Jason Peterson: Mongolia and Investments in Mongolia on the ASX
Please see the clarification regarding the recent speculation in the market regarding the foreign ownership of assets within Mongolia.
We see this as positive, that the country is taking these initiatives and providing clarification towards foreign investment in the country,however the law still needs to be applied in a sensible manner.
Summarised (from late last week):
The Parliament of Mongolia last night approved a law that regulates foreign direct investment into a number of key sectors of strategic importance which includes mineral resources. Unless vetoed by the President (which is unlikely), the Law will have immediate effect.
This law does not limit foreign direct investment. It does set up a process of review and approvals for significant investments into those industries of strategic importance to the country. The approvals regime is based on the following levels of investment:
• All foreign direct investments in excess of 5% in an entity operating in a sector of strategic importance must register with the Foreign Investment Agency of Mongolia ("FIA").
• Foreign direct investments in excess of 33% in an entity operating in a sector of strategic importance must receive Government of Mongolia approval [Comment: FIRB over 15% is required in Australia]
• Foreign direct investments in excess of 49% in an entity operating in a sector of strategic importance and in excess of 100bn MNT (approximately AUD$75m), requires approval from the Mongolian Parliament. [Comment: FIRB over 15% is required in Australia]
• Foreign direct investments made by a company with state ownership will require Government of Mongolia approval.
This law does not apply retrospectively.
The enacting of this foreign investment law now provides legislative certainty surrounding future foreign direct investments into Mongolia and in particular into its rapidly growing resources industry. The regime is not dissimilar to regimes enacted in other resource rich jurisdictions such as Australia and Canada.
The country will still be viewed negatively from an international investment perspective until the elections are held on June 28th this year. Once the elections are held, we find out who will govern the country over the next four years, we expect, from July the 1st, it will be business as usual in Mongolia and investment stability should return.
On the back of this, Mongolian stocks listed on the ASX will probably be a high risk speculative buy over the next two to three weeks with potential substantial returns to be made as the status quo is returned. In addition, the next few weeks could see substantial tax loss selling within the sector, leading to additional price pressure within the sector.
Our preferred stocks within the Mongolian sector are Haranga Resources (ASX: HAR) and Voyager Resources (ASX: VOR) both of which have come under heavy selling in recent weeks, as well as the recently listed Eumeralla resources (ASX: EUM) as it further develops it Tin and Tungsten projects.
Further information on these stocks can be provided upon request.
If you have any questions, please do not hesitate to ask.
Regards,
Jason
Disclosure: I hold shares and options in HAR, VOR and EUM, as well as other Mongolian based stocks.
We see this as positive, that the country is taking these initiatives and providing clarification towards foreign investment in the country,however the law still needs to be applied in a sensible manner.
Summarised (from late last week):
The Parliament of Mongolia last night approved a law that regulates foreign direct investment into a number of key sectors of strategic importance which includes mineral resources. Unless vetoed by the President (which is unlikely), the Law will have immediate effect.
This law does not limit foreign direct investment. It does set up a process of review and approvals for significant investments into those industries of strategic importance to the country. The approvals regime is based on the following levels of investment:
• All foreign direct investments in excess of 5% in an entity operating in a sector of strategic importance must register with the Foreign Investment Agency of Mongolia ("FIA").
• Foreign direct investments in excess of 33% in an entity operating in a sector of strategic importance must receive Government of Mongolia approval [Comment: FIRB over 15% is required in Australia]
• Foreign direct investments in excess of 49% in an entity operating in a sector of strategic importance and in excess of 100bn MNT (approximately AUD$75m), requires approval from the Mongolian Parliament. [Comment: FIRB over 15% is required in Australia]
• Foreign direct investments made by a company with state ownership will require Government of Mongolia approval.
This law does not apply retrospectively.
The enacting of this foreign investment law now provides legislative certainty surrounding future foreign direct investments into Mongolia and in particular into its rapidly growing resources industry. The regime is not dissimilar to regimes enacted in other resource rich jurisdictions such as Australia and Canada.
The country will still be viewed negatively from an international investment perspective until the elections are held on June 28th this year. Once the elections are held, we find out who will govern the country over the next four years, we expect, from July the 1st, it will be business as usual in Mongolia and investment stability should return.
On the back of this, Mongolian stocks listed on the ASX will probably be a high risk speculative buy over the next two to three weeks with potential substantial returns to be made as the status quo is returned. In addition, the next few weeks could see substantial tax loss selling within the sector, leading to additional price pressure within the sector.
Our preferred stocks within the Mongolian sector are Haranga Resources (ASX: HAR) and Voyager Resources (ASX: VOR) both of which have come under heavy selling in recent weeks, as well as the recently listed Eumeralla resources (ASX: EUM) as it further develops it Tin and Tungsten projects.
Further information on these stocks can be provided upon request.
If you have any questions, please do not hesitate to ask.
Regards,
Jason
Disclosure: I hold shares and options in HAR, VOR and EUM, as well as other Mongolian based stocks.
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