Companies in or considering getting into the Mongolian mining industry need to be aware of new changes in procedures for obtaining a license for minerals exploration. Recent changes to exploration license legislation facilitate:
- Application for and registration of a minerals exploration license
- Interest in continued minerals exploration in the Mongolian steppe
The mining industry is administered by the Ministry of Heavy Industry (“Ministry”) and the Mineral Resources and Petroleum Authority of Mongolia (“MRPAM”). The main legislations that govern the mining sector are the Constitution of Mongolia, the Subsoil Law, the Minerals Law, the Common Minerals Law, the Land Law, the Investment Law, the Environmental Protection Laws and the National Security Law. In addition, various resolutions are issued by the State great Khural (Parliament) and the Government (Cabinet) of Mongolia for the implementing of these and other laws that affect the mining sector. The most notable resolution is the one enacted by Parliament approving the State Policy on Minerals.
The amendment of the Law on Minerals regulating the issuing of new mining licenses, was adopted by the Mongolian Parliament on 10 November 2017. Under the law, new mining and exploration licenses will be granted through a new tender process starting this year (2018) via the following process:
TARGET AREA: The minerals exploration process will start with a determination by the State Administrative Agency as to the target plot of land to be explored.
LOCAL GOVERNANCE After identifying a candidate area for exploration, the State Administrative Agency will notify the provincial governor and local municipality, and provide a detailed outline and map of the proposed exploration.
RESPONSE: The governor and local municipality will have 45 days to provide a response to the State Administrative Agency giving local opinion as to the planned exploration in the target area. A meeting of citizen representatives should be held to determine local attitudes. If there is no official reply within the 45-day period the proposed exploration is considered accepted by the locality.
APPLICATION FOR MANAGEMENT: After a target area has been approved for minerals exploration, the State Administrative Agency will announce a selection process inviting potential exploration companies to submit application documents to be considered to manager the exploration. The invitation period will last 30 days and include publication through public media and newspapers. In the event that an area targeted for exploration receives no applicants to conduct the exploration, the State Administrative Agency will leave the area open and conduct further announcements going forward.
SELECTION: With the new Changes, licenses for minerals exploration will be issued through a special selection and bidding process. Interested companies are required to submit a request to be considered to participate in the selection process to the State Administrative Agency. The application must include documentation regarding the applicant’s technical proposal or project outline documentation. The required documentation will include information regarding personnel requirements, techniques and technology, and the nature of the planned exploration work. The State Administrative Agency will register the request and give a receipt to the applicant while the request is considered.
REVIEW: After receiving applications for a license to explore for minerals in a particular plot, the State Administrative Agency of Mongolia will evaluate each technical proposal and fee proposal submitted by the interested parties on a scale, and will notify the candidate who obtained the
SCORING: the highest scoring evaluation is eligible to receive the exploration license. If two or more applicants obtained equal or similar evaluation scores, the applicant which first submitted the application is first eligible to be issued the exploration license. If an applicant submitted incomplete documents or a review of the technical aspects of the documentation reveals that the application does not meet the requirements to be eligible for the exploration license, the State Administrative Agency will notify the applicants in writing regarding their exclusion from the remainder of the tender process, and will provide and explanation along with returning the application documentation to the applicant.
FEE: The selected candidates are required to pay an initial annual exploration license fee within 10 days after receiving notice of eligibility. If the candidate fails to pay this fee, it will be deemed to be a ground to revoke the license. After payment of the initial fee, the State Administrative Agency will issue an Exploration License valid for a three (3) year period. When the Exploration License is issued, the Ministry of Environment, the local province, district, city’s governor, and local Inspection Agency with jurisdiction over the target plot will each be notified directly, and the aware of the exploration license will be published in public media.
Revocation of a License
There are several potential issues which may result in revocation of an issued minerals exploration license.
- Breach of rules and standard procedures for exploration will result in revocation, and the holder will be required to transfer the license back to the State Administrative Agency.
- Failure to pay required corporate income taxes, to duly report to the tax office and to report relevant information to the tax office.
- The license holder does not report such status to the Mongolia Legal Entity Registration Office (LERO), along with relevant details about its corporate structure and holdings, or where changes to the license holders corporate governance and information is not reported within 10 days to the Tax Office.
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