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Mongolian Mining Drops to Record Low on Investment Rule Concerns

Mongolian Mining Corp., the nation’s biggest coking coal exporter, slumped to a record low on speculation investment rules will be tightened after this week’s parliamentary elections.

The Hong Kong-listed coal producer fell 3.1 percent to HK$4.70 at the close, the lowest since the shares started trading in October 2010. Modun Resources Ltd., an Australian company that’s developing a thermal coal project in Mongolia, fell 6.7 percent in Sydney and Xanadu Mines Ltd. dropped 4.9 percent. SouthGobi Resources Ltd. fell 1.23% in Hong Kong.

There’s growing concern among Mongolia’s citizens about the way politicians are handling the country’s mineral resources. Lawmakers, seeking to control ownership of assets, approved a law in May requiring parliament to approve deals in which overseas investors hold more than 49 percent of the equity and for transactions exceeding $75 million in strategic sectors, including mining.

“Whatever the result will be, there will be a deterioration in the investment climate in Mongolia,” said Stanislav Chuyev, an analyst with Visor Capital Joint Stock Co. in Almaty, Kazakhstan. “There’s just a risk that in the future, companies will be required to transfer more funds to ordinary people in the form of corporate social responsibility.”

Mongolian Mining spokeswoman Khatantuul Tuvdendargaa, based in Ulan Bator, declined to comment when contacted on her mobile phone.

“We’re in a pre-election phase in Mongolia, so the investment community is waiting to see what happens,” said Chris Mardon, managing director of Subiaco, Australia-based Modun Resources. Calls to Xanadu’s Sydney office and SouthGobi’s Vancouver office outside working hours weren’t answered.

The passage of the law curbing foreign investment was accelerated after a public outcry following moves in April by Aluminum Corp. of China Ltd. to buy SouthGobi Resources. Parliamentary elections are scheduled in Mongolia on June 28.

Mongolia has gold, iron ore, copper and coal, and its 10 biggest mineral deposits are worth more than $1.3 trillion, according to estimates by Quam Asset Management.

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