B.Batkhuu: Gold mining companies will operate actively if regulation is amended

The Ministry of Mining has been working on an amendment to the law on prohibition of extraction at water basins and forested areas. The minister proposed a discussion of the matter to the special session of parliament. The law was passed four years ago, yet implementation of the law has always been inadequate. Some economists explain that this is the result of public disapproval of the law. Below is the interview with Chief of the Policy Implementation Regulatory Agency of the Ministry of Mining, B.Batkhuu,  on the new amendment to the law and its advantages and disadvantages.

-          What changes were made in the law regulating compliance with the law on prohibition of extraction at river basins and forested areas?

-          When the law itself was adopted on July 16, 2009, the concomitant law on regulations for complying with the law was adopted as well. Although four years have passed since the regulatory law was adopted, the realization of the law is extremely inadequate. There are a number of ground reasons behind this situation. First of all, when the law was first enacted, the Ministry of Environment and Green Development was responsible for setting the boundaries of the three affected regions, yet they’re still not set.

Also the regulation law itself  is defective. Entities had already invested a large amount of money to obtain special permission and keep their corporations operational before the law went into effect.

We didn’t amend the main law on prohibition of extraction at river basins and forested areas at all. But the means of execution were faulty. Thus, we agreed to receive the petitions of 346 mining companies with extraction permit licenses which had commenced their operations before the law on regulations for complying with the law on prohibition of extraction at river basins and forested areas was adopted.

     – Did you establish criteria for the companies?

- Of course we did. The company had to issue a guarantee on rehabilitation and obtain an official evaluation of the mining site confirming that the deposit was profitable and resourceful enough to afford full land rehabilitation. The companies that satisfied the criteria would conclude an agreement with the ministry.

-          Can you talk more about the content of the agreement?

-          It’s a trilateral agreement among the Mineral Resources Authority, the mining company and local authorities. The agreement focuses on the mining company’s operation stages, profit, and ability to rehabilitate the land. After the mining company becomes operational, local authorities and official agencies will monitor the abidance of the agreement. Also we’ll embellish certain laws related to our sector in the agreement. For example, according to law on forest the company must plant 10 trees for every one tree that is cut for the operation of the company.

-          Many gold mining companies backed off because of the law on prohibition of extraction at river basins and forested areas. Is the amended law in such companies’ favor?

-          Most of the companies that are subject to the amended law are gold mining companies. Today, the gold mining sector is seeing unfavorable conditions. Before, gold delivery to the Bank of Mongolia was permanently around twenty tons a year. But now this number has decreased to four or five.

-          I believe it was greatly affected by the 68 percent windfall profit tax?

-          The law on prohibition of extraction at water basins and forested areas and 68 percent windfall profit tax both resulted in this problem. But now, the amended law offers the chance for gold mining companies to get back on track again. But we’ll conform to the principal of not contaminating rivers and destroying forests only for small profit. Thus, the resource estimation must be exact.

-          So, does that mean the mining companies are allowed to operate at river basins, river source and forested areas?

-          Yes, to a certain extent. The companies will operate provided they pay the tax properly, deliver the mined gold to the Bank of Mongolia and comply with the agreement.

-          Have you received requests from gold mining companies?

-          They agreed to have transparent operating process and to deliver gold to the Bank of Mongolia. Also, operating near river basins is strictly forbidden. Basically, the mining companies and government can reach concurrence.

-          How many companies are delivering their gold to the Bank of Mongolia currently?

-          As it was last reported, five tons of gold from thirty companies were delivered.

-          Can you talk about the draft law on increasing gold trade?

-          Although the 68 percent windfall tax law was rescinded due to the sudden drop in gold delivery to the Bank of Mongolia, it could make no difference. Then the law on exhausting renewable resources was adopted. Before the companies were obliged to pay an over 10 percent tax including payment for resource extraction. Since the gold is not as the same size as copper or iron it’s hard to control its shipment. Thus, the gold being delivered to the Bank of Mongolia by mining companies will be free of payment for resource extraction as enshrined in the draft law. The main purpose of this draft law is to expose the underground gold trade.

-          Will the newly amended law on prohibition of extraction at river basins and forested areas affect the Mongolian economy?

-          We are expecting many results. First of all, the law on prohibition of extraction at river basins and forested areas will be enforceable. Secondly, the discord between gold mining companies and civil movement organizations will surely thaw. Thirdly, the burden on the state budget will significantly decrease as the rehabilitation costs will be covered fully by mining companies, which was previously paid by the government. Fourthly, the more companies operating means more tax, which means more input into the state revenue. Also, the practices of the companies will get better as the law goes into effect.

-          It’s said that the gold mining sector will be liberalized?

-          This law is still in its early stage. It will be officially introduced as soon as it’s complete.

-          The laws related to mining will be discussed during the next special session of parliament?

-          We’ll discuss factors that are hindering the progress of the mining sector and try to find an alternative way out. According to the research, the drop in mining sector investment is related to the strict law on prohibition of extraction at river basins and forested areas. Thus the discussion of the law to make it more practical will also be a main topic.  

-          Some people feel that the clauses of the law on prohibition of extraction at river basins and forested areas must be strict. But some say that these strict clauses have negative effects?

-          We held meetings with the related organizations and NGOs and agreed that the main principle of the law is acceptable. We’ll amend the law on regulations of compliance, not the main law.

-          Does this law include issues related to private miners, the “ninjas”?

-          A new legal environment for private miners was created. They will be allowed to work on the waste soil of deposits and in the areas where major mining companies can’t operate.

-          What are the possible risks of the newly amended law?

-          It’s possible that the mining companies might not be able to rehabilitate the mining site if certain deposits are not as rich in resources as estimated, then the private miners could work on that site. But according to environmental law, the mining companies mustn’t abandon the land without rehabilitating it. Since the companies won’t be compensated, the newly amended law might have a certain kind of negative impact.


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Posted by on Sep 18 2013. Filed under Community, Domestic. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

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