Mongolia Reviews Mine Licenses
Dashdorj Zorigt, Mongolia's minister for mineral resources and energy, also confirmed that the government was suspending 254 gold-mining licenses to conform with the law.
The Water and Forest Law prohibits mining activities in water basins and forest areas of the landlocked desert country of fewer than 3 million people, where water in scarce supply. Since the law was passed in July 2009, the government has conducted surveys to see what licenses might be affected.
The number of licenses to be reviewed for termination compares with a total of about 4,000 mining licenses that the country has issued to date. Regulations have been established to compensate license-holders facing losses as a result of the law, Mr. Zorigt said.
Michael Waring, a fund manager who specializes in mining stocks for Toronto-based Galileo Global Equity Advisors, said the review shouldn't be viewed as an attack on foreign miners.
"Mongolia is only really moving towards where the rest of the developed mining world is already at, in terms of protecting watersheds," he said in an interview on Friday.
Mongolia's vast and largely untapped mineral and energy resources, as well as its proximity to China's booming economy, have attracted a surge of interest from mining companies and investors, particularly in the past year. A number of major mining companies with assets in Mongolia are listed on exchanges in Canada and Hong Kong.
However, the revocation of the licenses highlights the regulatory risks businesses operating in Mongolia face as the country comes to grips with the implications of its resource boom.
"Lots of Mongolian land is tundra," said Mr. Zorigt. "It is difficult to rehabilitate. Forest is easily damaged." He called the termination of the licenses a response to a "difficult situation."
On Thursday, shares of Toronto-listed Centerra Gold Inc. fell 7% on concerns that the company would be impacted by the revocation of mining licenses in Mongolia. Shares rebounded on Friday, rising 2.9% to 16.50 Canadian dollars ($16.17) in 4 p.m. trading.
Centerra issued a statement Thursday saying that it has four alluvial gold-mining licenses on the list of those to be revoked, but none were material to the company's business. Alluvial gold refers to gold dust found in sand, silt or other substances deposited by flowing water.
The company noted that its principal Gatsuurt hardrock mining license wasn't listed among those licenses to be revoked.
The names of companies whose licenses are to be terminated haven't yet been made public but would be at a later date, Mr. Zorigt said.
Work is now taking place to sort out which of the nongold licenses under review will be terminated. Some may be partially terminated, Mr. Zorigt said, in cases where only part of the area covered by the license is in violation of the law. Some mines may be classified as strategic deposits, in which case they could be exempted from the law, though the government would then acquire an equity stake in the project. —Ben Dummett contributed to this article.
Write to Peter Stein at peter.stein@wsj.co
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