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Deputy Chief Cabinet Secretary: "Economic benefits of Oyu Tolgoi to Mongolia must increase" www.montsame.mn
Solongoo Bayarsaikhan, Deputy Chief at Cabinet Secretariat yesterday, January 13, gave information on the official position of the Mongolian government on the situation surrounding the Oyu Tolgoi copper and gold mine project.
In December 2019, the working group was set up to hold talks with investors of the Oyu Tolgoi project with the aim of improving Oyu Tolgoi-related agreements, including Investment Agreement, Shareholders’ Agreement and Underground Mine Development and Financing Plan in line with Mongolia’s legislations. Solongoo is a member of the Government working group.
“The government of Mongolia supports the Oyu Tolgoi underground mine development, which is viewed as holding benefits to the Mongolian economy because 80 percent of Oyu Tolgoi's value lies beneath the surface, and it is expected to become the fourth largest copper mine in the world after the underground starts its production. The working group has been studying the financial estimate of the benefits Mongolia to receive from the project.”
On the basis of revised definitive estimate for the underground mine development announced by Rio Tinto on December 16, 2020, which extended the date when sustainable production to be achieved to October 2022 for development capital of USD 6.75 billion, already USD 1.4 billion higher than the first estimation, the underground’s economic benefits for Mongolia are likely to decline, underlined Ms. Solongoo.
“It is calculated that Mongolia will not receive dividend payments until 2051 and will incur debts of USD 22 billion. In addition, Oyu Tolgoi is estimated to pay profit taxes or corporate income taxes only in four years until 2051. Therefore, the Mongolian government has sent a letter to the investor side to have careful discussions to enhance the economic benefits of the project to Mongolia."
Under the parliament’s 2019 resolution No. 92 aimed at protecting the rights and interests of Mongolian people in the exploitation of Oyu Tolgoi deposit, the government has been forwarding certain proposals and demands to investors and talks are underway, according to the Deputy Chief.
However, she reaffirmed that the government has never expressed any position to stop the ongoing Oyu Tolgoi project. “I believe the situation will not become dire of having to stop the project and this matter could be settled in a mutually beneficial manner. Both Rio Tinto and Turquoise Hill Resources have also expressed that the issue is in no way under that serious circumstances of ending the development".
“The government has put forward proposals to coordinate and lower the management services payment received from Rio Tinto in line with performances, and reduce shareholder loans interest rates with LIBOR plus 6.5 percent with a view to increase Mongolia’s benefits” added the Deputy Chief.
Oyu Tolgoi Board of Directors has decided to set up an independent committee made up of experts nominated by Erdenes Oyu Tolgoi LLC and Turquoise Hill Resources to review the causes of cost overrun and delay in the Oyu Tolgoi underground development. “Once the experts are selected, the committee is expected to make conclusion on the matter within six months,” says Solongoo.
According to her, Oyu Tolgoi company’s current copper production from its surface mining with sales revenue of USD 1.1 billion equals to half of the total copper export of Mongolia.
Published Date:2021-01-14
