January 10, 2008 / 2:23 PM / 10 years ago

Mongolia keen to move forward on mining deal: Canada

BEIJING (Reuters) - Mongolia wants to move forward with major mining projects, Canada’s top trade official said on Thursday, but he added officials there told him the government was still seeking a greater state share in strategic sectors.

Canadian Trade Minister David Emerson was the first cabinet minister to visit the mineral-rich Central Asian country in over a decade, in part to press Mongolia’s government over delays in approving a copper and gold project backed by Canada’s Ivanhoe Mines.

“I think there is a good likelihood that some of the projects caught in this period of debate will move along, but we’ll just have to wait and see,” Emerson told reporters in Beijing.

“But they also alerted us to the fact that they’re going to want more state involvement in mining and uranium going forward, but they have yet to determine what that means.”

Mongolia’s government has been considering classing uranium as “strategic,” which would guarantee the government at least a 50 percent share in each deposit of the nuclear fuel.

Ivanhoe and Australian miner Rio Tinto concluded a draft investment accord with Mongolia in April for the massive Oyu Tolgoi project in the Gobi desert, agreeing Mongolia would get a 34 percent stake.

But Mongolia’s new prime minister last month withdrew the pact from consideration by a parliamentary working group, saying instead it would form a group of cabinet ministers and legislators to try to move the project forward.

The withdrawal came after Prime Minister Sanj Bayar gave a folksy speech in which he called on Mongolians to develop natural resources. Industry officials said it marked a new, and more proactive, approach to mining investment.

In the speech, Bayar said his administration would move ahead with a deal for Oyu Tolgoi.

“Mongolia’s natural resources are valuable and attract increasing attention. Therefore, it is our duty to the next generation to use this opportunity properly. If we lose it by quarrelling with each other, the next generation will blame us,” he said.

But Emerson said while the government in the former Soviet satellite state was on a path to market reforms, an election set for June was complicating the political landscape.

“They have started to retrench a bit. There has been some political backsliding, if I can say, and with an election coming up, some of these issue are becoming a bit controversial.”

The Mongolian People’s Revolutionary Party currently commands a tiny majority, but faces a general loss of confidence.

The Mongolian public is divided on mining, with many eager to create jobs and economic growth but suspicious that deals between miners and the government bring little national benefit and much environmental damage to its grasslands and deserts.

Emerson said Mongolian officials indicated an interest in seeking advice from Canada on a regulatory and tax regime for the mining sector, adding that a delegation would likely go to Canada to study the issue.

But he said he also communicated to the government the risk that Canadian miners could pull out.

“If you get to the point where significant investors are pulling out, it will be difficult to reverse that,” he said.

Additional reporting by Lucy Hornby; editing by Michael Roddy

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