mineral resources

Recently, natural resource authorities in many places have successively issued announcements on the withdrawal of mining rights, with unprecedented scope and intensity. A geological exploration company in a certain province that has held exploration rights for more than ten years received a notice from the competent authority stating that its exploration rights need to be withdrawn within a time limit because it is within the ecological protection red line. Although another coal mining company holds a legal mining license, its mining rights overlap with the nature reserve, and it is facing the dilemma of having its mineral rights canceled. In addition, some mining rights holders have not completed statutory exploration investment for a long time, and their exploration licenses have been announced by the natural resources department as ex officio.

These three types of situations are not isolated cases. According to the "Mineral Resources Law of the People's Republic of China" and related supporting policies that will be revised and implemented in 2024, the withdrawal of mining rights has entered a legal and standardized track. This article will systematically sort out the main types, legal basis and corporate response strategies of current mineral rights withdrawals to help mineral rights holders accurately identify their own risks and safeguard legitimate rights and interests in accordance with the law.

1. Withdrawal of mining rights within ecological protection red lines

Article 9 of the newly revised Mineral Resources Law in 2024 clearly stipulates that the state implements the policy of unified planning, rational layout, comprehensive exploration, rational mining and comprehensive utilization of mineral resources exploration and mining. Article 18 of the Law further stipulates that where laws and administrative regulations stipulate that the mining of mineral resources is prohibited or restricted within a certain area, the relevant provisions must be observed. This provides a superior legal basis for the withdrawal of mineral rights within the ecological protection red line.

According to relevant legal provisions, the people's governments at or above the county level shall organize the withdrawal of mining rights located in areas prohibited from development such as ecological protection red lines and nature reserves. Mining rights holders should receive fair and reasonable compensation, including refund of mining rights transfer income, compensation for exploration investment, compensation for ground attachments, etc.

2. Cancellation of mining rights caused by changes in mineral types or adjustments to industrial policies

Article 8 of the new Mineral Resources Law stipulates that the state implements protective mining of strategic mineral resources, and the catalog of strategic mineral resources is determined and adjusted by the State Council. This means that for minerals that are explicitly restricted or prohibited from mining due to adjustments in national industrial policies, companies holding relevant mineral rights may face the risk of their mineral rights being withdrawn or cancelled.

In addition, according to relevant legal provisions, if the mining right holder fails to mine mineral resources according to the mineral types specified in the mining license, the natural resources authorities have the right to deal with it in accordance with the law. If the mineral type is changed and exploited without approval, the mineral rights may be cancelled.

3. The validity period of the mining right expires or legal reasons for its elimination arise.

Article 20 of the new Mineral Resources Law stipulates that the mining rights transfer contract should specify the term of the mining rights. Exploration rights and mining rights are time-sensitive. If no application for renewal is made upon expiration of the time limit, the mining rights will be extinguished in accordance with the law. When the validity period of the mining license expires and the mining right holder fails to apply for extension within the legal period or the extension application is not approved, the mining license will automatically become invalid and the mining rights will be extinguished.

At the same time, according to relevant legal provisions, if a mining rights holder fails to pay the mining rights transfer proceeds overdue and still fails to pay after being urged, the natural resources authorities have the right to take back the mining rights. If the exploration license expires without completing the minimum exploration investment or fails to apply for renewal, the exploration license will also be announced to be revoked.

Typical case: A mining rights withdrawal compensation case heard by the Intermediate People's Court of a certain province has important reference value. The facts of the case are as follows: The mining area with mining rights held by a mining company was located in a non-overlapping area before the establishment of a provincial nature reserve. Later, due to the adjustment of the scope of the nature reserve, the entire mining area fell into the scope of the reserve. The local government initiated the mining rights withdrawal process and required the company to close the mine within a time limit, but no agreement was reached on the amount of compensation. The company filed an administrative lawsuit and requested the government to compensate according to the assessed value of the mining rights.

After trial, the court held that the establishment of the mining rights involved in the case preceded the adjustment of the scope of the nature reserve, and the mining rights holder was not at fault for this. According to the spirit of the new Mineral Resources Law and related policies, if mining rights cannot be continued to be exercised due to public interest needs, fair and reasonable compensation should be given to the mining rights holder. The court ultimately ruled that the local government should pay compensation to the plaintiff based on the value of the mining rights determined by a third-party evaluation agency.

The gist of the ruling in this case is that the withdrawal of mining rights caused by the adjustment of ecological protection red lines falls within the scope of public interests. Mining rights holders are entitled to fair compensation, and the compensation should be based on the actual value of the mining rights and cannot simply be limited to the transfer amount of the mining rights. This adjudication idea has important guiding significance for similar cases.

Based on the above legal analysis and case studies, lawyer Liu Jingzhu of Beijing Yingtong Law Firm believes that the current withdrawal of mineral rights mainly focuses on three types of situations: first, mining rights located in areas where development is prohibited such as ecological protection red lines and nature reserves; second, mining rights that have been included in restricted or prohibited scopes due to adjustments to national industrial policies; third, mining rights that have expired and have not been renewed or have statutory cancellation reasons.

In practice, some mining rights holders have insufficient understanding of clearance risks and have a fluke mentality. This is the biggest cognitive misunderstanding. Mining rights holders should realize that ecological priority has become the fundamental principle of mining management, and cooperating with policy adjustments and safeguarding rights in accordance with the law is the right approach.

In view of the risks of mineral rights clearance, the following three practical suggestions are put forward:

First, immediately conduct a self-examination of mineral rights compliance to check whether there is any overlap between the mineral rights and ecological red lines and nature reserves, the validity period and extension status of the mineral rights, and whether there are any violations such as unpaid transfer proceeds, so that you can be aware of it and respond proactively.

Secondly, for mining rights that have entered the withdrawal process, we must attach great importance to the compensation assessment process. It is recommended to entrust a qualified third-party evaluation agency to independently evaluate the value of mining rights to avoid accepting low-price compensation plans unilaterally determined by the government.

Third, the legal bottom line must be adhered to during clearance negotiations. If the compensation plan is unreasonable, relief rights should be promptly obtained through administrative reconsideration or administrative litigation, and key evidence such as the establishment of mineral rights, exploration inputs, and outputs should be preserved.

If you are facing legal issues related to the withdrawal of mining rights, please contact us for professional consultation.

——Lawyer Liu Jingzhu, Beijing Yingting Law Firm

*Please consult a professional lawyer for specific questions. This content does not constitute legal advice. *