Mongolia’s parliament approved a resolution to nationalize copper, gold and iron-ore assets in the country following a probe that found a $400 million transaction with a closely held company was illegal.
Parliament’s resolution invalidates a previous government decision that had authorized the sale of 49 percent stakes in both Erdenet Mining Corp. and Mongolrostsvetmet LLC to Mongolian Copper Corp. The resolution was approved by a vote of 49 in favor to 12 against, according to a broadcast carried on Bloomberg TV Mongolia.
Former Prime Minister Saikhanbileg Chimed announced the sales on the eve of elections in June, declaring the purchases from Russia’s state-controlled Rostec a victory for a country that wanted to put greater control of its natural resources in the hands of Mongolians. Still, Saikhanbileg’s Democratic Party lost the election to the Mongolian People’s Party.
The purchases of the 49 percent holdings in the two mining stakes by Mongolian Copper used illegal loans and violated the constitution, according to the probe conducted by a parliamentary working group. Trade & Development Bank of Mongolia LLC spearheaded financing for the deal.
The most important market news of the day.
Get our markets daily newsletter.
“It appears that there were various legal, governance and transparency issues surrounding the transaction,’’ Dale Choi, head of Mongolia Metals & Mining, said in an e-mail. “Moreover, it seems that public funding was used for private buyout and the government of Mongolia issued international bonds at an expensive 11 percent to supply FX for the transaction. While the privatization is desirable, the way it was done appears questionable and the rule of law should be applied.’’
TDBM Chief Executive Officer Orkhon Onon said the loans weren’t illegal and didn’t violate banking regulations, according to an e-mailed reply to queries Jan. 30.
The Erdenet Mining and Mongolrostsvetmet joint ventures were set up by the former Soviet Union and Mongolia in the 1970s. Erdenet is focused on copper, while Mongolrostsvetmet mines metals, including gold and iron ore.