Dispute over Erdenet’s 49 percent stock continues

The Mongol Messenger
unurzul@montsame.gov.mn
2019-03-15 16:09:19

These days, many events have happened around the issue concerning 49 percent shares of Erdenet Mining Corporation (EMC), which is a major contributor to the state budget. It processes 26 million tons of ore per year and produces around 530.0 thousand tons of copper concentrate and around 4.5 thousand tons of molybdenum concentrates annually.

 

A core of the problem is the fact that then-Government had had an opportunity to get EMC’s 49 percent, but it refused from its preference and privileged a private entity to obtain it instead. Currently, 51 percent of the EMC is under state ownership. But a dispute on the ownership of 49 percent has been taking two years.


It is important to note MP T. Ayur­saikhan’s report to the press on February 27. He said, “Both of EMC and Mon­golrostsvetmet LLC are registered in the state registration database as 100 percent state-owned legal entities.”


Actually, the Independent Authority Against Corruption of Mongolia (IAAC) and National Policy Agency (NPA) considered that the purchase of EMC’s 49 percent is probably to be the act of illegally obtaining state property and money laundering. Therefore, the organizations submitted a request for investigation twice to Prosecutor’s Office of the Capital City since 2016, but received refusals.


Here is an overview of the events surrounding the problem.

Erdenet Mining Corporation (EMC) is one of the biggest ore mining and ore processing factory in Asia. EMC was established in accordance with an agreement between governments of Mongolia and (former) Soviet Union and started its operation in 1978. According to the agreement, Mongolia owned its 51 percent and Russia’s Rostech owned 49 percent.

On June 28, 2016 then-Prime Minister Ch.Saikhanbileg announced that Russian Rostech transferred its 49 percent common shares of EMC to Mongolian ownership, thus it became a 100 percent state-owned, as a result of the negotiations held in 2016 with Russian Rostech.


In doing so, the Government refused from its preference to buy EMC’s 49 percent shares and ‘Mongolian Copper’ Corporation (MCC) took it from Russia’s Rostech. However, the Parliament considered the MCC having violated several laws when buying 49 percent, and approved a resolution No:23 of 2017 on taking it back to state ownership. Specifically, the Constitution of Mongolia states, “Within its full powers, Parliament of Mongolia has the right to ratify and denounce international agreements to which Mongolia is a Party.” Moreover, the Law on Company states, “The owner of the state-owned company shall be the State Great Khural representing the state.” As the issue of selling 49 percent was not discussed at the parliament, the parliament considered it having violated the special power of top legislative organization and obliged the Government to transfer it back to state ownership by means of mutual deductions.


In pursuant to the resolution No:23, the Government called its irregular meeting on January 4, 2018 and issued a decision to make EMC a 100 percent state-owned. Opposing the decision, MCC complained to the court that the government’s decision of taking 49 percent shares of the EMC into state ownership violated legislations. As a result, courts of three instances made a decision in the side of MCC.


At its meeting on February 27, 2019 the Cabinet made a decision to declassify the minutes of the Cabinet meeting dated June 9, 2016. The minutes about some actions taken for EMC and Mongolrostsvetmet LLC involve a report of then-Minister of Industry D.Erdenebat themed ‘About Government’s refusal from its preference due to its investment incapability, and selling EMC’s 49 percent shares to MCC’. Also, the minutes evidenced that authorities of MCC and Trade and Development Bank (TDB) were present at the meeting, answering to the questions by cabinet members. Head of the Cabinet Secretariat of Government L.Oyun-Erdene reported press that the Cabinet decided to declassify the minutes which were groundlessly categorized as classified.


With a purpose to implement Parliamentary Resolution No:23 of 2017 and a recommendation H05/05 of the National Security Council, the Government set six-month emergency regimes at EMC and Mongolrostsvetmet LLC respectively based on related laws including the Law on Government of Mongolia. During the period of emergency regime, no interruptions will be there in the operations of the enterprises and financial activities will be inspected only.


At the press conference, Minister of Mongolia and Head of the Cabinet Secretariat of Government L. Oyun-Erdene introduced a scheme on how MCC had accumulated its over USD400 million to buy EMC’s 49 percent shares.




Furthermore, a working group headed by L.Oyun-Erdene worked at EMC, sealed eight rooms and released top officials including First Deputy Director from their positions since IAAC and NPA considered the deal a probable act of money laundering and necessary to inspect transactions of some enterprises related to EMC.


Few days later, or on March 5, the IAAC and NPA detained CEO of TDB D.Erdenebileg, Executive Director of TDB O.Orkhon and Executive Director of MCC Ts.Purevtuvshin for questioning. But Sukhbaatar District’s Primary Court considered unnecessary to continue their detention and decided to release them. Now, they are being investigated without detention.


On March 11, authorities of MCC submitted to the Government a request to hold negotiations on 49 percent shares of EMC. Nevertheless, L.Oyun-Erdene pronounced on March 6, “72.4 percent of over USD400 million spent on buying EMC might be taken from state and remaining 27.6 percent might be issued by the TDB. It will be possible to negotiate with MCC after legal organizations inspected the scheme.” Therefore, the Government has not officially responded to MCC.

 

                                                                                                                                                                         Ch. Ariunbold