TerraLex Cross-Border Guide to Cross-Border Guide to Mining Rights

The governing legislation of the mineral industry in Malaysia is the Mineral Development Act 1994 (“MDA 1994”). The MDA 1994 delineates the Federal Government’s powers to inspect and regulate the exploration and mining of minerals and mineral ores and other issues associated therewith. In addition, there are 10 states which have adopted their respective State Mineral Enactments (“SMEs”) to regulate the mining industry within their respective jurisdictions.

The mining industry is regulated by the Ministry of Energy and Natural Resources of Malaysia, branching out to the Minerals and Geoscience Department. Furthermore, the State governments also enforce their respective SMEs.

The mining industry is mostly a state-regulated matter and thus, an applicant may apply to the State Director of the Lands and Mines Department (a sub-division of each State’s Land Office). By virtue of SMEs, the State Director of Land and Mines is granted powers to issue several permits namely, prospecting licenses, exploration licenses and mining leases to the applicant. It is highlighted that the applicant shall also fulfil other requirements such as submission of environmental reports, mining schemes, rehabilitation plans and others.

An application for a prospecting license or exploration license may be made to the State government. This application is then referred to the State mineral resources committee for its recommendation. The committee will thereby consider the technical and financial qualifications of the applicant before making its recommendation.

In respect of mining lease, the application is also made to the State government alongside submission of a pre-feasibility study. Similarly, the State mineral resources committee makes and delivers its recommendation to the State government. The State government may approve or refuse the application, regardless of the committee's recommendation, and its decision is final.

The list: - Under the SMEs, a prospecting license or exploration license may only be granted to the following:

• A person;
• A company;
• A body expressly empowered to hold mining land under any other written law of Malaysia; and
• A foreign company as defined in the relevant legislation relating to companies, registered under the said legislation and authorized by its constitution to hold mining land

The other statutory requirements for a license holder of prospecting license or exploration license are as follows:

• submit periodical activity reports;
• compensate for any loss, damage or disturbance caused;
• restore prospecting or exploration area;
• relinquish areas required by State authority for public purposes;
• comply with annual work program, expenditure, and area relinquishment;
• seek approval for sales of the specimen; and
• make payment of royalty

Whereas under the MDA 1994, at a federal level, an operational mining scheme is required to be submitted by the miner and the activities are required to be executed according to the approved scheme.

There are two types of licenses for mining exploitation/production i.e., proprietary mining license and mining lease. A proprietary mining license is required upon an owner of any alienated land who intends to carry out mining activities on its land and it shall be obtained from the State government. The rights and obligations of a proprietary mining license are attached to and are inseparable from the registered title of the land as long as the license remains in force.

In respect of a mining lease, it applies to any person intending to mine the land. Similarly, the applicant may apply to the respective State government for a mining lease according to the SMEs. In obtaining the mining lease from the relevant State Land Office, the scale of the operation and the location of the mining operations should be taken into consideration.

The owner of the land in respect of which a mining license or mining lease has been granted may be entitled to compensation for any loss or damage suffered by him arising from the exploration or mining work. The compensation may include the following classes:

• Any damage to the surface of the land or any part thereof;
• Any damage to the crops, trees or livestock on the land or damage to buildings and improvements thereon;
• Any deprivation of possession or use of the surface of the land or any part thereof;
• Any loss or restriction of surface righty of way or other easements; or
• Any disruption to agricultural activity.

An application for the transfer of mining rights shall be made to the State government. The State government will refer the application to the State mineral resources committee and receive recommendations from them. Ultimately, the State government will approve or refuse the transfer and the transfer shall be effective upon payment of the prescribed fee and registration by the State Director.

A holder of mining license shall only carry out exploration work in reserved land or reserved forest area according to the manner or requirements prescribed under any applicable reservation land law. Otherwise, the license holder shall obtain prior written permission of the officer before commencing exploration work.

The locations of most of the mining sites are within the rural areas which may have undeveloped infrastructures, neighboring villagers, and farming areas. Hence, a comprehensive and collective set of laws and regulations are required to balance the mining development and environmental and safety interests. It must be ensured that mining activities do not negatively impact the environment and land.

In view of the above, there are other legislations such as the Environmental Quality Act 1974, the Occupational Safety and Health Act 1994 and the Factories and Machinery Act 1967 that a miner may have to observe.

For instance, a holder of a mineral tenement who uses water in connection with mining operations shall comply with the water quality standards prescribed under the Environmental Quality Act 1974. Another example is illustrated in the Mineral Development (Effluent) Regulations 2016 in which a miner shall obtain written approval in relation to the method of effluent discharged and shall not discharge any effluent containing parameters exceeding the specified limits.

Under Section 34A of the Environmental Quality Act 1974, 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. As mining activities fall within the ambit of “prescribed activity” pursuant to the Environmental Quality (Prescribed Activities) (Environmental Impact Assessment) Order 2015, a miner is required to submit an environmental assessment report to the Department of Environment and obtain approval prior to operating such activities.

The said report shall conform to 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.

Therefore, any applicant who wishes to undertake mining activities is required to submit an environmental assessment report to the Department of Environment and may only operate such activities after securing the said department’s approval.

An owner of a dam may implement the following policies: - Establishing appropriate procedures and arrangements to upkeep safety of the dam under all conditions;

• Establishing and maintaining the necessary competencies for dam safety management including provision of sufficient information and training;
• Verifying appropriate design, construction and quality of the dam and the structures are carried out in compliance with acceptable current dam safety practices and resiliency to commensurate with the consequences of dam failure;
• Ensuring the safe control of the reservoir operations (i.e., inflows, outflows, and stored volumes);
• Ensuring the safe control of all sediments and unwanted materials resulting from the operation of the dam and reservoir;
• Carrying out periodic dam safety inspection and reviews.

On top of that, the operations of the dam may also be subject to the Mineral Development (Safety in Exploration and Surface Mining) Regulations 2014 and any related regulations enforced by the respective State governments since dam-related matters are within the jurisdictions of the State governments.

The Malaysian Government has proposed the long-term National Mineral Industry Transformation Plan 2021-2030 (“MIT 2021-2030 Plan”). The MIT 2021-2030 Plan aims to develop the mineral industry across the entire value chain in making significant contributions to economic growth based on the principles of sustainability. The MIT 2021 – 2030 plan has five pillars, which cover governance and legislation, mineral industry value chain development, mineral resource mapping and inventory, technology application and innovation, as well as human capital development. In addition, the Malaysian Mineral Industry Development Board would also be established.

The Malaysian authorities are cautious towards the mining industry as most mining sites are in rural areas and thus the relevant mining laws encompass not only mining licensing and operations, but also environmental and safety requirements. It is envisaged by the ministry that future miners may employ hi-tech equipment to obtain data on the mineral distribution and land use. A comprehensive database platform would also be developed – one that includes traceability application of mineral resources to monitor and control trade.

Furthermore, research and development would be carried out by the government to develop processing techniques for certain strategic minerals to add values to raw minerals. These include tin ore, silica sand, kaolin, bauxite, and non-radioactive rare earth elements.

On environmental sustainability’s front, the government explores various concepts such as “circular economy”, “urban mining” and extraction of minerals from waste materials in households, electronic components and so on. To this end, the Government has developed standard operating procedures (SOPs) for all relevant parties to ensure mining activities do not adversely impact the environment.