Mongolia and Ivanhoe to sign Tuesday Oct. 6 the $3.6 Billion Oyu Tolgoi Copper-Gold mine agreement

By Dan (ToMongolia)

ivanhoe chairman Robert FriedlandIvanhoe and the Mongolian government are finally expected  to sign the long awaited Oyu Tolgoi  landmark deal. Preparations are underway for the agreement signing ceremony on Tuesday October 6, at 3:00PM at the government house.

The Oyu Tolgoi  copper-gold mine in the Gobi desert  will be one of the largest copper-gold mine developments in the world. The Investment will be the largest foreign investment ever in Mongolia. The project will have a tremendous impact on Mongolia's economy, it will employ thousands of Mongolians and have major positive economic effects on the supply chain nationwide.

Ivanhoe executive team led by Ivanhoe Mines’ President and CEO John Macken and Mongolian officials led by Finance Minister S.Bayartsogt, the head of Governmental "Working group" on Oyu Tolgoi Investment Pacts, spent sleepless nights during the last few days to brush up and synchronise the English and Mongolian versions of the agreement.

The last few hurdles negotiated up to the last minute, included a 5 point secrete section added to the agreement by the National Security Council, headed by the President Elbegdorj Tsakhia, the terms of an upfront payment of  $225 million by Ivanhoe to the Mongolian government, and tax issues. Elements of the agreement are anchored in the Mongolian law. Recent changes in the law relevant to the agreement had to go through a period of optional disapproval by the president, though he is not expected to disapprove, the proper period of time had to be respected until this week.

The final terms of the agreement are favorable to the Mongolian people after decades of mining agreements with foreign parties that exploited the rich land of Mongolia and returned very little to the Mongolian people.

Oyu Tolgoi  marks a change in the way the mines of Mongolia are exploited. It took years of negotiations which eventually redefined the country's mining and investment laws. The deal will set a precedent for future foreign mining investments in Mongolia. The Oyu Tolgoi agreement provided the Government of Mongolia with a 34% equity interest in Ivanhoe Mines Mongolia Inc.

According to parliamentary economic committee Chairman T. Bayarsaikhan Mongolia’s government may approach international financial Institutions, including the World Bank, to help it raise the $820 million needed to maintain a 34 percent equity stake in the project.

Signing the agreements on behalf of  the investor's side will be; Peter Meredith, Deputy Chairman of Ivanhoe Mines, Keith Marshall, Managing Director of Ivanhoe Mines Mongolia, John Foniani, Executive Vice President of Ivanhoe Oyu Tolgoi, and Bret Clayton, Chief Executive Copper of Rio Tinto - Ivanhoe's venture partner.

On behalf of  the Mongolian side the agreements will be signed by Bayartsogt Sangajav Finance Minister, Gansukh Luumed Environmental and tourism Minister, Zorigt Dashdorj Minister of Mineral Resources and Energy and B.Enebish, CEO of Erdenes Mongolia.

The main agreement document is the investment agreement, supplement to it is the shareholders agreement and a pre-payment agreement.

Hosting the ceremony will be Mongolia's President Ts.Elbegdorj, Speaker D.Demberel, and Prime Minister S.Bayar.

Robert Friedland, (in the photo above) Executive Chairman and largest shareholder of Ivanhoe Mines arrived in Ulaanbaatar with several institutional investors on his private jet to honor the event.

Mongolia is rich in a range of resources, including coal, gold, iron ore, zinc and uranium. According to a study, the Oyu Tolgoi mine could produce 440,000 metric tons of copper annually, and 330,000 oz of gold a year for at least 45 years. production at the mine is expected to begin as early as 2013 with an approximate five-year ramp-up to full production.

Partnering with Ivanhoe is Anglo-Australian Rio Tinto  currently holding a 9.9% stake in Canada-based Ivanhoe, after making an initial $US303 million investment in 2006,  with an option to raise that to 43.1% totaling the phased investment in Ivanhoe inclusive of equipment purchased to approximately US$2.4 billion. Other investors are looking into buying a stake in this promising venture. Provisions have been made recently to allow that, by amending the original agreement between Ivanhoe it it's major partner Rio Tinto.

Oyu Tolgoi, in Mongolian means Turquoise Hill, hinting to the Turquoise green rocks found in the region. These rocks drew the attention of the geologists to the possibility that this area is rich with copper.

An exploration shaft was drilled and in January 2008 it reached the depth of 1385 meters. Analysis of the rocks drilled out clearly show the rich gold deposits.

zeus_goviex_ip_oyu_tolgoiSouth west of Oyu Tolgoi a new copper-gold field was discovered recently by Ivanhoe named Heruga, which is a 13 million-ounce gold deposit, with about 16 billion pounds of copper equivalent. New copper-gold deposits have been located in the last few months by Ivanhoe using new exploration technology named "Zeus" (in the photo) developed by GoviEx and tested for the first time in real exploration. Large copper wires are stretched along the Gobi with electrodes on each end up to a distance of 20-km, enormous electrical current is passed through those wires and the Zeus measures the earth's electrical conductivity to locate metalic mineral deposits. This method is named Induced Polarization (IP). Zeus enables geologists to "see" copper and gold using a non invasive method similar to a CAT scan of the human body or MRI, avoiding the hit-and-miss method of traditional exploration by drilling.

See ToMongolia for additional video, maps and photos of the Oyu Tolgoi project.

Dan: ToMongolia@Gmail.com

 

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Archived Comments
roydongen
2009-10-05 05:17:14
We can congratulate Mongolia and its government on the progress made on the investment climate in Mongolia. The result of the long negotiations is a deal much more favorable for Mongolia as previous deals, resulting in direct low interest loans to the government, investments in infrastructure and a high percentage of jobs reserved for Mongolian employees. Ivanhoe and its partner Rio Tinto we can congratulate with the result as well, endurance, patience have been rewarded with one of the largest mining projects possible! There are only winners with the signing of this agreement: Great State of Mongolia, Ivanhoe and Rio Tinto and above all, the people of Mongolia.
Esta
2009-10-05 13:03:29
I want to thank all the people involved in the negotiations for the superb ending - finally we as investors are positive to invest MORE in Mongolia and the Mongolian people!
Bo
2009-10-09 08:57:06
I feel like i am witnessing real economic "boom" in central asia. Mongolia deserves it.
bj
2009-10-09 17:51:44
Congrats to Mongolia I know that you all deserve every bit of money and whatever else you guys can get. I wish you the best of luck:-* ;D
Itgel
2009-10-23 09:51:33
Yes it is about time indeed, the negotiating has been ongoing for about a total of 6 years now which is just totally ridicilious... HOORAY! Be expecting 180 degree change in Mongolia in the next 10 years :D