By Melissa Pistilli-Exclusive to Uranium Investing News

As the mining industry expands into resource-rich developing nations around the world, its mining companies are becoming increasingly exposed to all manner of political risk from guerrilla warfare to regime changes. In the case of Mongolia, many mining firms are finding the government is their biggest challenge.

Recently, three Canadian miners reported receiving notice that their licenses have been suspended by the Mineral Resources Authority of Mongolia (MRAM).

Last month, Western Prospector (TSX-V: WNP), newly purchased by China-based CNNC International for $25 million, said the MRAM has suspended their uranium exploration licenses for three months due to alleged violations of various Mongolian laws. Western, which owns the Saddle Hills uranium project, also faced license suspensions in April; at that time the reason given was for “violations cited by inspectors from Mongolia’s Atomic Energy Agency.”

“In Western Prospector’s case, as in Ivanhoe’s, it’s been a long running dispute. From time to time it comes to a boil, then it gets sorted out, then it comes to a boil again. So this is more of the same,” said John Ing of Toronto-based Maison Placements.

Khan Resources (TSX: KRI) also reported that the mining license of its joint venture Central Asia Uranium was suspended for three months. Khan owns 58 per cent of the company, while a Russian firm and the Mongolian government each also hold a 21 per cent interest. The reasons cited for the suspension was supposed mining violations that were detected after a recent inspection of Central Asia Uranium’s Dornod uranium deposit.

Centerra Gold Inc. (TSX: CG) received a three-month suspension notice of its operating license on the company’s Borroo Mine due to alleged issues with record keeping, incorrect land use and improper operating procedures.

It may seem like the Mongolian government is really keen on ensuring mining companies are playing by the rules, but some in the industry say Mongolia’s actions have more to do with resource control and protectionism.

Take the long-suffering Ivanhoe Mines (TSX: IVN), newly partnered with Rio Tinto on its Oyu Tolgoi property, as a primary example. After 6 years, Ivanhoe is still battling it out in the Mongolian Parliament over how much the government deserves to profit off of the miner’s huge 2003 copper and gold discovery.

With these suspensions and setbacks, the Mongolian government is sending a very strong message to the mining industry: We’re not letting our national resources go into the hands of foreign investors that easily.

For the most part, the Mongolian economy has been historically agrarian-based. As the country faces mounting economic problems, the government is looking to its vast mineral reserves in iron, coal, copper, gold, uranium and other metals to improve its financial situation.

According to Ing, the newly-elected President Tsakhiagiin Elbegdorj is partly responsible for this latest series of mining suspensions and even cancellations. “This fellow is thought to be behind these cancellations,” he said. “So it is difficult. Mongolia needs the jobs, needs the investment . . . so it’s expected to be temporary but unfortunately when you’re dealing with this country you just never know.”

Elbegdorj, a Harvard-educated former prime minister and member of the opposition Democratic Party, won a surprise victory over incumbent Enkhbayar of the Mongolian People’s Revolutionary Party who was reportedly in favour of a speedy resolution to the Oyu Tolgoi dispute.

“We need to find a single position. We are not unified,” Elbegdorj said the day before the election. “We have to invite government, NGOs, experts, bring them all to the table to find common ground. After that, we’ll find a deal that works. But it should be beneficial to the Mongolian people.”

Mongolians feel they have suffered enough in the past from foreign investors taking their country’s mineral resources without any compensation. “The Mongolian people have made a choice for their rights and freedoms,” Elbegdorj told his supporters in front of a Genghis Khan statue after being declared the victor. “Mongolians have made a choice for the material wealth that rightly belongs to them.”

For now, Elbegdorj’s government is focused on the “material wealth” that can be made from Ivanhoe’s Oyu Tolgoi, believed to be the world’s biggest copper-gold deposit.

Included in the Mongolian government’s 35 demands are a 68 per cent windfall profits tax, a 50 per cent share of the profits generated from the resource or even a 34 per cent share in Ivanhoe itself without putting up any capital. The government is also requesting three representatives to sit on the Ivanhoe board of executives.

With demands such as these, the negotiations are likely to go on for sometime. “We have been discussing this investment agreement for such a long time now that everybody in Mongolia talks as if they are professional geologists and miners,” said Chuluunbaatar Ochirbat, a legislator and member of the Mongolian People’s Revolutionary Party.

The path the Mongolian government has chosen to take in regards to its dealings with the mining industry may prove disastrous for Mongolia’s future as foreign investment dries up. Time will tell if the struggling nation comes to its senses and realizes its actions are only pushing away the investment its struggling economy needs.