VZCZCXRO5746
RR RUEHLMC RUEHVC RUEHVK
DE RUEHUM #0362/01 2070200
ZNR UUUUU ZZH
R 250200Z JUL 08
FM AMEMBASSY ULAANBAATAR
TO RUEHC/SECSTATE WASHDC 2390
INFO RUEHMO/AMEMBASSY MOSCOW 2389
RUEHBJ/AMEMBASSY BEIJING 6301
RUEHUL/AMEMBASSY SEOUL 3511
RUEHKO/AMEMBASSY TOKYO 3182
RUEHBY/AMEMBASSY CANBERRA 0316
RUEHFR/AMEMBASSY PARIS 0088
RUEHVC/AMCONSUL VANCOUVER 0138
RUEHVK/AMCONSUL VLADIVOSTOK 0321
RUEHNE/AMEMBASSY NEW DELHI 0230
RUEHHK/AMCONSUL HONG KONG 0892
RUEHOT/AMEMBASSY OTTAWA 0696
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 0689
RUEKJCS/SECDEF WASHINGTON DC
RHEHAAA/NSC WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS SECTION 01 OF 02 ULAANBAATAR 000362 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EAP/CM AND NP 
 
E.O. 12958: N/A 
TAGS: ENRG PREL KNNP SENV EMIN EINV KIDE MG
SUBJECT: Mongolian Uranium Deposit Update 
 
REFS:  A) 07 ULAANBAATAR 0238 
       B) 07 ULAANBAATAR 0267 
       C) 07 ULAANBAATAR 0630 
 
SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
CAUTION: CONTAINS PROPRIETARY INFORMATION 
 
¶1. (SBU) SUMMARY: Western Prospector Group (WP) CEO Eric Bohren 
(protect) discussed uranium mining issues in Mongolia with Emboffs 
on July 10 and discussed his company's near-term plans and the 
uranium mining business.  Bohren made clear that Western Prospector, 
a Vancouver-based firm, remains interested in Mongolia's uranium and 
hopes to process raw uranium into value-added "yellowcake" in 
Mongolia.  Bohren said Mongolian officials appear to prefer a 
"third-neighbor" policy in the mining sector, adding that his firm 
remains concerned over possible GOM moves to nationalize uranium 
holdings.  WP does not favor outright nationalization, which would 
see the company lose its property under the currently proposed 
51%-state-equity position.  However, WP states that it could support 
a production-sharing contract model, which was included in the 
latest mining-law amendments before Parliament. WP announced that it 
has received a purchase offer by a Hong Kong-based investment fund, 
suggesting that international interest in Mongolia's uranium remains 
strong. END SUMMARY. 
 
¶2. (U) Eric Bohren, CEO of Western Prospector Group (WP), met on 
July 10 with Acting Econ/Comm Head and Econ/Pol Intern to discuss 
issues related to uranium mining in Mongolia.  Bohren sought general 
information about the post-election political scene in Mongolia, and 
discussed his company's near-term plans and the uranium mining 
business. 
 
¶3. (SBU) Bohren stated that despite Mongolia's weak legal framework 
and stalled mineral legislation, there is still high interest among 
investors in WP's Dornod province uranium assets, due to aggressive 
Russian, Chinese and Indian plans for expanded involvement in 
nuclear power.  Bohren hinted that western firms are preferred as 
strategic partners, but that Chinese and Russian partners will be 
necessary for transportation.  In a positive sign from the GOM, 
representatives from the GOM signaled to Bohren that the GOM will 
not influence WP's decisions on its strategic partners and that they 
prefer a "third neighbor" policy with respect to uranium mining. 
 
¶4. (SBU) In the short term, WP plans to sign strategic partnerships 
with companies in three areas: political, financing and transport. 
Bohren was reticent to mention the names of potential partners, but 
noted that WP was seeking what he called a first-tier firm or firms 
from Russia, Japan, the U.S. or other western nations that could 
bring values in all three areas, followed by second-tier firms that 
had strengths in one or more (but not all three) of the key areas. 
He did mention U.S. power supplier Exelon as a potential first-tier 
partner, and guardedly referred to discussions with Russian 
authorities about transport and processing issues.  He specifically 
dismissed China and France as mining partners. (Note: French 
state-owned nuclear power, uranium mining giant Arreva is active in 
Mongolia.  End Note.)  China was dismissed because of Mongolian 
resistance to allowing China any control over Mongolian uranium 
supplies.  France was dismissed because of concerns about Arreva's 
behavior in Mongolia, with which WP does not which to become 
associated.  (Comment: Bohren and others have criticized Arreva for 
being too generous with its hospitality, both in Mongolia and in 
France.  Bohren referred to wine-soaked meetings held for Mongolian 
officials that may have put off some Mongolian officials, who feared 
being tarred with claims that they were bought off by the French. 
True or not, this perception may exist, and WP does not want to be 
stained by it.  End Comment.) 
 
Minerals Legislation Outcome Still Uncertain 
--------------------------------------------- 
 
 
ULAANBAATA 00000362  002 OF 002 
 
 
¶5. (SBU) Bohren made clear that he believes that his company's 
long-term prospects are strong, and that the main obstacles are 
political.  Most foreign mining firms still prefer a 
production-sharing (versus an equity-sharing) minerals law, and WP 
is no exception.  If the election results hold, the MPRP's majority 
will position Parliament to pass laws more efficiently, but it is 
still unclear which direction the next government will take with 
regard to mining.  Major decisions on mineral laws will likely be 
delayed in the near term, while the GOM sorts out allegations of 
election fraud. 
 
Western Firm Plans to Process Raw Uranium in Mongolia 
--------------------------------------------- -------- 
 
¶6. (SBU) Bohren said his company plans to process uranium ore into 
the value-added product, "yellowcake", in Mongolia, creating higher 
revenues for the GOM. (Note: Yellowcake, uranium oxide concentrate, 
is the end product of the mining and milling stages.  This is the 
form in which uranium is sold prior to further processing into fuel 
grade product.  End Note.) He contrasted his company's plan against 
probable Russian and Chinese plans to process the raw uranium 
outside of Mongolia.  He believes this will be a selling point for 
his firm during negotiations with the GOM. (Note: WP and other 
western firms with stakes in uranium have discussed processing ore 
into yellowcake and then exporting that product only to countries 
with capacity to process the product for nuclear power production -- 
Russia, the U.S., India, the E.U., and China, among others. 
Enrichment of yellowcake in Mongolia has until now not been 
mentioned by western firms, but the Russian government -- through 
its nuclear power agency Rosatom -- has indicated that it might 
consider such processing in Mongolia.  Bohren and others dismiss 
this possibility as fairy tale.  Technical and financial issues 
aside, Bohren wonders why the Russians would surrender any control 
over downstream processing to a neighbor with absolutely no 
oversight capacity.  Discussions about a Russian-built nuclear plant 
for Mongolia are seen in similarly skeptical light by industry 
players.  End Note.) 
 
Tinpo purchases Western Prospector Group 
---------------------------------------- 
 
¶7. (SBU) The proposed purchase of WP by Tinpo Holdings Industrial 
Company Limited (Tinpo) on July 15 supports Bohren's contention that 
western interest in Mongolian uranium remains strong.  WP announced 
the execution of a definitive agreement for (Tinpo) to acquire all 
of WP's outstanding common shares (about 81%) for C$74 million 
(US$73,850,000)in cash.  Tinpo is a privately owned investment 
company based in Hong Kong, but financed by western investors, 
according to Bohren.  The remaining 19% will continue to be held by 
Anchorage, an American hedge/equity investment fund.  Bohren stated 
that Tinpo and Anchorage have signaled that they will continue to 
implement the strategic development plan crafted by WP's current 
management team.  In addition, WP will continue plans to align with 
potential strategic partners, the GOM and other key stakeholders, 
toward the successful implementation of a uranium production 
strategy in Mongolia. 
 
MINTON