Mongolia offered half the profits for the right
DALE CROFTS and ROB DELANEY
Sun
CHICAGO — Rio Tinto and Ivanhoe Mines have offered Mongolia more than half of the profits from the Oyu Tolgoi copper project in return for the right to develop the deposit, Rio Chief Executive Officer Tom Albanese said.
Under a 2007 draft agreement, the Asian nation would have the right to a 34 per cent equity stake in the project and related taxes equivalent to 55 per cent of the profits, Albanese said in a Feb. 22 interview in Chicago. The companies are in “ dialog ue and debate” with the government over the agreement, he said.
“ That’s a very fair transaction as measured by any mining jurisdiction in the world that would be one that attracts international c a p i t a l ,” Al b a n e s e s a i d . He declined to comment on whether the country was seeking a greater share of profit.
Companies planning mines in Mongolia are facing opposition f r o m p o p u l i s t l a w m a k e r s demanding that more of the country’s mineral wealth be used to benefit the public. Ivanhoe, based in Vancouver, has been trying for more than four years to reach an agreement with Mongolia for the Oyu Tolgoi project to gain from copper prices that have more than doubled in that period.
In most jurisdictions, the government “ typically” wouldn’t take an equity interest in the project, Albanese said.
The cabinet of Mongolian Prime Minister Sanjaa Bayar is reviewing a draft agreement Ivanhoe reached last year with former Prime Minister Miyeegombo Enkbold, said Nyamaa Tumenbayar, first secretary of trade and economic affairs at Mongolia’s U. S. embassy.
“ The Mining Law of Mongolia allows the government to hold up to 51 percent of stake of strategically important deposits,” Tumenbayar said in a Jan. 14 response to questions, without providing the terms the government was seeking. “ This might be now under the consideration.”
Ivanhoe said Sept. 11 that it may suspend development if it doesn’t win “ timely” approval. Rio, based in London, said in October that it would consider other options if the agreement wasn’t approved by the end of 2007. The two companies already have invested “ hundreds of millions of dollars” i n d e v e l o p i n g t h e p r o j e c t , Albanese said.
Bayar told Mongolia’s parliament in an inaugural address Dec. 13 that his government wants to complete the accord as soon as possible. He also proposed in the address that an independent, international organization be hired to assist the government in reaching a final agreement.
Rio called Oyu Tolgoi “ the world’s largest undeveloped coppergold resource” when it agreed to buy 10 per cent of Ivanhoe in October 2006. The site, about 80 kilometres north of Mongolia’s border with China, contains about 32 million metric tonnes of copper and 31.3 million ounces of gold.