January 2015
The Government has now started acting seriously to resolve differences over how to finance development of the second stage of the Oyu Tolgoi project, which is its underground mine. At the same time, a Government working group is in regular discussion with the international consortium finally chosen to invest in the Tavan Tolgoi deposit, the development of which will be our main way out of the current economic difficulties, as MMJ showed in its January issue. The Mongolian section of the present issue contains a sobering look by G. Iderkhangai at certain pitfalls and risks these discussions would have to negotiate.
It is clear and heartening that the Government has approached the present Oyu Tolgoi talks to retrieve the project out of limbo with considerable preparation. Prime Minister Ch.Saikhanbileg’s call for a mobile text poll among the three million citizens of Mongolia on the question ‘Is it right to increase investment in strategic deposits? ’ found that 56 per cent of the respondents favoured moving on with work to develop the deposits. As soon as the Prime minister publicly announced the result of the poll on 6 February, R.Jijgid, Minister of Mining, submitted a draft law on amendments to the Law on Mining to the Speaker for discussion in Parliament.
The draft wants a radical change in the way strategic deposits are owned and run. It proposes that the State will give up its shares in a deposit of strategic importance in favour of a special fee from the other licence and share holder(s). In other words, the Government has now chosen to forgo ownership of deposits and responsibility to develop them, preferring to receive fees in lieu of dividends. It will continue to receive all taxes as per law. This is a welcome move in that it will restrict, if not put an end to, political interference in business, leaving it to be run by professionals. Analysts calculate that royalties will bring more to the state budget than dividends.
We give below an unauthorized and unofficial, but accurate, translation of the text of the law draft.
Amendments to the law on mining
Article 1. Article 47with the following content shall be added to the law on mining.
47. Special fee on mining mineral resources of deposits of strategic importance.
47.1. In case the parties agree on transferring state ownership of a mineral deposit of strategic importance to the other party of the agreement as allowed by an authorized body, the party taking over the state ownership or the mining licence holder shall pay a fee for mining mineral resources of a strategic deposit to the state fund in compliance with the procedure detailed in article 47.2 of this law.
47.2. The Government shall approve the amount of the special fee for mining mineral resources of strategic deposits stated in article 47.1 of this law.
47.3. The amount of the special fee for mining mineral resources of strategic deposit specified in article 5.3-5.5 of the present law shall not exceed 5 percent depending on the characteristics of the deposit.
Article 2. In article 5.3-5.5 of the law on mining, subsequent to ‘shall be determined by the agreement’, the following part shall be added: ‘State ownership under this agreement can be replaced with fee for mining mineral resources of strategic deposits.’
Article 3. This law shall come into force on ………….