The Mongolian Parliament will be back to work debating this on July 13th
Parliament Started Debating OT Agreement, Vote is Expected
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Written by Administrator
Friday, July 10, 2009.
In latest Oyu Tolgoi developments, Parliament started debating OT agreement which is being broadcast live on local TV stations. Majority of MPs are criticizing the agreement, while Government is doing its best to defend it. Parliament is expected to cast its vote on the agreement today.
Meanwhile, Senior Vice President if Ivanhoe Mines Mongolia Inc. Mr. Ania Munkhbat continued pro-OT agreement PR campaign giving interviews to major Mongolian dailies, in which he calmed worries of Mongolian people who have doubts about the project. For example, according to influential Mongolian daily “Ardyn Erkh”, he said that “there has been considerable progress in negotiations with Mongolian party. The duration of the agreement is 30 years. There have been several advantages gained by Mongolian side. One, Mongolian side obtained right to audit all expenses done by investors. Next, Mongolian side is to get from 55 to 76 percent of profit depending metals prices. The practice of cooperating with foreign experienced reputable companies is present in many other countries of the world. For example, in Es Condida mine of Chile is operated by Rio Tinto, BHP Billiton and Japanese companies who invested and own shares and only pay taxes to Chilean Government, which does not mine itself.”
Regarding civil movements, Mr.Munkhbat views that “they are unreasonable and criticize only for criticism itself, when 34 percent is mentioned they ask for 50 percent, when 50 percent is mentioned, they ask for 80 percent.” Mr.Munkhbat noted that “Mongolian side is not doing any investment. There is no risk for Mongolia. The 34 percent stake is being provided by investor side. In case of failure of the project or copper price hitting bottom, only the mine will stop. In that case, Mongolian Government does not have obligation to pay back the US$1.7 billion. Thus, this is not a risk for Mongolia.”
According to leading Mongolian daily” Unuudur” he said that “among economic benefits for Mongolia several thousand jobs and development of infrastructure. There will indeed high direct and indirect impact on economy once the agreement is established. If productive development is started during world economic and financial downturn, it is needed by all parties.”
In other encouraging news, according to Press, and Information Office of the Parliament, during meeting of Speaker of the Parliament with directors of European Bank for Reconstruction and Development, the EBRD representatives said that if OT agreement is approved EBRD is interested in investing in infrastructure projects related to OT. The Speaker informed the directors that OT agreement issue will be resolved and power to sign the Agreement will be given to the Government before spring session of the Parliament finishes.
Following this news, according to Major Mongolian daily “Udriin Sonin”, during the meeting with President of North America-Mongolia Business Council Steve Saunders and the President of Mongolia Ts. Elbegdorj said that his position “is to speedily approve the agreement without losing time.”
President Elbegdorj noted that “OT is first major project being done since social change in Mongolia. Many major projects are waiting after this agreement. This is great economic opportunity for Mongolia.” At the same time, advisor of the President, Mr.P.Tsagaan confirming position of the President criticized 34 percent Mongolian stake version instead advocating no equity version. Mr.Saunders noted that North American investors are carefully watching OT developments.
On the opposite side, 16 civil movements headed by “My Mongolian Land and Earth” movement have organized protest rally again the OT agreement on main square of Ulaanbaatar. Anti-OT agreement PR campaign, continued in major Mongolian daily “Zuuny Medee”, that surprisingly turned anti-OT agreement recently ,publishing article accusing President Ts.Elbegdorj, Prime Minister S.Bayar, Chairwoman of Civil Courage Party MP S.Oyun, MP L.Gantumur, MP N.Batbayar,Chairman of Economic Standing MP Ts.Bayarsaikhan,E.Bat-Uul, Minority Leader MP Ch.Saikhanbileg, MP D.Odkhuu, MP Kh.Badamsuren, Majority Leader D.Lundejantsan, Miinister of Justice MP Ts.Nyamdorj of being main lobbyist of the OT agreement in the Parliament.
Former Prime Minister D.Byambasuren joined anti-OT agreement chorus by giving full page interview accusing MPs of submitting to foreign investors and treating the issue on time and money interests.
Meanwhile abroad, according to Reuters, amid a sharp overall contraction in the Toronto market, the Ivanhoe shares were 9.8 percent lower at C$8.62 on volume of almost 3.6 million shares on the Toronto Stock Exchange on Wednesday as analysts remained cautious. “Despite the support of both major parties, the MPRP and the DP, caucus discipline is much weaker in Mongolia than in, say, Canada,” said Salman Partners analyst Raymond Goldie. “Thus passage of the legislation authorizing the agreement is by no means assured before parliament breaks for summer,” he said. He said the share price was also likely hurt by a lower copper price on Wednesday. In interesting development, Ivanhoe also announced that it has appointed former charismatic Canadian Prime Minister Jean Chretien as a senior international adviser to the company. “The parliament hopes to have the agreement approved before the beginning of Nadaam, a national festival beginning on July 11, 2009,”
Desjardins Securities analyst John Redstone said in a research note. He does not expect this to pose a significant problem and is increasing his price target on Ivanhoe shares to US$12 from US$9.40. This accounts for the company’s increased ownership in the Oyu Tolgoi mine, since the government was expected to hold a 51 percent stake. It also reflects specific details obtained from a news release by Mongolian securities firm Frontier Securities.
Mr.Redstone’s model assumes that the project will come on stream in 2013 and that Ivanhoe will be responsible for building the mine infrastructure, including the mill, smelter and power plant. The analyst expects Rio Tinto will convert its debt and interest into Ivanhoe stock, and exercise all its warrants following the conclusion of a successful agreement with the Mongolian government for the development of Oyu Tolgoi. This would result in Rio Tinto holding more than 256 million shares of the Vancouver-based miner, or 42.7 percent of the share it would then have outstanding. Rio Tinto would be able to increase its holding to 46.65 percent through purchases in the market, Mr. Redstone added.
(Source: Ardyn Erkh, Unuudur,Press, Information and Promotion Office of the Parliament, Udriin Sonin,Reuters,National Post, July 9)
Author Dale Choi is a market commentator of Frontier Securities |
