DEPARTMENT OF MINES MINISTRY OF ENERGY AND MINES LAO PDR

DEPARTMENT OF MINES MINISTRY OF ENERGY AND MINES LAO PDR

OUTLINE OF THE PRESENTATION I. Vision II. Economic outlook III.Mineral potential IV. Mining related laws V. Licenses Procedure VI. Duties and responsibility of DOM VII.Fiscal regime VIII.Challenge and advantages for Investor IX. Conclusion

I.VISION Very carefully utilize minerals and mineral resources to have high efficiency in conjunction with environmental protection and consistent with national socio - economic development plan in order to create conditions for having national capital and gradual economic growth, industrialization, progressive modernization, sustainable mineral development and improving the standard of living of all ethnic groups.

II. ECONOMIC OUT LOOK Mining industry in Lao PDR is identified as one of the priority sectors in the country s socio-economic development. Which is rapidly becoming an important source of economic growth, national revenue and a driver for local community development and plan of poverty alleviation In the last five years, mining sector has increased average 13.87% per year, contributed 0.5% of the GDP in 2002 and 8% in 2007, 2008-2009 mining sector reached more than 60% of total export of the LAO PDR ( it has increased 68.51% comparing to 2002 ), 2011 Mining sector contributed 10.3% of GDP.

III. MINERAL POTENTIAL Lao PDR has significant mineral potential for the discovery of new ore deposits and their successful development of a medium to large scale mining industry. The total number of Mineral occurrences are 511 : Gold 150, Copper 45, Zinc and Lead 75, Tin 45, Iron ore 52, Bauxite 8, Other metals 36, Gypsum 6, Limestone 9, Potash 36, Other industrial material 14, Coal 37 and Gemstone 6.

Mineral Reserve ( update after details F/S) No Type of Mineral Reserve (T) 01 Potash 326,197,210 (T) 02 Bauxite 442,576,847 (T) 03 Lignite 384,532,231 (T) 04 Copper ore (o,5 1 % Cu) 152,623,073 (T) 05 Gold ore (0.56-3.43 g/t) Au) 44,402,904,212 (T) 06 Limestone ( Cao>50%) 1,708,146,577 (T) 07 Tin ore 32,439,097 (T)

Mineral Production Commodity Unit 2004 2005 2006 2007 2008 2009 2010 2011 Barite T 10,470 8,600 6,500 1,000 1,000 12,400 14,500 5,250 Lignite T 332,907 358,637 319,242 681,715 379,273 466,082 507,496 474,032 Sapphire Carat 712,320 0 0 80,000 104,780 11,947 0 36,512.92 Au +Ag (Metal) Copper concentrate (25% CU) T 6.75 10.15 12.65 9.261 6.997 6.476 5.609 4,003 T 0 0 1,646 4,094 107,890 256,479 302,523 279,168 Gypsum T 244,145 109,787 206,104 232,250 337,304 761,331 0,519,31 7 Tin (Concentrate 65%) Zinc (Concentrate 25-38%) Copper (Cathode) 507,119 T 144 240 809 1,109 551 598 1,113 668,2 T 2,000 8,000 4,000 2,350 2,950 2,000 2,999 150 T 0 20,514 60,757 62,621 63,540 67,571 64,482 78,183

IV. MINING RELATED LAWS Mineral Law; Investment promotion Law; Land Use Law; Environmental Law; Forestry Law; Taxation Law; Transportation Law; Construction Law

MINING ACTIVITIES There were 48 companies investing in the mining sector in 2001. Up to March 2012 there are 290 project including prospection 107 project, Exploration 125 project and Mining 58 project.

History of Mining Law The first Mining Law enacted 1997. 2006 Revised Mining Law and Change from Mining Law to Minerals Law and enacted in 8/12/2008. Draft of Implementing Decree on Minerals Law approved by Government meeting in April 2011. Government declared to set up new an Ministry of Natural Resources and Environment and transfer partly the responsibility of Geology and Mineral to the above Ministry in August 2011.

Mineral and Mining Activities Activities concerning minerals are as follows: 1. Prospecting; 2. Exploration; 3. Pre-Feasibility study and Detailed Feasibility study; 4. Mining; 5. Mineral Processing, smelting and refining; 6. Selling and Buying; 7. Transport of Mineral products; 8. Rehabilitation and Mine Closure; 9. Transfer of Mining Activities.

DURATION OF LICENSES Prospection 2 y + 1 y; Exploration 3 y + 2 y; Feasibility study 1 y + 1 y; Construction 2 y + 1 y; Mining + Processing 20 y + 5 y; Concession area.. Maximum : 300 KM 2. End of prospection period: Relinquish not less than 25% of original area;. End of Exploration period: Relinquish not less 25% of prospection area;

The Investment Promotion Law Types of Investment: 1. General business activities; 2. Concession business activities; 3. Specific economic zone activities. Concession Activities: This is an investment in activities which is granted the rights from the government to develop and operate business such as land concession right, mineral concession rights, energy concession rights, aviation concession rights, telecommunication concession rights, insurance concession rights, financial concession rights, stock market concession rights.

Procedure of getting the investment licenses on mineral Ministry/Department of industry and commerce Ministry/Department of Planning and Investment Specific Economic Zone General business activities (Negative List) Concession Business Activities & Representative Office Investment In Specific Economic Zone Enterprise Registration Licenses Investment Licenses on Mineral & Representative Office Licenses Enterprise Registration Licenses

FORM OF MINERAL INVESTMENT Forms of Investment: 1. Business Cooperation by contract 2. Joint Venture between foreign and domestic 3. 100% foreign owned or domestic owned Representative Office: For collecting information, study investment opportunities.

V. LICENSE PROCEDURE A. Approval procedure for prospection and exploration licenses

B. Approval for Mining licenses

VI. Duties and responsibility of DOM For the management of mining industry the Ministry of Energy and Mines has the main following rights and duties: To undertake study-research and to develop the strategy plan, policy plan, laws and regulation; To provide study and issue regulations concerning management of mining industry; To disseminate, provide guidelines and monitor and inspect the implementation of law and regulation related to minerals; To establish the Committee to conduct the study, checking and approval report on the detail feasibility study; To study the benefit s share of the state from the mining industry; To participate in the negotiation and signing of an agreement on mining operation; To issue and extend licenses for mining, establishment of processing and smelting plant, certificate for buying-selling; To propose to the Government for consideration of suspension or cancellation of an agreement on mineral mining which investor violated;

To build, train and upgrade mining industry skills to staffs and workers; To provide technical certificates for the export and import of minerals; vehicles, machines, and equipment and samples; To issue mineral bulletins and administer mining area registration; To relate and cooperate with foreign countries and international organizations regarding mining industry; To regularly summarize and report on the result of the implementation of mining industry to the Government; To exercise the rights and perform other duties as provided in the laws and regulations;

Road map mining sector development Short term: Establish new structure of DOM which consists of 6 Divisions: 1) Administration; 2) Mining title and Policy; 3) Mining Technology and Metallurgy; 4) Mining Economics and Community Development; 5) Mining Information and Evaluation; 6) Mines Safety, Health and Environment. Upgrade capacity of the DOM S staff Set up IT center and Library Draft roles, regulations and technical standards for Pre-F/S and Detailed F/S, Mines Health Safety and Environmental Protection Monitoring and evaluation Mining Projects; Review Exploration and Mining Agreement.

Long term: Incorporates with Educational Sector to plan Scholarship in Mining Sector ; Incorporates with Environmental Sector to establish Master strategic plan on sustainable development in Mining sector; Incorporates with Financial Sector to collect the revenue from Mining Sector; Study and draft Mining Policy by 2015 and 2020; Plan to Decentralize Mining management in provincial level; Setup cadastral system (Mining area).

VII. Fiscal regime Rental fee for:. Prospection, Exploration and Pre F/S : 0.5 1 USD/ha/y. Mining : 3-12 USD/ha/y Royalty: 1 7 % depend on type of Mineral and type of product; Cooperate income tax: 25-35 % depend on size of project and type of mineral. Option share: Government have right to have 10 % of option share by borrowing from investor and Reimbursement capital and interest by future dividend

Main subcontractor shout be registered company in Lao; Value added tax 10%, could be completed but it cover as expense as operating cost; Other incentives: 1. Exemption of import duties and taxes on raw materials and capital equipment (not including vehicle and fuel); 2. Exemption of export duty on export products; 3. 10% personal income tax on expatriate employees; 4. Additional tax holidays, reduced tax rates for large projects with special concession are available upon negotiation.

VIII. Challenges and advantages for Investor The main challenged issues are: 1. Lake of technical skill for Government staff and limited number; 2. Old structure of DOM S is not appropriated for new climate investment should be reformed; 3. Limited on rule, regulation and international technical standard for enforcement in the mining industry sector; 4. Limited and unskilled local labor working in the mining industry; 5. Most number of mineral trade company more than professional company.

Advantages: 1. Unifying domestic and foreign investment laws: (No discrimination between the foreign and domestic investors, esp. investment incentives) 2. Government vision: land-linked; 3. Social and politically stability ; 4. High security (Low crime rate); 5. Low investment cost ( Labor, land, utilities ); 6. GSP Privileges given from 42 countries; 7. Investment bilateral agreement with 27 countries; 8. In the process of joining WTO.

CONCLUSION 1. Minerals development in Lao PDR is rapidly becoming an important source of economic growth and poverty reduction and ensure sustainable development; 2. Gov t issue mineral and mining activity license 290 projects at the present time Gov t consider new concession area in accordance with applicable law: Mineral Law, Investment Law, Land use Law, Environmental Law and Forestry Law; 3. Gov t encourages investors to joint with existing and new licenses. 4. The most number of the companies has completed prospecting and exploration stage. They are conducting feasibility study on several minerals such as potash, bauxite, gold, copper, lignite, iron, tin and zinc. And it is expected in 5 years the mineral product will be increased and contributed GDP of Lao PDR;

5. Advantages: Unifying domestic and foreign investment laws; Social and politically stability; High security (Low crime rate); Low investment cost ( Labor, land, utilities ); GSP Privileges given from 42 countries, investment bilateral agreement with 27 countries and in the process of joining WTO. 6. Challenges: Lake of technical skill for Government staff and limited number; Limited on rule, regulation and international technical standard for enforcement in the mining industry sector; Limited and unskilled local labor working in the mining industry.

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