Mongolia is preparing for another change on its mining legislation as Parliament considers amendments to the Law on Minerals, with the proposed Law on Supporting Critical Minerals Projects expected to play a decisive role.

     The Law on Minerals, first adopted in 1994 and most recently revised in 2006, has been amended 44 times since 2008. Thirty of those changes were linked to other legislation, a process that some experts argue has left the law “without a guiding philosophy.” After 19 years without a full revision, a parliamentary working group is now researching potential reforms.

Critical Minerals Legislation Driving Change

     Alongside this review, Law on Supporting Critical Minerals Projects is getting drafted, introduced by Member of Parliament B. Uyanga and colleagues. The initiative seeks to channel more of the benefits from subsoil resources—guaranteed under Mongolia’s Constitution—into the sovereign wealth fund, while safeguarding the rights of project implementers.

     If adopted, the law could reshape the balance between the State and private entities in Mongolia’s mining sector.

From Parliamentary Discretion to Investment-Based Regulation

     One of the most significant changes would abolish the long-standing distinction between deposits explored with public funds and those financed privately.

     Under the current regime, the State may take up to 50% ownership free of charge in projects based on publicly funded exploration, or up to 34% free equity in projects discovered with private funding. The draft law eliminates this free equity rule, instead linking State ownership strictly to its actual financial contribution. According to the drafters, this amendment is justified on the basis that Article 60 of the Law on Minerals already provides for reimbursement to the State of exploration costs financed by the state budget, making any recalculation redundant.

     The reform would also allow State participation to be replaced by royalty payments, creating a more standardized and predictable legal framework for investors.

Curbing Parliamentary Discretion

     Another striking proposal is the removal of Parliament’s authority to set the percentage and scope of State ownership on a case-by-case basis. Instead, ownership and royalties would be determined by investment levels.

     Though the drafters offered little explanation for this shift, they might referenced Norway’s Government Pension Fund model, which inspired much of the law’s underlying research.

Redefining Mineral Classifications

     The draft law also introduces a clearer classification framework. It distinguishes between “strategically important mineral deposits” and “critical minerals,” shifting away from the previous approach that tied benefits to reserve size.

     Critical minerals, defined as essential production resources, would be subject to lower exploitation rates—50% less than before for critical minerals specified under law, and just 2% for those not listed in Article 47.5 of the Minerals Law.

     Accompanying amendments to related laws are also being prepared, offering tax and regulatory benefits to companies engaged in critical mineral projects. Policymakers hope this package will attract foreign investment, diversify Mongolia’s mining sector, and expand contributions to the sovereign wealth fund.

     With the Minerals Law having undergone piecemeal changes for nearly two decades, the new draft represents an effort to restore coherence and competitiveness to Mongolia’s mining policy.

ALT-3 (Gold-3) Program Stalled Following Presidential Veto

     President U. Khurelsukh has vetoed key provisions of Parliament’s Resolution No. 85 of 2025, which sought to advance the “ALT-3” program. He argued that the measure undermines environmental protection and contradicts Mongolia’s constitutional principles.

ALT-1 (1992–2000)

     The first-ever ‘ALT’ program, initiated by Mongolia’s first President P. Ochirbat shortly after his election, was launched to help stabilize the economy and the tugrik. During the “ALT-1” program, annual gold production rose from 0.7 tons to 11 tons, largely due to private investment in placer deposits. This provided strong momentum for the industry and boosted state revenues.

     However, environmental safeguards were minimal, and limited rehabilitation efforts led to significant waste and the rise of artisanal miners (“ninjas”) around Shariin Gol, Zaamar, and Bayankhongor.

ALT-2 (2000–2010)

     The successor of the “ALT-1”, the “ALT-2” program marked a new stage in the sector. Production peaked at 24.1 tons, with over 40 percent sourced from primary deposits—a major structural shift.

     But from 2006 onward, output collapsed as the Windfall Profits Tax imposed heavy fiscal burdens on mining companies, discouraging production.

ALT-3, Growth Plans Versus Environmental Concerns

     During former Prime Minister L. Oyun-Erdene’s cabinet, the ‘ALT-3’ program was proposed as part of the 2024–2028 Action Plan. Its goal is to increase foreign reserves and stabilize the tugrik through expanded mining, stricter export controls, and the development of major deposits.

     After the new Prime Minister Zandanshatar G. took office, the ALT-3 program was launched in July following Parliament’s Resolution No. 85.

     However, one controversial provision would allow changes to protected areas in order to access large-scale deposits. President Khurelsukh rejected this measure, emphasizing that environmental protection and the expansion of protected zones are essential to national security. He also warned that the resolution risks undermining presidential veto powers.

     Parliament must now reconsider the veto at a plenary session regardless of the regular agenda. If two-thirds (66.6 percent) of MPs present vote not to accept the veto, the resolution will remain in force.

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