Finance Minister explains proposed graduated royalty rates

The Government yesterday decided that a bill to amend the Law on Mineral Resources should be submitted to Parliament for approval. The draft proposes graduated royalty rates to replace the 68 percent windfall tax. Minister for Finance S.Bayartsogt explained the provisions in the draft to media and then answered questions.

The draft was prepared after considering suggestions from the Mongolian National Mining Association and entrepreneurs and companies operating in the mining sector. Not all of these were accepted.

What does the Government want?

The Finance Ministry studied many types of taxes and then formulated the present draft. There will be a basic five percent royalty fees on every mineral commodity. This will be raised by one percent, up to a maximum of 5%, as commodity prices increase. When a ton of copper ore costs USD 5,000 or less, the royalty payable will be the basic 5 percent. When the price reaches USD 6,000, the royalty will become six percent. Rising gradually, the royalty will be 10% when prices exceed USD9,000.

As for gold, the basic rate will apply until price per ounce is below USD 900. It becomes six percent when the price reaches USD1,000, seven percent at USD1,100, eight percent at USD1,200 and 10 percent if the price exceeds USD1,200.

For zinc it will be 5 percent for below USD 2,000, 6 percent at USD2,500, 7 percent at USD 3,000, 8 percent at USD 3,500 and so on.

Royalty on molybdenum will be 6 percent when the price per ton is USD40,000, 7 percent when USD45,000, 8 percent when USD50,000, 9 percent when USD55,000, and 10 percent when it crosses USD 55,000.

Coal will be in two groups - raw and processed. In the case of the first, royalty will be 5 percent when the price is USD 25 per ton, six percent when USD35 per ton, 7 percent when USD 45, 8 percent when USD 55, 9 percent when USD65 and 10 percent if the prices exceeds USD65 per ton. As for coked coal, it will be 5 percent for price below USD100 per ton, 6 percent for USD130, 7 percent for USD160, 8 percent for USD190, 9 percent for USD210 and 10 percent if the price is above USD 210.

He said the royalty graduation will not affect the Oyutolgoi mine


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