The Cambodian Mining Sector

The mining sector in Cambodia is still largely undeveloped, and most mining companies active in Cambodia are small-scale quarries producing materials for construction, such as laterite, marble, granite, limestone, gravel and sand. There are also a large number of artisanal miners, running very small operations mining for gold and other minerals. To date there has been no industrial scale extraction of precious minerals, although in recent years there have been a large number of exploration licenses granted to both local and international companies.

The neighbouring countries of Laos and Viet Nam have significantly more developed mining sectors, with large-scale extraction of minerals such as gold and copper on-going. Due to various factors, including decades of civil war, proliferation of land mines and unexploded ordnance, and inadequate infrastructure, Cambodia lags far behind its neighbours in development of the sector. The Cambodian Government is actively encouraging companies to invest in the sector, and for a number of years speculation has been rife that Cambodia is on the verge of a major expansion of its mining industry.

Prospects for the Cambodian mining sector

Due to a lack of extensive geological surveys, it is still not clear exactly how much exploitable mineral resources Cambodia has, but the Ministry of Industry, Mines and Energy (MIME) has stated that copper, gold, iron ore, zinc, lead, tin, bauxite, sapphire, ruby, kaolin and limestone are amongst the most prevalent resources in Cambodia – and to date they are still largely untapped¹. Currently there are companies from various countries exploring for minerals in Cambodia, including Australian, Korean, Chinese and Vietnamese. Some companies are working in partnership with local companies, however, as the Cambodian law allows for wholly foreign owned mining companies to receive licenses, some foreign companies are also working alone.

The process of setting up a working mine includes a number stages, from initial reconnaissance and prospecting, to exploration, feasibility study, and finally exploitation. The various stages can be lengthy and very expensive, and from the initial reconnaissance to actually extracting minerals, a large mine can sometimes take years to become fully operational. Because of the potentially huge costs associated with establishing a working mine, experienced and competent companies are likely to be very cautious entering into the young Cambodian mining sector. While the country’s relatively untouched mineral resources are extremely attractive to investors and developers, this undeveloped sector also poses a number of risks, such as inadequate regulation, poor infrastructure, and lack of transparency.

However, the Government is optimistic, and in 2010 MIME Minister H.E. Suy Sem stated that a number of “companies with enough capital and high technologies have shown us positive signs that they could begin their extraction activities … So in no more than six years, [we] will be able to get revenue from mineral resources.” H.E. Suy Sem also stated that since 2006, Cambodia has issued 104 licenses to 20 local and international mining companies.²

Legal framework and regulation for granting mining licenses

The current legal framework governing mining in Cambodia is still undeveloped, in places lacking detail, and in need of modernizing if it is to cope with the potential expansion of the industrial mining sector. Below is a brief summary of the key legal provisions, all of which are available for download here.

The Constitution of the Kingdom of Cambodia states that all natural resources are the property of the State, and that the “control, use and management of State properties shall be determined by law.”³ The Law on Mineral Resource Management and Exploitation (hereafter, the mining law) confirms that all mineral resources are the property of the State.⁴ Licenses can be granted allowing companies to commercially exploit these minerals, but as all minerals are the property of the State, any mining conducted without a license is illegal.

In discussions and writing on the Cambodian mining sector, the terms “mining license” and “mining concession”, are sometimes used interchangeably. However, the Cambodian mining law does not expressly mention concessions – and is concerned only with mining licenses. In most countries, a concession is granted that sets out the geographical area in which mining operations can take place, and in order to work within that concession the concessionaire must also obtain a mining license.

Under the Cambodian mining law there are six types of mining license.⁵ It is an offense to conduct commercial mining operations without a license, and is punishable by fine and/or time in jail⁶. The six types of mining license listed in the mining law are: Artisanal Mining License; Pits and Quarries Mining License; Gem Stone Mining License; Mineral Transforming License; Exploration License; and, Industrial Mining License.

Applications for all types of mining license should be submitted to MIME, which is responsible for managing and inspecting all mining operations and ensuring that the provisions of the mining law are respected.⁷ Licenses can only be issued if the applicant is commercially registered in the Kingdom of Cambodia, and after a thorough consideration of the technical and financial capability of the applicant.⁸

A Pits and Quarries Mining License covers exploitation of stone mined from pits and quarries for use in construction. This includes sand, gravel, crushed stone, laterite, clay, cement, limestone, and marble.⁹ Many such licenses are already in existence, as demand for construction materials has boomed in Cambodia over the last 10 years. Sand-dredging operations are also granted under Pit and Quarry Licenses.

If a company wishes to explore or mine for precious minerals such as gold, copper, iron ore or bauxite, it must first receive an Exploration License. Companies who possess an exploration license can take samples from within the license area, but cannot exploit the minerals commercially – it is a criminal offence to conduct commercial exploitation of minerals when only in possession of an exploration license. Exploration licenses generally last for 2 years with the option of extension.

If exploration activities show that there are minerals in high enough quantities to be profitable, the company may apply for an Industrial Mining License. All requests for Industrial Mining Licenses (hereafter referred to as Mining Licenses) must be approved by the Council for Development of Cambodia.¹⁰ After having obtained agreement from the CDC, MIME will issue the license. Mining Licenses can only be issued to applicants who are already in possession of an existing Exploration License, and the area for mining must be located within the same area covered by the Exploration License. The applicant must submit a technical, financial, environmental, social and economic analysis to determine the “socio-economic feasibility” of proceeding with the mining.¹¹

Conduct and requirements of license holders

According to the mining law, license holders and contractors have the responsibility to conduct operations in a technically and financially efficient way, and abide by environmental laws and regulations. Before a Mining License is granted an Environmental Impact Assessment must be conducted which includes a management plan for minimizing negative environmental and social impacts. The holder must also provide financial guarantees and prepare a plan for restoration after the project is over. During the course of operation, the licensee must protect the health of workers and of the public living in and around the mining site, and is also required to educate, train and provide jobs to Cambodian citizens.¹²

License holders are required to pay fees to the State for registration, renewal or transfer of licenses, and annual land rental. Royalties must also be paid to the State for any minerals extracted, with rates varying depending on the type of mineral extracted. Any license holder who commercially exploits minerals without paying the correct royalty is liable to pay a fine of double the original value or the minerals and/or have their license revoked. In addition, license holders are also obliged to pay the appropriate taxes according to existing tax law. Any breach of the mining law and associated regulations may lead to the suspension or cancellation of the license.¹³

Where can mining happen?

Mining can take place on private land, but the licensee must first obtain written permission from the landowner. This should include provisions for compensating the owner for any damage or inconvenience caused by the mining operations.¹⁴ Anyone who violates this restriction is liable to pay a fine or be sentenced to time in prison.

In cases where legal landholders are displaced or affected by a mining operation, the company will be responsible to develop plans to adequately compensate them. It is also possible that the Law on Expropriation could be applied to mining operations, although the law has yet to be applied, so it is not clear what effect it will have on land acquisition for mining operations. The law sets out the principles and procedures for the State to acquire privately held land for public interest purposes. The law includes a list of projects which may be determined to be in the public interest, one of which is “construction and expansion of buildings and equipment for research and processing mines and other natural resources”.¹⁵

The mining law states that all mining in “national cultural, historical and heritage sites” is strictly prohibited, and any mining activities in “protected, reserved or restricted” areas can only be carried out with written permission of the authority responsible for managing that area.¹⁶ The Protected Areas Law of 2008 introduced a new system of zoning land within protected areas into four categories: Core Zones, Conservation Zones, Sustainable Use Zones and Community Zones. Mining within Core and Conservation zones is not allowed, however, mining may be permitted in Sustainable Use Zones.¹⁷ The 2002 Law on Forestry allows mining within the Permanent Forest Estate, however, any proposed mining operation, in addition to following other relevant laws, must be the subject of a “prior study-evaluation” by the Ministry of Agriculture, Forestry and Fisheries (MAFF).¹⁸

The legality of mining operations on lands traditionally managed by indigenous people still requires clarification, especially as much of the exploration currently on-going is being conducted in areas with large indigenous populations. The 2001 Land Law states that indigenous communities have the right to register their collective ownership over “those lands where the said communities have established their residences and where they carry out traditional agriculture.”¹⁹ Until communities have the opportunity to register their land, interim protection is provided by the 2001 Land Law, which also states that all indigenous groups existing at the time the law was passed “shall continue to manage their community and immovable property according to their traditional customs” until they are able to register their land.²⁰ Therefore, any mining on the land of indigenous peoples is potentially in breach of the Land Law.

Emerging trends

As mentioned earlier, a large number of domestic and foreign companies are engaged in research and exploration for minerals in Cambodia, and it is being reported that companies are now receiving licenses to conduct exploitation. A number of foreign companies have reported positive findings, such as Australian companies Indochine Mining, Southern Gold and OZ Minerals, who have all been active exploring for gold in the northeast and have reported promising finds. BHP Billiton and Mitsubishi were less successful and after three years of study in Mondulkiri failed to find adequate bauxite resources to justify an investment in the country. However, it is now reported that a Chinese company has decided to try its luck in the area, and the Vietnamese giant Vinacomin is also exploring for bauxite over 1,500 square kilometres in Mondulkiri province.²¹

Much of Cambodia’s resource wealth lies in the northeast of the country, in Mondulkiri, Ratanikiri and Kratie. Although these areas have relatively low populations, they are home to diverse ecosystems and extremely sensitive biodiversity. Although logging has taken its toll on the region, much of the northeast is still forested and the area has a number of wildlife sanctuaries, protected areas, protected forests and a national park. According to a 2009 NGO report, “Mondulkiri province contains areas of four protected wildlife sanctuaries and two protected forests which in their entirety total 1,267,322 hectares. As of 2008 no less than 282,700 hectares or 22 percent of these protected areas were covered by mining concessions.”²² Many people are concerned that the promise of extremely high revenues is likely to outweigh concerns for environmental protection. Although, earlier in 2011 a planned titanium mine in Koh Kong province was cancelled due to “concerns of the impact on the environment, biodiversity and local livelihoods”, which many saw as an encouraging sign that decision makers are aware of the need to balance the impacts of development with its benefits.²³

Concerns have been raised by many communities and civil society observers that mining deals are being agreed in a secretive manner. In some cases, communities have had no idea that licenses have been granted in their area until they come across company staff conducting field tests, or observed company offices being established. This has led to widespread anxiety, and is a potential cause of future dispute. The law on mining does restrict access to certain information related to mining and states that all “application forms, reports, plans and notices” are confidential until the termination of the license, unless the holder of the license approves the disclosure. Information related to environmental and social issues can be released to the public, but only at the discretion of the Minister in charge of MIME.²⁴ This creates a significant barrier to those hoping to monitor or investigate mining operations’ compliance with the law.

This lack of transparency is of serious concern for a number of reasons, including for the developers themselves. For example, companies considering investing in mining in Cambodia may not be able to ascertain for certain where boundaries of existing concessions lie. There are already reports of mineral concessions overlapping with each other, and also overlapping with other types of concession, such as Economic Land Concessions (ELCs) for agro-industrial development. In addition, the current system makes monitoring of revenues extremely difficult, as there are limits on access to information on the rents and royalties that are due. Finally, any kind of monitoring is made extremely difficult without a well regulated and public framework for granting Mining Licenses. The public, civil society and even other ministries such as the Ministry of Environment cannot monitor and report on compliance of the mining company if they are not aware of the agreed boundaries of the concession, how long it may operate for, and other important elements of the license agreement.

Prospects for the future

Various stakeholders have raised the concern that the current regulatory framework for industrial scale mining in Cambodia is not adequate to deal with the predicted increase in activity that the sector is likely to see in the near future, and similar concerns have been raised about the country’s capacity to enforce regulations and monitor compliance. However, it should be noted that the Cambodian mining sector is still in its very early stages, and other countries with developed mining industries have in some cases had decades to develop complex regulatory framework and bring practices up to international standards.

In order to better protect the rights of Cambodian citizens, responsibly manage Cambodia’s mineral resources and promote Cambodia as a place for responsible mining companies to do business, the legal framework still needs to be developed in line with international best practice. Positive signs are contained within Cambodia’s updated National Strategic Development Plan for 2009-2013, where the government states that it is examining the Extractive Industry Transparency Initiative (EITI) as a platform for good governance in the treatment of oil and gas resources, developing an action plan for monitoring the management of revenues obtained from oil, gas other mineral resources.

Good regulatory framework also needs good implementation. This will require that alongside legal development, progress is made towards improving transparency and governance of the mineral sector, improving technical capacity of ministry staff, allocating adequate resources for investigating and monitoring mining operations, and improving cooperation between the different ministries involved.
September 2011