I. Basic Concepts

(1) Revenue from the payment for prospecting rights and mining rights

According to the "Notice of the Ministry of Finance, the Ministry of Natural Resources, and the People's Bank of China on Matters Relating to the Management of Proceeds from Fees for Exploration Rights and Mining Rights," the proceeds from fees for exploration rights and mining rights refer to all revenues collected by the approval and registration authorities of exploration and mining rights under the central and local governments when such rights—formed through state-funded exploration (including funding from the central government, local governments, or joint funding by the central and local governments)—are transferred via market-based methods such as bidding, auction, or listing, or through negotiated agreements. They also include the fees paid by state-owned enterprises to make up for the unpaid fees associated with exploration and mining rights that they have occupied free of charge.

(2) State-funded

According to the "Notice on Clearing Nationally Funded Prospecting Areas for Previously Discovered Mineral Deposits," "nationally funded" refers to funds allocated by the central and local governments—through expenditures such as geological exploration fees, mineral resource compensation fees, mining rights usage fees and revenue from sales, and various special funds—for the exploration and development of mineral resources. (Exploration investments previously made by other types of economic entities that have now resulted in the loss of mining rights shall also be treated as nationally funded.)

II. Payment Status

(1) General Payment Scenarios

According to the "Administrative Measures for the Fees and Prices of Prospecting Rights and Mining Rights," when the State transfers prospecting rights formed through its capital investment to a prospecting rights holder, it shall collect from the holder the prescribed fee for prospecting rights. Similarly, when the State transfers mining rights formed through its capital investment to a mining rights holder, it shall collect from the holder the prescribed fee for mining rights.

(2) Circumstances for Supplementary Payment

1. The mineral type being explored has been changed from a high-risk mineral type to a low-risk mineral type.

According to the "Notice of the Ministry of Natural Resources on Further Standardizing the Management of Prospecting Rights," in principle, a prospecting rights holder is not permitted to change the type of mineral being explored from a high-risk category to a low-risk category. However, if the change is due to newly discovered minerals during the exploration process, it may be allowed after expert review organized by the registration and management authority at or above the provincial level and public announcement. In such cases, the prospecting rights holder must also assess and pay any additional fee required for the change in mineral type.

2. Transfer and disposal of cooperative exploration rights

According to the Provisional Measures for the Management of Equity in Central Geological Exploration Fund Projects, if a prospecting rights holder holding prospecting rights formed through exploration funded by the state intends to engage in cooperative investment with the Geological Exploration Fund, it shall first pay the prospecting rights fee in accordance with relevant state regulations. Alternatively, the parties may agree in the contract that, upon completion of the joint exploration and transfer of the jointly held prospecting rights, the original prospecting rights holder shall make up the payment of the original prospecting rights fee to the state.

(3) Circumstances for Reduction or Exemption of Fees

1. Circumstances for Reduction or Exemption of Exploration Rights Fees

According to the "Administrative Measures for the Registration of Mineral Resource Exploration Blocks," if any of the following circumstances apply, the holder of the exploration right may submit an application. Upon review and approval by the registration authority in accordance with the reduction and exemption measures for exploration right usage fees and exploration right payments formulated jointly by the competent department of geology and mineral resources under the State Council and the Ministry of Finance under the State Council, the exploration right usage fee and exploration right payment may be reduced or exempted: (1) mineral types that are encouraged for exploration by the state; (2) areas that are encouraged for exploration by the state; (3) other circumstances specified jointly by the competent department of geology and mineral resources under the State Council and the Ministry of Finance under the State Council.

2. Circumstances for Reduction or Exemption of Mining Rights Fees

According to the “Administrative Measures for the Registration of Mineral Resource Exploitation” (State Council Order No. [No. ]). 241 According to the provisions of [Document No.], if any of the following circumstances apply, the mining right holder may submit an application. After review and approval by the registration and management authority under the people's government at or above the provincial level, in accordance with the measures for reducing or exempting mining rights usage fees and mining rights payments formulated jointly by the competent department of geology and mineral resources under the State Council and the Ministry of Finance under the State Council, the mining rights usage fee and mining rights payment may be reduced or exempted: (1) Exploiting mineral resources in remote and impoverished areas; (2) Exploiting mineral types that are critically scarce nationwide; (3) Suffering severe losses or suspension of production due to force majeure events such as natural disasters; (4) Other circumstances specified by the competent department of geology and mineral resources under the State Council and the Ministry of Finance under the State Council.

III. Payment Methods

There are three methods for paying the fees associated with prospecting rights and mining rights: payment in cash, conversion into state capital, and payment in the form of stock issuance.

(1) Pay by means of funds

1. One-time payment of exploration rights and mining rights fees

According to the "Supplementary Notice from the Ministry of Finance and the Ministry of Natural Resources on Issues Relating to the Reform of the Paid Acquisition System for Prospecting Rights and Mining Rights," the payment for prospecting rights associated with mineral rights registered and licensed by the Ministry of Natural Resources shall be... 500 Below 10,000 yuan, the mining rights payment is... 3000 For amounts under 10,000 yuan, the payment should, in principle, be made in one lump sum. As for prospecting rights registered and certified locally, the standard for one-time payment shall be determined by each province based on its specific circumstances.

2. Installment payment of exploration rights and mining rights fees

According to the "Notice on Issues Concerning the Deepening of the Reform of the Paid Acquisition System for Prospecting Rights and Mining Rights," mining rights registered and licensed by the Ministry of Natural Resources may have their prospecting right fees paid in installments, with the maximum number of installments being... 2 Annual payment—The payment ratio for the first year should not be lower than... 60% ; The mining rights payment can be paid in installments at most. 10 Annual payment—The payment ratio for the first year should not be lower than... 20% Meanwhile, holders of exploration and mining rights who pay the consideration in installments shall bear a fund occupation fee no lower than the prevailing bank loan interest rate for the same period.

(2) Conversion to State Capital Investment

The state’s regulations on converting exploration rights into state capital have evolved from being permitted to “generally prohibited, with exceptions allowed.” According to the “Notice on Deepening Reform of the Paid Acquisition System for Prospecting and Mining Rights,” prospecting right holders shall promptly and fully pay the prospecting right fees to the state in accordance with relevant state regulations. Except as otherwise provided in this notice, prospecting right fees will no longer be converted into state capital under any circumstances. At the same time, the document specifies certain exceptional circumstances: “State-owned geological exploration units may continue to implement the policy of converting the fees paid for prospecting and mining rights—rights that were already registered and held by them prior to the issuance of this notice and were formed through state-funded exploration—into state capital. If the state has other provisions, those provisions shall prevail.”

(3) Payment by share conversion

The state’s regulations regarding the payment of consideration in the form of equity shares have similarly undergone a transition—from being permitted initially to being “generally prohibited, with exceptions allowed.” According to the “Supplementary Notice on the Administration of Fees and Consideration for Exploration and Mining Rights,” state-owned enterprises and institutions holding shares in joint ventures, joint-stock companies, and share-cooperative enterprises may, with the approval of the Ministry of Natural Resources and the Ministry of Finance, convert their payable exploration and mining rights consideration into state-owned shares.

Subsequently, according to the provisions of the “Notice on Issues Concerning the Deepening of the Reform of the Paid Acquisition System for Prospecting Rights and Mining Rights,” except in special circumstances, the fees for both prospecting rights and mining rights may no longer be paid in the form of equity contributions. The document specifies two special circumstances under which the fees for prospecting rights and mining rights may be paid in the form of equity contributions:

The first scenario: 2006 Year 10 Moon 25 Prior to the date mentioned, prospecting rights holders and mining rights holders who have been occupying free-of-charge prospecting rights and mining rights over mineral deposits identified through state-funded exploration—and who genuinely face difficulties in paying the fees for such rights in cash and meet one of the following conditions—may, on a voluntary basis and subject to approval by the Ministry of Finance in conjunction with the Ministry of Natural Resources, pay part or all of the fees due for prospecting rights and mining rights to the state by converting them into equity shares: (1) prospecting rights and mining rights obtained free-of-charge before the promulgation of the “Administrative Measures for the Registration of Mineral Resource Exploration Blocks” and the “Administrative Measures for the Registration of Mineral Resource Exploitation,” and which remain currently valid; (2) prospecting rights and mining rights that have been reorganized and restructured with the approval of the State Council or a provincial-level people’s government, and whose assessed values as prospecting rights and mining rights have been contributed as assets to the restructured enterprise; (3) prospecting rights and mining rights explicitly stipulated in documents issued by the State Council or approved by the State Council.

The second scenario: Where, with the approval of the Ministry of Finance and the Ministry of Natural Resources, or of the provincial-level finance departments and natural resources administration authorities, part or all of the consideration paid for exploration rights and mining rights has already been converted into state-owned capital, the holders of such exploration and mining rights shall first make up the unpaid consideration to the state in cash. If it is genuinely difficult to make up the unpaid consideration in cash, the holders of exploration and mining rights may voluntarily choose to convert the previously converted state-owned capital into equity shares instead.

Four, Amount confirmed

(1) Determination of the Assessment Agency

According to the "Notice of the Ministry of Natural Resources on Regulating Matters Relating to the Entrustment of Mineral Rights Transfer Valuation," for projects involving the establishment, transfer, or renewal of mineral rights that require valuation of mineral rights premiums, the natural resources administration authorities shall, in accordance with their respective approval and management powers, select and entrust, through an open, fair, and impartial process, appraisal institutions qualified to conduct mineral rights valuations—either by the Ministry of Natural Resources or by the provincial-level natural resources administration authorities.

(2) Requirements for the Assessment

According to the "Notice of the Ministry of Finance and the Ministry of Natural Resources on Strengthening the Management of Mineral Deposits and Rights Identified through State-Funded Exploration," if a mining rights holder obtains a prospecting right for a mineral deposit identified through state-funded exploration free of charge and subsequently undertakes exploration activities at its own expense, the registration authority, when commissioning an appraisal, shall explicitly require the appraisal agency to clearly distinguish in its appraisal report the portion of the mining rights price that was formed by state-funded exploration.

(3) Confirmation of Assessment Results

According to the "Notice of the Ministry of Natural Resources on Adjusting the Authority for Confirmation (Filing) of Mineral Rights Premiums and Filing Management of Reserves Evaluation," the Ministry of Natural Resources is responsible for issuing exploration licenses and mining licenses, and the confirmation (filing) of mineral rights premiums shall be handled by the Ministry. All other matters shall be handled by the natural resources management departments of provinces (autonomous regions, municipalities). The provincial-level natural resources management departments shall report to the Ministry of Natural Resources on a quarterly basis regarding the confirmation (filing) of premiums and their disposal status.