M. Ariunbayar: Suspension of SouthGobi Sands license was a warning sign to Ivanhoe Mines
-Let us begin our conversation with recent events – SouthGobi Sands. A draft law was proposed to the State Great Khural concerning a certain loophole in the law but the only official decision made today is the suspension of SouthGobi Sands licenses. What sort of management is this?
-This simply means getting permission from the Mongolian Government. We are currently discussing the company in question which obtained the rights to the stocks of SouthGobi Sands. Right now the mineral resources still belong to the Mongolian people. They should understand that owning stocks does not necessarily mean owning the resources. Suspending the licenses means that the stocks cannot be transferred, everything is halted.
I want to add something here: the suspension was our warning sign and I think our target received the sign. Ivanhoe Mines were planning to sell its Tsagaan Tolgoi mine but now they have stopped. This is the direct result of the SouthGobi Sands license suspension.
-People are counting the days until the law on limiting foreign ownership on state strategic mines is passed. Is it possible to resolve this issue with the suspension action even after the 35 days?
-Well, they are talking about the time in which the permission is granted. But what we should be talking about is how the buyer and the seller should both be seeking to get permission from the Mongolian Government.
-Even State Great Khural members are saying that if the law is passed within the 35 days, the Mongolians will not lose their resources to China…
-This law is not about losing resources. It is law on foreign investment management. It will manage what it has to. We also cannot understand that the new law will limit foreign investments.
-But unless we deal with this fast, Chinese state-owned companies will be mining and exporting coal from within Mongolia, will the market rule apply to this operation?
-We did bring this issue up in 2009, but no one paid any attention to it. But this doesn’t mean it cannot be managed today. It can be done through monitoring coal exports. We can determine exactly how much we can mine, and how much we can sell. Whether a Chinese state-owned company was planning to reduce its coal price is just a speculation that stirred up a lot of trouble.
-It is said that trading can be done without getting permission from the Government through a loophole in the law. Generally, are there any other loopholes or similar problems in the current Law on Mineral Resources?
-I think there is no perfect law. I don’t think there are any countries with the perfect law. Canada is believed to be the most experienced country in mining, but I believe in 2005, a large foreign company that was mining gold in Canada simply left the country after exploitation without proper mine closure procedures and ecological restoration. Canada then quickly passed a law that forces mining companies to pay up all the environmental restoration costs before the mining operations commence.
There are a number of things that need to be fixed in the Law on Mineral Resources. We cannot count them one by one, there are always new ones.
-There are foreign investment limitations on 15 mines that are considered to be of strategic importance.
What about the other mines? The State Great Khural was ordered to add more mining sites to the current 15, what is the progress?
-This is being done. We have been doing this and will continue in the future. Every time a company performs a full geological data on a reserve and reports it to the Ministry of Mineral Resources and Energy, we find and evaluate new reserves. It is not about how many strategic mines we have but it is about what we do after we have many strategic mines. This management should be satisfactory.
Private companies are reluctant to have their mines turned into a state mine of strategic importance as the Government support for any strategic mine is very blurry. This should be managed.
-Lately, there is news that the Oyu Tolgoi reserve estimation is increasing. What can you say about this?
-I received their official standing on this rumor and they said that as of today they have drilled holes in locations where there could be possible reserves. But they don’t yet have a full geological data to solidly say that the total reserve has increased. They have sent me this information through a letter, saying that geological exploration is ongoing.
There is one geological rule to finding mineral deposits: they are discovered by looking in places right next to other mineral deposits. We do not usually go out to nowhere to look for minerals. So we believe that there are other deposits nearby Oyu Tolgoi.
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