Search for Mongolian riches strikes a hump
And for the long line of junior Australian resources companies that flocked to Mongolia in the hope of unlocking some of the nation's mineral riches, it has made winning the support of investors increasingly difficult.
The crop of Australian companies exploring in Mongolia has come under extreme pressure over the past year. Uncertainty over a national election earlier this year, ongoing debates over taxes and royalties, infrastructure headaches and a reputation for corruption have all seen many investors reassess their exposure to the country.
Perth-based Aspire Mining, which owns a large coal deposit in Mongolia's remote north, has fallen from $1.08 in April 2011 to just 9.1c a share at present. Xanadu Mines has fallen from 44c a year ago to 12c, Guildford Coal has almost halved to 55c, while Draig Resources has shed three-quarters of its value in the past six months.
Ms Armstrong's detention in Mongolia, amid allegations of corruption and bribery involving government officials and the company she works for, Canada- and Hong Kong-listed SouthGobi Resources, is the latest in a run of incidents which have hurt the country's reputation as an investment destination.
Rio Tinto's massive Oyu Tolgoi copper-gold development continues to be on the receiving end of persistent rumours that the government will look to increase its tax and royalty take from the project. A lack of infrastructure has hurt the prospects of many companies that have identified promising deposits, only to prove unable to identify immediate infrastructure options through which to exploit them.
Coupled with commodities prices that have generally been falling, and an equities market increasingly averse to risk, the result has been a lot of pain for Mongolia's junior explorers and the investors still backing them.
The ongoing saga around SouthGobi -- which found itself in the middle of a political storm in Mongolia when it received a takeover bid from China's state-owned giant Chalco, provoking a strong reaction in a country still deeply suspicious about investment from China -- has hurt the nation in the eyes of investors.
Xanadu chairman Brian Thornton said the latest controversy would further slow the progress of companies working in the country, which continues to offer very real potential for significant resources.
"Everyone was holding their breath about the new government, everyone was holding their breath about what that outcome was going to be, and now that's done everyone's holding their breath about this issue," he said.
"I think we'd all wish it would just settle down and get back to business, and get back to exploration."
The timing of the run of controversies -- coinciding with general weakness in mining stocks -- exacerbated the situation, he said.
"We all know that every precinct, whether its Mongolia or Cambodia or Thailand or South America or Africa, (is) going to have issues from time to time. You just don't want these issues to happen when the overall market is in an off mode -- it puts another level of uncertainty into the equation," he said.
Joe Burke, the managing director of Mongolia-focused copper explorer Voyager Resources, said he had expected 2012 to be a tough year for Mongolian explorers given it was an election year and the administration of the mining industry was a hot election issue. While the controversies had harmed Mongolia in the eyes of investors, he said many large miners remained interested in building positions in the country -- potentially opening up opportunities for juniors prepared to persevere.
"The lucky thing for Mongolia is that everywhere else in the world is in a mess," he said, referring to the ongoing economic uncertainty in Europe and North America.
"The junior companies need to keep an eye on doing what they are good at doing -- identifying strategic opportunities, drill, drill and drill, and package it up for a buyer."
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