The Regulation of Implementation of License Transfer and Royalty (Redevance) Tenders of the General Directorate of Turkish Coal Enterprise (“Regulation”) has been promulgated in the Official Gazette dated 30.05.2022 and entered into force.
The procedures and principles of tendering practices regarding the license transfer and/or royalty processes of the mine sites at the disposal of the Directorate General of Turkish Coal Enterprises Authority (“Authority”) have been determined with the Regulation.
The subjects we consider important regarding the Regulation can be summarized as follows.
WHAT IS A ROYALTY (REDEVANCE) AGREEMENT?
Firstly, we would like to give a brief explanation of Royalty contracts before moving on to the developments introduced by the regulation.
In the article 4 of the Regulation for the Implementation of Mining Operations, a royalty contract is defined as the contract signed by a license holder with third parties or organizations to provide them the right of disposition of the whole or a part of a license area so that they can use and produce the minerals in the license area.
In royalty contracts, the mining license areas are left to the use of a real or legal person with a contract to operate the mine for a certain period, provided that the license of the operation right of the mine remains at the license holder. Under this contract, the real or legal person undertaking the operation of the mine pays the license holder a fee equal to the amount determined by the parties for each ton of mine it produces.
SCOPE OF THE REGULATION
The regulation only covers the following processes regarding the mines in the concession area of the Turkish Coal Enterprises Authority (“Authority”);
- The operation of mining sites and/or quarries and disposal sites,
- The exploration and operation of coal-derived methane gas in mining sites,
- The operation of impure mined ores that are generated during the operation of mine sites and/or quarries, waste areas and/or reserves under these areas,
- Tendering of mining sites and/or quarries, waste areas and related licenses,
- Searching for reserves of leonardite resources in mining sites and tendering licenses for these operations,
- The procedures, principles, methods to be applied in the tenders of these above-mentioned works and the establishment and functioning of the commissions authorized to conduct these processes, and the responsibilities and liabilities of the members of these commissions.
With the Regulation, all issues related to the tender processes such as the announcement procedure, technical specifications, the mandatory clauses that must be added to the contracts to be signed after the tender, and the guarantees to be requested are explained in detail.
RESPONSIBILITIES OF THE AUTHORITY REGARDING THE TENDERING PROCESSES
The authorized institution for tender of the works within the scope of this Regulation will be the Board of Directors of the Authority. The Board of Directors may delegate all or part of its powers to the persons/units that it deems appropriate.
The Authority will ensure transparency, competition, equal treatment, reliability, confidentiality, public scrutiny, meeting the needs in proper circumstances and on time, and efficient use of resources in the tenders it will hold.
COAL STOCKED BY OPERATORS MAY BE PURCHASED BY THE AUTHORITY
Another important matter determined by the Regulation is that the coals stocked by the operators may be purchased by the Authority. Upon the request of the operator, the coals that the operators produce and stock within the contract period may be purchased by the Authority for a price determined by research regarding the possible economic opportunity that the Authority can benefit from.
AT THE MINE SITES BEING OPERATED ON THE CONDITION OF ESTABLISHING A THERMAL POWER PLANT, OPERATORS WILL BE ABLE TO SELL COAL WITH THE AUTHORITY’S PERMISSION
By the Regulation, in case there is a request for permission submitted by an operator, in the mine sites that are being operated on the condition of establishing a thermal power plant, the Authority may grant permission for the operators to sell coal to others, on the condition that it does not prejudice the main purposes targeted by the contract and the reason for which the reserve is allotted and does not reduce the energy production and does not affect the rights and obligations adopted in the contract.
In determining the share or rate per ton, the Directorate General of Mining and Petroleum Affairs’ latest sales prices depending on the characteristics of the coal to be sold will be taken into consideration together with the share or rate per kWh determined in the contract between the operator and the Authority for electrical energy.