1

Draft Amendments to the 2006

Minerals Law

20 May 2014

2

About the Legislative Working GroupOur Projects:

Established in November 2007 as an advocate for certain legal and

business practice matters, as well as to provide the membership of the

BCM with information on legislation in Mongolia, and consists of leading

law firms and in-house legal counsel operating in Mongolia or with

business related thereto

3

4

SEFIL

2012 Minerals Law

2013 Minerals Policy

2013 Investment Law

2014 Amendments

5

Expectations Based on the Minerals Policy

• improve public services and ensure their openness, transparency and

effectiveness (Article 3.7.6)

• eliminate bureaucracy and duplication from state control and collection of

fees at national and local levels (Article 3.3.5)

• develop conditions for mutual understanding between investors and local

communities and increase the responsibility of local authorities in an effort

to explain and introduce the economic and social importance of projects

(Article 3.5.1)

• prioritize a policy of development of exploration to ensure the stable

growth of mining. (Article 3.2.1.1)

• are drafted based on detailed research and analysis (Article 2.1.1)

• rely upon the private sector for development (Article 1.1)

• limit and define the role of the State in the minerals sector (Article 2.1.8)

• are coordinated with the policies of other sectors, inclusive of the

investment policies which are designed to attract investment (Article 4.1.2)

• aim to establish a stable investment environment (Article 1.2)

• improve coordination to support operations of private sector entities in

the minerals sector (Article 3.7.11)

6

Some Focus Points

7

Choices

Amendment (MP 3.5.2)

42.1. A mining license holder shall work in cooperation with the Governors of

soums and districts where the mineral deposit is located and conclude an

agreement on matters of environmental protection, voluntarily supporting local

community development

Minerals Policy

3.5.1. To develop conditions for mutual understanding between investors and

local community prior to the start of extraction in particular area, to increase

the responsibility of local authorities in efforts to explain and introduce

economic and social importance of mining project;

3.7.11. To deliver state and local public services through a consolidated

policy and improve coordination between them in order to support operations

of private sector entities in the minerals sector;

8

Clarity5.4/5.5 The percentage of the State ownership in a strategic important mineral deposit.

. . taking into consideration the economic benefits and profit rate of such deposit.

[Removed. . . taking into consideration the amount of investment by the State].

35.8 Mining license holder shall provide prior notice to the state administrative body in

charge of geology and mining when ceasing operation of mining development, mining

plant and enrichment plant

35.10 To provide the processing plant operating within the territory of Mongolia as a

priority with extracted, enriched and half-processed products by market price;

[Commercial/financing analysis, market price, priority?]

49.12. It is prohibited to transfer the exploration license partially or wholly to others

within three years after the date of issuance. [Financing/In-group]

35.7. When acquiring necessary goods, services, and hiring subcontractors the license

holder shall give priority to taxpayer entities registered in Mongolia. Goods, work and

services shall be consistent with the requirements of purchasing business entity.

9

Some Key Issues Not Addressed

• Overlapping licensing

• National v. Local Authority

10

34.7. Overdue period set forth in article 34.6 of this law shall be up to 30

days and license shall be revoked in accordance with article 56 of this

law in the even of exceeding such overdue period.

56.8. License term shall continue to be counted after the date of court

order entering into effect which annuls the decision on revoking license

under grounds set forth in article 56.1 of this law.

66.1.10. If a mining license holder violates Article 35.7 of this law, the

license holder will be fined equivalent to the royalty payment during the

halt in progress; CHANGED TO

66.1.10. If a mining license holder violates Article 35.7 of this law, the

license holder will be fined equivalent to 100-200 times the minimum

monthly wage.

Article 21.1.5 change “2” to “3”

11

Research and

Analysis

Public Comment

12

THANK YOU