TORONTO (miningweekly.com) – TSX-listed Khan Resources continues to have “constructive” discussions with officials in Mongolia, on the implications of the nation's new nuclear energy law, the firm said in a statement.

The legislation gives the government the right to take ownership without payment of at least 51% of a project if uranium resources were determined through exploration with State funding, and at least 34% if State funding was not used in exploration.

Khan's main asset is a 58% interest in Central Asian Uranium Company (CAUC), which holds a mining licence on the Dornod uranium project in Mongolia.

The Dornod mining licence was temporarily suspended in July, when the new law was passed, CAUC has submitted an application to reregister the mining licence under the new nuclear-energy legislation.

However, Khan reported this week that CAUC has received a formal notice from the State Property Committee of Mongolia, ordering it to propose a resolution to its shareholders that would increase the government's ownership in CAUC to 51%.

If a “favourable resolution” is not provided by January 31, CAUC's mining licence could be revoked.

"We view this notice as part of the process of implementing the new Nuclear Energy Law", said Khan CEO Martin Quick.

"We have been working cooperatively with representatives of the Mongolian government in an effort to reach a mutually satisfactory arrangement that will provide the framework which allows the government of Mongolia to achieve its goals while also protecting Khan's investment in the project and enabling us as the operator to proceed with the development of the mine,” he said.

“Our discussions have been constructive, and are continuing.”

Khan is currently the subject of a hostile takeover bid from Russian State-owned Atomredmetzoloto, but the company has dismissed the offer as opportunistic and too low.

Even if the government takes 51% in the project, the value of the Dornod property to Khan is not recognised in ARMZ's bid, Quick asserted.

ARMZ subsidiary Priargunsky owns 21% of CAUC and Mongolian government-owned MonAtom holds the balance.