MP N.Batbayar: “No mistake” Is to Which the Working Group Adhere
The Parliament started to discuss the draft law on modifications to the Minerals Law of Mongolia yesterday. Working group, which worked on the draft law formulation for more than two months, developed the “undebatable” draft version and made conclusion on April 9. Working group, comprising of the PM, Minister of Industry and Trade, 4 MPRP and 4 DP members, came consolidated. They made conclusion on each modified clauses of the law. The main goal of the draft law was to determine state ownership percentage in strategic deposits. We got details from N.Batbayar, Chief of Working group.
Last week minerals issues were not discussed because no draft was introduced. When did you introduce the draft to MPRP and DP boards?
Last Wednesday we introduced the draft law and the board supported main principles of the draft on modifications to the Minerals law. But MPRP group had not discussed the issue, so it has been postponed.
It was incorporated in the draft law that the Government was to own 51 percent of strategic deposits. You kept the position of your board that Mongols should own it. Did you consolidate?
We studied international experiences when formulating the draft law. Mineral deposits are taken as strategic, ordinary and common prevalent. It is stated that ownership of investors should not exceed 50 percent in ordinary deposits. For instance, in America underground coal resource is under state ownership. After the resource is revealed by a company, bids are announced. Those, who offer the maximum price for underground coal, win. They approved this procedure in 1920. China started to realize it since 1993. Ownership percent of their state and investors varied. We took this structure and developed 50/50. Coal is the most important mineral for power industry. Now we have major deposits including Oyutolgoi and Tavantolgoi except Erdenet. Over 40 percent of mineralized land of Mongolia is licensed and 2/3 is possessed by foreigners. The objective of the Clause is to eliminate it. 51 percent of strategic deposit is to be owned by the Government. A term “legal body” has been excluded from the clause because a foreign investment company, too, can be a legal body by getting a certificate after being registered at Tax Authority. Thus, they might be able to possess the deposit 100 percent.
Isn’t it the clause on not transferring exploration license to others for the first three years?
The Government grants permission for vodka but licenses for mineral deposits are granted by a cadastral Office under Minerals and Oil Authority. 2/3 of licensed area, which accounted for 40 percent, is owned by foreigners. With purposes of managing this, it is modified that the Government should provide licenses for strategic deposits, Ministry for ordinary deposits and the same Office for common prevalence/spread deposits. Exploration licenses are provided for 9 years period however it is forbidden to transfer it to others for the first three years. Also investment agreement shall be concluded for 30 years period and expanded twice for 20 years respectively. We changed it into 15 years. There is a one or two African country that concludes investment agreements for 70 years. 15-year is a potential period for returning the investment profit. Our working group adhered to two main functions. Firstly, we have no right to make a mistake since minerals are related to Mongolia’s 100 years future. We should formulate right policy. Secondly, not only political parties but also Mongols must have a consolidated mind on it. Tavan tolgoi and Oyutolgoi deposits are Mongolia’s future.
Will investment agreements of Oyutolgoi and Tavan tolgoi be composed during spring session?
I don’t think so. However the legislation should be passed.
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Comments
Yes, this man is the head of the working group. Unfortunately he is the one who created and lobbied windfall tax. I abstain to say something about windfall tax but I would say that this law is just a law for the Chinese bidders or those who are rookie in the mining industry. I think Rio Tinto is retreating from Mongolia already and it prefer to give away its Mongolian property to Chinese ones who can make Mongolians reach deal using economy blockade and other factors.
2. …Over 40 percent of mineralized land of Mongolia is licensed and 2/3 is possessed by foreigners. The objective of the Clause is to eliminate it… it is so scary word!!! We dreamed today in early 90s and now we are eliminating it.
Mr. Batbayar says:
“For instance, in America underground coal resource is under state ownership. After the resource is revealed by a company, bids are announced. Those, who offer the maximum price for underground coal, win. They approved this procedure in 1920.”
And this man is the HEAD of the task force?? He is either poorly briefed or thinks that lying is an acceptable habit as long as it sounds good.
This is the procedure that the US Government approved in 1920–
From: The Mineral Leasing Act of February 25, 1920
24. Leases to permittees.—
“Such leases will be granted without competitive bidding, on rents and royalties to be fixed by the Secretary of the Interior, and otherwise substantially in the form of lease provided in section 18 of these regulations. …”
AND
“Valid existing rights acquired prior hereto on the lands described herein will not be adversely affected hereby. …”
Current (2008) rents are approximately $2-$3 per acre/year. Current royalties are fixed at 12.5%. Approximately 37% of coal mined in the US is mined from federal lands today. Less than 15% of oil production in the US comes from federal lands. The 1920 law and no law since in the US has created a US leasing or federal ownership of non-ferrous or ferrous minerals lands–i.e.: copper/gold.
If the Mongolian government cannot be accurate at least it can try to be honest and bargain with those who came and acted in good faith and trust in the Mongolian leadership.