Mongolia Minerals Law Changes May Lead to Lifting of License Ban

Changes being considered to Mongolia’s minerals law are expected to pave the way to the end of a three and a half year moratorium on new exploration licenses, according to an official from the Ministry of Mining.

Amendments to the 2006 law under review include creating a National Geological Survey and forming a Policy Council to oversee legal changes in the mining sector, said Otgochuluu Chuluuntseren, director general of the department of strategic policy and planning at the ministry and part of the group framing the changes. The amendments haven’t been made public and should be sent to the government next week for approval, before going to parliament, he said.

The amended law would build on a minerals policy adopted by Mongolia’s parliament on Jan. 16 that seeks to limit the state’s role in mining and create stability in the industry, Otgochuluu said. The nation is trying to win back investors after direct foreign investment slumped 50 percent in the 11 months through November and amid a protracted battle with its biggest investor Rio Tinto Group.

“The main message is that we are giving more advantages to the private sector,” he said in a Jan. 20 interview in Ulaanbaatar. “If there is too much state involvement it’s not good. Last year was the best lesson.”

In addition to the Policy Council, which would include domestic and foreign investors, the proposed amendments also include clarifying defined geological exploration boundaries and so-called “strategic deposits,” he said.

‘Strategic Deposits’

“We will increase the level of the economic impact to be recognized as a strategic deposit,” Otgochuluu said. “It is not our objective to increase the number of strategic deposits.”

The government is planning to rescind a ban on the sale of exploration licenses that began in June 2010 once the amendments are in place, said Otgochuluu. That may stoke new investment as exploration companies seek to stake claims, he said.

Passage of the amendments may also trigger a resolution to last year’s cancellation of 106 mining licenses, Otgochuluu said. Should the changes be approved, the former license holders will be able to apply to regain their permits and each will be considered on a case-by-case basis, he said.

“The minerals sector is the main engine to reach prosperity, but we have some disadvantages, such as extreme weather conditions,” he said. “So our laws should be more liberal to stay competitive. Amendments will improve the investment climate.”

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at mkohn5@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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