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Gold/Mining/Energy : Mining News of Note -- Ignore unavailable to you. Want to Upgrade?

To: LoneClone who wrote (42122)	8/26/2009 11:57:41 AM
From: LoneClone	Read Replies (1) \| Respond to of 197257

Oyu Tolgoi celebrations premature? How safe is western mining investment in Mongolia? After five years of wrangling, party politics and ever-changing government policies, one of the world's largest copper-gold deposits may now be at the threshold of official approval. But where do the Russians and Chinese stand? Author: Dorothy Kosich Posted: Wednesday , 26 Aug 2009 RENO, NV - mineweb.co.za After years of fits and starts and agreements shattered by political conflicts, the Mongolian Government may finally approve the investment agreement to develop the massive Oyu Tolgoi copper-gold mine. Investors engaged in an orgy of speculation Tuesday as stock and options trading in Ivanhoe Mines rose by 24%. The website optionmonster.com reported options activity in Ivanhoe stock was seven times the average while stock trading was four times greater than average. However, the fickle politics of Mongolia has dashed investor hopes before over the past five years. And, while Ivanhoe and joint venture partner Rio Tinto celebrated their good fortune, the spectre of Mongolia's past and future Russian ties was also hovering in the background Tuesday as Russia's state-owned nuclear power company, Rosatom, won a large concession to mine uranium in Mongolia. In separate announcements Tuesday Ivanhoe Mines praised the Mongolian Parliament's approval of amendment to four levels including a sunset provision to end the punitive, three-year-old, 68% windfall profits tax on copper and gold. "This expression of confidence in Mongolia's future clears the way for finalization of an agreement with the Government for the construction and operation of Ivanhoe's Oyu Tolgoi copper-gold complex. Now we are in a position to make arrangements with the Government to sign the Oyu Tolgoi agreement in the near future," said Ivanhoe President John Macken. Rio Tinto CEO Tom Albanese called the vote "an incredibly important milestone in bringing on stream one of the finest undeveloped copper-gold projects in the world. The Investment Agreement is also a landmark for the future development of Mongolia's resources industry." Under the terms of the Investment Agreement, the Government of Mongolia will hold a shareholding of 34% in Ivanhoe Mines Mongolia. Canada's Financial Post declared, "While nobody will guarantee that the signing is around the corner, sources said that it will likely happen very soon, after some minor tweaks to the agreement are resolved. Mongolia's finance minister said on television that the government could be ready to sign within two or three weeks." But, despite the jubilation and hoopla surrounding Tuesday's parliamentary vote, Rio Tinto may find itself making some tough choices in the future. The über-miner now owns 10% of Ivanhoe Mines Mongolia. Many mining companies would sell their corporate souls for a shot at mining a massive deposit containing 78.91 billion pounds of copper and 45.19 million ounces of gold. But, the issue no one wants to talk about still remains: How far is Rio Tinto willing to go to secure a mining operation in one of the most corrupt nations in the world, which is sandwiched between two major nations, both with a history of corruption? For 70 years Mongolia was under the political influence of Russia. If Tuesday's uranium joint venture announced between the two countries is any indication, those old loyalties die hard. Mongolia has temporarily suspended mining licenses for foreign companies operating in the country. Canadian Khan Resources has a 55% stake in the license to the Dornod uranium deposit that was just awarded to Rosatom and Mongolia's Mon-Atom. How quickly the markets forget the experiences of Toronto-based Centerra Gold's Boroo gold mine, which saw its licenses temporarily revoked and operations brought to a halt in June after the Mongolian Government felt it wasn't getting enough benefits from mining development on the property. Rosatom head Sergei Kiriyenko said it marked the first time Mongolia had agreed to create a joint venture with a foreign company to mine and process uranium. "Russia will be the first," he told reporters. "It's an important political signal." Highly respected Mongolian political commentator Baabar, whose articles are not often carried in the officially approved Mongolian news outlets, calls Mongolia "the sword of Damocles" which hangs over Russia and China. Baabar asserts Mongolia cannot even come up with 5% of the money for the infrastructure that is required to pave the way for the development of the Oyu Tolgoi and Tavan Tolgoi deposits. Therefore, Chinese money is likely to flow into its neighbor. Rio Tinto has recently experienced the furor of a Chinese backlash when things don't go according to Beijing's plans. "Both Moscow and Beijing are interested in evicting Western investments and geopolitical interests from Mongolia or at least freezing the use of Mongolian natural resources such that nobody can use it if they cannot benefit from it," Baabar warns. Baabar notes that, over the years, the Mongolians have already tried to move in on the money raised by Ivanhoe from western markets. Meanwhile, Mongolia still can't develop a decent stock exchange. Transparency International ranks Mongolia 102nd on its corruption perception index. As Baabar advises, "Mongolia is a highly corrupted country. ...Everyone wants to have something for making decisions on behalf of their home making the game more complicated." Baabar believes Oyu Tolgoi will be used as another "option providing opportunity to about 100 decsiion makers to possess something. " The question remains: Is a Rio Tinto, which prides itself on its corporate stewardship and sustainability, is truly willing to commit a billion or so to a mining project operating in the culture of corruption in Mongolia? Rosatom's move into Mongolia was confirmed during a state visit by Russian President Dmitri Medvedev after the two countries agreed on a settlement of US$150 million in Soviet-era debt, the New York Times noted in an article published today. Some Mongolian politicians are not happy that the developers of the Oyu Tolgoi project are not paying the windfall profits tax that they hoped would have financed a copper smelter to be owned by Mongolian interests. Developing nations are keen on developing smelting and refining processes that keep operating once mining deposits run out. Nevertheless, today, the investment world is in love with Mongolia, the Mongolian Parliament and the promise of the fabulous mineral wealth of Oyu Tolgoi The question remains-with the announcement of Russia's first official Mongolian joint mining venture and the possibility of Chinese financing of infrastructure development to serve Oyu Tolgoi and Tavan Tolgoi-what will the future actually bring for Western mining investment in Mongolia?