Mongolia has introduced new investment legislation that signals it will look again to tap foreign investment and funds to develop its rich resources bounty.
Notably, introduction of a Stabilisation Certificate would grant eligible investors a freeze on the current set of rates applied to corporate income tax, customs duties, VAT, and royalty over a period.
Importantly, no changes can made to these rates by the implementation of future laws unless the amendment benefits the investor.
Providing comfort to funds flows, any future changes to the legislation would need to receive at least 66% of the votes in Parliament and support from both major political parties as well as provisions protecting against nationalisation of investors' assets.
These and other measures to attract investment lend further weight to Mongolia's solid pro-investment stance.
What it means
The legislation is likely to cause investors to take a closer look at listed companies with operations in Mongolia.
Concerns about sovereign risk in Mongolia would be improved over time, or at least mitigated, making it more likely that projects in the country would proceed towards development and production in a timely manner. Which would provide opportunities for investors in listed companies. As usual, it also depends on the investment characteristics of each company.
Read the full article here: Aspire Mining poised to benefit: Mongolia open for business
This would also be positive for companies such as: Aspire Mining, Mongolian Mining Corp (HKG:0975), Modun Resources (ASX:MOU), Centerra Gold (TSE:CG), Prophecy Coal (CVE:PCY), FeOre Ltd (ASX: FEO), SouthGobi Resources (TSE: SGQ, HKG:1878) and Wolf Petroleum (ASX: WOF) which have each received various approvals from the Government within this time.
Analysis
The new legislation makes Mongolia a far more attractive business destination by introducing incentives and increasing the confidence for investors to commit to projects or move existing projects into construction and production phases.
Significantly, for Aspire, it looks likely to meet criteria for a tax Stabilisation Certificate or Investment Agreement covering a period of greater than 20 years, based on its investment in Mongolia since 2010 and future expected investment to develop the Ovoot Coking Coal Project and Northern Rail Line.
As importantly, the changes are far wider in their scope as they positively impact market sentiment toward companies operating in Mongolia like Aspire, whose Ovoot project ranks as Mongolia’s second largest coking coal reserve and one of the higest quality coking coals in the world.
Sentiment is all important in investment markets and previously the market perceptions were not tuned optimally toward Mongolia. Proactive Investors believes it has held back market valuations of companies operating in Mongolia and we expect a gradual re-rating of the Aspire Mining share price to be not far away as the reverberations of "Mongolia is open for business" - filter through.
LVT Price at posting:
0.5¢ Sentiment: LT Buy Disclosure: Held
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