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The new Portuguese regulation on mineral deposits

Tuesday 21 September 2021

Manuel Santos Vitor
Abreu Advogados, Lisbon
manuel.s.vitor@abreuadvogados.com

Tiago Corrêa do Amaral
Abreu Advogados, Lisbon
tiago.c.amaral@abreuadvogados.com

Daniel Santos Almeida
Abreu Advogados, Lisbon
​​​​​​​daniel.s.almeida@abreuadvogados.com

Introduction

Mining is an important economic activity in Portugal and a priority for the Portuguese government. According to the regulatory agency for the mining sector, the Directorate-General for Geology and Energy (DGEG), in February 2021, there were 48 exploitation agreements, three experimental exploitation agreements and 22 prospecting and exploration agreements ongoing across the country. Furthermore, there were 101 ongoing orders. These impressive numbers may justify the strong contribution of the mining sector to the Portuguese economy and exports, which according to the Portuguese Institute of Statistics (INE), contributed about €900 million in  exports in January 2020, equivalent to 8.8 per cent of the total Portuguese exports.

Identified and proven lithium resources appear to be the driving factor of the approval of the legislation now enacted. The Government has announced the launch of public tenders to award lithium mining concessions and it would appear this will happen soon as there are no other relevant legislative obstacles to such tenders. The Government has expressed its intention  to have such resources extracted and also processed in Portugal and ultimately exported ready as an industrial asset, thus ensuring the vertical development of lithium resources in Portugal. Certainly this is a very interesting development.

This regulation is sustained on three fundamental vectors, which, as mentioned in the diploma, ‘form, among themselves, a system of communicating vessels, in which each one of them enhances the fulfillment of the others, creating mutual synergies that will not fail to optimise, as mentioned above, the implementation of multiple public policies that intersect in this activity’.

First and foremost, it is critical to ensure compliance with the most demanding standards on environmental sustainability during  exploitation, while also ensuring maximum economic value for the benefit of the country.

Therefore, exploitation  and the use of mineral deposits can only be developed if the process obeys the principles of ‘green mining’, that is, obeying strict principles of environmental sustainability, in accordance, notably, with the environmental-related programmes approved by the Government under the National Energy and Climate Plan and the Roadmap for Carbon Neutrality 2050. Also, according to this vector, wherever possible, mining should not be carried out in protected areas classified under international law and areas included in the so-called restrained and protected areas covered by the so-called Natura 2000 Network.

A second vector is related with the reinforcement of the information generally made available and public participation, as well as the reinforcement of the municipalities’ intervention, ensuring greater transparency of the administrative procedures. In this regard, anyone, including associations representing environmental, economic, social and cultural interests, may participate in all procedures before the award of rights of assessment of geological resources. Apart from the specific consultation requirements set forth in this diploma, the same has to be combined with other legislation from which additional consultation requirements may result, including without limitation regarding zoning and environmental constraints and the relevant supervisory/regulatory entities in these areas.

Finally, the third vector consists of an envisaged fair distribution of the economic benefits of the mining activity between the state, the municipalities where it is located and their populations. This third vector is revealed, for example, in the obligation of the concessionaire having its registered offices in one of the municipalities where the exploitation is located, thus ensuring the local distribution of part of the income tax paid by the concessionaire.

Mining rights

Pursuant to the applicable legal provisions, the following definitions should be considered:

  • ‘Mine’ includes the agglomeration of the mineral deposits covered by the concession, the mining annexes, the works and the immovable assets used in the exploitation of the mine.
  • ‘Prospecting and exploration’ includes the activities aiming at the discovery of mineral occurrences and the determination of their characteristics until verification of economic discovery (exploitation activities).
  • ‘Exploitation’ covers the activities following prospecting and exploration, involving the recognition, preparation and extraction of raw ore, as well as its treatment and transformation.

The law sets forth four different sets of mining rights, which may be granted:

  • Prior assessment rights to be applied for by any interested party willing to research and develop studies on metallic mineral resources which will allow a better knowledge of the geological potential of a given area. These rights are granted for a one year period and may not be extended.
  • Prospecting and exploration rights granted by means of the execution of an administrative agreement, regarding mineral deposits and granted for a maximum term of five years (including possible extensions), after a public tender procedure or a private application by an interested party.
  • Experimental exploitation rights which may be granted for a maximum period of five years by means of the execution of an administrative agreement with the state allowing the holder of such mining rights to develop already identified mining resources but regarding which there are no clear conditions that allow progressing into a full exploitation stage.
  • Exploitation rights or the definitive concession for exploitation of mining resources (appraisal, development and production contract) which is granted to the holder of previous mining rights through which the resources have been revealed. These rights may be granted for a maximum term of 90 years (including possible extensions).

Public participation

Everyone, including associations representing environmental, economic, social and cultural interests, may participate in all procedures before the award of assessment rights of geological resources.

As mentioned, apart from the specific consultation requirements set forth in this diploma, the same has to be combined with other legislation from which additional consultation requirements may result, including without limitation on zoning and environmental constraints and the relevant supervisory/regulatory entities in these areas.

The DGEG is the entity responsible for preparing these procedures, notably to set the public consultation rules and duration at the www.Participa.pt portal.

Prior assessment rights of geological resources

The activity of prior assessment rights of geological resources is carried out by the state and by private parties, in this latter case after the award of private use rights through an administrative contract.

The following activities are qualified as assessment of geological resources: (1) prior assessment; (2) prospecting and exploration; and (3) experimental exploitation, with increasing degrees of complexity.

The awarding of prior assessment rights is carried out at the request of the interested party. In the case of prospecting and exploration, the state may launch tender procedures for the award of these rights in a more efficient and competitive manner.

Protected areas, areas classified under an international law instrument and areas included in the Natura 2000 Network, among others, are excluded from any possible award or procedure.

Award of exploitation rights

The right to the exploitation of geological resources is awarded to the holder of prior assessment, prospecting and exploration or experimental exploitation rights, whenever mineral resources have been identified. The prospecting, exploration and use of mineral deposits can only be carried out in compliance with the so-called green mining principles.

The mining plan, to be prepared by the concessionaire and approved by the DGEG, becomes the centrepiece of the procedure, incorporating all the elements of the exploration, as well as the environmental, landscape recovery and restoration plan.

Entities in the area of ​​the environment, nature conservation, planning and cultural heritage intervene in all stages of the procedures for the award of private rights. The implementation of the required environmental and landscape restoration plan shall be guaranteed by the concessionaire through financial guarantees.

All procedures before the award of private use rights are preceded by the referred public participation phase. It is now mandatory to proceed with public clarification sessions in each of the municipalities where the exploitation is located, organised by the party interested in the awarding of private rights. This is applicable to the awarding of exploitation concessions as well as to prospecting and research rights. On exploitation sites, notably in the case of underground or metallic minerals resources, the DGEG may determine the setting up of a monitoring committee that will include a representative from each municipality and parish council where the exploitation is located and a representative of local or regional associations for the protection of the environment and the promotion of economic development.

It is also mandatory for the concessionaire to have its registered office in one of the municipalities where the exploitation is located, thus ensuring the local distribution of part of the income tax paid by the concessionaire. Moreover, the concessionaire is also obliged to prepare a so-called social responsibility plan. With regard to exploitation charges, a part of the royalties payable, hitherto exclusively reserved to the state, also becomes a local revenue of the municipalities involved, thus allowing an additional  direct benefit to the populations affected by the mining project.

Conclusion

The decree law entered into force on 8 May 2021 and regulates the basic law on geological resources with regard to mineral deposits, Law No 54/2015 of 22 June. It has taken almost six years to enact this long awaited diploma, which should open the doors to new mining tender and projects, especially the long awaited development of lithium projects.

Given the importance that it may represent to the extractive industry sector, in the specific case of mines, this diploma may have a very significant impact in the sector and in the extractive activity in Portugal, notably through the entry of new players that will now face clear rules governing the award of mining rights, mostly pursuant to public tender procedures.

The new diploma will not affect any existing mining rights contracts. The concession contracts in force shall be adapted to the provisions of the decree law if, following the initiative of the concessionaire or by extension of the respective term of validity, they are subject to any amendments. In addition to new mining projects, the decree law also foresees the possibility to re-exploit economically pre-existing and deactivated mines.

The decree law introduced new rules about public participation and the promotion of sustainability values during the mine’s activities, and adapted the procedures for prior assessment rights of geological resources, for prospecting and exploration rights, as well as for experimental exploitation rights, and specifies the exploration rights, namely the rules applicable to this kind of contracts.