Improving the policy framework for financial assurance for mine closure in Mongolia

Abstract

Mongolia is rich in mineral resources. Its economy is based on mining. As of 2020, mineral licenses for 1.65 million hectares have been issued in Mongolia, which represent 1% of the country's territory. Mining involves a great negative impact on the environment and society in mining areas not only during mining operations but also after mines are closed. To avoid such impacts on the environment and local communities, it is imperative to secure funds for appropriate mine closure. Therefore, adequate policy and regulatory frameworks for mine closure, including financial assurance for mine closure, are key to ensuring proper mine closure and minimizing negative environmental, health and safety impacts that may result from inadequate mine closure or abandoned mines. Our comparative study on financial assurance for mine closure, based on the internationally-applied guidelines, show that Mongolia's current legal framework regulating mining activities includes only a minimum level of requirements for mine closure and thus represents a policy and regulatory weakness that may lead to inadequate mine closure, or abandoning mines without proper closure.The study applies one of the typical formulas to calculate the cost of a recent mine closure in Mongolia. We then expand such calculations to cover the entire nation for mines in explorations or in operations that will be closed in the near future. Based on this estimation, we find that the total funds required to rehabilitate the existing areas affected by mining represent from 0.07 to 51.1% of local government budgets. If financial assurance for mine closure is not secured in order to avoid the abandonment of mines, financial burdens for mine closure in the future will place a heavy burden on central and local government budgets and the country's economy, along with serious negative impacts on the environment, biodiversity and human health.