Mongolia eyes changes to Oyu Tolgoi copper deal
* Mongolian minister says govt may seek to alter agreement
* Some lawmakers want bigger Mongolian stake in project
* Ivanhoe shares down over 2 pct on the NYSE and TSX (Adds comments from Rio Tinto, background, share price move)
Sept 20 (Reuters) - The Mongolian government is discussing possible changes to a 2009 investment agreement for the massive Oyu Tolgoi copper-gold deposit, media reports quoted Mongolia's finance minister, S. Bayartsogt, as saying Tuesday.
The 2009 deal gave a 66 percent stake in the multibillion-dollar Oyu Tolgoi project in Mongolia's South Gobi region to the Canadian miner Ivanhoe Mines (IVN.TO), in which mining giant Rio Tinto (RIO.AX) (RIO.L) now owns a 48.5 percent stake. The government has the remaining 34 percent stake.
Interviewed by Mongolian news portal www.news.mn, the minister said the country's Standing Committee on Security and Foreign Policy has been discussing changes to the terms and length of the agreement.
No details were given, but a group of lawmakers has recently urged the government to raise the country's stake in Oyu Tolgoi to at least 40 percent, saying Ivanhoe's profits were too high.
A spokesman for Ivanhoe declined to comment on the minister's remarks, but said construction work at Oyu Tolgoi was progressing on schedule.
Andrew Harding, the head of Rio Tinto's copper business, said at an investor presentation on Tuesday that the project has already generated vast amounts of wealth for Mongolia.
"I've had discussions with many (Mongolian) ministers and they fundamentally understand that it is not only about the value that is being gained now," Harding said. "But that it has also triggered a great many other companies looking for investment opportunities."
There is a provision in the existing agreement that would allow Mongolia to raise its stake to up to 50 percent after 30 years.
Some Mongolian lawmakers hope the country can raise its ownership interest in the project faster, but investors have warned that Mongolia's mining boom could be slowed by ill-conceived populist policies. [ID:nL3E7K7354]
The completion of the Oyu Tolgoi investment agreement in 2009 was itself contingent on the annulment of a controversial windfall tax on mining profits set by lawmakers two years earlier.
Cameron McRae, chief executive of the Oyu Tolgoi project, told a conference in Ulan Bator earlier this month that the country needed to honor the existing agreement.
"If even a few voices call for Mongolia's commitments to be broken or agreements to be changed, there is a risk that this will undermine investor confidence," he said.
Ivanhoe and Rio Tinto have already sunk billions of dollars into the project, which is expected to begin initial production in 2012. They expect average annual output during its first 10 years of commercial production to exceed 650,000 ounces of gold, 3 million ounces of silver and 1.2 billion pounds (544,000 tonnes) of copper.
"Remember that $7 billion will have been spent before the first truckload of concentrate leaves our site," McRae said. "Oyu Tolgoi's investors needed the investment agreement to have the confidence to invest such mammoth sums."
Shares of Ivanhoe were down roughly 2.2 percent at C$18.99 in afternoon trading on the Toronto Stock Exchange on Tuesday, while its U.S.-listed shares were down 2.4 percent at $19.16.
($1=$0.99 Canadian) (Reporting by David Stanway in Beijing, Euan Rocha in Toronto and Clara Ferreira Marques in London; Editing by Clarence Fernandez and Peter Galloway)
* Some lawmakers want bigger Mongolian stake in project
* Ivanhoe shares down over 2 pct on the NYSE and TSX (Adds comments from Rio Tinto, background, share price move)
Sept 20 (Reuters) - The Mongolian government is discussing possible changes to a 2009 investment agreement for the massive Oyu Tolgoi copper-gold deposit, media reports quoted Mongolia's finance minister, S. Bayartsogt, as saying Tuesday.
The 2009 deal gave a 66 percent stake in the multibillion-dollar Oyu Tolgoi project in Mongolia's South Gobi region to the Canadian miner Ivanhoe Mines (IVN.TO), in which mining giant Rio Tinto (RIO.AX) (RIO.L) now owns a 48.5 percent stake. The government has the remaining 34 percent stake.
Interviewed by Mongolian news portal www.news.mn, the minister said the country's Standing Committee on Security and Foreign Policy has been discussing changes to the terms and length of the agreement.
No details were given, but a group of lawmakers has recently urged the government to raise the country's stake in Oyu Tolgoi to at least 40 percent, saying Ivanhoe's profits were too high.
A spokesman for Ivanhoe declined to comment on the minister's remarks, but said construction work at Oyu Tolgoi was progressing on schedule.
Andrew Harding, the head of Rio Tinto's copper business, said at an investor presentation on Tuesday that the project has already generated vast amounts of wealth for Mongolia.
"I've had discussions with many (Mongolian) ministers and they fundamentally understand that it is not only about the value that is being gained now," Harding said. "But that it has also triggered a great many other companies looking for investment opportunities."
There is a provision in the existing agreement that would allow Mongolia to raise its stake to up to 50 percent after 30 years.
Some Mongolian lawmakers hope the country can raise its ownership interest in the project faster, but investors have warned that Mongolia's mining boom could be slowed by ill-conceived populist policies. [ID:nL3E7K7354]
The completion of the Oyu Tolgoi investment agreement in 2009 was itself contingent on the annulment of a controversial windfall tax on mining profits set by lawmakers two years earlier.
Cameron McRae, chief executive of the Oyu Tolgoi project, told a conference in Ulan Bator earlier this month that the country needed to honor the existing agreement.
"If even a few voices call for Mongolia's commitments to be broken or agreements to be changed, there is a risk that this will undermine investor confidence," he said.
Ivanhoe and Rio Tinto have already sunk billions of dollars into the project, which is expected to begin initial production in 2012. They expect average annual output during its first 10 years of commercial production to exceed 650,000 ounces of gold, 3 million ounces of silver and 1.2 billion pounds (544,000 tonnes) of copper.
"Remember that $7 billion will have been spent before the first truckload of concentrate leaves our site," McRae said. "Oyu Tolgoi's investors needed the investment agreement to have the confidence to invest such mammoth sums."
Shares of Ivanhoe were down roughly 2.2 percent at C$18.99 in afternoon trading on the Toronto Stock Exchange on Tuesday, while its U.S.-listed shares were down 2.4 percent at $19.16.
($1=$0.99 Canadian) (Reporting by David Stanway in Beijing, Euan Rocha in Toronto and Clara Ferreira Marques in London; Editing by Clarence Fernandez and Peter Galloway)
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