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Copper Miners Weather Mongolia’s Political Shake Up
Still, many analysts are hopeful that the incoming government’s rhetoric will be toned down as politicians focus less on attracting voters and concentrate more on ensuring sustainable growth. Certainly, it is in the best interest of policymakers to ensure that Oyu Tolgoi succeeds as it is expected to account for over 30 percent of GDP once completed. Its success will be critical in maintaining existing and attracting new private capital.
“The paramount importance of attracting and retaining foreign investment in developing Mongolia’s economy has been recognized,” stated Resource Investment Capital. “Leveraging on its strategic location with close proximity to emerging market economies combined with a very attractive landscape of existing mining projects and largely explored mining opportunities, Mongolia’s natural resources sector is set to be redefined as it experiences substantial growth over the coming years.”
In a Center for Strategic and International Studies briefing, Stephen Noerper, a former visiting professor to the National University of Mongolia’s School of Foreign Service, echoed that sentiment.
“With foreign support, (Mongolia) has the extractive capacities (to mine copper and other commodities) and is building the needed transportation lines. Managing this new wealth is a challenge for Mongolia’s leadership, and it has looked to nations like Chile and Norway for examples of effective management of the commons and sovereign trusts,” Noerper said in a recent report.
Foreign investors are remaining committed to profiting from Mongolia’s resources, and the number of junior mining companies in Mongolia has blossomed as Oyu Tolgoi nears completion. Halifax-based Erdene Resource Development (TSX:ERD), for instance, separated into two pubic companies last month to divide its North American and Mongolian development efforts. The move will allow Erdene to have a “dedicated Mongolia management team with greater flexibility to access capital for future programs” as it looks to develop its Zuun Mod copper and molybdenum project as well as its Altan Nar gold discovery, the company said.
Kincora Copper (TSXV:KCC) also has a significant stake in Mongolia’s copper prospects as it holds Ivanhoe Mines’ two former high priority targets in the country, namely its Bronze Fox and Tourmaline Hills projects, located near Oyu Tolgoi.
Australia’s Voyager Resources (ASX:VOR), meanwhile, fully acquired the Khongor copper and gold project in 2010, which is in the South Gobi Arc terrain where the Oyu Tolgoi mine is located. Voyager said that it “fully supports the right of the Mongolian government to implement (the latest) foreign investment regulation and the company notes that, provided this new legislation is applied sensibly, the effect of this new legislation will be not dissimilar to the foreign investment review procedures that exist in many other jurisdictions, including Australia.”
One dispute that will be closely monitored to gauge the new Mongolian government’s stance regarding foreign investment is the Aluminum Corporation of China’s (Chalco) bid for coal mining group SouthGobi Resources (TSX:SGQ), in which Ivanhoe Mines has a majority share. Chalco’s $926 million bid in April for SouthGobi has been supported by Ivanhoe, but the Mongolian government has challenged the legitimacy of the move under the new foreign investment law.
In last week’s meeting in Ulaanbaatar, US Secretary of State Hillary Clinton praised the country’s efforts to ensure greater transparency as it embraces democracy, while current Mongolian President Tsakhiagiin Elbegdorj said that “intensive economic growth gives many opportunities.” Regardless of political shifts, Mongolia’s economic growth depends not just on its mineral wealth, but also on partnering with junior miners and major mining groups alike for the long haul.
Source: Copper Investing News