Mongolia ordered to pay $100 mln for expropriating uranium asset

ULAN BATOR, March 3 (Reuters) - Mongolia has been ordered to pay about $100 million to Canada-based Khan Resources Inc as compensation for cancelling its uranium licences in a long-awaited decision from an international tribunal.

Khan Resources took Mongolia to international arbitration four years ago after the government cancelled its licences over the Dornod uranium project in 2009, handing the asset to Russia's ARMZ.

Khan had claimed $354 million in compensation, including interest, but the international arbitration tribunal based its calculation of $100 million, including interest and costs, on previous offers made for the Dornod asset.

"We are very pleased with the Tribunal's ruling that the expropriation of the Dornod asset violated Mongolian law," Khan CEO Grant Edey said in a statement.

The ruling comes just as Mongolia's new prime minister, Chimed Saikhanbelig, has been trying to revive foreign investment after previous governments rattled investors by backtracking on mining agreements, changing investment laws and cancelling mining licenses.

A Mongolian Mining Ministry spokesman had no immediate comment.

The penalty would be a heavy impost on the country, which has some $1.3 billion in reserves following a sharp slump in coal revenue, said Market intelligence group Cover Mongolia.

"A hundred million - I'm sure it can be managed by the government, although I'm sure it won't be easy. It'll constrain Mongolia's finances further," said Badral Munkhdul, Cover Mongolia chief executive.

Khan Resources shares jumped 28 percent after the ruling to C$0.55 a share, a four-year high close.

Khan's CEO said foreign investors would be closely watching whether the government meets its obligation.

"While the current government of Mongolia has taken certain progressive action to diminish the harmful acts of former regimes, western investors and governments will scrutinize the Mongolian government's action in this matter as the rule of law also dictates prompt payment of compensation," Edey said.

(Reporting by Terrence Edwards; Writing by Sonali Paul; Editing by Richard Pullin)