PRC Laws on Mineral Resources - Part 1

by David Richardson - Dorsey & Whitney

This series will focus on the basic legal and bureaucratic framework around the mining of mineral resources in the People's Republic of China (PRC).

Laws and Regulations Relating to Mineral Resources

All mineral resources of the PRC are owned by the State under the Mineral Resources Law of the PRC which came into force as of 1 January 1997. The Ministry of Land and Resources is responsible for the supervision and administration of the mining and exploration of mineral resources nationwide.

However locally there is a further level of control. The PRC government has geology and mineral resources departments that are responsible for the supervision and administration of the exploration, development and mining of mineral resources within their respective province, autonomous region or municipality.

Before a project company can commence exploration or mining activities relating to mineral resources, the project company must obtain an Exploration Licence or a Mining Permit, as the case may be. These permits are the basic requirements to entitle a project company to the exploration and mining rights attached to a mining project. However in some cases further permits are required. For example if the mining activities involve gold resources, a Gold Operating Permit must also be obtained.

Holders of Exploration Licence and holders of Mining Permits are subject to exploration right usage fees and mining right usage fees, respectively.

Exploration right usage fees are calculated according to the size of the exploration area and are payable on an annual basis. The rate of exploration right usage fees for the first year to the third year of exploration is RMB100 per of exploration area per annum. From the fourth year of exploration onwards, the rate increases by RMB100 per of exploration area per annum, up to an annual maximum rate of RMB500 per of exploration area.

Mining right usage fees are also payable on an annual basis. The rate of mining right usage fee is RMB1,000 per of mining area per annum. In accordance with the ‘‘Administration Regulation for Collection of Mineral Resource Compensation Fee”, which became effective as of July 3, 1997, holders of Mining Permits must also pay mineral resource compensation fees, based on a percentage of their sales revenue.

The transfer of permits for consideration is only permitted in circumstances prescribed under PRC laws, and subject to approval by relevant administrative authorities.

In further articles, will look at basic requirements to obtain licences and the rights and obligations that flow from holding the licences.

David Richardson of the Hong Kong office of Dorsey & Whitney has over 20 years of experience in corporate finance in Hong Kong. He sits on a number of securities regulatory committees in Hong Kong.

Sino Gold Mining Limited (the Company) is primarily listed on the Australian Stock Exchange. The Company was at the time of listing, the largest foreign producer of gold in the PRC. David advised in a secondary listing on the Hong Kong Stock Exchange which raised approximately US$120 million. Since its listing on the Hong Kong Stock Exchange, the Company has experienced great share liquidity. David had previously acted in the listing of Zijin Mining, one of the largest domestic producer of gold in the PRC, on the Hong Kong Stock Exchange.

Dorsey & Whitney have a strong mineral resources practice. Fora list of representative transactions of this practice, please click here.

For further information, please contact:

David Richardson
Dorsey & Whitney
Hong Kong
Telephone: +852 2105 0234