"Oyu Tolgoi" agreement to be amended
Ulaanbaatar, Mongolia, /MONTSAME/ On Wednesday, the cabinet meeting was introduced to a process of amending the investment agreement established between the government of Mongolia and the investors as “Ivanhoe Mines Mongolia Inc” LLC, the “Ivanhoe Mines Ltd” and “Rio Tinto International Holdings Ltd”.
The Minister of Mineral Resources and Energy D.Zorigt said the sides have been discussing at meetings of the Board and investors and at other talks the issues of reducing financing the “Oyu tolgoi” project (OT Project) and updating the financial methods and conditions in efficient ways for the Mongolian side. As a result, the government of Mongolia has reached an agreement with the investors.
In accordance with the mutual agreement, the sides have decided to reduce the interest of project financing to LIBOR (The London Interbank Offered Rate) plus 6.5 per cent. In addition, the Mongolian side is allowed to make financing, to participate in the project financing, to take a project financing in the first turn from a third person, to use a version for protecting from financial risk if necessary, to alter a matter of reference share which was reflected in the investment contract. In any case, the percentage for the Mongolian side (34%) will not be reduced.
The sides have reached agreements in following:
1. Financing and percentage of the credit: Mongolia's government and the investors have agreed to change the financing and percentage as LIBOR plus 6.5 per cent which is replacing a 9.9-percent plus the U.S inflation rate. It is considered that this new percentage will be more beneficial for the Mongolian side rather than a present financing terms which are granted for long-term credit to governmental or state-owned entities.
2. Right of the Mongolian side to make financing: It has been agreed to give Mongolia a right to allot money for the financing in any time. In order to create condition for the Mongolian side to make the financing, the company has been ordered to introduce to both the Board and the shareholders a plan of required money capital within 12 months for approving operational program and budget.
3. The Funding hedging options: Total financing and credit interest will be LIBOR plus 6.5 per cent. If the LIBOR reaches a high rate, the company shall take a necessary measure to protect from financial risks. Moreover, the government has agreed to update the financing and credit interest every seven years.
4. The project financing from a third person: The company shall exploit a project financing in the first turn from a third person that is beneficial for the OT Project. When the shareholders offer the company a project financing to be allotted from a third person, they shall not impose any charge upon the financing expenses and will not earn additional benefits.
5. Not declining the 34 per cent for the Mongolian side: The contract reflects a clause about not reducing the percentage of the Mongolian side in shares. Despite a decision to give the money from the Mongolian side, which required from the company, the 34 per cent of the shares for Mongolia shall not be declined without a permission.
6. Preference shares: A matter on the preference shares, which is reflected in the contract, has been removed in order to update this matter.
7. Others: In accordance with the contract, the “Ivanhoe Mines Ltd” and “Rio Tinto International Holdings Ltd” companies shall buy or transfer their shares of the OT Project to state participation entities or those persons who are directly or indirectly related to the “Oyu tolgoi” LLC, under a consultation with the government of Mongolia and a permission in paper.
Thus, the sides of investors have decided to establish own contract on limiting the trading and transferring the shares.
B.Khuder
The Minister of Mineral Resources and Energy D.Zorigt said the sides have been discussing at meetings of the Board and investors and at other talks the issues of reducing financing the “Oyu tolgoi” project (OT Project) and updating the financial methods and conditions in efficient ways for the Mongolian side. As a result, the government of Mongolia has reached an agreement with the investors.
In accordance with the mutual agreement, the sides have decided to reduce the interest of project financing to LIBOR (The London Interbank Offered Rate) plus 6.5 per cent. In addition, the Mongolian side is allowed to make financing, to participate in the project financing, to take a project financing in the first turn from a third person, to use a version for protecting from financial risk if necessary, to alter a matter of reference share which was reflected in the investment contract. In any case, the percentage for the Mongolian side (34%) will not be reduced.
The sides have reached agreements in following:
1. Financing and percentage of the credit: Mongolia's government and the investors have agreed to change the financing and percentage as LIBOR plus 6.5 per cent which is replacing a 9.9-percent plus the U.S inflation rate. It is considered that this new percentage will be more beneficial for the Mongolian side rather than a present financing terms which are granted for long-term credit to governmental or state-owned entities.
2. Right of the Mongolian side to make financing: It has been agreed to give Mongolia a right to allot money for the financing in any time. In order to create condition for the Mongolian side to make the financing, the company has been ordered to introduce to both the Board and the shareholders a plan of required money capital within 12 months for approving operational program and budget.
3. The Funding hedging options: Total financing and credit interest will be LIBOR plus 6.5 per cent. If the LIBOR reaches a high rate, the company shall take a necessary measure to protect from financial risks. Moreover, the government has agreed to update the financing and credit interest every seven years.
4. The project financing from a third person: The company shall exploit a project financing in the first turn from a third person that is beneficial for the OT Project. When the shareholders offer the company a project financing to be allotted from a third person, they shall not impose any charge upon the financing expenses and will not earn additional benefits.
5. Not declining the 34 per cent for the Mongolian side: The contract reflects a clause about not reducing the percentage of the Mongolian side in shares. Despite a decision to give the money from the Mongolian side, which required from the company, the 34 per cent of the shares for Mongolia shall not be declined without a permission.
6. Preference shares: A matter on the preference shares, which is reflected in the contract, has been removed in order to update this matter.
7. Others: In accordance with the contract, the “Ivanhoe Mines Ltd” and “Rio Tinto International Holdings Ltd” companies shall buy or transfer their shares of the OT Project to state participation entities or those persons who are directly or indirectly related to the “Oyu tolgoi” LLC, under a consultation with the government of Mongolia and a permission in paper.
Thus, the sides of investors have decided to establish own contract on limiting the trading and transferring the shares.
B.Khuder
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