MCC Claims Round Two in Battle Over Erdenet Copper Mine

- May 3rd, 2018

Local courts in Mongolia have ruled that attempts by the government to take over a 49-percent stake in MCC’s Erdenet mine were illegal.

Local courts in Mongolia have ruled that attempts by the Mongolian government to take over the 49-percent stake in the Erdenet copper mine controlled by Mongolian Copper Corporation (MCC) were illegal.

The company is clearly chuffed about the success, declaring victory in a press release published on Thursday (May 3).

“Attempts to nationalize the Mongolian Copper Corporation’s shareholding in the Erdenet mine in March 2017 and again in January 2018 have been ruled illegal by the administrative court in Ulaanbaatar,” the release declares.

“The judgment in favor of MCC is the fourth time the government’s expropriation attempts have been deemed illegal,” it also says.

The government has now made two attempts to gain control of Erdenet, first by a parliamentary resolution in 2017 and again in early 2018. Both attempts were deemed illegal in court and later upheld.

However MCC said it expects the government to appeal against the decision, and is considering its own legal actions.

“MCC is taking legal advice on commencing possible international arbitration proceedings,” Chairman Mukhbaatar Myagmar said in a statement.

Erdenet, which is one of the largest copper mines in Asia, was constructed as a joint venture between Mongolia and the Soviet Union in 1978. MCC purchased 49 percent of the mine in 2016 from Russia.

It’s no wonder the government and the company are bickering over ownership. According to government sources, the mine produces 530,000 tonnes of copper concentrate a year — a number that alone places Mongolia near the top 10 copper-producing countries in the world.

Ownership is currently split between MCC and the Mongolian government, which hold 49 percent and 51 percent, respectively.

The fight is set to go on into yet another round; a Mongolian government spokesman told Reuters that the decision by the administrative court cannot challenge a February ruling by the constitutional court that MCC never had the right to purchase its stake in the first place. MCC has not acknowledged that ruling.

Mongolia is well positioned to cater to China, but according to Myagmar, efforts by the Mongolian government to nationalize assets will damage Mongolia’s potential as a copper supplier globally.

“If this kind of thing happens again, no-one will come to Mongolia,” he said in a January interview.

The Mongolian government also owns a 34-percent stake in the Oyu Tolgoi copper-gold mine in Southern Mongolia. Its joint venture partner, Canadian company Turquoise Hill Resources (TSX:TRQ), reported production of 38,000 tonnes of copper concentrate in Q1 2018. The mine is expected to produce between 125,000 and 155,000 tonnes of copper for all of 2018.

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Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

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