Friday, May 18, 2012

[CPSI NewsAlert: Parliament Passes Foreign Investment Regulation]

CPSI NewsWire brings you market updates on Mongolia, compiled by CPS International, a Mongolian marketing arm of CPS Securities, a Perth, WA based stockbroking and corporate advisory firm, specialising in capital raising for mining and junior stocks.

Follow CPSI NewsWire on Twitter, Facebook


Mongolia Sets Plan to Cap Investments

May 17 (WSJ) Mongolia's parliament approved a new investment law Thursday that caps future foreign participation in certain strategic industries, reflecting a growing public push to keep profits from the mineral-rich nation's industries inside the country.

When it goes into effect, the law will require foreign investors to obtain government review and parliamentary approval for investments at 49% and above into industries such as resources, finance, telecommunications and media, according to analysts in Ulan Bator. The cap is specific to deals valued above about $75 million.

Investors owned by governments, such as state-backed Chinese companies, will also need special permission to buy into the sectors.

Foreign investment is critical to Mongolia's future as a commodity powerhouse. But the law reflects anxiety among ordinary Mongolians that foreigners would enjoy the spoils of the country's hoard of coal, copper, gold and other natural resources. Its passage comes weeks before a parliamentary election, the first in four years, for which politicians are expected to campaign on populist promises of ensuring profits are retained in Mongolia.

Dale Choi, chief investment strategist at Frontier Securities in the Mongolian capital, said in a research note Thursday that the legislation would take effect 10 days after its publication unless vetoed by the president.

Full details of the legislation weren't available Thursday night, but his note said key provisions hadn't changed since they were published earlier in the week.

The impetus to tighten foreign investment regulations now was spurred by a deal announced in April that would give investors backed by the Chinese government more sway over Mongolian coal reserves.

Still, the final version of the law carries less sting than foreigner investors had initially feared, in part because it wouldn't be retroactive.

"Foreign investment should continue to be the lifeblood of Mongolia's strong mining-sector ramp-up," Jim Dwyer, executive director of the 220-member Business Council of Mongolia, said by email.

Ahead of Thursday's vote, analysts also predicted revisions are possible once a new parliament is sitting.

Previously, Mongolia set few hard limits on foreign investments. In the all-important mining sector, the government had previously wanted about 34% of strategic mineral deposits that were developed privately, and retained stakes of up to 51% on others, including uranium mines, according to the business council.

Historically known for nomadic ranchers who produced cashmere, Mongolia is increasingly known for its coal.

Driving the economy is major mining under way near the border with China, the expected buyer for the mineral output.

But in the landlocked country, which broke from Soviet influence just over two decades ago and formed a democracy, China also makes some Mongolians nervous for its size and influence.

Mongolia's key mine projects remain in their infancy. The projects are already drawing foreign investment, which has pushed gross domestic product growth rates above 16% in recent quarters. But the nation's increasingly urban and still-poor population so far sees limited trickle down, making it a key issue going into elections.

Specifically spurring momentum for a foreign investment law, according to analysts, was an April 1 deal by Rio Tinto Ltd.-controlled Ivanhoe Mines Ltd. to sell a large stake in a coal company to a state-owned Chinese investor. Under that plan, Aluminum Corp. of China, or Chalco, would pay over $920 million to buy up to 60% in coal producer SouthGobi Resources Ltd., already about 14%-owned by the sovereign-wealth fund of China, China Investment Corp.

SouthGobi, which sits on roughly 800 million metric tons of coal, said some of its mine licenses were suspended by local authorities after the China deal was proposed. Chalco took another step into Mongolia days later, buying control of Winsway Coking Coal Holdings Ltd., another coal miner.

Two other mine projects are worth hundreds of billions of dollars and don't appear immediately impacted by the new legislation, namely a copper and gold project called Oyu Tolgoi, controlled by Rio Tinto and Tavan Tolgoi, which is being privatized with a structure in line with the new legislation.

Link to article



"Mogi" Munkhdul Badral

Senior Client Manager / Executive Director

CPS International LLC

Telephone/Fax: +976-11-321326

Mobile: +976-99996779


P Please consider the environment before printing a copy of this email.


Suite 1213 · Level 12 · 2 Sukhbaatar Square

Sukhbaatar District 8 · Ulaanbaatar 14200 · Mongolia


CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSLicense Holder. To trade ASX and international stocks, feel free to contact me at or +976-99996779.



CPS Securities, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions mentioned in correspondence from CPS International.

CPS International advise this email contains general information only and does not include advice. In preparing this communication, CPS International did not take into account the investment objectives, financial situation and particular needs of any person. As with any speculative mining company there are significant risks.



No comments:

Post a Comment