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Proposed amendments to the Minerals Law

27th of 6, 2014
We give below the text of the draft amendments to the Minerals Law. Only the Articles, Clauses and Sub-clauses sought to be amended are given. The translation from the Mongolian is neither official nor authorised nor literal, but it is accurate in giving the true sense of the proposed amendments.

Article 1/11.
The National Geology Institute

11.1. The Mongolian National Geology Institute shall have the following responsibilities:
11.1.1. Conduct geological, geophysical, geochemical, hydro-geological and geo-ecological mapping, surveying and research work in the country;
11.1.2. Conduct surveys of distribution of mineral resources, including nonmetal minerals, as also assess the prospects of mineral resources in the country;
11.1.3. Establish a database of geological, mining, and mineral resources, keep it updated, and provide information to those who ask for it, but not any information that is classified or confidential;
11.1.4. Keep a comprehensive registry of mineral resources, and record all transfer/movement of resources, as and when they take place.

Article 2/ 3
3.3. All matters pertaining to the commonly distributed mineral resources shall be regulated by a specific law.

Article 3/ 34
34.6. A fine of 0.5% of the annual fees will be charged for every day’s delay if payment is not made by the deadline set forth in Article 34.2.
34.7. The licence will be revoked in accordance with Article 56 if payment is not made within 30 days of the initial due date.

Article 4/ 35
35.7. The licence holder shall give priority to taxpayer entities registered in Mongolia, when acquiring goods and services from suppliers and subcontractors.
35.8. A mining licence holder shall not shut down operation of any mining development, or mining plant, or enrichment factory and processing plant without giving prior notice to the state administrative body in charge of geology and mining, except in cases of technical failure and delay, and of prolonged and continuing financial loss, or under a court order or government inspection order, or force majeure.
35.9. Exploration licence holders shall return 10 per cent of the total exploring area in the third year and 20 percent of remaining area in the sixth year.
35.10. A processing plant operating within the territory of Mongolia would be provided on a priority basis with extracted, enriched and half-processed products at market prices.

Article 5/48
48.12. Only a certified professional and legal entity shall evaluate exploration results and reports, as set forth in Article 48.3, and prepare feasibility studies and independent assessment reports under Article 48.6.1.
 
Article 6/ 49
49.12. Exploration licences shall not be transferred, wholly or partially, within three years of the original licence being issued.

Article 7/56
56.8. If a licence revocation is annulled by a court order the licence shall be deemed to be in force again from the date of the court decision, as set forth in Article 56.1.

Article 8/4
4.1.24. “Minerals resource” refers to the part of a deposit which was not estimated by geological mapping and was not studied or explored in terms of amount, volume, type, contents, composition and economic potential.
4.1.25. “Mineral resource deposit reserve” refers to the part of a deposit estimated by geological mapping and explored in terms of amount, volume, type, contents and composition, and has been determined to have economic viability and potential for industrial use and enrichment, and for use of technology during extraction.
4.1.26. A “professional expert or analyst” is a person who has received the right to be so known from the geology institute, or the mining industry, or a non-governmental organisation, and is accepted as such at the national and international level.

Article 9/1
1.10. Approve the template of a contract as set forth in Article 42.1.
1.11. The central governing body of mining and geology shall approve the exploration licence area based on intersection analysis, and will announce it to the public.
9.1.12. Resolve the issues of exploration, production, prospecting, and mining in the international border areas.
9.1.13. Define the boundaries of deposits with strategic importance.        
9.1.14. If state funds were used in geological prospecting that led to the discovery of a deposit with potential, further exploration work on it shall be conducted on the public-private-partnership model in order to increase the value of the site.

Article 10/1
1.11. Approve regulations for setting up mining, processing and enrichment plants.  
1.12. Approve regulations for operating enrichment plants.
1.13. Approve the norms for constitution of a Policy Council whose job would be to advise lawmakers in promoting and providing stability to the legal framework and strengthening the competitiveness of the mineral resources industry.

1.14. Approve, in consultation and agreement with the state central administrative body in charge of the environment, regulations for reclamation work, mine closure, and setting up processing and enrichment plants.
1.15. Approve regulations for maintaining a database of geological, mining and mineral resources.
1.16. Approve regulations to permit a non-governmental organisation to grant certificates to geological and mining industry professional experts and analysts, and guidelines for classification of mineral resources and deposit reserves.

Article 11/1
1.24. Keep a register of exploration and mining licence holders who are listed in the stock exchange.
1.25. Determine by coordinates the area available for mineral resources exploration.

Article 12/ 27
1.12. The feasibility study as under Article 48.6.1 shall determine the connection with local and international roads that would transport the mine’s output, and also the availability of rehabilitation and mine closure costs.
1.13. Have an official charged with keeping the state administrative organisation in charge of geology and mining regularly and properly informed on all issues relating to the environment, rehabilitation and mine closure.
 
Article 13/ 33
1.4. $10 for each 10-12 years of the exploration licence.

Article 14/ 66
1.10. Any mining licence holder violating Article 35.7 will be fined an amount equivalent to the royalty payment during the halt in progress.

Article 2. Add the following to the provisions of the Minerals Law:
“concentrate/dress” after “increase” in Article 4.1.7,
“other than state borders” before “state” in Article 8.1.3,
“exclude” after “approve/include” in Article 8.1.4,
“exclude” after “refer/include” in Article 9.1.4,
“submit decision on grant area for the purpose of small scale mining and common distributed mineral resource” after “provide” in Article 11.1.13,
“within one year” after “compensation” in Article 14.4,
“email address” after “fax number” in Article 18.2.1, as also in Article 25.1.1,
“$5 for the years of 10-12” after “$1.5” in Article 32.2,
“and their subcontractor” after “holder” in Article 43.1,
“and in subsequent years [submit] current year’s plan [within] 15th of April” in Article 48.1.1,
“set forth in Article 34.7 of this law” after “the payment” in Article 56.1.2,
“and specialised inspection [authority]” after “state administrative agency in charge of taxation matters” in Article 56.7,
“and state administrative agency may grant mining licence by an auction” after “not be granted” in Article 60.4,
“Administrative case” after “or” in Article 64.1.
Article 3. Sections and clauses of Minerals Law shall be amended as follows:

1/ Articles 5.3-5.5:
5.3. The percentage of State ownership of a mineral deposit, as set forth in Articles 5.4 and 5.5 of this law, shall be determined by an agreement on usage of the deposit and such an agreement will be valid for the deposit usage period as set forth in the feasibility study;
5.4. The percentage of State ownership of a strategically important mineral deposit where state funds were spent on prospecting and exploration work and determination of reserves, may be up to 50%, depending on the expected economic benefits and profitability of the deposit, if [the State] exploits it jointly with a legal entity.
5.5. The percentage of State ownership of a strategically important mineral deposit where no state funds were spent on exploration work and determination of reserves, may be up to 34%, depending on the expected economic benefits and profitability of the deposit, if [the State] exploits it jointly with a legal entity.
 
2/ Article 7.3:
7.3. Except in cases of mining minerals by small scale mines, it is prohibited to search, explore and extract without licence, and to extract, sell and export coloured stones, gemstones and paleontologic findings for the purpose of profit.  

3/ Article 20.1:
20.1. If a licence is terminated or revoked on grounds stipulated in Articles 53.1.1, and 56.1.3-56.1.5 of this law, the state administrative agency shall issue a fresh licence through undermentioned procedures.
 
4/ Article 42.1:
42.1. A mining licence holder shall work in cooperation with the local administrative bodies where the mineral deposit is located and conclude an agreement on matters of environmental protection, voluntarily supporting local community development;
 
5/ Article 45.1:
45.1. A licence holder shall inform the state central administrative body of proposed closure not less than one year prior to the proposed closure, and shall follow procedures set forth in Article 10.1.12 of this law in preparing for closing the mineral deposit, mining plant and enrichment plant.

6/ Articles 48.3, 48.4:
48.3. The exploration licence holder shall prepare a report giving the results of deposit reserve estimates, and of prospecting and exploration work in compliance with operational procedures of prospecting for and exploration of minerals and classification of mineral deposit reserves and its enrichment, and submit this along with primary supportive material to the state administrative body before the licence expires.  
 48.4. The state administrative body shall appoint specialists from the Mineral Professional Council to review and assess the report mentioned in Article 48.3 and the feasibility study mentioned in Article 48.6.1 of this law. Based on their recommendation, the state administrative body shall take a decision on registering and receiving the reserves into state general registration.
 
7/ Articles 4.1.12, 4.1.23:
4.1.12. A “mineral deposit of strategic importance” is a deposit that may have a potential impact on national security, or the economic and social development of the country or is producing or has a potential to produce more than five (5) per cent of the annual national Gross Domestic Product.
4.1.23. “Artisanal mining” refers to citizens’ unregistered cooperatives as described in Civilian Code Article 481.1 or to a community organised in the khorshoo model set forth in Civil Code Article 34.6 or to cooperative work, as in Article 35, in a deposit where it is  unprofitable to set up a mining plant or in a site formed by industrial waste, to produce mineral resources through mining operation.
 
8/ Articles 10.1.5, 10.1.9:

10.1.5. Review and approve the annual budget and work plan of geological studies to be done by state funding, and to review and assess the result reports thereof.
10.1.9. Establish a Mineral Resource Commission, comprising professional experts and responsible for giving references and recommendations on geological survey reports in Mongolian territory as well as on feasibility studies of mineral resource deposits and enrichment plants and framing regulations.
 9/ Articles 48.1.2, 48.6.1-48.6.3:
48.1.2. To file annual exploration reports in a form approved by the state administrative body, within 15 February of the following year;
48.6.1. To submit a feasibility study on developing a deposit prepared by an authorised entity, within one year of obtaining a mining licence;
 48.6.2. To submit before 1 December the following year’s production and mining activity plan in an approved form, with basic indicators.
 48.6.3. To conduct from time to time further exploration of the area under the mining licence to increase the reserve amount, and to submit an activity plan, a yearly report and a report of exploration result in accordance with Article 48.1.2 of this law.
 
10/ Article 66.1.2:                                           
Failure to submit the information, plan and report of mining activity set forth in Article 48 of this law on time or submission of false information and report, will lead to the responsible person being fined an amount 10 to 20 times the minimum wage and the legal entity to be fined an amount 30 to 50 times the minimum wage.

Article 4. Amend the following clauses of the Minerals Law as follows.  
Article 15.1: change “except for reserved areas and special purpose territories” to “Mongolian National”,
Article 21.1.5: change “2” to “3”,  
Article 27.1.4: change “exploited from mining area” to “mining licence holder and the person legally authorised to export”,  
Article 66.1.1: change “from “500,000 to 1,000,000” to “30 to 50 times the minimum wage”,
Article 66.1.3: change “from 100,000 to 300,000” to “5-10 times the minimum wage”, change “from 500,000 to 1,000,000” to “10-20 times the minimum wage”, change “from 1,000,000 to 2,000,000” to “30-50 times of the minimum wage”,    
Article 66.1.4: change “from 100,000-500,000” to “10-20 times the minimum wage”, change “from 500,000-1,000,000” to “30-50 times the minimum wage”,    
Article 66.1.5: change “from 200,000 to 500,000” to “10-20 times the minimum wage”, change “from 500,000 to 1,000,000” to “30-50 times the minimum wage”,    
Article 66.1.6: change “from 100,000 to 250,000” to “10-20 times the minimum wage”, change “from 1,000,000 to 2,000,000” to “30-50 times the minimum wage”,    
Article 66.1.7: change “from 100,000 to 250,000” to “10-20 times the minimum wage”,        
Article 66.1.8: change “from 200,000 to 500,000” to “10-20 times the minimum wage”, change “from 500,000 to 1000,000” to “20-40 times the minimum wage”,  
Article 66.1.9: change “from 100,000 to 300,000” to “5-10 times the minimum wage”, change “from 500,000 to 1,000,000” to “10-20 times the minimum wage”, change “from 1,000,000 to 2,000,000” to “30-40 times the minimum wage”,  
Article 66.2: change “from 200,000 to 300,000” to “10-20 times the minimum wage”.
Article 5. Annul the following articles: 23. 11.1.1-23.11.1.5, 11.2, and 8.1.6.
                    
REGARDING ANNULMENT OF THE LAW ON BAN ON ISSUING MINING EXPLORATION NEW SPECIAL LICENCES
Article 1. Annul the Law on Ban on Issuing Mining Exploration New Special Licences.
                                                                                           
REGARDING AMENDMENT TO THE LAW ON SPECIAL PROTECTED AREAS
Article 1. Amend “rare findings of minerals and rocks such as palaeo flora, fauna fossil or animate polite, pillar cut off from layerology” after “land” in Clause 2 of Article 23 of the Law on Special Protected Areas.  

REGARDING  PROCEDURE FOR ADHERING TO THE LAW ON AMENDMENT TO THE MINERAL LAW
Article 1. In adherence to the Law on Amendment to the Mineral Law adopted on …, a contract for exploitation signed in accordance with legislation in effect earlier, shall be newly registered within six months of the day the new law comes into force, in accordance with procedure stipulated in the law and shall remain valid for the period named in the original contract, on payment of a fee in accordance with legislation in effect at that time.       

Article 2. This Law will come into force on the day when the Law on Amendment to the Mineral Law comes into force.
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