Saturday, October 18, 2008

Mongolia opens mines to West

In Mongolia, all signs suggest the government is ready and eager to reach out to Western companies and push forward with more development of its massive mineral resources.

This is the news many mining investors have been waiting for, as Mongolia holds some of the best undeveloped deposits in the world and sits right on China's doorstep.

But for Robert Friedland's Ivanhoe Mines Ltd. and other companies in the region, it is not providing any kind of lift. Their stock prices are collapsing as investors react to lingering uncertainties and sinking commodity prices.

Following a disputed election in the summer, Mongolia formed a national unity government and started making overtures to foreign mining companies after years of inconclusive talks. Officials want to firm up an agreement with Ivanhoe and partner Rio Tinto Ltd. to develop Oyu Tolgoi, the flagship copper-gold deposit. Then other agreements could follow.

Michael Howard, a former Conservative party leader in Britain and deputy chairman of Mongolian miner Entree Gold Inc., recently visited the country and noticed a positive shift in public opinion.

"There's a real recognition that they've missed out for several years on the mining boom, and they've got to get on with it," he said.

He added that officials told him everything could be resolved by the end of the year, although he suspects that it could take longer.

"I'm hopeful that within the next three to six months, we will see a resolution of this issue," he said.

But as the Mongolians focus on mining, the industry itself is entering a serious crisis.

Rio Tinto has warned that China has not escaped the global economic downturn.

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