Mongolia aims to maintain “attractive” investment climate

Vancouver Robert Friedland, chairman of Ivanhoe Mines (IVN-T, IVN-N), and other mining executives active in Mongolia are welcoming comments made by top government officials to “maintain the current attractive climate” for foreign investment in the nation’s fledgling mineral sector.

At recent investment-related conferences in China and Mongolia, government officials responded to concerns raised by mining companies after certain factions and groups proposed legislative changes to the Minerals Law. The most controversial proposal would give the government rights to acquire up to 30% of ‘significant’ mineral deposits, namely those discovered with state funding during the pre-1991 Soviet era, and up to 15% of future discoveries.

Prime Minister Ts. Elbegdorj told delegates attending a conference in Ulaanbaatar that there is no case to be made for government ownership of mineral deposits. “Mongolia should be a country that is favorable for investment,” he stated, while indirectly acknowledging that there would be “negative consequences” if changes being promoted by certain individuals and groups were adopted.

The Prime Minister’s comments were echoed by Mongolia’s President Nambariin Enkhbayar and Foreign Minister Tsendiin Munkh-Orgil at a news conference in China. “The leadership in the country will do its best to make foreign investment feel happy about their money they are going to bring into the Mongolian economy,” President Enkhbayar told reporters.

While certain non-government organizations (NGOs) and United Nations agencies are believed to have endorsed and encouraged changes to the existing Minerals Law, the World Bank and the International Monetary Fund (IMF) both warned that onerous changes could curtail job creation, private sector development, and Mongolia’s overall economic growth.

Mining companies are working with the Mongolian National Mining Association and the North America Mongolia Business Council to ensure that future debate about mining laws is conducted in an open and transparent manner. An estimated 230 companies from 31 countries are exploring and developing mineral projects in Mongolia, with one of the most significant being Ivanhoe’s Oyu Tolgoi copper-gold project.

Friedland warned that the proposed changes would take Mongolia back to the Soviet system of state-owned resources, instead of allowing the resource-rich nation to become “an Asian Kuwait, or an Asian Canada.” He noted that Ivanhoe had invested $275 million and paid $11 million in government taxes, “without taking a penny out of Mongolia.”

Management of Entre Gold (ETG-V, ETG-X) was also encouraged by the positive response of government to the intense lobbying efforts of mining companies active in Mongolia. “This is an example of a young democracy at work,” says Entre President Greg Crowe.

Crowe noted that the Ministry of Industry and Trade has called for a formal response to the draft proposals before the final amendments are presented to cabinet later this week.