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.