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The Legal Framework of Mining Industry in Malaysia

Part 1: Introduction

Mining is one of the oldest industries in Malaysia and this may be traced back to the early 1820s following the arrival of Chinese immigrants in Perak. The mining industry has consistently played a vital role in the country’s economic development as it serves as a backbone for the construction and manufacturing sectors, namely in supplying the relevant basic raw materials.1 For interested parties, this article will provide a brief insight as to the legal framework of mining industry in Malaysia.

Part 2: Legislations

In Malaysia, the two main legislations which govern mining related activities are the Mineral Development Act 1994 (“Act”) and the relevant state mineral enactments (“SME”). The Act is enforced by the Department of Minerals and Geoscience of Malaysia. In addition, the Federal Government also works hand in hand with the relevant state land and mine offices to govern the mining landscape.

Mineral Development Act 1994

In short, the Act provides provisions for the inspection and regulation of the exploration and mining of minerals and mineral ores and for other matters connected therewith.2

In addition, Section 63 of the Act provides:

(1) “The Minister may make regulations in respect of any matter which may be prescribed under this Act.”

Premised on the above section, as at the date of writing this article, there are currently seven (7) regulations made by the Minister of Natural Resources and Environment.

No.

Regulation(s) 

Summary

Penalty

(1)

Mineral Development (Operational Mining Scheme, Plans and Record Books) Regulations 2007

These Regulations provide the procedures for:-

(a)

 

preparing operational mining schemes;

 

 

 

(b) 

 

operational mining plans; and 

 

 

 

(c)

 

operational record books.

 –

(2)

Mineral Development (Blasting) Regulations 2013

These Regulations impose, amongst others, a duty upon the license holder in relation to:-

(a)

 

storage, handling and transportation of explosives;3 and

 

 

 

(b) 

 

safety aspects before, during and after the blasting operations.4

Any party who fails to observe any provisions of these Regulations shall, on conviction, be liable to a fine not exceeding fifty thousand ringgit (RM 50,000.00) or imprisonment for a term not exceeding three (3) years or both.5

(3)

Mineral Development (Safety in Exploration and Surface Mining) Regulations 2014

These Regulations impose, amongst others, a duty upon the holder of prospecting licence, exploration licence, proprietary mining licence or mining lease (each as defined under the Act):-

(a)

 

to prepare and submit a safety management plan to the Assistant Director of Mines for his approval, within six months of the start of any development work in a mine, or three months of the start of the operation;6 and

 

 

 

(b)

 

to ensure safety in an area where exploration, mining or mineral processing is carried out in a mineral tenement.7

Any party who fails to observe any of the Part III provisions of these Regulations shall commit an offence and shall, on conviction, be liable to a fine not exceeding one hundred thousand ringgit (RM 100,000.00) or imprisonment for a term not exceeding five (5) years or to both.8

(4)

Mineral Development (Licensing) Regulations 2016

These Regulations provide, amongst others:-

(a) 

 

the prerequisites for:

 

 

 

 

 

(i)

 

the storage management plan; and

 

 

 

 

 

 

 

(ii)

 

the mineral processing schemes;

 

 

 

 

 

(b)

 

the prohibitions against obtaining minerals from illegal source; 

 

 

 

 

 

(c)

 

the procedures for: 

 

 

 

 

 

 

 

(i) 

 

the application of licence(s);

 

 

 

 

 

 

 

(ii) 

 

the issuance of licence(s);

 

 

 

 

 

 

 

(iii)

 

the renewal of licence(s); 

 

 

 

 

 

 

 

(iv)

 

the assignment of licence(s)

 

 

 

 

 

(d) 

 

the need for appointment of a premise manager; and  

 

 

 

 

 

(e)

 

the duties imposed on the licence holder or the premise manager.  

Any party who fails to observe any of the provisions of these Regulations shall commit an offence, and shall on conviction, be liable to a maximum fine not exceeding one hundred thousand ringgit (RM100,00.00) or to imprisonment for a maximum term not exceeding five (5) years or to both (Depending on the severity of the breach). 

(5)

Mineral Development (Effluent) Regulations 2016

These Regulations provide: 

(a)

 

the parameters allowed in relation to discharge of effluent;9 and

 

 

 

(b)

 

the procedures in relation to sampling and analysis of effluent.10 

Any party who fails to observe any of the provisions of these Regulations shall commit an offence and shall on conviction, be liable to a fine not exceeding one hundred thousand ringgit (RM 100,000.00) or imprisonment for a term not exceeding five (5) years or to both.11

(6)

Mineral Development (Statistical Return) Regulations 2019

These Regulations impose a duty upon the holder of proprietary mining licence or mining lease or a manager (each as defined under the Act) to submit statistical monthly returns to the Assistant Director of Mines.12

 Any party who fails to observe any of the provisions of these Regulations shall commit an offence and shall on conviction, be liable to a fine not exceeding fifty thousand ringgit (RM 50,000.00) or imprisonment for a term not exceeding three (3) years or to both.13

(7)

Mineral Development (Compounding of Offences) Regulations 2019 

These Regulations provide, amongst others, the procedures in relation to compounding of offences.14

 

State Mineral Enactment

Presently, there are thirteen (13) States in Malaysia which have adopted the SME, which are as follows:

(i)

 

Kelantan;

 

(viii)

 

Terengganu;

 

(ii)

 

Sarawak;

 

(ix)

 

Selangor;

 

(iii)

 

Perak;

 

(x)

 

Johor;

 

(iv)

 

Pahang;

 

(xi)

 

Penang;

 

(v)

 

Negeri Sembilan;

 

(xii)

 

Sabah; and

 

(vi)

 

Melaka;

 

(xiii)

 

Perlis;

 

(vii)

 

Kedah;

 

 

 

 

The SMEs are essentially based on a model template created pursuant to the National Mineral Policy. Be that as it may, it is imperative to note that there are minor differences between various SMEs, in particular the operational and administration aspects.

In respect of the issuance of licences and mining lease, this responsibility befalls upon the State Director of the Lands and Mines Department, which is currently a sub-division of each State’s Land Office.

Part 3: Validity, Renewability and Transferability of Licences

Under the Act, there are seven (7) types of mineral tenement licences namely fossicking licence, dulang licence, individual mining licence, prospecting licence, exploration licence, proprietary mining licence, mining lease. The validity, renewability and transferability of the licences are set out as below:-

Mineral Tenement

Validity

Renewability

Transferability

Fossicking Licence

Not exceeding one (1) year

No

No

 Dulang Licence

Not exceeding one (1) year 

No

No

Individual Mining Licence 

Not exceeding one (1) year

No

No

 Prospecting Licence

Not exceeding two (2) years

Yes

Yes

 Exploration Licence

Not exceeding ten (10) years

Yes

Yes

 Proprietary Mining Licence

For the maximum economic life of the mine or mining operations, but shall not exceed the expiry date of the alienated land title 

Yes

No, unless the transfer or dealing with the land includes the mining right 

Mining Lease 

For the maximum economic life of the mine or mining operations, but shall not exceed twenty-one (21) years 

Yes

Yes

*Note: Any application for renewable or transfer of the above requires the approval of the relevant State Authority.

Part 4: Other Relevant Issues

Notwithstanding the above, applicants who are interested in the mining operations would also be wise to bear in mind the need to comply with the environmental, safety and health aspects, namely the Environmental Quality Act 1974, the Occupational Safety and Health Act 1994 and the Factories and Machinery Act 1967.

Pursuant to Section 34A of the Environmental Quality Act 1974,

(2) “Any person intending to carry out any of the prescribed activities shall, before any approval for the carrying out of such activity is granted by the relevant approving authority, submit a report to the Director General. The report shall be in accordance with the guidelines prescribed by the Director General and shall contain an assessment of the impact such activity will have or is likely to have on the environment and the proposed measures that shall be undertaken to prevent, reduce or control the adverse impact on the environment.”

For ease of clarification, mining operations are within the scope of “prescribed activity” under the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 201515. Therefore, any applicant who wishes to undertake mining activities are required to submit an environmental assessment report to the Department of Environment (“DOE”) and may only operate such activity following securing the DOE’s approval.

Part 5: Recent Mining Related News

Despite the COVID-19 pandemic, the mining industry in Malaysia continues to attract foreign interests. In January 2021, a Canadian gold producer namely Monument Mining Limited (“Monument”) has signed a definitive agreement with Fortress Minerals Limited (“Fortress”) on disposal of its entire equity interest in its Malaysian subsidiary, Monument Mengapur Sdn Bhd.16 Fortress is currently listed on the Singapore Stock Exchange with its principal business in exploration, mining and production.17 Its primary iron ore operation is carried out in Terengganu as one of the top iron ore operations within the country.18 Monument, who currently operates the wholly owned Selinsing Gold Mine in Malaysia is planning to use the net proceeds from the transaction for corporate and gold projects development.19 As reiterated by Monument’s CEO, Cathy Zhai, Monument is committed to growth and is advancing several exploration and development projects including the “Mengapur Copper” and “Iron Project” in Pahang.20

Apart from the above, in July 2020, Ageson Bhd, an investment holding company listed on the Main Market of Bursa Malaysia had also entered into a joint-venture agreement with Menteri Besar Kedah Incorporated (“MBI Kedah”) to undertake the mining, supply and exportation of silica sand.21 MBI Kedah is the Kedah state investment arm, and its subsidiary, Permodalan Kedah Bhd holds a mining lease in Kedah.22 Pursuant to the agreement, MBI Kedah will grant the joint-venture company the full authority to undertake new silica sand mining activities at new located concession areas at Bukit Buluh, Mukim Serdang, and Bandar Baharu.23

Part 6: Conclusion

Any party who wishes to invest in the mining industry should seek legal advice accordingly. As stated above, undertaking mining operations require various approvals from both the Federal and the relevant State Government(s).

The sensitivity of mining industry in Malaysia, due to amongst others, the location of most mining fields in the rural areas (with undeveloped infrastructures, neighbouring villagers and farming areas) requires a very diligent compliance with the laws and regulations relating not only to the mining licensing and operations, but also environmental and safety requirements. Whilst foreign and local investments in the mining sector of Malaysia are important for the industry and the economy at large, it must also be ensured that mining activities do not negatively impact the environment and land, which are equally important and valuable to the society at large.

———-

1. Societe Generale – “MALAYSIAN MARKET : MAIN SECTORS” https://import-export.societegenerale.fr/en/country/malaysia/market-sectors?accepter_cookies=oui&
2. Preamble of the Act.
3. Part 3 of Mineral Development (Blasting) Regulations 2013
4. Part 4 of Mineral Development (Blasting) Regulations 2013
5. Regulations 31 of Mineral Development (Blasting) Regulations 2013
6. Regulations 3 of Mineral Development (Safety in Exploration and Surface Mining) Regulations 2014
7. Part 3 of Mineral Development (Safety in Exploration and Surface Mining) Regulations 2014
8. Regulations 12 of Mineral Development (Safety in Exploration and Surface Mining) Regulations 2014
9. Regulations 4 of Mineral Development (Effluent) Regulations 2016
10. Regulations 5 of Mineral Development (Effluent) Regulations 2016
11. Regulations 7 of Mineral Development (Effluent) Regulations 2016
12. Regulations 2 of Mineral Development (Statistical Return) Regulations 2019
13. Regulations 4 of Mineral Development (Statistical Return) Regulations 2019
14. Regulations 4 of Mineral Development (Compounding of Offences) Regulations 2019
15. Paragraph 8 of Second Schedule of the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 2015
16. Monument Mining News Release – “Monument Enters into Agreement for Sale of Mengapur Project in Malaysia”, Retrieved at https://www.monumentmining.com/news-media/news/2021/monument-enters-into-agreement-for-sale-of-mengapur-project-in-malaysia/
17. Ibid
18. Ibid
19. Ibid
20. Ibid
21. The Edge Markets – “Ageson forms JV with Kedah investment arm to venture into sand mining”, Retrieved at https://www.theedgemarkets.com/article/ageson-forms-jv-kedah-investment-arm-venture-sand-mining
22. Ibid
23. Ibid

 

Prepared By:

Ong Sern Tai (Associate) ongserntai@azmilaw.com

Syed Zomael Hussain (Associate Director) zomael@azmilaw.com