draft minerals law (new) mongolia december 5-2012

Send comments on this law to the President of Mongolia's office [email protected]

This is the draft minerals law proposed as of December 5, 2012.

You should pay particular attention to articles 13, 14, 15, 16, 66 & 90.

DRAFT LAW: "Minerals Law"

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The Office of Presidentlast version: 2012.12.05

Article 1.Purpose of the law

LAW OF MONGOLIA

(Month) (Date), 2012 City of Ulaanbaatar

MINERALS LAW

(Revised)

CHAPTER ONE General provisions

The purpose of this Law is to promote economically viable mining and extractive industries which carry out prospecting, exploration, mining and processing mineral resources in compatibility with the economic, social and environmental policies of the State.

Article 2.Scope of the law

This law shall regulate the relations arising from geological reconnaissance, prospecting, exploration, mining and processing of all types of minerals other than radioactive minerals in the territory of Mongolia.

Article 3.Definitions of terms

The following terms in this law shall have the following meaning:

1. 3.1.1. "Work permission" means any or all of the exploration, mining and processing permissionsas specified in chapter 8 of this law;

2. 3.1.2. "minerals" means

312. a. any usable mineral concentration which naturally occur either in solid, liquid or gaseous state that were formed on the surface or in the subsoil as a result from geological evolutionary processes, except for water, oil and natural gas;

312. b. minerals that have been extracted from the surface or the subsoil as specified in this law;

312. c. minerals that have been processed as specified in this law;

3. 3.1.3. "processing minerals" mean industrial activities directed at increasing the contents and value of minerals through means such as enriching, melting, purifying, producing products of extracted minerals other than radioactive minerals as specified by this law;

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4. 3.1.4. "mining minerals" means industrial extracting, washing and separating activities of minerals other than radioactive minerals from the earth's surface, subsoil, ore stockpile, waste and natural water according to the approved Technical and Economical Feasibility Report and work plan;

5. 3.1.5. "mineral deposit" means mineral concentration that has been formed on the surface or in the subsoil as the result of geological evolutionary processes, located in same site as rock's derived or separated from it by weathering, erosion and mechanical processes by forming of layers and bedswhere the quality and proven reserve is economically feasible to mine by industrial methods;

6. 3.1.6. "mineral exploration" means comprehensive activities of geological, geophysical, drilling, laboratory and hydrogeology works according to proven standards for detailed determining of formation, quantity, location, composition, concentration quality, geological structure, comprehensive mining technical condition of mineral resources for secure calculation of resources volume capacity and making decision about further advisability of mining operation;

7. 3.1.7. mineral prospecting" means comprehensive activities of geological, geophysical, drilling and laboratory worksaccording to proven standards in an area with prospects of mineral resources for detailed assessment of location, resources, composition, and to identify geological structure of minerals and for the purposes of determining to conduct further exploration works;

8. 3.1.8. "infrastructure" means roads, railways, airports, facilities for supply of electricity, heating, clean water, sewerage conveying system, air, motor vehicle and railway transportation, health, hygiene, education and related services that are accessible to public utilization;



9. 3.1.9. "rehabilitation" means the comprehensive activities of rehabilitation of the nature and environment of which the natural state has been changed due to geological and mining activities as specified in chapter 11 of this law;

3.1.10. "high grading mining" means a mining activity that mined not whole of the reserve and made the reserve impossible to mine further as a whole of the production reserves which was obtainable and determined by the Technical and Economical Study Report due to carried out not in accordance with approved technological procedures;

11. 3.1.11. "area" means the area that is granted by license according to the law, location of which is determined by corner points, coordinates of which are determined by degrees, minutes and seconds, and borders of which are surrounded by straight lines along the longtitute and latitude;

12. 3.1.12. "reconnaissance" means a research utilizing primary geological and mineral data for determining of earth surface and subsoil structure, chemical composition of rocks, their evolution history, transformation and presence of minerals through taking of rock samples without disturbing earth surface or subsoil, performing of geochemical, earth and air's geophysical surveys, geological mapping with all scales and thematic research;

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3.1.13. "State Administration" means the state administration in charge of geological and mining affairs;

3.1.14. "Central State Administration" means the central state administration in charge of geological and minerals resources affairs;

3.1.15. "licence" means the right certified by the license to conduct one of or all of the following activities, minerals prospecting, exploration, mining and processing granted by the State Administrative Authority as provided by this law

3.1.16. "common minerals" means the plenitudes' of rock, loam, sand and gravel accumulation of moraine and rock concentrations which could be used as construction materials;

3.1.17. "commercial infrastructure" means road and railway, airport, facilities for supply of electricity, heating, potable water, sewerage conveying system, air, motor vehicle and railway transportation and related services that are utilized for mining and industrial purpose;

3.1.18. "industrial waste" means earth, soil that is created due to mining and processing of minerals, and is proven and permitted by the Technical and Economical Feasibility Report as commercially non-profitable;

3.1.19. "mine and industry tenure" means a part of the land area that was granted under the license, that is affected by mining and processing activities;

3.1.20. derivative deposit" means earth, soil, rock and enrichment waste that is created due to mining and processing activities, is potentially commercially effective in specific setting of minerals re-processing;

3.1.21. "radioactive minerals" means minerals accumulation as stipulated in clause [_] of Nuclear Energy Law of Mongolia;

3.1.22. "occurrences of radioactive minerals with production value content" is stipulated in clause [_] of Nuclear energy law

3.1.23. "mineral resources" means mineral concentration that has been formed on the surface or in the subsoil as the result of geological evolutionary processes.

Article 4.Ownership of minerals

1. 4.1. Mineral resources naturally occurring on the surface and in the subsoil in the territory of Mongoliashall be the property of the State.

2. 4.2. The State, as being the owner,shall have the right to grant prospecting, exploration, mining and processing license as defined in the terms and conditions of this Law.

3. 4.3. Minerals separated from the soil and subsoil in the course of prospecting, exploration and mining without a license shall be the property of the State.

4. 4.4. Derivative deposits andindustrial wastes shall be deemed an integral part of the land and the property of the State in cases not specified by this law.

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Article 5.Areas prohibited for prospecting, exploration, mining and processing activities

4.1.

Any of prospecting, exploration, mining and processing activities shall be prohibited in the following areas.

1. 4.1.1. National and local special protected areas;

2. 4.1.2. normal protection territory areas with source of flow formation of rivers, and water basins as specified in the Law on Water;

3. 4.1.3. forest area on protected territory as specified in the Law on Forest;

4. 4.1.4. protected zones specified in the "Law on Railway";

5. 4.1.5. protected zones around high voltage power lines as specified in the "Law on Energy";

6. 4.1.6. protected zones around state or international roads as specified in the "Law on Road";

7. 4.1.7. protected zones specified in the "Law on utilization of the water supply and sewerage conveying system of the city and township";

8. 4.1.8. protected zones around mineral water specified in the "Law on Mineral Water"

9. 4.1.9. city and village tenure land, and within 5 kilometers from its borders;

Article 6.Prohibition of conducting prospecting, exploration, mining and processing activities without license

6.1 Unless specified in the following, it shall be prohibited to conduct prospecting, exploration, mining and processing activities without license.

6.1.1 reconnaissance;

6.1.2 mining and processing of common minerals by citizens on their owned land for purposes to use for own domestic needs and not for profits from sale thereof;

6.2 Unless set forth in this law, it shall be prohibited to separate minerals from the land and its subsoil, to purify, process, store, transfer, transport, sale, buy and broker minerals extracted without license.

Article 7. Registering of mined and processed products and certificate of origin

1. 7.1 Holders of mining and processing licenses shall have obtained a certificate of origin as defined in this law for all mined, processed, purchased, sold and reprocessed minerals and mineral products by them.

2. 7.2 Private person or legal entity manufacturing the goods with use of precious metals and stones shall have registered the used precious metals and stones using a form approved by State Administration and attach the documentation proving their origin to the registration form.

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Article 8. Mineral resources of strategic importance

8.1 8.2 8.3 8.4

Article 9.

9.1 9.2 9.3

9.4

9.5

9.6

Water, oil, gas, radioactive minerals and rare earth elements shall be deemed mineral resources of strategic importance.



Relations to prospecting, exploration and utilization of water shall be regulated by "Law on Water" in Mongolia.

Relations to prospecting, exploration, mining and processing of oil and gas shall be regulated by "Petroleum Law" in Mongolia.

Relations to mining and processing of radioactive minerals and rare earth elements shall be regulated by "Law on Nuclear Energy" in Mongolia.

Mineral deposits of strategic importance

As specified in this article, deposits of strategic importance shall be 15 deposits listed in Appendix 1 of 2007 in the State Great Hural Resolution No.27.

Borders of each deposit with strategic importance specified in 9.1 of this law shall be determined by Central State Administration.

No new deposits will be added into the list of deposits with strategic importance but can be excluded from the list by the State Great Hural upon submission ofopinion bythe Government.

The Government may establish, at its initiative, a Deposit Development Agreement with holders of licenses in order to set up a special regime for mining, processing and marketing activities of minerals extracted from deposits of strategic importance.

The State shall be entitled to possess free of charge a certain percentage of shares of legal entity which holds licenses for mining and processing of deposit with strategic importance. The percentage of the shares to which the state shall be entitled to possess free of charge shall be determined by Deposit Development Agreement that has been established in line with this law.

If the Deposit Development Agreement was not established by the Government, mining and processing activities of this deposit with strategic importance shall be carried out in compliance with the rule in this law.

Article 10 Deposit Development Agreement

10.1 If the Government establishes a Deposit Development Agreement with holder of mining and processing license for the deposits of strategic importance as specified in Article 9 of this law, the agreement shall be established in concurrence with the following principles:

1. 10.1.1 The initial term of Deposit Development Agreement shall be equal to the term defined in an approved Technical and Economical Feasibility Report necessary to earn the return on initial investments.

2. 10.1.2 Taxes and duties except fees and levies currently imposed by tax laws of

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Mongolia can be stabilized only for the initial term of Deposits Development Agreement.

3. 10.1.3 Tax or duties shall not be stabilized for any period beyond the initial term of Deposit Development Agreement.

4. 10.1.4 Deposit Development Agreement shall not regulate any issues concerning exemptions from taxes, duties, levies and fees; and stabilization of levies and fees.

10.2

10.3

10.4

10.5

10.6

10.7

Article 11

11.1 11.2

11.3 11.4



When the initial term of the Deposit Development Agreement expires the Agreement can be extended one time for up to 10 years along with necessary changes and amendments concurrent to the conditions of that time.

Total amounts of minerals to be mined or products to be manufactured within certain period of time may be determined in Deposit Development Agreement and the changes of determined amounts shall serve the grounds for making amendment in other terms or conditions as defined in the agreement.

If certain conditions or circumstances which could not have been foreseen at the time of signing of Deposit Development Agreement arise and any or some of clauses of the agreement cease complying to the interest of Mongolia or become detrimental to rights and interest of Mongolia initially meant to protect due to those newly discovered conditions or circumstances, they shall serve grounds for making changes and amendments to this agreement.

Unless categorized as confidential in the related laws of Mongolia, all parts, clauses, changes and amendments of Deposit Development Agreement and further collateral agreements shall be open to the public.

A holder of license who has signed Deposit Development Agreement shall be obliged to provide any information related to its activities permitted by the license, investments and proprietary nature at the period of the agreement to the Government upon its request.

The contents and clauses of Deposit Development Agreement to be established with holder of license shallcomply with this law and other related laws valid at that time.

Reconnaissance

Legal entities may conduct reconnaissance for minerals according to regulation as specified in this law.

Reconnaisance can be carried out in areas prohibited or restricted for prospecting, exploration, mining, processing activities or in a national or local special purpose territoriesas defined in this law, Law on Petroleum and Law on Nuclear Energy.

Disturbing the subsoil in the course of conducting reconnaissance shall be prohibited.

Reconnaissance shall be conducted according to scientific methods, methodology, in specific stages and in a comprehensive manner for the purposes of determining the

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11.5

11.6

11.7

11.8 11.9

11.10

Article 12

12.1

12.2

12.3

12.4 12.5

12.6

prospective area of geological formation, minerals abundance patterns and concentrations.

If the area of reconnaissance is in the ownership or possession of others, the interested party shall have obtained the permission to conduct reconnaissance and access the land from the owner and possessor of the land.

If reconnaissance conducted by state budget funding in an licensed area of prospecting, exploration, mining and processing a notice of trespassing shall be given to the license holder before entering to the area.



Interested legal entity to conduct reconnaissance shall submit its request and provide related information of the area of reconnaissance, its own name, surname, registration number and address of the area and location to State Administration in advance.

State Administration shall receive such request and register the application in conformity to this law and grant permission.

The entity which has obtained the permission to conduct reconnaissance shall be obligated to submit reconnaissance reports, and relevant document copies to the State Administration and such reports and document shall be stored in the national consolidated geology and minerals data base.

Specific rules for conducting reconnaissance and reception of reconnaissance reports shall be approved by the Government.

National consolidated geology and minerals data base

The State Administration shall have a national consolidated geology and minerals data base. The national consolidated geology and minerals data base shall consist of geological database, mineral reserves data base and petroleum data base.

Information related to earth subsoil formation, earth surface character, geological research information, primary documentation, samples, exhibition and pictures of earth and soil and report of reserves determined by prospecting and exploration, and other available information shall be stored in the geological database.

Complex information related to mineral deposit's production reserves, product's standards, technology, mine plan and operation report, production tailings, registration of derivative deposits, assessment of environmental impact, rehabilitation works and other related data shall be stored in mineral reserves database.

Petroleum data base and information to be stored and procedure and rule for storing the information shall be determined by Law on Petroleum.

All data compiled into the national consolidated geology and minerals data base except for confidential as specified in the related laws of Mongolia shall be open for public.

Activities for compiling, registering and extending the data into the national consolidated geology and minerals data base shall be carried out by State

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Article 13

13.1

13.2

13.3

13.4

Article 14

14.1

14.2

14.3

14.4

Article 15

15.1 15.2

Administration Authority according to the rule and procedures approved by the Government.

Taking areas into state reserve

Areas wherein the reconnaissance, prospecting, explorationand assessment of minerals resources were conducted with the fund from state budget may be taken into state reserve for a certain time period upon the decision of Central State Administration.



Areas with certain concentration of mineral resources wherein the reconnaissance, prospecting, exploration works were conducted with the finance from private funds may be taken into state reserve upon the decision of the Government for a certain time period after real expenses for above works have been reimbursed.

It shall be prohibited to accept an application or organize competitive tender selection procedures for granting licenses of the areathat has been taken into state reserve.

If the time period of being reserved in state reservation has expired and the time period has not been extended or authorized Government administrationhas decided to exclude the area from state reserve, the area shall be granted for license only through a competitive tender selection process.

Taking deposits into state reserve

The Government may take all or part of a deposit for a certain time period into state reserve if the deposit was explored and its resources were determined with state budget funding.

If the deposit which had been initially explored and resources has been determined by state budget funding was undergone additional licensed exploration as a result of which its mineral reserves were determined with increased amount, the Government shall reimburse the real expenses to the license holder upon taking the deposit into the state reserve.

State Great Khural may issue a decision and take deposits into state reserves that had been explored and the mineral reserves of which had been determined by finance of private fundsupon reimbursement of real expenses of the license holder.

If the time period of being reserved in state reservation has ceased and the period was not extended or authorized Government administration has decided to exclude the deposit from the state reserve, the license for that deposit holding shall be granted only through a competitive tender selection process.

Taking land granted by license for state or local special use

Land granted by the license for conducting prospecting, exploration or processing may be taken for state or local special use as specified in Law on Land.

If local self-governing authority has made a proposal to take the land granted by license for the local special use the local Governor shall submit the proposal to the

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15.3

15.4 15.5

15.6

15.7 15.8 15.9

Article 16

Government.

If the Government deems the proposal defined in 15.2 of this law as feasible, it shall issue a decision to take all or part of the land granted by the license for local special use.

The State Great Hural shall issue a decision to take a land granted by the license for state special use upon proposal made by the Government.

If a special purpose territory overlaps entirely or in part with a territory covered by a valid license, prohibiting further prospecting, exploration, mining and processing activities in the overlapping area the Government shall make a decision to compensate the license holder along with the decision specified in 15.3 and 15.4 of this law. The reimbursement shall be paid to the license holder within 3 (three) months from the date of the issuance of decision.

The license holder shall cease its work on the area from the date on which the decision had been made to take the land for state or local special use in accordance with 15.3 and 15.4 of this law.

The duration of time for setting the landaside for special use shall not be less than five (5) years.

The State Administrationshall make a public notice within 10 working days after expiry of the duration of time for setting the land aside for special use.



The State Administrative Authority shall record into the license registry the decisions to take the land granted by the license for state or local special use and to compensate the license holder.

CHAPTER TWOState regulation in the mining sector

Authority of the State Great Hural

16.1 The State Great Hural shall exercise the following authority in minerals affairs:

1. 16.1.1 to exclude a deposit from the list of the strategic importance;

2. 16.1.2 to issue a decision to take a deposit explored and determined by private funding into state reserve and in connection with this, to pay the reimbursement to the license holder;

3. 16.1.3 to issue a decision to take a land granted by license for a state special use;

16.2. Clause 16.1 of this law shall not serve the grounds for restricting, in any way, the authority of the State Great Huralenshrined by the Constitution of Mongolia and other laws.

Article 17 Authority of the Government

17.1 The Government shall exercise the following authority in minerals affairs:

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1. 17.1.1 to submit its opinion to exclude a deposit from list of deposits of strategic importance to the State Great Hural;

2. 17.1.2 to establish a Deposit Development Agreement with holder of license for mining in the deposit of strategic importance and processing and marketing of minerals as set forth in the law;

3. 17.1.3 if it deems necessary, to require information from the holder of license for the deposit of strategic importance with regards to licensed mine operation, timely investments according Deposit Development Agreement and proprietorship;

4. 17.1.4 to issue a decision to take area into state reserves wherein the reconnaissance, prospecting and exploration works had been carried out by private funding and in connection with this to determine and pay the reimbursement to the license holder;

5. 17.1.5 to issue a decision to take area into state reserve when the area had been explored and the reserves had been determined by state budget funding;

6. 17.1.6 to discuss the proposal of local authority to take the land granted by license for the local special use and to determine and pay the reimbursement to the license holder if the decision was issued in support of such proposal;

7. 17.1.7 to announce area and tender for granting prospecting, mining, and processing licenses for areas located in State border zones;

8. 17.1.8 to establish a special regime related to mining, processing and transporting and storage of specific types of minerals that may cause harm to the public health and environment;

9. 17.1.9 to approve a procedure to set up a national consolidated geology and minerals data base;

17.1.10 to approve a procedure to monitor the transactions of the special account for depositing the rehabilitation fund;

17.2 17.1 of this law shall not serve the grounds for restricting, in any way, the authority of the Government enshrined by the Constitution of Mongolia and other laws.

Article 18 Authority of the Central State Administration

18.1 The central state administration in charge of geological and mining affairs shall exercise the following authority:

1. 18.1.1 to determine borders and corners of all deposits of strategic importance;

2. 18.1.2 to issue a decision to take land into state reserve wherein the reconnaissance, prospecting, exploration had been financed by state budget;

3. 18.1.3 to approve a procedure for conducting the reconnaissance and submitting and receiving the reconnaissance reports and other related documentation;



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4. 18.1.4 to approve annual plan of reconnaissance, prospecting and exploration works to be funded by the State budget;

5. 18.1.5 to approve jointly with central financial administration the procedure for funding, implementing, receiving upon review of outcomes and calculating the funding expenses incurred for reconnaissance, prospecting, exploration by state funding;

6. 18.1.6 to approve a procedure for evaluation and assessment of the technical equipment and technology used in the prospecting, exploration, mining and processing activities;

7. 18.1.7 to announce an area which will be granted with license for prospecting, exploration and mining activities through competitive tender selection procedure;

8. 18.1.8 to approve a procedure for competitive tender selection procedure for granting licenses to conduct prospecting, exploration and mining activities;

9. 18.1.9 to approve a procedure to determine and demarcate the borders of areas granted by license;

18.1.10 to grant a license for development of Technical and Economical Feasibility Report for mining and processing and mining and processing architecture design;

18.1.11 to develop and approve mining product standards jointly with central state administration in charge of standardization and measurement affairs;

18.1.12 to approve standards and procedures for prospecting, exploration, mining and processing activities;

18.1.13 to make decision on granting, withholding, revoking and renewing the permission for execution of mining and processing related works, and to make other related decisions;

18.1.14 to develop and approve jointly with the central state administration in charge of nature and environmental affairs the procedure to receive the results of the rehabilitation work done on environment and nature affected by exploration, mining and processing activities;

18.1.15 to approve the procedure to register mines and industrial unit for processing and appoint commission for approval of launching the operation of mines and industrial units;

18.1.16 to approve a procedure for emergency elimination of accidents occurred during reconnaissance, exploration, mining and processing activities;

18.1.17 to establish a fund for emergency elimination of accidents and approve a procedure for its functioning;

18.1.18 to approve jointly with the central state administration in charge of labor the procedure for ensuring the appropriate working condition, salary structure,

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occupational health and safety, provisions and supplies to workers employed in mining and processing operations;

18.1.19 to approve the procedure to appoint the members of Professional Council, the rule of operations, salary and bonus payment to the Council members and calculation of business trip expenses as defined in this law;

20. 18.1.20 to appoint the members of Professional Council as stated in this law;

21. 18.1.21 to develop and approve the list of precious metals and precious gem

stones to be registered according to this law, the procedure to determine and register their carats jointly with the central state administration in charge of finance affairs;

18.1.22 to approve a procedure for services for which additional fees shall be paid and determine the additional fees payable for the services;

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18.1.23 to approve a procedure for allocation of professional degrees to workers employed in the geological and mining sector;

24. 18.1.24 to approve a procedure for categorizing the mineral reserves;

25. 18.1.25 other authority as specified in this law;

18.2 Central state administration in charge of nature and environmental affairs shall exercise the following authority in minerals affairs:

1. 18.2.1 to approve standards and minimum expenses of rehabilitation of nature and environment impacted by prospecting, exploration, mining and processing activities;

2. 18.2.2 to develop and approve methodology for determination and assessment of harms and damages to the nature and environment caused by prospecting, exploration, mining and processing activities;

3. 18.2.3 to open a special account to deposit the rehabilitation fund, to monitor its transactions, secure pledges, and reimburse;

4. 18.2.4 to develop and approve the procedure to receive the results of the rehabilitation work on nature and environment impacted by exploration, mining and processing activities jointly with the central state administration in charge of geological and mining affairs;

5. 18.2.5 to develop and approve the procedure for conduct of rehabilitation work by the funds accrued in the rehabilitation expenses fund and by state budget subsidy, and selection of the contractor through the tender selection process;

6. 18.2.6 to grant the right to conduct rehabilitation work;

7. 18.2.7 to review and make conclusion on the rehabilitation work plan submitted by the license holder in accordance with this law;

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8. 18.2.8 to submit specific recommendations to the state administration on the matter of obligating the license holder with nature and environmental protection obligation;

9. 18.2.9 to determine and validate the borders of the territory specified in 5.1 of this law jointly with state administration in charge of land relations affairs;

18.2.10 to submit its opinion for areas to be announced for tender selection procedure in accordance with this law;

18.2.11 to develop a method, a methodology and a procedure for planting ten trees for every cut down tree and foresting

18.2.12 other authority as specified in this law;

18.3 Central state administration in charge of labor affairs shall exercise the following authority in minerals affairs:

1. 18.3.1 to approve the procedure to ensure appropriate working condition, salary structure, occupational health and safety, provisions and supplies to workers employed in mining and processing operations jointly with state administration in charge of geology and mining affairs;

2. 18.3.2 to monitor the adherence of license holders to the prescribed by this law the quota (ratio) of domestic and foreign workers;

3. 18.3.3 other rights specified in this law;

18.4 Central state administration in charge of economic development affairs shall exercise the following authority in mineral affairs.

1. 18.4.1 to develop a comprehensive economic planning scheme on integration of the infrastructure, electricity and urban planning in developing mining activities nationwide;

2. 18.4.2 to review and issue conclusions on the work plan and Technical and Economical Feasibility Report of mining and processing license holders, and to issue recommendations to the license holder on coordination of the prospecting, exploration, mining and processing activities to the regional and local mining Consolidated plan;



3. 18.4.3 to review and if necessary to issue conclusions, recommendations and guidelines on the proposal to change the work plan of the license holder as specified in this law;

4. 18.4.4 to submit proposals and comments to the draft of the Local Development Agreement as specified in this law.

5. 18.4.5 to submit proposals to the tender selection process for granting licenses related to areas, selection criteria, condition and requirements as specified in this law;

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Article 19 Authority of the state administration

Rights and obligations of the state administration

19.1 The State Administration in charge of geological and mining affairs (hereinafter referred to as "State Administration") shall exercise the following authority:

1. 19.1.1 to grant a right to conduct reconnaissance work to legal entities submittedtheir applications according to this law;

2. 19.1.2 to organize and conduct the competitive tender selection process for granting prospecting, exploration and mining license specified in this law;

3. 19.1.3 to grant and revoke the right to conduct minerals prospecting, exploration, mining and processing through application or tender selection procedures specified in this law by a license and to render other decisions related thereto;

4. 19.1.4 to extend license and issue other decisions related thereto;

5. 19.1.5 to transfer, combine, revoke the license and area granted by the license, and to make other decisions related thereto;

6. 19.1.6 to resolve border disputes arising between holders of license;

7. 19.1.7 to maintain a consolidatedregistration database of licenses;

8. 19.1.8 to create and maintain the national consolidateddatabase of geology and minerals;

9. 19.1.9 to appoint the members of Professional Councilin consistent with procedures approved by state central administration and approve the procedure of theProfessional Council's functioning;

19.1.10 to evaluate and assess the technical equipment and technology used in reconnaissance, prospecting, exploration and processing according to the approved methodology and procedure;

19.1.11 to approve plan of works to be completed according to the reconnaissance, prospecting, exploration and processing license;

19.1.12 to make a decision on whether to accept the Technical and Economical Feasibility report;

13. 19.1.13 to make a decision on whether performed high grading mining;

14. 19.1.14 to provide advise, guidelines, and conclude technical and technological review in

the course of building mines and industrial unit for processing in relation to the implementation of the rights and obligations of the of the holder of prospecting, exploration, mining and processing license holder;

19.1.15 to issue certificates of origin for mined, processed, purchased, sold and reprocessed minerals and mineral products by holders of mining and processing license;

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19.1.16 to approve the sample form to be filled by private or legal entities used precious metals and stones for manufacturing of products or purchased them for such purposes;

17. 19.1.17 to grant, revoke, renew work authority and to issue related decisions thereto;

18. 19.1.18 to provide the relevant information other than that categorized as confidential as



specified by this law to interested party;

19.1.19 to make consolidated review on the prospecting, exploration, mining and processingof minerals in conjunction with the State specialized inspection agency;

19.1.20 other rights specified in this law;

19.2 The state administration in charge of planning shall exercise the following authorities in minerals affairs:

1. 19.2.1 to develop a comprehensive planning scheme on coordination the infrastructure, electricity and urban planning in developing mining activities nationwide;

2. 19.2.2 to review and issue conclusions on the work plan and Technical and Economical Feasibility Report of mining and processing license holders, and to issue recommendations to the license holder on coordination the prospecting, exploration, mining and processing activities to the regional and local mining Consolidated plan;

3. 19.2.3 to review and if necessary to issue conclusions, recommendations and guidelines on the proposal to change the work plan of the license holder as specified in this law;

4. 19.2.4 to submit proposals and comments to the draft of the Local Development Agreement as specified in this law.

5. 19.2.5 to submit proposals to the tender selection process for granting licenses related to areas, selection criteria, condition and requirements as specified in this law;

19.3 State administration in charge of land relations affairs shall exercise the following authority.

1. 19.3.1 to submit proposals to the tender selection process for granting licenses related to area, selection criteria, conditions and requirements;

2. 19.3.2 to issue and update constantly cohesive cadastral maps of Mongolian land owned or possessed and utilized according to agreements for land possession and utilization and deliver them according to approved procedures to state administration;

3. 19.3.3 to determine boundaries of areas as specified in article 5.1 of this law jointly with state administration in charge of nature and environment affairs;

19.4 State administration in charge of special protected places shall exercise the following authority in mineral affairs.

19.4.1 to conduct research and investigation based on the license holder's notification of the discovery of archaelogical, paleontological findings and historical and cultural heritagesin

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the course of prospecting, exploration, mining and processing activities to the local and State Administration, and to take it into state protection;

2. 19.4.2 to resolve the matter of taking the archeological, paleontological findings, historical and cultural hertitages as specified in 19.4.1 of this law into maintenance and custody based on the agreement entered into with individuals and legal entities;

3. 19.4.3 to submit proposals related to areas, selection criteria, condition and requirements of the tender selection process for granting licenses as specified in this law;

Article 20 Authority of the Local Self-Governing authorities and Local governments

1. 20.1 The local self-governing authority shall exercise the following authorities in minerals affairs:

1. 20.1.1 to prohibit the exploration, mining and processing activities wholly or partially on its land not granted by license for purposes of maintaining the balance of historical and cultural heritaged and findings or environmental ecological balance;

2. 20.1.2 to propose to the Government through c entral state adminsitration to take the license area under exploration, mining and processing activities as specified by this law for local special use;

3. 20.1.3 to discuss and makerelated decision upon receiving the notification of area for announcement of competitive tender selection submitted by the State Administration as specified in this law;



4. 20.1.4 to enter into Cooperation Agreementwith exploration license holder and the Local Development Agreement with the mining and processing license holder and to demand from the license holder to enter into agreement within the time period as specified in this law;

5. 20.1.5 to participate in and cooperate in the work of the Commission to receive the results of the rehabilitation work;

6. 20.1.6 to make proposal to the rehabilitation work plan of the license holder as specified in this law;

2. 20.2 The local administration shall exercise the following authorities in minerals affairs:

1. 20.2.1 to allow the use of land for the purpose granted by the license within the territory, and to terminate such use in case of violation;

2. 20.2.2 to monitor the implementation of the license holder of its obligations to protect and conduct rehabilitation of the environment, protect the public health and depositing fees in the local budget and obligations pertaining to the Coorperaion and Local Development Agreements;

20.3. It shall be prohibited for the local self-governing authorities and local governments to make the following demands to the license holder:

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20.3.1. to demand any investment not specified in the Local Development Agreement;

20.3.2. to demand any donations and assistance and funding for purposes other than - humanitarian purposes;

20.3.3. to demand fund for financing the political activities;

CHAPTER THREE Licenses

21. Rights granted by licenses

21.1 The license granted by the State Administration through procedures specified by this law shall entitle the license holder to conduct activities specified in this law upon fulfillment of the conditions and requirements as defined in this law.

21.2 The license certificate shall be granted to holder upon issuance of the decision to grant such license by the State Administration.

Article 22. Main conditions for granting of license

1. 22.1 By granting of a license for prospecting, exploration, mining and processing purposes through competitive tender selection procedure or upon application each of the following criteria shall be assessed thoroughly and licenses shall be granted to alegal entitywhich has best fulfilled the conditions and requirements specifiedbelow:

1. 22.1.1 Tentative plan of prospecting, exploration, mining and processing activities requested for authorization by the license;

2. 22.1.2 environmental rehabilitationtentative work plan;

3. 22.1.3 financial possibility and capacity guarantee of implementing the plans specified in 22.1.1 and 22.1.2 of this law;

4. 22.1.4 whether the amount of reserve and evaluation of the deposit determined by the exploration work and approved by the relevant authority is sufficient to cover the extraction expenses, rehabilitation works and mine closure expenses;

5. 22.1.5 capacity, experience of the applicant to conduct prospecting, exploration, mining and processing activities, its professional human resources;

6. 22.1.6 history, current status and further motivation and capacity of implementing laws, rules and procedures related to geology and mining activities, by citizens and legal entities respectively;

2. 22.2 whether the requesting legal entity, its executive management, members of board of

directors and its equivalent entity have been involved in conducting prospecting, exploration, mining and geological and mining activities or have been holders of licenses, if so, their past records in fulfilling their legal obligations as recorded in the speical permission database

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Article 23.Prospecting license

1. 23.1 Prospecting license will be granted for the areas announced by state administration in charge of geology and mining affairs only through a competitive tender selection procedure.

2. 23.2 The holder of prospecting special license shall be entitled to carry out mineral prospecting in licensed area only after having complied with all conditions and requirements as defined in this law.

3. 23.3 Area granted by prospecting license shall be at least 150 ha but no more than 250000 ha.

4. 23.4 If necessary state administration may announce competitive tender selection procedures for granting of prospecting licenses for smaller areas than postulated in 23.3 of this law.

5. 23.5 Prospecting licenses shall be granted for the period of up to 4 years.

6. 23.6 The Number of prospecting licenses to be granted to one legal entity shall not be more than 5.

7. 23.7 Holder of prospecting license for certain area who has complied the conditions and requirements of this law has a privileged right to obtaining the exploration license upon its submission of the application for such license.

Article 24.Exploration license

1. 24.1 Exploration license shall be granted according to following principles:

1. 24.1.1 if holder of a prospecting license meets the conditions and requirements specified by this law and submits application for an exploration license, the exploration license shall be granted over the area covered by the prospecting license;

2. 24.1.2 Exploration license for area taken into state reserve or not granted with license can be granted to economic entity with state ownership and state ownership participation without announcing and conducting competitive tender selection.

3. 24.1.3 in all other cases except specified in 24.1.1 of this law, exploration license shall be granted through competitive tender selection procedure over the area announced by state central administration in charge of geology and mining affairs;

2. 24.2 Upon fulfillment of the conditions and requirements specified by this law, the exploration license holder shall have the right to conduct prospecting and exploration work on the land covered by the license.

3. 24.3 The area to be granted by exploration license shall be no less than 25 hectares and no more than 12 000 hectares.

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4. 24.4 Exploration license shall be granted only one time for period of up to 5 years.

5. 24.5 The number of exploration licenses to be granted to one legal entity shall not be limited.

6. 24.6 Holder of the exploration license who meets the condition and requirements of this law shall have privileged right to be granted a mining license for area covered by the exploration license if it has submitted the application.

Article 25.Mining license

1. 25.1 Mining license shall be granted according to the following principles:

1. 25.1.1 if holder of an exploration license meets the conditions and requirements specified by this law and submits application for a mining license, the mining license shall be granted over the area covered by the exploration license;

2. 25.1.2 Mining license for area taken into state reserve or not granted with license can be granted to economic entity with state ownership and state ownership participation without announcing and conducting competitive tender selection

3. 25.1.3 in all other cases except specified in article 25.1.1 of this law,mining license shall be granted through competitive tender selection procedure over the area announced by central stateadministration in charge of geology and mining affairs;



2. 25.2 Upon fulfillment of the conditions and requirements specified by this law, the mininglicense holder shall have the right to conduct mining activity on the land covered by the license, in addition to the following rights:

1. 25.2.1 to conduct prospecting and exploration works on the area granted by the license;

2. 25.2.2 to construct mine, other buildings and facilities necessary for the extraction activities on the area granted by the license;

3. 25.2.3 to construct commercial infrastructure necessary for extraction acitivities on the mine tenure;

4. 25.2.4 to create derivative deposit and industrial wasteapproved by Technical and Economical Feasibility Report and to separate minerals from the derivative deposit and industrial waste created in the course of the mine;

5. 25.2.5 to conduct transportation of minerals extracted, and construct buildings and facilities designated for loading and unloading;

3. 25.3 The area for extraction of salt and other common minerals shall be no less than 100 meters on each side, the area for extraction of other minerals shall be no less than 500 meters in length on each side.

4. 25.4 The mining license shall be granted for a period of up to 20 years.

5. 25.5 The number of mining license to be granted to one legal entity shall not be exceeded to five.

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Article 21. Processing license

1. 26.1. Processing license shall be granted according to the following principles:

26.1.1.processing license can be granted to a interested legal entity who submits application for a processing license and meets the conditions and requirements specified by this law;

26.1.2. processinglicense may be granted through a competitive tender selection procedure;

2. 26.2. The processinglicense holder shall have the right to conduct processing activity, in addition to the following rights:

26.2.1. topossess and use land for industrial purpose;

26.2.2.to construct industrial unit for processing and other buildings and facilities necessary for the processing activities on the area granted by the license;

26.2.3.to construct commercial infrastructure necessary for processing activities and industrial unit for processing;

26.2.4. to conduct transportation of raw materials and processed products, and construct buildings and facilities designated for loading and unloading;

3. 26.3. The period of processing license shall be set by the State Administration in consideration of the Technical and Economical Feasibility Report and the capacity of the industrial unit for processing.

4. 26.4. The number of processing license to be granted to one legal entity shall not be limited.

5. 26.5. The area granted for industrial purposes according to the processing license shall not overlap in any way with the land prohibited to conduct prospecting, exploration, mining and processing activities thereon, and with areas granted by valid licenses.

6. 26.6. In all cases except set forth in 26.7 of this law, issues regarding possession and utilization of land for industrial purpose shall be regulated by land possession and utilization agreement as specified in the Land Law of Mongolia.

7. 26.7. If the holder of a mininglicense has applied for a processing license, the processing license may be granted on the area of extraction license in consideration of the applicant's preferences. In this case land possession and utilization agreement shall not be required to be made.

27. Validity of the license

1. 27.1. License shall be valid for the entire period initially granted for or within the period extended



thereon.

2. 27.2. The period of the license will cease in the following cases:

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27.2.1. license holder has returned the licensed area before expiry date as defined in this law;

27.2.2. decision made by related authority to take the licensed area for purpose of special national and local use and to reserve mineral deposit as set forth in this law;

27.2.3. the period of a license has expired and has not been extended;

27.3. License shall not be revoked on the grounds that are not specified in this law.

Article 28. Period of renewalof license

28.1. Period of the prospecting and exploration licenses shall not be renewed.

28.2. The State Administration may extend the period of the mining license twice, up to 20 years each time considering the reserve of the deposit.

28.3. The period of extension for processing license shall be determined by the State Administration based on the Technical and Economical Feasibilty Report of the production activities.

Article 22. Renewal of the license

1. 29.1. State Administration shall notify on the expiration of the license 45 (forty five) days prior to the actual expiration date to the license holder as per the approved procedure.

2. 29.2. The license holder shall submit its request to renew the period of the license within no less than 15(fifteen) days before the expiry as provided in this law.

3. 29.3. The State Administration shall refuse to accept requests to renew the licensewhich had not been submitted within the period as specified in 29.2 of this law.

4. 29.4. If the license holder has submitted its request for renewal of license in the period specified in 29.2 of this law, the license shall remain valid until such time when the state adminsitration shall issue its decision on whether to renew the period or reject the request.

5. 29.5. The State Administration shall refuse to renew the license period in the following cases.

29.5.1. the license holder did not or does not fully meet the conditions and requirements specified in Articles22 and 66 of this law;

29.5.2.obligations arising out of the permitted work plan,Technical and Economical Feasibility Report and approved Work plan have not been performed;

29.5.3. exhaustion of the reserve at the deposit;

6. 29.6. The State Administration shall renew the license period in cases other than specified in 29.5 of this law.

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7. 29.7. The renewed period of the license shall be counted from the date of expiry of the initial period of the license.

8. 29.8. The State Administration may issue the following decision in addition to the extension of the license.

29.8.1. the renewal of the license to be enforced on fulfillment of certain conditions;

29.8.2. to reduce the area granted by the license in renewing the period;

9. 29.9. If the license holder has not submitted its request for licenserenewal within the period specified in 29.2 of this law, or, the conditions to refuse renewal of the license have arisen, the State Administration shall immediately notify other persons the interests of whom are affected by the license, and which are registered in the license registration.



Article 30 Partial transfer of area granted by mining license

1. 30.1. It shall be prohibited to partially transfer the areas granted by exploration, mining and processing licenses.

2. 30.2. The license holder may transfer a part of the area granted by a mininglicense to others in the following cases.

30.2.1. the transferee is a holder of an extraction license; and

30.2.2. the area being transferred geographically borders that of the tranferee;

3. 30.3. The State Administration shall be obligated to notify third parties the interests of which are being affected by the request to partially transfer the area granted by license in the following cases.

30.3.1.pledge agreement related to the license has been registered in the special permisssion registration database;

30.3.2. agreement creating non-material property rights, joint ownership of interests, or transfer of interest percentage has been registered in the license registration database;

4. 30.4. The agreement on transferring part of the area shall be valid upon registration thereof in the license registration database of the State Administration.

5. 30.5. If the person has not fully met the conditions and requirements specified in 30.1 of this law, the State Administration shall not register the agreement on transfer of partial area.

6. 30.6. The area transferred shall be registered in with the transferee's area in the cartographic and license database; a separate license shall not be granted for the area transferred.

7. 30.7. The transferee taking the partial land shall be responsible for re-demarcating the cornerpoints and border coordinates and reflecting and obtaining the approval for the relevant changes in the extraction work plan and Technical and Economical Feasibility Report.

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30.8. With the agreement entering into validity, the following shall occur:

30.8.1. the obligations of the transferor with respect to the transferred area specified by law and imposed by the license from the State Administration shall be revoked;

30.8.2.the transferee shall be imposed the obligations with regards to the land transferred, specified by laws and imposed by the state admnistration at the time of issuing the license;

Article 31 Amalgamation of the licensed area

1. 31.1. Areas granted by exploration, prospecting and processing licenses shall not be subject to amalgamation.

2. 31.2. By notifying the license holder in advance, State Administrationmay issue a decision to amalgamatetwo or more areas that geographically border each other and granted to the same person.

22.3 The valid period of time for amalgamated licensed areas shall be defined by period of time of the most recent license granted as stated in 31.2 of this law.

Article 32. Returning the area wholly or partially

32.1 The holder of the license may submit its request and wholly or partially return the area according to the procedure approved by the State Administration.

32.2 Proof of rehabilitation obligation performance and certification of completed rehabilitation shall be attached to the request to wholly or partially return the area.

32.3 The State Administration shall issue one of the following decisions upon review of the proof specified in 32.2 of this law within 30 (thirty) days since the receipt of the request specified in 32.1 of this law.

1. 32.3.1 based on the certification of rehabilitation work, to receive the area and register it in the cartographic and license registration database;

2. 32.3.2 if no rehabilitation has been done, or the rehabilitation work was not done appropriately, the obligation to complete rehabilitation within a set time shall be imposed, or, to receive the land and



have the full compensation for rehabilitation work expenses borne by the license holder and registration thereof shall be done in the license and cartographic registration database;

32.4 If the decision of the State Administration specified in 37.3.2 of this law has been issued, the obligations and responsibilities related to the rehabilitation of the nature and environment shall remain valid after the license holder has wholly returned the area until such time that they are performed.

32.5 In case of partial return of a prospecting area the remaining area shall fulfill the requirements set in 23.3, in case of exploration area, the remaining area shall fulfill the

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requirements set in 24.3 of this law, and in case of partial return of amining area, the remaining area shall fulfill the requirements set in 25.3 of this law.

32.6 The State Administration shall notify relevant authorities on the receipt of the whole or partial area and inform the public.

Article 33.Transfer of license

1. 33.1 It shall be prohibited to transfer a prospecting license.

2. 33.2 It shall be prohibited to transfer exploration license within one year of its initial issuance

and any agreement entered into for its transfer in that period shall be invalid.

33.3 Except for the case specified in 33.1 and 33.2 of this law, the license may only be transferred by Assignment of rights agreement in accordance with this law and other procedures approved conformity therewith.

33.4 Holder of the license shall notify State Administration of the intention of the transfer no less than 30 (thirty) days prior to conclusion of the agreement on such transfer.

33.5 A state-owned legal entity that is holding the license for geological and mining activities shall have the privilidged right to obtain the license on anassignment of rights agreementby the price amount.

33.6 If the transferee has not fully met the conditions and requirements specified in Articles 22 and 66 of this law the State Administration shall not register the agreement to transfer the license thereto.

33.7 The agreement on transfer of license shall be valid upon registration by the State Administration in the license registration database.

33.8 If the State Administration has received request to transfer the license, it shall be obliged to inform third parties the interests of which are affected in the following cases.

1. 33.8.1 pledge agreement related to the license is registered in the license registration database;

2. 33.8.2 agreement to create interests, jointly own interest and transfer the interest percentage on the non-material property rights created by the license is registered in the license registration database;

33.9 Upon registration of the license transfer agreement by the State Administration, all rights and obligations of the license holder shall be transferred to the transferee.

34 Article 34 Pledge of license

1. 34.1 The license may be on pledge.

2. 34.2 The holder of the license shall submit its request to register the pledge agreement of the

license to the State Administration in the license registration database.

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34.3 Upon receipt of the request to register the license pledge agreement, the State Administration shall notify other persons the interests of which are affected in relation to the license registered previously in the license registration database.

34.4 The State Administration shall register the request specified in 34.2 of this law within 3 working days in the license registration database and issue a certification of such registration to the license holder.



34.5 The license holder shall submit its request to remove the license pledge registration from the license registration database after the termination of the pledge agreement.

34.6 The State Administration shall register the termination of the license pledge agreement in the license registration database upon the proof of the obligation fulfillment by the pledgee with respect to the underlying pledge agreement.

34.7 If the license holder has failed to perform its obligation under the agreement, the pledgee shall submit its request to to the State Administration to .transfer the license to other persons

34.8 If the transferee person suggested by the pledgee does not fully meet the requirements and conditions defined for a license holder as specified in this law, the State Administration may refuse the request to transfer the license.

34.9 The pledgee of the license shall not bear any obligations related to the license.

34.10 The State Administration shall not bear any obilgations to ensure the fulfilment of the license pledge agreement.

35 Article 35 Creating interest in the non-material property rights created by the license

35.1 By issuance, registration and performance of the obligation imposed, the license shall create non-material property rights for the holder.

35.2 The non-material rights created by the license shall serve as the guarantee to perform rights and obligation created by the license solely for the holder of the license.

35.3 For the purposes of accessing its fruition, other persons may create interest in the non- material rights of the license in the following ways.

35.3.1 investing;35.3.2 co-operating;35.3.3 completing contract works;

35.4 Agreements creating interest and directed at transferring the interest percentage in the non-material rights of the license shall be made according to the conditions and requirements approved by the State Administration and shall become valid upon registration at the State Administration according to this law.

36 Article 36 Revoking of license

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36.1 The State Administration may revoke the license on the following grounds.

1. 36.1.1 the license holder did not or does not fulfil the conditions and requirements set by Articles 22 and 66 of this law;

2. 36.1.2 relevant state authority has inspected and found that thelicense holder did not or does not fulfil the obligations under other permissions granted by relavant state administration and has thereof notified the State Administration to revoke the license;

3. 36.1.3 it has been confirmed by the State Administrationthat the license holder has mined in the high grade area;

4. 36.1.4 the authorized specialized inspector has submitted conclusion, and recommendations on revoking the license as specified in 144.3 of this law;

5. 36.1.5 the exploration license holder has not started exploration activities within the period specified in 93.5.1 of this law since the date of obtaining the Work authority;

6. 36.1.6 the mininglicense holder has not submitted its request to obtain Work authority within 12 (twelve) months since the decision has been issued to grant a mininglicense;

7. 36.1.7 the mininglicense holder has not started extraction works within timeframe stated in 94.5.1 of this law since the date of issuamce of the Work authority;

8. 36.1.8 the State Administration has revoked the Work authority for a specific period of time in accordance with 96.1 of this law, and the permission to conduct contracted works have not been restored for 6 (six) months since the date on which the license was revoked for failure to fulfill the requirements or perform the imposed obligations or eliminate the violations within the period;



9. 36.1.9 relevant authorities have determined that the activities of license holder may have created the conditions may have arisen as a result of that are harmful, hazardous to the licensed area, employees at the site, persons working nearby and citizens and inhabitants living in the environment;

36.1.10 the license holder has failed to pay the license fees within the specified period as specified in this law;

36.1.11 if the reimbursement and penalty have not been paid within 30 (thirty) days since the receipt of the notification by the State Administrationas to fulfilment of the obligations under the agreement to pay reimbursement in accordance with 110.6 of this law;

36.1.12 if liabilities as specified in 145.2 and 145.3 of this law have been imposed;

36.2 If the State Administrationdeems one of the grounds has emerged in accordance with 36.1 of this law, the State Administration shall immediately notify the licence holder and, other persons the interests of whom are affected by the license, and which are registered in the license registration.

36.3 If the license holder does not agree with the grounds specified inthe notification, it shall submit its clarification with the relevant proof and materials to the State Administrationwithin 30 (thirty) days since the receipt or date considered as receipt date. If the license holder

26



has not submitted its documents within this period the State Administration shall revoke the license.

36.4 The State Administration shall review the clarification, evidence and materials submitted within 30 (thirty) days and maintain the license valid if it deems such documents are well- grounded.

36.5 If the State Administration deems the clarification, evidence and material submitted by the license holder as groundless it shall issue a decision to revoke the license within the period specified in 36.4 of this law.

Article 37. Informing the public

37.1 If the State Administration has issued a decision regarding the announcement of tender for license granting, receipt of the application for a license, granting a license, extending the license, change in the size of the area granted by license, and revoking the license, it shall inform the public of the following within 5 working days since the decision has been issued through its own website and the media.

.

1. 37.1.1 the area size, location and type of license specified in the application for license;

2. 37.1.2 if the area size has been changed, the area and location of the area, period of license;

3. 37.1.3 extension period of license if any;

4. 37.1.4 area size, location of area and type of license when the decision was made to revoke or

license holder returned all of the area granted by license;

CHAPTER FOURTender selection to grant license

38 Article 38 Announcement of the area to be granted by tender

1. 38.1. Central State Administration shall announce the area to be granted through tender in the first week of February every year.

2. 38.2. Central State Administration shall have obtained the proposals of the relevant local self governing authority in announcing the area to be granted through tender, according to the procedure specified in article 39 of this law.

3. 38.3. Central State Administration shall have obtained comments of the state agencies in selecting the area to be granted through tenderfor that particular year according to the article 40 of this law.

4. 38.4. Central State Administration may have obtained proposals from legal entities in selecting the area to be granted through tenderfor that particular year.

5. 38.5. Central State Administration may announce tender selection processes for the following areas:



38.5.1. areas not granted by license and not applied for any license; 38.5.2. areas released due to the invalidation of the license;

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38.5.3. areas released due to the revocation of the license;38.5.4. areas which have been released due to the return by the license holder; 38.5.5. areas released from the state and local special use;38.5.6. for areas released from the state reserve;

6. 38.6. Central State Administration may announce the area to be granted through the tender as specified in 38.5.2-38.5.6 of this law as integrated or segregated.

7. 38.7. Central State Administration may announce tender for the areas that have been amalgamated or the same area that has been divided in accordance with 38.5.2-38.5.6 of this law.

8. 38.8. Central State Administration shall not announce tender for the areas on which prospecting, exploration, mining and processing activities are prohibited, or the areaswhich have been taken for state reserve or state and local special use.

9. 38.9. Central state administration shall not re-announce tender for the area when conditions as defined in 59.2 of this law have arisen and in the duration of 90 days during which applicant shall nominate another entity.

10. 38.10. The area to be announced for tender to grant prospecting exploration, mining and processing license shall have a tetragon shape the border of which shall be marked by straight lines, overlapping with the lines of longitude and latitude.

11. 38.11. The parts bordering with the following areas and territories may be non-straight line for purposes of avoiding the overlapping.

38.11.1. state border;

38.11.2. areas prohibited or limited to conduct prospecting, exploration, mining and processing activities thereon;

38.11.3. areas taken state reserve and state and local special use;

38.11.4. natural formation such as lakes and ponds considered not possible to be integrated into the prospecting and exploration area;

Article 39. Obtaining proposal from local self governing authority

1. 39.1. The State Administration shall have obtained the proposals from the relevant local self-governing authority in announcing the area for tender selection process, according to the procedure specified in this article.

2. 39.2. The central state administration shall notify the relevant local self-governing authority of areas to announce the tender in following manner:

39.2.1. to notify the relevant soum or district CitizensRepresentativeKhuralif the area requested by the license is in one soum or district territory;

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39.2.2. to notify each soum or district CitizensRepresentativeKhuralif the area requested by the license overlaps 2 or more soum or districts territories;

3. 39.3. The local self governing authority shall make a decision supporting or rejecting the announcement of area for tendering within 30 (thirty) days since the date of the receipt of the notification by the state central administration as specified by 39.2 of this law.

1. 39.3.1. if the decision is to reject the announcement, the grounds for such rejection shall be specified clearly in the decision;

2. 39.3.2. the local self-governing authority shall submit through certified post its decision to the state central administration within 21 days as specified in 39.3 of this law;



3. 39.3.3. If the local self-governing authority has not responded to the notification of the state central administration within the period specified in the law, it shall be deemed that announcement of the area for tendering has been supported;

4. 39.4. If the relevant local self-governing authority has rejected the state central administrative authority's proposal to announce area for tendering, the tender selection shall not be announced. Furthermore, the area shall not beannounced for tendering for the period of 4 years, since the date of decision of rejection by local self-governing authority.

Article 40. Obtaining comments from state agencies

1. 40.1. Before announcing the tender, Central State Administration shall obtain comments from following state agencies regarding the area applied for tendering and the license type to be granted through tender.

40.1.1. Central state administrationin charge of nature and environmental affairs; 40.1.2. Central state administration in charge of urban planning, and infrastructure; 40.1.3. Central state administration in charge of land relations;

2. 40.2. Notification on announcing the area to be tendered for mining and processing licenses shall be submitted to the administrations as specified in 40.1 of this law as well as thecentral state administration in charge of economic development.

3. 40.3. If state agencies as defined in 40.1 and 40.2 of this law have particular comments regarding the area applied for tendering, they shall submit its comments to the central state administration within 21 (twenty one) days following the date of receipt of the notification. In that case state central administration shall discuss with that particular state agency on comments raised.

Article 41. Announcing the area for tender on land in ownership, possession andutilization by others

41.1. The State Administrationmay announce the area for tender on land owned by citizens, possessed or utilized by others based on the permission of the land owner and possessor in cases other than those rejected by the relevant soum or district Governor as specified in the "Law on Allocation of Land to Mongolian Citizens for Ownership.

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Article 42. Announcing the area for tender to grant license with the national border zone

42.1. Area for tender and license to grant prospecting, exploration, mining and processing licensewithin the border zone shall be announced by the decision of the Government.

42.2.

42.3.

Applicant which has met the conditions and requirements as specified in Article 22 and 66.4 of this law shall be entitled to participate in tendering for the area for license granting within national border zone. .

The Governmentmay imposeexclusive control regime for prospecting, exploration, mining and processingactivitieswithin the national border zone.

Article 43. Announcing the tender to grant license

1. 43.1. State Administration shall announce the date of the tender to the public through daily newspapers within 14 (fourteen) days after the announcement of the area for tendering by the state central administration.

2. 43.2. The announcement on conducting the tender shall contain information as specified in this law and in the procedure approved by the state administration on the conditions and requirements of the tender, and shall be deemed invalid if the relevant information is not specified.

43.3 An area where minerals concentration has been detected as a result of reconnaissance and prospecting works funded by state budget shall be announced for tendering a license only for exploration activities.

43.4. An area where minerals reserves have been determined as a result of the exploration funded by the state budget shall be announced for tendering a license only for mining activities.

Article 44. Announcing of the tender to grant exploration and mining license for derivative deposits and industrial waste



1. 44.1. For the purpose of rehabilitating the environment, the state administration may announce the tender for exploration and mining license for derivative deposits and industrial wastes on the land which has been used before the adoption of this law and which has not been licensed during the adoption of this law.

2. 44.2. In announcing area for tender to grant exploration and mining license in derivative deposits and industrial waste site as defined in 44.1 of this law, there shall be no requirement to take comments and proposals as stated in 39, 41.1.2, 41.1.3 of this law.

3. 44.3. Exploration license holder in derivative deposits and industrial waste may have been exempted from a license fee and mining license holder in derivative deposits and industrial waste may have been exempted from the mining royalty in line with 44.1 of this law.

Article 45. Obtaining the comments from state agencies

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Article 46. Objecting the tender announcement

1. 46.1. Any entity shall have the right to object the announcement of the tenderin following manner:

1. 46.1.1. An entity which is making the objection to the announcement of the tender shall submit to state administration its statement in writing by which the grounds for objection have been clearly noted.

2. 46.1.2. The entity objecting the announcement of the tender shall submit the objection statement within 14(fourteen) days since the central state administration has publicly announced the area for tendering for license granting by the state central administrative authority.The entity bjecting the announcement of the tender shall issue the object within

2. 46.2. If the State Administrationis convinced that the objection has been well-grounded, it may not announce the tender.

3. 46.3. The State Administration shall ensure that objection statement and objection grounds have been accessible and open to the public and any interested entity until until the final decision shall be issued whether to grant or reject the request for license.

Article 47. Right to submit the application for participation in tender

47.1. Any entitywhich meets requirements and conditions as defined in this law and thereof eligible to hold a licenseshall have the right to participate in tender.

Article 48. Receiving the applications for participation in tender

1. 48.1. The starting date of receiving application to participate in tender shall be no less than 30 (thirty) days following the announcement of the tender and the deadline shall be no less than 14 (fourteen) days following the starting date.

2. 48.2. When receiving an application for tender the State Administration shall register the application and documents attached to the application in the primary application registry, record the number, date, hour and minute of the registration on each page of the application and attached documents to the application and issue the notification to the applicant that the application has been registered.

3. 48.3. Any other procedure regarding the application and receiving of the tender applications shall be regulated by the procedure approved by the central stateadministration.

4. 48.4. List of documents which have to be attached to the applicationshall be announced from time to time, by the State Administration.

5. 48.5. State Administration shall refuse to accept the application for tender if it does not fully comply with the conditions and requirements set out by this law and the procedure approved by central state administration as to submitting the applications for tender participation.

Article 49. Evaluating tender documents

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1. 49.1. The criteria to evaluate the tender applications shall be announced by state administration beforehand and the following conditions shall be evaluated at every tender selection.



1. 49.1.1. conditions to grant license specified in articles 22 and 66 of this law;

2. 49.1.2. proposal to voluntarily increase the mining royalty rate;

3. 49.1.3. proposals regarding the conditions to develop the agreements on Cooperation and Local development set forth in 86.1 and 86.2 of this law;

4. 49.1.4. proposal to voluntarily increase the rate of reimbursement for the exploration expenses, incurred to the participant to tender for granting mining license for the deposit, where exploration and reserve determination was funded by the State budget and registered in the national consolidated registration.

2. 49.2. The State Administration shall, upon consideration of the conditions and critera specified in 49.1 of this law, announce the participant which has gained the highest score as a winner of the tender.

3. 49.3. Participant which has failed to meet the main conditions and requirementsas defined in 49.1.1 of this law shall not be announced as a winner of the tender.

Article 50. Announcing the tender winner

1. 50.1. If the State Administration has selected the winner of the tender process, it shall immediately inform in written form the winner and the other participants of the tender.

2. 50.2. While informing the other participants which have not been selected in the tender, state administration shall clearly note the grounds for why they haven't been selected.

3. 50.3. The winner of the tender selection procces shall inform the State Administration in writing of its acceptance within 14 (fourteen) days since the receipt of the notification as defined in 50.1 of this law.

50.3.1. State Administration shall notify in writing the following administrations about the selection of the tender winner: .

50.3.2. local governments and local self governing authority in the territory wherein the area is to be granted with license;

50.3.3. central state administration in charge of nature and environmental affairs;

50.3.3. state administration in charge of land relations;

50.4. In addition to the administrations as specified in 50.3 of this law, the central state administration in charge of economic development shall be notified about the winner of tender for granting mining and processing licenses

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50.5. The State Administration shall inform the public of the information regarding area granted by license based on a tender, type of special pmierssion and the winner of such tender within 7 (seven) days since the date of issuance of such decision.

Article 51. Cases whereby tender winer has not been selected

1. 51.1. The State Administrationy may select none of the participants in the tender on the basis of the grounds as specified in49.3 of this law.

2. 51.2. In case whereby no winner has been selected in the tender, the State Administration may or may not re-announce the tender specific to the area

3. 51.3. If the State Administration has deemed impossible to select a winner in the tender in accordance with 51.1 of this law and has issued a decisionin concurrence with 51.2 of this law, the participants of the tender shall be immediately notified in writing.

Article 52. Granting license to the tender winner

1. 52.1. If the applicant has fulfilled its obligation as specified in 52.3 of this law State Administrationshall issue a decision to grant the license and thereof grant a license certificate to the tender winner after 30 (thirty) days since the date on which the winnerwas publicly announced in concurrence with this law and according to the following principles:

52.1.1. to grant prospecting license to the winner of the tender for prospecting license; 52.1.2. to grant exploration license to the winner of the tender for exploration license; 52.1.3. to grant mining



license to the winner of the tender for mining license;52.1.4. to grant processing license to the winner of the tender for processing license;

2. 52.2. It shall be prohibited to grant license for persons other than the winner of the tender selection on the area announced for tender;

3. 52.3. The tender winner shall pay the initial year license fee and other fees payable in advance within the time specified in Article 85 of this law and other relevant laws after the State Administration has announced the tender winner.

4. 52.4. In cases whereby the tender winner has not notified the state administration about its acceptance of the result of the tender and has not paid the initial year and other advance fees within the specified period, these shall serve grounds for not granting the license and cancelling the tender result.

5. 52.5. The date of issue, name of holder, size of granted area, and the cornerpoint coorindates shall be recorded on the license certificate and the license shall be accompanied with attachment to reflect the changes to be made in relation to the license.

6. 52.6. The State Administration shall notify the following agencies about granting the license within 3 working days since the license certificate has been granted to the license holder and thereof registeredin the register of licenses.

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52.6.1. the relatedlocal government;52.6.2. state administration in charge of taxation matters, 52.6.3. specalized inspection agency;

CHAPTER FIVEGranting a license through application

Article 53. Right to submit an application for license

53.1. The following legal entitiesshall be entitled to apply for license.53.1.1. a legal entitydefined in 24.1.1 of this law to apply for exploration license; 53.1.2. a legal entitydefined in 25.1.1 of this law to apply for mining license; 53.1.3. a legal entitydefined in 26.1.1 of this law to apply for processing license;

Article 54. Receiving the applications for license

1. 54.1. Upon receiving the application for license the State Administration shall register the application and documents attached to the application in the primary application registry and record the number, date, hour and minute of the registration on each page of the application and attached documents to the application and issue the notification to the applicant which confirms the registration of the application.

2. 54.2. List of documents which have to be attached to the application shall be approved by the State Administration.

3. 54.3. The State Administration shall review the application if there are grounds to refuse the acceptance of the application and thereof notify the applicant within 10 (ten) days after the date of receiving an application and registering it to the primary application registry.

Article 55. Refusing to accept the application for license

55.1. TheState Administration shall refuse accepting the application for license in the following cases:

55.1.1. Applicant has applied for exploration license in the land where the prospecting license has not been granted to the applicant;

55.1.2. Applicant has applied for mining license in the land where the exploration license has not been granted to the applicant;

55.1.3.Entity other than the holder of the prospecting license has applied for explorationlicense on the area which had been granted to the holder of prospecting license;

55.1.4.Entity other than the holder of the exploration license has applied for mininglicense on the area which had been granted to the holder of exploration license;

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5. 55.1.5. The applicant has applied for processing license on the area that overlaps with the area granted by prospecting, exploration and mining licenses.

6. 55.1.6. The applicant has applied for license over the land that overlaps with an area that has been announced for tendering by central stateadministration;

7. 55.1.7. The applicant has applied for license in the area that overlaps with an area on which prospecting, exploration, mining and processing activities have been prohibitied or which has been decided to take in state reserve or the local special use;

8. 55.1.8. The applicant has applied for license on the area that has been prohibited for being licensed within four years since it had been applied for and the local self- governing authority had rejected to the proposal by the central state administration to tender;

9. 55.1.9. The applicant has applied for license on the mine and industrial as well as arable sites closed by the decision of the State Administration in accordance with this law;

2. 55.2. The State Administration shall refuse to accept the applicationfor license if it does not fully comply with the conditions and requirements as defined in this law and the procedure to submit applications for licenseapproved by State Administration.

3. 55.3. The State Administration shall review the application if there are grounds to refuse the acceptance of application in line with 55.1 of this law within 5 days since the application was received and may obtain additional information and clarification from the applicant if it deems that such grounds may exist.

4. 55.4. The State Administrative Authority shall request in writing the application to provide additional information and clarification in line with 55.3 of this law and in doing so, shall clearly specify the date within which (the information was to be given) the application should respond to the request. In that case, the period as specified in 55.3 of this law shall be deemed extended by the date of response.

5. 55.5. If the applicant has not submitted the additional information and clarification within the specified time, the State Administration may refuse to accept the application.

6. 55.6. The State Administrative Authority may accept the applications as specified in 55.1.3 and 55.1.4 of this law based on the written request submitted by the holders of exploration and mininglicense on the specific area.

7. 55.7. The State Administration shall refuse the acceptance of the application provided there are grounds for such refusal in line with this law, and shall notify the applicantabout the grounds and reasons for such refusal and thereof record in the registration book of licenses.

8. 55.8. If there are no grounds to refuse acceptance of the application as specified in this law, the State Administration shall accept the application and notify in writing the applicantabout it and record in the registration book of licenses.

Article 56. Prohibiting the transfer of application for license

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56.1 It shall be prohibited to transfer the application for license onto the names of other entities.

Article 57. Submitting the request to withdraw the application for license

1. 57.1. If the applicant has submitted its written request to withdraw the application to the State Administration, the application shall be deemed as withdrawn.

2. 57.2. The original copies of application and the documents attached to the application shall remain at the State Administration and their copies shall be given to the applicant free of charge.

Article 58. Deeming possible to grant license

1. 58.1. Upon acceptance of the application as set forth in article 55.8 of this law, each requirement listed in article 22 of this law shall be evaluated within thirty (30) days since the date of acceptance of application.

2. 58.2. Upon evaluation of the requirements in accordance with 58.1 of this law, the State Administration may submit a request in writing to the applicant for additional information and



clarification. In this case the period within which to provide this additional information and clarification shall be specified clearly.

3. 58.3. The State Administration shall deem it possible to grant the license to the entity which has met the conditions and requirements as specified in Article 22 of this law and shall notify it in writing to the applicant and the following administrations.

58.3.1. Relevant local government and self-governing authority;58.3.2. Central state administration in charge of nature and environmental affairs; 58.3.3. state administration in charge of land relations;

4. 58.4. In addition to the authorities as specified in article 58.3 of this law, the state administration in charge of economic development shall be notified about granting the licenses for mining and processing.

5. 58.5. If the state agencies specified in 58.3 and 58.4 of this law have specific comments and proposals in reponse to the notification, they shall submit them to the state administration within 14 (fourteen) days since the date of receipt of the notification. State administration shall be obliged to consult with the state agencies on their comments and proposals.

Article 59. Deeming impossible to grant license

59.1. If the applicant has not fulfilled the conditions and requirements as specified in Article 22 of this law the State Administration shall deem it impossible to grant license to the applicant and shall notify in writing the applicant within 3 (three) days since the date on which the decision has been made. In doing so, the state administration shall clearly specify the grounds for such decision.

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59.2. If the State Administration has issued a decision on being impossible to grant a license in line with 59.1 of this law, the applicant shall be entitled to nominate another entity which meets all conditions and requirements as specified in this law and submit the request in writing to grant license to the state administration within 90 (ninety) days since the decision has been issued.

Article 60. Objections togranting a license

60.1. Any entity shall be entitled to make objection to granting a license. In such case making objection shall be regulated by the rule and procedure as defined in Article 46 of this law.

Article 61. Decision making by State Administration with respect to granting or not granting a license

1. 61.1. The State Administration shall issue one of the following decisions within 60 (sixty) days since the date of accepting the application for license in accordance with 55.8 of this law.

61.1.1. refuse to grant a license;

61.1.2. grant a license;

2. 61.2. If the State Administrative Authority has made a decision to grant a license to the applicant, it shall issue a license certificate to the license holder within 3 (three) work days since the date on which the decision has been made.

Article 62. Refusal to grantlicense

62.1. The State Administration shall refuse to grant license in the following cases.

62.1.1.When the legal entity has not met the conditions and requirements on as specified in 22 of this law;

2. 62.1.2. When the entity is other than the applicant which has been deemed by the state administration as being possible to be granted with licensein line with 58.3 of this law;

3. 62.1.3. Exploration license shall not be granted to another entity on the area licensed to prospecting unless the holder of prospecting license has made such request in writing;

4. 62.1.4. Mining license shall not be granted to another entity on the area licensed to exploration unless the holder of exploration license has made such request in writing;

5. 62.1.5. Processing license shall not be granted to another entity on the area licensed to mining unless the holder of mining license has made such request in writing;

6. 62.1.6. Any area that overlaps with areas granted by license;



62.1.7.Area for which the application for license has been accepted and the state administration has not made a decision yet to grant or not to grant a license;

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62.1.8. Areas on which prospecting, exploration, mining and processing activities are prohibited by this law.;

62.1.9. Areas which have been decided to take in state reserve or special use;

2. 62.2. Licenses of the prohibited types of activities shall not be granted on land on which such types of geological and mining activities have been prohibited.

3. 62.3. Prospecting license shall not be granted on areas on which prospecting workshad been carried out and reports of the prospecting works had been accepted by the relevant authority.

4. 62.4. Exploration license shall not be granted on areas on which exploration works had been carried out and the reserves have been determined in line with this law.

5. 62.5. Mininglicense shall not be granted on areas the reserve of which has not been determined in line with this law.

6. 62.6. If the State Administrative Authority deems the objection as specified in article 60 of this law is well-grounded, it may refuse to grant license.

Article 63. Refusal to accept license

1. 63.1. The applicant or winner of the tender selection process may refuse to accept the license after the decision has been made to grant license through application and tender procedure as specified in this law.

2. 63.2. The entity specified in 63.1 of this law shall submit its refusal in writing to the State Administration, and the State Administration shall cancel its decision to grant the license and register such revoked decision in the license registration book.

Article 64. Specific conditions and obligations set license

64.1. On the basis of consultation with the relevant state agencies as defined in 58.3-58.5 of this law or on its initiaitive, the state administration may oblige the license holder to meet specific conditionsand obligations on the following matters.

64.1.1. rehabilitation, rehabilitation expenses, its pledges;64.1.2. environmental protection;64.1.3. equivalent improvement of environmental state in the licensed area or other area, 64.1.4. protection of underground water;64.1.5. land management and land use;

64.1.6.historical and cultural heritages and common property, their protection and treatment;

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2. 64.2. The State administrative agency shall clearly specify whether conditions and obligations have been set as defined in 64.1 of this law and reflect them in decision on grantng a license.

3. 64.3. The State Administration may consult with the license holder in setting the conditions and obligations specified in 64.1 and shall notify in wirting the agencies specified in 58.3 and 58.4 of this law about the conditions and obligations that have been set to the license holder.

4. 64.4. The conditions and obligations set by the State Administration on the matters specified in 64.1 of this law shall be achievable and the following issues shall be clearly specified and attached to the license.

64.4.1. to specify each task related to the condition and obligation; 64.4.2. duration of task implementation;64.4.3. conditions wherein obligation deem to have been fulfilled;

Article 65. Amending the obligation, conditions and requirements set by license



1. 65.1. On the basis of reaching a consensus with the license holder, the State Administration may amend, postpone, revoke or add the conditionsset by the license on the matters specified in 64.1 of this law.

2. 65.2. The State Administrationshall not be entitled to negotiate with the license holder to change the valid period of license or change on its own the valid period of the license.

3. 65.3. If the license holder has submitted a request to make amendment to the obligation and conditions set by the license in accordance with 65.1 of this law, the State Administration shall adhere to the following principles in reaching agreements with the license holder.

65.3.1.to protect the nature and environment in the area granted by license, and enhance the activities and the results of rehabilitation,

2. 65.3.2. to keep the balance of environment and create and apply the conditions which contribute to keeping the environmental balance,

3. 65.3.3. to improve maintenance and protection of common property,

4. 65.3.4. improve conditions for license holder to implement planned work and exercise fully the rights and obligations according to the license,

4. 65.4. The decision issued by the State Administration on amendment of the obligation and conditions set by the license shall be notified in writing to other authorities as defined in 58.3 and 58.4 of this law.

CHAPTER SIX License holder

Article 66. Entitlement to hold a license

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66.1 A tax paying legal entity that has been established and has been operating in conformity with the legislation of Mongolia shall be entitled to hold prospecting, exploration and processing licenses on areas outside the national border zone.

1. 66.1.1 A share holding company shall be entitled to hold a mining license when it has been founded by a citizen of Mongolia, and not less than 75% of its share capital and in case of foreign invested company, not less than 34% of share amount is owned by a Mongolian citizen, and when it has been established and has been operating in conformity with the legislation of Mongolia and when it has been paying tax in Mongolia.

2. 66.1.2 A share holding company shall be entitled to hold a license to mine at deposits that have been explored and the reserves have been determined by state budget financing when it has been founded by a citizen of Mongolia and not less than 75% of its share capital and in case of foreign invested company not less than 51% of capital share is owned by a citizen of Mongolia and when it has been established and has been operating in conformity with the legislation of Mongolia and when it has been paying tax.

3. 66.1.3 A share holding company shall be entitled to hold license for prospecting, exploration, mining and processing in the areas outside the national border zone when it has been founded by a citizen of Mongolia and not less than 75% of its share capital and in case of foreign invested company not less than 51% of capital share is owned by a citizen of Mongolia and when it has been established and has been operating in conformity with the legislation of Mongolia and when it has been paying tax .

Article 67 Entity accountable and liable on behalf of the license holder

67.1 The members of executive management, board of directors and equivalent body shall be accountable and liable by this law on behalf of the license holder.

Article 68 Compliance of the license holder's activities with the law

68.1 The license holder and the entity appointed to manage and lead the prospecting, exploration, mining and processing activities as specified in article 99 of this law shall be obligated to carry out the activities in compliance with this law and other relevant laws, rules and procedures.

Article 69 Prohibition of high grading mining

69.1 The license holder shall be obligated to mine the mineral resources at full extent and it shall be prohibited to engage in high grade mining.



69.2 If the condition, which might apply to selecting mining of minerals, has been detected, the state administration shall appoint an expert and thereof suspend a working authority of the license holder upon making a decision to appoint the expert.

69.3 State administration shall determine whether the license holder has been selectively mining based on the conclusion by the expert within 3 (three) months of appointment of the expert.

69.3 Followings shall be specified in the expert's conclusion.

1. 69.3.1 whether the reserve was mined selectively;

2. 69.3.2 amount of selectively mined minerals and its market value;

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69.3.3 amount of minerals that became unable to be mined further as a consequence of high grading mining and its market value;

69.3.4 amount of compensation payment imposed to the license holder;

69.3.5 amount of damages caused to geology and mine technical conditions as a result of high grading mining

4. 69.4 The amount of compensation shall be not less than the market value sum of minerals, set forth in 69.4.2 and 69.4.3 of this law respectively.

5. 69.5 A mining license holder shall be prohibited to reproduce derivative deposit and industrial waste that are not approved by the Technical and Economical Feasibilty Report.

Article 70 Obligation tomine and process the mineralsat full extent

70.1 A mining license holder shall be obliged to mine main and subordinate mineralsat full extent, determined as a production reserve.

70.2 A processing license holder shall be obliged to process main and subordinate minerals at full extent.

70.3 During the mining and processing period, a license holder may have a sub-contractor to mine and process subordinate minerals.

70.4 A list of subordinate minerals shall be defined by Central State Administration.

Article 71 Obligation to provide raw materials

71.1 The mining and processinglicense holdersshall be obliged to provide,above all, the processing plant operating in the territory of Mongolia with its mined and processed main and subordinate minerals and raw materials.

71.2 In fulfilling its obligation specified in 71.1 of this law, the extraction license holder shall not be obliged to discount the price of the raw materials in any way, or reduce the price below the market price or for sales of raw materials or below the agreed price with others.

Article 72 Obligation to have some activities executed by domestic companies

72.1 A license holder shall be obliged to subcontract domestic companies to execute more than 60% of its main and minor operations of prospecting, exploration, mining and processing.

72.2 Companies which were founded upon a foreign investment as specified in the Foreign Investment Law of Mongolia shall not be deemed as domestic companies as specified in 72.1 of this law.

72.3 In the event that the license holder is unable to fulfill its obligation, set forth in the article 72.1 of this law due to the insufficiency of companies or failure of companies to meet the requirements for completing the work and if such grounds are duly proved, the license holder may have a partial or full immunity from the obligation on the basis of decision by competent authority.

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Article 73 Demarcating the borders of the area granted by mining and processing licenses



73.1 Mining and processing licenses shall have clear and permanent demarcation marks that separate the area from other areas and compy with the standards approved by the relevant authority.

73.2 The license holder shall install permanent demarcation marks as specified in this law and relevant procedure within 3 (three) months since the date on which mining and processing licensehas been granted and registered by the State Administration.

73.3 The license holder shall be obligated to transfer and install the demarcation marks within 2 (two) months since the change in area border has been registered by the State Administration.

Article 74 Land possession permission under the license

74.1 Within 90 (ninety) days since mining and processing license has been granted to the license holder, a competent authority shall resolve the issues with regard to land possession and utilization in the licensed area as per the Land Law.

74.2 A relevant authority, as defined in the Land Law shall issue a certificate of land possession and utilizationto license holder within 30 (thirty) days since the decision was made by the State Administration to grant the license.

74.3 Certificate of land possession and utilization shall be issued for the same period of time as the license. Expiry, no extension, return of the license before the expiry date and revokingof the license shall serve grounds for terminating the permission of land possession and utilization.

74.4 License holder shall not use the land allocated under the licensefor other purposes than specified hereunder.

1. 74.4.1 conducting prospecting, exploration, mining and processing activities in compliance with authorized rights by the license, specified in this law;

2. 74.4.2 constructing permanent or temporary workers' camps and other required facilities for conducting activities, specified in 74.4.1 of this law;

3. 74.4.3 constructing commercial infrastructure which is prerequisite for mining activities in the mine and its industrial land;

4. 74.4.4 creating derivative deposits and industrial waste dams;

5. 74.4.5 transporting mined minerals and produced products as well as constructing loading and unloading facilities;

74.5 While possessing and utilizing the land for purposes, specified in articles 74.4.2-74.4.5 of this law, the license holder shall not be exempted from duties of paying taxes and fees set forth in other relevant laws

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74.6 In the event that the licensed area is damaged during possession and utilization of the land for purposes, specified in articles 74.4.2-74.4.5 of this law, the license holder shall be obliged to compensate the incurred damages in conformity with the Land Law.

74.7 An authorized person, stipulated in the Land Law shall place a control on the state of land possession and utilization for specified purposes in 74.4.2-74.4.5 of this law.

74.8 The license holder shall inform following authorities to enter the licensed area for installing the demarcation marks, not less than twenty (20) days prior to the intended entry.

1. 74.8.1 relevant local government;

2. 74.8.2 state administration in charge of land relations;

3. 74.8.3 the owner, possessor or user of land if the land granted by the license holder is part of private property or granted under land possesion or use agreement;

74.9 Land possession, utilization and entry rights in the licensed area shall be preserved for the license holder in the following circumstances:

1. 74.9.1 the demarcation markswereinstalled as specified in this law;

2. 74.9.2 within the initial and/or extended period of the license;

3. 74.9.3 a decision is pending by the State administrative agency regarding the return and cancellation of the license;



Article 75 Obligation to insurance

75.1 The license holder shall be obliged to be covered by mandatory insurance for the purpse of fulfilling its liability for reimbursement of damages to others as a result of the activities of the license holder.

Article 76 Obligation to notify the decision on issuing the shares

76.1 If the license holder is to issue shares in international and domestic markets in relation to its geological and mining activities, it shall notify the State Administration within 30 (thirty) days since such decision has been made.

76.2 The license holder shall be obliged to inform the state administration on issuance of share in the international and domestic stock market within 30 (thirty) days after the registration with stock market.

76.3 Upon receipt of the notification, the state administration shall register the notification specified in 76.1 of this law, in the license registration database.

76.4 License holder or its daughter or subsidiary company overseas and entity with shared interest with them shall sell the shares in concurrence with the relevant provisions in the Mongolian Law on Regulating Foreign Investment in Economic Entities operating in Strategically Important Sectors"(2012).

Article 77 Obligation of the license holder to consult the public

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77.1 The extraction and processing license holder shall be obligated to consult the local citizens on matters of its activities that may affect the interests of the local citizens.

77.2 In informing the local citizens as specified in 77.1 of this law, the extraction and processing license holder shall be obligated to provide conditions for local citizens to express their views and opinions.

Article 78 Obligation to notify about the discovery of rare ancient flora, fauna and historical and cultural findings

78.1 If rare ancient flora, fauna and historical, cultural findings have been discovered in the course of prospecting, exploration and extraction works the license holder shall be obliged to cease its activities within the distance specified in 98.1 of this law, and set up protection and immediately notify the local administrative authorities about it.

Article 79 Obligation to notify about the exposure of radioactive minerals

79.1 If exposure of consentration with content of radioactive minerals has been discovered in the course of prospecting, exploration and extraction works, the license holder shall be obliged to notify the State Administrationwithin 30 (thirty) days thereof.

79.2 The concentration with content of radio-active mineral shall be interpreted as amount, specified in the Law on Nuclear Energy.

Article 80 Environmental impact assessment

80.1 The mining and processing license holder shall have environmental impact assessment made within 3 (three) months since the date of issuance of decision to grant a license by by the state adminstration.

80.2 The environmental impact assessment shall determine the potential hazardous effects of the mining and processing activities to the environment and meansures to reduce and eliminate such risks, and procedures that must be taken duirng the closure of mine and industrial units.

80.3 Development of environmental impact assessment for holders of more than two mining and processing licenses on two or more geographically-bordered areas or within the same deposit shall reflect entire environmental impact, assessed on the impacted area.

80.4 The conditions, criteria for evaluation for potential and occurred damages, and environmental impact assessment methodology shall be regulated by the relevant laws on nature and environmental protection and relevant procedure.

Article 81.The health impact assessment

81 The mining and processing license holder shall have the assessment made by competent organization covering to determine the potential hazardous effects of the mining and processing activities and measures to reduce and eliminate such risks within 3 (three) months since the decision has been issued to grant the license.

Article 82. Enabling the working and living condition of the employees



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82. 1 The mining and processing license holder shall provide the enabling work condition, payroll, labor safety and social issues of its own employees according to the regulation approved by the relevant authority

Article 83. Obligation to pay land fee

83.1 Thelicense holder shall pay the land fees by the base price evaluation percent for each hectare by the area of the land granted for prospecting, exploration, mining and processig activities as specified in the Law on Land Fees.

83.2 If the license holder has not paid land fees within the period specified in the Law on Land Fees, this shall serve the grounds for revoking the license.

Article 84.Obligation to pay the royalty for use of mineral resources

84.1 The mining and processing license holder shall be obliged to pay the royalty for use of mineral resources to the state and local budget according to the principles as specified in this law.

84.2 The amount of royalty and the procedure to pay such royalty and procedure to distribute the accrued royalty in the state budget shall be regulated by a separate law.

84.3 The mining license holder shall pay the royalty according to the following principles:

1. 84.3.1 A mining license holder shall pay royalty for use of minerals resources, estimated on the basis of main and subordinate minerals amount registered in the state reserve registration in an area, where mining activity was conducted and which included in annual mining report of that year.

2. 84.3.2 In the event that reserve amount, registered in the state reserve registration has not proved during the mining operation of that year, the issue shall be discussed by Professional Mining Counsel and related conclusion shall be obtained prior to the submission of mining operation plan of the next year to the State administrative agency.

3. 84.3.3 The State administrative agency shall change minerals resources reserve previously registered in the state reserve registration on the name of the license holder on the basis of conclusion by the Professional Mining Counsel.

4. 84.3.4 For processing license holder, royalty for use of mineral resources shall be estimated from the amount of ore and concentration as well as its main and subordinate minerals amount, specifiedin the purchase contract of raw material.

5. 84.3.5 In the event that amount of ore and concentration and its main and subordinate minerals, estimated as per article 84.3.4 of this law has not proved during the processing activity, it shall be informed and registered to the state administrative agency prior to the submission of processing operation plan of the next year.

6. 84.3.6 Producing technological (mining and industrial) waste excessivelymore than reflected in the Technical and Economical Feasibility Report of mining and processing activity shall not serve as a ground for exemption from royalty for use of mineral resources.

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7. 84.3.7 Mining license holder shall pay royalty for use of mineral resources for derivative deposit and industrial waste created in the course of mining.

8. 84.3.8 Mining and processing license holder shall pay royalty for use of mineral resources for re-processed derivative deposit and industrial waste generated from itsown mining activity.

9. 84.3.9 Upon being granted a license, winner of tender which has claimed to voluntarily increase the royalty for resource use shall pay royalty for mineral resources, in increased amount in the course of validity period of the license.

84.4 Price of minerals and products, specified in this article payable for mineral resource use shall be defined by a costestimation of National mineral exchange.

84.5 Operation of National mineral exchange shall be regulated by a separate law.



Article 85.Obligation to pay the license fees

85.1 The license holder shall annuallly pay the license fees by the amount and percentage specified in the Law on Stamp Duties.

85.2 The size of area registered in the license registration database shall be based in determining the amount of license fees, and the amount of fees for the year shall not be amended.

85.3 The amount of the processing license fee shall be set in consideration of the capacity of the industrial unit for processing.

4. 85.4 The license holder shall pay the license fees in advance annually in the following way.

85.4.1 the first year fees of the license within 10 working days since the receipt of or from the day considered the date of receipt of the notification from the state administration as specified in 58.3 of this law;

85.4.2 the fee of the next year of the license before the date of expiry of the first year fees calculated from the first issuance or renewal of the license;

5. 85.5 Return of area partially or wholly shall not serve the grounds for reimbursement of the

license fees.

85.6 The date of payment of license fees shall be determined by the day of bank transaction. Article 86. Establishing agreements86.1 Establishing the Cooperation Agreement

1. 86.1.1 Prospecting and exploration license holder shall establish a Cooperation Agreement within 3 (three) months since the date ofissuance and registration of the prospecting and exploration licenses by state administrationas specified in this law.

2. 86.1.2 Prospecting and exploration license holder shall prepare the draft agreement based on the template approved by the central state adminstration in charge of financial matters

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and submit it to the self-governing authority of related soum or district within a period specified in this law.

86.1.3 The self-governing authority of the relevant soum or disstrict shall establish the agreement with the license holder within 15(fifteen) days since the date of receipt of the draft local development agreement.

86.2 Establishing the Local Development Agreement

1. 86.2.1 Mining and processing license holder shall enter into Local Development Agreement within 3(three) months since the date on which the decision was made by the State Administration as specified in this law.

2. 86.2.2 Mining and processinglicense holder shall prepare the draft agreement based on the template approved by the central state adminstration in charge of financila matters and submit it to the aimag or city self-governing authority within a period specified in this law.

3. 86.2.3 The aimag or city self-governing authority shall enter into agreement with the license holder within 30 (thirty) days since the date of receipt of the draft local development agreement.

4. 86.2.4 The following issues may be agreed by the Local Development Agreement:

86.2.4.1

86.2.4.2

86.2.4.3

86.2.4.4

86.2.4.5

improve the local public infrastructure;improve local social services;support for production and business of the local citizens; provide jobs for local citizens;improve the environment state;



86.3 Several entities holding licenses may join to become one party to the Cooperation

Agreement and Local Development Agreement in the following cases: 86.3.1 if the local self-governing authority made the proposal;86.3.2 several holders of licenses in the local area made a joint request;

86.4 The amount of investment for the Cooreation agreement and Local Development Agreement shall be no less than the amount in the proposals on agreement conditions attached to the tender documentation and initial request for license by the license holder.

86.5 If the license holder has not fulfilled the obligations specified in the Cooperation Agreement and Local agreements local self-governing authority may submit its proposal to suspend the Work authority to the State Administrative Authority.

86.6 The duration of the Cooreation agreement and Local Development Agreement shall be specified by the agreement.

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86.7 Parties may make amendments to the Cooreation agreement and Local develop agreement based on mutual agreement.

86.8 The license holder shall not bear any obligations or responsibilities in relation to the matters not specified in the agreements.

CHAPTER SEVENTechnical and Economical Feasibility Report, Work plan

Article 87. Technical and Economical Feasibility Report

87.1 The Technical and Economical Feasibility Report shall be developed by an entity with a license granted by the State administration, as defined in 18.1.8 of this law.

87.2 Technical and Economical Feasibility Report shall be a general survey calculating the extraction and processing activities, and its commercial feasibility within the period of the license based on the production reservesdetermined as a result of the exploration work.

87.3 Technical and Economical Feasibility Report shall comprise the following types of documents.

1. 87.3.1 estimation to extract the reserve;

2. 87.3.2 technical and technological choice, engineering solutions for extraction and processing activities;

3. 87.3.3 calculation of investment and expenses, financial analysis;

4. 87.3.4 analysis of economy and marketing;

5. 87.3.5 strategy analysis and plan of labor forces;

6. 87.3.6 calculation of damages to the nature and environment, methodology and measures for their mitigation;

7. 87.3.7 calculation of damages to the public health, methodology and measures for their mitigation;

8. 87.3.8 plan for closure of mining and industrial unit;

87.4 The mining and processing license holder shall develop the Technical and Economical Feasibility Report for mining and processing activities within 6 (six) months since the deicsion to grant a license has been made and submit it to the State Administration for approval, and the copies of the feasibility report to the following state authorities.

87.4.1 Central state administration in charge of nature and environmental matters; 87.4.2 Central state administration in charge of economic development87.4.3 Specialized inspection agency;

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87.5 The authorities specified in article 87.4 of this law may reivew the Technical and Economical Feasibility Reportsubmitted by the license holder and provide their recommendations on amending such Technical and Economic Feasibility Report to the State Administration.

87.6 The license holder shall amend the Technical and Economical Feasibiolity Report in line with the recommendations provided in line with 64.3 of this law.

87.7 The Professional mining counsil shall review the Technical and Economical Feasibility Reportsubmitted by the license holder and issue its conclusion within 3 (three) months.

87.8 The State Administration shall issue a decision to approve or refuse the Technical and Economical Feasibiolity Reportsubmitted by the license holder based on the conclusion of the Professional mining counsil and register thereof such decision in the license registration database.

87.9 If the State Administration has issued a decision refusing to approve the Technical and Economical Feasibility Report based on the conclusion of the Professional mining counsil, it shall immediately notify the license holder. The grounds for refusal to approve the report shall be clearly stated in the notification and the state administration shall consult with the license holder on amending or redeveloping the Technical and Economical Feasibility Report and establish the date of submission of such Technical and Economical Feasibility Report.

88 Work plan

88.1 The license holder shall conduct activities on the area granted by the license according to the following plans approved by the state administration.

1. 88.1.1 prospecting work plan by prospecting license holders;

2. 88.1.2 exploration work plan by exploration license holders;

3. 88.1.3 extraction work plan by mininglicense holders;

4. 88.1.4 production work plan by processing license holders;

88.2 The prospecting and exploration license holder shall annually develop work plan in accordance with the approved procedure and have it approved by the state administration. The work plan shall reflect the amount, types and amount of expenses of prospecting and exploration work to be carried out each year.

88.3 Mining and processing license holder shall develop and have obtained the approval by the state administration for its work plan detailing the amount of extracting and processing work to be done each year, economic indicators and amount of investment and expenses, in compliance with the Technical and Economical Feasibility Report approved by the State Administration.

88.4 The license holder shall make the workplan in 2 copies and submit them to the state administration in charge of mining matters within the following period:

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1. 88.4.1 the first year prospecting and exploration workplan within 30 (thirty) days since the decision to grant the license has been issued and the workplan for the succeeding years 3 (three) months before the commencement of the prospecting and exploration work;

2. 88.4.2 the first year mining and processing plan within 60 (sixty) days since the date of approval of Technical and Feasibility Report and the workplan for the succeeding years 3 (three) months before the start of the calendar year;

88.5 The following documents shall be annexed to the first year workplan:

1. 88.5.1 the detailed environmental impact assessment conducted as specified in article 80 of this law;

2. 88.5.2 plan of measures for reducing the adverse impacts to public health;

3. 88.5.3 workplan of rehabilitation work to be conducted in the licensed area as specified in 115.1 of this law;

4. 88.5.4 Cooperation Agreement or Local Development Agreement;

88.6 The holder of the prospecting and exploration license shall have obtained comments from the soum or district Governor and local environmental inspector before it submits the annual work plan to the State Administration.



88.7 The holder of the mining and processing license shall submit the rehabilitation work plan along with the annual work plan to the central state administration in charge of nature and environmental affairs within a period specified in 88.4 of this law.

88.8 The central state administration in charge of nature and environmental affairs shall review the workplan submittted by the license holder as specified in 88.7 of this law and provide its comments and recommendations to the state administration within 14 (fourteen) days since the recept of the plans.

88.9 If the State Administration in charge of nature and environmental affairs has not provided the comments and reommendations within the period specified in 88.8 of this law it shall be deemed as approval of the plan.

88.10 The State Administration shall issue the decision within 14(fourteen) days since the date of receipt of comments and recommendations from central state administration in charge of nature and environmental affairs.

88.11 The State Administration shall consider the following in making the decision specified in 88.10 of this law.

1. 88.11.1 Comments and recommendations as specified in 88.8 and 88.9 of this law;

2. 88.11.2 whether the license holder has obtained other permissions necessary for

conducting the prospecting, exploration, mining and processing activities as specified by this law and other law and legislation;

88.11.3 whether the workplan is achievable and implementable;

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88.12 The state administration may provide guidelines on specific matters to the license holder upon approval of the plan.

88.13 If the State Administration has proposed changes to the plan the license holder shall change and submit the plan to the State Administration and the State Administration shall review and issue the decision as specified in 88.3-88.12 of this law.

89 Minimum expenditure forprospecting

89.1 The prospecting license holder shall have specified prospecting work to be done each year expenditures no less than the following for each hectare of area granted by the prospecting license:

89.1.1 5 000 MNT per hectare each year for the first 2 years;89.1.2 10 000MNT per hectare each year for the third and fourth years; 90 Minimum expenditure forexploration

90.1 The exploraion license holder shall have specified exploration work to be done each year expenditures no less than the following for each hectare of area granted by the exploration license:

90.1.1 150 000 MNT per hectare each year for the first 3 years;

90.1.2 300 000MNT per hectare each year for the fourth and fifth years;

91 Variation of the workplan

91.1 The license holder shall submit its request to vary the work plan in writing to the State Administration.

91.2 If the license holder has submitted a request to vary the workplan the State Administration shall notify the central state administration in charge of nature and environmental affairs and the central state administration in charge of economic development within 5 working days since the date of receipt of such request.

91.3 Upon review of the request specified in 91.1 of this law, if the variation is required for the rehabilitation plan due to changes in the workplan, the central state administrative in charge of nature and environmental affairs shall submit its comments and recommendation related to such variation to the State Administration within 21 (twenty one) days since the date of receipt of such notification.

91.4 The central state administration in charge of economic development shall review the request submitted by the mining and processing license holder and provide its comment and recommendation to the State Administration within 21 (twenty one) days since the date of receipt of such notification.

91.5 The State Administrative Authority shall issue decision taking into account of the aforementioned comments and recommendations as specified in 91.3 and 91.4 of this law within 30 (thirty) days since the



date of receipt of the request by the license holders to vary the work plan and thereof notify the decision in writing to the license holder.

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91.6 The State Administration shall adhere to the procedure specified in 88.3-88.12 of this law in issuing the decision specified in 91.5 of this law.

91.7 The State Administration shall have the right to voluntarily initiate the variationin the workplan and may incorporate such changes based on consultations with the license holder.

91.8 The conditions and requirements set for variationin the workplan shall be determined by the procedure of the State Administration.

CHAPTER EIGHTWork authority under license

Article 92. Work authority

92.1 The license holder shall conduct works other than prospecting and rehabilitation works on the area granted by the license based on the Work authority issued by the State Administration.

2. 92.2 The Work authority shall be issued only to license holder.

3. 92.3 The Work authority authorises the licensee to carry out work in accordance with the

workplan approved by the State Administration.

4. 92.4 The Work authorityis valid only for the area as specified in the work plan.

5. 92.5 The previously granted and valid Work authority shall not serve the grounds to be

released from the obligations due to the variation in workplan as specified in Article 91 of this law.

Article 93 Work authority to conduct exploration

93.1 It shall be prohibited to conduct or commense exploration works on the area granted by the license if the exploration license holder has not obtained the exploration Work authority from the State Administrative Authority.

93.2 It shall be prohibited for exploration license holder to conduct extraction activities in any way.

93.3 The State Administration shall grant the Work authority to conduct exploration if the exploration license holder has fulfilled each of the following conditions.

1. 93.3.1 the exploration work plan has been approved by the State Administration as specified in this law;

2. 93.3.2 the rehabilitation workplan has been approved as specified in this law;

3. 93.3.3 the pledge for rehabilitation work expenses has been deposited in a special account as specified in Article 119 of this law;

4. 93.3.4 other permissions necessary to conduct exploration activities as specified in this law and other laws are obtained;

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5. 93.3.5 the Cooperation agreement specified in86.1 of this law has been established with the local self-governing authority and is in effect;

6. 93.3.6 the mandatory insurance of license holders specified in article 75.1 of this law has been retained;

93.4 The State Administration shall grant and register the Work authority to conduct exploration based on the review of whether the exploration license holder has fulfilled the conditions specified in 93.3 of this law.

93.5 The holder of the Work authority to conduct exploration shall have the following obligations.



1. 93.5.1 to start the exploration work within 3 (three) months since the date of issuance of the Work authority;

2. 93.5.2 to inform the start up of exploration works through local media at least 7 (seven) days before staring the work;

3. 93.5.3 to annually conduct exploration work of expenditure per hectare that is no less than the amount specified in article 90 of this law on the area granted by the license;

4. 93.5.4 to maintain a copy of the exploration license, exploration workplan and the environmental rehabilitation plan at the site of exploration work;

5. 93.5.5 to comply with labor safety and health requirements during exploration activities;

6. 93.5.6 to develop the Consolidated report on the reserve, prospecting and exploration results according to the approved form 1 (one) month before the expiry of the license, and have it approved by state administration;

7. 93.5.7 to register the reserve proven by the relevant authority at the State Administrative Authority, and to submit the exploration workplan with the primary materials to the national consolidated database on geology and minerals resouces;

Article 94. Work authority to conduct extraction

94.1 It shall be prohibited to conduct or commense extraction works on the area granted by the license if the mining license holder has not obtained the Work authority to conduct extraction work from the State Administration.

94.2 The license holder shall submit its request to the State Administration for the Work authority to conduct extraction works if it has fulfilled each of the following conditions.

1. 94.2.1 has obtained the approval for Technical and Economical Feasibility Report and mining work plan as specified in this law;

2. 94.2.2 has obtained the approval for rehabilitation work plan as specifed in this law;

3. 94.2.3 has conducted the environmental impact assessment as specified in this law;

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4. 94.2.4 has conducted assessment by authorized organization with regards calculation of damages to the public health, methodology and measures to reduce the impact;

5. 94.2.5 has depostied the rehabilitation fund pledge in a special account as specified in Article 119 of this law;

6. 94.2.6 has deposited the fund for mine closure in a special fund as specified in 135.1 of this law.

7. 94.2.7 has obtained all the permissions necessary to conduct extraction activities as required by this law and other relevant laws;

8. 94.2.8 has entered into Local Development Agreement as specified in 86.2 of this law and such agreement remains valid;

9. 94.2.9 the mandatory insurance of license holders specified in 75.1 of this law has been retained;

94.3 If the mininglicense holder has fulfilled the conditions and criteria specified in 94.2 of this law, the State Administration shall grant and register the Work authority to conduct extraction works.

94.4 The central state administration may determine the limitation to the depth of extraction in the area when granting the Work authority to conduct extraction works.

94.5 The holder of the Work authority to conduct exploration works shall have the following obligations.

1. 94.5.1 to start the extraction work within 12(twelve) months since the Work authority has been obtained;

2. 94.5.2 to have the quality of all the precious metals and gemstones extracted proven by the authority in charge of quality and carats, and reigster the amount;

3. 94.5.3 to have the certificate of origin obtained from the State Administration in order to sell and process main and subordinate minerals extracted;



4. 94.5.4 to sell natural gold formation over 400 grams or lighter with special defining forms and shapes, and gemstones of rare color and shape to the Mongolbank state gem treasury at a discount price;

5. 94.5.5 to conduct mining activities with as little damage to the environment as possible, and to prevent from negative effects on humans, flora and fauna;

6. 94.5.6 to keep the level of air pollution, dust, water pollution and noise at the permitted level;

7. 94.5.7 to ensure that citizens of Mongolia make up no less than 90% of the total employees completing the works specified in the approved work plan;

8. 94.5.8 to ensure the labor and health safety of the employees at the mine and of the citizens in the proximity of the extraction area;

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94.5.9 in the case of accident and other dangerous situation in the course of the extraction activities the license holder and the management of the mine shall take the necessary measures to immediately eliminate the situation, render first aid to the victims, evacuate the people from the dangerous area and immediately notify the relevant authorities of the situation;

94.6 If the license holder has employed citizens of Mongolia in numbers less than that specified in article 94.5.7 of this law, it shall be obligated to pay a montly amount to the relevant soum or distrcti budget equal to the minimum wage amount multiplied 10 times for each foreign employee above the threshold.

94.7 Except for the case specified in article 94.7.1 of this law, it shall be prohibited for the mininglicense holder to conduct prospectingand exploration work solely, on the area granted by the license.

94.7.1 If the State Administrative Authority has authorized it based on the conclusion of the Professional mining Council, the mininglicense holder may conduct prospection and exploration activities solely for a period of upto 3 years on the area granted by the license.

Article 95. Work authority to conduct processing work

95.1 The license holder shall submit its request to the State Administration for the Work authority to conduct works if the license holder has fulfilled each of the following conditions.

1. 95.1.1 the construction of the industrial unit for processing has completed and the state commission has accepted it for utilization;

2. 95.1.2 has obtained the approval of the processing work plan specified in article 88.3 of this law;

3. 95.1.3 has conducted environmental impact assessment;

4. 95.1.4 has conducted assessment by authorized organization over calculation of damages to the public health, methodology and measures to reduce the impact;

5. 95.1.5 has obtained the approval for the rehabilitation work plan specified in this law;

6. 95.1.6 has deposited the fund for mine closure in a special fund as specified in article 135.1 of this law.

7. 95.1.7 has obtained all the permissions necessary to conduct extraction activities as required by this law and other relevant laws;

8. 95.1.8 the mandatory insurance of license holders specified in 75.1 of this law has been retained;

9. 95.1.9 has entered into Local Development Agreement as specified in 86.2 of this law and such agreement remains valid;

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95.2 If the license holder has fulfilled the conditions and criteria specified in article 95.1 of this law, the State Administration shall grant and register the Work authority to conduct processing works.

95.3 The holder of the Work authority to conduct processing works shall have the following obligations:



1. 95.3.1 to purchase main and subordinate minerals with certificate of originobtained from the State Administration;

2. 95.3.2 to have the certificate of origin for processed minerals to sell and reprocess those minerals obtained from the State Administration;

3. 95.3.3 to conduct industrial unit for processing activities with as little damage to the environment as possible, and to prevent from negative effects on humans, flora and fauna;

4. 95.3.4 to ensure that citizens of Mongolia constitute no less than 90% of the total employees completing the works specified in the approved work plan;

5. 95.3.5 to ensure the labor and health safety of the employees at the processing plan and of the citizens in the proximity of the processing area;

6. 95.3.6 in the case of accident and other dangerous situation in the course of the processing activities the license holder and the management of the mine shall take the necessary measures to immediately eliminate the situation, render first aid to the victims, evacuate the people from the dangerous area and immediately notify the relevant authorities of the situation;

7. 95.3.7 to strictly adhere to the processing standards and procedures;

95.4 If the license holder has employed citizens of Mongolia in numbers less than that specified in95.3.4 of this law, it shall be obligated to pay a montly amount to the relevant soum or distrcti budget equal to the minimum wage amount multiplied 10 times for each foreign employee above the threshold.

Article 96. Suspension of the Work authority to conduct works

96.1 The State Administration may suspend the Work authority to conduct works granted to the license holder in the following cases.

1. 96.1.1 the license holder has not submitted the plans, reports, agreements and other documents specified by this law in time, or the documents do not fulfill, or fully fulfill the requirements specified by this law and other relevant laws and regulations;

2. 96.1.2 the obligation to pay the fees imposed by this law and rules and procedures enacted in conformity therewith have not been performed;

3. 96.1.3 the cenral state administration in charge of nature and environmental matters has submitted a recommendation to suspend the Work authority to conduct works as specified in article 119.6 of this law;

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4. 96.1.4 the local self-governing authority has submitted a recommendation to suspend the Work authority to conduct works to the State Administrative Authority due to the fact that the license holder has not fulfilled its obligations imposed by Cooreation agreement and Local Development Agreement;

5. 96.1.5 if a binding requirement to suspend the Work authority to conduct works has been issued by the state specialized inspection inspector as specified in article 144.2 of this law;

96.2 If it deems necessary, the State Administration may partially suspend the Work authority to conduct works by means of prohibiting specific activities of the license holder.

96.3 The State Administration may extend the period of suspension or partial suspension of the Work authority to conduct works and total duration of the suspension and extension shall not exceed 6 (six) months.

96.4 The suspension and partial suspension of the Work authority to conduct works shall not apply tothe works to be completed according to the rehabilitation work plan of the license holder.

Article 97. Restoring the Work authority to conduct works

97.1 The license holder may submit its request to the central state administration and state administration with regards to restoring the Work authority to conducts works along with the evidence if it deems that the violations have been eliminated within the period of suspension.

97.2 If the central state administration and state administration deem the violations eliminated upon review of the request, it shall render and register the decision to restore the Work authority to conduct works within 14 (fourteen) days since the date of receipt of such request.



Article 98. Areas limited for prospecting, exploration, mining and processing activities

98.1 It shall be prohibited for the holder of the Work authority to conduct works, to conduct prospecting, exploration, mining and processing activities within 100 meters from each side of the following objects except for the case specified in 98.2 of this law.

1. 98.1.1 spring and winter settlements of the herder inhabiting, or house and apartment dwellings built for residency prior to the approval and registration of the workplan of the license holder;

2. 98.1.2 findings of rare ancient flora and fauna, historical and cultural findings registered before the approval and registration of the work plan of the license holder or notified to the license holder by the state administrative central authority in charge of specially protected areas;

98.2 The license holder may conduct activities based on the permission of the owner and possessor on the area on which prospecting, exploration, mining and processing activities are prohibited as specified in article 98.1.1 of this law.

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98.3 The permission of the owner or possessor specified in 98.2 of this law shall be issued in writing in accordance with the template approved by the State Administrative Authority.

98.4 The written permission specified in 98.3 of this law shall:

1. 98.4.1 have the same validity for assignees and heirs of owners and possessors;

2. 98.4.2 the owner or possessor, their assignees and heirs shall not have the right to revoke such permission;

98.5 The owner or possessor may determine the border and depth of area within which to permit prospecting, exploration, mining and processing activities in granting the permission specified in98.2 of this law.

98.6 The following activities shall comprise the prospecting, exploration, mining and processing activities specified in article 98 of this law.

1. 98.6.1 to affect the soil surface and conduct excavation by using mechanical facilities for the purposes of exploration and extraction sampling;

2. 98.6.2 assembling, installing and using facilities, mine opening designated for accessing or air conditioning the underground facility;

3. 98.6.3 to extract and process minerals using machinery, and other facilities other than manual equipment;

4. 98.6.4 transport loads to derivative deposit, ore stockpile and mine and production waste, construct and use facilities, autoroads and dirtroads designated to reach them;

5. 98.6.5 create derivative desposits and ore stockpile;

6. 98.6.6 construct and use dams, buildings and facilities designated to store the water and soil water used for mine and production waste and activities;

7. 98.6.7 construct buildings and facilities designated to store and reprocess mine and industrial waste, use buildings and equipment for the above purposes;

8. 98.6.8 conduct drilling for any purposes;

98.7 The 100 meter distance specified in article 98.1 of this law shall be calculated in the following way.

1. 98.7.1 to calculate the tenure of the spring, and winter settlements, housing and houses built for residency as 0.1 hectare unless otherwise specified by law and 100 meters each side from such tenure;

2. 98.7.2 if it is not possible to determine the tenure land as specified in article 98.7.1 of this law, to measure from 30 meters from each side of the wall of housing or house built for residency and 100 meters from such startpoint;

Article 99. Managingand conducting of prospecting, exploration, mining and processing activities

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99.1 The license holder may appoint a person to manage and conduct the prospecting, exploration, mining and processingactivities to be performedat the area granted by the license under an agreement.

99.2 The license holder shall be obliged to notify the relevant local government and state administration about the agreement and appointed person as specified in 99.1 of this law and register in the license registration database within 30 (thirty) days since the agreement has been entered.

99.3 The entity appointed to manage and conduct the prospecting, exploration, mining and processing activities shall be fully qualified in terms of knowledge, skills, experience and background to lead and control safe, mining operation and shall be fully aware and familiar with this law and other relevant laws, rules and procedures.

99.4 The license holder shall be obligated to fully inform the entity appointed to manage the mine and production activities on obligations imposed by laws, relevant rules and procedures.

99.5 The license holder may appoint oneself to manage and conduct the mine and production activities if it fulfills the criteria specified in 99.3 of this law.

99.6 The entity appointed to manage and conduct geology and mining activities shall be responsible for any damages caused due to its own activities as specified by law

Article 100. Conducting extraction work in deposits, of which exploration work and proven reserve was funded by the state budget and registered in the national consolidated registration

100.1 The license holder conducting extraction work in deposits of which exploration work and proven reserve was funded by the state budget and registered in the state Consolidated registration, shall reimburse the exploration expenses funded by the state budget from the day of its extraction based on the agreement.

100.2 Expenses relating to mineral deposit detailed prospecting, prospecting-evaluation work, geological cartography expenses for the area and the expenses incurred by all stages of exploration work shall be included in the state budget expenses for exploration work.

100.3 For entities privatized in accordance with the State and local property law, the corresponding expenses to the used minerals of the deposit shall be proportionately deducted from the total expenses funded by the state for the exploration work and the remaining reserve expenses shall be reimbursed.

100.4 The total amount, period of payment, and the annual payment amount shall be specified in the reimbursement agreement.

100.5 The amount of annual payment shall be determined based on the number and amount of products to be produced in the year.

100.6 If the reimbursement has not been completed within the period specified in the agreement, the holder of the license shall be notified to perform its obligations and a penalty of 0.1 percent of the total unpaid payment shall be accrued daily.

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100.7 If the reimbursement and penalty specified by this law has not been paid within 30 (thirty) days of receipt of notification to perform the reimbursement obligation from the State Administrative Authority, the license shall be revoked and the State Administrative Authority shall announce a tender selection on the area granted by the license.

CHAPTER NINE Reports and finance

101 Issuing reports

101.1 The prospecting and exploration license holder shall make accurate and trustful exploration work reports for that year within February 10th of the next year in accordance with the approved procedure and submit it to the state administration and tax agency.

101.2 1 (one) month prior to the expiration of the license, a prospecting or exploration license holder shallhave integrated report of the prospecting and exploration workvalidated by the authorized person in accordance with Article 102 of this law, and submit it along with the primary documents to the State Administration in line with the approved procedures.



101.2.1 Main and subordinate minerals, hazardious mixtures of the minerals, estimations of their quality, as well as of quantity of the reserves must be accurately defined in the integrated report of the exploration in accordance with the standards.

101.3 State Administration shall register the proven reserve and reports of the exploration specified in article 101.2 of this law in the ConsolidatedNationaldatabases of geology and minerals.

101.4 The mining license holder shall submit the following reports withinthe following period to the State Administrative Authority:

101.4.1 the basic indicators and graphic designs of mine work of the year approved and specified by the annual report and survey according to the procedure approved by the State Administrationwithin February10th of the subsequent year;

101.4.2 the basic production indicators of the next year according to the approved template within November 10th of each year;

101.5 The following information shall be provided in the reports specified in 101.4.1, 101.4.2 of this law.

101.5.1 working days, number of employees, agreements and covenants related to the property of the license holder;

101.5.2 performance of the mine work plan, calculation of reserve mobilization, duration of mine operation, schemes, extensions and reform work of the production;

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101.5.3 extracted ore, amount, number of products sold and loaded for sale, sales price, information on its purchaser, investmend made in that year, mining expenses, royalty for use of minerals resources and reports on the equipmentand other property in use

101.6 The mining license holder shall issue the report specified in 101.5.3 of this law according to the template approved by the tax authorities in increased amount and submit it to the tax authorities within the 20th of the first month of the next quarter, and the annual report within the 20th of January of the next year, and deliver the receipt of submission immediately to the State Administration.

101.7 The processinglicense holder shall submit the following reports within a period specified below to the State Administration:

101.7.1 an annual report and basic calculation of the production shall be submitted within the 10th of February of the subsequent year, in accordance with the procedures approved by the State Administration;

101.7.2 the basic calculation of the production work of the next year shall be submitted on the approved templatewithin the 10th of November of each year;

101.8 The following information shall be provided in the reports specified in article 101.7.1, 101.7.2 of this law.

101.8.1 working days, number of employees, reports on occupational safety, agreements and covenants related to the property of the license holder;

101.8.2 performance of the processing work plan, duration of plant operation, a scheme of the plant facilities and expansion and renovation of such facilities;

101.8.3 processed ore and concentration, documents of their origin, contract and agreements, amount and number of products sold and loaded for sale, sales price, information on its purchaser, investmend made in that year, mining expenses, royalty for use of minerals resources and reports on the equipment that has been utilized and other property in use;

101.8.4 payment of royalties for resource use, equipment and other capital in use;

101.9 The processinglicense holder shall issue the report specified in article 101.8.3 of this law according to the template approved by the tax authorities in increased amount and submit it to the tax authorities within the 20th of the first month of the next quarter, and the annual report within the 20th of January of the next year, and deliver the receipts of submission immediately to the State Administration.

101.10 The license holder shall issue its rehabilitation work report within February 10th of the next year and submit it to the state administrative central authority in charge of nature and environment, the State Administration, tax authorities and the specialized inspection authority.

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101.11The rehabilitation work report shall include the performance of rehabilitationworkplan and the following information.

101.11.1 registration of negative effects to the nature and environment caused byprospecting, exploration, mining and processing activities;

101.11.2 measures not specified in the rehabilitation workplan, but taken to protect the nature;

101.11.3 potential negative effects on the nature, related environmental impact assessment, and proposed changes to the rehabilitation workplan for the next year due to expansion of activities and increase in capacity;

101.12 The license holder shall be obliged to submit to the State Administration the information on the quantity of the mined, processed, and sold products in that year, taxes, duties, fees, levies paid to the state and local budget, total amount of funds spent under the Cooperation and Local Development Agreement within the first quarter of the next year. The State Administration shall inform this information to the public within 30 (thirty) days since the date of the receipt.

101.13The State Administration shall maintain the confidentiality of the information in the reports of prospecting, exploration, extraction and processing activities categorized as corporate confidential in line with relevant laws, rules and proceduresthroughought the valid period of the license.The State Administrative Authority may enter into confidentiality agreement with the license holder if the license holder has so requested.

101.14 The template to issue reports specified in this article shall be approved by the State Administration.

102 Receiving the result of the prospecting and exploration work, validating the reserve of the deposit

102.1 A license holder of prospecting or exploration work shall conduct prospecting or exploration work under the management or with the involvement of specializedentity.

102.2 The estimation of the deposit reserves that have been determined as a result of the exploration work shall be made by the specialized entity involved in the exploration work under this law.

102.3 A certificate for the specialized entity shall be granted to an entity which meets the terms and conditions set by the state central administration in charge of geology and mining affairs.

102.4 For the purpose of reviewing the accuracies of the estimation of the reserves and work report on prospecting and exploration activity prepared by the specialized entity, the state administrative body may appoint an independent professional geology expert.

102.5 The professional, independent geology expert may be a national or international individual or organization specializing in geology.

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102.6 Based on the opinion by the independentprofessionalgeology expert appointed by the State Administration in respect of the review of the estimation of reserves and the report specified in this law, the Professional Council on minerals resources shall discuss the report on reserves and issue a decision whether to register it in the National consolidated databases of geology and minerals.

102.7 The specialized geology entity shall adhere to the following principles in its activities:

1. 102.7.1 to participate in the exploration work on site;

2. 102.7.2 the estimation of reserves determined by the exploration work shall be accurate

and based on the primary documents;

102.7.3 to be responsible for the accuracy of the conclusion before the client and other entities;

102.7.4 to repay or compensate from own property for any loss incurred to any person due to intentionally making of an error in the estimation;

5. 102.7.5 to have retained professional liability insurance;

6. 102.7.6 to maintain the confidentiality of the business secrets of the client obtained in the

course of conducting activites, and not to inform others of such information unless required so by law;



102.7.7 not to use any information on the clients obtained in the course of conducting activities, for personal or third party interests;

102.8 The license holder shall be obliged to submit to the State Administration the consolidated and validated exploration work report on the reserves, reserve estimates and relevant other documents and primary materialswithin the period specified in this law.

CHAPTER TEN Professional Council

Article 103. The Professional Council under the State Administration

103.1 Professional Council for Geological Survey, Professional Council for Mineral Resources and Professional Council for Mining shall be operating under the State Administration with the duty of providing professional advise in their respective areas.

103.2 The members of the Councils shall be specialized in geology and mining and have in- depth knowledge, skills and experience on mineral exploration, mining and processing.

103.3 The Professional Council on mineralsresources shall be comprised of 15 members as provided below:

103.3.1 from the specialized departments and divisions of the relevant Governmentagencies-5

103.3.2 from the research institutions-3

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103.3.3 from the professional associations in geology and mining-7

103.4 The Professional Councilfor Mining shall be comprised of 15 members as provided below:

1. 103.4.1 from specialized departments and divisions of the relevant Government agency-6

2. 103.4.2 from research institutions-4

3. 103.4.3 from professional associations in geology and mining-5

103.5 Professional Council for Geology shall be comprised of 15 members as provided below. 103.5.1 from specialized departments and divisions of the relevant Government agency-6

2. 103.5.2 from research institutes -4

3. 103.5.3 from professional associations in geology and mining - 5

103.6 The members, specified in articles 103.3, 103.4 and 103.5 of this law, shall be appointed by Geology and Mining Minister for the period of 3 years based on the proposals from the relevant specialized organizations.

103.7 The professional Councils, specified in this law, shall have the charters for their operation.

103.8 The state administration shall approve the chart of the professional councils and the procedure for appointing and re-appointing the members of the councils.

103.9 The Professional Councilfor Geology shall exercise the following rights and duties in the issues regarding mapping, and prospecting and exploration works funded by state budget:

103.9.1 Determining the area for mapping and prospecting and exploration work to conduct;

2. 103.9.2 Determining the type, size and budget of the work'

3. 103.9.3 To discuss and approve the work performance and report;

4. 103.9.4 If necessary, to appoint an expert as specified in this law;

103.10 . The Professional Council for Mineral Resources shall exercise the following rights and duties in the issues regarding prospecting and exploration works.

103.10.1 to discuss the report of prospecting and exploration work that is not funded by state budget and issue a conclusion on whether to accept such report;

103.10.2 If necessary, to appoint an expert as specified in this law;



103.11 The Professional Council for Mining shall exercise the following rights and duties in relation to the mining and processing issues:

103.11.1 to provide professional advice and issue an opinion in relation to issues on reviewing and modifying of the Technical and Economical Feasibility

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Reporton mining production, submitted by the holders of mining or processing

licenses;103.11.2 to review and issue an opinion in respect of a request of a mining license

holder to generate a derivative deposit and industrial wastes that has been received for opinion by the state administration;

103.11.3 to provide comments and recommendations, and issue an opinion in relation to approving, modifying and rejecting of work plans of mining and processing operations for which, in the opinion of the State Administration, a respective opinion is necessary;

103.11.4 to provide professional advice and assistance to the State Administration in relation to issues of granting of a Work authorityto conduct the work, for which, in the opinion of the State Administrative Authority, a respective opinion is necessary.

12. 103.12 If the Professional Council disagrees with the conclusion of an authorized research laboratory in respect of a sample, ore or a product that has been obtained during the prospecting, exploration, mining and processing activities, the Council shall issue a proposal and an opinion for the State Administration to appoint an expert to take samples and conduct re-analysis. The state administration shall issue a decision to appoint an expert. The associated expenses thereof shall be financed from the budget of the Council as specified in article103.16 of this law.

13. 103.13 If a license holder disagrees with the opinion of the expert appointed by the state administration as specified in article 103.10 of this law, it may choose an international certified independent research laboratory to re-analyze the sample, ore or the product that has been obtained during the prospecting, exploration, mining and processing activities. In such case, the associated expenses shall be borne by the license holder. The certified research laboratory should be recognized by the state administration. .

14. 103.14 The conclusion of the international certified research laboratory shall be regarded as final. The license holder shall be obliged to pay all taxes, fees,levies and payments in relation to types and quantity of deposit reserves, main and subordinate minerals that have been determined by such final conclusion. The taxes, fees, levies and payments that have been due during the unpaid period shall be paid in accordance with the percentage and levels as determined by the tax office.

15. 103.15 If the state administration deems as necessary, the members of the Councils shall participate in the operation of the State Administration to conduct an on-site examination of the implementation of the work plan and of work performance, and shall issue proposals, recommendations and opinions.

16. 103.16 The State Administration shall issue a decision based on the opinion of the Professional Councils.

17. 103.17 The Professional Councils exercise the following rights in order to implement its functions specified in this law.

103.17.1 to demand and access the necessary information from the license holder; 65



103.17.2 to have the independent expert and audit conclusion issued if necessary, and to consider these conclusions in considering the matters;

103.18 The Councils shall be financed by 20% of the licenses fees paid in the given year. 103.19 The procedure to pay salary, bonus and business trip per diems to the members of

the Professional Councils shall be approved by the State Administrative Authority

CHAPTER ELEVEN Registration

Article 104. Registration database



1. 104.1 The State Administration shall have a Consolidated registration database.

2. 104.2 The registration database shall consist of the license database and license cartography

database.

104.3 The license and its cartography shall be accessible to the public according to the procedure approved by the State Administrative Authority.

4. 104.4 The registration database may be in the electronic form.

5. 104.5 The following documents shall be registered in the license database:

1. 104.5.1 requests and application made in relation to the license;

2. 104.5.2 certificate of license;

3. 104.5.3 applications and requests made in relation to Work authority to conduct activities;

4. 104.5.4 agreement on reimbursement;

5. 104.5.5 agreement pledging the license and a decision releasing the license from the

pledge;

104.5.6 agreement on creating entitlements to non-material proprietary interest in a license, shared entitlements to such interest or transfer of such entitlements;

7. 104.5.7 Cooperation Agreement and Local Development Agreement;

8. 104.5.8 receipt of depositing the rehabilitation fund in a special account;

9. 104.5.9 receipt of depositing the funds for mining and industrial unit for processing

closure in a special account;

104.5.10 receipt of payment payable as specified in this law;

104.5.11 permission in writing issued by the owner and possessor specified in article 98.2 of this law;

104.5.12 certificate of rehabilitation work quality;

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104.5.13 request to close mine, industrial unit for processing;

104.5.14 any other documents submitted to the State Administration as specified in this law;

104.6 The following decisions issued by the State Administration shall be registered in the license registration database.

1. 104.6.1 refusal to accept the application for license;

2. 104.6.2 granting a license and imposition of obligation when granting license;

3. 104.6.3 refusal to grant license;

4. 104.6.4 return of the application for license by the request of the applicant;

5. 104.6.5 renewal of the license, and reduction of the area granted by license at the time of

renewal;

6. 104.6.6 any changes to the obligation imposed by the license;

7. 104.6.7 refusal to renew license;

8. 104.6.8 transfer or refusal to transfer the license;

9. 104.6.9 partial transfer of the area granted by the mininglicense;

10. 104.6.10 whole or partial return of the area granted by license;



11. 104.6.11 re-issuance of license;

12. 104.6.12 revocation of license;

13. 104.6.13 approval of, changes to and refusal to approve the prospecting, exploration,

mining and processing work plan;

104.6.14 granting, refusal to grant, suspension, partial suspension and restoration of Work authority to conduct works;

104.6.15 104.6.16 104.6.17

104.6.18 conclusion of the professional authority on mine and industrial unit for processing closure, decision of the relevant authority;

104.6.19 other decisions rendered by the State Administration as provided by this law;

decision of the Commission to accept the results of the rehabilitation work;

decision of accepting of mines and industrial unit for processing for utilization;

decision of the relevant authority on closing the mine or industrial unit for processing wholly or partially;

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104.7 The cartographic database of licenses shall contain the following types of cartography and mapping:

1. 104.7.1 an area map of prospecting and exploration;

2. 104.7.2 a map of a licensed area and any modification thereof;

3. 104.7.3 an area map of a mine claim;

4. 104.7.4 an area map of an industrial unit for processing;

5. 104.7.5 a map of an area on which the rehabilitation work has been conducted;

6. 104.7.6 a cadastre map defining the borders of the area whichprospecting, exploration,

mining and processingactivitiesare prohibited;

7. 104.7.7 a map of the state and local special protected and reserved areas;

8. 104.7.8 a cadastral map defining the borders of the area granted to citizens for ownership

and possession that registered in the state integrated geodetic and cartographic database.

104.8 If it deems necessary, the State Administrative Authority may register court decision rendered in relation to the license holder's implementation of rights and obligations granted by the license, in the license registration database.

104.9 All decision and documents issued in relation to one license shall be stored in a portfolio by the order of issuance of such documents in the archive.

105 Deeming the registration as invalid, restoring registration

105.1 If the documents specified in this law does not contain the information specified in this law and other relevant procedures approved by the State Administration, or does not conform with the approved template or fails to fulfill the requirements provided by law the Head of the State Administration may deem its registration as invalid .

105.2 The State Administration shall restore the registration if the submitting entity compiles the documents as required and submits it to the State Administration within 30 (thirty) days since the date of the decision on deeming the registration invalid as specified in 105.1 of this law

105.3 The State Administration shall not issue any decisions in relation to the license related to the documents, and the area issued by the license within the period specified in article 105.2 of this law.

105.4 Typographical mistakes and mis-input of decisions and documents other than in cases of deliberate and misleading purposes committed in the course of registering the decisions and documents in the registration database specified in 104.5 and 104.6 of this law shall not constitute grounds to revoke the registration.



106 Registering information about the license holder in the registration database

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106.1 The surnames, names and registration number of the member of executive management, board of directors and equivalent entity of the legal entity to represent the license holder shall be registered in the license database.

106.2 Information regarding the transfer and changes to the representing persons specified in 106.1 of this law shall be notified and registered at the State Administrative Authority within 10(ten) days of such changes by the license holder or the representing person itself.

107 Approving the procedure related to registration107.1 The State Administration shall approve the procedure to register the decisions and

documents specified in 104.5 and 104.6 of this law in conformity with this law.

107.2 The State Administration shall approve the template of requests, procedure to receive and review requests and applications in conformity with this law.

107.3 The State Administration shall approve the procedure to inform the public of the decisions rendered by the State Administrative Authority in conformity with this law.

108 Legal consequence of Document registered in the Registration Database

108.1 If the agreement to transfer jointly possess rights conferred by a license or to transfer percentage of possession of rights and the agreement to pledge a license specified in this lawis registered in the licenseregistration database in accordance with procedure of this law, the State Administrative Authorityshall have no obligation with regard to the matters related to the foregoing agreements and transfer actvity of a license.

108.2 Registering documents in the registration database by the State Administration according to this law shall not be deemed as guarantee to make an agreement or contract, to entitle right to parties to contract and to transfer rights by contracts or create an exclusive right.

109 Rectification of registration errors

109.1 The head of State Administration's unit in charge of registration may rectify error in registration by his/her own initiative or by request of a license holder.

109.2 The head of State Administration's unit in charge of registration shall develop and issue legal act with regard to rectification of a registration error and shall register such legal act in the license registration database.

109.3 If the head of state administration's unit in charge of registration deems necessary, he/she shall rectify errors in registration by the following ways:

1. 109.3.1 to insert missing datas;

2. 109.3.2 to correct incorrect datas; and

3. 109.3.3 to remove incorrect and redundant datas;

109.4 If rectification of registration errors impacts any rights or obligations granted to a licenseholder by such license, the head of State Administration's Unit in charge of

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registration shall immediately notify the license holder and deliver the legal act with regard to rectification of registration errors to the licenseholder.

109.5 If any person deems the change in rights and obligations under a licenseto be due to the rectification of registration errors as harmful to persons other than the license holder, the person whose right has been violated is entitled to appeal to court for review of such legal act with regard to the rectificiation of registration error.

110 Determination of the correctness of documents to be registered in registration database



110.1 The documents registered in registration database shall be correct and the State Administration may review the documents or decisions specified in this law in order to determine the correctness of the foregoing document and decisions prior to registration of such decisions or documents. The procedure and terms of such reviewing process shall be set by state administration.

111 Reference letter

111.1 The head of State Administration's unit in charge of registration may provide the reference letter with regard to registration of documents and decisions kept in registration database to any party interested in such reference letter. The reference letter shall be a of proof whether documents are correct or not and whether documents are registered or not.

111.2 The State Administration may determine the service fee for service to provide reference letter specified in article 111.1 of this law and provide copies of documents registered in registration database.

112 Address and record of special permisson holder

112.1 When contacting with a license holder in a matter specified in this law, the State Administration shall contact a license holder by the address and phone number registered in the license holder registration database.

112.2 The license holder shall be obliged to inform correctly the State Administration about its official an current address, location and phone number in order to keep the contact information in the registration database.

112.3 The State Administration shall not be responsible for the consequence arisen from the failure to receive notification, correspondence or documents if the notification, correspondence or documents delivered to a license holder is returned to the State Administration, if the State Administration is not available to contact with a license holder due to failure to register official and current address and phone number in accordance with article 112.2 of this law and the license holder did not receive any notification, correspondence or document from the State Administrative Authority.

113 To deem notification, correspondence or documents delivered to recipient

113.1 When the State Administrationsubmits any notification, correspondence or documents to any person via offiical post, email or facsimilein accordance with this law, the notification, correspondence or documents shall be deemed as delivered to receiver in the following time period:

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113.1.1 If the State Administration delivered the notification, correspondence or documents via post, those shall be deemed delivered within the specified time period set in the Law of Mongolia on Post;

113.1.2 If the State Administration delivered the notification, correspondence or documents via email or facsimile, those shall be deemed delivered within the verified date of facsimile or email;

113.2 If the State Administrationsubmits any information and date via telephone to any person and record to provethetelephone conversation exist, the data and information shall be deemed delivered.

CHAPTER TWELVE REHABILITATION

Article 114. The mandatory rehabilitation of environment affected by prospecting, exploration, mining and processing activities

114.1 The license holder shall be obliged torehabilitate land affected by prospecting, exploration, mining and processing activities in accordance with the rehabilitation plan.

114.2 The local self governing authority may agree with the license holder in agreements on Cooperation and Local development about implementation of rehabilitation of land and reciprocal improvement of environment quality.

114.3 Amining and processing license holder shall be mandatory to replant trees in the foregoing area irrespective of the geographic region when implementingrehabilitation activity in area affected by prospecting, exploration, mining and processing activities.

114.4 A license holder shall be obliged to plant 100 trees in place of each tree that was cut down in the course of prospecting, exploration, mining and processing activities.

114.5 The central state administration in charge of nature and environmental affairs shall ensure that a license holder or relevant authorized organization mandatorily implementsrehabilitation activity in accordance with Article 127of this Law.



114.6 The central state administration in charge of environment shall set and approvethe minimum rehabilitation expenditure per hectare differentiated by the territorial regions and mineral types.

115 Rehabilitation plan

115.1 A license holder shall implement rehabilitation activities in accordance with the rehabilitation plan approved by the relevant authority.

115.2 If a mining and processing license holder agreed with the local self governing authority on making reciprocal improvement of the environmental quality, the holder shall specify it in the rehabilitation plan.

115.3 The rehabilitation work plan of a prospecting or exploration license holder shall be reviewed by a local environmental inspector of a relevant soum or district, and shall be approved by a division in an aimag or the capital city in charge of environmental affairs.

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115.4 The rehabilitation work plan of a mining or processing license holder shall be approved by the central state administrationin charge of nature and environmental affairs.

116 Reviewing the rehabilitation plan

116.1 Prospecting and explorationlicense holder shall submit the rehabilitation plan with prospecting and exploration workplan to the local environmental inspector of a relevant soum or district.

116.2 Mining and processing license holder shall submit the rehabilitation plan with mining and processing workplan to the central state administration in charge of nature and environmental affairs in accordance with 88.7 of this law.

116.3 The local environmental inspector and central state administration in charge of nature and environmental affairs shall assess the following conditions when reviewing the rehabilitation plan:

1. 116.3.1 whether the rehabilitation plan is in compliance with that activity plan;

2. 116.3.2 whether the rehabilitation plan is achievable;

3. 116.3.3 whether the planned expenditure to be spent for rehabilitation activity is sufficient

for the actual expenditure for rehabilitation;

116.3.4 whether therehabilitationactivities fulfill the standards and requirements;

116.4 The local environmental inspector shall make one of the following decisions within 5(five) days after the date of receipt of the rehabilitation plan.

1. 116.4.1 to approve the rehabilitation plan;

2. 116.4.2 to return the rehabilitation plan in order to make certain changes;

3. 116.4.3 to reject to approve the rehabilitation plan;

116.5 If the local environmental inspector hasreturned the rehabilitation plan with certain comments to change the plan or rejected to approve the rehabilitation plan he/she shall notify the decision to the license holderwith specific statement of the grounds for such return or rejection.

117 Approvingrehabilitation plan

117.1 If rehabilitation plan approved by the local environmental inspector of a relevant soum or districtprospecting and explorationlicense holder shall submit the rehabilitation planto the division in an aimag or the capital city in charge of environmental affairs.

117.2 The central state administrationor the division in an aimag or the capital cityin charge of nature and environmental affairs shall make one of the following decisions based on review of circumstances specified in article 116.3.1-116.3.4 of this law within 10(ten) days after the date of receipt of the rehabilitation plan:

117.2.1 to approve the rehabilitation plan;

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2. 117.2.2 to return the rehabilitation plan in order to make certain changes;

3. 117.2.3 to reject to approve the rehabilitation plan;

117.3 If the central state administration or the division in an aimag or the capital cityin charge of nature and environmental affairs has approved the rehabilitation plan, the decision shall be delivered to the following entities within 7 (seven) days after the date of issuance of the decision to approve the rehabilitation plan:

1. 117.3.1 thelicense holder;

2. 117.3.2 State Administrationy;

3. 117.3.3 state specialized inspection authority;

117.4 If the central state administration or the division in an aimag or the capital city in charge of nature and envinromental affairs has returned the rehabilitation plan with certain comments with regard to change the plan in accordance with article 117.2.2 of this law, the decision to return the rehabilitation plan shall be notified to State Administration within a period specified in article 117.3 of this law.

117.5 If the state central administrative authorityor the division in an aimag or the capital cityin charge of nature and environmental affairshas returned the rehabilitation plan with certain comments to change the plan to thelicense holder, the license holder shall make proper changes in the rehabilitation plan and deliver it within 30 (thirty) days after the date on which the decision has been rendered to return the rehabilitation plan.

117.6 If the state central administrative authority or the division in an aimag or the capital city in charge of nature and envinromental affairs has deemed it not possible to approve the rehabilitation planbased on the review of factors specified in article 116.3 of this law, it shall reject to approve the rehabilitation plan and ,thereof, notify the license holder and State Administrationwithin the time period specified in article 117.3 of this law. The decision to reject approval of the draft rehabilitation plan shall specifically reflect the grounds for such rejection.

117.7 If the license holder has not submitted the rehabilitation activity report for theprevious year in accordance with relevant procedures to the relevant authority, the central state administrationor the division in an aimag or the capital cityin charge of environmental affairs may reject the approval of rehabilitation plan for the following year.

117.8 If thelicense holder disagrees with the decision to reject the approval of rehabilitation plan, the license holder shall be entitled to litigate in the court within 30 (thirty) days since the date of rendering the decision to reject the foregoing plan.

117.9 If the license holder has not litigated against the decision to reject the approval of rehabilitation plan, the license holder may redevelop the rehabilitation activity report once again and deliver it to the central state administration or the division in an aimag or the capital city in charge of nature and environmental affairs within 30 (thirty) days.

117.10 The central state administration or the division in an aimag or the capital cityin charge of nature and environmental affairs shall review and resolve the rehabilitation plan redeveloped by thelicense holder in accordance with thisarticle of this law.

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118 Rehabilitation Expenditure Estimation

118.1 In order to estimate and determine the expenditure for rehabilitation activity for rehabilitation activity each year, thelicense holder shall have the rehabilitation expenditure estimation for rehabilitation activity made.

118.2 The expenditure per hectare for rehabilitation activity shall not be less than the minimum expenditure per hectare for rehabilitation activity set and approved by the central state administration in charge of nature and environmental affairs.

118.3 An entity conducting the rehabilitationcost estimation shall comply with the procedures approved by the central state administration in charge of nature and environmental affairs.

118.4 When making the rehabilitation cost estimation, the area on which prospecting, exploration, mining and processing activitiesis to be completedand the planned rehabilitation activity for the foregoing area shall be assessed and the factors specified in article 116.3 of this law shall be addressed.

118.5 If the central state administration in charge of nature and environmental affairs deems it necessary, it may require the license holder to have an audit organization conduct audit and issue a conclusion on the rehabilitation cost estimation.



118.6 In the case specified in article 118.5 of this law, the audit organization issuingthe conclusion shall deliver the copy of conclusion to the State Administration within 3 (three) days following the issuance of such conclusion.

118.7 The amount of expenditure shall be reflected in the rehabilitation plan and approved by the state central administrative authority or the divisionin an aimag or the capital city in charge of nature and environmental affairs.

119 Expenditure deposit for rehabilitation activity

119.1 Guarantee for performance of rehabilitation activity shall be equal to 100% of amount of expenditure for rehabilitation activity of each year specified in article 118 of this law.

119.2 A license holder shall place the expenditure to be spent for rehabilitation activity for a year in a special bank account established by the state central administrative authority in charge of nature and environmental affairs within 14 (fourteen) days after approval of the rehabilitation plan.

119.3 It shall be prohibited to use the the expenditure deposit in the special account for purposes other than the designated purpose.

119.4 If for specific year the rehabilitation plan of the prospecting and exploration license holder has changed or the rehabilitation activities have not complied the standards and requirements approved by central state administration in charge of nature and environmental affairs, the division in an aimag or the capital city in charge of nature and environmental affairs may demand prospecting and exploration license holder to increase monetary capital placed or to be placed in a special account for the next year.

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119.5 In the cases specified in 119.3 and 119.4 of this law, the license holder shall transfer the necessary additional monetary deposit to the special bank account for rehabilitation expenditure within 30 (thirty) days.

119.6 If the license holder has not deposited the additional monetary capital to the special bank account in accordance with 119.5 of this law, the central state administration orthe division in an aimag or the capital cityin charge of nature and environmental affairs shall submit the proposal to the State Administrationto suspend theWork authorityfor the license holder.

119.7 Transaction of the special bank account in which to deposit the rehabilitation expenditure and monitoring of the foregoing bank account shall be regulated by the procedure approved by the Government.

120 Rehabilitation activity

120.1 Thelicense holder shall implement rehabilitation activity in accordance with the annual rehabilitation plan and shall be obligated to reclaim the area granted under thelicense in compliance with the standards and requirements approved by central state administration in charge of nature and environmental affairs prior to the expiration of the license.

120.2 If the license holder has not completed rehabilitation activity prior to the expiration of license term, it shall be obligated to complete the rehabilitation activity at the shortest time as possible. The central state administration in charge of nature and environmental affairsshall set the specific time of completing the rehabilitation activity by taking into account the specific features of the remaining rehabilitation activity.

120.3 The local self-governing authority, the state specialized inspection agency and the division in an aimag or capital city in charge of nature and environmental affairs shall jointly monitor the implementation and performance of the rehabilitation plan.

120.4 The expiry of the license shall not serve grounds for license holder to be releases from duties of completing the rehabilitation work in the area

121 Committee in charge of accepting the result of rehabilitation activity

121.1 The results of a rehabilitation work of a license holder shall be accepted by a Committee consisting of the representatives of the local specialized inspection offices, the divisions of the aimag and the capital city in charge of nature and environmental affairs and local citizens, under the procedures approved by the state central administrative authority in charge of nature and environmental affairs.

Article 122. Accepting the result of rehabilitation activity



122.1 The committee shall assess the result of rehabilitation activity at site of rehabilitation and issue the conclusion. The committee shall submit its conclusion to the central state administration in charge of nature and environmental affairs.

122.2 The central state administration in charge of nature and environmental affairs shall, , make a decision as to whether to accept the results of the rehabilitation work based on the opinion of the Committee under article 122.1 of this law.

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122.3 The cenral state administration in charge of nature and environmental affairs shallbe obliged to deliver, within 3 (three) days, its decision regarding whether to accept the results of the rehabilitation work to the State Administration and the license holder, respectively.

Article 123 Refusing to accept the rehabilitation activity result

123.1 If the Committee deems that rehabilitation work fails to meet standards approved by the central state administration in charge of nature and environmental affairs and has not coveredan entire area for rehabilitation in the given year, it shall issue conclusion to reject to accept the rehabilitation work results, and set a specific period of time to re-perform the rehabilitation. The Committee must submit its conclusion to the state central administrative authority in charge of nature and environmental affairs, the specialized inspection authority and the State Administration.

123.2 The centralstate administration in charge of nature and environmental affairs shall issue decision to reject the rehabilitation work results if received the conclusion specified in 123.1 of this law.

Article 124. To file compliant against the decision

124.1 The license holder may file the complaint to Minister (Cabinet Member) in charge of nature and environmental affairs if it does not agree with the conclusion of Committee and decision of thecentral state administration in charge of nature and environmental affairs to reject the acceptance of the rehabilitation work result.

124.2 The Minister (Cabinet Member)in charge of nature and environmental affairs shall appoint an independent team of specialized experts consisting of 15 members as specified in article 124.4 of this law if the license holder has filed the complaint in line with 124.1 of this law.

124.3 The members of the independent, specialized team shall be specialized in geo-ecology and environment and have in-depth knowledge, skills and experience.

124.4 The expert team shall be comprised of 15 members as provided below:

124.4.1 one person each from the central state administration in charge of nature and environmental affairs and the specialized inspection authority, with specialization in the studies of flora, fauna, air, water and soil;

2. 124.4.2 from the local self-governing authority of the given area - 2;

3. 124.4.3 specialized researchers from research institutions in geo-ecological studies - 2;

4. 124.4.4 specialized researchers from research institutions in botanical studies - 2;

5. 124.4.5 specialized researchers from research institutions in water and soil studies - 2;

6. 124.4.6 specialized researchers of the research institution on issues of fauna studies - 2;

7. 124.4.7 representatives from the local area - 2;

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124.4.8 representative from professional associations and the legal entity carrying out the prospecting, exploration, mining and processing activities - 1;

124.5 The Cabinet Member in charge of nature and environmental affairs shall appoint the members of the team specified in 124.4.1, 124.4.3-124.4.6of this law on the basis of proposals made by public and professional organizations.

124.6 The Cabinet Member in charge of nature and environmental affairs shall appoint the members of the team specified in articles124.4.2, 124.4.7, and 124.4.8of this law on the basis of proposals made by the local self governing authority and local public organizations.



7. 124.7. The internal procedures for electing, appointing and re-appointing the members of the experts' team and the functioning of the experts' team as well as the procedures for allocating incentives and estimating the expenses of official trips for the team members shall be approved by the centralstate administration in charge of nature and environmental affairs.

8. 124.8. The Cabinet Member in charge of nature and environmental affairs shall issue a decision as to whether to receive the results of the rehabilitation workbased on an opinion of the experts' team,

Article 125. Certification that land has been rehabilitated

125.1 If the Committee deems that the license holder rehabilitated the land in compliance with the standards and requirements it shall grant the certificate that the land has been rehabilitated to the license holder.

Article 126. Return of the expenditure for rehabilitation activity placed in the special account

125.2 On the basis of the certificate that the land has been rehabilitated specified in article125.1 of this law, the state central administrative authority in charge of nature and environmental affairs shall return the expenditure for rehabilitation activity to the license holder within 14 (fourteen) days.

Article 127. Carrying out the rehabilitation by the state central administrative authority in charge of nature and environmental affairs

127.1 The central state administration in charge of nature and environmental affairs shall render the decision to ensure that the rehabilitation activity would be performed by another entity and dispose the monetary deposit for expenditure placed in special account for the foregoing activity if the area where thelicense holder has not performed rehabilitation or the pristine nature is affected as a result of a incomplete performance of rehabilitation by license holder.The central state administration in charge of nature and environmental affairsshall deliver this decision to the State Administrative Authoritywithin 3 (three) days in order to have the decision registered in the license registration database.

127.2 The central state administrationin charge of nature and environmental affairs shall issue the decision specified in article 127.1 of this law in the following cases::

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127.2.1 if a license holder has not conducted the rehabilitation in consistent with the rehabilitation plan and the standards under this law;

127.2.2 If the license holder has failed to perform the rehabilitation within the specific period of time set by the Committee in charge of reviewing and accepting the result of rehabilitation;

127.3 If the expenditure for rehabilitation activity deposited in the special bank account by the license holder is not sufficient to finance the rehabilitation activity, the central state administration in charge of nature and environmental affairs shall ensure the allocation of the necessary monetary fund from the state budget and have the rehabilitation activities implemented in completion by the organization authorized to engage in rehabilitation activiteis.

127.4 The state administration in charge of nature and environmental affairs shall file the lawsuit against the responsiblelicense holder.to get compensation for the expenditure for rehabilitation activity funded by the state budget specified in article 127.3 of this law

128 Obligation to inform public

128.1 The central state administration in charge of nature and environmental affairs and geology and mining affairs shall inform the public through electronic form concerning the the following information, documents and decisions with regard to the rehabilitation and protection of environment:

1. 128.1.1 environmental impact assessment;

2. 128.1.2 rehabilitation plan and report;

3. 128.1.3 decision to accept the result of rehabilitation activity made by the Committee in

charge of reviewing and accepting the foregoing result;

128.1.4 any complaint and proposal with regard to rehabilitation submitted to the state organizations and the status of resolution of those complaint and proposals;

128.1.5 an information regarding the usage of chemical toxic and other chemical substances that may affect the environment and public health;



CHAPTER THIRTEENThe Closure of Mine and Plant

Article 129. Request for permission to close the mine and plant

129.1 A mining license holder shall, in accordance with the Technical and Economical Feasibility Report of mining, submit a request to the following state authorities, within not less than 3 years before the planned closure date of a mine:

129.1.1 the state administration;

129.1.2 the central state administration in charge of nature and environmental affairs;

129.1.3 the specialized inspection agency;

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129.1.4 the local Government;

129.2 If a processing license holder planned to close the plant, it shall be obligated to submit the request at least 3 (three) year prior to the planned date for closure of the plant and deliver the request to the state organizations specified in articles 129.1.1-129.1.4 of this law.

129.3 The license holder shall attach detailed closure plan of a mine or a plant approved as specified in this law, and other related documents to the request.

129.4 The State Administration shall register the request for closure of a mine or a plant in the license registration.

130 Granting of permission for closure of mine and plant

130.1 The Professional Mining Council shall review a request, a detailed plan and other related documents submitted by a license holder, issue an opinion in respect of granting of the permission for closure of a mine or a plant, and shall send such opinion to the State Administration.

130.2 The State Administration, based on the opinion of the Professional Mining Council, shall make a decision as to whether to grant the permission for closure of a mine or a plant.

130.3 If the State Administration has decided to grant the permission for closure of a mine or a plant, it shall notify the specialized inspection authority in writing.

131 Refusing to grant permission for mine closure

131.1 If the Professional Mining Council deems that the permission cannot be granted for a mine closure given that the approved reserves for production have not been fully exhausted, the State Administration may reject the request on mine closure of a license holder.

131.2 If a license holder disagrees with the decision of the State Administration specified in 131.1 of this law, the State Administration shall grant a permission for the mine closure on the grounds of assigning to pay the royalty fees on the remaining unused production reserves.

132 Closure plan of mine and plant

132.1 Mining and processing license holder must have a closure plan of a mine or a processing factory.

132.2 A license holdershall be obliged to have prepared and approved closure plan of a mine or a plant together with the preparation and approval of a Technical and Economical Feasibility Report of mining or processing activity.

132.3 A license holder shall adjust the closure plan of the mine or the plant once every 3 years and, as specified in article 130 of this law, submit it for discussion to the Professional Mining Council, and for approval by the State Administration.

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132.4 A detailed closure plan of a mine or a plant shall be prepared 3 years before the closure of such mine or a plant andthe detailed plan shall be adjusted every year, and be submitted for discussion and approval, as specified in article 132.3 of this law.



132.5 The following conditions should be included in a closure plan of a mine or a plant.

1. 132.5.1 technical indicators of closure of the mine or the plant;

2. 132.5.2 measures to be taken in relation to the environmental protection and reclamation

during the closure of the mine or the plant;

132.5.3 any social impact that may occur as a consequence of the closure of the mine or the plant, its evaluation and measures to be taken in respect any means to remedy such impact;

132.5.4 financing and relevant indicators of closure of the mine or the plant.

132.6 Ifcommercial infrastructure and facilities constructed and used for the production purposes are located outside of the licensed area, the issues on the ownership, usage and possession of such infrastructure or facilities in relation to the closure of the mine or the plant shall be included in the closure plan.

132.7 The issues related to the maintenance, protection and monitoring of the surroundings of the mine or the plant after closure as well as the means of resolving and regulating of the financing of such issuesshall be included in the closure plan.

132.8 The closure plan shall determine the transfer, ownership or the purpose of the usage of the land after closure of the mine or the plant. Such issue should have consulted with a local self-governing authority.

133 Temporary closure of mine and plant

133.1 A closure plan shall include measures to be taken in respect of a temporary closure of a mine or a plant.

133.2 In the event of a temporary closure of a mine or a plant, a license holder shall send a notification of temporary closure of such mine or plant to the State Administration and the specialized inspection agency.

133.3 The notification on a temporary closure of a mine or a plant shall clearly indicate a reason and a duration for temporary closure of such mine or plant.

133.4 The specialized inspection agency shall, within 7 (seven) days upon receiving such notification, inspect the reasons and conditions for temporary closure of the mine or the plant, and monitor the temporary closure process.

133.5 A temporary closure of the mine or the plant shall not cause either to decrease the amount of the expendituredeposit for closure activity specified in this law or exempt from the obligation to place the expendituredeposit in the special account.

133.6 A planned halt indicated in the mining or processing work plan shall not be considered as a temporary closure.

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134 The obligations of license holder during the mine closure

134.1 As specified in this law, a license holder shall commence the preparation for a mine closure from a date of receiving the permission on the closure of a mine or a plant from the state administrative body.

134.2 The license holder has the following obligations during the mine closure period:

134.2.1 to fully control the mine closure activities, to ensure the labour safety operation and to implement all the regulation and procedures related to the foregoing;

134.2.2 to adhere with relevant regulation with regard to closure of tunnel and entrance of mine;

134.2.3 to take measures to prevents the penatration of water used in the mine siteand contaminated by chemicals to the subsoil, groundwater or water in the surface;

134.2.4 to remove all things used in mine such as mining equipment, techniques, road, construction, ditch, trench, communication line and pipe shall be removed from the area granted under a special permisson unless agreed otherwise;

134.2.5 to close all the entrance of open pitin order to prevent illegal extraction activity in the particular area after the closure of mine;

6. 134.2.6 to prevent fire disaster and water accumulation;



7. 134.2.7 to bury all the valley and hole which has been created as a result of open pit

mining and to take measures to improve the charesteristic of environment through creating artificial lake and pond;

134.2.8 to plant trees and plants in the area affected by extraction activityor that has been agreed to be improved by exchange under this law;

134.2.9 if the deep and subsoil water revealed in surface of land, to build a ditch and trench in order to use the foregoing water for watering purpose;

134.2.10 to reclaim the hydrology system if the hydrology system had changed during the extraction;

134.2.11 to control and review quality of ground and subsoil water from the mine and to take measures to purify the polluted water;

134.2.12 to take measure to make the area granter under a license and mining claim field usable for public tenure lands, pasture or agricultural lands after the closure of mine;

134.2.13 to take measures to ensure the possibility of workers to be recruited in the other mine project or mine after the closure of mine;

134.3 A license holder shall place the necessary expenditure deposit for the mine or plant closurein the special account under article 135 of this law.

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134.4 The expiry of the valid date of mining and processing license shall not serve the grounds to release from duties related to closure of mine and plants and post closure review and assessment.

134.5 closurein the special account under article 135 of this law.

135 Expenditure deposit for closure of a mine or a plant.

135.1 Before obtaining the work authority to conduct the relevant worka license holder shall place the expenditure deposit for closure of a mine or a plant in a monetary form in the special account, in order to provide assurance to conduct the closure of such mine or plant at an area of the mining or processing work, as required in accordance with the approved plan.

135.2 The license holder shall set the amount of the expenditure deposit for closure of a mine or a plant taking into account the following conditions:

1. 135.2.1 Technical and Economical Feasibility Report of a mine or a plant;

2. 135.2.2 a detailed environmental impact assessment;

3. 135.2.3 an impact assessment on public health and society;

4. 135.2.4 a size of an area affected by the mine or the plant;

5. 135.2.5 a future risk assessment;

6. 135.2.6 other grounds specified in the law;

135.3 An area specified in article 135.2.4 of this law must be determined as covering both a size of a mine claim, an area beyond the licensed area and its border which has been adversely influenced by a mining or processing activity.

135.4 The amount of expenditure deposit for closure of a mine or a plant must be fully sufficient for financing the work or activity to be implemented under the approved plan as specified in this law.

135.5 The amount of expenditure deposit for closure of a mine or a plant placed in the special account by a license holder shall be updated and increased by the Professional Mining Council once every 5 years taking into consideration changes in the amount of closure costs and inflation. The Professional Mining Council shall not reduce the closure costs placed in the special account by the license holder and shall not return it to the license holder on the grounds other than those as specified in in Article 138 of this law .

Article 136.Decision on closure of a mine or a plant

136.1 The State Administration, the specialized inspection agency, the central state l administration in charge of nature and environmental affairs and the local Government authority shall appoint a joint Committee for the closure process of a mine or a plant.



136.2 The Committee shall monitor the closure process of a mine or a plant and issue an opinion regarding the closure of such mine or plant as required.

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136.3 Prior to the issuance of decision on closure of a mine and plant, the license holder shall be obliged to submit to the State Administration. the schemes, Technical and Economical Feasibility Report and all other documents related to the closure of the mine or the plant.

136.4 The State Administration,, based on an opinion specified in article 136.2 of this law, shall issue a decision on the closure of a mine or a plant and register it with the license registration database.

137 Monitoring after closure

137.1 A license holder shall be obliged to carry out the monitoring at own expenses for a specific period after the closure of a mine or a plant.

137.2 A durationof monitoring after closure shall be determined by the State Administrationtaking into consideration the scope of the activity of a mine or a plant, a state of environmental disturbance, safety conditions, possible future risks and a time frame for clearing up of the adverse impacts.

138 Returning of expenditure deposit

138.1 Where a period for monitoring has been finished, and no risks have occurred in respect of the closure during such period, and where the land has been transferred for the subsequent use and an issue on protecting from possible risks has been resolved, up to 90 percent of the closure expenditure deposit accrued in the special account can be returned.

139 Contingency fund for closure of a mine or a plant

139.1 After refunding of the closure expenditure deposit specified in 138.1 of this law, 10 percent of the expenditure deposit for closure of a mine or a plant that has been placed in the special account, shall be transferred into the Contingency fund of closure of mines and plants for protection from possible risks that may occur in the closed areas in the future.

139.2 The operation of the special account for expenditure deposit for closure of mines and plants, and the closure Contingency fund shall be regulated by a separate law.

CHAPTER FOURTEEN Inspection

Article 140.Inspection

140.1 In the necessary circumstances, the state specialized inspection agency may appoint the inspector who is authorized to conduct inspection in the activity of a license holder.

140.2 The inspector who appointed in accordance with this law has the following mandates:

140.2.1 to enter the area granted under a license, mine, factory and mining claim area and other constructions related to mining claim area where the license holder conducts its activity under a license within working hour without any obstacles;

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140.2.2 to carry out an investigation, examination or survey in the buildings, facilities, equipment, goods and materials specified in article 140.2.1;

140.2.3 to seize the evidence related to an activity which is possible to violate this law, other relevant legislation and regulations;

140.2.4 to ask questions from a relevant person, and to require to provide an explanation;

140.2.5 to take samples for analysis when an additional analysis is deemed as necessary;

6. 140.2.6 to take picture and make record in order to strengthen the evidence of violation;

7. 140.2.7 other rights specified in law;



140.3 If the authorized inspector deems it necessary to inspect and immediately take measures to cease the activity of license holder which has caused serious damage to the environment, the inspector is authorized to enter the premises at any time of the day.

140.4 The license holder or any other related person shall be obliged to render assistance to the inspection and cooperate with the state inspector.

140.5 A license holder must not, without reasonable excuse, obstruct a state inspector in the exercise of powers or refuse to cooperate

140.6 Upon entry into the area and construction and facilities for the purpose of exercising his or her mandate conferred by this law, the authorized state inspector appointed under this law shall be obliged to provide the identification card of the state inspector, appointment for inspection and other documents authorizing him to conduct such inspection, and to explain to a relevant person of the rights and duties specified in this law.

140.7 If the authorized inspector did not implement his/her obligation specified in 140.6 of this law, entity may refuse to perform the demand made by the foregoing inspector.

Article 141. To document the inspection by the authorized inspector

141.1 Where an authorized state inspector has, for the purpose of the inspection under this law, entered the area and the premises specified in Article 140.2.1. of this law, and carried out an inspection, he shall issue a document on such entry into the foregoing area and construction, and give one copy of the document to a license holder or his authorized person.

141.2 The document specified in Article 141.1 of this law shall be in written form and contain the following information:

1. 141.2.1 name and identification number of inspector and number of appointment;

2. 141.2.2 entering and exiting date and time;

3. 141.2.3 purpose of entrance;

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4. 141.2.4 work has been done and description of activity conducted during inspection;

5. 141.2.5 brief conclusion regarding potential violation which observed during inspection;

6. 141.2.6 a reference of any photograph or record taken during inspection, and ways of

access to such photograph or record by the license holder or his authorized person;

141.2.7 a contact information and phone number of inspector and foregoing information of his senior management person;

141.2.8 procedures for reviewing and filling a compliant in respect of the conclusion made at the inspection site by the state inspector;

Article 142. Forfeiture of the property and return the forfeitured property

142.1 If the inspector seizes any item for the purpose of taking samples for analysis, the inspector shall document a file which clearly indicates the name, type, quantity and value of seized items and provide one copy of such file to the license holder or its authorized person.

142.2 The state specialized inspection agency shall return the seizedproperty to the owners or possessors of the those property except for those as specified in the following:

142.2.1 if seized property may be a proof of violation of the law or relevant rules and procedures;

142.2.2 if a decision has been made that the seized property in the state revenue due to an owner or possessor of such property is unknown;

142.2.3 If the seized properties are things that should be destructed in accordance with law and court decision;

142.2.4 If the seized properties have been used up as samples, and thereof, being impossible to return;

142.3 The state specialized inspection agency may sanitize and detoxicate the seizedproperties and in this case it may decide to claim the relevant expenses for sanitization and detoxication of the properties from the owner and possessor the foregoing things.



Article 143. Confiscated as state revenue

143.1 The state specialized inspection agency shall make decision to take the confiscated property as the state revenue in the following cases:

1. 143.1.1 if the owner and possessor of the seized properties are unknown;

2. 143.1.2 property items, mined minerals, products, and any income derived from such

items, that have been generated as a result of a prospecting, exploration, mining and processingactivities without a license;

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143.1.3 if the seizedproperties are things prohibited to extract, store, transport and sell according to the laws of Mongolia or the things prohibited to be return to its owner and possessor;

Article 144. Other rights of the authorized inspector

144.1 The authorized inspector shall have the following mandates, in addition to those specified in article 140 of this law:

144.1.1 If it is necessary for the inspection, to take translation assistant from particular person who is under inspection without any charge;

144.1.2 to require and receive explanation and reference from the relevant authority during the inspection;

144.1.3 to make copies of documents when necessary;

144.2 If the authorized state inspector has found, during inspection work, that an activity of a license holder has been in violation of the legislation, and that such act may become a ground to suspend the Work authority to conduct the work specified in this law, the inspector shall issue an opinion and submit an official notice to suspend the Work authority to the State Administration.

144.3 If the authorized state inspector has found, during an inspection work, that an activity of a license holder has been in a serious violation of the legislation, and that such act may become a ground to revoke the license under this law, the inspector shall issue an opinion and submit a proposal to revoke the license to the State Administration.

CHAPTER FIFTEEN Liabilities

Article 145. Liabilities for breach of legislation.

145.1 If a breach of the minerals legislation does not constitute a criminal offence, an authorized state inspector, whilst taking into account the circumstances of the infringement, shall impose the following penalty on the guilty person:

145.1.1 If any person has conducted mineral prospecting, exploration, mining and processing activities without holding a license, all incomes or products derived from foregoing activities shall be confiscated and a fine equal to minimum wage multiplied by 5-10 times shall be imposed on an individual, or a fine equal to minimum wage multiplied by 25 - 100 times shall be imposed on a legal entity.

145.1.2 If any person purifies, processes, transfers, transports, stores, sells, purchases, mediates minerals that have been mined illegally, a fine equal to minimum wage multiplied by 5 - 10 times shall be imposed to an individual and a fine equal to minimum wage multiplied by 50 - 75 times shall be imposed to an legal entity;

145.1.3 For conducting mineral prospecting, exploration, mining and processing activities on the territory on where the prospecting, exploration, mining and processing activities has been prohibited or restricted, the relevant incomes

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derived from such activity shall be confiscated, and a fine equal to minimum wage multiplied by 5 - 10 times shall be imposed to an individual person and a fine equal to minimum wage multiplied by 25 - 100 times shall be imposed to a legal entity;



145.1.4 If a license holder has failed to comply with the obligation to exhaust the main and subordinate minerals determined as the production reserves during extraction of a deposit, any loss resulting from such failure shall be recompensated and a fine equal to minimum wage multiplied by 50 - 100 times shall be imposed;

145.1.5 If a license holder has conducted high grading mining shall be compensated in accordance with this law and a fine equal to minimum wage multiplied by 100-250 times shall be imposed;

145.1.6 If a license holder, who has concluded a Deposit development agreement has failed to fulfill his duty to provide, upon a Government request, any information related to an activity undertaken in respect of the license as well as to investment and ownerships during the term of such agreement, a fine equal to minimum wage multiplied by 25-50 times shall be imposed;

145.1.7 If a person, who has right to conduct reconnaissance, has disturbed the subsoil, the reclamation expenditure for the affected area shall be compensated, and a fine equal to minimum wage multiplied by 5 - 10 times shall be imposed;

145.1.8 If a person failed to fulfill the obligation to submit the reconnaissance, prospecting or exploration report and copies of relevant documents to the State Administrative Authority in accordance with this law and to ensure registration of the foregoing report and document in the Consolidated database of National geology and minerals,shall have submitted the foregoing report and document by that particular person and a fine equal to minimum wage multiplied by 3 - 5 times shall be imposed to an individual and a fine equal to minimum wage multiplied by 10 - 15 times shall be imposed to a legal entity;

145.1.9 If a license holder creates derivative deposit and industrial waste without permission of the State Administrative Authority, a fine equal to minimum wage multiplied by 50 - 100 times ora fine equal to 15% of revenue derived during the creation of derivate deposit and industrial waste shall be imposed;

145.1.10 If amining license holder has carried out prospecting on and exploration activity solely, on the area granted by the license a fine equal to the minimum wage multiplied by 25-50 times shall be imposed;

145.1.11 If a license holder has commenced a work or carried out an activity without the Work authority to conduct such work or activity from the State Administrative Authority, the incomes derived from such work or activity shall be confiscated, and a fine equal to the minimum wage multiplied by 100-150 times shall be imposed;

145.1.12 If a exploration license holder has carried out extraction activities in any way the revenue shall be confiscated and a fine equal to the minimum wage multiplied by 100- 150 times shall be imposed;

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145.1.13 If a license holder or its authorized person has, in any way, obstructed the authorized state inspector specified in this law to exercise his rights or refused unreasonably to cooperate, a fine equal to the minimum wage multiplied by 30-50 times shall be imposed shall be imposed;

145.1.14 If a license holder has failed to submit the information, report or work plan on time within the periods as specified in this law, or has submitted false information,report or plan, misrepresentation, a fine equal to 20 % of the incomes accrued during the given reporting period shall be imposed;

145.1.15 If the license holder has failed to inform the decision to issue shares to the State Administrative Authority as specified in this law a fine equal to minimum wage multiplied by 50-100 times shall be imposed;

145.1.16 If the license holder has failed to perform its obligation to consult and inform the public with accurate information a fine equal to the minimum wage multiplied by 50-100 shall be imposed;

145.1.17 If a specialized person in geology or an independent expert, specified in article 102 of this law, has failed to fulfill an obligation to issue an integrated report and estimations on the results of the prospecting and exploration work, truly and accurately, or has deliberately issued false information, report, estimation or opinion, misrepresentation, a fineequal to minimum wage multiplied by 100-200 times shall be imposed;

145.1.18 For a failure to comply with the regulations in respect of assaying and registering of precious metals and gemstones, a fine equal to 25% of the total value of such precious metals and gemstones that should have been registered shall be imposed;

145.1.19 If a license holder has failed to fulfill an obligation to sell, at a premium rate, to the treasury fund of Mongolbank, a nugget, which weighs more than 400 grams, or which has a peculiar shape though weighing less, or a precious stone with a rare color and shape, a fine equal to 50% of the value of such items shall be imposed;



145.1.20 If a license holder has suppressed the quantity of the mined minerals, and has concluded a deceitful contract for such purpose, or has intentionally understated the sales revenue by selling such minerals at an unreasonably low price, the amount of the minerals extracted and the price difference shall be calculated and repaid into the state budget, the fine equal to 50 percent of the amount of revenue accrued during this period shall be imposed.

145.1.21 If a mining and processing license holder has failed to fulfill or has intentionally avoided to fulfill an obligation to supply raw materials to domestic processing plants, a fine equal to the minimum wage multiplied by 400-450 shall be imposed;

145.1.22 If a license holder has failed to fulfill its obligation to have executed its main and minor operations of prospecting, exploration, mining and processing by domestic companies in a proper percentages as specified in this law, a fine equal to minimum wage multiplied by 250-300 times shall be imposed;

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145.1.23 If a license holder has failed to submit the notification as specified in article 101.12 of this law, a fine a fine equal to minimum wage multiplied by 20-50 times shall be imposed;

145.1.24 If a sample, assayandprimary materialsaccumulated by the course of exploration have been lost or destroyed, such items shall be re-compiled, and a fine equal to minimum wage multiplied by 50-100 times shall be imposed;

145.1.25 If a license holder has experienced an illegal interference in exercising his rights under the legislation, a fine equal to the minimum wage multiplied by 5-10 times to an individual, equal to the minimum wage multiplied by 25-50 times to a legal entity shall be imposed;

145.1.26 If the State Administrative Authority has failed to fulfill an obligation to issue a public notice in respect of the information required under this law for publicizing in accordance with the approved procedures, a fine equal to minimum wage multiplied by 5-10 times shall be imposed to the responsible person;

145.1.27 If a responsible person has failed to fulfill an obligation to notify other persons whose rights are affected in respect of the license that has already been registered in the license registration database under this law, a fine equal to minimum wage multiplied by 5-10 times shall be imposed;

145.1.28 If the license holder has failed to install area demarcation marks, or transfer the installed demarcation marks as specified in this law, a fine equal to minimum wage multiplied by 5-10 times shall be imposed;

145.1.29 If the license holder, or the management of the mine or processing plant have failed to inform of the accident occurred and arising of other dangerous conditions occurred during the course of prospecting, exploration, mining and processingactivities according to the procedure specified in this law, failed to take necessary measure to eliminate the conditions, or failed to perform its obligation to render first aid to the victims and evacuate people from the danger zone, a fine equal to minimum wage multiplied by 50-100 times to individual, and a fine equal to minimum wage multiplied by 200-250 times shall be imposed to legal entity;

145.1.30 If the license holder has used chemical toxic substances, concoctions in its activities without permission, or has used hazardious chemical toxic substances, concoctions prohibited by law, or has not complied with the technological regime, rules and procedure to handle such chemical toxic substances and concoctions, the damages incurred shall be recompensated and a fine equal to the amount of the minimum wage multiplied by 250-300 times shall be imposed;

145.1.31 If a license holder has failed to comply its obligation to maintain the pollution of air, water and soil, as well as dust and noise at permissible levels, a fine equal to minimum wage multiplied by 50-100 times shall be imposed;

145.1.32 If the license holder has failed to inform the relevant authority of the discovery of historically and culturally valuable findingsduring the prospecting, exploration, mining and processing activities as provided by this law, and such cultural and historical, rare findings have been destroyed due to failure to restrict its activities within the specified

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distance, the damages incurred shall be compensated and a fine equal to the minimum wage multiplied by 150-200 times shall be imposed;



145.1.33 If a license holder has failed to inform to or has concealed from the State Administrative Authority of finding a mineral occurrence with a radioactive production content during the prospecting, exploration, mining and processing activities as required in this law, a fine equal to minimum wage multiplied by 100-150 times shall be imposed;

145.1.34 If a person appointed to manage the prospecting, exploration, mining and processing activities has failed to fulfill an obligation under this law thereby causing any loss in such activity, a compensation must be paid for the loss and a fine equal to minimum wage multiplied by 100-150 times to an individual, and a fine equal to minimum wage multiplied by 200-250 times to a legal entity shall be imposed;

145.1.35 If a responsible official has breached the procedure specified in this law in relation to entering of data in the license registration database, by entering wrong data or omitting a data, which has caused a loss to a relevant person, a compensation must be paid for the loss, and a fine equal to minimum wage multiplied by 3-5 times shall be imposed;

145.1.36 If a person authorized to conduct an evaluation of the rehabilitation expenses has violated the procedures under this law by providing wrong or unrealistic evaluation of therehabilitationexpenditures, the authorization of such person to conduct the evaluation shall be revoked and, a fine equal to minimum wage multiplied by 100-150 times shall be imposed;

145.1.37 If a person who has license to develop a Technical and Economical Study Report has violated relevant law and procedures in respect of the preparation of Technical and Economical Study Report by providing wrong or unrealistic estimations of such study, the respective authorization shall be revoked, and a fine equal to minimum wage multiplied by 200-250 times shall be imposed;

145.1.38 If a license holder has failed to fulfill an obligation specified by this law in respect of the closure of a mine or a plant, a fine equal to minimum wage multiplied by 50-100 times shall be imposed or if any loss incurred due to such failure a compensation must be paid for the loss,a fine equal to minimum wage multiplied by 100-150 times shall be imposed;

145.2 If the license holder has committed the violation specified by this law repeatedly, or, the violation specified in this law has been committed despite having been imposed administrative measures twice previously the license shall be revoked and the the legal entity, founded or shared by members of the legal entity holding the licenseand its executive management, board of directors and the equivalent entity and its members shall not be granted any other prospecting, exploration, mining and processing license for 5 yearsof such revocation.

145.3 If a license holder has violated this law and the court has rendered a decision to impose criminal liability, the license shall be revoked and any loss incurred must be compensated and the legal entity, founded or shared by members of the legal entity holding the licenseand its executive management, board of directors and the equivalent entity and its

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members shall not be granted any other prospecting, exploration, mining and processing license for 20 yearsof such revocation.

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Ganby



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draft minerals law (new) mongolia december 5-2012

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