Mongolia sits atop immense mineral wealth as global demand intensifies for copper, uranium, and critical minerals, the very resources the country possesses in abundance. Nevertheless, the country cannot attract the sustained investment needed to actually develop that wealth, and it is now commonly japed that Mongolia is a “beggar sitting on gold.”
There are surely many reasons for this – populism, corruption, political inefficiency, and economic mismanagement – and from this very amalgamation of problems arose the concept of the “strategic deposit.” Touted as a framework for ensuring the Mongolian people benefit from their country's natural wealth, it has become in practice a politically elastic instrument that expands state power at the expense of investment and economic growth. Internal actors now squabble endlessly over their “slice of the cake,” while shutting the door on the very conditions that would allow more cakes to be made. The end result is stark, though not unexpected: Mongolia is often perceived as a challenging destination for foreign investment, driven in part by persistent concerns over regulatory risks.
It is frequently mentioned in Mongolian media that the concept of a “strategically important mineral deposit” does not exist in most of the world. As Mongolian lawyer B.Bayaraa noted in an interview, the designation is a holdover from the Soviet era, and the international community has long since moved on, adopting product-based frameworks like “critical minerals” instead. By enshrining a concept that the rest of the world abandoned, Mongolia has made it harder to speak the same language as potential partners and investors, and has handed its own Parliament an instrument of almost unlimited discretion over the country’s most valuable assets.
A vague criterion that is broadly applied
The formal criteria for a strategic deposit were established in the 2006 Minerals Law, which defines “mineral deposit of strategic importance” to mean a deposit that may have a potential impact on national security, economic and social development of the country at the national and regional levels or that is producing or has a potential of producing more than 5 (five) percent of total Gross Domestic Product in a given year. Fifteen of the eventual 16 designated deposits were formally listed by Parliament's Resolution No. 27 in 2007, passed at a time when populism was growing alongside investments and discoveries in the mining sector. The 16th deposit, Gatsuurt, was added in 2015. The Resolution further instructed the Government to conduct detailed assessments of the reserves of the 39 deposits listed in Annex II of the resolution, as well as newly identified deposits, and to submit proposals to Parliament on whether they should be designated as strategically important mineral deposits.
On its face, the GDP criterion appears to set a high bar. In May 2025, the then-Minister of Industry and Mineral Resources, Tuvaan Tsevegdorj, acknowledged that 5% of GDP implies an annual production threshold of around one billion USD, a figure requiring extensive research and assessment to establish for any given deposit. He further confirmed that work on evaluating the 39 deposits listed in Annex II was still ongoing, emphasizing the technical challenges of the process. Meanwhile, the former Government Plenipotentiary for strategic deposit negotiations Batzandan Jalbasuren claimed he submitted an additional eight deposits to the Government for potential designation in early 2025, bringing the total of candidates to 47. Despite these repeated efforts, the official list has remained at 16 since the mid-2010s, largely because no sufficiently large deposits meeting the formal criteria have been discovered.
The GDP threshold captures only one part of the definition. The other, which refers to deposits that “may have a potential impact on national security, economic and social development,” is framed so broadly that its scope is effectively open-ended. As Bayaraa observed, there is ultimately no mining operation that does not affect the economy or society to some degree, which means Parliament retains the practical ability to designate any deposit it chooses. The result is a framework that is simultaneously too narrow and too broad: the GDP threshold is difficult to meet, while the development impact criterion is almost impossible to fail. This combination fails to produce a coherent framework for resource governance, instead generating uncertainty that actively discourages investment.
A decade of stagnation in exploration and investment confidence
The damage from policy uncertainty did not begin with the strategic deposit framework alone. A series of legislative missteps, including the Strategic Entities Foreign Investment Law and the so-called “law with the long name,” contributed to a “dearth of exploration” in the 2010s, compounded by broader commodity market downturns. The consequences have proved lasting. According to current Minister of Industry and Mineral Resources Damdinnyam Gongor, a healthy mining sector typically requires exploration activity five to ten times greater than active extraction in order to sustain a viable pipeline of future reserves. Mongolia now finds itself in a position where mining licenses significantly outnumber exploration licenses, with roughly 1,778 mining licenses compared to about 1,000 exploration licenses. The sector has, in the minister's own framing, effectively stagnated, and should the current generation of large-scale projects decline without adequate replacement, Mongolia risks losing the dominant pillar of its economy.
Recent legal developments have further intensified the already challenging investment climate. In 2019, Article 6.2 of the Constitution was amended to enshrine the principle that the “majority of benefits” from strategically important deposits must accrue to the people through a Sovereign Wealth Fund. At the time,“benefits” was explained broadly to encompass taxes, fees, and dividends, while “majority” was defined as “50+1.” The amendment paved the way for the 2024 Law on Sovereign Wealth Fund and a contemporaneous amendment to the Minerals Law, which imposed limits on private sector ownership of strategic deposits and ordered private holders to transfer a minimum 34% stake to the state without compensation, reducing their own ownership to no more than 34% by May 2025 (except for entities that have signed an investment agreement with the Government). Companies could also be required to pay back-dividends to the Government retroactively from the start of a project, even if the state had previously declined any equity stake. The American, Australian, and European chambers of commerce warned the legislation would deter investment, while the political context also mattered, with parliamentary election scheduled for June 2024.
The deeper legal problem, raised by Mongolian lawyers who subsequently filed a challenge with the Constitutional Court, is that forcing the transfer of private shares without compensation appears to contradict the Constitution's own protection of private property which states that private property cannot be seized unlawfully, and that the state must pay fair compensation when it compulsorily acquires assets for public need. The lawyers argued that no democratic market economy permits the state to appropriate private property without compensation through legislation, and that the current framework effectively forces companies to choose between surrendering equity or paying a special royalty, neither of which was contemplated at the time the original investments were made.
A flexible benchmark with no apparent ceiling
The most recent development extends the ambiguity rather than resolving it. A Memorandum of Understanding (MoU) signed in February 2026 between the Government and four mining companies introduced a new benchmark: 60% of “economic benefit” from strategic deposits must flow to the public, exceeding the constitutional floor of 51%. There is an upward drift with no clear ceiling. The Orano uranium deal had set 51% as a floor; by February 2026, the Government was targeting above 53% from Oyu Tolgoi, and by March, that figure had jumped to above 60%.
The term “economic benefit” itself remains elusive. Does it include water-use fees? Employee salaries? Social insurance contributions? The CEO of Erdenes Mongol acknowledged that defining it precisely is challenging and that no two deposits are alike. One of the private signatories to the MoU observed that Mongolia had learned that collecting a special royalty is preferable to holding equity that yields no dividends, a clear acknowledgment that mandatory state participation has not produced the returns its proponents had anticipated. Notably, Mongolyn Alt MAK, holder of licenses for two strategic deposits, was absent from the MoU signing, suggesting the 60% consensus is a government position rather than a broadly shared agreement.
A potential turning point, however delayed
The proposed amendments to the Minerals Law represent the most significant legislative effort in years to address the structural problems the strategic deposit framework has helped create. The amendments, affecting roughly 40% of the current law, propose to decrease copper royalty rates, introduce new exploration incentives, and for the first time bring critical minerals into Mongolia's legal framework. Despite influential voices within the system acknowledging that constitutionally embedded strategic deposits have long deterred private sector participation, the proposed changes appear to consist of targeted amendments rather than a comprehensive legislative overhaul.
Whether the proposed amendments would materially improve conditions for investors remains contested. The 2019 constitutional amendment and the 2024 laws are still in force. The list of strategic deposits can still be expanded at parliamentary will. The 60% economic benefit target is still being negotiated with no agreed definition of what “benefit” even means. And yet the trajectory of Mongolia’s mining sector, however tentative, appears to be shifting. Significant voices are increasingly acknowledging that the strategic deposit concept has no place in a modern investment framework, and that the costs of lost opportunities under the current approach are increasingly compounding.
Mongolia has the resources the world urgently needs, and a genuine window, as global competition for critical minerals intensifies, to position itself as a reliable partner rather than remain trapped in never-ending cycles of policy uncertainty. Mongolia is increasingly finding that choices driven by populism and the politics of resource control lead investors to go elsewhere, and that the cake they are so determined to divide never gets made at all. This window will not stay open indefinitely, and the cost of squandering it will ultimately be borne by future generations of Mongolians.
