The Mongolian government will pay Canada’s Khan Resources Inc. to solve a seven-year dispute over lost mining licenses, signaling a new willingness to draw in foreign investment. The shares surged probably the most intraday on record.
The US$70 million is to be paid on or before May 15, based on the agreement, disclosed inside a press statement from Khan Resources Monday. Full payment will end all outstanding matters associated with the international-arbitration award Khan caused by a Paris court in March 2015.
Resolution from the case is a “long-awaited relocate the best direction and further evidence that Mongolia is trying to obtain itself back in line with foreign investors and investment,” Jay Liotta, chairman of the American Chamber of Commerce in Mongolia, said by email from Ulaanbaatar.
The share rose 26 cents to 73 cents at 11:02 a.m. in Toronto, after rising to as high as 80 cents, the most intraday since the company began exchanging May 2012, based on data compiled by Bloomberg. The shares reached a higher of 76 cents in July 2015.
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Mongolia’s foreign direct investment tumbled to US$195.1 million last year from US$4.45 billion in 2012. A series of long-standing disputes and a drop in commodity prices also slowed the country’s growth to 2.3 per cent, in contrast to 17 per cent in 2011.
Khan’s licenses were stripped in ’09 and it was instructed to abandon its uranium development in the east of the country.
In March 2015, a global arbitration tribunal underneath the United Nations Commission on International Trade awarded approximately US$100 million to Khan as compensation for that company’s mining licenses. The Toronto-based company have been seeking damages in excess of US$350 million.
The agreement is in the welfare of Khan’s shareholders as “it provides a complete resolution of all outstanding matters in a timely manner,” Grant Edey, Khan Resources ceo, said within the statement.
“Mongolia negotiated a really favorable deal for themselves,” Nick Cousyn, chief operating officer for BDSec, Mongolia’s largest brokerage, wrote in a tweet from Ulaanbaatar.
Andrew Fennell, sovereign analyst with Fitch ratings, wrote in an email that resolution of the dispute is a “credit positive for that sovereign insofar because it helps you to relieve external funding constraints.”
In May 2015 Rio Tinto Group and the Mongolian government settled a two-year dispute that stalled growth and development of the underground mine at Oyu Tolgoi. In December, a US$4.4 billion project finance package was signed to restart the project.
“The settlement demonstrates the government’s ongoing resolve for improving the investment climate,” Bolor Bayarbaatar, Mongolia’s minister for finance, said inside a Khan Resources statement.
Bloomberg News
