Mongolia May Force Private Stakes in Rio Mine, Lawmaker Says

Sep 29 • Business, Companies, Economy, Government, Laws, Mining, News • 979 Views • 3 Comments on Mongolia May Force Private Stakes in Rio Mine, Lawmaker Says

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By Rob Delaney

Sept. 26 (Bloomberg) — The government of Mongolia, where Rio Tinto Group is seeking to develop one of the world’s biggest copper mines, may seek to give domestic, private investors a stake in the project, a senior lawmaker said.

Mongolia should participate in the Oyu Tolgoi project through royalties and private investment, said Gavaa Batkhuu, deputy chairman of Mongolia’s parliament. Lawmakers also may seek changes to Mongolia’s mineral law guaranteeing that mining companies, Rio Tinto included, produce finished products such as cable or wire, Batkhuu said yesterday in an interview.
“The government should not be involved in equity investment, but when there is already production, there will be revenues that will be shared,” Batkhuu said yesterday after hosting a lunch in Washington, where he met with officials from Rio Tinto and other potential investors. “Once they have these revenues, it’s up to the government if they want to distribute equally to Mongolians or in the form of shares to private investors.”

A 2007 draft agreement entitling the government to a 34 percent equity stake of the project never received parliamentary approval as some lawmakers pressed for as much as a 51 percent share for the nation.

Rio and partner Ivanhoe Mines Ltd. have sought approval for Oyu Tolgoi for five years at a time when emerging-market governments are attempting to boost their share of profits from mining ventures amid years of commodity price gains. Mongolian lawmakers have been deadlocked, with some seeking the royalties as soon as possible to spend on infrastructure and alleviating poverty, while others want to hold out for better terms.

Kathleen Ambrose, Rio’s Washington-based principal adviser for government relations, said the company’s position hasn’t changed since a September 2007 statement that Rio expects ongoing investments in the project will be cut “significantly” in the absence of a satisfactory agreement.

Parliamentary Session

The companies and the government aren’t likely to conclude an agreement in the next parliamentary session, which runs from October to February, because both sides are starting negotiations from scratch and will have to craft a new draft agreement for lawmakers to debate, Batkhuu said.

Rio Chief Executive Officer Tom Albanese said July 16 that he’s hopeful an agreement will be approved this year and production will start by 2011.

Rio called Oyu Tolgoi “the world’s largest undeveloped copper-gold resource” when it agreed to buy 10 percent of Vancouver-based Ivanhoe in October 2006. The deposit, about 80 kilometers (50 miles) north of Mongolia’s border with China, contains about 78 billion pounds (35.3 million metric tons) of copper and 45.2 million ounces of gold, Ivanhoe said in March.

That estimated metal content may be only “a tiny fraction of what is actually there,” Ivanhoe Chairman Robert Friedland said in June.

To contact the reporter on this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

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3 Responses to Mongolia May Force Private Stakes in Rio Mine, Lawmaker Says

  1. Jane E. says:

    This is a shame for the people of Mongolia and the Ivanhoe Company. Mongolians who are poor now will remain so for several more years of their life spans. These are people who could have had their teeth problems fixed with fillings and crowns instead of being pulled out, their infections easily healed with antibiotic pills instead of death, cars instead of camel rides, and they could have enjoyed delicious fruits, vegetables and nuts from around the world on a daily basis.
    The rest of the world looks at the Mongolian Government as being ridiculously slow and stupid. They are missing their opportunity to raise up the Mongolian people.

  2. Naran says:

    It’s comment for Jane. E who posted comment on Sept. 29. I found your post is being very offensive for Mongolians as I’m Mongolian(please it’s only my personal opinion). It’s shame for Government not the People of Mongolia, if it would be considered as a shame which is not really. Please remember that the talk is not about some small mining project which would run 10 years; it’s the talk about a potential mining project that might run for at least 100 years. Plus, Mongolians are not “dying” right now due to “less antibiotic pills, teeth problem, camel ride, or lack of nutritious food”. Please don’t pose your idea, value to Mongolians. We are different people who value different items than you. Please, you and people who shares same belief, be aware that the world is not only for you guys. There are different more diverse culture which has deep history has been existed for years and years. Don’t look through your narrow window and judge it, try to embrace more diverse values and ideas. For example, I prefer greasy meat, bitter aaruul curd, hot milk, etc. than instead of peanut butter (BTW, I hate it). Just side information, I found imported fruits are terrible, not delicious compared to our native berries.

  3. Naran says:

    I’ve another thought along with Jane’s post. I think being slow is not shameful thing, rather it would be shameful if Mongolians would hand this resource to wrong hand and lead the way as some nations did, unfortunately. As being Mongolian and citizen of small country, I’m sometimes frustrated at how big countries “rape” small countries through economically, culturally, etc. It’s not difficult to find an example. Very recent example is from coal mining in Congo. I don’t know much about this. However, from my view point, corporations reaped millions as Congo suffers. World Bank played in a big role, behind a curtain. So, it’s natural that Mongolians to fear and act slow. Big countries, such as USA, Russian Federation, etc. have done this through entire nineteenth, twentieth centuries through their agents, even done in twenty first century. Meanwhile people from “highly civilized” countries just silently watched it and let it happen. Shame for them!

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