Mining Royalties

The Minerals Law (Article 47) provides that the holder of a mining license must pay a standard royalty calculated on the basis of the total sales value of the minerals extracted.   The standard royalty rates are 2.5% for coal sold in Mongolia as well as for commonly occurring minerals sold in Mongolia, and 5.0 % for all other minerals i.e. coal sold abroad, commonly occurring minerals sold abroad and minerals that are not commonly occurring, either sold in Mongolia or abroad.

On November 25, 2010, the parliament of Mongolia adopted an amendment to Article 47.  The amendment introduced a new surtax royalty that was applicable from January 1, 2011. The amendment does not modify the standard royalty regime.

·         A surtax royalty is imposed on the total sales value of 23 types of minerals in addition to the standard flat-rate royalty previously applicable

·         The new surtax royalty replaces a previously applicable windfall profits tax

·         The rates of the surtax royalty vary depending on the type of minerals, their market prices and their degree of processing.

More specifically, the rates are significantly higher for copper than for other types of minerals; the rates increase as the market prices for the minerals go up; and the rates are lower for processed materials than for unprocessed minerals in order to encourage mining companies to engage in value-added activities.

The rates of the new surtax royalty vary from 1% to 5% for minerals other than copper. For copper, the surtax royalty rates range between 22% and 30% for ore, between 11% and 15% for concentrates, and between 1% and 5% for final products. Reference prices with their sources are announced from Government organizations on a quarterly basis.

The table below sets out the rate structure for covered commodities.

Surtax Royalty Rates Applicable in Addition to the Standard Royalty Rates

№	Types of Minerals	Unit of Measure	Reference Products	Future Market Price (USD)	Surtax Royalty Rates based  on the Degree of Processing
					Ore	Concentrate	Product
1	Copper	Tonne	Copper (pure metal)	0-5000	0.00	0.00	0.00
				5000-6000	22.00	11.00	1.00
				6000-7000	24.00	12.00	2.00
				7000-8000	26.00	13.00	3.00
				8000-9000	28.00	14.00	4.00
				9000 and above	30.00	15.00	5.00
2	Gold	Ounce	Gold (chemically pure)	0.9	-	-	0.00
				900-1000			1.00
				1000-1100			2.00
				1100-1200			3.00
				1200-1300			4.00
				1300 and above			5.00
3	Zinc	Tonne	Zinc (pure metal)	0-1500	0.00	0.00	0.00
				1500-2000	1.00	0.80	0.40
				2000-2500	2.00	1.60	0.80
				2500-3000	3.00	2.40	1.20
				3000-3500	4.00	3.20	1.60
				3500 and above	5.00	4.00	2.00
4	Molybdenum	Tonne	Molybdenum	0-35000	0.00	0.00	0.00
				35000-40000	1.00	0.80	0.50
				40000-45000	2.00	1.60	1.00
				45000-50000	3.00	2.40	1.50
				50000-55000	4.00	3.20	2.00
				55000 and above	5.00	4.00	2.50
5	Iron	Tonne	Iron ore	0-60	0.00	0.00	0.00
				60-70	1.00	0.70	0.40
				70-80	2.00	1.40	0.80
				80-90	3.00	2.10	1.20
				90-100	4.00	2.80	1.60
				100 and above	5.00	3.50	2.00
6	Tungsten	Tonne	Tungsten concentrate	0-25000	0.00	0.00	-
				25000-30000	1.00	0.80
				30000-35000	2.00	1.60
				35000-40000	3.00	2.40
				40000-45000	4.00	3.20
				45000 and above	5.00	4.00
7	Fluorite	Tonne	Fluorite ore and fluorite concentrate	0-80	0.00	0.00	-
				80-90	1.00	0.90
				90-100	2.00	1.80
				100-110	3.00	2.70
				110-120	4.00	3.60
				120 and above	5.00	4.50
8	Fluorite flotation concentrate	Tonne	Fluorite flotation concentrate	0-200	-	0.00	-
				200-230		0.70
				230-260		1.40
				260-290		2.10
				290-320		2.80
				320 and above		3.50
9	Tin	Tonne	Tin	0-17000	0.00	0.00	0.00
				17000-18000	1.00	0.80	0.50
				18000-19000	2.00	1.60	1.00
				19000-20000	3.00	2.40	1.50
				20000-21000	4.00	3.20	2.00
				21000 and above	5.00	4.00	2.50
10	Lead	Tonne	Lead (pure metal)	0-1500	0.00	0.00	0.00
				1500-1800	1.00	0.80	0.40
				1800-2100	2.00	1.60	0.80
				2100-2400	3.00	2.40	1.20
				2400-2700	4.00	3.20	1.60
				2700 and above	5.00	4.00	2.00
11	Non-processed coal	Tonne	Coal	0-25	0.00	-	-
				25-50	1.00
				50-75	2.00
				75-100	3.00
				100-125	4.00
				125 and above	5.00
12	Processed coal (dry and wet processing)	Tonne	Coal	0-100	-	0.00	-
				100-130		1.00
				130-160		1.50
				160-190		2.00
				190-210		2.50
				210 and above		3.00
13	End products (semi-coke, coke, gas, liquid fuel, coal chemical products)	Tonne	Coke	0-160	-	-	0.00
				160-190			0.50
				190-210			1.00
				210-240			1.50
				240-270			2.00
				270 and above			2.50
14	Silver	Ounce	Silver (chemically pure)	0-25	-	-	0.00
				25-30			1.00
				30-35			2.00
				30-40			3.00
				40-45			4.00
				45 and above
15	Magnesia	Tonne	Magnesia concentrate	0-100	0.00	0.00	-
				100-120	1.00	0.90
				120-140	2.00	1.80
				140-160	3.00	2.70
				160-180	4.00	3.60
				180 and above	5.00	4.50
16	Aluminum	Tonne	Aluminum (pure metal)	0-2300	0.00	0.00	0.00
				2300-2600	1.00	0.90	0.50
				2600-2900	2.00	1.80	1.00
				2900-3200	3.00	2.70	1.50
				3200-3500	4.00	3.60	2.00
				3500 and above	5.00	4.50	2.50
17	Rare earth elements	Kg	Rare earth elements oxide concentrate	0-10	0.00	0.00	-
				20-Oct	1.00	0.90
				20-30	2.00	1.80
				30-40	3.00	2.70
				40-50	4.00	3.60
				50 and above	5.00	4.50
18	Phosphate	Tonne	Concentrate	0-70	0.00	0.00	0.00
				70-90	1.00	0.90	0.50
				90-110	2.00	1.80	1.00
				110-130	3.00	2.70	1.50
				130-150	4.00	3.60	2.00
				150 and above	5.00	4.50	2.50
19	Celite	Tonne	Celite (цеолит)	0-200	0.00	0.00	-
				200-250	1.00	0.90
				250-300	2.00	1.80
				300-350	3.00	2.70
				350-400	4.00	3.60
				400 and above	5.00	4.50
20	Quartz vein	Tonne	Quartz	0-30	0.00	0.00	-
				30-40	1.00	0.90
				40-50	2.00	1.80
				50-60	3.00	2.70
				60-70	4.00	3.60
				70 and above	5.00	4.50
21	Rock salt	Kg	Salt	0-40	0.00	0.00	-
				40-50	1.00	0.90
				50-60	2.00	1.80
				60-70	3.00	2.70
				70-80	4.00	3.60
				80 and above	5.00	4.50
22	Potash	Tonne	Potash	0-140	0.00	0.00	-
				140-150	1.00	0.90
				150-160	2.00	1.80
				160-170	3.00	2.70
				170-180	4.00	3.60
				180 and above	5.00	4.50
23	Gypsum	Tonne	Gypsum	0-9	0.00	-	-
				9-11	1.00
				11-13	2.00
				13-15	3.00
				15-17	4.00
				17 and above	5.00