As China slows faster than expected, putting downward pressure on commodity prices, Mongolia is exploring ways and means to attract investment into the mining sector.
Mining Minister Jambalyn Ganbaatar stated that the new exploration licenses, which have been halted since February 2022, will be awarded in tiny batches to avoid arousing local community opposition. He also indicated that exploration licenses would be issued in batches of 5-10 instead of wholesale.
50 invitations for the selection of mineral licenses due December 23, 2022, are open on the government's tender site.
Minister Ganbaatar acknowledged key restrictions to expand the mining sector and attract more investors, citing the fact that 76 percent of Mongolia’s total territory remains under special protection. This means “the specially protected” land area equal to the autonomous region of Inner Mongolia of China is legally prohibited for any economic activities.
Only 2.6 percent of the country (equal to Switzerland territory) is currently permitted for mining exploration, while only 0.23 percent (~Long Island, New York) is mined. Because desertification and climate change affect most of the land available for economic activity (equal to Japanese territory) miners, herders and farmers compete for it.
Herders and rural dwellers are a key voting group that politicians seeking reelection must placate. Also, the decision to make the land available for exploration or include it in the specially protected area is largely made by the citizens’ council of the local community in their respective administrative units, such as aimag, soum or bagh.
Minister Ganbaatar, who was elected from Ulaanbaatar city, stated that the rural people are skeptical of mining exploration efforts because they do not see immediate and direct economic benefits. Everyone expects a miner and even an exploration company to invest in social initiatives and community infrastructure. The Erdenet mine, which established a city of 100,000 people next to it during the socialist times, is referred to as a "perfect example.”
Cabinet Secretary Dashzegviin Amarbayasgalan added that “fair division” of gains from mining activities was critical, and that the government would not “oppress businesses” unless they demonstrated environmental and social responsibility. The phrase “fair distribution/division of wealth” originates from the government action plan (2020-2024) and it was coined by President Khurelsukh during his election campaign in 2021.
Although the 2019 constitutional amendment includes equitable and fair distribution/division of mining earnings, it has yet to be clearly defined in the mineral law revision, which has been delayed for several years.