MINEX Forum

Tag: mineral extraction tax

  • New Support Measures for Kazakhstan’s Mining and Metallurgy Industry Under Consideration

    New Support Measures for Kazakhstan’s Mining and Metallurgy Industry Under Consideration

    In a recent meeting, the Committee of Geological, Mining, Coal, and Metallurgical Industries of the Presidium of Kazakhstan’s National Chamber of Entrepreneurs discussed new support measures for the mining and metallurgy industry. The proposed measures aim to attract additional investments to the sector.

    One key proposal is to reduce the mineral extraction tax by 10 times for companies engaged in extracting metals from technogenic mineral formations. Additionally, projects for processing mineral raw materials could be granted the same benefits as priority investment projects listed in Kazakhstan’s Entrepreneurial Code.

    Furthermore, the committee considered fully deducting expenses for geological exploration and proposed a five-year exemption from the mineral extraction tax for subsoil users developing low-grade and capital-intensive deposits (with an internal rate of return not exceeding 15%). Such mechanisms are already in place in the oil and gas sector.

    In 2025, Kazakhstan’s national railway holding, NC “KTZh”, plans to increase price limits on export transportation tariffs. Last year, railway transportation showed negative dynamics: coal transportation decreased by 7%, iron ore by 10%, and non-ferrous metals by 5%.

    To prevent mining and metallurgical enterprises from losing export markets, parties are trying to agree on a special methodology for decision-making on tariff reductions. One of the main criteria for setting prices will be the financial condition of the producers.

  • Junior Mining Companies in Kazakhstan to Transition from Mineral Extraction Tax to Royalties in 2025

    Junior Mining Companies in Kazakhstan to Transition from Mineral Extraction Tax to Royalties in 2025

    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.

  • Kazakhstan to Shift Junior Exploration Companies from Mineral Extraction Tax to Royalties by 2025

    Kazakhstan to Shift Junior Exploration Companies from Mineral Extraction Tax to Royalties by 2025

    Vice Minister of Industry and Construction Iran Sharkan announced that starting in 2025, junior exploration companiesthat have already discovered and confirmed reserves of solid minerals will be transitioned from the mineral extraction tax (MET) to royalties. Sharkan explained that the MET has become outdated and cumbersome, necessitating a shift to a universally understood international royalties system. The phased transition will begin with junior companies and eventually include all entities.

    At the AMM-2024 forum, Sharkan emphasized that the transition to royalties marks the logical conclusion of the mining reform initiated in 2017. The Ministry, in collaboration with colleagues from the Ministry of National Economy and the Ministry of Finance, aims for a smooth, environmentally friendly transition. Discussions will be held with the industry to define what constitutes a junior company, which Sharkan described as a new player in mining that has confirmed reserves and is moving to the extraction stage.

    Sharkan also mentioned that Kazakhstan will continue adopting modern standards. While old deposits protected by the State Reserves Committee (SRC) standards will remain in force, 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 (AMME), suggested setting the MET for technogenic mineral formations (TMFs) at 0.1 of the existing rate to encourage investment in TMF processing.

    Kononov advocated for synchronizing sectoral and tax legislation, noting that TMFs not classified as subsoil should not be taxed under the MET. He proposed a reduced coefficient, such as 0.1 of the current MET rates, for TMFs owned by the state. These measures would boost large-scale processing of TMFs in the country. Kononov criticized the current tax regime for making TMF extraction projects unprofitable and called for clearer taxation norms for solid minerals in TMFs.

    Since January 2023, MET rates have increased by 50% for exchange-traded metals and by 30% for others. Kononov warned that any further tax increases would be detrimental to the industry.