This article ispart of a series. Part 1 can be viewed by clicking here.

It is difficult to estimate the entire cost of a project during the initial exploration stage. For major projects, the investment is usually greater than $US30 million. However, during each of the initial stages, investment is often less than this threshold.

Foreign investors are concerned that although exploration and development contracts may be approved at the provincial level for the initial stages of an investment, once a discovery has been made the final approval to proceed with the project to a mining phase will require approval from state-level ministries.

When state assets (including mining or exploration rights) are transferred a valuation of the exploration or mining right is required by law. The valuation is based on the mineral resources reserve report or other geological reports related to the valuation.

This valuation must be carried out by an approved valuation organisation.

At times there is a clear conflict with some agencies when valuations are obtained and the parties are in no way independent or impartial.

Further, foreign mining companies generally wish to have a greater involvement in the assessment process.

Approvals are subject to broad administrative discretion with a lack of clear guidelines on how that discretion should be exercised and with no effective administrative review mechanism. For example, currently two levels of government can issue exploration licences and four levels of government can issue mining licences. This leads to confusion in that different companies can obtain their respective licences from different levels of government.

Another key problem is that there is still an insufficient definition of the "qualified explorer" status. In order to hold an exploration licence, the applicant must hold either a geological exploration qualification or enter into a contract with the holder of a geological exploration qualification – commonly referred to as a qualified explorer.

To date there are very few wholly foreign owned entities that have obtained an exploration licence. In practice, however, they have had severe difficulty in actually using that exploration licence.

However, the regulation requires an applicant to provide a list of equipment and a list of technical personnel, which have mid-level or senior level qualifications.

It is not clear if a foreign applicant's equipment overseas and its overseas-qualified personnel shall count for the purpose of this application.

There are also irregular applications of the law between national and provincial departments. CIMG wants those irregularities removed.

There has been considerable improvement in the laws surrounding geological data and a concerted attempt has been made to develop a national database.

However, there are still many problems as provincial ministries and bureaus are reluctant to release local data and the purchase and pricing of maps and data is unclear and at times prohibitive.

That aside, another hurdle lies in the vague rules surrounding the project approval process and what constitutes fair competition and procurement. Such inconsistency in the implementation of a national or provincial policy exists across a range of issues not limited to business registration and licences and bidding regulations.

It is not clear on the face of the bidding regulations whether or not a foreign company can be a qualified applicant. If not, then foreign investors will need to establish a foreign-invested entity prior to the bid process in order to be appropriately qualified to participate. In such a case the lengthy time period it would take for such an entity to be set up may prevent participation in bidding/auction/listing.

The trial measures on the Administration of Bidding, Auction and Listing of Exploration Rights and Mining Rights were issued by the Ministry of Land and Resources (MOLAR) in June 2003 ("the Bidding Regulations"). These regulations have been updated: No. 12 – Circular of MOLAR on further standardising the administration of the grant of mining industrial rights, although the same issues still apply.

There are many issues regarding these "bidding regulations". The first is that there are no details on the qualification of bidders in the rules, although other regulations set out the appropriate funding levels, technology and equipment required.

Problems aside, Clark has a clear view on whether the mining boom is over.

He feels that depends on where you are looking from, mining in Australia or Australian miners in China. Exploration and mining activities in China are increasing as China's demand for commodities continues. The CIMG's membership has tripled in the past three years and is likely to grow at the same pace as these activities continue.

In terms of environmental problems, Clark said miners were under considerable pressure to explore, develop and mine in a responsible and sustainable manner with due regard for and protection of the environment.

This will be more challenging for the old mines than the new mines.

Clark said he had been in China for nine years and had seen the mining industry grow and mature. He is sure there will be many opportunities for those investors who can be patient and persistent and work with the right partners.

Given China's prospective geology Clark has little doubt that China will attract an increased share of worldwide exploration funding in the future.