Khan Rebuts All Charges Based on “Inaccurate Information”

By , 22 March, 2010, No Comment

In an open letter to MP Z. Enkhbold, Khan Resources has clarified its point of view about certain conclusions and recommendations recently made by the working group led by him after its visit to Dornod uranium district last summer.

The company notes that the license it holds was not included in the list of licenses whose legality was sought to be investigated. Reiterating that the company has been fully cooperating with Government officials, Khan says it would be pleased to provide all relevant documents to the working group if asked to do so. Expressing confidence that Khan has fulfilled all its obligations towards Central Asia Uranium Corporation (CAUC), the company says it is difficult to understand why only it should be investigated when there are two other partners in the joint venture. “It is most unfortunate that inaccurate information has been delivered…through recent official and unofficial sources that suggests that only Khan may have been in breach of the law,” the letter says.

It traces the full history of the operations of Khan Resources in Mongolia “in compliance with all laws and regulations”, and asserts that the company intends to work “according to international standards”, even though some of the measures “will be more costly”, in keeping with Khan’s strong belief “in putting health, safety, and environment protection as a number one priority, and well ahead of profits”.

The letter details the course of events that led to the conclusion of a Memorandum of Understanding on January 22 between MonAtom LLC, the representative of the Mongolian Government, and Khan, “whereby Khan agreed to transfer 51% of the shares of Khan Resources Co., Ltd to MonAtom free of charge”, in “clear acknowledgment by Khan of the Mongolian right to own a majority of the Dornod uranium deposit and thereby comply with the Nuclear Energy law”.  The Russian partner (ARMZ) in CAUC “did not respond to this request and abstained from voting”.

Khan says “ARMZ did not obtain any approval from the NEA (Nuclear Energy Agency)” when it made a hostile take-over bid to purchase all of the common outstanding shares of Khan Resources. The NEA broke its silence only when it issued a statement “a day before the expiration of the ARMZ take-over bid” saying that the MoU had “violated Mongolian laws and should not be implemented”. Khan says “this would have led to a drop of the share price of KRI, and would have allowed” ARMZ to purchase them for low value. It was at this time that CNNC of China made an offer to acquire all shares of KRI, and “KRI had no other option than to accept the CNNC offer under such circumstances”.

The letter expresses surprise and disappointment that the ARMZ has made “speculative and unsubstantiated comments” and has been “releasing information about actions that have not taken place and appears to be telling the Government of Mongolia what to do and what not to do”. Then it explains how in a market economy a publicly traded company cannot dictate who buys its shares, and in this regard the Khan management “has no power to prevent investors purchasing its shares, whether they be Russian, Chinese or any other third party… (as) only shareholders make the final decision”.   That final decision on the CNNC offer is yet to be made “and it is too early to predict” what it will be. Thus, “obtaining prior approval from the NEA of a deal which is not yet complete and one in which we cannot predict, does not make any sense to us.

More importantly we cannot find any regulations demanding such approval before the deal is completed.” Besides, the Mongolian law stipulates that “the license holder must obtain approval if it intends to sell, pledge or transfer its shares to others”. In this case, “a third party has made an offer to purchase all outstanding common shares of the Canadian parent company” and this “potential sale will not change the ownership of shares of the company holding licenses in Mongolia”. Khan clarifies “that no amendments were made into the ownership of Khan Resources Co., Ltd and CAUC holding licenses in Mongolia and, if there were indeed any changes to the ownership of these two companies, we would have obtained approval in accordance with the law”.

The letter says “the claim by certain NEA officials that Khan ‘violated’ the law, and did not get the Dornod uranium deposit reserve approved, is simply not true and is completely misleading”. It details how time and again Khan “has been asking to conclude the Dornod deposit pre-mining agreement since 2007 in accordance with the new Mineral Law requirements, but Government agencies would simply ask it to wait”.
The letter concludes by appealing “to all parties to study the facts, and to present to the public accurate and objective information, and then to make decisions in conformity with the laws and regulations”.

Source: Khan Resources; highlighted in the BCM Newswire by Mongolia Business Council

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