Announcing its financial results and review of operations for the year ended December 31, 2009, Ivanhoe Mines Ltd. has said the signing and approval of “the long-awaited” investment agreement for the Oyu Tolgoi project in October 2009 marked the culmination of “nine years of exploration successes... and nearly six years of negotiations”.
The provisions of the agreement include protection of the parties’ investments in the project, the amount and term of the investments, the right to realize the benefits of such investments, the conduct of mining with minimum environmental impact and progressive rehabilitation, the social and economic development of the South Gobi Region, and the creation of thousands of new jobs in Mongolia.
Mongolia’s state-owned company, Erdenes MGL LLC, will acquire a 34% interest in the Oyu Tolgoi Project within 14 days of the approved agreement taking effect. Ivanhoe Mines will retain a controlling 66% interest in OT LLC.
In late 2009, the joint Ivanhoe Mines-Rio Tinto Oyu Tolgoi Technical Committee conditionally approved a USD758-million budget for 2010 to begin full-scale construction of Oyu Tolgoi. The 2010 budget provides for an early start on a site-wide development program. In 2009, Ivanhoe Mines incurred exploration expenses of USD107.4 million at Oyu Tolgoi compared to the USD156.0 million incurred in 2008. A significant portion of the 2009 expenditures was related directly to development work. Ivanhoe Mines expects to begin capitalizing Oyu Tolgoi development costs in the second quarter of 2010.
The agreement now has taken full legal effect, with the Mongolian Government confirming on March 31, 2010 that all procedural and administrative conditions were satisfied within the allocated six-month period that followed the agreement’s official signing.
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