Navigating mineral rights, environmental obligations in Mongolia

Strategically located within the Belt and Road framework, Mongolia is blessed with more than 80 types of energy and mineral resources – and is home to some of the world’s largest coal and copper mining projects – making it a prime destination for Chinese investors.

In 2024, bilateral trade between China and Mongolia surpassed USD19 billion, accounting for nearly 70% of Mongolia’s total foreign trade, with mineral products dominating.

As a major mining nation, rich in natural resources and attracting significant foreign investment, Mongolia has established a robust legal framework centred on its Minerals Law, providing strong institutional support for the sector’s growth.

This article introduces the country’s mining governance system and outlines key concerns for mining investors, including the acquisition and transfer of mineral rights, responsibilities of licence holders, and obligations in environment protection.

Acquisition, transfer of mineral rights

Under the Minerals Law, there are two types of mineral rights – namely, exploration right and mining right – granted exclusively to legal entities established and operating under Mongolian law. In most cases, holders of exploration or mining licences are limited liability companies registered in Mongolia (project companies).

The Minerals Law mandates that exploration licences are issued through a bidding process organised by the Mineral Resources and Petroleum Authority of Mongolia (MRPAM). These licences are valid for three years and can be renewed three times, each for an additional three years. Licence holders are required to pay licence fees and cover the necessary minimum expenditures for exploration activities.

Mining licences are granted through an exploring-to-mining process, where exploration licence holders can apply to convert their exploration licences into mining licences covering the same area. Mining licences are valid for 30 years and can be extended indefinitely for 20-year increments, provided sufficient mineral reserves are confirmed.

A project company seeking to transfer an exploration or mining licence must submit the required documents and reports and secure prior approval from the MRPAM.

Licence holder responsibilities

Exploration licence holders. The Minerals Law requires project companies to submit raw data and a comprehensive report on mineral reserves, exploration and prospecting results before their exploration licence expires. The MRPAM then reviews the report, consults experts, and decides whether to adopt the reserve estimates and include them in the national reserve registry.

Mining licence holders. Within one year of obtaining a mining licence, project companies must prepare and submit a feasibility report on mineral deposit development. This report should also be submitted to the Minerals Professional Council for approval and registration.

Once approved, project companies are required to revise, update or recompile their feasibility report every five years, or whenever significant changes occur in project capacity, technology or processes.

Additionally, project companies must submit an annual mining plan for the following year by 1 December and an annual mining report by 15 February of the following year for the MRPAM’s review. Failure to submit these documents does not directly result in licence termination, but may lead to penalties under Mongolia’s Law on Petty Offenses.

Environmental obligations

Upon obtaining mining rights, project companies are required to fulfil a range of environmental obligations. Compliance with these obligations is critical to the company’s successful operation.

Under Mongolia’s Minerals Law and the Law on Environmental Impact Assessment, mining licence holders must submit an environmental impact assessment report to the relevant authorities before commencing any mining operations.

The Ministry of Environment and Climate Change (MECC) typically sets submission deadlines based on the licence holder’s specific circumstances and may grant extensions if necessary. Due to its technical complexity, the report is typically prepared by specialised agencies and reviewed by MECC experts.

Project companies must annually draft and implement an environmental management plan, submitting the following year’s plan to the MECC by 1 November each year. The plan should outline environmental protection measures for mining sites, infrastructure, processing plants and roads, as well as management approaches for water supply, waste discharge, hazardous chemical use and storage, and subcontractor activities.

Upon mine closure, project companies must report progress on environmental restoration and mine closure to the MRPAM and submit a detailed closure and reclamation report. The report must include information on dedicated funds for ecological restoration.

Mongolia’s regulations also provide detailed guidelines on the temporary storage, collection, transport, recycling and disposal of hazardous waste post-closure. Non-compliance may result in penalties under Mongolia’s Criminal Code or Law on Petty Offences, depending on the violation’s nature.

Takeaways

Mining is a crucial driver of Mongolia’s economy and growth. The nation’s abundant mineral resources and strategic location have made it a key destination for Chinese investors.

To safeguard their interests and ensure project sustainability, Chinese companies investing in Mongolia’s mining sector must thoroughly understand local laws and regulations, as well as their own rights and responsibilities.

Cheng Jun is an equity partner and Zhao Zeyu is an associate at Zhong Lun Law Firm