* Joint venture to mine Dornod uranium deposit
* Uranium reserves of 28,000 tonnes could be doubled
* Canada's Khan Resources still owns 58 percent of licence
* Investment of "hundreds of millions of dollars"
(Adds quotes, details, background)
By Denis Dyomkin and Lucy Hornby
ULAN BATOR, Aug 25 Mongolia welcomed Russia as
its partner in a uranium mining venture on Tuesday as part of a
wider pact to boost co-operation in infrastructure and farming,
raising concerns for the Canadian miner that owns the deposit.
Russian and Mongolian state-owned companies formed a joint
venture to develop the Dornad deposit, which holds seven times
as much uranium as Russia produced last year, after the
Soviet-era allies settled a $150 million debt owed to Moscow.
Toronto-listed Khan Resources KRI.TO, which still owns a
58 percent interest in the mining licence, is seeking to
determine how Mongolia's new law on nuclear energy will affect
its investment in the country.
"We are having a joint venture meeting tomorrow with our
partners," Khan Resources President and CEO Martin Quick said.
"We will discuss the impact of the new Nuclear Energy law,"
he told Reuters. "It may have a detrimental impact on the
project, so we need to canvass our partners' thoughts on that."
Russia, which holds more than a tenth of global uranium
reserves, is positioning itself as a major player in meeting
growing demand for uranium from the nuclear power industry.
President Dmitry Medvedev led a Russian delegation to Ulan
Bator and agreed with his Mongolian counterpart, Tsakhiagiin
Elbegdorj, to settle a dispute over the unpaid Mongolian debt in
order to move ahead with a series of joint investments.
"New infrastructure and energy projects, the development of
atomic industries, processing uranium ore -- this is a future
that looks extremely interesting to me," Medvedev said.
The joint venture also comes after Mongolia's legislature in
July passed a Nuclear Energy law that gave the state greater
ownership over uranium deposits. The Mongolian state claims the
right to 51 percent of any strategic uranium deposit.
Sergei Kiriyenko, head of Russian state nuclear company
Rosatom, called the uranium agreement "an important political
signal" and said investment in the project would reach "hundreds
of millions of dollars". He declined to give an exact figure.
GROWING STATE INFLUENCE
Mongolian state firm AtomMon and Rosatom's mining arm,
AtomRedMedZoloto, agreed to create the joint venture to develop
the deposit. Kiriyenko said Dornad held 28,000 tonnes of uranium
reserves and that the amount could be doubled with exploration.
These two companies already owned 21 percent each of the
licence, said Quick, the chief executive of Khan Resources.
Shortly before the Nuclear Energy law was passed, the
partners received notice the mining licence had been suspended
for three months, Khan Resources said in a statement in July.
"Hopefully we can come to some reasonable accommodation with
our partners and the Mongolian government," Quick said. "It is a
democracy and hopefully the rule of law will prevail."
Kiriyenko also said Japan could join the project at a later
date. Rosatom is already working in Russia with Toshiba Corp
(6502.T) and Mitsui & Co (8031.T).
Mongolia opened its uranium deposits to international
prospectors after the collapse of the Soviet Union ended six
decades as a satellite state, but in recent years it has become
more concerned about re-exerting control over its resources.
The debt settlement also cleared the way for Russia to
provide Mongolia with a $300 million loan for agricultural
projects and to invest in expanding the country's rail network.
(Writing by Robin Paxton in Moscow and Lucy Hornby in Beijing,
Editing by Peter Blackburn)