State ownership in the Gatsuurt gold mine, a strategically important deposit, will be 34 percent as a Parliamentary resolution was approved on defining state ownership in the Gatsuurt deposit on February 4.
This approval gives license holder Canadian ‘Centerra Gold’ Company permission to start mining operations after holding talks and making investment agreements with the Government. However, mining operations at the Gatsuurt deposit have to be delayed for an uncertain period because on February 5, the Administrative Court made a decision to open an administrative case regarding two mining licenses of Centerra Gold at the Gatsuurt deposit. “Let’s save Noyon mountain” movement addressed the court complaining that the Mining Authority gave mining license numbers 431 and 372 to the Centerra Gold Company based on counterfeit facts the licenses should be cancelled.
‘The court urged to not conduct any activity until the case is finalized. The trial will continue for at least one year; and during this time, it is impossible to conduct mining operations in Noyon Uul mountain’ said G.Batbayar, lawyer for the movement.
The decision to mine the Gatsuurt deposit has faced many barriers and protests for over 5 years and even after Parliament made a final decision, Centerra Gold in on hold due to the court decision.
Centerra Gold Mongolia made a request to the government to jointly use the deposit. The location of the deposit prevented Centerra Gold from running mining operations since 2009 when the law on prohibiting mineral exploration and mining operations at headwaters of rivers, protected zones of water reservoirs and forested areas, was adopted. In late January 2015, Parliament adopted a resolution to include the Gatsuurt gold deposit in the list of strategic deposits which allowed Centerra Gold to move forward with the project within the application of related laws. As the Gatsuurt mine is considered as a deposit of strategic importance, the government should have an ownership share in the deposit. In February 2015, the Government proposed to have 20 percent state ownership in the deposit but Parliament rejected the draft.
During the draft discussions, civil protests against mining the deposit were active with organized demonstrations and a hunger strike. The deposit is located in Mandal soum of Selenge Aimag, in the Noyon Uul basin where many archeological findings including graveyards of Hunnu, the first confederation of Mongolian tribes, were discovered.
Some MPs, environmental movements, NGOs and local residents protested against mining the Noyon Uul mountain area claiming that mining operations negatively affect sacred places and graves of ancient kings and noblemen.
On Oct 23, 2015, the Government resubmitted a new version of the Parliamentary resolution on defining state ownership in the Gatsuurt deposit which is a 34 percent share.On February 04, 2016, majority of the attending MPs at the plenary session supported the approval. During the discussion, some MPs again expressed opposing positions.
The Gatsuurt river now contains high arsenic levels. This poisonous element is present in wells and it will be very dangerous if the arsenic amount exceeds acceptable levels, they warned.
“Ancient graveyards of the Hunnu Empire face the danger of being destroyed for some 50 tons of gold. It is also strange that the government assures that the deposit has a reserve of 50 tons of gold while the license holder estimated that the deposit has a reserve of 105 tons of gold.
Professional institutes said that a 78 thousand ha area is needed to be under protection to conserve the Noyon Uul in its natural state. The right to define border line of the protected areas around Noyon Uul should not be given to the Government.We do not need a foreign investor to extract gold, as artisanal miners manage to extract gold” said MP G.Uyanga during the parliamentary discussion.
Mining Minister R.Jigjid said ‘ Studies and experiements related to arsenic were held in 2009. Arsenic was exposed when an open pit had been used earlier due to soil erosion. There are three types of arsenic:organic, 5 valence and 3 valence.Arsenate +5 (oxidation state) is the dominant form of hypoxic to anoxic environments. Arsenite is more soluble and mobile than arsenate). Arsenic with 3 valence is more dangerous and it can be neutralized, making it 5 valence. Experiements have been conducted successfully to make arsenic safe to nature by encrusting it through a chemical reaction and assimilate it into the sand. It is planned that polluted water would accumulate in a pond to make it safe to reach standard levels and would resupply nature”, said Minister R.Jigjid.
Parliament adopted a resolution to take some around Noyon uul mountain under special protection, namely 11 thousand ha area in the Mandal soum territory of Selenge aimag under the category of natural reserve and a 405 ha area in Bornuur and Batsumber soums’ territory of Tuv aimag under the category of historical memorial sites. The Government will define the border line of the areas under special protection.
Some MPs proposed to take area around Noyon Uul mountain under the category of National Parks. However, it was said that MPs should initiate another resolution as at least 36 thousand ha land needs to be taken to meet that category.
PM Ch.Saikhanbileg underlined ‘By having a 34 percent share in Gatsuurt deposit, taxes worth 480 billion tugrug will be paid to the State Budget, the gold reserve of Bank of Mongolia will increase by 50 tons and 1000 jobs will be created”.
Exploration work at the Gatsuurt mine deposit was carried-out with private funds; therefore, the Mongolian government has a chance to own up to 34 percent of its shares as stated in the Minerals law.
The Mining Ministry is to hold talks with the license holder Centerra Gold Mongolia LLC saying that 34 percent state ownership in Gatsuurt deposit could be replaced with a special royalty. Prior to approval of the parliamentary resolution, a working group at Mining Ministry held talks with the license holder and agreed that the special royalty would be 3 percent when the gold price is 1100-1400 USD per ounce.
The special royalty rate can be changed in future based on an agreement of the two sides in accordance with the gold price on the world market.
“According to the Minerals law, the Government has two options: to own 34 percent and get dividends, or get a special royalty equal to a 34 percent share. In case of owning the share, the Mongolian government has to invest money equal to 34 percent. This version is tough for Mongolia as the economy faces difficulties and we have to borrow money. Moreover, we will get dividends when the company generates profit. In other words, it takes time. The parliament resolved difficulties of cooperating with foreign investors in exploiting strategically important deposits by creating a special royalty.
This option allows Mongolia to get paid as soon as the mining products are traded regardless the company’s profit’ explained Mining minister R.Jigjid.
According to the mining minister, the royalty will be 3 percent, accounting for 432.3 billion tugrug (433.6 million USD) by preliminary estimations. Five tons of gold will be sold annually to the Bank of Mongolia, which means some 189 million USD if trades hold in the swap.
The project needs 215.9 million USD investment. Operation costs for the mine are estimated to be 1.0262 billion USD with annual sales of 1.7692 billion USD and the tax will be 433.6 million USD.