Since January this year 106 exploration license holders have had no legal recourse or rights to undertake exploration on their properties in Mongolia due to a criminal court case involving corruption relating to former senior government employees in the Mineral Resource Authority of Mongolia (MRAM).

For only 31 of the 106 impacted licenses about $19m had already been been spent and a further $36m planned. The 106 licenses cover a landmass approximately six times larger in surface area than active mining licenses in Mongolia according to a new report by Independent Mongolian Metals & Mining Research.

On Wednesday, one of the explorers caught up in the bureaucratic and political mess, Kincora Copper announced that it has received official notification from MRAM that two of its licences are part of the 106 licences now being officially revoked.

The revocation of licenses is effective October 30, 2013 following Resolution № 457 issued by the Chairman of the Geology and Mining Cadastre Department.

In April 2012, Kincora paid $5 million in script for the two licenses held by the Vancouver-based company’s wholly-owned subsidiary company Golden Grouse. Kincora incurred approximately $71,000 in legal costs relating to the acquisition and have spent approximately $1.85 million in exploration costs.

According to a press release Kincora’s flagship Bronze Fox license remains in good standing and was not on the list of licenses to be revoked:

“Kincora was unable to undertake planned exploration activities in the 2013 field season on the Golden Grouse licenses following uncertainty relating to criminal legal proceedings against former Government officials, which has brought into question the legal rights and interests for the owners of 106 exploration licenses.

“The Company is currently accessing avenues now available to it with receipt of official notification from MRAM expected to finally provide legal rights and potential recourse relating to the Golden Grouse licenses.

“Consultations with key third neighbor governments have been ongoing and continue as the affected license holders work with the Government of Mongolia on resolving this situation. The Mongolian National Mining Association (“MNMA”) is also assisting where possible.

“The acquisition of the licenses followed full detailed due diligence, with the licenses confirmed to be in good standing by MRAM, with exploration costs incurred following approval of the proposed exploration programmes which have been subsequently accepted, annual license fees incurred and licenses extended by MRAM.

“The Civil Code of Mongolia supports liability for damages caused by government officials if the rights of existing licenses holders are negatively impacted.”

Another company that fell foul of Mongolia’s bureaucracy and politics, uranium explorer Khan Resources, is currently seeking $200 million of damages from the government of Mongolia due to the illegal expropriation of its permits with a trial by the International Arbitration Tribunal scheduled to start November 11.

Mongolia’s parliament on Monday adopted a new investment law designed to attract foreigners to the country’s resource sector  after a steep decline in FDI this year.


Henry Sapiecha

fine gold line

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