Oman is trying to resolve the longstanding issue of mining operators taking advantage of sultanate’s natural resources and environment.

A study completed by government officials found that a total of 113 mining companies have breached their individual licence terms and have been supplying crushed aggregates in the local market at low prices.

Many of the offending companies now face legal proceedings for a variety of charges ranging from operating without a permit and operating in unapproved regions.

Companies working on government-related contracts will not be affected by the closure of mines as permits are already in place. However, the shutdown of some mines has created a shortage of basic construction materials available for contractors working on private developments, creating a spike in aggregate prices.

According to MEED Cost Indices, the region’s only independent construction cost tracker, the average price of 40mm crushed aggregate has increased from $8.86 a cubic metre to $9.47 a cubic metre since December 2012, a seven per cent increase.

Aggregate prices are expected to follow an upward trajectory, unless Oman’s Commerce & Industry Ministry can issue new mining licences to increase supply. The updated regulation stipulates that new permits will only be granted to companies that can add value to the raw material, and contribute to gross domestic product growth.

This will likely create short-term pain for the industry as mining operators struggle to comply with the stricter regulations in order to obtain new permits and licences. The government has moved quickly to identify a number of sites within the sultanate suitable for mineral extraction, which is hoped to speed up the process of licence allocation.

However, it is not clear how the current aggregate shortage in Oman will have an effect on the wider region, especially in Qatar and Kuwait, which do not have significant resources and are heavily reliant on imports.

As the new mining permits are issued to complying operators, the supply of aggregates should increase to satisfy regional demand, pushing prices down.

However, the sultanate has also stipulated that companies in the mining sector must allocate five per cent of profits and invest it back into the local communities. The effective five per cent tax rate on crushed aggregates will ultimately be felt across the supply chain, both in the local market and in countries importing aggregates.