Miner’s $100m award deals blow to Mongolia
Mongolia has resolved a string of disputes with foreign miners, including a pardon for three foreigners convicted of tax evasion, in an effort to reignite investment interest amid a global downturn in commodity prices that has battered its currency and economy.
Khan Resources, which lost its Dornod uranium prospect to state-owned Monatom in 2009 when the deposit was declared a strategic resource, announced the award in a filing to the Canadian Securities Exchange on Monday. It said it would pursue further action if the money was not paid.
Mongolia’s finances are stretched, with declining export revenues resulting from sharp falls in the prices of coal, copper and other mineral exports, plummeting foreign investment and a weakened currency. Bond auctions have flopped horribly.
Khan did not specify whether the award should be made at once or over an extended period. The latter would be much easier for the country’s struggling economy to absorb.
“It can be managed, with some pain of course,” said Badral Munkhdul, who runs the economic consultancy Cover Mongolia, pointing to the nation’s $1.3bn in foreign exchange reserves.
In recent years Mongolia has wooed western allies as part of its “third neighbour” policy to offset the influence of China and Russia, the two giants on its borders, but the terms for foreign mining investors have gyrated as the country tries to maximise state revenues from those investments.
Mongolia has already resolved two other cases dating from the commodities boom, when the prospect of windfall wealth from the mammoth Oyu Tolgoi mine triggered a backlash of resource nationalism.
Last month the president, Tsakhiagiin Elbegdorj, pardoned one American and two Filipino businessmen who had been jailed for tax evasion allegedly committed by their company, Rio Tinto subsidiary SouthGobi.
Before their conviction the three had been the most prominent examples of a policy of preventing foreigners involved in business disputes from leaving the country, labelled “Hotel Mongolia” after the line in the Eagles’ song “Hotel California”: “You can check out any time you like, but you can never leave.”
Unresolved disputes include protracted negotiations with Rio Tinto over the second, $2bn phase of the Oyu Tolgoi mine and tangles with Japanese and western investors over other failed mining and investment deals.
This article has been amended since original publication to reflect the fact that Khan Resources’ announcement was made in a filing to the Canadian Securities Exchange