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Zorana Mihajlović Ph.D., Deputy Serbian Prime Minister And Minister Of Mining And Energy

Mining Has Serious Development Potential

The value of Serbia’s mineral wealth totals in excess of 200 billion dollars, and that wealth should be used in a sustainable way – in order to contribute to economic development and growth, and for that to be responsible towards the environment and, finally, for us to see the effects of that in Serbia’s national budget.

Our aim is to create the conditions to invest in mining in Serbia, for investors to be able to rely on transparent and efficient procedures, but, on the other hand, for us as a state to take care of our mineral resources, of the income that’s generated from their use, and for all projects to be in compliance with requirements that relate to the environment. This is how Deputy Prime Minister and Minister of Mining and Energy Zorana Mihajlović summarises the directions of the ministry’s activities in the field of mining for the period ahead.

You started your term by announcing reforms in the sectors of energy and mining. What are the preconditions for these two sectors to become development drivers of the Serbian economy?

Mining and energy are sectors that have long been “sleeping” and have not developed in the previous six years at the speed required for Serbia to be energy secure and to utilise the potentials that exist in these sectors. Mining is a sector that has been stalled for a long time completely undeservedly. We want to fix this injustice, because mining has much greater potential than is currently utilised. The value of Serbia’s mineral wealth totals in excess of 200 billion dollars, and that wealth should be used in a sustainable way – in order to contribute to economic development and growth, and for that to be responsible towards the environment and, finally, for us to see the effects of that in Serbia’s national budget. It was with this aim in mind that the Ministry prepared draft amendments to the Law on Mining and Geological Research, with which we want to create the conditions for Serbia to gain a modern and much more successful mining sector. This means that we want to attract new investments to Serbia, and for the share of mining in GDP to increase over a period of about three years to be close to 4%, instead of the current 1.9%. With this in mind, it is important to better protect our mineral resources, and to secure higher revenues for the state, because mining resources are non-renewable. Last but by no means least, we want the development of mining to be sustainable, and for everything done in this area to be carried out with adherence to all regulations and the highest environmental standards.

Juxtaposed to that, Serbia is in a period of major and serious changes to the energy sector, because we are turning towards climate-neutral development, which implies increased investment in renewable energy sources and energy efficiency, while electricity production from coal – as part of the energy transition – will be gradually reduced in the coming decades. The beginnings of these changes are already visible in the draft laws prepared by the Ministry. By amending the Law on Energy and introducing new laws on renewable energy sources and a law on energy efficiency and the rational use of energy, we will enable the energy sector to operate more efficiently and orderly and to be harmonised with current regulations and processes applied in the European Union. At the same time, we are starting to establish new directions in our energy policy, in which we want to raise energy efficiency to the level of the national goal and national project, as well as creating opportunities to invest in and use much more energy from renewable sources. Among other things, with the new law we’ve provided the possibility for customers to also be energy producers, to have solar panels on the roofs of their houses, residential buildings, production facilities and sports halls.

Serbia is in a period of major and serious changes to the energy sector, because we are turning towards climateneutral development, which implies increased investment in renewable energy sources and energy efficiency

You’ve announced e-energy and e-mining, or the digitisation of procedures. Will that require more or less work compared to building permits? How much have we progressedin the digital transformation of administrative procedures as a country, at both the national and local levels?

With the introducing of e-permits in construction we showed what we are capable of doing as a country when the political will, knowledge, commitment and a clear goal exist. From a country that was ranked 186th in the world in the field of issuing building permits, we’ve reached 9th place on the list of the World Bank’s Doing Business Index. We said that we want to apply this model to other areas, and now we’ll do just that in the fields of energy and mining, through e-energy and e-mining. The legal basis for digitisation has been created through proposed amendments to the law, which will enable the introduction of electronic procedures. This will bring great changes not only in energy, but also in mining, where a digital procedure is being introduced in mining to obtain documentation for the first time. This means that permits will be issued under shorter deadlines, falling on average from the current 150 days to around 15 days, while investors will be able to monitor the exact stage that their procedure has reached. In other words, the efficiency and electronic procedures that we introduced for the issuance of construction permits will now also exist in mining, as well as in energy.

You’ve also announced the creation of conditions for the entry of private capital in the field of energy and mining. The experience with mini power plants didn’t prove to be the most fortuitous concept. How will you progress?

Neither mining nor energy can advance without new investments, and without their significant increase. Our task is to create the conditions for that, for us to have clear and transparent procedures that are equal for all investors, while at the same time protecting the interests of the state, for example when it comes to taking care of mineral resources.

The same applies to renewable energy sources, where the goal is for that potential to be better utilised, which – together with investing in increasing energy efficiency – should enable us to generate about 50 per cent of electricity from renewable sources by 2050. The focus in this area will primarily be on new medium-sized and large hydropower plants, which can most quickly ensure energy security and compensate for the gradual reduction of coal-fuelled electricity production. In addition to this, the use of solar energy is especially important in all parts of Serbia, as well as greater use of biomass potential, particularly in heating plants, while we also expect continued investment in the use of wind energy. When it comes to the construction of small hydropower plants, one of the basic and most stringent criterion from the aspect of environmental protection relates the conditions issued by the Institute for Nature Protection of Serbia and its agreement to the Environmental Impact Assessment Study. That’s precisely why we will stipulate in the Draft Law on RES that qualification for participation in auctions envisaged for each project must include a confirmed Environmental Impact Study, which has been confirmed by the Ministry of Environmental Protection, in order for us to eliminate any project that would harm nature in any way.

You’ve also announced the way mineral exploitation royalty charges are to be determined. We saw in the previous period that this is an issue that has its own political weight. What are you striving for as the ideal variant of change, and what would it be realistic to expect?

The level of royalty charges, i.e. fees for the exploitation of mineral raw materials, is regulated by the Law on Fees for the Use of Public Goods, which is under the jurisdiction of the Ministry of Finance. We have forwards an initiative to the Ministry of Finance to amend the level of fees, with the aim of securing greater funds for the budget of the Republic of Serbia from the mining sector, and the Ministry of Finance – as the competent ministry – will analyse and evaluate this initiative and make a decision.

A priority for us, as the Government, is for everything in mining to be done with the highest level of technology, and the highest degree of environmental protection, because there is no amount of money and investment that can justify the destruction of the environment

Mineral royalty charges in Serbia are today the lowest by far compared to all surrounding countries. For example, in Romania this fee ranges from two to 10 per cent of the value of mining production, and in Hungary it ranges from two to 12 per cent. In North Macedonia the fee is 1.5 to 15 per cent of the value of sold mineral raw materials, while in Russia this fee ranges from 3.8 to 20 per cent, depending on the value and type of mineral raw material.

The Ministry of Mining and Energy will continue its analysis of the application of possible models for mineral exploitation royalty charges and their increasing, starting from the fact that we want amendments to the Law on Mining and Geological Research to provide an environment in which Serbia’s mineral wealth, which has a value exceeding 200 billion dollars, will be valorised in a sustainable and responsible way, with its full contribution to economic development and growth. By increasing the royalty charge, we will value our mineral wealth more as a country, while on the other hand that will impact significantly on increasing the budget of the Republic of Serbia.

In your opinion, what is the best way for Serbia to retain part of the value created on its territory – not only at the moment of exploitation, but also when production ceases?

First and foremost, Serbia as a state should play a key role in managing its own mineral wealth, and that should be recognised in all legal solutions, as well as strategic documents.

Security for investors, in terms of a predictable and stable legal framework, must be accompanied by greater security for the state in terms of providing essential quantities of raw materials that will be processed in our country and getting the final product created from them. We thus create an environment for the sustainable use of mineral resources with clearly defined rules for its further treatment, and we do so with a special emphasis on human health and environmental protection.

What are your most important priorities when it comes to current projects, including lithium exploitation?

The Jadar Project is the project with perhaps the greatest development potential of all projects in the mining sector, due to the high level of investment and the number of people to be hired, but also due to the possibility of organising the production of batteries for electric vehicles in Serbia. which is particularly important to us. However, a priority for us, as the Government, is for everything to be done with the highest level of technology, and the highest degree of environmental protection, because there is no amount of money and investment that can justify the destruction of the environment. Only when all the analyses and studies have been carried out, especially the environmental impact study, will we discuss and examine the final decision on this project. What we certainly won’t allow is for this project to be politicised, and for panic to be spread among citizens in order for someone to score political points by spreading untruths about the project’s environmental impact. I understand the fear that people have, because I’m very well aware of the experiences that citizens had with the Zajača Mine, and that’s why everything related to this project must be completely transparent, in order for the citizens of Loznica and Podrinje to be informed about every step, and the Government has formed a special working group to monitor this project.

In the area of renewable energry sources the focus will primarily be on new medium-sized and large hydropower plants, which can most quickly ensure energy security and compensate for the gradual reduction of coal-fuelled electricity production

Of the remaining projects, the launch of operations at the Čukaru Peki copper and gold mine, by company Serbia Zijin Mining, are planned for the second half of the year, with which conditions will be provided for the exploitation of these mineral reserves with an annual capacity of 3.3 million tonnes and an increase in the production of copper concentrat, which is also significant because of the impact on GDP and job creation. The total value of the investment in the entire project is 474 million dollars. The construction of flotation plants in Majdanpek by the Serbia Zijin Copper company is also expected to be completed by year’s end 2021.

When it comes to the reform of the mining sector, to what extent does Serbia utilise its human resources when it comes to our scientific community at universities and institutes?

There can be no development of mining without a strong foothold in the profession, from the Geological Survey of Serbia, as the most important institution in this field, via the University, to professional associations. Through amendments to the Law on Mining and Geological Research, it has been proposed that the competencies and role of the Geological Survey of Serbia be strengthened, as this is an institution with a great international reputation, where all data from geological research will be collected. Moreover, the Geological Survey will give its opinion on all feasibility studies and general projects for capital facilities of importance to the Republic of Serbia. An important innovation in amendments to this law is that licenses are to be introduced for individuals and companies engaged in mining and geology for the first time. These licenses will be issued by the profession, i.e. the Chamber of Mining and Geology that will be established on the model of the Serbian Chamber of Engineers, in order for us to have a fully organised and reviewed system in this segment too, which is important not only today, but also for all those who will deal with this profession in the future.

MANDATE

Serbia as a state should play a key role in managing its own mineral wealth, and that should be recognised in all legal solutions, as well as strategic documents

REVENUE 

By increasing the mineral exploitation royalty charge, we will value our mineral wealth more as a country, while on the other hand that will impact significantly on increasing the budget of the Republic of Serbia

TURNAROUND

Mining is a sector that has been stalled for a long time completely undeservedly. We want to fix this injustice, because mining has much greater potential than is currently utilised

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