TORONTO (miningweekly.com) – TSX-listed Khan Resources and its partners on the Dornod uranium project are reregistering the mining and exploration licences for the asset, under Mongolia's new nuclear energy law, and hope to start negotiations soon on an investment agreement with the nation's government.

Khan holds a 58% interest in Central Asian Uranium Company (CAUC), which holds a mining licence on the main Dornod property. Russian State-owned company JSC Priargunsky owns 21% of CAUC and Mongolian government-owned MonAtom holds the balance.

Khan also has a 100% interest in an adjacent exploration licence area.

A definitive feasibility study was completed earlier this year on the Dornod project, and the next big step will be the investment agreement.

Khan CEO Martin Quick said on Monday he is “encouraged” by the progress achieved by Ivanhoe and Rio Tinto in negotiating an agreement for their Oyu Tolgoi copper/gold project.

“We are prepared to immediately commence negotiations with the government of Mongolia,” he said.

The Dornod project is expected to have a mine life of 15 years, and could produce an average of three-million pounds of the nuclear fuel, at $23,22/lb.

The government of Mongolia could receive some $464-million in royalties and corporate income taxes, according to the March feasibility study.

The joint-venture partners will also need to renegotiate and update their agreement.

Quick said Khan will need clarification under the newly enacted nuclear energy law on what ownership level the Mongolian government must have.

"We acknowledge the legitimate interest of the government of Mongolia in ensuring that its people benefit from the uranium and other natural resources in Mongolia,” Quick said.

“We remain committed to working constructively with the government to demonstrate that this can be achieved while still respecting our legal rights.”

The company will also need assurances from Khan's Mongolian and Russian partners that they will fund their shares of the capital.

Once an investment agreement is eventually signed, the next step will be arranging finance for the project.

"We believe the strong economics of the project, with the expected high internal rate of return and a net present value of $276-million after tax, using a 10% discount rate, will allow a fairly high ratio of project debt," Quick said.

The company is also optimistic that it can trim down the projected $333-million in capital expenditure for the development of the project.

“In particular, we will investigate the use of preowned mill equipment in order to reduce the cost of the mill which is currently estimated at $110-million,” Quick said.

The mine plan envisages underground mining at the deposit number seven in years one to 15, combined with openpit mining and deposit number two in years eight to 15.

Shares in Khan Resources rose 3,4% on Monday, to 30,5 Canadian cents apiece by 15:56 in Toronto.

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