PARLIAMENT APPROVES CONSIDERATION OF LONG-AWAITED DRAFT MINERALS LAW

A.Khaliun

Parliament has approved consideration of the draft Minerals Law, which was submitted to Parliament by the Government on May 26, 2026.

Currently, Mongolia's mining sector accounts for 22% of the country's gross domestic product (GDP), 71% of foreign direct investment (FDI), and 94% of exports, making it a cornerstone of the country's economic development.

The draft law was developed to establish the conditions for expanding the National Sovereign Wealth Fund by securing the country's mineral resource base, ensuring a reliable supply of raw materials for industry, and increasing sales in the mining sector.

Following the adoption of the revised Minerals Law in 2006, which entered into force in 2007, the number of mineral exploration licences fell from 4,111 in 2008 to 870 in 2023. Foreign direct investment (FDI) in the mining sector also declined from a peak of 335 billion MNT to 104 billion MNT in 2025, representing a more than threefold decrease.

Under the current law, mineral exploration licences are granted either through an application process or by competitive tender. Although these mechanisms are intended to ensure fairness, transparency, and equal opportunity, many exploration areas offered for licensing receive no applications, while 40-46% attract only a single applicant. This suggests that areas of interest to investors are not being made available for exploration.

Minister of Industry and Mineral Resources G. Damdinnyam explained that the draft law therefore proposes multiple methods for granting exploration licences.

Member of Parliament Sh. Byambasuren highlighted a provision in the draft law requiring any business entity seeking to exploit a derivative deposit generated during mineral processing operations to obtain a mineral processing licence.

He noted that the provision appeared to relate to the regulation of artisanal and small-scale mining, adding, "You may have had companies such as Achit Ikht and Erdmin in mind when drafting this provision. The lack of adequate regulation of artisanal mining has given rise to numerous problems. Is the purpose of this draft law to support artisanal mining or to restrict it?"

Minister G. Damdinnyam stated, "The exploitation of derivative deposits has so far been carried out without a legal framework. The draft law will provide the necessary legal regulation. It will also strengthen the accountability of artisanal miners. Since they exploit the nation's mineral resources, unregistered partnerships will be required to register, pay mineral royalties, and submit mining operation reports. Without these requirements, the sector remains largely unregulated."

DRAFT LAW INTRODUCES PROVISIONS ON CRITICAL MINERALS

As clean energy production continues to expand, countries have become increasingly aware of the risks associated with the supply of critical minerals. Accordingly, at a time when both end-user countries and countries involved in the critical minerals supply chain-including producing and exporting nations-are defining their policies and strategies, the draft Minerals Law introduces provisions governing the exploration and exploitation of critical minerals.

Currently, countries around the world have designated approximately 30-35 elements as critical minerals. Mongolia has identified numerous occurrences of these elements. Accordingly, it is envisaged that by establishing a national policy on critical minerals and presenting it to the international community, Mongolia will be able to expand critical minerals exploration, discover new deposits, attract investment, and bring these resources into economic use.

Member of Parliament B. Uyanga asked whether any business entities are currently engaged in the exploration and study of critical minerals and what measures the draft law proposes to support companies entering the sector.

Speaking at a meeting of Parliament's Standing Committee on Economics, she also expressed concern that critical mineral deposits could eventually be designated as strategic deposits and become subject to more stringent regulation.

According to the Minister of Industry and Mineral Resources G. Damdinnyam, critical minerals have become a geopolitical issue. "First, Mongolia will adopt its own list of critical minerals. Second, the Government will determine with whom it will cooperate in this sector and announce its decision. Third, the Government will pursue a policy of providing budgetary and financial support for geological surveys and mineral exploration."

COPPER MINERAL ROYALTY TO REMAIN UNCHANGED UNTIL ENTRÉE RESOURCES NEGOTIATIONS ARE CONCLUDED

The public has expressed unanimous support for the provision to allocate a portion of the Mineral Resources Royalty (MRR) to local communities that promote responsible mining.

The draft law also introduces measures to strengthen accountability for mine rehabilitation and closure by requiring project developers to provide a mine rehabilitation financial guarantee or deposit rehabilitation security in advance. The security deposit will be refunded only after the project developer has completed both technical and biological rehabilitation using its own funds and equipment.

In major copper-producing countries, mineral royalties on copper are levied at an average rate of 8-10%. Mongolia's comparatively high mineral royalty has constrained the discovery of new copper deposits.

Accordingly, the draft law aligns the mineral royalty with international practice while keeping the mineral royalty applicable to Erdenet Mining Corporation unchanged in order to avoid reducing state budget revenue.

The Working Group that drafted the bill estimates that the proposed amendments would increase annual copper concentrate production from the current 2.1 million tonnes to 3.3 million tonnes, representing an increase of up to 47%.

However, as negotiations with Entrée Resources are ongoing and issues relating to the Javkhlan and Shivee Tolgoi deposits remain under discussion, the Mongolian People's Party (MPP) Parliamentary Group and the Government have agreed to temporarily defer the proposed amendments relating to the mineral royalty for the copper sector.

Minister G. Damdinnyam stated, "We will not repeat the mistakes made in the Oyu Tolgoi Investment Agreement in our dealings with Entrée Resources. We plan to conclude a separate Investment Agreement with Entrée Resources in the near future. The licence holder has already been notified and invited to come to Mongolia as soon as possible to begin negotiations."

Member of Parliament D. Uuriintuya questioned why Erdenet's mineral royalty was to remain unchanged. "What makes Erdenet different? While separate agreements are being concluded with Oyu Tolgoi and Entrée Resources to reduce their royalty burden, the only enterprise that has consistently shouldered the burden of contributing to the state budget continues to face increasing pressure. How can the company continue to develop under such circumstances?"

She continued, "If there are concerns about the impact on state budget revenue, why not reduce the mineral royalty gradually? Erdenet Mining Corporation pays 50% of its sales revenue in various taxes. How can the company invest, ensure safe operations, and improve the welfare of its miners under these circumstances? I support the draft Minerals Law. However, I do not support provisions that would result in the law being applied differently to different mining companies."

Minister of Industry and Mineral Resources G. Damdinnyam noted that, as a former employee of Erdenet Mining Corporation, MP Uuriintuya had accurately described the company's challenges. The Ministry had drafted the bill with the objective of ensuring that Erdenet Mining Corporation could continue operating over the long term. The Working Group had reached an understanding with Erdenet Mining Corporation to maintain the current 15% mineral royalty for four years, after which the rate would be reduced gradually.

However, he added that, during the inter-ministerial consultation process required under the Law on Legislation, both the Ministry of Finance and the Ministry of Justice and Home Affairs had indicated that they could not support the bill unless the reference to the four years was removed.

Copper mineral royalties currently contribute 1.8 trillion MNT to the state budget, of which 900 billion MNT is paid by Oyu Tolgoi.

The Working Group estimates that aligning the copper mineral royalty at 10% with international practice would enable the implementation of more than 20 projects that have conducted exploration since 2010 and have completed and approved feasibility studies. The measure is also expected to increase mineral royalty revenues. Parliament has approved the continued consideration of the long-awaited draft Minerals Law, which has remained unresolved despite years of debate.