Presentation on theme: "MINERAL SECTOR OF MONGOLIA"— Presentation transcript:
1 MINERAL SECTOR OF MONGOLIA 4/11/2017MINERAL SECTOR OF MONGOLIAPresenter J.BILEGSAIKHANHead of Mining Department of Mineral Resources andPetroleum Authority of Mongolia1
2 Present level of Geological investigation in Mongolia 99.1 % of the Mongolian territory is covered by geological mapping on a scale of 1: ,24.8 % of the Mongolian territory is covered by general exploration work and geological mapping on a scale of 1:50 000,84% of the Mongolian territory is covered by hydro-geological mapping on a scale of 1: ,22.5 % of the Mongolian territory is covered by gravimetric survey on a scale of 1: and 1: ,60 % of Mongolian territory is covered by aerial magnetic survey on a scale of 1: ,32 % of the Mongolian territory is covered by aerial multispectral survey on a scale of 1: and 1:
3 24.8% of the Mongolian territory is covered by general exploration work & geological mapping on a scale of 1: This figure is expected to increase every year by 0.2 to 0.5 %.
7 The mineral sector’s impact on the Mongolian economy (1) 20022003200420052006GROSS DOMESTIC PRODUCT10.10%12.70%17,3%18.00%30.1%GROSS INDUSTRIAL PRODUCT47.30%49.60%64,7%65,5%72.2%EXPORT56.70%58.90%70.80%75,8%76.1%
8 Production and Investment in MiningPreliminary estimations by MRPAM
12 Petroleum Exploration Blocks Active exploration under PSC:Petro China Daqing Tamsag – XIX, XXI, XII; Dongsheng Gazriin tos – 1997PSC; Petromatad – XX; China Golden Sea Petroleum - XVApplication under consideration:Block number – II, III, IV, V, VI, XI, XII, XVI,XVII, XVIII, XXIII,Blocks for receiving applications:Block number – VII, IX, X north, X south, XXVI,Block receiving applications by countries:Canada -1, Australia-1, Russia-2, Mongolia-2, China-2Open blocks:Block number – VIII, XIII, XIV, XXIV
14 TAXES APPLICABLE TO MINING OPERATIONS 2002200320042006CORP. INCOME TAX15% / 40%15% / 30%10% / 25%VALUE ADDED TAX (VAT) ON IMPORTED MINING EQUIPMENT15%ROYALTY2,5%2,5% / 5%ROYALTY FOR PLACER GOLD PRODUCTION2,5%7,5%5%VALUE ADDED TAXON GOLD PRODUCTION15%
15 WINDFALL TAXIn 2006 the Mongolian parliament passed a law on excess profits tax (windfall tax).The windfall tax is imposed on gold when its LME-price exceeds 500 USD/ounce and on copper above a LME-price of 2600 USD/t.A tax rate of 68% applies to revenues that exceed above-mentioned price levels.
16 Taxes in the mining sector of Mongolia Effective tax rate5101520253019971998199920002001200220032004200520062007yearpercentageGold, %Copper, %
17 Tax rates based on gold prices Effective tax rate/gold/0%10%20%30%40%50%60%70%80%700750800850US$/ounceEffective tax rateRate in total expenseGold price US$/ounceEffective tax rateTax rate on total costs70028%68.5%75032%71.9%80034%74.2%85037%76.1%
18 Tax rates for different copper prices Price of copperUS$/tonEffective tax rateRate on total costs400016%23%500024%34%560026%37%600029%41%650032%45%700036%51%Effective tax rate /Copper/0%10%20%30%40%50%60%400050005600600065007000US$/tonEffective tax rateRate in total expense
19 Effective tax rate as calculated in paragraph 61 of Minerals Law 51015202519971998199920002001200220032004200520062007years%Gold, %Copper, %
20 AMENDMENTS OF THE NEW MINING LAW Strengthened issues on environmental protection and rehabilitationExtended rights of local administrative bodiesLicense holders duties are increasedMining licenses are granted in two different ways:First come first serve basis on new exploration areasTender biding on other areas
21 AMENDMENTS OF THE NEW MINING LAW Classification of Mineral deposits:- Deposits of strategic importance- Deposits of conventional mineral- Deposits of common mineralGovernments Participation and Guarantee:the state may participate up to 50% jointly with a private legal person in exploitation of a mineral deposit of strategic importance where state funded exploration was used to determine proven reserves.The state may own up to 34% of shares of the investment made by a license holder of a mineral deposit of strategic importance where proven reserves were determined through funding sources other than the State budget.
22 Strategic deposits in production 1ERDENETCoppermolibdeniumB+C1 = 3,2 mil t Cu,B+C1 = 90 thous t Mo,Orkhon Erdenet6BOROOGold36 tSelenge Mandal2BAGANUURBrown CoalA+B+C1 = 511,4 mil tCentralBayandelger3SHIVEE OVOOA+B+C1 =564.0 mil tGovisumber4NARIIN SUKHAITHard CoalA+B+C1 = 88.9 mil tSouthgovi Gurvantes5TOMURTIIN OVOOZincB+C1 = mil tSukhbaatar Sukhbaatar
23 Uranium deposits of strategic importance 1Mardain golUraniumC1 =1063 t (9.8 thous t)DornodGurvanbulag2Gurvan bulagC1+C2 =16073 tDornod Bayandun3C1+C2 =58933 tDornod Dashbalbar
24 Strategic deposits in pre-operation stage 1TAVANTOLGOICooking and hard coalA+B+C1 = 2,5 bil. tSouthgovi Tsogttsetsii2TOMURTEIIronB=57,0 mil t,C1=100,7 mil.tSelenge Eroo3OYU TOLGOICopper and goldSouthgovi Hanbogd4TSAGAAN SUVARGACopperB+C1=1,08 mil.t Cu, B+C1=170,9 mil.t Ìî,Dornogovi Mandah5ASGATSilverC1=976,6 tBayan-Ulgii Nogoonnuur6BURENHAANPhosphorusC1+C2 = 40,5 mil.tHubsgulAlag-Erdene
25 LICENSEPeriod of validity of exploration licenses shall be 9 years. /3+3+3/Pre-mine development operation /in з years under agreements/Periods of validity of mining licenses shall be 70 years. / /Minimum exploration expenditure. / 0.0, 0.5, 1.0, 1.5 $/hа /Limited license transferring and mortgaging. Added an item stating that licenses can not be used for trading.
26 RoyaltyRoyalties for domestically sold coal or other conventional mineral resources are equal to 2,5% of sales revenueRoyalty for minerals other than specified above shall be 5,0% of sales revenueDistribution of Royalty revenues:70 % into the State budget20 % into the budget of the aimag or capital city10 % into the budget of the soum or district
27 INVESTMENT AGREEMENT 50,0 - 100,0 million USD 10 years Investment agreement can be concluded if an investment of more than 50.0 mill USD is made within the first 5 years.50, ,0 million USD 10 years100, ,0 million USD 15 years300,0 million or more USD 30 yearsThe agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues.
28 Share price of Ivanhoe mines Early result from negotiation on the investment agreement of Oyu Tolgoi depositEstimated resourcesGold1000 tCopper32 mil. tShare holderRio Tinto10%Government of Mongolia34%Ivanhoe mines56%Tax holidayWindfall tax0 during the invetstment agreementOther taxes under Law of MongoliaNo tax holidayTime scheduleOpen pit mine2010Underground mine2014Copper smelter2015Export and importGold product100% to bank of MongoliaPower supply100% national power stations will supplyShare price of Ivanhoe mines
33 Investors from Common Wealth in Mongolia No.Name of CompanyNumber of exploration licensesNumber of mining licensesArea in hectarCanada1Erdenemongol LLC272ENTRE LLC83Redhill LLC57 5394Jaruslav Ruza79 4005EAM energy LLC216UGL-Enterprises LLC22Subtotal88Great BritainRio Tinto15 987Batu Mining81Asia Gold87Ivanhoe mines80Gobi gold49 2QGX78376AustraliaZanadu mine Inc.13Troy Resourses Mongolia2841Total50533