Ivanhoe: No Talks With Mongolia On Changes To Oyu Tolgoi Pact

Canada-listed Ivanhoe Mines Ltd (IVN.T, IVN), the majority owner of the massive Mongolian Oyu Tolgoi copper and gold project, said Tuesday there have been no talks with the Mongolian government to change the terms of the 2009 investment agreement.
"There have been no discussions between Ivanhoe Mines and the Mongolian government about potential changes to the Oyu Tolgoi investment agreement," an Ivanhoe Mines spokesman said in response to media reports that Mongolian politicians are mulling possible changes.
Reuters had cited an interview on Mongolian news portal www.news.mn in which the Mongolian finance minister S. Bayartsogt said the country's Standing Committee on Security and Foreign Policy has been discussing changes to the terms and length of the agreement.
The 2009 agreement gave Ivanhoe Mines a 66% stake in the project while the Mongolian government retained a 34% stake. Rio Tinto is the project operator and is an indirect shareholder in Oyu Tolgoi through a 48.5% equity stake in Ivanhoe Mines.
Andrew Harding, chief executive of Rio Tinto's copper division, said during Rio Tinto's investor day conference Tuesday that have been general discussions among Mongolians about the investment agreement, during the run-up to next year's elections. But he noted that Mongolian ministers have indicated that they're aware of the wealth that the project has generated for the country.
"I've had discussions with many ministers and they fundamentally understand that it is not only about the value that is being gained now," he said. "It has triggered a great many [other] companies looking for investment opportunities," he noted, citing Tavan Tolgoi as an example of a Mongolian project that has attracted large amount of investor interest recently.
The Mongolian government also has an option to increase its stake in Oyu Tolgoi to 50% once the initial 30-year term on the investment agreement expires.
Cameron McRae, Oyu Tolgoi LLC CEO and Rio Tinto's Mongolia country director, said in a presentation last week in Ulaanbaatar that he expects the Mongolian government to stand by the investment agreement and prevent it from being altered.
"We are confident that Mongolia will not let this happen, that stability and the rule of law will prevail, and that Mongolia's long-awaited economic promise will become a reality," he said.
He estimates that Oyu Tolgoi will account for about one-third of Mongolia's economy by 2020 and will cause Mongolia's economy to grow at an average rate of 12.7% a year between 2013 to 2020, compared with 7.7% in the absence of Oyu Tolgoi.
Rio Tinto has so far invested several billion dollars into the project and says the project is developing according to plan. Harding expects the first phase of the project to start commercial production in 2013.
Oyu Tolgoi is forecast to produce more than 650,000 ounces of gold, 3 million ounces of silver and 1.2 billion pounds of copper annually during the first 10 years of commercial production.
Harding, however, noted that securing power for further expansion is a key issue.
"While we are pleased with the site production progress...[it] requires a power solution," he says. Rio Tinto is currently in talks with the Mongolian government and China to find that solution.
"The original thinking was that power would be supplied by power line from China," he said, but the investment agreement of 2009 requires a power station be built in Mongolia for the provision of power four years after the start of commercial production at Oyu Tolgoi.
More than 14,000 people currently work on the Oyu Tolgoi site and the project is committed to getting 90% of its workers from the local population by 2013.

Source: Dow Jones Newswires



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