Independent Mongolian Metals&Mining Research
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TRANSLATION OF AN INTERVIEW OF FORMER TOP MONGOLIAN EXECUTIVE AT OT A. MUNKHBAT IN WHICH HE SAYS IT ALL ( our apologies for translation quality by a translator but we think readers can grasp the main messages)
A.Munkhbat: There are also Mongolian influences in Oyu Tolgoi cost increase
Providing concrete answer to many arguments surrounding Oyu Tolgoi is difficult in today’s condition. Working group supposed to revise the investment agreement is meeting, however, refuses to provide information. Therefore, we invited A.Munkhbat, former vice president of Oyu Tolgoi to our “ interview hall”. He was leading Mongolian management of the Oyu Tolgoi in the past 8 years and today, working as General director of “Innova” company.
- You managed all work to put Oyu Tolgoi deposit into economic circulation and worked until signing of the Investment agreement. Therefore, we aimed to get your answer for many questions related to this deposit and the agreement. However, would you answer if you seeing the Oyu Tolgoi agreement from independent point of view based on current situation?
- It is been one year since I gave up my job. Initially, I began to work as executive director from 2004 or by start of 2nd round of negotiation to conclude the Oyu Tolgoi investment agreement . I worked in Ivanhoe Mines total 8 years. As someone who managed and directed all work during this period, it is hard to say I’m an independent. However, since I resigned, as of today, I have no connection with the Oyu Tolgoi LLC.
- I drafted many questions to ask from you. Probably I need to ask questions that may have nature of history for some, but I aim to explain causes. Would you clarify what are primary factors for delay of negotiation of the investment agreement?
- During initial negotiation of the investment agreement in 2003, both parties agreed that” the agreement needs to be concluded”. However, did not agree on one thing. That is issue about power supply. Investor party which considered power requirements of the Oyu Tolgoi and concluded “ it is not possible to get power supply from Ulaanbaatar” and submitted proposal to source power from China which is about 80 km away. Our side said “ it is possible to source power from Ulaanbaatar. It will be supplied from Power station no.4” and this led to conflict and the parties could not conclude the Stability agreement. Since then, the two parties interrupted for 4 years and continued the negotiation and concluded it in 2009 during global economic crisis. Probably, it became proof that sometimes crisis has good sides. If there was no crisis, maybe, no agreement would have been signed even until today. Of course,there were many obstacles and problems. There were too many difficult periods. Our people talk badly about people who concluded the Investment agreement. As someone who was participating in the negotiation and witnessed all this, former Finance Minister S.Bayartsogt who headed the Mongolian working group during the negotiation and D.Zorigt, former Minister of Mineral resources and energy should be thanked. They are very patriotic young men. Because of them, Oyu Tolgoi investment agreement became more benefificial for Mongolian side.
- -However, public concludes they are traitors. Maybe, your name is also included among them.
- The agreement is misinterpreted for the public. Many false information such as “This agreement is fraud”, “ agreement that does not benefit Mongolia”, “ those who concluded this agreement betrayed the country” were and are disseminated. Actually, not a few people that say these words. On the contrary, I consider then unpatriotic.
- Why? Surely, it is not because they have different views than you. What was the real rationale according to your view?
- No such thing. If this agreement was not signed, how Mongolia could have overcome the 2009 crisis? Our country overcame the global economic crisis with less damage because of signing the agreement. Mongolia did not get more debt because of signing this agreement. Today, Mongolian government issued $ 1.5 billion dollar bond. This is debt. This debt has to be repaid back from the Mongolian government budget. By signing the Oyu Tolgoi agreement, Mongolian government did not get a debt like this bond debt. Oyu Tolgoi deposit cost increased and they say this will be debt for Mongolia. No such thing. Our side (mongolia) will not spend a single tugrug for development of Oyu Tolgoi. Even if it is not profitable, we will not end up with debt. What the reason of tainting this negatively and talking about it negatively without any clear logic when actual situation is like this? If these pseudo-patriots were not there, Oyu Tolgoi agreement would have signed before 2009 and the mine operation would have been normalized before economic crisis. In this sense, I can never talk about them as patriots. It is true.
- However, recently, Oyu Tolgoi investors which lent 250 million dollars to our country asked for it. Because of this, protest started by saying “ the investors indebted us instead of themselves and pressure us when we try to talk with them. They should not allowed to act like this”?
- Mongolia has to pay back this as it is the Mongolian government asked for this loan. Rio Tinto group did not say “ we will lend you money”. Government of that time borrowed money in order to fulfill its election pledge. This loan was ratified through agreement and our government is obliged to pay back the loan. However, when time to pay back the loan came, it is said” this was not included in this year’s budget”. We can’t act like that. Both parties have to be loyal to their agreement commitments.If we can’t, what is the sense of concluding agreement? Is not that right?
- Were the investor supposed to exercise right of Mongolian government to get loan by delaying repayment of this loan? Why not propose positive relationship since financing for underground mining will be borrowed? Maybe, this is too simple and not good idea,however, if you look at it from the point of “Business is commerce”, this alternative can work?
- Why? If no underground mining, no investors would have worked here in the first place. When underground mine will be commissioned, investors will recoup the cost and get profit and also will provide our dividends. When they began to talk and negotiate with the international banking and financial institution in order to find financing for this, our side blocks this opportunity. We should not act like this. Since the whole world is in crisis, Rio Tinto is also in difficult situation. Crisis did not by-pass them. All global mining companies are affected by crisis. This is even serious for large companies. In relation to crisis, Rio Tinto closed many of its mines and investing to Oyu Tolgoi from sales proceeds of these mines. We must understand this difficulty as both Mongolian government and Rio Tinto are both parties on the Oyu Tolgoi deposit. Actually, any business company does not finance new project through its capital asset. It preserves capital assets and finds other financing sources through loan. This is just routine business principle. Also Mongolian government issues $ 1.5 billion dollar bond and creates debt. This is ok. is not it is unfair not to allow the investor party to get a loan? When not allowing the key partner the right to get loan , no only Rio Tinto but also Mongolian interest is damaged. Our people do not understand the actual situation and politicize it.
- I have to ask you about guessing and suspicion one more time. There is warning that “ investors going to borrow 4 billion dollars using the name of Oyu Tolgoi and half of it, will be used to finance other deposits and remaining loan will be spent for purchase of equipments and machinery using offshore account and this is money laundry”?
- Impossible. Our people should stop all these never-ending suspicion and warnings. Rio Tinto is a world famous company. It is one of largest three global mining companies. Such company does not do financial fraud.
- Where is the proof? What are actual explanation for this?
- The seven billion dollars invested in Mongolia as of today can be the proof. Rio Tinto personnel working here are also their proof. Main thing is, license owned by Oyu Tolgoi company. This is the key proof. What other proofs can be there? If Rio Tinto violates Mongolian law, the license will be cancelled. Since it is clear that they don’t want to be in this situation, they will not violate the laws. Our people are scared from offshore account and think of it as fraud.
- S.Bayartsogt, member of the parliament made them scare from this?
- No. It is not like this. Actually, I think S.Bayartsogt and D.Zorigt as true patriots. They spent many sleepless nights in order to increase benefit for Mongolia. As result of this, this agreement became beneficial for Mongolia. I will tell it anywhere. As for offshore accounts, when investor party transfers its profit earned from here to offshore account, our side will not have any loss. On the contrary, it is beneficial for us. Think about it. Today, the concentrate is sold, our side can fully monitor the concentrate amount. Since it is not gold, there is no problem to monitor copper concentrate amount. In another word, it will be fully possible to estimate its profit. When investor transfer its profit to offshore area, it is beneficial. If they transfer their dividend to England or America, they will have to pay 30-40 percent as tax. In this case, let’s assume that a million dollars required for Oyu Tolgoi expansion. Then a million dollar transferred to offshore region, will be come directly to our country. Million dollar trasnferred to England and America will come back as 600 thousand dollars. So which is better for our side? It is right that investor side will transfer its money to offshore account. This is the actual estimation. We should thank that the profit earned from our country is transferred to offshore account. There is no need to be scared. However, it will be issue if there is a running away without paying due tax to our country and hiding it in offshore region.
- Probably, you reviewed and added and cut the costs of initial Oyu Tolgoi investment. In that sense, can you provide actual comment about 2 billion dollars that is allegedly exceeded without any clear rationale?
- Rather than investors, wrong activities of our side is very much responsible for cost increase. In general, there are 4 reasons for this.
- Can you explain each of these reasons?
- Yes. First, plant capacity and data is very much changed from the time when the feasibility study was approved. Ivanhoe Mines company developed “Integrated Oyu Tolgoi development plan” for banking and financial institutions even before arrival of Rio Tinto. When Mongolian government said “ you develop that technical and economical Justification and bring it”, it was translated by Mongolians and given to government. This was translated by top Mongolians who was working as lecturers of the Mongolian University of Science and Technology and mining economists who graduated schools in western countries. Since the western countries does not have Technical and economic Justification like our country, both sides misunderstood each other. In general, the plan was translated as Technical and economic Justification in compliance with Mongolian requirement. When this happens, the 5.4 billion dollars mentioned differed from actual situation.
The 2nd reason is increased cost of similar mining operations all around the world. Cost of some mines even increased by two times. In another word, copper price reached is zenith in 2006. Because of this, copper mines upgraded their capacity. When all mines began upgrading their operations, equipment manufacturers increased their price. The cost has increased to that extent. Not only cost of Oyu Tolgoi company has increased. Just take a simple example. Previously, one km road was built by one hundred million tugrug in Mongolia, now it is almost 500 million. Take the buildings also. One square meter building area was built for 200-300 dollars, now it reached almost one million. Its own cost increased 2-3 times. When cost is increasing in Mongolia like that, why can’t cost of investors working here increase by 30-40 percent? Can we be unfair like this? This can be explained only by market factor? When actual situation is like this, we are suspicious of investors “ you increased the cost”. As for Rio Tinto group, cost of its mines in Australia, Chile and Canada increased. Even freezing expansion of world class mine “ Olympic Dam”. It sold many of its mines in order to invest in Oyu Tolgoi. In this case, our country should support them. We can’t act like a boulder stone in the path of gaining cheap loan like this.
- What are other two reasons for the cost increase?
- The third reason is Mongolians created condition for the cost increase. Probably, it will continue in the future also. It always happens.
For example, in 2009, one lawmaker of the parliament suggested revision of legal clause that exempted mining companies from VAT and this happened within a week. Because of that, Oyu Tolgoi project cost increased by 400 million dollars. 400 million dollars out of alleged 2 billion dollars increase occurred because of this.
Also in 2007, one inspector of the professional inspection agency visited the site and said “ you should stop the development of the shaft. We have no standard of shaft mines” after reviewing the shaft development. Because of that, 1500 Mongolians were laid off. This means, one average inspector interrupted livelihood of about 5000 people if we assume one miner have 3-4 person family. I was in much shock when signed the order to lay off these workers. I was stressed and experienced psychological shock. It was really difficult when I thought “ why I’m laying off these people?”. At that time, global economic crisis was spread everywhere and it was not easy to make living. since we are western company, paid the three month salary. However, it is still not easy.
Last time in 2011, when there was small scale fire outbreak in the shaft of underground mine, was told” since there was fire here, you demolish this building”. What will happen if we demolish that building which required financing of hundreds of millions of dollars. Because of that, development of the shaft halted for about half year. This way, our people increasing the Oyu Tolgoi project cost. Previously halted it for 2 year period.
On top of that, our people considered Ivanhoe Mines as small company. We chased it out by saying “ you are small fish and scoundrels”. Instead, Rio Tinto group came. Arrival of large company means big costs. Safety standard and requirements are very costly. At least the communication cost is very high compared to Ivanhoe Mines. When bring foreign specialists, trip, flight and supply of that person is very high. The monitoring cost is much higher. Monitoring cost of large company is very high. This is their standard. Our people does not understand all this. Instead of understanding this, we attempt to improve the Oyu Tolgoi investment agreement. In 2009, Mongolian side gained one third ownership and representative in the governing board. In another word, Mongolian began to participate in the company operations and obtained information and approved the budget as shareholder since 2010. Continued like that by approving the budget and monitored the execution and then suddenly in 2012-2013, said “ you exceeded the budget. We will not share this cost” and this is like acting very inadequately in even term of individual person.
- Actually, I don’t remember the investors explaining why the cost has increased. Maybe, this is their mistake. On the other hand, Mongolian ministers which concluded the agreement and even the former PM S.Bayar comments “ we concluded the agreement. Government of given time are obliged to improve this agreement during its implementation”. When they are saying like this, common citizens and certain lawmakers of the parliament have right to demand improvement and revision of the agrement as you said.
- I see that our people don’t understand one thing.
- What is that?
- They think of negotiation and agreement as one thing. Actually, it is not. These are two different concepts. However, our people mixed up these two in the Oyu Tolgoi investment agreement. Negotiation means period of negotiation. The agreement means final and approved negotiated agreement. Then, our people mixes up these two and understand that it is possible to continually improve and revise agreement.
- I just said the comment of those people who concluded the agreement.
- Rio Tinto considers it concluded 30-year agreement with Mongoliangovernment and thinks it can’t be changed. Then, our government is pressuring them to revise the agreement since they are operating in our land and halted their operations. In countries where law is implemented, such condition would not exist. Our people should carefully study this agreement in international level. Then, we can make conclusion on this agreement. Otherwise, we should not make conclusion about this agreement based on information acquired here. If we can’t compare and study it ourselves, we can request the World Bank and IMF to conduct comparative study of the agreement with other mines of the world. Otherwise, several populist lawmakers of the parliament should not run around acting like they are going to negotiate on behalf of the government. They don’t understand they look bad in the eyes of foreign people. Actually, state participation and earning profit in large mining projects is implemented through tax, ownership and providing infrastructure and getting payment and fees. Building power station and transmission line and motor road and railway and getting payments is the cultured and efficient way to earn profit. However, we did not do substantial work in that area. Now we just beginning to work in that area.
-People who protested the OT IA and organized and participated in demonstrations say “This Agreement was approved in its present form because of us. If not for us the Mongolian treasures would’ve been loaded and taken away for free.” Please, give your realistic assessment of their achievement as a person who represented the investors and met and negotiated with them. Was there a contribution protesters made during this Agreement?
- I don’t know if they understood what they were saying. As I see, most of them had a goal to enter politics through OT. It was like that at that time. And it is like that today. Many of those people have become MPs. Everybody can see that. And they still shout. If they are not able to study on their own they should obtain international help. Senior citizens compare it with Erdenet and make various comments, when these two are completely different cases. And they don’t even have basic English. People shouldn’t act so irresponsibly and make fake shows like that. The process of making the OT IA was mostly about the ratio for dividing the value. Even a movement with a title 50:50 was established at that time. You know there is an Honored Economist who switches parties. And you see he has quieted down once he understood Mongolia should receive more than 50%. He forgot all that and now says “OT agreement was made through bribes”. In general, it is difficult for foreign investors to invest in Mongolia and run business here. They can’t deal with this kind of blacl PR. If foreigners are put in charge they do not understand the Mongolian context and methods and can’t adjust their work. There are many examples besides OT like Boroo Gold, Areva, Khushuut, petroleum, shale. It looks like that, we call and invite investors to “Invest in Mongolia”, but once they arrived we strangle them and try to rob them of their project funds
- Please, answer honestly. Every time they announce a protest a thought occurs sometimes “They do it for money”. Have you had cases when protesters came to you for money?
- Some who demanded money, ended up using weapons and are in prison now. They just show their own behavior. The majority of fake patriots who are born from movements and protest foreign investment are people who have never developed anything, never created jobs.
-So they did demand money?
-There have been cases.
-How was it dealt with?
-OT has never given a penny neither to organization nor to individuals. As an international company it employed legally responsible actions. Media published that millions and millions of dollars were distributed to protesters and even to former PM S.Bayar and Ministers who participated in the negotiation. We were accused of bribing. But, as a person who participated in this process from the beginning to the end I can fully assure you. Mongolians think within their mentality. If it were like that then OT permission would’ve been taken long ago. A politician who came to rise protesting OT once said to me “OT is located in Mongolia so why don’t we get rid of investors. They say they need 5 bn USD. If a thousand national companies contribute 5 mln USD each then we’ll open this mine. No big deal. Let’s take over.” There were politicians like that, really.
-What was your response to that?
-“It can’t work this way. If a well-respected international company comes to work with us it will become a guarantee of our national security.” I studied international relations in my university and worked in a foreign relations sector for many years. I swore to serve my country. Foreign relations is a special division similar to military. I’ve never stepped back from my vow.
-But you worked representing investors. Did you have doubts when facing conflicts between interests of Mongolia and interests of investors?
-Of course, as an individual I had such doubts. But I have a firm belief that more Mongolian economy opens up more our national security is guaranteed. I have a degree in Economics, in addition to my degree in International relations. I used to work for World Bank. I worked as a CEO of a bank. In this regard, I know well what is beneficial to Mongolia. In this regard, I have worked with belief “Mongolia must benefit. If this project is implemented it is beneficial to Mongolia.” I am still loyal to this belief. Although I left OT LLC last year I still stand on my position since this deposit is a source of food for our future generations. Let’s imagine, we scare away the investors. If we stop the operations of our only investor, turn down its right to raise funds and regularly frighten to change the agreement then other investors will leave too. Let’s think. An investors’ meeting took place in Myanmar last March. Out of 40 companies that participated in this conference 28 were companies that ceased their operations in Mongolia. This is an issue. They all said “It’s become difficult to work in Mongolia”. A high-level official from the Ministry in charge of this sector is establishing a company to run mining operations in South East Asia. This is the reality. And there is a draft bill on Amendment of Law on Minerals. This draft is the final straw to drive away the investors, yet, they call it “good draft”. Our people can’t act like that. I, personally, am greatly surprised that people do not understand a simple thing, if investors leave, money leave too.
-You’ve probably noticed a comment that’s been circulating which says “through amending Law on Minerals we will control Mongolian treasures and restrain the outraging behavior of investors.”
-Our people put forward wrong issue, explain it to public in a wrong way and wrongfully establish their belief. What you are saying is an indication of that. If Law on Minerals is amended then possibility for prospecting must be provided. And possibility to transfer prospecting licenses must be provided. This sector has an unwritten rule that big ones swallow small ones. As long as taxes on profits are paid we don’t need to limit or close transfers within this sector. However, state should participate when prospecting license is upgraded to mining license and tax rates, infrastructure and this kind of issues must be picked up and discussed. For example, a license on Escondida was transferred 9 times before mining was started. The license on OT was transferred 4 times already. That’s why support must be provided not obstacles. But, for us, personal jealousy is the main driving force. For a while we all became miners. And now, when this sector has met with challenges, many turn away. State officials do not say anymore words “let’s improve our competitive capacity”. Attracting FDI is a low-risk way to deal with the economic growth slowdown and to decrease the deficit of payment balance.
-So how much USD came to Mongolia as a result of the work of Ivanhoe Mines on OT deposit? Can you give a rough amount?
-Approximately 13-14 bn USD were invested at that time. Friedland single-handedly did what the Foreign investment department couldn’t. His words “Mongolia has future, investment in Mongolia will yield profit, Mongolia has treasures” attracted 13-14 bn USD to Mongolia in direct investment. These nice tall buildings in Mongolia were built with these money. Market expanded, economic capacity strengthened. We didn’t understand this, we did not want to.
-One of few people who praise Friedland is you. He is more known as “Poisonous Bob”.
-We blamed Friedland a lot. As a person he is not such a bad man. He was a billionaire before he came to Mongolia. Profit he got from OT was not that big, it was rather small. He owned 100 mln shares of Ivanhoe Mines company. He did not sell them until last April and he sold 50 mln shares when price was a little over 4 USD. And we remember the price peaked as high as 30 USD per share.
-As a person who met him in person what can you say about his belief and hope in OT?
-When we met first, he said “I’ve been a exploring my whole life. Now I want to become a miner. This is my dream. I will work hard for this dream.” He stayed true to his dream until 2012 and he stopped when the OT plant was put into operation. Friedland is a sharp-minded man. People say bad things about him. But it’s not true. He is a sharp-minded, capable man. He can say who you are by looking into your eyes. He scolds people. But for good reasons only. I can’t say anything bad about him. A former Minister of Industry and Agriculture told me “Mongolians must put a monument made of copper to your Friedland. And he must awarded a Labor Hero rank.” I think this monument will be put one day. But Friedland left feeling hurt by Mongolians. He’s been out of touch for the past 1-2 years. He will not probably come to Mongolia again. “I am not valued. Mongolians have wrong perception of me”, he said. This man, actually, did a big service to Mongolia.
-Generally speaking, are there many investors that have good reputation in resource-rich country they invested in? We hear more “cheater, thief”.
-Of course, there are. Mongolians are very suspicious people. They are not able to invest and install technologies, yet, always suspicuous. And it is not just about investors, we envy each other. The entire world is competing for investment, only we are pushing it away. Even the countries with most powerful economies, US and China, do everything they can to attract foreign investment. Our fragile economy, geopolitically dependent country can develop only through foreign investment. Only then we can guarantee our independence. Economic science has a term open small economy. Such an economy cannot dictate prices on international market, but can develop and expand following investment developments. We should follow this path. As for OT, it’s like trying to get more when given some. Everything must be compared in order to determine profitability. Today, it is too early to evaluate the results. An investment of 7 bn was already made and no immediate results can be achieved. We can speak of results in 2-3 years. We can’t call them cheaters when production was started only 6 months ago.
-Sorry, I’d like to ask a personal question. Just to make this interview complete. You’ve been with OT LLC since the start of the negotiations on the IA and you’ve always represented the interests of the investor. What are your personal gains and profits?
-I’ve learnt a lot. I’ve gained mining experience. I’ve started the biggest in Mongolia project. It looks like I had this destiny to work in the mining sector. When I finished the seventh grade I worked in Umnudelger soum of Khentii aimag. I worked with a Bulgarian expedition for two years. I earned around 2 thousand MNT for a period of a month and half. Since then I’ve been connected to the mining sector.
-Then why did you quit when the OT IA was approved and profits are about to be earned?
-Eight years of working in a private company is long enough. I decided to concentrate on my own business.
-What kind of business does INNOVA company that you lead run?
-Mining, construction, tourism. Also, we offer consulting services on investment.
-When you were interviewed soon after the signing of OT IA you said some romantic words like “Eyes of big international investors opened with the signing of the OT IA. Let’s make it the development of the century.” Do you still believe in these words? OT operations were halted and investors are leaving.
-I do believe. Those who wanted to leave left, and those who want to wait, wait. Mongolian state must find the key to them. I hope it knows it must find the key.
-In general, is it difficult for investors to deal with Mongolian politicians? Or is it more difficult to deal with public?
-I’d like to complain here. It’s very difficult for investors to deal with public. They can’t explain in realistic way their ideas and their work plans due to language problems. In this case, public officials, who partner in these projects, must give realistic explanations. But, none of them can say a word because of public pressure. Those who participated in making this Agreement have stopped saying anything. Even mouths of those people who used to speak out, S.Bayartsogt, D.Zorigt, P. Ochirbat, have been shut. All of them were accused “You took a bribe. You are corrupt. You leave Mongolia.” and they can’t speak anymore. It is wrong. And not only people who stand aside can’t speak anymore, those who are inside and who hold executive positions are afraid to speak too. It’s shocking they are silent and avoid media. And I, personally, have complains about media. They see money when they hear OT. They publish paid articles on first pages and if not paid then throw to the back. And they call it business. Can’t they support a project that will give benefits to Mongolia? They don’t do that.
-But, we did not ask you for money for this interview.
-Yes. Of course, I should mention that.
-And you support and give interview.
-Well, I am just a person. I speak a lot. Once I stood on Sukhbaatar square with a speaker. It happened during the movement frenzy. And I heard how someone approached me from the back and said “Shall we put a knife in the back of this traitor?” Since then I don’t speak in public.
Are you scared?
-It is not about scaring. Actually, it is not good. Probably, those people led by S.Bayar were desperate as they came under constant pressure. That's how the situation is.
-Are you staying in contact with the Oyu Tolgoi investors now?
-As of last one year, i have no contacts. I'm just a man with belief that this project is needed for Mongolia. Mongolians needs to have good reputation in outside world and needs to keep the words they said. Sometimes, it is really shameful. Investors are running away. BHP left. Anglo American was here and then left. Recently, they came back. Vale also left. Large companies like Peabody, Cliff Natural and Teck are waiting what will be the investment environment will be like.
-It seems you are saying through this interview that we should be afraid and scared from all this. What if government and citizens act against what you are saying? What will happen then ? Pls, understand this as question to see far
-Udokan deposit in Chita region of Russia, not far from our country was evaluated by Russian government at 500-600 million dollars and given to private sector. This decision was made in order not to risk the government budget. In another word, there no concept about strategic deposit. Reserve of that deposit rivals with Oyu Tolgoi. In another word, if we don't rush, Udokan mine will be commissioned in 2018-2019 during peak of Oyu Tolgoi production. If such large mine near Chinese border is commissioned, it means emergence of powerful competitor for our country. Directly, this will affect price of concentrate delivered. This means, we should not waste time by arguing. If politicians don't understand that we might lose in the competitive market, Mongolia will end up as victim as scapegoat for this. One man who was working as Khanbogd soum governor between 2008-2012 created so much obstruction for many works that Oyu Tolgoi could have taken for the soum. He blocked the benefit for the soum residents. He gave the permit of the land where Oyu Tolgoi wanted to develop, to his friends and close circle. They tried to sell the land to Oyu Tolgoi and pressured. Now, there is new leadership emerged and relationship is getting better. Connected to permanent power source. If all issues ranging from small to big is solved positively, Oyu Tolgoi will be engine and driving force of Mongolian development and prosperity. I'm proud that I participated in start of this largest development in Mongolian history and this is my belief.
SOURCE OF THIS ARTICLE : UCLALUM.blogspot.co.uk
TRANSLATION OF AN INTERVIEW OF FORMER TOP MONGOLIAN EXECUTIVE AT OT A. MUNKHBAT IN WHICH HE SAYS IT ALL ( our apologies for translation quality by a translator but we think readers can grasp the main messages)
A.Munkhbat: There are also Mongolian influences in Oyu Tolgoi cost increase
Providing concrete answer to many arguments surrounding Oyu Tolgoi is difficult in today’s condition. Working group supposed to revise the investment agreement is meeting, however, refuses to provide information. Therefore, we invited A.Munkhbat, former vice president of Oyu Tolgoi to our “ interview hall”. He was leading Mongolian management of the Oyu Tolgoi in the past 8 years and today, working as General director of “Innova” company.
- You managed all work to put Oyu Tolgoi deposit into economic circulation and worked until signing of the Investment agreement. Therefore, we aimed to get your answer for many questions related to this deposit and the agreement. However, would you answer if you seeing the Oyu Tolgoi agreement from independent point of view based on current situation?
- It is been one year since I gave up my job. Initially, I began to work as executive director from 2004 or by start of 2nd round of negotiation to conclude the Oyu Tolgoi investment agreement . I worked in Ivanhoe Mines total 8 years. As someone who managed and directed all work during this period, it is hard to say I’m an independent. However, since I resigned, as of today, I have no connection with the Oyu Tolgoi LLC.
- I drafted many questions to ask from you. Probably I need to ask questions that may have nature of history for some, but I aim to explain causes. Would you clarify what are primary factors for delay of negotiation of the investment agreement?
- During initial negotiation of the investment agreement in 2003, both parties agreed that” the agreement needs to be concluded”. However, did not agree on one thing. That is issue about power supply. Investor party which considered power requirements of the Oyu Tolgoi and concluded “ it is not possible to get power supply from Ulaanbaatar” and submitted proposal to source power from China which is about 80 km away. Our side said “ it is possible to source power from Ulaanbaatar. It will be supplied from Power station no.4” and this led to conflict and the parties could not conclude the Stability agreement. Since then, the two parties interrupted for 4 years and continued the negotiation and concluded it in 2009 during global economic crisis. Probably, it became proof that sometimes crisis has good sides. If there was no crisis, maybe, no agreement would have been signed even until today. Of course,there were many obstacles and problems. There were too many difficult periods. Our people talk badly about people who concluded the Investment agreement. As someone who was participating in the negotiation and witnessed all this, former Finance Minister S.Bayartsogt who headed the Mongolian working group during the negotiation and D.Zorigt, former Minister of Mineral resources and energy should be thanked. They are very patriotic young men. Because of them, Oyu Tolgoi investment agreement became more benefificial for Mongolian side.
- -However, public concludes they are traitors. Maybe, your name is also included among them.
- The agreement is misinterpreted for the public. Many false information such as “This agreement is fraud”, “ agreement that does not benefit Mongolia”, “ those who concluded this agreement betrayed the country” were and are disseminated. Actually, not a few people that say these words. On the contrary, I consider then unpatriotic.
- Why? Surely, it is not because they have different views than you. What was the real rationale according to your view?
- No such thing. If this agreement was not signed, how Mongolia could have overcome the 2009 crisis? Our country overcame the global economic crisis with less damage because of signing the agreement. Mongolia did not get more debt because of signing this agreement. Today, Mongolian government issued $ 1.5 billion dollar bond. This is debt. This debt has to be repaid back from the Mongolian government budget. By signing the Oyu Tolgoi agreement, Mongolian government did not get a debt like this bond debt. Oyu Tolgoi deposit cost increased and they say this will be debt for Mongolia. No such thing. Our side (mongolia) will not spend a single tugrug for development of Oyu Tolgoi. Even if it is not profitable, we will not end up with debt. What the reason of tainting this negatively and talking about it negatively without any clear logic when actual situation is like this? If these pseudo-patriots were not there, Oyu Tolgoi agreement would have signed before 2009 and the mine operation would have been normalized before economic crisis. In this sense, I can never talk about them as patriots. It is true.
- However, recently, Oyu Tolgoi investors which lent 250 million dollars to our country asked for it. Because of this, protest started by saying “ the investors indebted us instead of themselves and pressure us when we try to talk with them. They should not allowed to act like this”?
- Mongolia has to pay back this as it is the Mongolian government asked for this loan. Rio Tinto group did not say “ we will lend you money”. Government of that time borrowed money in order to fulfill its election pledge. This loan was ratified through agreement and our government is obliged to pay back the loan. However, when time to pay back the loan came, it is said” this was not included in this year’s budget”. We can’t act like that. Both parties have to be loyal to their agreement commitments.If we can’t, what is the sense of concluding agreement? Is not that right?
- Were the investor supposed to exercise right of Mongolian government to get loan by delaying repayment of this loan? Why not propose positive relationship since financing for underground mining will be borrowed? Maybe, this is too simple and not good idea,however, if you look at it from the point of “Business is commerce”, this alternative can work?
- Why? If no underground mining, no investors would have worked here in the first place. When underground mine will be commissioned, investors will recoup the cost and get profit and also will provide our dividends. When they began to talk and negotiate with the international banking and financial institution in order to find financing for this, our side blocks this opportunity. We should not act like this. Since the whole world is in crisis, Rio Tinto is also in difficult situation. Crisis did not by-pass them. All global mining companies are affected by crisis. This is even serious for large companies. In relation to crisis, Rio Tinto closed many of its mines and investing to Oyu Tolgoi from sales proceeds of these mines. We must understand this difficulty as both Mongolian government and Rio Tinto are both parties on the Oyu Tolgoi deposit. Actually, any business company does not finance new project through its capital asset. It preserves capital assets and finds other financing sources through loan. This is just routine business principle. Also Mongolian government issues $ 1.5 billion dollar bond and creates debt. This is ok. is not it is unfair not to allow the investor party to get a loan? When not allowing the key partner the right to get loan , no only Rio Tinto but also Mongolian interest is damaged. Our people do not understand the actual situation and politicize it.
- I have to ask you about guessing and suspicion one more time. There is warning that “ investors going to borrow 4 billion dollars using the name of Oyu Tolgoi and half of it, will be used to finance other deposits and remaining loan will be spent for purchase of equipments and machinery using offshore account and this is money laundry”?
- Impossible. Our people should stop all these never-ending suspicion and warnings. Rio Tinto is a world famous company. It is one of largest three global mining companies. Such company does not do financial fraud.
- Where is the proof? What are actual explanation for this?
- The seven billion dollars invested in Mongolia as of today can be the proof. Rio Tinto personnel working here are also their proof. Main thing is, license owned by Oyu Tolgoi company. This is the key proof. What other proofs can be there? If Rio Tinto violates Mongolian law, the license will be cancelled. Since it is clear that they don’t want to be in this situation, they will not violate the laws. Our people are scared from offshore account and think of it as fraud.
- S.Bayartsogt, member of the parliament made them scare from this?
- No. It is not like this. Actually, I think S.Bayartsogt and D.Zorigt as true patriots. They spent many sleepless nights in order to increase benefit for Mongolia. As result of this, this agreement became beneficial for Mongolia. I will tell it anywhere. As for offshore accounts, when investor party transfers its profit earned from here to offshore account, our side will not have any loss. On the contrary, it is beneficial for us. Think about it. Today, the concentrate is sold, our side can fully monitor the concentrate amount. Since it is not gold, there is no problem to monitor copper concentrate amount. In another word, it will be fully possible to estimate its profit. When investor transfer its profit to offshore area, it is beneficial. If they transfer their dividend to England or America, they will have to pay 30-40 percent as tax. In this case, let’s assume that a million dollars required for Oyu Tolgoi expansion. Then a million dollar transferred to offshore region, will be come directly to our country. Million dollar trasnferred to England and America will come back as 600 thousand dollars. So which is better for our side? It is right that investor side will transfer its money to offshore account. This is the actual estimation. We should thank that the profit earned from our country is transferred to offshore account. There is no need to be scared. However, it will be issue if there is a running away without paying due tax to our country and hiding it in offshore region.
- Probably, you reviewed and added and cut the costs of initial Oyu Tolgoi investment. In that sense, can you provide actual comment about 2 billion dollars that is allegedly exceeded without any clear rationale?
- Rather than investors, wrong activities of our side is very much responsible for cost increase. In general, there are 4 reasons for this.
- Can you explain each of these reasons?
- Yes. First, plant capacity and data is very much changed from the time when the feasibility study was approved. Ivanhoe Mines company developed “Integrated Oyu Tolgoi development plan” for banking and financial institutions even before arrival of Rio Tinto. When Mongolian government said “ you develop that technical and economical Justification and bring it”, it was translated by Mongolians and given to government. This was translated by top Mongolians who was working as lecturers of the Mongolian University of Science and Technology and mining economists who graduated schools in western countries. Since the western countries does not have Technical and economic Justification like our country, both sides misunderstood each other. In general, the plan was translated as Technical and economic Justification in compliance with Mongolian requirement. When this happens, the 5.4 billion dollars mentioned differed from actual situation.
The 2nd reason is increased cost of similar mining operations all around the world. Cost of some mines even increased by two times. In another word, copper price reached is zenith in 2006. Because of this, copper mines upgraded their capacity. When all mines began upgrading their operations, equipment manufacturers increased their price. The cost has increased to that extent. Not only cost of Oyu Tolgoi company has increased. Just take a simple example. Previously, one km road was built by one hundred million tugrug in Mongolia, now it is almost 500 million. Take the buildings also. One square meter building area was built for 200-300 dollars, now it reached almost one million. Its own cost increased 2-3 times. When cost is increasing in Mongolia like that, why can’t cost of investors working here increase by 30-40 percent? Can we be unfair like this? This can be explained only by market factor? When actual situation is like this, we are suspicious of investors “ you increased the cost”. As for Rio Tinto group, cost of its mines in Australia, Chile and Canada increased. Even freezing expansion of world class mine “ Olympic Dam”. It sold many of its mines in order to invest in Oyu Tolgoi. In this case, our country should support them. We can’t act like a boulder stone in the path of gaining cheap loan like this.
- What are other two reasons for the cost increase?
- The third reason is Mongolians created condition for the cost increase. Probably, it will continue in the future also. It always happens.
For example, in 2009, one lawmaker of the parliament suggested revision of legal clause that exempted mining companies from VAT and this happened within a week. Because of that, Oyu Tolgoi project cost increased by 400 million dollars. 400 million dollars out of alleged 2 billion dollars increase occurred because of this.
Also in 2007, one inspector of the professional inspection agency visited the site and said “ you should stop the development of the shaft. We have no standard of shaft mines” after reviewing the shaft development. Because of that, 1500 Mongolians were laid off. This means, one average inspector interrupted livelihood of about 5000 people if we assume one miner have 3-4 person family. I was in much shock when signed the order to lay off these workers. I was stressed and experienced psychological shock. It was really difficult when I thought “ why I’m laying off these people?”. At that time, global economic crisis was spread everywhere and it was not easy to make living. since we are western company, paid the three month salary. However, it is still not easy.
Last time in 2011, when there was small scale fire outbreak in the shaft of underground mine, was told” since there was fire here, you demolish this building”. What will happen if we demolish that building which required financing of hundreds of millions of dollars. Because of that, development of the shaft halted for about half year. This way, our people increasing the Oyu Tolgoi project cost. Previously halted it for 2 year period.
On top of that, our people considered Ivanhoe Mines as small company. We chased it out by saying “ you are small fish and scoundrels”. Instead, Rio Tinto group came. Arrival of large company means big costs. Safety standard and requirements are very costly. At least the communication cost is very high compared to Ivanhoe Mines. When bring foreign specialists, trip, flight and supply of that person is very high. The monitoring cost is much higher. Monitoring cost of large company is very high. This is their standard. Our people does not understand all this. Instead of understanding this, we attempt to improve the Oyu Tolgoi investment agreement. In 2009, Mongolian side gained one third ownership and representative in the governing board. In another word, Mongolian began to participate in the company operations and obtained information and approved the budget as shareholder since 2010. Continued like that by approving the budget and monitored the execution and then suddenly in 2012-2013, said “ you exceeded the budget. We will not share this cost” and this is like acting very inadequately in even term of individual person.
- Actually, I don’t remember the investors explaining why the cost has increased. Maybe, this is their mistake. On the other hand, Mongolian ministers which concluded the agreement and even the former PM S.Bayar comments “ we concluded the agreement. Government of given time are obliged to improve this agreement during its implementation”. When they are saying like this, common citizens and certain lawmakers of the parliament have right to demand improvement and revision of the agrement as you said.
- I see that our people don’t understand one thing.
- What is that?
- They think of negotiation and agreement as one thing. Actually, it is not. These are two different concepts. However, our people mixed up these two in the Oyu Tolgoi investment agreement. Negotiation means period of negotiation. The agreement means final and approved negotiated agreement. Then, our people mixes up these two and understand that it is possible to continually improve and revise agreement.
- I just said the comment of those people who concluded the agreement.
- Rio Tinto considers it concluded 30-year agreement with Mongoliangovernment and thinks it can’t be changed. Then, our government is pressuring them to revise the agreement since they are operating in our land and halted their operations. In countries where law is implemented, such condition would not exist. Our people should carefully study this agreement in international level. Then, we can make conclusion on this agreement. Otherwise, we should not make conclusion about this agreement based on information acquired here. If we can’t compare and study it ourselves, we can request the World Bank and IMF to conduct comparative study of the agreement with other mines of the world. Otherwise, several populist lawmakers of the parliament should not run around acting like they are going to negotiate on behalf of the government. They don’t understand they look bad in the eyes of foreign people. Actually, state participation and earning profit in large mining projects is implemented through tax, ownership and providing infrastructure and getting payment and fees. Building power station and transmission line and motor road and railway and getting payments is the cultured and efficient way to earn profit. However, we did not do substantial work in that area. Now we just beginning to work in that area.
-People who protested the OT IA and organized and participated in demonstrations say “This Agreement was approved in its present form because of us. If not for us the Mongolian treasures would’ve been loaded and taken away for free.” Please, give your realistic assessment of their achievement as a person who represented the investors and met and negotiated with them. Was there a contribution protesters made during this Agreement?
- I don’t know if they understood what they were saying. As I see, most of them had a goal to enter politics through OT. It was like that at that time. And it is like that today. Many of those people have become MPs. Everybody can see that. And they still shout. If they are not able to study on their own they should obtain international help. Senior citizens compare it with Erdenet and make various comments, when these two are completely different cases. And they don’t even have basic English. People shouldn’t act so irresponsibly and make fake shows like that. The process of making the OT IA was mostly about the ratio for dividing the value. Even a movement with a title 50:50 was established at that time. You know there is an Honored Economist who switches parties. And you see he has quieted down once he understood Mongolia should receive more than 50%. He forgot all that and now says “OT agreement was made through bribes”. In general, it is difficult for foreign investors to invest in Mongolia and run business here. They can’t deal with this kind of blacl PR. If foreigners are put in charge they do not understand the Mongolian context and methods and can’t adjust their work. There are many examples besides OT like Boroo Gold, Areva, Khushuut, petroleum, shale. It looks like that, we call and invite investors to “Invest in Mongolia”, but once they arrived we strangle them and try to rob them of their project funds
- Please, answer honestly. Every time they announce a protest a thought occurs sometimes “They do it for money”. Have you had cases when protesters came to you for money?
- Some who demanded money, ended up using weapons and are in prison now. They just show their own behavior. The majority of fake patriots who are born from movements and protest foreign investment are people who have never developed anything, never created jobs.
-So they did demand money?
-There have been cases.
-How was it dealt with?
-OT has never given a penny neither to organization nor to individuals. As an international company it employed legally responsible actions. Media published that millions and millions of dollars were distributed to protesters and even to former PM S.Bayar and Ministers who participated in the negotiation. We were accused of bribing. But, as a person who participated in this process from the beginning to the end I can fully assure you. Mongolians think within their mentality. If it were like that then OT permission would’ve been taken long ago. A politician who came to rise protesting OT once said to me “OT is located in Mongolia so why don’t we get rid of investors. They say they need 5 bn USD. If a thousand national companies contribute 5 mln USD each then we’ll open this mine. No big deal. Let’s take over.” There were politicians like that, really.
-What was your response to that?
-“It can’t work this way. If a well-respected international company comes to work with us it will become a guarantee of our national security.” I studied international relations in my university and worked in a foreign relations sector for many years. I swore to serve my country. Foreign relations is a special division similar to military. I’ve never stepped back from my vow.
-But you worked representing investors. Did you have doubts when facing conflicts between interests of Mongolia and interests of investors?
-Of course, as an individual I had such doubts. But I have a firm belief that more Mongolian economy opens up more our national security is guaranteed. I have a degree in Economics, in addition to my degree in International relations. I used to work for World Bank. I worked as a CEO of a bank. In this regard, I know well what is beneficial to Mongolia. In this regard, I have worked with belief “Mongolia must benefit. If this project is implemented it is beneficial to Mongolia.” I am still loyal to this belief. Although I left OT LLC last year I still stand on my position since this deposit is a source of food for our future generations. Let’s imagine, we scare away the investors. If we stop the operations of our only investor, turn down its right to raise funds and regularly frighten to change the agreement then other investors will leave too. Let’s think. An investors’ meeting took place in Myanmar last March. Out of 40 companies that participated in this conference 28 were companies that ceased their operations in Mongolia. This is an issue. They all said “It’s become difficult to work in Mongolia”. A high-level official from the Ministry in charge of this sector is establishing a company to run mining operations in South East Asia. This is the reality. And there is a draft bill on Amendment of Law on Minerals. This draft is the final straw to drive away the investors, yet, they call it “good draft”. Our people can’t act like that. I, personally, am greatly surprised that people do not understand a simple thing, if investors leave, money leave too.
-You’ve probably noticed a comment that’s been circulating which says “through amending Law on Minerals we will control Mongolian treasures and restrain the outraging behavior of investors.”
-Our people put forward wrong issue, explain it to public in a wrong way and wrongfully establish their belief. What you are saying is an indication of that. If Law on Minerals is amended then possibility for prospecting must be provided. And possibility to transfer prospecting licenses must be provided. This sector has an unwritten rule that big ones swallow small ones. As long as taxes on profits are paid we don’t need to limit or close transfers within this sector. However, state should participate when prospecting license is upgraded to mining license and tax rates, infrastructure and this kind of issues must be picked up and discussed. For example, a license on Escondida was transferred 9 times before mining was started. The license on OT was transferred 4 times already. That’s why support must be provided not obstacles. But, for us, personal jealousy is the main driving force. For a while we all became miners. And now, when this sector has met with challenges, many turn away. State officials do not say anymore words “let’s improve our competitive capacity”. Attracting FDI is a low-risk way to deal with the economic growth slowdown and to decrease the deficit of payment balance.
-So how much USD came to Mongolia as a result of the work of Ivanhoe Mines on OT deposit? Can you give a rough amount?
-Approximately 13-14 bn USD were invested at that time. Friedland single-handedly did what the Foreign investment department couldn’t. His words “Mongolia has future, investment in Mongolia will yield profit, Mongolia has treasures” attracted 13-14 bn USD to Mongolia in direct investment. These nice tall buildings in Mongolia were built with these money. Market expanded, economic capacity strengthened. We didn’t understand this, we did not want to.
-One of few people who praise Friedland is you. He is more known as “Poisonous Bob”.
-We blamed Friedland a lot. As a person he is not such a bad man. He was a billionaire before he came to Mongolia. Profit he got from OT was not that big, it was rather small. He owned 100 mln shares of Ivanhoe Mines company. He did not sell them until last April and he sold 50 mln shares when price was a little over 4 USD. And we remember the price peaked as high as 30 USD per share.
-As a person who met him in person what can you say about his belief and hope in OT?
-When we met first, he said “I’ve been a exploring my whole life. Now I want to become a miner. This is my dream. I will work hard for this dream.” He stayed true to his dream until 2012 and he stopped when the OT plant was put into operation. Friedland is a sharp-minded man. People say bad things about him. But it’s not true. He is a sharp-minded, capable man. He can say who you are by looking into your eyes. He scolds people. But for good reasons only. I can’t say anything bad about him. A former Minister of Industry and Agriculture told me “Mongolians must put a monument made of copper to your Friedland. And he must awarded a Labor Hero rank.” I think this monument will be put one day. But Friedland left feeling hurt by Mongolians. He’s been out of touch for the past 1-2 years. He will not probably come to Mongolia again. “I am not valued. Mongolians have wrong perception of me”, he said. This man, actually, did a big service to Mongolia.
-Generally speaking, are there many investors that have good reputation in resource-rich country they invested in? We hear more “cheater, thief”.
-Of course, there are. Mongolians are very suspicious people. They are not able to invest and install technologies, yet, always suspicuous. And it is not just about investors, we envy each other. The entire world is competing for investment, only we are pushing it away. Even the countries with most powerful economies, US and China, do everything they can to attract foreign investment. Our fragile economy, geopolitically dependent country can develop only through foreign investment. Only then we can guarantee our independence. Economic science has a term open small economy. Such an economy cannot dictate prices on international market, but can develop and expand following investment developments. We should follow this path. As for OT, it’s like trying to get more when given some. Everything must be compared in order to determine profitability. Today, it is too early to evaluate the results. An investment of 7 bn was already made and no immediate results can be achieved. We can speak of results in 2-3 years. We can’t call them cheaters when production was started only 6 months ago.
-Sorry, I’d like to ask a personal question. Just to make this interview complete. You’ve been with OT LLC since the start of the negotiations on the IA and you’ve always represented the interests of the investor. What are your personal gains and profits?
-I’ve learnt a lot. I’ve gained mining experience. I’ve started the biggest in Mongolia project. It looks like I had this destiny to work in the mining sector. When I finished the seventh grade I worked in Umnudelger soum of Khentii aimag. I worked with a Bulgarian expedition for two years. I earned around 2 thousand MNT for a period of a month and half. Since then I’ve been connected to the mining sector.
-Then why did you quit when the OT IA was approved and profits are about to be earned?
-Eight years of working in a private company is long enough. I decided to concentrate on my own business.
-What kind of business does INNOVA company that you lead run?
-Mining, construction, tourism. Also, we offer consulting services on investment.
-When you were interviewed soon after the signing of OT IA you said some romantic words like “Eyes of big international investors opened with the signing of the OT IA. Let’s make it the development of the century.” Do you still believe in these words? OT operations were halted and investors are leaving.
-I do believe. Those who wanted to leave left, and those who want to wait, wait. Mongolian state must find the key to them. I hope it knows it must find the key.
-In general, is it difficult for investors to deal with Mongolian politicians? Or is it more difficult to deal with public?
-I’d like to complain here. It’s very difficult for investors to deal with public. They can’t explain in realistic way their ideas and their work plans due to language problems. In this case, public officials, who partner in these projects, must give realistic explanations. But, none of them can say a word because of public pressure. Those who participated in making this Agreement have stopped saying anything. Even mouths of those people who used to speak out, S.Bayartsogt, D.Zorigt, P. Ochirbat, have been shut. All of them were accused “You took a bribe. You are corrupt. You leave Mongolia.” and they can’t speak anymore. It is wrong. And not only people who stand aside can’t speak anymore, those who are inside and who hold executive positions are afraid to speak too. It’s shocking they are silent and avoid media. And I, personally, have complains about media. They see money when they hear OT. They publish paid articles on first pages and if not paid then throw to the back. And they call it business. Can’t they support a project that will give benefits to Mongolia? They don’t do that.
-But, we did not ask you for money for this interview.
-Yes. Of course, I should mention that.
-And you support and give interview.
-Well, I am just a person. I speak a lot. Once I stood on Sukhbaatar square with a speaker. It happened during the movement frenzy. And I heard how someone approached me from the back and said “Shall we put a knife in the back of this traitor?” Since then I don’t speak in public.
Are you scared?
-It is not about scaring. Actually, it is not good. Probably, those people led by S.Bayar were desperate as they came under constant pressure. That's how the situation is.
-Are you staying in contact with the Oyu Tolgoi investors now?
-As of last one year, i have no contacts. I'm just a man with belief that this project is needed for Mongolia. Mongolians needs to have good reputation in outside world and needs to keep the words they said. Sometimes, it is really shameful. Investors are running away. BHP left. Anglo American was here and then left. Recently, they came back. Vale also left. Large companies like Peabody, Cliff Natural and Teck are waiting what will be the investment environment will be like.
-It seems you are saying through this interview that we should be afraid and scared from all this. What if government and citizens act against what you are saying? What will happen then ? Pls, understand this as question to see far
-Udokan deposit in Chita region of Russia, not far from our country was evaluated by Russian government at 500-600 million dollars and given to private sector. This decision was made in order not to risk the government budget. In another word, there no concept about strategic deposit. Reserve of that deposit rivals with Oyu Tolgoi. In another word, if we don't rush, Udokan mine will be commissioned in 2018-2019 during peak of Oyu Tolgoi production. If such large mine near Chinese border is commissioned, it means emergence of powerful competitor for our country. Directly, this will affect price of concentrate delivered. This means, we should not waste time by arguing. If politicians don't understand that we might lose in the competitive market, Mongolia will end up as victim as scapegoat for this. One man who was working as Khanbogd soum governor between 2008-2012 created so much obstruction for many works that Oyu Tolgoi could have taken for the soum. He blocked the benefit for the soum residents. He gave the permit of the land where Oyu Tolgoi wanted to develop, to his friends and close circle. They tried to sell the land to Oyu Tolgoi and pressured. Now, there is new leadership emerged and relationship is getting better. Connected to permanent power source. If all issues ranging from small to big is solved positively, Oyu Tolgoi will be engine and driving force of Mongolian development and prosperity. I'm proud that I participated in start of this largest development in Mongolian history and this is my belief.
SOURCE OF THIS ARTICLE : UCLALUM.blogspot.co.uk
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