Mongolia's Minerals Law: The Overdue Reform Is Now on Parliament's Desk

Last week, Mongolia's Cabinet approved long-overdue amendments to the Minerals Law — legislation that has been discussed for the better part of a decade and is finally on Parliament's desk. The bill revises up to 50% of the existing framework and targets five structural failures in one go: royalty distribution, the stalled copper pipeline, exploration licensing, processing regulation, and critical minerals — all areas where the current law has been visibly failing.

The amendments address structural problems that have compounded for over a decade: chronic underinvestment in exploration, a weak domestic processing sector, inequitable distribution of mining revenues between central and local governments, and a pipeline of economically viable copper projects that cannot move forward under current royalty conditions.

Five key amendments: Each targets a structural failure the sector has lived with for twenty years

• Royalty distribution — rewarding host communities.
  Local governments have had too little financial stake in the mining operations on their doorstep — and it has shown. The amendments raise the royalty share directed to local government fund from 10% to up to 20%, and shift from blanket province-level disbursement to a performance-weighted formula that reaches down to the district level, scoring communities on population, remoteness, active license count, and cooperation with responsible mining operations. The financial incentive to obstruct becomes a financial incentive to facilitate.
• Copper — breaking a two-decade logjam.
  Twenty-two copper projects with approved feasibility studies are sitting idle, stranded by royalty rates that make their economics globally uncompetitive. The amendments cut the price-linked surcharge on copper roughly in half across all product tiers — ore surcharges drop from 22–30% to 11–15%, and concentrate from 11–15% to 1–5%. The current disparity is stark: Erdenet bears an effective total royalty burden near 21.6%, while Oyu Tolgoi pays 5% under its IA. "Activating the copper sector will advance more than 10 pending projects — this would increase our export capacity by 50%," said Damdinnyam G., Minister of Industry and Mineral Resources.
• Exploration — from license trading to actual geology.
  Mongolia has more mining licenses than active exploration licenses — a pipeline running in reverse. The fix is structural: maximum license tenure is simultaneously halved from 12 to 6 years, fees raised sharply — draining the value from dormant license-holding and pushing capital toward companies committed to real drilling programs.
• Processing — closing the regulatory gap.
  Mongolia extracts and exports. Value-added processing has remained largely outside formal legal oversight — and domestic processors have paid the price through feedstock shortages and unworkable economics. For the first time, mineral beneficiation without a mining license will require its own dedicated license, bringing the activity within a formal regulatory perimeter. The framework is designed to underpin downstream industrialization, including coal-chemical and steel complex projects in the government's 2024–2028 program.
• Mine closure — codifying what was regulatory.
  Closure and rehabilitation obligations are placed in statute for the first time. Operators must develop closure plans before commencing operations and begin setting aside dedicated closure financing once production reaches 75% of planned life — reducing tail-end liability risk and closing a gap that has increasingly complicated access to institutional and ESG-aligned capital.
• Critical minerals — a legal framework for a geopolitical moment.
  The amendments create the country's first statutory basis for designating critical minerals. "The legal foundation to declare a critical minerals list is now being established — 21 types of critical minerals will be added," said Dashpurev B., State secretary of Ministry of Mining and Heavy Industry. A published list converts geopolitical attention into actionable investment and cooperation structures.

The broader legislative package accompanying these amendments — spanning the Budget Law, National Sovereign Wealth Fund Law, Mining Products Exchange Law, and others — signals that this is designed as systemic reform, not an incremental patch.

The bill is currently before Mongolia's Parliament for spring session deliberation

The stakes on both sides are concrete. Passage unlocks 22 copper projects with approved feasibility studies. Stalling means another year of stranded projects, another year of processing sector drift, and another year of local communities watching mining revenues flow past them.

What makes this moment different is that external demand has never been stronger — copper hit record highs in 2025, critical minerals have become a priority agenda item for the world's largest economies, and Mongolia has the reserves and the reform package to compete seriously. The variable that remains is political will.

What happens next is a spring session question. The bill is on the table, the economic case is clear, and the geopolitical timing is as favorable as it has ever been. Whether Parliament converts that into a passed law — rather than another cycle of deliberation — is what investors will be watching between now and the session's close.