Thanks to the State Great Khural, the Government has limited space to maneuver at deal making table

Jan 19 • Government, Laws, Mining • 712 Views • 3 Comments on Thanks to the State Great Khural, the Government has limited space to maneuver at deal making table

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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.

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3 Responses to Thanks to the State Great Khural, the Government has limited space to maneuver at deal making table

  1. ChiMan says:

    It is sad, because with these predictable agreement delays, Mongollia has lost much investor repect and investment/mining dollars will instead go to new projects in Alaska, Africa, and Austraila. Mongollia may have to wait until the next metal boom to see investors.

  2. Barry says:

    It is another confirmation of my distrust of asian governments and comapnies to deal with the west.

    Again we are disappointed and misinformed by a Mongolian government official.
    Statements to the press by minsiter of minerals etc. saying the OT agreement would be presented to the KSG, on the 12th of Feb., is untrue. another disappointment.
    I must seel my IVN stocks, until the agreement is finalized.
    I have been investing in and following OT propgress for nearly 10 years. This may be the end of all those years of confidence in the project.

    Not an investor now.

  3. Barry says:

    Six Months have passed since These comments by D. Zorigt Minister of Minerals and Energy. Published Jan 19, 2009, submitted by Amaransaa.
    The people of Mongolia should be very upset with their elected officials and should make their MPs aware of their dissapointment.
    The MOST IMPORTANT issue before the SGK is Mining Law reform and OT & TT mining agreements. Neither has had progress in the past six months. without the changes in the Mining Laws and also thye signing of a Mining agreement for OT. The economy of Mongolia is going to suffer for many years.
    Citizens of Mongolia should be outraged, and should say so.
    Mongolian goverment (MPs, etc) should have it as their highest priority. If both of these issues are not resolved by July 1, the entire mining economy will suffer great setbacks. Government revenues will be delayed for several more years. Which may result in an unpreventable economic downturn with far reaching effects.
    I cannot believe that any consultants to the government have not said this to them. I do not think the persons involved from the Mongolian government understand what is at stake.
    Mongolia at this time is NOT an attractive country to invest in. “B”

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