This article draws on Think Mongol Institute's Policy Brief No. 7: "Mongolia's Strategic Deposits: A Framework Under Strain in the Critical Minerals Race." Read the full brief by downloading it above.
Mongolia faces a dilemma common to many resource-rich developing countries: how to attract the foreign capital needed to develop its mineral wealth without surrendering the benefits that wealth is expected to deliver to the public. Sitting atop an estimated one to three trillion dollars in mineral wealth, the country has spent the better part of two decades attempting to strike that delicate balance through legislation that has, at times, pulled sharply in competing directions. The result has been a mining legal framework shaped by competing political pressures, shifting commodity cycles, and recurring debates over state control and public ownership. Tracing the sequence of major legislative decisions over this period is instructive not only as a record of what changed, but as a foundation for understanding what meaningful reform might look like.
2006: The Current Framework is Established
In July 2006, Parliament extensively revised the 1997 Minerals Law, which had provided a broadly favorable environment for mining investment. Most consequentially, it introduced the concept of the “mineral deposit of strategic importance,” a designation granting the state the right to own up to 34% of shares in companies holding licenses for a given strategic deposit where the proven reserves were determined through funding sources other than the State budget, and up to 50% in those where state-funded exploration was used. The legal definition of a strategically important deposit was provided, and the authority to designate a deposit as strategic was vested in Parliament.
This revision did not emerge in a vacuum. While the mining sector had boomed from the investor-friendly policies of the late 1990s and a sharp increase in commodity prices, with over 6,000 exploration licenses covering 44% of Mongolia’s land area, public sentiment had shifted. Growing distrust of the sector, rooted in concerns about “inadequate environment practices” and a “perceived lack of real benefits” had created political pressure for closer state oversight. In response, the government moved to expand its role in the sector, revising the Minerals Law and adopting a windfall profits tax on gold and copper producers in 2006. While the law was not considered favorable to investors, it established the institutional framework that continues to govern the sector today.
2007: Strategic Deposits are Listed
A year later, Parliament officially listed 15 of the eventual 16 strategic deposits through Resolution No. 27 of 2007. The 16th deposit, the Gatsuurt gold deposit, was added to the list in January 2015. The state equity provision was not considered inherently expropriatory at the time, as the government had committed to compensating companies at fair market value for any shares it acquired. Parliament also directed the government to conduct detailed reserve assessments for 39 mineral deposits specified in the resolution's second annex, as well as for any deposits discovered thereafter, and to recommend whether each warranted strategic designation. Combined with a definition of strategic deposits that critics have described as both too narrow and overly broad, this created a list that could, in principle, be expanded at Parliament's discretion at any time. In 2009, the Minerals Law was further amended to allow the state to replace its equity stake in strategic deposits with additional royalty payments.
As of May 2026, 14 of the 16 deposits had their reserves determined through the state budget, 14 entities are currently conducting operations on strategic deposits, and 25 or 26 legal entities hold licenses to them.
2009–2015: A Series of Further Missteps
This period represents a turbulent phase for Mongolia's investment climate, shaped by a combination of legislative overreach and high-profile commercial dispute. The 2009 Law with the Long Name and the 2012 Strategic Entities Foreign Investment Law (SEFIL) further weakened investor sentiment during a period of growing uncertainty in global commodity markets. Indeed, investors identified SEFIL as one of the primary drivers of a more than 50% decline in FDI between 2012 and its revocation the following year.
Exploration licensing was suspended entirely in 2010 and did not resume until 2015, when the Minerals Law was amended again. For an industry in which the timeline from exploration to first extraction spans roughly 16 years, such a licensing freeze carries long-term consequences. By 2015, the total area covered by exploration licenses had already fallen to 19.9% of Mongolia's territory. Moreover, the protracted dispute between the government and Rio Tinto over the Oyu Tolgoi project, which accounted for nearly half of Mongolia's total FDI between 2010 and 2022, damaged perceptions of Mongolia as a reliable investment destination. This dispute is also widely regarded as a significant contributor to the decline in FDI that followed 2012.
2019: Constitutional Amendment
In 2019, Parliament amended Article 6.2 of the Constitution to enshrine the principle that the “majority of benefits” from strategically important deposits must accrue to the Mongolian people through a Sovereign Wealth Fund. At the time, the term “benefits” was explained to encompass taxes, fees, and dividends, reflecting a broadly held public conviction that the proceeds of resource extraction had not been equitably shared. The amendment carried significant implications for the investment framework: it ultimately paved the way for the 2024 Law on the Sovereign Wealth Fund and the accompanying Minerals Law amendments.
2024: Ownership Rules Tighten Further
The 2024 Sovereign Wealth Fund Law and Minerals Law amendments gave institutional form to the constitutional direction set in 2019. The SWF Law provided the legal basis for the “Chinggis Khaan SWF,” while the Minerals Law amendments imposed new ownership restrictions on strategic deposits and extended state ownership requirements to their residual deposits as well. Investors warned at the time that the policy trajectory would further constrain FDI, noting that a single investor could previously own as much as 66% of a project, and under the new policies that ceiling would fall to 34%. In other words, the new amendments restricted any single investor to a 34% stake and allowed the state to acquire ownership in strategic mining projects without compensation to existing owners.
The cumulative effect has been stark. The area available for exploration, once covering over 40% of Mongolia's territory, had by this point shrunk to approximately 4%. For investors evaluating Mongolia against peer jurisdictions, the country has become an increasingly difficult proposition.
2026: Toward a New Approach
Taken together, this timeline reflects a recurring tension at the heart of Mongolian resource governance: a country that depends on FDI to develop its mineral wealth, yet has repeatedly introduced policies that constrain the conditions under which that investment can operate. Each legislative shift has been driven by a combination of resource nationalism, populist political pressures, and genuine ambitions for national benefit.
Along with a new round of Minerals Law amendments currently under discussion, a directive has been issued to develop a draft law on determining the state ownership share in strategic deposits and their residual deposits and allocating returns to the SWF. The proposed law represents a shift from relying on equity stakes as the primary mechanism of state participation towards relying on formally codified special royalties, classified by mineral type. Moreover, no less than 60% of the "benefits" from strategic deposits would be guaranteed to citizens, with the precise components of that calculation codified in law, and where benefits fall below that threshold, an adjustment payment would be applied.
This new directive, coupled with the pending amendments to the Minerals Law, offers reason for cautious optimism. Moving towards a transparent, rule-based royalty regime attempts to address the unpredictability and open-ended state discretion that has characterized the existing framework. If implemented meaningfully, these reforms could mark the beginning of a more stable chapter for Mongolia's mining sector.
