mineral resources

Preface Having said so much about theory, let’s look at a few real cases. These cases are all cases actually handled by the legal team of Yingting Law Firm and are shared with everyone after desensitization.

Case 1: The "golden time" during the adjustment period of the protected area

Basic information: A mining company (referred to as "Company A" for convenience) obtained a copper mine exploration right through bidding, auction and listing in 2018. The exploration area covers an area of approximately 50 square kilometers. After four years of exploration and a cumulative investment of more than 50 million yuan, a large copper ore body was discovered in 2022, with the resource amount reaching medium-sized scale.

Problems arise In 2023, when applying for renewal of the exploration rights, the following problems were discovered: 1. About 30% of the exploration area was classified into the newly adjusted provincial nature reserves 2. According to regulations, areas involving nature reserves cannot be renewed 3. If it is renewed directly, the entire exploration rights may be "cut in half"

Solution After Company A entrusted the legal team of Ying Ting to intervene, they conducted a comprehensive analysis:Plan options:Apply to reserve exploration rightsReason:1. Copper ore bodies that have been proven to be mineable (meeting reservation conditions) 2. Mining rights cannot be transferred temporarily - the exploration area involves a nature reserve 3. Special circumstances that fall under "public interest needs"Specific operations:1. Prepare a complete resource reserve report and review and filing documents 2. Collect relevant policy documents for the adjustment of nature reserves 3. Explain the situation to the competent authorities and apply for the retention of exploration rightsResult:Successfully obtained a 2-year exploration rights reservation, waiting for the adjustment of the scope of the protected area to complete the mining procedures.

Lawyer Comments The highlights of this case are:Accurately identify the reason for reservation "need for public interest". The adjustment of nature reserves is a typical public interest matter, but many companies do not understand this, resulting in either being forced to give up some exploration areas, or taking the risk of being punished after renewal.

Case 2: "Strategic Suspension" after the Capital Chain is Broken

Basic situation: B Mining Company obtained the exploration rights for a tungsten mine in 2019. After more than two years of exploration, it discovered good mineralization clues. In 2021, due to investment failures in other projects, the company's capital chain was broken and it was unable to continue investing in exploration work.

Problems arise When the exploration rights expire in 2022, the company faces a dilemma: 1.Renewal consideration: Renewal requires continued exploration work, but the company has no funds 2.The price of giving up: Giving up the exploration rights means that the initial investment of more than 20 million yuan was wasted.

Solution After the Yingting legal team intervened, they suggested:Plan options:Staged processingPhase 1 (short term):Apply to reserve exploration rights

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Reason: The company's capital chain is broken and it belongs to "other special circumstances"

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Purpose: Suspend the expiration date of exploration rights and buy timeSecond stage (mid-term):Introduce strategic investors

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Use retention periods to find the right investors

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Introduce funds through equity transfer and other methodsThe third stage (long term):transfer mining rights

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After the funds are in place, continue to complete the exploration work

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Apply for transfer of mining rights when conditions are matureResult:Company B successfully introduced strategic investors using the one-year retention period, and continued exploration work after replenishing funds.

Lawyer’s Comments: This case embodies the principles of the exploration rights retention system."time value"——It provides mining companies with an opportunity for "strategic pause", allowing them to retain their exploration rights during difficult times and wait for better development opportunities.

Case Three: "Retention Failure" Caused by Insufficient Exploration

Basic information: C Mining Company obtained the exploration rights for a lead-zinc mine in 2019 and invested approximately 6 million yuan in exploration. Before expiration in 2022, the company applied to the competent authorities to retain the exploration rights on the grounds that "the ore bodies have been proven to be exploitable."

Problems arise. After review, the competent authorities found that: 1. The exploration work has only reached the census stage. 2. No resource reserve report has been submitted for review and filing. 3. The so-called "ore body" is only a few surface mineralization points, and no deep verification has been carried out.Conclusion:The conditions for retaining exploration rights were not met and the application for retention was rejected.

Lessons learnedWhy do retention requests fail?1.The level of exploration is not up to standard- Large and medium-sized coal mines, large non-coal mines: need to reach the level of exploration - Other minerals: need to reach the level of detailed survey (inclusive) or above - This project only reaches the level of general survey and does not meet the requirements 2.Insufficient materials- There is no reviewed and filed resource reserve report - Unable to prove "proven and ready for exploitation" 3.Misunderstanding of policies- Mistaking surface mineralization sites for "proven ore bodies"

Lawyer Comments: This case is a "negative example".Retention of exploration rights is not a "panacea" and has strict applicable conditions.Before applying for retention, companies must evaluate:

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Is the level of exploration up to standard?

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Is there a resource reserve report for review and filing?

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Are the reasons for the application sufficient?

Common inspirations from the three cases

Revelation 1: Advance planning is key. Whether it is renewal or retention, materials need to be prepared in advance. It is recommended to start evaluation and preparation 6 months before the expiration of the exploration rights.

Enlightenment 2: Retention is conditional. Retention of exploration rights does not mean you can keep it if you want to. It needs to meet:

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Proven ore bodies available for mining

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Reach the required level of exploration

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Have valid reasons for reservation

Revelation 3: Leave professional matters to professionals. These three cases tell us:

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Legal issues require professional judgment

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Material preparation requires professional guidance

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Communicating with authorities requires professional experience

Yingting Lawyer Reminder The mining lawyer team of Beijing Yingting Law Firm has rich practical experience in the fields of mining rights such as retention, renewal and transfer of exploration rights. If you encounter the following situations, please feel free to consult:

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The exploration rights are about to expire and I don’t know how to deal with it.

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Want to apply for reservation, but not sure if you qualify?

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My reservation application was rejected, I don’t know what to do

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Problems encountered in renewing exploration rights --- *Warm reminder: This content is for reference only and does not constitute legal advice. Please consult a professional attorney for specific questions. *