Talks with Rio Tinto on Oyu Tolgoi Project launches

The Mongol Messenger
2021-04-16 17:16:15

Ulaanbaatar /MONTSAME/. The working group in charge of implementing the parliamentary resolution No.92 dated November 21, 2019, titled ‘Ensuring the interests of Mongolia in the exploitation of the Oyu Tolgoi gold-copper mine’ began the negotiations with Rio Tinto company delegates on April 12.

The government's working group, set up by the decree of the Prime Minister of Mongolia, has expressed its position to the investor side to terminate the Oyu Tolgoi Underground Mine Development and Financing Plan, also known as the ‘Dubai Agreement‘, and ensure the interest of Mongolia. This is because when the plan was first established, the initial cost estimates of the Oyu Tolgoi underground development plan were approved at USD 5.3 billion. Unfortunately, this cost estimate was increased by USD 1.4 billion or about 30 percent, reaching USD 6.75 billion, and the date when the first underground production to be achieved was extended by 22 months from the first estimation of January 2021. Moreover, it was calculated that Mongolia will not receive dividend payments until 2051 and will incur debts of USD 22 billion, which is prompting to reconsider the plan.

B.Solongoo, Deputy Chief of Cabinet Secretariat and a member of the working group, said during her interview with Mongolian National Broadcaster, “We will take all necessary measures to make the Oyu Tolgoi project as profitable as possible for the Mongolian side. I do not assume that the negotiations on this issue will end soon as the parliamentary resolution No. 92 commands very broad areas. In this regard, we have to work for the improvement of the entire framework agreement, such as the Investment Agreement of 2009, the Shareholders‘ Agreement of 2011, and to make the Oyu Tolgoi project more profitable for Mongolia as a whole."

She also said that independent experts are expected to make a conclusion on the issue of cost overrun in the underground development of Oyu Tolgoi by late June. Tax acts of MNT 377 billion and MNT 649.4 billion were imposed on Oyu Tolgoi LLC in 2018 and 2020 respectively. However, the company declined to accept the tax penalty of MNT 377 billion and initiated an arbitration proceeding at the London Court of International Arbitration.

"The government will defend its stance that the company must pay an appropriate amount of tax if it earns its income from Mongolia," stressed B. Solongoo.

80 percent of the total resources of the Oyu Tolgoi project will be mined underground. Currently, Oyu Tolgoi has an annual revenue of USD 1 billion from open-pit mining. With the opening of the underground mine, this revenue is expected to quadruple.

Related news