TORONTO (CP) -- Several miners with interests in Mongolia traded lower Tuesday, as a warning from Khan Resources Inc. [TSX:KRI] that an upcoming election in that country could potentially jeopardize its majority ownership stake in the Dornod uranium project - and general market weakness - pushed the group down.
Stock in Khan Resources fell 17% or 38 cents Tuesday to close at C$1.80 after talk of the political situation in Mongolia.
Other companies that could be affected by a change in leadership include Vancouver-based Ivanhoe Mines [NYSE:IVN; TSX:IVN], Western Prospector Group Ltd. [TSX-V:WNP], and Red Hill Energy [TSX-V:RH]. Shares in those companies were also down, with Ivanhoe down 3.5% to C$10.82, Western Prospector off 7% at C$1.35 and Red Hill closing at 93 cents Canadian, down 5%.
Under Mongolian laws, the country's parliament may designate deposits as ''strategic'' and acquire up to a 50% interest in the deposit if it has been defined by exploration activities funded by the state budget.
Dornod was designated as a deposit of ''strategic importance,'' and its deposits are on the list of properties published by the Mongolian government that have been funded from the state budget, Khan said.
In September, Khan had said the Mineral Resources and Petroleum Authority had sent letters to permit holders stating that the licences are not being revoked.
But on Monday, the company said it was watching out for the possibility that its stake could be reviewed following the 22 November election of Bayar Sanj as prime minister of Mongolia and the upcoming election.
''This momentous election together with the upcoming general election in June 2008, will almost certainly mean political change in Mongolia,'' Khan said.
''As one of the largest uranium deposits in Mongolia, the Dornod Uranium Project has attracted political attention.''
The Toronto-based miner owns 69% of the Dornod project through a combination of its 58% interest in Central Asian Uranium Co. - which in turn holds a mining licence for the Main Dornod property - and its own exploration licence.
Ivanhoe, meanwhile, is developing the Oyu Tolgoi copper-gold development in Mongolia, which it owns through a venture with Entree Gold Inc. [AMEX:EGI; TSX:ETG].
Ivanhoe has said it expects to start capitalizing costs on its copper-gold project in Mongolia once it finalizes and investment agreement with the Mongolian government.
Along with its strategic partner on the project, Rio Tinto [NYSE:RTP; LSE:RIO], Ivanhoe reached an agreement in principle with the government to stabilize tax and fiscal issues and guide the planned development and long-term operation of the Oyu Tolgoi project in Mongolia's South Gobi Region.
''(Khan) did reaffirm that there's an election due in June, so in the case of Ivanhoe there would be (some) concern that the election campaigning might start before Ivanhoe has received its investment agreement with the government and continue through the summer,'' said Ray Goldie, a metals analyst with Salman Partners Inc.
''There's a concern with respect to Ivanhoe that it may not be until next fall, at the earliest, that a deal is done.''
But, he added, the general weakness of the mining stocks Tuesday was likely tied to general market weakness.
One notable exception, Goldie noted, was Cameco Corp. [NYSE:CCJ; TSX:CCO], which was up 1.5% or 58 cents at C$40.43 despite having holdings in Mongolia.
That company also has a stake in the Boroo mine in central Mongolia as well as the Gatsuurt project through its holding in Centerra Gold Inc. [TSX:CG]. It also owns the Cigar Lake uranium mine in northern Saskatchewan and is the world's biggest uranium producer.
Centerra said Tuesday that the government of Mongolia had initiated a review of the company's Gatsuurt project, paving the way for possible development of the mine.
''This is the first step in the process that should pave the way for the negotiation of an investment agreement and the development of the Gatsuurt deposit,'' the company stated.
Centerra plans to truck ore from Gatsuurt to the processing facility at its Boroo mine, where a new bio-oxidation circuit will be constructed to treat it.
Centerra is gold miner with properties in Central Asia, the former Soviet Union and other emerging markets.
On the TSX, Centerra stock was trading down nine cents at C$10.06 while Cameco rose 56 cents to C$40.41.
Khan is a Canadian exploration and development company focused on the Dornod area in northeastern Mongolia, the site of a former Russian open-pit uranium mine.
Western Prospector owns the Gurvanbulag uranium deposit in Mongolia.
(c) The Canadian Press 2007
