07.01.2013, BCM Minerals Law Draft Comments Detailed Analysis, BCM
1. No. Article Draft provision Comment Recommendations
1 Purpose of the law
The purpose of this Law is
to promote economically
viable mining and extractive
industries which carry out
prospecting, exploration,
mining and processing
mineral resources in
compatibility with the
economic, social and
environmental policies of
the State.
The purpose to “promote
economically viable” does not
appear to be implemented
throughout this legislation.
"in compatibility with the
economic, social and
environmental policies of the
State" rings of a soviet
character
Give a serious re-think to
what this Draft Law does to
threaten the economic
viability of exploration,
mining and processing in the
minerals sector.
The State needs to give a
serious rethink as to its
overall polices regarding
free market economics and
democratic values vs.
centrally planned economy
an authoritarian State.
2 Scope of the law
This law shall regulate the
relations arising from
geological reconnaissance,
prospecting, exploration,
mining and processing of all
types of minerals other than
radioactive minerals in the
territory of Mongolia.
The Draft Law regulates (1)
reconnaissance, (2) prospecting,
(3) exploration, (4) mining, and
(5) processing.
There is the possibility to
merge and/or exclude
categories. For example, it
is not clear as to why
prospecting and exploration
have been divided into
separate categories.
3 Definitions of terms The
following terms in this law
shall have the following
meaning:
3.1.1 “Work permission“ means
any or all of the exploration,
mining and processing
permissionsas specified in
chapter 8 of this law;
See specific comments in
Chapter 8.
3.1.2 "minerals" means
3.1.2(a) any usable mineral
concentration which
naturally occur either in
solid, liquid or gaseous state
that were formed on the
surface or in the subsoil as a
result from geological
evolutionary processes,
except for water, oil and
natural gas;
CBM is not included within the
Draft Law. It is likely that the
draft petroleum law will include
covers all types of
hydrocarbons including CBM,
tight oil, shale gas, conventional
oil and gas. Similarly, water is
covered under the Water Law.
This could create serious issues
of overlapping licensing. Using
ETT as an example, if CBM is
included under the petroleum
law then another private
company could take out a
license over ETT tomorrow and
then prevent ETT under the
Petroleum law from developing
their coal resources.
Consider whether CBM
better fits under the Draft
Law or in the petroleum law.
If under the petroleum law,
then the laws must
coordinate so as to address
overlapping licensing and
priority rights.
2. No. Article Draft provision Comment Recommendations
Likewise, does an overlapping
water license, nuclear energy
license or land license pose
such inconsistencies?
3.1.2(b) minerals that have been
extracted from the surface or
the subsoil as specified in
this law;
3.1.2(c) minerals that have been
processed as specified in this
law;
3.1.3 “processing minerals“ mean
industrial activities directed
at increasing the contents
and value of minerals
through means such as
enriching, melting,
purifying, producing
products of extracted
minerals other than
radioactive minerals as
specified by this law;
The definition for processing
minerals and mining minerals
overlap as “washing and
separating” are processing
activities directed to increase
the contents and value of
minerals.
Are we to assume that
“washing and separating”
are “processing” activities.
Clarify.
3.1.4 “mining minerals“ means
industrial extracting,
washing and separating
activities of minerals other
than radioactive minerals
from the earth‟s surface,
subsoil, ore stockpile, waste
and natural water according
to the approved Technical
and Economical Feasibility
Report and work plan;
3.1.5 “mineral deposit“ means
mineral concentration that
has been formed on the
surface or in the subsoil as
the result of geological
evolutionary processes,
located in same site as
rock‟s derived or separated
from it by weathering,
erosion and mechanical
processes by forming of
layers and beds where the
quality and proven reserve is
economically feasible to
mine by industrial methods;
No definition of mineral
reserve/proven reserve.
Need to define proven
reserve.
3.1.6 “mineral exploration“ means
comprehensive activities of
geological, geophysical,
drilling, laboratory and
3. No. Article Draft provision Comment Recommendations
hydrogeology works
according to proven
standards for detailed
determining of formation,
quantity, location,
composition, concentration
quality, geological structure,
comprehensive mining
technical condition of
mineral resources for secure
calculation of resources
volume capacity and making
decision about further
advisability of mining
operation;
3.1.7 “mineral prospecting“ means
comprehensive activities of
geological, geophysical,
drilling and laboratory
works according to proven
standards in an area with
prospects of mineral
resources for detailed
assessment of location,
resources, composition, and
to identify geological
structure of minerals and for
the purposes of determining
to conduct further
exploration works
3.1.8 “infrastructure” means
roads, railways, airports,
facilities for supply of
electricity, heating, clean
water, sewerage conveying
system, air, motor vehicle
and railway transportation,
health, hygiene, education
and related services that are
accessible to public
utilization;
3.1.9 “rehabilitation” means the
comprehensive activities of
rehabilitation of the nature
and environment of which
the natural state has been
changed due to geological
and mining activities as
specified in chapter 11 of
this law;
3.1.10 “high grading mining”
means a mining activity that
mined not whole of the
Extreme lack of clarity and
potentially un-economic.
Need to define reserve.
“production reserves”
includes uneconomical
4. No. Article Draft provision Comment Recommendations
reserve and made the reserve
impossible to mine further
as a whole of the production
reserves which was
obtainable and determined
by the Technical and
Economical Study Report
due to carried out not in
accordance with approved
technological procedures;
reserves. Need to
create definition based
on economic cut-off,
which may include
influence of commodity
price, general
tax/economic
environment in the
country. In other words, it
needs to be commercially
minable and not mandatory
mining of everything. As
such, taxes, labor costs,
metal price, etc. will be a
factor. Further the Technical
and Economical Study
Report may be amended or
changed and is not likely to
be a “fixed” product.
3.1.11 “area” means the area that is
granted by license according
to the law, location of which
is determined by corner
points, coordinates of which
are determined by degrees,
minutes and seconds, and
borders of which are
surrounded by straight lines
along the longitude and
latitude;
3.1.12 “reconnaissance” means a
research utilizing primary
geological and mineral data
for determining of earth
surface and subsoil structure,
chemical composition of
rocks, their evolution
history, transformation and
presence of minerals through
taking of rock samples
without disturbing earth
surface or subsoil,
performing of geochemical,
earth and air‟s geophysical
surveys, geological mapping
with all scales and thematic
research;
3.1.13 “State Administration”
means the state
administration in charge of
geological and mining
affairs;
5. No. Article Draft provision Comment Recommendations
3.1.14 “Central State
Administration” means the
central state administration
in charge of geological and
minerals resources affairs;
3.1.15 “licence” means the right
certified by the license to
conduct one of or all of the
following activities,
minerals prospecting,
exploration, mining and
processing granted by the
State Administrative
Authority as provided by
this law;
3.1.16 “common minerals” means
the plenitudes‟ of rock,
loam, sand and gravel
accumulation of moraine
and rock concentrations
which could be used as
construction materials;
3.1.17 “commercial infrastructure”
means road and railway,
airport, facilities for supply
of electricity, heating,
potable water, sewerage
conveying system, air, motor
vehicle and railway
transportation and related
services that are utilized for
mining and industrial
purpose;
Under inclusive.
Note, that Mongolian version
refers to “production
infrastructure”
Needs to be expanded
to include everything
that a Mining Licence
holder may require for a
mining operation. Items
such as airstrip,
accommodation camp,
offices, waste dumps,
tailings dams, water bores,
roads etc need be captured
by this.
Clarity of translation is
required and expansion of
definition depending on
translation.
3.1.18 “industrial waste” means
earth, soil that is created due
to mining and processing of
minerals, and is proven and
permitted by the Technical
and Economical Feasibility
Report as commercially non-
profitable;
Under Inclusive. Should include tailings and
perhaps others.
3.1.19 “mine and industry tenure”
means a part of the land area
that was granted under the
license, that is affected by
mining and processing
6. No. Article Draft provision Comment Recommendations
activities;
3.1.20 “derivative deposit” means
earth, soil, rock and
enrichment waste that is
created due to mining and
processing activities, is
potentially commercially
effective in specific setting
of minerals re-processing;
3.1.21 “radioactive minerals”
means minerals
accumulation as stipulated in
clause [_] of Nuclear Energy
Law of Mongolia;
3.1.22 “occurrences of radioactive
minerals with production
value content” is stipulated
in clause [_] of Nuclear
energy law;
3.1.23 “mineral resources” means
mineral concentration that
has been formed on the
surface or in the subsoil as
the result of geological
evolutionary processes.
No definition for mineral
reserve.
Mineral resources are
potentially valuable,
and for which
reasonable prospects
exist for eventual
economic extraction.
Mineral reserves or
Ore reserves that are
valuable and legally
and economically and
technically feasible to
extract
Include definition for
mineral reserve.
4 Ownership of minerals
4.1 Mineral resources naturally
occurring on the surface and
in the subsoil in the territory
of Mongolia shall be the
property of the State.
4.2 The State, as being the
owner, shall have the right to
grant prospecting,
exploration, mining and
Note: reconnaissance does not
require a licence. However, the
Draft Law does require that the
State Administration grant such
7. No. Article Draft provision Comment Recommendations
processing license as defined
in the terms and conditions
of this Law.
right to a legal entity
(application) and that a
reconnaissance work plan be
submitted (See Articles 19.1.1
and 19.1.11).
4.3 Minerals separated from the
soil and subsoil in the course
of prospecting, exploration
and mining without a license
shall be the property of the
State.
Assumption that if with a
license then it is the property of
the license holder.
Confirm assumption.
4.4 Derivative deposits and
industrial wastes shall be
deemed an integral part of
the land and the property of
the State in cases not
specified by this law.
Assumption as above that if
with a license then derivative
deposit is the property of the
license holder.
Confirm assumption.
5 Areas prohibited for
prospecting, exploration,
mining and processing
activities
Cross reference Article 11.2
allowing for reconnaissance
5.1 Any of prospecting,
exploration, mining and
processing activities shall be
prohibited in the following
areas.
Should be more along the lines
that prospecting, exploration,
mining and prospecting is
permissible but only under
exceptional
circumstances, and under
strict environmental
controls. Exceptions
would be something that
could significantly add to
the economy of Mongolia.
Should be permitted
through an authorisation
process.
For example, many deposits in
Canada and equatorial Africa
that would be prohibited under
this Article have been
developed. But strict
controls and
environmental
considerations and
reclamation regulation
(including reforestation)
need to be in place, to
offset and reinstate any
temporary loss of forest.
Countries like Canada and the
Consider opening this
section up to such activities
if tightly regulated by the
State as this could be very
beneficial to the State. Why
not develop the same
“exclusive control regime”
as set forth in Article 42.3?
8. No. Article Draft provision Comment Recommendations
UK have Forest Service and
Forestry Commission
respectively with the
responsibility of managing
companies working in forests,
reforesting areas disturbed,
logged or destroyed by fire.
Should be permitted through an
authorisation process.
5.1.1 National and local special
protected areas;
5.1.2 normal protection territory
areas with source of flow
formation of rivers, and
water basins as specified in
the Law on Water;
5.1.3 forest area on protected
territory as specified in the
Law on Forest;
5.1.4 protected zones specified in
the “Law on Railway”;
Railways can be moved so this
is not necessary and reduces
possible discoveries. Should be
permitted through an
authorisation process.
5.1.5 protected zones around high
voltage power lines as
specified in the “Law on
Energy”;
Same issues as 5.1.4 There are
many deposits that are adjacent
to powerlines which can be
moved. This should not be an
issue.
5.1.6 protected zones around state
or international roads as
specified in the “Law on
Road”;
Same issues as 5.1.4
5.1.7 protected zones specified in
the “Law on utilization of
the water supply and
sewerage conveying system
of the city and township”;
5.1.8 protected zones around
mineral water specified in
the “Law on Mineral
Water”;
5.1.9 city and village tenure land,
and within 5 kilometres from
its borders;
Lack of Clarity.
How are the borders of city and
village tenure land to be
determined? What is the
definition of a city or a village?
The 5km limit would prohibit
mining at many existing
projects. When a village gets
Consider rethinking or
clarifying this provision.
9. No. Article Draft provision Comment Recommendations
built next to a mine what
happens? Can a village be built
next to a successful exploration
project to prevent a mine from
being established?
BorUndur, Erdenet,
MoigiinGol, Baganuur and
Nalaikh would have to be
closed down, or if these towns
existed before discovery of the
deposits these major deposits
benefiting the Mongolian
economy and infrastructure
would not, under the Draft Law,
be able to be developed.
6 Prohibition of conducting
prospecting, exploration,
mining and processing
activities without license
6.1 Unless specified in the
following, it shall be
prohibited to conduct
prospecting, exploration,
mining and processing
activities without license.
Lack of Clarity. What is
permitted and what is not?
What is the purpose of having
6.1.1?
Clarify.
6.1.1 reconnaissance; Note: reconnaissance (as
defined) does not require a
licence. However, the Draft
Law does require that the State
Administration grant such right
to a legal entity (application)
and that a reconnaissance work
plan be submitted (See Articles
19.1.1 and 19.1.11).
6.1.2 mining and processing of
common minerals by
citizens on their owned land
for purposes to use for own
domestic needs and not for
profits from sale thereof;
This limits the mining and
processing of common minerals
to “citizens” on their “owned
land” for purposes to use for
their own “domestic needs”.
What about legal entities? Are
they required to obtain licensing
for similar uses.
Take for example ETT, that will
most likely want to use
construction and aggregate for
the concrete plant (for
construction of the washery or
power plant) or aggregate for
making mine roads? Will this
now be illegal? – needs
Consider expanding the
scope of “who” may use the
common minerals to include
legal entities and non-
citizens and for “what” they
may use them for. Further
consider widening the scope
beyond “owned” land.
10. No. Article Draft provision Comment Recommendations
clarification in the law.
6.2 Unless set forth in this law,
it shall be prohibited to
separate minerals from the
land and its subsoil, to
purify, process, store,
transfer, transport, sale, buy
and broker minerals
extracted without license.
7 Registering of mined and
processed products and
certificate of origin
7.1 Holders of mining and
processing licenses shall
have obtained a certificate of
origin as defined in this law
for all mined, processed,
purchased, sold and
reprocessed minerals and
mineral products by them.
“Certificate of Origin” is not
defined nor are the costs or
process for obtaining one
developed.
Define “Certificate of
Origin” and provide a
developed framework for
costs and process.
7.2 Private person or legal entity
manufacturing the goods
with use of precious metals
and stones shall have
registered the used precious
metals and stones using a
form approved by State
Administration and attach
the documentation proving
their origin to the
registration form.
Seems to be oddly placed as
this appears to regulate
manufacturers of goods using
precious metals and stones and
not any entity related to
minerals or mining or licensed
under this Draft Law.
Consider placing this
provision under the
jurisdiction of another law.
8 Mineral resources of
strategic importance
8.1 Water, oil, gas, radioactive
minerals and rare earth
elements shall be deemed
mineral resources of
strategic importance.
Assumption that coal, iron ore
and other bulk commodities, as
well as all else, are excluded
from this category.
Can water, oil, gas, radioactive
minerals and rare earth
elements be governed by
Investment Agreements or the
DDA listed below?
Confirm assumptions.
Clarify.
8.2 Relations to prospecting,
exploration and utilization of
water shall be regulated by
“Law on Water” in
Mongolia.
Does the Law on Water give
any deference or priority to
license holders?
Clarify.
8.3 Relations to prospecting,
exploration, mining and
processing of oil and gas
shall be regulated by
“Petroleum Law” in
Is there any distinction between
conventional and
unconventional gasses?
Consider where CBM fits in
Clarify.
11. No. Article Draft provision Comment Recommendations
Mongolia. (see comment to Article
3.1.2(a))
8.4 Relations to mining and
processing of radioactive
minerals and rare earth
elements shall be regulated
by “Law on Nuclear
Energy” in Mongolia.
9 Mineral deposits of
strategic importance
9.1 As specified in this Article,
deposits of strategic
importance shall be 15
deposits listed in Appendix 1
of 2007 in the State Great
Hural Resolution No.27.
9.2 Borders of each deposit with
strategic importance
specified in 9.1 of this law
shall be determined by
Central State
Administration.
This poses a serious threat to
adjacent license holders.
Can these borders be extended
into adjacent licence areas
either putting at risk that licence
or resulting in a new discovery
being declared to be a part of an
existing Strategic Deposit?
What are the implications for
ownership rights of adjacent
areas?
What is the criteria for selecting
areas/borders for review?
Once determined can
these borders be changed
at a later date?
Suggest changing “shall be”
to “have been” to protect
existing border delineations.
The process for
determination of these
boundaries needs to be fair
and transparent.
9.3 No new deposits will be
added into the list of
deposits with strategic
importance but can be
excluded from the list by the
State Great Hural upon
submission of opinion by
the Government.
Overall good. The process for the
exclusion of these deposits
needs to be fair and
transparent.
9.4 The Government may
establish, at its initiative, a
Deposit Development
Agreement with holders of
licenses in order to set up a
special regime for mining,
processing and marketing
activities of minerals
extracted from deposits of
Investment Agreements (IA)
now replaced with Deposit
Development Agreements
(DAA) but only for Strategic
Deposits.
The DDAs are only at the
Government initiative and are
less beneficial than IA's were.
A rethink should occur
regarding this Article and
replacing IAs with DDAs in
general (see below
comments).
12. No. Article Draft provision Comment Recommendations
strategic importance.
Does not provide a transparent
criteria by which the
government may choose to
establish a DDA or not.
This unusually expands into
“marketing activities”.
9.5 The State shall be entitled to
possess free of charge a
certain percentage of shares
of legal entity which holds
licenses for mining and
processing of deposit with
strategic importance. The
percentage of the shares to
which the state shall be
entitled to possess free of
charge shall be determined
by Deposit Development
Agreement that has been
established in line with this
law.
This clause is expropriator and
likely unconstitutional as it
attacks the private property of a
license holder (shares) which
are not the property of the State
like minerals.
State has a (free) right to shares
in entities that own Strategic
Deposits and that there is no
guidance on what percentages
or how they are to be
calculated.
Further the percentage of state
ownership is as agreed in the
DDA, but what happens if the
Government does not initiate a
DDA? Can/will it still claim an
ownership percentage?
Moreover, what if the parties
cannot come to an agreement
while negotiating the DDA (see
below comments).
If the interest held by the state
is a controlling interest that will
adversely effect the interest of
investors to invest the
significant capital required and
equally critically will adversely
effect the bankability of the
project in regards to raising
project finance.
A serious rethink needs to be
done regarding this Article.
9.6 If the Deposit Development
Agreement was not
established by the
Government, mining and
processing activities of this
deposit with strategic
importance shall be carried
out in compliance with the
rule in this law.
Lack of clarity.
Leaves a dagger hanging over
the license holder‟s head in the
absence of more clarity on
closure.
Needs clarity on which
“rule” in “this law” is being
referred to – excl. Art. 9.
Clarify whether there can be
closure for the license holder
by the Government resolving
that they are not going to
conclude a DDA and will
not in the future.
13. No. Article Draft provision Comment Recommendations
10 Deposit Development
Agreement
Assumption that all other
companies can have an IA and
that DDAs are specific to
Strategic Deposits only. This
affects Investor confidence if no
investment/stability agreements
are available and is likely to
deter international financing.
Generally, the replacement
DDA's are far less substantive
than the IAs and even license
holders over a Strategic Deposit
are likely to reject the notion of
the DDA.
Further, what if the parties
cannot agree on the terms?
There appears to be an utter
lack of dispute mechanism.
This cannot be a contract of
adhesion where the State thugs
its way into the terms its wants.
We assume that the DDA is a
commercial and not an
administrative agreement under
Mongolian Law?
Confirm assumption.
Consider broader DDA
provisions to match with
typical IAs.
Consider a fair and
transparent mechanism for
dispute resolution.
Confirm assumption.
10.1 If the Government
establishes a Deposit
Development Agreement
with holder of mining and
processing license for the
deposits of strategic
importance as specified in
Article 9 of this law, the
agreement shall be
established in concurrence
with the following
principles:
General comments apply.
The following principals do not
seem to be based using a
commercial scale considering
the investors return on
investment, and proportionality
based on investment, efforts
and input, and the
Government‟s requirement to
fully come to the table.
Consider making more
proportional/commercial
based on what each party is
realistically putting into the
development of the project.
10.1.1 The initial term of Deposit
Development Agreement
shall be equal to the term
defined in an approved
Technical and Economical
Feasibility Report necessary
to earn the return on initial
investments.
Term is only equal to length of
time the Technical and
Economic Feasibility Report
(Feasibility Report) sets out is
necessary to earn return on
initial investment. What if the
Feasibility Report is to be
changed or amended as it may
be inaccurate or subject to
modification based on
developing circumstances?
A Feasibility Report is a
Consider why this is linked
to the Feasibility Report and
if that is feasible to fix the
term.
14. No. Article Draft provision Comment Recommendations
document created at a specific
point in time and is based on a
number of assumptions. There
will be unforeseeable risks and
events which may necessarily
increase the length of the initial
term. Life of Mine timeframe
should be considered.
The initial term should not be
set by reference to the actual
recovery of initial investment as
this is irrelevant to the
operational needs of the mine,
or the required return on
investment levels that would
require investment of
significant capital.
It must be remembered that
investment will not be made
readily by investors, local or
foreign in order to only have
certainty that they can recover
their initial
investment. Commercial
entities, local or foreign, make
investments in order to return a
profit and make a return on
investment, not just to recover
their initial investment.
10.1.2 Taxes and duties except fees
and levies currently imposed
by tax laws of Mongolia can
be stabilized only for the
initial term of Deposits
Development Agreement.
Clarity needed.
Stabilization should not be
limited to the initial term of the
DDA, but should be available
for the duration of the DDA to
provide certainty.
Define fees and levies and
explain why they cannot be
stabilized?
Address why it is limited to
only as imposed in the tax
laws of Mongolia? Address
whether royalties can be
stabilized?
10.1.3 Tax or duties shall not be
stabilized for any period
beyond the initial term of
Deposit Development
Agreement.
So taxes and duties will not be
established beyond the time set
out in the Feasibility Report to
earn return on initial investment
only? Why not? Why is the
door being slammed shut here
and not left to desecration?
It will be much harder for an
investor to proceed with the
development of a project
knowing that they may stand to
Consider amending or
deleting this Article to leave
the door open for longer tax
stabilization.
15. No. Article Draft provision Comment Recommendations
make little to know profit going
forward. No investor invests
only to recoup their initial
investment or make very little
thereafter.
Further, if taxes and duties go
up making it uneconomical to
mine, then there is a serious
problem.
10.1.4 Deposit Development
Agreement shall not regulate
any issues concerning
exemptions from taxes,
duties, levies and fees; and
stabilization of levies and
fees.
Can these matters be regulated
elsewhere (i.e. an Investment or
Stability Agreement)?
Clarify
10.2 When the initial term of the
Deposit Development
Agreement expires the
Agreement can be extended
one time for up to 10 years
along with necessary
changes and amendments
concurrent to the conditions
of that time.
A one-time extension of “up to”
10 years is not synchronized
with the timeline of a mining
licence set forth in Article 25.4,
which allows 20 years life on a
mining licence. This does not
appear to take into full account
the addition of reserve and the
quantum involved.
Consider amending to take
into account the addition of
reserves and the quantum
involved.
10.3 Total amounts of minerals to
be mined or products to be
manufactured within certain
period of time may be
determined in Deposit
Development Agreement
and the changes of
determined amounts shall
serve the grounds for
making amendment in other
terms or conditions as
defined in the agreement.
If any change is made to the
amount of mineral or products
to be produced (as per the
DDA) then this opens the door
to give the State the right to
renegotiate the terms of the
DDA.
Consider linking the
amounts to be mined and
products to be manufactured
to the mine and processing
plan rather than the DDA to
simplify process and
eliminate over burdening the
license holder with
interaction by the
Government.
Alternatively, consider
deleting this Article.
10.4 If certain conditions or
circumstances which could
not have been foreseen at the
time of signing of Deposit
Development Agreement
arise and any or some of
clauses of the agreement
cease complying to the
interest of Mongolia or
become detrimental to rights
Unacceptable as this utterly
destroys the integrity of the
DDA if the State may, at will,
reopen the DDA. Further, this
does not allow the license
holder to do the same.
The concepts of what is in the
interest of Mongolia or what is
detrimental to Mongolia are too
Consider deleting this
Article.
16. No. Article Draft provision Comment Recommendations
and interest of Mongolia
initially meant to protect due
to those newly discovered
conditions or circumstances,
they shall serve grounds for
making changes and
amendments to this
agreement.
subjective.
Both 10.3 and 10.4 become
over burdensome for investors
as they only protect the State.
10.5 Unless categorized as
confidential in the related
laws of Mongolia, all parts,
clauses, changes and
amendments of Deposit
Development Agreement
and further collateral
agreements shall be open to
the public.
If the DDA is largely a
commercial agreement, or even
if it is an administrative
agreement, the confidentiality
of the DDA should be left to the
parties to decide.
Further, opening these to the
public could be a tool for either
party to try and use public
pressure to force the other party
into less favourable terms
during negotiations.
Consider adjusting the level
of confidentiality protections
for the parties.
10.6 A holder of license who has
signed Deposit Development
Agreement shall be obliged
to provide any information
related to its activities
permitted by the license,
investments and proprietary
nature at the period of the
agreement to the
Government upon its
request.
This creates an unnecessary and
wide ranging power for State to
request information from a
DDA party.
By the time the DDA is
executed, as in this Article, the
State will already be a
shareholder in the license
holding company which allows
the State to have the right under
the Company law as a
shareholder to access necessary
information.
This clearly should not apply
upstream.
Consider deleting this
Article as this is already
covered in the Company
Law with the State being a
shareholder.
Clarify whether this is
attempting to apply to
upstream companies (the
shareholders and beneficial
shareholders of the license
holder).
10.7 The contents and clauses of
Deposit Development
Agreement to be established
with holder of license shall
comply with this law and
other related laws valid at
that time.
The assumption is that if the
laws do change then the DDA
has the effect of “stabilizing”
the parties as of the date they
signed the DDA.
A more direct statement to that
effect would be comforting as
this Draft Law is a
Parliamentary act, where as the
DDA is held only to the
Government level.
Confirm assumption and
consider making the point of
stabilization more clear.
11 Reconnaissance
11.1 Legal entities may conduct
reconnaissance for minerals
This has been limited only to
legal entities.
Clarify why this is being
limited only to legal entities
17. No. Article Draft provision Comment Recommendations
according to regulation as
specified in this law.
and not citizens (both
foreign and domestic).
11.2 Reconnaissance can be
carried out in areas
prohibited or restricted for
prospecting, exploration,
mining, processing activities
or in a national or local
special purpose territories as
defined in this law, Law on
Petroleum and Law on
Nuclear Energy.
Reconnaissance can be carried
out in prohibited or restricted
areas.
As noted above in comments
to Article 5, consider
opening the same to
prospecting, exploration,
mining and processing if
regulated by the State.
11.3 Disturbing the subsoil in the
course of conducting
reconnaissance shall be
prohibited.
What does “disturbing the soil”
mean? Undefined, this appears
to contradict Article 11.4 as it is
not possible to scientifically,
determine minerals abundance,
patterns and concentrations
without disturbing the subsoil.
Define what constitutes
“disturbing the soil”.
11.4 Reconnaissance shall be
conducted according to
scientific methods,
methodology, in specific
stages and in a
comprehensive manner for
the purposes of determining
the prospective area of
geological formation,
minerals abundance patterns
and concentrations.
11.5 If the area of reconnaissance
is in the ownership or
possession of others, the
interested party shall have
obtained the permission to
conduct reconnaissance and
access the land from the
owner and possessor of the
land.
Unless physical trespass needs
to occur, no notice or
permission should be needed.
If reconnaissance is by purely
scientific methods (e.g. satellite
imagery, aerial photography,
etc), there should be no need to
obtain permission.
If permission is required, in
what form – an agreement, a
sign off on an application, etc.?
Can the owner/possessor
demand compensation?
What if the land is in the “use”
of another either through land
use or a land lease?
Consider qualifying this
Article to limit when
permission is needed.
Clarify how such permission
is obtained and what if any
limitations exist.
Clarify the scope of who
permission must be obtained
from and what, if any, rights
a land user has to exclude
reconnaissance.
18. No. Article Draft provision Comment Recommendations
11.6 If reconnaissance conducted
by state budget funding in an
licensed area of prospecting,
exploration, mining and
processing a notice of
trespassing shall be given to
the license holder before
entering to the area.
Is the notice of trespassing
subject to any type of right for
the licence holder to object?
The ability for state ground
reconnaissance to be conducted
in the area of the licence may
have health and safety and
operational implications for
personnel.
This creates overlapping rights
to the license area held by the
license holder and could put the
license holder and the State into
direct competition.
This could create a pretext for
the State to demand an interest
in the license holder by jumping
in front of the license holder‟s
prospecting, exploration,
mining or processing by
snapping an satellite photo and
then claiming State funded
reconnaissance which leads to a
mandatory State interest and a
expropriation under Article 13.1
(see below comments).
Include grounds for the
license holder to object.
Address the overlapping
interest of two parties –
consider, given that the
license holder is already
holding their license, making
the area “exclusive” to the
license holder .
Consider that ex-post facto
State funded reconnaissance
on the license area of a
license holder shall not be
grounds for the State to
demand an interest in the
project or within the license
area.
11.7 Interested legal entity to
conduct reconnaissance shall
submit its request and
provide related information
of the area of
reconnaissance, its own
name, surname, registration
number and address of the
area and location to State
Administration in advance.
Even with Articles 3.1.15 and
6.1.1this become a de facto
licensing requirement.
No process, procedure or timing
indicated. What is the
difference between receiving
permission and receiving a
license under the Draft Law?
Further, if no physical trespass
is involved and the area is not
under licence, then need to
obtain permission should not
exist.
Consider eliminating the
need to obtain permission, in
particular if there is no
indication of a physical
trespass. Clearly indicate
the process, procedure and
timing, as well as exclusivity
and priority rights.
11.8 State Administration shall
receive such request and
Reconnaissance request must be
registered. No process,
Clearly indicate the process,
procedure and timing, as
19. No. Article Draft provision Comment Recommendations
register the application in
conformity to this law and
grant permission.
procedure or timing indicated.
Further, there is no indication as
to exclusivity give to the legal
entity who has obtained the
permission.
well as exclusivity and
priority rights.
11.9 The entity which has
obtained the permission to
conduct reconnaissance shall
be obligated to submit
reconnaissance reports, and
relevant document copies to
the State Administration and
such reports and document
shall be stored in the
national consolidated
geology and minerals data
base.
This should not be required. It
erodes company IP. There is no
benefit to any company
carrying out reconnaissance, in
particular given their lack of
right to exclusivity and priority
toward a prospecting license.
Consider eliminating the
need to submit such reports.
11.10 Specific rules for conducting
reconnaissance and
reception of reconnaissance
reports shall be approved by
the Government.
Further rules to be imposed by
State.
Clarify.
12 National consolidated
geology and minerals data
base
12.1 The State Administration
shall have a national
consolidated geology and
minerals data base. The
national consolidated
geology and minerals data
base shall consist of
geological database, mineral
reserves data base and
petroleum data base.
Water, oil and natural gas are
excluded from the definition of
“minerals in Article 3.1.2, so it
is unclear why a petroleum data
base is being mentioned here
and not set forth separately in
the Petroleum Law.
Clarify.
12.2 Information related to earth
subsoil formation, earth
surface character, geological
research information,
primary documentation,
samples, exhibition and
pictures of earth and soil and
report of reserves
determined by prospecting
and exploration, and other
available information shall
be stored in the geological
database.
We note the absence of
“reconnaissance”, emphasizing
comments to Article 11 about
the lack of need for
reconnaissance reports to be
submitted.
Consider above comments to
Article 11.
12.3 Complex information related
to mineral deposit‟s
production reserves,
product‟s standards,
Not the wide scope of highly
sensitive information. Please
see comment below on Article
12.5.
20. No. Article Draft provision Comment Recommendations
technology, mine plan and
operation report, production
tailings, registration of
derivative deposits,
assessment of environmental
impact, rehabilitation works
and other related data shall
be stored in mineral reserves
database.
12.4 Petroleum data base and
information to be stored and
procedure and rule for
storing the information shall
be determined by Law on
Petroleum.
Why is this in the Draft Law? Consider removing as it will
be in the Petroleum Law.
12.5 All data compiled into the
national consolidated
geology and minerals data
base except for confidential
as specified in the related
laws of Mongolia shall be
open for public.
In conjunction with Articles
12.2 and 12.3 this highlights the
greater need for (1)
transparency for obtaining and
openness of this information to
the public and potential license
holders; and (2) confidentiality
during the period, or potential
period, when a license is held
by a license holder.
Otherwise this provides an
unfair advantage to
competition, benefiting from
any companies' exploration
proprietary exploration
techniques and knowledge.
In Canada, for example,
confidentiality of work reports,
varies from Province to
Province from 1 year, 5 years or
until claim (exploration
Licence, concession, tenement)
expires. In the latter case under
the current Minerals Law work
reports would become Public
information after 9 years, under
the proposed Draft Law after 5
years.
Consider the balancing
availability to the public
with confidentiality during
license holding periods.
12.6 Activities for compiling,
registering and extending the
data into the national
consolidated geology and
minerals data base shall be
carried out by State
Administration Authority
according to the rule and
These rules should contain very
clear rules for the balance of
protecting confidentiality and
transparency/openness, as well
as very strict penalties for
violations.
Consider these factors when
developing the rules and
procedures.
21. No. Article Draft provision Comment Recommendations
procedures approved by the
Government.
13 Taking areas into state
reserve
Major issues with Articles 13-
15 to be considered.
For example, an exploration
company which takes a
portfolio approach and has 10
exploration licences may get
lucky with only one containing
a mineral deposit. Exploration
companies generally lose
money in the hope that one of
their projects succeeds and they
create significant value. Articles
13 – 15 essentially remove any
incentive to risk exploration
capital in Mongolia and is not
consistent with Article 1 which
defines the purpose of the law is
to promote economically viable
mining industries which carry
out “exploration” etc.
Generally, Articles 13-15 lack
process, criteria, basis, time
periods, etc.
Generally, consider a major
rethink of Articles 13 – 15
collectively with the
industry. In the absence of
balance, existing investors
will be chased away and
future investors will be
deterred.
13.1 Areas wherein the
reconnaissance, prospecting,
exploration and assessment
of minerals resources were
conducted with the fund
from state budget may be
taken into state reserve for a
certain time period upon the
decision of Central State
Administration.
Why does this refer to “areas”
whereas Article 14 refers to
“deposits”.
There is not clear definition of
State Reserve.
There is no clarity on the
implications of a company
losing its reserve (area) to state
reserve.
There is no process, procedure
or timing indicated.
There is no percentage of
necessary state budget funding
set out (i.e. is it 1% or 99% of
total funds spent).
As noted in our comments to
Article 11.6, there appears to be
an overlap whereby the State
can conduct reconnaissance on
a prospecting, exploration,
mining and processing license
Clarify.
Define State Reserve.
Make clear the implications.
Make clear the process,
procedure, timing, etc.
Make clear the
percentages/amount of
funding from the State
budget.
Consider and address this
major concern.
22. No. Article Draft provision Comment Recommendations
holders licensed area. Article
11.6, combined with Article
13.1 creates a pretext for the
State to infringe upon the rights
of the license holder by
conducting reconnaissance and
then expropriating the license
area ex-post facto as a State
reserve (i.e. based on something
as small as a satellite photo?).
13.2 Areas with certain
concentration of mineral
resources wherein the
reconnaissance, prospecting,
exploration works were
conducted with the finance
from private funds may be
taken into state reserve upon
the decision of the
Government for a certain
time period after real/actual
expenses for above works
have been reimbursed.
There is no definition of what
will constitute "actual
expenses" and the assumption is
that “actual expenses” are
limited to sunk costs.
The reimbursement of “actual
expenses” is not adequate
compensation as the license
holder will have suffered an
opportunity cost from not
investing its capital in more
attractive mining locations and
a loss of its expected return on
investment.
Actual expenses are only paid
where there has been no state
funded exploration or resource
determination. The law is silent
as to what constitutes sufficient
State funding (old Russian data,
minimal State mapping, etc.)
and what occurs in the event of
an overlap of State and private
funding.
As above, there is a need to
define a period of time for
which the land may be taken
into a State Reserve.
Define “actual expenses”
Consider the negative impact
on investment if actual
expenses are limited to sunk
costs and not expectations.
Consider what occurs in the
event of an overlap. A black
and white there is or is not
State funding in the absence
of what constitutes State
funding (sliding scale)
presents a major problem.
Make clear the process,
procedure, timing, etc.
13.3 It shall be prohibited to
accept an application or
organize competitive tender
selection procedures for
granting licenses of the area
that has been taken into state
reserve.
If not clarified, possibility for
abuse.
Consider putting a timing
requirement on this so that
an applicant who applies
when there is no intention of
creating a State reserve
cannot be blocked shortly
after its application by an
immediate call to create a
State reserve. For example,
if there is existing State
reserve then prohibited to
accept and application, if an
application is filed then a
23. No. Article Draft provision Comment Recommendations
State reserve may not later
be implemented or may only
be implemented within
fifteen (15) days of the
application having been
filed. The mere possibility
or whisper of a State reserve
should not serve as a basis to
reject an application.
13.4 If the time period of being
reserved in state reservation
has expired and the time
period has not been extended
or authorized Government
administration has decided
to exclude the area from
state reserve, the area shall
be granted for license only
through a competitive tender
selection process.
Given that the Government can
take any privately funded area
into state reserve and put then
put it out for tender, there
should be a pre-emptive right of
the original license holder or
applicant for a license.
Or, the license should be
suspended during the time of
State reserve and then reinstated
upon the expiration of the
period. We do not see this as a
ground for revocation in Article
36.
Consider creating a
“suspension +
reinstatement”, or pre-
emptive right to the license
holder and/or applicant.
14 Taking deposits into state
reserve
This Article will not encourage,
'promote' investment, by
entities in Mongolia. Which
again per Article 1 is the
purpose of this Draft Law.
Generally, investors will not
like this type of risk and will
discount an IPO value as this
provision would have to be
disclosed in any prospectus. If
after listing the license holder
does something which annoys
the Government, the
Government can arbitrarily take
away a portion of a deposit for
whatever reason it likes and
thereby causing a huge
reduction in the value for the
license holder.
Consider and Clarify
14.1 The Government may take
all or part of a deposit for a
certain time period into state
reserve if the deposit was
explored and its resources
were determined with state
budget funding.
No process, procedure or timing
indicated.
No percentage of necessary
state budget funding is set out,
i.e. is it 1% or 99% of total
funds spent.
This needs to be limited to
Consider and Clarify
24. No. Article Draft provision Comment Recommendations
within a particular licence area.
As this stands you could lose a
deposit on an adjacent or
nearby licence area if it were
argued that it is a part of the
same deposit.
14.2 If the deposit which had
been initially explored and
resources has been
determined by state budget
funding was undergone
additional licensed
exploration as a result of
which its mineral reserves
were determined with
increased amount, the
Government shall reimburse
the real expenses to the
license holder upon taking
the deposit into the state
reserve.
Phrase "deposit was explored
and its resources were
determined" is very broad.
No specific amount of increased
mineral reserves is set out, i.e.
is it 1% or 99% increase?
Only real expenses will be
reimbursed, i.e. no loss of
profit?
No definition of what will
constitute "real expenses".
Consider and Clarify.
14.3 State Great Khural may
issue a decision and take
deposits into state reserves
that had been explored and
the mineral reserves of
which had been determined
by finance of private funds
upon reimbursement of real
expenses of the license
holder.
Only real expenses will be
reimbursed, i.e. no loss of
profit.
No definition of what will
constitute "real expenses".
This and Article 15.1 should be
removed, without it, it is
unlikely that a private company
will invest in the Mongolian
mining sector.
(According to Article 25.1.2 the
reserved deposit likely goes to
state owned company (SOE)
which is a departure for a clean
and transparent system.
Consider and Clarify.
14.4 If the time period of being
reserved in state reservation
has ceased and the period
was not extended or
authorized Government
administration has decided
to exclude the deposit from
the state reserve, the license
for that deposit holding shall
be granted only through a
competitive tender selection
process.
Given that the Parliament can
take any privately funded
deposit into state reserve and
the Government can put it out
for tender, there should be a
pre-emptive right of the original
license holder or applicant for a
license.
Or, the license should be
suspended during the time of
State reserve and then reinstated
upon the expiration of the
Consider creating a
“suspension +
reinstatement”, or pre-
emptive right to the license
holder and/or applicant.
25. No. Article Draft provision Comment Recommendations
period. We do not see this as a
ground for revocation in Article
36.
15 Taking land granted by
license for state or local
special use
This entire clause needs to be
struck out or have major
modification. It shows no
respect for existing tenure under
licence.
This law does not take into
account as in most jurisdictions
prior rights of any entity. It is
easily open to abuse and also
contradicts Article 1.
Consider and Clarify.
15.1 Land granted by the license
for conducting prospecting,
exploration or processing
may be taken for state or
local special use as specified
in Law on Land.
This must be decided before
granting a licence (duration will
be more than 5 years according
to Article 15.7.
So land given under licence for
a specific use can later have an
additional tenure placed over
the top of it that would prohibit
the original licenced use?
Consider and Clarify.
15.2 If local self-governing
authority has made a
proposal to take the land
granted by license for the
local special use the local
Governor shall submit the
proposal to the Government.
So land given under licence for
a specific use can later have an
additional tenure placed over
the top of it that would prohibit
the original licenced use?
Contradicts current Land Law –
local Governor does not need to
seek Government‟s approval.
Consider and Clarify.
15.3 If the Government deems the
proposal defined in 15.2 of
this law as feasible, it shall
issue a decision to take all or
part of the land granted by
the license for local special
use.
Contradicts current Land Law –
local Governor does not need to
seek Government‟s approval.
Consider and Clarify.
15.4 The State Great Hural shall
issue a decision to take a
land granted by the license
for state special use upon
proposal made by the
Government.
Contradicts current Land Law –
local Governor does not need to
seek Government or
Parliamentary approval.
Consider and Clarify.
15.5 If a special purpose territory
overlaps entirely or in part
with a territory covered by a
valid license, prohibiting
further prospecting,
exploration, mining and
processing activities in the
Definition of “compensate”
needed. Lost profit, actual
expenses, etc.?
What if there is a dispute
regarding amount
compensated?
Consider and Clarify.
26. No. Article Draft provision Comment Recommendations
overlapping area the
Government shall make a
decision to compensate the
license holder along with the
decision specified in 15.3
and 15.4 of this law. The
reimbursement shall be paid
to the license holder within 3
(three) months from the date
of the issuance of decision.
Clarification is also required as
to the level of assurance that
reimbursement will actually be
made, how reimbursement will
be calculated and how installed
assets (e.g. processing plant) are
to be dealt with.
15.6 The license holder shall
cease its work on the area
from the date on which the
decision had been made to
take the land for state or
local special use in
accordance with 15.3 and
15.4 of this law.
Clean-up and removal,
reclamation obligations, mine
closure obligations? Will these
costs be arbitrarily deducted
from the amount of
compensation?
Consider and Clarify.
15.7 The duration of time for
setting the land aside for
special use shall not be less
than five (5) years.
What happens after the 5 years?
Is the license back up for grabs?
Is the license “suspended”
during this time, “revoked”
etc.? We do not see this as
“revocation” criteria under
Article 36 (for most of these
articles).
Consider and Clarify.
15.8 The State Administration
shall make a public notice
within 10 working days after
expiry of the duration of
time for setting the land
aside for special use.
15.9 The State Administrative
Authority shall record into
the license registry the
decisions to take the land
granted by the license for
state or local special use and
to compensate the license
holder.
16 Authority of the State
Great Hural
Refer to many other comments
on reimbursement,
expropriation etc. This will
affect authorities and
responsibilities.
16.1 The State Great Hural shall
exercise the following
authority in minerals affairs:
16.1.1 to exclude a deposit from the
list of the strategic
importance;
Parliament can exclude a
deposit from the list of Strategic
Deposits.
16.1.2 to issue a decision to take a
deposit explored and
Parliament can decide to take a
deposit explored and
27. No. Article Draft provision Comment Recommendations
determined by private
funding into state reserve
and in connection with this,
to pay the reimbursement to
the license holder;
determined by private funding
into state reserve.
This is linked to Article 14.
16.1.3 to issue a decision to take a
land granted by license for a
state special use;
Parliament can decide to take
land granted by licence for state
special use.
This is linked to Article 15.
16.2 Clause 16.1 of this law shall
not serve the grounds for
restricting, in any way, the
authority of the State Great
Hural enshrined by the
Constitution of Mongolia
and other laws.
17 Authority of the
Government
Refer to many other comments
on reimbursement,
expropriation etc. This will
affect authorities and
responsibilities.
17.1 The Government shall
exercise the following
authority in minerals affairs:
17.1.1 to submit its opinion to
exclude a deposit from list
of deposits of strategic
importance to the State
Great Hural;
17.1.2. to establish a Deposit
Development Agreement
with holder of license for
mining in the deposit of
strategic importance and
processing and marketing of
minerals as set forth in the
law;
17.1.3 if it deems necessary, to
require information from the
holder of license for the
deposit of strategic
importance with regards to
licensed mine operation,
timely investments
according Deposit
Development Agreement
and proprietorship;
17.1.4 to issue a decision to take
area into state reserves
wherein the reconnaissance,
prospecting and exploration
works had been carried out
by private funding and in
This is linked to Articles 13.2
and 14.3. Again only 'real'
expenses compensated for.
28. No. Article Draft provision Comment Recommendations
connection with this to
determine and pay the
reimbursement to the license
holder;
17.1.5 to issue a decision to take
area into state reserve when
the area had been explored
and the reserves had been
determined by state budget
funding;
This is linked to Articles13.1
and 14.1 and 14.2
17.1.6 to discuss the proposal of
local authority to take the
land granted by license for
the local special use and to
determine and pay the
reimbursement to the license
holder if the decision was
issued in support of such
proposal;
Again allows 'local authority' to
expropriate licences for 'special
use' and compensate entity in
an undetermined manner for
such expropriation.
17.1.7 to announce area and tender
for granting prospecting,
mining, and processing
licenses for areas located in
State border zones;
17.1.8 to establish a special regime
related to mining, processing
and transporting and storage
of specific types of minerals
that may cause harm to the
public health and
environment;
Government can establish a
special regime related to
mining, processing and
transportation and storage of
specific types of minerals that
may cause harm to the public
health and environment. Such
minerals are not defined. Note
transportation and storage has
been captured.
17.1.9 to approve a procedure to set
up a national consolidated
geology and minerals data
base;
This is a generally positive
outcome although further
clarification is required as to the
nature of the relevant
procedures.
17.1.10 to approve a procedure to
monitor the transactions of
the special account for
depositing the rehabilitation
fund;
Clarification required as to
nature of procedures.
17.2 17.1 of this law shall not
serve the grounds for
restricting, in any way, the
authority of the Government
enshrined by the
Constitution of Mongolia
and other laws.
29. No. Article Draft provision Comment Recommendations
18 Authority of the Central
State Administration
Refer to many other comments
on reimbursement,
expropriation etc. This will
affect their authorities and
responsibilities.
18.1 The central state
administration in charge of
geological and mining
affairs shall exercise the
following authority:
18.1.1 to determine borders and
corners of all deposits of
strategic importance;
18.1.2 to issue a decision to take
land into state reserve
wherein the reconnaissance,
prospecting, exploration had
been financed by state
budget;
18.1.3 to approve a procedure for
conducting the
reconnaissance and
submitting and receiving the
reconnaissance reports and
other related documentation;
18.1.4 to approve annual plan of
reconnaissance, prospecting
and exploration works to be
funded by the State budget;
18.1.5 to approve jointly with
central financial
administration the procedure
for funding, implementing,
receiving upon review of
outcomes and calculating the
funding expenses incurred
for reconnaissance,
prospecting, exploration by
state funding;
18.1.6 to approve a procedure for
evaluation and assessment of
the technical equipment and
technology used in the
prospecting, exploration,
mining and processing
activities;
18.1.7 to announce an area which
will be granted with license
for prospecting, exploration
and mining activities
through competitive tender
selection procedure;
18.1.8 to approve a procedure for Assumption that competitive Confirm assumption.
30. No. Article Draft provision Comment Recommendations
competitive tender selection
procedure for granting
licenses to conduct
prospecting, exploration and
mining activities;
tender will give equal
preference to national
companies and foreign invested
companies.
18.1.9 to approve a procedure to
determine and demarcate the
borders of areas granted by
license;
18.1.10 to grant a license for
development of Technical
and Economical Feasibility
Report for mining and
processing and mining and
processing architecture
design;
Assumption that this license
will be granted giving equal
preference to national
companies and foreign invested
companies.
Confirm assumption.
18.1.11 to develop and approve
mining product standards
jointly with central state
administration in charge of
standardization and
measurement affairs;
18.1.12 to approve standards and
procedures for prospecting,
exploration, mining and
processing activities;
18.1.13 to make decision on
granting, withholding,
revoking and renewing the
permission for execution of
mining and processing
related works, and to make
other related decisions;
18.1.14 to develop and approve
jointly with the central state
administration in charge of
nature and environmental
affairs the procedure to
receive the results of the
rehabilitation work done on
environment and nature
affected by exploration,
mining and processing
activities;
18.1.15 to approve the procedure to
register mines and industrial
unit for processing and
appoint commission for
approval of launching the
operation of mines and
industrial units;
Assumption that the
commission will be appointed
to hold impartial and non-
political objectives.
Confirm assumption.
18.1.16 to approve a procedure for
emergency elimination of
“prospecting” not included. Clarify
31. No. Article Draft provision Comment Recommendations
accidents occurred during
reconnaissance, exploration,
mining and processing
activities;
18.1.17 to establish a fund for
emergency elimination of
accidents and approve a
procedure for its
functioning;
18.1.18 to approve jointly with the
central state administration
in charge of labour the
procedure for ensuring the
appropriate working
condition, salary structure,
occupational health and
safety, provisions and
supplies to workers
employed in mining and
processing operations;
Assumption that items such as
“salary structure” will not
interfere with the commercial
operations and projections of
the license holder (i.e. no State
mandated salaries other than
minimum wage).
Limited only to “mining and
processing”.
Confirm assumption.
Clarify if reconnaissance,
prospecting, and exploration
are to be included.
18.1.19 to approve the procedure to
appoint the members of
Professional Council, the
rule of operations, salary and
bonus payment to the
Council members and
calculation of business trip
expenses as defined in this
law;
Assumption that the
Professional Council will be
appointed to hold impartial and
non-political objectives.
Confirm assumption.
18.1.20 to appoint the members of
Professional Council as
stated in this law;
18.1.21 to develop and approve the
list of precious metals and
precious gem stones to be
registered according to this
law, the procedure to
determine and register their
carats jointly with the central
state administration in
charge of finance affairs;
18.1.22 to approve a procedure for
services for which additional
fees shall be paid and
determine the additional fees
payable for the services;
Unclear Clarify what “services” and
the extent of “additional fee”
(i.e. actual costs?).
18.1.23 to approve a procedure for
allocation of professional
degrees to workers
employed in the geological
and mining sector;
Assumption that a foreign
professional degree from a
developed nation is sufficient.
Confirm assumption.
18.1.24 to approve a procedure for
categorizing the mineral
Assumption that this will
meeting international standards
Confirm assumption.
32. No. Article Draft provision Comment Recommendations
reserves;
18.1.25 other authority as specified
in this law;
18.2 Central state administration
in charge of nature and
environmental affairs shall
exercise the following
authority in minerals affairs:
This is a generally positive
outcome.
18.2.1 to approve standards and
minimum expenses of
rehabilitation of nature and
environment impacted by
prospecting, exploration,
mining and processing
activities;
18.2.2 to develop and approve
methodology for
determination and
assessment of harms and
damages to the nature and
environment caused by
prospecting, exploration,
mining and processing
activities;
18.2.3 to open a special account to
deposit the rehabilitation
fund, to monitor its
transactions, secure pledges,
and reimburse;
18.2.4 to develop and approve the
procedure to receive the
results of the rehabilitation
work on nature and
environment impacted by
exploration, mining and
processing activities jointly
with the central state
administration in charge of
geological and mining
affairs;
18.2.5 to develop and approve the
procedure for conduct of
rehabilitation work by the
funds accrued in the
rehabilitation expenses fund
and by state budget subsidy,
and selection of the
contractor through the tender
selection process;
18.2.6 to grant the right to conduct
rehabilitation work;
18.2.7 to review and make
conclusion on the
33. No. Article Draft provision Comment Recommendations
rehabilitation work plan
submitted by the license
holder in accordance with
this law;
18.2.8 to submit specific
recommendations to the
state administration on the
matter of obligating the
license holder with nature
and environmental
protection obligation;
18.2.9 to determine and validate the
borders of the territory
specified in 5.1 of this law
jointly with state
administration in charge of
land relations affairs;
Prohibited areas with respect to
the Water Law need to be better
defined. For example what is a
river and a floodplain?
Ephemeral streams should not
be included but under certain
interpretations they have been.
This is too broad.
Legislative review for
clarity.
18.2.10 to submit its opinion for
areas to be announced for
tender selection procedure in
accordance with this law;
18.2.11 to develop a method, a
methodology and a
procedure for planting ten
trees for every cut down
tree and foresting;
Bizarre as to why this is
included in this Draft Law as
this could fit within the
reclamation plan. Further, it
would not make sense to plant
trees in areas that can sustain a
very limited number of trees.
Remove from this Draft Law
and regulate separately.
18.2.12 other authority as specified
in this law;
18.3 Central state administration
in charge of labour affairs
shall exercise the following
authority in minerals affairs:
18.3.1 to approve the procedure to
ensure appropriate working
condition, salary structure,
occupational health and
safety, provisions and
supplies to workers
employed in mining and
processing operations jointly
with state administration in
charge of geology and
mining affairs;
Assumption that items such as
“salary structure” will not
interfere with the commercial
operations and projections of
the license holder (i.e. no State
mandated salaries other than
minimum wage).
Limited only to “mining and
processing”.
Confirm assumption.
Clarify if reconnaissance,
prospecting, and exploration
are to be included.
18.3.2 to monitor the adherence of
license holders to the
prescribed by this law the
quota (ratio) of domestic and
foreign workers;
18.3.3 other rights specified in this
34. No. Article Draft provision Comment Recommendations
law;
18.4 Central state administration
in charge of economic
development affairs shall
exercise the following
authority in mineral affairs.
18.4.1 to develop a comprehensive
economic planning scheme
on integration of the
infrastructure, electricity and
urban planning in
developing mining activities
nationwide;
The use of „infrastructure‟ as
opposed to „commercial
infrastructure‟ implies some
expectation of mining
companies providing what is
effectively „social
infrastructure‟. How will this be
commercialised between the
GOM and the company if no
IA, SA or DDA exists?
If it is an overall plan working
in conjunction with companies
this is good, but if it means
Government dictates to mines
how they must develop
infrastructure etc. It is not
good. This is not clearly
defined.
Clarify the intent and scope.
Modify to limit Government
involvement in the free
market and commercial
affairs of the license holders.
18.4.2 to review and issue
conclusions on the work
plan and Technical and
Economical Feasibility
Report of mining and
processing license holders,
and to issue
recommendations to the
license holder on
coordination of the
prospecting, exploration,
mining and processing
activities to the regional and
local mining Consolidated
plan;
Assumption that “review” and
“recommendations” means that
the Ministry of Economic
Development does not have the
authority to mandate, require or
otherwise approve such reports.
Confirm assumption.
18.4.3 to review and if necessary to
issue conclusions,
recommendations and
guidelines on the proposal to
change the work plan of the
license holder as specified in
this law;
Not clear to what extent the
work plan must be modified
based on “conclusions”.
Clarify.
18.4.4 to submit proposals and
comments to the draft of the
Local Development
Agreement as specified in
this law.
Understood as not being
mandatory.
Clarify.
18.4.5 to submit proposals to the
35. No. Article Draft provision Comment Recommendations
tender selection process for
granting licenses related to
areas, selection criteria,
condition and requirements
as specified in this law;
19. Authority of the state
administration
Refer to many other comments
on reimbursement,
expropriation etc. This will
affect their authorities and
responsibilities.
19.1 The State Administration in
charge of geological and
mining affairs (hereinafter
referred to as “State
Administration”) shall
exercise the following
authority:
19.1.1 to grant a right to conduct
reconnaissance work to legal
entities submitted their
applications according to
this law;
19.1.2 to organize and conduct the
competitive tender selection
process for granting
prospecting, exploration and
mining license specified in
this law;
19.1.3 to grant and revoke the right
to conduct minerals
prospecting, exploration,
mining and processing
through application or tender
selection procedures
specified in this law by a
license and to render other
decisions related thereto;
19.1.4 to extend license and issue
other decisions related
thereto;
19.1.5 to transfer, combine, revoke
the license and area granted
by the license, and to make
other decisions related
thereto;
19.1.6 to resolve border disputes
arising between holders of
license;
19.1.7 to maintain a consolidated
registration database of
licenses;
19.1.8 to create and maintain the
national consolidated
36. No. Article Draft provision Comment Recommendations
database of geology and
minerals;
19.1.9 to appoint the members of
Professional Council in
consistent with procedures
approved by state central
administration and approve
the procedure of the
Professional Council‟s
functioning;
19.1.10 to evaluate and assess the
technical equipment and
technology used in
reconnaissance, prospecting,
exploration and processing
according to the approved
methodology and procedure;
No “mining” Clarify.
19.1.11 to approve plan of works to
be completed according to
the reconnaissance,
prospecting, exploration and
processing license;
No “mining” Clarify
19.1.12 to make a decision on
whether to accept the
Technical and Economical
Feasibility report;
19.1.13 to make a decision on
whether performed high
grading mining;
This is an arbitrary decision
based on undefined guidelines.
Before this is enacted there
needs to be clear guidelines as
to what is 'high grade mining",
as this changes with technical
innovation and economics.
Address concerns related to
“high grading”.
19.1.14 to provide advise,
guidelines, and conclude
technical and technological
review in the course of
building mines and
industrial unit for processing
in relation to the
implementation of the rights
and obligations of the of the
holder of prospecting,
exploration, mining and
processing license holder;
19.1.15 to issue certificates of origin
for mined, processed,
purchased, sold and
reprocessed minerals and
mineral products by holders
of mining and processing
license;
19.1.16 to approve the sample form
37. No. Article Draft provision Comment Recommendations
to be filled by private or
legal entities used precious
metals and stones for
manufacturing of products
or purchased them for such
purposes;
19.1.17 to grant, revoke, renew work
authority and to issue related
decisions thereto;
19.1.18 to provide the relevant
information other than that
categorized as confidential
as specified by this law to
interested party;
19.1.19 to make consolidated review
on the prospecting,
exploration, mining and
processing of minerals in
conjunction with the State
specialized inspection
agency;
19.1.20 other rights specified in this
law;
19.2 The state administration in
charge of planning shall
exercise the following
authorities in minerals
affairs:
19.2.1 to develop a comprehensive
planning scheme on
coordination the
infrastructure, electricity and
urban planning in
developing mining activities
nationwide;
This means that MRAM is
effectively in charge of
coordinating development of
„social‟ infrastructure
development?
The use of „infrastructure‟ as
opposed to „commercial
infrastructure‟ implies some
expectation of mining
companies providing what is
effectively „social
infrastructure‟.
How will this be
commercialised between the
GOM and the company if no
IA, SA or DDA exists?
Clarify.
19.2.2 to review and issue
conclusions on the work
plan and Technical and
Economical Feasibility
Report of mining and
processing license holders,
and to issue
recommendations to the
Same as above.
38. No. Article Draft provision Comment Recommendations
license holder on
coordination the
prospecting, exploration,
mining and processing
activities to the regional and
local mining Consolidated
plan;
19.2.3 to review and if necessary to
issue conclusions,
recommendations and
guidelines on the proposal to
change the work plan of the
license holder as specified in
this law;
Same as above.
19.2.4 to submit proposals and
comments to the draft of the
Local Development
Agreement as specified in
this law.
Same as above.
19.2.5 to submit proposals to the
tender selection process for
granting licenses related to
areas, selection criteria,
condition and requirements
as specified in this law;
19.3 State administration in
charge of land relations
affairs shall exercise the
following authority.
19.3.1 to submit proposals to the
tender selection process for
granting licenses related to
area, selection criteria,
conditions and requirements;
19.3.2 to issue and update
constantly cohesive cadastral
maps of Mongolian land
owned or possessed and
utilized according to
agreements for land
possession and utilization
and deliver them according
to approved procedures to
state administration;
19.3.3 to determine boundaries of
areas as specified in Article
5.1 of this law jointly with
state administration in
charge of nature and
environment affairs;
39. No. Article Draft provision Comment Recommendations
19.4 to conduct research and
investigation based on the
license holder‟s notification
of the discovery of
archaeological,
paleontological findings and
historical and cultural
heritages in the course of
prospecting, exploration,
mining and processing
activities to the local and
State Administration, and to
take it into state protection;
19.4.1 to conduct research and
investigation based on the
license holder‟s notification
of the discovery of
archaeological,
paleontological findings and
historical and cultural
heritages in the course of
prospecting, exploration,
mining and processing
activities to the local and
State Administration, and to
take it into state protection;
19.4.2 to resolve the matter of
taking the archaeological,
paleontological findings,
historical and cultural
heritages as specified in
19.4.1 of this law into
maintenance and custody
based on the agreement
entered into with individuals
and legal entities;
19.4.3 to submit proposals related
to areas, selection criteria,
condition and requirements
of the tender selection
process for granting licenses
as specified in this law;
20 Authority of the Local
Self-Governing authorities
and Local governments
This Article gives far reaching
powers to Local Authorities.
20.1 The local self-governing
authority shall exercise the
following authorities in
minerals affairs:
40. No. Article Draft provision Comment Recommendations
20.1.1 to prohibit the exploration,
mining and processing
activities wholly or partially
on its land not granted by
license for purposes of
maintaining the balance of
historical and cultural
heritage and findings or
environmental ecological
balance;
20.1.2 to propose to the
Government through central
state administration to take
the license area under
exploration, mining and
processing activities as
specified by this law for
local special use;
What challenge can a licence
holder make?
With this Article, Aimag level
down to Bag level governments
could potentially, arbitrarily,
with State Approval,
expropriate Licence area.
Establish measures to ease
investor concerns (i.e. time
limits, substantive and
procedural requirements.).
20.1.3 to discuss and make related
decision upon receiving the
notification of area for
announcement of
competitive tender selection
submitted by the State
Administration as specified
in this law;
20.1.4 to enter into Cooperation
Agreement with exploration
license holder and the Local
Development Agreement
with the mining and
processing license holder
and to demand from the
license holder to enter into
agreement within the time
period as specified in this
law;
This puts a “gun to the head” of
the license holder.
A similar ability of „demand‟
needs to be vested with the
licence holder, otherwise there
is no onus on the local authority
to progress things and respect
the rights of the licence holder.
Create a similar demand
right for the license holder.
20.1.5 to participate in and
cooperate in the work of the
Commission to receive the
results of the rehabilitation
work;
20.1.6 to make proposal to the
rehabilitation work plan of
the license holder as
specified in this law;
20.2 The local administration
shall exercise the following
authorities in minerals
affairs:
41. No. Article Draft provision Comment Recommendations
20.2.1 to allow the use of land for
the purpose granted by the
license within the territory,
and to terminate such use in
case of violation;
Clarification is required as to
what is meant by 'in case of
violation'?
Who determines that there is a
violation that warrants
termination?
A very minor problem could be
considered to be a violation by
the local administration so there
needs to be a due process of
notice being given and
rectification works being
allowed before any termination
event can be considered.
Is this mandated that they must
allow a license holder to use the
land or is this still subject to
their decision under the Land
Law?
Clarify.
20.2.2 to monitor the
implementation of the
license holder of its
obligations to protect and
conduct rehabilitation of the
environment, protect the
public health and depositing
fees in the local budget and
obligations pertaining to the
Cooperation and Local
Development Agreements;
Does the „depositing of fees‟
extend to royalties and taxes
paid to the GOM or is relating
to the CA or LDA only. Is this
intended to encourage payments
or actual development/building?
20.3 It shall be prohibited for the
local self-governing
authorities and local
governments to make the
following demands to the
license holder:
20.3.1 to demand any investment
not specified in the Local
Development Agreement;
20.3.2 to demand any donations
and assistance and funding
for purposes other than –
humanitarian purposes;
What are “humanitarian
purposes”?
Clarify.
20.3.3 to demand fund for
financing the political
activities;
What are “political activities”? Clarify.
21 Rights granted by licenses The grandfathering provisions
are not defined for all types of
licenses.
42. No. Article Draft provision Comment Recommendations
21.1 The license granted by the
State Administration through
procedures specified by this
law shall entitle the license
holder to conduct activities
specified in this law upon
fulfillment of the conditions
and requirements as defined
in this law.
Should mention “exclusive
right” over the area and not
subject to overlapping licensing
such as Petroleum, Nuclear
Energy, etc.
Clarify “exclusive right”.
21.2 The license certificate shall
be granted to holder upon
issuance of the decision to
grant such license by the
State Administration.
22 Main conditions for
granting of license
22.1 By granting of a license for
prospecting, exploration,
mining and processing
purposes through
competitive tender selection
procedure or upon
application each of the
following criteria shall be
assessed thoroughly and
licenses shall be granted to a
legal entity which has best
fulfilled the conditions and
requirements specified
below:
Note that a licence will be
granted to a legal entity, but
there is no mention of
Mongolian citizens. Note the
distinction between a legal
entity and a Mongolian citizen,
question is what is the
definition of a legal entity (i.e.
does it include natural persons,
i.e. Mongolian citizens).
Assuming that the translation is
correct and the „or‟ is operative,
this is OK as it allows for
tender OR for direct
application.
This implies that if an entity
requests an area for licence it
has determined to be of merit,
through its own corporate
intelligence and expertise, has
no rights, and can be outbid
arbitrarily by another entity
based on its knowledge of the
other's know abilities.
Clarify.
Confirm assumption
22.1.1 Tentative plan of
prospecting, exploration,
mining and processing
activities requested for
authorization by the license;
22.1.2 environmental rehabilitation
tentative work plan;
43. No. Article Draft provision Comment Recommendations
22.1.3 financial possibility and
capacity guarantee of
implementing the plans
specified in 22.1.1 and
22.1.2 of this law;
The plans set forth in Article
22.1.1 may be in stages as the
license holder may be in the
process of raising money as
things progress. Many
companies may not outright
have full funding, in particular
if they are listing or doing
private placements.
Clarify that this is taken into
account.
22.1.4 whether the amount of
reserve and evaluation of the
deposit determined by the
exploration work and
approved by the relevant
authority is sufficient to
cover the extraction
expenses, rehabilitation
works and mine closure
expenses;
This may be difficult to
determine given the resource
cycle (fluctuating value).
Further, if taxes, fees, royalties,
etc. are modified upward by the
State, this could have a serious
impact on this criteria.
Produce clear procedures for
making this determination.
22.1.5 capacity, experience of the
applicant to conduct
prospecting, exploration,
mining and processing
activities, its professional
human resources;
It would be necessary to take
into consideration that their
capacity may be crippled by
labor quotas, mandatory local
shareholding, mandatory local
procurement, etc.
Some projects will be tied into
raising financing over time in
order to carry them out as most
companies do not have large
amounts of cash reserves on
hand. Is financial capacity a
criteria?
Will these items be taken
into consideration?
22.1.6 history, current status and
further motivation and
capacity of implementing
laws, rules and procedures
related to geology and
mining activities, by citizens
and legal entities
respectively;
If law, rules and/or procedures
are being disputed by the
license holder in a court or
otherwise, will this be held
against them? Even if the
outcome is not in their favour,
will there be an understanding
that the law suit or objections
were not frivolous by the
license holder?
Is a tax dispute or dispute
against a State inspector enough
to knock a company out of the
running?
Clarify.
44. No. Article Draft provision Comment Recommendations
22.2 whether the requesting legal
entity, its executive
management, members of
board of directors and its
equivalent entity have been
involved in conducting
prospecting, exploration,
mining and geological and
mining activities or have
been holders of licenses, if
so, their past records in
fulfilling their legal
obligations as recorded in
the special permission
database
Assumption that this is limited
to the “special permission
database”? What does that
mean?
Confirm assumption and
meaning.
23 Prospecting license There is a disjoint between a
legal entity that has conducted
reconnaissance to identify a
valuable prospect and their
priority right to a prospecting
license. This seems to be
counterproductive.
How will this impact existing
license holders? Must they
divide their exploration license
into a prospecting and
exploration phase?
Consider amending this
process to provide some
form of priority right for a
legal entity that conducted
reconnaissance.
Clarify.
23.1 Prospecting license will be
granted for the areas
announced by state
administration in charge of
geology and mining affairs
only through a competitive
tender selection procedure.
This Article does not make
entirely clear whether Article
23.1 is initiated by the license
holder or Government.
23.2 The holder of prospecting
special license shall be
entitled to carry out mineral
prospecting in licensed area
only after having complied
with all conditions and
requirements as defined in
this law.
45. No. Article Draft provision Comment Recommendations
23.3 Area granted by prospecting
license shall be at least 150
ha but no more than 250000
ha.
The maximum land area values
are max 250000ha for
prospecting, 12000ha for
exploration, and undefined for
Mining and Processing license.
Is the intention of the State to
break up bigger deposits,
develop them slower, or force
them into handing them back so
that the State can put them out
to tender?
Clarify the overall intent of
the areas being listed.
23.4 If necessary state
administration may
announce competitive tender
selection procedures for
granting of prospecting
licenses for smaller areas
than postulated in 23.3 of
this law.
Unclear why this is necessary.
Why not eliminate the floor of
150 listed in 23.3.
Clarify.
23.5 Prospecting licenses shall be
granted for the period of up
to 4 years.
How was a 4 year period
determined?
Clarify.
23.6 The Number of prospecting
licenses to be granted to one
legal entity shall not be more
than 5.
Unclear whether multiple
subsidiaries of a legal entity
count as separate legal entities
or are consolidated.
Clarify.
23.7 Holder of prospecting
license for certain area who
has complied the conditions
and requirements of this law
has a privileged right to
obtaining the exploration
license upon its submission
of the application for such
license.
24 Exploration license
24.1 Exploration license shall be
granted according to
following principles:
24.1.1 if holder of a prospecting
license meets the conditions
and requirements specified
by this law and submits
application for an
exploration license, the
exploration license shall be
granted over the area
covered by the prospecting
license;
See Article 24.3which appears
to contradict this Article.
Clarify.
46. No. Article Draft provision Comment Recommendations
24.1.2 Exploration license for area
taken into state reserve or
not granted with license can
be granted to economic
entity with state ownership
and state ownership
participation without
announcing and conducting
competitive tender selection.
Combined with Article 13, the
effect of this provision may be
prone to abuse by State entities
and removes the economic
efficiencies inherent in a
competitive tender system.
Suggest deleting this Article.
24.1.3 in all other cases except
specified in 24.1.1 of this
law, exploration license shall
be granted through
competitive tender selection
procedure over the area
announced by state central
administration in charge of
geology and mining affairs;
Highly unlikely that any
commercial enterprise, after
doing all the research, to
highlight an area of interest ,
would want to go through this
process.
Consider.
24.2 Upon fulfillment of the
conditions and requirements
specified by this law, the
exploration license holder
shall have the right to
conduct prospecting and
exploration work on the land
covered by the license.
Assumption that this creates
and automatic right to land?
Confirm assumption.
24.3 The area to be granted by
exploration license shall be
no less than 25 hectares and
no more than 12 000
hectares.
Note this area contradicts
Article 24.1.1 which states that
the area will be the same as
under the prospecting licence
(see Article 23.3, min 150ha
and max 250, 000 ha)(see note
above).
24.4 Exploration license shall be
granted only one time for
period of up to 5 years.
“Up to” 5 years is entirely
insufficient. Where did this
number come from?
In fact, the current nine years is
barley sufficient time to carry
out exploration. On average it
takes sixteen (16) years to find
and discover sufficient
resources to be a deposit of
significance. Oyu Tolgoi is a
prime example. Coal deposits
are the only type that might be
able to fit into this schedule.
Clarify the logic behind the
up to 5 years.
47. No. Article Draft provision Comment Recommendations
24.5 The number of exploration
licenses to be granted to one
legal entity shall not be
limited.
The assumption would be that if
a company holds unlimited
exploration license but then
may only hold five (5) mining
license, then the company is
permitted to freely sell and
transfer the remainder of its
licenses to other commercial
entities to recoup its investment
and make additional profit.
Confirm assumption.
24.6 Holder of the exploration
license who meets the
condition and requirements
of this law shall have
privileged right to be granted
a mining license for area
covered by the exploration
license if it has submitted
the application.
25 Mining license
25.1 Mining license shall be
granted according to the
following principles:
25.1.1 if holder of an exploration
license meets the conditions
and requirements specified
by this law and submits
application for a mining
license, the mining license
shall be granted over the
area covered by the
exploration license;
As noted above, the area of the
exploration license must be
clarified first.
25.1.2 Mining license for area
taken into state reserve or
not granted with license can
be granted to economic
entity with state ownership
and state ownership
participation without
announcing and conducting
competitive tender selection
Combined with Articles 13 and
14, the effect of this provision
may be prone to abuse by State
entities and removes the
economic efficiencies inherent
in a competitive tender system.
Suggest deleting this Article.
25.1.3 in all other cases except
specified in Article 25.1.1 of
this law, mining license shall
be granted through
competitive tender selection
procedure over the area
announced by central state
administration in charge of
geology and mining affairs;
48. No. Article Draft provision Comment Recommendations
25.2 Upon fulfillment of the
conditions and requirements
specified by this law, the
mining license holder shall
have the right to conduct
mining activity on the land
covered by the license, in
addition to the following
rights:
Assumption that this implies
automatic land rights?
Confirm assumption.
25.2.1 to conduct prospecting and
exploration works on the
area granted by the license;
25.2.2 to construct mine, other
buildings and facilities
necessary for the extraction
activities on the area granted
by the license;
How does this differ to the
defined term of “commercial
infrastructure” below?
Clarify.
25.2.3 to construct commercial
infrastructure necessary for
extraction activities on the
mine tenure;
25.2.5 to conduct transportation of
minerals extracted, and
construct buildings and
facilities designated for
loading and unloading;
How does this differ to the
defined term of “commercial
infrastructure” above?
25.3 The area for extraction of
salt and other common
minerals shall be no less
than 100 meters on each
side, the area for extraction
of other minerals shall be no
less than 500 meters in
length on each side.
25.4 The mining license shall be
granted for a period of up to
20 years.
“Up to” 20 years is entirely
insufficient. Where did this
number come from?
We note that according to
Article 28.2 that a mining
license may be extended twice
for a period of “up to” 20 years
each time. What if a deposit
has a greater than 60 year
LOM.
Clarify.
25.5 The number of mining
license to be granted to one
legal entity shall not be
exceeded to five.
If applied retroactively or even
going forward this could create
serious complications.
For example, ETT currently
holds 8 licenses. Will they be
required to give up 3?
Clarify.
49. No. Article Draft provision Comment Recommendations
26 Processing license Separation of mining and
processing licenses may not be
good as it will encourage
government interference in
economic activity (i.e.: divert
all processing to Sainshand).
Also, without a guarantee of a
processing license to the mining
license holder it may be
difficult to raise financing for
integrated projects due to
increased
operational/commercial risk.
If applied retroactively, could
this now prevent ER from using
its wash plant (no licensing)
and force it to divert its
unwashed coal to another
processor?
Address these concerns.
26.1 Processing license shall be
granted according to the
following principles:
26.1.1 processing license can be
granted to a interested legal
entity who submits
application for a processing
license and meets the
conditions and requirements
specified by this law;
26.1.2 processing license may be
granted through a
competitive tender selection
procedure;
Is this correct, “may”? The
assumption is that it does not
have to be tendered if the word
is “may”.
Confirm assumption.
26.2 The processing license
holder shall have the right to
conduct processing activity,
in addition to the following
rights:
No reference to waste disposal.
You can't have processing
without waste.
Clarify.
26.2.1 to possess and use land for
industrial purpose;
Implies that there is an
entitlement to such land.
Clarify.
26.2.2 to construct industrial unit
for processing and other
buildings and facilities
necessary for the processing
activities on the area granted
by the license;
How does this differ to the
defined term of “commercial
infrastructure” below?
Clarify.
26.2.3 to construct commercial
infrastructure necessary for
processing activities and
industrial unit for
processing;
Clarify.
50. No. Article Draft provision Comment Recommendations
26.2.4 to conduct transportation of
raw materials and processed
products, and construct
buildings and facilities
designated for loading and
unloading;
How does this differ to the
defined term of “commercial
infrastructure” above?
Clarify.
26.3 The period of processing
license shall be set by the
State Administration in
consideration of the
Technical and Economical
Feasibility Report and the
capacity of the industrial
unit for processing.
26.4 The number of processing
license to be granted to one
legal entity shall not be
limited.
26.5 The area granted for
industrial purposes
according to the processing
license shall not overlap in
any way with the land
prohibited to conduct
prospecting, exploration,
mining and processing
activities thereon, and with
areas granted by valid
licenses.
26.7 If the holder of a mining
license has applied for a
processing license, the
processing license may be
granted on the area of
extraction license in
consideration of the
applicant‟s preferences. In
this case land possession and
utilization agreement shall
not be required to be made.
What if the mining license
holder will not be processing
but wants to have another
company with a processing
license located on their license
area? Is this permissible?
Clarify.
27 Validity of the license
27.1 License shall be valid for the
entire period initially
granted for or within the
period extended thereon.
27.2 The period of the license
will cease in the following
cases:
27.2.1 license holder has returned
the licensed area before
expiry date as defined in this
law;
51. No. Article Draft provision Comment Recommendations
27.2.2 decision made by related
authority to take the licensed
area for purpose of special
national and local use and to
reserve mineral deposit as
set forth in this law;
52. No. Article Draft provision Comment Recommendations
27.2.3 the period of a license has
expired and has not been
extended;
27.3 License shall not be revoked
on the grounds that are not
specified in this law.
28 Period of renewal of
license
28.1 Period of the prospecting
and exploration licenses
shall not be renewed.
28.2 The State Administration
may extend the period of the
mining license twice, up to
20 years each time
considering the reserve of
the deposit.
What happens after 60 years? Clarify.
28.3 The period of extension for
processing license shall be
determined by the State
Administration based on the
Technical and Economical
Feasibility Report of the
production activities.
Extension of a Processing
Licence is subject to the
Feasibility Report.
Important to ensure that
current operating costs/cut-off
rates are considered at the time
of the extension and not from
the original studies.
Consider.
29 Renewal of the license
29.1 State Administration shall
notify on the expiration of
the license 45 (forty five)
days prior to the actual
expiration date to the license
holder as per the approved
procedure.
29.2 The license holder shall
submit its request to renew
the period of the license
within no less than 15
(fifteen) days before the
expiry as provided in this
law.
29.3 The State Administration
shall refuse to accept
requests to renew the license
which had not been
submitted within the period
as specified in 29.2 of this
law.
53. No. Article Draft provision Comment Recommendations
29.4 If the license holder has
submitted its request for
renewal of license in the
period specified in 29.2 of
this law, the license shall
remain valid until such time
when the state
administration shall issue its
decision on whether to
renew the period or reject
the request.
This should also include all
appeals processes within the
agency and through the
administrative courts to allow
the license holder to continue
with all operations until all
appeals may be exhausted.
Consider extending this time
frame for the entire appeals
process.
29.5 The State Administration
shall refuse to renew the
license period in the
following cases.
29.5.1 the license holder did not or
does not fully meet the
conditions and requirements
specified in Articles 22 and
66 of this law;
29.5.2 obligations arising out of the
permitted work plan,
Technical and Economical
Feasibility Report and
approved Work plan have
not been performed;
To what extent? Taking into
account what factors (strikes,
weather conditions, economic
down turns, etc.).
Clarify.
29.5.3 exhaustion of the reserve at
the deposit;
To what extent? Taking into
account what factors (revised
reserve estimates, strikes,
weather conditions, economic
down turns, etc.).
Clarify.
29.6 The State Administration
shall renew the license
period in cases other than
specified in 29.5 of this law.
29.7 The renewed period of the
license shall be counted
from the date of expiry of
the initial period of the
license.
This makes sense only if the
license holder is able to fully
operate during any appeals
process to a denial. However, it
should also be taken into
consideration that the license
holder will not want to operate
during this time if it involves
making expenditures in the face
of uncertainty.
Clarify.
29.8 The State Administration
may issue the following
decision in addition to the
extension of the license.