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Polo Resources has 58 coal assets and 25 uranium assets in Mongolia.
Of the coal assets, 37 are in the South Gobi and the balance is
in the central or northwest Mongolia. Polo has specifically targeted
areas of significant known coal resources that are near the necessary
infrastructure to export coal into the growing energy markets of
adjacent China and Russia.
PEABODY ENERGY CORPORATION (NYSE: BTU)
On January 2009, Polo announced a joint venture agreement
with Peabody Energy Corporation, which would hold all of Polo’s
coal and mineral interests in Mongolia. Peabody is the world’s
largest private-sector coal company whose coal products account
for nearly 10% of all of US electricity and 2% of worldwide electricity
generation.
MONGOLIA BACKGROUND
Mongolia is a landlocked country bordered by Russia to the north
and China to the east, south and west. With an area of more than
1.5 million square kilometres (world’s seventh largest country)
and a population of approximately 2.4 million people, Mongolia has
one of the lowest population densities in the world. The landscape
has several geographic features, including forest mountain ranges
to the north, desert and low mountain areas to the south, high mountain
ranges to the west and vast plains to the east. The climate is continental
with hot summers and cold winters.
Mongolia’s population is relatively homogenous in terms of
ethnicity, language and religion. It is also a young country with
more than 60% of the population below the age of 30. Approximately
one third of the Mongolian population lives in the capital city
of Ulaanbaatar with a large portion of the remainder living as nomads
throughout the country.
Mongolia has a very long history and is often associated with its
most famous leader, Genghis Khan, who ruled during the 13th century.
In 1921, Mongolia fell under the influence of the Soviet empire,
which dominated the politics and economy of the country until 1990
when the country’s transition to democracy and a free market
economic system began.
The Mongolian Constitution adopted in 1992 established an elected
legislature and a directly elected President. The Prime Minister
is nominated by and serves on behalf of the majority party in the
parliament. The Constitution enshrines the concepts of democracy,
freedom of speech, and judicial independence, among others.
The first multiparty elections were held in July of 1990 at which
the Mongolian People's Revolutionary Party (the "MPRP")
became the dominant political party. The MPRP was victorious again
in the July 1992 elections but lost to the Democratic Coalition
in the elections of 1996. The MPRP regained power in 2000 and remain
in power now.
MONGOLIA MINING LAW
Mongolia possesses one of the most progressive mineral regimes in
Asia. Introduced in 1995 and modified in 1997 and 2006, the Minerals
Law of Mongolia provides a transparent licensing system that has
served to encourage investment in the sector. The Law clearly establishes
the state as having primary control of its mineral resources, a
central premise of modern minerals legislation throughout the world.
The law allows any Mongolian citizen, foreign citizen or legal person
to hold any number of mineral exploration licenses of up to 400,000
hectares each. An exploration license holder is afforded the exclusive
right to conduct exploration for minerals within the boundaries
for nine years (three years initially plus two extensions of three
years each), the exclusive right to obtain a mining license for
any part of the exploration license, and the right to transfer or
pledge any part of the exploration license.
Mining license holders have the right to engage in mining of minerals
within the license area for twenty years (with the right to extend
for an additional two terms of 20 years), the right to sell mineral
products internationally, the right to transfer or pledge all or
part of the license, and the exclusive right to conduct exploration
for minerals within the license area. A mining license holder must
pay royalties to the government equal to 2.5% of the sale value
of products sold (with the exception of alluvial gold on which the
royalty is 7.5%). The much talked about windfall tax (68% tax on
portion above gold price of US$500) is under review but is offset
by low company tax (10% on first US$3m profit and 25% flat rate
on remainder) and low wages tax (10% flat rate tax).
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