The Mongolian parliament is discussing a law that will control investment by foreign state owned firms in strategic assets says unofficial source. This new law could potentially stop Chalco’s bid to buy a controlling stake in SouthGobi Resources Ltd.
The source says that in near time, the Mongolian Parliament’s plan to change the law is to ensure that acquisitions by foreign state-owned firms in strategic firms, such as resource companies or mines, will go through a government vetting process akin to that practised in Canada and Australia.
Currently, there is no shareholding limit for foreign state-owned firms looking to invest in Mongolia’s strategic firms.
Early last month, China’s state owned Chalco, biggest aluminum producer by output in China said it had agreed to buy a controlling stake in Mongolian coal miner SouthGobi Resources from Canada’s Ivanhoe Mines in a deal worth US$923 million.
SouthGobi, which listed in Hong Kong two years ago, is 66%-owned by Ivanhoe, and 14% by Chinese sovereign wealth fund, China Investment Corp. Two weeks after that acquisition was announced, SouthGobi said in a statement that the Mongolian government had suspended some of its mining licences on national security concerns following Chalco’s bid to take control of the Mongolian miner.