Uranium in Mongolia
(Updated April 2016)
- Uranium was produced from the Dornod deposit in Mongolia by Russian interests to 1995.
- Mongolia has substantial known uranium resources and geological prospectivity for more.
- Since 2008 Russia has re-established its position in developing northeastern Mongolian uranium deposits.
- There is currently no uranium mining in Mongolia.
According to the 2014 Red Book, Mongolia has 141,000 tU in Reasonably Assured Resources plus Inferred Resources, to US$ 130/kg U. Mostly the resources are in volcanogenic deposits in Mongol-Priargun province, with some in sedimentary ones in the Gobi-Tamsag province. However, geological indications reported in the Red Book suggest that uranium resources could be 1.39 million tU.
The mining sector is Mongolia’s single largest industry, accounting for 55% of industrial output and more than 40% of export earnings. The new $4.5 billion Ivanhoe-RioTinto Oyu Tolgoi copper-gold project will boost this.
However, the country has been considered to have relatively high political risk associated with investment. One aspect of this was the existence of an eminent domain provision for strategic minerals which involved the possibility of claw-back at the discretion of the government, applied where new exploration covered areas which were previously explored or developed, such as Dornod and Gurvanbulag. Originally this was understood to involve compensation if it were invoked, but this provision was abolished in the July 2009 Nuclear Energy Law.
Brown coal provides most of its electricity (4.75 billiion kWh in 2011), from less than 1 GWe capacity, and about 13% of electricity is imported from Russia. An international consortium involving GdF Suez is planning to build a coal-fired combined heat and power plant in Ulaan Baatar with 415 MWe power and 587 MWt heat. A 220 kV transmission line is built to import electricity from China for the Oyu Tolgoi/Turquoise Hill mine in the Gobi desert, which is 550 km south of Ulaan Baatar but only 80 km from China.
Air pollution is a major problem in Ulaan Baatar, from domestic combustion, cars, and power generation.
Mongolia has a long history of uranium exploration commencing with joint Russian and Mongolian endeavours from 1950s involving investment of some US$ 200 million then. Initial success was obtained in the Saddle Hills area of northeastern Mongolia (Dornod and Gurvanbulag regions) where uranium is present in volcanogenic sediments. Prior to 1960, numerous uranium occurrences were discovered in the deposits of brown coal in eastern Mongolia. Over 1970-90 government geological surveys covered much of the country, and based on these the country was classified into four uranium provinces: Mongol-Priargun, Gobi-Tamsag, Khentei-Daur and Northern Mongolian. Each has different geology and hosts different deposit types. Within these provinces, nine uranium deposits and about 100 uranium occurrences were identified.
The Mongol-Priargun uranium province includes the main uranium prospects, Dornod and Gurvanbulag, in the east and northeast of the country, in volcanogenic mineralisation. The Gobi-Tamsag uranium province in southern Mongolia includes the Sainshand deposits in sediments, notably Zoovch Ovoo.
The Dornod open cut mine and undergound orebody, with the surrounding area containing a number of deposits, is in the Dornod aimag (province). The main deposit was mined by the Erdes Mining Enterprise, a subsidiary of Priargunsky Industrial Mining & Chemical Union from 1988 to 1995. The ore was railed 480 km to Krasnokamensk in Siberia for treatment by Priargunsky. Only about 535 tU was produced, all from open pit mining.
Mardai township close to Dornod was built in the 1970s and was reported to house 10,000 Russian workers at the mine with a very high standard of living and commerce. It is now in ruins, also the railway north has been removed and the materials sold.
Atomredmetzoloto (ARMZ) says that Russia spent the equivalent of $600 million (in 2009 dollars) on uranium exploration and development in Mongolia to 1995.
In April 2008 Russia and Mongolia signed a high-level agreement to cooperate in identifying and developing Mongolia's uranium resources. This aimed to restore and consolidate Russia's involvement in Mongolia's uranium sector, notably Dornod. This was taken forward by further bilateral agreements in August 2009 and December 2010, and in Russian legislation signed into law in January 2011 ratifying establishment of the joint limited liability company Dornod Uran, 49% owned by ARMZ.
Legislation and government entities
Since 1956 the Joint Institute for Nuclear Research (JINR) at Dubna, near Moscow, has trained Mongolian scientists. A Nuclear Energy Commission was set up in the 1980s.
In 2008 the government established a new Ministry of Minerals and Energy. Then the Nuclear Energy Agency (NEA) was set up about the beginning of 2009 as a policy and regulatory body and government line agency directly accountable to the Prime Minister. In February 2009 the government set up MonAtom LLC to undertake uranium exploration and mining on behalf of the state, as well as pursuing nuclear energy proposals. It will hold the state's equity in uranium and nuclear ventures and so comes under the Nuclear Energy Agency and the State Property Committee. The Radiation Control Authority is a part of this Agency, along with MonAtom. The existing Mineral Resources Authority of Mongolia (MRAM) was expected to work closely with MonAtom and the Nuclear Energy Agency. In March 2015 the government approved the structure of a new Nuclear Regulatory Commission, to be chaired by the prime minister, apparently to replace NEA or some of its functions.
In mid-July 2009, after consultation with the International Atomic Energy Agency, parliament passed a Nuclear Energy Law to regulate the exploration, development, and mining of uranium and give the state a greater degree of ownership and control of uranium resources. It included transitional provisions dealing with existing mining and exploration licences. The new Law gives the government the right to take ownership without payment of not less than 51% of the shares of a project or joint venture if the uranium mineralisation was discovered by state funded exploration, and not less than 34% if state funding was not used to find the mineralisation. It gives the State Administrative Authority the responsibility to implement and enforce state policy on the exploration and development of deposits of radioactive minerals and establishment of nuclear energy, including the power to grant, suspend or revoke any licences granted pursuant to the Nuclear Energy Law. Licences to conduct uranium exploration and production of any radioactive minerals must be obtained under this law.
Parliament also passed legislation regarding the re-registration of existing exploration and mining licences. Existing licence holders had to apply to the State Administrative Authority by 15 November 2009 and comply with all of the conditions and requirements set out in the Nuclear Energy Law, including acceptance of the state’s 34% or 51% share participation in the licence holder, at no cost to the government.
A new law on radiation protection and safety was enacted in 2001, replacing 1977 and 1983 provisions.
Mongolian Uranium Resources
||Resources tU, %U
||67,706 t @ 0.022%
||6,259 t @ 0.022%
||8,580 t @ 0.162%
||2,479 t @ 0.034%
||7,288 t @ 0.026%
||8,406 t @ 0.071%
||2,611 @ 0.036%
Updated from Red Book 2014 to Jan 2013, except Dornod.
Sainshand (Cogegobi, Areva)
Areva has been conducting exploration since 1997, lately through its subsidiary Areva Mongol LLC which holds extensive tenements in Dornogovi and also Sukhbaatar provinces (Sukhbaatar is between Dornogovi and Dornod). In 2013 Mitsubishi Corp took a 34% share in Areva Mongol. From 1997 to 2013 Areva Mongol subsidiary Cogegobi LLC spent $150 million on exploration, mostly on two deposits in the Sainshand Basin of Dornogovi province.
In October 2013 the government took a 34% stake in Areva Mongol’s mining and project arm, Areva Mines LLC, through Monatom. In 2015 the company received an operating licence for the Zoovch Ovoo and Dulaan Uul projects, but mining them will depend on the uranium market conditions.
The Zoovch Ovoo roll-front deposit 130 kilometres south of Sainshand at Ulaanbadrah Soum has 67,700 tU as inferred resource at 0.022% grade amenable to ISL. It was discovered in 2011, and Cogegobi is undertaking a prefeasibility study with a view to production from Zooch Ovoo by ISL at about 2000 tU/yr. ISL testing was planned in 2015.
On the Dulaan Uul roll-front deposit 20 kilometres west of Zoovch Ovoo, Cogegobi has been trialling ISL at Umnut and quotes an inferred resource of 6500 tU at 0.015%. It was discovered in 2007.
The Dariganga area of the Sukhbaatar province is mentioned as part of the Sainshand project.
During the visit of the Mongolian Prime Minister to Russia in mid 2009, an agreement was signed between the Mongolian Nuclear Energy Agency and Russia's Rosatom corporation. This agreement envisaged creation of a joint venture company between MonAtom and ARMZ to develop two uranium projects in Mongolia in which Russia retains an historical stake: Dornod, and exploring Dornogovi (East Gobi) further south. Rosatom said that the new JV is of particular interest due to its proximity (350 km direct) to Priargunsky operations, allowing creation of a "single infrastructure". Russian aid is expected for railway upgrades throughout Mongolia.
The final intergovernmental agreement to set up the Dornod Uranium LLC joint venture was signed on 25 August 2009 and ratified by the Duma in 2010. In January 2010 an economic protocol related to this was signed. The joint venture was to be relieved from taxes and other compulsory payments imposed by Mongolian legislation, because Russian labour was to be used initially.
Meanwhile, Canada-based Khan Resources Inc. (KRI) had a 69% share in the Dornod project, mostly through a 58% subsidiary Central Asian Uranium Co. Ltd (CAUC), a Mongolian stock company set up by World Wide Minerals at the behest of the government in late 1990s. Russia's Priargunsky Mining & Chemical Enterprise (a subsidiary of ARMZ and Rosatom) and Monatom each owned 21% of CAUC, which claimed to have the only uranium mining licence in Mongolia. Khan's definitive feasibility study released in March 2009 showed that the project was sound, on the basis of 24,780 tU indicated resources (NI 43-101 compliant), including 20,340 tU probable reserves. Annual production of 1150 tU over 15 years was envisaged. After that various corporate arrangements were proposed involving Monatom and ARMZ, but when in February 2010 Khan recommended that its shareholders accept a full takeover by a Chinese government entity, Monatom and NEA proceeded to exclude Khan from any role with Dornod.
After suspending and then canceling Khan's licences, the NEA announced in August 2009 that Monatom would develop Dornod in a joint venture with ARMZ and possibly Japanese or Chinese partners, and would hold at least 51% of the new entity Dornod Uranium LLC.
In May 2010 Rosatom said that all disagreements related to the project had been settled and it awaited final signing of new joint venture agreements between ARMZ and Monatom, under the terms of this intergovernmental agreement. ARMZ looked forward to having access to 50,000 tonnes of uranium reserves from which it could produce about 2000 tU/yr. ARMZ estimated that launching the Dornod project would require more than US$ 200 million. The final agreement was signed in mid December 2010, between Rosatom and ARMZ as one party (49%) and Monatom and NEA (51%) as the other. The Mongolian prime minister said that the government decision on this project had been vexed, which relates to Rosatom's impatience with the delay in finalizing it.
The parties will contribute their stakes in existing Mongolian joint ventures into the new JV, as well as rights and other assets relative to their equity interests. Russia's JSC Priargunsky Industrial Mining & Chemical Union based just over the border at Krasnokamensk will be the operator for Dornod Uranium.
The whole Dornod situation is very unclear but there was some expectation of 1000-1200 tU/yr from Dornod from about 2015. However the 2014 Red Book makes no mention of mining prospects from Dornod.
In January 2011 Khan announced it was suing the Mongolian government "for its expropriatory and unlawful treatment of Khan in relation to the Dornod uranium deposit" and sought US$200 million damages plus over $126 million interest and costs. In mid-2012 the tribunal dismissed all of Mongolia’s objections to proceeding with arbitration, and in March 2015 it awarded $100 million to Khan as compensation for its Dornod licences being cancelled. In July 2015 Mongolia filed a notice to annul the award, but in March 2016 it settled for paying US$ 70 million. (See Appendix.)
Gurvanbulag (CNNC International)
Gurvanbulag, about 30 km west of Dornod, had extensive underground development down to 560 metres in the Soviet era, and was readied for production. The Canada-based Western Prospector Group Ltd had Gurvanbulag as the main focus of its Saddle Hills project since 2004. Some 9000 tU is known as a NI 43-101 inferred resource based partly on Russian exploration to 1989. Western Prospector and its Mongolian subsidiary, Emeelt Mines, undertook a definitive feasibility study which showed that the project was barely economic, on the basis of 6900 tU reserves averaging 0.137%U. With radiometric sorting the head grade would be 0.152%U and the mine could produce 700 tU/yr for 9 years. Mine development cost would be about US$ 280 million. It is only 100 km from the Chinese border.
In mid-2008 Khan Resources Inc made a bid to take over the Western Prospector Group so as "to consolidate its position in the Saddle Hills district" but was outbid by Tinpo Holdings, which subsequently withdrew the offer due to political uncertainty. In March 2009 Western Prospector agreed to a US$ 25 million takeover by China's CNNC International, a 74% subsidiary of CNNC Overseas Uranium Holding Ltd and through it, of SinoU. In August 2009, the amalgamation with CNNC was complete and the company delisted in Canada.
In July 2009 MRAM suspended for three months all of the company's uranium exploration licences due to alleged violations of Mongolian laws. In October 2009 it said that CNNC's equity "would be decided soon", but it would evidently be less than 50%. This whole CNNC prospect then appeared to be dead, with ARMZ positioned to take up Gurvanbulag. But following passage in May 2012 of foreign investment legislation perceived as being designed to limit state-owned Chinese companies, in June 2012 CNNC Mongolia Project Co announced an agreement with NEA to develop Gurvanbulag, following three years of feasibility studies and preparation. In August 2014 CNNC said that the government had approved its recent feasibility study, and negotiations towards a joint venture company with NEA continued. It is expected that the government will hold 51% and CNNC International Ltd. will hold 49% of the project, upon issuance of the mining licence.
In November 2015 CNNC International reported that all exploration work was complete and that it awaited a mining licence. It then expected to form a project JV with the government.
The 2011 'Red Book' reported that Emeelt Mines LLC, now a subsidiary of the Central Asian Uranium Company Ltd (CAUC), carried out exploration and research activities in the Dornod area and was planning to start underground mining of the Gurvanbulag deposit in 2014. The 2014 Red Book shows Gurvanbulag as an Emeelt Mines project with planned production from 2018. CAUC is a Mongolian stock company set up by World Wide Minerals at the behest of the government in late 1990s. In 2010 Khan Resources Inc. held 58% of the company, with Russia's Priargunsky Mining & Chemical Enterprise (a subsidiary of ARMZ and Rosatom) and Monatom, holding 21% each. CAUC claimed to have the only uranium mining licence in Mongolia.
Gurvan Saihan (Czech)
Canada's Denison Mines had an 85% interest in the Gurvan Saihan Joint Venture (GSJV) through Denison Mines (Mongolia) Ltd (having bought out a 15% Russian partner early in 2012), with Monatom 15%. However, the government proposed to transfer at least 19% from Denison to Monatom, giving it 34%. Monatom is entitled to up to 51% under the nuclear energy law.
In December 2012, the GSJV entered into a pre-mining agreement with NEA, in accordance with provisions of the Nuclear Energy Law and the Mineral Law of Mongolia. The GSJV then had three years to assess the development prospects of its four licence areas, and it then applied for mining licences for the Hairhan, Haraat, Gurvan Saihan, and Ulziit projects. In January 2015 Denison said that “the company continues its efforts to pursue strategic alternatives for its 85% interest in the Gurvan Saihan Joint Venture (GSJV). Further guidance regarding the company's interest in the GSJV will be provided in the first half of 2015.” In July Denison announced that it had agreed to sell its GSJV interest to Czech Uranium Industry a.s. for $20 million, conditional upon grant of mining licences by the end of November. This did not happen, and Denison settled for $13.25 million for all shares in Denison Mines (Mongolia) Ltd and Denison Mines Mongolia LLC which is the operator of the GSJV. Some $12 million of the price is contingent upon mining licences being issued. Uranium Industry is already active in Mongolia and established the Mon Czech Uranium JV with MonAtom in June 2015.
As each exploration licence area has uranium deposits, the GSJV has applied to convert each of the four widely separated exploration licences into mining licences: Hairhan, Haraat/Choir, Gurvan Saihan, and Ulziit. All are acid ISL prospects.
In 2011 NI 43-101 resource figures were published for two of these. Indicated resources are 7600 tU and inferred resources are 2240 tU for Hairhan (Khairkhan, 65 km south of Gurvan Saihan), and 2470 tU for Haraat (Kharaat, part of Choir, northwest of Sainshand and about 100 km east of Gurvan Saihan). These three deposits are in Dundgovi province, Ulziit is in Sukhbaatar province, some distance east.
ISL tests on these two deposits are favourable, with Hairhan the most advanced. Environmental assessments were prepared and submitted to the Nuclear Energy Agency for Hairhan and Haraat. The main Choir mineralization is above the water table so not suitable for ISL, and a 40-metre deep open pit is being considered, with heap leaching. Gurvan Saihan is 65 km north of Hairhan and could become a satellite ISL operation. At Ulziit, several hundred kilometres northeast, 2600 tU is reported.
Denison also held some leases though its Mongolian affiliate International Uranium Mongolia XXK (IUM). GSJV has focused on defining ore which is amenable to in situ leach (ISL) mining, and it holds interests in several Mongolian properties in Omnogovi (South Gobi). Denison reports work at Urt Tsav.
Other deposits and interests
Solomon Resources of Canada was exploring on its Baruunbaayan uranium project in the west of Dornogovi province, and following the new 2009 Nuclear Energy law its main exploration licence immediately west of the Areva tenements in the Ooshlin Govi Basin was granted. However, it does not mention Mongolian activities in its January 2014 MD&A.
The Chuluut palaeochannel sandstone deposit with about 10,000 tU is further west again.
In 2007 Century City International of Hong Kong entered into an agreement with China Nuclear Energy Industry Corp (CNEIC), a subsidiary of CNNC, to explore and develop uranium resources on its leases in eastern Mongolia.
Red Hill Energy holds a number of exploration licences including the Emeelt deposit in the Ulaan Nuur fault zone of Dornogovi, Khashaat in Omnigovi and Baganurat 350 km southeast of Ulaan Baatar, and Jargalan, 500 km west of the city
In December 2008 Japanese trading company Marubeni acquired rights to conduct feasibility studies on three uranium deposits, including Dornod and Gurvanbulag, developed by KRI and Western Prospector. The company planned to invest US$ 430 million and had signed a letter of intent with Khan. Since it was perceived that the laws of the mining-dependent country had become increasingly protectionist in recent years, Khan Resources then commented that “We are excited by Marubeni’s interest in Khan’s Dornod uranium project and are optimistic about the positive influence Japanese investors have on the Mongolian mining investment environment. Marubeni will work to improve the mining investment climate in Mongolia." MonAtom and Rosatom have both said that a Japanese company, presumably Marubeni, may be involved with the Dornod project JV.
In September 2009 India signed a uranium supply and nuclear cooperation agreement with Mongolia. In 2010 France signed a nuclear cooperation agreement.
Nuclear power proposals
Russia is examining the feasibility of building nuclear power plants in Mongolia.
The Nuclear Energy Agency has tentative plans for developing nuclear power, using either Korean Smart reactors or Toshiba 4S types, from 2021. Three sites under consideration are Ulaan Baatar, western Mongolia and Dornod province.
Mongolia joined the IAEA in 1993, though it has applied safeguards under the NPT since 1972. A law on nuclear weapons-free status was passed in 2000. The Additional Protocol to its safeguards agreement with IAEA has been in force since May 2003.
Appendix: Khan Resources and Dornod
The Canada-based Khan Resources Inc. (KRI) has had a 69% share in the Dornod project, mostly through a 58% subsidiary Central Asian Uranium Co. Ltd (CAUC), a Mongolian stock company set up by World Wide Minerals at the behest of the government in late 1990s. Russia's Priargunsky Mining & Chemical Enterprise (a subsidiary of ARMZ and Rosatom) and Monatom each own 21% of CAUC, which claimed to have the only uranium mining licence in Mongolia. A bankable feasibility study undertaken for Khan had confirmed the viability of the project, the capital cost estimate being US$ 333 million and first production possibly in 2012. A definitive feasibility study released in March 2009 showed that the project was sound, on the basis of 24,780 tU indicated resources (NI 43-101 compliant), including 20,340 tU probable reserves. Annual production of 1150 tU over 15 years was envisaged.
In July 2009 MRAM suspended, it said for three months, the CAUC mining licence due to alleged violations of Mongolian laws. Then on 25 August an intergovernmental agreement between Mongolia and Russia provided for setting up the Dornod Uran joint venture. The Nuclear Energy Agency announced that the Dornod Uran joint venture of MonAtom with Russia's ARMZ would develop the project to produce about 2000 t/yr. In mid-January 2010 CAUC's mining licence was restored by MRAM. Khan's exploration licence was unaffected.
Khan had been granted a three-year exploration licence from MRAM early in 2008 covering part of the Dornod orebody, and was applying to have this converted into a mining licence contiguous with that held by CAUC. In addition, subsidiary Khan Mongolia holds 100% of an exploration license covering an adjoining "Additional Dornod property". In March 2009 Khan was reported as holding 58% of the No.2 deposit (open cut mine) and two-thirds of the deep No.7 deposit (via CAUC?), and 100% of the remaining third of the No.7 deposit, which would give it 69% of the overall uranium resource. The company was aiming to negotiate an investment agreement with the government as soon as possible, and engineering was then likely to take three years to mine start up.
On 27 November 2009 ARMZ announced a cash offer to buy all Khan's shares, at a substantial premium on the market. ARMZ said that it believed "the offer represents full and fair value for the Khan shares and provides Khan shareholders with an opportunity to receive liquidity at a significant premium to the current market, as well as value certainty today, relative to the significant political and licensing risks associated with the development of the Dornod property in Mongolia." On 15 December Khan's board of directors unanimously recommended its shareholders reject the offer, describing it as inadequate, failing to recognize the full value of the company, and containing "objectionable" terms and conditions, as well as being "highly prejudicial and opportunistic" and exposing Khan to serious risks.
In January 2010, Mongolia’s parliament passed a law giving the government an uncompensated 51% stake in any resource extraction project with which it was involved. On 25 January 2010 Khan announced that it had signed a memorandum of understanding with MonAtom to set up a joint venture and resolve the ownership of Dornod. It also creates a framework for developing the deposit and bringing it into production. The proposed corporate structure had MonAtom taking a 51% interest in both CAUC and Khan Mongolia, then after a share issue Khan would end up with 65% of the joint venture company, which in turn would own 74% of CAUC and 100% of Khan Mongolia, while MonAtom would own up to 20% of Khan.
But a week after this, on 1 February 2010, the Khan directors recommended a full takeover by a China National Nuclear Corporation subsidiary, CNNC Overseas Uranium Holding Ltd. The price was 118% higher than before Russia's unsolicited bid in November 2009, and 48% above what they offered with some implied duress. The Khan CEO said: "We look forward to working with CNNC to build upon the progress we have made in Mongolia towards establishing a stable platform for developing the Dornod uranium project and bringing it into operation." The CNNC bid was extended to 25 May 2010, apparently to allow time for Chinese government approval, but possibly also due to Mongolian government hostility.
However, ARMZ then extended its takeover offer for Khan, citing a Nuclear Energy Agency statement that some provisions of the Khan-Monatom agreement were contrary to Mongolian law and policy. ARMZ asserted that the agreement, "including its provisions on revising and granting a mining licence to CAUC, as well as exploration licences of Khan Mongolia, cannot be properly approved and do not comply with the existing legislation in Mongolia.” ARMZ also said that the agreement contravened Mongolia's international obligations under the intergovernmental agreement between Mongolia and Russia of August 25, 2009, which set up the JV Dornod Uran to develop the Dornod uranium deposit. The ARMZ takeover bid expired on 1 March 2010.
On 13 April 2010 Khan announced that it had received notice from the NEA that CAUC's mining and exploration licences had been invalidated as of October 2009, purportedly due to the company's failure to address issues identified in July 2009. Khan said it intended to challenge the ruling, and that "The NEA's intention appears to be to invalidate our licenses, as well as potentially those held by other foreign companies operating in the region, with a view to transferring all of the mineral rights and interests in the entire Dornod uranium region to a 'Dornod Uranium joint venture' that is purportedly being established between the Russian and Mongolian Governments."
On 21 April Khan announced that CAUC had filed a formal claim in the Capital City Administrative Court in Mongolia challenging the legal basis for the notice received from the Mongolian NEA purporting to invalidate CAUC's mining license 237A and seeking a declaration that NEA's action was invalid. It said that Khan Mongolia was preparing to file a similar claim in relation to exploration licence 9282X, and it had written on 15 April to the Prime minister of Mongolia appealing for his help.
Khan then said that the CNNC takeover remained ongoing and should not be affected by "any expropriation of Khan's properties or assets". However, on 24 May CNNC Overseas Uranium Holdings informed Khan that its cash offer to acquire all Khan's common shares would be allowed to expire following its failure to obtain regulatory approval from the Chinese government. The National Energy Administration, an arm of the Chinese National Development Reform Commission (NDRC), said that the offer was not approved.
In November 2010 the NEA announced that would not reinstate Khan's licences.
On 10 January 2011 Khan announced it had "formally commenced an international arbitration action against the Government of Mongolia for its expropriatory and unlawful treatment of Khan". In its initial filing, Khan alleged that the Mongolian government had “caused substantial loss and damage to claimants and their investments through expropriatory, unlawful, unfair, and discriminatory treatment” in connection with the Dornod uranium deposit. The arbitration brought by Khan and several of its subsidiaries took place under the Arbitration Rules of the United Nations Commission on International Trade Law, and was administered by the Permanent Court of Arbitration, located in The Hague, Netherlands. It asserted claims under the Energy Charter Treaty, the Foreign Investment Law of Mongolia, and the Founding Agreement between Khan and the Mongolian Government. The claim was served on various officials of the Mongolian government, and sought US$326 million in compensation for losses and damages.
Mongolia objected to the tribunal’s jurisdiction over the claim, but in July 2012 the tribunal upheld its jurisdiction over Khan’s claim both in relation to its merits and damages. In December 2012 Khan submitted seven volumes of evidence in support of its claim, containing thousands of pages of documents. The Mongolian government had until April 5, 2013 to respond, and in turn Khan had until June 28, 2013 to respond to Mongolia’s filings. The tribunal was scheduled to meet from November 11 to 15, 2013. The Tribunal is reported to have agreed with virtually all of Khan’s arguments and concluded that Mongolia had breached its obligations towards Khan under its Foreign Investment Law. As a consequence, Mongolia had also breached the multilateral Energy Charter Treaty. A ruling was handed down in March 2015, awarding $100 million to Khan. The international arbitration tribunal based its calculation of $80 million plus interest and costs, on previous offers made for the Dornod asset, notably that by CNNC in 2010. In July 2015 Mongolia filed a notice to annul the award, but in March 2016 the finance minister announced: “The Government of Mongolia and Khan Resources Inc. successfully reached an agreement that effectively resolves all outstanding issues in regards to the international arbitration awards.” Khan announced that it had settled for $70 million, to be paid by mid-May.
Over 2010 to 2013 Khan was simultaneously engaged in a legal battle with Atomredmetzoloto (ARMZ). In August 2010, Khan filed a $300 million claim against ARMZ in a Canadian court on the basis of an alleged breach of fiduciary duties and damage to its rights, reputation, and property. Russia’s Justice Ministry refused to honor Khan’s request that it serve ARMZ with process. Khan then filed a motion with Ontario’s Supreme Court to validate the service of process. That court initially held for Khan, but on appeal held for ARMZ on the basis of the theory that Khan had not exhausted all process service options. In December 2012 Khan was appealing the decision, but in April 2013 the court dismissed Khan’s appeal.
OECD NEA & IAEA, 2015, Uranium 2014: Resources, Production and Demand (‘Red Book’).
Khan Resources website http://www.khanresources.com/
O. Cardon, F. Le Goux, Uranium exploration in Mongolia: A major discovery in the Gobi Desert, IAEA CN-216 (URAM-2014)
The Uranium Shakedown: How Mongolia and Russia Conspired Against Western Investors, Frontera (31/03/2016)