Ivanhoe faces further delay in MongoliaPublished by MAC on 2009-07-27
Source: Toronto Globe & Mail
Government refuses final green light on copper-gold project
In the latest installment of the on-going saga, Ivanhoe has received yet another set-back from the Mongolian government in its effort to push through the Oyu Tolgoi project.
Ivanhoe Mines Ltd. suffered another setback yesterday in its marathon quest for permission to build a massive copper and gold mine in Mongolia.
Instead of giving the $3-billion (U.S.) Oyu Tolgoi project the final go-ahead, as many investors and analysts had expected, Mongolia's national parliament yesterday passed a resolution authorizing the government to finalize a "definitive investment agreement" with the Vancouver company and its partner Rio Tinto PLC.
In a statement, Ivanhoe said it was "reviewing the provisions of the resolution and expects that further negotiations will be held with the Mongolian government to attempt to conclude a final agreement that is acceptable to all parties."
Ivanhoe shares skidded 13 per cent on the TSX as investors who had been anticipating less ambiguous news sold the stock.
Shares in the company, which is led by billionaire mining financier Robert Friedland, have been rising for weeks on hopes the company's five-year-long pursuit of a deal to mine what it claims is one of the world's largest untapped copper and gold deposits would finally be realized.
Analysts, including BMO Nesbitt Burns' John Hayes, had recently published reports telling clients that there was growing optimism a deal to approve a draft agreement would get done.
Yesterday, Mr. Hayes said the news out of Mongolia suggested "progress has been made," because the final decision may now be in the hands of a smaller group of lawmakers.
However, Mr. Hayes also said the process has now "taken a different path" and that there is now "an implementation process that is not really clear."
Indeed, Ivanhoe has not released details of the proposed investment agreement or what changes, if any, are contained in the parliamentary resolution.
"Instead of parliament approving the agreement, the parliament has given the government the authority to conclude the agreement," said one person close to Ivanhoe, who spoke on the condition of anonymity.
Local news reports recently suggested Mongolia's new president Tsakhiagiin Elbegdorj wanted to change the proposed agreement with Ivanhoe to increase the country's interest in Oyu Tolgoi, but Ivanhoe has said the reports contain inaccuracies.
Other Canadian mining firms, including Centerra Gold Inc., Western Prospector Group Ltd. and Khan Resources Inc. are also facing uncertainty in Mongolia. All three have had their operating or exploration licences suspended by the government in recent weeks.
An analyst who covers Ivanhoe, who asked not to be named, said the resolution was not the news long-suffering Ivanhoe investors were eager to see.
"The ultimate outcome that everyone was hoping for was for them to say 'yes, we love the agreement, go ahead, build the mine.' That's not what we got," the analyst said.
Last week, Ivanhoe announced the appointment of former prime minister Jean Chrétien as an "senior international adviser." Ivanhoe has said that Mr. Chrétien will not lobby for the company.
Rather, he "is expected to be of assistance principally in areas in which the various companies affiliated with Ivanhoe Capital currently are doing business, and expect to do business in the future - including countries in Asia Pacific, Africa and South America."