Mongolia Sovereign Wealth Fund Law + Minerals Law amendments — 34% strategic-deposit ownership cap and mandatory state share

Mechanism

The Sovereign Wealth Fund Law (SWFL) creates a three-fund architecture — a Future Heritage Fund (international portfolio investments funded from residual minerals royalties), a National Development Fund (domestic infrastructure), and a Savings Fund (cash distribution reserve). The accompanying Minerals Law amendments are the binding upstream capture mechanism:

• 34% private cap. No person, alone or with affiliated parties,

may hold more than 34% of issued shares of a company that holds a special licence for a deposit of strategic importance. The cap does not apply to state-owned or locally-owned legal entities, nor to shareholders covered by an investment agreement with the Government of Mongolia.

• Mandatory state share. For designated strategic deposits, up to

34% of share capital transfers to the State (typically without compensation in the public-discovery cases that motivated the law).

• Tax overlay. The amendment package raised CIT on transfers,

inheritance and gifting of strategic-deposit licence rights — a fiscal moat that limits dilution-by-secondary-sale.

• Expandable list. Parliament retains discretion to designate

additional projects as strategic deposits at any point in their lifecycle. Approximately 16 deposits are currently potentially in scope.

The February 2025 SOE rebrand of Mongolrostsvetmet → Erdenes Critical Minerals operationalises the policy on the equity side: the state's new shares feed into a single Erdenes Mongol LLC group governance plan, with explicit rare-earth processing mandate.

Downstream implications

• EM resource-nationalism vector. Pairs with Indonesia hilirisasi,

DRC cobalt quota, Zimbabwe lithium concentrate ban, Chile lithium strategy — Mongolia is now a fifth-front EM upstream-capture case, but with an equity-stake mechanism rather than an export ban.

• Rio Tinto / Oyu Tolgoi. Existing investment agreements grandfather

Oyu Tolgoi out of the cap; but the precedent reframes any future underground-expansion or successor-licence negotiation. Rio's long-running tax-and-stake disputes get a harder legal backdrop.

• Orano US$1.6bn Zuuvch-Ovoo uranium deal. Signed under the prior

regime; structure may need to slot under an investment-agreement carve-out to avoid the 34% cap.

• Western critical-minerals offtake diplomacy. US, EU, Korea, Japan

have all courted Mongolia for non-China REE/Cu/W supply. The 34% state-share rule is a de-facto sovereignty premium on offtake terms — friendlier to G7-style joint ventures than to Chinese SOE-style full acquisition.

• China dependency overhang. Mongolia's geography means physical

exports still flow overwhelmingly through China; the SWFL/Minerals Law amendment shifts equity ownership but not logistics.

Open questions

• Definitive published list of designated strategic deposits and which

16 are in scope — sourced from Mongolian Mining Cadastre / MMHI.

• How the 34% cap interacts with Mongolia's existing investment-

agreement framework (Oyu Tolgoi precedent, Tavan Tolgoi pre-arrangements).

• Investor-state arbitration risk: any moves that effectively

re-nationalise existing private equity stakes will trigger BIT claims. Watch for any ICSID filings.

• Whether the Future Heritage Fund's foreign-asset allocation

materially affects Mongolian balance-of-payments and TUG/USD pair.