UPDATE: Equatorial Guinea, Sao Tome Lose EITI Candidate Status

Equatorial Guinea and Sao Tome and Principe have lost their status as candidates to become Extractive Industries Transparency Initiative countries while Mongolia is a step closer to compliance, the board of EITI said in a statement late Friday.

The board said there were insufficient grounds for the two countries to merit an extension to a deadline they were given in 2008 to complete external verification of their progress under the initiative, which aims to improve transparency and accountability in the extractives sector.

In the case of Equatorial Guinea, a lack of political will has been the main obstacle to progress.

"Equatorial Guinea has not demonstrated sufficient commitment to the goals and spirit of the initiative," said Alfred Lahai Brownell, a campaigner with Publish What You Pay Liberia and EITI board member. "All stakeholders should nevertheless remain engaged in Equatorial Guinea and the country should be encouraged to demonstrate renewed commitment to transparency and accountability," he added.

In Sao Tome and Principe, the EITI process has effectively been on hold for some time and oil production hasn't yet commenced.

EITI is a multi-stakeholder initiative comprised of governments, companies, civil society groups, investors and international organizations. It is a voluntary initiative that is implemented by countries whose governments sign-up.

PWYP is a global civil society coalition that helps citizens of resource-rich developing countries hold their governments accountable for the management of revenues from the oil, gas and mining industries.

Mineral-rich Mongolia, where an investment agreement was recently agreed between the government, Ivanhoe Mines Ltd. (IVN.T) and Rio Tinto PLC (RTP) for the $4 billion Mongolian Oyu Tolgoi copper-gold project, meanwhile had its validation report approved and its candidate status renewed. EITI said the country is close to compliance and needs to undertake a number of remedial measures within the next six months before it can be reassessed.

Azerbaijan and post-conflict Liberia were designated as compliant in 2009.

A further 16 countries were unable to meet the deadline but were granted an extension following a case-by-case review which teased out the specific difficulties countries have faced in meeting the deadline, the EITI board said. Their difficulties were judged to be "exceptional and unforeseen."

"The board did not take the granting of these extensions lightly, and the responsibility now falls upon countries to prove they can fulfil their side of the bargain within their extension periods," said Radhika Sarin, Publish What You Pay International Coordinator and EITI board member. "At the next EITI board meeting, most countries will face a rigorous test to remove any suspicion that they are free riding on the brand of EITI."

-By Andrea Hotter, Dow Jones Newswires; +44 (0)20 7842 9413; andrea.hotter@dowjones.com

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