mineral resources

In 2024, Mr. Zhao, the head of an iron ore company in Hebei Province, wanted to use his mining rights certificate as a mortgage for a loan of 10 million yuan. As a result, he went to four banks, which took half a year, but in the end he could not get a penny of the loan.

What's the problem? Lawyer Liu Jingzhu from Beijing Yingting Law Firm will analyze this typical failure case for you to help mining companies avoid minefields.

Case background

B Iron Ore Co., Ltd. was established in 2015 and holds the mining rights license of a local iron ore with a designed annual production capacity of 500,000 tons. At the beginning of 2024, the company plans to expand its production scale and needs to purchase new equipment and build transportation roads, with a funding gap of approximately 15 million yuan.

Mr. Zhao heard that mineral rights could be mortgaged for loans, so he started running around. However, six months later, all four banks rejected his application.

First application: ICBC - the mining rights period does not meet the requirements

Mr. Zhao first went to the Industrial and Commercial Bank of China. After understanding the situation, the account manager said that it could be done, but the remaining years of the mining rights were required to be no less than 10 years. Mr. Zhao's mining right certificate expires in eight years. Although the renewal is not a big problem, the "remaining years are less than 10 years" is stuck.

Second application: Agricultural Bank of China - there is historical arrears

Mr. Zhao did not give up and went to the Agricultural Bank of China again. This time the account manager's attitude was very positive, but after reviewing the materials, he discovered a problem: the company had an overdue income from the transfer of mining rights in 2022. Although it was later paid, the record is still there. The bank believed that there was a "credit defect" and refused to lend.

Third application: China Construction Bank - the assessed value does not meet the standard

Mr. Zhao found China Construction Bank again. This time the materials were reviewed and the bank accepted the loan application. However, after entrusting an appraisal agency to evaluate, the appraisal report showed that the iron ore was appraised to be worth about 40 million yuan. Considering the risk factor, the bank was only willing to lend 50% of the appraised value, which was 20 million yuan.

Mr. Zhao felt that the quota was too low and did not accept it.

The fourth application: Postal Savings Bank - ecological red line issue

Mr. Zhao heard that the mining rights mortgage business of Postal Savings Bank was doing well, so he went to try it again. This time the account manager was also very enthusiastic, but after on-site investigation, he discovered a problem: part of the mining area of ​​the iron ore is located within the provincial ecological protection red line, and the actual exploitable range of the mine is limited. The bank believed that this would affect the realization of the mineral rights and refused to lend.

Problem analysis: None of the four minefields has been avoided

Lawyer Liu Jingzhu analyzed four key issues in this case:

Minefield 1: Insufficient remaining years of mining rights

Banks have basic "threshold requirements" for mineral rights mortgages, one of which is the remaining years of the mining rights. This is an important basis for banks to calculate the repayment period. If the remaining years are too short, the bank may believe that the loan term cannot cover the repayment cycle, which is a risk.

Recommendation: Mining companies should pay attention to the expiration date of mining rights in advance, and if there is a need for renewal, go through the renewal procedures as soon as possible.

Minefield 2: There are historical arrears records

The payment record of mining rights transfer income is an important reflection of corporate credit. If there are records of arrears, overdue payments, etc., the bank will consider that there is a problem with the company's ability or willingness to repay.

Recommendation: Mining companies should pay all fees on time and in full and maintain a good credit record.

Minefield Three: Low Appraisal Value

Mineral rights evaluation involves multiple factors such as resource reserves, mineral product prices, and development costs. The conclusions of different evaluation agencies may vary greatly. If the appraised value is low, the loan amount will be reduced accordingly.

Suggestion: Choose an evaluation agency with qualifications and good reputation. If necessary, you can communicate with the bank to confirm the evaluation standards.

Minefield 4: There are restrictions in some areas

If the mine involves prohibited or restricted development areas such as ecological protection red lines, nature reserves, and basic farmland, banks will worry about the ability to liquidate the mineral rights.

Recommendation: Mining companies should conduct a comprehensive review of mining land conditions before applying for loans to avoid touching policy red lines.

Yingting lawyer reminds

Lawyer Liu Jingzhu reminded that although the policy for mineral rights mortgage loans has been liberalized, banks' risk control standards are still very high. Before mining companies apply for loans, it is best to do a "self-examination":

1. Confirm the remaining years of the mining rights
2. Check whether there are arrears, disputes, seizures, etc.
3. Understand whether the mine involves restricted areas such as ecological red lines
4. Communicate with the bank in advance to understand the specific access conditions and assessment requirements.

If you find that there are problems, you should deal with them as soon as possible. Don't wait until your application is rejected to regret it.

Beijing Yingting Law Firm can help mining companies conduct pre-financing due diligence, identify potential risks, make improvement suggestions, and improve the loan success rate.

(This article is for reference only. Please consult a professional lawyer for specific questions. This content does not constitute legal advice.)