Rio Hopeful Mongolia PM Change Will Unblock Oyu Tolgoi

Rio Tinto Group (RIO) sees a change of leadership in Mongolia as potentially positive for the stalled $5.4 billion expansion of the Oyu Tolgoi project, while leaving open the prospect for another writedown at the mine.
The ouster of former Prime Minister Altankhuyag Norov last week comes as London-based Rio and Mongolia’s government continue negotiations on disputes around taxes and costs that have held up progress for more than 18 months on an underground extension to the copper and gold mine -- Mongolia’s single-biggest foreign investment.
“I’m hoping it will be a positive sign,” Chief Executive Officer Sam Walsh said today in Beijing, in an interview with Bloomberg Television, at the Asia-Pacific Economic Cooperation forum. “Certainly there are a lot of things that are indicating that people want the project to proceed.”
Commitments from lenders for $4.2 billion needed to help fund the development expired after a Sept. 30 deadline to reach an agreement was missed, Rio-controlled unit Turquoise Hill Resources Ltd. said last month in a statement. The company wrote down the value of the mine by $4.7 billion in March.
Oyu Tolgoi, located about 80 kilometers (50 miles) north of the Chinese border, will contribute about a third of Mongolia’s economy when in full operation and will be the world’s third-biggest copper mine, according to Turquoise Hill.
Rio may need to consider a writedown of the mine if delays to the expansion continue, according to CLSA Asia-Pacific Markets. The project had a book value of $4.96 billion at the end of June, Rio said in an August filing.
“Time will tell with that and standing here today, and not actually understanding how quickly we may move to getting the project approved, that’s not possible for me to say,” Walsh said on the prospects of an impairment.

Patiently Impatient

Mongolia’s ruling Democratic Party is seeking a permanent replacement for Altankhuyag. Rio Tinto is continuing negotiations with officials within the government, Walsh said.
“I’m willing to be patiently impatient as we wait for the approval,” he said. “I’d love to get things going, but I understand their need to get things right and we will wait.”
Walsh, a 64-year-old Australian appointed in January 2013, last month had his contract extended after accelerating a cost-cutting drive that’s targeting $1 billion in savings by the end of next year after stripping out $3.2 billion of expenses since 2012.
The savings measure “give us the opportunity to continue our growth, it will also give us the opportunity to materially increase our returns to shareholders,” Walsh said in the interview.
The producer will update shareholders on the company’s strategy at seminars in Sydney on Nov. 28 and London on Dec. 4, ahead of full-year results in February.
To contact Bloomberg News staff for this story: David Stringer in Melbourne atdstringer3@bloomberg.net; Stephen Engle in Beijing at sengle1@bloomberg.net
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.netAndrew Hobbs, Indranil Ghosh

Source:Bloomberg
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Rio upbeat about Mongolian leadership change

Mining giant Rio Tinto is optimistic a change of leadership in Mongolia could result in some progress on its stalled $5.4 billion expansion of the Oyu Tolgoi project,Bloomberg reports.
"I’m hoping it will be a positive sign,” Rio Tinto chief executive Sam Walsh said in an interview with Bloomberg Television at the APEC forum.
"Certainly there are a lot of things that are indicating that people want the project to proceed." 
Last week the Mongolian Parliament voted to oust Prime Minister Altankhuyag Norov, with the nation's ruling Democratic Party still seeking a permanent replacement. 
“I’m willing to be patiently impatient as we wait for the approval,” he said. “I’d love to get things going, but I understand their need to get things right and we will wait.”
However, according to the news outlet, Rio Tinto also left the prospect of a further writedown on the project should the current delays persist. 

Source:Bloomberg
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Mongolia PM ousting may delay mine talks -Turquoise Hill

(Recasts with conference call; background)
Nov 10 (Reuters) - Last week's ousting of Mongolia's prime minister is likely to delay talks on resolving a long-running dispute over the huge Oyu Tolgoi copper and gold mine in the mineral-rich country, joint-mine owner Turquoise Hill Resources (Toronto:IVN.TO - news) Ltd said on Monday.
Mongolia's parliament voted last week to remove Prime Minister Norov Altankhuyag amid concerns about a serious economic downturn as gold, copper and coal prices and foreign direct investment slump.
"The political situation certainly could result in a possible delay," Turquoise Hill Chief Executive Kay Priestly said on a conference call to discuss the company's third-quarter results.
Vancouver-based Turquoise Hill owns 66 percent, and the Mongolian government 34 percent, of Oyu Tolgoi, which is one of the world's biggest gold and copper mines. The mine is operated by global mining giant Rio Tinto Plc (LSE: RIO.L - news) , which owns a majority stake in Turquoise Hill.
Mongolia and Rio Tinto (Xetra: 855018 - news) /Turquoise Hill have been unable to agree on investment terms for the $5.4 billion underground expansion of Oyu Tolgoi, which is currently an open-pit mine.
Priestly said Rio Tinto and Turquoise Hill had recently made an offer to the government to resolve the dispute. However, this was made before the removal of the prime minister.
Another hold-up has been a tax dispute between the government and the companies. A government official said in September that the dispute had been resolved, with the two sides agreeing to cut an outstanding tax bill to $30 million from $130 million.
However, Priestly said that while the reduction is "welcome," Oyu Tolgoi is appealing the ruling.
Earlier on Monday, Turquoise Hill reported a lower third-quarter loss and said it expected strong concentrate sales to continue during the fourth quarter and sales to exceed production.
Contracts have been signed for all of Oyu Tolgoi's expected 2014 concentrate production, while long-term contracts account for 92 percent of 2015 planned production.
Turquoise Hill's shares ended 3 percent higher on the Toronto Stock Exchange at C$3.71. (Reporting by Nicole Mordant in Vancouver; additional reporting by Tanvi Mehta and Darshana Sankararaman in Bangalore; Editing by Savio D'Souza and Dan Grebler)

Source:Reuters
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Rio’s Mongolian plans remain on the outer after PM’s ouster

NEGOTIATIONS to press ahead with Rio Tinto’s planned $US5 billion ($5.8bn) expansion of the Oyu Tolgoi copper and goldmine in Mongolia look set to remain in limbo, with the Mongolian parliament kicking out the Prime Minister and widespread management and board changes at the project.
Two days after Mongolian legislators voted their Prime Minister out, Rio subsidiary Turquoise Hill announced its chairman and chief executive would retire at the end of the year, after less than three years each in the job.
And Rio’s Oyu Tolgoi chief executive Craig Kinnell returned to Britain last month for family reasons.
Vancouver-based Turquoise Hill, which Rio owns 51 per cent of, said chairman David Klingner and chief executive Kay Priesly, both former Rio employees, would step down at the start of January and December respectively.
Rio copper development vice president (and Turquoise Hill board member) Jeffrey Tygesen will be appointed chief executive and fellow director Jill Gardiner, a former RBC Canada regional head who has never worked for Rio, will become chairman.
Andrew Woodley, who was running the ill-fated Mozambique coal operation Rio sold for $US50m after buying for $4bn, will become Oyu Tolgoi chief this month. Under Ms Priestly and Mr Klingner, Turquoise Hill brought Oyu Tolgoi into production but oversaw a period of tensions with the government that has seen the valuable underground expansion of the project stalled so far for 16 months.
“The appointments were the result of an extensive succession planning program that has been under way for several months,” Turquoise Hill said.
Dr Klingner said he was pleased with the company’s development under Ms Priestly.
“Under her leadership, the company emerged debt free in January 2014 following a successful rights offering, significantly reduced corporate costs ... and divested multiple non-core assets,” he said. Rio Tinto and Mongolia, which owns 34 per cent of Oyu Tolgoi, have been unable to negotiate a fiscal framework and settle other disagreements over the expansion, which will realise most of the value in the project.
This week’s 36 to 30 vote dismissal of Prime Minister Norov Altankhuyag amid reported allegations of financial mismanagement, including slumping foreign investment, corruption and nepotism, does little for confidence that a deal on Oyu Tolgoi is close.
Rio would not comment on the political turmoil..

Source:http://www.theaustralian.com.au/
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Mongolia government collapses as budget deadline looms

Mongolia's parliament is fast approaching the deadline to pass the budget for next year, but one would hardly know it with the political drama unfolding as Mongolia's parliament voted on November 5 to remove Prime Minister Norovyn Altankhuyag amid concerns about the economic downturn.
Lawmakers had been preparing to vote on appointments for a government reshuffle that was largely motivated by economic concerns. 
Mongolia's flagging economy has hit a political breaking point after over two years of declining foreign investment. Mongolia's central bank reported a 59% decline in foreign investment for October from the year before, which is a large reason why growth of the mining-based economy has yet to come close to 2011's stellar 17.5%. Troubles in the mining sector, particularly with the giant Oyu Tolgoi copper-gold mine that should drive the economy over the next decade, are no help either.
“We first got an inkling that there would be trouble ahead for our commodities' exports in the second half of 2011, which was the peak year economic growth,” says Badral Munkhdul, head of the Ulaanbaatar-based market intelligence firm Cover Mongolia.
China, the main consumer of Mongolia's coal and copper resources, has reduced its consumption as its economy also slows. That has contributed to a price decline of 21.7% for coking coal in the year to November, according to data from Mongolia's Khan Bank. “We can see now that Mongolia is one of the most-impacted economies from the China slowdown, if not the most affected,” Munkhdul says.
In 2011, new jobs were being created as money poured in from around the world into Mongolia-based businesses. Today, however, companies are scaling back and introducing cost-cutting measures to keep afloat. The World Bank has predicted 6.3% economic growth for 2014 – still buoyant but nowhere near the stratospheric growth rates of a few years ago.
The now-outgoing Prime Minister Altankhuyag's solution has been a complete government overhaul. Seven ministers were kicked out in October, including the ministers of finance and mining, when parliament approved Altankhuyag's proposal to consolidate government ministries to 13 from 16, and replace key positions in his cabinet.
With three less ministries now in play, the parliament had been scheduled to vote on the new appointments proposed by Altankhuyag shortly after he began announcing candidates on October 15. But the coalition government twice delayed the vote and then a no-confidence vote called against the government on November 5 ended up with 34 of 66 members of parliament voting in favour of ousting Altankhuyag, Mongolian television showed. Eight members of his own coalition government failed to vote.
Altankhuyag had hoped to turn the economy around with measures such as a new investment regime, a cut in the royalty tax for gold, and new laws for mining and pumping oil that he hoped would entice back investors. But little has changed.
“The opposition is doing what oppositions do, laying down the blame on the events that led up to the current economic woes,” said Munkhdul.
The budget, meanwhile, is being held hostage to the political battle. The deadline is November 15 for parliament to pass a budget that pegs foreign debt below 40% of GDP. The debt ceiling is a new restriction for next year that Altankhuyag had attempted to raise, but parliament wouldn’t budge. Mongolia currently has a debt/GDP ratio of about 49%, a civil servant familiar with this year's budget-making process tells bne.
The budget is way behind schedule, too, because the parliament has rejected two proposals.

Source:http://www.bne.eu/
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Rio Tinto jobs go in Mongolian mining shake-up for Turquoise Hill Resources Read

Rio Tinto's relationship with the Mongolian government faces an even bigger test than first thought, with the two of the company's most senior executives in the developing country following the Mongolian Prime Minister's lead by standing down.
Less than 48 hours after Mongolian Prime Minister Norovan Altankhuyag was squeezed out of the top job by a no-confidence vote in parliament, the Rio subsidiary that controls the miner's interests in Mongolia announced that its chief executive and chairman were standing down.
The subsidiary, Toronto-listed Turquoise Hill Resources, announced on Friday that long-serving Rio executive Jeff Tygesen would replace Kay Priestley as chief executive of the subsidiary, which is 50.79 per cent owned by Rio.
Ms Priestley has served just over two years in the role, which has been dominated by conflict with the Mongolian Government over a number of issues, including the cost of building the second stage of the Oyu Tolgoi project and the share of the project that will come back to Mongolian taxpayers.

Ms Priestley's chairman, Dr David Klingner, has also stood down, prompting a complete refresh of the company's executive ranks.
The surprise round of leadership changes within the government and the company could jeopardise the chances of a deal being struck between the parties prior to Christmas.
A debt funding deadline has already been extended twice this year, and there were hopes that a lasting resolution could be solved before the start of 2015.
Turquoise Hill sought to downplay any connection between the departures of both the government and company leaders, saying the changes had been planned for a long time.
"The appointments are the result of an extensive succession planning program that has been underway for several months," the company said in a statement.
Ms Priestley will remain on the board until December 31, when she will be replaced by Dr Craig Stegman, who was working on Rio's Northparkes copper and gold mine in New South Wales until it was sold one year ago.
Oyu Tolgoi is a copper, gold and silver mine which is expected to be the dominant force in the Mongolian company for several decades.
The smaller first stage of the mine is already exporting copper concentrate to Chinese buyers, but the long-awaited second stage of the project is considered to hold the bulk of the project's value.

Source:http://www.theage.com.au/
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Mongolia prime minister ousted as economy reels

Mongolia’s parliament, the Grand Hural, voted on Wednesday to oust Prime Minister Norov Altankhuyag, as plunging commodities prices wreaked havoc on the landlocked nation’s economy.
Mr Altankhuyag and the ruling Democratic party have been under siege from the opposition Mongolian People’s Party since a decision in August to consolidate the number of ministries in Mongolia, from 16 to 13.

Seven ministers, including those who oversee mining and foreign affairs, have resigned since then. Mr Altankhuyag lost the no-confidence vote by 55 per cent, after losing the support of members of his own coalition.
Mr Altankhuyag will be temporarily replaced by his deputy, D Terbishdagva, and the rest of the cabinet will stay on until replacements are chosen.
Foreign investment in Mongolia, which is dependent on copper, coal and gold exports, has dropped sharply as the country has been unable to agree with global miner Rio Tinto on the terms of investment in the $5bn next phase of the Oyu Tolgoi mine.
His successor will not have an easy job. For several years Mongolian politicians and governments have committed to spending based on expectations of revenues from Oyu Tolgoi, in which the state holds a 34 per cent stake. Output from the second, underground phase is now unlikely before 2020, according to a report last month from Macquarie analyst Daniel Greenspan.
The Fiscal Stability Law, which takes full effect next year, caps the level of debt and could make it hard to meet budgetary commitments including civil servant salary raises.
Meanwhile, foreign reserves contracted to $1.4bn in August, from a peak of $4.1bn at the end of 2012, and Mongolia has had to expand a bilateral swap facility with China despite being wary of its giant neighbour’s influence. The Mongolian tugrik has weakened to about 1,865 to the dollar, down from 1,780 just six months ago.
Mongolian banks are heavily exposed to mining and related industries, and Moody’s rating agency has a negative outlook on the sector.

Source:Financial Times

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Mongolian PM fired by parliament, leading to gov't collapse

ULAN BATOR, Nov. 05 (Xinhua) -- Mongolian lawmakers voted on Wednesday to dismiss Prime Minister Altankhuyag Norov for incompetence, cronyism and corruption.
Out of 66 lawmakers who was present during the full parliament session, 36,including lawmakers of his own party, voted for dismissal of the parliament.
Altankhuyag came under criticism for incompetence and cronyism and corruption by opposition Mongolian People's Party (MPP) and some factions within his party -- the Mongolian Democratic Party (MDP).
Currently one of his senior aides is under investigation by the country's anti-corruption body, Independent Agency Against Corruption.
MPP lawmaker Khayankhyarvaa Damdin said "because of the policy mistakes of (the) so-called reform government, the country's economic growth, which was 17.5 percent two years ago, decreased every year and now it looks it will be 6.3 percent."
The opposition also blames Altankhuyag for allowing embezzlement by his relatives and aides.
"Criminal actions which involve the prime minister's senior aide, assistant, son-in-law and daughter have been investigated by the anti-corruption agency and other relevant bodies," said Khayankhyarvaa.
Zorigt Munkhchuluun, an MDP member, also backed the dismissal of the prime minister, He put a paper on his desk with the words saying "I will not support father-in-law of Denzen".
Altankhuyag's senior deputy, Terbishdagva Dendev, will serve as acting prime minister before a new premier is appointed., and all current ministers will work as acting ministers till a new cabinet is formed.
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Resource-rich Mongolia ousts prime minister amid economic downturn

By Terrence Edwards
Nov 5 (Reuters) - Mongolia's parliament voted on Wednesday to remove Prime Minister Norov Altankhuyag amid concerns about a serious economic downturn as gold, copper and coal prices and foreign direct investment slump.
Out of 66 members of parliament who voted, 34 were in favour of ousting Altankhuyag, Mongolian television showed. Ten members of parliament, including eight members of his own coalition government, did not show up.
It will now be up to the coalition government to select a new candidate, who will have to be approved by the president and confirmed by parliament.
The government has been in turmoil over the past month, as seven ministers, including the ministers of mining and foreign relations, resigned after Altankhuyag won parliamentary approval to consolidate ministries from 16 down to 13.
That led to calls from the opposition Mongolian People's Party for the prime minister to stand down, and finally people from his own government demanded his resignation.
The political fight has distracted the government of the resource-rich country, landlocked between Russia and China, from passing a budget.
Parliament rejected a budget proposal for the second time on October 31 amid criticism of exorbitant spending and overly optimistic economic projections. Mongolia's Fiscal Stability Law takes full effect next year, which will cap debt at below 40 percent of gross domestic product.
"It's quite clear that whoever will run next year will have big, big troubles, with even paying state employees' salaries," said Luvsanvandan Sumati, head of the Sant Maral Foundation polling group.
Key to reviving foreign investment, which has slumped 59 percent this year, is a resolution of a long-running dispute over the huge Oyu Tolgoi copper mine that Mongolia shares ownership with mining giant Rio Tinto's Turquoise Hill Resources arm.
Rio suspended construction of a $5.4 billion underground expansion project in August 2013 because of disagreements including construction costs. Altankhuyag had been expected to sign a memorandum of understanding before bankers release $4 billion in project financing to help pay for the expansion.
China bought more than 90 percent of Mongolia's exports, mainly of coal and copper, and 49 percent of foreign enterprises registered in Mongolia were Chinese, China's Xinhua news agency reported in August. (Reporting by Terrence Edwards; Editing by Nick Macfie)

Source:Reuters
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Read more: http://horsetalk.co.nz/2014/11/03/unicef-improve-safety-mongolia-child-jockeys/#ixzz3HxbzqyxZ Reuse: You may use up to 20 words and link back to this page. Other reuse not permitted Follow us: @HorsetalkNZ on Twitter | Horsetalk on Facebook UNICEF seeks to improve safety for Mongolia’s child jockeys

By Andy Brown
Horse racing is a hugely popular sport in Mongolia, but also a serious danger to the young riders who often ply their trade with no protection and no insurance. UNICEF is advocating for stronger safety laws to protect child jockeys and preserve family’s livelihoods. 
ULZIIT, Mongolia, 31 October 2014 – In a ger tent in Ulziit, horse racing capital of Mongolia, 15-year-old former child jockey Budgarav rests on his crutches and adjusts the baseball cap on his head. Four years ago, he was thrown from a horse during training and was trampled, breaking both his legs and losing his front teeth. “It was very painful when I fell,” he says.
UNICEF Image
© UNICEF Mongolia/2014/Brake
Budgarav, 15, was injured while working as child jockey. He lost his front teeth and both his legs were broken.
Budgarav wasn’t wearing any safety equipment and was not insured. His trainer didn’t want to report the injury or take him to hospital. Instead, his legs were bound with camel wool and he was warned not to tell anybody about it. By the time he saw a doctor, a month later, his legs and gums had become infected and his condition was much worse.
Despite his severe injuries, Budgarav is a happy and outgoing boy. He often smiles and jokes,  but he cannot walk far from the ger, even on crutches, and he has had to drop out of school.
“Now I stay at home and watch TV,” he says. “Sometimes I play outside the ger. I would like to go back to school next year if my health improves.”
His younger brother, Munkh-Erdene, 13, is also a former jockey. He was thrown from a horse during a winter race. He wasn’t wearing a helmet and landed on his head, crushing the side of his skull. Unlike his brother, Munkh-Erdene is a quiet, serious boy, and still obsessed with horse racing. “I like drawing pictures of horses and listening to songs about horses,” he says. “When I grow up, I want to be a horse trainer.”
Although doctors have warned Munkh-Erdene that another blow to his head could be fatal, and his parents have forbidden him to race, the horse trainers still encourage him. He raced again this year without a helmet and under another boy’s name. This summer, his parents sent him to stay with relatives to stop him from racing.
Cultural tradition
Every midsummer, the country celebrates the Naadam festival to mark Mongolia’s independence. The games featuring the ‘three manly sports’ of archery, horse racing and wrestling are the highlight of the festival.
“Horse racing is a big part of Mongolia’s history and culture,” says Sarangerel Chuluunbat, from the Federation of Mongolian Horse Racing Sport and Trainers. “Mongolia as a nation was founded on strong men and powerful horses. I am not against children racing horses, but I know our responsibility is to ensure the safety of child jockeys.”
UNICEF Image
© UNICEF Mongolia/2014/Brown
Former child jockeys Munkh-Erdene (left) and Budgarav (centre) with their parents outside the family ger.
Unlike in ancient times, today hundreds of horses and jockeys race at one time. Athletes in other traditional sports are adults, but jockeys are almost always children, because of their light weight. Some trainers teach children to fall from their horse on the final straight, so that it comes in lighter and faster. With so many horses galloping behind, the risk of being trampled is high.
Wealthy families also organize horse races to celebrate weddings, even during the winter months, when the ground is icy and even more dangerous. In these races, the jockeys are as young as 5 and rarely wear protective gear. If they are insured at all, it is usually for far less than the horses.
Ulziit is where the main Naadam horse races are held. Almost all the children in the town work as child jockeys. The school is linked to the horse training centre, and children are pulled out of class for up to a month to race, often without their parent’s consent.
Budgarav’s father, Otgonbaatar, does occasional labouring jobs, but horse racing was the family’s main source of income. Now they live on disability benefits and food coupons. The horse trainers gave the family one-off payments of 200,000 Tugriks (US$108) for each injured boy. “Life is hard,” Otgonbaatar says. “We don’t have enough to live on.”
Call for change
The current law governing the Naadam festival states that children under 7 years old cannot race, and jockeys must be insured and wear protective gear. But the law is specific to the official Naadam races and does not cover other races.
UNICEF is advocating for the law to be extended to all horse races in Mongolia. “We also want to ban winter races and raise the minimum age to 9, as a first step towards meeting the international standard of 14,” says Amaraa Dorjsambuu, Child Protection Officer at UNICEF Mongolia. “It’s important to acknowledge Mongolian traditions, but at the same time, we need to be strong on wrongdoing and prevent the exploitation of children.”
UNICEF Image
© UNICEF Mongolia/2014/Brown
A horse monument being constructed at a new racecourse outside Ulziit.
The situation has already improved. In recent years, the Government’s National Authority for Children has worked with the Federation of Mongolian Horse Racing Sport and Trainers to monitor national races and enforce the rules on age, safety equipment and insurance. Over 1,700 children took part in this year’s Naadam races in Ulaanbaatar.
“You can really see the difference,” Amaraa continues. “Last year, 63 children were injured and six killed during the Naadam races, but this year there were only two light injuries and no deaths.”
Otgonbaatar still celebrates Naadam but no longer feels the same way about horse racing. “Definitely my view of horse racing has changed,” he says. “The traditions have been lost, and it’s all about big business. We used to have two healthy boys, but now they are both disabled. If Munkh-Erdene had been wearing a helmet, he might still be OK.”
Outside Ulziit a new racecourse is being built. Alongside it a massive horse statue has been raised, paid for by a wealthy horse owner. The horse is shown tossing its mane against a dramatic backdrop of steppe and mountains. Although the statue stands beside a racecourse, the horse has no rider.
It is clear that much more needs to be done if child jockeys, and their rights, are to become visible in the public eye.
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Mongolia Eager for Oyu Tolgoi Deal by Year End, Official Says

Mongolia’s prime minister is pushing to end the deadlock with Rio Tinto Group (RIO) over the expansion of the Oyu Tolgoi copper and gold mine by the end of this year, according to an industry official of the landlocked nation.
Prime Minister Altankhuyag Norov sent an order to solve the dispute by the end of this year to government departments including the Economic Development Ministry and the Mining Ministry, according to Khorloo Baatarkhuu, a counselor of Mongolian National Mining Association, who says he’s read the document from the premier’s office. Rio put the $5.4 billion underground expansion at the Oyu Tolgoi mine, the largest foreign investment in Mongolia, on hold in July 2013.
“The central government sent around an order about a month ago, urging people to work on the negotiations diligently and quickly,” Baatarkhuu said in an interview in Chengdu, China, on Oct. 29. “We want the project to resume development as soon as possible as the deadlocked situation hurts the country’s economic growth and forex incomes.”
Officials from the prime minister’s office, the mining ministry and the board of Oyu Tolgoi LLC didn’t respond to requests for comment. The Ministry of Economic Development was dissolved this month as part of a reorganization by Altankhuyag, who said in a televised address Sept. 9 that the government intends to resolve the mine dispute by “this autumn.” Melbourne-based Rio spokesman Ben Mitchell declined to comment.

Third-Largest Mine

Oyu Tolgoi, located about 80 kilometers (50 miles) north of the Chinese border, will contribute about a third of Mongolia’s economy when in full operation and will be the world’s third-biggest copper mine, Rio-controlled unit Turquoise Hill Resources Ltd., which owns 66 percent of the mine, said in a January presentation. Copper on the London Metal Exchange has fallen about 8 percent this year.
Commitments from lenders for $4.2 billion needed to help fund the underground expansion expired after a Sept. 30 deadline to reach an agreement was missed, Turquoise Hill said in a statement earlier this month. The two sides are still negotiating taxation and accounting standards as well as infrastructure and environmental management projects associated with the mine development, Baatarkhuu said.
The deadlock began last year after Rio raised cost estimates for the project. Officials from the Mongolian mining ministry and Rio said during meetings that Baatarkhuu attended that they’re targeting a deal by the end of this year, he said.

Biggest Customer

Copper concentrate production in Mongolia could rise to 1.5 million metric tons in 2015, up 25 percent from this year’s projected 1.2 million, according to Baatarkhuu. Mongolia has one smelter with annual capacity of 100,000 tons and there are no plans to build new ones, he said.
Almost all of Mongolia’s production will be exported to China its “neighboring the biggest customer in the world,” Baatarkhuu said. China imported 317,689 tons of copper concentrate from Mongolia in September, an 83 percent jump from the previous month, customs data showed. Mongolia is now the third-largest exporter of copper concentrate to China, supplying 25 percent of its imports last month.
To contact Bloomberg News staff for this story: Alfred Cang in Shanghai at acang@bloomberg.net
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net Andrew Hobbs
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Russia, China & Mongolia Begin Trilateral Talks

The first round of talks will take place at the deputy foreign minister level and focus on transit corridors.

Following up on Vladimir Putin’s September invitation for trilateral talks, Russian, Chinese and Mongolia deputy foreign ministers met in Ulaanbataar for the first-ever Russia-Mongolia-China trilateral consultation. Russian Deputy Foreign Minister Igor Morgulov kicked off the talks by remarking that the three countries share “vast borders, rich historic traditions, firm friendship of peoples, huge potential and vast prospects for practical cooperation, as well as closeness of approaches to international affairs,” according to Russia’s ITAR-TASS news agency. He added that Russia sees China and Mongolia “not only as close neighbors, but also as time-tested and reliable friends.”
According to ITAR-TASS, trilateral talks will likely focus primarily on economic matters, with an supplementary focus on humanitarian and foreign policy issues. Given that the talks are in their initial phase, no major agreements are expected to result from this first trilateral consultation.
The trilateral arrangement carries more meaning for Russia and Mongolia than it does for China. Russia, which faces alienation from Europe on its West, is increasingly looking at Mongolia and China as major economic partners. Earlier this year, Russia signed a major natural gas agreement with China, demonstrating the Kremlin’s eastward economic gaze. Similarly, Russia and Mongolia are working to integrate their national rail networks, increasing connectivity between the two neighbors.
For Mongolia, this trilateral arrangement fits perfectly with its greater international aspirations. As I’ve noted on The Diplomat before, Mongolian President Tsakhiagiin Elbegdorj has almost single-handedly transformed the country’s foreign policy. Under Elbegdorj, Mongolia has grown increasingly activist in the region. Mongolia’s eagerness for this trilateral arrangement should be unsurprising as it remains sandwiched geographically between two behemoth neighbors. In order to realize its international aspirations, Mongolia necessarily needs to coordinate with both China and Russia.
Speaking to this sentiment, Mongolia’s Deputy Foreign Minister Dambyn Gankhuag remarked that “Mongolia is actively cooperating with its neighbors — the Russian Federation and the Chinese People’s Republic — to deepen the existing strategic partnership relations, as well as to give concrete substance to them.”
This first round of trilateral talks will likely focus on the setting up of transit corridors between the three countries — in essence, connecting Russia to China via Mongolia. Specifically, the three countries will look into rail development, highway construction, and a gas pipeline. ITAR-TASS notes that “the Mongolian side is expected to offer Russia to build a section of the so-called western route pipeline not via the Altai mountains but across its steppe territories.”

Source:http://thediplomat.com/
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Rio Tinto poised for write-off on delayed Mongolian copper mine

RIO TINTO looks set to take a $US2.5 billion writedown on its huge but troubled copper project in Mongolia.
Construction of the $US5 billion Oyu Tolgoi mine has become ensnared in a tax dispute with the government.
The mine has the potential to transform an economy that is on a par with Angola or Swaziland in national income per head. The International Monetary Fund says that it will be responsible for a third of the country’s GDP growth by the time it is operational.
However, the delays contributed to a $US2.5 billion reduction in the project’s value, according to a report by Turqoise Hill, the Rio-controlled company that owns most of the project.
Rio (RIO) had flagged at its half-year results in August that it may have to write down the value of the project if the delays continued.
Its value has shrunk from $US9.9 billion to $US7.4 billion during the past year, with $US1.1 billion of the fall in value due to the delays and slower production ramp-up. First production from the underground element of the project, which holds about 80 per cent of the value, was supposed to arrive in 2017 but is not now expected until 2019, with one analyst who visited the site this week saying that 2020 is a more likely start date.
Daniel Greenspan, a Macquarie analyst who visited the site, wrote to clients: “We got the distinct impression that even if the green light was given tomorrow, it could take at least ten months before workers and contractors are mobilised and construction recommences. Therefore, the 2019 production start date targeted in the new (technical report) is likely one year off at least.”
Construction of the underground mine, and its 200km of tunnels, was postponed last summer after the Mongolian government announced that it was reviewing a feasibility study, which meant that Rio was unable to hit a September 30 deadline attached to a $US3.6 billion finance package.
Rio cut 300 jobs in May and appointed a new chief executive for the project, Andrew Woodley, in September.
The project would be one of the world’s largest copper mines at full capacity, helping Rio Tinto to break its dependence on Australian iron ore for the vast majority of its profit. Macquarie is forecasting that the project will suck in about 40 per cent of Rio’s growth investment from next year.
The negotiations and impending writedown come at a fraught time for Rio. The company was informally approached in July by Glencore about a potential merger and is three weeks into a six-month period, enforced by the Takeover Panel, during which Glencore cannot return.
Sam Walsh, Rio’s chief executive, said: “It’s a 50-year project ... I need to make sure with these sorts of projects that you don’t put lead in the saddle that you have to carry for 50 years.”
The Times

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Fitch: Mongolian Banks Face Rising Risks from Subsidised Mortgages

(The following statement was released by the rating agency) HONG KONG, October 31 (Fitch) Mongolian banks' mortgage exposure continues to rise amid the government's commitments to provide affordable housing to low- to medium-income households, and to contain inflation, Fitch says in its Asia-Pacific Banks: Chart of the Month report. Ongoing securitisation by the Mongolian Mortgage Corporation supports banks' liquidity as banks can repay 90% of funding from the Bank of Mongolia with the senior tranche of the residential mortgage-backed securities. The securitisation also improves banks' interest spread. However, most of the credit risk remains in the sector as banks retain the equity tranche carrying a 1,250% risk weight for regulatory capital purposes. The mining sector and the volatile operating environment for the banks remain the key pressure points for Mongolian banks. The report "APAC Banks: Chart of the Month" is available at www.fitchratings.com or by clicking on the link above. Contact: Sabine Bauer Senior Director +852 2263 9966 Fitch (Hong Kong) Limited 2801, Tower Two, Lippo Centre 89 Queensway, Hong Kong Ivan Lin Associate Director +852 2263 9984 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available at www.fitchratings.com. Applicable Criteria and Related Research: APAC Banks: Chart of the Month
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Mongolia Eager for Oyu Tolgoi Deal by Year End, Official Says

Mongolia’s prime minister is pushing to end the deadlock with Rio Tinto Group (RIO) over the expansion of the Oyu Tolgoi copper and gold mine by the end of this year, according to an industry official of the landlocked nation.
Prime Minister Altankhuyag Norov sent an order to solve the dispute by the end of this year to government departments including the Economic Development Ministry and the Mining Ministry, according to Khorloo Baatarkhuu, a counselor of Mongolian National Mining Association, who says he’s read the document from the premier’s office. Rio put the $5.4 billion underground expansion at the Oyu Tolgoi mine, the largest foreign investment in Mongolia, on hold in July 2013.
“The central government sent around an order about a month ago, urging people to work on the negotiations diligently and quickly,” Baatarkhuu said in an interview in Chengdu, China, on Oct. 29. “We want the project to resume development as soon as possible as the deadlocked situation hurts the country’s economic growth and forex incomes.”
Officials from the prime minister’s office, the mining ministry and the board of Oyu Tolgoi LLC didn’t respond to requests for comment. The Ministry of Economic Development was dissolved this month as part of a reorganization by Altankhuyag, who said in a televised address Sept. 9 that the government intends to resolve the mine dispute by “this autumn.” Melbourne-based Rio spokesman Ben Mitchell declined to comment.

Third-Largest Mine

Oyu Tolgoi, located about 80 kilometers (50 miles) north of the Chinese border, will contribute about a third of Mongolia’s economy when in full operation and will be the world’s third-biggest copper mine, Rio-controlled unit Turquoise Hill Resources Ltd., which owns 66 percent of the mine, said in a January presentation. Copper on the London Metal Exchange has fallen about 8 percent this year.
Commitments from lenders for $4.2 billion needed to help fund the underground expansion expired after a Sept. 30 deadline to reach an agreement was missed, Turquoise Hill said in a statement earlier this month. The two sides are still negotiating taxation and accounting standards as well as infrastructure and environmental management projects associated with the mine development, Baatarkhuu said.
The deadlock began last year after Rio raised cost estimates for the project. Officials from the Mongolian mining ministry and Rio said during meetings that Baatarkhuu attended that they’re targeting a deal by the end of this year, he said.

Biggest Customer

Copper concentrate production in Mongolia could rise to 1.5 million metric tons in 2015, up 25 percent from this year’s projected 1.2 million, according to Baatarkhuu. Mongolia has one smelter with annual capacity of 100,000 tons and there are no plans to build new ones, he said.
Almost all of Mongolia’s production will be exported to China its “neighboring the biggest customer in the world,” Baatarkhuu said. China imported 317,689 tons of copper concentrate from Mongolia in September, an 83 percent jump from the previous month, customs data showed. Mongolia is now the third-largest exporter of copper concentrate to China, supplying 25 percent of its imports last month.
To contact Bloomberg News staff for this story: Alfred Cang in Shanghai at acang@bloomberg.net
To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net Andrew Hobbs
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Russia hails ties with China, Mongolia as trilateral consultations open

ULAN-BATOR, October 30. /TASS/. Russia is satisfied with a dynamic pace of ties with China and Mongolia, Deputy Foreign Minister Igor Morgulov said in his opening remarks at the first Russian-Mongolian-Chinese consultations at the deputy foreign ministerial level.
Russia, Mongolia and China share “vast borders, rich historic traditions, firm friendship of peoples, huge potential and vast prospects for practical cooperation, as well as closeness of approaches to international affairs,” Morgulov said.
Russia sees China and Mongolia “not only as close neighbors, but also as time-tested and reliable friends,” he said.
Consultations would focus on cooperation in trade-economic, humanitarian and foreign policy sectors, he said, adding that they were expected to become a basis for future concrete projects.
Mongolia’s Deputy Foreign Minister Dambyn Gankhuyag said, “Mongolia is actively cooperating with its neighbors — the Russian Federation and the Chinese People’s Republic — to deepen the existing strategic partnership relations, as well as to give concrete substance to them”.
Chinese’ Deputy Foreign Minister Chen Gopin expressed readiness to join efforts with his counterparts at consultations towards the implementation of the already signed agreements.
INFOGRAPHICSAltai gas pipelineAltai gas pipeline
Gazprom is in negotiations with China on supplying gas via the western route in the volume of 30 billion cubic meters per year and possibly increasing it later to 100 billion cubic meters per year. Infographics by TASS
The parties are expected to discuss the idea of transit corridors between Russia and China, notably rail and motor roads, a gas pipeline and energy supplies. The agenda will also include steps to invigorate political dialogue in the tripartite format.
As for gas cooperation, the Mongolian side is expected to offer Russia to build a section of the so-called western route pipeline not via the Altai mountains but across its steppe territories. Mongolia’s government says it would help spare large funds. The western route provides for gas supplies to China from West Siberian gas fields. Direct gas supplies are planned to be launched in 2019.
The Ulan-Bator-based newspaper UB Post reminded that earlier in 2014, on September 11, the first meeting of the leaders of Russia, Mongolia and China was held at the initiative of the Mongolian side on the sidelines of the Shanghai Cooperation Organization (SCO) summit in Dushanbe. The leaders then reached an agreement to continue cooperation between the foreign ministries of the three countries.
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