mineral resources

"Can my prospecting license be used as a mortgage for a loan?" This is a question that many heads of geological exploration companies are concerned about.

The answer is: yes! The new Mineral Resources Law clarifies that exploration rights and mining rights are collectively referred to as mining rights and can be mortgaged in accordance with the law. But what is the difference between prospecting rights mortgage and mining rights mortgage? What are the special risks? Lawyer Liu Jingzhu of Beijing Yingzhu Law Firm will give you a detailed explanation.

Exploration rights vs mining rights: mortgage conditions are very different

Although prospecting rights and mining rights are both mining rights, their legal nature and economic value are very different, and the mortgage conditions are also different.

Features of mining rights mortgage:

Characteristics of prospecting rights mortgage:

Because of this, banks are more cautious about mortgaging exploration rights and have stricter loan conditions.

Three Major Risks of Mortgage of Exploration Rights

Risk 1: Exploration Risk

Geological exploration itself is a risky investment. Even if the prospecting rights holder conducts exploration according to specifications, it is possible that the mineral cannot be found, or the mineral found has no mining value. This uncertainty directly affects the value of exploration rights.

Risk 2: Transformation risk

Even if mineral resources that can be exploited are discovered during the exploration stage, there is still a transformation process required from exploration rights to mining rights, including applying for mining rights, signing a mining rights transfer contract, paying transfer proceeds, and preparing a development and utilization plan. This process can take several years and involves many variables.

Risk three: policy risk

Mineral resource exploration and mining involves many fields such as ecological environmental protection, production safety, and industrial policies. Changes in relevant policies may affect the value of exploration rights.

Special requirements for mortgage registration of exploration rights

According to the "Temporary Service Guidelines for Registration of Mining Rights Mortgage" issued by the Ministry of Natural Resources in July 2025, the materials required for registration of mortgage rights for exploration rights are basically the same as those for mining rights, but there are the following points to note:

1.The prospecting right holder must be an enterprise or institution: Exploration rights held by individuals cannot be used as collateral;
2.Exploration rights must be within the validity period: If the exploration license has expired or been cancelled, it cannot be mortgaged;
3.Exploration projects must comply with plans: If it involves prohibited or restricted exploration areas, it cannot be mortgaged;
4.The evaluation report must be reasonable: The "discounted cash flow method" or "exploration income method" is usually used to evaluate exploration rights, and the evaluation assumptions must withstand scrutiny.

Lawyer Ying Ting suggested: Under what circumstances can exploration rights be mortgaged?

Lawyer Liu Jingzhu believes that mortgage of exploration rights is feasible under the following circumstances:

Situation 1: Exploration rights are about to be converted into mining rights

If the exploration work has been completed, the resource reserve report has been reviewed and filed, and the mining rights are being applied for, the value of the exploration rights at this stage is relatively certain and can be used as collateral.

Scenario 2: The exploration rights have clear prospects for increasing reserves

If there are known mineralized zones in the exploration area or there are active mines in adjacent areas with great resource potential, banks may be willing to accept mortgages.

Scenario 3: A powerful company provides guarantee

If the prospecting right owner has other assets or security measures that can reduce the bank's risk, the bank may be willing to lend.

Scenario 4: Special loan support

Some policy banks or local banks have specialized mortgage loan products for exploration rights, with relatively loose loan conditions.

Yingting lawyer reminds

Lawyer Liu Jingzhu reminds exploration rights holders:

1. Before applying for a mortgage loan, it is best to consult a bank to understand each bank’s policy on mortgage of exploration rights;
2. Choose an institution with mining evaluation qualifications to issue an evaluation report, and the evaluation assumptions must be reasonable and conservative;
3. The prospecting right mortgage contract must clearly stipulate: if the prospecting right expires and is not renewed or fails to be converted into mining rights, how the mortgage right will be handled;
4. Fully disclose exploration risks and let banks understand the true value of exploration rights.

Beijing Yingtong Law Firm has extensive experience in the field of exploration rights financing and can provide you with professional legal services.

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