The previous government signed in 2007 a draft agreement, giving it a 34 percent equity stake in the Oyu Tolgoi project and related taxes equivalent to 55 percent of profits. That accord was scrapped because of opposition from lawmakers.
“Half of the profit can belong to the Mongolian state, and half of the profit belongs to the investor,” Elbegdorj said yesterday in an interview with Bloomberg in the capital Ulan Bator. Elbegdorj was sworn in today after he defeated Nambaryn Enkhbayar in the May 24 presidential election. “An equity share is not a good proposal,” he said.
Ivanhoe, based in Vancouver, has been trying for more than five years to complete an investment agreement for the Oyu Tolgoi copper and gold deposit, about 80 kilometers (50 miles) north of the border with China. Mongolia’s economic growth has slumped and its budget deficit has widened, increasing the incentive for the government to attract more foreign investment.
While a profit-sharing arrangement rather than a government stake may be good news for investors, the possibility that a final deal could take years more to reach is “not so good,” according to Masa Igata, chief executive officer of Frontier Securities in Ulan Bator.
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