The Effects of Russo-Mongolian Relations

This Friday 28 August, it was reported that the Mongolian President Tsakhiagiin Elbergdorj and the Russian Federation President Dimitry Medvedev reached an agreement in the negotiations concerning cooperation in general and in nuclear energy in particular, called; Declaration on Developing a Strategic Partnership between Russia and Mongolia. Also signed was four more detailed protocols and memorandums of understanding, including; Intergovernmental Agreement Establishing Dornod Uranium Joint Company.

Note: The map shows Dornod Aimag, Mongolia, and the location of the Dornod Uranium Deposit, presently operated by Khan Resources Inc. Toronto, Canada.

The uranium agreement was signed by the Mongolian Chief of Nuclear Energy Commission, Sodnom Enkhbat and the Head of Rosatom Russian Nuclear Energy State Corporation, Sergey Kiriyenko, in the presence of the two state leaders. Mr. Kiriyenko said:

We understand that Mongolia will cooperate not only with us. Russia will be the first. This is an important political signal.

This seems to be the conclusion of a series of events that started with the election of Tsakhiagiin Elbegdorj as Mongolian President in May 2009. The Dornod uranium deposit has been owned as a joint venture called Central Asia Uranium Cooperation Ltd (CAUC), by the Canadian Khan Resources Inc., owning 58 percent, the Mongolian state firm MonAtom, 21 percent, and Rosatom’s mining section, AtomRedMedZoloto, 21 percent.

Note: The Dornod Uranium Deposit site, in Dornod Aimag, Mongolia.

On July 15 Khan Resources Inc. was informed that its mining license 237A had been temporary suspended, by the Mineral Resources Authority of Mongolia (MRAM). The reasons behind the temporary suspension was based in an inspection made by the MRAM in mid April 2009, which claimed to have found contradictions and violations of the agreement on which the joint venture was based. Khan Resources claimed that they were not informed of nature of these complaints.

July 17 2009 the Mongolian Great Khural passed a piece of legislation called Nuclear Energy Law, and Khan Resources Inc. expressed, a couple of days later, concerns about the transparency of the legislation process, based merely on the fact that the company neither was informed of the contents of the law or asked of their opinion. Khan Resources said it had received reports on plans made by the Mongolian authorities intended to change the relation of the shares of the joint venture CAUC, between Khan, MonAtom and Rosatom. Their assumption was that this operation would not be to the advantage of Khan Resources Inc.

These suspicions grew out of statements made by Elbegdorj during his President election campaign. Furthermore, the Nuclear Energy Law stated that the Mongolian state, or its state-owned firm had the right to own 51 percent of any strategic uranium deposit. Strictly implemented this Law would of course totally change the relations within the joint venture and efficiently make MonAtom and Rosatom together owning about 72 percent. Thus, it would mean a loss of 30 percent of its total share in the joint venture. Suddenly Khan Resources Inc. is degraded from majority owner, into a less qualified minority position.

The Russian Federation President Dimitry Medvedev expressed more hapiness as he announced:

… the appearance of some entirely new projects. They relate to developing Mongolia’s transport network and the document we just signed on the mining, exploration, and processing of uranium ore deposits. These are prime examples of new projects, ones that I hope will be effective and beneficial to our nations.

The Mongolian Nuclear Energy Law went into force on August 15 and the signing of the Agreement of the Joint Uranium Company occurred on August 25, 2009. As we can see, it seems as Mongolia’s new President Elbegdorj is operating at great speed these days, and it seems as these operations are in harmony with the opinions occurring in the Great Khural. After all, the Nuclear Energy Law was approved by the MPRP dominated Great Khural, and the President did not veto the Law. A bonus of these developments seems to be improved relations with the Russian Federation. Last, the information I have does not say anything about the Rosatom share in the joint venture, and I have assumed that it has not been changed. But that is just an assumption.

Sources: UB Post August 28, 2009; Khan Resources Inc. July 15 and 22, 2009.