Prime Minister S. Batbold has made it clear that he would prefer the Tavan Tolgoi deposit to remain under 100% state ownership, and not be developed as a joint venture like Oyu Tolgoi.

The working group set up by Parliament to prepare the general guidelines for using the mine told him at a meeting earlier in the week that there were two options: foreign investors could be taken as partners with the State owning 51 percent, or the State will keep 100 percent ownership and give the selected investor(s) coal extracting rights under an agreement. He said he had advised the group to work on the second option.

Soil removal work must start this summer if the Parliament directive to begin export from Tavan Tolgoi by 2012 is to be followed. Mr. Batbold has instructed the working group to ready its recommendations before Parliament begins its Spring session. The Government will finish negotiations with investors during the session. The tender will be floated in the summer.
The Minister for Nature, Environment and Tourism told him the group is ready to present the plans for infrastructure, railway and water reserves. The project proposes to establish a power station with an initial capacity of 100 mw, to be gradually raised to 600 mw. The Ministry for Road, Transportation, Construction and City Development is working on choosing between the two possible railway routes: Tavantolgoi-Zuunbayan-Sainshand and Tavantolgoi-Oyutolgoi-Gashuunsukhait. The closest water source is Balgas Ulaan Lake, 65 km from the mine, but the water there can supply only about half the mine’s needs. Other sources will have to be identified.

Minister of Minerals and Energy D. Zorigt said a fresh round of talks with 11 international companies and consortiums will be held this month.  Norwest Corporation, a Canadian consultancy, is working as technical advisor, while JP Morgan and Deutsche Bank have been working as financial advisors. Individual consultants of the World Bank will also offer their services. The preliminary payment demanded will be no less than USD250 million.

Article Source

The source of information was obtained from Mongolian language newspapers Ardiin Erkh and Zuunii Medee and was included in English language in the news highlights of BCM Newswire issue 104.  BCM Newswire is sent once a week and highlights leading articles relating to business, investments, & mines in Mongolia.  BCM Newswire is sent to members of Business Council of Mongolia (BCM) and is made available to public after a month at bcmongolia.org.

Shares in Khan Resources surged 14.7% in Toronto on Monday following the announcement that the company has signed a non-binding memorandum of understanding (MoU) with MonAtom, Mongolia's State-owned uranium development company, on setting up a joint venture company to own and develop Khan's uranium project in the country.

Khan's main asset is a 58% interest in Central Asian Uranium Company (CAUC), which holds a mining license on the Dornod uranium project in Mongolia. Khan also owns 100% of an adjacent license. Both MonAtom and a subsidiary of Russia's Atomredmetzoloto (ARMZ), which has launched a hostile bid for Khan, own 21% each of CAUC. The Dornod project has faced uncertainty after Mongolia passed a new nuclear energy law, and with Khan fending off ARMZ's takeover campaign.
Khan said it believes the deal with MonAtom will enable it to fulfill the requirements of the new law in Mongolia and provide certainty for the project, while still retaining value for its own shareholders. The new nuclear energy legislation gives the Government the right to take ownership, without payment, of at least 51% of a project if uranium resources were determined through exploration with State funding.
Under the terms of the MoU, MonAtom would buy a 51% interest in both CAUC and Khan Mongolia, in accordance with the new nuclear energy law, but MonAtom would then transfer to Khan part of its interest in the joint venture in exchange for shares representing 17% of Khan, and a warrant to buy another 2.9%. At the end of the day, Khan would own 65% of the new JV company, which in turn will own 74% of CAUC and 100% of Khan Mongolia.

"With this MoU, we think we have achieved the right balance,” said Khan CEO Martin Quick. “It gives us a stable ownership and regulatory platform upon which we can obtain the necessary financing to complete the project.” The parties aim to have a definitive JV agreement signed by the end of March.
“Khan's board of directors believes that the transactions contemplated by the MoU will, when completed, deliver far greater value to Khan's shareholders than the price per share offered by ARMZ in its hostile bid,” the firm said.

Khan said that under the agreement with MonAtom, applications to reregister the existing CAUC mining license and Khan Mongolia exploration license would be approved and new licenses issued within seven days of signing the MoU. The company's exploration license would also be converted into a mining license within 45 days of signing the MoU and Khan Mongolia will be appointed as the operator of the Dornod project.

The company said the JV partners will aim to negotiate and finalize an investment agreement with the Government of Mongolia within six months after signing a definitive JV agreement. The investment agreement will likely be modeled on the deal secured last year by Rio Tinto and Ivanhoe Mines for their Oyu Tolgoi copper/gold project.

Article Source

This article was originally published by miningweekly.com and was obtained from the highlights of BCM Newswire issue 103.  BCM Newswire is sent once a week and highlights leading articles relating to business, investments, & mines in Mongolia.  BCM Newswire is sent to members of Business Council of Mongolia (BCM) and is made available to public after a month at bcmongolia.org.