Mongolia mine law change unlikely to be retroactive
LONDON, April 30 |
LONDON, April 30 (Reuters) - Changes to Mongolia's investment rules that will allow it to review takeover bids by foreign investors are part of efforts to avoid over-dependence on commodity-hungry China and are not aimed at reviewing existing deals, a government minister said.
Worries over the new rules have unsettled investors in Canadian miner SouthGobi Resources.
Earlier this month, China's state-owned aluminium giant Chalco said it planned to make a proportional bid to all shareholders to buy a 60 percent stake in coal miner SouthGobi. Ivanhoe, which owns a majority stake, has already agreed to tender its shares in favour of the deal.
The Mongolian government said after the deal was announced that it would suspend SouthGobi's licences for its several large coal projects, which are close to the Chinese border, and said it would introduce new foreign investment legislation.
"People demand the government does everything possible not to let one country dominate (the economic balance)," Chuluun Ganhuyag, Mongolia's vice finance minister, said on Monday on the sidelines of an investor confidence in London.
"I don't think the law will be retroactive. The Chalco deal is still ongoing, still on the table," he said, adding Ivanhoe and Chalco had indicated their readiness to work with the Mongolian government.
Ganhuyag also said the new law would only apply to investment in certain deposits, but the list would go beyond the country's current list of strategic assets. "There must be some sort of threshold," he said.
He added Mongolia, a top supplier of coking coal to China, was also keen to cooperate with Beijing on securing access to the seaborne coal market, for example through the port of Tianjin.
Ganhuyag did not elaborate on whether the legislation would involve specific shareholder limits for a foreign or foreign state-owned entity, but said it would bring Mongolia into line with other resource-rich states like Canada or Australia.
He said separately that the country, sitting on an estimated resource bounty worth $1.2 trillion, was planning to shift its Human Development Fund - set up for the distribution of a share of the wealth to the country's citizens - to a more traditional sovereign wealth fund which would begin accumulating cash from July, building from a base of around $600 million.
"We are still working at the cabinet level on this proposal. We want to maybe create a future pension type of fund which will enable us to invest long term and take bigger risk than the stabilisation fund," he said, referring to a fund set up to smooth out the vagaries of commodities markets.
The sovereign wealth fund would aim to diversify Mongolia's wealth and would invest overseas. (Reporting by Clara Ferreira-Marques and Kylie MacLellan; Editing by David Cowell)
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