BC Mongolia:16 Points of Revised Oyu Tolgoi Agreement Draft

Business Council of Mongolia - Oyu Tolgoi1. The 68 percent windfall profits tax will be abolished with effect from January 1, 2011.

2. The Government will own 34 percent of the project. The capital the Government has to contribute will be no more than USD816 million, down from the USD1.7 billion earlier proposed by the investors. According to the Finance Minister this decreases the Government risk by half.

3. Investors will not be exempted from paying any tax and will also not get any compensation beyond what the law permits.

4. Investor-dependent entities and subcontractors will also work under the proposed new tax environment.

5. The following eight types of taxes will be stabilized:

  • Company income tax,

  • Customs tax,

  • VAT,

  • Special taxes, not including fuel tax,

  • Mineral reserve usage tax,

  • Payment for minerals exploration,

  • Real estate tax,

  • VAT on certain products.

6. Investment tax rebates will be allowed only during construction.

7. During construction, foreign labor will not exceed 60 percent of the work force.

8. The initial amount of investment in the project will be no more than USD4 billion.

9. No more than 60 percent of the total investment expenses will be met by sale of ordinary shares. The rest will come from preferential shares and direct financing. This will bring in more tax to Mongolia.

10. The Government will raise this amount on its own. In case it fails to find ways of raising the money, the Government can seek collaboration with the investors.

11. The Mongolian side will save USD268 million from the new system of collecting VAT. The Mongolian side will also get USD90 million more by adopting new Customs regulations. Together these work out to USD358 million and this will start coming in as soon as work on the project starts.

12. Investors will make an initial payment in the form of a loan of USD250 million. This will be repaid with 5 percent interest. Previously the investors had offered USD125 million, of which USD25 million was to carry no interest, while the interest on the rest was set at 9.9 percent.

13. Exploration expenses will not be met with this loan.

14. All provisions in the March negotiations that were beneficial for Mongolia have been retained.

15. Currently, the estimated value to Mongolia of the project’s revenues has increased from the March estimate of USD5.3 billion or 58 percent return to USD5.4 billion or 59 percent return. The nominated price or money to take every year was previously estimated at USD28.8 billion, and now it has risen to USD29.1 billion. The total cost of the project is estimated at USD4.1 billion.

16. Besides annulling the WPT, three other laws are sought to be amended.

i) The law on corporate tax will be amended to allow 100% loss to be carried forward for 8 years. “We have followed the advice of foreign organizations on this,” the Finance Minister has said.

ii) The existing law permits roads to be built only at State expense. The proposed amendments will allow investors to build paved roads for their needs. “This is very beneficial to Mongolia,” the Ministers said.

iii) “Water is of great importance to continue this project successfully. We have now proposed incorporation of several new articles and paragraphs in the existing law,” the Ministers said.


Business Council of Mongolia The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
No votes yet
Archived Comments
2009-08-24 14:05:13
It is not the extortionate contract equal in rights. We Mongols should cancel Oyu Tolgoi mining licence and expel impudent and haughty Canadians. We hate them for impudence.
2009-08-24 17:07:34
Yeah, you have ALL the time in the world to make up you mind. ;) Your economy is is bad shape, Russia just announced you STILL owe them the money and NO other major company or country will invest in you until you can show that you can at least finish the OT IA. So kick them out, and good luck to you.
2009-08-24 17:13:22
I take it that nothing of significance happened with the SGK session on Monday aug 24th. It is after 9 PM and I find nothing reported online. "B"
2009-08-25 04:59:13
IS THIS TRUE? I just read that the budgetary Committee Approves the repeal of Windfall Tax and Revised Law on Commercial Entities by 9 to 7 in its original form submitted by the Government. If this is true then does it now go to the floor of SGK for final vote?
2009-08-25 08:07:51
Great Imperial Power House that is Mongolia will not tolerate 'impudence'. How rude to invest multi billions in your fumbling country with shifting sand for laws on a prayer that one day its law/decision makers will actually think past their next paycheck. The cheek of it. Wake up and give your head a good shake bolvo tolgoi.
2009-08-25 14:20:58
Why you westerns trying to make deal in your robbery condition? Why don't want fare and equal relatios with us? You cannot recognize mongolian as part of human civilization. Ivanhoe Mines should leave our country! We will push out.
2009-08-25 15:14:59
You are getting a fair deal.
Jimmie D
2009-08-29 16:22:00
World opinion in a nutshell.. http://www.mineweb.net/mineweb/view/mineweb/en/page72068?oid=88037&sn=Detail