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If you don’t do this before acquiring the mineral rights, you will regret it (list attached)

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Article author:Yingting Lawyers Group | Update time:1970-01-01 | Reading times:130

Preface "What is the most important thing in mineral rights acquisition?" "Price? Type of mineral? Reserves?" None of them are right!Most importantly – do your due diligence!When many mining companies acquire mineral rights, they are most concerned about price and reserves, but they ignore the most critical link - due diligence. It was only after the acquisition was completed that various problems were discovered, and it was too late. Today, Lawyer Ying Ting will talk about due diligence before mining rights acquisition.

A contrasting case

Case 1: The cost of not paying attention to due diligence A mining company acquired the mining rights of a gold mine for 80 million yuan. Before the acquisition, the seller vowed that there would be no problems. After the acquisition, I discovered:

The mining rights were mortgaged to the bank with a debt of 40 million yuan.

Over the years, arrears of transfer income of 8 million yuan

There is cross-border mining and administrative penalties are faced.Additional expenditure: 48 million yuan!

Case 2: Paying Attention to the Benefits of Due Diligence Another company acquired another gold mine in the same area for the same amount of 80 million yuan. Before the acquisition, a professional team was hired to conduct comprehensive due diligence:

Discover the issue of mining rights mortgage → Adjust the transaction structure and let the seller release the mortgage before delivery

Discover historical arrears issues → Deduct them from the transaction price

Discover the risk of cross-border mining → Require the seller to undertake historical responsibilities and set default clausesThe final delivery was successful with no additional expenses!

Ten key points of due diligence

The first point: Verification of mining rights certificatesNeed to check:

Is the prospecting license/mining license true and valid?

Is the license period within the validity period?

Whether the type and scope of minerals stated in the certificate are consistent with the actual situation

Are the procedures for extension and change over the years complete?Common risks:

The certificate is forged or expired

The mineral type and scope are inconsistent with the contract stipulations

Missing extension procedures

Second key point: Verification of ownership burdensNeed to check:

Whether there is mortgage registration

Whether there is seizure or freezing

Whether there is leasing or contracting

Are there any other rights restrictions?Common risks:

Mining rights are mortgaged and need to bear secured debt after acquisition

Mining rights have been sealed and normal operations cannot be carried out

There is a situation of "one mine sells many"

The third point: historical payment verificationNeed to check:

Payment status of mining rights transfer income

Payment status of exploration rights/mining rights royalties

Resource tax payment status

Performance of other statutory payment obligationsCommon risks:

There are historical arrears, which need to be borne after the acquisition.

Being charged late fees and fines

The license cannot be renewed normally

The fourth key point: Verification of resource reservesNeed to check:

Whether the resource reserve report has been reviewed and filed

Authenticity and accuracy of reported data

Does the reserve level meet the requirements?

Is there any risk of negative changes in reserves?Common risks:

Reserve reports are false or exaggerated

Actual reserves are much lower than reported data

Reserves have been depleted or grades have declined

Fifth Point: Compliance Operation VerificationNeed to check:

Environmental impact assessment approval and acceptance status

Safety production license status

Land use procedures

Forest land use proceduresCommon risks:

The environmental impact assessment has not been approved or accepted

Safety production conditions are not up to standard

Insufficient procedures for land and forest use

Sixth point: Verification of mining area scopeNeed to check:

Does the scope of the mining area involve ecological protection red lines?

Does it involve basic farmland?

Whether it involves a nature reserve

Whether there are overlapping mineral rightsCommon risks:

The mining area has been classified as an ecological red line and faces exit

Occupies basic farmland and cannot be mined

Overlap with other mining rights, causing disputes

Seventh Point: Safety and Environmental Protection VerificationNeed to check:

Historical safety accidents

Administrative penalty records

Damage to the ecological environment

Fulfillment of ecological restoration obligationsCommon risks:

There are unresolved safety incident liabilities

Facing environmental penalties

Need to bear huge ecological restoration costs

Eighth Point: Contract Debt VerificationNeed to check:

All contracts signed by the target company

debt situation

Guarantee situation

Pending litigation, arbitrationCommon risks:

Hidden debt exists

There are unfavorable terms in the contract

There are undisclosed guarantees

Point 9: Labor and Employment VerificationNeed to check:

Number and composition of employees

Social security payment status

Signing of labor contract

historical labor disputesCommon risks:

There is a large amount of unpaid wages

Social security arrears

There is an unresolved labor dispute

Point 10: Verification of actual controllerNeed to check:

Shareholder situation

Equity structure

Related companies

Actual controller backgroundCommon risks:

Equity holding

There are related transaction risks

The actual controller has a bad record

Due Diligence Checklist (Collector's Edition)

Basic license documents | Serial number | File name | Verification points | |-----|---------|---------| | 1 | Mining right certificate | Authenticity, validity period, scope | | 2 | Business license | Authenticity, business scope | | 3 | Transfer contract | Rights and obligations, payment agreement |

Ownership burden status | Serial number | File name | Verification points | |-----|---------|---------| | 5 | Real estate registration inquiry | Mortgage and seizure status | | 6 | Contract agreement | Leasing and contracting status | | 7 | Related company status | Related transaction review |

Payment Status | Serial Number | File Name | Verification Points | |-----|---------|---------| | 8 | Payment Voucher | Transfer Income, Use Fees | | 9 | Tax Certificate | Resource Tax Payment Status | | 10 | Arrears Query | Historical Arrears |

Compliance management documents | Serial number | File name | Verification points | |-----|---------|---------| | 11 | Environmental impact assessment approval | Is it valid and accepted | | 12 | Safety production license | Validity, conditions meet standards | | 13 | Land use documents | Legality, scope |

Mining area scope | Serial number | File name | Verification points | |-----|---------|---------| | 15 | Planning map | Ecological red line, basic farmland |

Suggestions from Yingting Lawyer The mining lawyer team of Beijing Yingting Law Firm reminds:Due diligence before acquiring mineral rights is the last line of defense to protect yourself!Suggestions:1.Be sure to do due diligence——Regardless of the transaction amount 2.Hire a professional team——Lawyers, accountants, technical experts 3.The investigation must be comprehensive——Don’t just look at the surface, but conduct in-depth verification 4.Pay attention to the findings——When risks are discovered, the trading plan must be adjusted in a timely manner 5.Set protection terms——Set representations, warranties and breach of contract clauses based on due diligence resultsLeave professional matters to professionals!--- *Warm reminder: This content is for reference only and does not constitute legal advice. Please consult a professional attorney for specific questions. *


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