Türkiye has a significant potential in the mining industry with a wide range of mineral deposits, including nearly 70 different types of minerals such as coal, boron, lignite and gold. The mining tradition in Türkiye has a long history and has always played an important role for the economy since the earliest civilisations of Anatolia, including the Hittites, Phrygians, Phoenicians and Lydians. As Türkiye has a complex geology due to intense tectonic movements since ancient times, it has a wide variety of mineral production to the extent that it ranks tenth in the world in terms of mineral variety.
0.4% of world’s metallic mineral reserves, 2.2% of industrial raw material reserves, 1% of coal reserves, and 0.8% of geothermal energy potential are located in Türkiye. The most significant mineral deposits and mines in Türkiye consist of industrial minerals including boron, marble, magnesite, baryte, celestite and metallic minerals including copper, chromite, ferrochromium and steel and also processed mineral commodities such as refined borates, cement and ceramics. As exploration and production activities have steadily increased in Türkiye, foreign investors are mainly interested in cement, marble, gold, lead-zinc-copper, silver, and chrome, reflecting the growing importance of Türkiye in the global mining industry.
Türkiye has a civil law system based on codified legislation.
Mining is a regulated sector in Türkiye, and therefore, mining activities are subject to several pieces of legislation, as follows.
As per the Turkish Constitution, natural underground wealth and resources are under the sovereignty and control of the State. Therefore, according to Article 4 of the Mining Law, mineral resources are not subject to the ownership of the land parcels under which they are located and these cannot be subject to private ownership.
Although the exploration and exploitation rights of the mineral resources belongs to the State, these rights can be temporarily granted to persons or legal entities by means of licences and permits issued by the State. In return, the licensee shall make royalty payments to the Treasury contributing a portion of the revenue from mineral production under the name of “State Right”.
As for the grantor-regulator role of the state, the Ministry of Energy and Natural Resources (the “Ministry”) is the governmental authority to regulate the main policies for natural resources and to supervise mining activities. The General Directorate of Mining Affairs (GDMPA) is the competent governmental authority responsible for the supervision and regulation of mining activities, including the granting of mining licences, keeping the mine registry records, determination of policies and measures for mining activities.
Further, the General Directorate of Mineral Research and Exploration carries out scientific and technological research for mineral exploration activities and the Turkish Coal Enterprises Institution analyses the raw materials for energy production and implementing the economic strategies.
Although the owner-operator role of the state was more dominant before the 1980s and the operation rights of the mines were mostly transferred to private entities afterwards, the State still has the owner-operator role for some minerals. As per the Law No 2840 on the Operation of Boron Salts, Trona and Asphaltite Mines and Nuclear Energy Raw Materials and the Return of Some Lignite and Iron Fields, published in the Official Gazette No 18076 and dated 13 June 1983, the exploration and exploitation of boron salts, uranium and thorium mines shall be carried out exclusively by the State and the licences previously granted to real persons and private legal entities for these minerals shall be cancelled. Accordingly, the exploration and exploitation activities of boron mineral are operated by Eti Maden İşletmeleri Genel Müdürlüğü (General Directorate of Eti Mining Enterprises) (the “Eti Maden”) which is a state-owned entity.
The Turkish Constitution stipulates that natural underground wealth and resources shall be under the authority and at the disposal of the State. The details of these mineral rights (ie, ownership, registration, transfer, termination) are regulated in the Mining Law. Accordingly, the mineral rights are defined as “the authorisations granted for the exploration, discovery, development and exploitation of minerals and the financial opportunities granted to assist in the discovery of mineral deposits” under the Mining Law. Therefore, the mineral rights in Türkiye derive from State authorisations in the form of licences and permits as explained in 1.6 Granting of Mineral Rights. However, as they are not subject to private ownership, mineral rights do not have the status of property, but rather the status of “right of authorisation for exploration, operation, development and production of minerals” granted to real and legal persons by the Ministry for a certain period of time.
The Ministry, acting through its affiliate, the GDMPA, is the competent governmental authority responsible for the granting of mining licences and keeping with the mine registry records as further detailed in 1.4 Role of the State in Mining Law and Regulations. The GDMPA operates at the national level and the mining registry is managed from a centralised system.
The mineral rights are classified into five different groups as per the Mining Law with licensing requirements varying depending on these groups. These groups are as follows:
As for the granting of these mineral rights, there are (i) exploration licences, (ii) operation licences and (iii) operation permits and these licences granted for the specific group of mines do not authorise the licence holder to exploit the other groups of mines.
An exploration licence provides the holder with the right to perform exploration activities, including geological prospecting, mapping, sampling, geophysical research, geochemistry, hydrogeological and geotechnical surveys, and exploration drilling within a specified area and timeframe. This licence is granted upon submission of the necessary documents, including but not limited to a preliminary investigation report, a mining exploration project and financial ability documents (ie, determined based on the group of mine) and payment of the licence fee to the GDMPA upon registration of the licence on the mine registry according to Article 14 of the Mining Regulation.
An operation licence provides the holder with the right to carry out operation activities and mine production within a specified area and timeframe. The licence is granted upon submission of the necessary documents to the GDMPA and the financial capability of the applicant should be equal to at least 20% of the total investment price according to Article 21 of the Mining Regulation. The holder also possesses ownership rights to the minerals extracted from the mine. In addition to operation, the holder of this licence has also the right to carry out exploration activities within the designated area.
The holder of an operational licence is also required to obtain an operation permit from the GDMPA, which is essential for mining operations. The operation permit proves that all other permits and licences are procured for the mines within the operation licence area, and there is no legal obstacle to the production activities. This permit is inseparably linked to the operation licence and cannot be transferred independently.
It should be underlined that under the Turkish mining legislation, “operation licence” and “operation permit” are two different terms. Operation licence shows the borders surrounding the mine site and prevents the distribution of the same mineral group licences to others within these borders. However, an “operation permit” shows the place where mining operations will be performed, within the limits of the licence.
Under these principles, mineral rights are neither granted by act nor by contract, but instead they are granted by means of licences and permits, which are registered in the mine registry to become effective and publicly available.
Lastly, depending on the type of the mine group, licences are either issued by the application of the licensee or following a tender process organised by the GDMPA.
Term and Renewal
As explained in 1.6 Granting of Mineral Rights, licences and permits issued under the Mining Law are (i) the exploration licence, (ii) the operation licence and (iii) the operation permit. Each licence or permit and their terms are different for each group of mine.
As a general rule, the term of the exploration licence is one year. For mines of Group IV, there is a general exploration period of two years, to be followed by a detailed exploration period of four years.
An operation licence for a part of Group I mines is granted for five years, whilst the term of the operation licences for the remaining mineral groups is determined on a project basis, provided that the licence period is not less than ten years. The operation licence can be renewed upon demonstration of the requirement to continue the operations with a renewal application at least 12 months before the expiry date of such licence.
Operation permits are usually issued for the term of the operation licence.
Progress from Exploration to Production
If the exploration activities are concluded successfully and the licensee determined a proven reserve, then it can apply to convert its exploration licence to an operation licence (unless it is a type of mine in terms of which the operation licence is directly granted without the need for an exploration licence).
In order to obtain the operation licence, the applicant must prepare an operation project and submit it to the GDMPA together with a report showing the results of its exploration activities and pay the licence application fee. Such project should include the technical details regarding the operation activities (ie, closed pit/open pit, depth, amount of waste to be produced, etc).
Following the review of the documentation by the GDMPA, if there is no missing document or the GDMPA does not require any additional information or documentation, the operation licence is granted to the applicant.
During the term of the operation, licensees are obliged to pay the annual licence fees and State shares to the government. Further, operational activities must be carried out in accordance with the operation project submitted at the licensing stage.
Mining operations are controlled and supervised by the GDMPA. The GDMPA is authorised to carry out on-site inspections without prior notice and to apply administrative fines and other penalties (including the seizure or full closure of the mining operations) in case the operations are not carried out in accordance with the operation project or the applicable legislation.
The Mining Law allows the licensees to apply for the termination of the mining licences. In this case, the licensee who wishes to abandon the mining project is obliged to take the necessary safety measures on the project site and submit the required information and documents to the GDMPA within one year.
Further, the GDMPA has the right to cancel the mining licences or apply administrative fines if the required permits have not been duly obtained, necessary documents have not been submitted as per the applicable legislation, and licence fees have not been paid partially or fully on time.
A mining licence can be transferred to third parties who meet the conditions for exercising the relevant mining right subject to the approval of the GDMPA, and such transfers are registered with the mine registry. Merger and demerger transactions in a licence holder company or contribution of a mining licence as capital in kind are also deemed as the transfer of the licence.
Furthermore, the approval of the GDMPA is required if the shareholding structure of the legal person licence holder changes more than 10% as a result of a share transfer. As per the recent amendment in the Mining Regulation, share transfers resulting in more than 10% change in the shareholding structure of a mining royalty company are also subject to the prior approval of the GDMPA.
Mining operations in Türkiye are governed by environmental laws and regulations issued at the national level by the Ministry of Environment and Urban Planning, as well as by regional and local bodies. The main legislations regulating environmental issues for mining projects are Environmental Law No 2872 published in the Official Gazette No 18132 and dated 11 August 1983 (the “Environmental Law”) and the Regulation on Environmental Permit and Licence published in the Official Gazette No 29115 and dated 1 November 2014 issued by the Ministry of Environment and Urban Planning (the “Environmental Licence Regulation”).
As per the Environmental Licence Regulation, mining activities are considered among the operations that may have adverse effects on the environment. Therefore, an environmental permit certificate must be obtained for the mining projects to start operating. An environmental permit certificate covers at least one of the air emission, noise, wastewater discharge and deep sea discharge issues depending on the case that must be fulfilled in accordance with the Environmental Law. The environmental permits remain valid for five years. The renewal process should be initiated at least 180 days prior to the expiration of the environmental permit and the new environmental permit must be obtained before the expiration of the former permit. As for the consequence of non-compliance, activities conducted without an environmental permit or a licence are suspended immediately.
Environmental Impact Assessment (EIA)
As per the EIA Regulation, projects listed under Annex I (eg, refineries, metal industry plants, nuclear fuel plants) require EIA approval in order to conduct their operations. On the other hand, for the projects listed under Annex II (eg, 500 tonnes/day hard coal and bituminous materials gasification and liquefaction projects, metal industry of 1000 tonnes/year and above with the specified qualifications), an application for assessment is made to determine whether the project requires an EIA report; if decided otherwise, the “EIA Not Required Certificate” is obtained. Therefore, either an EIA Approval or EIA Not Required Certificate should be obtained for the mining project to start operation depending on its qualification, capacity and size. Different from the environmental permit explained above, an EIA Approval or EIA Not Required Certificate is given for an indefinite period unless the main features (eg, capacity, production) of the project change. Moreover, the investment for the project that acquired an EIA Approval or EIA Not Required Certificate should initiate within five years following the issuance of the relevant approval; otherwise, it shall be deemed invalid. As for the consequence of non-compliance, activities conducted without an EIA shall be also suspended immediately.
As per the Article 7 of the Mining Law, mining activities planned to be carried out in some areas are subject to certain restrictions and prior authorisations. For instance, the licence holder should obtain permission from the relevant authorities in order to operate in special environmental protection zones, national parks, wildlife protection and development areas, protected forests, areas that need to be protected according to the Coastal Law No 3621 dated 4/4/1990, first degree military prohibited areas, areas with approved 1/5000 scale zoning plan, first degree protected areas, power plants, organised industrial zones, oil, natural gas and geothermal pipelines allocated for non-mining purposes and approved by the GDMPA.
As per the Article 7 of the Mining Law, mining activities require the approval from (i) the Ministry if the mining field is located within 60-metre distance from areas reserved for public benefits, and (ii) third parties if the mining field is located within 20-metre distance from the private property of the said-third party.
Further, during the EIA procedure, the Ministry may give a seat to, amongst others, non-governmental organisations, unions or public professional organisations in the commission evaluating the EIA report of the applicant.
Other than the participation in the EIA procedure and approval on private ownership, Turkish law does not specifically envisage the involvement of the community in relation to mining projects.
An EIA procedure requires a prior consultation to f the public opinion. In order to inform the public about the investment, and to attract their opinions and recommendations regarding the project, as per provisions of the EIA Regulation, a meeting called a “the Public Participation Meeting” is held at a place and time accessible to the concerned public, and set by the governorship, on the date set by the Ministry, in which the investor, as well as the Ministry accredited entities/organisations are also in attendance. The Ministry accredited entities/organisations have an advertisement announcing the date, time, venue and subject matter of the meeting published in a local periodical published in the area where the project is to be carried out, as well as in a newspaper considered a mass-circulation periodical, at least ten calendar days in advance of the meeting.
In the meeting, it is ensured that the public is informed about the project and their opinions, questions, and recommendations are taken. Public opinions and recommendations are then submitted to the EIA commission accordingly.
Following the public opinion, the Ministry prepares the EIA Report Special Format in line with the opinions and recommendations received from the public, as well as the opinions and recommendations of the agencies/institutions which are members of the EIA commission. The commission examines and assesses the EIA report, among other things, whether the opinions and recommendations received through the Public Participation Meeting and within the process were addressed or not.
There are no specially protected communities in this jurisdiction.
There are no community development agreements in this jurisdiction.
Apart from the related provisions of the regulations listed under 1.2 Legal System and Sources of Mining Law and the “Regulation on the Control of Industrial Source Air Pollution” and the “Regulation on the Control of Air Pollution Arising from Heating”, which are also applicable for mining activities, the main ESG guidelines or regulations that have been introduced for the mineral sector are as follows:
One of the sensitive subjects in the public is the use of cyanide for gold production and the potential effects of cyanide on the environment. In various instances, local populations, who are concerned with a potential leakage of cyanide pools to underwater resources, tried to stop gold mine projects, with a certain degree of success in some cases.
In each of these cases, there have been bad public relations from the investor side, who failed to explain the measures taken to prevent any environmental issues, especially the leakage of the cyanide into water resources. On the contrary, statements given to media that they have a “right” to produce gold and fell trees in the region as all necessary permits and licences have been duly obtained backfired and created a nationwide opposition to such projects. Therefore, it is advisable to inform the local population in detail concerning the risks and the measures to mitigate such risks and to avoid any statement that might be construed arrogant by the general public.
Most of the good examples in mining projects involve strong relations with local communities and support the development of the regional economy. One example is a project carried out by Eti Maden, called “Mining Like Honey” (Bal Gibi Maden). In this project, Eti Maden distributed bee hives to the local population for supporting honey production. This was especially successful in the regions where Eti Maden carried out re-forestation works. Increase in the bee population assisted in the protection of the natural habitat in the region, and increased honey production supported the local communicates financially. This was especially important for forest villages as these communities lost access to some part of the forestry areas due to mining activities. Eti Maden purchases all honey produced in this project, as a gift to its employees and domestic and foreign customers.
There is a Ministry of Environment, Urbanisation and Climate Change and a special department for climate change within this Ministry, which undertakes various initiatives to deal with climate change and publishes annual activity reports. Accordingly, a number of environmental measures are taken for the purpose of dealing with climate change in the mining industry. First, the requirements of an environmental permit in relation to emission, waste and discharge and EIA approval procedures (as explained above), its supervision and administrative penalties provide an effective oversight mechanism for climate change concerns.
The Regulation on Mining Wastes was introduced in 2017 in order to manage the waste generated as a result of exploration, extraction, preparation/enrichment or storage of mines in a way that does not harm the environment and human health starting from their production to their final disposal.
Pursuant to the Development Report of the Turkish Mining Sector for 2020 issued by the Ministry and the Union of Chambers and Commodity Exchanges of Türkiye (the “Development Report”), many projects have been carried out in the last few years within the scope of management of the waste generated due to mining activities by the Ministry and related organisations such as General Directorate of Turkish Coal Enterprises, Eti Maden, General Directorate of Mineral Research and Exploration in order to minimise gas emissions and diffusion of harmful ashes affecting climate change. Moreover, projects such as water treatment plants, rehabilitation programmes, solar power plants, electricity generation from waste heat are also being carried out by various general directorates and entities with the purpose of controlling and improving air and water quality.
Climate change legislation has not yet been enacted under Turkish law. However, the draft is being discussed and is planned to enter into force in the near future.
The main features and intentions of the contemplated draft are the reduction of greenhouse gas emissions, adaptation activities to climate change and planning and implementation tools for these purposes, an emission trading system, carbon pricing and the inspection of these measures in line with the green development vision and net zero emission target.
As per the Development Report and as further explained in 3.1 Climate Change Effects, many projects have been realised by the Ministry and related bodies in relation to sustainable development concerning waste management and improvement of water, air and soil quality. Furthermore, according to the 12th Development Plan for the years 2024–2028 issued by the Strategy and Budget Directorate of the Presidency of Türkiye (the “12th Development Plan”), sustainable development initiatives and plans for the years 2024–2028 include the following.
Pursuant to the 12th Development Plan, co-operation with countries with rich reserves of nickel, lithium, cobalt and rare earth elements used in renewable energy, batteries and electric vehicles is planned to be carried out in order to ensure the supply reliability of such raw materials. In addition, in the next five-year period, it is aimed to develop rare earth elements and lithium production technologies and to activate large-scale production facilities in this field and to be among the world’s major producers of these minerals.
Pursuant to publicly available sources, Eti Alüminyum A.Ş. (a joint stock company), one of the leading aluminium producers in Türkiye, announced that it has produced high-purity lithium carbonate through research and development efforts focused on lithium production from bauxite ore. Moreover, Eti Maden has revealed in recent years that lithium production from boron waste has been achieved, and it has initiated extraction and production activities with a pilot plant in Türkiye. Considering the richness of boron deposits in Türkiye, these unique initiatives play a crucial role in increasing the demand for the energy-transition minerals and therefore, achieving sustainable objectives such as renewable energy, batteries and electric vehicles.
Pursuant to the Mining Law, a royalty payment ranging from 1% to 8% (depending on the group of mine) of the total annual sales of the mine must be paid to the Treasury each year, which is so-called the “State Right” as explained in 1.4 Role of the State in Mining Law and Regulations.
The royalty payment is neither revenue-based nor profit-based; instead it is determined based on the applicable sales price. The applicable sales price per mine is determined for each mine separately and for the respective year depending on the regions and announced by the GDMPA. Further, in case the mine is operated by someone other than the explorer of the mine, a payment is made to the right-holder under the name of “finder’s right” at the rate of 1% of the annual sales price per mine every year by the producers.
As the relevant payments are based on the annual applicable sales price of the mine, the relevant legislation does not distinguish between national and foreign investors in terms of royalty payment.
As the main payment for the mining activities is the royalty payment, there are no other special taxation requirements in the Mining Law. However, general tax provisions are also applicable, such as corporate income tax for mining companies and taxes regulated in other laws for the import and export of minerals.
Türkiye has a robust incentive regime for attracting foreign investment, especially those carried out in least developed regions in the country.
According to Article 9 of the Mining Law, 50% of the royalty fee is not collected from the mining companies that provide additional value added by processing the produced ore at their domestic facilities. Further, for the first ten years, the land usage fee is discounted by 100% or 50%, depending on the type of the mine and location, for the use of the State-owned land (except the forestation fee to be paid according to the Forest law No 6831) for the companies that produce mid and end products from the ore extracted from Group IV mines.
Mining companies can also benefit from general investment incentive programmes in Türkiye for their mining investments by providing the required conditions of the programme. Türkiye is divided into six regions for the purposes of the incentive programme, the first region being the most developed (and therefore, incentives are provided at minimum) and the sixth region being the least developed (hence receiving the highest incentive amounts). For mining investments, even if an investment is located in the first four regions, these benefit from the incentives provided to the fifth region. Accordingly, the following incentives are provided to mining companies, subject to various conditions and at the rates varying depending on the region where the investment is located:
While it is possible to transfer mining rights, shares of a company carrying out mining activities can also be sold, transferred or otherwise disposed of. Capital gains arising from disposal of the mining company shares is subject to (i) income tax, if the investor is a real person, and (ii) corporate income tax, if the investor is a corporate entity, as part of its annual profits. If the shares are sold at a lower price than their book value, there will be no tax exposure for the investor, as there will be no gain to be taxed. The tax rate would range from 20% to 40% depending on the taxable amount of capital gain for income tax, and would be 25% for corporate income tax.
While this is the general rule of capital gains taxes, as per the relevant tax exemptions of Turkish law, the capital gains derived from the disposal of resident companies’ shares are exempt for individuals (ie, real person investors) provided that they have been held for more than two years. If the investor, who holds the mining company shares more than two years, is a corporate entity, a 75% of capital gain is exempted from capital gains tax.
The main reasons that make Türkiye an attractive location for investment are as follows.
As per the provisions of the Mining Law, mining rights can only be granted to Turkish citizens or companies incorporated in Türkiye. However, any company carrying out mining activities can be fully owned by a foreign real person or legal entity. Therefore, foreign investors have equal treatment with Turkish nationals, which is protected by the Foreign Direct Investment Law of Türkiye No 4875.
Türkiye is party to more than 88 bilateral investment treaties where foreign investments are secured with international investment principles including most favoured nation treatment and equal treatment provisions. Türkiye has also signed a co-operation agreement with Azerbaijan for the development of joint mining projects and exchange of know-how and practices.
Further, Türkiye is also a party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention) as facilitating dispute resolution mechanisms for foreign investors.
The Turkish mining sector is mainly funded by equity investment. There are also international financial institutions funding these projects with project finance arrangements, as Turkish banks are reluctant to fund mining projects.
On the other hand, large-scale groups of companies are financing their mining subsidiaries through their own credit arrangements (at the holding level) with Turkish banks or debt market issuances in international capital markets.
Although there is no special capital market instrument to be used for financing of mining projects, there are some Turkish mining companies listed on Borsa Istanbul (Turkish Stock Exchange), which also has a mining companies index.
Türkiye’s capital markets were improved in recent years, where 40 Turkish companies went public in 2022 alone. Among them, there are also mining companies going public for the purpose of financing their capex needs. The current trend is expected to continue as the domestic loan market is tightened.
Pursuant to the Mining Law, an operation licence can be mortgaged to the creditors to secure present and future debts incurred in connection with the development and operation of a mining project. A mine mortgage can only secure debts incurred in connection with the mine, and cannot be provided to secure other debts of the licensee legal entity which prevents licensees from using their mining licences as a security for their other activities and financing purposes. A mine mortgage automatically creates security over all property including materials required for the operation of the mine, plant, vehicles and equipment.
The land of a licensed area does not fall within the scope of a mine mortgage, and therefore, any easement right granted over such land can be mortgaged separately.
A mine mortgage must be registered to the mine registry in order to be effective. Further, in case an enforcement request in relation to a mine mortgage is filed, the execution office shall notify the GDMPA regarding the sale proceedings.
As per the 12th Development Plan, the main policies and measures planned to be implemented in the next couple of years for the mining sector in Türkiye include, amongst others, the following.