The government of Mongolia will not seek state participation in mineral deposits discovered by foreign companies without state help or funding, but is supporting proposed changes to the Minerals Law that would allow for “possible state participation” in deposits that were previously explored or partially developed by government agencies.
The compromise was reached after a cabinet meeting was held to consider proposed changes to the Minerals Law. The most controversial would have given the government rights to acquire up to 30% of “significant” mineral deposits, namely those discovered with state funding during the pre-1991 Soviet era, and up to 15% of future discoveries. While that unpopular proposal was rejected, other proposed amendments were endorsed by the 17-member cabinet, which includes the prime minister and other government ministers.
Specifically, the government supported a proposal for possible participation in deposits previously explored or developed by government agencies, though it’s believed this provision will apply only to a limited number of deposits.
The portion of the state interest in each eligible deposit would be equal in value to the amount of state funds spent on exploration and definition of the deposit, and would be subject to negotiation with any private property owner.
Robert Friedland, chairman of
“Oyu Tolgoi is not, and never has been, a state-funded deposit in any way, shape or form,” Friedland noted in a prepared statement. “Ivanhoe plans to establish a world-scale mine that will become a central pillar of Mongolia’s modernizing economy.”
Another proposal endorsed by cabinet calls for the introduction of a public auction system to allocate future exploration and mining licences for areas where state-funded work has taken place. This provision would also apply to areas surrendered by licence-holders and areas where licences have been revoked. The proposed changes include measures for improved environmental protection. These amendments to the 8-year-old Minerals Law must be reviewed by Parliament before they can become law.
Ivanhoe notes that none of the proposed changes would affect Oyu Tolgoi, which has a mining licence obtained in 2004, or its exploration licences.
Friedland and other mining executives active in Mongolia also welcomed comments by top government officials indicating they wanted to “maintain the current attractive climate” for foreign investment.
Prime Minister Tsakhiagiin Elbegdorj told delegates attending an investment-related conference in Ulaanbaatar that “Mongolia should be a country that is favourable for investment.”
President Nambaryn Enkhbayar echoed those comments at a news conference in China. “The leadership in the country will do its best to make foreign investment feel happy about their money they are going to bring into the Mongolian economy,” he told reporters.
Mining companies plan to work with the Mongolian National Mining Association and the North America Mongolia Business Council as the amendments work their way through the parliamentary process.
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