Mongolia Defends Draft Mining Law Branded as Bad for Investment

Jan 19 • Government, Mining, News • 1313 Views • No Comments on Mongolia Defends Draft Mining Law Branded as Bad for Investment

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Mongolian officials held a briefing yesterday to defend proposed changes to a mining law that the country’s biggest business association says would deter investment.

Puntsag Tsagaan, the mineral policy adviser to President Tsakhia Elbegdorj who led the legislation’s drafting, said the proposed law would strengthen the economy, better protect the environment and ensure Mongolians benefit from the country’s mining boom, according to James Liotta, a partner at Mahoney Liotta LLC, who attended the meeting in the capital Ulan Bator. Representatives of Peabody Energy Corp. (BTU), Aspire Mining Ltd. (AKM) and Centerra Gold Inc. (CG) were among the attendees, Liotta said.

The briefing was held after the Business Council of Mongolia sent Elbegdorj a letter on Jan. 7 saying the proposed law would halt current minerals exploration and discourage investment. Private-equity firm Origo Partners (OPP), which owns more than $100 million of mining assets in Mongolia, said this past week the president may have drafted the law to bolster his popularity before elections in June.

“The president showed some courage to open this up,” said Liotta, who has represented companies including Rio Tinto Group (RIO) and Peabody. “Now we wait to see if he shows leadership to get a proper draft law that is acceptable.” Elbegdorj didn’t attend yesterday’s event, Liotta said by e-mail.

Sukhbaatar Erdenebold, Elbegdorj’s spokesman, didn’t immediately answer calls to his office and mobile phone after normal business hours yesterday. Baatar Bulganbayar, an assistant to Tsagaan, the mineral policy adviser, confirmed Liotta’s account of the briefing.

Minerals Law

Mongolia’s current minerals law was passed in 2006 and is the basis for the Oyu Tolgoi investment agreement between Rio Tinto, the owner of 66 percent of the project, and Mongolia, which has the rest, according to Mongolia International Capital Corp., an Ulan Bator-based investment bank.

The proposed legislation, which will give the state the right to a free stake in many mineral projects, will take the country away from the free-market principles practiced there since the early 1990s, the Mongolian business council said in a Jan. 7 letter to Elbegdorj’s office. The group has 250 members including Rio Tinto, Peabody, General Electric Co. and Mitsubishi Corp. (8058)

Dash Bat-Erdene, head of geology at Ulan Bator-based Biluut Mining and a member of the group that drafted the proposed law, said Mongolia’s earlier laws were designed to attract foreign investment. In addition to creating jobs and bringing in foreign capital and technology, they also led to speculation, tensions with local communities and corruption, he said. The proposed law seeks to fix that, Bat-Erdene said at the meeting yesterday, according to Liotta.

Investor Note

Origo Partners, in a Jan. 14 note to investors, said it expected that a final draft of the law will be submitted to the spring session of parliament in April. Mongolia passed legislation ahead of parliamentary elections last year increasing the government’s ability to regulate foreign companies.

Presidential adviser Tsagaan said yesterday that the proposed law isn’t politically motivated and that there’s no hurry to approve it before presidential elections scheduled for June, according Liotta.

Source: Bloomberg

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