Interview with J.Aldarjavkhlan, Director of Financing of Housing Corporation

Aug 5 • Mining • 672 Views • 2 Comments on Interview with J.Aldarjavkhlan, Director of Financing of Housing Corporation

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J.Aldarjavkhlan: Non refundable desire is needed for non renewable resources.
Q: Mongolians believe that because OT is resource of Mongolia then the owner should be Mongolia. 34% ownership should prove this whereas the tax issue is responsibility of any property making firm?
A: From the start we can have all the rights to control or make regulations whether if we own 1 or 34%. We can make the 34% ownership into 1% golden ownership which is the same as the 34% but Mongolia need not to invest 2 billion USD. People think of this as number 1 but the hidden benefit is the same. 30-50% ownership is common with our neighbors but 1% is very common around the globe. In this case the tax should be set at higher level. By doing this the Government can collect 60-70% of the profits.
B: What can you conclude by looking at the IA resolution in 2007 and IA of today?
A: Resolution made in 2007 says that we collect all taxes except the 68% tax. There was some redemption for the first two years. This current draft offers full tax waive but the tax redemption issue should be set lower.
Q: If we compare today’s situation with the situation of the year 2007 then the investors are in a situation of demanding to get the IA deal done due the economic recession. Because of this the government is a vulnerable situation. In this situation is it right to approve the IA deal without losing any further time?
A: We should not get tempted to any demand. Of course the government will lose some tax revenues for another few years but if we can get Tavan Tolgoi into economic cycle then we can cope for another 3 years. Instead of offering tax waive or redemption we should postpone the agreement and get the taxes we should get. We should scrape the 68% tax issue. This tax is blocking the way of many investments into the country. This was one of the big issues discussed during the meetings.
Q: Can you agree that if the agreement is signed today then Mongolians can benefit from this straight away and worry less about economic recession?
A: OT project will not give any benefit for at least 3 years even if the agreement is signed today. Well, it might increase the amount of wages, benefits and pensions by small about but can’t provide cash to the population. There are no such experiences around the world anyway.
Q: How was the environment during the discussion?
A: During the discussions one or the other side left the hall quite few times due to frustration because of unsupported proposals and arguments. In general we talked around the 68% tax issue. To be honest we had some achievements because of the 68% tax issue. If we did not have the 68% tax law in the first place then we would be few steps behind. In terms of today, this IA issue of OT is working like a guide to all other IAs. Investors coming from abroad will also ask for tax redemption by stating the OT IA. Therefore we have to carefully look at this as it will lead to many other mistakes later on.
Q: There was a strong message that if we act so harsh then the investors will leave the country Mongolia will not benefit?
A: There is less chance of them leaving as they explored this epic amount of resource. Previously I used to think that what if Rio Tinto leaves but now I truly think they will not leave.
Q: I would like to ask 1 question as you have studied in Australia. Mongolians like to compare the industry with Australia. If most things were the same as Australia then would Australians propose the same IA deal as Mongolia?
A: Rio Tinto is the No 1 in terms of underground mining. If this group works in Mongolia then it is very beneficial to us but it is impossible to make such a huge IA without tax. I personally think that Rio Tinto can’t make deal with tax waiver or redemption in Australia if OT was found over there. In terms of Mongolia we have lots of barriers and we are eager for development. They know all our situations therefore they are demanding such things. Whatever happens, non refundable desire is needed for non renewable resources.

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2 Responses to Interview with J.Aldarjavkhlan, Director of Financing of Housing Corporation

  1. investor says:

    This persons comments show why the IA is not completed. He looks at the profit only, but has little concept of how industry works. Industry sells stock to gain money for projects. Without company profits for the stock holders to share, there is no investment, no production. China and Russia may offer financial assistance now, but what gain in future mining projects does that give them. How is that any better? I see this like the story of the man with a dead camel heavy with treasure. He can not carry his treasure or leave it for others to find. He waits for help, and accepts aid to survive. A man with a horses and wagon sees him and offers to carry him and his treasure to civialization for a share of his wealth. The standed man is insulted and curses the man with the wagon. The wagon goes away, but comes back later to check on the stranded man and offer food and water. The stranded man is suspicious of the wagon man’s greed and sends him away again. After many times of giving aid and offering travel and delivery for part of the treasure the wagon man gives up. The man with the treasure dies.

  2. Barry says:

    There does not seem to be any concern by the Mongolians as to how fast deveopment of OT occurs, they have TT to fall bacl on. Production from TT will NOT happen before OT. Just one draw back to that assumption is (1,000km of railroads to build, without any money to do so.
    I doubt that IVN / RTP will place apriority on mine expansion at OT if the profits are not there. OT could, in the next 10 years produce several million oz of gold per year, but if there is no incentive to expand,production will not be increased. At least not in Mongolia. Money better spent on other mining operations.
    Since there are only 1 or 2 com0panies with experience in underground caving, who will come in to replace RTP?
    Open pit mines are one thing, underground caving is another Yak of a different color.
    Who is going to pay for the city of 10,000 people?
    Who is going to pay for the infrastructure to support the south gobi region mining industry?
    Leave it to the Mongolians and the city will look like Ulanbatar expansion, no running water, no sewers, no electricity, they have set a great example of taking care of their people. NOT.
    Winter is coming, how many Mongolian citizens in Ulanbatar heat with coal? How many have NO electricity.
    I hope they plan better for the growth in the South Gobi region.
    Just my opinion, there is not going to be an agreement on OT for several more years. This will most certainly stop most mining development also. “B”

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