By Elena Fehrbach
The Parliament of Mongolia is continuing the work on a draft of the new Law on Minerals. The core content of the Law is at the active discussion stage at the moment. The first draft of the new Law has been introduced in February 2013. The new draft is representing an attempt to bring the Law that regulates one of the most vital industries in the country to the new level, however some parts of the new Law that refer to the license ownership and the license holder’s rights still lack integrity, as the potential investors’ needs are not properly addressed. The first draft has been widely criticized by the local companies and foreign investors resulting in additional work on the draft. Despite further work on the new Law, the current version of the Law has added up a new amendment effective from the date it has been approved.
On 24 January 2014, the Government has approved an amendment to the existing Law on Minerals that refers to the royalty on gold production and sale. According to the new amendment, the royalty for gold sold to Central Bank of Mongolia or its accredited banks should be 2.5 percent of the sales value. No additional payments shall be made in addition to the base percentage for this specific case.
The royalties on the all the other gold sales would remain on the same current rates. Before introduction of the new amendment, the base case royalty on gold in all cases was 5 percent with additional payment of up to 5 percent depending on the market price.
One of the main reasons for introduction of this amendment is an attempt to build up more significant level of the national gold reserves. With the new amendment in force, the Government hopes to raise the level of the national gold reserves to at least 20 tonnes from the current level of about 5 tonnes. In view of the national currency instability in Mongolia, the other function of the increased gold reserves should be strengthening of the national currency against foreign currencies, as commented by the Government representatives.