MP G.Zandanshatar: OT dividend will be provided starting from 2024

May 26 • Laws, Mining • 855 Views • 12 Comments on MP G.Zandanshatar: OT dividend will be provided starting from 2024

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Working groups of Standing Committee on Economy and SGK combined their comments and conclusions on OT agreement and presented to the Government. In relationship with the event, working group chairmans MP Ts.Bayarsaikhan and MP G.Zandanshatar, MP D.Damba-Ochir, D.Baldan-Ochir made press conference.

MP Ts.Bayarsaikhan, Chairman of the Standing Committee on Economy, opened the press conference “… people of Mongolia received many comments towards the strategically important deposits. Draft investment agreement on OT project between the Government of Mongolia and IMMI was presented to the State Great Khural in March. Many important issues such as benefits from the mining projects to the people of Mongolia took effect in the draft agreement. But it was discussed by the party groups and decided that it cannot be adopted as it was presented by the Government. Some issues of this important and big agreement were discussed separately over ten times in the past. The Standing Committee concluded that the working group comments were correct and sent back to the Government…”

Not only MPs worked on the draft. Research and Monitoring Center of the State Great Khural made study on three directions including news, editorials, articles, research materials around the world regarding the mining industry. Working group thinks that the term of the agreement (30 years at the signature and will be extended twice with 20 years) is quite long. It suggests shortening it down to 15 years of initial term. Also the Mongolian side refuses to receive loan with higher interest rate for buying its 34% equity at OT. There are many issues were considered also including tax waive issues, Mineral Law Amendments and etc.

After the press release, MPs answered the questions of the media representatives.

Q: What is the current reserve of Oyu Tolgoi deposit?

MP Ts.Bayarsaikhan: 32 million tons of copper and 1200 tons of gold. Reserve size is stable.

MP G.Zandanshatar: When realizing OT deposit, its benefit will come regardless of the production. At first instance 3500 people will be employed. Over 500 million US$ revenue will come as tax income. Construction material factories will be in production. Mongolia will solve its certain difficulties of its economy. The resource of providing Grant of the Motherland will be established. Prior to all, socially vulnerable parts, including elders, disabled people, of the society will be benefited. Oyu Tolgoi agreement will be the example of its following agreements.
MP D.Damba-Ochir: Investors are closely observing this agreement. First part will be ready in 2011 and it must operate in its full strength in 2013. The work must start instantly when the stability agreement is signed. But OT is three times bigger than Erdenet, therefore, we should not be in rush.

MP D.Baldan-Ochir: Erdenet has at least 50 years of reserve. If Erdenet is in production for 80-90 years, then Oyu Tolgoi will be in production 100-200 years.

MP Ts.Bayarsaikhan: This is the first time that SGK discussed the investment agreement. It will be reach in the medium that is beneficial to Mongolia and interesting for the investors. OT is the world class reserve. I hope that investors will agree with the Government on our comments and conclusions. Mongolia should be one part, here, political view is not important. Our mission is to build feasible and economically fruitful agreement.

MP G.Zandanshatar: We get 70-80% tax from Erdenet including windfall tax. We can receive revenue of 24 billion US$ in next 30 years. Dividend can be received starting from 2024. Over 20 types of taxes, fees and payments will be received from Oyu Tolgoi. Mongolian side will get 55-60% profit from it. Mongolia will receive the final responsibility of the agreement, if any conflict occurs, and then it will be resolved by international arbitrage. If the agreement will be made correctly, Mongolia will be a rich country with its treasury and currency reserve in next 10-20 years.

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12 Responses to MP G.Zandanshatar: OT dividend will be provided starting from 2024

  1. Barry says:

    Does anyone, besides me, think that 55% to 60% of the profits of OT is exorbitant by any standards, international or otherwise?
    I for one cannot see ivn / rtp agreeing to these terms. There are many terms that we do not have the needed info to make an inteligant and informed decision about.
    As a shareholder of IVN stock, Iam glad that I sold most of my holding at a price over $6. I will NOT buy back until I see a signed agreement. That looks unlikely for several more years.
    THE Mongolian government nor it’s citizens will se proceeds from dividends or taxes for many years to come. No help for the economy as many mining companies will not invest in Mongolia.
    Sad to see.
    “B”

  2. north of 48 says:

    Look at all the tax that is paid.. 50% or 60 % if this is all tax then its the same as most mining deals imo

  3. Barry says:

    north of 48,
    does Canada tax gold 55% to 60% of profits?
    Take a look at the recent agreement sifned by Centerra in Kyrgyz. 15% tax plus acouple of small contributions, total tax may reach 18%.
    That is a pretty big spread. Does Australia have taxes on gold that high? Mongolian governement simply does not want any profits from mines, any of them, leaving Mongolia. They want all profits either spent on mining process or they will take it in taxes. What is left for shareholders? “B” just my opinion.

  4. Purev says:

    Centerra Gold Inc has settled all disputes related to the 600,000oz/y Kumtor gold mine, ending a feud with the Kyrgyz Republic which has lasted almost a year.
    The government has withdrawn all claims which would have deprived Centerra of its mining and exploration licences.
    In June 2008, the Kyrgyz government withdrew Centerra’s licences, claiming they had not been ratified by parliament and therefore expired.
    In settling the claims, Centerra will pay US$22.4 million in back taxes, advance on taxes and other liabilities and issue approximately 18.2 million shares to the Kyrgyz Government.
    Centerra’s 53%-hareholder Cameco Corp, will also transfer to the Kyrgyz Government up to 25.3 million Centerra shares, dependent on certain conditions.

  5. Tmax says:

    The only ones who care about the IVN shareholder is IVN. The Government of Mongolia does not give a hoot nor do the people of Mongolia. Quite frankly the same people whining and complaining about on this forum is tired. It is very apparent from questions and comments by certain individuals they do not have an understanding or care about Mongolia or Mongolians.

    No one in the GOM wants to be the one remembered by Mongolian people as the one who gave away the country’s wealth. They want to be certain they get the best deal they can. Who can blame them with the hype put forth in recent years by IVN that OT has the potential thrust Mongolian into wealth comparable to Saudi Arabia when they began pumping oil.

    The Mongolians are playing hardball, interest has not waned one bit through financial crisis, political crisis etc. They have nothing to lose. Should the deal fall through with IVN the Russians are waiting in the wings to pounce on the property. In the Russian news outlets they are already reporting they have a deal worked out. IVN is not the be all and end all. The GOM does not care what IVN shareholders think they care about their interests and what the people of Mongolia think.

    Tmax

  6. eric says:

    Tmax,

    The Russians, are you kidding???

    Are these the same Russians that Mongolia broke free from. Are these the same Russians that would strong arm the Mongolians if there wasn’t a US in the world to police them, ask Afghanistan about the Russians.

    The Russian news outlet was a misrepresentation of the facts. The Mongolian government has already disputed their claim.

  7. Tmax says:

    Do your homework Eric, look at S. Bayar’s resume. He has always been close with Moscow and since taking office has put a lot of work into strengthening ties with Russia. Why do you think he was selected to replace Enkhbold?

    What exactly should I ask the Afghans about the Russians? Perhaps I could ask them about the Americans, I could also ask Iraq and Vietnam while I am at it. Whats your point? How are the Americans keeping Russia in check exactly? What has the US done about recent strong arming by Russia on the MCC? What has the US done to keep them in check, I am very curious to know. Or will it become obvious at this years khan quest?

  8. Kris says:

    Ivanhoe is a Canadian company.

  9. Barry says:

    T-Max, GOM should care a little about what the shareholders of IVN think. Reason, they will be the ones to finance the future development of the OT mine. If the Project does not look lioke it will produce a decent profit for shareholders, they will not buy future equity offers. Why would IVN / RTP be intertested in opera5ting any mine if NOT for profit. Why would any investor buy the stock, including GOM, if there wass not profit in the picture? “B” Investors need profit incentive.

  10. Purev says:

    Barry there is a same question. Why should GOM and mongolians to allow IVN/RT to mine and take away their resources if there are not any gains and profits and grant it through unfairly IA? Why we need middleman in neighborhood trade of copper? Why we should buy back our natural recuorces granted by our Constituion from foreigners?

  11. Purev says:

    Should the GOM take of the investors who bougth junk stocks of IVN or it should for for will of Mongolian people? In conclusion we need win-win situations here.

  12. Barry says:

    Purev,
    The answer is simple.
    NO mining company will invest shareholder money in a mine that they cannot make profit from. Mongolian cannot operate a mine like OT on their own, they need IVN / RTP, or someone with those deep investment dollars.
    We ard still in the dark as to what the IA will end up being. so we can only speculate at this time. But I will assume that when RTP Chief of Copper says there are clauses they cannot agree to, that means no agreement under the terms Mongolian side of negotiations is seeking.
    The big question,,,,,,Where is the $5 billion dollars Plus going to come from for the further development of OT. NOT FROM MONGOLIAN GOVERNMENT.
    I think I read somewhere in the online news that the GDP for Mongolia in 2008 was $5 billion US.In the next 5 years Mon Gov wants IVN / RTP to spend $5 billion on expansion of OT. GUARANTEED. With threat of losing license.
    If IVN / RTP do not make $5 billion in profits in the next 5 years, where will the money come from? They are not like a government that can print money when they need it. They must do it from production profits, or raise the funds on the open market, by selling equity stake. Who would buy shares in mine that does not make a profit?
    Anxiously awaiting the IA final.
    Until then all we can do is speculate. “B”

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