Mongolia Confident Oyu Tolgoi Mine Dispute Can Be Resolved Soon-Minister
The Mongolian government is confident it can resolve a dispute with Rio Tinto PLC (RIO) regarding the massive Oyu Tolgoi copper and gold project in as little as a "few weeks," Mongolia's deputy minister of economic development said Wednesday.
Rio Tinto and the government of Mongolia are currently discussing issues such as rising costs at Oyu Tolgoi and tax pre-payments, said Ochirbat Chuluunbat on the sidelines of the Mongolia Investment Summit here.
The government is concerned that rising costs could delay its ability to reap more profits from the project.
"There is no big problem," Mr. Chuluunbat said, adding he expects a solution to the impasse before the June 28 presidential elections. "It is negotiable. It's not a big deal," he added, noting that the parties involved should reach a solution, if not in a few weeks.
Cameron McRae, the chief executive of Oyu Tolgoi LLC, the unit that's majority owned by Rio Tinto through Turquoise Hill Resources Ltd. (TRQ.T) said in a speech on the same day that the two sides have made "constructive progress."
"Whilst some of the issues are complex, I am confident these discussions will resolve them and we will deliver the promise of Oyu Tolgoi together," he added.
The Oyu Tolgoi project is due to start commercial production by the end of June. The cost for developing the first phase of the mine has increased to $6.2 billion from an initial $4.6 billion capital expenditure budget, according to Mr. Chuluunbat.
The cost for the second phase of the project has also escalated due to a 30% increase in the cost of developing an underground mine and providing contingencies, among other things.
The discussions between Rio Tinto, Turquoise Hill and the government as well as stricter controls on foreign direct investment introduced last year have weighed on foreign investor sentiment regarding Mongolia.
Mr. Chuluunbat said that the government wants to change that perception.
"In the last six months we have noticed some slowdown of the economic growth in Mongolia due to reduction of direct foreign investment in Mongolia," he said. "So we have now drafted a new law on investment" to encourage investors.
The law aims to provide certainty to investors that rules that apply to their investments today won't change in the future, according to Mr. Chuluunbat.
"The basic idea is we want to send a very strong message on the stability and clarity of the treatment of foreign investment in the future in Mongolia," he said.
"If you put in investment today, your investment...will be regulated over five, 10, 20 years...by laws and regulations of today so that future amendments in four or eight years won't affect investment regulations of today," he said.
The new investment law will apply to all private sector investment while investment from state-owned enterprises will still require parliamentary approval, Mr. Chuluunbat said.
He noted that the new investment law has already been drafted and will be submitted to Mongolia's Parliament before July 10.
Write to Alex MacDonald at alex.macdonald@dowjones.com
Copyright © 2013 Dow Jones Newswires
Rio Tinto and the government of Mongolia are currently discussing issues such as rising costs at Oyu Tolgoi and tax pre-payments, said Ochirbat Chuluunbat on the sidelines of the Mongolia Investment Summit here.
The government is concerned that rising costs could delay its ability to reap more profits from the project.
"There is no big problem," Mr. Chuluunbat said, adding he expects a solution to the impasse before the June 28 presidential elections. "It is negotiable. It's not a big deal," he added, noting that the parties involved should reach a solution, if not in a few weeks.
Cameron McRae, the chief executive of Oyu Tolgoi LLC, the unit that's majority owned by Rio Tinto through Turquoise Hill Resources Ltd. (TRQ.T) said in a speech on the same day that the two sides have made "constructive progress."
"Whilst some of the issues are complex, I am confident these discussions will resolve them and we will deliver the promise of Oyu Tolgoi together," he added.
The Oyu Tolgoi project is due to start commercial production by the end of June. The cost for developing the first phase of the mine has increased to $6.2 billion from an initial $4.6 billion capital expenditure budget, according to Mr. Chuluunbat.
The cost for the second phase of the project has also escalated due to a 30% increase in the cost of developing an underground mine and providing contingencies, among other things.
The discussions between Rio Tinto, Turquoise Hill and the government as well as stricter controls on foreign direct investment introduced last year have weighed on foreign investor sentiment regarding Mongolia.
Mr. Chuluunbat said that the government wants to change that perception.
"In the last six months we have noticed some slowdown of the economic growth in Mongolia due to reduction of direct foreign investment in Mongolia," he said. "So we have now drafted a new law on investment" to encourage investors.
The law aims to provide certainty to investors that rules that apply to their investments today won't change in the future, according to Mr. Chuluunbat.
"The basic idea is we want to send a very strong message on the stability and clarity of the treatment of foreign investment in the future in Mongolia," he said.
"If you put in investment today, your investment...will be regulated over five, 10, 20 years...by laws and regulations of today so that future amendments in four or eight years won't affect investment regulations of today," he said.
The new investment law will apply to all private sector investment while investment from state-owned enterprises will still require parliamentary approval, Mr. Chuluunbat said.
He noted that the new investment law has already been drafted and will be submitted to Mongolia's Parliament before July 10.
Write to Alex MacDonald at alex.macdonald@dowjones.com
Copyright © 2013 Dow Jones Newswires
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