Advising on Myanmar’s Mining Sector

Myanmar is endowed with world-class mineral resources including copper, gold, lead, zinc, silver, tin and nickel. High prospectivity and a lack of exploration means there is a high probability of further world class discoveries and the potential for high returns for mineral companies willing to commit to Myanmar.

To date, in terms of large scale exploration, a small number of exploration blocks have been applied for. In terms of small scale exploration, many blocks have been granted but activity is limited. Notable existing mining projects include the Monywa copper mine and Tagauun Taung nickel project. Myanmar mining

Myanmar is widely expected to pursue more substantial political, legal and economic reform which is likely to mean improved conditions for investors. Of course, Myanmar, like most mining jurisdictions, presents investors with a unique set of challenges. Under -exploration means there is a shortage of historical data and successful precedents which new entrants can study. Myanmar persists with dead rents which are higher than most other global jurisdictions and signing on bonuses at the exploration stage. Myanmar also suffers from inadequate and degraded infrastructure. However the government, in cooperation with the private sector, has already commenced a number of capital works projects and has made improvement of the country’s infrastructure a policy priority.

For additional information on mining in Myanmar please refer to Charltons presentation “Advising Mineral Resources Companies in Myanmar“.

Mining Law in Myanmar

The core pieces of mining legislation in Myanmar are the Myanmar Mines Law (“Mines Law“), the Law Amending the Myanmar Mines Law (2015) and Government Myanmar Mining Rules (2018) (the “Mining Rules“).

The Mines Law was updated in December 2015. The new Myanmar Mining Rules (the “Mining Rules”) was promulgated in February 2018 by repealing the old Myanmar Mining Rules (Notification 125/1996) and it was updated again in July 2019. Charlton’s analysis of the updated Mines Law can be found here.

A number of other related laws also apply to the mining sector such as the State Owned Economic Enterprise Law, Myanmar Companies Law, Myanmar Investment Law, the Protection of Biodiversity and Protected Natural Areas Law, Environmental Conservation Law, Environment Impact Assessment Procedure, Forest Law, the Explosive Substances Law, the Occupational Safety and Health Law, the Conservation of Water Resources and Rivers Land, the Myanmar Insurance Law and the Cultural Heritage Law.

The Ministry of Natural Resources and Environmental Conservation (MNREC) is the responsible ministry for the administration and regulation of the mining industry. The Department of Mines (DOM), which sits within the MNREC, is in charge of the administration of mineral policy, mine inspection, environmental conservation and royalty collection.

The mineral policy of the Myanmar Government aims:-

To extend the participation of local and foreign enterprises and state-owned enterprises for exploration and production of mineral resources;
To emphasize environmental preservation in exploration and production of mineral resources;
To emphasize rehabilitation of abandoned mines;
To review the world market update and look forward to production and marketing of mineral commodities which are demanded;
To strive for fulfilling domestic demand and promote export the increased production of mineral commodities; and
To strive for production and marketing of enhanced downstream products of metals, gems and jewellery.

The government’s current practice is to enter into production sharing contract with miners. A mining company can invest as a foreign direct investment or joint investment with local company.

Myanmar Mining Joint Ventures

Foreign mining companies can establish mining joint venture in Myanmar in cooperation with local partners (an individual, a private company).

The DOM utilises Production Sharing Contracts (PSCs). Under PSC agreement, the investors are required to contribute 100% of investment. The government takes a share of the production according to a production sharing ratio agreed between the mining joint venture partners. The production sharing ratio is based on the mineral commodities such as Gold, Copper, Lead, Zinc, Tin, Tungsten, Nickel, Manganese, Ind Advising on Myanmar’s Mining Sector ustrial Raw Mineral and Coal and the commodities current price on the London Metal Exchange.

The DOM has issued information on http://www.mining.gov.mm/DM/1.DM/Details.asp?submenuID=7&sid=343 and the Myanmar Extractive Industries Transparency Initiative (EITI) Report covered on oil and gas, gems and jade, other minerals and pearls in the Myanmar Mining Sector.

At present, the Myanmar-China Non-ferrous Metal & Mining Co., Ltd (China), Myanmar-Pongpipat Co., Ltd (Thailand), Simco Songda (Vietnam) have invested in mining joint ventures in Myanmar on a PSC basis.

Steps in the Investment Process

As part of the investment process mining companies seeking to undertake projects in Myanmar should follow the steps set out below:-

Send letter of courtesy call to the Union Minister through the respective Embassy in Myanmar to Ministry of Foreign Affairs and to DOM;
Discuss the investment opportunities in mining sector mainly focus on mineral commodity and targeted area;
Site visit with responsible departments after discussion;
Submit a proposal to DOM and copy to relevant departments;
Obtain recommendations from the respective authorities;
Apply to MIC with the approval of DOM and other recommendation documents;
Apply for a company registration at Directorate of Investment and Company Administration (DICA) while submitting to Myanmar Investment Commission (MIC).