LONDON, April 30 (Reuters) – Changes to Mongolia’s
investment rules that will allow it to review takeover bids by
foreign investors are part of efforts to avoid over-dependence
on commodity-hungry China and are not aimed at reviewing
existing deals, a government minister said.
Worries over the new rules have unsettled investors in
Canadian miner SouthGobi Resources.
Earlier this month, China’s state-owned aluminium giant
Chalco said it planned to make a proportional bid to all
shareholders to buy a 60 percent stake in coal miner SouthGobi.
Ivanhoe, which owns a majority stake, has already agreed to
tender its shares in favour of the deal.
The Mongolian government said after the deal was announced
that it would suspend SouthGobi’s licences for its several large
coal projects, which are close to the Chinese border, and said
it would introduce new foreign investment legislation.
“People demand the government does everything possible not
to let one country dominate (the economic balance),” Chuluun
Ganhuyag, Mongolia’s vice finance minister, said on Monday on
the sidelines of an investor confidence in London.
“I don’t think the law will be retroactive. The Chalco deal
is still ongoing, still on the table,” he said, adding Ivanhoe
and Chalco had indicated their readiness to work with the
Mongolian government.
Ganhuyag also said the new law would only apply to
investment in certain deposits, but the list would go beyond the
country’s current list of strategic assets. “There must be some
sort of threshold,” he said.
He added Mongolia, a top supplier of coking coal to China,
was also keen to cooperate with Beijing on securing access to
the seaborne coal market, for example through the port of
Tianjin.
Ganhuyag did not elaborate on whether the legislation would
involve specific shareholder limits for a foreign or foreign
state-owned entity, but said it would bring Mongolia into line
with other resource-rich states like Canada or Australia.
He said separately that the country, sitting on an estimated
resource bounty worth $1.2 trillion, was planning to shift its
Human Development Fund – set up for the distribution of a share
of the wealth to the country’s citizens – to a more traditional
sovereign wealth fund which would begin accumulating cash from
July, building from a base of around $600 million.
“We are still working at the cabinet level on this proposal.
We want to maybe create a future pension type of fund which will
enable us to invest long term and take bigger risk than the
stabilisation fund,” he said, referring to a fund set up to
smooth out the vagaries of commodities markets.
The sovereign wealth fund would aim to diversify Mongolia’s
wealth and would invest overseas.
