Ministry of Land and Resources, Administration of Granting and Assigning Mining Industry Rights Tentative Provisions

Article 3: Exploration rights and mining rights, collectively referred to as mining industry rights, are property rights to which the principles of regulation in real property laws and regulations are applicable.

A natural person, legal person or other economic organization that has obtained a mining industry right in accordance with the law shall be referred to as a mining industry right holder.

A mining industry right holder has the right to possess, use, benefit from and dispose of its mining industry right in accordance with the law.

Article 4: Granting of mining industry rights shall be conducted by the department in charge of geology and mineral resources of a people's government at or above the county level in accordance with the Administration of Registration of Mineral Resource Exploration Blocks Procedures, the Administration of Registration for Exploitation of Mineral Resources Procedures and the authority prescribed by the administrative procedures formulated by the standing committee of the people's congress of the province, autonomous region or municipality directly under the central government and by ways such as approval of application, invitation for bids and auction.

Mining industry rights may be granted over a mineral resource area that was explored with State funding, a mineral resource area requisitioned in accordance with law and other land free of mining industry rights.

Article 5: When a mining industry right over a mineral resource area that was explored with State funding is granted by the department in charge of geology and mineral resources at any level of government according to its statutory jurisdiction, the department shall appoint an appraising institution that has been recognized by the State Council department in charge of geology and mineral resources as having the qualifications for appraising mining industry rights (hereafter, Appraisal Institution) to conduct an appraisal of the mining industry right.

Article 6: A mining industry right holder may lawfully assign a mining industry right in accordance with the provisions hereof through sale, capital contribution, cooperative exploration or exploitation or share listing.

The parties to the assignment shall complete the procedure for the change of registration of the mining industry right with the original registration and licensing authority as required. Where the assignee is a foreign investment mining enterprise, the parties shall complete the procedure for the change of registration with a registration and licensing authority that is authorized to license foreign investment mining enterprises.

A mining industry right holder may lease or mortgage a mining industry right in accordance with the provisions hereof.

Article 7: The State Council department in charge of geology and mineral resources is in charge of the examination and approval of the assignment of those mining industry rights that were approved and licensed by it. The departments in charge of geology and mineral resources of the people's governments of provinces, autonomous regions and municipalities directly under the central government are in charge of the examination and approval of the assignment of other mining industry rights.

Article 8: If a mining industry right holder assigns a mining industry right formed by exploration with State funding, the mining industry right holder shall appoint an Appraisal Institution to appraise the mining industry right.

Article 9: "State funding" means the allocation by the central government's finance department or a local government's finance department of funds such as geological exploration fees, mineral resources compensation fees, various funds and specially ear-marked funds to the exploration of mineral resources.

Article 10: The result of an appraisal of a mining industry right over a mineral resource area formed by exploration with funding from the central government's finance department shall be confirmed by the State Council department in charge of geology and mineral resources. The result of an appraisal of a mining industry right over a mineral resource area formed by exploration with funding from a local government's finance department shall be confirmed by a provincial people's government department in charge of geology and mineral resources on entrustment.

The result of an appraisal of a mining industry right over a mineral resource area formed by exploration with joint funding from the finance departments
of the central and local governments shall be confirmed by the State Council department in charge of geology and mineral resources after an examination opinion is submitted by a provincial people's government department in charge of geology and mineral resources.

The result of an appraisal of a mining industry right over a mineral resource area formed by exploration with joint funding from the State and an enterprise or an individual shall be confirmed by the State Council department in charge of geology and mineral resources or by a provincial people's government department in charge of geology and mineral resources on entrustment depending on the channel of the State funding.

Article 11: Where a mining industry right over mineral resource area formed by exploration is granted by approval of application, the fee payable for the mining industry right may be paid in instalments with the approval of the registration authority. When applying for payment of the mining industry right fee in instalments, justification shall be provided to the registration authority and an undertaking shall be made as to the amount of each instalment and the number of instalments, and the instalment arrangement will be implemented after the application is approved.

If an application made by a State-owned geological surveying work unit or a State-owned mining enterprise for the granting of a mining industry right over a mineral resource area formed by exploration is consistent with the relevant provisions of the State, the applicant may apply to capitalize all or part of the payable mining industry right fee as additional State capital in accordance with the relevant provisions, and the capitalization shall be implemented after the application is examined and approved.

Article 12: If an exploration right holder applies for a mining right in its own exploration area, the appraisal of the mining industry right may be omitted and the registration authority shall not charge any mining industry right fee.

When a mining enterprise enters into a restructuring such as equity joint venture, cooperative joint venture, merger or acquisition, it shall have its mining right appraised and complete the procedures for the examination and approval and for the change of registration of the assignment of the mining rights. If the mining right was formed by exploration with State funding, the appraised mining right fee shall be confirmed by the State Council department in charge of geology and mineral resources or a provincial people's government department in charge of geology and mineral resources, and the registration authority shall not any charge mining right fee.

Article 13: Applicants, bidders, auction bidders and lessees of mining industry rights shall have commensurate qualifications.

Article 14: When granting a mining industry right, the registration authority shall provide the relevant geological information at the same time. When assigning a mining industry right, the assignor shall provide the relevant geological information at the same time.

PART TWO: GRANTING OF MINING INDUSTRY RIGHTS

Article 15: Granting of a mining industry right means the granting of a mining industry right to a mining industry right applicant by ways such as approval of application, invitation for bids and auction.

Article 16: During the effective term and the reserved term of an exploration right, an exploration right holder has an pre-emptive right to obtain the right to explore the mineral resources within its own exploration area, and the registration authority shall not accept the application of another party for a mining industry right over that exploration area without the consent of the exploration right holder.

Article 17: Where a mining industry right over a mineral resource area formed by exploration is granted by approval of application, the registration authority shall charge a mining industry right fee on the basis of the confirmed appraisal result.
Where a mining industry right over a mineral resource area formed by exploration is granted by invitation for bids or by auction, the registration authority shall determine the base price or reserve price for the invitation for bids or the auction on the basis of the confirmed appraisal result, and shall charge a mining industry right fee after the closing of the bid invitation or the auction on the basis of the actual closing price.

Section One: Approval of Application

Article 18: Granting of a mining industry right by approval of application means that after examination and approval of an application for a mining industry right, the registration authority grants the mining industry right to the applicant.

Article 19: A mining industry right applicant shall be a capital contributor or a legal person established with the capital contribution of the capital contributor. However, where the exploration was conducted with State funding, the exploration right applicant shall be designated by the capital contributing organization. Where two or more capital contributors establish an equity or cooperative joint venture to explore
and exploit mineral resources, the joint venture shall be the mining industry right applicant; where these capital contributors conduct exploration and exploitation of mineral resources without establishment of any joint venture, the capital contributors shall jointly issue a written document to designate a mining industry right applicant.

A mining industry right applicant shall be an enterprise legal person, and an individual who wishes to exploit mineral resources shall establish a wholly individually-owned enterprise in accordance with the law.

Article 20: Conditions and procedures for approving mining industry right applications shall be enforced in accordance with the relevant provisions of the State Council.

Article 21: Where the State has determined that the mining industry rights over an area are subject to invitation for bids, no other application for mining industry rights over that area will be accepted.

Section Two: Invitation for Bids

Article 22: Granting of a mining industry right by invitation for bids means that the winning bidder is awarded, with consideration, the mining industry right from the registration authority through an invitation for bids in accordance with the relevant laws and regulations.

Article 23: The registration authority may act as the bid inviting party to directly organize the invitation for bids within its examination and approval authority in respect of mining industry rights, or it may appoint an intermediary as its agent to conduct the invitation
for bids.

Article 24: If the registration authority adopts the invitation for bids as the method of granting a mining industry right, it shall announce in the State Land and Resources Gazette the specific range of the block or mine field under the invitation for bids, the time of the invitation for bids and the requirements on the qualifications of bidders.

Article 25: There shall be a minimum of 20 days from the date of publication of the bid invitation documents to the closing date for the submission of bid documents.

Article 26: If the registration authority adopts the invitation for bids as the method of granting a mining industry right, it shall appoint an Appraisal Institution to appraise the mining industry rights. The result of the appraisal, as confirmed in accordance with the law, may be used as the basis for setting the base price for the bidding.

Article 27: The registration authority may, depending on the particular mining industry right, set a single-factor base price or multiple-factor base price on the basis of the mining industry right fee, the investment committed or other factors.

Article 28: If the base price for the invitation for bids has been set on the basis of the investment committed, the winning bidder shall pay a security bond to a special bank account for security bonds of a bank designated by the registration authority when it completes the registration. The amount of the security bond shall be determined on the basis of a certain percentage of the amount of investment that has been committed by the winning bidder when submitting its bid. The percentage basis for determining the security bond shall be specified in the bidding announcement. The registration authority shall return the security bond in proportion to the amount of the actual investment upon annual inspection. If no investment has been made as committed, the security bond shall not be returned and shall be turned over by the registration authority to the finance department of the same level.

Article 29: The registration authority, the bid inviting party and the mining industry right appraisal institution shall keep the appraised value of the mining industry right and the base price for the bidding in strict confidence.

Article 30: The registration authority shall establish a bid evaluation committee in accordance with the law to organize the evaluation of bids and determine the winning bidder on the principle of selection of the most advantageous.

Section Three: Auction

Article 31: Granting of a mining industry right by auction means that in accordance with the principles and procedures prescribed by the relevant laws and regulations, the registration authority appoints an auctioneer to grant the mining industry right to the bidder who makes the highest bid in a public competitive auction.

Article 32: The registration authority shall organize auctions of mining industry rights within its examination and approval authority for mining industry rights.

Article 33: The block or area the mining industry right over which is to be auctioned, the time of the auction and the requirements on the qualifications of auction bidders shall be determined by the registration authority and announced on the State Land and Resources Gazette.

Article 34: If a mining industry right over a mineral resource area formed by exploration is to be granted by auction, the registration authority shall appoint an Appraisal Institution to appraise the mining industry right, and the result of the appraisal as confirmed in accordance with the law may be taken as the reserve price for the auction.

Article 35: The auction vendee shall pay the relevant fees and the auction price in accordance with the relevant provisions and complete the registration and obtain a licence according to the law within the prescribed time. If the auction vendee fails to pay the fees and the price and complete the registration within the prescribed time, it shall be deemed to have automatically abandoned the purchase, and shall bear the corresponding liability for breach of contract.

PART THREE: ASSIGNMENT OF MINING INDUSTRY RIGHTS

Article 36: Assignment of a mining industry right means a transfer of the mining industry right by the mining industry right holder, which includes sale, capital contribution, cooperation and restructuring.

Leasing and mortgage of mining industry rights shall be administered in accordance with the conditions and procedures applicable to assignment of mining industry rights and shall be subject to examination and approval by the original licensing authority.

Article 37: For any types of assignment of mining industry rights, both parties to the assignment must apply to the registration authority and shall complete the procedure for change of registration after the application has been examined and approved.

Article 38: A mining right holder shall not transfer its mining right to another party by such way as contracting.

Article 39: When a mining industry right formed by exploration with State funding is assigned, the assignor shall use the confirmed appraisal result as the base price for charging the assignee a mining industry right fee or for capital contribution.

If a State-owned geological surveying work unit assigns a mining industry right formed by exploration with State funding, a part of the proceeds from the assignment equal to the amount of the actual investment in the exploration shall be credited as additional State funds and the rest of the proceeds shall be credited as revenues of its primary business.

If a State-owned mining enterprise treats the proceeds from the assignment of a mining industry right formed by exploration with State funding as State capital, it shall submit a report for approval in accordance with the provisions of the State Council department in charge of geology and mineral resources and the State Council finance department.

If a non-State-owned mining enterprise assigns a mining right over a mineral resource area formed by exploration with State funding, the registration authority shall charge a corresponding mining right fee. This provision does not apply to assignments subject to Article 12 hereof.

Section One: Sale, Capital Contribution and Cooperation

Article 40: Sale of a mining industry right means that the mining industry right holder sells the mining industry right in accordance with the law to another party for exploration and exploitation of mineral resources.

Article 41: The capital contribution of the appraised value of a mining industry right means that after pricing the mining industry right in accordance with the law, the mining industry right holder invests it into
an enterprise as capital and exercises rights and performs obligations corresponding to the amount of such capital.

Article 42: Cooperation in exploration or exploitation means that the mining industry right holder enters into a cooperation contract with another party to introduce the funds, technology, management expertise, etc. of that party, agree upon the rights and obligations of the parties, and jointly explore or exploit mineral resources.

Article 43: When a mining industry right holder is restructured into a listed company limited by shares, it may, after appraising the mining industry right, invest it into the listed company as capital, or assign the mining industry right to the listed company for disclosure to the public, provided that before completing the procedures for examination and approval of the assignment and for the change of registration, it shall have the mining industry right appraised by entrustment and report the result of the appraisal to the State Council department in charge of geology and mineral resources for confirmation.

If the company limited by shares is listed abroad, it may have the mining industry right appraised by an appraisal institution abroad in accordance with the provisions of the country where it is listed, but it shall file the appraisal report to the State Council department in charge of geology and mineral resources for the record.

Article 44: If a mining industry right holder sells a mining industry right or establishes a cooperative or equity joint venture legal person to explore or exploit mineral resources, it shall apply to complete the procedures for the examination and approval of the assignment and for the change of registration thereof of the mining industry right.

Exploration or exploitation of mineral resources without establishing a cooperative or equity joint venture legal person, the cooperative or equity joint contract shall be filed, after conclusion, with the registration authority for the record.

If a mining right applicant establishes an equity or cooperative mining joint venture with another party after it has obtained a mining licence, it may be exempt from the requirement of having been in mining production for one full year.

Article 45: If a mining industry right holder needs to sell part of a mining industry right, it must file to the registration authority an application for division of the mining industry right before the sale, and it shall complete the procedure for the change of registration of mining industry right after the application has been approved.

In principle, a mining right shall not be assigned in part.

Article 46: The parties to an assignment of a mining industry right must conclude a contract for the assignment of the mining industry right in accordance with the law. Depending on the method of assignment, the assignment contract may be a sale assignment contract, an equity joint assignment contract or a cooperative joint assignment contract.

An assignment contract shall be effective as of the date of approval of the application for assignment.

Article 47: A contract for assignment of a mining industry right shall include the following basic contents:

(1) the names of the assignor and the assignee, their legal representatives, and their registered addresses;

(2) the basic information about the mining industry right being assigned, including its current ownership, the licence number, the licensing authority, the geographic coordinates and boundaries of the area covered by the mining industry right, the valid period of the licence and the extent of the exploration or the status of the exploitation;

(3) the method of assignment, the price for the assignment, the method of payment or the means to realize the rights and interests;

(4) the method of dispute resolution; and

(5) the liability for breach of contract.

Article 48: Upon receipt of the approval notice of the assignment, the assignor and the assignee shall complete the procedure for change of registration within the prescribed time limit; and if they fail to do so, they shall be deemed to have automatically abandoned the assignment, and the approved application for assignment shall be void.

Section Two: Leasing

Article 49: Leasing of a mining industry right means that the mining industry right holder, acting as a lessor, leases the mining industry right to a lessee and receives rents from the lessee.

Leasing of a mining industry right shall comply with the conditions stipulated by the State Council for assignment of mining industry rights.

The mining industry right holder shall continue to perform the statutory obligations and bear the legal responsibilities as a mining industry right holder during the term of the lease of the mining industry right.

Article 50: If a mining right over a mineral resource area formed by exploration with State funding is to be leased, the mining right shall be appraised and the result of the appraisal shall be confirmed in accordance with the provisions applicable to assignment of mining rights, and the mining right fee shall be handled in accordance with the relevant provisions.

A mining right that has been leased shall not be sold, used for an equity or cooperative joint project or a listing, or mortgaged.

Article 51: To apply for leasing of a mining industry right, the mining industry right holder shall provide the following materials to the registration authority:

(1) an application for leasing;

(2) a photocopy of the licence;

(3) a contract for the lease of the mining industry right;

(4) the qualification certificate or business licence of the lessee; and

(5) other relevant information required by the registration authority.

Article 52: A contract for leasing of mining industry right shall include the following major contents:

(1) the names of the lessor, lessee and their legal representatives as well as their registered addresses or domicile;

(2) the name of the mining industry right to be leased, the licence number, the licensing authority, the valid period of the licence, and the geographic coordinates, boundaries and mineral resource of the area covered by the mining industry right;

(3) the term and the purpose of the lease;

(4) the amount of the rent and the method of payment;

(5) the rights and obligations of the parties to the lease;

(6) the effective term of the lease contract;

(7) the method of dispute resolution; and

(8) the liability for breach of contract.

Article 53: The lessee of a mining industry right shall not sub-lease the mining industry right.

If the lessee of a mining right needs to change the mining method and the main mineral resource during the course of mining operation, it must have the lessor apply to the registration authority for approval and complete the procedure for change of registration.

If the mining right holder's mining licence is revoked in accordance with the law, the party in fault shall be liable for the consequences arising therefrom.

Article 54: When a leasing relationship is terminated, the lessor shall apply to the registration authority for cancellation of the lease within 20 days.

Section Three: Mortgage

Article 55: Mortgage of a mining industry right means that the mining industry right holder being a debtor provides a security interest over the mining industry right it owns to its creditor without transferring the possession of the mining industry right.

The debtor who mortgages the mining industry right is the mortgagor, the creditor is the mortgagee, and the mortgaged mining industry right is the mortgage security.

Article 56: If the creditor requires the mortgagor to provide the value of the mortgage security, the mortgagor shall appoint an Appraisal Institution to appraise the mortgage security.

Article 57: If a mortgage is created over a mining industry right, the mining industry right holder shall bring the mortgage contract and the mining industry right licence to the original licensing authority to complete the filing procedures. When the mortgage over the mining industry right is discharged, the mining industry right holder shall notify the original licensing authority in writing within 20 days.

Article 58: Where the debtor defaults on the debt, the creditor has the right to apply for realization of the mortgage and receive a compensation from the proceeds of the disposal of the mining industry right. The new mining industry right applicant shall meet the qualification requirements prescribed by the State and the parties concerned shall complete the procedures for the assignment and change of registration of the mining industry right in accordance with the law.

If the mining right holder's mining licence is revoked in accordance with law, the debtor shall be liable for the consequences arising therefrom.

PART FOUR: SUPERVISION AND ADMINISTRATION

Article 59: Default of a mining industry right holder on its commitment to pay the mining industry right fee shall be punished by the registration authority in accordance with Article 31 of the Administration of Registration of Mineral Resource Exploration Blocks Procedures and Article 21 of the Administration of Registration for Exploitation of Mineral Resources Procedures.

Article 60: If an appointed intermediary, the bid evaluation committee, a bidder or an auction bidder has committed an act against laws and regulations in the course of the invitation for bids or the auction for a mining industry right, the registration authority shall impose penalties in accordance with the relevant provisions of laws and regulations.

If an Appraisal Institution divulges the appraised value in the course of the invitation for bids or the auction, in addition to pursuing the legal liability of the Appraisal Institution according to the law, the State Council department in charge of geology and mineral resources shall order it to suspend business operation for one year. If the case is repeated, its qualification for appraisal shall be revoked.

Article 61: If a mining industry right holder assigns a mining industry right without the approval of the registration authority or leases the mining industry right to another party in violation of the provisions hereof, the registration authority shall impose penalties in accordance with Article 14 of the Administration of Assignment of Exploration Rights and Mining Rights Procedures.

Article 62: If a lessor of a mining industry right violates the provisions hereof, or if a mining industry right holder contracts a mining industry right to another party for exploitation or mining operation, the registration authority shall impose penalties in accordance with Article 15 of the Administration of Assignment of Exploration Rights and Mining Rights Procedures.

Article 63: A mortgage created over a mining industry right in violation of the relevant laws and the provisions hereof is void.

Article 64: If the registration authority issues
or approves a licence in violation of the provisions hereof, it shall promptly rectify the matter; if losses have been caused to the parties concerned, it shall compensate them in accordance with the provisions of the relevant laws.

Article 65: If a member of the working personnel of the registration authority practises graft, abuses his authority or is derelict in his duties, criminal liability shall be pursued against him if the matter constitutes a criminal offence, or administrative punishment shall be imposed on him if the matter does not constitute a criminal offence.

PART FIVE: SUPPLEMENTARY PROVISIONS

Article 66: If a non-legal person organization applies for or assigns an exploration right, the application or the assignment shall be handled by reference to the procedures applicable to the application for or the assignment of an exploration right by a legal person.

Article 67: If a mining industry right is assigned by way of donation, inheritance or exchange, the parties concerned shall bring the relevant licences and documents to the registration authority to complete the procedures for change of registration.

Article 68: If a mining enterprise had entered into a contract before the promulgation of the Administration of Assignment of Exploration Rights and Mining Rights Procedures, it shall complete the relevant procedures post factum in accordance with the provisions hereof concerning the administration of leasing of mining industry rights by June 30 2001. Failure to do so shall be handled in accordance with Article 62 hereof.

Article 69: These Provisions shall be implemented as of the date of promulgation.