Mongolian acquisition on Oyu Tolgoi would be reviewed

The Standing Committee on Economy reviewed the implementation of the State Great Khural’s resolution No57, given by SGK when adopting Oyu Tolgoi Investment Agreement.

Minister for Finance and Minister for Mineral Resource and Energy replied to the criticism of “losing unnecessary time on further acquisition of Oyu Tolgoi deposit, which was clearly stated in the resolution as … the ownership of the Mongolian side will be further increased upon reaching of breakeven point, which was calculated as 4.7 years” made by several MPs. They explained that they followed resolution direction according to the law, as they were explaining before. But Minister S.Bayartsogt calmed MPs with his statement that “…if Mongolians are united on this issue, we can show pressure on investors in order to shorten this time and apply gliding royalty tax”.

The agreement was made on October 6 2009, and it became effective on March 31 2010. The number of the Mongolian workers at Oyu Tolgoi project has increased from 300 to 2250. It was stated in agreement that ratio between the Mongolian and foreign employers will be 60/40, but it is now 70/30. It will also train additional 3,000 workers in three years with annual budget MNT12bn.

The issue of creating 3000 workplaces in Ulaanbaatar is temporarily stopped. The project will start its production in 2013 and create 5700 workplaces in infrastructure and road building sector in 2014. These works will be completed by the domestic companies.

Minister D.Zorigt has details on the project timing:

Minister D.Zorigt: $728 million will be invested for Oyu Tolgoi project in 2010 and it will be approved by the Board of Directors. Between 2010-2012, project of over $400 million will be spent for the infrastructure and road building by the Mongolian companies.

Q: When the initial investment will be covered?

Minsiter D.Zorigt: According to the agreement it is 30 years. There are some attempts are made to alter its meaning or suspend the project. It is still uncertain why such attempts are made. The initial investment can be covered in 7-8 years. The Mongolian side will acquire additional 16% after 30 years.