According to Mr. D.Zorigt, Minister for Mineral Resource and Energy, draft agreements’ negotiation work on Oyu Tolgoi and Tavan Tolgoi deposits is scheduled to be taken into account this week. He also informed that the first result of the negotiation will come up by the end of this week. Previously, sides disclosed their interest only and now, it is time to make it serious.
Therefore, it seems that draft investment agreement, stated in the resolution of the State Great Khural, can’t be proposed to the State Great Khural within its given time, namely by February 1st 2009. The State Great Khural also instructed that if draft agreement collide with the current effective laws and regulations, their amendments must be proposed to the State Great Khural.
Adjusting and harmonizing the effective legislation with draft agreements are not that easy work that can be achieved within two weeks. Therefore, no results will come up in this January as it was planned.
Also another crucial issue is that selection of international advising institute. Because, the guideline of the State Great Khural said to seek assistance from the advising institute. The advising institute is to assist to the Mongolian side on the issue of foreign investment agreement on the two deposits.
Several well known and widely recognized investment banks, such as “JP Morgan”, “Deutche Bank” and “Goldman Sachs”, expressed their interest to become adviser to the Government of Mongolia. According to the international standard and experience, selection of the investment adviser takes at least two or three months.
So investment agreement building will go through some procedures such as selection of international adviser, making negotiation and concluding and then it will be proposed to the State Great Khural. It is quite early to say when it will be concluded. On the other side of the river, civil movements raised a question of inserting their comments in the agreement and so on. Civil movements were the strongest block and the main factor of delay in the concluding the investment agreement. The version of year 2007 was not bad, but was rejected thanks to the civil movements.
Basically, the faith of mining industry was decided unconsciously by the civil movements in the past when the commodity price was attractive and lustful. But its faith is to be decided again by the State Great Khural when the civil movements are passive and intimidated with their unconscious acts.
More clearly, the State Great Khural more or less formulated its will and interest as to start its ownership from 34% that can be achieved up to 50% in the future, to get pre-payments of taxes and fees that will be applied in exploitation of the deposits and replace our side investment payment with taxes, dividends and fees. Therefore, the Mongolian Government has not that much thing to surprise or maneuver during the negotiation. According to the mutually beneficial cooperation standard, the case must be “win:win”. So it is time to wait and anticipate what would be the reaction of interested investors in the deposits.