MP. N.Ganbyamba: There is no evidence that they not influenced by lobby.
MP N.Ganbyamba shares his opinion on Ot agreement, because he made interesting and notable comments on draft agreement on investment between the Government of Mongolia and IMMI.
Q: Of course, there are many alternatives on OT draft agreement. What version of agreement is good for Mongolia? Some say that Mongolia doesn’t need ownership, but better get the tax income according to the agreement.
MP N.Ganbyamba: Oyu Tolgoi agreement term is 30 years and it will be extended twice with 20 years, totaling 70 years of exploitation. Like other MPs, I like to shorten its term.
As for building the agreement, we can build the prodcut share agreement. Investor can invest its full investment and share its profit 50/50. If the investor agrees so we can get 40% and the investor can get 60%. In the alternative, that golden share version sounds good.
Q: When the working group presented its conclusion at the Standing Committee on Economy, you commented that we are going to get money under the name of “pre-payment” with high interest rate, loan and pre-payment are different issues. What would you say about it?
MP N.Ganbyamba: In the draft agreement developed by the Government, pre-payment has become loan. I warned it only. Actually, in the resolution of the State Great Khrual, pre-payment of royalty was stated.
Also this clause is included in the resolution 40 of the State Great Khural. Loan and pre-payment have different legal explainations. But in the agreement draft 125 million US$ pre-payment has different arrangement. It has high interest rate. Therefore, I suggested Minister D.Zorigt to fix this uncertain issue.
Q: What is the exact interest rate?
MP N.Ganbyamba: I think it was 8.9%. We will lose much with this rate. But 125 million US$ is not that big money. Realizing this deposit and see the production take 4-5 years. But we need to realize these two deposits in order to overcome the crisis with less damage to public and to distribute the Grant of the Motherland. Therefore, when we asked pre-payment, the other side agreed so.
Q: You also mentioned about responsibility issue…
MP N.Ganbyamba: Yes, we shouldn’t forget on talking about responsibility. Before, oil deposit was explored and owned by the American company, but Chinese took control later. Therefore, we should be careful from such acts. We should determine the subject of who is responsible for.
Q: Can you make it more clear?
MP N.Ganbyamba: Mongolian Government shall determine its partner more precisely. Rio Tinto sold its stake to the Chinese company! Therefore, we have to make it clear with whom we are partnering with. Actually, Ivanhoe Mines breached law from its beginning. Politicians hinder the issue for 4-5 years because of their political fractions. We lost our chance of making almost 100 billion US$ per month. The Constitution of Mongolia says that the wealth under the earth belongs to the state. This provision is only salvation for us. But IMMI breached the Constitution of Mongolia. It announced the wealth of Mongolia in the world through internet and made profit of billions and billions of dollars.
Q: Why we can’t file against IMMI to the international court?
MP N.Ganbyamba: Yes, we can, but we didn’t.
Q: Can we understand that IMMI takes advantage because it conducted the exploration work?
MP N.Ganbyamba: Exploration is different understanding. IMMI is not yet the owner of the property, but it announced that Oyu Tolgoi has big reserve of copper and made money with this announcement. Even though, it is going to give us 125 million US$ high interest rate. Another issue is the economy feasibility.
Q: Some politicians say that the agreement is profitable.
MP N.Ganbyamba: They say so. But the main issue is that how the feasibility is calculated. If the agreement is calculated by the international accounting system, it is not feasible? We should consider the agreement very neat. But it is not good to call this agreement is feasible without seeing the result of the complete feasibility study.
Q: So, Oyu Tolgoi technical and economical study is not made yet?
MP N.Ganbyamba: It was not made. The feasibility study is based on the technical and economical reasoning. Also the project value will be clear. I think that there is nothing is valueless in market economy. Therefore, the wealth under the ground must be evaluated.
Q: Do you think that some of the MPs or decision makers are lobbied by?
MP. N.Ganbyamba: There is no evidence that they not influenced by lobby.
Interviewed by National Post
Popularity: 4% [?]
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For MP N. Ganbyamba to be upset that Ivanhoe Mines has consitently made public the results of its exploratory mining endeavors and estimates of the mineral weatlh at OT appears to be extraordinary to me. There is never any mention of the billions of dollars Ivanhoe Mines has spent in exploring the properties and constructing the main mine shaft number 1.
These expenmsive exploraion activites are the “feasibility studies” to determine the wealth that is under the grfound. Ivanhoe is a publicly held company and is obligated to report the results of its exploratory mining results to its shareholders as well as the Government of Mongolia.
Ivanhoe Mines has done just this.
The MPs do not appear to understand even the rudiments of publicly held companies and their responsibilities to shareholders.
Sometimes I fear they are coming from a communist model of state ownership.
The interviews hardly ever talk about the many economic benefits of an a ative and properous OT mine for the economy and ghe people of Mon- golia.
The benefits or lack thereof are usually defined only in terms of different percentages of ownership or different years of leasing agreemenmts.
Where are the desvcriptions of the many economic beneftis to Mongolia during the entire terms of the leases?
Sort of amazing.
MP N. Gambyamba believes that Ivanhoe and Roi Tinto made billions of dollars from publishing info about the OT mine. IVN raised funds to expolit the OT mine, most money has been spent IN Mongolia developing the mine. Value of IVN stock that was sold to RTP has lost 2/3 of its value.Mongolia has been the only beneficiary from this sale of aportion of the stock to RTP.
Billions (US) have been spent, for the benfit of Mongolia government, and the Mongolian citizens that have enjoyed years of employment at the mine. I suggest that the MPs go to the IVN website to gain a better idea of the benefits that Mine employees and the entire South Gobi region have have recieved.
Shareholders of IVN have NOT recieved a penny in dividends, and the stock price is depressed as a result of MPs excessive demands and delays. They should leave the negotiations to those more expert in such dealings.
Feasability studies are only educated guesses.
Hard and fast contract terms should not be based on feasability studies (estimtes) but on actual production of resources. After deductions for cost of production. 60%/40% is not sufficient Return on Investment (ROI) for IVN /RTP to raise the additional moneys needed to further develope OT mine.
In order that IVN/RTP expand OT to the world class mine that it should be, they will need to spend many more billions of dollars. Mongolian government and the citizens of Mongolia will benefit hugely from these expenditures.
Fair is fair.
“B”
I do wonder when Prime Minister Bayar who signed/approved the draft agreement will
publicly be interviewed as to why he favored the draft agreement and the signing of an OT contract.
PM Bayar is the
elected leader of the MPRP Party.
He has been on public recored for years as being in foavor of an OT contarct that is fair to both Mongolia and to investors.
Hopefully, he will come out for his public policies soon.
MP Ganbyamba is from MPRP party led by PM S.Bayar.
This is the part of the interview and translation is literal translation, nothing is added or changed or even removed.
The key issue here in IA between Mongolia and Ivanhoe is accountablablity of Ivanhoe. I see two problems in there. one. Registration of Ivanhoe; it keep changing its name, registration place and partners. and secondly it has not have any solid feasibilty study or solid numbers proved by the recognizable labs. BorooGold, the branch of Centerra Gold has shown us, to Mongolians how accountablity is important. They even do not call them same name and could just leave the country any time they want. We, the people of Mongolia look for sustainable, mutual beneficial, long term cooperation same as we have in Erdenet with Russians.
Purev, excuse me, but it is the Mongolian Parliament that continues to change its Minerals Law and tax policies in ways that discourage investors and long term relationships.
Ivanhoe plans to have a very long term relationship with Mongolia and the OT mine. The length of the proposed long term relaionship is apparently one of the objections of the Parliament.
The Parliament could demonstrate its preference for a long term relationship by approving a long term OT contract. LOL
What I would hope top hear from Prime Minister Bayar would be parallel to the radio address of President Enkhbayar,
“Mongolia and Mongolian people are losing, at least, US$1 million each day – like the saying, ‘dropping butter from the mouth,’ that it is becoming our own faults and tragedy, making the mineral resources the subject of disputes and arguments and so falling deeper into poverty, to say directly. Four years have passed with only “talking.” It means we have cooled our cup of tea without drinking it for four years. It’s like ‘dividing the still living bear’s skin in ten or twenty pieces.’ It is enough now. Let’s put an end to rumors and start working efficiently. It is time to issue and implement the state policy and decisions as soon as possible.”
Why was this address not posted in this newspaper?
Purev,
I do not know what studies are missing. 43-101 filings are all available on the iVN website.
What information is it that you seek, that is not available?
For the 8 years or so that I have been following the OT project, Ivanhoe Mining has always been called and listed as Ivanhoe Mining. What listing do you refer to, that has changed so many times? Establishing a corporation for each mine is normal international behavior, is this what you refer to? “B”
Elections are only 1 week away. Just my thoughts, but if this OT agreement is NOT done prior to elections then we have a distinct possibility of another 2 years of delays.
We may have new ministers, new MPs, and maybe even a new President. Negotiations go back to the beggining and repeat the process of the past 5 years.
NOT good for invetors. NOT GOOD for Mongolian citizens, NOT GOOD for Mongolian goverment.
This also holds up many other mining companies that have been considering investing in Mongolia.”B”
There will be a debate on TV in a few days with both individuals promissing everything to the people…again after 7 years of going nowhere, this is an excellent example of Govt inefficiency.
Friday, 10 August 2007 04:23
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.
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written by Tserendalai, D. , August 13, 2007
“delay quick passage of the accord.” 5 – repeat over FIVE years to NOT come to an agreement must be approaching a World Record for approving ANY mine in the world by ANY government!! “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.”
Who in the current government or opposition parties or who will be in “THE PARLIMENTARY WORKING GROUP” is NOT an amateur but an expert in costs of developing world class underground mines and what would be fair in the free trade world economy as taxes.
I am afraid in terms of encouraging investment in our country to stimulate our growth is what is sadly amateur by both the government and oppositin parties playing games for power not for the greater good of our country.
Our politicians are trying to be greedy before the goose has laid the golden egg!!!!
Hey! I did not expected any responce to my post. So have not checked it for awhile. Sorry guys for my late comment.
Arthur, As far as I know, there were only couple changes in Mongolian Mining/Mineral law; one in 1997 and in 2006. Regarding to the later one, some mongolians including me suspect that changes made in favor of foreign miners. One of the mongolian civil society demands related to the IA is to change the Mineral law before go to the agreement with Ivanhoe. In my point of view, The IA suppose to cover Taxation law but not mineral one. Idea behind IA is constant taxation in longtime. It should not give any MNs a tax heaven which Boroogold got illegally and unfairly.
Barry, Buddy, If you has kept checked OT project, you should know that The Commission of Mongolian Parlamentary noticed it is, the feasibility study which suppose to support the draft IA is missing there. And they included it in the commission report. This the one which I am asking and looking for. We are independent country with its own rules and regulations, therefore 43-101 filings for USA SEC does not fit perfectly to our requirements. BTW, Ivanhoe mines keeps changing its figures year by year including amount of ore, gold, investment, number of licences and etc even coal. Personally, I suspect it is part of RF’s 5$ T-short story which suppose to bring him more investment.
For the name, I agree personally with you, it calls it self IVANHOE MINES but not Hugo anymore. But, Barry friend my, officially they have some extention on it eg, Ivanhoe mines + Mongolia INC, Virgina irland, registered at NY, TSX. Who knows one day it’ll turn into a Chinese company.
Purev,
I do not find that the projected resource numbers changing a strage thing. The more exploration they do the more known resources they can identify as actually there. So the numbers change from time to time. Just looking at the maps posted on IVN website I understand that there are large areas yet to be explored. So, the numbers may change in the future, again. That is good, yes?
You are correct that there are many rules and laws that are specific to Mongolia. Most not known or available to the general public, especially if you do not read Mongolian language. And the laws change. Which maybe they should. Check in more often, I enjoy your comments.
“B”
Can I simply say what a comfort to discover someone who truly understands what they are talking about over the internet.
You definitely realize how to bring an issue to light and make it important.
More people have to look at this and understand this
side of your story. It’s surprising you are not more popular because you definitely have the gift.