Today, the Standing Committee on Economy will discuss the draft agreement on Oyu Tolgoi copper – gold deposit.
MPs worked “hard” on the draft agreement submitted by the State Great Khural and managed to conclude it by 22.00 Thursday, May 07 2009.
As our readers may have known that Working group is led by MP G.Zandanshatar and its members are MP Kh.Badamsuren, Ts.Bayarsaikhan, D.Zorigt, N.Batbayar, D.Baldan-Ochir, B.Batbayar, S.Byambatsogt, R.Bud, D.Odkhuu, Ts.Tsengel.
MP G.Zandanshatar has his word regarding the working group conclusion.
Q: Working group has concluded. What was the result?
MP G.Zandanshatar: Yes, today this issue will be discussed through the meeting of Standing Committee on Economy.
Q: What were the main changes?
MP G.Zandanshatar: We prepared proposal with 11 point to be added in the draft. Generally speaking, we agreed to shorten the length of the agreement down to 15 years, to make more detailed feasibility study, to determine the method of infrastructure solution.
Q: When the Standing Committee will hold meeting?
MP G.Zandanshatar: It is bit early to say, because, it coincides with the general session of the State Great Khural.
Therefore, Oyu Tolgoi draft agreement is ready to be discussed by the Standing Committee on Economy. If the Standing Committee supports the draft agreement to be presented to the State Great Khural, the draft agreement will be discussed by the general session of the State Great Khural.
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Take your time no rush … keep mongolia poor for another year ..To late for this year .
The Mongolian Parliament has delayed passing the proposed agreement between the government and Ivanhoe Mines Ltd. (TSE:IVN, NYSE:IVN) to mine the country’s most important mining project at Oyu Tolgoi, operated in cooperation with Rio Tinto (RTP: NYSE; RIO: LSX, ASX). A parliamentary working group will be established to further examine the case.
Members of parliament are questioning whether the terms of the agreement are overly favorable to Ivanhoe as well as other issues, including the taxing structure agreed upon and the length of the exclusive contract being issued to Ivanhoe and their partner in the project, Rio Tinto.
Government advocates for passage of the agreement have repeatedly stated the importance of beginning the project because of the enormous revenues that will raise Mongolia’s Gross Domestic Product.
At the same time, Democratic Party Parliament members have repeatedly questioned whether the agreement violates Mongolian law. Of particular concern to opposition lawmakers is wording in the agreement stating, “If this agreement somehow contradicts Mongolian laws, both sides will follow agreement terms.”
Democrat N. Batbayar insisted on learning who in the government was responsible for the wording, however, the government was unable to answer. Ch. Hurelbaatar, leader of the government’s negotiating group, responded that the agreement is very important for Mongolia’s economy and must move ahead. Hurelbaatar also said three IMF specialists had assisted in working out the agreement.
Z. Enkhbold responded, “Ivanhoe has great experience in making agreements, but what was the government’s experience compared to Ivanhoe’s.” Other Democrats complained that the 80-year agreement was too long, saying the country had lived under communism for nearly 100 years and now the country will have to live under “Ivanhoe’s pressure for 80 years because of this agreement.”
Z. Enkhbold further reminded Parliament that Mongolia has the world’s second largest mineral deposits, following China, and many investors seek unfair advantage in wishing to sign agreements with Mongolia.
Z. Enkhbold noted, “If the IMF suggested this agreement is in favor of the Mongolian people then I feel suspicious about them. This is a very big project for Mongolians and we should not be hurrying. This agreement is going to be in force for the next 80 years, and we will be choosing our next 80-year business partner. We need more advantages in the agreement and we need to hire foreign specialists to assist in drafting the agreement, even paying them a million dollars a year. In the future we need to be prepared for reaching agreements with large companies. Our government’s fault is they sent inexperienced kids to negotiate an agreement with Ivanhoe. The government’s agreement was made at an amateur level.”
Democratic Parliament member N. Batbayars questioned if the agreement’s exempting Ivanhoe from paying the windfall tax of 68 percent for five years is legal. Hurelbaatar replied that with its 68 percent tax, Mongolia will not be able to attract any investors for the Oyu Tolgoi project. According to Hurelbaatar, calculations using today’s copper prices of $797 per ton, Ivanhoe’s tax exemption would be 4 billion dollars. However, according to N. Batbayar, Ivanhoe’s investment in developing Oyu Tolgoi is only $2 billion and he feels their tax exemption violates the law.
Adding additional pressure to pass the agreement, local suppliers for the project believe that Ivanhoe would suspend all contracts and purchase orders if the agreement is not concluded during the current session of Parliament.
Nonetheless, Democrats appear to be moving to have The Standing Committee on Economic Policy look further into the agreement, which is sure to delay quick passage of the accord.
Oyu Tolgoi is considered to be the largest untapped copper and gold mine in the world. 2005 estimates put the annual yields from the mine at 450,000 tons of copper and 330,000 ounces of gold to be extracted beginning in 2010.
Remember THIS
You can discuss this all you want. There is no way Rio/IVN will agree to a 15 year agreement. It takes 5 years to get a 15 year agreement. Oh wait, there is still no agreement! Seriously!!!!!
1 word – IGNORANCE
Hosso, your being nice! I say so many other words but I won’t.
I just poled a few IVN investors that I know. A very informal poll.
They were all in agreement that there is a 50/50 chance that IVN/RTP will NOT accept the terms of this agreement. They admit that they do not have much info on which to base that opinion, but what they do know they find unacceptable themselves.
All of them think IVN/RTP will walk away and be willing to start all over again from the beggining after the elections, new negotiators, new Ministers, and possibly a different President.
What a terrible setback this would be for Mongolian people.
IVN/RTP both have many other operations that could use the development money. Some of which are actually in production, and could use a little cash to expand production.
One thing this would do for Mongolia, is that it would give them time to develope infrastructure to support the expanding mining industry. If they can find the money. I gues they can borrow more from IMF, Russia, and China.
Two weeks, we will know one way or the other.
Barry
Preparing for a drop in the share price of IVN.
Is IVN/RTP even included in these”agreed upon” changes?
Barry
Hi Barry,
When will the election happen?
When will the spring session of State Great Khural conclude? Thanks.
Do you think we should sell some in the next 2 weeks? I have a couple of thousand of shares bought after Dr Faber recommended IVN.
Larry
Presidential election is on May 25 2009
IVN president thinks the OT will pass in weeks. Interesting!
Salman Partners analyst Raymond Goldie said he thinks there’s a “good chance” the agreement will be dealyed again, likely for another year.
Raymond James analyst Tom Meyer said until the investment agreement is approved by the govenment, the Ouy Tolgoi project is essentially “n hold.”
As reported by Brenda Bouw, The Canadian Press, and available at
it was also stated that they thought the stock was cheap buy recomendation
ca.news.finace.yahoo.com/s/08052009/2/biz-fincance-ivanhoe-mines-oyu-tolgoi-investment-deal-completed.html
If the MPs don’t approve this agreement before the election, good chance that there won’t be any production form the Oyu Tolgoi mine for nearly 5 more years. Lots of promise no revenues.
Sad goings on in Parliament.
Barry