January 9, 2018 / 6:17 PM / 2 months ago

Mongolian Copper Corp says to fight government stake repurchase

* Supreme Court ruled against nationalisation in December

* MCC says decision sends negative signal to foreign investors

By Barbara Lewis and Terrence Edwards

LONDON/ULAANBAATAR, Jan 9 (Reuters) - Mongolian Copper Corporation (MCC) said on Tuesday it will fight a decision by the Mongolian government to repurchase its stake in one of Asia’s biggest copper mines for about $400 million after a failed attempt to nationalise it.

Earlier on Tuesday, the government passed a resolution to buy the 49 percent holding, giving Mongolia full state control of the Erdenet mine, following a ruling by the country’s Supreme Court in December against the nationalisation decided by parliament in February 2017.

MCC said no agreement had been reached with the government and it would fight the decision legally.

“We will protect our legal ownership rights locally and internationally,” MCC’s Chairman Munkhbaatar Myagmar told Reuters on Tuesday in London. He was is in the city for talks with law firm Omnia Strategy, which is representing the company.

The signal Mongolia’s government was giving to potential foreign investors, which can help it meet the terms of an IMF bailout agreed last year, was negative, he said.

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

Erdenet is one of the region’s largest copper mines, producing 530,000 tonnes of copper concentrate annually.

Mongolia’s proximity to neighbouring China, the world’s biggest copper consumer, has attracted interest from Chilean state-owned company Codelco, the biggest copper-producing company.

Major miner Rio Tinto is already present in Mongolia, where it is working on a massive underground extension at copper mine Oyu Tolgoi.

Oyu Tolgoi is jointly owned by the government of Mongolia (34 percent) and Turquoise Hill Resources (66 percent), which in turn is 51 percent-owned by mine operator Rio Tinto.

MCC purchased the Erdenet mine from Russia in 2016, with the approval of then prime minister Chimed Saikhanbileg.

The parliament later nationalised the mine, saying it had never endorsed the sale.

MCC says its purchase was legal and the government’s dismissal of the Supreme Court’s decision, which upheld an earlier court ruling, was unconstitutional.

It also argues the company will be run more efficiently under private management and says it is a big tax payer to the Mongolian government, paying around $100 million in tax in the first half of last year.

No-one from the Mongolian government was immediately available to comment on Tuesday.

In a statement last week before Tuesday’s government resolution formalised the repurchase, it said MCC would be compensated by the just over $400 million it said the company paid to Russia to acquire the stake. (Editing by David Evans)

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