Mining 2020

Last Updated January 22, 2020

Afghanistan

Law and Practice

Authors



RIAA Barker Gillette AFG (RIAABG) is an internationally recognised law firm that is committed to offering the highest standard of legal services to its clients. It is also one of the largest and most reputed international firms in the region. RIAABG has gained recognition by maintaining the highest standards of professional excellence. Its membership of Lex Mundi means that it is affiliated with the finest global law firms in more than 106 jurisdictions around the world. RIAABG has 50 years of global legal expertise and now has one of the largest presences by an international legal service-provider in Afghanistan. It has a strong team of dedicated, qualified and experienced lawyers providing a broad spectrum of legal services. As the official languages of the Afghan laws are Pashto and Dari, the lawyers in the Kabul office are fluent in both languages. All staff are also fluent in English, the most widely used language for commercial transactions. By advising its corporate clients, the firm has developed a niche in the areas of project finance, mergers and acquisitions, privatisation, power projects, oil and gas projects, infrastructure projects, banking and finance, intellectual property, non-profit and social sector development, employment and labour law matters, telecommunication, construction, mining, pharmaceutical sector, regulatory affairs, customs, corporate registration, corporate restructuring, joint ventures, public-private partnership, and taxation.

There are more than 1,400 mineral fields in Afghanistan, according to a recent geological survey. These contain deposits of copper, lithium, talc, marble, gold, uranium, barite, chromite, coal, iron ore, lead, natural gas, petroleum, precious and semi-precious stones, salt, sulfur, and zinc. Gemstones include high-quality emerald, lapis lazuli, red garnet and ruby and others, and the vast mineral wealth of Afghanistan is estimated to exceed three trillion dollars.

The promulgation of the Minerals Law in October 2018 has enabled the private-sector investment in the mining sector to have the benefit of a clear set of legal provisions relating to each aspect of investment in the mining sector. The previous lacunas of uncertainty as to the manner in which the various stages of the mining processes were to be dealt with by the regulator have now been removed.

The legal system of Afghanistan is based on Civil Law. The Minerals Law, published in the official gazette No 1315, dated 13th October 2018 (the Minerals Law), is the principal legislation for the mining sector. This law sets out provisions on mineral deposits’ ownership, eligibility of obtaining mineral rights, types of mineral rights, mineral activities regulating bodies, bidding process, ensuring transparency and eliminate corruption, investment protection, the rights and obligations of the mineral right-holders in terms of health and safety, environmental and social or community development and abiding by the Extractive Industries Transparency Initiative's (EITI) standards in the mining sector.

Other sources of mining legislation in Afghanistan also include the following:

  • the Regulation of Mineral Processing, published in the Official Gazette No 1007, dated 31 December 2009;
  • the Private Investment Law, published in the Official Gazette No 869, dated 21 December 2005;
  • the Hydrocarbons Law, published in the Official Gazette No 1277, dated 11 December 2017;
  • the Income Tax Law, published in the Official Gazette No 976, dated 18 March 2009;
  • the Environment Law, published in the Official Gazette No 912, dated 25 January 2007;
  • the Regulation on Evaluation of Environmental and Social Impacts, published in the Official Gazette No 1276, dated 9 December 2017;
  • the Hydrocarbon Regulation, published in the Official Gazette No 1000, dated 1 November 2009;
  • the Law on Expropriation, published in the Official Gazette No 1258, dated 10 May 2017; and
  • the Law on Managing Land Affairs, published in the Official Gazette No 1254, dated 15 April 2017.

The natural resources, including mineral deposits, are owned by the state in Afghanistan, even if the mineral deposits are located on private property. However, the minerals extracted in compliance with the conditions of a licence are considered the property of the licence-holder. Article 9 of the Constitution of the Islamic Republic of Afghanistan 2004 (the Constitution) provides that “mines and other subterranean resources, as well as historical relics, shall be the property of the State. The State shall administer, control and regulate Mineral resources and Mineral Activities”. However, Article 15 (2) of the Minerals Law provides that “all Minerals extracted under a licence in accordance with the conditions of the Licence (in any form of Product) are the property of the Licence-Holder.”

The principal role of the State is to promote the efficient development of the mineral industry by the private sector and is one of grantor-regulator in the mining sector. The state grants licences to investors and companies to extract minerals in Afghanistan. The state issues licences that allow all mineral activities in the country to be conducted in accordance with the provisions of the relevant Afghan laws and regulations.

The Ministry of Mines and Petroleum (MoMP), the Mining Technical Committee, the High Economic Council, the National Procurement Commission, the National Procurement Authority and the Cabinet of the Islamic Republic of Afghanistan have important and specific roles in different decision-making processes under the Minerals Law, 2018.

The MoMP is responsible for the administration and implementation of the Minerals Law. The minerals under the soil are owned by the State, but when extracted according to the licence, the minerals become the property of the licence-holder, who has to pay royalties to the State.

In Afghanistan, there are no mandatory national or government joint ventures, contracting or participating in the mining sector, as the government of Afghanistan tries to encourage private investment in the mining sector. Foreign natural and legal persons are not eligible to hold a small-scale mining licence. Legal persons, however, can hold a large-scale mining licence (Article17 of the Minerals Law).

The role of each relevant authority is discussed as follows:

Ministry of Mines and Petroleum (MoMP)

The MoMP is the central organ of the state administration responsible for guiding the mining sector, geological surveys, and similar matters that are deemed necessary by the authorised state organs, enhancement of the level of production and improvement of the quality of products.

The functions of the MOMP include the development in all possible ways of geological resources, regulating mines surveys, preservation and protection subterranean natural resources, utilising natural resources in light of economic benefits, setting the prices of products of the MOMP and its associated enterprises, guidance and control of the sale and marketing of products of enterprises of the MOMP, development and strengthen of relations with foreign and local business companies, issuing licences and administering the mining contracts, conducting tender process, obtaining performance bonds from the contractors, approving or cancelling large- or small-scale mining areas and prohibited areas, promoting effective use of raw materials and mines/hydrocarbons etc. The MoMP has to provide the necessary co-operation to the Mining Technical Committee (Article 5 of the Minerals Law).

The Mining Technical Committee (MTC)

The MTC is an independent committee and is regulated under the Minerals Law. The MTC comprises the Deputy Minister responsible for the Geological Survey and the Deputy Minister of Technical Affairs, and five other appointed members. These members shall have specific skills and experience in mining, finance, and legal sectors. The obligations and responsibilities of the MTC include, but are not limited to: providing technical input to the decisions made under the Minerals law, making recommendations in respect of a declaration or cancellation of large- or small-scale mining areas and prohibited areas, evaluating applications for small-scale mining licences, evaluating feasibility studies and mining proposals and issuing mine reports, making recommendations in respect of variations to exploration programmes, mining proposals or small-scale work programmes, making recommendations in respect of the export policies and the use of existing infrastructure, and the suspension and revocation of exploration licences and exploitation licences, and evaluating tender proposals and issuing evaluation reports (Articles 7 and 8 of the Minerals Law).

The High Economic Council (HEC)

The HEC is involved in different decision-making under the Minerals Law. The HEC approves procedures for the conduct of meetings of the Mining Technical Committee, endorses restricted minerals programmes and endorses or rejects the declaration or cancellation of large- and small-scale mining areas and prohibited areas. It provides approval to the MoMP to negotiate mining concessions to replace transitional licences and approves or rejects mining proposals and determines any conditions relating to the mining proposal. HEC also recommends the grant or refusal of small-scale mining licences and approves or refuses variations to exploration programmes, mining proposals or small-scale work programmes. Furthermore, the HEC approves guidelines, approves or rejects the award of Mining Concessions or terminates bidding processes, approves export policies, approves model forms of Mining Concessions, approve the suspension and revocation of exploration licences and exploitation licences and approves compulsory acquisition of land. HEC approval is also required to declare an area of land as either open or closed for mining activities (Article 9 of the Minerals Law).

The HEC is headed by the President, and the Chief Executive of Afghanistan. Some of its members are the Second Vice President, the first Deputy to the Chief Executive, the Minister of Finance, the Minister of Economy, the Minister of Foreign Affairs, the National Security Adviser, the Minister of Industries and Commerce, the Minister of Water and Energy, the Minister of Mines and Petroleum, the Minister of Public Works, Minister of Agriculture, Irrigation and Livestock, the Senior Advisers to the President, the Governor of the DAB, and the Minister of Urban Development and Land. 

National Procurement Commission (NPC)

The NPC is established pursuant to Article 54 of the Procurement Law of Afghanistan. The sole responsibility and power of the NPC under the Minerals Law is to approve the award of the Mining Concession or terminate the bidding process (Article 11 of the Minerals Law). If the HEC approves the award of a mining contract, the NPC must determine whether to approve the award after considering the report of the NPA and the terms of the mining contract or terminate the bidding process (Article 45(2) and (6)).

The NPC has been established by the President of Afghanistan for the review and approval of the award of procurement contracts of monetary value beyond the powers of "award authority" and to determine the functions and authorities of "procuring entities" (Article 54 of the Procurement Law). The President of Afghanistan is the head of the NPC and appoints its members as well as changes the composition of the NPC, whenever required. The NPC has the authority in special circumstances, considering the nature of situation and for the greater interest of Afghanistan, to take appropriate decisions/resolution.

The National Procurement Authority (NPA)

The NPA was established pursuant to the Procurement Law. The responsibilities of the NPA under the Mineral Law are to monitor bidding processes, prepare audit reports, prepare guidelines, and make recommendations to the MoMP in relation to practices and procedures for bidding processes (Article 10 of the Minerals Law).

The Islamic Republic of Afghanistan Cabinet

The Islamic Republic of Afghanistan Cabinet is responsible to determine the salaries of appointed members of the mining technical committee, approve restricted minerals programmes, approve or reject the declaration or cancellation of large- and small-scale mining areas and prohibited areas, and endorse or reject the award of mining concessions or terminate the bidding processes (Article 12 of the Minerals Law).

The Cabinet is the highest executive and administrative body of the government. Decisions of the Council of Ministers are to be implemented by the citizens of Afghanistan and government officials and offices. The Cabinet consists of the President of the Islamic Republic of Afghanistan and the Ministers (Article 3 of the Law of the Council of Ministers of Afghanistan).

The mineral rights in Afghanistan have a constitutional basis and are also derived from other statutory laws. After the Constitution, the Minerals Law is the principal legislation for mineral rights.

Article 9 of the Afghanistan Constitution states “Mines and other subterranean resources as well as historical relics shall be the property of the state.” Article 15 of the Minerals Law also provides that “all Minerals existing in their natural state are the property of the State.” Sub-article (2) of this Article states provides that, “All Minerals extracted under a licence in accordance with the conditions of the Licence (in any form of Product) are the property of the Licence-holder.”

Based on the above-mentioned articles, it is clear that mineral rights have the status of property. If minerals have not been extracted from the land, they are considered property of the state. However, if they have been extracted by a licence-holder in accordance with the conditions of a licence, the extracted minerals are considered the property of the licence-holder.

As previously stated, the MoMP is the relevant authority for the mining projects and it has the executive power to issue all types of licences, whereas the HEC, on the recommendations of the MTC, is the granting authority for the small-scale mining licences (Article 29 of the Minerals Law). For large-scale mining contracts, the Cabinet with the confirmation from the NPC and the HEC is the relevant granting authority (Article 45 of the Minerals Law). For large-scale mining licences, the HEC with the recommendation from the MTC is the granting authority (Article 28 of the Minerals Law). Accordingly, the granting authority in Afghanistan for a small-scale mining licence is the HEC and for large-scale mining contracts is the Cabinet. The MoMP has provincial directorates in all provinces of Afghanistan and there is no overlapping of jurisdictions. The mineral rights are granted through a contract between the MoMP and a private company.

Security of Tenure is guaranteed through the legal force of the contract between the licence-holder and the MoMP. The term of the contract with respect to length and renewal are reflected in the licence issued by the MoMP. An exploration licence is granted for three years and can be extended for another three years. A small-scale licence is granted for five years and can be renewed for another five years. An exploitation licence is granted for a term of 30 years and can be renewed for another 15 years. The renewal or extension of the licence is subject to the approval of the MoMP (Article 31 of the Minerals Law).

Progressing from exploration to mining requires an exploitation licence, which is issued by the MoMP after confirmation by the HEC, the NPC and approval by the Cabinet (Article 28 of the Minerals Law). If the licence-holder fails to comply with the provisions of the contract or licence or the minerals law, in the first instance the licence-holder will be fined. If there is a second infraction the licence will be suspended after approval by the HEC and with the recommendation of the MTC. If the suspension has not been resolved within one year, the licence will be cancelled. The cancellation of a licence must be approved by the HEC with the recommendation from the technical mining committee (Article 58, 59, 60 of the Minerals Law).

Operating control and inspection of the mining projects is carried out by the Technical Mining Committee.

Environmental impact assessment is an important part of the any natural resources project. Afghanistan has developed a clear impact framework, that is in line with the international standards. The Environmental laws and regulations in Afghanistan include:

  • the Environmental Law, published in the Official Gazette No 912, dated 25 January 2007;
  • the Regulation on Evaluation of Environmental and Social Impacts, published in the Official Gazette 1276, dated 9 December 2017;
  • the Regulation on Decrease and Prevention of Air Pollution, published Official Gazette 991, dated 11 August 2009;
  • the Regulation on Controlling Materials Destructive to the Ozone Layer, published in the Official Gazette 894, dated 6 August 2006;
  • the Regulation on Reduction & Prevention of Noise Pollution, published in the Official Gazette 1210, dated 18tApril 2016;
  • the Regulation on Bed and Surrounding of Water Resources and Water Infrastructures, published in the Official Gazette 1187, dated 10 October 2015; and
  • the Law on Managing the Jungle Affairs, published in the Official Gazette 1087, dated 10 September 2012.

Anyone who wants to undertake an exploration and a mining project, plan policy or activity must submit accurate information to the National Environmental Protection Authority (NEPA) in order for it to determine the potential adverse effects and positive impacts of the project, plan, policy or activity. The NEPA reviews the submitted information and may authorise the project, plan, policy or activity with or without conditions, provided that the potential adverse effects of the project, plan, policy or activity on the environment are unlikely to be significant. If the adverse effects are significant, the NEPA may require the applicant to submit an Environmental Impact Statement or a Comprehensive Mitigation Plan (Article 14 of the Environmental Law).

A licence-holder is obliged to comply with the Environment Law and is required to avoid, minimise, mitigate and remediate impacts to the environment caused by the conduct of mineral exploration and extraction activities and rehabilitate the land where the mining activities have taken place (Article 63 of the Minerals Law).

A small-scale licence-holder must prepare and submit proposed environmental management plans. An environmental impact statement or a comprehensive mitigation plan is required under the Environment Law and the Environmental Management Plan, which must meet the requirements of these documents (Article 28 of the Minerals Law).

The exploration or exploitation licence-holders are required to submit the proposed environmental management plan and have the plan approved prior to commencing ground-disturbing works. If a licence-holder fails to submit the environmental management plan, it may result in the rejection of the application for the licence (Article 35 of the Minerals Law).

The NEPA has the authority to review proposed environmental management plans and has to assess whether the plan will avoid, minimise, mitigate and remediate impacts to the environment caused due to the mineral extraction activities as required by the Minerals Law. The NEPA may decide to impose conditions on the proposed environmental management plan or require the licence-holder to amend it (Articles 63 and 64 of the Minerals Law).

Environmental licences are issued on a national level by the NEPA. The NEPA is a competent authority and its officials are very well-trained. As such, the NEPA is a very efficient and effective organ of the state which regulates the environmental laws and compliance of the Environmental Laws in Afghanistan.

The Environment Law establishes categories of protected areas, which are: strict natural reserves, national parks, natural monuments, habitat/species management areas, protected landscapes, managed resource protected areas (Article 40 of the Environmental Law).

The NEPA develops a Management Plan for each protected area which identifies activities permitted within the protected area and also identifies activities appropriate for surrounding areas (Article 39 of the Environmental Law).

Pursuant to the provisions of the Expropriation Law, properties and land that contain historic and cultural heritage and national protection areas cannot be expropriated (Article 6 of the Law on Expropriation).

Furthermore, according to the Minerals Law, if a licence-holder discovers an archaeological or cultural relic or site in the course of conducting mineral extraction activities, he or she has to notify the MoMP and the Ministry of Culture and Information. The licence-holder shall cease conducting mineral activities in proximity to the archaeological or cultural relic or site until the MoMP grants approval for the recommencement of mineral activities, which may require compliance with additional conditions. The Ministry of Culture and Information is obliged to provide a report to the MoMP within three months regarding the archaeological or cultural relic or site and any additional conditions which must be complied with by the licence-holder (Article 73 of the Minerals Law).

Accordingly, the Environmental Laws only have an impact on exploration and mining in the protected areas and, in the case where a cultural relic is discovered at an operating mine, the operation of the mine can be postponed or halted based on the decision of the MoMP or the Ministry of Culture.

Community engagement and social impact assessment are common components of many mining projects. Afghanistan regulates all social impact projects through a Citizen Charter programme.

A licence-holder for any mining project must submit and obtain the approval of a Community Development Plan and a Local Content Plan from the MoMP prior to commencing ground-disturbing work and the licence-holder must comply with any undertakings contained in or conditions imposed upon approval of the plans. The MoMP is also required to appoint an ombudsman who shall invite and receive submissions from the local community in relation to any concerns in connection with the conduct of mineral mining activities. The licence-holder must as a priority also hire local community personnel.

Furthermore, if a mining licence is granted for land that is owned or occupied by another person within 250 metres’ proximity of the licensed land, the licence-holder has to obtain the consent of the owner or occupier of the land prior to undertaking mineral-mining activities. The licence-holder has to pay the owner or occupier compensation for any loss suffered by the owner or occupier resulting from mining activities. However, if the owner or occupier does not give consent to the project, the land can be expropriated pursuant to the provisions of the Law on Expropriation. However, if the land is not within 250 metres of mining activities, the licence-holder is only obliged to consult with the owner or occupier in order to avoid or minimise any conflict between the mineral activities and the activities of the owner or occupier.

Any conflicts with the local community and/or with landowners in close proximity to the land used by the licence-holder are resolved through consultation with the local authorities and with the Valuation Committee established under the Law on Expropriation (Articles35, 65, 66, 71 of the Minerals Law).

Prior and informed consultation with the local communities is mandatory and this is carried out by the state. After the applicant submits the mining proposal, the MoMP is obliged to consult with the local community and prepare a report summarising the consultation. Thereafter, the Mining Technical Committee is obliged to consider the consultation report prepared by the MoMP, evaluate the feasibility study and the mining proposal and assess commitments made in the documents with respect to the exploitation phase (Article 28 of the Minerals Law).

There are no specially protected communities such as indigenous people in Afghanistan. However, there are Sikh, Hindu and nomad communities who are considered to be indigenous people, but there are no provisions in Afghan law about specially protected communities. According to Article 6 of the Constitution, the state is obliged to create a prosperous and progressive society based on social justice, preservation of human dignity, protection of human rights, realisation of democracy, and attainment of national unity as well as equality between all people and tribes and balanced development of all areas of the country. However, the MoMP may, upon the recommendation of the Mining Technical Committee, with the confirmation of the HEC and with the approval of the Cabinet, determine land to be either a large-scale mining Area, a small-scale mining area, or a prohibited area. If a land or parcel of land is considered to be of public interest, mineral activities on the land will be prohibited by the MoMP after considering such factors as national security, health and safety, environmental protection, the preservation of archaeological or cultural sites, the incompatibility of mineral activities with other land uses and any other factors prescribed in the regulations (Article 19 of the Minerals Law).

It is usual to have community development agreements in Afghanistan and they are mandatory. That is why the licence-holder or applicant is required to submit and have approved a Community Development Plan (Article 28 of the Minerals Law). See 2.3 Communities for further information.

While the government of Afghanistan has created an investment-friendly environment in the mining sector, there have been scattered incidents where the local communities have had issues with mining on a large scale. Having stated the above, the sector has very recently been opened for investment and it will take time for the communities to realise the benefits thereof.

Climate-change initiatives can and will potentially impact the mining industry in Afghanistan. The strict requirements in relation to the protection of the environment and very limited exceptions has an impact on the mining sector.

A specific piece of climate change legislation related to mining has not been passed in Afghanistan, but a Climate Change Directorate (CCD) was established in 2010 under the NEPA. The CCD works on climate change and its impact throughout the country. The CCD’s work is based on Environmental Law and Afghanistan’s commitments on UNFCCC objectives, and is responsible to address climate change in Afghanistan, both adaptation and mitigation. The CCD monitors climate change in projects and is involved in all stages of the project. It also assesses the vulnerability and builds adaptive capacity and increases resilience in order to save the ecosystem and decrease the threats, either from unexpected climatic risks, or to stabilise the climatic factors' situation. The CCD is also in the process of preparation of the Climate Change Strategy and Action Plan.

The decisions of the CCD could have an impact on licences issued in the mining sector. However, at this point it is too early to be able to assess the full impact on the mining industry of the directorate’s decisions on the mining industry.

There are some sustainable development initiatives under the Minerals Law. The 5% of revenue paid into the general revenue account of the state under the Minerals Law in connection with exploration licences and exploitation licences and 8% of revenue in connection with small-scale mining licences is appropriated annually into the Provincial Development Fund. The revenue appropriated into the Provincial Development Fund is invested in initiatives for the benefit of the province or transferred to the Municipal Incentive Fund and invested in initiatives for the benefit of Municipalities in the province in which the relevant licence is situated (Article 50 of the Minerals Law).

Licence-holders and their contractors, advisers and employees are liable to pay all applicable taxes and duties in accordance with the law of Afghanistan (Article 48 of the Minerals Law). Pursuant to the provisions of Afghanistan Income Tax Law 2009, income from discovery and extraction of any minerals, petroleum, or any other sources and benefits from mining licences and mining authorisations are taxable. The income tax for legal persons is 20% of taxable income for the tax year. Income of investment corporations is subject to income tax on all income from dividends, interest, discounts, rents, service charges, fees, commissions and on gains from capital transactions (Article 54 of the Income Tax Law).

The exploration licence-holder is not obliged to pay any royalties as it is not allowed to sell the product, but holders of exploitation licences and small-scale mining licences have to pay the royalty and surface rent (Article 35 of the Minerals Law).

The royalties are revenue-based and are paid into the general revenue account of the state. The MoMP is responsible for collecting all royalties, surface rents, fees and penalties payable under the Minerals Law (Article 49 of the Minerals Law).

The royalty rates for minerals, other than construction materials, is set out in the Minerals Law. The royalty rates for a Primary Product is 7.5%, Secondary Product 5% and Tertiary Product is 2.5% (Article 51 of the Minerals Law).

A licence-holder is required to lodge a Royalty Report within 30 days of the end of each quarter to the MoMP and pay any royalty due in respect of that quarter. A licence-holder is also required to submit audited accounts to the MoMP. If the audited accounts disclose any shortfall in the payment of the royalties, the licence-holder shall pay the shortfall within 28 days. The MoMP must at the request of the Mining Technical Committee conduct an audit to determine whether the content of a Royalty Report is true and accurate. The licence-holder is obliged to provide any information or documents requested by the MoMP. If shortfalls are found, the licence-holder may be liable to a penalty or can be prosecuted for providing false information in a Royalty Report (Article 52 of the Minerals Law).

Afghanistan does not make a distinction between taxing national and foreign investors. However, national investors (resident legal persons) are subject to income tax on taxable income from all sources within and outside Afghanistan (Article 5 of the Income Tax Law). Non-resident natural persons and non-resident legal persons (foreign investors) engaged in economic, service or business activities in Afghanistan are subject to tax on their income from sources within Afghanistan (Article 8 of the Income Tax Law).

There are no tax incentives for the mining investor and projects. No tax-stabilisation agreements are available.

The Afghanistan tax system imposes a transfer or capital gains tax on the transfer or sale of a mining project. Pursuant to the provisions of the Income Tax Law of Afghanistan, the gain from the sale or exchange of capital assets or investment in trade or business shall be subject to income tax. The gain from the sale or exchange of any asset of a corporation or a limited liability company is taxable income in the tax year in which assets was transferred. Also, the gain from the sale, exchange or transfer of business, equipment, machinery, buildings and land, or any part of such assets are taxable income. The tax is determined based on the market value. The market value, at the time the asset was transferred or exchanged, is the basis for computing the gain (Articles 23, 25, 30 of the Income Tax Law).

These tax levies do not apply when the transfer takes place through a corporate structure outside Afghanistan.

The profit from the sale of minerals extracted from mines in Afghanistan represents the principal attraction for investment in mining.

There are no special rules on foreign investment approval in Afghanistan. Anyone who intends to operate a business in Afghanistan is required to have a business licence from the Afghanistan Central Business Registry (ACBR) (Article 5 of the Law on Limited Liability Companies 2018). Foreign investors have to register their entities with the ACBR in order to be eligible to participate in the bidding process for the mining contracts (Article 42 of the Minerals Law). After obtaining a licence from the ACBR, the registered foreign investment has to submit an application for a mining concession to the MoMP. According to the Minerals Law, foreign natural and legal persons, or an entity whose majority shareholder is foreign, are not eligible to hold a small-scale mining licence. The foreign legal person, however, can hold a large-scale mining licence following receipt of an investment licence from the ACBR. A legal entity has to have an office or place of business in Afghanistan prior to executing a mining concession.

Foreign investors registered with the ACBR or domestic investors can obtain a mining concession and there are no specific restrictions for obtaining the concession except the restriction that a foreign national and legal person is not eligible to hold a small-scale mining licence (Article 17 of the Minerals Law). 

Moreover, pursuant to Articles 4 and 5 of the Private Investment Law 2005, all persons (foreign or domestic) may make investments in all sectors of the economy except investments in the development of nuclear power, the establishment of casinos, gambling and similar establishments, and production of narcotics and any other intoxicants.

Afghanistan has not entered into any bilateral or multilateral agreements for investment in the mining sector of Afghanistan.

The two main sources of financing the developments of mining projects in Afghanistan are:

  • an internal source, such as commercial banks and semi-governmental banks;
  • an external source, such as foreign governments, USAID, the European Union, International Financial Organizations such as the World Bank, the IMF, the Asian Development Bank (ADB), the Islamic Development Bank, and private companies.

Currently, Afghanistan does not have an active financial market which deals in financial securities. However, the government of Afghanistan is planning to establish a securities market in the near future. Such a market would play an important role in the financing of exploration, development and mining projects in Afghanistan.

There are currently no aspects of the Afghan legal system relating to security over the financing of mining tenements (licences) and related assets.

Afghanistan has extensive mineral resources located in every province of the country. The country has world-class deposits of iron ore, copper, gold, rare-earth minerals, and a host of other natural resources. Other natural resource endowment includes oil, natural gas, copper, coal, marble, gemstones, construction materials, lithium and other industrial minerals, which all provide the country with a diversity of development opportunities. The principal mineral resources that are currently being exploited are oil and gas, coal, marble and especially lithium.

Based on the Mining Sector Roadmap + Reform Strategy: Extractive Industries published by the Ministry of Mines & Petroleum of the Islamic Republic of Afghanistan in 2019, Afghanistan is estimated to hold more than 2.2 billion metric tons (MTs) of iron ore, 1.3 billion MTs of marble, almost 30 million MTs of copper, 1.4 million MTs of rare-earth minerals, and 2700kg of gold. It is estimated that Afghanistan has more than one trillion dollars’ worth of mineral resources. The mining sector has remained under-developed in Afghanistan. For the purpose of developing this sector, the High Economic Council approved the Mining Sector Roadmap in January 2018. The Reform Strategy has been developed to assist as an implementation mechanism for the Mining Roadmap, to institutionalise reforms and develop the sector in a way that maximises its benefits for the citizens of Afghanistan. The vision of the MoMP is to develop a knowledge-based, sustainable, transparent, and efficient extractives sector that supports Afghanistan’s broad-based equitable development. H.E. Mohammad Ashraf Ghani (President of the Islamic Republic of Afghanistan) earlier stated that “The government of Afghanistan is committed to an open and accountable mining sector, as it represents the greatest opportunity to increase economic growth rates in the country. To sustainably utilise our natural capital to create the financial capital to expand and ensure the freedoms, rights and securities enshrined in our constitution is the vision that guides us.”

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RIAA Barker Gillette AFG (RIAABG) is an internationally recognised law firm that is committed to offering the highest standard of legal services to its clients. It is also one of the largest and most reputed international firms in the region. RIAABG has gained recognition by maintaining the highest standards of professional excellence. Its membership of Lex Mundi means that it is affiliated with the finest global law firms in more than 106 jurisdictions around the world. RIAABG has 50 years of global legal expertise and now has one of the largest presences by an international legal service-provider in Afghanistan. It has a strong team of dedicated, qualified and experienced lawyers providing a broad spectrum of legal services. As the official languages of the Afghan laws are Pashto and Dari, the lawyers in the Kabul office are fluent in both languages. All staff are also fluent in English, the most widely used language for commercial transactions. By advising its corporate clients, the firm has developed a niche in the areas of project finance, mergers and acquisitions, privatisation, power projects, oil and gas projects, infrastructure projects, banking and finance, intellectual property, non-profit and social sector development, employment and labour law matters, telecommunication, construction, mining, pharmaceutical sector, regulatory affairs, customs, corporate registration, corporate restructuring, joint ventures, public-private partnership, and taxation.

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