In many developing countries, Govt want their "fair share"
mano

Mongolia ready to grab stake in Ivanhoe mine
GEOFFREY YORK

From Wednesday's Globe and Mail

ULAN BATOR — In a fiery speech to mining executives, a senior Mongolian cabinet minister has left little doubt that his government will seek an ownership stake in Ivanhoe Mines Ltd.'s massive Oyu Tolgoi project.

The move could have a significant impact on Ivanhoe because a new law allows the government to acquire up to 34 per cent of private mining projects and there is no clear mechanism to ensure that the government pays a fair price.

Industry and Trade Minister Bazarsad Jargalsaikhan said the issue of state "participation" in the Oyu Tolgoi copper mine will be raised this fall when Ivanhoe meets the government to seek a 30-year investment agreement.

He argued that Ivanhoe should welcome a government stake in Oyu Tolgoi, since it would create more "security" for the Vancouver-based miner as it tries to raise money for a project that will cost an estimated $5.6-billion ( U.S.) over the next 40 years. "Mongolian government participation will create even more opportunities for Ivanhoe to raise capital on world markets."

"If you have the government as your partner, you will enjoy more stability," Mr. Jargalsaikhan told the annual Mongolian mining conference Tuesday. "Do not be scared of government participation ... Governments never go bankrupt. We reduce the risks inherent in a project."
If foreign investors are unhappy with government ownership, they can simply leave the country, he told the miners.

"You can go to another corner of the world. We're not forcing anyone to stay in Mongolia. I have to work for the interests of the people, and they are demanding that Mongolia's resources be fairly distributed. They want to see government participation, so that the people can gain more of Mongolia's resources. We can't allow 100-per-cent private ownership."

As if to emphasize his point, the mining conference was picketed Tuesday by banner-waving protesters who warned the foreign investors to avoid any investments that would "harm the basic interests of the people."

Pressure from protesters was a key factor in persuading the Mongolian government to pass the new mineral law this year. Thousands of people clogged the central square of Ulan Bator, throwing eggs, pitching tents, holding hunger strikes and even burning an effigy of Ivanhoe's executive chairman, Robert Friedland.

The new law allows the Mongolian government to acquire up to 34 per cent of "strategic" mineral deposits that were discovered in privately financed explorations and up to 50 per cent of publicly financed discoveries.

If the government acquires an ownership stake, the law says the government and the mining company should negotiate the purchase price. But it fails to specify what happens if there is a disagreement on the valuation of the government stake.

Layton Croft, executive vice-president of corporate affairs at Ivanhoe's Mongolia subsidiary, confirmed that there is "a chance" that the government will seek a stake of Oyu Tolgoi during its negotiations with the company this fall on the 30-year investment agreement.

"Ivanhoe will follow the law," Mr. Croft told reporters after listening to the Industry Minister's speech Tuesday. "The question of valuation is of critical importance. I don't have the answer on that. But what I heard Mr. Jargalsaikhan say was that those negotiations should be businesslike."

The government is working on regulations to clarify the process for state acquisitions of equity shares in mining projects.

Some analysts believe that the government will consult an independent international expert to establish a fair purchase price for each stake, although nothing has been confirmed yet.

Mr. Jargalsaikhan said the government will not "confiscate" a share of mining projects. The stakes will be obtained on a commercial basis, he said.

The new mineral law, combined with a new 68-per-cent tax on "windfall profits" in the copper and gold industry, have caused widespread concern about Mongolia's future. Some companies have suspended their exploration activities. But others, such as Entrée Gold Inc. C of Vancouver, are continuing to explore.

Gregory Crowe, president and chief executive officer of Entrée, said he is optimistic that the government ownership issue and the tax issue will "sort themselves out" over the next year or two. Mongolia could rescind the laws if it sees signs of a withdrawal by foreign investors next year, he said.

Although it is still unclear whether the government will pay a fair market value for its newly acquired ownership stakes, a mining company would always have the option of a court challenge if it feels cheated by a government acquisition, Mr. Crowe said.

An independent analyst, Tom Meyer of Raymond James Ltd., said the Canadian investors — especially Ivanhoe — are putting too positive a spin on the situation. "I think there is a high level of misplaced optimism that Mongolia will ultimately reverse the windfall tax and provide incentives for foreign mine investment," he said. "I'm not so optimistic. In my view, Mongolia's view of the middle ground is distant from what I believe would be acceptable to Mr. Friedland or his shareholders ... It would be hard for the country to save face if foreigners received the bulk of the benefits."

http://www.thestreet.com/pf/markets/commodities/10308866.html

Excerpts

investment demand could boost bullion prices to over $700 an ounce by year-end, according to the Gold Survey 2006 -- Update 1, published Thursday morning by London-based specialty consulting firm GFMS.

Contributing factors, the GFMS report asserts, include a "bleak outlook" for the U.S. dollar due to a "problematic U.S. housing market," an "extremely volatile [Middle East] contributing to a general unease," as well as the "perceived threat of global terrorism," which should all contribute gold's allure as a safe haven.

I have followed KRY very closely and have a large stake (at least for me). Does anyone have any opinions on GRZ?

Although it would proabbly not be a good idea to invest in both of them as that would would be in essence 'putting your speculative eggs in one basket' (Venezuela).

For some unknown reason this DJ reporter seems to use his platform to unfairly denigrate Gold Reserve. The simple trick of combining these two completely and unrelated items into the same paragraph as quoted here

"Gold Reserve is expected to invest $700 million in the Las Brisas project, a mine obtained under concession in 1998, a year before President Hugo Chavez took office. Chavez has promised to cancel contracts and concessions found to be "idle" and to reassign mines to small-scale miners in poverty-stricken communities. "

is designed to mislead the reader into believing that in some way GRZ's Brisas concession is considered to be "idle".

Nothing can be further from the truth. Not only has GRZ spent more money directly on Brisas than KRY has spent directly on Cristinas, every official from Venezuela when asked has confirmed that Brisas is not considered to be idle..

GRZ has spent almost $100 million on Brisas. It has 10.1 million ounces of gold and 1.3 billion pounds of copper all classified P&P at $350 gold and $1 copper, very conservative figures. GRZ has only 40 million shares issued and has no debt and almost $1 a share cash on hand.

"This month is providing exceptional timing advantages to buy shares of gold miners like KRY and GRZ."

Isn't that just a polite way of saying that they have been HAMMERED? :)

I continue to follow the "story" of KRY. It's fascinating. If a modern day Livermore were to tell its tale, what would he say?

As I stare at my active screen of stocks it is all red with the exception of IVN/KRY what a support team.

Hmm. Yes, I see what you mean. Gap open on both. Unusually high volume chasing it up in the first 30 minutes. Selloff all day to below the gap open. Interesting.

At least the IVN guys got it right by doing some heavy volume pre-positioning late yesterday.

Aurelian (ARU) is also doing nicely today following another press release with new drill results.
http://www.globeinvestor.com/servlet/WireFeedRedirect?cf=GlobeInvestor/config&vg=BigAdVariableGenerator&date=20060914&archive=ccnm&slug=0347108001

Interesting that IVN and KRY have clone charts for the day.

How about Goldcorp, what is the next support level?

MarkM, what do you think of this gold selling being the CBs filling their quotas before Sept. 26. Maybe we should wait until then?

Thx.