This paper is divided into the following sections:

1. General information on exploration and development of gold deposits
2. Grounds for subsoil use in the Kyrgyz Republic
3. Procedure of granting rights for conducting exploration and development of gold deposits
4. Suspension and Termination of Subsoil Use Rights

1. General information on exploration and development of gold deposits

Exploration and development of gold deposits is regulated by the subsoil legislation of the Kyrgyz Republic. According to this legislation Subsoil Use is understood to mean actions pertaining to subsoil study, mineral recovery, and the use of subsoil for construction and operation of structures not related to recovery. Accordingly works connected with gold mining consist of two types of subsoil use: Geological study of gold deposits and gold mining. According to the legislation Geological subsoil study means special research activities pertaining to search for and exploration of deposits, determining the amount and quality of a stock of raw minerals contained in a deposit, and assessment of their economic value. As for Gold Mining, it is determined as all processes aimed at extraction of minerals from the subsoil. Mineral deposits are natural accumulations of mineral formations in the subsoil, which have economic significance, taking into consideration prices and industrial technologies at any given time.

According to the Constitution of the Kyrgyz Republic, and Decree of the President of the Kyrgyz Republic regarding foundation of gold reserves and fund of precious metals in the Republic of Kyrgyzstan, dating December 19, 1991, gold deposits are the exclusive property of the state. Legal entities and citizens of both the Kyrgyz Republic and foreign countries can be Gold Deposit Users. Gold and other minerals mined in deposits belong to a subsoil user in accordance with ownership rights, if no other stipulation is made in legislation or agreements.

2. Grounds for subsoil use in the Kyrgyz Republic

The legislation of the Kyrgyz Republic provides the following grounds for subsoil use in the Kyrgyz Republic:

1) Granting rights for subsoil use by the State

Rights for subsoil use are granted on the basis of Licenses, issued by an authorized state body. Separate licenses are given for of the various stages of mining operations, e.g. for geological study of subsoil, and separately for the development of mineral deposits.

A license for geological study gives its holder the exclusive right to conduct research within the boundaries of the licensing area for a period of two years, with the possibility of prolongation for up to 10 years.

License to develop mineral deposits grants the licensee the exclusive right, within the boundaries of the mining allotment, to conduct geological study, stripping, deposit preparation, raw minerals recovery and processing, use of mining and processing waste, refining (affinage), to sell and export all recovered minerals and raw minerals processing for a period established by a technical proposal but no longer than 20 years with the subsequent extension pending the depletion of mineral stocks.

A License Agreement is also concluded between the state and the subsoil user. The License Agreement is a concurrent part of License, and the License is deemed to be invalid without a License Agreement.

The License shall contain following information:

• the type of subsoil use;
• to whom the license was issued and the licensee's particulars;
• name of the licensing object;
• date of issue and effective period of the license.

The license agreement should contain the following information:

• a specified program of activities coordinated with the licensee and a definition of force-majeure circumstances under the agreement;
• information on the license holder;
• the aim of the works related to subsoil use;
• all types of payments and license fees charged for subsoil use;
• coordinates of the angular points delimiting the land, mining and/or geological allotment for subsoil use;
• conditions for applying technologies of recovery and processing of mineral products and restoration of the environment disturbed by subsoil use.

Concession on subsoil use

In addition to the License and the License Agreement, the legislation of the Kyrgyz Republic envisages other grounds for rights of subsoil use; one of them is a Concession Agreement. The Government of the Kyrgyz Republic and a foreign investor (foreign country, legal entity, a foreign citizen, joint ventures) are the parties to such Agreement. Concessions are determined as the granting of a right for a foreign investor to execute commercial activity in connection with a provision of land and its subsoil on terms of lease by the Government of the Kyrgyz Republic. The state grants the foreign investor the right of ownership and use of gold deposits, yet holds the exclusive right to determine their disposal. Minerals extracted from the gold deposit belong to the subsoil user.

2) Transfer of mining rights:

The legislation of the Kyrgyz Republic on subsoil use envisages the transfer of mining rights to third persons, in the form of Pledge of License rights. In this case a subsoil user grants a third person mining rights for additional funding of the project with regard to a licensing object. For this purpose it is necessary to obtain a permit from the competent state body.

3) Transfer of mining rights resulting from legal succession

In accordance with the civil legislation of the Kyrgyz Republic in the event of reorganization of the subsoil user, its mining rights shall pass to its successor(s).

3. The Procedure of granting rights for conducting exploration and development of gold deposits

Subsoil use rights are granted by tender or/and auction. The authorized state body determines the mine and subsoil areas allotted for use subject to the limited size defined by the Government of the Kyrgyz Republic. Tenders are announced and conducted for mining in these areas. Tender announcement is published in the mass media of the Kyrgyz Republic, and, if necessary, in foreign publications, and should contain following information:

• the location and quantity of explored reserves and probable resources in the tender project or prospects of their discovery in the subsoil;
• terms for winning the tender;
• closing date for submitting applications for participation in the tender and submitting tender programs;
• the fee for participation in the tender, documents containing geological information and one-off payment of a tender winner for the right of subsoil use (bonus).

Entities participating in the tender should submit an application with carrying the following information:

• information on the applicant, including location and nature of his activity, and his economic relations with financial and industrial partners;
• certificates on availability of finance for developing subsoil objects, availability of human, material and technical resources

Participants should provide proposals for geological study of the license area within 30 days after the closing date for submitting applications for tender, and within 60 days after the closing date for submitting the applications for tender — tender programs on developing the licensing area.

The Government establishes a special commission for every licensing area, consisting of specialists. The Commission determines terms of the tender and its winner. The Commission examines tender programs and takes decisions within one month. It determines the winner of the tender or announces the failure of the tender if no participant meets the requirements.

The Decision of the tender Commission will be the ground for the issue of the Licence and conclusion of Licence Agreement.

4. Suspension and Termination of Subsoil Use Right

The subsoil use right may be suspended if: 

1. subsoil is used for a purpose other than that for which it has been allocated;
2. the terms of the license agreement are breached;
3. force-majeure circumstances arise.

The subsoil use right shall be terminated by withdrawal (annulment) of the license in the following cases:

1. where the exploration works are completed, the mineral stock is depleted, and/ or the enterprise is liquidated;
2. where technologies are used for subsoil development, which create a threat to the health and safety of employees and the population, and a threat of irreparable damage to environment and the loss of mineral stocks;
3. if a technical proposal is agreed with the government agencies for protection of subsoil, environment, technical safety and land owners within a term provided by the license agreement;
4. where within one year the user fail to start the development of subsoil in the volumes provided by the terms of licensing;
5. where the user voluntarily refuses to use the subsoil or the license term has expired.