Mongolian gov’t rescinds 106 exploration licences

Criminal legal proceedings against former government officials in Mongolia have resulted in the cancellation of 106 mineral-exploration licences in the country. Investigating the former government officials accused of corruption has brought into question the legal rights and interests of the licence owners, whose exploration programs ground to a halt nine months ago.

Kincora Copper (TSXV: KCC; TSXV: BZDLF) is one of the foreign mining companies swept up in the controversy. It has had two of its licences revoked, collectively called the “Golden Grouse” licences (Tourmaline and North Fox). Its flagship asset, Bronze Fox, the focus of one of the most active copper-exploration programs in Mongolia this year, remains in good standing.  

Uncertainty over the fate of the Golden Grouse licences prevented Kincora from exploring the properties this year. The company paid $5 million in scrip for the two licences and has spent $1.85 million on exploration since April 2012. It also incurred $71,000 in legal costs related to their acquisition.

Dale Choi, the founder of Ulaanbaatar-based Independent Mongolian Metals & Mining Research, commented in a research note after the news that there was no notification provided about any compensation mechanisms or preferential rights for the revoked licences.

“Security of tenure and a transparent legal system are key cornerstones for both domestic and foreign investment, with the 106 licences case a clear breach, and likely to result in reduced private-sector activity and deterioration in sentiment towards Mongolia,” he wrote in a research note. “Without flagship transactions and resolution of key security of tenure uncertainties, we do not believe the foundation for a return towards private-sector growth will be provided.”

Kincora’s president and CEO Sam Spring wrote in an email response to questions from The Northern Miner that the company’s acquisition of the licences followed full, detailed due diligence, and the licences were confirmed to be in good standing by the Mineral Resource Authority of Mongolia (MRAM).

“MRAM’s actions are not surprising,” he remarked. “Obviously it is disappointing that no other details are provided other than saying the licences are revoked, but MRAM is just following the ruling of the court, and as we understand it, this matter is no longer under their jurisdiction.”

The official notification of the cancellations on Oct. 30, however, provides the licence holders with potential legal rights and recourse for the first time since January, he added. And now that the formalities of the criminal court process are concluded, Kincora and the other affected licence holders, along with the Mongolian government and the Ministry of Mining, “can actually take actions to hopefully resolve the situation.”

Spring added that “working to a solution that doesn’t involve legal measures would be a preferable outcome for all stakeholders.”

In the meantime, Kincora plans to forge ahead with its Bronze Fox project, which Spring describes as “one of the most advanced and prospective projects in the region.”

The CEO noted that the company has already identified a number of “world-class scale,” high-priority copper porphyry targets on the Bronze Fox property.