“There is nothing in the law that is against national interests, or shows prejudice against investors,“

T.Bayarbayasgalan, Head of the Licensing Division of the Nuclear Energy Agency, tells L. Bolormaa that the uncertainties in the uranium sector will end soon and that companies with clear targets and long-term plans of work should have no fear.

Companies holding licences for uranium exploration and extraction have for quite some time been unsure of where they stand. There is much talk that licences will be revoked and also that the state will pay large compensations for this. What exactly is the situation?

Our agency attended a recent discussion organized by the Mongolian National Mining Association where a lot of concern was raised on the State’s role and share in the uranium sector. I would think the law is unamuous on this. Its ambit does not include exploration licences. The law covers companies involved in operating mines where the reserves of the deposit have been established and registered with the State.
The issue of State share of the ownership, whether 51% and 34%, does not concern most licence holders today. That will crop up only when the deposits are ready to be developed. This final stage will come after the reserve estimates have been accepted by the Mineral Reserve Council and registered by the State.  The extent of State ownership will be based on whether the exploration was made with private funding or state funding. The norms are clearly defined and there will be no pressure on any company or any unilateral and arbitrary decision by the Government.
The State will not own less than 34% of any deposit. This is a well known provision of the current Minerals Law and stems directly from the assertion in our Constitution that all resources under the ground are the property of the Mongolian people. This is not a negotiable concept, but this does not mean that licences will be revoked or forcibly taken away. Every investment agreement and agreement on the development of a deposit will be negotiated by the concerned parties strictly following the provisions of the law.
I think the talk about compensation is related to the requirement for companies to renew the registration of their licences. The principle here is to make sure that the interests of neither the Government nor the company are compromised. There is no question, however, of giving compensation to companies who may not be granted a renewed licence.
Incidentally, while Vice Minister of Mineral Resources and Energy B.Ariunsan has said there are 162 licences at the moment, our records put the figure at 146. We have told the Prime Minister of the anomaly and have stressed that our figure is the actual one.
According to the Prime Minister’s Order No.82 issued on 24 August, 2009, the Minister of Mineral Resources and Energy chairs a working group that includes the Chairman of the Nuclear Energy Agency (NEA), the Chairman of the Mineral Resources Authority of Mongolia (MRAM), the Legal Analyst at the Government Secretariat, and a senior specialist in registration, monitoring and inspection at the State Property Commission. Its responsibility is to arrange for transfer to the NEA of all material related to the special permits. These include geological reports on radioactive minerals that the recently adopted law wants the NEA to have.  NEA and MRAM officials have met a couple of times to talk about the modalities but the actual work of transferring the material is yet to start officially.
The deadline for renewal of registration of licences relating to uranium deposits is 15 November, but we want to finish this as quickly as possible. Several issues connected with the transfer of licences from MRAM to NEA are still to be sorted out. Our Agency is providing companies with answers to their queries as much as possible. We plan to post all regulations and instructions related to the special permits on our website. There will also be clear steps leading to renewal of registration. We shall advertise these in daily newspapers. Our goal is to reduce amuity and follow transparent procedures.
 

How many companies are there with mining licences on uranium deposits?

There are only two:  Central Asian Uranium and Xin Õin Mines.  The rest hold licences for exploration. The licences of some companies like   Western Prospector were suspended on the basis of an inspection carried out by the State Inspection Agency. They are not the only ones, many other exploration licences have also been suspended. However, most of the terms of suspension will expire soon. The NEA will consider their cases once all the material has been transferred. All 146 licences will be reviewed and we shall be happy to renew the licences of all companies meeting our requirements. It is premature to say that all are most of the licences are going to be taken away.
 

How true is the popular perception that the renewal exercise is actually aimed at reducing the number of licences, and to allow only major companies in the field and force out the minor ones?

No. It doesn’t have such an aim. The exercise is in pursuance of a provision in the recently passed law on nuclear energy that clearly calls for a review and renewal of all special permits issued prior to the law becoming effective. This is where we stand now. It can well be that once the law is put into practice we shall discover some anomalies or contradictions which will need review.
The criticism that the law on nuclear energy was passed after only a week of discussion is not based on fact. There was no undue hurry. The process was started two or three years ago. The draft document was the result of many years of discussion.
Uranium is getting attention worldwide. The rise in demand can be traced to the concern about global warming and protection of the environment that has led many countries to plan generating nuclear energy. China alone plans to build 20-30 nuclear reactors. So do many other countries. The present estimates of our uranium reserves are largely based on studies made by Soviet experts and the actual reserve is likely to be much higher.
We need to know our exact potential and MonAtom was established for this purpose. Once MonAtom finishes the exploration work, we shall begin developing the deposits. Our goal is to become one of the leading uranium producers in the world. A policy formulated by the Government on use of radioactive minerals was ratified in May. The law is in fulfilment of this policy. The draft of the law was discussed by the National Security Council two or three times. It was also reviewed at Cabinet meetings. Both Parliament and the Government appointed working groups to study the draft and professionals were involved at several stages.
It is thus not fair to say that the law was passed in a hurry or without adequate deliberation. We are aware of the possibility that as we begin its implementation, loopholes will be discovered and some concerns expressed by some companies and NGOs will turn out to be true. This is only to be expected and we shall have to cross every bridge as we come to it. There is no problem that cannot be resolved. Some MPs have proposed a few amendments and we shall soon find out what their fate will be.
Our intention is not to harm any company. If there is a need, we shall seek professional help to improve the law but even as it stands, there is nothing in the law against national interests, or that shows prejudice against investors or can be called regressive.
 

Since March, when Western Prospector sold its shares to a Chinese company, the status of several uranium licence holders was inspected. The results have not been made public. Which companies were inspected and what did you find? 

A joint working group of the State Professional Monitoring Agency, the MRAM, and State inspectors of radioactivity control inspected activities of companies with special permits in Dornod, Dornogobi and Dundgobi. Their reports were reviewed by the Council of the Chairman of the State Professional Monitoring Agency and submitted to the Parliamentary Standing Committee on Security and Foreign Policy.
I agree the inspection reports were not publicized but there was no sinister secret behind the decision. The inspection was the joint work of three unrelated State organizations. The NEA respects the competence and responsibility of State administrative organisations and some licences were suspended on the basis of certain violations noticed during the inspection. The inspection was made prior to the Nuclear Energy Law coming into force. The suspensions were in July, and will expire before November 15. We shall review all applications from these companies for revival of their licences and decide according to specific criteria. Companies that have clear targets and long-term plans of work should have no difficulty in getting their licences renewed.
 

How many of the 146 licences do you expect to renew?

I can’t speculate on the number. We do not intend to allow any change in the territory to be explored under the existing licences. We have asked for a meeting of the joint working group to adopt guidelines. I expect all the 146 companies to apply for a new registration. I shall not be surprised if MRAM has already held talks with some of them.
 

Are there any differences between regulating authorities over changing or withdrawing the territories under licence, or over claims of overlapping territories?

None so far, but this does not mean that there will not be any in the future. But these can be resolved under the law which states that any dispute over territory will have to be decided only on the basis of consensus between NEA and the MRAM. Some amendments to the Minerals Law are likely and I expect them to set out more clearly what the working relations between the two will be. There could also be formal guidelines to govern relations between the NEA with the State Professional Inspection Agency and maybe with the Intelligence Office also.
The Government’s priority is to get a final idea of the volume of the uranium reserve in the Dornod deposits and to put it into the economic cycle. The comprehensive national development policy also favors deployment of nuclear energy for peaceful purposes. Let us begin with exporting the uranium under a clear-cut policy and following well-defined regulations. Let us also see how we can build a processing plant.
The first steps have already been taken. An agreement has been made with RosAtom. Once Dornod Uranium is established, exploration and development will begin in the Dornod region. At present, the Mongolian Government owns 21% of Khan Resources LLC or Central Asian Uranium LLC and 15% of Gurvansaikhan LLC. It will also have shares in Dornod Uranium.
 

What will be the ownership ratio in the Dornod Uranium joint company? Will it be 50:50?

It is not clear yet. Our law says that 51% will be owned by the Mongolian Government and during the Russian President’s visit, we insisted that this would have to be followed. An understanding in principle on the joint venture has been reached but the Russian side is yet to accept the Mongolian demand for 51% ownership. Obviously the company cannot be set up until this is resolved. It has been two months since the two Presidents met and a task force was set up to recommend the modalities of establishing a joint company.
 

Will uranium licences be the responsibility of the NEA in the future?

Yes. This is clear from Provision 6 of Article 11.5.  Article 15 vests the authority to issue, suspend and revoke 8 different types of special permits related to nuclear energy, radioactive element transportation and deployment of nuclear energy with a state organ responsible for nuclear energy. This is the NEA.
Of the 8 types of special permits we shall issue two are related to mineral resources, stipulated in Articles 15.1.5 and 15.1.6. Two others pertain to uranium or any other radioactive mineral, while the other four are related to nuclear substances, nuclear energy equipment installation, deployment and transport.
Over 20 sets of regulations, guidelines and instructions will be formulated by the Government. The drafts of a few have already been submitted for consideration.
 

Has Mongolia chosen its final partner in the uranium sector or shall we have other partners, too?

At present, on the basis of reserve estimates of 1.4 million tons made during the Socialist times Mongolia ranks 15th in the world.  Once the many more undiscovered reserves are found we may jump to the 5th place. Let us wait and see what deposits are discovered, study their quality and only then shall we know how best to go about developing them. We do not rule out joint exploratory work between private companies and the Mongolian State. Foreign partners will certainly be interested in investing in the Mongolian uranium sector.
The Prime Minister sought cooperation in the uranium sector when he visited Russia, France and Japan. Agreements and MOUs on uranium were signed during the Mongolian President’s visit to India. South Korea has also shown interest. These are mostly offers from Governments and state-owned enterprises.
An example of cooperation with the private sector is the American-invested Denison Mines partnering the Russian-Mongolian state-owned joint company to form Gurvansaikhan that has now registered its reserves at the Mineral Reserve Council.  Gurvansaikhan has two deposits in Dundgobi province. The French Areva group has been here for years and its head recently came and signed a fresh memorandum of understanding. Other well-known companies such as Cameco and a few from Japan have expressed interest in working here. Apart from our neighbours, we are open to cooperation with other highly developed countries and shall issue licences to those expressing interest in investment and exploration regardless of size of the company.
However, there are instances where one company took out 10-20 licences. We shall deal with this issue according to law and State policy.
 

How much have licence holders spent on exploration activities? What about claims that some companies stand to lose a lot if their licences are suspended or revoked?

It depends on the territory and also on the extent of their operations. At the Mongolian National Mining Association meeting with uranium companies, a representative of Khan Resources said in ten years the company had spent USD20 million. Members of the Standing Committee on Security and Foreign Policy had visited Mardai in August and then asked the State Professional Monitoring Agency, the MRAM and our agency to visit the sites to assess how much money was likely to have been spent by companies and how much the value of the reserves there would be. We are still working on it. MonAtom will be the working arm of the NEA to estimate, explore and develop reserves. As a state-owned company, MonAtom will have the same status as Erdenes MGL.
 

What is the institutional status of MonAtom?

It is the same as our Agency’s. The NEA was established by an order of the Prime Minister on January 20 that also specified its structure and personnel. Today, we need more staff, particularly professionals, to improve our quality of work. MonAtom is in a similarly difficult financial situation. It has no office on its own. We are now located on the 7th floor of the 11th building of the Government with 40 employees. Our mandate is quite , as it spreads beyond uranium to thorium and also rare earth elements.
 

What is the status of Denison Mines? Has it renewed its registration and recorded its reserves and is everything going in a lawful manner?

The company applied for its reserves registration before the law came into force and so this could be done once the law was in place, and the mining licence was also issued without delay. The Central Asian Uranium LLC also made a number of requests to review their estimated reserves, but the Mineral Reserve Council did not convene, choosing to wait for the new law. What happens when reserve estimates are assessed is that a group of Mongolian experts are appointed who evaluate the claims. For example, data provided by any company to support claims of established reserves and also of expenses on exploration will be reviewed by these experts, geologists and professional institutions. After that we will approach the Mineral Resource Council to approve the reserve estimate of a deposit explored under licence.
The Mineral Resource Council has already approved part of the deposit reserve claims of Denison Mines which works in four territories. In order to advance to the production stages, the exploration licence has to be converted to a mining one. The company should now approach our agency for this with a completed pre-feasibility study which we shall review and confirm before issuing a mining licence. The company plans to begin producing yellow powder next year.  

How long will uranium companies have to wait for clarity?

Not long. We are working with all speed and things will be very clear for the companies once we post the new registration procedure on the Internet. Companies should then have no uncertainty about what material to submit and in what manner.

Did the Chinese Nuclear Corporation buy shares in Western Prospector?

We have heard this but no official information has been provided to the NEA. No information has been given to MRAM either. So we are not certain what the position is and how to address the issue. A CNC team visited Mongolia quite some time ago, before the law had been actively considered even. So Mongolia could not reach any understanding with CNC then. Today, the issue is clear, we now have a law, so once we have information it will be easy for us to act. The state has the policy ready. The guidelines are clear now. Also there will be clear demarcation of the responsibilities and rights of different state organizations that will facilitate arriving at decisions. These are not complex issues. The companies’ period of uncertainty will soon pass and in future, everything related to uranium will be clear.
 

When will there be a meeting between MRAM and NEA?

We shall meet soon. Now that the legal environment is clear, there will be no conflict or contradiction between our policies and approaches. All State organizations will work with the same perspective.

Is there any real possibility of Mongolia building a nuclear power station?
Nuclear technology experts at the NEA have started preliminary work on building one. Right now, the most appropriate location is being identified. The IAEA has advised us to study future energy demands in the country. We are collecting material on that. Since we have the uranium a nuclear power plant should not be difficult to build and this could even produce more than the domestic demand so that Mongolia will be able to export energy to neighbors. 
 

Shall we be able to use the fourth generation technology when building the nuclear power station?

The IAEA has recommended introduction of this fourth generation technology in small countries and Mongolian professionals are studying what countries like Japan and Germany are doing in this regard.