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Gold/Mining/Energy : Mongolia Gold Resources -- Ignore unavailable to you. Want to Upgrade?

To: Phil Jones who wrote (3276)	3/23/1999 10:32:00 AM
From: Dave R. Webb	Read Replies (1) \| Respond to of 4066

Mongolyn Alt Corporation ("MAC"), a privately-held Mongolian company borrowed funds from the Trade and Development Bank ("TDB"), a Mongolian government-owned bank. On December 25 MAC defaulted on the loan. MAC had pledged, among other things, their participating interest (initially 51%) in Bumbat Company Ltd. ("BCL") the entity which owns and controls the Bumbat Mine. Mongolia Gold Resources Ltd owns the balance (initially 49%) of the BCL. MAC was deficient in contributions to BCL on their participating interest, and dilution and/or penalty clauses may be enforced. Additionally, participating parties are prohibited from pledging, assigning, transferring in whole or in part their participating interest in BCL without the express written approval of the other participating party. MGR was never asked, and has never approved of any encumberances, transfers, sale, or pledge of MAC's interest. I have been informed that the TDB has filed court documents to seize all of MAC's assets. I am told that a decision is due any day now. MGR takes the position that: 1. MAC has not fully contributed to BCL, and is therefor must pay all deficient amount plus interest and penalties as defined in the joint venture agreement. 2. MAC may not own 51% of the BCL 3. MAC may have inappropriately or illegally pledged an asset they were specifically prohibited from pledging to secure a loan. 4. We will work with all parties to assist in resolving this issue, and to restart Bumbat once all issues that we have raised are addressed in a satisfactory manner. That is the bulk of our concerns and position. I will not express our views or comments on how this happened, who is responsible, what should be done, or how it's going to happen. I think there is an opportunity here to make some adjustments to the operations, to correct some problems, and to maximize the potential of Bumbat. Mongolia's commercial courts are now being viewed by the world, and there is no more important provision affecting foreign investment than the guarantee of the rule of law. Dave