral processing sectors. 

The head of Turkish Chamber of Mining Engineers, Mehmet Torun, said in 2014 that mining permitting had "stalled completely". "There has been no exploration licence issued for a long time (…) The unemployment rate in the sector has increased. The investments have been shifted to other sectors," he said, and called on the government to rectify the situation as soon as possible. 

The president of Turkish Miners Association, Mustafa Sonmez, also speaking last year, said that the efforts of stakeholders in the sector to find a solution to the problem had been inconclusive. He added that the circular had scared off foreign investors, who look for political stability and well-established mining legislation that is free of contradiction. When a circular like the 2012 law is passed unexpectedly, investors naturally lose confidence in a country.

The 2015 mining law

On 18 February 2015, an amendment to the mining law was published in the Official Gazette under Law No. 6592, having been approved by the Turkish Parliament and the country’s president. It brought in some comprehensive changes to mining regulation, the most important of which were to the fees and securities regime, permitting process, supervision of activities, royalties and the cancellation of sanctions. Minerals containing radioactive elements like uranium and thorium can now be licenced as industrial raw materials. Unlike previous amendments, the commission that drafted the February 2015 amendment involved representatives of the mining sector, including the Union of Aegean Mining Exporters, Turkish Marble, Natural Stone and the Machinery Producers Union (TUMMER), Chambers of Geology and Mining Engineers and the Union of Chambers and Commodity Exchanges
of Turkey. 

This broad consultation exercise reflects the Turkish government’s intention to make the country’s mining sector attractive to investors. But industry participants have stressed that the most important measure will be to make sure mining companies remain exempt from the provisions of the 2012 circular. The chairman of the Union of Aegean Mining Exporters, Arlan Eedinc Kaya, said earlier this year that: "We, as the mining sector, expect that circular by the Prime Ministry is abolished as soon as possible (…) Exports of natural stone have dropped by 35%. This shows the potential for further decreases [to levels below those seen] during the 2008 global economic downturn".

Even after the latest amendment, it is still not clear whether different government departments will collaborate effectively in the implementation of the law in order to streamline the mining and exploration activities in the country. Regulations detailing the application of the law, which were supposed to be released six months after the announcement of the amendment in February, have yet to be published and are unlikely to appear before a new government is formed.

A general election in Turkey in May 2015 resulted in no single party winning a majority and the leading parties were unable to form a coalition. A second general election has been scheduled for November 2015, but in the meantime, Turkey’s mining sector looks set to remain in limbo.