Friday, December 28, 2007

Mongolia's Mining Deals are on the Move

Immediately after he took office last month, the new Prime Minister of Mongolia, S.Bayar, stated the government would take full control of Tavan Tolgoi’s mining license, the largest high-grade coking coal mine in Omnogobi aimag. He began talks with license holders of Energy Resources, a consortium of 14 private companies and individuals. Some members stated that they are ready to cooperate with the government for the benefit of national security and interests.
The big mining deal that was expected to be signed between the Government of Mongolia and Canadian invested Ivanhoe Mines Mongolia, Inc., is likely to be reviewed by the Government in the near future. The government and members of Parliament have reportedly agreed that the draft investment agreement for Oyu Tolgoi, a multi-billion dollar copper and gold mining project in the same aimag, should be withdrawn from Parliament and resubmitted. The main opposition force in Parliament, the Democratic Party, agrees that the agreement should be seriously reconsidered as it was “above the laws and regulations of Mongolia”. Local media has speculated that some specific articles of the agreement, including the government’s 34 percent stake, would be renewed at up to 51 percent. According to the agreement, the Canadians were about to enjoy a long term tax break of 68 percent of the windfall profits tax. Increasing the Government’s stake from 34 to 51 percent is a tough job as the current Minerals Law says that the government is eligible to take a 34 percent maximum of strategically significant mineral deposits that were explored by private funding.
Another mining deal in dispute between Mongolia and Russia is Asgat, a polymetallic silver deposit located in Bayan-Olgii aimag. National daily newspapers reported last week that the State Property Committee outlined a proposal for a 50:50 percent ownership and submitted it to the Government which later agreed, and submitted it to the Parliament for discussion. Thus, the big mining deals are “on the move” for the benefit of national interests and security.


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