D.Gankhuyag: It all becomes clear if it is stated “The Mongolian share will be 50 percent once the initial investment is met.”
The following is an interview with Minister of Mining, D.Gankhuyag.
-Twenty three parliament members have demanded that the Oyu Tolgoi contract be renewed in accordance with decree 57. A year ago, the same demand was made by the previous parliament members. You were one of them. Are you still an advocate of this demand?
-The parliament decree 57 is the law of the Mongolian Nation. Therefore it is actively being implemented and enforced. Because it is active, parliament members have handed in their proposal. The demand is not about abolishing the Oyu Tolgoi contract. I personally have never stated that I wanted to abolish or take down the Oyu Tolgoi contract. Hence you will never hear me say that.
I was always for the creating of the contract but I have always criticised when a policy or an article of the contract was not practical. For example, for Mongolia to own 34 percent of the project, we had to have a loan with a 12-13 percent interest. After my criticism, it has been changed to 6.5 percent interest. The Minister of Finance of that time noted that this has increased the Mongolian revenue from the project by one billion USD. We have to understand this and think long and short term. The parliament decree 57 has three clauses. The first clause already mentions that the Mongolian side will own 34 percent from Oyu Tolgoi straight away. In this section, it also states that when the initial investment is raised, Mongolia will own 50 percent. I’m on this still for this policy. The parliament created a policy on mining for both Oyu Tolgoi and Tavan Tolgoi. But the government Ministers of the time who were supposed to enforce and implement these laws signed the contract even though it was in conflict with the law. It is not the fault of the investors. After all they didn’t force our ministers to sign the contract. But since the contract is in conflict with decree 57, it is not congruent with the Mongolian law.
-You are now the minister of this sector. You have the power to correct the contract. Will you change the contract so that it is in accordance with the decree 57?
-In the last election, the Democratic Party, Mongolia People’s Party, Justice Coalition and Civil Will Green Party have formed a coalition government. The parliament has given birth to the government. The programs and projects the government will undertake are being discussed. The issues that were talked about during the election are to form the base for this. The Oyu Tolgoi contract was also discussed within this scope. It was decided that a change in the investment agreement will be made after the initial investment has been met so as to benefit both sides. Since the government’s duty is to implement and enforce the law, there is no other way. This is the principle that the “Innovation Government” has taken on. Not just mine.
-Does this mean that the Oyu Tolgoi investment contract will be changed and Mongolia’s ownership will become 51 percent?
-Not 51 percent. The policy states, “Not less than 50 percent.” This means the old government did not implement the law, decree 57 that was passed by the Parliament. Which means the talks of changing the agreement on the base of economic data will be carried on by the government.
-Have the investors of Oyu Tolgoi raised the initial investment?
-There is an estimation made by the Rio Tinto and the Ivanhoe Mines or Turquoise Hill Resources during the time the agreement was made. It is the amount of money they will contribute to the Mongolian Nation through tax and after-tax profit. The estimation is that when a ton of copper is 4,320 USD on the international market, the initial investment will be met in 4.7 years. But this is after the Oyu Tolgoi mines have started operations. The Oyu Tolgoi mines will begin operations in 2013. Bear in mind that the copper price has been 7000-8000 USD since 2006. Which means the initial investment can be met in 3-4 years. Which means, it will all become clear if it is stated “The Mongolian share will be 50 percent once the initial investment is met.” Hence this issue has been on the agenda of the Government programs.
-Will changing of the agreement give rise to conflict on the investor’s side?
-It will. They will say, “Your previous governmentww already signed the contract, what are you talking about?” If the policy had been abided by from the start, there wouldn’t have been any issues. The government will decide in accordance with the Mineral Resource law which ministers will conduct a meeting with the Oyu Tolgoi investors. They will listen to the investors and work to come up with the solution to please both parties involved.
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