Kincora Copper Limited (the "Company", "Kincora") has today received official notification from the Mineral Resources Authority of Mongolia ("MRAM") advising that 106 mineral exploration licenses, including 15075X (Tourmaline Hills) and 15076X (North Fox) wholly owned by Kincora's subsidiary company Golden Grouse LLC, have been revoked.
The revocation of licenses is effective October 30, 2013 following Resolution № 457 issued by the Chairman of the Geology and Mining Cadastre Department. The Company's flagship Bronze Fox license (15000X) remains in good standing, is not on the list of licenses to be revoked, and was the focus of one of the most active copper exploration programmes in Mongolia during 2013.
Kincora was unable to undertake planned exploration activities in the 2013 field season on the Golden Grouse licenses 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 licenses. 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 licenses.
Consultations with key third neighbor governments have been ongoing and continue as the affected license 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 licenses, incurred approximately $71,000 in legal costs relating to the acquisition and have spent approximately $1.85 million in exploration costs since. The acquisition of the licenses followed full detailed due diligence, with the licenses confirmed to be in good standing by MRAM, with exploration costs incurred following approval of the proposed exploration programmes which have been subsequently accepted, annual license fees incurred and licenses extended by MRAM. The Civil Code of Mongolia supports liability for damages caused by government officials if the rights of existing licenses holders are negatively impacted.
Kincora will continue to inform the market of any material developments relating to the Golden Grouse licenses.
Golden Grouse license background
Uncertainty concerning the Tourmaline Hills (15075X) and North Fox (15076X) licenses due to criminal legal proceedings against former Government officials, impacting a total of 106 mineral licenses, began in January 2013. The Bayangol District Court (a first level provincial court in Ulaanbaatar, Mongolia) reviewed the criminal case related to D.Batkhuyag, the former head of MRAM and L.Davaatsogt, the former head of Geology, mining and cadastre department, such court issued the accusatory judgment #70 on January 30th. Section 8 of the above Accusatory Judgment provides that "the decisions to issue the 106 minerals licenses made in contradiction to Articles 19.12, 20.1, 24.2 and 26.9 of the Minerals Law shall be deemed null and void".
Kincora acquired these licenses as part of the Golden Grouse transaction in April 2012 and are lower priority exploration targets relative to the Company's flagship Bronze Fox license (15000X). There is no suggestion that these licenses were originally issued as a result of any criminal wrongdoing and the 15000X license remains in good standing and is not on the list of licenses to be revoked.
It is estimated 11 foreign and 67 local groups are the owners of the 106 licenses. At present, 24 companies holding 31 licenses of the above revoked 106 licenses, including Kincora, are actively seeking direct dialog and discussions with appropriate government authorities. These 31 special licenses were issued before approval of the President's decree to ban issuance of new licenses for Mineral Resources dated April 20, 2010.
It is estimated that for only 31 of the 106 licenses, that about US$19m has been invested and a further US$36m investment planned (from only 17 of the 24 companies). The 106 licenses cover a landmass approximately six times larger in surface area than active Mining Licenses in Mongolia. The recent previous peak number of employees and contractors employed by groups impacted by the license issue was 743 and these groups have only employed a peak number of 333 this year.