TORONTO (miningweekly.com) – The recent downturn in commodity markets, coupled with an improved political climate, could provide the impetus needed for Mongolia to resolve uncertainty over investment in the country’s mineral wealth “within months”, Entree Gold deputy chairperson Michael Howard said on Monday.
Howard, who is a former leader of Britain’s Conservative party, said that the Mongolian government realises that it has “missed out” on the commodities boom of the last two years.
“I think they are more realistic about what can be achieved,” he said.
Secondly, the new government of national unity, formed after parliamentary elections were held in June this year, will hopefully eliminate a lot of “political football” between the two main parties, over investment rules for foreign-owned mining companies.
This means that a consensus will be more likely than in the past.
“I am hopeful that it could be a matter of months,” Howard said in a telephone interview.
Vancouver-based Entree is exploring for copper, gold, molybdenum and coal on a property in the South Gobi region of Mongolia, next to Rio Tinto and Ivanhoe Mines’ huge Oyu Tolgoi project, which has been delayed after the government failed to approve a draft investment agreement for the project.
Ivanhoe owns approximately 15% of Entree Gold, and Rio Tinto holds 16%. Part of the Lookout Hill property is owned in joint venture with Ivanhoe, and the partners have completed NI 43-101-compliant resource estimates on two deposits on the property – the Hugo North Extension copper-gold porphyry and Heruga copper-gold-molybdenum porphyry.
Howard, who was in the country a few weeks ago, meeting with newly elected Ministers, commented on Monday that there had been several “encouraging” developments in Mongolia since the elections, after which the winning party invited the opposition to form a coalition government.
Several politicians, including the Prime Minister, have also made public comments indicating that the government wants to move forward and resolve the issue as soon as possible.
However, Ivanhoe CEO John Macken cautioned on Friday that, while he was encouraged by the recent progress, the company would reconsider preproduction spending and may curtail other further investment in the project if progress was not made towards the “timely conclusion” of an investment agreement.
The Oyu Tolgoi deposit has been touted by Ivanhoe and its partner Rio Tinto as the world’s largest undeveloped copper/gold project.
After five years of negotiations, the Mongolian cabinet last year approved a draft deal, which would give the government a 34% interest in the property.
The agreement was then being reviewed by a working group comprised of Members of Parliament from the parliamentary Standing Committee on the Economy, which was to report to Parliament.
However, Prime Minister Sanjaa Bayar, who was elected in November last year, withdrew the document for further review.
Understandably, in the run-up to the elections, no perceivable progress was made on an agreement.
Another Canadian company, Centerra Gold, is also seeking an investment agreement before moving ahead with its Gatsuurt project.
Centerra CEO Stephen Lang said on October 31 that the company had met with the Prime Minister and the new Minister of Mines and Energy, and both officials had indicated that revisions to Mongolia’s mining law would be a “priority”.
By: Liezel Hill