Proposed amendment to the the minerals law of Mongolia Print E-mail
law.jpeg1. With reference to Minerals Law of Mongolia, Article 5. Ownership of minerals, Clause 5.4, which states “The State may participate up to 50% jointly with a private legal person in the exploitation of a mineral deposit of strategic importance where State funded exploration was used to determine proven reserves. The percentage of the State share shall be determined by an agreement on exploitation of the deposit considering the amount of investment made by the State” to be amended as “Strategic mineral deposits where State funded exploration was used to determine proven reserves shall be deemed 100% property of the State. In the instance of a joint development of the strategic mineral deposit with a private legal person, the State may participate up to 50% jointly, and State will utilise transparent means to develop the mineral deposit.
In the instance where the financial source is lacking, risky or is deemed unnecessary, the private legal person, whether national or foreign, having any percentage of the shares shall be liable to taxation from the period when the mine goes into operation, taking into consideration national economic security and based on feasibility study to determine the amount of financing necessary, and through open tender process.”
5.4.1 “With reference to Clause 5.4, the tender threshold amount will be based on feasibility study that takes into consideration proven reserves, the current market value of the reserves and the amount of financing that is deemed necessary. The amount of financing required shall be determined through confirmation of an independent auditing organisation”.
5.4.2. “With reference to the development of mineral deposit, the investment agreement shall be made between the State and a private legal person.”
2. With reference to Article 5, Clause 5.5, “The State may own up to 34% of the share of the investment made by a license holder in a mineral deposit of strategic importance where proven reserves were determined through funding sources other than the State budget. The percentage of the State share shall be determined by an agreement on exploitation of the deposit considering the amount of investment made by the State” to be mended as “ гэснийг “The State, as owner of the property, may own up to 34% or wholly own the share of the investment made by a license holder in a mineral deposit of strategic importance where proven reserves were determined through funding sources other than the State budget. The percentage of the State share shall be determined by an agreement on exploitation of the deposit considering the type of minerals, proven reserves, the current market value of the reserves and the amount of financing that is deemed necessary. The process and outcome of the investment agreement shall be made made transparent to the public.”
5.5.1 “With reference to Clause 5.5, in case of disputes between the State and private legal person, and if it causes harm to the national economy, and in the case that the agreement cannot be continued further, the State as owner of the property, in connection with international standards will adhere privilege to tax paying license holder, based on feasibility study, national security and amount of financing requred to develop the mineral deposit, through open and competitive tender procedure to local or foreign investors. Percentage of ownership can be determined based on amount of risk taken in discovering reserves, total costs incurred and whether it is in their interests of the parties. The agreement negotiation proces and the outcome shall be tansparent to the public. Determining of exploration risk and the amount of expenses incurred in exploration will be in accordance with Article 33.2 and 3.3 of this law and will be liable to auditing by an external organisation.
5.5.2 “With reference to the percentage indicated in Artile 5.5, in the instance where the financial source is lacking, risky or is deemed unnecessary, the private legal person, whether national or foreign, having any percentage of the shares shall be liable to taxation from the period when the mine goes into operation, taking into consideration national economic security and based on feasibility study to determine the amount of financing necessary, and through open tender process”.
5.5.3 With reference to Clause 5.5.1 and 5.5.2, the tender threshold amount will be based on feasibility study that takes into consideration proven reserves, the current market value of the reserves and the amount of financing that is deemed necessary. The amount of financing required shall be determined through confirmation of an independent auditing organisation”.
5.5.4  “With reference to the development of mineral deposit, the investment agreement shall be made between the State and a private legal person.”
3. Clause 5.6, which states “A legal person holding a mining license for a mineral deposit of strategic importance shall trade less than 10% of its shares on the Mongolian Stock Exchange” to be changed to Clause 5.6.1 “ “ In accordance with Article 2.2, the State and the Mongolian government shall not support exploration and mining licences holders of strategic deposits to raise financing through trading shares on the international stock exchange before the investment agreement is finalised. If the license holder does not abide by the law, the State shall not be responsible for any loses incurred. However, the investing company registered in Mongolia may raise financing through the international stock exchange after the investment agreement is in place. The financing raised and profit allocation is to be set in acordance with related Mongolian laws.
4. In reference to Article 29. Investment Agreement, Clause 29.1.10 is to be added as “If the State initiates value added production from transferring produce of mining exporters from semi-finished to finished products, the State will receive top priority to purchase the semi-finished produce based on current market value. The State may render support to finished mineral produce makers to maintain competitiveness on the international market.
5. In Article “29.3……… the terms of the agreement shall be 30 years and the investment agreement to be made in accordance with Article 29.1”. to be amended as “29.3. ……… the terms of the agreement shall be up to 30 years and the investment agreement to be made in accordance with Article 29.1”.
6. This law shall be applicable from 2009 … month … day onwards.
Source: www.business-mongolia.com

 
 
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