Resolution of the State Great Khural to Recall Draft Laws

2. To entrust the Government of Mongolia (S. Bayar) to develop and submit to the State Great Khural within December 1, 2008, draft Investment Agreements to jointly develop the TavanTolgoi coal deposit of strategic importance and the Oyu Tolgoi copper and gold deposit of strategic importance in compliance with existing laws of Mongolia and the State Great Khural Resolution on Approving the Basic Principles and Guidelines, and if deemed necessary, together with Draft Law on Changes and Amendments to Certain Articles and Provisions of the Minerals Law of Mongolia.

3. To order the Working Group (MP Kh. Badamsuren) to ensure preparations for discussion of the state policies in the minerals industry and the Development Program for the Sector up to year 2015 at the State Great Khural session, and to prepare and introduce to the State Great Khural certain proposals and conclusions on improving the legal environment and regulation for geology and mining sector upon careful study of the proposals and suggestions received from individual citizens, organizations, researchers and scholars.

DRAFT 2. RESOLUTION OF THE STATE GREAT KHURAL TO APPROVE BASIC PRINCIPLES AND GUIDELINES

Given the evolving reality of decline of the commodity prices and stock values of mining companies at the global markets and the ever increasing probability of reduction of investments in the minerals industry, factored by the global financial crisis, in order to start the negotiations with investors and expedite the conclusion of Investment Agreement(s) with the view to prevent possible complications, commence the development of the major deposits of strategic importance so as to enable payments to the citizens of Mongolia from the revenues of mining these deposits, founding upon Provision 43.1 of the Law on the State Great Khural of Mongolia, the State Great Khural resolves:

1. To approve respectively the basic principles and guidelines for an Investment Agreement to jointly mine TavanTolgoi coal deposit as per Attachment One; and the basic principles and guidelines for an Investment Agreement  to jointly mine OyuTolgoi copper and gold deposit as per Attachment Two;

2. To entrust the Working Group (MP Kh. Badamsuren), established by the Decree #103 of 2008 of the Chairman of the State Great Khural, to monitor the process of the Mongolian Government’s work to conclude the Investment Agreements, and to ensure the preparations for discussing at the State Great Khural of the draft Investment Agreements on joint mining of Tavantolgoi coal and OyuTolgoi copper and gold deposits.

Attachment One to the Resolution of the State Great Khural

 BASIC PRINCIPLES AND GUIDELINES FOR ESTABLISHING AN INVESTMENT AGREEMENT TO JOINTLY MINE TAVANTOLGOI COAL DEPOSIT

1. To develop the Agreement in conformity with laws of Mongolia currently in effect;

2. To study the possibility of providing in the Agreement for no less than 51% participation of the Mongolian side in the shareholding company to be established at the Tavantolgoi deposit;

3. To study the possibility of developing the Investment Agreement based on Product Share Agreement Principles;

4. Subject to the deposits geological and mining conditions and the size of the reserves, to provide for the most optimal rate of the royalty, its calculation method and distribution as is prescribed by Article 47 of the Minerals Law. To agree to get a certain portion of royalty and tax payments in advance;

5. To agree on the possibility to make the investment by the Mongolian Government in the form of taxes, fees and dividend payments and loan;

6. To reflect in the agreement the solutions for mine township, energy, auto road, railroad, water supply and other infrastructure facilities;

7. To pursue the policy to produce finished products to the extent possible, reach agreement on production phases and the output items and commodities;

8. To agree in conformity with pertinent laws on the programs and plans to train national professional personnel  to be employed during production;

9. To reflect in the agreement in conformity with laws application of eco-friendly and free of any adverse impacts on human and animal health, modern and advances technologies and equipment and provide for undertaking environmental reclamation work at all stages and phases of exploration and mining;

10. When developing the proposal on establishing the Agreement, to study the proposals by and speak with the experienced, financially capable and reputable foreign and national companies;

11. In establishing the Agreement, seek assistance from internationally renowned consulting firms and entities;

12. To agree the term of the Agreement as prescribed by Provision 29.3 of the Minerals Law;

13. No exemptions and preferential treatment beyond or different from those provided by Law shall be allowed in the Agreement.

Attachment Two to the Resolution of the State Great Khural

BASIC PRINCIPLES AND GUIDELINES FOR ESTABLISHING AN INVESTMENT AGREEMENT TO JOINTLY MINE OYUTOLGOI COPPER AND GOLD DEPOSIT

1. To develop the Agreement in conformity with laws of Mongolia currently in effect;

2. To study the possibility of providing in the Agreement for 34% initial participation of the Mongolian side, and eventually increasing that participation to 50% once the initial investment is recouped;

3. To study the possibility of developing the Investment Agreement based on Product Sharing Agreement Principles;

4. Providing for 34% direct ownership of the stocks of the shareholding company to be established at Oyu Tolgoi deposit by the Mongolian side, to agree to make the investment  proportionate to 34% equity participation in the form of tax, fees and royalty payments and loans;

5. Subject to the deposit’s geological and mining conditions and the size of the reserves, to provide for the most optimal rate of the royalty, its calculation method and distribution as is prescribed by Article 47 of the Minerals Law. To agree to get a certain portion of royalty and tax payments in advance;

6. To reflect in the agreement solutions for mine township, energy, auto road, railroad, water supply and other infrastructure facilities;

7. To pursue  policy of  producing finished products to the extent possible, reach agreement on production phases and the output items and commodities;

8. To agree in conformity with pertinent laws on the programs and plans to train national professional personnel to be employed during production;

9. To reflect in the agreement in conformity with laws application of eco-friendly and free of any adverse impacts on human and animal health, modern and advanced technologies and equipment and provide for undertaking environmental reclamation works at all stages and phases of exploration and mining;

10. While noting the Conclusions of December 24, 2007, by the Working Group established by the Decree of the Chairman of the State Great Khural in the process of working on the Agreement, to provide no exemptions and preferential treatment beyond or different of those stipulated by law;

11. To agree the term of the Agreement as prescribed by Provision 29.3 of the Minerals Law;