The special session of Parliament did what it was widely expected to do, and also did it faster at the end. Around 8 on Tuesday evening Parliament approved the last of the four amendments the Government had proposed to facilitate an agreement with the investors in the Oyu Tolgoi project, allowing a relieved and jubilant Rio Tinto CEO Tom Albanese to say in distant Canada, "This is an incredibly important milestone in bringing onstream one of the finest undeveloped copper-gold projects in the world.”

As shares in Vancouver-based Ivanhoe rose 24% in Toronto on receipt of the news, Rio and Ivanhoe both said they now expect to formally sign the agreement with the Government of Mongolia “in the near future”. The Mongolian Finance Minister has said the signing will take place within two weeks.

"The votes today by overwhelming majorities of the members present for the special session of Parliament represent a significant step in Mongolia's commitment to attract foreign investment in the development of the country's mineral resources," Ivanhoe president John Macken said. He was certainly right about the majority support for the amendments. After long months of acrimonious bickering and maddening uncertainty, the MPs approved changes to the law on water by a 90.9 percent majority, to the law on roads by 88.3 percent, and to the corporate income tax by 86.9 percent. The annulment of the windfall profits tax with effect from January 1, 2011 remained the most contentious to the end, but only statistically so, gaining 85 percent support.

Some of its opponents remained unconvinced to the end. Mr. N.Batbayar, one of the MPS who had initiated the tax that was passed in 2006, said after the vote, “The Mongolian Government has just gifted USD20 billion to foreign companies.” Many of the MPs who did favor the annulment shared his concern that the tax, which has brought MNT960 billion to the state budget, will be difficult to replace. The Government’s answer has been that times have changed, the tax has served its purpose, and continuing with it would scare away investment, killing the goose that laid the golden eggs.

The agreement gives the Government 34% shares in Ivanhoe Mines Mongolia, the company that will run the project. Other key terms include a stable and operational tax environment in relation to the development and operation of the project and certainty regarding the term of the investment.

Rio Tinto owns just under 10% of Ivanhoe at present, but an agreement the two companies signed in 2006 allows it to buy another 9.95% for USD388 million when the investment agreement is signed. Rio also gave Ivanhoe a USD350-million loan in 2007 so that project development could continue. Rio could increase its holding of Ivanhoe to approximately 46.5% if all its options are converted to shares.

Ivanhoe expects construction of the mine to take 30 months, but work will begin only after the agreement is approved and signed by the Government and both companies' boards. At the moment, production is targeted for as early as 2013, with a five-year ramp up to full output, Rio said on Tuesday.The Oyu Tolgoi project is located in the South Gobi region just north of the Chinese-Mongolian border, and is expected to produce 440,000 tons of copper and 320,000 ounces of gold annually, with a 45-year mine life.

Source: en.News.mn

IFC LAUNCHES PROJECT TO PROMOTE CORPORATE GOVERNANCE, TRADE FINANCE

NEW BIOBEER SEASON STARTS!
Batbayar.G, Munkhjargal.M, will present a talk entitled "Monitoring Mongolian Biodiversity Wildlife Picture Index (WPI)"
on *Thursday, September 3, 2009.*

We will describe our Wildlife Picture Index (WPI) pilot project just completed in Myangan Ugalzat in Western Mongolia and present our preliminary findings. The WPI, developed jointly by the Zoological Society of London and the Wildlife Conservation Society, uses camera stations to reliably and systematically detect many types of terrestrial vertebrates. We set up 2 20 sq km grids with 20 camera stations each; one in the Buffer Zone and one in the core area of the Park for 30 days. Interestingly, human disturbance was much higher in the Core Area of the Park and less so in the Buffer Zone. We detected numerous vertebrate species including passerine birds, small rodents, pikas, marmots and also larger vertebrate species such as Argali. We also used other wildlife detection techniques such as avian point counts, mist netting and small mammal trapping. We discuss future plans for expanding this project as well.

Biobeers is held on the first Thursday of every month at Sweet Cafe
(located behind the Information and Technological National Park and
next to the Admon Printing Company, west of Internom Bookstore
Building). People are requested to arrive after 6pm, in time for the
talk to start at 6.30.

Biobeers is a monthly gathering of government and NGO staff,
biologists, researchers, and other professionals interested in
conservation. Each month, Biobeers sponsors a half-hour presentation
on a topic relevant to Mongolian conservation, followed by an informal
gathering to discuss activities and issues of interest. Biobeers is an
opportunity to find out what is happening in the field of conservation
in Mongolia, talk informally to other researchers and peers in your
field, and share information about issues critical to the environment
and people of Mongolia.

Biobeers is organised by the Zoological Society of London's Steppe
Forward Programme and sponsored by the Wildlife Conservation Society.
At Biobeers the beer is on us!

The following documents were signed during Russian President Medvedev’s visit to Mongolia.

-Memorandum on cooperation between the Railway Agency of the Mongolian Government and the Railway and Road Agency of Russian Government;

-Memorandum on cooperation between Ulaanbaatar Railway, and Russian Railways and Transmash Holding of Russian Federation;

-Protocol between General Election Committee of Mongolia and Central Election Commission of Russia;

-Agreement on establishment Dornod Uran company;

-Declaration on strategic partnership between Mongolia and Russian Federation.

1. 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.

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