Mineral Laws in Mongolia Something is cooking in UB. The Mongolian government is saying they should have 34% of all strategic mineral deposits without requirement for compensation to the licence holders.
They also say no party should be allowed to hold more than 34% of any strategic deposit.
The existing IA with Rio Tinto would exempt Rio from the effect of any new law like this in respect of OT and the OT JV. ETG doesn't hold more than 30% at most of any strategic mineral deposit if the JV is valid.
IF this is a scheme aimed at OT, the mind reels wondering what has occurred at the arbitration and with respect to the never-fulfilled promise to use best efforts to make ETG subject to IA protection equivalent to that enjoyed by OTLLC/Rio Tinto.
what if the arbitration determined Rio Tinto had repudiated the Earn In Agreement and ETG is not bound by the never-settled JV? Mongolia moves to assert their right to 34% without cost to them, and further, says ETG, you can't have more than 34% yourselves ... as in, go back to Rio Tinto and renegotiate from a position of much greater strength, so we can move the consolidation of OT forward.
Maybe the 34% ownership limitation is aimed at other projects, but typically in the past when we see these quick push-through mineral law changes they have been all about OT and OT negotiations. If it is about OT, Rio Tinto's ownership of 2/3 of OT would be protected by the existing IA (including the JV ground or including that portion of ETG's licences as they are specifically included in the IA ambit. So why any limit on ownership mentioned? If it is in contemplation of ETG having ownership of all its licences back except 34% to Mongolia, and the Mongolians wanting to force Rio Tinto back in on newly negotiated price terms with ETG ... that could lead to a speedy buy-out of ETG by Rio Tinto with a surprise premium. Who knows, maybe that's all too far fetched, but definitely something is cooking in UB.
Mongolia's interests - 34% ownership at no cost. Also speed up development and expansion - as in Lift 2 and Heruga, and clear up this logjam over the JV, potential ETG buyout valuation problems.
Very murky. None of our upside is removed on valuation, and Mongolia asserting they won't pay for 34% of all strategic deposits isn't really new - nobody expected them to pay, it has always been a question of whether Rio Tinto might be obligated under the best efforts to procure IA treatment for ETG to pay whatever the cost might be.
Clear as mud.
cg