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The government of Mongolia has settled a dispute over an arbitration award that required it to pay more than $100 million to Canada’s Khan Resources (TSX:KRI) for revoking a uranium mining licence.
The parts, which came together at PDAC —a major mining conference in Toronto — this week, have settled on a payment of $70 million.
The move comes as the Asian country is launching a new program this week that aims to attract a fresh wave of mining exploration.
An international court had awarded $100 million to the miner last year, following the breakdown of talks and the death of the company’s chairman, but it had it materialize.
The move comes as Mongolia is launching a new program this week that aims to attract mining exploration.
“The government of Mongolia and Khan Resources Inc. successfully reached an agreement that effectively resolves all outstanding issues in regards to the international arbitration awards,” Mongolian Finance Minister Bolor Bayarbaatbar said, according to a company’s release.
“The settlement demonstrates the government’s ongoing commitment to improving the investment climate,” he added.
The stock climbed 26 cents to 73 cents at 11:02 a.m. ET, after hitting as much as 80 cents, the most intraday since the company began trading in May 2012.
Former chairman Jim Doak, a prominent figure in the Toronto financial industry, was found dead in a hotel room in April last year. He had travelled to Ulaanbaatar to negotiate the payment of such amount awarded to the firm earlier in the year.
An autopsy performed in Canada found his death to be from natural causes related to the late-onset Type 1 diabetes he suffered for almost 40 years.
Khan had pursued the claim after Mongolia nationalized in 2010 the Dornod uranium deposit it was developing. Initially the miner had sought $326 million in compensation for having its mining licenses cancelled by Mongolia and given to Russian producer ARMZ, but the tribunal lowered the payout to $100 million, including interest and costs, based on previous offers made for the asset.
Mongolia’s prime minister has promised to put and end to several high profile disputes with overseas companies, which have pushed investors away and damaged the nation’s economic growth.
The Asian Development Bank has forecast a 3% percent expansion for 2015 from 7.8% the previous year.
5 Comments
Altaf
My advise to the Canadian miner : Take what ever is agreed in the first instance and get out in the second instance. Once again commodity prices are looking up. You never know when the govts go back on their word.
patent bs
How desperate are we that we will make deals with countries like this and not have an offshore dispute resolution formula in place? Now they are paying for seized assets in order to attract new victims. Hmm – I think I am out!
Honheree
Look at the modus operandi of the Mongolian government and whether they can be trusted in the future! They confiscated Khan Resources Dornod licence which they gave to Russian buddies in 2010. In early 2015, they were ordered by International Arbitration (IA) to pay $100 million to Khan, which they refused, then in June 2015 before meeting US government they said they would pay the $100 million. Then, a few days later they said they would not pay and went to a French court to try and overthrow IA ruling.
Now, in March 2016 they say they have agreed to pay $70 million to Khan….still waiting. This was just before the PDAC and at the conference they said they would do everything to encourage investors to come back to Mongolia.
For those who do not know or have short memories, in 2005, the Mongolian Prime Minister, stated, ” were cognise we are in competition with other countries for exploration funding and we will do everything to encourage investment in Mongolia”. In less than one year later, Mongolia imposed the Windfall Profits Tax, and scared away many companies.
There is clearly a pattern here and until the Mongolian government gets their act together and shows stability and that they can be trusted very few sane companies will invest in Mongolia.
indira singh
Agreed with all the comments. Let us give new government of Mongolia a chance! About 34% reduction is FDI to Mongolia is a wake up call.
Ichbin EsNicht
Corruption, Graft and grave violations of human rights will not be ignored internationally. Mongolia will soon be back in the stone age.