The Mongolian story blew up during the week after a letter from the country’s business council to the government in Ulaanbaatar was made public. This said the proposed new mining law – which will mandate Mongolian citizens must hold a 34 per cent stake in all projects and gives state-owned entities a pre-emptive right to any mining or exploration licences for sale – “threatens to shut down the entire minerals industry in Mongolia”.
Which is a smart move for a country that gains 90 per cent of export revenues from mining.
The business council said the new laws would halt all exploration and mine development, discourage future foreign investment, and knee-cap the whole economy. The council includes big boys such as Rio Tinto (RIO) – whose Oyu Tolgoi copper/gold project eventually will provide 30 per cent of Mongolia’s gross domestic product – Peabody Energy, General Electric and Mitsubishi.
There is resentment in many rural areas affected by mining projects and the new law is being seen as an attempt by politicians to capitalise on this.
ASX-listed companies operating in Mongolia have seen their shares take a battering in recent months but, with two exceptions, they seem to be sticking to their plans.
While Eumeralla Resources (EUM) now seems to find Burmese tin and tungsten more alluring than its original Mongolian plans, and General Mining (GMM) appears to be taking more interest in its Australian gold project rather than potash and lithium in Mongolia and others have been updating their Mongolian plans.
They would have been as pleased as Punch over at Aspire Mining (AKM). They saw their stock rise 39 per cent on Thursday and another 28 per cent on Friday after it was announced that Noble Group, Asia’s biggest listed commodity trader, was pledging further support to the Ovoot coking coal project. Noble, which is providing money for the planned railway that will make it possible to rail coal out of Ovoot, is increasing its marketing rights to 60 per cent of the mine’s output and is opening up the chance for Aspire to ship coal to Asian customers through a planned port in Russia. It was just the tonic Aspire’s share price needed, closing on Friday at 10.5c. The stock had fallen from a 52-week high of 45.5c to a low of 5.5c.
Guildford Coal (GUF) is also regaining ground, having seen its stock fall in the past year from 89c to a 27c low. It is now back to 52.5c. The company reassured shareholders last week it still planned for the South Gobi project to produce coal this year.
Matthew Wood’s Haranga Resources (HAR) seems to be moving in advance of the new laws. Its Selenge iron ore project is already 20 per cent owned by Mongolian interests and last week it did a $6m placement to a group of Mongolian investors who together will hold 12.4 per cent of the company. HAR closed at 17c, still a long way off its 54c last March.
Wood has had a mixed 12 months with his other two Mongolian plays. Copper hunter Voyager Resources (VOR) has fallen from 8.1c a year ago to 1.5c. But his Wolf Petroleum (WOF) rose from 1c in September to 14c just before Christmas and on Wednesday unveiled a production-sharing contract with the Petroleum Authority of Mongolia. It does seem Wood knows his way around Ulan Bator. WOF is now the largest petroleum exploration ground holder in Mongolia, with 74,400sq km. As the junior pointed out last week, Mongolia is striving to free itself of dependence on Russian oil and this year will start building its own refineries.
Of the other Mongolian players, Newera Resources (NRU) has seen its share price rebound, albeit to only 4c. It has the Shanagan coal project.
Meanwhile, another Noble Group partner, Xanadu Mines (XAM), will be looking to rebuild investor enthusiasm this year for its Mongolian copper and coking coal projects. Its stock has fallen from 80c two years ago to 8.7c on Friday.