Mongolia may claim 51% of "strategic" mines, official saysPublished by MAC on 2008-04-27
by Roby Delaney and Sonja Franklin, Bloomberg
Lawmakers in Mongolia, where Rio Tinto Group and BHP Billiton Ltd. are seeking to develop mines, may pass a law entitling the state to more than half of some mineral projects, a government official said. Mongolia's parliament is likely to decide within two weeks whether the government should claim at least 51 percent of all ``strategic deposits,'' according to Luvsanvandan Bold, chairman of the nation's Mineral Resource and Petroleum Authority. Companies may get the option to negotiate production-sharing agreements with the government that could supersede the proposed ownership mandate, he said.
``Our main discussion is now around whether the Mongolian government could acquire 51 percent'' of major projects, Bold said in an interview in Calgary yesterday. ``The parliamentary debate is going on.''
Proposed amendments to Mongolia's Mineral Law are part of an effort to use rising prices for copper, gold and coal to reduce poverty in a country where, according to International Monetary Fund data, annual per-capita income is about $1,000. Mining accounts for 30 percent of Mongolia's gross domestic product and 78 percent of exports, according to government data. Further amendments to Mongolia's Mineral Law, which took effect in 1997, would follow the passage of a windfall tax in 2006. The windfall tax and uncertainty over additional changes crimped foreign investment, which tumbled to $31 million in the first half of 2007, according to the most recent government data. The country booked $995 million of inward investment in 2006.
A final agreement with Rio Tinto and Ivanhoe Mines Ltd. on a $3-billion copper and gold project will have to wait until debate on the amendments is over, Bold said. It was likely an accord may be signed before a general election due in June, he said.
A 2007 draft investment agreement gives Mongolia the right to a 34 percent equity stake in the Oyu Tolgoi project and related taxes equivalent to 55 percent of the profits, Rio Chief Executive Officer Tom Albanese said Feb. 22.
BHP, Peabody Energy Corp. and China Shenhua Energy Co. had been in talks with Energy Resources LLC, a private Mongolian company, to win development rights to the Tavan Tolgoi coal deposit until pressure from populist lawmakers forced the government to intervene. Prime Minister Sanjaa Bayar said Dec. 13 that the state would assume control of negotiations to ensure that Tavan Tolgoi development plans benefit the country.