Mongolia: mine ownership gets political

Apr 27 • Mining, News • 587 Views • No Comments on Mongolia: mine ownership gets political

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A nasty bout of resource nationalism in Central Asia is worrying investors brave enough to invest in frontier markets. Mongolia and Kyrgyzstan are at it, with the Kyrgyz government this week announcing it has revoked 46 gold mining licences in what it calls an attempt to clean up the mining industry.

At least none of the Kyrgyz licences are for the country’s major mining operations. The situation is different in Mongolia, which on April 16 suddenly suspended the mining licenses of SouthGobi Resources.

SouthGobi’s majority owner Ivanhoe Mines had agreed to sell a 57.6 per cent stake in the company to state-run Aluminum Corporation of China (Chalco). In response, the government is now busy rushing through parliament legislation that puts limits on foreign investment into enterprises with “strategic significance”.

According to comments attributed to Minister of Foreign Affairs G Zandanshatar on the parliament website, he told MPs that the law could be passed “within two weeks”. Zandanshatar said it is only a “coincidence” that the government is rushing through this law following the revoking of SouthGobi’s licenses and ahead of the June parliamentary elections.

Nevertheless, Chinese influence is a touchy subject for many Mongolian people, and bashing foreign investors, especially Chinese ones, goes down well with voters. “This contract should be terminated immediately,” Jargalsaikhan Dambadarjaa, an economist and popular local talk show host said on his programme, speaking for many. “If someone doesn’t disrupt the SouthGobi deal, it will become Chinese property.”

SouthGobi Resources is one of the country’s largest exporters, shipping one in every five tonnes of Mongolian coking coal to China. The company is majority owned by Ivanhoe Mines, but Chalco earlier in April agreed with Ivanhoe to buy the majority stake for $926 million, a hefty 28 per cent premium to the market. The announcement appeared to take the government by surprise and two weeks later it suddenly announced it would suspend SouthGobi’s licenses, including that for the flagship Ovoot Tolgoi coal mine, as they had not authorised the deal.

By Nicholas Watson

Source: http://blogs.ft.com

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