Historically, China has been the subject of serious animosity from their neighbor Mongolia and now that China has become an international power, the animosity has intensified. As China’s domestic metal reserves shrink, they have been looking to import resources from countries like Chile, Brazil and especially Mongolia. However, Mongolia’s fears of being economically dominated by the Chinese have hurt their metal export opportunities. The Globe and Mail reports:
Shares in SouthGobi Resources Ltd. fell nearly 20 per cent Tuesday after the company said it will stop production at its Mongolian coal mine this month amid a controversial Chinese takeover bid for the Canadian mining company.
The company said earlier that Mongolian authorities had asked it to suspend production while they review a plan by state-owned Aluminum Corp. of China (Chalco) to acquire a majority stake in SouthGobi from Ivanhoe Mines Ltd.
Mongolia has profited from selling coal, copper and other minerals to China’s booming economy but some in the sparsely populated North Asian country are uneasy about possible economic domination by their giant neighbour.
Chalco’s plan to buy a 57.6 per cent stake in SouthGobi from Ivanhoe triggered anxiety in Mongolia about Chinese ownership of a major resource producer.
Last month, Mongolia’s parliament passed a foreign investment law that appeared aimed at stopping Chalco. It requires government approval for investments in mining or other strategic industries if the investors are foreign state-owned companies or if foreign investment would exceed 49 per cent of the venture.
Mongolian leaders want to develop their economy by creating industries to process minerals and other resources before they are exported. They worry Chinese owners might undercut that by shipping raw ores and other materials across the border for processing.