Mongolia stakes out the management of its vast mineral wealth

Oct 3 • Mining, News • 553 Views • No Comments on Mongolia stakes out the management of its vast mineral wealth

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As the extent of Mongolia’s vast reserves of untapped mineral deposits become apparent, the politicians in Ulaan Bataar are showing sure-footed skills in managing the country’s emerging importance as a strategic player in northeast Asia.
Political leaders have been on a breakneck ride since the country emerged from the wreckage of the Soviet Union in 1990.
As well as trying to master the not always responsive levers of democracy, governments and members of the parliament, the Great Khural, are having to contend with the much more profound reality of the need for cultural change for the country’s nearly three million people.
Most immediately pressing has been how to deal with the hordes of importuning chancers and representatives of international mining companies who have turned Ulaan Bataar into perhaps the most raucous frontier city anywhere.
Successive governments, including the current Mongolian People’s Party (MPP) administration, led by Prime Minister Sukhbaataryn Batbold, have taken two contracts for massive mining developments as on-thejob training and as statements to the world about how the country intends to use its treasure.
One, the first major post-independence prospect, is the Oyu Tolgoi huge deposit of copper and gold in the southern Gobi Desert near the border with China, which is a joint venture between Vancouver’s Ivanhoe Mines and the global mining company Rio Tinto.
The second is in the same region and is the world’s largest known reserves of coking coal at Tavan Tolgoi.
Tavan Tolgoi is entirely stateowned, so the politicians’ approach to the two projects are providing textbook illustrations of both future private and public developments.
The negotiations around the Oyu Tolgoi copper and gold mine have been the most tortuous and time-consuming.
And they are not over. What seemed a done deal in 2009 is now much less so as parliamentary elections loom in June next year and neither the MPP nor its powerful rival, the Democratic Party, want to appear soft on defending Mongolia’s resource inheritance.
Under the 2009 agreement Ivanhoe Mines, now 49 per cent owned by Rio Tinto, would have a 66 per cent interest in Oyu Tolgoi and the Mongolian government would have a 33 per cent interest until 2039, when Ulaan Bataar’s share would rise to 50 per cent.
But the Batbold government is under pressure from opposition parliamentarians to demand a reopening of the agreement and the state getting a half share in the project from the start. The opposition has enough backers for this move to bring a motion before parliament when the new session starts this week.
It is as yet unclear if or how this will affect the timetable for Oyu Tolgoi and is scheduled to begin production late in 2012.

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