Uranium War in Mongolia

monatom_badamdamdin_ragchaaMongolia-Forward, a United States based company, announced that it is negotiating uranium mining in Mongolia. The Mongolian counterpart is Badamdamdin Ragchaa (photo) chairman and CEO of MonAtom, Mongolia’s State-owned uranium development company. In a proposed joint venture, the two companies wish to explore, mine and process uranium in Mongolia.

In accordance with the recently enacted Mongolian Nuclear Energy Law, MonAtom would take ownership of 51% of the project.

The original press release published first on May 21, and distributed on May 28, went virtually unnoticed by the Mongolian press. This press release is significant in the Mongolian foreign policy strategy, and is the latest Mongolian move in the uranium-war.

giacomettoChairman and CEO of Mongolia-Forward is Leo A. Giacometto (photo).  Giacometto  is a retired lieutenant colonel of the US army. He was  a member of the Northwest Power Planning Council, serves on the board of advisers for Gemnet, a Mongolian-based international telecommunications company, and held several other political, private and public sector positions, in the US and in Mongolia.  The most significant position was chief of staff to a United States senator where he helped bridge the gap between American and Mongolian foreign policy goals.

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Third Neighbor
The announcement by the American company  comes in the wake of the Mongolian foreign diplomacy's  delicate balancing act  of  balancing  between Russia and China.

Mongolia with a population of only 2.7 million is wedged between the two neighboring  giants, Russia and China.

The Mongolia-Forward  announcement introduces  the USA as a "third neighbor" (in Mongolian geopolitical terminology) into the recent uranium-war going on in Mongolia.

Mongolia has a vast amount of natural resources.  Mongolia holds uranium reserve estimated at 1.2 million tons, worth billions of dollars. China and Russia are in desperate need of uranium to fuel their existing and planed nuclear  reactors to supply the increasing electricity demand by their ever-growing population and industry.

Mongolia's balancing act is an attempt to prevent the uranium sector from being dominated by either neighboring country, while ensuring the state gets a fair share of the revenues.

dornod_uranium_mongolia

Dornod - Uranium War Zone
Khan bought the abandoned Russian owned property of Dornod uranium in Mongolia about a decade ago. 
This did not stop T. Bayarbayasgalan, the head of licensing at the country's Nuclear Energy Agency ("NEA")  from invalidating  Khan's  mining license 237A for the Dornod uranium property.  The invalidation was  based on infringements of Mongolian law, including the Mineral Law and the Law on Mineral Energy.

Bayarbayasgalan  said: The Khan license was invalidated because it had violated many of our laws," he said, "In particular, Khan violated an article in the new Nuclear Energy Law which stipulates that a company needs the permission of Ulan Bator if it intends to transfer its shares".

Clause 7.1 of the Law on Nuclear Energy states clearly that approval of NEA is needed in case of:  - "Selling, bestowing as gift, using as a collateral and otherwise transfer into ownership, possession and utilization by others more than 5 per cent of shares of the company"

The NEA statement to Khan stated: "We learned from the Internet that CNNC Inc offered to buy the share of Khan resources"

Khan Resources through its 58%-owned Mongolian joint venture subsidiary, Central Asian Uranium Company, LLC ("CAUC") has filed a formal claim in the Administrative Court in Mongolia challenging the legal basis for the notice received from the Mongolian Nuclear Energy Agency.

Uranium-War Casualties
grant_edeyKhan Resources, the Canadian based company, is the major "casualty" in the uranium-war.

The first to coin publicly the term "war" was Grant A. Edey (photo) who serves as Khan's Chairman of the Special Buy Out Committee. "We are right in the middle of a geopolitical war," said Grant Edey, the Khan company director, speaking to Reuters.

 

The Russians - ARMZ
Russia's entry into the Mongolian uranium sector, was announced during a visit by Russian president Dmitry Medvedev in August 2009.

MardaiIn the Russian eyes it is in many ways a return to deposits originally developed by Russians, and abandoned when the Soviet Union collapsed.

Mardai township close to Dornod was built by the Soviets in the 1970s and was reported to house 10,000 Russian workers at the uranium mines with a very high standard of living and commerce. Mardai which was abandoned after the collapse of the Soviet union,  is now in ruins. (photo).

The first move in the uranium-war was taken by the Russians in August 25, 2009 when an inter-governmental treaty between Mongolia and Russia was signed. The treaty stipulates the creation of a joint limited liability company, Dornod Uranium, through which the Dornod Uranium Property would be jointly developed by Mongolian and Russian interests.
medvedev_elbegdorj_zhukov_monument_26_aug_2009The uranium agreement was signed by the Mongolian chief of Nuclear Energy Commission, Sodnom Enkhbat and the head of Rosatom Russian Nuclear Energy State Corporation, Sergey Kiriyenko, in the presence of the two state leaders, Russian president Dmitry Medvedev, and Mongolian  president Elbergdorj. (photo).

In order to exercise the treaty, ARMZ Uranium (Atomredmetzoloto) was sent to the battlefield. ARMZ is the Russian company in charge of all post Soviet uranium mines. ARMZ  made an unsolicited take over bid of Khan by offering on November 30, 2009  to acquire all of the outstanding common shares of Khan Resources for C$0.65 per Khan Share totaling about  $33 million buyout offer.

This bid was regarded by Khan as a hostile takeover, and Khan neglected to cooperate,  describing it as "inadequate, failing to recognize the full value of the company"

The Chinese - CNNC
China sent "China National Nuclear Corporation" ("CNNC") to take advantage of the delicate situation.
CNNC negotiated a friendly take over for a higher price of  C$0.96 .  Khan's directors recommended that shareholders take up the CNNC bid.
The offer was conditional upon the receipt of all necessary Chinese governmental and regulatory approvals.
The Russians pushed the Mongolians to make sure the bid is not approved by the Chinese authorities. Several Mongolian officials paid a visit to China.

CNNC was notified on 21 May 2010 by the Chinese National Energy Administration, that the offer had not been approved. A few days later CNNC declared that its cash offer to acquire all Khan's common shares would be allowed to expire at the scheduled expiry date on 25 May following its failure to obtain regulatory approval.

The Americans - Mongolia-Forward
Khan, failed to negotiate its way through the complex political challenges that face Mongolia, specifically the delicate Mongolian balancing act between Russia and China. Khan is therefore  squeezed out  of the Uranium game, paving the way for Mongolia Forward a US company to take over the role of the balancing "third neighbor".

By: Dan ToMongolia@Gmail.com

Sources:
NEA  http://nea.gov.mn
ARMZ http://www.armz.ru/eng
KHAN http://www.khanresources.com
Mongolia-Forward  http://mongoliaforward.com
CNNC  http://www.cnnc.com.cn/english/index.htm

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