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Dornod uranium deposit
* Uranium reserves of 28,000 tonnes could be doubled
* Canada's Khan Resources still owns 58 percent of licence
* Investment of "hundreds of millions of dollars"
(Adds quotes, details, background)
By Denis Dyomkin and Lucy Hornby
ULAN BATOR, Aug 25 (Reuters) - Mongolia welcomed Russia as its partner in a uranium mining venture on Tuesday as part of a wider pact to boost co-operation in infrastructure and farming, raising concerns for the Canadian miner that owns the deposit.
Russian and Mongolian state-owned companies formed a joint venture to develop the Dornad deposit, which holds seven times as much uranium as Russia produced last year, after the Soviet-era allies settled a $150 million debt owed to Moscow.
Toronto-listed Khan Resources , which still owns a 58 percent interest in the mining licence, is seeking to determine how Mongolia's new law on nuclear energy will affect its investment in the country.
"We are having a joint venture meeting tomorrow with our partners," Khan Resources President and CEO Martin Quick said.
"We will discuss the impact of the new Nuclear Energy law," he told Reuters. "It may have a detrimental impact on the project, so we need to canvass our partners' thoughts on that." [ID:nN22340017]
Russia, which holds more than a tenth of global uranium reserves, is positioning itself as a major player in meeting growing demand for uranium from the nuclear power industry.
President Dmitry Medvedev led a Russian delegation to Ulan Bator and agreed with his Mongolian counterpart, Tsakhiagiin Elbegdorj, to settle a dispute over the unpaid Mongolian debt in order to move ahead with a series of joint investments.
"New infrastructure and energy projects, the development of atomic industries, processing uranium ore -- this is a future that looks extremely interesting to me," Medvedev said.
The joint venture also comes after Mongolia's legislature in July passed a Nuclear Energy law that gave the state greater ownership over uranium deposits. The Mongolian state claims the right to 51 percent of any strategic uranium deposit. Sergei Kiriyenko, head of Russian state nuclear company Rosatom, called the uranium agreement "an important political signal" and said investment in the project would reach "hundreds of millions of dollars". He declined to give an exact figure.
GROWING STATE INFLUENCE
Mongolian state firm AtomMon and Rosatom's mining arm, AtomRedMedZoloto, agreed to create the joint venture to develop the deposit. Kiriyenko said Dornad held 28,000 tonnes of uranium reserves and that the amount could be doubled with exploration.
These two companies already owned 21 percent each of the licence, said Quick, the chief executive of Khan Resources.
Shortly before the Nuclear Energy law was passed, the partners received notice the mining licence had been suspended for three months, Khan Resources said in a statement in July.
"Hopefully we can come to some reasonable accommodation with our partners and the Mongolian government," Quick said. "It is a democracy and hopefully the rule of law will prevail."
Kiriyenko also said Japan could join the project at a later date. Rosatom is already working in Russia with Toshiba Corp <6502.T> and Mitsui & Co <8031.T>.
Mongolia opened its uranium deposits to international prospectors after the collapse of the Soviet Union ended six decades as a satellite state, but in recent years it has become more concerned about re-exerting control over its resources.
The debt settlement also cleared the way for Russia to provide Mongolia with a $300 million loan for agricultural projects and to invest in expanding the country's rail network. (Writing by Robin Paxton in Moscow and Lucy Hornby in Beijing, Editing by Peter Blackburn)
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