07.01.2013, BCM Minerals Law Draft Comments Detailed Analysis, BCM

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,


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,


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.


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


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


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


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


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;


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


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



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,


Note: reconnaissance does not

require a licence. However, the

Draft Law does require that the

State Administration grant such


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



activities

Cross reference Article 11.2

allowing for reconnaissance

5.1 Any of prospecting,


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?


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.


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



activities without license

6.1 Unless specified in the

following, it shall be

prohibited to conduct



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.


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


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,


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.


Mongolia. (see comment to Article

3.1.2(a))

8.4 Relations to mining and

processing of radioactive


elements shall be regulated

by “Law on Nuclear

Energy” in Mongolia.

9 Mineral deposits of


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


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).


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.


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


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.


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.


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


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


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.


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


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.


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


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


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


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.


11.6 If reconnaissance conducted

by state budget funding in an

licensed area of prospecting,


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


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


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


base

12.1 The State Administration

shall have a national

consolidated geology and

minerals data base. The



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.


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



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.


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.


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


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


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



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.


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.


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.


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?


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.


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.



seek Government‟s approval.


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.



seek Government or

Parliamentary approval.


15.5 If a special purpose territory

overlaps entirely or in part

with a territory covered by a

valid license, prohibiting

further prospecting,


processing activities in the

Definition of “compensate”

needed. Lost profit, actual

expenses, etc.?

What if there is a dispute

regarding amount

compensated?



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?


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).



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


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


on reimbursement,


affect authorities and

responsibilities.

17.1 The Government shall



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


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


and proprietorship;

17.1.4 to issue a decision to take

area into state reserves

wherein the reconnaissance,


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.


connection with this to

determine and pay the

reimbursement to the license

holder;


area into state reserve when

the area had been explored

and the reserves had been


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


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


restricting, in any way, the

authority of the Government

enshrined by the

Constitution of Mongolia

and other laws.


18 Authority of the Central

State Administration


on reimbursement,


affect their authorities and

responsibilities.

18.1 The central state



affairs shall exercise the

following authority:

18.1.1 to determine borders and

corners of all deposits of

strategic importance;


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;


evaluation and assessment of

the technical equipment and

technology used in the



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.



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


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


standardization and

measurement affairs;

18.1.12 to approve standards and

procedures for prospecting,


processing activities;

18.1.13 to make decision on

granting, withholding,

revoking and renewing the

permission for execution of


related works, and to make

other related decisions;


jointly with the central state


nature and environmental

affairs the procedure to

receive the results of the

rehabilitation work done on

environment and nature

affected by exploration,


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.


emergency elimination of

“prospecting” not included. Clarify


accidents occurred during

reconnaissance, exploration,


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


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.


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;


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?).


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.


categorizing the mineral

Assumption that this will

meeting international standards

Confirm assumption.


reserves;

18.1.25 other authority as specified

in this law;

18.2 Central state administration

in charge of nature and

environmental affairs shall



This is a generally positive

outcome.

18.2.1 to approve standards and

minimum expenses of

rehabilitation of nature and

environment impacted by



activities;


methodology for

determination and

assessment of harms and

damages to the nature and

environment caused by



activities;

18.2.3 to open a special account to

deposit the rehabilitation

fund, to monitor its

transactions, secure pledges,

and reimburse;


procedure to receive the

results of the rehabilitation

work on nature and

environment impacted by


processing activities jointly

with the central state



affairs;


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


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


jointly with state


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;


in charge of labour affairs

shall exercise the following



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


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


law;


in charge of economic

development affairs shall


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


license holder on

coordination of the



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


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


on reimbursement,


affect their authorities and

responsibilities.

19.1 The State Administration in

charge of geological and

mining affairs (hereinafter

referred to as “State

Administration”) shall


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


process for granting


mining license specified in

this law;

19.1.3 to grant and revoke the right

to conduct minerals



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



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


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,


processing license;

No “mining” Clarify

19.1.12 to make a decision on

whether to accept the


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,


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


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,


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


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



processing license holders,

and to issue


Same as above.


license holder on

coordination the



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


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.




areas, selection criteria,



19.3 State administration in

charge of land relations

affairs shall exercise the

following authority.




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


charge of nature and

environment affairs;


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



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


heritages in the course of



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,


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,


of the tender selection

process for granting licenses


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:


20.1.1 to prohibit the exploration,


activities wholly or partially

on its land not granted by

license for purposes of

maintaining the balance of


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


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


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


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


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:


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.


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



purposes through


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



activities requested for

authorization by the license;

22.1.2 environmental rehabilitation

tentative work plan;


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



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.


22.2 whether the requesting legal

entity, its executive

management, members of

board of directors and its

equivalent entity have been

involved in conducting


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?


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


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.


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.


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


procedure over the area

announced by state central


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.


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


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


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


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.


25.1.3 in all other cases except

specified in Article 25.1.1 of

this law, mining license shall

be granted through


procedure over the area

announced by central state


geology and mining affairs;


25.2 Upon fulfillment of the


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;



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


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.


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


26.1.1 processing license can be

granted to a interested legal

entity who submits

application for a processing

license and meets the


specified by this law;

26.1.2 processing license may be

granted through a


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


necessary for the processing

activities on the area granted

by the license;



infrastructure” below?

Clarify.

26.2.3 to construct commercial

infrastructure necessary for

processing activities and

industrial unit for

processing;

Clarify.


26.2.4 to conduct transportation of

raw materials and processed

products, and construct


designated for loading and

unloading;



infrastructure” above?

Clarify.

26.3 The period of processing

license shall be set by the

State Administration in

consideration of the


Feasibility Report and the

capacity of the industrial

unit for processing.

26.4 The number of processing

license to be granted to one


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



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;


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;


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


28 Period of renewal of

license

28.1 Period of the prospecting

and exploration licenses

shall not be renewed.


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


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


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.


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.


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.


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.


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


specified in Articles 22 and

66 of this law;

29.5.2 obligations arising out of the

permitted work plan,


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.


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.


may issue the following

decision in addition to the

extension of the license.


29.8.1 the renewal of the license to

be enforced on fulfillment of

certain conditions;

Is there a time frame? Clarify.

29.8.2 to reduce the area granted by

the license in renewing the

period;

There is no criteria set out in

the proposed law on when (or

the extent to which) the area of

a licence may be reduced upon

renewal. This compromises the

tenure security of the licence

and should be clarified further.

Clarify.

29.9 If the license holder has not

submitted its request for

license renewal within the

period specified in 29.2 of

this law, or, the conditions to

refuse renewal of the license

have arisen, the State

Administration shall

immediately notify other

persons the interests of

whom are affected by the

license, and which are

registered in the license

registration.

30. Partial transfer of area

granted by mining license

Can this be in the form of a

sale?

Clarify.


partially transfer the areas

granted by exploration,


licenses.

30.2 The license holder may

transfer a part of the area

granted by a mining license

to others in the following

cases.

30.2.1 the transferee is a holder of

an extraction license; and

Extraction licence is not

defined.

Clarify.

30.2.2 the area being transferred

geographically borders that

of the transferee;


shall be obligated to notify

third parties the interests of

which are being affected by

the request to partially

transfer the area granted by

license in the following

cases.


30.3.1 pledge agreement related to

the license has been

registered in the special

permission registration

database;

30.3.2 agreement creating non-

material property rights,

joint ownership of interests,

or transfer of interest

percentage has been


registration database;

30.4 The agreement on

transferring part of the area

shall be valid upon

registration thereof in the

license registration database

of the State Administration.

30.5 If the person has not fully

met the conditions and

requirements specified in

30.1 of this law, the State

Administration shall not

register the agreement on

transfer of partial area.

30.6 The area transferred shall be

registered in with the

transferee‟s area in the

cartographic and license

database; a separate license

shall not be granted for the

area transferred.

30.7 The transferee taking the

partial land shall be

responsible for re-

demarcating the cornerpoints

and border coordinates and

reflecting and obtaining the

approval for the relevant

changes in the extraction

work plan and Technical and


Report.

30.8 With the agreement entering

into validity, the following

shall occur:

30.8.1 the obligations of the

transferor with respect to the

transferred area specified by

law and imposed by the

license from the State

Administration shall be

revoked;


30.8.2 the transferee shall be

imposed the obligations with

regards to the land

transferred, specified by

laws and imposed by the

state administration at the

time of issuing the license;

What about past/existing

liabilities of the transferor?

Clarify.

31 Amalgamation of the

licensed area

31.1 Areas granted by

exploration, prospecting and

processing licenses shall not

be subject to amalgamation.

Assumption that “mining” areas

can be amalgamated by the

license holder.

Articles 31.1 and 31.2 would

appear to be in direct

contradiction.

Confirm assumption.

Clarify.

31.2 By notifying the license

holder in advance, State

Administration may issue a

decision to amalgamate two

or more areas that

geographically border each

other and granted to the

same person.

What if the license holder does

not want their license areas to

be amalgamated? What is the

process for comment and

dispute resolution? This could

require a license holder to

spend significant amounts of

money and time to re-develop

feasibility studies, exploration

and mining plans, etc. Further,

the license holder many not

have intended to develop a

particular license area (will let

it go upon need to apply for

change in licensing or renewal)

but will now be required to

develop that area – making it

non-feasible/economic. The

assumption would be that they

could still return the particular

area to the State.

If a license holder wants this

can they self-initiate?

Is this for any type of license?

Clarify.

Clarify.

Clarify.

31.3 The valid period of time for

amalgamated licensed areas

shall be defined by period of

time of the most recent

license granted as stated in

31.2 of this law.


32 Returning the area wholly

or partially

32.1 The holder of the license

may submit its request and

wholly or partially return the

area according to the

procedure approved by the


32.2 Proof of rehabilitation

obligation performance and

certification of completed

rehabilitation shall be

attached to the request to

wholly or partially return the

area.


shall issue one of the

following decisions upon

review of the proof specified

in 32.2 of this law within 30

(thirty) days since the receipt

of the request specified in

32.1 of this law.

32.3.1 based on the certification of

rehabilitation work, to

receive the area and register

it in the cartographic and

license registration database;

32.3.2 if no rehabilitation has been

done, or the rehabilitation

work was not done

appropriately, the obligation

to complete rehabilitation

within a set time shall be

imposed, or, to receive the

land and have the full

compensation for

rehabilitation work expenses

borne by the license holder

and registration thereof shall

be done in the license and

cartographic registration

database;


32.4 If the decision of the State

Administration specified in

37.3.2 of this law has been

issued, the obligations and

responsibilities related to the

rehabilitation of the nature

and environment shall

remain valid after the license

holder has wholly returned

the area until such time that

they are performed.


32.5 In case of partial return of a

prospecting area the

remaining area shall fulfill

the requirements set in 23.3,

in case of exploration area,

the remaining area shall

fulfill the requirements set in

24.3 of this law, and in case

of partial return of a mining

area, the remaining area

shall fulfill the requirements

set in 25.3 of this law.


shall notify relevant

authorities on the receipt of

the whole or partial area and

inform the public.

33 Transfer of license Can this be in the form of a

sale?

Clarify.


transfer a prospecting

license.

What about within an existing

corporate structure of a license

holder?

Clarify.


transfer an exploration

license within one year of its

initial issuance and any

agreement entered into for

its transfer in that period

shall be invalid.

It is unclear how this restriction

would impact any farm-in or

similar agreement which may

be entered into as contemplated

by Article 35. Most

jurisdictions draw a distinction

between a farm-in arrangement

and a straight agreement to

transfer. Given the potential

benefit of farm-in agreements in

terms of requiring committed

expenditure and completion of

exploration works,

arrangements of this kind

should be supported and the

prohibition in Article 33.2

should not extend to such

arrangements.

Clarify.

33.3 Except for the case specified

in 33.1 and 33.2 of this law,

the license may only be

transferred by Assignment

of rights agreement in

accordance with this law and

other procedures approved

conformity therewith.

Assumption that this will

trigger a much higher tax rate

compared to a purchase and

sale.

Clarify.


33.4 Holder of the license shall

notify State Administration

of the intention of the

transfer no less than 30

(thirty) days prior to

conclusion of the agreement

on such transfer.

What is the scope of such

notice? Does the State

Administration have the right to


aspects of the transaction? Is

this really an approval?

This is problematic given that

notice must be given “prior to

the conclusion” of an agreement

rather than as a condition

precedent to effectiveness after

the conclusion of an agreement.

As phrased, a commercial party

has an extra 30 days to exit the

transaction rather than being

locked in.

Clarify.

Consider changing from

“prior to the conclusion of

an agreement” to “prior to

the full effectiveness of the

Agreement” or something

similar.

33.5 A state-owned legal entity

that is holding the license for


activities shall have the

privileged right to obtain the

license on an assignment of

rights agreement by the price

amount.

Drafting is unclear, could

possibly seek to impose a right

of first refusal for all

Mongolian SOEs for all

assignments or possibly only

assignments for licences in

which they have an interest.

Unclear what this Article is

trying to achieve.

Clarify.

33.6 If the transferee has not fully

met the conditions and

requirements specified in

Articles 22 and 66 of this

law the State Administration

shall not register the

agreement to transfer the

license thereto.

33.7 The agreement on transfer of

license shall be valid upon

registration by the State

Administration in the license

registration database.

33.8 If the State Administration

has received request to

transfer the license, it shall

be obliged to inform third

parties the interests of which

are affected in the following

cases.

It is unclear what timing or

procedural requirements will be

in place in relation to such

notifications.

Clarify.


33.8.1 pledge agreement related to

the license is registered in

the license registration

database;

33.8.2 agreement to create interests,

jointly own interest and

transfer the interest

percentage on the non-

material property rights

created by the license is


registration database;

33.9 Upon registration of the

license transfer agreement

by the State Administration,

all rights and obligations of

the license holder shall be

transferred to the transferee.

34. Pledge of license Essentially, the pledge is

useless as State Administration

may refuse the transfer to the

lender (or another operator as

may be chosen by the lender).

Security risk for lenders is too

high.

Consider financing

consequences.

34.1 The license may be on

pledge.

Licences may be pledged. This

does not distinguish between

the types of licences that may

be pledged. For example, if a

pledge was enforced over a

prospecting licence or an

exploration licence in the first

year query could they validly be

transferred?

Further, there is no requirement

for the pledge to only be with

banking and non-banking

financials, legal entities or

persons.

Clarify.

Clarify that this is correct.

34.2 The holder of the license

shall submit its request to

register the pledge

agreement of the license to

the State Administration in


database.


34.3 Upon receipt of the request

to register the license pledge

agreement, the State

Administration shall notify

other persons the interests of

which are affected in

relation to the license

registered previously in the

license registration database.

Within what time frame? Is this

pre or post notice given the

short time frame in Article 34.4.

Clarify.


shall register the request


within 3 working days in the

license registration database

and issue a certification of

such registration to the

license holder.


submit its request to remove

the license pledge

registration from the license

registration database after

the termination of the pledge

agreement.


shall register the termination

of the license pledge

agreement in the license

registration database upon

the proof of the obligation

fulfillment by the pledge

with respect to the

underlying pledge

agreement.

How is this accomplished?

Assumption that they will

notify/contact the Pledgee for

consent?

Clarify.


failed to perform its

obligation under the

agreement, the pledgee shall

submit its request to the

State Administration to

transfer the license to other

persons.

34.8 If the transferee person

suggested by the pledgee

does not fully meet the

requirements and conditions

defined for a license holder

as specified in this law, the

State Administration may

refuse the request to transfer

the license.

Then what? May they submit

further, tender? What happens

to the license and license area

during this time? How is the

pledgor prevented from an

immediate “grab and carry” or

other hasty actions just prior to

losing their license? Is this left

to the courts?

Clarify.


34.9 The pledgee of the license

shall not bear any

obligations related to the

license.


shall not bear any

obligations to ensure the

fulfillment of the license

pledge agreement.


35 Creating interest in the

non-material property

rights created by the

license

35.1 By issuance, registration and

performance of the

obligation imposed, the

license shall create non-

material property rights for

the holder.

35.2 The non-material rights

created by the license shall

serve as the guarantee to

perform rights and

obligation created by the

license solely for the holder

of the license.

35.3 For the purposes of

accessing its fruition, other

persons may create interest

in the non-material rights of

the license in the following

ways.

35.3.1 investing;

35.3.2 co-operating;

35.3.3 completing contract works;

35.4 Agreements creating interest

and directed at transferring

the interest percentage in the

non-material rights of the

license shall be made

according to the conditions

and requirements approved

by the State Administration

and shall become valid upon

registration at the State

Administration according to

this law.

Given the potential economic

benefits of encouraging

exploration works through

farm-ins or similar mechanisms

(and the prevalence of such

arrangements among small-

medium sized miners), any

conditions or requirements

should be clearly set out in the

proposed law. In keeping with

the practice of other

jurisdictions, such conditions or

restrictions should be minimal

and retain the freedom of

parties to contract within the

overall framework of the

proposed law (i.e. prescriptive

regulations will discourage

investment and restrict miners

from pursuing alternative

arrangements which facilitate

exploration works).

Consider and clarify.

36 Revoking of license



may revoke the license on

the following grounds.

We note the language “may” as

opposed to “shall” which

implies discretion is granted to

the State Administration as to

whether or not they want to

revoke.

Clarify that this is the case.

36.1.1 the license holder did not or

does not fulfill the


set by Articles 22 and 66 of

this law;

36.1.2 relevant state authority has

inspected and found that the

license holder did not or

does not fulfill the

obligations under other

permissions granted by

relevant state administration

and has thereof notified the

State Administration to

revoke the license;

Licenses can be revoked if

“obligations under other

permissions..” are not fulfilled.

This is too general and could be

interpreted as applying to the

most minor and insignificant

administrative omission.

The scope and substance

needs to be better defined.

36.1.3 it has been confirmed by the

State Administration that the

license holder has mined in

the high grade area;

Unclear what is meant by 'high

grade area'. It is assumed that

this provision is designed to

reinforce Article 69

Further, and as noted elsewhere,

high-grading needs to be

clarified.

Clarify and address scope of

high grading issue.

36.1.4 the authorized specialized

inspector has submitted

conclusion, and

recommendations on

revoking the license as

specified in 144.3 of this

law;

36.1.5 the exploration license

holder has not started

exploration activities within

the period specified in 93.5.1

of this law since the date of

obtaining the Work

authority;

The period is only three (3)

months. This does not take into

account when the “Work

Authority” is granted (during

the winter months and outside

the scope of the exploration

season), nor does it take into

account that economic or

social/labor conditions may

require a delayed start.

Re-think.


36.1.6 the mining license holder

has not submitted its request

to obtain Work authority

within 12 (twelve) months

since the decision has been

issued to grant a mining

license;

This does not take into account

that economic or social/labor

conditions may require a

delayed start. Further, if the

project requires major mine

infrastructure or planning, this

is not feasible. It may not be

within the license holder‟s

control to have the Technical

and Economic Feasibility

Report, Mine Plan,

Rehabilitation work Plan,

Environmental Impact

Assessment, Damage

Assessment, Local

Development Agreement, etc.

completed within this time

frame.

It is our assumption that even

ETT could not meet this

requirement if asked and many

of its license would be revoked.

Re-think.

36.1.7 the mining license holder

has not started extraction

works within timeframe

stated in 94.5.1 of this law

since the date of issuance of

the Work authority;

The period is only twelve (12)

months and does not allow for

sufficient flexibility given all of

the commercial, financing, and

technical requirements to begin

extraction.

Re-think.

36.1.8 the State Administration has

revoked the Work authority

for a specific period of time

in accordance with 96.1 of

this law, and the permission

to conduct contracted works

have not been restored for 6

(six) months since the date

on which the license was

revoked for failure to fulfill

the requirements or perform

the imposed obligations or

eliminate the violations

within the period;


36.1.9 relevant authorities have

determined that the activities

of license holder may have

created the conditions may

have arisen as a result of that

are harmful, hazardous to

the licensed area, employees

at the site, persons working

nearby and citizens and

inhabitants living in the

environment;

Language in this article is

somewhat vague. Clarification

is required as to what would

constitute 'harmful' or

'hazardous'. By virtue of the

very nature of mining

operations, safety hazards can

be identified almost anywhere.

Clarification is also required

around the process used to

determine whether citizens or

inhabitants are impacted,

including rights of review by

the licence holder.

Clarify.

36.1.10 the license holder has failed

to pay the license fees within

the specified period as


36.1.11 if the reimbursement and

penalty have not been paid

within 30 (thirty) days since

the receipt of the notification


as to fulfillment of the

obligations under the

agreement to pay

reimbursement in

accordance with 110.6 of

this law;

We assume this is 100.7?

36.1.12 if liabilities as specified in

145.2 and 145.3 of this law

have been imposed;


deems one of the grounds

has emerged in accordance

with 36.1 of this law, the

State Administration shall

immediately notify the

license holder and, other

persons the interests of

whom are affected by the

license, and which are


registration.


36.3 If the license holder does not

agree with the grounds

specified in the notification,

it shall submit its

clarification with the

relevant proof and materials

to the State Administration


the receipt or date

considered as receipt date. If

the license holder has not

submitted its documents

within this period the State

Administration shall revoke

the license.

We note that it says “shall”

revoke here as opposed to

“may”. It is not clear whether

this is mandatory or left to the

State Administration‟s

discretion.

If 30 days is not sufficient may

there be an extension?

Clarify.


shall review the clarification,

evidence and materials

submitted within 30 (thirty)

days and maintain the

license valid if it deems such

documents are well-

grounded.


deems the clarification,

evidence and material

submitted by the license

holder as groundless it shall

issue a decision to revoke

the license within the period


We assume that this decision

can be appealed within the State

Administration and in the

administrative courts and that

the license shall remain valid

during the appeals process.

If 30 days is not sufficient may

there be an extension?

Confirm assumption.

37 Informing the public


has issued a decision

regarding the announcement

of tender for license

granting, receipt of the

application for a license,

granting a license, extending

the license, change in the

size of the area granted by

license, and revoking the

license, it shall inform the

public of the following

within 5 working days since

the decision has been issued

through its own website and

the media.

37.1.1 the area size, location and

type of license specified in

the application for license;


37.1.2 if the area size has been

changed, the area and

location of the area, period

of license;

37.1.3 extension period of license if

any;

37.1.4 area size, location of area

and type of license when the

decision was made to revoke

or license holder returned all

of the area granted by

license;

38 Announcement of the area

to be granted by tender

Increased authority of local

government in issuing license

38.1 Central State Administration

shall announce the area to be

granted through tender in the

first week of February every

year.


shall have obtained the

proposals of the relevant

local self governing

authority in announcing the

area to be granted through

tender, according to the

procedure specified in

Article 39 of this law.


shall have obtained

comments of the state

agencies in selecting the area

to be granted through tender

for that particular year

according to the Article 40

of this law.


may have obtained proposals

from legal entities in

selecting the area to be

granted through tender for

that particular year.

When are these proposals due

by?

Clarify?


may announce tender

selection processes for the

following areas:

38.5.1 areas not granted by license

and not applied for any

license;

Does this include existing land

licenses?

Clarify?

38.5.2 areas released due to the

invalidation of the license;

38.5.3 areas released due to the

revocation of the license;


38.5.4 areas which have been

released due to the return by

the license holder;

38.5.5 areas released from the state

and local special use;

38.5.6 for areas released from the

state reserve;


may announce the area to be

granted through the tender as

specified in 38.5.2-38.5.6 of

this law as integrated or

segregated.


may announce tender for

the areas that have been

amalgamated or the same

area that has been divided in

accordance with 38.5.2-

38.5.6 of this law.


shall not announce tender for

the areas on which



activities are prohibited, or

the areas which have been

taken for state reserve or

state and local special use.


shall not re-announce tender

for the area when conditions

as defined in 59.2 of this law

have arisen and in the

duration of 90 days during

which applicant shall

nominate another entity.

38.10 The area to be announced

for tender to grant

prospecting exploration,


license shall have a tetragon

shape the border of which

shall be marked by straight

lines, overlapping with the

lines of longitude and

latitude.

38.11 The parts bordering with the

following areas and

territories may be non-

straight line for purposes of

avoiding the overlapping.

38.11.1 state border;


38.11.2 areas prohibited or limited to

conduct prospecting,


processing activities thereon;

38.11.3 areas taken state reserve and

state and local special use;

38.11.4 natural formation such as

lakes and ponds considered

not possible to be integrated

into the prospecting and

exploration area;

39 Obtaining proposal from

local self governing

authority

Increased authority of local

government in issuing license


shall have obtained the

proposals from the relevant


authority in announcing the

area for tender selection

process, according to the

procedure specified in this

Article.

By what date must the State

Central Administration notify

them?

Clarify.


administration shall notify

the relevant local self-

governing authority of areas

to announce the tender in

following manner:

39.2.1 to notify the relevant soum

or district Citizens

Representative Khural if the

area requested by the license

is in one soum or district

territory;

39.2.2 to notify each soum or

district Citizens

Representative Khural if the

area requested by the license

overlaps 2 or more soum or

districts territories;

39.3 The local self governing

authority shall make a

decision supporting or

rejecting the announcement

of area for tendering within

30 (thirty) days since the

date of the receipt of the

notification by the state

central administration as

specified by 39.2 of this law.


39.3.1 if the decision is to reject the

announcement, the grounds

for such rejection shall be

specified clearly in the

decision;

39.3.2 the local self-governing

authority shall submit

through certified post its

decision to the state central

administration within 21

days as specified in 39.3 of

this law;

39.3.3 If the local self-governing

authority has not responded

to the notification of the

state central administration

within the period specified

in the law, it shall be

deemed that announcement

of the area for tendering has

been supported;

39.4 If the relevant local self-

governing authority has

rejected the state central

administrative authority‟s

proposal to announce area

for tendering, the tender

selection shall not be

announced. Furthermore, the

area shall not be announced

for tendering for the period

of 4 years, since the date of

decision of rejection by local

self-governing authority.

This gives the localities a lot of

power given that “the tender

selection shall not be

announced”. Would it not be

advisable to have the State

Central Administration take this

into consideration but not as a

definitive cancelation?

Effectively, the locality could

halt the national development of

Mongolia. Why not limit this

similar to Article 40?

The four year period also seems

to be extreme. What is the

rationale for this duration?

Consider revising the weight

of the local decision.

Clarify.

40. Obtaining comments from

state agencies

40.1 Before announcing the

tender, Central State

Administration shall obtain

comments from following

state agencies regarding the

area applied for tendering

and the license type to be

granted through tender.

By what date must the State

Central Administration notify

them?

Clarify.

40.1.1 Central state administration


environmental affairs;


in charge of urban planning,

and infrastructure;



in charge of land relations;

40.2 Notification on announcing

the area to be tendered for


licenses shall be submitted

to the administrations as


as well as the central state


economic development.

40.3 If state agencies as defined

in 40.1 and 40.2 of this law

have particular comments

regarding the area applied

for tendering, they shall

submit its comments to the


within 21 (twenty one) days

following the date of receipt

of the notification. In that

case state central

administration shall discuss

with that particular state

agency on comments raised.


41 Announcing the area for

tender on land in

ownership, possession and

utilization by others


may announce the area for

tender on land owned by

citizens, possessed or

utilized by others based on

the permission of the land

owner and possessor in cases

other than those rejected by

the relevant soum or district

Governor as specified in the

“Law on Allocation of Land

to Mongolian Citizens for

Ownership.

What about the permission of

the land “user”?

What are the mechanics to

make this work as the land

owner, possessor and user are

liable for the condition of their

land? What about the

requirements of the Land Law

that the local Governor must

approve any such use as well?

Can the local Governor prevent

this by denying such use? It

would appear that this is

another avenue for the local

Governor to prevent a project.

Clarify.

Clarify.

42 Announcing the area for

tender to grant license

with the national border

zone

42.1 Area for tender and license

to grant prospecting,


processing license within the

border zone shall be

announced by the decision

of the Government.

42.2 Applicant which has met the


as specified in Article 22

and 66.4 of this law shall be

entitled to participate in

tendering for the area for

license granting within

national border zone.

42.3 The Government may

impose exclusive control

regime for prospecting,


processing activities within

the national border zone.

What is meant by “exclusive

control regime”?

Clarify.

43 Announcing the tender to

grant license



announce the date of the

tender to the public through

daily newspapers within 14

(fourteen) days after the

announcement of the area

for tendering by the state

central administration.

The time periods in this Article

do not align with those in

Article 46.1.2

Clarify.

43.2 The announcement on

conducting the tender shall

contain information as

specified in this law and in

the procedure approved by

the state administration on

the conditions and

requirements of the tender,

and shall be deemed invalid

if the relevant information is

not specified.

43.3 An area where minerals

concentration has been

detected as a result of

reconnaissance and

prospecting works funded by

state budget shall be

announced for tendering a

license only for exploration

activities.

34.4 An area where minerals

reserves have been

determined as a result of the

exploration funded by the

state budget shall be

announced for tendering a

license only for mining

activities.

44 Announcing of the tender

to grant exploration and

mining license for

derivative deposits and

industrial waste


44.1 For the purpose of

rehabilitating the

environment, the state

administration may

announce the tender for

exploration and mining

license for derivative

deposits and industrial

wastes on the land which has

been used before the

adoption of this law and

which has not been licensed

during the adoption of this

law.

44.2 In announcing area for

tender to grant exploration

and mining license in


industrial waste site as

defined in 44.1 of this law,

there shall be no requirement

to take comments and

proposals as stated in 39,

41.1.2, 41.1.3 of this law.

44.3 Exploration license holder in


industrial waste may have

been exempted from a

license fee and mining

license holder in derivative

deposits and industrial waste

may have been exempted

from the mining royalty in

line with 44.1 of this law.

45 Obtaining the comments

from state agencies

[Note: no text in draft law]

46 Objecting the tender

announcement

There is no limit on the number

of dispute/objections or a

statute of limitations of sorts.

What information will be

provided to the candidates who

may want to tender and for

them to base their tender on?

Consider imposing

reasonable limits.

Clarify.

46.1 Any entity shall have the

right to object the

announcement of the tender

in following manner:


46.1.1 An entity which is making

the objection to the


shall submit to state

administration its statement

in writing by which the

grounds for objection have

been clearly noted.

46.1.2 The entity objecting the


shall submit the objection

statement within 14

(fourteen) days since the


has publicly announced the

area for tendering for license

granting by the state central

administrative authority. The

entity objecting the


shall issue the object within

The time periods in this Article

do not align with those in

Article 43.1.

The sentence is incomplete.

Clarify.

Clarify.

46.2 If the State Administration is

convinced that the objection

has been well-grounded, it

may not announce the

tender.


shall ensure that objection

statement and objection

grounds have been

accessible and open to the

public and any interested

entity until the final decision

shall be issued whether to

grant or reject the request for

license.

47 Right to submit the

application for

participation in tender

47.1 Any entity which meets

requirements and conditions

as defined in this law and

thereof eligible to hold a

license shall have the right

to participate in tender.

48 Receiving the applications

for participation in tender


48.1 The starting date of

receiving application to

participate in tender shall be

no less than 30 (thirty) days

following the announcement

of the tender and the

deadline shall be no less

than 14 (fourteen) days

following the starting date.

We assume that the tender

documents will not be over

burdensome (requiring

advanced reports,

technical/financial reports and

calculations, etc.) and can

realistically be reviewed,

completed and submitted within

such timeframes.

Confirm assumption by

clarifying the scope of the

tender documents.

48.2 When receiving an

application for tender the


register the application and

documents attached to the

application in the primary

application registry, record

the number, date, hour and

minute of the registration on

each page of the application

and attached documents to

the application and issue the

notification to the applicant

that the application has been

registered.

48.3 Any other procedure

regarding the application

and receiving of the tender

applications shall be

regulated by the procedure

approved by the central state

administration.

48.4 List of documents which

have to be attached to the

application shall be

announced from time to

time, by the State

Administration.

We assume that the tender

documents will not be over

burdensome (requiring

advanced reports,


calculations, etc.) and can

realistically be reviewed,

completed and submitted within

such timeframes.



tender documents.


refuse to accept the

application for tender if it

does not fully comply with

the conditions and

requirements set out by this

law and the procedure

approved by central state

administration as to

submitting the applications

for tender participation.

49 Evaluating tender

documents


49.1 The criteria to evaluate the

tender applications shall be

announced by state

administration beforehand

and the following conditions

shall be evaluated at every

tender selection.

There are currently no

prescribed periods within which

the State Administration must

make a decision regarding a

tender application. While there

is a need to be flexible to allow

the State Administration

sufficient time to consider such

applications, provisions that set

out general time parameters

would enhance the certainty of

the regime. For example, the

State Administration could be

required to make a decision

within 6 months of tenders

closing with the ability to

extend its consideration for an

additional 3 month period in

particularly complex

circumstances.

We assume that the criteria will

not include any preference to

national entities over foreign

invested entities.


Confirm assumption.

49.1.1 conditions to grant license

specified in Articles 22 and

66 of this law;

49.1.2 proposal to voluntarily

increase the mining royalty

rate;

This could lead to unfair and

anti-competitive practices. It

encourages parties to put

forward un-economic projects

and could lead to projects

starting and then going

insolvent as parties will

overstate their ability to pay

royalties to win tenders – or if

other legislative or technical

changes occur this may become

impossible.


49.1.3 proposals regarding the

conditions to develop the

agreements on Cooperation

and Local development set

forth in 86.1 and 86.2 of this

law;


49.1.4 proposal to voluntarily

increase the rate of

reimbursement for the

exploration expenses,

incurred to the participant to

tender for granting mining

license for the deposit,

where exploration and

reserve determination was

funded by the State budget

and registered in the national

consolidated registration.


shall, upon consideration of

the conditions and criteria

specified in 49.1 of this law,

announce the participant

which has gained the highest

score as a winner of the

tender.

49.3 Participant which has failed

to meet the main conditions

and requirements as defined

in 49.1.1 of this law shall not

be announced as a winner of

the tender.

50. Announcing the tender

winner


has selected the winner of

the tender process, it shall

immediately inform in

written form the winner and

the other participants of the

tender.

50.2 While informing the other

participants which have not

been selected in the tender,

state administration shall

clearly note the grounds for

why they haven‟t been

selected.

50.3 The winner of the tender

selection process shall

inform the State

Administration in writing of

its acceptance within 14

(fourteen) days since the

receipt of the notification as

defined in 50.1 of this law.


50.3.1 local governments and local

self governing authority in

the territory wherein the area

is to be granted with license;

50.3.2 central state administration



50.3.3 state administration in

charge of land relations;

50.4 In addition to the

administrations as specified

in 50.3 of this law, the



development shall be

notified about the winner of

tender for granting mining

and processing licenses


shall inform the public of the

information regarding area

granted by license based on

a tender, type of special

permission and the winner of

such tender within 7 (seven)

days since the date of

issuance of such decision.

51 Cases whereby tender

winner has not been

selected

Assumption that if there is no

one bidding or no suitable

candidates then the license area

remains untendered until the

following year.

Confirm assumption.


may select none of the

participants in the tender on

the basis of the grounds as

specified in49.3 of this law.

51.2 In case whereby no winner

has been selected in the

tender, the State

Administration may or may

not re-announce the tender

specific to the area


has deemed impossible to

select a winner in the tender

in accordance with 51.1 of

this law and has issued a

decision in concurrence with

51.2 of this law, the

participants of the tender

shall be immediately

notified in writing.


52 Granting license to the

tender winner

52.1 If the applicant has fulfilled

its obligation as specified in

52.3 of this law State

Administration shall issue a

decision to grant the license

and thereof grant a license

certificate to the tender

winner after 30 (thirty) days

since the date on which the

winner was publicly

announced in concurrence

with this law and according

to the following principles:

52.1.1 to grant prospecting license

to the winner of the tender

for prospecting license;

52.1.2 to grant exploration license

to the winner of the tender

for exploration license;

52.1.3 to grant mining license to

the winner of the tender for

mining license;

52.1.4 to grant processing license to

the winner of the tender for

processing license;

Cross Reference 53.1.3 and

26.1.1. Who determines if a

processing license must be

tendered?

Clarify.

52.2 It shall be prohibited to grant

license for persons other

than the winner of the tender

selection on the area

announced for tender;

52.3 The tender winner shall pay

the initial year license fee

and other fees payable in

advance within the time

specified in Article 85 of

this law and other relevant

laws after the State

Administration has

announced the tender

winner.


52.4 In cases whereby the tender

winner has not notified the

state administration about its

acceptance of the result of

the tender and has not paid

the initial year and other

advance fees within the

specified period, these shall

serve grounds for not

granting the license and

cancelling the tender result.

52.5 The date of issue, name of

holder, size of granted area,

and the cornerpoint

coordinates shall be

recorded on the license

certificate and the license

shall be accompanied with

attachment to reflect the

changes to be made in

relation to the license.


shall notify the following

agencies about granting the

license within 3 working

days since the license

certificate has been granted

to the license holder and

thereof registered in the

register of licenses.

52.6.1 the related local

government;


charge of taxation matters;

52.6.3 specialized inspection

agency;

53 Right to submit an

application for license

53.1.1 a legal entity defined in

24.1.1 of this law to apply

for exploration license;



for mining license;



for processing license;

54 Receiving the applications

for license


54.1 Upon receiving the

application for license the


register the application and


application in the primary

application registry and

record the number, date,

hour and minute of the

registration on each page of

the application and attached

documents to the application

and issue the notification to

the applicant which confirms

the registration of the

application.

54.2 List of documents which

have to be attached to the

application shall be

approved by the State

Administration.

We assume that the application

will not be over burdensome

(requiring advanced reports,


calculations, etc.).



application documents.


shall review the application

if there are grounds to refuse

the acceptance of the

application and thereof

notify the applicant within

10 (ten) days after the date

of receiving an application

and registering it to the

primary application registry.

It is unclear whether this

provision requires all

applications to be decided

within 10 days of receipt.

Clarify.

55 Refusing to accept the



shall refuse accepting the

application for license in the

following cases:

55.1.1 Applicant has applied for

exploration license in the

land where the prospecting

license has not been granted

to the applicant;

55.1.2 Applicant has applied for

mining license in the land

where the exploration

license has not been granted

to the applicant;


55.1.3 Entity other than the holder

of the prospecting license

has applied for exploration

license on the area which

had been granted to the

holder of prospecting

license;

55.1.4 Entity other than the holder

of the exploration license

has applied for mining

license on the area which

had been granted to the

holder of exploration

license;

55.1.5 The applicant has applied for

processing license on the

area that overlaps with the

area granted by prospecting,


licenses.

Clarification of the intent of this

provision is required as the

definitions for mining and

processing overlap (mining

allows for processing, but not

vice versa). For example, is it

intended that 2 licences would

be required (1 for mining and 1

for processing)?

Clarify.


license over the land that

overlaps with an area that

has been announced for

tendering by central state

administration;


license in the area that

overlaps with an area on

which prospecting,


processing activities have

been prohibited or which has

been decided to take in state

reserve or the local special

use;


license on the area that has

been prohibited for being

licensed within four years

since it had been applied for

and the local self-governing

authority had rejected to the

proposal by the central state

administration to tender;



license on the mine and

industrial as well as arable

sites closed by the decision

of the State Administration

in accordance with this law;


shall refuse to accept the

application for license if it

does not fully comply with

the conditions and

requirements as defined in

this law and the procedure to

submit applications for

license approved by State

Administration.


shall review the application

if there are grounds to refuse

the acceptance of application

in line with 55.1 of this law

within 5 days since the

application was received and

may obtain additional

information and clarification

from the applicant if it

deems that such grounds

may exist.


Authority shall request in

writing the application to

provide additional


in line with 55.3 of this law

and in doing so, shall clearly

specify the date within

which (the information was

to be given) the application

should respond to the

request. In that case, the

period as specified in 55.3 of

this law shall be deemed

extended by the date of

response.

55.5 If the applicant has not

submitted the additional


within the specified time, the


refuse to accept the

application.



Authority may accept the

applications as specified in

55.1.3 and 55.1.4 of this law

based on the written request

submitted by the holders of


license on the specific area.


shall refuse the acceptance

of the application provided

there are grounds for such

refusal in line with this law,

and shall notify the applicant

about the grounds and

reasons for such refusal and

thereof record in the

registration book of licenses.

55.8 If there are no grounds to

refuse acceptance of the

application as specified in

this law, the State

Administration shall accept

the application and notify in

writing the applicant about it

and record in the registration

book of licenses.


56 Prohibiting the transfer of



transfer the application for

license onto the names of

other entities.

57 Submitting the request to

withdraw the application

for license

57.1 If the applicant has

submitted its written request

to withdraw the application

to the State Administration,

the application shall be

deemed as withdrawn.

57.2 The original copies of

application and the


application shall remain at


their copies shall be given to

the applicant free of charge.

Assumption that they will be

kept confidential?

Confirm assumption.

58 Deeming possible to grant

license

58.1 Upon acceptance of the

application as set forth in

Article 55.8 of this law, each

requirement listed in Article

22 of this law shall be

evaluated within thirty (30)

days since the date of

acceptance of application.

58.2 Upon evaluation of the

requirements in accordance

with 58.1 of this law, the


submit a request in writing

to the applicant for

additional information and

clarification. In this case the

period within which to

provide this additional


shall be specified clearly.



shall deem it possible to

grant the license to the entity

which has met the conditions

and requirements as


this law and shall notify it in

writing to the applicant and

the following

administrations.

58.3.1 Relevant local government

and self-governing authority;






58.4 In addition to the authorities

as specified in Article 58.3

of this law, the state


economic development shall

be notified about granting

the licenses for mining and

processing.

58.5 If the state agencies

specified in 58.3 and 58.4 of

this law have specific

comments and proposals in

response to the notification,

they shall submit them to the

state administration within

14 (fourteen) days since the

date of receipt of the

notification. State

administration shall be

obliged to consult with the

state agencies on their

comments and proposals.

This reopens the door to the

localities and agencies. We

assume that this is merely a

“consultation” and the State

administration can ultimately

make its decision.

Confirm assumption.


59 Deeming impossible to

grant license

59.1 If the applicant has not


requirements as specified in

Article 22 of this law the


deem it impossible to grant

license to the applicant and

shall notify in writing the

applicant within 3 (three)

days since the date on which

the decision has been made.

In doing so, the state

administration shall clearly

specify the grounds for such

decision.

There is no cure period? We suggest adding a limited

cure period.


has issued a decision on

being impossible to grant a

license in line with 59.1 of

this law, the applicant shall

be entitled to nominate

another entity which meets

all conditions and

requirements as specified in

this law and submit the

request in writing to grant

license to the state

administration within 90

(ninety) days since the

decision has been issued.

60 Objections to grant a

license

60.1 Any entity shall be entitled

to make objection to

granting a license. In such

case making objection shall

be regulated by the rule and

procedure as defined in


61 Decision making by State

Administration with

respect to granting or not

granting a license



shall issue one of the

following decisions within

60 (sixty) days since the date

of accepting the application

for license in accordance

with 55.8 of this law.

As we understand, after the

State Administration has

accepted an application (Article

55.8) it has 30 days to review

whether an applicant meets the

requirements of Article 22 of

the Draft Law (Article 58.1). If

not then the applicant has 90

days to find another suitable

entity to hold the license

(Article 59.2). However,

according to Article 61.1, the

State Administration must make

a decision to grant or refuse to

grant a license within 60 days

of accepting an application as

set forth in Article 55.8. Thus,

even though there is an

additional 30 days for the

applicant to find a replacement,

the State Administration must

decide whether to refuse or

grant.

Assuming that we are

reading this correctly, we

would suggest qualifying

Article 61.1 by stating that

the period shall be extended

for another 30 days if action

is being taken under Article

59.2.

61.1.1 refuse to grant a license;

61.1.2 grant a license.

61.2 If the State Administrative

Authority has made a

decision to grant a license to

the applicant, it shall issue a

license certificate to the

license holder within 3

(three) work days since the

date on which the decision

has been made.

62 Refusal to grant license


shall refuse to grant license

in the following cases.

62.1.1 When the legal entity has

not met the conditions and

requirements on as specified

in 22 of this law;

Subject to Article 59.2, right? Clarify.

62.1.2 When the entity is other than

the applicant which has been

deemed by the state

administration as being

possible to be granted with

license in line with 58.3 of

this law;


62.1.3 Exploration license shall not

be granted to another entity

on the area licensed to

prospecting unless the

holder of prospecting license

has made such request in

writing;

62.1.4 Mining license shall not be

granted to another entity on

the area licensed to

exploration unless the holder

of exploration license has

made such request in

writing;

62.1.5 Processing license shall not

be granted to another entity

on the area licensed to

mining unless the holder of

mining license has made

such request in writing;

62.1.6 Any area that overlaps with

areas granted by license;

62.1.7 Area for which the

application for license has

been accepted and the state

administration has not made

a decision yet to grant or not

to grant a license;

62.1.8 Areas on which prospecting,


processing activities are

prohibited by this law.;

62.1.9 Areas which have been

decided to take in state

reserve or special use;

62.2 Licenses of the prohibited

types of activities shall not

be granted on land on which

such types of geological and

mining activities have been

prohibited.

62.3 Prospecting license shall not

be granted on areas on

which prospecting works

had been carried out and

reports of the prospecting

works had been accepted by

the relevant authority.

This closes the door to any

further prospecting by a

different legal entity that many

need to verify or confirm such

findings and forces a tender for

an exploration license, perhaps

prematurely.



62.4 Exploration license shall not

be granted on areas on

which exploration works had

been carried out and the

reserves have been

determined in line with this

law.

Similar to above comment. Consider and Clarify.

62.5 Mining license shall not be

granted on areas the reserve

of which has not been

determined in line with this

law.

62.6 If the State Administrative

Authority deems the

objection as specified in

Article 60 of this law is

well-grounded, it may refuse

to grant license.


63 Refusal to accept license

63.1 The applicant or winner of

the tender selection process

may refuse to accept the

license after the decision has

been made to grant license

through application and

tender procedure as


By when? Is there a deadline?

Article 64 could greatly impact

this if not pre-determined prior

to the tender.

Clarify.

63.2 The entity specified in 63.1

of this law shall submit its

refusal in writing to the State

Administration, and the


cancel its decision to grant

the license and register such

revoked decision in the

license registration book.

64 Specific conditions and

obligations set license

This Article needs substantial

clarification. Is this the same as

entering into an agreement with

the State? Are these obligations

not covered in their own subject

matter legislation and non-

negotiable/fixed?

Clarify.

64.1.1 rehabilitation, rehabilitation

expenses, its pledges;

64.1.2 environmental protection;

64.1.3 equivalent improvement of

environmental state in the

licensed area or other area,

64.1.4 protection of underground

water;

64.1.5 land management and land

use;

64.1.6 historical and cultural

heritages and common

property, their protection

and treatment;

64.2 The State administrative

agency shall clearly specify

whether conditions and

obligations have been set as

defined in 64.1 of this law

and reflect them in decision

on granting a license.



may consult with the license

holder in setting the

conditions and obligations

specified in 64.1 and shall

notify in writing the

agencies specified in 58.3

and 58.4 of this law about

the conditions and

obligations that have been

set to the license holder.

64.4 The conditions and

obligations set by the State

Administration on the

matters specified in 64.1 of

this law shall be achievable

and the following issues

shall be clearly specified and

attached to the license.

These conditions should also be

commercially feasible/flexible

and reasonable as well.

What if these conditions and

obligations as “set by the State

Administration” are disputed?


Clarify process of dispute

resolution.

64.4.1 to specify each task related

to the condition and

obligation;

64.4.2 duration of task

implementation;

64.4.3 conditions wherein

obligation deem to have

been fulfilled;

65 Amending the obligation,

conditions and

requirements set by license

65.1 On the basis of reaching a

consensus with the license

holder, the State

Administration may amend,

postpone, revoke or add the

conditions set by the license

on the matters specified in

64.1 of this law.


shall not be entitled to

negotiate with the license

holder to change the valid

period of license or change

on its own the valid period

of the license.



submitted a request to make

amendment to the obligation

and conditions set by the

license in accordance with


Administration shall adhere

to the following principles in

reaching agreements with

the license holder.

65.3.1 to protect the nature and

environment in the area

granted by license, and

enhance the activities and

the results of rehabilitation,

65.3.2 to keep the balance of

environment and create and

apply the conditions which

contribute to keeping the

environmental balance,

65.3.3 to improve maintenance and

protection of common

property,

65.3.4 improve conditions for

license holder to implement

planned work and exercise

fully the rights and

obligations according to the

license,

66 Entitlement to hold a

license Article (66) is highly

restrictive.

Unworkable for foreign

publicly listed companies

that cannot control the %

held by Mongolian

shareholders.

Raises numerous issues, for

example, how will private

Mongolian ownership be

financed?

Note the delineation

between share holding

companies and Mongolian

citizens throughout this

Article.

Re-think and clarify.

66.1 A tax paying legal entity that

has been established and has

been operating in conformity

with the legislation of

Mongolia shall be entitled to

hold prospecting,

exploration and processing

licenses on areas outside the

This article creates unnecessary

barriers to entry. Most start-up

mining companies will require

licences to generate profit in

order to pay relevant taxes. Do

you mean registered with the

tax offices (meaning State

Registration Office)?

Re-think and clarify


national border zone.

Further, what is the incentive to

conduct such activities in view

of the limitations on mining?

66.1.1

(is 66.2)

A share holding company

shall be entitled to hold a

mining license when it has

been founded by a citizen of

Mongolia, and not less than

75% of its share capital and

in case of foreign invested

company, not less than 34%

of share amount is owned by

a Mongolian citizen, and

when it has been established

and has been operating in

conformity with the

legislation of Mongolia and

when it has been paying tax

in Mongolia.

Major put-off for investment.

Maximum company ownership

for a foreign invested company

(FIC) is 66%. Note under the

Company Law and

overwhelming majority is

2/3rds or 66.66% and this will

remove substantial control.

Will the 34% be held by

Mongolian citizen in a license

holder subsidiary or does this

provision apply to the listed

company?

What is the definition of

Mongolian citizen, is it

restricted to natural persons?

Serious re-think.

Clarify.

Clarify.

Clarify.

66.1.2

(is 66.3)


shall be entitled to hold a

license to mine at deposits

that have been explored and

the reserves have been


financing when it has been

founded by a citizen of

Mongolia and not less than



company not less than 51%

of capital share is owned by

a citizen of Mongolia and



conformity with the


when it has been paying tax.


This means that in the case of

any state funded exploration,

the maximum company

ownership for FIC's is 49%.

Does the state funding include

pre-1991 period?

Serious re-think.

Clarify.

66.1.3

(is 66.4)


shall be entitled to hold

license for prospecting,


processing in the areas

outside the national border

zone when it has been

founded by a citizen of

Mongolia and not less than




Mongolian version refers to

"inside" not "outside" the

border zone.

This means that in the case of

any deposit inside the border

zone, the maximum company

ownership for FIC's is 49%.

Serious Re-think.

Clarify the distinction.


company not less than 51%

of capital share is owned by

a citizen of Mongolia and



conformity with the


when it has been paying tax

.

67 Entity accountable and

liable on behalf of the

license holder

Do you mean “persons” rather

than “entity”?

Clarify.

67.1 The members of executive

management, board of

directors and equivalent

body shall be accountable

and liable by this law on

behalf of the license holder.

See Article 145 also for

liabilities. Need to clarify the

nature and extent of liability.

Is this not already covered in

the Governing Persons under

the Company Law.

Clarify.

Consider removing from this

Draft Law.

68 Compliance of the license

holder’s activities with the

law

68.1 The license holder and the

entity appointed to manage

and lead the prospecting,




this law shall be obligated to

carry out the activities in

compliance with this law

and other relevant laws,

rules and procedures.

69 Prohibition of high

grading mining It should be noted that this article potentially conflicts with modern commercial mining practices. See earlier comments on production reserves vs. economic reserves Art. 3.1.10.

For example, a major coal

miner may want to leave high

ash thermal coal in the ground

as uneconomic to mine. If

some inspector were to come

along and accuse the company

of high grading by not taking all

resources even if not economic

and then cancel their licenses,

this would be unacceptable.

Investors will never believe that

their investment is safe from



bad decision on the part of State

officials if this is left as is.

69.1 The license holder shall be

obligated to mine the

mineral resources at full

extent and it shall be

prohibited to engage in high

grade mining.

Clarification required as to what

is intended by the phrase 'full

extent'.

Clarify.

69.2 If the condition, which

might apply to selecting

mining of minerals, has been

detected, the state

administration shall appoint

an expert and thereof

suspend a working authority

of the license holder upon

making a decision to appoint

the expert.


the definition of 'high grade

mining' to ensure there is no

ambiguity as to when the State

authority can exercise its rights.

The appointment of a single

expert in these circumstances

may also result in error or be

prone to abuse. It is suggested

that an independent panel

mechanism be adopted.

There should also be a

mechanism in the event that the

license holder disputes the

findings.

Clarify.



69.3 State administration shall

determine whether the

license holder has been

selectively mining based on

the conclusion by the expert

within 3 (three) months of

appointment of the expert.

Same issues.

There should be a mechanism

in the event the license holder

disputes the State

Administration‟s determination.

Clarify.


69.3 Followings shall be

specified in the expert‟s

conclusion.

69.3.1 whether the reserve was

mined selectively;

69.3.2 amount of selectively mined

minerals and its market

value;

69.3.3 amount of minerals that

became unable to be mined

further as a consequence of

high grading mining and its

market value;

69.3.4 amount of compensation

payment imposed to the

license holder;

amount of damages caused

to geology and mine

technical conditions as a

result of high grading

mining


69.4 The amount of

compensation shall be not

less than the market value

sum of minerals, set forth in

69.4.2 and 69.4.3 of this law

respectively.

69.5 A mining license holder

shall be prohibited to

reproduce derivative deposit

and industrial waste that are

not approved by the


Feasibility Report.

70 Obligation to mine and

process the minerals at full

extent

Clarification required as to the

meaning of 'full extent'.

Provisions would need to reflect

economic practice.

Clarify.


shall be obliged to mine

main and subordinate

minerals at full extent,

determined as a production

reserve.

70.2 A processing license holder

shall be obliged to process


minerals at full extent.


meaning of „full extent‟ in these

circumstances. For example, it

could mean that

miners/processors have to

extract trace elements or

elements / mineral sizes that are

not economically viable.

Clarify.

70.3 During the mining and

processing period, a license

holder may have a sub-

contractor to mine and

process subordinate

minerals.

70.4 A list of subordinate

minerals shall be defined by

Central State

Administration.


minerals would comprise this

list.

Clarify.

71 Obligation to provide raw

materials

71.1 The mining and processing

license holders shall be

obliged to provide, above

all, the processing plant

operating in the territory of

Mongolia with its mined and

processed main and

subordinate minerals and

raw materials.

Meaning is unclear. Clarify.

71.2 In fulfilling its obligation Clarification required as to Clarify.



the extraction license holder

shall not be obliged to

discount the price of the raw

materials in any way, or

reduce the price below the

market price or for sales of

raw materials or below the

agreed price with others.

whether this is an absolute

prohibition. If so, it has

implications for long term

supply contracts as such

contracts will often be done at

some discount pricing

mechanism.

72 Obligation to have some

activities executed by

domestic companies

72.1 A license holder shall be

obliged to subcontract

domestic companies to

execute more than 60% of

its main and minor

operations of prospecting,


processing.

Although Mongolian domestic

companies may be

commercially competitive in a

number of areas associated with

the mining industry, this article

has the potential to encourage

anti-competitive and fraudulent

conduct. Clarification is also

required as to how the 60%

threshold is to be measured

(e.g. value of works, head count

or otherwise). Domestic

companies are not defined.

Further, this appears to already

be regulated under the Strategic

Entities Foreign Investment

Law to a large extent.

Repercussion of this clause

could render existing contract

mining agreement invalid and

prevent similar future

agreements with foreign

invested companies while at the

same time there are no domestic

contracts of similar capacity.

Likewise, companies note that

if wash plants are needed

domestic companies are not

able to carry out such

construction.

Clarify and consider relaxing

this requirement based on

practical realities based on

expertise as well as

commercially reasonable

terms to the license holder.

We would suggest removing

this from the Draft Law and

in particular a specific

number, as this is already

covered in the Strategic

Entities Foreign Investment

Law by giving priority

rights.

Practically, this Article

creates major complications.


72.2 Companies which were

founded upon a foreign

investment as specified in

the Foreign Investment Law

of Mongolia shall not be

deemed as domestic

companies as specified in

72.1 of this law.

Clarification required in the

extent of foreign investment

required to trigger this

provision. Further guidance

may be obtained through SEFIL

regulations once released.


72.3 In the event that the license

holder is unable to fulfil its

obligation, set forth in the

Article 72.1 of this law due

to the insufficiency of

companies or failure of

companies to meet the

requirements for completing

the work and if such grounds

are duly proved, the license

holder may have a partial or

full immunity from the

obligation on the basis of

decision by competent

authority.

How is this immunity obtained?

What are the grounds? What

constitutes “duly provded”.

Who will be the competent

authority?

Clarify.

73 Demarcating the borders

of the area granted by


licenses

73.1 Mining and processing

licenses shall have clear and

permanent demarcation

marks that separate the area

from other areas and comply

with the standards approved

by the relevant authority.


install permanent

demarcation marks as

specified in this law and

relevant procedure within 3

(three) months since the date

on which mining and

processing license has been

granted and registered by the



obligated to transfer and

install the demarcation

marks within 2 (two) months

since the change in area

border has been registered

by the State Administration.

74 Land possession

permission under the

Largely overlaps with the

jurisdiction and authority of the

Consider deleting most of

this Article and regulating


license Land Law. under the Land Law.

74.1 Within 90 (ninety) days

since mining and processing

license has been granted to

the license holder, a

competent authority shall

resolve the issues with

regard to land possession

and utilization in the

licensed area as per the Land

Law.

Clarification as to how this is

resolved “as per the Land Law”.

Currently a separate tender is

required and land is not

guaranteed. Please address

whether the draft Land Law

will modify this.


relationship between the

definitions of mining and

processing as outlined in Article

55.1.5 and wether both mining

and processing licences are

required.

Clarification is also required as

to the potential conflict with

Article 26.7 which allows for

the holder of a mining licence

that applies for a processing

licence to have the processing

licence granted on the area of

extraction.

Clarify.

Clarify.

Clarify.

74.2 A relevant authority, as

defined in the Land Law

shall issue a certificate of

land possession and

utilization to license holder


the decision was made by

the State Administration to

grant the license.

Is this included in the draft

Land Law as that would be the

appropriate piece of legislation

to regulate land?

Confusion as to the distinction

between 30 days and 90 days in

Article 74.1.

Clarify.

Clarify.

74.3 Certificate of land

possession and utilization

shall be issued for the same

period of time as the license.

Expiry, no extension, return

of the license before the

expiry date and revoking of

the license shall serve

grounds for terminating the

permission of land

possession and utilization.

Clarification required as to how

this provision is intended to

operate in circumstances where

a mining licence or processing

licence are renewed.

Does this comport with the

draft Land Law?

Clarify.

Clarify.

74.4 License holder shall not use

the land allocated under the

license for other purposes

than specified hereunder.

Would this not be as specified

in the land possession/use

contract, Governor‟s resolution,

and certificate?

Clarify.

74.4.1 conducting prospecting,



processing activities in

compliance with authorized

rights by the license,


74.4.2 constructing permanent or

temporary workers‟ camps

and other required facilities

for conducting activities,


law;

74.4.3 constructing commercial

infrastructure which is

prerequisite for mining

activities in the mine and its

industrial land;

74.4.4 creating derivative deposits

and industrial waste dams;

74.4.5 transporting mined minerals

and produced products as

well as constructing loading

and unloading facilities;

74.5 While possessing and

utilizing the land for

purposes, specified in

Articles 74.4.2-74.4.5 of this

law, the license holder shall

not be exempted from duties

of paying taxes and fees set

forth in other relevant laws;

74.6 In the event that the licensed

area is damaged during

possession and utilization of

the land for purposes,

specified in Articles 74.4.2-

74.4.5 of this law, the

license holder shall be

obliged to compensate the

incurred damages in

conformity with the Land

Law.

The term 'damaged' is

ambiguous. Note that

compensation will applied as

per the Land Law.

We assume that if reclamation

is carried out in accordance

with reclamation plan then there

is no “damage”.


clarify.

74.7 An authorized person,

stipulated in the Land Law

shall place a control on the

state of land possession and

utilization for specified

purposes in 74.4.2-74.4.5 of

this law.

Can they unduly interfere with

the commercial operations of

the license holder?

Clarify.


inform following authorities

to enter the licensed area for

installing the demarcation

marks, not less than twenty

Clarification of the rationale of

this provision is required. It

would appear unusual in

circumstances where a granted

licence holder is required to

Clarify.


(20) days prior to the

intended entry.

notify government authorities

of the conduct of authorities

activities.

74.8.1 relevant local government;



74.8.3 the owner, possessor or user

of land if the land granted by

the license holder is part of

private property or granted

under land possession or use

agreement;

74.9 Land possession, utilization

and entry rights in the

licensed area shall be

preserved for the license

holder in the following

circumstances:

74.9.1 the demarcation marks were

installed as specified in this

law;

74.9.2 within the initial and/or

extended period of the

license;

74.9.3 a decision is pending by the

State administrative agency

regarding the return and

cancellation of the license;

75 Obligation to insurance


obliged to be covered by

mandatory insurance for the

purpose of fulfilling its

liability for reimbursement

of damages to others as a

result of the activities of the

license holder.


constituted 'mandatory

insurance'.

Can this be from an

international insurance

provider?

What is the scope of coverage?

Clarify.

Clarify.

Clarify.

76 Obligation to notify the

decision on issuing the

shares

Article 76 is grossly

unnecessary given that these

types of transactions are already

to be reported under the

Strategic Entities Foreign

Investment Law to the Ministry

of Economic Development and

there is no possible benefit to

also being required to report to

the State Administration.

Consider deleting this entire

Article.

76.1 If the license holder is to

issue shares in international

and domestic markets in

relation to its geological and

mining activities, it shall

The requirement to notify

within 30 days of the relevant

decision being made (as

opposed to the actual issue of

shares) could present disclosure


notify the State

Administration within 30

(thirty) days since such

decision has been made.

or insider trading issues and is

likely to be contrary to the

listing rules of most

jurisdictions.


obliged to inform the state

administration on issuance

of share in the international

and domestic stock market

within 30 (thirty) days after

the registration with stock

market.

76.3 Upon receipt of the

notification, the state

administration shall register

the notification specified in

76.1 of this law, in the

license registration database.

Registration in a public register

of the intention to issue shares

will potentially trigger the same

issues identified in Article 76.1.

76.4 License holder or its

daughter or subsidiary

company overseas and entity

with shared interest with

them shall sell the shares in

concurrence with the

relevant provisions in the

Mongolian Law on

Regulating Foreign

Investment in Economic

Entities operating in

Strategically Important

Sectors” (2012).

77 Obligation of the license

holder to consult the public

What should be the result of

consultation process? How

often?

Clarify.

77.1 The extraction and


shall be obligated to consult

the local citizens on matters

of its activities that may

affect the interests of the

local citizens.

77.2 In informing the local

citizens as specified in 77.1

of this law, the extraction

and processing license

holder shall be obligated to

provide conditions for local

citizens to express their

views and opinions.

78 Obligation to notify about

the discovery of rare

ancient flora, fauna and



findings

78.1 If rare ancient flora, fauna

and historical, cultural

findings have been

discovered in the course of


extraction works the license

holder shall be obliged to

cease its activities within the

distance specified in 98.1 of

this law, and set up

protection and immediately

notify the local

administrative authorities

about it.

For how long? Clarify.

79 Obligation to notify about

the exposure of radioactive

minerals

79.1 If exposure of concentration

with content of radioactive

minerals has been

discovered in the course of


extraction works, the license


notify the State


(thirty) days thereof.

79.2 The concentration with

content of radio-active

mineral shall be interpreted

as amount, specified in the

Law on Nuclear Energy.

80 Environmental impact

assessment


license holder shall have

environmental impact

assessment made within 3

(three) months since the date

of issuance of decision to

grant a license by the state

administration.

80.2 The environmental impact

assessment shall determine

the potential hazardous

effects of the mining and

processing activities to the

environment and measures

to reduce and eliminate such

risks, and procedures that

must be taken during the

closure of mine and


industrial units.

80.3 Development of


assessment for holders of

more than two mining and

processing licenses on two

or more geographically-

bordered areas or within the

same deposit shall reflect

entire environmental impact,

assessed on the impacted

area.


how this provision would apply

in circumstances where

subsequent contiguous licences

are obtained.

Clarify.

80.4 The conditions, criteria for

evaluation for potential and

occurred damages, and


assessment methodology

shall be regulated by the

relevant laws on nature and

environmental protection

and relevant procedure.

81 The health impact

assessment


license holder shall have the

assessment made by

competent organization

covering to determine the

potential hazardous effects

of the mining and processing

activities and measures to

reduce and eliminate such

risks within 3 (three) months

since the decision has been

issued to grant the license.


constitutes a 'competent

organisation'. The obligation to

'eliminate' (not just mitigate or

otherwise reduce) risks is

impractical.


82 Enabling the working and

living condition of the

employees


license holder shall provide

the enabling work condition,

payroll, labour safety and

social issues of its own

employees according to the

regulation approved by the

relevant authority

We note that reconnaissance,

prospecting and exploration are

not covered here and assume

that they are not meant to be

covered.

This has potential to greatly


decisions and management of

the license holder – in particular

if “payroll” and “social issues”

are to be mandated by the State.

83 Obligation to pay land fee

83.1 The license holder shall pay

the land fees by the base


price evaluation percent for

each hectare by the area of

the land granted for



activities as specified in the

Law on Land Fees.


paid land fees within the

period specified in the Law

on Land Fees, this shall


revoking the license.

Would this not be better placed

under Article 36.1 of the Draft

Law? How does this process

work?

Clarify.

84 Obligation to pay the

royalty for use of mineral

resources

The royalty provisions would

not appear to reflect common

practice in other mining

jurisdictions. The provisions

appear to base royalties on pre-

determined values set by the

National Minerals Exchange

rather than actual market values

or values traded. See also

comments in article 71.2.

Serious Re-think.




obliged to pay the royalty

for use of mineral resources

to the state and local budget

according to the principles

as specified in this law.

What is the justification for

both the mining and processing

license holder to pay royalties.

Typically royalties would only

apply to mining license holders.

Clarify.

84.2 The amount of royalty and

the procedure to pay such

royalty and procedure to

distribute the accrued

royalty in the state budget

shall be regulated by a

separate law.


whether this law already exists.

The previous Minerals Law

included provisions defining

such procedures. Assuming a

separate law is to be passed,

what is to occur in

circumstances where the

Mineral Law is passed first and

royalty payment procedures

have not been introduced?

Clarify.

84.3 The mining license holder

shall pay the royalty

according to the following

principles:

This article requires royalties to

be paid on the basis of plans

submitted in Feasibility Study

and the annual mine plan, as

opposed to the volume of

product actually shipped. This

is a fundamental difference to

the existing law (and with

royalty regimes in other mining

jurisdictions) and fails to

account for commodity price

fluctuations. In cases where an

Serious re-think.


entity holds a mining and a

processing license, royalty

should be based on actual

product sold. Current drafting

implies royalty at each

intermediate stage amounting to

effective double taxation.

84.3.1 A mining license holder

shall pay royalty for use of

minerals resources,

estimated on the basis of


minerals amount registered

in the state reserve

registration in an area, where

mining activity was

conducted and which

included in annual mining

report of that year.

This provision is commercially

impractical. Fails to recognise

general economic principles. A

royalty based on reserve

estimate is somewhat illusory as

there is a fundamental

difference between tonnages

extracted and reserve

estimations based on

exploration results.

Clarify.

84.3.2 In the event that reserve

amount, registered in the

state reserve registration has

not proved during the

mining operation of that

year, the issue shall be

discussed by Professional

Mining Counsel and related

conclusion shall be obtained

prior to the submission of

mining operation plan of the

next year to the State

administrative agency.

Timing between the submission

of the previous mining plan and

the next plan is very close,

effectively limiting the

circumstances in which the

Professional Mining Counsel

can be consulted (to the point of

making it practically

impossible). Conclusion is more

of an opinion. Is there are an

appeal process?


84.3.3 The State administrative

agency shall change

minerals resources reserve

previously registered in the

state reserve registration on

the name of the license

holder on the basis of

conclusion by the

Professional Mining

Counsel.

84.3.4 For processing license

holder, royalty for use of

mineral resources shall be

estimated from the amount

of ore and concentration as

well as its main and

subordinate minerals

amount, specified in the

purchase contract of raw

material.

Does this mean that, for

example, ETT would have to

pay royalties on their coal

twice? Once for extraction and

a second time for processing?

This is not clear and processors

should not be paying royalties –

only the minerals extractor.

If so, does the processing

license holder only pay

Clarify.

Clarify.


royalties based on actual

volumes in the purchase

contract? Double taxation, see

above 84.3

84.3.5 In the event that amount of

ore and concentration and its


minerals, estimated as per

Article 84.3.4 of this law has

not proved during the

processing activity, it shall

be informed and registered

to the state administrative

agency prior to the

submission of processing

operation plan of the next

year.

May present same issues as

Article 84.3.2.

Clarify.

84.3.6 Producing technological

(mining and industrial)

waste excessively more than

reflected in the Technical



processing activity shall not

serve as a ground for

exemption from royalty for

use of mineral resources.

84.3.7 Mining license holder shall

pay royalty for use of

mineral resources for

derivative deposit and

industrial waste created in

the course of mining.

Need definition of industrial

waste, tailings, dumps. What is

the rationale for applying a

royalty on waste?

This easily could render a

project uneconomic. Usually

royalties are based on the value

of a product – wast has no

value, only cost. For example,

most coal extractors produce

five to ten times as much waste

as they do coal.

Clarify.

There should be no royalty

on waste.

84.3.8 Mining and processing

license holder shall pay

royalty for use of mineral

resources for re-processed


industrial waste generated

from its own mining

activity.

Need definition of industrial

waste, tailings, dumps.

Clarify.

84.3.9 Upon being granted a

license, winner of tender

which has claimed to

voluntarily increase the


royalty for resource use shall

pay royalty for mineral

resources, in increased

amount in the course of

validity period of the

license.

84.4 Price of minerals and

products, specified in this

Article payable for mineral

resource use shall be defined

by a cost estimation of

National mineral exchange.

Royalties should be paid on

actual revenue received, not on

an industry average prices.

Prices vary significantly based

on quality. National Mineral

Exchange does not exist!


84.5 Operation of National

mineral exchange shall be

regulated by a separate law.


whether this law already exists

and which government body

will be responsible for oversight

of the exchange and compliance

matters?

Clarify.

85 Obligation to pay the

license fees


annually pay the license fees

by the amount and

percentage specified in the

Law on Stamp Duties.

85.2 The size of area registered in


database shall be based in

determining the amount of

license fees, and the amount

of fees for the year shall not

be amended.


whether there would be any

refund in circumstances where

the State takes an area (wholly

or partially) back into State

ownership.

Clarify.

85.3 The amount of the

processing license fee shall

be set in consideration of the

capacity of the industrial

unit for processing.

85.4 The license holder shall pay

the license fees in advance

annually in the following

way.

85.4.1 the first year fees of the

license within 10 working

days since the receipt of or

from the day considered the


notification from the state

administration as specified

in 58.3 of this law;

85.4.2 the fee of the next year of

the license before the date of

expiry of the first year fees

calculated from the first


issuance or renewal of the

license;

85.5 Return of area partially or

wholly shall not serve the

grounds for reimbursement

of the license fees.

85.6 The date of payment of

license fees shall be

determined by the day of

bank transaction.

86 Establishing agreements There is now no mention of a stability agreement or investment agreement. This has significant ramifications for international companies in order to obtain the assurances required to finance projects and contribute to FDI into Mongolia.

The conflicts between the Draft

Minerals Law LDAs and CA

should and the requirements of

the Conflicts of Interest Law

should be examined as there

could be a very serious impact

on minerals activity if the local

or national administrations

cannot execute plans and

reports.

Further, there is no indication as

to whether this applies to

existing license holders. Will

they now be required to secure

such agreements? If so, by

when? What happens to future

projects of a license holder? Is

there a need to include them in

an agreement now even though

they may not develop for 10-20

years?

Consider retaining IAs and

Stability Agreements.



86.1 Establishing the Cooperation

Agreement

86.1.1 Prospecting and exploration

license holder shall establish

a Cooperation Agreement

within 3 (three) months

since the date of issuance

and registration of the

Will the holder of an existing

exploration license be required

to enter into a Cooperation

Agreement?

Clarify.



licenses by state


in this law.

86.1.2 Prospecting and exploration

license holder shall prepare

the draft agreement based on

the template approved by the


in charge of financial

matters and submit it to the

self-governing authority of

related soum or district

within a period specified in

this law.

Does the template already

exist? What is the scope of the

CA?

Clarify.

86.1.3 The self-governing authority

of the relevant soum or

district shall establish the

agreement with the license

holder within 15 (fifteen)

days since the date of receipt

of the draft local

development agreement.

What agreement is being

referred to here, the CA (above)

or the LDA (below)? This is

under Article 86.1 so we would

assume that it is the CA and not

the LDA.

What happens if the agreement

is not established within 15

days?

Clarify and confirm

assumption.

Clarify.

86.2 Establishing the Local



license holder shall enter

into Local Development

Agreement within 3 (three)

months since the date on

which the decision was

made by the State


in this law.


whether this provision shall

apply to existing licence

holders.

Clarify.


license holder shall prepare

the draft agreement based on

the template approved by the


in charge of financial

matters and submit it to the

aimag or city self-governing

authority within a period



whether the template already

exists.

Clarify.

86.2.3 The aimag or city self-

governing authority shall

enter into agreement with

the license holder within 30

(thirty) days since the date

of receipt of the draft local

development agreement.


implications of not establishing

the agreement within 30 days or

if parties act unreasonably?



86.2.4 The following issues may be

agreed by the Local

Development Agreement:


relevant details of such

agreements. For example, there

is little detail on the investment

amounts required and no

reference to relocation of

herders who live in the licence

area.


86.2.4.1 improve the local public

infrastructure;

86.2.4.2 improve local social

services;

86.2.4.3 support for production and

business of the local

citizens;

86.2.4.4 provide jobs for local

citizens;

86.2.4.5 improve the environment

state;

86.3 Several entities holding

licenses may join to become

one party to the Cooperation

Agreement and Local

Development Agreement in

the following cases:

86.3.1 if the local self-governing

authority made the proposal;

86.3.2 several holders of licenses in

the local area made a joint

request;

86.4 The amount of investment

for the Cooperation

agreement and Local


shall be no less than the

amount in the proposals on

agreement conditions

attached to the tender

documentation and initial

request for license by the

license holder.


fulfilled the obligations

specified in the Cooperation

Agreement and Local

agreements local self-

governing authority may

submit its proposal to

suspend the Work authority

to the State Administrative

Authority.

This right should be clarified

and limited to particular

obligations which are

significant enough to warrant

such suspension to avoid

irrelevant and vexatious claims.

This appears to duplicate levels

of authority.


86.6 The duration of the

Cooperation agreement and


Local Development

Agreement shall be specified

by the agreement.

86.7 Parties may make

amendments to the

Cooperation agreement and

Local develop agreement

based on mutual agreement.

86.8 The license holder shall not

bear any obligations or

responsibilities in relation to

the matters not specified in

the agreements.

87 Technical and Economical

Feasibility Report

87.1 The Technical and


Report shall be developed by

an entity with a license

granted by the State

administration, as defined in

18.1.8 of this law.

Incorrect reference to article

18.1.8.

Clarify.

87.2 Technical and Economical

Feasibility Report shall be a

general survey calculating

the extraction and

processing activities, and its

commercial feasibility

within the period of the

license based on the

production reserves


exploration work.

87.3 Technical and Economical

Feasibility Report shall

comprise the following types

of documents.

87.3.1 estimation to extract the

reserve;

87.3.2 technical and technological

choice, engineering

solutions for extraction and

processing activities;

87.3.3 calculation of investment

and expenses, financial

analysis;

87.3.4 analysis of economy and

marketing;

87.3.5 strategy analysis and plan of

labor forces;

87.3.6 calculation of damages to

the nature and environment,

methodology and measures


for their mitigation;

87.3.7 calculation of damages to

the public health,


for their mitigation;

87.3.8 plan for closure of mining

and industrial unit;


license holder shall develop

the Technical and


Report for mining and

processing activities within

6 (six) months since the

decision to grant a license

has been made and submit it


for approval, and the copies

of the feasibility report to

the following state

authorities.

Generally, mining technical and

economic feasibility reports

take a minimum of 12-18

months to complete. The 6

month timeframe is therefore

unrealistic. In most

jurisdictions, feasibility studies

and reports will be prepared

prior to seeking the grant of any

form of mining licence. It is

therefore unusual for a

feasibility report to be prepared

after a mining licence has been

granted, although this may be a

result of the fact that the fixed 5

year term for an exploration

licence also does not give

enough time for a feasibility

report to be prepared. Further

consideration should be given

to how such reports and the

duration of such licences should

be. This Article also appears to

conflict with the timing

requirements for an EIA under

Article 80.1.




environmental matters;



development

87.4.3 Specialized inspection

agency;

87.5 The authorities specified in

Article 87.4 of this law may

review the Technical and


Report submitted by the

license holder and provide

their recommendations on

amending such Technical

and Economic Feasibility

Report to the State

Administration.

No time limit. Clarify

87.6 The license holder shall It is highly unusual for Consider and Clarify.


amend the Technical and


Report in line with the

recommendations provided

in line with 64.3 of this law.

government authorities to

approve or amend feasibility

reports. It is usually the case

that government approval is

required in relation to work

plans.

87.7 The Professional mining

council shall review the


Feasibility Report submitted

by the license holder and

issue its conclusion within 3

(three) months.


date from which the 3 month

period is calculated.

Clarify.


shall issue a decision to

approve or refuse the


Feasibility Report submitted

by the license holder based

on the conclusion of the

Professional mining council

and register thereof such

decision in the license



has issued a decision

refusing to approve the


Feasibility Report based on

the conclusion of the

Professional mining council,

it shall immediately notify

the license holder. The

grounds for refusal to

approve the report shall be

clearly stated in the

notification and the state

administration shall consult

with the license holder on

amending or redeveloping

the Technical and


Report and establish the date

of submission of such


Feasibility Report.

88 Work plan


conduct activities on the area

granted by the license

according to the following

plans approved by the state


administration.

88.1.1 prospecting work plan by

prospecting license holders;

88.1.2 exploration work plan by

exploration license holders;

88.1.3 extraction work plan by

mining license holders;

88.1.4 production work plan by

processing license holders;

88.2 The prospecting and


shall annually develop work

plan in accordance with the

approved procedure and

have it approved by the

state administration. The

work plan shall reflect the

amount, types and amount of

expenses of prospecting and

exploration work to be

carried out each year.


the approved procedure and

processes to have a work plan

approved by the state

administration.

Clarify.


license holder shall develop

and have obtained the

approval by the state

administration for its work

plan detailing the amount of

extracting and processing

work to be done each year,

economic indicators and

amount of investment and

expenses, in compliance

with the Technical and


Report approved by the State

Administration.

How are work plans to comply

with economic indicators in

feasibility reports in

circumstances where

subsequent market fluctuations

impact commodity prices? It is

suggested that while the work

plan should be consistent, it is

not necessary to strictly

comply. Alternatively, is it

possible that Article 88.11.3 is

intended to cover these

circumstances.



make the workplan in 2

copies and submit them to

the state administration in

charge of mining matters

within the following period:

88.4.1 the first year prospecting and

exploration workplan within

30 (thirty) days since the

decision to grant the license

has been issued and the

workplan for the succeeding

years 3 (three) months

before the commencement

of the prospecting and

exploration work;

88.4.2 the first year mining and The time periods under this Consider and Clarify.


processing plan within 60

(sixty) days since the date

of approval of Technical and

Feasibility Report and the

workplan for the succeeding

years 3 (three) months

before the start of the

calendar year;

article are practically

unreasonable. Licence holders

will be required to develop the

work plan in parallel with the

feasibility study, but will also

require the documentation listed

in articles 88.5.1 to 88.5.4. This

will be in addition to

negotiating and finalising the

Cooperation Agreement and

Local Development Agreement

in tandem.

88.5 The following documents

shall be annexed to the first

year workplan:

88.5.1 the detailed environmental

impact assessment

conducted as specified in

Article 80 of this law;

88.5.2 plan of measures for

reducing the adverse impacts

to public health;

88.5.3 workplan of rehabilitation

work to be conducted in the

licensed area as specified in

115.1 of this law;

88.5.4 Cooperation Agreement or

Local Development

Agreement;

88.6 The holder of the


license shall have obtained

comments from the soum or

district Governor and local

environmental inspector

before it submits the annual

work plan to the State

Administration.

The proposed law does not

include any mechanism for

resolving the situation where

comments from the soum or

district Governor and local

environment inspector are not

provided or not provided in a

timely manner in order to

comply with Article 88.4. A

circuit-breaker mechanism

similar to that in Article 88.9

should therefore be included.


88.7 The holder of the mining

and processing license shall

submit the rehabilitation

work plan along with the

annual work plan to the



environmental affairs within

a period specified in 88.4 of

this law.





affairs shall review the

workplan submitted by the


88.7 of this law and provide

its comments and


state administration within

14 (fourteen) days since the

recept of the plans.



environmental affairs has

not provided the comments

and recommendations within

the period specified in 88.8

of this law it shall be

deemed as approval of the

plan.


shall issue the decision

within 14 (fourteen) days

since the date of receipt of

comments and

recommendations from



environmental affairs.


shall consider the following

in making the decision


law.

88.11.1 Comments and

recommendations as


this law;

88.11.2 whether the license holder

has obtained other

permissions necessary for

conducting the prospecting,



specified by this law and

other law and legislation;

88.11.3 whether the workplan is

achievable and

implementable;

88.12 The state administration may

provide guidelines on

specific matters to the


license holder upon approval

of the plan.


has proposed changes to the

plan the license holder shall

change and submit the plan


and the State Administration

shall review and issue the

decision as specified in 88.3-

88.12 of this law.

89 Minimum expenditure for

prospecting

Art 89 and Art 90: excessive

minimum expenditure

requirements may/will kill

Mongolian junior business.

For example, a 4 year

prospecting license would

require approximately USD 5

million and a 5 year exploration

license would require

approximately USD 90 million.

All per license. These are set at

levels that no Mongolian

company (or the Government

itself) can ever sustain, and in

fact many mineral deposits have

total resource values of less

than the amount required to be

spent on exploration. The only

companies capable of doing this

are a few large international

mining companies. The

Government could rightly be

accused of discriminating

against local companies in

favour of foreigners.

Ultimately, Articles 89 and 90

are so draconian that they will

completely destroy any

exploration activity and cause

the loss of thousands of jobs for

Mongolians in technical and

professional fields as well as

logistics and supply which are

created and sustained by the

mineral exploration industry.


89.1 The prospecting license

holder shall have specified

prospecting work to be done

each year expenditures no

less than the following for


each hectare of area granted

by the prospecting license:

89.1.1 5 000 MNT per hectare each

year for the first 2 years;

89.1.2 10 000MNT per hectare

each year for the third and

fourth years;

90 Minimum expenditure for

exploration

90.1 The exploration license

holder shall have specified

exploration work to be done

each year expenditures no

less than the following for

each hectare of area granted

by the exploration license:

90.1.1 150 000 MNT per hectare

each year for the first 3

years;

90.1.2 300 000MNT per hectare

each year for the fourth and

fifth years;

91 Variation of the workplan


submit its request to vary the

work plan in writing to the



submitted a request to vary

the workplan the State

Administration shall notify

the central state



affairs and the central state


economic development

within 5 working days since

the date of receipt of such

request.

91.3 Upon review of the request


if the variation is required

for the rehabilitation plan

due to changes in the

workplan, the central state

administrative in charge of


affairs shall submit its

comments and

recommendation related to

such variation to the State



(twenty one) days since the

date of receipt of such

notification.



economic development shall

review the request submitted

by the mining and


and provide its comment and

recommendation to the State


(twenty one) days since the

date of receipt of such

notification.


Authority shall issue

decision taking into account

of the aforementioned

comments and

recommendations as


this law within 30 (thirty)

days since the date of receipt

of the request by the license

holders to vary the work

plan and thereof notify the

decision in writing to the

license holder.


shall adhere to the procedure

specified in 88.3-88.12 of

this law in issuing the

decision specified in 91.5 of

this law.


shall have the right to

voluntarily initiate the

variation in the workplan

and may incorporate such

changes based on

consultations with the

license holder.

91.8 The conditions and

requirements set for

variation in the workplan

shall be determined by the

procedure of the State

Administration.

92 Work authority


conduct works other than

prospecting and


rehabilitation works on the

area granted by the license

based on the Work authority

issued by the State

Administration.

92.2 The Work authority shall be

issued only to license holder.

92.3 The Work authority

authorises the licensee to

carry out work in accordance

with the workplan approved

by the State Administration.

92.4 The Work authority is valid

only for the area as specified

in the work plan.

92.5 The previously granted and

valid Work authority shall

not serve the grounds to be

released from the obligations

due to the variation in

workplan as specified in


93 Work authority to conduct

exploration


conduct or commence

exploration works on the

area granted by the license if

the exploration license

holder has not obtained the

exploration Work authority

from the State

Administrative Authority.

93.2 It shall be prohibited for

exploration license holder to

conduct extraction activities

in any way.

We assume that this does not

apply for for necessary

sampling?

Clarify.


shall grant the Work

authority to conduct

exploration if the


has fulfilled each of the

following conditions.

93.3.1 the exploration work plan

has been approved by the

State Administration as


93.3.2 the rehabilitation workplan

has been approved as


93.3.3 the pledge for rehabilitation

work expenses has been


deposited in a special

account as specified in

Article 119 of this law;

93.3.4 other permissions necessary

to conduct exploration

activities as specified in this

law and other laws are

obtained;

Very wide open door. Clarify exactly what is

required.

93.3.5 the Cooperation agreement


has been established with the


authority and is in effect;

93.3.6 the mandatory insurance of

license holders specified in

Article 75.1 of this law has

been retained;


shall grant and register the

Work authority to conduct

exploration based on the

review of whether the


has fulfilled the conditions


93.5 The holder of the Work


exploration shall have the

following obligations.

93.5.1 to start the exploration work

within 3 (three) months

since the date of issuance of

the Work authority;

Many conditions could prevent

this such as when the Work

Authority is granted (winter

months), economics, labor

issues, etc. Yet there is nothing

to suggest an extension.


93.5.2 to inform the start up of

exploration works through

local media at least 7 (seven)

days before staring the work;


what will constitute 'exploration

works' in this circumstance. For

example, does it encompass

exploration expenditure for

desk-top studies conducted in

an office? Consideration should

also be given to whether the

short time period is feasible

(especially in winter).

Define “local media”. Is this

Aimag, Soum, Bag?

Clarify.

Clarify.

93.5.3 to annually conduct

exploration work of

expenditure per hectare that

is no less than the amount



this law on the area granted

by the license;

93.5.4 to maintain a copy of the

exploration license,

exploration workplan and

the environmental

rehabilitation plan at the site

of exploration work;

93.5.5 to comply with labor safety

and health requirements

during exploration activities;

93.5.6 to develop the Consolidated

report on the reserve,


results according to the

approved form 1 (one)

month before the expiry of

the license, and have it

approved by state

administration;

What is this? Is the approved

form available?

Clarify.

93.5.7 to register the reserve proven

by the relevant authority at

the State Administrative

Authority, and to submit the

exploration workplan with

the primary materials to the


database on geology and

minerals resources;

Does this mean that the

“relevant authority” may

dispute the reserve?

Clarify.


extraction


conduct or commence

extraction works on the area

granted by the license if the

mining license holder has

not obtained the Work


extraction work from the




State Administration for the


extraction works if it has

fulfilled each of the



94.2.1 has obtained the approval for


Feasibility Report and

mining work plan as



rehabilitation work plan as


94.2.3 has conducted the


assessment as specified in

this law;

94.2.4 has conducted assessment by

authorized organization with

regards calculation of

damages to the public

health, methodology and

measures to reduce the

impact;

94.2.5 has deposited the

rehabilitation fund pledge in

a special account as


this law;

94.2.6 has deposited the fund for

mine closure in a special

fund as specified in 135.1 of

this law.

94.2.7 has obtained all the

permissions necessary to


as required by this law and

other relevant laws;

Wide open door. Clarify by providing an all

inclusive list.

94.2.8 has entered into Local

Development Agreement as


and such agreement remains

valid;



75.1 of this law has been

retained;

94.3 If the mining license holder

has fulfilled the conditions

and criteria specified in 94.2

of this law, the State

Administration shall grant

and register the Work


extraction works.


administration may

determine the limitation to

To what aim? Clarify.


the depth of extraction in the

area when granting the Work


extraction works.



exploration works shall have

the following obligations.

Do you mean “extraction”

rather than “exploration”?

Clarify.

94.5.1 to start the extraction work

within 12 (twelve) months

since the Work authority has

been obtained;

This requirement places

unreasonable restrictions of the

ability of licence holders to

respond to changes in

circumstances which mean

extraction work is not possible.


94.5.2 to have the quality of all the

precious metals and

gemstones extracted proven

by the authority in charge of

quality and carats, and

register the amount;

94.5.3 to have the certificate of

origin obtained from the


order to sell and process


minerals extracted;

94.5.4 to sell natural gold formation

over 400 grams or lighter

with special defining forms

and shapes, and gemstones

of rare colour and shape to

the Mongolbank state gem

treasury at a discount price;

Clearly translation issues,

Mongolian version says

“premium” not “discount”.

What about “lighter” vs.

“heavier”? Need to clarify.

94.5.5 to conduct mining activities

with as little damage to the

environment as possible, and

to prevent from negative

effects on humans, flora and

fauna;

94.5.6 to keep the level of air

pollution, dust, water

pollution and noise at the

permitted level;

What is the “permitted level”? Clarify.

94.5.7 to ensure that citizens of

Mongolia make up no less

than 90% of the total

employees completing the

works specified in the

approved work plan;

Requirement for 90%

Mongolian work-force may be

unrealistic. Large mining

projects will require thousands

of workers and it may not be

possible to source such labour

domestically in all

circumstances. Similarly,

depending on the nature of the

works, if a small number of



highly specialised workers are

required, there may be an

insufficient labour pool in

Mongolia to satisfy this

requirement. Consideration

should be given to exceptions to

this requirement (e.g.

exceptions for trainers,

instructors and supervisors).

This requirement will cause

huge delays in existing projects

and future projects for

construction of key

infrastructure.

Based on Articles 94.5.7 and

95.3.5 it appears that this quota

only applies to mining and

processing (as well as the

ability to pay to exceed such

quotas). What then is the quota

for reconnaissance, prospecting

and exploration companies?

Are they stuck at 5% as per

Government Resolution

following other legislation?


Clarify.

94.5.8 to ensure the labor and

health safety of the

employees at the mine and

of the citizens in the

proximity of the extraction

area;

94.5.9 in the case of accident and

other dangerous situation in

the course of the extraction

activities the license holder

and the management of the

mine shall take the necessary

measures to immediately

eliminate the situation,

render first aid to the

victims, evacuate the people

from the dangerous area and


relevant authorities of the

situation;

Overlap with the Labor Health

and Safety Law.

Consider striking this Article


employed citizens of

Mongolia in numbers less

than that specified in Article

94.5.7 of this law, it shall be

obligated to pay a monthly

“extraction” license holder?

This sets such companies up

from the outset to have to pay

penalties because of a lack of

qualified Mongolian citizen

Clarify.



amount to the relevant soum

or district budget equal to

the minimum wage amount

multiplied 10 times for each

foreign employee above the

threshold.

employees. Realities should be

understood in Mongolia to

either increase the % of

permissible foreign workers or

relax this payment for

exceeding the quota.

94.7 Except for the case specified

in Article 94.7.1 of this law,

it shall be prohibited for the

mining license holder to

conduct prospecting and

exploration work solely, on

the area granted by the

license.

94.7.1 If the State Administrative

Authority has authorized it

based on the conclusion of

the Professional mining

Council, the mining license

holder may conduct

prospection and exploration

activities solely for a period

of up to 3 years on the area

granted by the license.


processing work



State Administration for the


works if the license holder

has fulfilled each of the


95.1.1 the construction of the


has completed and the state

commission has accepted it

for utilization;

95.1.2 has obtained the approval of

the processing work plan

specified in Article 88.3 of

this law;

95.1.3 has conducted


assessment;

95.1.4 has conducted assessment by

authorized organization over

calculation of damages to

the public health,


to reduce the impact;


the rehabilitation work plan



95.1.6 has deposited the fund for

mine closure in a special

fund as specified in Article

135.1 of this law.

Problematic in conjunction with

Art. 119.

Clarify.

95.1.7 has obtained all the

permissions necessary to


as required by this law and

other relevant laws;

Why does a “processing”

license holder need to obtain

“extraction” permissions?

Clarify.



75.1 of this law has been

retained;

95.1.9 has entered into Local

Development Agreement as


and such agreement remains

valid;



criteria specified in Article


Administration shall grant

and register the Work


processing works.



processing works shall have

the following obligations:

95.3.1 to purchase main and

subordinate minerals with

certificate of origin obtained

from the State

Administration;

95.3.2 to have the certificate of

origin for processed

minerals to sell and

reprocess those minerals

obtained from the State

Administration;

95.3.3 to conduct industrial unit for

processing activities with as

little damage to the

environment as possible, and

to prevent from negative

effects on humans, flora and

fauna;

95.3.4 to ensure that citizens of

Mongolia constitute no less

than 90% of the total

employees completing the

This obligation may be difficult

to achieve in practice given

capacity constraints so it would

be preferable to require license



works specified in the

approved work plan;

holders to use reasonable efforts

to achieve this quota.

95.3.5 to ensure the labor and

health safety of the

employees at the processing

plan and of the citizens in

the proximity of the

processing area;

95.3.6 in the case of accident and

other dangerous situation in

the course of the processing

activities the license holder

and the management of the

mine shall take the necessary

measures to immediately

eliminate the situation,

render first aid to the

victims, evacuate the people

from the dangerous area and


relevant authorities of the

situation;

Overlaps with the Labor Health

and Safety Law.


Article

95.3.7 to strictly adhere to the

processing standards and

procedures;

What standards? Whose? Clarify.


employed citizens of

Mongolia in numbers less

than that specified in 95.3.4

of this law, it shall be

obligated to pay a monthly

amount to the relevant soum

or district budget equal to

the minimum wage amount

multiplied 10 times for each

foreign employee above the

threshold.

This sets such companies up

from the outset to have to pay

penalties because of a lack of

qualified Mongolian citizen

employees. Realities should be

understood in Mongolia to

either increase the % of

permissible foreign workers or

relax this payment for

exceeding the quota.


96 Suspension of the Work

authority to conduct works


may suspend the Work


granted to the license holder

in the following cases.

96.1.1 the license holder has not

submitted the plans, reports,

agreements and other

documents specified by this

law in time, or the

documents do not fulfil, or

fully fulfil the requirements

specified by this law and

other relevant laws and


regulations;

96.1.2 the obligation to pay the fees

imposed by this law and

rules and procedures enacted

in conformity therewith have

not been performed;

96.1.3 the central state



matters has submitted a

recommendation to suspend

the Work authority to

conduct works as specified

in Article 119.6 of this law;

96.1.4 the local self-governing

authority has submitted a

recommendation to suspend

the Work authority to

conduct works to the State

Administrative Authority

due to the fact that the

license holder has not

fulfilled its obligations

imposed by Cooperation

agreement and Local

Development Agreement;

What is the process? Is the

license holder permitted to

work until proven otherwise?

What is the dispute mechanism?

Clarify.

96.1.5 if a binding requirement to


to conduct works has been

issued by the state


inspector as specified in

Article 144.2 of this law;

What is a “binding

requirement”?

Clarify.

96.2 If it deems necessary, the


partially suspend the Work


by means of prohibiting

specific activities of the

license holder.


may extend the period of

suspension or partial

suspension of the Work


and total duration of the

suspension and extension

shall not exceed 6 (six)

months.

Grounds to appeal and timing

for administrative court case to

be considered.


96.4 The suspension and partial

suspension of the Work


shall not apply to the works


to be completed according to

the rehabilitation work plan

of the license holder.

97 Restoring the Work





and state administration with

regards to restoring the

Work authority to conducts

works along with the

evidence if it deems that the

violations have been

eliminated within the period

of suspension.

Why is the State Central

Administration involved here?

All prior reference for

suspension has been only to the


Clarify.

97.2 If the central state

administration and state

administration deem the

violations eliminated upon

review of the request, it shall

render and register the

decision to restore the Work



since the date of receipt of

such request.

Why is the State Central

Administration involved here?

All prior reference for

suspension has been only to the


Who is “it”, which

administration?

What if a decision is render

contrary? What is the dispute

mechanism?

Clarify.

Clarify.

Clarify.

98 Areas limited for



activities

98.1 It shall be prohibited for the

holder of the Work authority

to conduct works, to conduct



activities within 100 meters

from each side of the

following objects except for

the case specified in 98.2 of

this law.

98.1.1 spring and winter

settlements of the herder

inhabiting, or house and

apartment dwellings built for

residency prior to the

approval and registration of

the workplan of the license

holder;

Consider what legal right is

granted to such persons (though

likely to be a social issue) under

the Land Law.


98.1.2 findings of rare ancient flora


and fauna, historical and

cultural findings registered

before the approval and

registration of the work plan

of the license holder or

notified to the license holder

by the state administrative

central authority in charge of

specially protected areas;


conduct activities based on

the permission of the owner

and possessor on the area on

which prospecting,


processing activities are

prohibited as specified in

Article 98.1.1 of this law.

98.3 The permission of the owner

or possessor specified in

98.2 of this law shall be

issued in writing in

accordance with the

template approved by the


Authority.

Does this template exist? Clarify.

98.4 The written permission


shall:

98.4.1 have the same validity for

assignees and heirs of

owners and possessors;

98.4.2 the owner or possessor, their

assignees and heirs shall not

have the right to revoke such

permission;

98.5 The owner or possessor may

determine the border and

depth of area within which

to permit prospecting,



granting the permission


98.6 The following activities

shall comprise the



activities specified in Article

98 of this law.

98.6.1 to affect the soil surface and

conduct excavation by using

mechanical facilities for the


purposes of exploration and

extraction sampling;

98.6.2 assembling, installing and

using facilities, mine

opening designated for

accessing or air conditioning

the underground facility;

98.6.3 to extract and process

minerals using machinery,

and other facilities other

than manual equipment;

98.6.4 transport loads to derivative

deposit, ore stockpile and

mine and production waste,

construct and use facilities,

autoroads and dirtroads

designated to reach them;

98.6.5 create derivative deposits

and ore stockpile;

98.6.6 construct and use dams,


designated to store the water

and soil water used for mine

and production waste and

activities;

98.6.7 construct buildings and

facilities designated to store

and reprocess mine and

industrial waste, use

buildings and equipment for

the above purposes;

98.6.8 conduct drilling for any

purposes;

98.7 The 100 meter distance


this law shall be calculated

in the following way.

98.7.1 to calculate the tenure of the

spring, and winter

settlements, housing and

houses built for residency as

0.1 hectare unless otherwise

specified by law and 100

meters each side from such

tenure;

98.7.2 if it is not possible to

determine the tenure land as

specified in Article 98.7.1 of

this law, to measure from 30

meters from each side of the

wall of housing or house

built for residency and 100

meters from such startpoint;


99 Managing and conducting

of prospecting,


processing activities


appoint a person to manage

and conduct the prospecting,


processing activities to be

performed at the area

granted by the license under

an agreement.


obliged to notify the relevant

local government and state

administration about the

agreement and appointed

person as specified in 99.1

of this law and register in


database within 30 (thirty)

days since the agreement has

been entered.

We assume that this is only a

“notice” and not “approval”

requirement.

Clarify.

99.3 The entity appointed to

manage and conduct the



activities shall be fully

qualified in terms of

knowledge, skills,

experience and background

to lead and control safe,

mining operation and shall

be fully aware and familiar

with this law and other

relevant laws, rules and

procedures.

What does “fully qualified”

mean? Must one be registered

and permitted in Mongolia?

Clarify.


obligated to fully inform the

entity appointed to manage

the mine and production

activities on obligations

imposed by laws, relevant

rules and procedures.


appoint oneself to manage

and conduct the mine and

production activities if it

fulfils the criteria specified

in 99.3 of this law.

99.6 The entity appointed to

manage and conduct

geology and mining


activities shall be

responsible for any damages

caused due to its own

activities as specified by law

100 Conducting extraction

work in deposits, of which

exploration work and

proven reserve was funded

by the state budget and

registered in the national

consolidated registration

100.1 The license holder

conducting extraction work

in deposits of which

exploration work and proven

reserve was funded by the

state budget and registered

in the state Consolidated

registration, shall reimburse

the exploration expenses

funded by the state budget

from the day of its extraction

based on the agreement.

Appears that the license holder

will have to give up majority

shareholding AND reimburse

exploration expenses to the

Government? On what basis?

Are records even available for

exploration done in Soviet

times? Where is the date cut-

off?

Confirm and clarify.

100.2 Expenses relating to mineral

deposit detailed prospecting,

prospecting-evaluation

work, geological

cartography expenses for the

area and the expenses

incurred by all stages of

exploration work shall be

included in the state budget

expenses for exploration

work.

100.3 For entities privatized in

accordance with the State

and local property law, the

corresponding expenses to

the used minerals of the

deposit shall be

proportionately deducted

from the total expenses

funded by the state for the

exploration work and the

remaining reserve expenses

shall be reimbursed.

100.4 The total amount, period of

payment, and the annual

payment amount shall be

specified in the

reimbursement agreement.

100.5 The amount of annual

payment shall be determined


based on the number and

amount of products to be

produced in the year.

100.6 If the reimbursement has not

been completed within the

period specified in the

agreement, the holder of the

license shall be notified to

perform its obligations and a

penalty of 0.1 percent of the

total unpaid payment shall

be accrued daily.

100.7 If the reimbursement and

penalty specified by this law

has not been paid within 30

(thirty) days of receipt of

notification to perform the

reimbursement obligation

from the State

Administrative Authority,

the license shall be revoked

and the State Administrative

Authority shall announce a

tender selection on the area

granted by the license.

101 Issuing reports

101.1 The prospecting and


shall make accurate and

trustful exploration work

reports for that year within

February 10th of the next

year in accordance with the

approved procedure and

submit it to the state

administration and tax

agency.

101.2 1 (one) month prior to the

expiration of the license, a

prospecting or exploration

license holder shall have

integrated report of the


work validated by the

authorized person in

accordance with Article 102

of this law, and submit it

along with the primary

documents to the State

Administration in line with

the approved procedures.

101.2.1 Main and subordinate

minerals, hazardious


mixtures of the minerals,

estimations of their quality,

as well as of quantity of the

reserves must be accurately

defined in the integrated

report of the exploration in

accordance with the

standards.


register the proven reserve

and reports of the

exploration specified in

Article 101.2 of this law in

the Consolidated National

databases of geology and

minerals.


shall submit the following

reports within the following

period to the State

Administrative Authority:

101.4.1 the basic indicators and

graphic designs of mine

work of the year approved

and specified by the annual

report and survey according

to the procedure approved


within February 10th of the

subsequent year;

101.4.2 the basic production

indicators of the next year

according to the approved

template within November

10th of each year;

101.5 The following information

shall be provided in the

reports specified in 101.4.1,

101.4.2 of this law.

101.5.1 working days, number of

employees, agreements and

covenants related to the

property of the license

holder;

101.5.2 performance of the mine

work plan, calculation of

reserve mobilization,

duration of mine operation,

schemes, extensions and

reform work of the

production;


101.5.3 extracted ore, amount,

number of products sold and

loaded for sale, sales price,

information on its purchaser,

investmend made in that

year, mining expenses,

royalty for use of minerals

resources and reports on the

equipment and other

property in use


shall issue the report


law according to the

template approved by the tax

authorities in increased

amount and submit it to the

tax authorities within the

20th of the first month of the

next quarter, and the annual

report within the 20th of

January of the next year, and

deliver the receipt of

submission immediately to



holder shall submit the

following reports within a

period specified below to the

State Administration:

101.7.1 an annual report and basic

calculation of the production

shall be submitted within the

10th of February of the

subsequent year, in

accordance with the


State Administration;

101.7.2 the basic calculation of the

production work of the next

year shall be submitted on

the approved template

within the 10th of November

of each year;

101.8 The following information

shall be provided in the

reports specified in Article

101.7.1, 101.7.2 of this law.

101.8.1 working days,

number of employees,

reports on occupational

safety, agreements and

covenants related to the


property of the license

holder;

101.8.2 performance of the

processing work plan,

duration of plant operation, a

scheme of the plant facilities

and expansion and

renovation of such facilities;

101.8.3 processed ore and

concentration, documents of

their origin, contract and

agreements, amount and

number of products sold and

loaded for sale, sales price,

information on its purchaser,

investmend made in that

year, mining expenses,

royalty for use of minerals

resources and reports on the

equipment that has been

utilized and other property in

use;

101.8.4 payment of royalties for

resource use, equipment and

other capital in use;


holder shall issue the report

specified in Article 101.8.3

of this law according to the

template approved by the tax

authorities in increased

amount and submit it to the

tax authorities within the

20th of the first month of the

next quarter, and the annual

report within the 20th of

January of the next year, and

deliver the receipts of

submission immediately to



issue its rehabilitation work

report within February 10th

of the next year and submit

it to the state administrative

central authority in charge of

nature and environment, the

State Administration, tax

authorities and the


authority.

101.11 The rehabilitation work

report shall include the


performance of

rehabilitation workplan and

the following information.

101.11.1 registration of negative

effects to the nature and

environment caused by



activities;

101.11.2 measures not specified in the

rehabilitation workplan, but

taken to protect the nature;

101.11.3 potential negative effects on

the nature, related


assessment, and proposed

changes to the rehabilitation

workplan for the next year

due to expansion of

activities and increase in

capacity;


obliged to submit to the

State Administration the

information on the quantity

of the mined, processed, and

sold products in that year,

taxes, duties, fees, levies

paid to the state and local

budget, total amount of

funds spent under the

Cooperation and Local


within the first quarter of the

next year. The State

Administration shall inform

this information to the public


the date of the receipt.


shall maintain the

confidentiality of the

information in the reports of


extraction and processing

activities categorized as

corporate confidential in line

with relevant laws, rules and

procedures throughought the

valid period of the license.

The State Administrative

Authority may enter into

confidentiality agreement


with the license holder if the

license holder has so

requested.

101.14 The template to issue reports

specified in this Article shall

be approved by the State

Administration.

102 Receiving the result of the

prospecting and

exploration work,

validating the reserve of

the deposit

What is a “specialized entity”

Is this a reference to a Qualified

Person (a la N43-101?) Who

determines? On what

basis/qualifications?

Clarify.

102.1 A license holder of


work shall conduct


work under the management

or with the involvement of

specialized entity.

Will this entail a significant

added expense to exploration/

Clarify.

102.2 The estimation of the deposit

reserves that have been



made by the specialized

entity involved in the

exploration work under this

law.

102.3 A certificate for the

specialized entity shall be

granted to an entity which

meets the terms and

conditions set by the state

central administration in

charge of geology and

mining affairs.

Assumption that this can be a

foreign invested entity?

Confirm assumption.

102.4 For the purpose of reviewing

the accuracies of the

estimation of the reserves

and work report on


activity prepared by the

specialized entity, the state

administrative body may

appoint an independent

professional geology expert.

102.5 The professional,

independent geology expert

may be a national or

international individual or

organization specializing in

geology.

102.6 Based on the opinion by the


independent professional

geology expert appointed by

the State Administration in

respect of the review of the

estimation of reserves and

the report specified in this

law, the Professional

Council on minerals

resources shall discuss the

report on reserves and issue

a decision whether to

register it in the National

consolidated databases of

geology and minerals.

102.7 The specialized geology

entity shall adhere to the

following principles in its

activities:

102.7.1 to participate in the

exploration work on site;

102.7.2 the estimation of reserves

determined by the


accurate and based on the

primary documents;

102.7.3 to be responsible for the

accuracy of the conclusion

before the client and other

entities;

102.7.4 to repay or compensate from

own property for any loss

incurred to any person due

to intentionally making of an

error in the estimation;

102.7.5 to have retained professional

liability insurance;

102.7.6 to maintain the

confidentiality of the

business secrets of the client

obtained in the course of

conducting activites, and not

to inform others of such

information unless required

so by law;

102.7 not to use any information

on the clients obtained in the

course of conducting

activities, for personal or

third party interests;


obliged to submit to the

State Administration the

consolidated and validated


exploration work report on

the reserves, reserve

estimates and relevant other

documents and primary

materials within the period


103 The Professional Council

under the State

Administration

103.1 Professional Council for

Geological Survey,

Professional Council for

Mineral Resources and

Professional Council for

Mining shall be operating

under the State

Administration with the duty

of providing professional

advise in their respective

areas.

103.2 The members of the

Councils shall be specialized

in geology and mining and

have in-depth knowledge,

skills and experience on

mineral exploration, mining

and processing.

103.3 The Professional Council on

minerals resources shall be

comprised of 15 members as

provided below:

103.3.1 from the specialized

departments and divisions of

the relevant Government

agencies-5

103.3.2 from the research

institutions-3

103.3.3 from the professional

associations in geology and

mining-7

103.4 The Professional Council for

Mining shall be comprised

of 15 members as provided

below:

103.4.1 from specialized



agency-6

103.4.2 from research institutions-4

103.4.3 from professional


mining-5

103.5 Professional Council for


Geology shall be comprised

of 15 members as provided

below.

103.5.1 from specialized



agency-6

103.5.2 from research institutes –4

103.5.3 from professional


mining – 5

103.6 The members, specified in

Articles 103.3, 103.4 and

103.5 of this law, shall be

appointed by Geology and

Mining Minister for the

period of 3 years based on

the proposals from the

relevant specialized

organizations.

Isn‟t there a potential for a

conflict of interest on the part of

the Government? No

independence/transparency in

process.


103.7 The professional Councils,

specified in this law, shall

have the charters for their

operation.

103.8 The state administration

shall approve the chart of the

professional councils and the

procedure for appointing and

re-appointing the members

of the councils.


Geology shall exercise the

following rights and duties

in the issues regarding

mapping, and prospecting

and exploration works

funded by state budget:

103.9.1 Determining the area for

mapping and prospecting

and exploration work to

conduct;

103.9.2 Determining the type, size

and budget of the work‟

103.9.3 To discuss and approve the

work performance and

report;

103.9.4 If necessary, to appoint an

expert as specified in this

law;


Mineral Resources shall

exercise the following rights

and duties in the issues


regarding prospecting and

exploration works.

103.10.1 to discuss the report of


work that is not funded by

state budget and issue a

conclusion on whether to

accept such report;

103.10.2 If necessary, to appoint an

expert as specified in this

law;


Mining shall exercise the

following rights and duties

in relation to the mining and

processing issues:

103.11.1 to provide professional

advice and issue an opinion

in relation to issues on

reviewing and modifying of

the Technical and


Report on mining

production, submitted by the

holders of mining or

processing licenses;

103.11.2 to review and issue an

opinion in respect of a

request of a mining license

holder to generate a


industrial wastes that has

been received for opinion by

the state administration;

103.11.3 to provide comments and

recommendations, and issue

an opinion in relation to

approving, modifying and

rejecting of work plans of


operations for which, in the

opinion of the State

Administration, a respective

opinion is necessary;

103.11.4 to provide professional

advice and assistance to the


relation to issues of granting

of a Work authority to

conduct the work, for which,

in the opinion of the State

Administrative Authority, a

respective opinion is


necessary.

103.12 If the Professional Council

disagrees with the

conclusion of an authorized

research laboratory in

respect of a sample, ore or a

product that has been

obtained during the



activities, the Council shall

issue a proposal and an

opinion for the State

Administration to appoint an

expert to take samples and

conduct re-analysis. The

state administration shall

issue a decision to appoint

an expert. The associated

expenses thereof shall be

financed from the budget of

the Council as specified in

Article103.16 of this law.

103.13 If a license holder disagrees

with the opinion of the

expert appointed by the state


in Article 103.10 of this law,

it may choose an

international certified

independent research

laboratory to re-analyze the

sample, ore or the product

that has been obtained

during the prospecting,


processing activities. In such

case, the associated expenses

shall be borne by the license

holder. The certified

research laboratory should

be recognized by the state

administration.


103.14 The conclusion of the

international certified

research laboratory shall be

regarded as final. The


obliged to pay all taxes, fees,

levies and payments in

relation to types and quantity

of deposit reserves, main

and subordinate minerals

that have been determined

by such final conclusion.

The taxes, fees, levies and

payments that have been due

during the unpaid period

shall be paid in accordance

with the percentage and

levels as determined by the

tax office.

103.15 If the state administration

deems as necessary, the

members of the Councils

shall participate in the

operation of the State

Administration to conduct

an on-site examination of the

implementation of the work

plan and of work

performance, and shall issue

proposals, recommendations

and opinions.


shall issue a decision based

on the opinion of the

Professional Councils.

103.17 The Professional Councils

exercise the following rights

in order to implement its

functions specified in this

law.

103.17.1 to demand and access the

necessary information from

the license holder;

103.17.2 to have the independent

expert and audit conclusion

issued if necessary, and to

consider these conclusions

in considering the matters;

103.18 The Councils shall be

financed by 20% of the

licenses fees paid in the

given year.

103.19 The procedure to pay salary,


bonus and business trip per

diems to the members of the

Professional Councils shall

be approved by the State


104 Registration database We did not see an indication of

a registration of State funding

(for exploration and mining).

Clarify if this is to be in the

database and made public.


shall have a Consolidated


104.2 The registration database

shall consist of the license

database and license

cartography database.

104.3 The license and its

cartography shall be

accessible to the public

according to the procedure

approved by the State


104.4 The registration database

may be in the electronic

form.

104.5 The following documents

shall be registered in the

license database:

104.5.1 requests and application

made in relation to the

license;

104.5.2 certificate of license;

104.5.3 applications and requests

made in relation to Work


activities;

104.5.4 agreement on

reimbursement;

104.5.5 agreement pledging the

license and a decision

releasing the license from

the pledge;

104.5.6 agreement on creating

entitlements to non-material

proprietary interest in a

license, shared entitlements

to such interest or transfer of

such entitlements;

104.5.7 Cooperation Agreement and

Local Development

Agreement;

104.5.8 receipt of depositing the

rehabilitation fund in a


special account;

104.5.9 receipt of depositing the

funds for mining and


closure in a special account;

104.5.10 receipt of payment payable


104.5.11 permission in writing issued

by the owner and possessor


this law;

104.5.12 certificate of rehabilitation

work quality;

104.5.13 request to close mine,

industrial unit for

processing;

104.5.14 any other documents

submitted to the State


in this law;

104.6 The following decisions

issued by the State

Administration shall be



104.6.1 refusal to accept the

application for license;

104.6.2 granting a license and

imposition of obligation

when granting license;

104.6.3 refusal to grant license;

104.6.4 return of the application for

license by the request of the

applicant;

104.6.5 renewal of the license, and

reduction of the area granted

by license at the time of

renewal;

104.6.6 any changes to the

obligation imposed by the

license;

104.6.7 refusal to renew license;

104.6.8 transfer or refusal to transfer

the license;

104.6.9 partial transfer of the area

granted by the mining

license;

104.6.10 whole or partial return of the

area granted by license;

104.6.11 re-issuance of license;

104.6.12 revocation of license;

104.6.13 approval of, changes to and


refusal to approve the


mining and processing work

plan;

104.6.14 granting, refusal to grant,

suspension, partial

suspension and restoration

of Work authority to conduct

works;

104.6.15 decision of the Commission

to accept the results of the

rehabilitation work;

104.6.16 decision of accepting of

mines and industrial unit for

processing for utilization;

104.6.17 decision of the relevant

authority on closing the

mine or industrial unit for

processing wholly or

partially;

104.6.18 conclusion of the

professional authority on

mine and industrial unit for

processing closure, decision

of the relevant authority;

104.6.19 other decisions rendered by

the State Administration as

provided by this law;

104.7 The cartographic database of

licenses shall contain the

following types of

cartography and mapping:

104.7.1 an area map of prospecting

and exploration;

104.7.2 a map of a licensed area and

any modification thereof;

104.7.3 an area map of a mine claim;

104.7.4 an area map of an industrial

unit for processing;

104.7.5 a map of an area on which

the rehabilitation work has

been conducted;

104.7.6 a cadastre map defining the

borders of the area which



activities are prohibited;

104.7.7 a map of the state and local

special protected and

reserved areas;

104.7.8 a cadastral map defining the

borders of the area granted


to citizens for ownership and

possession that registered in

the state integrated geodetic

and cartographic database.

104.8 If it deems necessary, the


Authority may register court

decision rendered in relation

to the license holder‟s

implementation of rights and

obligations granted by the

license, in the license


104.9 All decision and documents

issued in relation to one

license shall be stored in a

portfolio by the order of

issuance of such documents

in the archive.

105 Deeming the registration

as invalid, restoring

registration

105.1 If the documents specified in

this law does not contain the

information specified in this

law and other relevant


State Administration, or

does not conform with the

approved template or fails to

fulfill the requirements

provided by law the Head of


may deem its registration as

invalid .


shall restore the registration

if the submitting entity

compiles the documents as

required and submits it to



the date of the decision on

deeming the registration

invalid as specified in 105.1

of this law


shall not issue any decisions

in relation to the license

related to the documents,

and the area issued by the

license within the period



this law.

105.4 Typographical mistakes and

mis-input of decisions and

documents other than in

cases of deliberate and

misleading purposes

committed in the course of

registering the decisions and

documents in the registration

database specified in 104.5

and 104.6 of this law shall

not constitute grounds to

revoke the registration.

106 Registering information

about the license holder in

the registration database

106.1 The surnames, names and

registration number of the

member of executive


directors and equivalent

entity of the legal entity to

represent the license holder

shall be registered in the

license database.

Why is this here as it must

already be registered with the

State Registration Authority

under the Company Law and

State Registration Law? This

will create one more layer of

unnecessary compliance each

time a person changes position.


106.2 Information regarding the

transfer and changes to the

representing persons


shall be notified and

registered at the State


within 10 (ten) days of such

changes by the license

holder or the representing

person itself.

Same comment Suggest deleting this Article

as it repeats obligations

contained in other

legislation.

107 Approving the procedure

related to registration


shall approve the procedure

to register the decisions and

documents specified in

104.5 and 104.6 of this law

in conformity with this law.


shall approve the template of

requests, procedure to

receive and review requests

and applications in

conformity with this law.


shall approve the procedure

to inform the public of the


decisions rendered by the


Authority in conformity with

this law.

108 Legal consequence of

Document registered in the

Registration Database

108.1 If the agreement to transfer

jointly possess rights

conferred by a license or to

transfer percentage of

possession of rights and the

agreement to pledge a

license specified in this law

is registered in the license

registration database in

accordance with procedure

of this law, the State


shall have no obligation with

regard to the matters related

to the foregoing agreements

and transfer actvity of a

license.

108.2 Registering documents in

the registration database by


according to this law shall

not be deemed as guarantee

to make an agreement or

contract, to entitle right to

parties to contract and to

transfer rights by contracts

or create an exclusive right.

109 Rectification of

registration errors

109.1 The head of State

Administration‟s unit in

charge of registration may

rectify error in registration

by his/her own initiative or

by request of a license

holder.



charge of registration shall

develop and issue legal act

with regard to rectification

of a registration error and

shall register such legal act

in the license registration

database.

109.3 If the head of state


administration‟s unit in

charge of registration deems

necessary, he/she shall

rectify errors in registration

by the following ways:

109.3.1 to insert missing datas;

109.3.2 to correct incorrect datas;

and

109.3.3 to remove incorrect and

redundant datas;

109.4 If rectification of registration

errors impacts any rights or

obligations granted to a

license holder by such

license, the head of State

Administration‟s Unit in

charge of registration shall


license holder and deliver

the legal act with regard to

rectification of registration

errors to the license holder.

109.5 If any person deems the

change in rights and

obligations under a license

to be due to the rectification

of registration errors as

harmful to persons other

than the license holder, the

person whose right has been

violated is entitled to appeal

to court for review of such

legal act with regard to the

rectificiation of registration

error.

110 Determination of the

correctness of documents

to be registered in

registration database

110.1 The documents registered in

registration database shall be

correct and the State

Administration may review

the documents or decisions

specified in this law in order

to determine the correctness

of the foregoing document

and decisions prior to

registration of such

decisions or documents. The

procedure and terms of such

reviewing process shall be

set by state administration.


111 Reference letter



charge of registration may

provide the reference letter

with regard to registration of

documents and decisions

kept in registration database

to any party interested in

such reference letter. The

reference letter shall be a of

proof whether documents

are correct or not and

whether documents are

registered or not.


may determine the service

fee for service to provide

reference letter specified in

Article 111.1 of this law and

provide copies of documents

registered in registration

database.

112 Address and record of

special permisson holder

112.1 When contacting with a

license holder in a matter

specified in this law, the


contact a license holder by

the address and phone

number registered in the

license holder registration

database.


obliged to inform correctly


about its official an current

address, location and phone

number in order to keep the

contact information in the



shall not be responsible for

the consequence arisen from

the failure to receive

notification, correspondence

or documents if the


or documents delivered to a

license holder is returned to

the State Administration, if

the State Administration is


not available to contact with

a license holder due to

failure to register official

and current address and

phone number in accordance

with Article 112.2 of this

law and the license holder

did not receive any


or document from the State


113 To deem notification,

correspondence or

documents delivered to

recipient

113.1 When the State

Administration submits any


or documents to any person

via offiical post, email or

facsimile in accordance with

this law, the notification,

correspondence or

documents shall be deemed

as delivered to receiver in

the following time period:

113.1.1 If the State Administration

delivered the notification,

correspondence or

documents via post, those

shall be deemed delivered

within the specified time

period set in the Law of

Mongolia on Post;

113.1.2 If the State Administration

delivered the notification,

correspondence or

documents via email or

facsimile, those shall be

deemed delivered within the

verified date of facsimile or

email;


submits any information and

date via telephone to any

person and record to prove

the telephone conversation

exist, the data and

information shall be deemed

delivered.

114 The mandatory

rehabilitation of

environment affected by




activities


obliged to rehabilitate land

affected by prospecting,



accordance with the

rehabilitation plan.

114.2 The local self governing

authority may agree with the

license holder in agreements

on Cooperation and Local

development about

implementation of

rehabilitation of land and

reciprocal improvement of

environment quality.

114.3 A mining and processing


mandatory to replant trees in

the foregoing area

irrespective of the

geographic region when

implementing rehabilitation

activity in area affected by



activities.

This appears to be out of place

as this would regulated as a

practical matter in the plans and

under environmental

legislation.

This may not be practical in all

conditions (e.g. Southern Gobi).

If the intention is to create

environmental offset

obligations this should be

specified and mechanisms

should be in place for the

licence holder to discharge its

obligations by planting or

rehabilitating flora in other

regions. Clarification is

required as to whether the

licence holder is requirement to

replant 'trees' or any type of

suitable vegetation.

Suggest deleing this Article.

Clarify.


obliged to plant 100 trees in

place of each tree that was

cut down in the course of



activities.

Same comment as above Suggest deleting this Article.




affairs shall ensure that a

license holder or relevant

authorized organization


mandatorily implements

rehabilitation activity in

accordance with Article 127

of this Law.



environment shall set and

approve the minimum

rehabilitation expenditure

per hectare differentiated by

the territorial regions and

mineral types.

115 Rehabilitation plan

115.1 A license holder shall

implement rehabilitation

activities in accordance with

the rehabilitation plan

approved by the relevant

authority.

115.2 If a mining and processing

license holder agreed with

the local self governing

authority on making

reciprocal improvement of

the environmental quality,

the holder shall specify it in

the rehabilitation plan.

115.3 The rehabilitation work plan

of a prospecting or


shall be reviewed by a local

environmental inspector of a

relevant soum or district,

and shall be approved by a

division in an aimag or the

capital city in charge of


115.4 The rehabilitation work plan

of a mining or processing


approved by the central state



affairs.

116 Reviewing the

rehabilitation plan

Does the rehabilitation plan

cover the entire operation as per

Technical and Economic

Feasibility Report or is it

incremental?

Clarify.

116.1 Prospecting and exploration

license holder shall submit

the rehabilitation plan with



workplan to the local


relevant soum or district.



the rehabilitation plan with


workplan to the central state



affairs in accordance with

88.7 of this law.

116.3 The local environmental

inspector and central state



affairs shall assess the

following conditions when

reviewing the rehabilitation

plan:

116.3.1 whether the rehabilitation

plan is in compliance with

that activity plan;


plan is achievable;

116.3.3 whether the planned

expenditure to be spent for

rehabilitation activity is

sufficient for the actual

expenditure for

rehabilitation;


activities fulfill the standards

and requirements;

Further clarification required as

to what precise standards and

requirements are being referred

to (i.e. standards and

requirements set in guidelines

released by State administration

in charge of environmental

affairs from time to time).

Clarify.

116.4 The local environmental

inspector shall make one of

the following decisions

within 5 (five) days after the



116.4.1 to approve the rehabilitation

plan;

116.4.2 to return the rehabilitation

plan in order to make certain

changes;

116.4.3 to reject to approve the

rehabilitation plan;


116.5 If the local environmental

inspector has returned the

rehabilitation plan with

certain comments to change

the plan or rejected to

approve the rehabilitation

plan he/she shall notify the

decision to the license holder

with specific statement of

the grounds for such return

or rejection.

117 Approving rehabilitation

plan

117.1 If rehabilitation plan

approved by the local


relevant soum or district



the rehabilitation plan to the





administration or the




affairs shall make one of the

following decisions based on

review of circumstances

specified in Article 116.3.1-

116.3.4 of this law within 10

(ten) days after the date of

receipt of the rehabilitation

plan:

117.2.1 to approve the rehabilitation

plan;

117.2.2 to return the rehabilitation

plan in order to make certain

changes;

117.2.3 to reject to approve the

rehabilitation plan;







affairs has approved the

rehabilitation plan, the

decision shall be delivered to

the following entities within

7 (seven) days after the date

of issuance of the decision to


plan:

117.3.1 the license holder;

117.3.2 State Administrationy;

117.3.3 state specialized inspection

authority;





nature and envinromental

affairs has returned the


certain comments with

regard to change the plan in

accordance with Article

117.2.2 of this law, the

decision to return the

rehabilitation plan shall be

notified to State

Administration within a

period specified in Article

117.3 of this law.

117.5 If the state central

administrative authority or

the division in an aimag or

the capital city in charge of


affairs has returned the


certain comments to change

the plan to the license

holder, the license holder

shall make proper changes in

the rehabilitation plan and

deliver it within 30 (thirty)

days after the date on which

the decision has been

rendered to return the


117.6 If the state central


The grounds for rejection of the

rehabilitation plans should be Consider and Clarify.




nature and envinromental

affairs has deemed it not

possible to approve the

rehabilitation plan based on

the review of factors


this law, it shall reject to


plan and ,thereof, notify the

license holder and State

Administration within the

time period specified in

Article 117.3 of this law.

The decision to reject

approval of the draft

rehabilitation plan shall

specifically reflect the

grounds for such rejection.

expressly linked to the criteria

to be assessed under Article

116.3.


submitted the rehabilitation

activity report for the

previous year in accordance

with relevant procedures to

the relevant authority, the


or the division in an aimag

or the capital city in charge

of environmental affairs may

reject the approval of

rehabilitation plan for the

following year.

117.8 If the license holder

disagrees with the decision

to reject the approval of



entitled to litigate in the

court within 30 (thirty) days

since the date of rendering

the decision to reject the

foregoing plan.


litigated against the decision

to reject the approval of


license holder may

redevelop the rehabilitation

activity report once again

and deliver it to the central

state administration or the





affairs within 30 (thirty)

days.






affairs shall review and

resolve the rehabilitation

plan redeveloped by the

license holder in accordance

with thisArticle of this law.

118 Rehabilitation

Expenditure Estimation

118.1 In order to estimate and

determine the expenditure

for rehabilitation activity for

rehabilitation activity each

year, the license holder shall

have the rehabilitation

expenditure estimation for

rehabilitation activity made.

118.2 The expenditure per hectare

for rehabilitation activity

shall not be less than the

minimum expenditure per

hectare for rehabilitation

activity set and approved by

the central state



affairs.

118.3 An entity conducting the

rehabilitation cost estimation

shall comply with the





Are these procedures available? Clarify.

118.4 When making the

rehabilitation cost

estimation, the area on

which prospecting,


processing activities is to be

completed and the planned

rehabilitation activity for the

foregoing area shall be

assessed and the factors


this law shall be addressed.





affairs deems it necessary, it

may require the license

holder to have an audit

organization conduct audit

and issue a conclusion on

the rehabilitation cost

estimation.

We assume that this is a rare

exception to the general rule

that this is not required?

Conform assumption.

118.6 In the case specified in

Article 118.5 of this law, the

audit organization issuing

the conclusion shall deliver

the copy of conclusion to the

State Administration within

3 (three) days following the

issuance of such conclusion.

118.7 The amount of expenditure

shall be reflected in the

rehabilitation plan and

approved by the state central





affairs.

119 Expenditure deposit for

rehabilitation activity

119.1 Guarantee for performance

of rehabilitation activity

shall be equal to 100% of

amount of expenditure for

rehabilitation activity of

each year specified in


What form the guarantee should

be in? Is a bond sufficient? Is it

rolling or cumulative? Does the

bond cover the entire

rehabilitation plan or is it

incremental (see Art. 116).

Clarify.

119.2 A license holder shall place

the expenditure to be spent

for rehabilitation activity for

a year in a special bank

account established by the

state central administrative

authority in charge of nature

and environmental affairs


after approval of the


119.3 It shall be prohibited to use

the the expenditure deposit

in the special account for

purposes other than the

designated purpose.

119.4 If for specific year the Assumption that if there is a Confirm assumption.


rehabilitation plan of the


license holder has changed

or the rehabilitation

activities have not complied

the standards and

requirements approved by



environmental affairs, the




affairs may demand


license holder to increase

monetary capital placed or to

be placed in a special

account for the next year.

change in the rehabilitation

activity that would decrease the

amount specified that a portion

of the monetary capital will be

returned within thirty (30) days

of notice (see below article

also)?

119.5 In the cases specified in

119.3 and 119.4 of this law,

the license holder shall

transfer the necessary

additional monetary deposit

to the special bank account

for rehabilitation

expenditure within 30

(thirty) days.


deposited the additional

monetary capital to the

special bank account in

accordance with 119.5 of

this law, the central state





affairs shall submit the

proposal to the State

Administration to suspend

the Work authority for the

license holder.

119.7 Transaction of the special

bank account in which to

deposit the rehabilitation

expenditure and monitoring

of the foregoing bank

account shall be regulated by

the procedure approved by

the Government.

Does this procedure exists?

Will this be an interest bearing

account to the benefit of the

license holder?

Clarify.

120 Rehabilitation activity



implement rehabilitation

activity in accordance with

the annual rehabilitation

plan and shall be obligated

to reclaim the area granted

under the license in

compliance with the

standards and requirements

approved by central state



affairs prior to the expiration

of the license.


completed rehabilitation

activity prior to the

expiration of license term, it

shall be obligated to

complete the rehabilitation

activity at the shortest time

as possible. The central state



affairs shall set the specific

time of completing the

rehabilitation activity by

taking into account the

specific features of the

remaining rehabilitation

activity.

120.3 The local self-governing

authority, the state


agency and the division in

an aimag or capital city in



jointly monitor the

implementation and

performance of the


120.4 The expiry of the license

shall not serve grounds for

license holder to be releases

from duties of completing

the rehabilitation work in the

area

121 Committee in charge of

accepting the result of


121.1 The results of a

rehabilitation work of a



accepted by a Committee

consisting of the

representatives of the local


offices, the divisions of the

aimag and the capital city in


environmental affairs and

local citizens, under the


state central administrative


and environmental affairs.

122 Accepting the result of


122.1 The committee shall assess

the result of rehabilitation

activity at site of

rehabilitation and issue the

conclusion. The committee

shall submit its conclusion to

the central state



affairs.




affairs shall, , make a

decision as to whether to

accept the results of the

rehabilitation work based on

the opinion of the

Committee under Article

122.1 of this law.

122.3 The cenral state



affairs shall be obliged to

deliver, within 3 (three)

days, its decision regarding

whether to accept the results

of the rehabilitation work to


the license holder,

respectively.

123 Refusing to accept the


result

123.1 If the Committee deems that

rehabilitation work fails to

meet standards approved by

the central state




affairs and has not covered

an entire area for

rehabilitation in the given

year, it shall issue

conclusion to reject to accept

the rehabilitation work

results, and set a specific

period of time to re-perform

the rehabilitation. The

Committee must submit its

conclusion to the state

central administrative


and environmental affairs,

the specialized inspection

authority and the State

Administration.




affairs shall issue decision to

reject the rehabilitation work

results if received the

conclusion specified in

123.1 of this law.

Can the State Central

Administration not have

discretion as whether to reject

or accept if it disagrees with the

decision in Article 123.1? Why

mandate a conclusions/action.


124 To file compliant against

the decision

124.1 The license holder may file

the complaint to Minister

(Cabinet Member) in charge

of nature and environmental

affairs if it does not agree

with the conclusion of

Committee and decision of

the central state



affairs to reject the

acceptance of the

rehabilitation work result.

124.2 The Minister (Cabinet

Member) in charge of nature


shall appoint an independent

team of specialized experts

consisting of 15 members as


this law if the license holder

has filed the complaint in

line with 124.1 of this law.

124.3 The members of the


independent, specialized

team shall be specialized in

geo-ecology and

environment and have in-

depth knowledge, skills and

experience.

124.4 The expert team shall be

comprised of 15 members as

provided below:

124.4.1 one person each from the



environmental affairs and


authority, with specialization

in the studies of flora, fauna,

air, water and soil;

124.4.2 from the local self-

governing authority of the

given area - 2;

124.4.3 specialized researchers from

research institutions in geo-

ecological studies - 2;


research institutions in

botanical studies - 2;


research institutions in water

and soil studies - 2;

124.4.6 specialized researchers of

the research institution on

issues of fauna studies - 2;

124.4.7 representatives from the

local area - 2;

124.4.8 representative from

professional associations and

the legal entity carrying out

the prospecting, exploration,


activities – 1;

124.5 The Cabinet Member in



appoint the members of the

team specified in 124.4.1,

124.4.3-124.4.6 of this law

on the basis of proposals

made by public and

professional organizations.




appoint the members of the


team specified in Articles

124.4.2, 124.4.7, and

124.4.8 of this law on the

basis of proposals made by

the local self governing

authority and local public

organizations.

124.7 The internal procedures for

electing, appointing and re-

appointing the members of

the experts‟ team and the

functioning of the experts‟

team as well as the

procedures for allocating

incentives and estimating the

expenses of official trips for

the team members shall be

approved by the central







issue a decision as to

whether to receive the


work based on an opinion of

the experts‟ team,

Can the Cabinet Member make

an independent decision or must

this person follow the opinion

of the experts?

Clarify.

125 Certification that land has

been rehabilitated

125.1 If the Committee deems that

the license holder

rehabilitated the land in

compliance with the

standards and requirements

it shall grant the certificate

that the land has been

rehabilitated to the license

holder.

126 Return of the expenditure

for rehabilitation activity

placed in the special

account


125.2 On the basis of the

certificate that the land has

been rehabilitated specified

in Article 125.1 of this law,

the state central

administrative authority in



return the expenditure for

rehabilitation activity to the

license holder within 14

(fourteen) days.

We assume that this will be the

full return of the payment +

interest.

Confirm assumption.

127 Carrying out the

rehabilitation by the state

central administrative






affairs shall render the

decision to ensure that the

rehabilitation activity would

be performed by another

entity and dispose the

monetary deposit for

expenditure placed in special

account for the foregoing

activity if the area where the

license holder has not

performed rehabilitation or

the pristine nature is affected

as a result of a incomplete

performance of

rehabilitation by license

holder. The central state



affairs shall deliver this

decision to the State


within 3 (three) days in

order to have the decision






affairs shall issue the

decision specified in Article

127.1 of this law in the

following cases:

127.2.1 if a license holder has not


conducted the rehabilitation

in consistent with the

rehabilitation plan and the

standards under this law;

127.2.2 If the license holder has

failed to perform the

rehabilitation within the

specific period of time set by

the Committee in charge of

reviewing and accepting the

result of rehabilitation;

127.3 If the expenditure for


deposited in the special bank

account by the license holder

is not sufficient to finance

the rehabilitation activity,

the central state



affairs shall ensure the

allocation of the necessary

monetary fund from the state

budget and have the

rehabilitation activities

implemented in completion

by the organization

authorized to engage in

rehabilitation activiteis.

127.4 The state administration in



file the lawsuit against the

responsible license holder.to

get compensation for the

expenditure for

rehabilitation activity funded

by the state budget specified

in Article 127.3 of this law

128 Obligation to inform

public




affairs and geology and

mining affairs shall inform

the public through electronic

form concerning the the

following information,

documents and decisions

with regard to the

rehabilitation and protection

of environment:


128.1.1 environmental impact

assessment;

128.1.2 rehabilitation plan and

report;

128.1.3 decision to accept the result

of rehabilitation activity

made by the Committee in

charge of reviewing and

accepting the foregoing

result;

128.1.4 any complaint and proposal

with regard to rehabilitation

submitted to the state

organizations and the status

of resolution of those

complaint and proposals;

128.1.5 an information regarding the

usage of chemical toxic and

other chemical substances

that may affect the

environment and public

health;

129 Request for permission to

close the mine and plant

The entire Chapter 13 (Art 129-

139) is a deal killer for some

operators.



shall, in accordance with the


Feasibility Report of mining,

submit a request to the

following state authorities,

within not less than 3 years

before the planned closure

date of a mine:

129.1.1 the state administration;

129.1.2 the central state



affairs;

129.1.3 the specialized inspection

agency;

129.1.4 the local Government;

129.2 If a processing license

holder planned to close the

plant, it shall be obligated to

submit the request at least 3

(three) year prior to the

planned date for closure of

the plant and deliver the

request to the state

organizations specified in

Articles 129.1.1-129.1.4 of

this law.



attach detailed closure plan

of a mine or a plant

approved as specified in this

law, and other related

documents to the request.


shall register the request for

closure of a mine or a plant

in the license registration.

130 Granting of permission for

closure of mine and plant

130.1 The Professional Mining

Council shall review a

request, a detailed plan and

other related documents

submitted by a license

holder, issue an opinion in

respect of granting of the

permission for closure of a

mine or a plant, and shall

send such opinion to the


130.2 The State Administration,

based on the opinion of the

Professional Mining

Council, shall make a

decision as to whether to

grant the permission for

closure of a mine or a plant.


has decided to grant the

permission for closure of a

mine or a plant, it shall

notify the specialized

inspection authority in

writing.

131 Refusing to grant

permission for mine

closure

131.1 If the Professional Mining

Council deems that the

permission cannot be

granted for a mine closure

given that the approved

reserves for production have

not been fully exhausted, the


reject the request on mine

closure of a license holder.

We assume that the approved

reserves for production to be

exhausted are based on

economic factors and not

complete exhaustion.

Confirm assumption.

131.2 If a license holder disagrees

with the decision of the State

Administration specified in

Same comment as above Confirm assumption.



Administration shall grant a

permission for the mine

closure on the grounds of

assigning to pay the royalty

fees on the remaining

unused production reserves.

132 Closure plan of mine and

plant


license holder must have a

closure plan of a mine or a

processing factory.


obliged to have prepared and

approved closure plan of a

mine or a plant together with

the preparation and approval

of a Technical and


Report of mining or

processing activity.

132.3 A license holder shall adjust

the closure plan of the mine

or the plant once every 3

years and, as specified in

Article 130 of this law,

submit it for discussion to

the Professional Mining

Council, and for approval by


132.4 A detailed closure plan of a

mine or a plant shall be

prepared 3 years before the

closure of such mine or a

plant and the detailed plan

shall be adjusted every year,

and be submitted for

discussion and approval, as


this law.

132.5 The following conditions

should be included in a

closure plan of a mine or a

plant.

132.5.1 technical indicators of

closure of the mine or the

plant;

132.5.2 measures to be taken in

relation to the environmental

protection and reclamation

during the closure of the

mine or the plant;


132.5.3 any social impact that may

occur as a consequence of

the closure of the mine or

the plant, its evaluation and

measures to be taken in

respect any means to remedy

such impact;

Is the license holder held

responsible for “social impact”

of closure? What is the full

scope of this Article?

Clarify.

132.5.4 financing and relevant

indicators of closure of the

mine or the plant.

132.6 If commercial infrastructure

and facilities constructed

and used for the production

purposes are located outside

of the licensed area, the

issues on the ownership,

usage and possession of such

infrastructure or facilities in

relation to the closure of the

mine or the plant shall be

included in the closure plan.

We assume that this will

primarily be pre-determined

and dictated in the Land

Possession or Use Agreements

under the Land Law, and under

the Civil Code, and be

mimicked in the closure plan.

We would assume the same if

located within the license area.

Confirm assumption.

Confirm assumption.

132.7 The issues related to the

maintenance, protection and

monitoring of the

surroundings of the mine or

the plant after closure as

well as the means of

resolving and regulating of

the financing of such issues

shall be included in the

closure plan.

132.8 The closure plan shall

determine the transfer,

ownership or the purpose of

the usage of the land after

closure of the mine or the

plant. Such issue should

have consulted with a local

self-governing authority.

We assume that the Land

Agreement will pre -

“determine” this.

Confirm assumption.

133 Temporary closure of mine

and plant

133.1 A closure plan shall include

measures to be taken in

respect of a temporary


133.2 In the event of a temporary

closure of a mine or a plant,

a license holder shall send a

notification of temporary

closure of such mine or plant


and the specialized

inspection agency.


133.3 The notification on a

temporary closure of a mine

or a plant shall clearly

indicate a reason and a

duration for temporary

closure of such mine or

plant.

133.4 The specialized inspection

agency shall, within 7

(seven) days upon receiving

such notification, inspect the

reasons and conditions for

temporary closure of the

mine or the plant, and

monitor the temporary

closure process.

Does the Specialized Inspection

Agency have any authority to

veto the temporary closure or

only “inspect” and report on

such reasons?

Clarify.

133.5 A temporary closure of the

mine or the plant shall not

cause either to decrease the

amount of the expenditure

deposit for closure activity

specified in this law or

exempt from the obligation

to place the expenditure

deposit in the special

account.

133.6 A planned halt indicated in

the mining or processing

work plan shall not be

considered as a temporary

closure.

134 The obligations of license

holder during the mine

closure

134.1 As specified in this law, a

license holder shall

commence the preparation

for a mine closure from a

date of receiving the

permission on the closure of

a mine or a plant from the

state administrative body.

134.2 The license holder has the

following obligations during

the mine closure period:

134.2.1 to fully control the mine

closure activities, to ensure

the labour safety operation

and to implement all the

regulation and procedures

related to the foregoing;

134.2.2 to adhere with relevant

regulation with regard to


closure of tunnel and

entrance of mine;

134.2.3 to take measures to prevents

the penatration of water used

in the mine site and

contaminated by chemicals

to the subsoil, groundwater

or water in the surface;

134.2.4 to remove all things used in

mine such as mining

equipment, techniques, road,

construction, ditch, trench,

communication line and pipe

shall be removed from the

area granted under a special

permisson unless agreed

otherwise;

134.2.5 to close all the entrance of

open pit in order to prevent

illegal extraction activity in

the particular area after the

closure of mine;

134.2.6 to prevent fire disaster and

water accumulation;

134.2.7 to bury all the valley and

hole which has been created

as a result of open pit mining

and to take measures to

improve the charesteristic of

environment through

creating artificial lake and

pond;

This requirement it largely

acknowledged as economically

impossible and therefore not

required in other jurisdictions.


134.2.8 to plant trees and plants in

the area affected by

extraction activity or that has

been agreed to be improved

by exchange under this law;

This appears to be unusual as

directly included in the Draft

Law and would be better placed

in the plans as negotiated with

the Ministry of Environment.


Article.

134.2.9 if the deep and subsoil water

revealed in surface of land,

to build a ditch and trench in

order to use the foregoing

water for watering purpose;

134.2.10 to reclaim the hydrology

system if the hydrology

system had changed during

the extraction;

134.2.11 to control and review quality

of ground and subsoil water

from the mine and to take

measures to purify the

polluted water;

134.2.12 to take measure to make the

area granter under a license


and mining claim field

usable for public tenure

lands, pasture or agricultural

lands after the closure of

mine;

134.2.13 to take measures to ensure

the possibility of workers to

be recruited in the other

mine project or mine after

the closure of mine;

To what extent? What is the

scope of this Article –

recruitment, advertisement, re-

training?

Clarify.

134.3 A license holder shall place

the necessary expenditure

deposit for the mine or plant

closure in the special

account under Article 135 of

this law.

134.4 The expiry of the valid date

of mining and processing

license shall not serve the

grounds to release from

duties related to closure of

mine and plants and post

closure review and

assessment.

134.5 closure in the special

account under Article 135 of

this law.

135 Expenditure deposit for

closure of a mine or a

plant.

135.1 Before obtaining the work

authority to conduct the

relevant work a license

holder shall place the

expenditure deposit for


in a monetary form in the

special account, in order to

provide assurance to conduct

the closure of such mine or

plant at an area of the

mining or processing work,

as required in accordance

with the approved plan.

This requirement is onerous and

may deter investment in the

minerals sector for significantly

large mines because it ties up a

significant amount of capital for

the life of the project. Such

sums of money will likely need

to be financed and borrowed, at

cost to the project, and this will

deter projects, and furthermore

banks will not necessarily be

willing to lend such sums at the

start of a project.

It would be preferable to permit

license holders to provide

security in respect of their mine

closure requirements (i.e.

performance bonds). Another

alternative is to establish a

Government fund which

collects annual contributions

from license holders based on a



license holder's total expected

mine closure expenditure (for

example, as was recently

introduced in Western

Australia). However

establishing a fund of this kind

will require careful planning

and implementation. Another

option could be a progressive

deposit into escrow over the

mine life.

For example, we cannot image

ETT being able to put up

hundreds of millions of dollars

for an obligation likely to be

over 60 years in the future and

at the same time have enough

money to develop and operate.

135.2 The license holder shall set

the amount of the



taking into account the

following conditions:

135.2.1 Technical and Economical

Feasibility Report of a mine

or a plant;

135.2.2 a detailed environmental

impact assessment;

135.2.3 an impact assessment on

public health and society;

135.2.4 a size of an area affected by

the mine or the plant;

135.2.5 a future risk assessment;

135.2.6 other grounds specified in

the law;

135.3 An area specified in Article

135.2.4 of this law must be

determined as covering both

a size of a mine claim, an

area beyond the licensed

area and its border which

has been adversely

influenced by a mining or

processing activity.


deposit for closure of a mine

or a plant must be fully

sufficient for financing the

work or activity to be

implemented under the

Same comment as 135.1. Clarify.


approved plan as specified in

this law.


deposit for closure of a mine

or a plant placed in the

special account by a license

holder shall be updated and

increased by the

Professional Mining Council

once every 5 years taking

into consideration changes

in the amount of closure

costs and inflation. The

Professional Mining Council

shall not reduce the closure

costs placed in the special

account by the license holder

and shall not return it to the

license holder on the

grounds other than those as

specified in in Article 138 of

this law .

Does the license holder have a

say in this or is it upon demand

of the Professional Mining

Council?

Clarify.

136 Decision on closure of a

mine or a plant

136.1 The State Administration,


agency, the central state l



affairs and the local

Government authority shall

appoint a joint Committee

for the closure process of a

mine or a plant.

136.2 The Committee shall

monitor the closure process

of a mine or a plant and

issue an opinion regarding

the closure of such mine or

plant as required.

136.3 Prior to the issuance of

decision on closure of a

mine and plant, the license


submit to the State

Administration. the schemes,


Feasibility Report and all

other documents related to

the closure of the mine or

the plant.

136.4 The State Administration,,

based on an opinion



this law, shall issue a

decision on the closure of a

mine or a plant and register

it with the license


137 Monitoring after closure


obliged to carry out the

monitoring at own expenses

for a specific period after the


If mine or plant is closed and

rehabilitated, in most

jurisdictions, responsibility and

liability passes back to the

State.


137.2 A duration of monitoring

after closure shall be

determined by the State

Administration taking into

consideration the scope of

the activity of a mine or a

plant, a state of

environmental disturbance,

safety conditions, possible

future risks and a time frame

for clearing up of the

adverse impacts.

This is very open ended. Suggest adding a maximum

amount of time “no greater

than” or “up to”.

138 Returning of expenditure

deposit

138.1 Where a period for

monitoring has been

finished, and no risks have

occurred in respect of the

closure during such period,

and where the land has been

transferred for the

subsequent use and an issue

on protecting from possible

risks has been resolved, up

to 90 percent of the closure

expenditure deposit accrued

in the special account can be

returned.

Depending on the monitoring

period, the expenditure deposit

could be held for a very lengthy

period of time. Is this interest

bearing?

No refund mechanism/criteria is

specified.

What is meant by “land has

been transferred for the

subsequent use”? Does this

mean transferred back to the

State or the State transferring to

another party to use? If the

latter, what if nobody wants the

land?

Why is the language “up to” 90

percent used? Why does it say

“can” be returned and not

“shall” be returned?


Clarify.

Clarify.

Clarify.

139 Contingency fund for


139.1 After refunding of the

closure expenditure deposit

Note 10% of closure deposit

will be retained against possible




law, 10 percent of the



that has been placed in the

special account, shall be

transferred into the

Contingency fund of closure

of mines and plants for

protection from possible

risks that may occur in the

closed areas in the future.

future risk, despite monitoring

period being concluded.

Effectively this is yet another

tax.

139.2 The operation of the special

account for expenditure

deposit for closure of mines

and plants, and the closure

Contingency fund shall be

regulated by a separate law.

Does this law exist? Clarify.

140 Inspection

140.1 In the necessary

circumstances, the state


agency may appoint the

inspector who is authorized

to conduct inspection in the

activity of a license holder.

140.2 The inspector who appointed

in accordance with this law

has the following mandates:

140.2.1 to enter the area granted

under a license, mine,

factory and mining claim

area and other constructions

related to mining claim area

where the license holder

conducts its activity under a

license within working hour

without any obstacles;

There are health and safety

issues, as well as other issues

that should be considered. It

would be more appropriate to

require the State Inspector to

provide at least 48 hours written

notice of arrival and then carve

out except in “emergency

situations” such as is done in

Article 140.3, industrial

accident, etc.


140.2.2 to carry out an investigation,

examination or survey in the

buildings, facilities,

equipment, goods and

materials specified in Article

140.2.1;

During an investigation, how

much “interference” can a State

Inspector have?


140.2.3 to seize the evidence related

to an activity which is

possible to violate this law,

other relevant legislation and

regulations;

Does this include documentary

inspection and review and

seizure? CR 144.1.3.

Clarify.

140.2.4 to ask questions from a

relevant person, and to


require to provide an

explanation;

140.2.5 to take samples for analysis

when an additional analysis

is deemed as necessary;

140.2.6 to take picture and make

record in order to strengthen

the evidence of violation;

140.2.7 other rights specified in law;

140.3 If the authorized inspector

deems it necessary to inspect

and immediately take

measures to cease the

activity of license holder

which has caused serious

damage to the environment,

the inspector is authorized to

enter the premises at any

time of the day.

140.4 The license holder or any

other related person shall be

obliged to render assistance

to the inspection and

cooperate with the state

inspector.

To what extent? We assume

that the State Inspector must

pay his/her own costs.

Confirm assumption.

140.5 A license holder must not,

without reasonable excuse,

obstruct a state inspector in

the exercise of powers or

refuse to cooperate

140.6 Upon entry into the area and

construction and facilities

for the purpose of exercising

his or her mandate conferred

by this law, the authorized

state inspector appointed

under this law shall be

obliged to provide the

identification card of the

state inspector, appointment

for inspection and other

documents authorizing him

to conduct such inspection,

and to explain to a relevant

person of the rights and

duties specified in this law.

140.7 If the authorized inspector

did not implement his/her

obligation specified in 140.6

of this law, entity may refuse

to perform the demand made

by the foregoing inspector.

141 To document the


inspection by the

authorized inspector

141.1 Where an authorized state

inspector has, for the

purpose of the inspection

under this law, entered the

area and the premises

specified in Article 140.2.1.

of this law, and carried out

an inspection, he shall issue

a document on such entry

into the foregoing area and

construction, and give one

copy of the document to a

license holder or his

authorized person.

141.2 The document specified in

Article 141.1 of this law

shall be in written form and

contain the following

information:

141.2.1 name and identification

number of inspector and

number of appointment;

141.2.2 entering and exiting date and

time;

141.2.3 purpose of entrance;

141.2.4 work has been done and

description of activity

conducted during inspection;

141.2.5 brief conclusion regarding

potential violation which

observed during inspection;

141.2.6 a reference of any

photograph or record taken

during inspection, and ways

of access to such photograph

or record by the license

holder or his authorized

person;

141.2.7 a contact information and

phone number of inspector

and foregoing information of

his senior management

person;

141.2.8 procedures for reviewing

and filling a compliant in

respect of the conclusion

made at the inspection site

by the state inspector;

142 Forfeiture of the property

and return the forfeitured

property


142.1 If the inspector seizes any

item for the purpose of

taking samples for analysis,

the inspector shall document

a file which clearly indicates

the name, type, quantity and

value of seized items and

provide one copy of such

file to the license holder or

its authorized person.

142.2 The state specialized

inspection agency shall

return the seized property to

the owners or possessors of

the those property except for

those as specified in the

following:

142.2.1 if seized property may be a

proof of violation of the law

or relevant rules and

procedures;

142.2.2 if a decision has been made

that the seized property in

the state revenue due to an

owner or possessor of such

property is unknown;

142.2.3 If the seized properties are

things that should be

destructed in accordance

with law and court decision;

142.2.4 If the seized properties have

been used up as samples,

and thereof, being

impossible to return;


inspection agency may

sanitize and detoxicate the

seized properties and in this

case it may decide to claim

the relevant expenses for

sanitization and detoxication

of the properties from the

owner and possessor the

foregoing things.

143 Confiscated as state

revenue


inspection agency shall

make decision to take the

confiscated property as the

state revenue in the

following cases:

143.1.1 if the owner and possessor


of the seized properties are

unknown;

143.1.2 property items, mined

minerals, products, and any

income derived from such

items, that have been

generated as a result of a



activities without a license;

143.1.3 if the seized properties are

things prohibited to extract,

store, transport and sell

according to the laws of

Mongolia or the things

prohibited to be return to its

owner and possessor;

144 Other rights of the

authorized inspector

144.1 The authorized inspector

shall have the following

mandates, in addition to

those specified in Article

140 of this law:

144.1.1 If it is necessary for the

inspection, to take

translation assistant from

particular person who is

under inspection without any

charge;

144.1.2 to require and receive

explanation and reference

from the relevant authority

during the inspection;

144.1.3 to make copies of documents

when necessary;

144.2 If the authorized state

inspector has found, during

inspection work, that an

activity of a license holder

has been in violation of the

legislation, and that such act

may become a ground to


to conduct the work

specified in this law, the

inspector shall issue an

opinion and submit an

official notice to suspend the

Work authority to the State

Administration.

144.3 If the authorized state

inspector has found, during


will constitute a 'serious



an inspection work, that an

activity of a license holder

has been in a serious

violation of the legislation,

and that such act may

become a ground to revoke

the license under this law,

the inspector shall issue an

opinion and submit a

proposal to revoke the

license to the State

Administration.

violation'.

Consideration should also be

given to requirements for

remediation of violations before

revocation. Due process.

145 Liabilities for breach of

legislation.

These provisions include very

little protection for licence

holders and the only relevant

provision is article 145.1.26

which protects against third

parties who obstruct the

performance of authorised

activities. However the fine is

disproportionate to the potential

damage which may be incurred.

For example, the cost of

standby for a single drill rig for

a 24 hour period is

approximately 6.85 million

MNT.


145.1 If a breach of the minerals

legislation does not

constitute a criminal offence,

an authorized state inspector,

whilst taking into account

the circumstances of the

infringement, shall impose

the following penalty on the

guilty person:

145.1.1 If any person has conducted

mineral prospecting,


processing activities without

holding a license, all

incomes or products derived

from foregoing activities

shall be confiscated and a

fine equal to minimum wage

multiplied by 5-10 times

shall be imposed on an

individual, or a fine equal to

minimum wage multiplied

by 25 – 100 times shall be

imposed on a legal entity.

145.1.2 If any person purifies,


processes, transfers,

transports, stores, sells,

purchases, mediates

minerals that have been

mined illegally, a fine equal

to minimum wage multiplied


imposed to an individual and

a fine equal to minimum

wage multiplied by 50 – 75

times shall be imposed to an

legal entity;

145.1.3 For conducting mineral



activities on the territory on

where the prospecting,


processing activities has

been prohibited or restricted,

the relevant incomes derived

from such activity shall be

confiscated, and a fine equal



imposed to an individual

person and a fine equal to



imposed to a legal entity;

145.1.4 If a license holder has failed

to comply with the

obligation to exhaust the


minerals determined as the

production reserves during

extraction of a deposit, any

loss resulting from such

failure shall be

recompensated and a fine

equal to minimum wage

multiplied by 50 – 100 times

shall be imposed;

Clarity needed as to exhaustion

of the main and subordinate

minerals determined as the

production reserves.

Clarify.

145.1.5 If a license holder has

conducted high grading

mining shall be compensated

in accordance with this law

and a fine equal to minimum

wage multiplied by 100-250

times shall be imposed;

Clarification on “high grading”. Clarify.

145.1.6 If a license holder, who has

concluded a Deposit

development agreement has

Would this not be regulated by

the Company Law given that

the Government will be a

Clarify and consider

removing.


failed to fulfill his duty to

provide, upon a Government

request, any information

related to an activity

undertaken in respect of the

license as well as to

investment and ownerships

during the term of such

agreement, a fine equal to


by 25-50 times shall be

imposed;

shareholder under the DDA?

145.1.7 If a person, who has right to

conduct reconnaissance, has

disturbed the subsoil, the

reclamation expenditure for

the affected area shall be

compensated, and a fine



shall be imposed;

Clarity needed on “disturbed

the subsoil.”

Clarify.

145.1.8 If a person failed to fulfill

the obligation to submit the

reconnaissance, prospecting

or exploration report and

copies of relevant

documents to the State

Administrative Authority in

accordance with this law and

to ensure registration of the

foregoing report and

document in the

Consolidated database of

National geology and

minerals, shall have

submitted the foregoing

report and document by that

particular person and a fine



shall be imposed to an

individual and a fine equal



imposed to a legal entity;

145.1.9 If a license holder creates


industrial waste without

permission of the State

Administrative Authority, a



or a fine equal to 15% of


revenue derived during the

creation of derivate deposit

and industrial waste shall be

imposed;

145.1.10 If a mining license holder

has carried out prospecting

on and exploration activity

solely, on the area granted

by the license a fine equal to

the minimum wage


shall be imposed;


commenced a work or

carried out an activity

without the Work authority

to conduct such work or

activity from the State

Administrative Authority,

the incomes derived from

such work or activity shall

be confiscated, and a fine

equal to the minimum wage


shall be imposed;

145.1.12 If a exploration license

holder has carried out

extraction activities in any

way the revenue shall be

confiscated and a fine equal

to the minimum wage


shall be imposed;

145.1.13 If a license holder or its

authorized person has, in

any way, obstructed the

authorized state inspector

specified in this law to

exercise his rights or refused

unreasonably to cooperate, a

fine equal to the minimum


times shall be imposed shall

be imposed;


to submit the information,

report or work plan on time

within the periods as

specified in this law, or has

submitted false information,

report or plan,

misrepresentation, a fine

equal to 20 % of the incomes


accrued during the given

reporting period shall be

imposed;


failed to inform the decision

to issue shares to the State

Administrative Authority as

specified in this law a fine



shall be imposed;

This is regulated under the

Strategic Entities Foreign

Investment Law and should be

under the Jurisdiction of the

Ministry of Economic

Development and not the State

Administrative Authority. This

imposes an additional fine

outside the scope of this

legislation. Overregulation.

Recommend deleting this

Article.


failed to perform its

obligation to consult and

inform the public with

accurate information a fine


multiplied by 50-100 shall

be imposed;

145.1.17 If a specialized person in

geology or an independent

expert, specified in Article

102 of this law, has failed to

fulfill an obligation to issue

an integrated report and

estimations on the results of

the prospecting and

exploration work, truly and

accurately, or has

deliberately issued false

information, report,

estimation or opinion,

misrepresentation, a fine



shall be imposed;

145.1.18 For a failure to comply with

the regulations in respect of

assaying and registering of

precious metals and

gemstones, a fine equal to

25% of the total value of

such precious metals and

gemstones that should have

been registered shall be

imposed;


to fulfill an obligation to

sell, at a premium rate, to the

treasury fund of

Mongolbank, a nugget,


which weighs more than 400

grams, or which has a

peculiar shape though

weighing less, or a precious

stone with a rare color and

shape, a fine equal to 50% of

the value of such items shall

be imposed;


suppressed the quantity of

the mined minerals, and has

concluded a deceitful

contract for such purpose, or

has intentionally understated

the sales revenue by selling

such minerals at an

unreasonably low price, the

amount of the minerals

extracted and the price

difference shall be

calculated and repaid into

the state budget, the fine

equal to 50 percent of the

amount of revenue accrued

during this period shall be

imposed.

145.1.21 If a mining and processing

license holder has failed to

fulfill or has intentionally

avoided to fulfill an

obligation to supply raw

materials to domestic

processing plants, a fine


multiplied by 400-450 shall

be imposed;


to fulfill its obligation to

have executed its main and

minor operations of


mining and processing by

domestic companies in a

proper percentages as

specified in this law, a fine



shall be imposed;


to submit the notification as

specified in Article 101.12

of this law, a fine a fine




shall be imposed;

145.1.24 If a sample, assay and

primary materials

accumulated by the course

of exploration have been lost

or destroyed, such items

shall be re-compiled, and a



shall be imposed;


experienced an illegal

interference in exercising his

rights under the legislation, a

fine equal to the minimum


times to an individual, equal

to the minimum wage

multiplied by 25-50 times to

a legal entity shall be

imposed;

Drafting unclear assume the

fine will be levied against the

person/company creating the

interference.

Further, this should be greatly

expanded to include the costs of

shut-down, temporary closure,

lost profits, actual losses, etc.

For example, if a State

Inspector or Striking Labor

Force, or Protests create and

illegal suspension or shutdown,

the license holder should be

fully compensated for all

damages. This is done in Article

145.1.34 and should also be

done here.

Clarify.


145.1.26 If the State Administrative

Authority has failed to fulfill

an obligation to issue a

public notice in respect of

the information required

under this law for

publicizing in accordance

with the approved

procedures, a fine equal to



imposed to the responsible

person;

145.1.27 If a responsible person has

failed to fulfill an obligation

to notify other persons

whose rights are affected in

respect of the license that

has already been registered

in the license registration

database under this law, a



shall be imposed;



failed to install area

demarcation marks, or

transfer the installed

demarcation marks as

specified in this law, a fine



shall be imposed;

145.1.29 If the license holder, or the

management of the mine or

processing plant have failed

to inform of the accident

occurred and arising of other

dangerous conditions

occurred during the course

of prospecting, exploration,


activities according to the

procedure specified in this

law, failed to take necessary

measure to eliminate the

conditions, or failed to

perform its obligation to

render first aid to the victims

and evacuate people from

the danger zone, a fine equal


by 50-100 times to

individual, and a fine equal



imposed to legal entity;

145.1.30 If the license holder has used

chemical toxic substances,

concoctions in its activities

without permission, or has

used hazardious chemical

toxic substances,

concoctions prohibited by

law, or has not complied

with the technological

regime, rules and procedure

to handle such chemical

toxic substances and

concoctions, the damages

incurred shall be

recompensated and a fine

equal to the amount of the



imposed;



to comply its obligation to

maintain the pollution of air,

water and soil, as well as

dust and noise at permissible

levels, a fine equal to



imposed;


failed to inform the relevant

authority of the discovery of

historically and culturally

valuable findings during the



activities as provided by this

law, and such cultural and

historical, rare findings have

been destroyed due to failure

to restrict its activities within

the specified distance, the

damages incurred shall be

compensated and a fine



shall be imposed;


to inform to or has

concealed from the State

Administrative Authority of

finding a mineral occurrence

with a radioactive

production content during

the prospecting, exploration,


activities as required in this

law, a fine equal to



imposed;

145.1.34 If a person appointed to

manage the prospecting,


processing activities has

failed to fulfill an obligation

under this law thereby

causing any loss in such

activity, a compensation

must be paid for the loss and

a fine equal to minimum


times to an individual, and a




to a legal entity shall be

imposed;

145.1.35 If a responsible official has

breached the procedure

specified in this law in

relation to entering of data in


database, by entering wrong

data or omitting a data,

which has caused a loss to a

relevant person, a

compensation must be paid

for the loss, and a fine equal



imposed;

Does this include a breach of

confidentiality?

Clarify.

145.1.36 If a person authorized to

conduct an evaluation of the

rehabilitation expenses has

violated the procedures

under this law by providing

wrong or unrealistic

evaluation of the

rehabilitation expenditures,

the authorization of such

person to conduct the

evaluation shall be revoked

and, a fine equal to



imposed;

145.1.37 If a person who has license

to develop a Technical and

Economical Study Report

has violated relevant law and

procedures in respect of the

preparation of Technical and

Economical Study Report by

providing wrong or

unrealistic estimations of

such study, the respective

authorization shall be

revoked, and a fine equal to



imposed;



to fulfill an obligation

specified by this law in

respect of the closure of a

mine or a plant, a fine equal



imposed or if any loss

incurred due to such failure

a compensation must be paid

for the loss, a fine equal to



imposed;


committed the violation

specified by this law

repeatedly, or, the violation

specified in this law has

been committed despite

having been imposed

administrative measures

twice previously the license

shall be revoked and the the

legal entity, founded or

shared by members of the

legal entity holding the

license and its executive


directors and the equivalent

entity and its members shall

not be granted any other



license for 5 years of such

revocation.

Even for minor infringements?

This will be extreme. How

about repeated “serious

violations” in which case the

license holder has received two

or more administrative

sanctions for such violations

and has not cured, or something

to that effect? Further, it makes

no sense to punish the

shareholders, board or others in

aggregate for decision that may

not be in their day-to-day

control. We suggest that only

the person who has committed

the offense face the possible 5

year bar if this remains.


145.3 If a license holder has

violated this law and the

court has rendered a decision

to impose criminal liability,

the license shall be revoked

and any loss incurred must

be compensated and the

legal entity, founded or

shared by members of the

legal entity holding the

license and its executive


directors and the equivalent

entity and its members shall

not be granted any other



This must be better developed

as isolated events of individuals

which are determined by a court

to be criminal (i.e. fraud in

filing a minor application,

misappropriation of funds, etc.)

should not lead to the

revocation of a license and

liability of by the company.

This will serve as a great

disincentive for a license holder

to report a crime and prosecute

one of its employees if it could

lead to the revocation of their

license and 20 year bar.

Perhaps more proportional, only

the person who has committed



license for 20 years of such

revocation.

the crime should be barred for

20 years.

07.01.2013, BCM Minerals Law Draft Comments Detailed Analysis, BCM

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Transcript of 07.01.2013, BCM Minerals Law Draft Comments Detailed Analysis, BCM