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Wednesday, July 6, 2011

Mongolia Briefing is a magazine and daily news service about doing business in Mongolia. We cover topics relating to the Mongolian economy, the market in Mongolia, foreign direct investment and Mongolian law and tax. It is written in-house by the foreign investment professionals at Dezan Shira & Associates

Progress on Oyu Tolgoi Negotiations with the Mongolian Government

By Elena Fehrbach

The dispute between Rio Tinto and the Government of Mongolia regarding the development of Oyu Tolgoi, the biggest copper mine in the world is still ongoing. As noted by the Head of Communication of Turquoise Hills, a Mongolian subsidiary of Rio Tinto, the dispute on the remaining issues of conflict can be resolved before the end of 2013. Out of 30 issues in the negotiations agenda, at least half have been already solved. The issues cover aspects related to the budget for the underground mine expansion, management and control structure, confirmation of the spending related to the 1st stage of the project and other issues.

Needless to say, that the global investment community is eyeing the progression of Oyu Tolgoi as one of the indicators of the Mongolia’s investment attractiveness. Getting the major projects settled is crucial for investors’ willingness to be in the country. The proposed budget for the 2nd stage development is very challenging to confirm due to the scale of operation, but the suggested amount may start at 4 billion USD mark and add in future. Rio Tinto has discussed 4 billion USD loan with international financial institutions, but had to suspend the actual loan borrowing until all the issues with the Mongolian Government are properly resolved. For a project like Oyu Tolgoi, the agreement with the Government must be long-lasting and supported by guarantees, as mentioned by Rio Tinto representatives.

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