Rio Tinto battles to win over Mongolian public

By David Stanway

ULAN BATOR, Sept 30 | Fri Sep 30, 2011 9:29am EDT

(Reuters) - Global miner Rio Tinto is fighting a legacy of bad publicity as it tries to persuade the Mongolian public a $10 billion copper deposit it took over from Ivanhoe Mines last year is in safe hands.
Some Mongolian politicians have bridled at the idea of giving away most of the Oyu Tolgoi mine -- the world's biggest untapped copper deposit -- to foreign firms, and Rio Tinto has been trying to win the PR war.
On Thursday, Rio Tinto held a briefing to deny claims made by legislators it had accused Mongolia of being "greedy", saying a report by The Australian newspaper had misrepresented its position and had since been corrected.
"Rio inherited a quite difficult situation over the Oyu Tolgoi mine," said Luvsandendev Sumati, a Mongolian pollster.
"I think they have a really difficult task to change public opinion in their favour."
A petition by 20 MPs last month called for Mongolia to boost its share in Oyu Tolgoi from the current 33 percent, and the government has agreed to re-open talks.
Rio Tinto, one of the world's leading producers of copper, iron ore, aluminium and gold, has built up a 49 percent stake in Ivanhoe Mines, which owns two thirds of the Oyu Tolgoi property after an investment agreement signed in 2009.
PR BLITZ
When Rio took full control of the project late last year, it brought along its own brand of public relations savvy, reversing a more combative approach taken by Ivanhoe and its chief executive, Robert Friedland.
The pollster Sumati said part of Rio's public relations problem concerned Friedland, who bought the exploration licence for Oyu Tolgoi from BHP Billiton more than a decade ago following a collapse in copper prices.
"I would say (the perception of Ivanhoe) is rather negative ... because of certain announcements by Friedland in international communities which reached Mongolia," he said.
Mongolians were particularly angered by Friedland's comment that "the nice thing about (Oyu Tolgoi) is that there are no people around, the land is flat, there's no tropical jungle, there's no NGOs," Sumati said.
The market expects Rio to bid for full control of Vancouver-based Ivanhoe once a standstill agreement expires next January.
Andrew Harding, chief of Rio's copper division, played down talk that rifts with Ivanhoe were hurting the project, adding that the takeover of Oyu Tolgoi's management was a natural move.
"Ivanhoe is a company with probably 60 people. Rio Tinto is a company with 77,000 people, and established systems for mine management," he told reporters in Ulan Bator earlier this week.
The Oyu Tolgoi project, expected to produce 400,000 tonnes of copper a year over its 50-year lifespan, has transformed the South Gobi region, covering its bleak landscape with roads, pylons, construction camps, residential buildings and warehouses.
Cameron McRae, Rio's Mongolia country manager and chief executive of Oyu Tolgoi LLC, the entity running the mine, said the project would contribute about five percentage points of annual GDP growth for at least a decade, but the company also sought to stress its social commitments.
It has set up a microfinance facility for local businesses, and is also setting up colleges and vocational training.
"If you want a workforce that is healthy and productive and mentally well adjusted to working in the mine industry, you are going to have to invest in it," McRae said.

BATTLING PERCEPTIONS
Rio is studying the environmental impact of the project, but opponents remain concerned about local water supplies.
The company said just a third of a newly discovered aquifer around 70 km from the project would be used during the mine's lifespan, but Munkhbayar, an activist who has been campaigning against the mining sector disputed the figures.
"The Gobi's water resources will be used in full in 7-10 years, and that's why they are trying to divert water from central and northern regions," he said.
Rio is also trying to counter the perception that the project, just 80 kilometres from the country's border with China, will bring more benefits to Beijing than Ulan Bator.
While it makes economic sense to focus on China, currently Mongolia's only viable market, the government has to balance its financial interests with its geopolitical ones.
It has already sought out other options when it comes to its other major strategic resource, the nearby Tavan Tolgoi coal mine, and plans to build train routes that will provide access to Russia's rail network and its far eastern ports.
McRae said China remained Mongolia's only natural market, adding that "the real issue" was building the infrastructure that will deliver copper to the border and allow Mongolia to sell at international prices rather than at a discount.
But whatever the economics involved, the suspicion remains that Chinese interests are being prioritised, said Dugersuren Sukhgerel, executive director of a non-government organisation known as Oyu Tolgoi Watch, which campaigns against the project.
"If you look at the international and domestic discussions, it is clear that the only reason we are trying to attract investment is because we have a huge and hungry market in the south -- China," she said. (Editing by Will Waterman)

Source:Reuters news service

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Mistah Khurts, he free

TO THE surprise of many, Bat Khurts, the head of Mongolia’s National Security Council, is back at his desk in Ulaanbaatar, and not sitting in a German prison, awaiting trial for his alleged involvement in a kidnapping in 2003. The charges that allowed his detention have been dropped. Among those surprised was the Foreign Office in Britain, apparently, where Mr Khurts was arrested last year in controversial circumstances. He was extradited to Germany in August, and his trial was due to begin on October 24th. Germany’s Chancellor, Angela Merkel is due in Mongolia on a planned visit on October 12th.

Besides affecting Mongolia’s relations with Britain, which are now tetchy, and with Germany, which is in its good books, the case has cast depressing light on the thuggery of Mongolia’s security services. It has also been a constant reminder of a grisly political assassination with long-lasting effects. 

Mr Khurts faced charges related to a kidnapping in May 2003 in the French port of Le Havre. Damiran Enkhbat, a Mongolian who had gone into exile after being freed early from a jail sentence for assault, was duped into going to a McDonald’s for what was supposed to be a meeting with a compatriot. Instead, he was set upon by four men, drugged, bundled unconscious into a car and driven across Europe for four days, before being put on a Mongolian Airlines flight from Berlin to Ulaanbaatar. Mr Khurts, who at the time ran Mongolia’s main spy agency, was accused of being one of Mr Enkhbat's assailants, and the driver of the car. 

On return, Mr Enkhbat was detained as a suspect in the brutal murder in 1998 of Sanjasuuren Zorig, who had been the most prominent leader of the country’s democratic revolution in 1989-90, and was at that time in government as the infrastructure minister. Some of his supporters believe that, at the age of just 36, he was about to become prime minister, and was assassinated on the order of corrupt politicians who saw their interests threatened. His murder remains unsolved.

Despite alleged torture, Mr Enkhbat never admitted any involvement. Amnesty International, a human-rights lobby, campaigned for him when he was denied access both to a lawyer and to medical care for a life-threatening condition. He died shortly after his release from prison in 2006, as a result, believe his family, of his maltreatment in detention. His children, who are German citizens, brought charges against Mr Khurts.

Mongolian officials do not bother to deny that the kidnapping happened. As if it were an unfortunate but rather trifling oversight, they say they have accepted it was wrong, apologised and everybody should move on. Clearly it did not affect Mr Khurts’s climb up the ladder of Mongolia’s security establishment. So it was natural that he should be the man designated last year to take part in talks with Britain on closer security co-operation.

He was given a visa, in response to an application accompanied by a diplomatic note verbale, and his trip was discussed in advance by the countries’ respective ambassadors and their host governments. But instead of chewing the cud over an important partnership, he found himself locked up: arrested on arrival at Heathrow airport. 

Tsogtbaatar Damdin, state secretary at Mongolia’s foreign ministry, says Mongolia remains baffled by what he describes as the British “entrapment” of Mr Khurts. Like Germany, he insists that his release is purely the result of a judicial decision, unrelated to political considerations such as Mrs Merkel’s imminent visit.

That is still scheduled, though there must be a risk it will be derailed by unrelenting turmoil in the euro zone. But, says Mr Tsogbaatar, Mongolia is “grateful” to the Germans, and most Mongolians seem to take it for granted that the release is a goodwill gesture intended to smooth Mrs Merkel's way. Mr Khurts arrived back, if not quite to a hero’s welcome, than at least to the handshake of a deputy foreign minister (who was at the airport by coincidence, says Mr Tsogtbaatar). 

A spokesman at the German embassy in Ulaanbaatar says that Mr Khurts was freed after his country’s second-highest court (after the constitutional court) ruled that charges of “Verschleppung”, a specific form of abduction covered under article 234(a) of Germany’s criminal code, should be dropped. This was the count which justified his detention. Charges of “deprivation of freedom” and “causing bodily harm” still stand, but Mr Khurts seems unlikely ever to face them.  

The German spokesman says there were contacts with Britain before Mr Khurts arrived back in Mongolia on September 27th. But two days later, a foreign-office spokesman contacted by The Economist was unaware that he was free. Indeed, Germany seems to have managed the release very quietly. Few if any German and British newspapers have mentioned it. 

Britain denies Mr Khurts was entrapped, and also emphasises the separation of its judicial and political processes. Indeed, having managed to antagonise Mongolia, a small but booming economy, with what turned out to be a fool’s errand of an extradition action, some officials may be wishing they were more co-ordinated than they are.

Source: www.economist.com

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Mongolia hands it to a cast of neighbors

By Peter Lee


ULAN BATOR - Before embarking for the United States, Mongolia's President Tsakhiagiin Elbegdorj sat down with the Washington Post for a charm offensive, at least in terms that Mongolians understand: dispensing comparisons to Genghis Khan that they, at least deem flattering.

Elbegdorj has lessons for USA from Mongolia's past
As the leader of a diminished land that was once an invincible superpower, President Tsakhiagiin Elbegdorj has some advice for Americans fatigued by the burdens of global power: Remember Genghis Khan, and stick with your friends. "It is tough, but Mongolia was the biggest power in the world, and

 
we had the same responsibility," Mr Elbegdorj said ... Genghis Khan's warriors killed lots of people, to be sure, but according to the president ... it was done in a good cause.

"Do you think we just went to places and killed?" Mr Elbegdorj said. "No." Mongolia, he said, used its muscle to keep trade along the Silk Road flowing and to enforce a written law. And "when there was a killer, or in today's expression, a terrorist nation," he said, "we were God's will to make them peaceful ... When there was a poor nation, we helped them."

Perhaps President Barack Obama did not appreciate being compared either to Genghis Khan, or having the United States regarded in terms similar to the currently impoverished, land-locked nation of Mongolia.

During the obligatory group photo of world leaders attending the opening session of the United Nations General Assembly, Obama chose to wave at somebody behind the camera as the picture was snapped, thereby obscuring the face of the supremo standing next to him.

The face behind the hand? Mongolia's President Elbegdorj.

Talk to the hand, President Elbegdorj.

America's faux news comedy program The Colbert Report had a hearty laugh at Mongolia's expense, warning that the affront endangered America's access to Mongolian pony races, fermented mare's milk and throat singing. [1]

Maybe Mongolia will have the last laugh, instead.

As the United States lumbers into a decade of economic stagnation and political gridlock, Mongolia is poised to double the per capita gross domestic product (GDP) of its citizens at a single stroke and grow its economy at a rate of almost 10% over the next few years.

Key to Mongolia's economic future - and its primary political challenge - is development of its immense mineral resources of copper, gold, coal and uranium.

The Scylla and Charybdis of Mongolian economic policy are the twin threats of resource nationalism and resource diplomacy. The vital indicator that Mongolia is open for business is the Oyu Tolgai copper and gold mine in the Gobi Desert.

After years of negotiation (and repeal of a windfall profits tax that foreign resource companies deemed onerous), in 2009 the Mongolian government struck a deal for a joint venture between its state-owned resource giant, Erdenes MGL LLC, and a foreign partner, Ivanhoe Mines (minority owned by Rio Tinto, which will be the actual mine operator).

The mine will take about US$6.3 billion to develop, so the government agreed to limit the Mongolian share of the profits to 34% for 30 years, to allow the foreign partners to recoup their investment.

This was seen as too sweet a deal by certain members of the Mongolian legislature, who recently demanded that the national share be bumped up to 50% immediately.

Elbegdorj, who had indicated during his presidential campaign in 2009 that he favored a 50% deal, acted quickly and favorably to the request. On September 25, his Mining Minister, D Zorigt, announced that the government wanted to get to the 50% level sooner aka not immediately. [2]

The stage is set for the inevitable horse-trading - and threats from the foreign side that pushing too hard on Oyu Tolgoi will damage the perception of Mongolia as a hospitable environment for foreign investors on other, equally critical projects.

Upon receipt of Zorigt's letter requesting negotiations on the time frame, Ivanhoe (which has already sunk $3 billion of its own and Rio Tinto's money in the project) responded:

"The investment agreement has been fundamental in building Mongolia's reputation as an increasingly reliable and stable destination for foreign investment," Ivanhoe said. "With many significant resources projects still to be financed and developed - including the proposed overseas listing of Erdenes Tavan Tolgoi - Ivanhoe Mines is confident that Mongolia's leadership understands the fundamental importance of Oyu Tolgoi's contractual commitments and stabilized investment agreement that were formalized less than two years ago. [3]

Erdenes Tavan Tolgoi is Mongolia's other major near-term resource play.

It is also Elbegdorj's chance to demonstrate that his brand of enlightened resource nationalism can get a mega-project off the drawing board and into production more quickly and equitably than his political rivals.

So far, the results appear rather mixed.

Tavan Tolgoi is called the second-largest coal deposit in the world: 7 billion tons of thermal coal (for power plants) and coking coal (for blast furnace operations in steel mills) near the Chinese border in the Gobi Desert (and quite close to Oyu Tolgoi).

Remarkably, China is interested in Tavan Tolgoi, because it represents a source of supply superior to many of its own mines.

Mongolia currently lacks the financial, technological, and logistical wherewithal to develop Tavan Tolgoi itself, a project that would require well over $10 billion in investment.

Crude business logic would seem to dictate opening Tavan Tolgoi to Chinese development.

However, allowing the Chinese to swarm into the Gobi Desert, dig up a big chunk of the motherland, and ship it off to China is a non-starter.

Beyond a generic affront to the resource nationalist sensibilities of the Mongolian electorate, a Chinese monopoly on Tavan Tolgoi is impossible.

China's extensive economic penetration of Mongolia is widely resented, and hostility to China is the default setting of Mongolian politics.

On the popular level, it is not quite safe for Chinese to walk the streets of Mongolia's capital, Ulan Bator. Mongolia's democratic miracle does not encompass anything approaching full employment, so any plan for economic development that permits Chinese workers relatively free access to a Mongolian megaproject is political suicide.

On the elite level, Mongolia cannot be excessively cavalier in its relations with China, which accounts for over half of its international economic activity.

The attempt to keep China at arm's length is expressed diplomatically and discreetly as Mongolia's "third neighbor" policy. The first two neighbors are China and Russia.

The "third neighbor" is pretty much any nation that Mongolia can entice into a political and diplomatic alliance to counter China. The list of "third neighbors" is theoretically infinite, but for practical purposes consists of the United States, South Korea and Japan and, to a lesser extent, India.

Tavan Tolgoi looks like an attempt to gratify all the neighbors that ends up satisfying on one. As the plan stands today:
S

Erdenes MGL has set up a subsidiary company, Erdenes Tavan Tolgoi, which holds the mining licenses. Erdenes TT has divided the coal reserves into two fields: East Tsankhi and West Tsankhi. West Tsankhi is Mongolia's exclusive slice of coal heaven, containing a majority of the coal reserves, primarily thermal coal, which will be exported largely to China. East Tsankhi - the coking coal - is to be awarded to a foreign group that is expected to pay handsomely for the privilege of developing the mine. High quality coking coal of the sort available at Tavan Tolgoi is a valuable international commodity attractive to steel mills in "third neighbors" in South Korea and Japan, as well as China. In the first iteration, the Mongolian government announced that East Tsankhi would be developed by a consortium consisting of China's Shenhua (40%), America's Peabody Coal (24%) and the Russian Railway Corporation (18%) and the Mongolian Railway Corporation (18%). After an outcry from South Korea and Japan - who are, after all, Mongolia's largest aid donors - the government backtracked and announced that the percentages would be juggled to make room for representatives of the two nations. Further complexity is pitched into the situation by the most exciting element of Mongolia's resource play: the plan to list Erdenes TT simultaneously on the Hong Kong, London, and Ulan Bator stock exchanges.   Thirty percent of Erdenes TT stock will be sold in an initial public offering (IPO) to international investors through the good offices of Deutsche Bank and Goldman Sachs, with an assist from BNP Paribas SA and Australia's Macquarie Group. Estimates for the value of the IPO careen from $1.5 to $10 billion, making Erdenes TT the 2012 wet dream for the international investment banking community. Avidity for underwriting the IPO apparently inspired a mass migration of competing financiers to Ulan Bator in the dead of the Mongolian winter, and provoked a shoving match between competing bankers in one of Ulan Bator's premier drinking establishments. Ten percent of the stock will be given away to every citizen of Mongolia, giving ever Mongolian title to 538 shares of stock. Mongolian national companies (with no foreign ownership) will be given the opportunity to buy another 10% "at face value". The mechanism to credit each Mongolian, including its itinerant population of nomadic herders, is apparently not yet finalized. In distributing the shares, hopefully the debacle of privatization in the 1990s - when a predatory and well-informed minority duped many Mongolians into giving up their shares in privatized state corporations for a pittance - can be avoided this time. The Elbegdorj government is anxious to follow through on a campaign promise to demonstrate the concrete economic benefits of its strategy to ordinary Mongolians. It is desirable, therefore, that the IPO go through per schedule at the beginning of next year. It is even more important to nail down the East Tsankhi consortium, because finalizing the deal will hopefully result in the payment of hundreds of millions of dollars in pre-paid taxes in time to give Mongolians some walking-around money prior to the upcoming elections. As Mining Minister D. Zorigt put it in an April 2010 interview: Q: Sources confirm that the pre-payment will be higher than Oyu Tolgoi. How much will it be? D Zorigt: We will work to gain more than Oyu Tolgoi. [4] China already obligingly signed a $250 million contract for Mongolian coal to be delivered over the next five years. "Obligingly" may be stretching it, because it appears that China is getting the coal at below-market price. The fire-sale price was apparently necessary so that the Mongolian government could move coal out to China this summer and rustle up some much-needed cash for its Human Development Fund. [5] However, Mongolia's pursuit of third-neighborliness will put its ambitious Tavan Tolgoi timetable to the test. The key problem is the railroad. Russian involvement in the Tavan Tolgoi East Tsankhi is important to the Mongolian government since it would enable construction of a rail line connecting the mine to the Russian rail system and onward to Pacific markets such as Japan and South Korea, thereby eliminating sole (and risky) reliance on the good offices of China in moving the coal to market. China cuts transportation links to Mongolia whenever Mongolia commits a Dalai Lama-related offense. It also stands accused of unilaterally fiddling with freight rates for Mongolia-related cargo, so a second rail line is a logical piece of geopolitical insurance. In some quarters, the Russian rail line is touted as the economic and geopolitical salvation for Mongolia, as it will shift the country's center of gravity away from China and toward Russia and Japan and South Korea. The rail line is an expensive precaution, however. Tavan Tolgoi is only 200 km from the Chinese border and not much further from a linkup with the Chinese rail system. The Russian line will require 600 to 900 km of new construction costing up to $3 billion on the Mongolian side of the border and perhaps another $2 billion on the Russian side, depending on the route chosen. Operating costs are another problem. By the time a Russian port is reached 5,000 km away, freight costs may have tripled (and profits reduced profits by 90%) compared to a China export channel, according to the World Bank. [6] Private investment was already available to build the line to China. But the Mongolian government blocked the project in favor of the Russian line - which has already attracted the skepticism of the World Bank and is unlikely to be greeted enthusiastically by other international lenders, let alone the private sector. Originally, the Russians laid down a marker that they expected 25% of Tavan Tolgoi in return for building the railroad. It seems the Mongolian government hoped to offer less. To ensure its participation in the Tavan Tolgoi project on appropriate terms, Russia allegedly cut off deliveries of diesel fuel to Mongolia over the summer of 2010, when the Mongolian government was debating its strategy. [7] At face value, the Russians may be getting more than 25% of the pie. Russian National Railways is slated for 18% and Mongolian National Railways - in which RNR holds a half-interest - is reportedly getting another 18%. [8] The Russian demand highlights the shaky economic underpinnings of the project - and Russian doubts that the gold-plated insurance policy will pay off. If economic logic reasserts itself after the mine is set up, the China rail line gets built, and the operators decide to ship coking coal out through Qinghuangdao for $55 per ton instead of through Russia for $84 per ton or more, the Russian tracks will be idle and the investment will have to be recovered by claiming a 25% share of profits from the China-routed exports. [9] For good measure, the Mongolian government brought in another "third neighbor" to Tavan Tolgoi. Peabody Coal is valued for its technical and environmental good offices, for giving America - missing in action in Mongolia - some skin in the game, and, presumably, further diluting the Chinese stake in the enterprise. China's Shenhua Energy is already saddled with two unwanted partners and an effective 25% tax on profits in order to subsidize a Russo-Mongolian strategic rail link. Now, the word is out that its share may be trimmed further to accommodate Japan and South Korea. And if the Mongolian government decides to block the China rail line in order to keep the Russian rail line humming, shipping coal to China by truck will become a logistical impossibility as production grows to a projected 30 million tons per year. China is undoubtedly feeling the love by now. It also probably feels it has the leverage as well. The spat between the Mongolian government and Ivanhoe/Rio Tinto revealed that an important source of anxiety is the possibility that China might not provide the access to its electric power grid needed to make the Oyu Tolgai copper project and its US$ 6 billion investment feasible. Electricity for Oyu Tolgai in exchange for a rail line to China for Tavan Tolgai? Maybe. West Tsankhi's premium coking coal might be salable through Russia, albeit with negligible profits; but if East Tsankhi doesn't get a rail line to China, Tavan Tolgoi's millions of tons of commodity thermal coal can't be delivered competitively to Chinese power plants. And it's not going to go anywhere else. If Oyu Tolgai blows up, the Mongolian government can't get the lions and lambs lay down together in Tavan Tolgoi West Tsankhi, and it looks like the government is unwilling to do what needs to be done to ensure East Tsankhi's competitiveness, then international finance's enthusiasm for the Erdenes Tavan Tolgai IPO is likely to evaporate. That IPO is a bonanza that the Mongolian government is really counting on to kickstart Mongolia's economic growth, catapult Mongolia in the first rank of resource economies, and line the pockets of deserving and undeserving Mongolian citizens alike. Under these circumstances, it is probably best that Mongolia's mining negotiations are conducted in secret and the Mongolian public isn't exposed to the contortions needed to simultaneously keep the Chinese on board and the "third neighbor" policy moving forward. Notes 1. Click here to see the video. 2. Mongolia presses on key mine project, Mongolian Economy and Finance, Sep 26, 2011. 3. Ivanhoe stands firm on Oyu Tolgoi project agreement ownership split, Mongolian Economy and Finance, Sep 27, 2011. 4. D Zorigt: Working on to gain more from Tavan Tolgoi than Oyu Tolgoi, Business-Mongolia, Apr 23, 2010. 5. Chinalco signs $250 million deal with Tavan Tolgoi, Business-Mongolia, Jul 27, 2011. 6. Click here for the World Bank report. 7. Japan and Korea to receive stakes in Tavan Tolgoi, The Business Council of Mongolia, Sep 21, 2011. 8. Ulan Bator Railway, Jane's, Jan 4, 2011. 9. Exporting the Tavan Tolgoi Coal: Choosing the Best Way Out, Mining-Mongolia. Peter Lee writes on East and South Asian affairs and their intersection with US foreign policy. Source:www.atimes.com/atimes/China/MJ01Ad02.html

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Ivanhoe Mines expects the Mongolian government to support the Oyu Tolgoi investment agreement

Schedule for supply of interim electric power remains on track

Statement
VANCOUVER, CANADA – Ivanhoe Mines said in a statement today that the investment agreement for the Oyu Tolgoi Project remains a fair and legally binding contract that deserves and requires the unqualified support of all parties.
Media reports during the weekend quoted Mongolia’s Mineral Resources and Energy Minister D. Zorigt as indicating that Ivanhoe Mines and Rio Tinto would receive a letter from the Mongolian government asking the companies to consider entering into discussions to address a possible change to the investment agreement. A reported potential proposed change would see acceleration of the government’s right to increase its current 34% interest in Oyu Tolgoi to 50% by purchasing an additional 16% at fair market value at some future point, after Ivanhoe Mines and Rio Tinto recoup their capital investments in the project.
Earlier this month, 20 members of Mongolia’s national parliament petitioned the government to pursue changes to the investment agreement ahead of a general election set for next June.
The investment agreement, which was negotiated over five years, signed in October 2009 and became fully effective in March 2010, complies fully with all Mongolian laws and was negotiated by the government in accordance with all resolutions issued by the Mongolian parliament. The agreement has been the basis for the commitment by Ivanhoe Mines and its strategic investor, Rio Tinto, to invest billions of dollars in the development of the mining complex. Ivanhoe Mines discovered the Oyu Tolgoi deposits and holds a 66% interest in the project.
Oyu Tolgoi already has created jobs for thousands of Mongolians and has helped Mongolia to achieve one of the highest growth rates of any developing country in the world. The project’s benefits also have been shared among local businesses and suppliers, which now form an integral and growing part of the project.
Rio Tinto Chairman Jan du Plessis hosted a milestone “Half-Way There” ceremony at the site of the Oyu Tolgoi complex yesterday, which was addressed by Mineral Resources and Energy Minister Zorigt, former President N. Bagabandi and project executives, marking 50 per cent completion of the construction of the mine’s first phase. Speech texts will be posted to the Ivanhoe Mines website. The project’s progress has been made possible by the support of an exceptionally dedicated Mongolian and international workforce and an excellent working relationship with the Mongolian government and its regulatory authorities.
2
The project is on track toward production of first ore in 2012 and commercial production of copper,
gold and silver concentrate in the first half of 2013.
The investment agreement has been fundamental in building Mongolia’s reputation as an increasingly
reliable and stable destination for foreign investment. With many significant resources projects still to be
financed and developed – including the proposed overseas listing of Erdenes Tavan Tolgoi – Ivanhoe
Mines is confident that Mongolia’s leadership understands the fundamental importance of Oyu Tolgoi’s
contractual commitments and stabilized investment agreement that were formalized less than two years
ago.
Under Mongolia’s Minerals Law, Ivanhoe Mines was entitled to request and enter into an investment
agreement with the government that guaranteed a stable tax, fiscal and operational environment for a
30-year term. The investment agreement provides that following renewal of the investment agreement
after expiry of its term the government may negotiate to acquire an additional 16% interest in Oyu
Tolgoi, on agreed terms, to take its total participating interest in the project to 50%.
Power supply assurances
Ivanhoe Mines has noted comments attributed to Rio Tinto executives at an investor briefing last week
regarding the possible delay of delivery of electric power to Oyu Tolgoi. Ivanhoe Mines remains
confident that the necessary agreements between Mongolia and China will be satisfactorily concluded
to secure the timely supply of interim, high-voltage electric power from China to ensure that Oyu Tolgoi
can begin commercial production on schedule.
Oyu Tolgoi representatives have been assured that inter-governmental negotiations between Mongolia
and China are continuing to progress and that the Mongolian government also is confident that interim
power for the project will be provided from China. The Mongolian government recently began
engagement with China’s National Development and Reform Commission on the matter. Erection of
steel towers for an 86-kilometre, high-voltage power line from Oyu Tolgoi to the Mongolia-China border
currently is 82% complete. In a landmark strategic partnership agreement signed by the Mongolian
prime minister and Chinese premier during a bilateral summit meeting in mid-June this year, China
committed to cooperate with Mongolia and support the supply of electric power.
Ivanhoe Mines reaffirms the accuracy and completeness of its previous disclosures on power supply,
which are a matter of public record. Ivanhoe Mines has a rigorous system of disclosure controls and
protocols to ensure that material information is disclosed in a timely manner so that all Ivanhoe
shareholders have access to essential information. Ivanhoe will be informing Rio Tinto of its objections
to a number of recent statements and will ask Rio Tinto to adhere to a policy of public disclosure that is
accurate, clear and complete on key details and fair to all Ivanhoe shareholders.
About Ivanhoe Mines
Ivanhoe Mines (NYSE, NASDAQ & TSX: IVN) is an international mining company with operations
focused in the Asia Pacific region. Assets include the company’s 66% interest in the Oyu Tolgoi coppergold-
silver mine development project in southern Mongolia; its 57% interest in Mongolian coal miner
SouthGobi Resources (TSX: SGQ; HK: 1878); a 62% interest in Ivanhoe Australia (TSX & ASX: IVA), a
copper-gold-uranium-molybdenum-rhenium exploration and development company; and a 50% interest
in Altynalmas Gold Ltd., a private company developing the Kyzyl Gold Project in Kazakhstan.
Information contacts
Investors: Bill Trenaman +1.604.688.5755. Media: Bob Williamson +1.604.331.9830



Source:Ivanhoe Mines

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Mongolia denies reports of security official's release

ULAN BATOR, Sept. 26 (Xinhua) -- Mongolia on Monday denied a German newspaper report that a top official of the National Security Council has been freed from German prison. "That would be good news. However, it is not true," said Deputy Foreign Minister Bayarbaatar Bolor. Bat Khurts, head of the executive office of Mongolia's National Security Council, was arrested under a European arrest warrant in September 2010 on suspicion of kidnapping Damiran Enkhbat in Europe in 2003 and then taking him back to Mongolia. Enkhbat, who was charged with the 1998 assassination of a Mongolian minister, never confessed to the crime during imprisonment. He died shortly after his release in 2006. The Mongolian government claimed that Khurts was on a "special mission to meet with British officials and discuss bilateral cooperation on security issues" when he was arrested. Britain extradited Khurts to Germany on Aug. 19 as Enkhbat's children, who are German citizens, filed charges against Khurts. On Saturday, a German newspaper said that Khurts has been freed from custody and may have already left for Mongolia. Some Mongolian news organizations also reported that Khurts was already in Mongolia and was being treated in a place away from public eye. But the Mongolian official has denied the report. "I can 100 percent guarantee that Khurts is not in Mongolia and did not arrive in Mongolia and he is still in German prison waiting for trial." The Mongolian government hired two German criminal lawyers to defend Khurts, who would go on trial in Germany on Oct. 24. This case has drawn much attention in Mongolia. German Chancellor Angela Merkel plans to visit Mongolia in the first week of October. Mongolian officials said the visit would not be affected by the Khurts issue. Source:Xinhua news agency

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Culture Shock Mongolia

Mongolia is an amazing place to visit, and one of the best places in the world to ride. The Northern route takes you through some of the best Mongolia has to offer, and although you miss the Gobi desert by taking it, you still get to see herds of camels, vast open steppes, mountains and even a couple of sand dunes. It is not an easy land to ride through however. “Roads” (read dirt paths) turn treacherous with rain and sand lurks mixed in with normal dirt, causing the back wheel of your bike to unexpectedly try to overtake your front. And perhaps the greatest tragedy is that food is of the subsistence variety rather than the delectable tastes that other parts of Asia are known for. Mongolia can be a shock to the system. Culture shock, much like an addiction or a grieving process, has a series of phases that the sufferer struggles through in an effort to come to terms with their new environment, and we hit them all in Mongolia. You begin to think, “If they would only just stop punching us, then this land would be perfect…” Phase one is the honeymoon period. This is where everything in your new environment is shiny and bright, and nothing can ever destroy the love you have for your new surroundings. For me, this was demonstrated by the experience of waking up just before sunrise to the faces of two strange men who had peeled back the entrance to our tent and were grinning in and waving at us. A person may find that sort of thing slightly disconcerting, but we weren’t going to let it get to us. We were camped next to a mountain lake, the view was breathtaking, I had survived driving my bike off of the side of a mountain the day before, and as we found out visitors in the middle of nowhere is quite normal in Mongolia. (the fact that back home, I threaten friends with death should they ever call me before 10:00am is besides the point) Private sphere? What private sphere? By the end of our time in Mongolia we knew that if no one was waiting for us when we crawled out of the tent, it was only a matter of time before they would arrive. Usually, exactly the amount of time it takes to boil the water for tea or coffee. No sooner would our morning beverage be ready than our visitor was there, horse in hand (quite literally). We had previously been warned that nomadic Mongolians do not have a sense of the private sphere. After all, when you live with your entire family in a circular tent there is no such thing as privacy. We could walk unannounced (and in our view, uninvited) into their homes for tea and dried yak cheese and no one would be surprised. So why shouldn’t they do the same to us? Most of the time we welcomed it. It was great to check out each others’ bikes or look over their horses. Their sense of timing did give rise to the feeling we were being watched however (given their propensity to show up just as the coffee or tea was ready), and this feeling was later confirmed when they would randomly whip binoculars out of their coats to spy the horizon. Travelers were not so alone in this land after all. Culture Shock: Phase Two Phase two is the negotiation period. This is when things begin to feel slightly uncomfortable, and you may find yourself thinking that if this new land was just a little more like home, then it would be better. In our case it wasn’t the complete loss of our personal space that caused this feeling: we accepted the common experience of making a trip into a shop and having people rub their hands up and down over our back protectors while making “ooh” sounds. Less welcome however was the occasional punch to test out our back protectors’ strength. You begin to think, “If they would only just stop punching us, then this land would be perfect…” …we were almost there when the German wennt and messed it all up by deciding he needed some meat. Phase three is the adjustment period. This is when things begin to settle down, you no longer find everything to be darling, but neither do you feel like crying at the sight of yet another mutton pancake. For us fermented horse milk was something we still wanted to avoid, but salty milk tea became pretty yummy. We thought we were safe, and about to enter the final phase. This is the phase of mastery, the acceptance and meshing of both cultures together, and we were almost there when the German went and messed it all up by deciding he needed some meat. The price of a goat As I’ve mentioned, Mongolia may be high on the outdoor enthusiast’s list of must-sees, but a foodie may find themselves wishing for death. I was torn. I loved just about everything about this land, except for the strange back-fondles and the lack of good food. Every day the menu was cookies for breakfast, mutton pancake for lunch, and pasta with mystery sauce for supper. Every single day. So one day the German and his brother got it into their heads to ask one of our neighbors for meat. Their logic went along the lines that Mongolians must have more food in their homes than what was available in the little stores. Therefore it shouldn’t be too hard to buy some meat off of them to have a BBQ. We decided to appoint the German’s little brother Jannick as our meat ambassador. Something got lost in translation. At the request for meat our Mongolian friend’s eyes lit up. He jumped on his motorcycle to return with his kids. Then he abducted the German’s brother, brought him to his ger, and had his wife feed him cheese and ply him with horse milk. With Jannick safely in the care of his wife, he sped off to his herd of goats and proceeded to strap a live one onto the back of his bike. Upon returning, he then whipped the goat off of the bike, slit its chest open, reached in and flipped said goat’s heart over. Truthfully the motorcycle ride was probably worse for the goat than the actual death, but the event left everyone a little dumbfounded. Moreover, we had no idea what to pay him. What do you pay someone who has just sacrificed a goat in your honor? If you ever find out, let us know. Until then I need to struggle with how squeamish I’ve become every time I see a goat on a motorcycle zoom by, and yet how happy I was to find a ready-made burger (as in someone else killed it out of my sight) on my birthday. Culture shock mastery, I fear, continues to elude me. Source: www.theindependent.ca

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Mongolia Wants to Raise Stake in Oyu Tolgoi, Minister Says

By Soraya Permatasari and Nichola Saminather

(Adds comment from analyst in fourth paragraph.)

Sept. 25 (Bloomberg) -- Mongolia wants to bring forward the raising of its stake in the Oyu Tolgoi copper project that’s being developed by Rio Tinto Group and Ivanhoe Mines Ltd. to 50 percent from 34 percent, according to the minerals minister.

“We have sent the proposal to Ivanhoe to renegotiate the timeframe for us to increase the government stake,” Dashdorj Zorigt told reporters at Oyu Tolgoi today. Such an increase is permitted after only 30 years, according to a summary of the $16 billion project agreement from London-based Rio Tinto.

Countries across Asia, Africa and Latin American are seeking greater control of the mineral and energy resources on their territories as rising commodities demand boosts prices. So-called resource nationalism is the biggest business risk to global mining companies, Ernst & Young LLP said last month.

“Alarm bells would ring, that if they change the rules here, are they going to change it again, are they going to take more than 50 percent,” Gavin Wendt, founder and director of Mine Life Pty in Sydney, said by phone today. “Rio and Ivanhoe obviously won’t be happy about it.”

The project, 66 percent owned by Ivanhoe Mines, is half way through completion and will be one of the world’s five-biggest copper mines, according to Rio, which controls Oyu Tolgoi’s management. Ivanhoe, 48.5-percent owned by Rio, spent more than six years negotiating with Mongolia before reaching an agreement in October 2009 to develop the site, which may open in 2013.

‘Unstable Environment’

“An unstable environment, where changes to agreements are forced, leads to investors being very apprehensive,” Cameron McRae, Rio Tinto’s Mongolia country director, said in the capital, Ulan Bator, yesterday. “What we are demonstrating is the investment agreement is a contract. We’re going to honor it and we expect the government to honor it.”

A group of 20 Mongolian lawmakers wrote to Prime Minister Sukhbaatar Batbold on Sept. 7 demanding the Oyu Tolgoi accord be revised to give the country a 50 percent holding, China’s Xinhua News Agency said Sept. 20. Mongolia will seek to revise the terms for Oyu Tolgoi, Finance Minister Sangajav Bayartsogt told News.mn portal in an interview published on Sept. 20. Mongolia has appointed chief of the cabinet office Chimed Khurelbaatar to start talks with the miners, Xinhua News reported on Sept. 22.

Coal Deposit

Mongolia may also seek to change the allotment of stakes in the Talvan Tolgoi coal deposit to investors including Peabody Energy Corp., the largest U.S. coal producer. The potential ownership changes at the country’s two biggest mineral developments come ahead of parliamentary elections next year.

Oyu Tolgoi may have average annual output of 450,000 tons of copper and 330,000 ounces of gold, Rio said. World demand for copper will grow 40 percent to 27 million tons by 2020, according to a Sept. 8 presentation from the company. Calls to Ivanhoe outside office hours today were not immediately returned.

Rising demand led by China, the largest copper user, coupled with a global supply deficit pushed the price to a record $10,190 per ton on the London Metal Exchange in February. The three-month contract for the metal used to make pipes and wires ended at $7,360 per ton on Sept. 23.

“As a mining company, we are very aware of the impact our operations have on our host countries and particularly in Mongolia,” Rio Chairman Jan du Plessis said in a ceremony marking the 50 percent construction of the project in Oyu Tolgoi today. The company “will continue to develop partnerships with the government of Mongolia, communities and businesses.”

--Editors: Jake Lloyd-Smith, Rebecca Keenan
To contact the reporters on this story: Soraya Permatasari in Melbourne at soraya@bloomberg.net; Nichola Saminather in Sydney at nsaminather1@bloomberg.net
To contact the editor responsible for this story: Jake Lloyd-Smith at jlloydsmith@bloomberg.net

Source:Bloomberg news service

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Rio Tinto says will talk to Mongolia on copper mine deal

By David Stanway

OYU TOLGOI, Mongolia, Sept 25 | Sat Sep 24, 2011 11:59pm EDT

(Reuters) - Global mining giant Rio Tinto will respond to any request from the Mongolian government to discuss its investment in the country's giant Oyu Tolgoi copper-gold deposit, but still expects the original 2009 agreement to be honoured.
Cameron McRae, Rio Tinto's Mongolia country manager and chief executive of Oyu Tolgoi LLC, the entity running the mine, said he had not yet received any formal notification that the government will seek to modify the investment agreement.
"We respect the Mongolian government and when they give us the notification to come and talk we will have those talks," he said ahead of a Sunday ceremony marking the half-way stage of construction on the project.
"I think what we are demonstrating is that the investment agreement is a contract, and we're going to honour our commitments and we expect the government to honour its commitments."
The landmark 2009 investment agreement on Oyu Tolgoi gave 66 percent of the project to Ivanhoe Mines , with the rest remaining in the hands of the Mongolian state. Rio Tinto owns 48.5 percent of Ivanhoe's shares and is also in charge of constructing the mine.
However, a group of 20 parliamentarians have submitted a petition to the government asking it to reopen negotiations to increase Mongolia's stake.
Rio Tinto's own forecasts suggest the Oyu Tolgoi project alone could account for about 5 percent of the country's GDP growth.
McRae said the project had already brought huge benefits to the Mongolian economy, helping to transform the capital Ulan Bator and driving construction and growth across the country.
Another benefit of the Oyu Tolgoi agreement was the confidence it gave other foreign firms to invest in the country, he said.
Phase one of the massive mine, started almost from scratch last year in the remote and sparsely populated South Gobi region, will be ready to begin producing copper in the second half of next year.
It is expected to produce an average of 450,000 tonnes of copper a year over its 50-60 year lifetime.
Nationalist politicians continue to bridle at the idea of "selling out" their strategic resources, and foreign investors in Mongolia remain concerned about the risk of more populist legislation directed at overseas mining firms, especially as next year's parliamentary elections loom.
Previous bills passed by parliament include an export tax on gold and a windfall tax on mining profits, both of which were heavily criticised by investors and subsequently revoked.
Experts also said that while a move to increase the government's stake might appease nationalist sentiment, it was unlikely to improve the potential of the mine itself.
"If a government takes more than 50 percent, projects will shut down -- mining is bringing tremendous growth to Mongolia but that could be killed very quickly," said Bernard Guarnera, president of mining consultants Behre Dolbear, speaking in Ulan Bator earlier this month. (Reporting by David Stanway; Editing by Sugita Katyal)

Source:Reuters news service

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Mongolia security chief freed in Germany: report

A top Mongolian security official extradited from Britain to Germany on suspicion of kidnapping a crime suspect has been freed from custody and may already have left the country, a German daily said Saturday.
Quoting his lawyers, the Sueddeutsche Zeitung said Bat Khurts, 42, a key figure in Mongolia's National Security Council, was freed a week ago after prosecutors lifted a custody order.
He was accused of kidnapping a Mongolian murder suspect and abducting him from Germany in May 2003.
Khurts was detained on a European arrest warrant issued by Germany when he flew into London on September 17 last year for meetings with British security officials.
He was ordered extradited to Germany by a British court in July, sparking anger in Ulan Bator, which accused Britain of luring Khurts to London to arrest him.
The arrest warrant issued by Germany alleged Khurts and three other members of the Mongolian secret service kidnapped and drugged Mongolian refugee Damiran Enkhbat in France in May 2003.
It claimed that Khurts drove a car carrying Enkhbat, wanted for the assassination of a Mongolian minister in 1998, to Brussels and then to the Mongolian consulate in Berlin, from where he was flown out to Ulan Bator.
Enkhbat was imprisoned until 2006 in Mongolia and died five days after his release from jail. His family blamed ill-treatment in prison.


Source:www.expatica.com

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Source of rumor that reincarnation of His Holiness Dalai Lama is born in Mongolia

Recently, Mongolian newspapers published stories which said next reincarnation of His Holiness Dalai Lama is born in one of the Gobi provinces of Mongolia and this  news is kept secret. 

However, Dalai Lama's office rejected rumor and said "it is not authentic and we wonder how it started". 


Legally, it is not possible for Mongolian state to accept reincarnation of high lamas in Mongolia. Pro-Communist, Mongolian People's Government banned appearance of high lamas and reincarnations of various Buddhist clergy in Mongolian territory since 1924 after death of 8th  Bogd Khaan, all powerful theocratic ruler of Mongolia.


Since then,this law has not revised. However, various minor reincarnations of Tibetan lamas are often being born in Mongolia after 1990s. 


We suspect source of this rumor can be traced to Mongolian buddhist lamas studying Dharmasala, India. Currently there are about 300 Mongolian lamas study in Tibetan monasteries and temples in north India. 


On Sept 23, High Tibetan lamas discussed about next reincarnation of His Holiness and issues surrounding it.

Please see below "Times of India" report on this conference.

Dalai Lama reincarnation to be discussed today

DHARAMSHALA: The 11th high-level conference, since 1963, of chief monks (Tibetan religious heads) began on Thursday at Mcleodganj. The Tibetan spiritual leader Dalai Lama will preside over the meeting on the second day of the conference on Friday. Heads and representatives of four major traditions and sub-traditions of Tibetan Buddhism and ancient Bon tradition are taking part in this three-day religious conference.
This meeting assumes more significance as the Dalai Lama had told reporters last month in Europe that the September meeting of Tibetan religious heads will hold discussions on the issue of his reincarnation.
Reliable sources told TOI that the meeting, among the pre-decided topics that doesn't include the reincarnation of Dalai Lama, will discuss the reincarnation of the 14th Dalai Lama, an issue that dominated media headlines and became a serious topic of discussion within the Tibetan communities, especially after China introduced a new law banning Tibetan religious beings from reincarnating without government's approval.

Information unit of Mongolianviews.com

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Mongolia's high plains herders warily eye coal truck

(Reuters) - A lone cement ribbon bisecting hundreds of miles of shale and scrub on the high plains of Mongolia's Gobi Desert may be a talisman or curse for nomadic herders that trace their lineage to the empire of Ghengis Khan.
Carved into the Gobi by the Hong Kong-listed Mongolian Mining Corporation (MMC), the 147-mile (245-km), two-lane road is due to open next month, allowing the company to speed up cargoes of coal to China from its expanding Ukhaa Khudag mine.
Ukhaa Khudag is not well-known but is situated on the northwest corner of Mongolia's Erdenes-Tavan Tolgoi, the world's biggest untapped coal mine with as much as 7.5 billion tons of reserves. Some bankers say plans for an IPO in 2012 to develop the prospect could fetch as much as $15 billion.
The freshly paved highway is one of the first glimpses of a mining boom that will transform Mongolia's fortunes. But many, including President Tsakhia Elbegdorj, are worried that mining has already put the country's fragile pastoral economy under strain and left a million nomads behind.
"Hundreds of rivers, streams and lakes have disappeared because of deforestation, climate change, and also partly because of irresponsible mining," Puntsag Tsagaan, the president's senior adviser, told Reuters.
"Our challenge is how to diversify our economy. I don't want my children and my grandchildren to live in a different country called Minegolia -- it has to be Mongolia. Therefore we have to manage the mineral wealth in a better way."
ENVIRONMENTAL IMPACT
The road will remove a major logistical hurdle for MMC.
"We will start using it next month and it will have a total throughput capacity of about 18 million tons per annum -- this year our total production will be 7 million tons so we no longer have logistics and transportation problems," said Adilbish Gankhuyag, MMC's chief financial officer.
It is also a key part of the company's commitment to protect the region's ecosystem, which has been damaged by hundreds of overloaded coal trucks churning up grazing land, said Shurka Baigalmaa, MMC's onsite manager at Ukhaa Khudag.
MMC is also committed to using the parched region's water supplies efficiently, with Baigalmaa saying that 95 percent of water used at the mine's washing plant would be recycled.
The open-cast mine is already 70 meters deep, and will eventually descend 300 meters, but she said the company would limit the impact by refilling exhausted seams using peat excavated from new mining areas further west.
But mining can never be completely clean. Clouds of sulfurous dust drift across the site and Baigalmaa said they had not yet built screens to help contain the problem.
Apart from the thirsty crows circling the mine's reservoir, there are few signs of life in South Gobi, where about 50,000 herders roam an area the size of England and Wales.
MMC said it was obliged to resettle people disrupted by mining construction, but many have abandoned the region already, frustrated by having to move their tents 20 times a year just to keep herds nourished.
Further north, at the Hustai National Park, 150 km (100 miles) west of Ulan Bator, people are also paying the price of mining, said Khagvadorj, a herder with a large family and dozens of horses.
Sipping fermented mare's milk in a crowded ger, a felt tent that many Mongolian nomads call home, Khagvadorj said dwindling pastures were having to support bigger and bigger herds as land concessions are handed over to miners.
"We are nomads, and we move from one place to another -- the mining stops us from moving around. Mining is not a good thing for us because it is spoiling our pastoral land."
SWITZERLAND OF THE TWENTY-FIRST CENTURY?
Tsagaan said mining, if managed properly, could bring in enough tax revenue to provide the education, infrastructure and prosperity that can turn Mongolia into "the Switzerland of the twenty-first century."
But turning a basic resource economy to high-end banking and manufacture center is a big leap for a country of 2.8 million people and a per capita income of $3,600 in 2010, and analysts say its future is more closely linked with China.
Mongolia, landlocked between Russia and China, exports all of its coal to its southern neighbor, China, and has long been wary of becoming a satellite valued only for its resources.
Chuluuntseren Otgochuluu, the director of Mongolia's Economic Policy and Competitiveness Research Center, an independent think tank, said mining had done little for Mongolia and was "far more integrated with the Chinese economy than the domestic economy."
Political leaders are sensitive to the issue and talk about "adding value" to raw material processing and developing other exports such as meat and other traditional rural industries.
"People talk about the resource curse, and we should learn from others, from the successes and from those who made mistakes," Prime Minister Sukhbaatar Batbold told Reuters.
But as increasing numbers of herders abandon the land and rush to the city, Mongolia is racing to devise the right mix of policies to preserve its old ways of life, said Clyde Goulden, a Mongolian ecology expert with the U.S. National Academy of Sciences.
"Herders tell us that mines are really causing a problem and that the water is deteriorating," he said. "There is no question there are herders giving up herding, and the question then is what are they going to do?"
(Additional reporting by Deborah Kan and Khaliun Bayartsogt; Editing by Idayu Suparto and Ed Lane)

Source:Reuters news wire service

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Mongolia wants bigger stake in gold, copper mine

Ganbat Namjilsangarav, Associated Press, On Thursday September 22, 2011, 6:17 am EDT

ULAN BATOR, Mongolia (AP) -- Mongolia's government is demanding a bigger stake in the massive gold and copper mine it is developing in conjunction with mining companies Rio Tinto and Ivanhoe.
A statement released by the government this week says the Cabinet had asked the ministers of finance and minerals to re-negotiate an investment agreement signed in 2009 in an effort to increase Mongolia's stake in the Oyu Tolgoi copper and gold mine.
Canada's Ivanhoe Mines and Anglo-Australian miner Rio Tinto are jointly developing the $4.6 billion Oyu Tolgoi mine, but the project has met with resistance from the public and some lawmakers who say Mongolia's stake in the project should be bigger.
Oyu Tolgoi is one of several big projects Mongolia has been debating as it strives to ensure local interests are protected while tapping foreign expertise needed to develop the resources.
Mongolia currently owns 34 percent of the Oyu Tolgoi joint venture company, but some lawmakers have demanded the stake be raised to at least 50 percent.
The company said in a statement that the current agreement is fair and there was no need to revise it.
"The investment agreement gives Mongolia the benefits of ownership, while not requiring the government from having to put up any money up front," Oyu Tolgoi chief executive officer Cameron McRae said in a statement.
"It is a robust agreement enshrined in Mongolian law and was signed by all parties in good faith on the understanding it would not be changed," he said.
The mine project, which is 50 percent complete, is expected to produce 1.2 billion pounds of copper and 650,000 ounces of gold per year in the first decade of operation beginning from 2013.
The project has also fueled discontent in the country. Protesters last year called for the cancellation of the mine investment citing uncertain tax rates.
In 2009, Mongolian lawmakers voted to phase out a windfall profits tax in 2011, removing the last obstacle to a deal with Rio Tinto and Ivanhoe Mines to develop the Oyu Tolgoi mine. The tax was enacted in 2006 at a time of surging metals prices, but miners said it made tax rates too uncertain and would discourage investment.
McRae called the investment agreement a "cornerstone agreement" whose stability was important to investor confidence in the country.
Earlier this month, Mongolia's National Security Council rejected a plan for U.S. mining giant Peabody Energy, China's Shenhua Group and a Russian-Mongolian consortium to jointly develop the keenly sought Tavan Tolgoi coking coal deposit in the Gobi Desert.
Mongolian officials said they would hold negotiations with the various companies involved to change the ownership.

Source:AP news wire service

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Mongolian ministers assigned to renegotiate foreign mining deal

ULAN BATOR, Sept. 22 (Xinhua) -- The Mongolian Cabinet Office would ask Canadian and Australian mining companies to renegotiate the Oyu Tolgoi copper-gold mining agreement, local media reported Thursday.
Chimed Khurelbaatar, chief of the Cabinet Office of Mongolia, was assigned to approach mining giants Ivanhoe Mines of Canada and Rio Tinto of Australia to discuss increasing Mongolia's stake from the 34 percent prescribed in the 2009 joint investment agreement.
A working group comprised of Minerals Minister Dashdorj Zorigt and Finance Minister Sangajav Bayartsogt was appointed by the government to take charge of the renegotiation during a cabinet meeting held Wednesday.
Twenty lawmakers submitted a letter to Prime Minister Sukhbaatar Batbold on Sept. 7, demanding a revision of the agreement to increase the government stake to 50 percent and impose a higher royalty tax.
The mining project, which employs about 10,000 Mongolians and is training 3,000 more, was being implemented well, Zorigt said, adding the 50 percent completion of the mine would be celebrated on Sept. 25.
"The impact of this large project on the Mongolian economy is enormous and very positive. Based on this, we are assigned to renegotiate in order to increase Mongolian ownership to 50 percent," he said.
Ivanhoe Mines owns 66 percent of the project and Rio Tinto, which manages its development, owns 48.5 percent of Ivanhoe.
The government's 34 percent stake in the mine has been the focus of heated public debates. Many consider Mongolia should own more than 50 percent.
However, Oyu Tolgoi CEO Cameron McRae of Rio Tinto said in a statement Monday the Mongolian government benefited a lot from the project, including gaining more than 50 percent of cashflow.
According to a preliminary exploration, the Oyu Tolgoi mine contains more than 31 million tons of copper, 1,328 tons of gold and about 7,000 tons of silver, and is regarded as one of the world's biggest copper-gold deposits.

Source:Xinhua news service

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Mongolia May Revise Biggest Coal, Copper Project Agreements

Mongolia may revise ownership accords with Rio Tinto Group and other foreign companies for the nation’s two biggest mineral projects ahead of parliamentary elections scheduled for next year.
The initial agreement with companies including Peabody Energy Corp. (BTU) for part of the Tavan Tolgoi coal deposit may change, Baasangombo Enebish, executive director of state-owned Erdenes MGL LLC, said by phone today. Mongolia will also seek to revise the investment terms for the Oyu Tolgoi copper project that’s part-owned by Rio, Finance Minister Sangajav Bayartsogt told News.mn portal in an interview published yesterday.
“The fact that they may be changing the goal posts near the end of the game is not ideal but they are not the first country in the world to be doing it,” Richard Knights, an analyst at Liberum Capital Ltd. in London, said today by phone, referring to recent mining tax changes in Australia and Chile. “It would definitely make companies more cautious when considering an investment decision.”
Mongolia is planning a potential initial public offering next year for Tavan Tolgoi, the nation’s biggest coal field, which may raise more than $3 billion. Revision talks may delay the 2013 proposed start-up of the $6 billion Oyu Tolgoi copper and gold project, on which Rio’s partner, Ivanhoe Mines Ltd., spent more than six years negotiating an investment accord.

Coming Election

“There are discussions going on,” Andrew Harding, chief executive officer of Rio’s copper division, said yesterday in London, referring to media reports about a review of Oyu Tolgoi accords. The reports should be assessed in the context of a Mongolian election next year, Harding said.
Rio declined 0.5 percent to 3,518.5 pence at 10:27 a.m. London time. It earlier rose 1 percent to A$69.59 in Sydney.
A group of 20 lawmakers submitted a letter to Prime Minister Sukhbaatar Batbold on Sept. 7 demanding that the Oyu Tolgoi agreement, in which Mongolia has a 34 percent stake, be revised to give the country half the equity, Xinhua reported yesterday. The lawmakers also demanded higher taxes, the news agency said.
“It’s a continuation of the theme of resource nationalization which is now firmly back on the radar following the Guinean government announcement a fortnight ago,” Knights said. “Clearly, from a government perspective, it is still a big issue.”

Guinean Mining Code

Guinean lawmakers adopted a new mining code on Sept. 9, giving the West African nation 35 percent of local minerals companies and raising customs duties to 8 percent. Rio is developing the Simandou iron ore mine in the country which it has said will cost more than $10 billion to build.
Ivanhoe Mines hasn’t had any discussions with the Mongolian government about potential changes to an investment agreement for Oyu Tolgoi, the company said today in an e-mailed statement. Oyu Tolgoi’s development will boost Mongolia’s economy by 30 percent by 2020, according to Rio.
Peabody, the largest U.S. coal producer, said yesterday that it’s continuing negotiations on Tavan Tolgoi, in western Mongolia.
In July, the government announced that China Shenhua Energy Co., Peabody and a Russian-Mongolian group would be allocated 40 percent, 24 percent and 36 percent stakes to develop the West Tsankhi part of Tavan Tolgoi.
That accord was preliminary and its terms may change, Erdenes MGL’s Enebish said. “This is an internal discussion process within Mongolia on how to continue this investment negotiation,” he said, adding that the process continues.
To contact the reporters on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net; Jesse Riseborough in London at jriseborough@bloomberg.net
To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

Source:Bloomberg news service

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Development key to regional peace

SHENYANG - Prominent political figures from Northeast Asia gathered in Shenyang on Wednesday to mark the 30th International Day of Peace, and stressed that sustainable development was a key factor to ensure peace in the region.
Around 250 officials, entrepreneurs, academics and former leaders from China, Japan, Mongolia, South Korea and Russia attended the event.
Lee Hong-koo, former prime minister of South Korea, said at the event's opening ceremony that East Asia has been rising as one of the leading centers of the "global village" in various areas including the economy, and its members should boost mutual development with "neighboring villagers" in other parts of the world.
"To become a 'model villager' of the global village, East Asian countries should work for better cooperation, put aside past disputes and resist the temptation to resort to military force," said Lee.
The Northeast Asia region boasts abundant natural resources, advanced technology and hardworking people, factors which have helped to achieve sustainable economic growth and make the region a powerhouse of the global economy, said Sanjaagiin Bayar, former prime minister of Mongolia.
Mongolia welcomes efforts to boost dialogue between parties in the Northeast Asia region, said Bayar.
Tomiichi Murayama, former prime minister of Japan, referring to the earthquake and tsunami that caused a disaster at the Fukushima Daiichi nuclear power plant in March, said that the development of nuclear energy was akin to having a "house without a bathroom".
Murayama called for a halt to the construction of new nuclear power stations.
Recalling the painful memory of World War II, Murayama said lessons should be taken from it.
Shenyang, the capital of northeastern China's Liaoning province, was the scene of the Sept 18 Incident, which marked the beginning of the Japanese military occupation of Northeast China in 1931.
Participants in the Shenyang meeting stressed the strategic importance of peace and development for the region.
Liu Jiangyong, a professor of Japanese studies at Tsinghua University in Beijing, told China Daily that the stability of Northeast Asia exerts a major influence on peace and prosperity in the region and throughout Asia.
To guarantee regional stability and development requires countries in the region such as China, Japan and South Korea, to enhance their contribution to mutual political trust and security cooperation, said Liu.
Economic cooperation can also play a vital role in enhancing regional stability and world peace, said Liu.
The International Day of Peace was initiated by the United Nations in 1981.
The UN General Assembly adopted a resolution 55/282 in 2001 declaring Sept 21 of each year as the International Day of Peace on which a temporary cease-fire in all combat zones is proposed.
"Peace is our missions; our day-to-day quest," Renata Lok-Dessallien, the United Nations resident coordinator in China, quoted the special message from UN Secretary-General Ban Ki-moon as saying.
With the 2015 deadline for achieving the Millennium Development Goals approaching fast, Lok-Dessallien called for support for finding solutions to global problems that threaten peace, including injustice, poverty, hunger and environmental degradation.
This is the first time China has marked the International Day of Peace outside Beijing, said Chen Duming, the deputy secretary-general of the Chinese People's Association for Peace and Disarmament.
Chen added that another innovative aspect of the Shenyang meeting was to combine the celebrations with forums focusing on the regional situation and regional development.
Liu Ce contributed to this story.
Source:China Daily

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Peabody Energy Senior Scientist Honored by Mongolia's Ministry of Nature, Environment and Tourism as 'Distinguished Environmentalist'

ST. LOUIS, Sept. 21, 2011 /PRNewswire via COMTEX/ -- Mongolia's Ministry of Nature, Environment and Tourism has honored Peabody Energy's Senior Manager of International Reclamation Vern Pfannenstiel as a 'Distinguished Environmentalist' for his leadership to establish best scientific practices in land restoration to protect Mongolia's environment.

The award is a credit to Pfannenstiel's work directing Mongolia's first coal mine restoration project near the community of Bulgan, which included collaboration with joint venture partner Peabody-Winsway, based in Ulaanbaatar. The Ereen Mine restoration project was designed in consultation with the Mongolian government, the Mongolian Agricultural University and the Mongolian Forage Seed Producers Association. Many of the principles applied were pioneered at Peabody operations on indigenous lands in the United States where there are similar environmental conditions and cultural needs.

"Peabody is a global leader advancing world-class mining and restoration practices founded on key principles of excellence in safety, operations, and environmental and social responsibility," said Peabody Chairman and Chief Executive Officer Gregory Boyce. "We are proud of Vern's leadership in establishing practices that will create a lasting legacy for the Mongolian people."

Project team members included 60 U.S. and Mongolian environmental scientists, engineers and technicians who restored an 18 hectare area to hardy, productive rangeland. Notably, a local workforce was recruited and trained to accomplish the job, completing more than 60,000 project hours without a safety incident.

The Ereen project also developed a new water source for livestock and a fresh drinking water source for area residents who previously had no nearby access to potable water, demonstrating the importance of sustainable practice.

One year following project completion, the former Ereen mine site is a productive pasture that ultimately will be used for traditional livestock grazing or hay production. Seeding results exceeded the accepted criteria for excellent plant establishment, and the forage in the seeded areas is more than four times that of the adjacent native lands.

Peabody Energy is the world's largest private-sector coal company and a global leader in clean coal solutions. With 2010 sales of 246 million tons and nearly $7 billion in revenues, Peabody fuels 10 percent of U.S. power and 2 percent of worldwide electricity.

Editor's Note: Images may be downloaded at PeabodyEnergy.com.

CONTACT:Beth Sutton(928) 699-8243

SOURCE Peabody Energy

Copyright (C) 2011 PR Newswire. All rights reserved

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Global Insider:Mongolia-India relationship

ndian and Mongolian troops are currently holding a two-week military exercise in Mongolia, following a visit by the Indian army chief to the Central Asian country. In an email interview, Sharad K. Soni, an assistant professor of Mongolian and Central Asian studies at the School of International Studies at Jawaharlal Nehru University, discussed India-Mongolia relations.

WPR: What is the recent history of India-Mongolia relations?

Sharad K. Soni: The two countries, known as "spiritual" neighbors, have been in close contact not only on the basis of their historical relationship, but also on the basis of post-Cold War realities. The Treaty of Friendly Relations and Cooperation, signed in 1994, laid a solid foundation for improving relations. However, the 2009 visit of newly elected Mongolian President Tsakhia Elbegdorj to India changed the extent and pattern of India-Mongolia relations. The move from bilateral ties to a comprehensive partnership reflected the ways in which both sides have redefined their geostrategic interests. Mongolia is critical for a rising India's Asian strategy, while India figures prominently in Mongolia's external relations, now characterized by its "third neighbor" policy. This pragmatic approach recently got a fillip when Indian President Pratibha Devisingh Patil visited Mongolia on July 27-30, the first visit by an Indian president in 23 years.

WPR: What is driving the recent push to improve relations, especially defense ties?

Soni: The recent push to boost India-Mongolia relations is driven by strategic concerns. Mongolia perceives its proximity with India as not only a window to the outside world, but also as a factor to balance China. The Mongolians want to translate their strong cultural relationship with India into a strategic partnership. And India, for its part, has been patiently expanding its defense and security links with Mongolia as part of an effort to build strategic ties with China's neighbors, in line with New Delhi's "Look East" policy.

Since 2001, defense ties have been moved forward by training, bilateral visits and joint military exercises. India has been providing training to Mongolian defense personnel in English language skills, peacekeeping and military operations. In addition to the ongoing bilateral exercise, known as "Nomadic Elephant" and organized alternately in Mongolia and India since 2004, the two sides participate in the annual multinational "Khan Quest" military training exercises, held in Mongolia since 2006. A defense cooperation agreement was also signed during the Indian president's visit to Mongolia in July, ahead of the visit by Indian Army Chief Gen. Vijay Kumar Singh in early September.

WPR: What are the areas of opportunity for deeper trade ties, and what are the major obstacles?

Soni: Bilateral trade stood at $16.9 million in 2010, an increase of nearly $3 million over 2009, which points to a slow but steady growth in trade between the two sides.

Mongolia's ongoing mining boom offers vast opportunities for Indian industry. The country's coal, gold, copper and uranium reserves hold much promise for India, and implementation of mining-related projects will generate significant demand for construction and mining equipment as well as in areas such as power generation, water supply and rail transport. As India's demand for imported natural resources grows, Mongolia may prove to be a natural and long-term economic and trade partner. Exploration of uranium in accordance with the 2009 India-Mongolia pact on civil nuclear energy will prove beneficial, given India's energy needs. There are also opportunities for trade in Mongolian dairy products as well as sea-buckthorn products. In return, Mongolia can benefit from India's IT and telecommunications products.

Nevertheless, it should be noted that because Mongolia is landlocked, its goods must be shipped through ports in China or Russia, increasing freight rates and also causing delivery delays. This is the primary reason why bilateral trade between India and Mongolia has not yet developed to the extent desired. 

Source:www.worldpoliticsreview.com

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Obama blocks the face of our poor president in the US

Obama blocks face of Elbegdorj in the UN

After President Obama gave a speech at the United Nations Tuesday to mark the start of an initiative for transparency in government, he joined other leaders for a group photo but must have forgotten for a brief moment that he wasn’t alone.
During one of the photos, which are taken in rapid succession by a group of photographers, the president lifted his hand to wave at the cameras and blocked the man standing on his right, believed to be the president of Mongolia, Tsakhia Elbegdorj.
Some of the other countries joining the Open Government Partnership initiative are Mexico, Indonesia, South Africa, the Philippines and Brazil.

Source:abcnews.go.com

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