Khan, Western Prospector licences look safe (September 24, 2007)

Vancouver — Mongolia’s foreign uranium explorers are breathing a sigh of relief after the country’s mineral authority recently went on record saying that it has not invalidated any licences, contrary to an announcement last month.

In a formal statement, the chairman of the Mineral and Petroleum Resources Authority of Mongolia (MPRAM), Luvsanvandan Bold, said that he has not invalidated any mineral licences and that the government agency is still anxious to see foreign exploration capital continue to flow into the country.

The announcement was welcome news to Khan Resources (kri-t, khrif-o) and Western Prospector Group (wnp-v), which saw their market values tumble in mid-August when some of their key exploration licences were apparently deemed invalid.

The MPRAM chairman called the earlier notice of revocation an “unlawful revision of these licences” and issued the statement to quell industry concerns.

Bold acknowledged that the notice followed recommendations by the state audit board after it discovered areas covered by 34 exploration licences (out of more than 6,000 active licences in the country) had undergone past exploration funded by the state. Under the new mineral policy passed by Mongolian Parliament in mid-2006, those exploration licences had to be revoked as they covered mineral deposits ready for development.

The apparent remedy to the situation is for the exploration licence holders to convert them to exploitation, pre-exploitation or production licences. Bold points out that under the new mineral policy, companies can no longer continue to hold exploration licences in areas “where exploration has finalized long ago (sic) and instead they are obliged to move on to develop the deposits.”

While it is plain the government is anxious to see development of the country’s mineral deposits, it is not clear who decides when exploration has been “finalized.”

Needless to say, both Khan Resources, at its Dornod uranium project, and Western Prospector Group, at its Saddle Hills project, are now moving to conform to the edict and convert all affected special exploration licences to mining licences.

Khan is planning to start a full feasibility study at Dornod in the fall.

Located in northeastern Mongolia, Dornod is a past-producing open-pit uranium mine that was operated by the Russians from 1988-1995. A recent prefeasibility study completed by Khan put the indicated resource at Dornod at 25.3 million tonnes averaging 0.116% U3O8, about 64.3 million contained pounds U3O8. The project also holds 2.2 million inferred tonnes of 0.05% U3O8.

Within the indicated resource, the study delineated a probable reserve of 18.2 million tonnes of 0.122% U3O8 in the No. 2 and No. 7 deposits for about 49.1 million contained pounds U3O8.

Khan has a 58% joint-venture interest in the No. 2 deposit and a majority interest in the No. 7 deposit.

Adjacent to Dornod is Western Prospector Group’s Saddle Hills project, which also saw past Russian development and contains several uranium deposits, the largest and most advanced being Gurvanbulag, which saw extensive underground development.

Gurvanbulag contains an indicated resource of 2.83 million tonnes grading 0.22% U3O8 (about 13.6 million contained pounds U3O8) plus 2.67 million inferred tonnes at 0.15% U3O8 (about 8.6 million contained pounds U3O8).

On the news, Khan shares jumped about 35%, or 60 apiece, to close at around $2.30. Western Prospector saw its shares surge 81%, or $1.21, closing at around $2.70.