10-11 September 2014

BEST WESTERN PREMIER Tuushin Hotel, Ulaanbaatar, Mongolia

Minerals law amendments passed by parliament, to boost exploration
Parliament approved changes to the nation’s 2006 Minerals Law on 3 July 2014, a development that may spur renewed investment in the flagging economy.
Passage of the amendments was announced on Parliament”s website. The legislature, which ended its spring session Tuesday, also passed a new law on energy to help expand that sector. In another vote, parliament blocked government investment in the Tsagaan Suvarga copper and molybdenum project, according to Otgochuluu Chuluuntseren, director general of the Ministry of Mining’s department of strategic policy and planning.

The flurry of activity comes amid Prime Minister Altankhuyag Norov’s 100-day push to jump start the economy after more than two years of slowing growth and plunging foreign investment. FDI fell 52 percent last year and dropped 64 percent in the first five months of 2014, due in part to plunging coal prices and disputes with key investors, including Rio Tinto Group. Drafts of the Minerals Law amendments included the creation of a National Geological Survey and the formation of a Policy Council to oversee legal changes in the mining industry. The final version of the changes hasn’t yet been made public.

Mining law amendments will increase the proportion of Mongolia’s area available to mining and exploration to 20 percent from about 8 percent, by lifting a 2010 ban on new licenses, according to comments made in May by Mining Vice Minister Erdenebulgan Oyun. The period of exploration will also increase to 12 years from 9 years, he said. Passage of the amendments may also lead to a resolution to last year’s cancellation of 106 mining licenses, according to Otgochuluu.
“Uncertainty that has been hanging over the mining and exploration sector for quite some time has been finally resolved with minimal amendments,” Dale Choi, head of the consultant Independent Mongolian Metals & Mining Research, said by e-mail. Investors should “be content that major parties can agree at the last minute on some major issues.”

The Ministry of Mining had said in May that the government intended to buy a 34 percent stake in Tsagaan Suvarga, a project owned by Ulaanbaatar-based Mongolyn Alt Corp. (MAK) LLC. The ministry’s Erdenebulgan then said Mongolia would sell bonds to pay for its purchase of the mine stake. As noted by Otgochuluu, on July 2 parliament blocked such a government investment before ending the spring session.

In May, Erdenebulgan said passage of the mining and energy laws may lead to USD 1 billion in new investments. Replacing Mongolia’s 1991 Petroleum Law could expand investment opportunities to include different types of contracts between parties and regulate new energy sources including Mongolia’s nascent oil shale industry, he said.