mineral resources

Mr. Sun, the head of a gold mining company in Shandong, signed a mineral rights mortgage contract, stipulating that he would use the mining rights certificate as collateral to borrow 20 million from a small loan company. Later, the company's management failed and it was unable to repay the loan. The small loan company sued the court and requested to exercise its mortgage rights.

In court, the two sides faced off. The small loan company took out the mortgage contract and asked for priority in repayment, but found that the contract only stated that "the mortgagor uses the mining rights certificate of a certain gold mine held by the mortgagor as collateral", but did not specify the amount of the guaranteed main claim, the debt performance period, the scope of the guarantee and other key terms.

The court finally determined that the mortgage contract was not established due to missing elements, and the small loan company's mortgage rights could not be established.

This is a real case experienced by lawyer Liu Jingzhu. How to write a mineral rights mortgage contract? Beijing Yingting Law Firm will explain it to you in detail.

Core elements of mineral rights mortgage contract

According to the relevant provisions of the Civil Code and Mineral Resources Law, a complete mineral rights mortgage contract should contain the following core terms:

Clause 1: Party Information

Includes basic information on the mortgagor (mining rights holder) and mortgagee (creditor):

Clause 2: Principal creditor’s rights situation

This is the most core clause and must be made clear:

Clause 3: Description of collateral

Clear mortgage mineral rights information:

Clause 4: Guarantee Scope

Clarify the scope of the mortgagee’s priority for payment, which usually includes:

Article 5: Mortgage registration

Clarify the obligations of both parties to handle mortgage registration:

Article 6: Realization of mortgage rights

It is agreed that when the debtor fails to pay due debts, how does the mortgagee realize the mortgage right:

Article 7: Liability for breach of contract

Agree on the legal consequences of breach of contract obligations by both parties:

Clause 8: Dispute Resolution

Agree on the resolution of disputes arising during the performance of the contract:

Special considerations for mineral rights mortgage contracts

Lawyer Liu Jingzhu reminded that mineral rights mortgage contracts are different from general mortgage contracts, and special attention needs to be paid to the following issues:

Note 1: The "clean" issue of mining rights

It should be stipulated in the contract that the mortgagor has complete and undisputed rights over the mining rights, and there are no encumbrances such as seizure, mortgage, or lease on the mining rights (except for this mortgage). If the above circumstances exist, the mortgagor shall bear liability for breach of contract.

Note 2: Mining rights renewal issue

Mining rights have a validity period, and the contract should stipulate that if the mining right expires and is not renewed or the renewal is not approved, the mortgagee has the right to exercise the mortgage right in advance.

Note 3: The issue of fluctuations in the value of collateral

Fluctuations in mineral prices may cause changes in the value of collateral. The contract should stipulate whether the mortgagor needs to provide additional guarantees or make early repayments when the value of the collateral drops significantly.

Note 4: Restrictions on exploration/mining activities

It may be stipulated in the contract that during the mortgage period, the mortgagor's exploration and mining operations shall comply with relevant regulations and shall not damage the value of the mortgaged property; if it is necessary to make major investments or dispose of assets, the mortgagee shall be notified in advance.

Lawyer Ying Ting recommends: Leave professional matters to professionals

Lawyer Liu Jingzhu suggested that the legal issues involved in mineral rights mortgage contracts are relatively professional, and it is recommended that companies hire professional lawyers to draft or review them. Lawyers can help businesses:

1. Comprehensively sort out the transaction structure and design the optimal plan;
2. Draft or review contract terms to ensure complete elements and rigorous expression;
3. Identify potential legal risks and propose preventive measures;
4. Assist in mortgage registration and follow up on registration progress.

Beijing Yingtong Law Firm has extensive experience in the field of mining rights mortgage financing and can provide professional legal services to mining companies and financial institutions.

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