In a significant shift for Kazakhstan’s mining industry, junior mining companies that have already discovered solid minerals and confirmed their respective reserves will transition from the Mineral Extraction Tax (MET) to royalties starting in 2025, announced Vice Minister of Industry and Construction Iran Sharkan.
“Everyone knows that the MET has long outlived its usefulness. It’s a cumbersome tool. We need to move to an internationally recognized and understood system of royalties. We support this transition. Fundamentally, we plan to start the phased transition in 2025, beginning with junior companies and then expanding to all entities,” Sharkan stated at the AMM-2024 forum. He emphasized that this reform in subsoil use marks the logical conclusion of a process that began in 2017.
Sharkan elaborated that the ministry is collaborating with the Ministry of National Economy and the Ministry of Finance to ensure a smooth and environmentally responsible transition. Additionally, the ministry plans to discuss with the industry how to define junior companies, which he described as new players in subsoil use who have defended their reserves and are moving to the extraction phase.
Furthermore, Sharkan highlighted that Kazakhstan will continue to adopt modern standards. Existing deposits protected under the GKZ (State Reserves Committee) standards will remain valid, while all new projects will adhere to the international reporting system.
In October 2023, Maxim Kononov, the first deputy executive director of the Republican Association of Mining and Metallurgical Enterprises (AGMP), noted that the MET for technogenic mineral formations (TMF), residues left by subsoil users, should be set at 0.1 of the current rate to encourage investors to process TMFs. He advocated for synchronizing industry and tax legislation to ensure that TMFs, which do not constitute subsoil, are not subject to MET.
Kononov argued that such measures would spur large-scale TMF processing projects in Kazakhstan. He criticized the current tax framework, stating that applying standard MET rates to TMFs makes such projects unprofitable. He also pointed out the ambiguity in taxing solid minerals extracted from TMFs owned by taxpayers and not considered subsoil under the Subsoil Code.
With MET rates increased by 50% for exchange-traded metals and by 30% for others since early 2023, Kononov warned that any further tax burdens would harm the industry.
