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’ held a press conference on August 9. During the press conference, the Head of the working group, Mr. Nyambaatar Khishigee, stated that the recently completed independent review into Oyu Tolgoi’s underground development challenges, specifically the USD 1.4 billion in cost overruns and 22 month schedule delays, concluded that the issues were triggered by Rio Tinto’s mismanagement and not the geotechnical conditions that Rio Tinto claimed.

To look more into the details of the situation, we met with member of the Board of Directors of Oyu Tolgoi LLC, Ms. Bayasgalan Enkhbaatar.

“The independent review on the cost overruns and schedule delays of Oyu Tolgoi underground development was submitted to the Government of Mongolia on August 9. The 157-page report rejected Rio Tinto’s claim of the abovementioned issues being caused by geotechnical conditions and concluded that it was triggered by the company’s mismanagement. The findings of the independent experts have been studied by the relevant authorities and will play an important role in the negotiations with Rio Tinto” she said.

“Discussions were held on the report and recommendations were given to us by the independent experts during a meeting of Oyu Tolgoi’s Board on August 25. At the third quarter board meeting which is scheduled to be held early this month, we will discuss ways to implement the recommendations we received from the experts in the future, how Rio Tinto should be held accountable for management errors, how to prevent such issues from recurring, and whether the current management should remain unchanged. One of the recommendations we received from the expert team was to have a detailed cost audit on the cost overruns of the underground expansion. In this regard, we may set up a special committee again, if necessary, and appoint independent financial experts to further audit the estimated costs of the underground mine development.”

“Bold Baatar, Copper Chief Executive of Rio Tinto, did not attend the August 25 Board meeting, unfortunately. It is rather disappointing that Rio Tinto did not make available its key representative to attend this important meeting and give the Board the opportunity to openly discuss the findings of the independent review and ask questions from the Rio Tinto’s executive team in charge of the management and development of Oyu Tolgoi. We are still waiting for Rio Tinto’s offical response on the independent review report. I believe that the official response will play a key role in the government’s negotations with Rio Tinto. For example, if they admit that they have made a management mistake, we can talk openly about further steps to be taken and changes to the contract.”

“To put it simply, the cost overrun of USD 1.5 billion should not be taken lightly, especially considering the initial budget of USD 5.3 billion included around USD 500 million of contingencies. Therefore, the issue of being held accountable for the mismanagement and consequences thereof, such as cost overrun, must be raised. That way, we can find a way forward” she added.

What exactly do you think Rio Tinto should be responsible for?

-Any organization that charges for services must ensure adequate performance of their services. But if the work they have done is not as you agreed, they continue to charge additional costs, and most importantly, if they are misleading you and being dishonest about their performance shortcomings, then you cannot continue to work with them on that basis. You will need to raise the issue of accountability before moving forward. I believe our government has the same view.

Rio Tinto invoices large sums of money as management fees annually. If you get that amount of money and do not do your job well enough, we need to reconsider the amount.

The government expressed its willingness to start the underground undercut process in September. Rio Tinto has confirmed it was technically feasible to initiate the undercut. However, as we all know, the work has not yet begun.

In addition, the net present value of the project is declining as construction of the underground mine is delayed. The 22-month delay has already devalued the project. The more time passes, the lower the value of the project. Ultimately, a quick start to underground mining is mutually beneficial.

Oyu Tolgoi’s reserve report and feasibility study are separate issues and must go through proper administrative due processes in order to ensure the appointed expert team is able to conduct their thorough review, to get responses to their questions and to raise issues and recommendations. Only at the completion of such procedural requirements, those reports should be received by the appropriate agencies. However, Rio Tinto continues to push the Mongolian government at the top to approve those reports, without allowing our mining and technical experts to do their work, which is an issue. As you know, the same problem arose in the Dubai Agreement and there is a clause forcing the government to accept the 2015 feasibility study.

What recommendations did the independent experts give?

-According to our independent external experts, it is certain that the cost was exceeded due to management errors. However, it was recommended that financial analysts be hired to dig deeper into cost overruns.

A letter from Rio Tinto to the Prime Minister of Mongolia stated that Mongolia’s share of 34 percent could be renegotiated. What is your position on this?

-It is better not to make a hasty decision on the offers of Rio Tinto. Each of these offers needs to be carefully reviewed and followed by a decision made in the best interests of Mongolia. We can also make offers. In my opinion, Rio Tinto has not responded to the report of independent experts. Therefore, I think it is inappropriate to make offers prior to openly discussing and resolving the issue of mismanagement and ways to mitigate such risks going forward.

How will the current negotiation affect the start of underground development?

-It will not affect it at all. It is not necessary to conclude negotations between the government and Rio Tinto, prior to the start of the underground mine. There is no reason for the development of the underground mine has to freeze because of the negotiation. Further delaying the schedule itself is economically unprofitable for all the stakeholders. The decision on when to start underground mining is in Rio Tinto's full control after all.

3,726 new cases of COVID-19 were detected nationwide in the past 24 hours. This is the highest number of coronavirus infections recorded in Mongolia in one day.

In specific, 916 of the new cases were recorded in Ulaanbaatar city and 2,810 in rural areas. Seven patients died from COVID-19 in the past 24 hours, which brings the COVID-19 death toll to 944.

Currently, 14,829 people are receiving hospital treatment for COVID-19 whilst 18,239 people with mild symptoms of COVID-19 are being isolated at home.

Today, a new school year has started in Mongolia amid the COVID-19 pandemic. According to the Ministry of Education and Science, this year more than 700 thousand children nationwide will receive in-school and classroom education.

This academic year begins with hybrid schedules that include a mix of online and in-school learning. According to the plan, children will go to school in person for a week and attend online learning for another week. To maintain the infection control regime, no more than 25 children are admitted to each classroom, with a child per desk.

As for the kindergarten, children aged 4 and 5 are admitted in September. However, the Ministry of Education and Science reported that an issue of admitting children aged 3 will be resolved next month depending on the pandemic situation.

For universities and colleges, students will start attending in-person classes from September 13. Currently, over 94 percent of teachers and educational staff have been fully vaccinated against the coronavirus.

The Ministry also informed that a three-year plan will be implemented from this academic year to eliminate the learning loss caused by the COVID-19 pandemic.

Japan has put a batch of Moderna's Covid-19 vaccine on hold after a foreign substance was found in a vial.

A pharmacist saw several black particles in one vial of the vaccine in Kanagawa Prefecture, according to authorities.

Some 3,790 people had already received shots from the batch. The rest of the batch has now been put on hold.

It comes less than a week after Japan suspended the use of about 1.63 million Moderna doses due to contamination.

The pharmacist found the black particles while checking for foreign substances before the vaccine's use.

The jab's domestic distributor has collected the vial suspected to be contaminated.

Local media reports say there is no evidence so far of any health hazards caused by the potentially contaminated vaccine.

Takeda Pharmaceutical, which sells and distributes the vaccine in Japan, had just last week put three batches of the vaccine on hold after "foreign materials" were found in some doses of a batch of roughly 560,000 vials.

Spanish pharmaceutical firm Rovi, which bottles the vaccine, said in a statement that a manufacturing line in Spain could be the cause of the issue.

It added that it was conducting an investigation.

On Tuesday, Japan's health minister said foreign matter found in jabs in the southern prefecture of Okinawa were due to needles being incorrectly inserted into vials.

Japan is battling a spike in Covid cases while it hosts the Paralympic Games.

Its vaccination roll-out has been relatively slow, with just over 40% of Japanese people fully vaccinated and around 50% having received one dose.

B.Solongo, Deputy Chief of the Cabinet Secretariat informed about the progress of discussions being held between the Cabinet and the Rio Tinto Group as well as the current situation.

During the press conference that took place following the cabinet meeting, the Deputy Chief of the Cabinet Secretariat said, “Oyu Tolgoi has had cost overruns two times. We acknowledged the reasons behind the first cost overrun that occurred at the open-pit section of the mine. However, the underground mining costs increased by USD 1.45 billion. Following an independent review on this matter, we were given a detailed report of 157 pages. In addition, a financial audit was recommended in the report. In the future, we have to monitor the operations Oyu Tolgoi. Furthermore, as the information provided by Oyu Tolgoi to Erdenes Oyu Tolgoi is very general, we have requested the company to provide more detailed information."

“The dispute over the two tax acts will also continue at the London Court of International Arbitration. As the dispute was initiated by Oyu Tolgoi, it will not be resolved even if Rio Tinto pays USD 350 million. Alongside the current pandemic circumstance, the schedule delays of the underground mine exploitation negatively affected the state budget. Rio Tinto, therefore, has offered to pay dividends to be paid to our side in advance. We did not hold any talks on suspending the development of the underground mine because the exploitation of the underground mine is mutually beneficial. Rio Tinto Group has sent us a report stating that the government owes USD 22 billion. As the report was quite concerning, we suggested discussing the matter with the group in order to resolve misunderstandings. We have not yet decided what to do with the share of 34 percent owned by Erdenes Oyu Tolgoi LLC on behalf of the Government of Mongolia,” she said.

Mongolian officials said on Tuesday that they will "carefully review" a new plan from Rio Tinto for financing the costly expansion of the vast Oyu Tolgoi copper mine -- intimating that it could take years to reach agreement.

The rising cost of the new underground phase of the mine, now pegged at $6.8 billion, played a part in bringing down both Mongolia's previous prime minister and Rio's last chief executive.

While the government has not paid up front for any of the construction or operating costs of the mine, figures that emerged late last year projecting that it might never receive any dividends from its 34% ownership of one of the world's biggest copper deposits engulfed the project in fresh controversy.

In a proposal submitted to Prime Minister Oyun-Erdene Luvsannamsrai on Monday, Rio offered to waive interest on the loan extended to finance the government's capital share, an official told Nikkei Asia. Under the current arrangement, the rate is fixed at Libor plus 6.5%, or around 6.74% currently.

The company also offered to pay the government $350 million over the next three years to assist Mongolia with its pandemic difficulties, government officials said.

"We take the cash payment offer as a prepaid dividend and there will be much more further talks," Solongoo Bayarsaikhan, deputy cabinet secretariat chief and a leading negotiator in the talks with Rio, said at a news conference Tuesday.

"Negotiations may take 3 to 4 years," said Nyambaatar Khishgee, minister of justice and internal affairs, noting the government would hire consultants to carefully review terms, given perceived mistakes made in earlier rounds of talks.

Rio on Wednesday said it would decline to comment on "speculation" about its offer.

Under the current financing arrangement, Mongolia will only receive dividends once it has paid off the interest and principal on the loan from Rio, now about $2.2 billion. Until late 2020, the authorities had expected to start collect dividends in 2032 but a two-year delay in construction and $1.5 billion increase in the project's budget darkened the outlook.

Copper production from the underground section of the mine was originally scheduled to begin last year, and preparatory work will continue while negotiations proceed. Solongoo said the government will also continue to pursue an international arbitration claim against Rio for taxes found to be unpaid after auditing the mine's records.

Rio has said the mine project pays around $300 million in taxes annually to the government, including royalties. The company has collected $1.3 billion in management fees for operating the original open-pit section of the mine since 2013.

Earlier this month, a special board committee of the joint venture that owns the mine concluded that project management problems were key to the delays and cost overruns with the underground expansion.

Former Mongolian Prime Minister Saikhanbileg Chimed, who signed a 2015 deal with Rio, is under investigation over his handling of those talks but is in exile. Bayar Sanj, a predecessor, was sentenced in 2020 to five years' imprisonment for abuse of power in another case related to the mine.

Following the Cabinet meeting today, August 31, Minister of Justice and Internal Affairs Kh. Nyambaatar held a press briefing to introduce a letter from Rio Tinto’s management team to the Prime Minister of Mongolia.

In the letter, as head of the Oyu Tolgoi mine project management team, Rio Tinto has apologized for delaying the development of the underground mine, expressing regrets for the schedule delays amid the pandemic and difficult economic times. The letter also reads that Rio Tinto offers to work with the government to generate MNT 1 trillion (USD 350 million) of additional revenue for Mongolia over the next three years, which is an addition to existing taxes and royalty payments generated by an existing open pit mine at Oyu Tolgoi.

To speed up returns that the Mongolian government will earn from the Oyu Tolgoi project, a working group set up by the both sides is willing to bring the term of dividends to be paid by Oyu Tolgoi to Erdenes Oyu Tolgoi LLC closer and to reduce the amount of debt that would have accrued on the investment of Mongolian side.

Mr. Nyambaatar said that Rio Tinto has officially expressed that it is ready to negotiate on reducing the current debt of USD 2.3 billion accrued on the Mongolian share of 34 percent. “Moreover, Rio Tinto expressed readiness to continue talks in all aspects and the project must be successfully proceeded, thus asking to adjourn the counterclaim raised by the Mongolian side at the London Court of International Arbitration and freeze the dispute temporarily. The government’s working group will convene this week and announce a date of meeting with a Rio Tinto representative headed by B. Bold, a head of Rio’s copper division.”

The letter also reads that the Rio Tinto wants a long-term agreement on a sustainable energy supply for the Oyu Tolgoi mine as it seeks to complete the development of underground mine.

The establishment of additional terminal for containerized shipping at Gashuunsukhait and Shiveekhuren border checkpoint is 80 percent complete.

The terminal, which will be commissioned in September, is being built with funding from Energy Resources LLC, Erdenes Tavan Tolgoi JSC and Tavan Tolgoi JSC. Moreover, road construction of containerized shipping has started with the establishment of an additional transportation control points at Shiveekhuren checkpoint by the ‘Mongoliin Alt’ LLC.

Construction of flood dams, long and short haul roads at Gashuunsukhait checkpoint as well as the infrastructure are being accomplished as planned.

The construction of terminal for containerized shipping at border checkpoints will reduce human contact and allow drivers to carry out works steadily without crossing the border. Furthermore, it will reduce the negative impact caused by coal transportation on environment, and increase coal export.

The movement of passenger train, which had been suspended for months due to the coronavirus pandemic, was reopened on August 29, 2021 at 5:00 a.m. by the decision made by the SEC.

When traveling by passenger train, the following documents must be submitted and the infection control regime must be strictly followed in accordance with the “Temporary Procedure for regulating traffic movement between the capital city and rural areas” approved by the Order No. 46 of the Chairman of the SEC dated May 19, 2021.

1. Proof that 14 days have passed since receiving the full dose of COVID-19 vaccine.

2. Medical certificate confirming recovery from coronavirus infection in the last 4 months;

Passengers must present a negative PCR test result carried out within the past 3 days or a negative antigen-based rapid test result (valid for 2 days from the date of test) except for passengers who have started their journey from a rural area (aimag, soum) where no cases of coronavirus infection have been reported and have the documents specified in 1.2.

However, children aged under 17 are not required to have a negative result of PCR or rapid antigen-based test for coronavirus infection. State Emergency Commission will be in charge of taking corresponding measures including performing rapid test involving children when coronavirus symptoms have detected with taking questionnaires at checkpoints, checking body temperature.

According to the Resolution No. 15 of the regular meeting of shareholders dated August 18, 2021, shareholders of Suu JSC approved the distribution of MNT 1.7 billion to its shareholders by a dividend of MNT 5.14 per share based on the net profit of the first half-year of 2021. The list of shareholders who are eligible for dividends will be determined by September 06, 2021, and the dividends will be placed in the shareholders’ accounts held at Mongolian Central Securities Depository within February 10, 2022.

The Board of Directors of APU JSC decided to allocate a dividend of MNT 46 per share or a total of MNT 48.8 billion from its net profit of 2021H1. The company publicly announced Board members’ decisions. The list of eligible shareholders is determined by September 03, 2021, whereas the company will allocate dividends through Central Securities Depository before February 10, 2022. APU JSC is pursuing a policy to allocate dividends twice a year. In particular, the company paid a dividend of MNT 37.5 per share or MNT 29.9 billion in 2020H1.

Source: Local Newspaper “Today Newspaper”