Several modifications to the Mining Law were recently approved by the Turkish Parliament and have now been brought in to effect by the President. Ariana Resources, the Anglo-Turkish gold exploration and development company focused on Turkey, believes this will hasten the mining permitting process in the country. Highlights:

•  Ground turn-over will be further encouraged and will reduce the number of areas currently sterilised to exploration due to under-utilisation
• Licences areas will be auctioned and an effort made to define licence areas according to geological continuity of mineralised features; larger licences may become available in time
• New royalty framework introduced, which scales according to commodity price.

Dr. Kerim Sener, Managing Director, commented: “These and other modifications to the Mining Law have occurred following extensive industry consultation. The urgency with which these and related issues were debated, demonstrates how seriously the Turkish Government views the mining sector. As we watched the open vote unfold in Parliament, it was reassuring to note that the law was passed almost unanimously, indicating wide cross-party support.

“The changes to the law are viewed by many as representing the further evolution of the Turkish mining sector and will encourage further professional development of the industry. Increased ground turn-over will be an outcome of the new law, as only currently producing or relatively near term development projects will be retained due to enhanced costs associated with their maintenance. Increased requirements associated with holding exploration licences and their expenditure commitments will also ensure better and more serious exploration in the long run. In the past, large areas of the country were effectively sterilised to exploration because licences owners could hold ground at minimal cost and by undertaking limited work. The new law will fundamentally change for the better the way in which both exploration and mining is undertaken in the country in the medium to long term.

“We are now confident that these changes will also catalyse the permitting process for the mining sector in general. Our application to the Department of Forestry for access to the areas designated for construction at our Red Rabbit project, remains in process at the Prime Ministry. This is in accordance with a Prime Ministerial Decree, which altered the way in which permits are granted over State land, irrespective of industry sector. We look forward to hearing positive news on our application in due course.”

Law number 6592 was passed by the Turkish Parliament on February 4 this year. This law primarily involved several modifications to articles within Law Number 3213, which is the Mining Law as passed in 1985. These modifications were approved by the President on February 17 and brought in to effect. Principle changes to the law that will have an impact on the business of Ariana Resources include:

1. Licence Fees: An area and exploration-stage dependent annual fee of between 1,000 and 5,000 TL for exploration licences and an area dependent fee of between 20,000 and 70,000 TL for operating licences will be due for payment at the end of January each year
2. State Right: the royalty paid to the Government on gold will range from 2 to 16% of the Pit Head Sale Price, in parallel with a commodity price range from <$800/oz to > $2,225/oz. At current gold price the royalty paid would be 4%. This royalty rate is reduced by 50% if production is occurring within an owner-operated process plant. In the event no production occurs with an operating licence within any one year, a State Right charge of 10,000 TL will be made automatically
3. Licence Auctions: Relinquished or abandoned licences will be auctioned, and it will no longer be possible to make direct applications in areas of free ground. The minimum auction bid price will be equal to the operating licence annual fee. Certain licences will be amalgamated prior to auction based on parameters such as geological setting and continuity of mineralised features. In these cases the existing area limitation of 2,000 ha for a Group 4 licence (e.g. gold/silver) will not apply. The Ccmpany views the above modifications as being generally positive for the industry, although noting that the cost structure associated with maintaining licences in good standing will increase. Ariana Resources considers this cost increase to be reasonable and manageable, based on current exchange rates. However, the cost of acquiring new licences in Turkey will be significantly higher than in the past, as licence acquisitions will be via competitive auction or licence transfer only. This is one aspect of the new law that could have a limiting effect on any greenfields-type exploration activity.