On 26 March 2019, the Parliament of Mongolia (the “Parliament“) introduced two main changes to the Minerals Law of Mongolia (the “Minerals Law”) by enacting the Law on Amendments to the Minerals Law (the “Recent Amendments”). We will briefly discuss below the main implication of these two changes.
- The scope of persons obliged to pay minerals royalties has been broadened:
Under the Minerals Law which was in effect prior to the Recent Amendments, only the mining license holders had obligation to pay royalty as calculated from sales price of all type of minerals they sold or shipped for sale or used from the mining site. This was viewed by the law drafters as a legal possibility which enabled artisanal mining unions, partnerships, and individuals (with no mining license) as well as legal entities that purchase minerals from artisanal miners and export to abroad and refinery and processing factories not to pay any royalty.
Pursuant to the Recent Amendments made to Article 47.1 of the Minerals Law, any person that:
- Sold minerals;
- Shipped minerals for sale;
- Used minerals; or
- Sold gold to the Bank of Mongolia and commercial banks is now obliged to pay royalty fees.
- The rate of royalty for gold has been increased to 5 percent:
In accordance with an amendment to the Minerals Law dated 24 January 2014, the basis rate of royalty for gold was set at 2.5% and the additional rate at 0 for 5 years or until 1 January 2019 for the purposes of increasing the volume of gold being sold to the Bank of Mongolia and the country’s foreign currency reserves. This was a law amendment that has reduced the regular rate for minerals royalty (which is 5%) by 50% for gold. In connection with the effective period of this amendment having been expired on 1 January 2019, the draft law on the Recent Amendments proposed to extend the effective period by another 5 years. But, the proposal was not approved by the Parliament. Hence, the rate of royalty for gold has been increased to 5% or the same rate for any other type of minerals (save for coal sold in the domestic market).
According to the National Statistics Office of Mongolia, 1.6 million tons of fluorspar in value of USD 381 million was exported in 2012-2016. During these years, only MNT 11.1 billion was paid to the state and local budget funds as royalties while MNT 34.6 billion was expected to be paid. http://forum.parliament.mn/projects/463.