S. BOLD-ERDENE
bolderdene@mininginsight.mn
The government approved the resolution on "Some Measures to Implement the Law on the Sovereign Wealth Fund" on September 25, 2024. This resolution is set to significantly impact the entire Mongolian mining industry. According to the decree, special license holders are now required to comply with Clause 5.5 of the Minerals Law, which mandates negotiations for state ownership of shares in current strategic deposits.
Additionally, to ensure the implementation of the Parliament's 27th resolution approved in 2007, the list of strategic deposits will be updated and revised. “Mining Insight” magazine presents a list of deposits that may be included in the strategic deposits category.
This list consists of the most promising reserves identified since 2007, when the initial list of strategic deposits was approved. Among these are significant gold deposits that are either currently being mined or are preparing for extraction. Consequently, 39 deposits are named in the second appendix of Resolution No. 27 as potential strategic deposits, with most of these being energy coal and polymetallic deposits. There is potential for an additional 14 deposits to be added to this list, although this is still uncertain. The task of "developing proposals for changes to the list of strategically important mineral deposits" has been assigned to Minister of Industry and Mineral Resources Ts. Tuvaan. This means that the Ministry will first present a proposal detailing which deposits should be added to the list of strategically important deposits to the Cabinet.
Following a clear decision from the government, the Parliament will discuss and approve whether these deposits and others will be included as strategically important. The 14 deposits reported here are the most likely candidates identified over the past two decades, indicating a lack of significant discoveries in recent years. Among these, the Zuuvch-Ovoo uranium deposit is expected to qualify as a strategic deposit under the Law on Radioactive Minerals. Negotiations regarding the state’s ownership share are currently ongoing with the investor. As for the other deposits, two key points are certain: First, these are among the largest mining deposits in Mongolia today. Second, none of them can produce 5 per cent of GDP, or approximately USD 1 billion, annually. However, several deposit-owning companies, unable to attract investors and recognizing their inability to operate independently, are eager to transform their deposits into strategic deposits. They are actively supporting the initiative to include these newly identified deposits in the strategic category, based on the expectation that they will be able to sell 34 per cent of their shares to the government and commence mining operations with government funding. There have been several attempts to add new deposits to the strategic deposit list since 2007. Last spring, during a public hearing in Parliament regarding mineral licenses, M. Mendbayar, the then head of the Ministry of Mining and Heavy Industry, proposed updating the list of strategic deposits multiple times in Cabinet meetings, but these proposals were rejected.
Following the amendment to the Constitution in 2019, there was a period when a list of potential strategic deposits was established, with one or two additions and deletions made subsequently. In 2015, only the Gatsuurt deposit was added, and negotiations with investors were initiated but were halted after reaching a settlement. Since then, there has been no discussion about the utilization of the Gatsuurt deposit. To date, no clear decisions have been made regarding the inclusion of new deposits as strategic deposits. The reason is straightforward: no sufficiently large deposits that meet the criteria for strategic designation have been discovered. Few deposits in Mongolia generate more than 5 per cent of GDP annually, which equates to producing and selling goods worth at least USD 1 billion each year. Furthermore, with new global trends emerging, the traditional concept of strategic deposits is diminishing, and the new concept of critical raw materials is gaining prominence. In recent years, there has been talk of revising the Minerals Law to align with global trends, but a definitive solution has yet to be reached.
Consequently, discussions regarding strategic deposits in the mining industry have remained "dormant" for over a decade. However, this government has approved the Law on the Sovereign Wealth Fund, which has brought strategic deposits back into focus. One of the primary sources of income for the wealth fund will be the dividends from state-owned strategic deposits. Thus, the government is effectively announcing a new policy aimed at increasing the number of strategic deposits and expanding state ownership. In reality, the largest source of revenue for the Sovereign Wealth Fund will derive from mineral royalties-the highest taxes paid by all mines-rather than dividends from state-owned assets.
Mining Insight Magazine, September 2024 №09 (034)
