Ivanhoe, Rio Tinto in talks with Mongolia
Miners seek to reach tax, royalty pact
WENDY STUECK
theglobeandmail.com
VANCOUVER -- Ivanhoe Mines Ltd. and Britain's Rio Tinto PLC are in formal negotiations with the Mongolian government to strike a long-term investment agreement that would govern tax and royalty rates and other conditions for Ivanhoe's massive Oyu Tolgoi project, Ivanhoe executive chairman Robert Friedland says.
Those discussions could lead to the Mongolian government taking a stake in the copper-gold project, one of the biggest and richest in the world and one that could transform the Mongolian economy, Mr. Friedland said yesterday at an industry conference in Vancouver.
"It's not a bad thing to have the government be your joint venture partner, especially when the government is your regulator, " Mr. Friedland said.
"There are a lot of benefits to bringing the government in as a shareholder in a project, and there are creative and interesting ways that can be achieved."
Vancouver-based Ivanhoe discovered the deposit in 2001 and has been working on it ever since. Last October, mining giant Rio Tinto struck a deal to acquire up to 40 per cent of Ivanhoe over five years.
The first step of the deal, already completed, saw Rio Tinto acquire a 9.95-per-cent stake for $303-million (U.S.)
The deal brought investment capital to Ivanhoe's flagship project, and renewed confidence in Ivanhoe's hopes of striking an investment deal with the Mongolian government.
Ivanhoe had been working on such an agreement for several years. But Mongolia announced sweeping changes to its mining legislation in 2006, rattling foreign investors and delaying an agreement for Oyu Tolgoi.
Mr. Friedland said the latest round of formal negotiations began Jan. 8, and includes participants from Ivanhoe, Rio Tinto and Mongolia.
The parties have agreed not to talk about the terms while negotiations are under way, he said. But he noted that some aspects of Mongolia's new mining law, such as 30-year terms instead of 15 years for major projects, will be positive for Oyu Tolgoi.
But the country's proposed windfall tax on copper and gold is still a "dumb idea," he said, and is part of the continuing discussions.
While an investment agreement is still being negotiated, Oyu Tolgoi is bustling with activity, including drilling and camp construction, Mr. Friedland said.
The project was planned when gold and copper prices were much lower than they are now, he said, meaning that once in production, the mine is expected to be among the lowest-cost copper producers in the world.
Along with Oyu Tolgoi, Ivanhoe is busy with coal projects in Mongolia and uranium exploration in Australia, Mr. Friedland said.
He noted that China's voracious energy demand means cleaner-burning coal plants will be a critical part of the country's future energy supply.
Mr. Friedland spoke at the Mineral Exploration Roundup conference in Vancouver. |
