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To: LoneClone who wrote (44524)	10/6/2009 9:26:19 AM
From: LoneClone	Read Replies (1) \| Respond to of 194504

WRAPUP 2-Rio, Ivanhoe ink $3 bln mine deal with Mongolia Tue Oct 6, 2009 5:47am EDT reuters.com * After six years of talks, Oyu Tolgoi gets green light * Breakthrough for Mongolia economy, boost for copper supply * Rio eyeing future exploration in Oyu Tolgoi region -exec (Adds background, quotes from prime minister, finance minister) ULAN BATOR, Oct 6 (Reuters) - Mongolia finally wrapped up a deal on Tuesday to develop one of the world's biggest untapped copper and gold deposits, signing off on Rio Tinto (RIO.AX) (RIO.L) and Ivanhoe Mines' (IVN.TO) $3 billion Oyu Tolgoi mine. The deal, made possible after the government repealed a windfall profits tax in late August, will allow work to begin on a project that will help boost and diversify the central Asian nation's economy, deliver a profit boon for small Ivanhoe, and ultimately increase global copper supply by more than 2 percent. "On this special day, we are signing the historic investment agreement for Oyu Tolgoi -- an agreement that has alluded us for a long time," Mongolia's Prime Minister Sanjaagiin Bayar said during a signing ceremony. "The mineral resources are part of the riches that we have inherited from our ancestors." The signing ends a six-year struggle for Ivanhoe to access the billions of dollars of copper and gold buried beneath Mongolia's Gobi desert, about 80 km (50 miles) from the border with China. [ID:nSP472570] The next milestone will be finalising a deal for global mining giant Rio to commit to a second tranche of investment, which had been tied to successfully signing the pact with the Mongolian government. Under their partnership to develop Oyu Tolgoi, Rio has the right to take a 43 percent stake in Ivanhoe Mines. It already owns a 10 percent share in the Canada-listed miner. "While the size and grade of the existing Oyu Tolgoi ore reserves and mineral resources are already world-class, we are also excited by significant exploration upside that still remains," said Bret Clayton, chief executive of Rio Tinto's copper and diamonds group. "We plan to be a partner here in Mongolia for decades to come." The development is expected to produce an average of 450,000 tonnes a year of copper and 330,000 ounces of gold over 35 years, but won't reach full capacity until about 2018. "It will take us to about 2013 to see first production, and it will ramp up full capacity over the next five years -- I'm talking maybe eight years," Clayton told Reuters in a telephone interview earlier on Tuesday. The copper will be sold directly to the world's biggest user of the metal, China, helping meet its rapidly growing need for raw materials at a time when finding major new mineral deposits is harder than ever, and exploiting them more costly. "I'm pretty bullish on copper because there is difficulty bringing new supply online," said Clayton. "(Mines) are harder to find, we're not finding the big ones as often as we were, they are sometimes in more politically difficult areas in which to develop. As we see a lot of these things lining up around the world, there's going to be a lot of work for supply to keep up with what we see as future demand." BREAKTHROUGH After years of negotiations, the development suffered a major setback in 2006 when Mongolia passed a windfall profits law to allow the state to benefit from record copper and gold prices. But that was removed by amendments passed in late August, cancelling the tax on copper and gold effective Jan. 1, 2011, well before the Oyu Tolgoi project is scheduled to begin producing. Parliament also passed amendments giving developers primary access to underground water resources and allowing foreign investors to finance the building of roads, besides making a change to the corporate tax law. "The Oyu Tolgoi agreement has gone through many changes and those changes have ensured that the Mongolian side will benefit much greater than the investor," Mongolian finance minister S Bayartsogt said. The deal would help relieve concerns about debt-heavy Rio's commitment to funding the project -- certain funding obligations were set to expire in October if a pact was not signed -- and rekindle foreign investment interest in the resource-rich country. Shares in Vancouver, British-Columbia-based Ivanhoe, which have jumped fourfold since the beginning of the year, ended Monday up 0.28 cents at C$13.91. Shares in Rio Tinto were up 1.55 percent at A$57.73. (Reporting by Danielle Mario in ULAN BATOR, Jonathan Standing in SYDNEY and Joseph Chaney in HONG KONG; Editing by Michael Urquhart)