Mongolia has temporarily suspended the issuance and transfer of mineral exploration licences until the government can enact a stricter law on mining investment.
The order was given by President Tsakhia Elbegdorj as head of the National Security Council, according to a statement posted on the presidential web site.
The president noted that almost half the exploration licence holders have neglected their duty to provide annual exploration reports, while many are only using the permits as money making tools and not investing in any active exploration at all.
The freeze on new mining permits will remain in place until a law on mineral licences is adopted by the government, according to the directive.
Mongolia has issued 4,706 valid mineral licences of which 3,610 are exploration permits and 1,096 are mining licences.
The directive notes that most of the permits currently held by companies and individuals operating in Mongolia are being held in violation of existing laws.
Foreign companies with operations in Mongolia include Rio Tinto, Ivanhoe Mines, SouthGobi Energy and EntreeGold.
Rio Tinto and Ivanhoe Mines have a joint $5bn Oyu Tolgoi project, of which 34% is owned by the Government of Mongolia.
Mongolia, seeking $25bn to develop metal and coal resources, wants to have a greater control over its resources and retain ownership of new mines and sell shares in state-owned producers.