DOW JONES NEWSWIRES
Canada-listed Ivanhoe Mines Ltd (IVN.T, IVN), the majority owner
of the massive Mongolian Oyu Tolgoi copper and gold project, said
Tuesday there have been no talks with the Mongolian government to
change the terms of the 2009 investment agreement.
"There have been no discussions between Ivanhoe Mines and the
Mongolian government about potential changes to the Oyu Tolgoi
investment agreement," an Ivanhoe Mines spokesman said in response
to media reports that Mongolian politicians are mulling possible
changes.
Reuters had cited an interview on Mongolian news portal
www.news.mn in which the Mongolian finance minister S. Bayartsogt
said the country's Standing Committee on Security and Foreign
Policy has been discussing changes to the terms and length of the
agreement.
The 2009 agreement gave Ivanhoe Mines a 66% stake in the project
while the Mongolian government retained a 34% stake. Rio Tinto is
the project operator and is an indirect shareholder in Oyu Tolgoi
through a 48.5% equity stake in Ivanhoe Mines.
Andrew Harding, chief executive of Rio Tinto's copper division,
said during Rio Tinto's investor day conference Tuesday that have
been general discussions among Mongolians about the investment
agreement, during the run-up to next year's elections. But he noted
that Mongolian ministers have indicated that they're aware of the
wealth that the project has generated for the country.
"I've had discussions with many ministers and they fundamentally
understand that it is not only about the value that is being gained
now," he said. "It has triggered a great many [other] companies
looking for investment opportunities," he noted, citing Tavan
Tolgoi as an example of a Mongolian project that has attracted
large amount of investor interest recently.
The Mongolian government also has an option to increase its
stake in Oyu Tolgoi to 50% once the initial 30-year term on the
investment agreement expires.
Cameron McRae, Oyu Tolgoi LLC CEO and Rio Tinto's Mongolia
country director, said in a presentation last week in Ulaanbaatar
that he expects the Mongolian government to stand by the investment
agreement and prevent it from being altered.
"We are confident that Mongolia will not let this happen, that
stability and the rule of law will prevail, and that Mongolia's
long-awaited economic promise will become a reality," he said.
He estimates that Oyu Tolgoi will account for about one-third of
Mongolia's economy by 2020 and will cause Mongolia's economy to
grow at an average rate of 12.7% a year between 2013 to 2020,
compared with 7.7% in the absence of Oyu Tolgoi.
Rio Tinto has so far invested several billion dollars into the
project and says the project is developing according to plan.
Harding expects the first phase of the project to start commercial
production in 2013.
Oyu Tolgoi is forecast to produce more than 650,000 ounces of
gold, 3 million ounces of silver and 1.2 billion pounds of copper
annually during the first 10 years of commercial production.
Harding, however, noted that securing power for further
expansion is a key issue.
"While we are pleased with the site production progress...[it]
requires a power solution," he says. Rio Tinto is currently in
talks with the Mongolian government and China to find that
solution.
"The original thinking was that power would be supplied by power
line from China," he said, but the investment agreement of 2009
requires a power station be built in Mongolia for the provision of
power four years after the start of commercial production at Oyu
Tolgoi.
More than 14,000 people currently work on the Oyu Tolgoi site
and the project is committed to getting 90% of its workers from the
local population by 2013.
-By Alex MacDonald, Dow Jones Newswires; +44 (0)20 7842 9328; alex.macdonald@dowjones.com