With the formation of the new Government of Mongolia after the elections in June, investors and business people have been closely watching the government’s actions: its policies and actions to support the mining industry, and to move forward.
An interview with Mr. B.Baatartsogt, head of the Mineral Resources Authority, shall perhaps provide some insights on the new government’s plans and prospects.
-The Government of Mongolia and Prime Minister J.Erdenebat have stated that they will partner and cooperate closely with foreign investors, specifically those in the mining industry. What actions will be taken to create a favorable environment to attract investors?
-Mongolia had ratified policy framework for the mining sector back in 2014. The framework includes policy, a development model, trends, and steps to reach objectives, in detail. It also highlights the legal environment to support investment in the mining sector, including geology and exploration, and yet, specifically concerning foreign investment, not to treat the private sector and state organizations differently.
-Exploration licenses were granted through an online system which was strongly criticized by applicants, and now it’s been cancelled. Companies and individuals are eager for the final decision about the continuation of license granting and how it will be conducted.
-Amendments approved in 2014 legalized the issuance of exploration licenses in accordance with tickets issued through an online system. The number of complaints related to the process had increased and the system ended. We are in discussions with the Ministry to resolve the issue soon. The state identifies areas eligible for exploration licenses and discloses the information to the public, which allows the entities and individuals interested in exploration activities to access information fairly, along with clear information about submission dates and locations.
-Can you explain the meaning of being treated “fairly” in this process?
-The only requirement is to be a taxpaying Mongolia-registered entity. But there are different ideas about the selection process, as the selection is announced publicly for the government’s defined area, as I mentioned earlier.
Previously, requests from companies to participate in selection were received by a special committee, and now that has changed. If an applicant meets 100% of the criteria for selection, then half of their consideration should go toward the entity with the highest offer, the remaining 50% should be an evaluation of the company’s resources, including equipment, machinery, its labor force, investment, financial capacity, etc. Countries rich in minerals follow this principle. The selection process is ongoing, and we have currently granted around 50 exploration licenses through the selection process. There is indeed a need to continue the licensing process.
-One of your activities is upgrading the geology and minerals database to comply with international standards. Will this improvement allow the public to have free access to mining information?
-In accordance with the Minerals Law and the Law on State Secrets, some geological information is considered to be a state secret. So, if the information is deemed a state secret, it can’t be disclosed to the public. But there is plenty of information on geological exploration conducted with state funds, including 1:50,1:200 scale geological maps and geochemical tests. Anyone who is interested in publicly disclosed information can access the geological database. Interested parties and individuals can obtain a primary report. There is great demand for building up the information which can legally be disclosed to the public, expanding the database, and translating the available information into English and other languages. This step will take Mongolia’s geological sector to a new stage in the global arena and will provide adequate information to foreign investors to address their concerns about Mongolia’s geological resources.
Investors carefully study the available geological information, to determine if it can be trusted, what their prospects are, and to make a decision about whether to invest in Mongolia or not. And we are working toward this by making amendments and changes to the laws to comply with these principles. A minerals and resource technology center will be established under the Mineral Resources Authority. We believe that the center should reach its goal and build up its services by introducing advanced technology and providing information to the public.
The information in the database is the result of explorations conducted in the mid XX century with state funding. In recent years, local private and foreign-invested entities have been extensively funding their own exploration. In this case, must private entities share the results of their exploration or the resources and reserves discovered for the database?
-A license holder is protected by the law to conduct exploration and define reserves within their own license area. Under those terms, it is impossible to disclose any information without the consent of the license holder. On the other hand, Mongolian and foreign entities engaged in exploration in Mongolia are registered at international stock exchanges and are obliged to publicly disclose the funds spent on exploration and their confirmed reserves in accordance with stock exchange rules. It’s up to the private entities to disclose this information or not. We comply with parallel legislation on access to information and do not disclose any information unless consent is granted by entities.
-Asian and European investors have different approaches. What would be your advice to foreign investors in our current circumstances?
The minerals sector is one of the leading and most highly important sectors in Mongolia. Therefore, Parliament and the Cabinet have been working to ensure a stable and transparent legal environment for the sector. If we look at the minerals sector as a whole, the legal environment for petroleum, mining and geology is relatively transparent and understandable. In addition to that, the legal environment is indeed stable. Any amendments and changes to the Minerals Law, Law on Petroleum, and other associated laws would negatively impact foreign investors as well as Mongolia’s competitiveness. We understand this clearly, and therefore, we are hesitant to make any fundamental changes. Mongolia is considered to have adequate legislation compared to other Asian, African, and South American countries in terms of competitiveness, and is praised for being competitive. In recent years, Mongolia has been valued for its competitiveness in the gold sector.
Source: Mining&Money magazine