Mass permit revocation puts Mongolia’s credibility back in spotlight
Mongolia’s Mineral Resource Authority, which issues mining and exploration licenses, recently revoked 106 exploration licenses that it had earlier given out under the tenure of its former, and since jailed, Chairman, D. Batkhuyag. But, it was more a formality, really, than anything else. Back in January a Mongolian court found Batkhuyag guilty of corruption and sentenced him to over six years in jail, a sentence later lowered to four years. At the same time the court voided 106 exploration licenses, contending they did not comply with Mongolia’s mineral laws, which are still in flux.
Some see the revocation – now official – as politically motivated, wrapped up in an anti-corruption drive by the Mongolian government. Dale Choi, founder of Independent Mongolian Metals & Mining Research, has been covering the issue in research notes for his clients. In an interview Thursday he expressed deep concern about the decision.
“Both sides lose,” he said, referring to the government and mining or exploration companies. “It’s a lose-lose situation.” Exploration companies lose their licenses and, as Choi sees it, the Mongolian government loses yet more credibility as a place for exploration dollars to flow. “I think the authorities are making a very big mistake in not settling more quickly,” he said.
The argument for Mongolia’s declining credibility as a mining and exploration jurisdiction comes down especially, but not only, to three outstanding issues: the pending arbitration over the alleged expropriation of Khan Resources’ uranium project; the Mongolian government’s 2010 decision to ban the issue of more exploration licenses until a new mineral law comes into effect; and the push and pull between Rio Tinto and Mongolia over the Oyu Tolgoi copper-gold mine, where the current argument has turned to the question of the funding of the phase II underground development. With these already very visible issues, a broad revocation of exploration licenses becomes harder to spin positively. “It’s damaging for the country,” Choi says, adding: “It’s a concerning trend.”
Yet not all those deeply invested in Mongolian exploration see the move as an existential threat to the Mongolian mining and exploration scene. The head of one long time explorer of Mongolia, who preferred not to be named in speaking with Mineweb, doesn’t see ulterior motives or political gamesmanship in the government decision to revoke exploration licenses. Rather the source sees the move to cull 106 exploration licenses as being rooted in a government attempt to clean the slate ahead of a new mineral resource law.
In this respect the source signaled optimism. “It sets the stage for the re-issuance of exploration licenses,” the source said. Still, the exploration veteran acknowledges the revocation caused damage. Public companies had invested in Mongolia after deciding they had rightful title to their licenses.
Behind the revocation there are few specifics. It’s not unreasonable to wonder if the Mongolian government could be casting its net too wide, treating all revoked exploration licenses that Batkhuyag issued as tainted – perhaps wrongly. It’s impossible to say without details.
Indeed, Choi notes in research and conversation that a group representing 31 of the revoked license holders, for example Kincora Copper, which reported the revocation of the exploration licences, have called for more investigation. “Not one of the companies were examined, investigated,” he said, referring to the January court case that found Batkhuyag guilty and voided the 106 exploration licenses. “They want to be investigated. The ones saying that – they’re very clean.” Still, Choi does not whitewash Mongolia. He acknowledges issues with corruption. “There is very fertile ground for illegal activities,” he said.
Indisputable is that Mongolian exploration has taken a nose-dive in the past five years and not just because of the recent turn for the worse in mining markets. In the past half decade the number of exploration permits in Mongolia has fallen by about half, while the area covered by exploration permits has crumbled even more: from about 44 percent of the country to 14 percent in late 2012. The ban on new exploration licenses and issues over security of tenure are heavily to blame. And without strong exploration programs running in Mongolia, it becomes far less likely new Oyu Tolgoi’s – drivers of Mongolia’s new economy – will be found.
Author: Kip Keen
Posted: Friday , 08 Nov 2013