(EnergyAsia, May 3 2012, Thursday) — In a belated move to contain the political fall-out in Mongolia over their proposed trade of a major coal mining firm, Aluminum Corporation of China Limited (Chalco) and Canada’s Ivanhoe Mines Ltd said they will cooperate with the government and consider issues related to tax and fair pricing involving foreign ownership.
The Mongolian government and businesses were surprised and angered by the companies’ April 1 announcement that Ivanhoe intended to sell its 57.6% stake in SouthGobi Resources, which owns and operates coal mines and licences in Mongolia, to Chalco for C$925 million. (US$1=C$0.99).
The proposed sale and discussions, made without consulting the Mongolian authorities, would have given China an overwhelming stake in SouthGobi, which is producing coal from the Ovoot Tolgoi mine.
The two companies faced the full blast of local anger on April 16 when the Mineral Resources Authority of Mongolia (MRAM) announced through a press conference “requesting” that SouthGobi suspend exploration and mining activity on certain licenses pertaining to the Tolgoi Mine.
The Mongolian government followed that up by informing SouthGobi, Ivanhoe and Chalco that it is considering the introducing new foreign investment legislation to focus on key issues to protect local interests through the establishment of fair transfer pricing and taxation regimes.
Chalco and Invanhoe said that while their proposed transaction had complied with the local laws and regulations, they would cooperate with and assist the MRAM and the Mongolian government in any future processes.
In view of the local reactions, Chalco said it intends not to take up any shares under its bid unless and until the government has given its regulatory approvals.