The rules of the game should be clear and consistent

D.Batkhuyag, Chairman of the Mineral Resources Authority of Mongolia, talks to G.Iderkhangai of the knotty issues facing mining in the country and the best ways to resolve them.  

Almost the first thing you did on taking over as chairman was to review exploration and mining licenses so that the illegal ones among them could be cancelled. Companies  complained a lot. So, what has been the progress?

My appointment is for four years and I got the job about two years ago. One of my main tasks is to follow the Prime Minister’s instructions to put the whole licence issue in order, within the law.  When I came, there were 5,187 exploration and mining licences covering 48.2 million hectares. Since then, the state has taken back over 21 million hectares. At the moment, we have 3,155 exploration and 1,134 mining licences. The number of mining licences is on the increase as exploration licences are converted to mining ones. The number of exploration licences might fall as we review the 3,155 of them from the legal point of view. Investors, foreign or domestic, must clearly understand that they have to follow Mongolian laws. This is our only principle and it is not that the state issues or revokes licenses arbitrarily. Companies have a responsibility to abide by the law of the land and we are checking on how they have been doing this.

What are the expected positive effects from reducing the number of licences?

This is a separate issue. It is for the Ministry of Mineral Resources and Energy to examine the possible impact of having fewer licences, how this will benefit or harm the mining sector, and then decide on what the policy should be. The effects on the mining sector of what we have so far done is not apparent.
People have a wrong notion that all the land in Mongolia is being dug up and exploited and given away to foreigners. In fact, only 17.1% of our territory is under exploration licence and 0.3% under mining licence. If anything, Mongolian territory is underexplored. Another related issue is that of reserves. There is no reliable estimate of how much we have of what. Studies are on to determine the gold and coal reserves. Once this is done, the state will determine what to do with it and through whom. 

President Elbegdorj has suspended the issue of any new licence and also transfer of licence on grounds of national security. How have foreign investors reacted to this?

Following up on the initiative of the President, Parliament has suspended both activities until December 1, 2010. This is consistent with our work of cancelling licences held illegally. Investors usually do not complain, but they do watch if the implementation is as strict as MPs wanted the law to be. What is most important is that regulations should be stable and consistently enforced. I don’t think the country will suffer any real financial loss because of revocation of exploration licences. The licence fee collected in a year is around MNT30 billion.

One issue for us is to determine who is paying for the exploration. According to law, only the investor should pay for it. It is imperative for us to have a proper policy on natural resource exploration which is essential for our economic growth. If there is no private capital for exploration, it has to be done by the state, either from the budget or through foreign loans. Only properly done exploration work will allow us to know what we have and then to register the resources. Exploitation is the next step. 

Is Parliament planning an amendment to the 2006 Minerals Law?  

It is true that our Minerals Law has been amended frequently, leading some investors to complain that the legal environment of the geological and mining sector is changed overnight in Mongolia. This also creates difficulties for the Minerals Authority, entrusted with implementing the law. We in the MRAM are not concerned with whether we think the law is right or not. Our obligation is to implement it in the best and most effective way. Still, I would like to say that given the primacy of the mining sector, both in attracting  foreign investment and in ensuring development, the rules of the game should at all times be very clear. The Minerals Authority has actually set up a group to work on the issue in consultation with the best legal experts. I hope we shall come up with proper ideas to enforce use of best practices in, among other things, post-mining rehabilitation and distribution of profits to the people.

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