ULAN BATOR/MELBOURNE, June 26 (Reuters) – Mongolia’s efforts to protect its mineral wealth have scared investors so much that not even the first exports from its biggest mine and the expected re-election this week of a president who wants foreign capital will turn sentiment around.
With the country’s economic growth heavily tied to its vast copper and coal resources, Mongolia should have been celebrating the first copper sales to China from the $6.2 billion Oyu Tolgoi mine.
Instead, the government twice this month told mine operator Rio Tinto to delay the first shipment, partly due to a dispute over the repatriation of profits. Some analysts said the holdup was also aimed at keeping a lid on nationalism ahead of the presidential vote on Wednesday.
Industry experts believe exports will start soon, but the delays follow a year in which Mongolia introduced draft legislation to tighten control over mining activity and limit foreign investment.
“Whilst the country has lots of resource potential and holds Oyu Tolgoi, a world-scale mine, there’s too much headline risk,” said Darko Kuzmanovic, a portfolio manager at Caledonia Investments, which holds global mining stocks but has steered clear of Mongolia-focused miners.
President Tsakhia Elbegdorj said he would seek to ease legal uncertainty after the election. The results are expected on Thursday.
“I think we have to combine our national interest with the interests of our investors and have more favourable conditions for investors,” he told Reuters after his final campaign rally on Sunday.
Mongolia’s government has been under public pressure to ensure the country gets a fair share of its resources, but the timing of the draft legislation, just as the global mining boom peaked, was poor, said mining experts.
“It has overplayed its hand,” added Kuzmanovic.
HOPES ON PRESIDENT
Foreign direct investment slumped 17 percent to $3.9 billion in 2012 and fell 12 percent in the first quarter of 2013 from the same period a year earlier, according to Mongolia’s National Statistics Office.
Mining executives hope that if Elbegdorj is re-elected as expected, he will be under less pressure to push a resource nationalism agenda since he will no longer be in campaign mode.
That should ease policy confusion and help revive foreign investment.
“Certainty on who the president will be – and the incumbent appears to be clear favourite – I think is critical,” said David Paull, managing director of Australian-listed Aspire Mining . “That will create a period of political stability and that’s the key thing people look for.”
For the rest of this article, click here: http://in.reuters.com/article/2013/06/26/mongolia-mining-idINL3N0EX1Z120130626