Mongolia to Take Areva Uranium Stake to Help Revive Investment

Mongolia will take a stake in a domestic uranium venture led by France’s Areva SA (AREVA) and support its development, signaling the nation’s willingness to revive foreign investment, said Prime Minister Norovyn Altankhuyag.

“Through this we see that foreign investors are continuing to invest in Mongolia,” Altankhuyag said in an interview in Tokyo on Sept. 14, at the end of a four-day visit.

Mongolia will take a 34 percent share of the uranium mining unit of Areva Mongol LLC, he said, adding that this is the level of ownership under domestic law that designates a strategic deposit. Areva Mongol owns 27 uranium exploration permits in the country and is seeking to upgrade them to allow mining. It is negotiating an equity interest with state-owned MonAtom LLC, according to the Paris-based company’s website. Japan’s largest trader, Mitsubishi Corp. (8058), is also a potential investor, it said.

Mongolia’s premier is seeking to revive direct foreign investment, which shrank by 42 percent, or $1 billion, in the first half of the year, due to stricter regulation of overseas companies and the government’s dispute with Rio Tinto Group.

The London-based mining company has delayed underground development of Mongolia’s biggest investment project, the $6.6 billion Oyu Tolgoi copper field, while it negotiates financing with the government. Mongolia holds 34 percent of Oyu Tolgoi.

Coupled with slowing Chinese demand for Mongolian coal, the drop in foreign investment has damped economic growth, which slowed to 11.3 percent in the first half of this year, from 12.4 percent in 2012 and 17.5 percent in 2011. The local currency, the tugrik, has weakened 18.3 percent against the U.S. dollar this year.

Improve Transparency

The “hiccups” in Mongolia’s economy are not unexpected and longer-term investors realize that the issues are par for the course in an emerging market, said Howard Lambert, chief representative of ING Groep NV in Mongolia, the first foreign lender to open an office in the country.

“Investors want stability and they want transparency,” Lambert said in an interview from Ulaanbaatar. “In emerging markets it’s rare to have all those things at the same time and for extended periods of time.”

Mongolia’s government is aware of the need to improve stability and transparency and plans to pass new laws soon to address the issues, Altankhuyag said.

Its parliament begins an extraordinary session this week to discuss five draft laws seeking to end “discrimination between foreign and domestic investors,” Mongolian Investment Banking Group LLC said Sept. 16 in a report.

Strategic Importance

Under one law, the mining, finance and communications industries would no longer be designated as sectors of strategic importance, which will make them easier to navigate for foreigners, Mongolian Investment said.

Consumer goods leasing and financing for agriculture are two industries outside of resources that have strong potential to attract foreign investor interest, ING’s Lambert said.

Areva has explored for uranium in Mongolia since 1997 and has 144 staff in the country, according to its website. MonAtom’s stake would be in Areva Mongol’s unit, Areva Mines LLC, the company that will produce the uranium.

Mitsubishi is waiting for Mongolian government approval to exercise its option on Areva Mongol shares, Japan’s biggest trading company said in an e-mailed response to questions. The approval is expected in the near future, Mitsubishi said.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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