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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