Mount Kellet invests in mine with a history

The capital injection gives Mount Kellett a 20% stake in Masan Resources, which owns the Nui Phao mine in Northern Vietnam. According to a statement, the Nui Phao mine will come online by 2013, and is expected to bring in $300 million in revenue per year from the mining of tungsten and fluorspar. Tungsten is used in steel alloys needed to make catalytic converters, fighter aircrafts and electric light filaments, among other things. Fluorspar is used in refrigerants and aluminum production. Unconfirmed reports claim the Nui Phao mine has the largest deposits of tungsten outside of China.

The Masan Group has invested $150 million into the project at this time, including the purchase in May 2010 of the Nui Phao Mining Joint Venture Company, acquired from Dragon Capital-backed Tiberon Minerals. Masan Group still owns 64% of Masan Resources while Tiberon Minerals will manage 16%.

Vietnam’s prominence as a potential mining destination has been much discussed, yet foreign developers’ activities have not increased. Less than a year ago, CEO of Asian Minerals Rob Guest vented to Western Australian press about Vietnam’s complicated and dated regulations. Vietnam had only given three mining licenses to overseas developers at the time (including to Guest’s company).

According to a circular put out by Freshfields Bruckhaus Deringer in 2006 after a revamp of the Law on Minerals, the new rules – still lengthy and cumbersome – applied to domestic firms and did not discuss how private-sector investors would fair.

Tiberon and Dragon Capital have had a long history with the Nui Phao mine, which at the end of 2009 was rumored to have had its license revoked. Because of the lucrative nature of the deals, mining and resources investments in emerging markets usually have regulatory – as well as moral – hurdles around them. Early prospectuses on the Nui Phao project dated in 2006 explain, “There are a total number of 1,910 households affected with a population of 7,464 persons, of which 884 households have to be physically relocated to, or re-arrange their houses at the relocation sites.”

From the investment side however, prospects for the project are good. Demand from China and other developing markets for natural resources and prized minerals continues to increase, and US-based Commercial Metals had agreed to buy all of Nui Phao’s projected acid-grade fluorspar output for the first three years of production.
Representatives for Masan Group and Mount Kellett did not elaborate on comments released publicly by press time.

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