Legal and Economic Basis for Performing

Mining Activities in Southeast Europe

Discussion, comparison and evaluation of Southeast European mining

legislation, general and mineral economic indicators

Thomas Heise

October 2009

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Preface

Mineral resources are essential for the existence and the development of our modern society. Metal

resources (e.g. iron, manganese, aluminium, PGM) are used for the production of a wide range

of merchandise. Industrial minerals are broadly used for pharmaceuticals, chemical products etc.

Energy, which is also as essential for our society as metals and industrial minerals, is also provided

on a very large scale by non-renewable mineral resources, like natural gas and coal. The European

Union represents a territory of low mineral potential. Of course there are several exceptions, like

Poland having a high production of copper, Sweden of iron, Finland of chromium, Germany of

several industrial minerals etc. Overall, the European Union is not able to cover the needs of the

domestic industry from domestic deposits and is therefore highly dependent on imports of mineral

resources (especially for metals and energy minerals). The mineral potential of Western Europe

has been used on a very high scale because the mineral wealth was already known in ancient times,

whereas the deposits in Southeast Europe have not been exploited on such an extended scale.

Both economic and legal situation of many Southeast European countries are not well known in the

Western world. As far as the mining industry is concerned, this fact is caused by the changing po-

litical situation during the last decades, the therewith connected underdeveloped mining industry

and a high complexity of legal requirements (for mining activities, environmental protection, con-

cession policy, investment policy, labor and fiscal legislation, etc.). In 2007, Bulgaria and Romania

became members of the European Union and therefore they represent the first Southeast European

countries being accepted into the European Union. Furthermore Croatia, Macedonia and Turkey

are considered candidate countries, all located in Southeast Europe. The increasing importance

of Southeast Europe for the enlargement of the European Union may also upgrade the economic

situation and therefore the mining sector, resulting in a reduced import dependence of mineral

resources. However, it is essential to upgrade the Southeast European mining industry, which, for

several reasons, should preferably be done by foreign companies already having experience in min-

ing. Two parameters are essential for investments in the mining industry, the existence of mineral

deposits on the one hand and a consistent legal framework on the other hand. This books deals

with both issues. The aim is to give general and detailed information on the overall economic,

mineral economic and legal situation in Southeast European countries as well as to evaluate and

compare both issues. This book combines information and research data, which was collected for

more than two years and forms the basis for a solid line of discussion as well as for horizontal and

vertical integrated evaluation and comparison.

Acknowledgment

At this point, I want to thank three people for their support. I want to thank my parents, Astrid

and Thomas, for supporting the development of my career. Furthermore, I want to express my

gratitude to my companion Eva Christina for reviewing this book. I want to dedicate this book to

all of you!

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Contents

1

About this book .

13

1.1 Background .

13

1.2 Horizontal and vertical synergetic approach .

13

1.3 Methodology

.

14

I

Introduction and geographical key data

.

17

2

Introduction .

19

2.1 Economic area Europe - marketing area European Union .

19

2.2 Geographical definitions .

25

2.3 Importance of the European mineral potential .

26

2.4 Factors influencing investment in the mining sector .

28

2.5 Legal basis for performing mining activities .

29

3

Geographical key data .

31

II

Economic basis .

35

4

General economic indicators in Southeast Europe .

37

5

Economic indicators of Southeast European countries .

43

6

Importance of the mining industry .

49

6.1 Metallic mineral resources .

49

6.2 Industrial minerals .

50

6.3 Energy resources .

51

6.4 Construction aggregates .

51

7

National mine production .

53

III Legal basis .

75

8

Form of government and administrative division .

77

8.1 Constitutions .

77

8.2 Forms of government .

78

8.3 Administrative divisions .

79

9

Overview of existing mining laws .

83

10 Mineral rights .

87

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6

11 Mineral resources categories .

91

12 Existing permits and licenses

.

97

13 Competence of public authorities .

107

14 Obtaining mining licenses .

111

15 Rights and obligations .

127

16 Mining programs .

135

17 Penal provisions .

139

18 Fees and royalties .

145

IV Integrated comparison and conclusion

.

149

19 Integrated comparison .

151

20 Conclusion .

163

V

Appendix .

165

A Mine production figures .

167

Bibliography .

193

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List of Figures

1.1

Horizontal and vertical approach .

14

1.2

Important legal aspects to perform mining activities .

16

2.1

EU in the global GDP ranking 2008 .

19

2.2

Composition of the European Union′s GDP

.

20

2.3

Candidate and potential candidate countries of the European Union .

20

2.4

Economic alliances in Europe

.

22

2.5

Candidate and potential candidate countries of the European Union .

22

2.6

Advanced, emerging and developing economies in Europe .

23

2.7

GDP of EFTA member countries .

24

2.8

GDP of European CIS member countries .

24

2.9

Territorial subdivision of Europe .

25

2.10

Geographic location of BRIC, N-11 and MAE .

27

2.11

GDP real growth rate in BRIC, N-11 and MAE .

27

3.1

Location of SEE countries .

31

4.1

GDP in SEE .

37

4.2

GDP in Europe 1 .

38

4.3

GDP in Europe 2 .

38

4.4

GDP per capita in SEE .

39

4.5

GDP composition in SEE .

40

4.6

Labor force composition in SEE .

40

4.7

GDP composition in comparison with GDP per capita .

41

4.8

GDP and industrial production growth rate .

41

7.1

Albanian chromite production 1987 - 2006 .

54

7.2

Aluminium, iron ore and steel production in Bosnia and Herzegovina from 1990

to 2007 .

55

7.3

Composition of the Bulgarian energy supply .

59

7.4

Composition of the Croatian energy supply .

60

7.5

Mineral occurrences in Kosovo .

62

7.6

Composition of the Macedonian energy supply .

64

7.7

Composition of the Montenegrin energy supply

.

65

7.8

Composition of the Romanian energy supply .

68

7.9

Composition of the Serbian energy supply .

70

7.10

Composition of the Turkish energy supply .

73

9.1

Scope of SEE mining laws .

85

19.1

Fictional mining legislation evaluation 1

.

152

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8

19.2

Fictional mining legislation evaluation 2

.

152

19.3

Albanian mining legislation evaluation 1 .

153

19.4

Albanian mining legislation evaluation 2 .

153

19.5

Bulgarian mining legislation evaluation 1 .

154

19.6

Bulgarian mining legislation evaluation 2 .

154

19.7

Croatian mining legislation evaluation 1

.

155

19.8

Croatian mining legislation evaluation 2

.

155

19.9

Cypriot mining legislation evaluation 1 .

156

19.10 Cypriot mining legislation evaluation 2 .

156

19.11 Kosovarian mining legislation evaluation 1 .

157

19.12 Kosovarian mining legislation evaluation 2 .

157

19.13 Macedonian mining legislation evaluation 1 .

158

19.14 Macedonian mining legislation evaluation 2 .

158

19.15 Romanian mining legislation evaluation 1 .

159

19.16 Romanian mining legislation evaluation 2 .

159

19.17 Serbian mining legislation evaluation 1 .

160

19.18 Serbian mining legislation evaluation 2 .

160

19.19 Turkish mining legislation evaluation 1 .

161

19.20 Turkish mining legislation evaluation 2 .

161

A.1

Metal production in Albania .

167

A.2

Industrial mineral production in Albania .

168

A.3

Energetic mineral production in Albania .

168

A.4

Cement production in Albania .

169

A.5

Iron ore, aluminium and steel production in Bosnia-Herzegovina .

169

A.6

Manganese, lead and zinc production in Bosnia-Herzegovina .

170

A.7

Industrial minerals and cement production in Bosnia-Herzegovina .

170

A.8

Energetic mineral production in Bosnia-Herzegovina .

171

A.9

Metal production in Bulgaria 1

.

171

A.10 Metal production in Bulgaria 2

.

172

A.11 Industrial mineral production in Bulgaria 1 .

172

A.12 Industrial mineral production in Bulgaria 2 .

173

A.13 Energetic mineral production in Bulgaria 1 .

173

A.14 Energetic mineral production in Bulgaria 2 .

174

A.15 Cement and crude steel production in Bulgaria

.

174

A.16 Bauxite and crude steel production in Croatia .

175

A.17 Industrial mineral production in Croatia .

175

A.18 Cement production in Croatia .

176

A.19 Energetic mineral production in Croatia

.

176

A.20 Copper production in Cyprus

.

177

A.21 Bentonite and gypsum production in Cyprus .

177

A.22 Cement production in Cyprus .

178

A.23 Metal production in Macedonia .

178

A.24 Precious metal production in Macedonia .

179

A.25 Industrial mineral production in Macedonia

.

179

A.26 Lignite production in Macedonia .

180

A.27 Crude steel and cement production in Macedonia .

180

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9

A.28 Aluminium and steel production in Montenegro .

181

A.29 Salt and lignite production in Montenegro .

181

A.30 Metal production in Romania 1 .

182

A.31 Aluminium production in Romania .

182

A.32 Precious metal production in Romania .

183

A.33 Industrial mineral production in Romania

.

183

A.34 Energy resources production in Romania .

184

A.35 Cement and crude steel production in Romania .

184

A.36 Metal production in Serbia .

185

A.37 Precious metal production in Serbia .

185

A.38 Industrial mineral production in Serbia .

186

A.39 Energetic mineral production in Serbia .

186

A.40 Crude steel and cement production in Serbia .

187

A.41 Metal production in Turkey 1 .

187

A.42 Metal production in Turkey 2 .

188

A.43 Metal production in Turkey 3 .

188

A.44 Metal production in Turkey 4 .

189

A.45 Industrial mineral production in Turkey 1

.

189

A.46 Industrial mineral production in Turkey 2

.

190

A.47 Cement production in Turkey .

190

A.48 Energy resources production in Turkey .

191

A.49 Lignite production in Turkey .

191

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List of Tables

2.1

Economic alliances in Europe .

21

3.1

Summary of geographical indicators

.

34

7.1

Metal production in Albania .

53

7.2

Industrial mineral production in Albania .

54

7.3

Energetic mineral production in Albania .

54

7.4

Metal and products thereof production in Bosnia and Herzegovina .

56

7.5

Industrial mineral production in Bosnia and Herzegovina .

56

7.6

Metal production in Bulgaria .

57

7.7

Industrial mineral production in Bulgaria .

58

7.8

Energy resources production in Bulgaria .

58

7.8

Energy resources production in Bulgaria .

59

7.9

Mineral resources production in Croatia .

59

7.9

Mineral resources production in Croatia .

60

7.10 Mineral resources production in Cyprus .

61

7.11 Metal production in Macedonia .

63

7.12 Industrial mineral production in Macedonia .

63

7.13 Lignite production in Macedonia .

63

7.13 Lignite production in Macedonia .

64

7.14 Mineral production in Montenegro .

64

7.14 Mineral production in Montenegro .

65

7.15 Metal production in Romania .

66

7.16 Industrial mineral production in Romania .

67

7.17 Energetic mineral production in Romania .

67

7.18 Metal production in Serbia

.

68

7.18 Metal production in Serbia

.

69

7.19 Industrial mineral production in Serbia .

69

7.20 Energetic mineral production in Serbia .

69

7.21 Metal production in Turkey .

71

7.22 Industrial mineral production in Turkey .

72

7.23 Energetic mineral production in Turkey .

73

8.1

Constitutions in SEE as of April 2009 .

77

9.1

Mining Laws in SEE .

85

10.1 Mineral righhts in SEE .

90

12.1 Exploration areas in Macedonia .

102

12.2 Mining permits, licenses and concessions in SEE

.

105

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12

12.2 Mining permits, licenses and concessions in SEE

.

106

13.1 Competent authorities in SEE .

110

14.1 Procedures for obtaining mineral rights in SEE .

125

14.1 Procedures for obtaining mineral rights in SEE .

126

18.1 Fees for prospecting permit in Cyprus .

146

18.2 Fees and rents for mining lease in Cyprus .

146

18.3 Quarry license type A pays and rents in Cyprus .

146

18.4 Quarry license type B pays and rents in Cyprus .

146

18.5 Royalties in Cyprus .

147

18.6 Royalties in Serbia .

148

20.1 Evaluation of mineral potential and legal consistency .

164

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Chapter 1

About this book

1.1 Background

The author of this book used to work at University of Leoben (Montanuniversit¨

at Leoben) with

specialization on mineral economy, mining law and policy. During that period the author already

published books on the topic of investments in the Southeast European mining sector. Mineral

law and policy is a very new research topic. The research work focused on general and applied

mineral policy, law and economics and the connections and relations between them. An extensive

professional and private research process of the author aimed at the compilation and evaluation

of the Southeast European mining legislation. After nearly one year of work the first results were

published. Four books in German language discuss the economic and legal basis for investments

in the Southeast European mining sector. The focus of these books was turned to legal aspects

because the existing legislative structure represents one of the most important factors influencing

investment decisions.

This book represents a summary and evaluation of the previously conducted works. For this pur-

pose the economic, mineral economic and legal situation (as far as mineral resources are directly

concerned) will be discussed, compared and evaluated.

1.2 Horizontal and vertical synergetic approach

This book′s particularity is the horizontal and vertical approach. The performance of mining ac-

tivities requires to consider many different issues. The most important factor is the existence of

an occurrence of a mineral resource (deposit). All these issues will be clearly identified in the next

section.

The horizontal approach is ensured by discussing both economic and legal issues in one book as well

as by adducing all countries in parallel. This allows a direct comparison. The vertical integrated

approach is represented by an in-depth discussion of the subject. Economic and legal basis will be

discussed separately. The separate issues which will be mentioned and which comprise the vertical

approach are subject of the following section. The general idea of the approach is illustrated in

figure 1.1.

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14

Horizontal integration

economic and legal

parallel discussion of countries: Albania, Bulgaria, Croatia, Cyprus,

issues

Kosovo, Macedonia, Romania, Serbia, Turkey

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Figure 1.1: Horizontal and vertical approach

1.3 Methodology

This book is subdivided into four major parts:

1. Introduction and key geographical data

2. Economic basis

3. Legal basis

4. Conclusion and summarizing thoughts

The first part of the book introduces the term Southeast Europe along with the categorization of

European territory into regions. The Southeast European region, which is one part of Europe, is

precisely defined. Furthermore the marketing area Europe is opposed to the marketing area Euro-

pean Union. The European Union is discussed specially because Romania and Bulgaria, which are

situated in Southeast Europe, are members in the EU. In addition Croatia, Macedonia and Turkey

are candidate countries for the EU membership and are all situated in the sphere of influence of

Southeast Europe. Many other Southeast European countries are potential members of the EU.

However, the term Europe is not equal to the term European Union. It is important for this book to

mention other economic alliances in Europe. Furthermore the developing status (developing, emerg-

ing, advanced and most advanced) of Europe is shown in a global context. For the introduction it

is important to briefly mention Europe′s mineral potential and supply situation. The potential role

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15

of the Southeast European countries shall be highlighted. Economic and legal basis represent very

significant issues for investment processes in mining. The introduction compiles description of the

different factors influencing investment in mining activities, especially the legal aspects. The end

of the introductorily part represents a short discussion of some important geographical data which

shall describe the often unknown geographic situation of the Balkan peninsula as well as Turkey

and Cyprus.

The second part of the book deals with the economic basis. First, general economic aspects like

GDP and its composition will be discussed for the whole Southeast European region. Data of Aus-

tria and the European Union (average data of all member states) are mentioned for comparison.

Afterwards a detailed portfolio on basic economic information will be given for each country, inter

alia (i.a.) GDP, GDP composition, GDP growth rate, labor force, labor force composition, informa-

tion on agricultural and industrial production as well as a trade balance. The mining industry will

also be discussed in general and in detail. The general importance of the Southeast European mine

production will be shown by citing production data and the share in world production. Detailed

information on each country contains mining production of the last years and short information

on the structure of the mining industry.

The focus of this book is turned to the legal basis which is discussed in the third part. There are

several very important legal aspects to be considered. Not all of them are discussed in this book

because it would overstretch the scope. The introduction to the legal basis is established by a com-

parison of active constitutions, forms of government and administrative divisions. This information

is relevant for the implementation of the mining (as well as other) legislation because for different

provisions or activities different authorities (local or national) can be responsible. The discussion

of active mining laws in Southeast Europe shall lead over to the mining specific part of the legal

basis. Besides the year of application of the law, the scopes will be compared as well. The further

discussion of several provisions of each mining law is based on the administrative procedures for

starting and performing mining activities (see figure 1.2).

First of all it is important to know whose domain mineral resources (mineral rights) are in. The cat-

egorization of mineral resources into different categories is also connected to mineral rights because

there may be different mineral rights for different mineral groupings. The mineral categorization

is also important for the application of a license or permit, fees and royalties. Resulting from the

different mineral categories and different mining works which are covered by law, a wide range of

concessions, licenses and permits exist. It is very significant to distinguish all these administrative

documents and (as mentioned before) different application processes and especially authorities.

Both the competent authorities and the different application and permitting procedures will be

discussed in detail in this book. After the relevant authorities have granted a license or permit,

several rights and obligations result from them. Together with existing mining plans and programs

established rights and obligations are the most important provisions for performing mining activ-

ities. A licensee, permittee or concessionaire has to pay several penalties (when charged guilty of

an offense), fees and royalties which are also requirements for the performance of mining. All these

legal aspects are discussed and nearly all of them (except rights and obligations, mining programs

and financial terms) are compared for each country in the same sequence as they were mentioned

in this chapter. This book does not contain information on the termination of mining activities

(including rehabilitation).

The fourth and last part of this book deals with an integrated comparison and evaluation of the

economic and the legal basis. As far as the legal basis is concerned, a common approach is uti-

lized: every mining law is evaluated by conducting a content analysis and derivating therefrom

the complexity of the mining law. Together with the actuality and the scope of the mining law

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16

it is possible to compare these very important legal issues in Southeast Europe. In addition a

summary of the general economic and the mining economic situation is implemented. These two

parts are connected and countries with a high level of legal consistency and high mineral potential,

and therefore a high mining development possibility (which may also be important to improve the

general economic situation) can be identified.

Intention to

permitting

perform mining

authorities

mining activities

procedure

act.

licenses

rights and

Fees and

Mining laws

and

obligations

Royalties

permits

Mineral

Mineral

mining

Penalties

rights

grouping

plans

Figure 1.2: Important legal aspects to perform mining activities

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Part I

Introduction and geographical key

data

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Chapter 2

Introduction

2.1 Economic area Europe - marketing area European Union

The European Union (EU) is the world′s largest marketing area. In 2008 the European Union′s

gross domestic product (GDP) accounted for 14.82 trillion US$ [15]1. Hence, the European Union

ranks first in global context outperforming the United Stats of America, China and Japan (see

figure 2.1). The same year the EU achieved about 21.33% of the global GDP. Still, it is important

to note that the European Union represents a political union of 27 European countries. Within the

union Germany, the United Kingdom, France, Italy and Spain are the economically most important

countries. These five countries accounted for 85.12% of the European Union′s GDP in 2008 [15].

Figure 2.2 shows a break-up of the European Union′s gross domestic product in 2008.

16000

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12000

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b

6000

4000

2000

0

EU

USA

China

Japan

India

Russia

Brazil

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Canada

South

Korea

Figure 2.1: EU in the global GDP ranking 2008

(Data source: CIA)

1All information about the GDP is listed in international US$ (PPP-$). All data correspond to 2008 except otherwise

noticed.

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20

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Figure 2.2: Composition of the European Union′s GDP

(Data source: CIA)

Many other European countries are not members in the European Union. Most of them are situated

in Southeastern and Eastern Europe. The EU faces further enlargement, especially in the South-

eastern European region. Macedonia2 and Croatia as well as Turkey are candidate countries for

joining the European Union [30]. The former two may become members of European Union in the

foreseeable future. The accession of Turkey to the European Union is controversial although official

accession negotiations started in 2005. In 2008, Turkey would have been the sixth most important

economic region within the European Union [15]. All other Southeast European countries that are

not members in the EU are potential candidate countries and already signed the Stabilization and

Association Agreement (see figure 2.3).

Figure 2.3: Candidate and potential candidate countries of the European Union

(Source: European Commission)

The economic importance of Southeast European countries will be discussed in part II of this book.

2Accession negotiations with Macedonia have not started yet. Macedonia has the status of a candidate country.

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