Doubts over Mongolia
Peter Koven, Financial Post - NATIONAL POST
Published: Wednesday, April 11, 2007
After
waiting four years for Ivanhoe Mines Ltd. to reach an agreement to mine
the Oyu Tolgoi metal deposit in Mongolia, shareholders are shrugging
off the company's announcement that a deal is at last in sight.
Ivanhoe
stock rose just 1.8% yesterday after the company, which is led by
Robert Friedland, said it negotiated a "draft investment agreement"
with the Mongolian government to develop the massive copper-gold
deposit.
After waiting so long for approval of the project,
shareholders are waiting for more than a "draft" from a government that
has proven to be very unpredictable, sources said.
Julian Dierkes, a
professor at the Institute of Asian Research at the University of
British Columbia, said it has been very difficult for the government to
make a decision on Oyu Tolgoi or any major issue. "Corruption clearly
has been a challenge," he said. "And almost worse is the whiff of
government corruption. It just paralyzes everything. When everyone
suspects that corruption is everywhere, it means all decisions are
suspect. [So] for government, it's very difficult to make any sort of
announcement."
He said Mongolia, which is a democratic country, is
lacking the policy-making experience to properly manage assets such as
its natural resources. That has led to some ill-conceived ideas, such
as the announcement of a 68% windfall-profits tax last year that
flattened Ivanhoe shares.
Mr. Dierkes also said Mongolia has had bad
experiences with foreigners in the past. For example, the country has
seen much of the wealth from its cashmere industry passed on to China,
which does the value added work on Mongolia's raw wool exports. And so
far, Canada as a nation has done nothing to alleviate those concerns,
he said.
Ivanhoe's breakthrough leaves investors cold
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