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Oyu Tolgoi Finally Moving Forward?

July 27, 2009  Ulaanbaatar, Mongolia

Government Given the Go-ahead to Negotiate

The current business environment in Mongolia is very exciting; in no small part due to recent developments in the Rio Tinto/Ivanhoe Mines negotiations.    After over five years of negotiating the Oyu Tolgoi (OT) Investment Agreement with Mongolian officials, the Parliament last week (July 16) passed a resolution giving the Government the right to conclude the Investment Agreement.  This marks the furthest the negotiations have reached since they began.  While obstacles remain, most notably the 68% Windfall Profits tax on gold and copper, most remain quietly optimistic the Investment Agreement is on the verge of moving forward.  Finally!

The OT site is located in the South Gobi region of Mongolia, 80 km north of the Mongolian-Chinese border.   It is claimed by investors to be the largest copper-gold development project in the world, with an estimated 35 year life-span with yield estimates of 440,000 tons of copper and 320,000 ounces of gold.  The over USD7 billion that will be invested over the life of the mine makes it one of the largest, if not the largest, development projects in Mongolian history.

Massive Changes Could be Just Around the Corner

All this adds up to a development that will have a huge impact on Mongolia and its government, institutions, and most importantly, its citizens.  Wise use of taxes, royalties and other fees from the mine can potentially bring about a sea change for the 2.7 million population of Mongolia.  This money will allow the government to significantly invest in the lagging healthcare and education sectors in Mongolia, as well as build badly needed roads, bridges and power stations throughout the country.

In addition to the money that will come directly from the project, OT has the potential to bring thousands of jobs to the country and build the capacity of the Mongolian workforce, thus reducing its reliance upon foreign workers for more technical positions.   OT itself will lead to approximately 3000 additional jobs, not to mention the countless jobs created to construct power plants, roads, water systems and other necessary infrastructure.

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