SouthGobi Resources files notice of investment dispute against Mongolian government

SouthGobi Resources (TSE:SGQ) said Wednesday one of its units has filed a notice of investment dispute tied to a bilateral investment treaty between Singapore and Mongolia.
The Mongolia-focused coal miner said SGQ Coal Investment Pte, which owns the company's Mongolian operating subsidiary SouthGobi Sands, exhausted all avenues to settle the ongoing dispute between SouthGobi Sands and Mongolian authorities.
The notice consists of the failure of the Mineral Resources Authority of Mongolia to execute pre-mining agreements associated with some exploration licenses, SouthGobi said.
Areas covered by the pre-mining agreements, for which "valid applications" were made in 2011, include the resource known as Zag Suuj as well as areas tied to the broader Soumber deposit.
The filed notice triggered a dispute resolution process under the treaty, the company said in a statement Wednesday. Under the process, the Mongolian government has six months to “satisfactorily” resolve the dispute through negotiations.
If negotiations fail, the company can start arbitration proceedings under the auspices of the International Centre for Settlement of Investment Disputes.
SouthGobi also said if the Mongolian government fails to negotiate, arbitration proceedings may be accelerated before the six-month cure period expires.
Last month, SouthGobi announced it would stop production at its Mongolian coal mine amid a controversial takeover bid for the Canadian mining company.
Operations at the Ovoot Tolgoi Mine were "entirely curtailed" at the end of the most recent quarter citing weak market conditions and regulatory issues.
Mongolia has profited from selling coal, copper and other minerals to China's booming economy but some in the sparsely populated North Asian nation are uneasy about possible economic domination by their giant neighbour.
Chalco's plan to buy a 57.6 per cent stake in SouthGobi from Ivanhoe triggered anxiety in Mongolia about Chinese ownership of a major resource producer.
Earlier this month, Chinese aluminum giant Chalco said it would delay plans to acquire a controlling interest in SouthGobi Resources. The Chinese metals company is continuing to work on securing regulatory approvals in Mongolia and outside.
In April, Chalco unveiled a $926 million bid for a controlling stake in SouthGobi, which owns large coal projects in Mongolia. The proposed deal has the backing of Ivanhoe Mines Ltd (TSE:IVN), which owns a controlling interest in SouthGobi.
Ivanhoe, majority-owned by global miner Rio Tinto (NYSE:RIO)(LON:RIO), plans to use the proceeds from the deal with Chalco to fund development of the massive Oyu Tolgoi copper-gold project in Mongolia.