The United Nations (UN) tribunal has ruled in favour of uranium explorer
Khan Resources in a $200-million arbitration case against the government of
Mongolia, the TSX-listed company said on Thursday.

The UN Commission on International Trade Law ruled on matters of
jurisdiction and has dismissed all of Mongolia”s objections to the continuation
of the suite.

Khan alleged that during 2009 the government of Mongolia in concert with a
Russian partner took actions that amounted to the illegal expropriation of the
company’s mining and exploration permits.

Khan said this took place after the government initially invited and
encouraged the company and its predecessors to invest millions of dollars,
expertise and resources in the Dornod Aimag uranium project, in north-eastern
Mongolia.

The action would now progress to the next phase, in which the panel would
rule on the merits of the arbitral claims and the amount of damages suffered by
Khan arising from Mongolia’s expropriatory and unlawful treatment of the
company.

In Khans’s arbitration filings, the company said the uranium deposit had
substantial resources of uranium and a capacity to produce about three-million
tons of yellow cake a year, for 15 years.

The established net present value is $276-million, which would be derived
from $2.94-billion in revenue over the life of the mine.

Khan said that just as it was preparing to start construction of the mine in
October 2009, the governments of Mongolia and Russia in January made a
statement that they intended to exploit the resource, and by August, had formed
a Dornod Uranium joint venture (JV).

On December 14, 2010, Russian Prime Minister Vladimir Putin
and Mongolian Prime Minister Sukhbaatar Batbold signed an
agreement confirming the JV, which also effectively confirmed the expropriation
of Khan’s project rights.

Subsequently Khan received a notice from Mongolia’s Nuclear Energy Agency in
which it said Khan’s Dornod rights had been invalidated, retroactive to October
8, 2009.

Khan initiated the international arbitration suite in January 2011.

“We are pleased that the tribunal has validated Khan”s initiatives to
achieve recourse to damages suffered by our shareholders. Our treasury is well
funded and we will continue to vigorously pursue this action to its logical end
to receive value for our investments in Mongolia,” Khan CEO Grant Edey
said.

Khan added that it would immediately start preparing for the upcoming
merits/damages phase of the proceedings.

Other firms are also currently embroiled in arbitration proceedings with
Mongolia, including SouthGobi Resources, which had filed a notice of
arbitration on the government, owing to the country’s Mineral Resources
Authority’s failure to execute the premining agreements for the Zag Suuj, and
certain areas of the broader Soumber coal deposits.

A newly elected conservative coalition government is also seeking to
restrict foreign companies from mining Mongolia’s wealth of mineral resources
and recently made noises about renegotiating a 2009 government agreement, which
gave Canada”s Ivanhoe Mines, now controlled by mining giant Rio Tinto, 66%
ownership of the $13-billion Oyu Tolgoi copper/gold project.

Canada’s Prophecy Coal is also active in the country.

Source: miningweekly.com