Mining rights

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THE PROCESS OF MINING MINERALS and using minerals to produce commodities is an important industry in many countries. China is no exception – it is both an exporter and importer of minerals. For example, China is the world’s largest importer of iron ore for steel production, sourcing a large amount of iron ore from countries such as Australia and Brazil. It is also the world’s largest producer of rare earth minerals, which are used in a wide range of products such as mobile phones. Oil and gas exploration is also becoming increasingly important in China.

This column begins by examining the legal nature of mining rights and its relevance. It then considers the issues that arise when security is taken over mining rights. Finally, it outlines the position in mainland China, Mongolia and Indonesia in terms of the nature of mining rights and whether security can be taken over them.

THE LEGAL NATURE OF MINING RIGHTS

The legal nature of mining rights is a fundamental issue as the legal nature of mining rights determines whether they can be dealt with as a type of property and related issues such as whether they can be assigned and made the subject of a security. The question of whether security can be taken over mining rights is particularly important to creditors who finance mining projects. If security over mining rights is possible, creditors need to know what rights they enjoy in the event that the project defaults in its debt payments to them. For example, can they enforce the security by taking control over the mining rights or by selling them to another operator?

If a mining right can be made the subject of a security, two questions become relevant. First, what type of security is possible? This is relevant, as the type of security will have an impact on the rights of the creditor and how they can enforce their rights. Second, what registration and enforcement procedures will apply? This is particularly relevant in circumstances where government approval is required to transfer the mining rights or otherwise enforce the security.

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Andrew Godwin

Andrew Godwin previously practised as a foreign lawyer in Shanghai (1996-2006) before returning to his alma mater, Melbourne Law School in Australia, to teach and research law (2006-2021). Andrew is currently Principal Fellow (Honorary) at the Asian Law Centre, Melbourne Law School, and a consultant to various organisations, including Linklaters, the Australian Law Reform Commission and the World Bank.