Business:
Changes in draft would mean renewed negotiation; Minerals Minister plays down talk of Ivanhoe ultimatum;MPRP group proposes 16 amendments to draft agreement; Ivanhoe publishes 2008 results and review of operations; Peabody renegotiates Mongolian coal deal with Polo; Estimates of new large copper-molybdenum deposits approved; Ceke border point working longer hours to help export more coal; BHP says building mines will become cheaper than buying them; Entrée “encouraged” by exploration results; MIAT proposes to cut 25% of international flights; Audit of Anod Bank completed; EU signs civil aviation agreement with Mongolia; Rio Tinto (NYSE:RTP) lines up USD8 billion rights issue, says newspaper; Poll finds Australians opposed to Chinese investment in mining; China denies spies targeted Australian PM, Rio Tinto; Italian company to advise Gobi.
Economy:
Long road to higher growth for Mongolia, says World Bank report; Mongolia given immediate access to USD76 million of IMF loan; No Trans Europe Express freight service now, says Deutsche Bahn; Speaker discusses herder loans, help for SMEs with bankers; Banks buying foreign currency spend it on imports; We have to wait for results, says TDB President defending monetary policies; Seminar on credit information; 3 officers under probe for issuing mineral licenses without tender; MSE team discusses economy with First Deputy PM; Mayor wants help from business to control litter; Mongolia could profit from tourism of doom; New MNCCI building inaugurated.
Politics:
Straight fight to decide next President; Prime Minister visits China next week; President’s veto of law stirs political passions; Incidence of serious crimes increasing; Buriyat Republic wants 50,000 sheep from Mongolia;Veterans demonstrate against delay in allotting apartments; Camel gives birth to twins, President informed;Work on garbage recycling to start next month; Amusement park to open in August; 8,606 cars lose registration for illegal parking; US club to provide helmets to child jockeys during Naadam; Korean group pins hope on eco-energy project in Mongolia; NGO offers scholarship to two Hazaras in Afghanistan; 53% in Russia fail to say where Mongolia is.
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CHANGES IN DRAFT WOULD MEAN RENEWED NEGOTIATION
A high-level delegation from Ivanhoe Mines (TSX:IVN) told Speaker D.Demberel last week that the draft Oyu Tolgoi investment agreement was a complex document, based on mutual consent and negotiation, and “if we now change a single provision or a single clause, the whole structure will be disturbed and the whole exercise will have to be started again”. Mr. John Macken, CEO of the company, said the agreement had been drafted “after long negotiations” and “in “full cooperation with the Government”. One could not expect accord on every single thing, but “well known analysts conclude that the draft is beneficial to the Mongolian Government,” he said.
The company team pointed out that the Mongolian share of the investment, as 34% owner of the project, is to be made by Ivanhoe Mines, making the project risk free for the Mongolian side. On the other hand, most of the reserve is 1-2 km under the surface, which means the investors are saddled with a lot more risk,” they said.
Mr. Macken wanted it to be understood that the project was finally going to start at a time of recession. “Our Board thinks there should be no further delay. The project was initiated in 2003 when commodity price was low, but then it went up and has fallen now. It is the right time to build the mine so that we are ready when the next wave of commodity price boom comes,” he said. If the agreement is signed “in the near future and funding questions are solved”, construction can start in the summer, he said. This will give employment to many Mongolians. “Our mission is to make this project one of the top three in the world. We have the experience, the know-how and the reputation,” Mr. Macken said.
Earlier, the Speaker had assured the delegation that Parliament was “in favor of adopting a draft investment agreement” on Oyu Tolgoi and that is why it has been placed on the agenda of the Spring session. However, “party groups and standing committees” wanted to review “some issues” in the present draft “more carefully”. When this is done, the Standing Committee on the Economy will “consider their suggestions” and present a revised draft, if necessary, to the Government.
The Speaker began the meeting by assuring his visitors that MPs, in party groups and in standing committees, had debated the provisions of the agreement in depth but wanted more information on a few matters to make sure that it was “mutually beneficial and workable”. He hoped the present meeting would help “develop, update and upgrade mutual understanding”. Mr. Demberel said the Mongolian side considered the interest rate on the prepayment made by the investors to be too steep. Mongolia also “wanted a copper smelting factory as the project had good prospects, with the large reserves in the area, their high grade and increasing copper demand in the world market”.
Another point mentioned by the Speaker referred to the clause that capped taxes to be paid at 68%. “To make it a fair deal, there also should be a clear statement on the bottom level of taxes that can be imposed,” he said. He also wanted it to be made clear that “the Mongolian side will never receive less than 55% of the profits”. He felt it would be “appropriate if both sides agreed upon a tax on dividends, according to international practice and standards, instead of waiving it”. The Mines delegation comprised Mr. John Macken and Mr. John Fognani, Chief Executive Officer and Executive Vice President respectively of Ivanhoe Mines, Mr. Keith Marshall, Executive Director of the Oyu Tolgoi project, and Mr. A.Munkhbat, Vice President and Executive Director of Ivanhoe Mines Mongolia Inc. MP Ts.Bayarsaikhan, Head of the Standing Committee on the Economy, MP Kh.Badamsuren, MP G.Zandanshatar, and adviser to the Speaker D.Davaasambuu also attended the meeting.
Source: Media Relations Department of Parliament
NOTE: This report is based on the authoritative version of the discussion as issued by the Speaker’s Office. As will be seen, the Ivanhoe Mines team did not use any threat or issue an ultimatum. It merely pointed out that the draft had been prepared on the basis of consensus after prolonged discussion, and any change will mean renewed negotiation. This will inevitably lead to more delay in beginning work on a project vital to Mongolia’s economy.
MPRP GROUP PROPOSES 16 AMENDMENTS TO DRAFT AGREEMENT
Reviewing the draft Oyu Tolgoi investment agreement at a meeting on Wednesday attended by Prime Minister S. Bayar, the MPRP group in Parliament proposed 16 amendments before it is submitted to Parliament for discussion. Among these are: the initial agreement will be for less than 30 years; the advance payment of USD125 million will be increased; and the total amount of investment will be revised. The group hoped the working group now reviewing the draft would complete its work soon so Parliament can begin discussing it.
Source: Zuunii medee
MONGOLIA GIVEN IMMEDIATE ACCESS TO USD76 MILLION OF IMF LOAN
The International Monetary Fund's executive board last week approved a USD229.2 million credit line for Mongolia to help it cope with the effects of the global economic crisis. The country has immediate access to USD76.4 million of the 18-month standby arrangement, the fund said in a statement.
"Mongolia has been severely affected by the global financial crisis through a sharp reduction in the prices of its main mineral exports, notably copper," said Mr. Takatoshi Kato, the IMF's deputy managing director and acting chairman of the board. "The authorities are committed to restoring macroeconomic stability and putting in place the conditions for strong and equitable growth. The program aims to smooth Mongolia's adjustment to the large terms-of-trade shock, put fiscal finances on a sustainable footing, allow for a more flexible exchange rate, address weaknesses in the banking system, and mitigate the impact of adjustment on the most vulnerable," he said.
Source: Dowjones Business News, Bloomberg.com
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