Mongolia Rethinks Mining Control

Prime Minister Zandanshatar pivots from state stakes to royalties, seeking to revive investment.

Prime Minister Gombojavyn Zandanshatar is recalibrating Mongolia’s approach to its mineral wealth. One hundred days into his term, he is watering down his predecessor’s aggressive drive to seize equity in “strategic deposits.”

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He is pushing royalties to the fore, while retaining a role for the state in selected projects as per the constitution. The adjustment seeks to restore investor confidence without abandoning state participation outright.

The shift became visible when Zandanshatar recently gathered executives from Mongolia’s largest private mining houses, including MCS and MAK.

Both groups, long vocal about government overreach, now signaled readiness to work within the revised framework. The plan emphasizes transparent subsoil fees and predictable royalties, without concentrating on the state equity. The aim is to secure stable revenue streams for the national wealth fund without paralyzing the mining industry.

The “strategic deposit” designation, introduced in 2006 to justify state equity claims, sits at the heart of investor unease. By law, the state can claim up to 34-50% of projects it deems “strategic” under defined conditions.

Executives say the ambiguity suppresses investment. MCS chairman Jambaljamtsyn Odjargal argued that Mongolia needs clarity on what qualifies as a “strategic deposit” and whether the category should exist at all. The National Mining Association calls the category a deterrent to capital.

By shifting to royalties, Zandanshatar implicitly acknowledges these critiques. The 2025 uranium agreement with France’s Orano already reflects this template: high royalties, but less state equity. If applied consistently, the model could reduce regulatory risk and lure fresh exploration—an urgent need as Mongolia’s existing copper and coal projects mature.

Skepticism lingers. Zandanshatar himself once championed populist measures such as windfall taxes and partial nationalizations. Investors now question whether his market-friendly stance will endure beyond fiscal necessity.

But Mongolia’s tight budget leaves little room for dogma. Previous attempts at state ownership yielded little revenue and discouraged expansion. A steady royalty stream, even if politically less satisfying, offers predictability to both sides.

The politics, however, remain fragile. Consolidating this approach requires not only cabinet discipline but also support within the ruling Mongolian People’s Party and the parliament, where politicians still flirt with resource nationalism.

A parliamentary hearing on the Khalzan Buregtei rare earth deposit on September 23 revealed how nationalist and environmental pressures have hijacked rational debate. Despite valid permits and private investment, local protests over radiation have stalled the project and left it in limbo while other countries race to dominate the rare earth market.

For Zandanshatar, the mining shift is pragmatic, not ideological. Mongolia cannot afford more missed opportunities. A royalty-first model will not fix every issue but offers clearer terms than the previous mix of state stakes and shifting rules.

Its success depends less on policy design and more on whether it survives the current political turbulence and translates into functioning mines.

The pivot sets a plausible course, yet its durability hinges on the government weathering the MPP leadership transition.