Tag Archives: Mining

Obtaining a Mining LIcense is no Obstacle for Foreign Enterprises Operating in Mongolia



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It is well-known that the economy of Mongolia is largely dependent on mining sector by generating 24 percent of GDP and 94 percent of export income and comprising 64 percent of FDI.

The country is abundant with natural resources, and it is the Government of Mongolia that determines those areas for which a mineral exploration license or a mining license may be granted based upon the recommendation of the Ministry of Mining. The law provides that the size of an exploration area for one license shall not be less than twenty-five (25) hectares and shall not exceed one hundred fifty thousand (150 000) hectares.

The Mineral Resources and Petroleum Authority of Mongolia under the jurisdiction of Ministry of Mining and Heavy Industry is in charge for organizing the selection for granting the special licenses for the exploration area and any entities interested in obtaining the exploration license may submit their proposals online as well. Upon the selection of the company in tender process and granting the special license, the entity shall duly complete the exploration project and determine the natural reserve deposits. Importantly, only the exploration license holder shall be entitled to apply for a mining license in the exploration licensed area.

The “One license for one legal entity” rule applies pertaining to prospecting, exploration or a mining right. Mineral exploration and mining licenses shall be granted to a legal entity duly formed and operating under the laws of Mongolia, and such legal persons shall be duly registered as taxpayers. Foreign companies may establish a foreign invested legal entity in Mongolia directly or they may establish a joint venture in cooperation with Mongolian businesses. Where more than 25 percent of the total share capital of a Mongolian enterprise is held by a foreign investor the investment amount by each foreign investor equals must be at least USD $100,000.

As it is prohibited to transfer the special licenses to any other third parties as a whole and there are strict requirements of obtaining the exploration and mining licenses, some foreign business entities choose to simply buy an existing Mongolian company, which already has obtained the necessary licenses. In other words, in such case the foreign entities may buy a Mongolian company along with all its rights and duties, as well as its licenses, and may operate its mining operations under this company.

The Government of Mongolia is doing its best effort to establish a pleasant environment for all businesses and grant the equal rights for both domestic and foreign companies willing to benefit from natural resources of Mongolia, provided they do operate in good faith by respecting and adhering to applicable laws.

How to Extend a Minerals Exploration License



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Our team of Mongolian lawyers recently received an inquiry from a long-time client regarding the process for renewal of a minerals exploration license. Exploration licenses are issued by the Mineral Resources and Petroleum Authority for a 3 year period with holders permitted up to 3 extensions of the term of an exploration license for 3 years each. A license holder should apply for extension to the Mineral Resources and Petroleum Authority 1 month before the expiration of the exploration license.

Within 10 working days after receiving the application for the extension of an exploration license, relevant government agency shall verify whether the applicant qualifies for a renewal. If so, the period of the exploration license shall be extended for a period of 3 years, and this shall be recorded in the license registration book.

As soon as Mineral Resources and Petroleum Authority renews the exploration license it will notify the state inspection agency and details of the renewal will be published in the daily newspaper.

In the event, the license holder does not meet the above- mentioned requirements and conditions, the Mineral Resources and Petroleum Authority will refuse to extend the term/period of the exploration license and shall notify the applicant in writing of this and record it in the license registry book.

Renewal of a Mining License



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In the past weeks the firm’s Mongolian lawyers have been approached with an inquiry regarding how the recently revised Law on Permits may affect renewal of Mining Licenses.

Mining license are typically granted for a term of thirty (30) years, and are available for renewal in the two years before expiration.

The holder of a Mining License is required to submit an application for renewal of the license not less than two years prior to the expiration of the Mining License.  The applicant is required to submit the original Mining License along with a copy of the license as part of the application. The applicant is also required to submit documentation demonstrating regarding implementation of the mandatory Environmental Protection Plan for mining operations for the project.

Upon the receipt of an application for renewal of the Mining License along with supporting documents mentioned above, the relevant government agency shall reach a decision within 15 days. Where the administering agency finds no violations or other issues which result in ineligibility, the Mining License should be extended for a new term of 20 years.

Mining License Renewal



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Do the originals of the Mining Licences need to be taken physically to MRPAM for the annual registration?

The license-holder is obliged to pay license fees annually in order to keep the license valid.   When you pay the annual license fee the original mining license certificate is required to be taken physically to MRPAM  (Mineral Resources and Petroleum Authority of Mongolia) and make the appropriate record on the annex of the license certificate.

According to the internal rule of MRPAM, when MPRAM receives original documents such as mining license, request letter, license fee and MRPAM will provide the receipt confirmation. The receipt confirmation shall contain the documents received by the MRPAM and the date on which the license certificate was recorded the annual payment will be returned to the license holder or authorized person.  Practically speaking, the registration will take 3-7 days depending on the workload of MRPAM. Please note that if license holder is unable to do the annual payment and registration, an annual registration could be done with MRPAM if agent has a proper POA to act on behalf of the license holder. 

What’s the process for in case of the Mining Licences were lost or damaged and can the Mining Licences be reissued?

MRPAM will re-issue the mining license and following documents are required when apply for new license certificate:

–          Official request letter to reissue the license;

–          A receipt of the stamp duty fee of 250 000 MNT for mining license and 200 000 MNT for exploration license paid to MRPAM;

–          Announcement of invalidation of the lost license in the newspaper (piece of announced newspaper including the name, date, number of the newspaper);

–          A copy of Company certificate issues by the LERO;

–          Completed application form (reissuance of license) (available at MRPAM’s website to download)

Switzerland Aids Mongolian Small-Scale Artisanal Mining



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The Sustainable Artisanal Mining (SAM) Project started in 2005 and built on Swiss Agency for Development and Cooperation’s (SDC) experience in Artisanal and small-scale mining (ASM) projects in Ecuador, Bolivia, and Peru. Since 2005, the SAM Project has been contributing to the organization and formalization of Mongolian ASM sector, advocating for environmentally sound mining practices and raising awareness amongst stakeholders on responsible ASM. The SAM Project has been implemented in four Phases, so far, with goals and aims to develop an economically sustainable, environmentally responsible and human rights-based ASM sector in Mongolia benefiting from and contributing to, global best practice regarding ASM. Phase 1 of the SAM Project aimed to develop ASM as a motor for sustainable rural development under an integrated sustainable resource management by the Government of Mongolia. Goal of Phase 2 was to support ASM to create favorable conditions and structures for the ASM sector so that its contributions to socio-economic development based on the careful use of natural resources in selected areas will increase. Phase 3 secured the recognition of ASM as a formal sub-sector contributing to Mongolia’s economic development. Phase 4 of the SAM Project seeks to transform Mongolia into an international knowledge hub for ASM best practice. In Phase 4 of the SAM Project, SDC initiated and funded the development of ASM Knowledge Hub, a web-based platform, opening ceremony for which was held on March 1, 2018. The ASM Knowledge Hub is a web-based interactive platform, which will provide active exchange and distribution of ASM information and connect ASM actors and knowledge contributors in Mongolia as well as with global ASM stakeholders. The platform features latest news and updates in ASM sector and provides information on upcoming events regarding the sector. Visit ASM Knowledge Hub at www.asmhub.mn for various articles, studies, researches and publications produced by ASM stakeholders.

Mongolia Minerals Exploration License: Review and Revocation



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In our previous post, we introduced Mongolia’s new tender process for obtaining a license for minerals exploration activities. Here, we will briefly discuss the procedures and requirements on review of an application for the exploration license. 

Application Review

After receiving applications for a license to explore for minerals in a particular plot, the State Administrative Agency of Mongolia will evaluate each technical proposal and fee proposal submitted by the interested parties on a scale, and will notify the candidate who obtained the highest scoring evaluation that it is eligible to receive the exploration license. If two or more applicants obtained equal or similar evaluation scores, the applicant which first submitted the application is first eligible to be issued the exploration license. If an applicant submitted incomplete documents or a review of the technical aspects of the documentation reveals that the application does not meet the requirements to be eligible for the exploration license, the State Administrative Agency will notify the applicants in writing regarding their exclusion from the remainder of the tender process, and will provide and explanation along with returning the application documentation to the applicant.

The selected candidates are required to pay an initial annual exploration license fee within 10 days after receiving notice of eligibility. If the candidate fails to pay this fee, it will be deemed to be a ground to revoke the license. After payment of the initial fee, the State Administrative Agency will issue an Exploration License valid for a three (3) year period. When the Exploration License is issued, the Ministry of Environment, the local province, district, city’s governor, and local Inspection Agency with jurisdiction over the target plot will each be notified directly, and the aware of the exploration license will be published in public media.

Revocation of a License

There are several potential issues which may result in revocation of an issued minerals exploration license. Breach of rules and standard procedures for exploration will result in revocation, and the holder will be required to transfer the license back to the State Administrative Agency. Failure to pay required corporate income taxes, to duly report to the tax office and to report relevant information to the tax office will also result in revocation of the license. The Exploration License will be revoked in the event that the license holder does not report such status to the Mongolia Legal Entity Registration Office (LERO), along with relevant details about its corporate structure and holdings, or where changes to the license holders corporate governance and information is not reported within 10 days to the Tax Office.

Mongolia Implements New Tender Process to Obtain Mining Licenses



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Companies in or considering getting into the Mongolian mining industry need to be aware of new changes in procedures for obtaining a license for minerals exploration. The new changes are geared toward making it easier to apply for and register a minerals exploration license, which will hopefully facilitate interest in continued minerals exploration in the Mongolian steppe.

The amendment of the Law on Minerals regulating the issuing of new mining licenses, was adopted by the Mongolian Parliament on 10 November 2017. Under the law, new mining and exploration licenses will be granted through a new tender process starting this year. Prior to the amendment, mining licenses were obtained through applications and tender bids.

Area Selection

The minerals exploration process will start with a determination by the State Administrative Agency as to the target plot of land to be explored. After identifying a candidate area for exploration, the State Administrative Agency will notify the provincial governor and local municipality, and provide a detailed outline and map of the proposed exploration.

The governor and local municipality will have 45 days to provide a response to the State Administrative Agency giving local opinion as to the planned exploration in the target area. A meeting of citizen representatives should be held to determine local attitudes. If there is no official reply within the 45-day period the proposed exploration is considered accepted by the locality.

After a target area has been approved for minerals exploration, the State Administrative Agency will announce a selection process inviting potential exploration companies to submit application documents to be considered to management the exploration. The invitation period will last 30 days and include publication through public media and newspapers. In the event that an area targeted for exploration receives no applicants to conduct the exploration, the State Administrative Agency will leave the area open and conduct further announcements going forward.   

Selection Process

With the new Changes, licenses for minerals exploration will be issued through a special selection and bidding process. Interested companies are required to submit a request to be considered to participate in the selection process to the State Administrative Agency. The application must include documentation regarding the applicant’s technical proposal or project outline documentation. The required documentation will include information regarding personnel requirements, techniques and technology, and the nature of the planned exploration work.  The State Administrative Agency will register the request and give a receipt to the applicant while the request is considered.

Our next post will look at procedures for review of submitted applications and revocation of issued licenses.

Mongolia Investment Promotion Agreement With Canada



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Canadian Minister of International Trade Francois-Philippe Champagne met March 12, 2017 with Mongolia Mining Minister Ts.Dashdorj, to issue a joint announcement that the Mongolia-Canada Foreign Investment Promotion and Protection Agreement (FIPA) has entered into force.

The Global Affairs Department of the Canadian government is quoated as saying, “This agreement sets out a framework of legally binding rights and obligations that will protect Canadian investors in Mongolia. The strong reciprocal protections in the FIPA will help Canadian and Mongolian companies deepen commercial ties with confidence and spur job creation.”

Canada is estimated to have invested over 6.4 billion USD in Mongolia in 2015, one of the larest individual country contributions. Most of this Canadia investment in Mongolia is in Mining and related sectors. It is hoped that FIPA will encourage diversification in investments in areas such as agriculture and infrastructure.

According to the agreement each nation will accord the other “Most Favored Nation” status.

We are happy to see Canada double down on economic engagement with Mongolia. Canada’s efforts include working with Mongolia to develop capacity in natural resources management, official transparency and accountability, and environmental sustainability.

The benefits Mongolia gains from these policy improvements will be felt not only by Canadian investors, but for all foreign investors in Mongolia, along with local Mongolian companies and individuals.

Mongolian Parliament Votes for Nationalization of Mining Company



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In 2016, a private Mongolian company, Mongolian Copper Corporation (MCC), bought 49% of shares in Erdenet Mining Corporation (EMC). The shares were purchased from previous owners, the government of Russia, and Russian state-owned Rostec Corporation. Described by Rostec as, “valued at a market premium,” The purchase initially attracted public criticism as to how it was conducted.

A task force, lead by Sh. Radnaased Head of the Mongolian Parliament’s Standing Committee on Law (SCL) investigated the transaction and found that MCC had paid over USD 400 million for the stake utilizing a pattern of illegal corporate structure ss and illegal financing arrangements. The transaction violated several provisions of the Mongolian Constitution and statutory laws. The SCL made a proposal this year to transfer the 49% stake in EMC to the Mongolian Government. The Mongolian Parliament has passed a resolution endorsing this course of action.

The sale to MCC was approved by the former government, the day before new parliamentary elections were held. Some now say the allegations of illegal conduct are political fabrications designed to make nationalization of the shares easier by discrediting the original sale.

Though in this case the nationalized shares are currently owned by a private Mongolian company, foreign investors will no doubt take note. Though the current government has allowed foreign mining company Rio Tinto to continue with the Oyu Tolgoi mining expansion, and claims that Mongolia is open to foreign investment, it is clear that among parliament at least, there are substantial sentiments regarding government ownership of mining projects.

Fresh Amendment to Mongolia Company Law Incoming



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A new draft law to amend to the company law was submitted to the Mongolia Parliament recently. The purpose of the proposed amendments is to improve the regulation of liability limited companies with majority state ownership. There have been problems which have occurred with corporate governance of such majority state owned companies, in areas such as shareholder and board meetings and selecting members of the Board and executive management.

The amendment aims to improve legislation concerning proposals to call regular and irregular meetings of shareholders of these companies and improve the effectiveness of the regular Board of Directors meeting so as to aid is role as decision maker and to ensure normal operations of these companies.

The draft amendment includes the regulations clarifying procedures for to the call of regular and irregular meetings of shareholders of and the effectiveness of Board of Directors meetings.

Once the draft law enacted, rights, obligations and liabilities associated with the liability limited companies dominated by state ownership shall be clear and no additional funding from state budget shall be required for enforcement of this law.  We see this as a positive step to encourage independent decision making among leadership of key state owned enterprises, which are the primary vehicles by which Mongolia facilities and draws profits from several of its major mining operations.