With the minerals sector set to be the driver of Mongolia’s economic growth in the coming years, if not decades, it is essential for the country to have a minerals law that is stable, and equitable to all players in the sector. Given the importance of the law and the sensitivity of several issues it will cover, it is no surprise that opinion is sharply divided on what the law should contain. The President’s Office, Parliament and the Government have all established working teams to prepare a draft law and all of them are busy collecting the views of individuals, business entities and professional associations before presenting their recommendations that will then be evaluated on the way to a consensus. There is not much time left as, apart from everything else, the ban on issue of fresh exploration licenses will be lifted only when a new minerals law is passed. G.Iderkhangai asked several people connected with the mining industry in various ways what they feel of the proposed amendments. No need to mark some deposits as “strategically important”
N.Algaa, Executive Director of the Mongolian National Mining Association: Our association collected ideas from our members and then forwarded them to all the working teams. We see no need for a complete overhaul of the law that has been in force since 2006. Some sensible changes are of course called for. We have five basic suggestions.
1. The listing of some mineral deposits as being of “strategic importance” should be scrapped. It is quite subjective and in any case everything is strategically important and there is no need to include some and not others. If it is really important to differentiate deposits, let’s just do it on the basis of their potential impact on national security. This can also be done during exploration and not follow a list prepared beforehand.
2. The present practice of giving the state 34% ownership of some deposits and 50% of others, on a predetermined basis, should also go. The matter should be decided through negotiation with the individual company in each case.
3. At present a clause about local contribution is taken to mean that citizens and local organisations have the technical authority to allow the land to be explored or searched for minerals, and also to restrict or ban activities. This power should be defined more clearly, so that the local administrations’ share of the tax paid by mining companies once they start commercial production is properly identified.
4. Tax provisions in the current mineral law overlap with those in the tax law. We also do not favour the present provision that a mining company has to sign agreements with a regional administration to protect the environment after the State grants it permission to work. We also want much more clarity in defining which areas fall in protected zones. The failure to do so is one reason for the stalemate over the law prohibiting exploration and exploitation of minerals in river and forest areas. Too much time is now wasted by deciding civil complaints by voting. Soum and aimag assemblies should be asked to prepare a map showing territories of historical or religious importance which cannot be touched and are not negotiable.
5. The present mechanism to enforce rehabilitation is weak and ineffective. Too few people are in charge of large territories and paying for their transport works out to be very expensive for the companies. Some regions have many more licenses than others and they should have proportionately more inspecting or investigating staff. At present, half the expected recovery expenses has to be deposited with the Ministry of Nature and Environment before companies start operation on site. But that is not enough for the Ministry to do the job if the companies leave without carrying out rehabilitation. We have suggested creation of a risk insurance mechanism for environmental protection which will cover every mining licence holder.
We also ask for some part of the mining revenue to be put into an independent risk fund for rehabilitation. The decision on how money in the fund is spent will not be the ministry’s alone, but mining companies and professional organisations should also be involved. There may very well be disputes on the fairness or feasibility of the ministry’s demands, when professional opinion will become important.
Companies cannot sell shares; Mongolia owns the resources 
N.Batbayar, head of the Department to Monitor Tourism, Geology and Mining at the Professional Inspection Agency: We have forwarded 36 suggestions to the Ministry of Minerals and Energy and the President’s Office. These include the need for a clear directive on whether an exploration licence holding company can have an IPO before valuing the reserve. We believe selling shares in a company violates the Mongolian Constitution which states that mineral resources under the surface remain the property of the Mongolian people, and can be given to companies only for mining. This has to be clarified.
Some of our other recommendations are given below.
1. The current law is not clear about the rights and responsibilities of our Agency in matters related to mineral exploration, mining activities and implementation of the law. We urge that these are spelt out in more detail and in clearer terms. Also, the specific areas of jurisdiction of three bodies -- the Mineral Resources Authority, the Ministry of Minerals and Energy, and our Agency – have to be clearly demarcated, so that there is no overlapping or transfer of blame.
2. We also want many more things to be decided and determined before the licence is issued, and not to leave them for later as happens now, which is not the international practice. A mining licence will be issued only when a company has done an estimation of the reserve, and received ratification from the local administration. We also want the law to clarify beforehand how exactly damage to the environment will be assessed after mining begins. That will preempt many of the disputes that routinely crop up now.
3. The role and nature of local contribution and participation must be made more definite. What do local people want from the mining projects? What will they receive when mining is over? What will they do with the exhausted asset? The licensee must know the deadline for submitting reports to the regulatory body and also exactly what these should contain. Here, too, it should be clear which Mongolian authority is to be responsible for evaluating plans and reports, or for approving or rejecting the environmental monitoring program. There are several uncertainties when granting exploration licences, too.
4. We need to have more rigorous directives to ensure that exploration licence holders do not do any mining whatsoever. Their licence will be immediately cancelled if they did any digging or made a pit entrance. Special permissions also need to be regulated more. There are now only four grounds to cancel them and there should be more, to ensure safety of human life, environmental protection. At present, our Agency has no authority to cancel a special permission and this should change.
5. Issues relating to closure should be taken much more seriously. The law now asks the company to submit its closure plans to our Agency one year in advance for approval, but this provision is difficult to enforce. On a number of occasions companies have just packed up and gone away without rehabilitation. We should have a better regulatory mechanism under the new law. Also, it must be ensured that the committee appointed under the authority of the soum governor to monitor the rehabilitation is competent and qualified for the job. This is now not often the case. Maybe the law should provide for a large national committee of professionals who will decide whether recovery measures are up to the standard and will be sustainable. It also has to be clear who pays for the recurring maintenance costs. Mining companies must be made to understand that their licence gives them not just the right to produce mineral but also the responsibility for recovery when production ceases.
6. The maximum fine for a violation now is MNT1 million. This is just silly and the penalty has to be commensurate with the loss caused.
7. We may call it the law on mineral resource but in fact, it affects land, the environment, use of explosives and dangerous chemicals, special permissions, and taxes. All laws relating to these areas have to be dovetailed into the amended mineral law, so that there is no confusion over apparent contradictions or overlapping. This will enable efficient implementation, monitoring, and quick resolution of disputes.
Security is a key concern
Ts. Davaatseren of the Mineral Resource Authority: I am a member of the team established by the Office of the President. We have been working hard but I fear we may not be able to follow the President’s directive to submit our draft amendments before the end of the Spring session of Parliament. That comes too soon. The President wants a public discussion of our ideas.
We do not wish to work in a hurry or be rushed, as the issue is too important and myriad aspects have to be considered and the interests of various sectors protected. It is essential to have a law that is equitable, implementable, and sustainable. What is at stake is the fair and proper development of the national mining industry.
The original law was adopted in 1994 and a major amendment, mostly focused on licensing regulation, was made in 1997. The 2006 amendment changed the licence holder’s responsibilities. What we have now is not proving effective and a discussion in the Citizen’s Chamber in April brought out many provisions in the law that are unrealistic.
Since our team has not finished its work, the suggestions given below are essentially my own, given in a personal capacity.
1. The entire process of issuing licences has to be improved. All parties involved in this should have a clear idea of what they can do and cannot do, what they should do and should not do under the law. Granting a licence is not an act of unilateral favor, nor does receiving one confers rights without responsibilities. The provisions of the law should be clear, easily understandable, not subject to contradictory interpretations, and binding on all.
2. Restoration of the damage mining does to the environment must be seen by the general society to be satisfactory.
3. Security at the workplace has to be strictly ensured. This includes both conditions that may lead to health problems in the long term and to prevention of accidents. The licence holder has to be extra careful about use of under-the-surface technology, in terms of both human health and environmental protection.
The law must cover work of processing plants
D. Galsandorj, President at Mongolian Union of Exporters: The law now is only about regulating the operation of a licence holder, but development if mining needs more than just producing mineral ore. The law should cover processing raw material for commercial profit. The amendments should extend to operation of processing plants engaged in commercial production. There should be clear regulations on minimising waste and export of unprocessed mineral produce. This applies to the tax structure for different types of exports. Only then can Mongolia make best use of its mineral wealth.
I personally think we should retain the current law as far as it regulates the licence issue and have a new and separate law for the long-term goals of the mining industry.
Geological aspects need a separate law
D. Bat-Erdene, head of Mongolian Union of Industrial Geologists: Most of our members want the law to be amended, especially its geological parts. We have sent our proposals to the teams working on the issue. I shall give you a brief summary of these.
1. Geological exploration has its own methodology and this should be acknowledged in the provisions on search and exploration.
2. The geological part of anything to do with mining must be run by professionals, whether individuals or organisations. It should be made mandatory that only geologists can prepare mineral resource reports.
3. Most geological operation in Mongolia is now done by foreign companies. Their reports are not available to us here. We demand that 60 percent of all geological exploration has to be done by domestic companies. Of course they must observe international standards.
4. Mongolia will have its own standards in geology and mining. In 1976, we adopted the methods and guidelines of the then Soviet Union, and now there is no agreement on anything. The law must specify national norms.
5. We also demand recognition of the contribution made by geologists. D. Garamjav, who discovered the OyuTolgoi deposit, was made a State Honoured Miner, but there are many others whose important achievements have not been rewarded. For example, Chimiddorj, who estimated the Tavan Tolgoi reserve, has not received any award. Companies who own the deposits must be made legally obligated to reward such people.
A comprehensive and competent law is essential to make optimum use of our mineral resource and to ensure peaceful competition by companies from all over the world. We feel it would be better to have separate laws for the geological and the cadastral aspects of mining. Let us have the present amendments for the time being but then we must work on a independent law about the geological parts.
It is essential to have public debates
D. Ganbaatar, head of civil movement Ers Shinechlel: The need for fresh amendments to the Mineral Law has been felt for long, to put the mining industry on the right path. There should be no arbitrary deadlines for the teams to finish their work, and their proposals and explanations must be debated in public before being submitted to Parliament. The President has suggested seeking the opinion of every citizen. This is impracticable but we certainly must have thorough public discussions, including on television. Our movement, Drastic Reform, has already sought the people’s opinion on some issues and all are agreed that the national interest will be safe only if final control rests with the people.
It does not really matter who submits the draft, the President, Parliament or the Government. We all remember what happened in 2007. This time so many teams have been working on their own draft for so long but we still do not know what they are coming up with. I offered my ideas in 2007 and also this year, but I don’t know if these have been considered or will be accepted.
There is no need for an overly complicated law
S. Oyun, MP: The President announced he would submit his draft to Parliament but it is not known when his team will finish the work. I doubt if any of the drafts under preparation will be submitted to Parliament before it ends its present session. Even if it is, we in Parliament will not be able to discuss it seriously in a very short time. Approving a draft without extensive and careful discussion is not a good idea. And a draft like this should be discussed not merely in Parliament, but there must be widespread public debates and the views of professional organisations must also be heard. I think I shall wait until later to give my detailed opinion.
For now I shall only say that the amendments adopted in 2006 were neither all bad, nor all good. Both the Government which creates the business environment and business entities, foreign and domestic, which work in that environment, feel something more stable is needed. It is true that no country should change its laws frequently. I see no need for an overly complicated law. A law is meant to give guidance, to put up a framework, and it is for the Government and the investors to join hands to take the country forward within the law’s parameters. I support the claim of geologists that their activity should come under a separate law.
Natural resources are Mongolians’ forever
Ch.Khurts, Ph.D in mineral science and former mining minister: My own draft mineral law consists of 9 chapters, 102 articles and 552 clauses. I want to place it before the people. I am not a lawyer so there might be some legal inaccuracies in it but my work addresses fundamental points of mining.
My basic premise is that our natural resources must remain the property of the Mongolian people forever. I suggested several ways in which a value could be put to this property. I also described several ways in which this concept of ownership can be defined. If a deposit is owned jointly with foreigners, does it become a joint property? An agreement has been made with Friedland to develop the OyuTolgoi deposit but I am not sure if that makes the deposit his property.
Our right to our property is inalienable. I, and the associates who helped me with the draft, feel the Government does not have the power to allocate to anybody else the property which has been inherited by the Mongolian people generation after generation. If you study the agreement on Oyu Tolgoi, you will see that it gives the investor only the best parts of the deposit. It is an irresponsible and legally untenable agreement. In my draft, I suggest various degrees of criminality that can follow from a mineral law.