UPDATE:Mongolia, Ivanhoe, Rio Tinto Commit To Oyu Tolgoi Post Talks

Anglo-Australian miner Rio Tinto PLC (RIO), Canada-based Ivanhoe Mines Ltd (IVN.T) and the Mongolia government have reaffirmed their commitment to keep to the original terms of the investment agreement to develop the massive Mongolian Oyu Tolgoi gold and copper project.

The joint statement marked a positive end to a standoff between the government and the project's stakeholders that had called into question the country's commitment to its foreign investment policy and its ability to avoid the pitfalls of resource nationalism.

Resource nationalism--where governments seek a larger take of profits from projects either through higher equity stakes or higher taxes--has slowed developments in other emerging economies with large reserves of industrial metals and energy, such as Pakistan, Guinea and Venezuela.

Mongolia is attracting billions of dollars in mining and infrastructure investments from Western companies aiming to ship copper and coal to support China's rapid industrialization. When it starts up in 2013, Oyu Tolgoi will catapult Mongolia into the top 10 global producers of copper, used in products ranging from power lines to air-conditioning systems.

In the run-up to Mongolia's general elections next year, the government began talking about a desire to raise its stake in the project from 34% to 50%, rather than wait a requiste 30 years for Rio and Ivanhoe to recoup their investment costs. The government also wanted to apply a sliding-scale royalty to the project.

In accordance to the 2009 agreement, the government sent invitations to Rio Tinto, the project operator, and Ivanhoe Mines, its largest shareholder, to discuss the government's interest in changing the terms.

The three parties said they concluded discussions on the two aspects of the investment agreement raised by the government and were "pleased to confirm that all parties have reaffirmed their continued support for the investment agreement and its implementation." The agreement can only be changed by mutual consent from all parties.

The three parties also noted that the shareholders were "united in their commitment to secure the necessary project finance and bring the Oyu Tolgoi Project to completion and full production."

Ivanhoe Mines discovered the Oyu Tolgoi deposits and holds a 66% interest in the project, while the Mongolian government owns the remaining 34% stake. Rio Tinto owns a 49% stake in Ivanhoe Mines.

The project is more than halfway done and is forecast to start commercial copper, gold and silver concentrate production in the first half 2013. It will be able to produce 450,000 metric tons of copper and 330,000 troy ounces of gold annually on average.

Rio and Ivanhoe forecast a total of $6 billion will be invested in the project before it starts commercial production. The project is expected to to boost Mongolia's economy by more than 35% by 2020.

-By Alex MacDonald, Dow Jones Newswires; 44 20 7842 9328; alex.macdonald@dowjones.com

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