If licences are revoked, Centerra will seek huge compensation through arbitration

25th of 7, 2018
On 7 June, the court trying the case between Save Noyon Mountain NGO and the Cadastral Section of Mineral Resources and Petroleum Authority of Mongolia (MRPAM) finally gave its ruling in favour of the NGO, after no fewer than 36 suspensions of hearing over some two years. The dispute was on whether four licences now held by Centerra Gold related to the Gatsuurt project had been granted in breach of the law. The company was not a party in the case, but the judgement orders MRPAM to revoke four licences issued to it. There is no information on whether MRPAM intends to appeal against the decision, but if it does not, the only way Centerra can hope to get the licences back is by going for international arbitration, as  Khan Resources of Canada did successfully, forcing the government to pay a large compensation. B.Tugsbilegt finds out from B.Baatarsaikhan, lawyer for Centerra Gold Mongolia, what the company’s plans are.

Was the Administrative Court decision unexpected for you?
We have not yet received the full text of the decision (The interview was taken on June 21: Editor) so we do not know what legal logic the judge followed, but speaking as a lawyer, I had not expected the decision. Surprisingly, in court, the judge asked only the plaintiff some questions, but did not allow any proper argument from any of the parties, including the NGO.

What happens next?
The media is saying the ruling spells the end of the Gatsuurt project but that is rather premature. There can be an appeal against this judgement, and what a higher court then decides can be reviewed by the Supreme Court. But it is very important to remember that Centerra Gold Mongolia is not a party in the dispute, which is between MRPAM as respondent and Save Noyon Mountain NGO as complainant. We are only a third party as the owner of the licences whose issuance is in contention, and I want to say again that Centerra Gold did not lose at the court.

What was the case Save Noyon Mountain NGO made?
You must first know how their case progressed. In 2016 the NGO petitioned the court to revoke two licences, Nos.372A and 431A. Even before disposal of their prayer, they wanted two more licences, Nos 5082A and 10810A, to be cancelled. Then there was a fresh complaint, in which they combined the earlier complaints. In this they claimed annulment of Licence Nos 372, 431 and 5082, all approved through Order No. 842 of the head of the Cadastral Section at MRPAM on 28 June, 2004, as also of Licence No 10810 approved through the same official’s Order No. 1470 on 3 November, 2005.  All four licences were then in the name of Centerra Gold Mongolia.

Some time thereafter, they lodged a fresh complaint against the Cadastral Section of MRPAM for having changed the name of the licence-holder company.

This is how this happened. In 2004 Centerra Gold was named here Cameco Gold Mongolia, and this company had applied for and been granted Licence Nos 372, 431 and 5082. That year it changed its name to its present one, Centerra Gold Mongolia LLC, and the licensee’s name was changed accordingly, in a perfectly legal manner.

The company placed the facts before MRPAM and asked for the change, a request that was met by Order No. 842. Licence No. 10810A was issued in 2005, when Centerra Gold Mongolia had come into existence and so the licence was in that name. 

Going even further, and for the record, the first owner of 372A was Gurvan Gol LLC, which received it in 1997, did some extraction work, and then, in 2001, sold the licence to Cascadia, a foreign invested company, which transferred it to Cameco Gold Mongolia. I have already explained how the ownership was changed to Centerra Gold Mongolia. All through these years Centerra has been operating under the terms of the licences and in compliance with the law.

The NGO wants to protect the historical and cultural heritage of the Hunnu era, to ensure strict adherence to the long-named law, and to see that the nature of the land is not altered. But all these are already protected by law, and Centerra has not broken any law. It is interesting that the NGO was established in 2015 and filed the first complaint the following year, even though the law bars any such organisation from making any such move until it has completed three years of stable operation. It has not submitted any report of its activities and does not pay any tax. The court should review these aspects.

The NGO wanted the licences revoked as the areas under them have Hunnu era royal graves and other cultural heritage sites. Is this not a real concern?
Centerra Gold fully agrees that sacred sites should be respected and artefacts not damaged. But are there any actual sites of historical-cultural heritage in the licensed areas? Many expert studies have failed to produce any conclusive evidence of this or to justify environmental concerns. These included archaeological studies, permafrost studies, study of the Kharaa river basin soil for arsenic content, and environmental impact studies.

The Mt. Noyon area excluding the gold deposit is now state protected and the Gatsuurt deposit is among strategically important ones, with 34 percent of it owned by the state. The NGO claims the area has high arsenic incidence following gold mining, but this is a debatable claim. The arsenic could be just a natural occurrence, and even if it is due to previous extraction, some maybe done a long time ago and some more recently by artisanal miners, Centerra Gold has had nothing to do with it. Centerra has not even started work, and in any case, it will be using eco-friendly technology. The Mineral Resource Council has permitted the deposit to be used, and the deposit reserve is part of the state gold resource estimates.

I repeat Centerra has not broken any rules and laws, and has not encroached into the local special need area. Mt. Noyon is not a UNESCO cultural heritage site and is not among the sites listed by the Environment Ministry to be submitted for such recognition. The History and Archaeological Institute under the Mongolian Academy of Science has certified that no historical and cultural artefact listed in state records can be traced to the licensed area.

Anybody can make a claim, but it should be within the parameters of the law. The court should also review the use of the deposit area since the first licence was issued 21 years ago and also Centerra’s track record in mining throughout its years of work in Mongolia.

It is not good to invite foreign investors to come and then, after they have spent large sums on already used land, to say “You are out”. If the licences are indeed annulled, the only course open to Centerra would be to seek international arbitration. Its claim will run into hundreds of millions of tugrug.

Centerra’s good reclamation work in the Boroo mine is well known. If you are allowed to work at Gatsuurt, how will you ensure protection of historical heritage and the environment?

I want to say again that the concerns of Save Noyon Mountain NGO are just, but they can and should be addressed within the law. We told them Centerra Gold Mongolia would offer all cooperation in this.
We hope the dispute will ultimately be amicably resolved. Much work will still need be done, such as preparing a deposit use agreement and the investment agreement with the Government.


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