The Mongolian parliament's approval in August of several mining and tax laws will lead to the signing of a long-awaited final investment agreement for the world's biggest undeveloped copper and gold deposit "as soon as possible," said Minister of Mineral Resources and Energy Dashdorj Zorigt on September 9.
As well as making it possible for international mining companies Ivanhoe Mines and Rio Tinto to end a six-year wait to develop the Oyu Tolgoi deposit, this agreement is also likely to pave the way for other companies to exploit Mongolia's rich trove of mineral resources. Mongolia has some of the world's largest deposits of copper, gold and uranium, as well as abundant resources of coal and other minerals. Its location, between China and Russia, in the past contributed to its isolation, but now means it has two of the world's largest markets on its doorstep. Today, its two neighbours consume around 60% of Mongolia's exports.
Tom Albanese, chief executive of Rio Tinto, described the passing of the four laws as "an incredibly important milestone in bringing on stream one of the finest undeveloped copper-gold projects in the world." Oyu Tolgoi, which is located in the South Gobi region near Mongolia's border with China, is expected to produce an average of 400,000 tonnes of copper and 300,000 ounces of gold over a 35-year period. Revenues from Oyu Tolgoi are expected to be in the region of $2.3bn a year, which would go a long way towards solving the country's financial difficulties.
In anticipation of a final deal, Ivanhoe and Rio Tinto are positioning themselves to take advantage of the huge increase in investor interest. On September 23, the Canadian-listed Ivanhoe announced it's considering selling up to a 9.9% stake in the company after being approached by several sovereign wealth funds. To enable such a deal to take place, Ivanhoe and Rio have agreed to change provisions of Rio's agreement to invest $2.4bn in Ivanhoe; any sale won't affect Rio's previously struck accord to buy a 43.1% stake in Ivanhoe, a statement said.
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