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

  • No. Article Draft provision Comment Recommendations

    1 Purpose of the law

    The purpose of this Law is

    to promote economically

    viable mining and extractive

    industries which carry out

    prospecting, exploration,

    mining and processing

    mineral resources in

    compatibility with the

    economic, social and

    environmental policies of

    the State.

    The purpose to promote

    economically viable does not

    appear to be implemented

    throughout this legislation.

    "in compatibility with the

    economic, social and

    environmental policies of the

    State" rings of a soviet

    character

    Give a serious re-think to

    what this Draft Law does to

    threaten the economic

    viability of exploration,

    mining and processing in the

    minerals sector.

    The State needs to give a

    serious rethink as to its

    overall polices regarding

    free market economics and

    democratic values vs.

    centrally planned economy

    an authoritarian State.

    2 Scope of the law

    This law shall regulate the

    relations arising from

    geological reconnaissance,

    prospecting, exploration,

    mining and processing of all

    types of minerals other than

    radioactive minerals in the

    territory of Mongolia.

    The Draft Law regulates (1)

    reconnaissance, (2) prospecting,

    (3) exploration, (4) mining, and

    (5) processing.

    There is the possibility to

    merge and/or exclude

    categories. For example, it

    is not clear as to why

    prospecting and exploration

    have been divided into

    separate categories.

    3 Definitions of terms The

    following terms in this law

    shall have the following

    meaning:

    3.1.1 Work permission means

    any or all of the exploration,

    mining and processing

    permissionsas specified in

    chapter 8 of this law;

    See specific comments in

    Chapter 8.

    3.1.2 "minerals" means

    3.1.2(a) any usable mineral

    concentration which

    naturally occur either in

    solid, liquid or gaseous state

    that were formed on the

    surface or in the subsoil as a

    result from geological

    evolutionary processes,

    except for water, oil and

    natural gas;

    CBM is not included within the

    Draft Law. It is likely that the

    draft petroleum law will include

    covers all types of

    hydrocarbons including CBM,

    tight oil, shale gas, conventional

    oil and gas. Similarly, water is

    covered under the Water Law.

    This could create serious issues

    of overlapping licensing. Using

    ETT as an example, if CBM is

    included under the petroleum

    law then another private

    company could take out a

    license over ETT tomorrow and

    then prevent ETT under the

    Petroleum law from developing

    their coal resources.

    Consider whether CBM

    better fits under the Draft

    Law or in the petroleum law.

    If under the petroleum law,

    then the laws must

    coordinate so as to address

    overlapping licensing and

    priority rights.

  • No. Article Draft provision Comment Recommendations

    Likewise, does an overlapping

    water license, nuclear energy

    license or land license pose

    such inconsistencies?

    3.1.2(b) minerals that have been

    extracted from the surface or

    the subsoil as specified in

    this law;

    3.1.2(c) minerals that have been

    processed as specified in this

    law;

    3.1.3 processing minerals mean

    industrial activities directed

    at increasing the contents

    and value of minerals

    through means such as

    enriching, melting,

    purifying, producing

    products of extracted

    minerals other than

    radioactive minerals as

    specified by this law;

    The definition for processing

    minerals and mining minerals

    overlap as washing and

    separating are processing

    activities directed to increase

    the contents and value of

    minerals.

    Are we to assume that

    washing and separating

    are processing activities.

    Clarify.

    3.1.4 mining minerals means

    industrial extracting,

    washing and separating

    activities of minerals other

    than radioactive minerals

    from the earths 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

    rocks 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

  • No. Article Draft provision Comment Recommendations

    hydrogeology works

    according to proven

    standards for detailed

    determining of formation,

    quantity, location,

    composition, concentration

    quality, geological structure,

    comprehensive mining

    technical condition of

    mineral resources for secure

    calculation of resources

    volume capacity and making

    decision about further

    advisability of mining

    operation;

    3.1.7 mineral prospecting means

    comprehensive activities of

    geological, geophysical,

    drilling and laboratory

    works according to proven

    standards in an area with

    prospects of mineral

    resources for detailed

    assessment of location,

    resources, composition, and

    to identify geological

    structure of minerals and for

    the purposes of determining

    to conduct further

    exploration works

    3.1.8 infrastructure means

    roads, railways, airports,

    facilities for supply of

    electricity, heating, clean

    water, sewerage conveying

    system, air, motor vehicle

    and railway transportation,

    health, hygiene, education

    and related services that are

    accessible to public

    utilization;

    3.1.9 rehabilitation means the

    comprehensive activities of

    rehabilitation of the nature

    and environment of which

    the natural state has been

    changed due to geological

    and mining activities as

    specified in chapter 11 of

    this law;

    3.1.10 high grading mining

    means a mining activity that

    mined not whole of the

    Extreme lack of clarity and

    potentially un-economic. Need to define reserve. production reserves includes uneconomical

  • No. Article Draft provision Comment Recommendations

    reserve and made the reserve

    impossible to mine further

    as a whole of the production

    reserves which was

    obtainable and determined

    by the Technical and

    Economical Study Report

    due to carried out not in

    accordance with approved

    technological procedures;

    reserves. Need to create definition based on economic cut-off, which may include influence of commodity price, general tax/economic environment in the country. In other words, it needs to be commercially

    minable and not mandatory

    mining of everything. As

    such, taxes, labor costs,

    metal price, etc. will be a

    factor. Further the Technical

    and Economical Study

    Report may be amended or

    changed and is not likely to

    be a fixed product.

    3.1.11 area means the area that is

    granted by license according

    to the law, location of which

    is determined by corner

    points, coordinates of which

    are determined by degrees,

    minutes and seconds, and

    borders of which are

    surrounded by straight lines

    along the longitude and

    latitude;

    3.1.12 reconnaissance means a

    research utilizing primary

    geological and mineral data

    for determining of earth

    surface and subsoil structure,

    chemical composition of

    rocks, their evolution

    history, transformation and

    presence of minerals through

    taking of rock samples

    without disturbing earth

    surface or subsoil,

    performing of geochemical,

    earth and airs 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;

  • No. Article Draft provision Comment Recommendations

    3.1.14 Central State

    Administration means the

    central state administration

    in charge of geological and

    minerals resources affairs;

    3.1.15 licence means the right

    certified by the license to

    conduct one of or all of the

    following activities,

    minerals prospecting,

    exploration, mining and

    processing granted by the

    State Administrative

    Authority as provided by

    this law;

    3.1.16 common minerals means

    the plenitudes of rock,

    loam, sand and gravel

    accumulation of moraine

    and rock concentrations

    which could be used as

    construction materials;

    3.1.17 commercial infrastructure

    means road and railway,

    airport, facilities for supply

    of electricity, heating,

    potable water, sewerage

    conveying system, air, motor

    vehicle and railway

    transportation and related

    services that are utilized for

    mining and industrial

    purpose;

    Under inclusive.

    Note, that Mongolian version

    refers to production

    infrastructure

    Needs to be expanded to include everything that a Mining Licence holder may require for a mining operation. Items such as airstrip,

    accommodation camp,

    offices, waste dumps,

    tailings dams, water bores,

    roads etc need be captured

    by this.

    Clarity of translation is

    required and expansion of

    definition depending on

    translation.

    3.1.18 industrial waste means

    earth, soil that is created due

    to mining and processing of

    minerals, and is proven and

    permitted by the Technical

    and Economical Feasibility

    Report as commercially non-

    profitable;

    Under Inclusive.

    Should include tailings and

    perhaps others.

    3.1.19 mine and industry tenure

    means a part of the land area

    that was granted under the

    license, that is affected by

    mining and processing

  • No. Article Draft provision Comment Recommendations

    activities;

    3.1.20 derivative deposit means

    earth, soil, rock and

    enrichment waste that is

    created due to mining and

    processing activities, is

    potentially commercially

    effective in specific setting

    of minerals re-processing;

    3.1.21 radioactive minerals

    means minerals

    accumulation as stipulated in

    clause [_] of Nuclear Energy

    Law of Mongolia;

    3.1.22 occurrences of radioactive

    minerals with production

    value content is stipulated

    in clause [_] of Nuclear

    energy law;

    3.1.23 mineral resources means

    mineral concentration that

    has been formed on the

    surface or in the subsoil as

    the result of geological

    evolutionary processes.

    No definition for mineral

    reserve.

    Mineral resources are

    potentially valuable,

    and for which

    reasonable prospects

    exist for eventual

    economic extraction.

    Mineral reserves or

    Ore reserves that are

    valuable and legally

    and economically and

    technically feasible to

    extract

    Include definition for

    mineral reserve.

    4 Ownership of minerals

    4.1 Mineral resources naturally

    occurring on the surface and

    in the subsoil in the territory

    of Mongolia shall be the

    property of the State.

    4.2 The State, as being the

    owner, shall have the right to

    grant prospecting,

    exploration, mining and

    Note: reconnaissance does not

    require a licence. However, the

    Draft Law does require that the

    State Administration grant such

  • No. Article Draft provision Comment Recommendations

    processing license as defined

    in the terms and conditions

    of this Law.

    right to a legal entity

    (application) and that a

    reconnaissance work plan be

    submitted (See Articles 19.1.1

    and 19.1.11).

    4.3 Minerals separated from the

    soil and subsoil in the course

    of prospecting, exploration

    and mining without a license

    shall be the property of the

    State.

    Assumption that if with a

    license then it is the property of

    the license holder.

    Confirm assumption.

    4.4 Derivative deposits and

    industrial wastes shall be

    deemed an integral part of

    the land and the property of

    the State in cases not

    specified by this law.

    Assumption as above that if

    with a license then derivative

    deposit is the property of the

    license holder.

    Confirm assumption.

    5 Areas prohibited for

    prospecting, exploration,

    mining and processing

    activities

    Cross reference Article 11.2

    allowing for reconnaissance

    5.1 Any of prospecting,

    exploration, mining and

    processing activities shall be

    prohibited in the following

    areas.

    Should be more along the lines

    that prospecting, exploration,

    mining and prospecting is permissible but only under exceptional circumstances, and under strict environmental controls. Exceptions would be something that could significantly add to the economy of Mongolia. Should be permitted through an authorisation process.

    For example, many deposits in

    Canada and equatorial Africa

    that would be prohibited under

    this Article have been

    developed. But strict controls and environmental considerations and reclamation regulation (including reforestation) need to be in place, to offset and reinstate any temporary loss of forest.

    Countries like Canada and the

    Consider opening this

    section up to such activities

    if tightly regulated by the

    State as this could be very

    beneficial to the State. Why

    not develop the same

    exclusive control regime

    as set forth in Article 42.3?

  • No. Article Draft provision Comment Recommendations

    UK have Forest Service and

    Forestry Commission

    respectively with the

    responsibility of managing

    companies working in forests,

    reforesting areas disturbed,

    logged or destroyed by fire.

    Should be permitted through an

    authorisation process.

    5.1.1 National and local special

    protected areas;

    5.1.2 normal protection territory

    areas with source of flow

    formation of rivers, and

    water basins as specified in

    the Law on Water;

    5.1.3 forest area on protected

    territory as specified in the

    Law on Forest;

    5.1.4 protected zones specified in

    the Law on Railway;

    Railways can be moved so this

    is not necessary and reduces

    possible discoveries. Should be

    permitted through an

    authorisation process.

    5.1.5 protected zones around high

    voltage power lines as

    specified in the Law on

    Energy;

    Same issues as 5.1.4 There are

    many deposits that are adjacent

    to powerlines which can be

    moved. This should not be an

    issue.

    5.1.6 protected zones around state

    or international roads as

    specified in the Law on

    Road;

    Same issues as 5.1.4

    5.1.7 protected zones specified in

    the Law on utilization of

    the water supply and

    sewerage conveying system

    of the city and township;

    5.1.8 protected zones around

    mineral water specified in

    the Law on Mineral

    Water;

    5.1.9 city and village tenure land,

    and within 5 kilometres from

    its borders;

    Lack of Clarity.

    How are the borders of city and

    village tenure land to be

    determined? What is the

    definition of a city or a village?

    The 5km limit would prohibit

    mining at many existing

    projects. When a village gets

    Consider rethinking or

    clarifying this provision.

  • No. Article Draft provision Comment Recommendations

    built next to a mine what

    happens? Can a village be built

    next to a successful exploration

    project to prevent a mine from

    being established?

    BorUndur, Erdenet,

    MoigiinGol, Baganuur and

    Nalaikh would have to be

    closed down, or if these towns

    existed before discovery of the

    deposits these major deposits

    benefiting the Mongolian

    economy and infrastructure

    would not, under the Draft Law,

    be able to be developed.

    6 Prohibition of conducting

    prospecting, exploration,

    mining and processing

    activities without license

    6.1 Unless specified in the

    following, it shall be

    prohibited to conduct

    prospecting, exploration,

    mining and processing

    activities without license.

    Lack of Clarity. What is

    permitted and what is not?

    What is the purpose of having

    6.1.1?

    Clarify.

    6.1.1 reconnaissance; Note: reconnaissance (as

    defined) does not require a

    licence. However, the Draft

    Law does require that the State

    Administration grant such right

    to a legal entity (application)

    and that a reconnaissance work

    plan be submitted (See Articles

    19.1.1 and 19.1.11).

    6.1.2 mining and processing of

    common minerals by

    citizens on their owned land

    for purposes to use for own

    domestic needs and not for

    profits from sale thereof;

    This limits the mining and

    processing of common minerals

    to citizens on their owned

    land for purposes to use for

    their own domestic needs.

    What about legal entities? Are

    they required to obtain licensing

    for similar uses.

    Take for example ETT, that will

    most likely want to use

    construction and aggregate for

    the concrete plant (for

    construction of the washery or

    power plant) or aggregate for

    making mine roads? Will this

    now be illegal? needs

    Consider expanding the

    scope of who may use the

    common minerals to include

    legal entities and non-

    citizens and for what they

    may use them for. Further

    consider widening the scope

    beyond owned land.

  • No. Article Draft provision Comment Recommendations

    clarification in the law.

    6.2 Unless set forth in this law,

    it shall be prohibited to

    separate minerals from the

    land and its subsoil, to

    purify, process, store,

    transfer, transport, sale, buy

    and broker minerals

    extracted without license.

    7 Registering of mined and

    processed products and

    certificate of origin

    7.1 Holders of mining and

    processing licenses shall

    have obtained a certificate of

    origin as defined in this law

    for all mined, processed,

    purchased, sold and

    reprocessed minerals and

    mineral products by them.

    Certificate of Origin is not

    defined nor are the costs or

    process for obtaining one

    developed.

    Define Certificate of

    Origin and provide a

    developed framework for

    costs and process.

    7.2 Private person or legal entity

    manufacturing the goods

    with use of precious metals

    and stones shall have

    registered the used precious

    metals and stones using a

    form approved by State

    Administration and attach

    the documentation proving

    their origin to the

    registration form.

    Seems to be oddly placed as

    this appears to regulate

    manufacturers of goods using

    precious metals and stones and

    not any entity related to

    minerals or mining or licensed

    under this Draft Law.

    Consider placing this

    provision under the

    jurisdiction of another law.

    8 Mineral resources of

    strategic importance

    8.1 Water, oil, gas, radioactive

    minerals and rare earth

    elements shall be deemed

    mineral resources of

    strategic importance.

    Assumption that coal, iron ore

    and other bulk commodities, as

    well as all else, are excluded

    from this category.

    Can water, oil, gas, radioactive

    minerals and rare earth

    elements be governed by

    Investment Agreements or the

    DDA listed below?

    Confirm assumptions.

    Clarify.

    8.2 Relations to prospecting,

    exploration and utilization of

    water shall be regulated by

    Law on Water in

    Mongolia.

    Does the Law on Water give

    any deference or priority to

    license holders?

    Clarify.

    8.3 Relations to prospecting,

    exploration, mining and

    processing of oil and gas

    shall be regulated by

    Petroleum Law in

    Is there any distinction between

    conventional and

    unconventional gasses?

    Consider where CBM fits in

    Clarify.

  • No. Article Draft provision Comment Recommendations

    Mongolia. (see comment to Article

    3.1.2(a))

    8.4 Relations to mining and

    processing of radioactive

    minerals and rare earth

    elements shall be regulated

    by Law on Nuclear

    Energy in Mongolia.

    9 Mineral deposits of

    strategic importance

    9.1 As specified in this Article,

    deposits of strategic

    importance shall be 15

    deposits listed in Appendix 1

    of 2007 in the State Great

    Hural Resolution No.27.

    9.2 Borders of each deposit with

    strategic importance

    specified in 9.1 of this law

    shall be determined by

    Central State

    Administration.

    This poses a serious threat to

    adjacent license holders.

    Can these borders be extended

    into adjacent licence areas

    either putting at risk that licence

    or resulting in a new discovery

    being declared to be a part of an

    existing Strategic Deposit?

    What are the implications for

    ownership rights of adjacent

    areas?

    What is the criteria for selecting

    areas/borders for review?

    Once determined can these borders be changed at a later date?

    Suggest changing shall be

    to have been to protect

    existing border delineations.

    The process for

    determination of these

    boundaries needs to be fair

    and transparent.

    9.3 No new deposits will be

    added into the list of

    deposits with strategic

    importance but can be

    excluded from the list by the

    State Great Hural upon

    submission of opinion by

    the Government.

    Overall good. The process for the

    exclusion of these deposits

    needs to be fair and

    transparent.

    9.4 The Government may

    establish, at its initiative, a

    Deposit Development

    Agreement with holders of

    licenses in order to set up a

    special regime for mining,

    processing and marketing

    activities of minerals

    extracted from deposits of

    Investment Agreements (IA)

    now replaced with Deposit

    Development Agreements

    (DAA) but only for Strategic

    Deposits.

    The DDAs are only at the

    Government initiative and are

    less beneficial than IA's were.

    A rethink should occur

    regarding this Article and

    replacing IAs with DDAs in

    general (see below

    comments).

  • No. Article Draft provision Comment Recommendations

    strategic importance.

    Does not provide a transparent

    criteria by which the

    government may choose to

    establish a DDA or not.

    This unusually expands into

    marketing activities.

    9.5 The State shall be entitled to

    possess free of charge a

    certain percentage of shares

    of legal entity which holds

    licenses for mining and

    processing of deposit with

    strategic importance. The

    percentage of the shares to

    which the state shall be

    entitled to possess free of

    charge shall be determined

    by Deposit Development

    Agreement that has been

    established in line with this

    law.

    This clause is expropriator and

    likely unconstitutional as it

    attacks the private property of a

    license holder (shares) which

    are not the property of the State

    like minerals.

    State has a (free) right to shares

    in entities that own Strategic

    Deposits and that there is no

    guidance on what percentages

    or how they are to be

    calculated.

    Further the percentage of state

    ownership is as agreed in the

    DDA, but what happens if the

    Government does not initiate a

    DDA? Can/will it still claim an

    ownership percentage?

    Moreover, what if the parties

    cannot come to an agreement

    while negotiating the DDA (see

    below comments).

    If the interest held by the state

    is a controlling interest that will

    adversely effect the interest of

    investors to invest the

    significant capital required and

    equally critically will adversely

    effect the bankability of the

    project in regards to raising

    project finance.

    A serious rethink needs to be

    done regarding this Article.

    9.6 If the Deposit Development

    Agreement was not

    established by the

    Government, mining and

    processing activities of this

    deposit with strategic

    importance shall be carried

    out in compliance with the

    rule in this law.

    Lack of clarity.

    Leaves a dagger hanging over

    the license holders 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.

  • No. Article Draft provision Comment Recommendations

    10 Deposit Development

    Agreement

    Assumption that all other

    companies can have an IA and

    that DDAs are specific to

    Strategic Deposits only. This

    affects Investor confidence if no

    investment/stability agreements

    are available and is likely to

    deter international financing.

    Generally, the replacement

    DDA's are far less substantive

    than the IAs and even license

    holders over a Strategic Deposit

    are likely to reject the notion of

    the DDA.

    Further, what if the parties

    cannot agree on the terms?

    There appears to be an utter

    lack of dispute mechanism.

    This cannot be a contract of

    adhesion where the State thugs

    its way into the terms its wants.

    We assume that the DDA is a

    commercial and not an

    administrative agreement under

    Mongolian Law?

    Confirm assumption.

    Consider broader DDA

    provisions to match with

    typical IAs.

    Consider a fair and

    transparent mechanism for

    dispute resolution.

    Confirm assumption.

    10.1 If the Government

    establishes a Deposit

    Development Agreement

    with holder of mining and

    processing license for the

    deposits of strategic

    importance as specified in

    Article 9 of this law, the

    agreement shall be

    established in concurrence

    with the following

    principles:

    General comments apply.

    The following principals do not

    seem to be based using a

    commercial scale considering

    the investors return on

    investment, and proportionality

    based on investment, efforts

    and input, and the

    Governments requirement to

    fully come to the table.

    Consider making more

    proportional/commercial

    based on what each party is

    realistically putting into the

    development of the project.

    10.1.1 The initial term of Deposit

    Development Agreement

    shall be equal to the term

    defined in an approved

    Technical and Economical

    Feasibility Report necessary

    to earn the return on initial

    investments.

    Term is only equal to length of

    time the Technical and

    Economic Feasibility Report

    (Feasibility Report) sets out is

    necessary to earn return on

    initial investment. What if the

    Feasibility Report is to be

    changed or amended as it may

    be inaccurate or subject to

    modification based on

    developing circumstances?

    A Feasibility Report is a

    Consider why this is linked

    to the Feasibility Report and

    if that is feasible to fix the

    term.

  • No. Article Draft provision Comment Recommendations

    document created at a specific

    point in time and is based on a

    number of assumptions. There

    will be unforeseeable risks and

    events which may necessarily

    increase the length of the initial

    term. Life of Mine timeframe

    should be considered.

    The initial term should not be

    set by reference to the actual

    recovery of initial investment as

    this is irrelevant to the

    operational needs of the mine,

    or the required return on

    investment levels that would

    require investment of

    significant capital.

    It must be remembered that

    investment will not be made

    readily by investors, local or

    foreign in order to only have

    certainty that they can recover

    their initial

    investment. Commercial

    entities, local or foreign, make

    investments in order to return a

    profit and make a return on

    investment, not just to recover

    their initial investment.

    10.1.2 Taxes and duties except fees

    and levies currently imposed

    by tax laws of Mongolia can

    be stabilized only for the

    initial term of Deposits

    Development Agreement.

    Clarity needed.

    Stabilization should not be

    limited to the initial term of the

    DDA, but should be available

    for the duration of the DDA to

    provide certainty.

    Define fees and levies and

    explain why they cannot be

    stabilized?

    Address why it is limited to

    only as imposed in the tax

    laws of Mongolia? Address

    whether royalties can be

    stabilized?

    10.1.3 Tax or duties shall not be

    stabilized for any period

    beyond the initial term of

    Deposit Development

    Agreement.

    So taxes and duties will not be

    established beyond the time set

    out in the Feasibility Report to

    earn return on initial investment

    only? Why not? Why is the

    door being slammed shut here

    and not left to desecration?

    It will be much harder for an

    investor to proceed with the

    development of a project

    knowing that they may stand to

    Consider amending or

    deleting this Article to leave

    the door open for longer tax

    stabilization.

  • No. Article Draft provision Comment Recommendations

    make little to know profit going

    forward. No investor invests

    only to recoup their initial

    investment or make very little

    thereafter.

    Further, if taxes and duties go

    up making it uneconomical to

    mine, then there is a serious

    problem.

    10.1.4 Deposit Development

    Agreement shall not regulate

    any issues concerning

    exemptions from taxes,

    duties, levies and fees; and

    stabilization of levies and

    fees.

    Can these matters be regulated

    elsewhere (i.e. an Investment or

    Stability Agreement)?

    Clarify

    10.2 When the initial term of the

    Deposit Development

    Agreement expires the

    Agreement can be extended

    one time for up to 10 years

    along with necessary

    changes and amendments

    concurrent to the conditions

    of that time.

    A one-time extension of up to

    10 years is not synchronized

    with the timeline of a mining

    licence set forth in Article 25.4,

    which allows 20 years life on a

    mining licence. This does not

    appear to take into full account

    the addition of reserve and the

    quantum involved.

    Consider amending to take

    into account the addition of

    reserves and the quantum

    involved.

    10.3 Total amounts of minerals to

    be mined or products to be

    manufactured within certain

    period of time may be

    determined in Deposit

    Development Agreement

    and the changes of

    determined amounts shall

    serve the grounds for

    making amendment in other

    terms or conditions as

    defined in the agreement.

    If any change is made to the

    amount of mineral or products

    to be produced (as per the

    DDA) then this opens the door

    to give the State the right to

    renegotiate the terms of the

    DDA.

    Consider linking the

    amounts to be mined and

    products to be manufactured

    to the mine and processing

    plan rather than the DDA to

    simplify process and

    eliminate over burdening the

    license holder with

    interaction by the

    Government.

    Alternatively, consider

    deleting this Article.

    10.4 If certain conditions or

    circumstances which could

    not have been foreseen at the

    time of signing of Deposit

    Development Agreement

    arise and any or some of

    clauses of the agreement

    cease complying to the

    interest of Mongolia or

    become detrimental to rights

    Unacceptable as this utterly

    destroys the integrity of the

    DDA if the State may, at will,

    reopen the DDA. Further, this

    does not allow the license

    holder to do the same.

    The concepts of what is in the

    interest of Mongolia or what is

    detrimental to Mongolia are too

    Consider deleting this

    Article.

  • No. Article Draft provision Comment Recommendations

    and interest of Mongolia

    initially meant to protect due

    to those newly discovered

    conditions or circumstances,

    they shall serve grounds for

    making changes and

    amendments to this

    agreement.

    subjective.

    Both 10.3 and 10.4 become

    over burdensome for investors

    as they only protect the State.

    10.5 Unless categorized as

    confidential in the related

    laws of Mongolia, all parts,

    clauses, changes and

    amendments of Deposit

    Development Agreement

    and further collateral

    agreements shall be open to

    the public.

    If the DDA is largely a

    commercial agreement, or even

    if it is an administrative

    agreement, the confidentiality

    of the DDA should be left to the

    parties to decide.

    Further, opening these to the

    public could be a tool for either

    party to try and use public

    pressure to force the other party

    into less favourable terms

    during negotiations.

    Consider adjusting the level

    of confidentiality protections

    for the parties.

    10.6 A holder of license who has

    signed Deposit Development

    Agreement shall be obliged

    to provide any information

    related to its activities

    permitted by the license,

    investments and proprietary

    nature at the period of the

    agreement to the

    Government upon its

    request.

    This creates an unnecessary and

    wide ranging power for State to

    request information from a

    DDA party.

    By the time the DDA is

    executed, as in this Article, the

    State will already be a

    shareholder in the license

    holding company which allows

    the State to have the right under

    the Company law as a

    shareholder to access necessary

    information.

    This clearly should not apply

    upstream.

    Consider deleting this

    Article as this is already

    covered in the Company

    Law with the State being a

    shareholder.

    Clarify whether this is

    attempting to apply to

    upstream companies (the

    shareholders and beneficial

    shareholders of the license

    holder).

    10.7 The contents and clauses of

    Deposit Development

    Agreement to be established

    with holder of license shall

    comply with this law and

    other related laws valid at

    that time.

    The assumption is that if the

    laws do change then the DDA

    has the effect of stabilizing

    the parties as of the date they

    signed the DDA.

    A more direct statement to that

    effect would be comforting as

    this Draft Law is a

    Parliamentary act, where as the

    DDA is held only to the

    Government level.

    Confirm assumption and

    consider making the point of

    stabilization more clear.

    11 Reconnaissance

    11.1 Legal entities may conduct

    reconnaissance for minerals

    This has been limited only to

    legal entities.

    Clarify why this is being

    limited only to legal entities

  • No. Article Draft provision Comment Recommendations

    according to regulation as

    specified in this law.

    and not citizens (both

    foreign and domestic).

    11.2 Reconnaissance can be

    carried out in areas

    prohibited or restricted for

    prospecting, exploration,

    mining, processing activities

    or in a national or local

    special purpose territories as

    defined in this law, Law on

    Petroleum and Law on

    Nuclear Energy.

    Reconnaissance can be carried

    out in prohibited or restricted

    areas.

    As noted above in comments

    to Article 5, consider

    opening the same to

    prospecting, exploration,

    mining and processing if

    regulated by the State.

    11.3 Disturbing the subsoil in the

    course of conducting

    reconnaissance shall be

    prohibited.

    What does disturbing the soil

    mean? Undefined, this appears

    to contradict Article 11.4 as it is

    not possible to scientifically,

    determine minerals abundance,

    patterns and concentrations

    without disturbing the subsoil.

    Define what constitutes

    disturbing the soil.

    11.4 Reconnaissance shall be

    conducted according to

    scientific methods,

    methodology, in specific

    stages and in a

    comprehensive manner for

    the purposes of determining

    the prospective area of

    geological formation,

    minerals abundance patterns

    and concentrations.

    11.5 If the area of reconnaissance

    is in the ownership or

    possession of others, the

    interested party shall have

    obtained the permission to

    conduct reconnaissance and

    access the land from the

    owner and possessor of the

    land.

    Unless physical trespass needs

    to occur, no notice or

    permission should be needed.

    If reconnaissance is by purely

    scientific methods (e.g. satellite

    imagery, aerial photography,

    etc), there should be no need to

    obtain permission.

    If permission is required, in

    what form an agreement, a

    sign off on an application, etc.?

    Can the owner/possessor

    demand compensation?

    What if the land is in the use

    of another either through land

    use or a land lease?

    Consider qualifying this

    Article to limit when

    permission is needed.

    Clarify how such permission

    is obtained and what if any

    limitations exist.

    Clarify the scope of who

    permission must be obtained

    from and what, if any, rights

    a land user has to exclude

    reconnaissance.

  • No. Article Draft provision Comment Recommendations

    11.6 If reconnaissance conducted

    by state budget funding in an

    licensed area of prospecting,

    exploration, mining and

    processing a notice of

    trespassing shall be given to

    the license holder before

    entering to the area.

    Is the notice of trespassing

    subject to any type of right for

    the licence holder to object?

    The ability for state ground

    reconnaissance to be conducted

    in the area of the licence may

    have health and safety and

    operational implications for

    personnel.

    This creates overlapping rights

    to the license area held by the

    license holder and could put the

    license holder and the State into

    direct competition.

    This could create a pretext for

    the State to demand an interest

    in the license holder by jumping

    in front of the license holders

    prospecting, exploration,

    mining or processing by

    snapping an satellite photo and

    then claiming State funded

    reconnaissance which leads to a

    mandatory State interest and a

    expropriation under Article 13.1

    (see below comments).

    Include grounds for the

    license holder to object.

    Address the overlapping

    interest of two parties

    consider, given that the

    license holder is already

    holding their license, making

    the area exclusive to the

    license holder .

    Consider that ex-post facto

    State funded reconnaissance

    on the license area of a

    license holder shall not be

    grounds for the State to

    demand an interest in the

    project or within the license

    area.

    11.7 Interested legal entity to

    conduct reconnaissance shall

    submit its request and

    provide related information

    of the area of

    reconnaissance, its own

    name, surname, registration

    number and address of the

    area and location to State

    Administration in advance.

    Even with Articles 3.1.15 and

    6.1.1this become a de facto

    licensing requirement.

    No process, procedure or timing

    indicated. What is the

    difference between receiving

    permission and receiving a

    license under the Draft Law?

    Further, if no physical trespass

    is involved and the area is not

    under licence, then need to

    obtain permission should not

    exist.

    Consider eliminating the

    need to obtain permission, in

    particular if there is no

    indication of a physical

    trespass. Clearly indicate

    the process, procedure and

    timing, as well as exclusivity

    and priority rights.

    11.8 State Administration shall

    receive such request and

    Reconnaissance request must be

    registered. No process,

    Clearly indicate the process,

    procedure and timing, as

  • No. Article Draft provision Comment Recommendations

    register the application in

    conformity to this law and

    grant permission.

    procedure or timing indicated.

    Further, there is no indication as

    to exclusivity give to the legal

    entity who has obtained the

    permission.

    well as exclusivity and

    priority rights.

    11.9 The entity which has

    obtained the permission to

    conduct reconnaissance shall

    be obligated to submit

    reconnaissance reports, and

    relevant document copies to

    the State Administration and

    such reports and document

    shall be stored in the

    national consolidated

    geology and minerals data

    base.

    This should not be required. It

    erodes company IP. There is no

    benefit to any company

    carrying out reconnaissance, in

    particular given their lack of

    right to exclusivity and priority

    toward a prospecting license.

    Consider eliminating the

    need to submit such reports.

    11.10 Specific rules for conducting

    reconnaissance and

    reception of reconnaissance

    reports shall be approved by

    the Government.

    Further rules to be imposed by

    State.

    Clarify.

    12 National consolidated

    geology and minerals data

    base

    12.1 The State Administration

    shall have a national

    consolidated geology and

    minerals data base. The

    national consolidated

    geology and minerals data

    base shall consist of

    geological database, mineral

    reserves data base and

    petroleum data base.

    Water, oil and natural gas are

    excluded from the definition of

    minerals in Article 3.1.2, so it

    is unclear why a petroleum data

    base is being mentioned here

    and not set forth separately in

    the Petroleum Law.

    Clarify.

    12.2 Information related to earth

    subsoil formation, earth

    surface character, geological

    research information,

    primary documentation,

    samples, exhibition and

    pictures of earth and soil and

    report of reserves

    determined by prospecting

    and exploration, and other

    available information shall

    be stored in the geological

    database.

    We note the absence of

    reconnaissance, emphasizing

    comments to Article 11 about

    the lack of need for

    reconnaissance reports to be

    submitted.

    Consider above comments to

    Article 11.

    12.3 Complex information related

    to mineral deposits

    production reserves,

    products standards,

    Not the wide scope of highly

    sensitive information. Please

    see comment below on Article

    12.5.

  • No. Article Draft provision Comment Recommendations

    technology, mine plan and

    operation report, production

    tailings, registration of

    derivative deposits,

    assessment of environmental

    impact, rehabilitation works

    and other related data shall

    be stored in mineral reserves

    database.

    12.4 Petroleum data base and

    information to be stored and

    procedure and rule for

    storing the information shall

    be determined by Law on

    Petroleum.

    Why is this in the Draft Law? Consider removing as it will

    be in the Petroleum Law.

    12.5 All data compiled into the

    national consolidated

    geology and minerals data

    base except for confidential

    as specified in the related

    laws of Mongolia shall be

    open for public.

    In conjunction with Articles

    12.2 and 12.3 this highlights the

    greater need for (1)

    transparency for obtaining and

    openness of this information to

    the public and potential license

    holders; and (2) confidentiality

    during the period, or potential

    period, when a license is held

    by a license holder.

    Otherwise this provides an

    unfair advantage to

    competition, benefiting from

    any companies' exploration

    proprietary exploration

    techniques and knowledge.

    In Canada, for example,

    confidentiality of work reports,

    varies from Province to

    Province from 1 year, 5 years or

    until claim (exploration

    Licence, concession, tenement)

    expires. In the latter case under

    the current Minerals Law work

    reports would become Public

    information after 9 years, under

    the proposed Draft Law after 5

    years.

    Consider the balancing

    availability to the public

    with confidentiality during

    license holding periods.

    12.6 Activities for compiling,

    registering and extending the

    data into the national

    consolidated geology and

    minerals data base shall be

    carried out by State

    Administration Authority

    according to the rule and

    These rules should contain very

    clear rules for the balance of

    protecting confidentiality and

    transparency/openness, as well

    as very strict penalties for

    violations.

    Consider these factors when

    developing the rules and

    procedures.

  • No. Article Draft provision Comment Recommendations

    procedures approved by the

    Government.

    13 Taking areas into state

    reserve

    Major issues with Articles 13-

    15 to be considered.

    For example, an exploration

    company which takes a

    portfolio approach and has 10

    exploration licences may get

    lucky with only one containing

    a mineral deposit. Exploration

    companies generally lose

    money in the hope that one of

    their projects succeeds and they

    create significant value. Articles

    13 15 essentially remove any

    incentive to risk exploration

    capital in Mongolia and is not

    consistent with Article 1 which

    defines the purpose of the law is

    to promote economically viable

    mining industries which carry

    out exploration etc.

    Generally, Articles 13-15 lack

    process, criteria, basis, time

    periods, etc.

    Generally, consider a major

    rethink of Articles 13 15

    collectively with the

    industry. In the absence of

    balance, existing investors

    will be chased away and

    future investors will be

    deterred.

    13.1 Areas wherein the

    reconnaissance, prospecting,

    exploration and assessment

    of minerals resources were

    conducted with the fund

    from state budget may be

    taken into state reserve for a

    certain time period upon the

    decision of Central State

    Administration.

    Why does this refer to areas

    whereas Article 14 refers to

    deposits.

    There is not clear definition of

    State Reserve.

    There is no clarity on the

    implications of a company

    losing its reserve (area) to state

    reserve.

    There is no process, procedure

    or timing indicated.

    There is no percentage of

    necessary state budget funding

    set out (i.e. is it 1% or 99% of

    total funds spent).

    As noted in our comments to

    Article 11.6, there appears to be

    an overlap whereby the State

    can conduct reconnaissance on

    a prospecting, exploration,

    mining and processing license

    Clarify.

    Define State Reserve.

    Make clear the implications.

    Make clear the process,

    procedure, timing, etc.

    Make clear the

    percentages/amount of

    funding from the State

    budget.

    Consider and address this

    major concern.

  • No. Article Draft provision Comment Recommendations

    holders licensed area. Article

    11.6, combined with Article

    13.1 creates a pretext for the

    State to infringe upon the rights

    of the license holder by

    conducting reconnaissance and

    then expropriating the license

    area ex-post facto as a State

    reserve (i.e. based on something

    as small as a satellite photo?).

    13.2 Areas with certain

    concentration of mineral

    resources wherein the

    reconnaissance, prospecting,

    exploration works were

    conducted with the finance

    from private funds may be

    taken into state reserve upon

    the decision of the

    Government for a certain

    time period after real/actual

    expenses for above works

    have been reimbursed.

    There is no definition of what

    will constitute "actual

    expenses" and the assumption is

    that actual expenses are

    limited to sunk costs.

    The reimbursement of actual

    expenses is not adequate

    compensation as the license

    holder will have suffered an

    opportunity cost from not

    investing its capital in more

    attractive mining locations and

    a loss of its expected return on

    investment.

    Actual expenses are only paid

    where there has been no state

    funded exploration or resource

    determination. The law is silent

    as to what constitutes sufficient

    State funding (old Russian data,

    minimal State mapping, etc.)

    and what occurs in the event of

    an overlap of State and private

    funding.

    As above, there is a need to

    define a period of time for

    which the land may be taken

    into a State Reserve.

    Define actual expenses

    Consider the negative impact

    on investment if actual

    expenses are limited to sunk

    costs and not expectations.

    Consider what occurs in the

    event of an overlap. A black

    and white there is or is not

    State funding in the absence

    of what constitutes State

    funding (sliding scale)

    presents a major problem.

    Make clear the process,

    procedure, timing, etc.

    13.3 It shall be prohibited to

    accept an application or

    organize competitive tender

    selection procedures for

    granting licenses of the area

    that has been taken into state

    reserve.

    If not clarified, possibility for

    abuse.

    Consider putting a timing

    requirement on this so that

    an applicant who applies

    when there is no intention of

    creating a State reserve

    cannot be blocked shortly

    after its application by an

    immediate call to create a

    State reserve. For example,

    if there is existing State

    reserve then prohibited to

    accept and application, if an

    application is filed then a

  • No. Article Draft provision Comment Recommendations

    State reserve may not later

    be implemented or may only

    be implemented within

    fifteen (15) days of the

    application having been

    filed. The mere possibility

    or whisper of a State reserve

    should not serve as a basis to

    reject an application.

    13.4 If the time period of being

    reserved in state reservation

    has expired and the time

    period has not been extended

    or authorized Government

    administration has decided

    to exclude the area from

    state reserve, the area shall

    be granted for license only

    through a competitive tender

    selection process.

    Given that the Government can

    take any privately funded area

    into state reserve and put then

    put it out for tender, there

    should be a pre-emptive right of

    the original license holder or

    applicant for a license.

    Or, the license should be

    suspended during the time of

    State reserve and then reinstated

    upon the expiration of the

    period. We do not see this as a

    ground for revocation in Article

    36.

    Consider creating a

    suspension +

    reinstatement, or pre-

    emptive right to the license

    holder and/or applicant.

    14 Taking deposits into state

    reserve

    This Article will not encourage,

    'promote' investment, by

    entities in Mongolia. Which

    again per Article 1 is the

    purpose of this Draft Law.

    Generally, investors will not

    like this type of risk and will

    discount an IPO value as this

    provision would have to be

    disclosed in any prospectus. If

    after listing the license holder

    does something which annoys

    the Government, the

    Government can arbitrarily take

    away a portion of a deposit for

    whatever reason it likes and

    thereby causing a huge

    reduction in the value for the

    license holder.

    Consider and Clarify

    14.1 The Government may take

    all or part of a deposit for a

    certain time period into state

    reserve if the deposit was

    explored and its resources

    were determined with state

    budget funding.

    No process, procedure or timing

    indicated.

    No percentage of necessary

    state budget funding is set out,

    i.e. is it 1% or 99% of total

    funds spent.

    This needs to be limited to

    Consider and Clarify

  • No. Article Draft provision Comment Recommendations

    within a particular licence area.

    As this stands you could lose a

    deposit on an adjacent or

    nearby licence area if it were

    argued that it is a part of the

    same deposit.

    14.2 If the deposit which had

    been initially explored and

    resources has been

    determined by state budget

    funding was undergone

    additional licensed

    exploration as a result of

    which its mineral reserves

    were determined with

    increased amount, the

    Government shall reimburse

    the real expenses to the

    license holder upon taking

    the deposit into the state

    reserve.

    Phrase "deposit was explored

    and its resources were

    determined" is very broad.

    No specific amount of increased

    mineral reserves is set out, i.e.

    is it 1% or 99% increase?

    Only real expenses will be

    reimbursed, i.e. no loss of

    profit?

    No definition of what will

    constitute "real expenses".

    Consider and Clarify.

    14.3 State Great Khural may

    issue a decision and take

    deposits into state reserves

    that had been explored and

    the mineral reserves of

    which had been determined

    by finance of private funds

    upon reimbursement of real

    expenses of the license

    holder.

    Only real expenses will be

    reimbursed, i.e. no loss of

    profit.

    No definition of what will

    constitute "real expenses".

    This and Article 15.1 should be

    removed, without it, it is

    unlikely that a private company

    will invest in the Mongolian

    mining sector.

    (According to Article 25.1.2 the

    reserved deposit likely goes to

    state owned company (SOE)

    which is a departure for a clean

    and transparent system.

    Consider and Clarify.

    14.4 If the time period of being

    reserved in state reservation

    has ceased and the period

    was not extended or

    authorized Government

    administration has decided

    to exclude the deposit from

    the state reserve, the license

    for that deposit holding shall

    be granted only through a

    competitive tender selection

    process.

    Given that the Parliament can

    take any privately funded

    deposit into state reserve and

    the Government can put it out

    for tender, there should be a

    pre-emptive right of the original

    license holder or applicant for a

    license.

    Or, the license should be

    suspended during the time of

    State reserve and then reinstated

    upon the expiration of the

    Consider creating a

    suspension +

    reinstatement, or pre-

    emptive right to the license

    holder and/or applicant.

  • No. Article Draft provision Comment Recommendations

    period. We do not see this as a

    ground for revocation in Article

    36.

    15 Taking land granted by

    license for state or local

    special use

    This entire clause needs to be

    struck out or have major

    modification. It shows no

    respect for existing tenure under

    licence.

    This law does not take into

    account as in most jurisdictions

    prior rights of any entity. It is

    easily open to abuse and also

    contradicts Article 1.

    Consider and Clarify.

    15.1 Land granted by the license

    for conducting prospecting,

    exploration or processing

    may be taken for state or

    local special use as specified

    in Law on Land.

    This must be decided before

    granting a licence (duration will

    be more than 5 years according

    to Article 15.7.

    So land given under licence for

    a specific use can later have an

    additional tenure placed over

    the top of it that would prohibit

    the original licenced use?

    Consider and Clarify.

    15.2 If local self-governing

    authority has made a

    proposal to take the land

    granted by license for the

    local special use the local

    Governor shall submit the

    proposal to the Government.

    So land given under licence for

    a specific use can later have an

    additional tenure placed over

    the top of it that would prohibit

    the original licenced use?

    Contradicts current Land Law

    local Governor does not need to

    seek Governments approval.

    Consider and Clarify.

    15.3 If the Government deems the

    proposal defined in 15.2 of

    this law as feasible, it shall

    issue a decision to take all or

    part of the land granted by

    the license for local special

    use.

    Contradicts current Land Law

    local Governor does not need to

    seek Governments approval.

    Consider and Clarify.

    15.4 The State Great Hural shall

    issue a decision to take a

    land granted by the license

    for state special use upon

    proposal made by the

    Government.

    Contradicts current Land Law

    local Governor does not need to

    seek Government or

    Parliamentary approval.

    Consider and Clarify.

    15.5 If a special purpose territory

    overlaps entirely or in part

    with a territory covered by a

    valid license, prohibiting

    further prospecting,

    exploration, mining and

    processing activities in the

    Definition of compensate

    needed. Lost profit, actual

    expenses, etc.?

    What if there is a dispute

    regarding amount

    compensated?

    Consider and Clarify.

  • No. Article Draft provision Comment Recommendations

    overlapping area the

    Government shall make a

    decision to compensate the

    license holder along with the

    decision specified in 15.3

    and 15.4 of this law. The

    reimbursement shall be paid

    to the license holder within 3

    (three) months from the date

    of the issuance of decision.

    Clarification is also required as

    to the level of assurance that

    reimbursement will actually be

    made, how reimbursement will

    be calculated and how installed

    assets (e.g. processing plant) are

    to be dealt with.

    15.6 The license holder shall

    cease its work on the area

    from the date on which the

    decision had been made to

    take the land for state or

    local special use in

    accordance with 15.3 and

    15.4 of this law.

    Clean-up and removal,

    reclamation obligations, mine

    closure obligations? Will these

    costs be arbitrarily deducted

    from the amount of

    compensation?

    Consider and Clarify.

    15.7 The duration of time for

    setting the land aside for

    special use shall not be less

    than five (5) years.

    What happens after the 5 years?

    Is the license back up for grabs?

    Is the license suspended

    during this time, revoked

    etc.? We do not see this as

    revocation criteria under

    Article 36 (for most of these

    articles).

    Consider and Clarify.

    15.8 The State Administration

    shall make a public notice

    within 10 working days after

    expiry of the duration of

    time for setting the land

    aside for special use.

    15.9 The State Administrative

    Authority shall record into

    the license registry the

    decisions to take the land

    granted by the license for

    state or local special use and

    to compensate the license

    holder.

    16 Authority of the State

    Great Hural

    Refer to many other comments

    on reimbursement,

    expropriation etc. This will

    affect authorities and

    responsibilities.

    16.1 The State Great Hural shall

    exercise the following

    authority in minerals affairs:

    16.1.1 to exclude a deposit from the

    list of the strategic

    importance;

    Parliament can exclude a

    deposit from the list of Strategic

    Deposits.

    16.1.2 to issue a decision to take a

    deposit explored and

    Parliament can decide to take a

    deposit explored and

  • No. Article Draft provision Comment Recommendations

    determined by private

    funding into state reserve

    and in connection with this,

    to pay the reimbursement to

    the license holder;

    determined by private funding

    into state reserve.

    This is linked to Article 14.

    16.1.3 to issue a decision to take a

    land granted by license for a

    state special use;

    Parliament can decide to take

    land granted by licence for state

    special use.

    This is linked to Article 15.

    16.2 Clause 16.1 of this law shall

    not serve the grounds for

    restricting, in any way, the

    authority of the State Great

    Hural enshrined by the

    Constitution of Mongolia

    and other laws.

    17 Authority of the

    Government

    Refer to many other comments

    on reimbursement,

    expropriation etc. This will

    affect authorities and

    responsibilities.

    17.1 The Government shall

    exercise the following

    authority in minerals affairs:

    17.1.1 to submit its opinion to

    exclude a deposit from list

    of deposits of strategic

    importance to the State

    Great Hural;

    17.1.2. to establish a Deposit

    Development Agreement

    with holder of license for

    mining in the deposit of

    strategic importance and

    processing and marketing of

    minerals as set forth in the

    law;

    17.1.3 if it deems necessary, to

    require information from the

    holder of license for the

    deposit of strategic

    importance with regards to

    licensed mine operation,

    timely investments

    according Deposit

    Development Agreement

    and proprietorship;

    17.1.4 to issue a decision to take

    area into state reserves

    wherein the reconnaissance,

    prospecting and exploration

    works had been carried out

    by private funding and in

    This is linked to Articles 13.2

    and 14.3. Again only 'real'

    expenses compensated for.

  • No. Article Draft provision Comment Recommendations

    connection with this to

    determine and pay the

    reimbursement to the license

    holder;

    17.1.5 to issue a decision to take

    area into state reserve when

    the area had been explored

    and the reserves had been

    determined by state budget

    funding;

    This is linked to Articles13.1

    and 14.1 and 14.2

    17.1.6 to discuss the proposal of

    local authority to take the

    land granted by license for

    the local special use and to

    determine and pay the

    reimbursement to the license

    holder if the decision was

    issued in support of such

    proposal;

    Again allows 'local authority' to

    expropriate licences for 'special

    use' and compensate entity in

    an undetermined manner for

    such expropriation.

    17.1.7 to announce area and tender

    for granting prospecting,

    mining, and processing

    licenses for areas located in

    State border zones;

    17.1.8 to establish a special regime

    related to mining, processing

    and transporting and storage

    of specific types of minerals

    that may cause harm to the

    public health and

    environment;

    Government can establish a

    special regime related to

    mining, processing and

    transportation and storage of

    specific types of minerals that

    may cause harm to the public

    health and environment. Such

    minerals are not defined. Note

    transportation and storage has

    been captured.

    17.1.9 to approve a procedure to set

    up a national consolidated

    geology and minerals data

    base;

    This is a generally positive

    outcome although further

    clarification is required as to the

    nature of the relevant

    procedures.

    17.1.10 to approve a procedure to

    monitor the transactions of

    the special account for

    depositing the rehabilitation

    fund;

    Clarification required as to

    nature of procedures.

    17.2 17.1 of this law shall not

    serve the grounds for

    restricting, in any way, the

    authority of the Government

    enshrined by the

    Constitution of Mongolia

    and other laws.

  • No. Article Draft provision Comment Recommendations

    18 Authority of the Central

    State Administration

    Refer to many other comments

    on reimbursement,

    expropriation etc. This will

    affect their authorities and

    responsibilities.

    18.1 The central state

    administration in charge of

    geological and mining

    affairs shall exercise the

    following authority:

    18.1.1 to determine borders and

    corners of all deposits of

    strategic importance;

    18.1.2 to issue a decision to take

    land into state reserve

    wherein the reconnaissance,

    prospecting, exploration had

    been financed by state

    budget;

    18.1.3 to approve a procedure for

    conducting the

    reconnaissance and

    submitting and receiving the

    reconnaissance reports and

    other related documentation;

    18.1.4 to approve annual plan of

    reconnaissance, prospecting

    and exploration works to be

    funded by the State budget;

    18.1.5 to approve jointly with

    central financial

    administration the procedure

    for funding, implementing,

    receiving upon review of

    outcomes and calculating the

    funding expenses incurred

    for reconnaissance,

    prospecting, exploration by

    state funding;

    18.1.6 to approve a procedure for

    evaluation and assessment of

    the technical equipment and

    technology used in the

    prospecting, exploration,

    mining and processing

    activities;

    18.1.7 to announce an area which

    will be granted with license

    for prospecting, exploration

    and mining activities

    through competitive tender

    selection procedure;

    18.1.8 to approve a procedure for Assumption that competitive Confirm assumption.

  • No. Article Draft provision Comment Recommendations

    competitive tender selection

    procedure for granting

    licenses to conduct

    prospecting, exploration and

    mining activities;

    tender will give equal

    preference to national

    companies and foreign invested

    companies.

    18.1.9 to approve a procedure to

    determine and demarcate the

    borders of areas granted by

    license;

    18.1.10 to grant a license for

    development of Technical

    and Economical Feasibility

    Report for mining and

    processing and mining and

    processing architecture

    design;

    Assumption that this license

    will be granted giving equal

    preference to national

    companies and foreign invested

    companies.

    Confirm assumption.

    18.1.11 to develop and approve

    mining product standards

    jointly with central state

    administration in charge of

    standardization and

    measurement affairs;

    18.1.12 to approve standards and

    procedures for prospecting,

    exploration, mining and

    processing activities;

    18.1.13 to make decision on

    granting, withholding,

    revoking and renewing the

    permission for execution of

    mining and processing

    related works, and to make

    other related decisions;

    18.1.14 to develop and approve

    jointly with the central state

    administration in charge of

    nature and environmental

    affairs the procedure to

    receive the results of the

    rehabilitation work done on

    environment and nature

    affected by exploration,

    mining and processing

    activities;

    18.1.15 to approve the procedure to

    register mines and industrial

    unit for processing and

    appoint commission for

    approval of launching the

    operation of mines and

    industrial units;

    Assumption that the

    commission will be appointed

    to hold impartial and non-

    political objectives.

    Confirm assumption.

    18.1.16 to approve a procedure for

    emergency elimination of

    prospecting not included. Clarify

  • No. Article Draft provision Comment Recommendations

    accidents occurred during

    reconnaissance, exploration,

    mining and processing

    activities;

    18.1.17 to establish a fund for

    emergency elimination of

    accidents and approve a

    procedure for its

    functioning;

    18.1.18 to approve jointly with the

    central state administration

    in charge of labour the

    procedure for ensuring the

    appropriate working

    condition, salary structure,

    occupational health and

    safety, provisions and

    supplies to workers

    employed in mining and

    processing operations;

    Assumption that items such as

    salary structure will not

    interfere with the commercial

    operations and projections of

    the license holder (i.e. no State

    mandated salaries other than

    minimum wage).

    Limited only to mining and

    processing.

    Confirm assumption.

    Clarify if reconnaissance,

    prospecting, and exploration

    are to be included.

    18.1.19 to approve the procedure to

    appoint the members of

    Professional Council, the

    rule of operations, salary and

    bonus payment to the

    Council members and

    calculation of business trip

    expenses as defined in this

    law;

    Assumption that the

    Professional Council will be

    appointed to hold impartial and

    non-political objectives.

    Confirm assumption.

    18.1.20 to appoint the members of

    Professional Council as

    stated in this law;

    18.1.21 to develop and approve the

    list of precious metals and

    precious gem stones to be

    registered according to this

    law, the procedure to

    determine and register their

    carats jointly with the central

    state administration in

    charge of finance affairs;

    18.1.22 to approve a procedure for

    services for which additional

    fees shall be paid and

    determine the additional fees

    payable for the services;

    Unclear Clarify what services and

    the extent of additional fee

    (i.e. actual costs?).

    18.1.23 to approve a procedure for

    allocation of professional

    degrees to workers

    employed in the geological

    and mining sector;

    Assumption that a foreign

    professional degree from a

    developed nation is sufficient.

    Confirm assumption.

    18.1.24 to approve a procedure for

    categorizing the mineral

    Assumption that this will

    meeting international standards

    Confirm assumption.

  • No. Article Draft provision Comment Recommendations

    reserves;

    18.1.25 other authority as specified

    in this law;

    18.2 Central state administration

    in charge of nature and

    environmental affairs shall

    exercise the following

    authority in minerals affairs:

    This is a generally positive

    outcome.

    18.2.1 to approve standards and

    minimum expenses of

    rehabilitation of nature and

    environment impacted by

    prospecting, exploration,

    mining and processing

    activities;

    18.2.2 to develop and approve

    methodology for

    determination and

    assessment of harms and

    damages to the nature and

    environment caused by

    prospecting, exploration,

    mining and processing

    activities;

    18.2.3 to open a special account to

    deposit the rehabilitation

    fund, to monitor its

    transactions, secure pledges,

    and reimburse;

    18.2.4 to develop and approve the

    procedure to receive the

    results of the rehabilitation

    work on nature and

    environment impacted by

    exploration, mining and

    processing activities jointly

    with the central state

    administration in charge of

    geological and mining

    affairs;

    18.2.5 to develop and approve the

    procedure for conduct of

    rehabilitation work by the

    funds accrued in the

    rehabilitation expenses fund

    and by state budget subsidy,

    and selection of the

    contractor through the tender

    selection process;

    18.2.6 to grant the right to conduct

    rehabilitation work;

    18.2.7 to review and make

    conclusion on the

  • No. Article Draft provision Comment Recommendations

    rehabilitation work plan

    submitted by the license

    holder in accordance with

    this law;

    18.2.8 to submit specific

    recommendations to the

    state administration on the

    matter of obligating the

    license holder with nature

    and environmental

    protection obligation;

    18.2.9 to determine and validate the

    borders of the territory

    specified in 5.1 of this law

    jointly with state

    administration in charge of

    land relations affairs;

    Prohibited areas with respect to

    the Water Law need to be better

    defined. For example what is a

    river and a floodplain?

    Ephemeral streams should not

    be included but under certain

    interpretations they have been.

    This is too broad.

    Legislative review for

    clarity.

    18.2.10 to submit its opinion for

    areas to be announced for

    tender selection procedure in

    accordance with this law;

    18.2.11 to develop a method, a

    methodology and a

    procedure for planting ten

    trees for every cut down

    tree and foresting;

    Bizarre as to why this is

    included in this Draft Law as

    this could fit within the

    reclamation plan. Further, it

    would not make sense to plant

    trees in areas that can sustain a

    very limited number of trees.

    Remove from this Draft Law

    and regulate separately.

    18.2.12 other authority as specified

    in this law;

    18.3 Central state administration

    in charge of labour affairs

    shall exercise the following

    authority in minerals affairs:

    18.3.1 to approve the procedure to

    ensure appropriate working

    condition, salary structure,

    occupational health and

    safety, provisions and

    supplies to workers

    employed in mining and

    processing operations jointly

    with state administration in

    charge of geology and

    mining affairs;

    Assumption that items such as

    salary structure will not

    interfere with the commercial

    operations and projections of

    the license holder (i.e. no State

    mandated salaries other than

    minimum wage).

    Limited only to mining and

    processing.

    Confirm assumption.

    Clarify if reconnaissance,

    prospecting, and exploration

    are to be included.

    18.3.2 to monitor the adherence of

    license holders to the

    prescribed by this law the

    quota (ratio) of domestic and

    foreign workers;

    18.3.3 other rights specified in this

  • No. Article Draft provision Comment Recommendations

    law;

    18.4 Central state administration

    in charge of economic

    development affairs shall

    exercise the following

    authority in mineral affairs.

    18.4.1 to develop a comprehensive

    economic planning scheme

    on integration of the

    infrastructure, electricity and

    urban planning in

    developing mining activities

    nationwide;

    The use of infrastructure as

    opposed to commercial

    infrastructure implies some

    expectation of mining

    companies providing what is

    effectively social

    infrastructure. How will this be

    commercialised between the

    GOM and the company if no

    IA, SA or DDA exists?

    If it is an overall plan working

    in conjunction with companies

    this is good, but if it means

    Government dictates to mines

    how they must develop

    infrastructure etc. It is not

    good. This is not clearly

    defined.

    Clarify the intent and scope.

    Modify to limit Government

    involvement in the free

    market and commercial

    affairs of the license holders.

    18.4.2 to review and issue

    conclusions on the work

    plan and Technical and

    Economical Feasibility

    Report of mining and

    processing license holders,

    and to issue

    recommendations to the

    license holder on

    coordination of the

    prospecting, exploration,

    mining and processing

    activities to the regional and

    local mining Consolidated

    plan;

    Assumption that review and

    recommendations means that

    the Ministry of Economic

    Development does not have the

    authority to mandate, require or

    otherwise approve such reports.

    Confirm assumption.

    18.4.3 to review and if necessary to

    issue conclusions,

    recommendations and

    guidelines on the proposal to

    change the work plan of the

    license holder as specified in

    this law;

    Not clear to what extent the

    work plan must be modified

    based on conclusions.

    Clarify.

    18.4.4 to submit proposals and

    comments to the draft of the

    Local Development

    Agreement as specified in

    this law.

    Understood as not being

    mandatory.

    Clarify.

    18.4.5 to submit proposals to the

  • No. Article Draft provision Comment Recommendations

    tender selection process for

    granting licenses related to

    areas, selection criteria,

    condition and requirements

    as specified in this law;

    19. Authority of the state

    administration

    Refer to many other comments

    on reimbursement,

    expropriation etc. This will

    affect their authorities and

    responsibilities.

    19.1 The State Administration in

    charge of geological and

    mining affairs (hereinafter

    referred to as State

    Administration) shall

    exercise the following

    authority:

    19.1.1 to grant a right to conduct

    reconnaissance work to legal

    entities submitted their

    applications according to

    this law;

    19.1.2 to organize and conduct the

    competitive tender selection

    process for granting

    prospecting, exploration and

    mining license specified in

    this law;

    19.1.3 to grant and revoke the right

    to conduct minerals

    prospecting, exploration,

    mining and processing

    through application or tender

    selection procedures

    specified in this law by a

    license and to render other

    decisions related thereto;

    19.1.4 to extend license and issue

    other decisions related

    thereto;

    19.1.5 to transfer, combine, revoke

    the license and area granted

    by the license, and to make

    other decisions related

    thereto;

    19.1.6 to resolve border disputes

    arising between holders of

    license;

    19.1.7 to maintain a consolidated

    registration database of

    licenses;

    19.1.8 to create and maintain the

    national consolidated

  • No. Article Draft provision Comment Recommendations

    database of geology and

    minerals;

    19.1.9 to appoint the members of

    Professional Council in

    consistent with procedures

    approved by state central

    administration and approve

    the procedure of the

    Professional Councils

    functioning;

    19.1.10 to evaluate and assess the

    technical equipment and

    technology used in

    reconnaissance, prospecting,

    exploration and processing

    according to the approved

    methodology and procedure;

    No mining Clarify.

    19.1.11 to approve plan of works to

    be completed according to

    the reconnaissance,

    prospecting, exploration and

    processing license;

    No mining Clarify

    19.1.12 to make a decision on

    whether to accept the

    Technical and Economical

    Feasibility report;

    19.1.13 to make a decision on

    whether performed high

    grading mining;

    This is an arbitrary decision

    based on undefined guidelines.

    Before this is enacted there

    needs to be clear guidelines as