Ivanhoe stands firm on Oyu Tolgoi project agreement ownership split
Ivanhoe Mines Monday refused to give in to the Mongolian government’s demand’s that the country’s interest in the massive Oyu Tolgoi copper-gold project rise from its current 34% to 50%. On September 7, 20 members of Mongolia’s national parliament petitioned Mongolian Prime Minister Sukhbaatar Batbold to pursue changes in the investment agreement ahead of Mongolia’s general election set for June 2012. The US$4.5 billion project is on track toward production of first ore in 2012 and commercial production of copper, gold and silver concentrate in the first half of 2013.Mining Minister Zorigt said Sunday that the government was seeking to change the terms of the Oyu Tolgoi agreement to allow Mongolia to increase its stake in Oyu Tolgoi., which is expected to yield more than 1.2 billion pounds of copper and 650,000 ounces of gold annually in the first decade of operation.
Zorigt said the government had sent a letter to Ivanhoe Mines asking to reopen the 2009 investment agreement. “We are proposing to start the negotiations on changing the time frame within which the Mongolia side will increase its equity to 50% from 34%.”
The negotiation of the October 2009 agreement, which was effective in March 2010, took five years to complete.
In a statement issued Monday, Ivanhoe argued the agreement “complies fully with all Mongolian laws and was negotiated by the government in accordance with all resolutions issued by the Mongolian Parliament. The agreement has been the basis for Ivanhoe Mines and its strategic investor, Rio Tinto, to invest billions of dollars in the development of the mining complex.”
“The investment agreement has been fundamental in building Mongolia’s reputation as an increasingly reliable and stable destination for foreign investment,” Ivanhoe said. “With many significant resources projects still to be financed and developed-including the proposed overseas listing of Erdenes Tavan Tolgoi-Ivanhoe Mines is confident that Mongolia’s leadership understands the fundamental importance of Oyu Tolgoi’s contractual commitments and stabilized investment agreement that were formalized less than two years ago.”
Meanwhile, Ivanhoe said it had noted comments attributed to Rio Tinto executives regarding the possible delay of the delivery of electric power to Oyu Tolgoi. “Ivanhoe Mines remains confident that the necessary agreements between Mongolia and China will be satisfactorily concluded to secure the timely supply of interim, high-voltage electric power from China to ensure that Oyu Tolgoi can begin commercial production on schedule,” the company said.
“Oyu Tolgoi representatives have been assured that inter-governmental negotiations between Mongolia and China are continuing to progress and that the Mongolia government is also confident that interim power for the project will be provided from China,” Ivanhoe said. Erection of steel towers for an 86-kilometre, high-voltage power line from Oyu Tolgoi to the Mongolia-China border is now 82% complete.
Ivanhoe owns 66% of Oyu Tolgoi and the Mongolia government owns 34%. The Mongolia government can increase its ownership stake by 16% to 50%, but only after 30 years in the year 2039.
Meanwhile, Rio Tinto announced Tuesday that it has increased its stake in Ivanhoe Mines to 49% at a price per share of C$19.75 for a total of C$73,075,000.
Rio Tinto’s current maximum permitted shareholding in Ivanhoe Mines is 49%. Since 2006 Rio Tinto has indirectly funded Oyu Tolgoi by buying shares in Ivanhoe, often when cash flow was tight.
Zorigt said the government had sent a letter to Ivanhoe Mines asking to reopen the 2009 investment agreement. “We are proposing to start the negotiations on changing the time frame within which the Mongolia side will increase its equity to 50% from 34%.”
The negotiation of the October 2009 agreement, which was effective in March 2010, took five years to complete.
In a statement issued Monday, Ivanhoe argued the agreement “complies fully with all Mongolian laws and was negotiated by the government in accordance with all resolutions issued by the Mongolian Parliament. The agreement has been the basis for Ivanhoe Mines and its strategic investor, Rio Tinto, to invest billions of dollars in the development of the mining complex.”
“The investment agreement has been fundamental in building Mongolia’s reputation as an increasingly reliable and stable destination for foreign investment,” Ivanhoe said. “With many significant resources projects still to be financed and developed-including the proposed overseas listing of Erdenes Tavan Tolgoi-Ivanhoe Mines is confident that Mongolia’s leadership understands the fundamental importance of Oyu Tolgoi’s contractual commitments and stabilized investment agreement that were formalized less than two years ago.”
Meanwhile, Ivanhoe said it had noted comments attributed to Rio Tinto executives regarding the possible delay of the delivery of electric power to Oyu Tolgoi. “Ivanhoe Mines remains confident that the necessary agreements between Mongolia and China will be satisfactorily concluded to secure the timely supply of interim, high-voltage electric power from China to ensure that Oyu Tolgoi can begin commercial production on schedule,” the company said.
“Oyu Tolgoi representatives have been assured that inter-governmental negotiations between Mongolia and China are continuing to progress and that the Mongolia government is also confident that interim power for the project will be provided from China,” Ivanhoe said. Erection of steel towers for an 86-kilometre, high-voltage power line from Oyu Tolgoi to the Mongolia-China border is now 82% complete.
Ivanhoe owns 66% of Oyu Tolgoi and the Mongolia government owns 34%. The Mongolia government can increase its ownership stake by 16% to 50%, but only after 30 years in the year 2039.
Meanwhile, Rio Tinto announced Tuesday that it has increased its stake in Ivanhoe Mines to 49% at a price per share of C$19.75 for a total of C$73,075,000.
Rio Tinto’s current maximum permitted shareholding in Ivanhoe Mines is 49%. Since 2006 Rio Tinto has indirectly funded Oyu Tolgoi by buying shares in Ivanhoe, often when cash flow was tight.
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