minerals law of mongolia

MINERALS LAW OF MONGOLIA

June
5, 1997

Ulaanbaatar

CHAPTER ONE

General Provisions

Article 1. Purpose of
the law

The purpose of this law
is to regulate relations with respect to exploration, mining and
related activities within the territory of Mongolia.

Article 2. Legislation
on minerals

  1. Mineral related
    legislation consists of the Constitution of Mongolia, the Subsoil
    Law, this law and other relevant legislation which is consistent
    with those laws.

  1. If an international
    treaty to which Mongolia is a signatory is inconsistent with this
    law, then the provisions of the international treaty shall prevail.

Article 3. Scope of
this law

This law shall regulate
relations with respect to exploration and mining of all types of
mineral resources except water, petroleum and natural gas.

Article 4. Definitions

In this law the following
terms shall have the following meaning:

  1. "mineral"
    means any usable naturally occurring mineral concentration that has
    been formed on the surface or in the subsoil as the result of
    geological evolutionary processes;

  2. "mining"
    means the entire range of activities that include separating and
    extracting minerals from the earth, course of water, ore stockpile
    or tailings, increasing the concentration of their usable contents,
    transforming these usable contents into marketable products, and
    marketing and selling those products;

  3. "mining
    license" means the right to conduct mining granted by the
    Office of Geological and Mining Cadaster (OGMC) in accordance with
    this law;

  4. "exploration
    license" means the right to conduct exploration granted by the
    OGMC in accordance with this law;

  5. “registration of
    an application" means the official recording in the register
    maintained by the OGMC of applications for exploration or mining
    licenses and the transfer of such licenses;

  6. "license
    cartographic register" means the official cartographic register
    maintained by the OGMC showing the boundaries of areas subject to
    mining and exploration licenses and any changes thereto;

  7. "prospecting"
    means investigation to identify mineral concentration without
    disturbing the subsoil through physical observation, rock sampling,
    airborne surveys, and reviewing related geological and minerals
    information;

  8. "exploration"
    means activities carried out on and under the earth's surface for
    the purpose of identifying the existence, location and quantity of
    mineral concentration and determining the technical and commercial
    feasibility of mining such mineral concentration. Exploration
    includes trenching, digging, opening and closing pits, drilling,
    removal and assaying of samples, pilot testing, geophysical surveys,
    and remote sensing;

  9. "license fee"
    means the payment that a license holder makes as provided in this
    law in order to maintain the license effective;

  10. "license
    holder" means the person to whom an exploration or mining
    license has been granted or transferred in accordance with this law;

  11. "reserved area"
    means an area which has been rendered temporarily unavailable for
    grants of licenses pursuant to Article 7 of this law;

  12. "special needs
    land" means land taken by authorized government entities
    pursuant to the Land Law for special public needs where exploration
    and mining are restricted or precluded;

  13. "mining area"
    means the area granted under a mining license;

  14. "mining claim"
    means a part of the earth in the form of an inverted pyramid whose
    apex is the center of the earth and whose base is a mining area;

  15. "exploration
    area" means the area granted under an exploration license;

  16. "exploration
    claim" means a part of the earth in the form of an inverted
    pyramid whose apex is the center of the earth and whose base is an
    exploration area.

  17. “hard rock”
    means mineral concentration that has been formed as a result of the
    geological evolutionary processes and that is located in the same
    subsoil from its creation. /This subparagraph was added by the
    Law of December 27, 2001/

  18. “plasser” means
    mineral concentration that has separated from its first subsoil
    location as a result of the depreciation and mechanic processes and
    that is located as a separate surface after re-concentration. /This
    subparagraph was added by the Law of December 27, 2001/

Article 5. Ownership
of minerals

  1. The mineral
    resources naturally occurring on and under the earth's surface and
    in natural water courses in Mongolia are the property of the
    State.

  1. The State, as owner
    of all mineral resources in Mongolia, has the right to grant
    exploration and mining licenses to other persons in accordance with
    the terms and conditions of this law.

Article 6. State
regulation

  1. The State Ih Hural
    shall have full authority with respect to the following matters:

  1. establishing a
    special regulatory regime for utilizing, storing and transporting
    radioactive materials;

  2. establishing State
    policy with respect to geology and mining;

  3. oversight of the
    implementation by the Government of legislation with respect to
    exploration and mining;

  4. deciding whether to
    permit mineral exploration and mining on State specially protected
    land.

  1. The Government shall
    have the following rights and duties:

  1. enforcing
    implementation of legislation with respect to exploration and mining
    of minerals;

  2. implementing State
    policy with respect to the development of the geology and mining
    sectors;

  3. granting of
    exploration and mining rights on State special needs land, except
    State specially protected land;

  4. establishing and
    maintaining an agency responsible for monitoring the mineral
    legislation; /This subparagraph was re-edited by the Law of
    September 1, 2000/

  5. establishing and
    maintaining a Geological and Mining Development Agency (GMDA)
    responsible for conducting basic geological and mining surveys and
    research, and the issuing and registering of licenses.

  1. The State central
    administrative body in charge of geology and mining shall have the
    following rights and duties:

  1. to develop and
    implement State policy with respect to the development of the
    geology and mining sectors;

  2. to reserve certain
    areas for limited periods of time.

  1. Local administrative
    body shall have the following rights and duties:

  1. to organize and
    ensure the implementation of this law and regulations of higher
    administrative bodies in their respective territories;

  2. to permit the use of
    licensed areas for the purposes specified in the licenses, except
    where exploration or mining is prohibited or restricted by
    applicable legislation;

  3. to ensure and
    monitor compliance by license holders of their obligations with
    respect to environmental protection, health and safety regulations
    for workers and local residents, and payment of their obligations to
    the treasuries of local administrative bodies. Local administrative
    bodies shall also have the right to request from license holders
    information and reports with respect to the above matters.

  1. The Government may
    participate in exploration and mining of mineral resources only
    through business entities in which the State holds interests. Such
    entities shall have the same rights, and be subject to the same
    obligations, as any other person under this law.

  1. State administrative
    bodies or officials, in their dealings with a holder of a license
    issued under this law, may only establish conditions and terms and
    request information and reports as authorized by applicable
    legislation.

Article 7. Reserved
areas

  1. The Government
    member in charge of geology and mining may decide to establish
    reserved areas for periods of up to three (3) years solely for the
    following purposes:

1) to bring order and accuracy to the Register of licenses;

2) to resolve boundary disputes among license holders.

  1. Within three (3)
    business days following a decision by the Government member to
    establish a reserved area, the Government member shall advise the
    OGMC of the decision and publish an official public notice
    containing the following information:

  1. the name of the
    aimag or capital city and soum or district where the reserved area
    is located;

  2. the coordinates of
    the reserved area;

  3. the purpose for
    which the area has been reserved;

  4. the time period for
    which the area has been reserved.

  1. The OGMC shall
    record the reserved area in the exploration license register, mining
    license register and cartographic register.

  1. Reserved areas shall
    be released for the following reasons:

  1. a decision by the
    Government member to release the reserved area prior to expiration
    of the original term for specified reasons; or

  2. expiration of the
    term for which the reserved area had been reserved.

Article 8. Special
needs land with restrictions on exploration and mining

  1. In the event that
    the Government, or a local administration body, establishes a
    special needs land in accordance with the Land law, a written notice
    containing the following information shall be delivered to the OGMC
    within ten (10) business days:

  1. the name of the area
    where the special needs land is established, the name of the aimag
    or capital city and soum or district where the land is located;

  2. the coordinates of
    the land;

  3. the purpose for
    which the land has been taken for special needs;

  4. the time period for
    which the land shall be used for special needs.

  1. The OGMC shall
    record the coordinates of special needs land in the exploration
    license register, mining license register and cartographic register.

  1. If a special needs
    land overlaps entirely or in part with a territory covered by a
    valid license, thus precluding further exploration or mining in such
    overlapping area, the State administrative body that decided to
    establish the special needs land shall assume an obligation to
    compensate the license holder.

  1. The amount of such
    compensation, and the time for payment, shall be negotiated and
    agreed to by the State administrative body that decided to establish
    the special needs land and the affected license holder. If the
    parties fail to reach agreement, then the amount of compensation and
    time for payment shall be determined by a neutral party in
    accordance with internationally recognized methods. The license
    holder shall have the right to resume its activities if the
    compensation is not timely paid in full.

  1. Disputes with
    respect to compensation shall be decided by a court.

 

CHAPTER TWO

Legal requirements for
conducting

exploration and mining

Article 9. Prospecting

  1. Any individual or
    legal entity shall have the right to conduct prospecting for
    minerals within the territory of Mongolia, except within special
    needs land areas, without a license. However, any person proposing
    to conduct prospecting must notify the OGMC and local administrative
    body and register its name and address and a description and
    location of the area in which it proposes to conduct prospecting.

  1. Disturbing the
    subsoil while prospecting is prohibited.

  1. Any person proposing
    to conduct prospecting shall obtain permission of landowners or
    land-possessors or land-users to enter their land.

Article
10. Eligibility for holding a license

  1. Any Mongolian
    citizen, foreign citizen, or legal person shall be entitled to hold
    an exploration license (hereinafter referred to as “exploration
    license”).

  1. A mining license may
    only be held by a legal person formed and operating under the laws
    of Mongolia.

  1. A license may only
    be granted to one person .

Article
11. Prohibition on exploration and mining without a license

  1. No person shall
    conduct exploration for minerals covered by this law within the
    territory of Mongolia without a valid license.

  1. No person shall
    conduct mining of minerals covered by this law within the territory
    of Mongolia without a valid mining license.

  1. The provisions of
    this Article shall not apply to landowners or land-possessors who
    utilize common minerals from their land for private and
    noncommercial purposes. A list of common minerals that can be mined
    without a license shall be approved by the Government.

  1. Exploration license
    holders shall disclose to the GMIA the quantity and quality of all
    minerals recovered as a result of preliminary work done during
    exploration activities, and upon approval by the professional
    inspection institution, exploration license holders may sell such
    minerals for commercial purposes. In such case, the exploration
    license holders shall pay royalties and other relevant taxes as if
    they were mining license holders. /This paragraph was amended by
    the Law of September 1, 2000/

 

In
all other cases, exploration license holders shall have the right to
sell samples and other products recovered during exploration
activities only after obtaining a mining license or surrendering the
entire exploration claim.

Article 12. Rights of
exploration license holders

An exploration license
holder shall have the following rights:

  1. the exclusive right
    to conduct exploration for minerals within the boundaries of an
    exploration claim in accordance with this law;

  2. the exclusive right
    to obtain a mining license for any part of an exploration area upon
    fulfilling the terms and conditions of this law;

  3. the right to
    transfer or pledge all or part of an exploration license in
    accordance with the terms and conditions of this law;

  4. the right to obtain
    two extensions of the term of an exploration license for two (2)
    years each, upon fulfilling the terms and conditions of this law;

  5. the right to have
    access to, entry on, and transit through, the exploration area and a
    right to construct temporary structures necessary for conducting
    exploration activities;

  6. the right of entry
    to and transit through the land adjacent to the exploration area for
    the purpose of gaining access and entry to the exploration area;

  7. the right of entry
    to and transit through land owned or used by other persons in order
    to exercise the rights described in this Article. This right shall
    be determined by a contract between the license holder and the
    landowner or land-user in accordance with the provisions of the
    Civil law.

Article
13. Requirements for obtaining an exploration license

  1. A person seeking an
    exploration license shall submit an application for the license to
    the OGMC in accordance with the requirements of this Article.

  1. The applicant must
    be eligible to hold an exploration license in accordance with
    paragraph 1 of Article 10 of this law.

  1. Coordinates of all
    corners of a requested exploration area shall be marked in degrees,
    minutes and seconds on an official standard map prepared by the OGMC
    and the map shall be attached to the application.

  1. The requested
    exploration area shall meet the following requirements:

  1. the borders of the
    exploration area must be straight lines oriented north-south and
    east-west;

  2. no part of the
    requested exploration area may overlap with a reserved area or a
    special needs land area;

  3. at the time of
    submission of the application no part of the requested exploration
    area may overlap with an existing licensed area or an area covered
    by a previously filed pending application for a license.

  1. Notwithstanding the
    provisions of this Article, the borders of an exploration area may
    deviate from straight lines in order to avoid overlapping with:

  1. national borders;

  2. a reserved area;

  3. a special needs land
    area;

  4. an exploration or
    mining license area granted before this law became effective having
    a shape and orientation other than as provided under this law;

  5. lakes, ponds and
    other natural geographic features that may be excluded from the
    exploration area.

  1. The size of an
    exploration area shall be not less than twenty-five (25) hectares
    and may not exceed four hundred thousand (400 000) hectares.

  1. A person may hold
    any number of exploration licenses.

 

Article 14. Granting
an exploration license

  1. An exploration
    license shall be granted to the first applicant who registers and
    files an application for an exploration area in accordance with the
    provisions of this law.

  1. A person seeking an
    exploration license shall submit an application to the OGMC in the
    standard form approved by the OGMC. The following documents shall be
    attached to the application:

  1. the applicant's
    name, mailing address for official correspondence, phone and fax
    numbers and, in case of foreign citizens or legal persons, the name,
    address, phone and fax numbers of the authorized representative of
    the applicant in Mongolia;

  2. in the case of an
    individual applicant, a copy of the applicant's passport and, as
    applicable, visa;

  3. in case of a legal
    person, a certificate of valid existence and good standing issued by
    the jurisdiction under the laws of which the entity was established.
    If the certificate is in a foreign language, it must be accompanied
    by a translation into Mongolian.

  4. an exploration area
    map prepared in accordance with the requirements of Article 13 of
    this law. The map shall contain the name of the aimag or capital
    city and soum or district in which the exploration area is located.

  5. a document showing
    that the applicant has paid the application processing fee
    established by the Government member in charge of geology and
    mining.

  1. Any application that
    does not meet the requirements of paragraph 2 of this Article shall
    not be accepted by the OGMC.

  1. Upon the receipt of
    a complete application, together with the attachments specified in
    paragraph 2 of this Article, the OGMC official responsible for the
    application register shall register the application in the
    application register, specify the record number, date, hour and
    minute of filing on each page, and issue the applicant a receipt
    acknowledging the filing of the application and payment of the
    applicable fee.

  1. At the end of each
    business day, the OGMC official responsible for recording
    applications shall make a written indication of the last recorded
    application in the application register book and sign the page.

  1. Immediately
    following the recording of the filing of an application, the OGMC
    shall determine by a preliminary screening whether the application
    meets the requirements specified in paragraphs 2, 3 and
    subparagraph 1 and 5 of paragraph 4 and paragraph 6 of Article 13,
    and paragraph 2 of this Article.

  1. If an application
    fails to meet the requirements of paragraph 6 of this Article, the
    OGMC shall, within two (2) business days, notify the applicant of
    the defects in the application and record the notice in the
    application register book, whereupon the application shall be deemed
    to be deleted from the application register.

  1. As promptly as
    possible following the preliminary screening, the OGMC shall
    determine whether the requested exploration area overlaps with any
    reserved area, special needs land, or any area covered by a
    previously issued valid license or previously filed pending
    application for a license.

  1. Within ten (10)
    business days following the registration of an application for an
    exploration license, the head of the OGMC shall take one of the
    following decisions and notify the applicant accordingly:

1) If the requested area does not overlap with any part of a
reserved area, special needs land, or any area subject to a
valid exploration license, or any area requested in a pending
application for an exploration license filed and registered prior to
the

application, that the requested exploration claim is
granted to the applicant, and the applicant is required to pay
the first year’s license fee within the time period
specified in paragraph 1 of Article 25 of this law.

2) The application is rejected and deemed to be removed from the
register because of a complete or partial overlap with one of
the following areas:

a) a special needs land;

b) a reserved area; or

c) an area subject to a valid license.

3) The application is rejected and deemed to be removed from the
register because of a complete overlap with an area requested in
a pending application for a license filed prior to the
application.

4) If the requested area partially overlaps with an area requested
in a pending

application for a license filed and registered prior to the
application, then an

exploration license may be granted for the part of the
requested area which does not overlap.

  1. If an applicant
    receives a notice pursuant to subparagraph 4 of paragraph 9 of this
    Article, such applicant may, within three (3) business days
    following receipt of such notice, divide the available area into
    several areas of the shape, location and size as specified in this
    law and file a separate additional application for each such area.
    Upon registration of each such application with the OGMC, each such
    application shall be deemed approved as provided in subparagraph 1
    of paragraph 9 of this Article.

  1. If an applicant who
    has received an exploration license approval notice in accordance
    with paragraphs 9 and 10 of this Article fails to pay the first
    year’s exploration license fee on a timely basis, the application
    shall be removed from the register book and the notice granting the
    requested exploration area shall be deemed rescinded.

  1. Within three (3)
    business days after payment by the applicant of the first year's
    exploration license fee, the OGMC shall issue an exploration license
    for a period of three (3) years and record the license and the
    exploration area in the license register and license cartographic
    register.

  1. A license
    certificate shall contain the date of issuance, the license holder's
    name, the coordinates of the area covered by the license, and an
    attachment in which all subsequent changes with respect to the
    license shall be recorded.

  1. Immediately
    following the grant of an exploration license, the OGMC shall notify
    the GMDA and publish an official notice informing the public of the
    granting of the license.

Article 15. Extension
of the term of an exploration license

  1. Not less than thirty
    (30) days prior to the expiration of an exploration license, the
    license holder may apply for an extension of the term of the license
    by filing with the OGMC an application for such extension on the
    standard form published by the OGMC. The following documents shall
    be attached to the application:

  1. the exploration
    license certificate;

  2. receipts for license
    fee payments made by the license holder;

  3. a certificate of
    inspection evidencing implementation of the license holder's
    environmental protection plan in accordance with Article 31 of this
    law.

  1. Within ten (10)
    business days following the receipt of an application for extension,
    the OGMC shall verify whether the license holder has complied with
    conditions for maintaining its eligibility to hold a license and
    shall record this fact in the license register book.

  1. Within ten (10)
    business days following the receipt of an application for extension,
    the OGMC shall extend the term of the exploration license and
    record the extension in the license register book. The license that
    has been extended shall then be returned to the license holder.

  1. Immediately
    following the grant of an extension of an exploration license, the
    OGMC shall notify the GMDA and publish an official notice informing
    the public of the granting of the extension.

Article 16. Rights of
mining license holders

A mining license holder
shall have the following rights:

  1. the exclusive right
    to engage in mining of minerals within the mining claim in
    accordance with the provisions of this law;

  2. the right to manage
    its operations and market its products, subject to compliance with
    the requirements of Chapter 4 of this law;

  3. the right to sell
    mineral products from the mining claim at market prices on domestic
    and foreign markets, subject to compliance with the requirements of
    Chapter 4 of this law;

  4. the exclusive right
    to conduct exploration for minerals within the mining claim;

  5. the right to
    transfer and pledge all or part of the mining license in accordance
    with provisions of this law;

  6. the right to extend
    the term of the mining license once for a period of forty (40)
    years;

  7. the right of entry
    to and transit through the mining area, use of the mining area, the
    right to construct necessary structures, and the right to conduct
    other activities related to mining and exploration;

  8. the right of entry
    to and transit through the land adjacent to the mining area;

  9. the right of entry
    to and transit through land owned or used by other persons in order
    to exercise the rights described in this Article. This right shall
    be determined by a contract between the license holder and the
    landowner or land-user in accordance with the provisions of the
    Civil law;

  10. the right to use
    water, subject to compliance with applicable laws.

Article 17.
Requirements for obtaining a mining license

  1. An applicant for a
    mining license must be eligible to hold a mining license in
    accordance with paragraph 2 of Article 10 of this law.

  1. In the case of areas
    covered by a valid exploration license, only the exploration license
    holder may apply for a mining license. In other cases, a mining
    license shall be granted to the first applicant whose application
    meets the requirements under this law and is registered with the
    OGMC.

  1. The applicant shall
    set forth the coordinates of all corners of the requested mining
    area in degrees, minutes and seconds on a standard map approved by
    the OGMC and attach the map to the application.

  1. A requested mining
    area shall meet the following requirements:

  1. a requested mining
    area shall have the shape of a polygon with borders that are
    straight lines, not less than 500 meters in length, oriented
    north-south and east-west;

  2. a requested mining
    area may not overlap with a reserved area or special needs land;

  3. at the time of
    submission of the application a requested mining area shall not
    overlap with an area covered by a valid license or an area requested
    in a pending application for a license.

  1. The borders of a
    mining license area may deviate from straight lines in the case of
    borders with following areas:

  1. national borders;

  2. a reserved area;

  3. a special needs land
    area;

  4. a mining license
    area granted under the prior minerals law having a shape and
    location that do not conform with the requirements of this law and
    natural geographic features, such as lakes and ponds, that may be
    excluded from the mining area.

Article
18. Procedure for granting a mining license

  1. An applicant for a mining license shall submit an application to the
    OGMC on the standard form approved by the OGMC. The following
    documents shall be attached to the application:

  1. the applicant’s name, mailing address for official correspondence,
    phone and fax numbers and a certificate containing the name of its
    officer authorized to make decisions;

  2. if the applicant is a business entity, a certificate of valid
    existence as a business entity in Mongolia issued by the appropriate
    registration agency;

  3. a map of the area prepared in accordance with the requirements of
    paragraph 3 of Article 17 of this law. The map shall contain the
    name of the aimag or capital city and soum or district in which the
    area is located.

  4. a document showing that the applicant has paid the application
    processing fee established by the Government member in charge of
    geology and mining.

  1. The OGMC shall
    reject any application that fails to meet the requirements set forth
    in paragraph 1 of this Article.

  1. Upon the receipt of
    a complete application, together with the attachments specified in
    paragraph 1 of this Article, the OGMC official responsible for the
    application register shall register the application in the
    application register and specify the record number, date, hour and
    minute of filing on each page, and issue the applicant a receipt
    acknowledging the filing of the application and payment of the
    applicable fee. At the end of each business day, the OGMC official
    responsible for recording applications shall make a written
    indication of the last recorded application in the application
    register book and sign the page.

  1. Immediately
    following the recording of an application, the OGMC shall determine
    by a preliminary screening whether the application and attached
    documents meet the requirements specified in paragraph 1 of this
    Article and paragraphs 1 and 3 of Article 17. If an application
    fails to meet the above-noted requirements, the OGMC shall notify
    the applicant of the defects in the application and record the
    notice in the application register book, whereupon the application
    shall be deemed to be removed from the application register.

  1. Within two (2)
    business days after the registration of an application for a mining
    license, the OGMC shall determine:

  1. in the case of an
    application submitted by the exploration license holder covering the
    requested mining area, whether such area is located entirely within
    the boundaries of the area covered by the exploration license;

  2. whether the requested mining area overlaps with any area already
    subject to a valid license or any area that is the subject of a
    pending license application;

  3. whether the requested mining area overlaps with a reserved area or a
    special needs land.

  1. Within twenty (20) business days following the registration of an
    application for a mining license, the head of the OGMC shall take
    one of the following decisions and notify the applicant accordingly:

  1. in the case of an application submitted by the exploration license
    holder covering the requested area, that an exclusive mining license
    has been granted to the applicant and require the applicant to
    timely pay the applicable fee for the first year of the license as
    provided in this law;

  2. if the requested area does not overlap with any part of a special
    needs land with prohibition on mining, or any area subject to a
    valid license, or any area requested in a pending application for a
    license filed and registered prior to the application, that the
    requested mining area is granted and the applicant is required to
    pay the applicable fee for the first year of the license as provided
    in this law;

  3. if the requested area overlaps in any way with a special needs land
    with prohibition on mining, or any area subject to a valid license,
    or any area requested in a pending application for a license filed
    and registered prior to the application, that the application is
    rejected and deemed to be removed from the register.

  1. If the applicant who has received a mining license approval notice
    in accordance with subparagraphs 1 and 2 of paragraph 6 of this
    Article fails to pay the first year’s license fee on a timely
    basis, that the application is rejected and removed from the
    application register, and that the decision granting the mining
    claim is rescinded.

  1. Within three (3) business days following payment of the license fee
    for the first year, the OGMC shall issue a mining license to the
    applicant for a term of sixty (60) years and shall register the
    license and mining area in the license register and license
    cartographic register.

  1. A license certificate shall contain date of issuance, the name of
    the license holder, the coordinates of the granted area, and an
    attachment in which all subsequent changes with respect to the
    license shall be recorded.

  1. Within seven (7) business days following the decision to grant a
    mining license, the OGMC shall notify the professional inspection
    institution and GMDA and publish an official notice informing the
    public of the granting of the license. /This subparagraph was
    amended by the Law of September 1, 2000/

Article
19. Extension of the term of a mining license

  1. Not less than two (2) years prior to the expiration of a mining
    license, the license holder may file an application with the OGMC on
    the standard form specified by the OGMC for an extension of the
    mining license. The following documents shall be attached to the
    application:

  1. the mining license certificate;

  2. receipts for license fee payments made by the license holder;

  3. a certificate of inspection evidencing implementation of the
    environmental protection program in accordance with Article 31 of
    this law.

  1. Upon filing of an application for an extension of a mining license,
    the applicant shall pay the processing fee established by the
    Government member in charge of geology and mining.

  1. Within ten (10) business days following the receipt of an
    application for extension of a mining license, the OGMC shall verify
    whether the license holder has complied with the conditions for
    maintaining its eligibility to hold the license.

  1. Within ten (10) business days following the receipt of an
    application for extension of a mining license, the OGMC shall record
    the application in the application register. The license certificate
    that has been extended shall then be returned to the license holder.

  1. Within seven (7) business days following the decision to extend the
    mining license, the OGMC shall notify the GMDA, publish an official
    notice informing the public of the granting of the extension.

Article
20. Stability agreements

  1. If a mining license holder undertakes to invest in its mining
    project in Mongolia no less than two (2) million US Dollars for the
    first five (5) years of the project, and if the mining license
    holder submits an application to enter into a stability agreement,
    then the Government of Mongolia, acting through the Minister of
    Finance, shall enter into such a stability agreement providing
    guarantees for a long term stable environment for such mining
    license holder.

  1. The form of the stability agreement shall be approved by the
    Government and shall contain provisions regarding the stability of
    tax rates for a definite time period, the right of the license
    holder to export and sell its products at international market
    prices, a guarantee that the license holder may receive and dispose
    of hard currency income derived from such sales, and provisions with
    respect to the purpose, amount, and term of the license holder’s
    investment.

  1. Within twenty (20) business days following the receipt by the
    Minister of Finance of the application and draft of the stability
    agreement, the Minister shall determine whether or not further
    clarification is required. If the Minister determines that no
    further clarification is required, the Minister shall enter into the
    stability agreement with the applicant.

  1. If the amount of the initial investment in the Mongolian mining
    project is no less than two (2) million US Dollars, the term of the
    stability agreement may be ten (10) years. If such investment is no
    less than twenty (20) million US Dollars, the term of the stability
    agreement may be fifteen (15) years.

Article
21. Procedure for concluding a stability agreement

  1. The license holder interested in concluding a stability agreement
    shall submit its application and draft agreement to the Ministry of
    Finance. An investment program, specifying the amounts to be
    invested within the first five (5) years, and the proposed term of
    the project, shall be attached to the application. If further
    clarification or amendment is required, the applicant shall be
    informed within seven (7) business days.

  1. Upon signing the stability agreement by the Minister of Finance,
    notice of the terms and conditions of the agreement shall be
    delivered to the Mongolbank (Central Bank of Mongolia) and other
    relevant authorities.

CHAPTER
THREE

Conditions
for maintaining eligibility to

hold
exploration and mining licenses

Article
22. Maintaining the eligibility to hold exploration and mining
licenses

A
license holder must comply on a timely basis with the conditions set
forth in this Chapter, and failure to comply with any of these
conditions shall constitute grounds for cancellation of the holder's
license pursuant to Article 47 of this law.

Article
23. Maintaining the legal status to hold exploration and mining
licenses

Any
license holder shall at all times during the terms of the license
maintain its legal status to hold the license in accordance with
Article 10 of this law.

Article
24. License fees

  1. Holders of exploration and mining licenses shall pay license fees
    annually as set forth in this Article.

  1. Exploration license fees shall be payable with respect to each
    hectare included within the exploration area at the following rates:

  1. US$ 0.05 for the first year, and US$ 0.1 for each of the second and
    third years of the term of the exploration license;

  2. US$ 1.00 for each of the fourth and fifth years of the term of the
    exploration license;

  3. US$ 1.50 for each of the sixth and seventh years of the term of the
    exploration license.

  1. Mining license fees shall be payable with respect to each hectare
    included within the mining area at the following rates:

  1. US$ 5.00 for each of the first three years of the term of the
    license;

  2. US$ 7.50 for each of the fourth and fifth years of the term of the
    license;

  3. US$ 10.00 for each year of the term of the license commencing from
    the sixth year.

Article 25. Payment of license fees

  1. License fees for the first year shall be paid within ten (10)
    business days after the license holder receives the notice specified
    in subparagraph 1 of paragraph 9 of Article 14 and subparagraphs 1
    and 2 of paragraph 6 of Article 18 of this law.

  1. License fees for subsequent years shall be payable annually in
    advance, on or before the anniversary date of the issuance of the
    license.

  1. The amount of the license fee shall be calculated on the basis of
    the measurements of the license area as registered in the register
    of licenses of the OGMC and the amount of the fee shall not change
    for the particular year.

  1. No exploration license fees shall be payable with respect to a
    mining area located within an exploration area.

  1. The license fee shall be deemed paid upon receipt by the OGMC of
    documents certifying the payment of the fees.

  1. A license holder shall have an obligation to pay applicable license
    fees within the term specified in paragraph 1 of this Article and no
    notice or invoice with respect to such fees shall be sent to the
    license holder.

CHAPTER
FOUR

Obligations of license holders

while carrying out their activities

Article
26. General obligations of license holders while carrying out their
activities

While
carrying out their activities a license holder shall comply with
general obligations set forth in this Chapter. Failure to comply
with the general obligations set forth in this Chapter will subject
the license holder to the penalties set forth in Chapter 8 of this
law.

Article
27. Establishing the boundaries and marking the area held under a
mining license

  1. Within ninety (90) business days following the registration of the
    mining license in the register of licenses, the mining license
    holder shall establish the boundaries and mark the approved mining
    area by permanent markers in accordance with technical requirements
    specified by the GMIA. The establishment of the boundaries of the
    mining area shall be performed by a professional expert accredited
    by the OGMC, who shall file a report with the OGMC upon completion
    of the establishment of the boundaries.

  1. A mining license holder shall preserve the markers and adjust and
    replace the markers upon extension of the license or any
    reorganization within the area in accordance with decisions of the
    OGMC.

Article 28. Environmental protection

  1. An exploration license holder has an obligation to comply with
    environmental laws in effect and with the environmental protection
    provisions of this law.

  1. A license holder may not commence exploration or mining operations
    without first obtaining written approvals from relevant
    environmental protection authorities pursuant to this law.

Article
29. Environmental protection obligations of exploration license
holders

  1. After consultation with the environmental inspection agency and
    local administrative bodies, exploration license holders shall
    prepare an environmental protection plan within thirty (30) days
    following the receipt of an exploration license.

  1. The environmental protection plan shall provide for measures to
    ensure that pollution of the environment as a result of the
    exploration activity does not exceed maximum limits and that the
    exploration area will be rehabilitated by means of backfilling,
    plugging, and cultivation to allow future utilization of the
    disturbed land for public purposes.

  1. The environmental protection plan shall be submitted to and approved
    by the Governor of the relevant soum or district where the
    exploration claim is located. The Governor of the soum or district
    shall make a decision with respect to the plan within ten (10)
    business days following receipt of the plan, and notify the license
    holder of the decision by an official letter.

  1. Upon approval of the environmental protection plan, the license
    holder shall provide a copy of the plan to the local environmental
    inspection organization and professional inspection institution.
    /This paragraph was amended by the Law of September 1, 2000/

  1. The license holder shall record all instances of adverse
    environmental impact resulting from the exploration activity and
    submit annual reports with respect to the environmental protection
    plan to the Governor of the relevant aimag or capital city and soum
    or district. These reports shall contain information on measures
    taken to protect the environment and on the possible impact on the
    environment of new exploration machinery and technology, and
    proposed amendments to the environmental protection plan. All
    amendments to the environmental protection plan shall be approved by
    the Governor of the relevant soum or district.

  1. A license holder shall provide officials in charge of monitoring
    implementation of the laws on environmental protection and local
    administrative body representatives with an opportunity to enter the
    exploration area to conduct monitoring activities on the site.

  1. To ensure the discharge of its responsibilities with respect to
    environmental protection, an exploration license holder shall
    deposit an amount equal to 50 % of its environmental protection
    budget in a special bank account established by the Governor of the
    relevant soum or district. This deposit shall be refunded to the
    license holder upon full implementation of its environmental
    protection plan .

  1. If a license holder fails to fully implement the measures provided
    for in the environmental protection plan, the Governor of the
    relevant soum or district shall use the deposit to enable the
    license holder to complete these measures, and if the deposit is not
    enough to cover the costs of environmental protection and
    rehabilitation activities, the license holder shall provide the
    required additional funds.

Article
30. Environmental protection obligations of mining license
holders

  1. An environmental impact assessment and an environmental protection
    plan shall be prepared by a mining license holder in accordance with
    applicable laws as soon as possible before or after receiving a
    mining license.

  1. The environmental impact assessment shall identify the possible
    adverse environmental impact from the proposed mining operations on
    land, water, air, plant, animal, and human life and shall include
    preventive measures to avoid and minimize such adverse impact.

  1. The environmental protection plan shall contain measures to ensure
    that mining operations are conducted in a least damaging way to the
    environment. The plan shall also identify preventive measures to
    protect air and water quality, and human, animal and plant life from
    the adverse effects of mining operations in accordance with the
    regulations adopted by the State central administrative body in
    charge of the environment.

  1. An environmental protection plan must include measures with the
    respect to the following issues:

1) storage and control of toxic and potentially toxic substances and
materials;

2) protection, utilization and conservation of surface water and
groundwater;

3) if necessary, construction, utilization and safekeeping of
tailings dams;

4) other measures as may be appropriate for the particular type of a
mining operation.

  1. The environmental protection plan shall also provide for post-mining
    rehabilitation measures through backfilling, plugging, and
    cultivation to allow future utilization of the disturbed land for
    public purposes.

  1. The environmental impact assessment and environmental protection
    plan shall be submitted to the State central administrative body in
    charge of environment and to the Governor of the relevant soum or
    district. The State central administrative body in charge of
    environment shall review these documents and notify the license
    holder of its decision within thirty (30) days after receiving such
    documents.

  1. Upon approval of the environmental impact assessment and the
    environmental protection plan, the license holder shall deliver the
    documents to the local environmental monitoring organization where
    the mineral deposit is located.

  1. Mining license holders shall record all instances of adverse
    environmental impact resulting from mining activity, prepare and
    send a copy of annual reports on the implementation of the
    environment protection plan to the State central administrative body
    in charge of environment, the Governor of any relevant aimag or
    capital city and soum or district, and the GMIA, respectively. These
    reports shall contain information on measures taken to protect the
    environment and on the possible impact on the environment of new
    machinery and technology, or the expansion of mining operations, and
    proposed amendments to the environmental impact assessment and
    environmental protection plan .

  1. Amendments to the environmental protection plan may be made only
    after the State central administrative body in charge of environment
    approves the amendments.

  1. A mining license holder shall provide local and State central
    administrative bodies officials in charge of monitoring
    implementation of legislation on environmental protection, an
    opportunity to enter the mining claim area and to conduct monitoring
    activities on the site.

  1. To ensure the discharge of its responsibilities with respect to
    environmental protection, a mining license holder shall deposit an
    amount equal to 50 % of its environmental protection budget for a
    particular year in a special bank account established by the
    Governor of the relevant soum or district. This deposit shall be
    refunded to the license holder upon full implementation of the
    environmental protection plan .

  1. If a mining license holder fails to fully implement the measures
    provided for in the environmental protection plan, the Governor of
    the relevant soum or district shall use the deposit to enable the
    license holder to complete these measures, and if the deposit is not
    enough to cover the costs of environmental protection and
    rehabilitation activities, the license holder shall provide the
    required additional funds.

Article
31. Review of environmental protection plan in connection with
extensions of licenses

  1. Exploration license holders applying for a license extension shall
    submit for approval to the Governor of the relevant soum or
    district, prior to the expiration of the exploration license, either
    their revised environmental protection plan or a new environmental
    protection plan .

  1. Mining license holders applying for a license extension shall submit
    to the State central administrative body in charge of environment a
    new environmental impact assessment and a new environmental
    protection plan.

  1. The State central administrative body in charge of environment may
    require the license holder to amend the environmental impact
    assessment and environmental protection plan to reflect impacts from
    the use of new machinery or technology or environmental impact not
    foreseen in the approved environmental impact assessment or
    environmental protection plan .

 

Article 32. Impact on local buildings and structures

License
holders shall fully compensate owners and users of private and public
residential dwellings, wells, winter huts, other structures, and
historic and cultural landmarks, for damages caused to these
structures by exploration or mining operations, including, if
necessary, relocation costs.

Article
33. Relations with local administrative bodies

  1. License holders shall consult and coordinate their activities with
    local administrative bodies in connection with environmental
    protection, infrastructure development and employment development in
    accordance with the provisions of this Article.

  1. If a license holder deems it necessary, it may request the local
    administrative body to organize a public debate in furtherance of
    objectives referred to in paragraph 1 of this Article.

  1. A license holder may select and employ a representative from among
    the local residents to coordinate all the matters involving the
    local administrative body.

Article 34.
Employment requirements

License holders shall
employ citizens of Mongolia in their exploration and mining
operations on a priority basis.

Article 35. Health
and safety standards

In conducting their
operations license holders shall comply with applicable laws so as
not to endanger the health and safety of workers and local residents.

Article 36.
Requirements for closure of a mine

  1. Before closure of a
    mine, mining license holders shall take preparatory measures
    pursuant to regulations of the professional inspection institution
    to protect the health and safety of local residents. License
    holders shall inform the professional inspection institution by an
    official letter that the mine shall be closed in whole or in part,
    at least one year prior to any such closure, and the following
    measures must be implemented during the preparatory period:

  1. to take all
    necessary measures to ensure safe use of the mining site and mining
    claim for non-mining purposes and to protect the environment;

  2. to seal safely and
    fence off the parts of the mining area that may be dangerous during
    the use of the area for other purposes;

  3. to remove all
    machinery, equipment and other property from the mining area except
    as permitted by local administrative bodies or the professional
    inspection institution. /This paragraph was amended by the Law of
    September 1, 2000/

  1. Mining license
    holders shall prepare a detailed map on an appropriate scale showing
    dangerous or potentially dangerous areas created by mining
    operations.

Article 37.
Registration and sale of precious stones and metals

  1. All precious stones
    and metals extracted by mining license holders shall be assayed and
    registered by the State assaying agency. Regulations on assaying
    and registration of precious stones and metals, and a list of
    minerals subject to assaying and registration, shall be published by
    the Government.

  1. Mongolbank shall pay
    world market prices when purchasing precious stones and metals.

  1. A mining license
    holder shall have a right to export precious stones and metals only
    through Mongolbank or authorized commercial banks.

Article 38. Royalties

  1. A mining license
    holder shall pay royalties to the treasuries of the central and
    local administrative bodies on the sales value of all products
    extracted from the mining claim that are sold, shipped for sale, or
    used. /This paragraph was amended by the Law of December 27,
    2001/

  1. The sales value
    shall be determined as follows:

  1. for exported
    products, the sales value shall be the average monthly prices of the
    products, or similar products, based on regularly published
    international market prices or on recognized principles of
    international trade;

  2. for products sold or
    used on the domestic market, the sales value shall be based on the
    domestic market price for the particular or similar product;

  3. for products sold on
    international or domestic markets, where it is impossible to
    determine market prices, the sales value shall be based on the
    revenue derived from the sale of the product as declared by the
    license holder.

  1. Royalties shall be
    equal to 2.5 per cent of the sales value of all products extracted
    from the mining claim that are sold, shipped for sale, or used.

Royalties shall be
equal to 7.5 per cent of the sales value of gold extracted from the

plasser that are
sold, shipped for sale, or used. /The second sentence of this
paragraph

was added by the Law
of December 27, 2001/

  1. The license holder
    shall pay royalties with respect to all extracted products that are
    sold, shipped for sale or used during a calendar quarter before the
    end of the next quarter.

  1. The mining license
    holder shall submit to the GMIA a quarterly report, in the form
    approved by the GMIA and verified by the license holder’s
    signature, indicating the quantity of products extracted and sold,
    shipped for sale, or used during the relevant quarter, the total
    value of the sales, and the basis of evaluation.

  1. The Government shall
    prepare, and periodically publish a list of commodity exchange
    prices and related information, which shall be used for the purpose
    of calculating the sales value of exported products.

Article 39. Submission
of information and reports

  1. A license holder
    shall prepare all information and reports specified in this Article
    on a timely and accurate basis and submit copies of the information
    and reports to the professional inspection institution and OGMC,
    respectively. /This paragraph was amended by the Law of September
    1, 2000/

  1. An exploration
    license holder shall submit the following information and reports:

  1. a plan of
    exploration activities shall be submitted within thirty (30) days
    after the grant of the exploration license;

  2. annual reports on
    exploration activities for the previous year shall be submitted in
    the form approved by the Office of Geology within thirty (30) days
    after the expiration of the relevant period;

The
report shall contain information on the amount of work completed and
expenses incurred in prospecting, geophysical and geochemical work,
drilling and other activities, information on the labor force, and
the results of the exploration work. A map indicating the places
where the work was done shall be attached to the report.

A copy
of the final report on the results of the exploration work and
original materials shall be submitted at no charge.

The
GMDA shall accept the estimates of the ore reserves submitted in the
report after receiving an opinion from a qualified expert and shall
include the ore reserves into the national register of reserves.

  1. the information
    reports on safe operations specified in Article 35 of this law.

  1. The GMDA shall also
    have a right to demand information and reports from the license
    holder, even if such information or reports are incomplete.

  1. A mining license
    holder shall submit the following information and reports:

  1. a feasibility study
    on the exploitation of the deposit within sixty (60) days after
    obtaining the mining license;

  2. estimated data with
    respect to the next year’s production in the form approved by the
    Mining Office not later than September of every year;

  3. a report on
    activities of the previous year, in the form approved by the Mining
    Office, shall be submitted by February 15 of the following year.
    The report must contain the following:

  1. number of work days,
    number of employees, and all contracts affecting the license
    holder’s right of ownership;

  2. information on
    implementation of the mining plan, an estimate of changes in
    reserves, time periods of operation of the mine, a general overview
    of production facilities and any expansion or renovation of such
    facilities;

  3. information on the
    quantity of ore mined, the quantity of products produced, shipped
    and sold, the price of the products sold, information with respect
    to the purchasers, information on investments made during the year,
    operating expenses, royalty payments and information with respect to
    the equipment and technology used in mining operations and
    information on other related properties.

  1. a report on safe
    operations as specified in Article 35 of this law.

  1. A license holder
    shall prepare a report on environmental protection as specified in
    Article 30 of this law and submit it to the Governor of any relevant
    aimag and soum or district.

CHAPTER
FIVE

Transfer
and mortgage of licenses

Article
40. Transfers of licenses.

  1. A license holder may transfer the license to persons eligible to
    hold a license by a transfer agreement or through legal processes
    such as inheritance, merger of business entities, or bankruptcy. A
    transfer of a license shall be recorded with the OGMC in accordance
    with the provisions of this Article, and the transfer of a license
    shall become effective upon such recording.

  1. Either the transferor or the transferee of a license shall submit an
    application for the recording of a license transfer to the OGMC, in
    the form approved by the OGMC. The application shall contain the
    following:

  1. the license number, date of issuance, and the name of the license
    holder as indicated in the records of the OGMC;

  2. a copy of the transfer agreement, or a court order with respect to
    the bankruptcy of the license holder, a certificate of inheritance
    from a deceased license holder, or a certificate of reorganization
    of legal entities, or other legally binding documents evidencing a
    valid transfer of the license;

  3. a document evidencing the transferee’s eligibility as specified in
    subparagraphs 1 and 2 of Article 10 of this law;

  4. a confirmation of acceptance by the transferee of all rights and
    obligations under the license, in a form approved by the OGMC.

  1. An applicant for the recording of a license transfer shall pay the
    processing fee established by the Government member in charge of
    geology and mining and attach a proof of payment to the application.

  1. The OGMC shall immediately deliver to the applicant a document
    containing the name of the applicant, the date of the application,
    and the type and number of the license to be transferred.

  1. Immediately following the receipt of an application for the
    recording of the transfer of a license, the OGMC shall record the
    application and verify the following:

  1. that the application complies with the requirements of this Article;

  2. that the license to be transferred is valid;

  3. that the license transferee is eligible to hold the license.

  1. Within fifteen (15) business days following the receipt of an
    application for recording of the transfer of a license, the head of
    the OGMC shall take one of the following decisions:

  1. record the transfer of the license and make appropriate notations on
    the license certificate; or

  2. inform the applicant of defects in the application and request the
    applicant to submit the necessary additional information; or

  3. if the transferee is not eligible to hold a license, or the license
    to be transferred is invalid, then the application shall be returned
    and the applicant shall be notified accordingly.

If the OGMC gives the applicant a notice of defects as provided in
this paragraph, the applicant shall, within ten (10) business days
following the receipt of such notice, submit additional information
to the OGMC. Within five (5) business days, the head of the OGMC
shall take a decision as specified either in subparagraphs 1 or 3 of
paragraph 6 of this Article.

  1. Following the recording of the transfer of the license, the OGMC
    shall notify the professional inspection institution and the GMDA
    in writing of the recording of the transfer and, in case of the
    transfer of a mining license, it shall also notify the Ministry of
    Finance in writing, and shall publish an official notice informing
    the public of the license transfer. /This paragraph was amended
    by the Law of September 1, 2000/

Article 41. Transfer of parts of licensed areas

 

  1. License holders may transfer parts of a licensed area to persons
    eligible to hold a particular type of license by a transfer
    agreement. The shape, size and orientation of the transferred and
    retained parts shall conform to the requirements of this law. The
    transfer of a part of a licensed area shall be recorded with the
    OGMC in accordance with the provisions of Article 40 and the
    provisions of this Article. The transfer agreement shall become
    effective upon such a registration.

  1. The application for recording the transfer of a part of a licensed
    area shall contain a description of the land. This description shall
    contain the information required by this law to be included in the
    initial application for a mining license.

  1. The applicant shall pay the application processing fee established
    by the Government member and include it with the application.

  1. The OGMC shall verify and confirm that the transferred area lies
    entirely within the boundaries of the licensed area covered by the
    transferor's license.

  1. Upon each transfer of a part of a licensed area covered by a valid
    license to an eligible transferee, the OGMC shall take the following
    actions :

  1. record the location and coordinates of the transferred and retained
    parts of the licensed area in the register of licenses and in the
    cartographic license register;

  2. make appropriate notation in the license certificate of the
    transferor;

  3. issue the transferee a separate license.

Article 42. Pledges of licenses

 

  1. To provide security for the financing of their investments and
    operations in Mongolia, license holders may pledge their licenses in
    accordance with the provisions of the Civil law. The pledge
    agreement shall become effective upon its registration with the OGMC
    in accordance with the provisions of Article 40 of this law.

  1. The pledgor shall submit a copy of the pledge agreement, together
    with the license certificate, to the OGMC. The pledgee is not
    required to confirm its acceptance of rights and obligations under
    the license.

  1. The OGMC shall verify whether the application for recording the
    pledge of the license complies with the terms and conditions
    specified in this law.

  1. Upon verification that the application for recording the pledge of
    the license complies with the terms and conditions specified in this
    law, the OGMC shall record the pledge of the license and deliver the
    license certificate to the pledgee.

  1. Upon termination of the pledge agreement, the license holder shall
    submit an application to the OGMC together with the following
    documents:

  1. a statement signed by the pledgee to the effect that the license
    holder has fulfilled its obligations under the pledge agreement and
    that the pledge has been terminated;

  2. the pledged license certificate.

Upon receipt of the foregoing documents, the OGMC shall record the
termination of the pledge and return the license certificate to the
license holder.

  1. During the period of time in which the license is pledged, the
    license may not be transferred to another person unless authorized
    in writing by the pledgee or transferred to legal successors of the
    exploration license holder.

Article 43. Transfer of a license pursuant to a pledge agreement

 

  1. If the pledgor fails to fulfill its obligations under the pledge
    agreement and the pledgee of a license wishes to transfer the
    license to a person eligible to hold such a license, the pledgee
    may, in conformity with Article 40 of this law and the present
    Article, submit an application to the OGMC to transfer the pledged
    license.

  1. The pledgee shall attach the following documents to its application
    for recording the transfer of the license to a person eligible to
    hold such a license:

  1. a document signed by the pledgor consenting to the transfer of the
    license and a statement by the pledgee confirming receipt of the
    license;

  2. a certificate of the pledged license;

  3. if the transferee is a person other than the pledgee, the documents
    specified in paragraph 2 of Article 40 of this law;

  4. confirmation by the transferee of its acceptance of rights and
    obligations under the license.

CHAPTER SIX

Termination of exploration and mining licenses

Article 44. Termination of licenses

 

  1. A license shall be terminated in the following cases:

  1. expiration of the license term;

  2. surrender by the license holder of the entire licensed area in
    accordance with the provisions of Article 46; or

  3. revocation of the license by the OGMC.

  1. A license shall terminate as to each and every part of a licensed
    area being surrendered by the license holder.

  1. Upon termination of the license, the rights and obligations of the
    license holder under the license shall cease to exist, except the
    license holder’s obligations with respect to environmental
    restoration and mine closure as provided for in Articles 29 and 30
    of this law and other obligations pursuant to legislation on
    environmental protection.

  1. Upon termination of the license, the license holder shall return the
    license certificate to the OGMC, and a new license may be issued for
    the area in accordance with the provisions of this law.

  1. The ownership of buildings and structures, equipment and other
    property allowed to be left on the exploration or mining area in
    accordance with subparagraph 3 of paragraph 1 of Article 36 shall be
    determined in accordance with the provisions of the Civil law.

Article 45. Surrender of part of the licensed area

 

  1. A license holder may surrender part of the licensed area in
    accordance with the provisions of this law.

  1. A license holder shall submit to the OGMC an application for
    surrender of part of the licensed area together with the
    description of the surrendered part in the form approved by the
    OGMC. In the case of surrender of part of an exploration area, the
    description of the surrendered area shall conform with the
    requirements of paragraph 3 of Article 13 of this law. In the case
    of surrender of part of a mining area, the description of the
    surrendered area shall conform with the requirements of Article 17
    of this law.

  1. The following documents shall be attached to an application for
    surrender of part of a licensed area.

  1. the license certificate;

  2. a certificate from the Governor of the relevant soum or district
    stating that the license holder has complied with the environmental
    protection plan for the surrendered area;

  3. a report described in subparagraph 2 of paragraph 2 of Article 39 of
    this law.

  1. The area retained by the license holder after surrender of part of
    the licensed area shall conform with the requirements of paragraph 4
    of Article 17 of this law.

  1. Upon receipt of an application for surrender of part of a licensed
    area, the OGMC shall register the surrender of part of the licensed
    area and make appropriate notations on the license certificate.

  1. The surrender of a part of a licensed area becomes effective upon
    the registering the application in accordance with paragraph 5 of
    this Article.

  1. The surrender of a part of a licensed area shall not entitle the
    license holder to a refund of license fees previously paid.

Article 46. Surrender of the entire licensed area

 

  1. A license holder may surrender the entire licensed area by
    submitting an application, on a form approved by the OGMC, and by
    registering the application in accordance with this Article.

  1. The following documents shall be attached to the application for
    surrender of the entire licensed area:

  1. a certificate of full compliance by the license holder with all
    environmental protection, mine closure, reporting and other
    requirements established by applicable laws;

  2. if the particular license is pledged, an official document signed by
    the pledgee consenting to the surrender.

  1. Promptly upon receipt of an application for surrender of the entire
    licensed area, and upon verification that the application complies
    with the requirements of paragraph 2 of this Article, the OGMC shall
    record the surrender in the register of licenses and modify the
    cartographic register of mineral licenses accordingly.

  1. Upon surrender of the entire licensed area, the license certificate
    shall be returned to the OGMC.

  1. The OGMC shall notify the relevant authorities of the surrender of
    the entire licensed area, and publish an official notice informing
    the public of the surrender.

  1. A license holder that surrenders a particular licensed area may not
    submit a new application for the same area for a period of two years
    following the surrender. If the person that surrenders the license
    is a legal entity, then this paragraph shall also apply to any third
    party that controls more than 50% of the voting rights in that legal
    entity or any third party in which such entity controls more than
    50% of the voting rights.

Article 47. Revocation of licenses

 

  1. The OGMC shall revoke any license, in accordance with this Article,
    if it determines that the license holder does not meet the
    requirements for maintaining eligibility to hold a license as
    specified in Chapter 3 of this law.

  1. The OGMC, pursuant to a decision by the head of the OGMC, shall
    revoke a license on the following grounds:

  1. that the license holder has lost its eligibility to hold a License
    in accordance with this law; or

  2. that the license holder has failed to pay License Fees specified in
    Article 24 of this law in full or did not pay License Fee and
    penalty within the time specified in the paragraph 4 of this
    article; or /This subparagraph was amended by the Law of January
    8, 1999/

  3. that an exploration or mining area has been designated as a special
    needs land and the license holder has been fully compensated.

  1. Immediately upon determining the existence of grounds for revocation
    of a license, the OGMC shall notify the license holder, and any
    license pledgee, in accordance with the procedures established by
    this law. The notice shall specifically indicate the grounds for
    revocation of the license.

  1. Within thirty (30) days following the receipt of the notice
    specified in paragraph 3 of this Article, a license holder, or any
    license pledgee who paid the License Fee and the required penalty,
    may submit to the OGMC documentary evidence that the grounds for
    revocation of the license are not valid. /This subparagraph was
    amended by the Law of January 8, 1999/

  1. Upon review and analysis of the documentary evidence submitted by
    the license holder, if the OGMC agrees that the grounds for
    revocation of the license are not valid, it shall withdraw its
    notice of revocation and notify the license holder accordingly.

  1. If the OGMC determines that the documentary evidence submitted by
    the license holder does not establish invalidity of the grounds for
    revocation of the license, the head of the OGMC shall revoke the
    license and notify the license holder and license pledgee
    accordingly.

  1. The holder or license pledgee shall have a right to file a complaint
    with the court within thirty (30) days following the date of
    issuance of the decision.

  1. If the license holder or the license pledgee files a complaint with
    the court, no license shall be issued with respect the license area
    until a valid court ruling has been made.

  1. The OGMC shall notify the professional inspection institution and
    the GMDA of the revocation of a license, and in case of revocation
    of a mining license, the OGMC shall notify the Ministry of Finance,
    and publish an official notice informing the public of the
    revocation. /This paragraph was amended by the Law of September
    1, 2000/

CHAPTER seven

Resolution of disputes arising out of

exploration and mining licenses

Article 48. Resolution of boundary disputes between or among
license holders

  1. Boundary disputes between or among license holders shall be resolved
    by the OGMC. Any party to a boundary dispute may request the OGMC
    to resolve the dispute.

  1. The OGMC shall give all parties to the dispute an opportunity to
    present their positions and arguments in writing.

  1. The OGMC shall verify if there is an overlap between disputed areas
    in the register of licenses and the cartographic register of
    licenses. If there is an overlap, the OGMC shall determine, based
    on the original applications and reports of field surveys, whether
    the coordinates and boundaries of the area were correctly recorded.

  1. If, as a result of a field survey, an overlap is confirmed, the OGMC
    shall modify the area covered by the more recently granted license
    and eliminate the overlap.

  1. The OGMC shall have disputed boundaries of a licensed area surveyed
    and established by an accredited professional geodesic surveyor and
    any costs and loss relating thereto shall be paid for by the party
    shown to be wrong.

  1. The OGMC shall verify the disputed boundaries, make decisions on
    relevant modifications, and notify the parties to the dispute
    accordingly.

  1. If the parties to the dispute disagree with the decision of the
    OGMC, they may file a complaint with the court.

Article
49. Resolution of disputes between license holders and land owners
or users

 

Land
access, rights of passage, and land use disputes between or among
license holders and land owners or land users, shall be resolved in
accordance with the provisions of the Land law, the Civil law and
other relevant laws.

Article 50. Filing of complaints to State administrative bodies

 

Where any actions or failures to act by civil servants or State
administrative bodies have prevented the exercise by citizens or
legal persons of rights conferred upon them hereunder, such citizens
or legal persons may file a complaint with respect thereto with
relevant senior officials or State administrative bodies or the
courts.

 

Article 51. Resolution of disputes arising out of a stability
agreement

Any disputes arising out of a stability agreement concluded with the
Government according to Articles 20 and 21 of this law shall be
resolved in accordance with the Arbitration law and international
treaties of Mongolia.

CHAPTER EIGHT

Sanctions

 

Article 52. Sanctions for breach of legislation

  1. If a breach of the minerals legislation does not constitute a
    criminal offence, a geological and mining inspector, whilst taking
    into account the circumstances of the infringement, shall impose the
    following penalty on the guilty person:

  1. If any person has conducted exploration or mining activities or sold
    minerals without holding a mineral license, all income or products
    derived from such activities shall be confiscated by the State and,
    a fine in an amount equal to the double of the value of the minerals
    in question shall be imposed on such person. In such case, the
    amount of the penalty shall not exceed the maximum penalty set forth
    in the law on Administrative responsibilities;

  2. A penalty of from 10,000 to 60,000 togrogs shall be imposed in the
    case of the non-timely submission of statements set forth in Article
    39 of this law or the submission of false statements;

  3. Prevention of a license holder from exercising rights conferred by
    this law shall give rise to the imposition of fines as follows:

  1. with respect to citizens, from 10,000 to 40,000 togrogs;

  2. with respect to officials, from 20,000 to 60,000 togrogs;

  3. with respect to organizations and legal entities from 100,000 to
    250,000 togrogs.

  1. Failure of a license holder to comply with obligations with respect
    to the conduct of activities under a license as set forth in Chapter
    4 of this law shall be fined as follows and, in addition, such
    license holder must pay for any damage resulting from such failure:

  1. with respect to citizens, from 10,000 to 50,000 togrogs;

  2. with respect to officials, from 20,000 to 60,000 togrogs;

  3. with respect to organizations and legal entities, from 50,000 to
    250,000 togrogs.

  1. Failure of a license holder to comply with legitimate requirements
    imposed by a geological and mining inspector with respect to the
    elimination of deficiencies discovered in the course of exploration
    or mining shall be fined as follows:

  1. with respect to citizens, from 15,000 to 50,000 togrogs;

  2. with respect to officials, from 10,000 to 60,000 togrogs;

  3. with respect to organizations and business entities from 50,000 to
    250,000 togrogs.

  1. Where a license holder continues to violate laws with respect to
    environmental protection, mine operation safety regulations, or the
    provisions of its environmental protection plan, the exploration
    and mining activities of such a holder be suspended for up to 60
    days, and if such deficiencies are not eliminated within this
    period, the exploration activities of the license holder shall be
    terminated or, in the case of an operating mine, the mine shall be
    closed.

  1. A legal person who has intentionally decreased, or attempted to
    decrease, disclosures with respect to sales revenue shall be fined
    from 100,000 to 250,000 togrogs and be required to pay any unpaid
    royalties due with respect to the shortfall and, in addition, a
    penalty equal in amount to such unpaid royalties.

  1. Any legal person who has failed to comply with the regulations with
    respect the assaying and registration of precious metals and
    gemstones as provided by this law shall be fined from 100,000 to
    250,000 togrogs.

  1. Where a mining license holder has intentionally reduced the volume
    or amount of minerals extracted, or has intentionally reduced sales
    revenue by intentionally reducing the sales price by entering into a
    fictitious contract, or by selling the product at an unfair price,
    such license holder shall be fined 100,000 to 250,000 togrogs and
    the amount by which the revenue has been understated shall be paid
    by such license holder to the State treasury.

  1. If the OGMC fails to make a decision within the time limit set forth
    in paragraph 9 of Article 14 of this law, it shall pay the applicant
    an amount equal to the processing fee for each ten (10) days such
    failure continues or, at the request of the applicant, such amount
    shall be deducted from the first year's license fee.

  1. If the OGMC fails to make a decision within the time limit set forth
    in paragraph 6 of Article 17 of this law, it shall pay the applicant
    an amount equal to the processing fee for each day such failure
    continues or, at the request of the applicant, such amount shall be
    deducted from the first year’s license fee.

  1. Any other penalties provided for by law.

  1. A court may impose a fine of up to 30,000 togrogs on any person who
    intentionally prevents an authorized official from performing his or
    her duties in the course of an inspection.

  2. If the license holder did not pay the license fee within the period
    specified in the article 25 of this law, a penalty equal to the 0.5%
    of the total unpaid amount shall be paid for each expired day. /This
    paragraph was added by the Law of January 8, 1999/

CHAPTER NINE

Structure and Composition of Agencies Responsible

for Implementation of Mineral Related Legislation

Article
53. Geological and Mining Inspection Agency

The
state monitoring on the exploration and mining activities shall be
organized and implemented by the professional inspection institution
in the central level, and by the inspection divisions in the local
level. /This article was re-edited by the Law of September 1,
2000/

Article
54. Geological and Mining Development Agency

The
GMDA is the implementing agency of the State central administrative
body in charge of geology and mining activities and includes three
divisions: the Office of Geology, the Mining Office, and the OGMC.

The
GMDA shall carry out its activities independently from the
professional inspection institutions. /This paragraph was amended
by the Law of September 1, 2000/

Article 55. Office of Geological and Mining Cadastre

The OGMC shall have the following functions:

  1. to receive, register and make decisions with respect to applications
    for licenses;

  2. to maintain the register of licenses;

  3. to maintain the cartographic register of licenses;

  4. to issue exploration and mining licenses;

  5. to collect and distribute application processing and license fees in
    accordance with applicable laws and regulations;

  6. to receive and register applications for prospecting;

  7. to review and resolve boundary disputes between and among license
    holders;

  8. to provide interested persons with access to the register of
    licenses and the cartographic register of licenses and to notify
    relevant government agencies of changes in these registers, and to
    publish official notices informing the public of such changes.

Article 56. Office of Geology

 

The Office of Geology is responsible for providing the State central
administrative body in charge of geology and mining with information
for the development of policies and programs with respect to geology
and related research, the conducting of such research, and the
following other activities:

  1. regional geological and hydro-geological mapping of Mongolia and
    related geophysical research;

  2. research on the patterns of distribution and types of occurrence of
    mineral resources within the territory of Mongolia and the
    evaluation of such resources;

  3. geo-ecological research and recommendations with respect to natural
    and human factors that may have an impact on the social and economic
    development of Mongolia;

  4. providing interested persons with all available geological and
    mining related information, including information provided by
    license holders in accordance with this law, except for information
    classified as confidential;

  5. maintaining and up-dating the information fund with respect to
    national geological and

related resources.

Article 57. Mining Office

The Mining Office is responsible for providing the State central
administrative body in charge of geology and mining with information
and research on the development of the mining sector and for
conducting of research with respect to the following matters:

  1. evaluations and recommendations with respect to technology and
    equipment used in the

mining industry, and implementation of mining technology policy;

  1. creation of a favorable investment environment for the mining sector
    and evaluations and recommendations with respect to the existing
    investment environment;

  2. research, evaluations and recommendations with respect to the impact
    the mining industry has on the social and economic development of
    Mongolia;

  3. research on the supply, demand and prices of mining products, and
    forecasting of long-term trends;

  4. development of proposals with respect to State policies with regard
    to particular mining projects, and implementation of such a
    policies.

CHAPTER TEN

Other Provisions

Article
58. Notification of Interested Persons

  1. The State administrative body in charge of the issuance of licenses,
    their registration, and the monitoring of activities of license
    holders, shall notify relevant persons of its decisions by means of
    an official letter.

  1. Such notices may be delivered to relevant persons in writing or by
    means of an official publication. In the event of a dispute with
    respect to the timing of the delivery of the notice, the date of the
    official publication shall be deemed to be the date of delivery of
    the notice.

Article
59. Payment of fees

With
respect to license fees specified in this law in US dollars, the
official exchange rate for the particular day established by the
Mongolbank shall be used.

Article
60. Access to minerals related information and reports

  1. Any interested person shall have a right to have access to the file
    of license applications, the register of licenses, and the
    cartographic register of licenses during office hours in specially
    designated rooms.

  1. Reports of exploration work prepared by a license holder,
    information with respect to mine operations, and feasibility studies
    shall be treated as the license holder’s confidential information.

  1. Information classified as confidential shall not be disclosed,
    published or disseminated except in accordance with provisions and
    procedures established in the Law on State secrets, the Law on
    Organization secrets, and the Law on Private secrets. An interested
    person shall have a right to have access to minerals related
    information not classified as confidential during office hours in
    specially designated rooms.

 

Article 61. Distribution of royalty revenues

 

All royalty payments shall be deposited in the treasury of the
central and local administrative bodies. /This article was amended
by the Law of December 27, 2001/

Article 62. Use of license fees

All
license fee payments shall be deposited in the State central
treasury.

Article
63. Specifics of mining industry finance and accounting

  1. All costs incurred for exploration, and all expenses incurred in
    preparing a mine site for production, shall be amortized on a
    straight line basis over a period of five (5) years commencing with
    the tax year in which production from the mine commences.

  1. The costs of acquisition of a license, either directly or by
    transfer, shall be amortized on a straight line basis over the term
    of the license.

  1. Fixed assets used in mining operations shall be depreciated on a
    straight line basis over a period of five (5) years.

  1. A loss incurred in any tax year may be deducted from taxable income
    during the three (3) tax years following the year in which the loss
    was incurred.

  1. All costs incurred in developing industrial and social
    infrastructure shall be depreciated on a straight line basis over
    the useful lives of the facilities constructed. All costs of
    maintaining and operating such infrastructure facilities shall be
    expensed in the year in which such costs are incurred.

  1. All maintenance costs in connection with mining operations shall be
    expensed in the year in which they are incurred.

  1. The Ministry of Finance shall adopt regulations implementing
    paragraphs 1 through 6 of this Article.

Article
64. Processing Fees

An
applicant shall pay the specified processing fee when submitting an
application to obtain a license, transfer a license, extend the term
of a license, pledge a license, transfer a license pursuant to a
pledge, or to surrender all or part of a licensed area, and when
requesting the resolution of a boundary dispute.

Article
65. Coming into force of the law

 

This
Law shall come into force on 1 July 1997.

Chairman
of the State Ih Hural of Mongolia R. Gonchigdorj

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