Mongolia Back in Negotiations with Ivanhoe, Rio Tinto

Mongolia resumed investment talks last week with Ivanhoe Mines and its strategic partner Rio Tinto on the Oyu Tolgoi copper-gold project. The State Great Hural (Parliament) set up a new all-party working group, comprised of Members of Parliament from the parliamentary Standing Committee on the Economics, which is expected to report to Parliament on the proposed changes of the Minerals Law by November 15.


The Parliament is scheduled to review the changes and start initial discussions for approval. The Government needs to revise its Minerals Law before resuming discussions on an Investment Agreement for Oyu Tolgoi.x Mongolia resumed investment talks last week with Ivanhoe Mines and its strategic partner Rio Tinto on the Oyu Tolgoi copper-gold project. The State Great Hural (Parliament) set up a new all-party working group, comprised of Members of Parliament from the parliamentary Standing Committee on the Economics, which is expected to report to Parliament on the proposed changes of the Minerals Law by November 15. The Parliament is scheduled to review the changes and start initial discussions for approval. The Government needs to revise its Minerals Law before resuming discussions on an Investment Agreement for Oyu Tolgoi.
The companies said last week that they were looking forward to engaging in negotiations with the new Mongolian government, in an effort to conclude an investment agreement for the development of the project, which would cost more than US$3 billion.

“We are encouraged by the initial steps that have been taken by the new Mongolian government, and by the communications that we have had with government representatives,” said Bret Clayton, Rio Tinto’s Chief Executive for copper and diamonds, who also is a Director of Ivanhoe Mines.
In May 2007, however, the Government approved a draft deal after five years of negotiations, which gave the government a 34 percent interest in the property. Prime Minister S.Bayar, who was elected in November last year, had withdrawn the document and wanted the agreement to be reviewed by his new cabinet. The new changes, on which four different proposed submissions are ongoing, is likely to redefine its strategically significant mineral deposits, and percentage of state ownership into those deposits.

“We are looking forward to engaging with the government as soon as possible to complete a competitive investment agreement that recognizes the realities of the current international investment environment,” said Clayton.

John Macken, Ivanhoe Mines President and CEO, stated that the mining companies were confident that the agreement could be appropriately updated to address the current interests of the investors and the people of Mongolia, to enable construction of the project to proceed.

Last month, senior management of Ivanhoe Mines and Rio Tinto met with key representatives of the Government to discuss the necessary remaining steps for negotiation and ultimate parliamentary approval of Oyu Tolgoi Investment Agreement. Government leaders have stated that they share the investors’ high priority for the conclusion of an acceptable agreement as soon as possible. “The Government is considering giving private domestic investors a stake in the project,” said G.Batkhuu, deputy Speaker of Parliament, last month. Lawmakers are also considering legislation to force the mining companies to build copper smelter, and manufacture copper products in the country, rather than exporting raw material to China.

Oyu Tolgoi is expected to produce an average of 440,000 metric tonnes of copper and 320,000 ounces of gold a year over a 35-year life.

Thursday, October 23, 2008.
The UB post newspaper