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Mongolia Pulls Entree Permit in Oyu Tolgoi Saying Invalid

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Feb. 27 (Bloomberg) -- Mongolia annulled mining licenses held by Entree Gold Inc. on land near Rio Tinto Group’s Oyu Tolgoi copper and gold project, saying they had been authorized incorrectly in 2009.

Entree Gold in 2009 upgraded its exploration permits to mining licenses, the mining ministry said yesterday in a statement on its website. The award of a mining license can only be granted by the Mineral Resource Authority, not the mining ministry, and is therefore invalid, according to the statement.

“The current mining minister has annulled the 2009 resolution and transferred the matter to the Mineral Resource Authority,” according to the statement. Rio Tinto has a direct 12.85 percent stake in Entree and a 10.7 percent stake is held by Rio’s Turquoise Hill Resources Ltd. unit, according to data compiled by Bloomberg.

Rio, the world’s second-largest mining company, controls 66 percent of Oyu Tolgoi LLC and Mongolia’s government the rest. Mongolia President Tsakhia Elbegdorj this month said it wants more control of the project -- the largest copper and gold mine under construction -- and requested Rio transfer all licenses connected to the mine to the joint venture. Rio is meeting with Mongolian officials today to discuss the project.

In 2010, Mongolia stopped issuing new licenses beyond the existing 2,253 exploration licenses and 1,255 mining licenses, pending revision of the country’s mineral laws.

Entree, based in Vancouver, is investigating reports that its licenses were canceled, Mona Forster, a spokeswoman for Entree said by telephone yesterday.

Entree Slumps

Entree fell 10 percent to 45 Canadian cents at the close in Toronto. The shares have tumbled 66 percent in the past 12 months.

Mongolia and Rio signed an agreement in 2009 to develop jointly the Oyu Tolgoi deposit, which could generate 30 percent of the nation’s gross domestic product at its peak.

Unless the mining permits held by Entree are transferred to Rio’s Oyu Tolgoi venture with the government, the country’s share of the earnings from the copper and gold field will shrink to 26 percent from 34 percent, the mining ministry said.

Entree Gold’s licenses are for areas that contain 18 percent of Oyu Tolgoi’s total copper and 32.6 percent of its gold reserves, as well as some silver and molybdenum, the ministry said.

To contact the reporters on this story: Michael Kohn in Ulan Bator at mkohn5@bloomberg.net; Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editors responsible for this story: Peter Langan at plangan@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net

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