More on the meeting
The Economic Development Minister wants Rio Tinto to prove the Investment agreement will be of benefit to Mongolians. Hard to believe that an important minister would wear his ignorance like a badge of honour. He must have gone to the same school of logic as the Finance Minister who declared that Rio Tinto paid no taxes in 2012.
Government and Rio Tinto PLC officials met on Wednesday to discuss grievances regarding the project at the Ikh Tenger complex in Ulaanbaatar. Government representatives included Mining Minister D. Gankhuyag, Environment and Green Development Minister S. Oyun, Erdenes Oyu Tolgoi LLC Director Ts. Sedvanching while Oyu Tolgoi President and Chief Executive Officer Cameron McRae and other Rio Tinto officials came to represent private interests.
“We have requested an explanation to why the initial investments had been increased by USD 2 billion, after which we would discuss the next financial issues,” said Gankhuyag. “Parties have agreed to resolve the issues based on scientific research and narrow estimations. We only demand what is in compliance with Mongolia's regulations.”
Economic Development Minister N. Batbayar noted Oyu Tolgoi's investors had grown worried over President Ts. Elbegdorj's statements on Friday when he said Mongolians should take back control of the project. He said the Rio Tinto officials had asked that members rescind their comments, to which they replied, “Mongolia is a state with a parliamentary republic. The people of Mongolia love and respect their land. You will be allowed to operate on the territory of Mongolia if you understand this point.” He added that the investment agreement must be proven to be of benefit to Mongolians.
Oyu Tolgoi clarifies Parliament's concerns
Friday, 08 February 2013 12:20
Source: Oyu Tolgoi LLC
Oyu Tolgoi LLC released an official statement in response to President Ts. Elbegdorj's message to Parliament where he asked for more control of Oyu Tolgoi by Mongolian interests.
The statement directly responded to the criticisms from the president and elsewhere regarding overblown costs for the mine's development. As of 31 December 2012, Oyu Tolgoi had reported USD 7.4 billion comprising USD 6.6 billion of phase one development costs, plus interest costs on loans USD 500 million, early phase two capital of USD 200 million and further exploration of USD 100 million.
The government purchased 34 percent in the company with borrowed money for other shareholders. State-owned Erdenes Oyu Tolgoi, which holds the 34 percent stake, is not required to repay the loan unless the business becomes profitable. Currently investors are seeking to raise project financing from international banking and financial institutions to enable the next stage of development. Project financing would lower the interest rate the government is paying with the opportunity to bring forward shareholder dividends. Project financing is expected to decrease the total cost of the business to all stakeholders.
Rio Tinto PLC provides Oyu Tolgoi with “highly valuable skills, systems and processes” for the benefit of the project. When Oyu Tolgoi reaches commercial production, management fee payments are expected to be in the range of USD 60 billion to USD 80 billion a year. While capital cost increases also increase management fee payments, Rio Tinto has no incentive to increase costs. Loss of dividends and higher financing costs erode a far greater value for Rio Tinto that it receives in increased management service fee payments.
Oyu Tolgoi was the country's sixth biggest taxpayer in 2011, according to the General Tax Office. This was before the mine was even operational. From January 2010 through November 2012, Oyu Tolgoi had paid USD 803 million in taxes and payments to the government. Between 2010 and 2011, Oyu Tolgoi loaned USD 250 million to the government. Part of that was a USD 150 loan in the form of a tax prepayment with repayment coming in tax credits. Under the prepayment agreement Oyu Tolgoi was entitled to use these tax credits from 2012.
Building Oyu Tolgoi has been a joint effort between Mongolians and workers from 44 nations. At the end of 2012, the Oyu Tolgoi project directly employed around 13,000 people, 85 percent of whom were Mongolians. During the operational phase, more than 90 percent of the Oyu Tolgoi total workforce would be Mongolian. Both foreign and Mongolian workers are paid commensurate with prevailing market conditions in their home countries. This is standard across the world.
Isn't there any minimum qualifications for the high ranking job of minister in Mongolia? Though it would be asking too much if the second meeting finally put the debate to rest, hopefully this current crop of politicians will better understand Rio Tinto's handling of OT. Some of them who truly believe in gangsterism possibly will never fully come on board but at least we might expect them to be less of an impediment. Regretfully our sp is tied directly to the mood swings of the GOM and a weak prime minister but these meetings should go a long way to taking the wind out of the sails of those in Mongolia who think OT will not be a benefit to their country. One analyst commented that OT is the first major mining development by foreigners in a country with an immature mining strategy. I think Rio Tinto understands through their experience that you have to help developing countries work through the process.
Government officials talks with Rio on hold for Tsagaan Sar
Friday, 08 February 2013 12:21
Source: Info Mongolia
Government officials talks with Rio on hold for Tsagaan Sar
Friday, 08 February 2013 12:21
Source: Info Mongolia
Government officials said its stakeholders meeting is ongoing, with talks to resume after Tsagaan Sar, Mongolia's lunar new year celebration.
Government and Rio Tinto PLC officials met on Wednesday to discuss grievances regarding the project at the Ikh Tenger complex in Ulaanbaatar. Government representatives included Mining Minister D. Gankhuyag, Environment and Green Development Minister S. Oyun, Erdenes Oyu Tolgoi LLC Director Ts. Sedvanching while Oyu Tolgoi President and Chief Executive Officer Cameron McRae and other Rio Tinto officials came to represent private interests.
“We have requested an explanation to why the initial investments had been increased by USD 2 billion, after which we would discuss the next financial issues,” said Gankhuyag. “Parties have agreed to resolve the issues based on scientific research and narrow estimations. We only demand what is in compliance with Mongolia's regulations.”
Economic Development Minister N. Batbayar noted Oyu Tolgoi's investors had grown worried over President Ts. Elbegdorj's statements on Friday when he said Mongolians should take back control of the project. He said the Rio Tinto officials had asked that members rescind their comments, to which they replied, “Mongolia is a state with a parliamentary republic. The people of Mongolia love and respect their land. You will be allowed to operate on the territory of Mongolia if you understand this point.” He added that the investment agreement must be proven to be of benefit to Mongolians.
Oyu Tolgoi clarifies Parliament's concerns
Friday, 08 February 2013 12:20
Source: Oyu Tolgoi LLC
Oyu Tolgoi LLC released an official statement in response to President Ts. Elbegdorj's message to Parliament where he asked for more control of Oyu Tolgoi by Mongolian interests.
The statement directly responded to the criticisms from the president and elsewhere regarding overblown costs for the mine's development. As of 31 December 2012, Oyu Tolgoi had reported USD 7.4 billion comprising USD 6.6 billion of phase one development costs, plus interest costs on loans USD 500 million, early phase two capital of USD 200 million and further exploration of USD 100 million.
The government purchased 34 percent in the company with borrowed money for other shareholders. State-owned Erdenes Oyu Tolgoi, which holds the 34 percent stake, is not required to repay the loan unless the business becomes profitable. Currently investors are seeking to raise project financing from international banking and financial institutions to enable the next stage of development. Project financing would lower the interest rate the government is paying with the opportunity to bring forward shareholder dividends. Project financing is expected to decrease the total cost of the business to all stakeholders.
Rio Tinto PLC provides Oyu Tolgoi with “highly valuable skills, systems and processes” for the benefit of the project. When Oyu Tolgoi reaches commercial production, management fee payments are expected to be in the range of USD 60 billion to USD 80 billion a year. While capital cost increases also increase management fee payments, Rio Tinto has no incentive to increase costs. Loss of dividends and higher financing costs erode a far greater value for Rio Tinto that it receives in increased management service fee payments.
Oyu Tolgoi was the country's sixth biggest taxpayer in 2011, according to the General Tax Office. This was before the mine was even operational. From January 2010 through November 2012, Oyu Tolgoi had paid USD 803 million in taxes and payments to the government. Between 2010 and 2011, Oyu Tolgoi loaned USD 250 million to the government. Part of that was a USD 150 loan in the form of a tax prepayment with repayment coming in tax credits. Under the prepayment agreement Oyu Tolgoi was entitled to use these tax credits from 2012.
Building Oyu Tolgoi has been a joint effort between Mongolians and workers from 44 nations. At the end of 2012, the Oyu Tolgoi project directly employed around 13,000 people, 85 percent of whom were Mongolians. During the operational phase, more than 90 percent of the Oyu Tolgoi total workforce would be Mongolian. Both foreign and Mongolian workers are paid commensurate with prevailing market conditions in their home countries. This is standard across the world.
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