Continued talks on Oyu Tolgoi project

Mar 3 • Mining, News, Politics • 9972 Views • No Comments on Continued talks on Oyu Tolgoi project

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Oyu Tolgoi LLC shareholder’s meeting resumed after Tsagaan sar last week at Ikh Tenger Complex, the governmental hotel. No resolutions or decisions have been made to progress the demands of the Government of Mongolia.

Mining Minister Mr.D.Gankhuyag told MNBTV that further talks will take place in March, and the operational budget was approved after convening a Oyu Tolgoi LLC special board meeting. It means that no further capital expenditure will be made during the month. Both sides have agreed that the show must go on. President and CEO of Oyu Tolgoi LLC Mr.Cameron McRae said that there are issues that will take some time to resolve.

Mongolian government proved its’ willingness to push the investors after Entree Gold licenses surrounding the Oyu Tolgoi LLC licensed area were annulled. If the ore bodies in both of the areas are interconnected it means the deposit is a group. The demand of the government is that it should own 34% out of the Oyu Tolgoi group of deposits. This is how the Mongolian government is interpreting the Investment Agreement.

If the government is going to forfeit the Entree Gold licenses and transfer it to Oyu Tolgoi LLC. It needs to pay several dozen million dollars after a long dispute.

The 2% royalty to Turquoise Hill Resources Inc. is the perhaps the one of the main economic concern for the government. As mentioned in the earlier article, the contractual agreements not agreed by both of the shareholders will not make the Mongolians happy. If the Mongolian government is willing to dispose of such obligations it needs a law to prevent the past and future royalty arrangements by private entities on mining licenses. It also needs to pay the purchase cost of the royalty rights of USD37 million dollars.

International media should note that Mongolia is not calling for higher stakes in the project anymore. The compliance and honoring the agreement is being questioned in these high-level talks. Altering the mine plan or feasibility study without the consent of Minerals Council is on of many facts violating laws and regulations. Rio Tinto should adhere the higher standards, comply with Mongolian laws and regulations and maintain high-moral standards instead of trying to circumvent it.

Moreover, Mongolian government needs to understand and comprehend the economics of the mine. It needs both independent, skillful and experienced legal and financial experts. Recent talks regarding Goldman Sachs Asia having conflict of interest at the time it was advising the Mongolian government shows that the Mongolia does not fully trust the international advisors. We also have to understand and accept that the economic estimations cannot be calculated in precise that government needs it to be.

We will have to wait and see how the dispute will be resolved. Business Mongolia research team is closely watching the event as much as the international media.

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