Kincora Copper has received official notification from the Mineral Resources Authority of Mongolia (MRAM) that 106 mineral exploration licences, including the Tourmaline Hills and North Fox licences wholly owned by Kincora’s subsidiary company Golden Grouse LLC, have been revoked.
The revocation of licences is effective October 30 following Resolution 457 issued by the chairman of the Geology and Mining Cadastre Department. The company’s flagship Bronze Fox licence remains in good standing, is not on the list of licences to be revoked, and was the focus of one of the most active copper exploration programs in Mongolia during 2013.
Kincora was unable to undertake planned exploration activities in the 2013 field season on the Golden Grouse licences following uncertainty relating to criminal legal proceedings against former government officials, which has brought into question the legal rights and interests for the owners of 106 exploration licences.
The company is currently accessing avenues now available to it with receipt of official notification from MRAM expected to finally provide legal rights and potential recourse relating to the Golden Grouse licences.
Consultations with key third neighbour governments have been ongoing and continue as the affected licence holders work with the Government of Mongolia on resolving this situation. The Mongolian National Mining Association (MNMA) is also assisting where possible.
In April 2012, Kincora paid $5 million in script for the two licences, incurred approximately $71,000 in legal costs relating to the acquisition and has spent approximately $1.85 million in exploration costs since. The acquisition of the licences followed full detailed due diligence, with the licences confirmed to be in good standing by MRAM, with exploration costs incurred following approval of the proposed exploration programs which have been subsequently accepted, annual licence fees incurred and licences extended by MRAM. The Civil Code of Mongolia supports liability for damages caused by government officials if the rights of existing licence holders are negatively impacted.
Kincora will continue to inform the market of any material developments relating to the Golden Grouse licences.
It is estimated 11 foreign and 67 local groups are owners of the 106 licences. At present, 24 companies holding 31 licences of the revoked 106 licences, including Kincora, are actively seeking direct dialog and discussions with appropriate government authorities. These 31 special licences were issued before approval of the President’s decree to ban issuance of new licences for Mineral Resources dated April 20, 2010.
It is estimated that for only 31 of the 106 licences, that about US$19 million has been invested and a further US$36 million investment planned (from only 17 of the 24 companies). The 106 licences cover a landmass about six times larger in surface area than active mining licences in Mongolia. The recent previous peak number of employees and contractors employed by groups impacted by the licence issue was 743 and these groups have only employed a peak number of 333 this year.