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Mongolia Will Own More Than a Third of Oyu Tolgoi
Thursday, 12 April 2007
By B. Bulgamaa
THE DRAFT of the investment agreement for the Oyu Tolgoi project is finally ready to be submitted for parliamentary approval after a two year wait and tough bargaining by both sides.
The working group of the government called a press conference to introduce the draft of the investment agreement of the Oyu tolgoi project on April 10 after it was completed, stating that the Mongolian government would own 34 percent of the mine's profits.
According to the draft of the investment agreement and Ivanhoe Mines Limited, 34 percent of the profit of mining would be owned by the Mongolian government, a decision derived from the fourth article of the Mineral Resources law. However, the Mongolian government will not give the capital and cash money investment required to own a share of the mining immediately to Ivanhoe Mines Ltd., but would pay the investment out of the future profit accrued by the Oyu tolgoi project, under terms of deferred carried interest.
According to the draft of the investment agreement, the Oyu tolgoi project's mining lifespan of 30 years has been determined by the technique of economy assessment. Open-pit (surface) mining will start from 2010 and the underground mining from 2014.
The project would enter the black and return profit dividends to shareholders from 2015. The Mongolian government calculated that at the peak of the copper mine's production, it would be possible to reap almost US$1 billion a year for the state from profits and taxes, while on average, receipts would be US$500 million a year. A total of US$15 billion would be added to the state budget, with another US$14-15 billion going to Ivanhoe Mines Ltd. during the 30 years after all the taxes, royalties and expenses. The working group of the government consisted of the civil servants from nine ministries led by Ch. Khurelbaatar, State Secretary of Ministry of Finance. http://ubpost.mongolnews.mn/main/index.php...5&Itemid=40