Mongolia’s Bayar Seeks $25 Billion of Investments in Mining

01 August 2009 | 04:23 Code : 19400 Geoscience events
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Mongolia is seeking $25 billion of overseas investments in mining in the next five....

Mongolia is seeking $25 billion of overseas investments in mining in the next five years to develop some of the world’s largest untapped gold and copper resources."We want to embark on one large-scale mining project every year, and an investment of $5 billion is required" annually, Prime Minister Sanjaa Bayar said in an interview in Tokyo yesterday. "We want countries like Japan to take part because they have technologies to develop gold and copper mines without damaging the natural environment."Companies have struggled to start projects in Mongolia. Vancouver-based Ivanhoe Mines Ltd. has tried for more than five years for approval to develop a copper and gold mine. The company faces further delays after Mongolia’s parliament authorized the cabinet yesterday to negotiate a deal, disappointing investors expecting outright approval. Khan Resources Inc. and Centerra Gold Inc., both based in Canada, have had licenses suspended."The key issue will be whether the government has the political will to go ahead and create the best environment for international capital to come to the country," said Alisher Ali Djumanov, chief executive of Eurasia Capital Management, an investment bank focused on Central Asia and Mongolia. "The track record has been mixed at best."Bayar, who met with Japanese Prime Minister Taro Aso in Tokyo yesterday, said Mongolia needs $5 billion of investment to develop the Tavan Tolgoi coal mine in the Gobi Desert. He didn’t give details of other mining projects or name companies the government is in talks with.The Oyu Tolgoi project that Ivanhoe seeks to develop about 80 kilometers (50 miles) north of the Mongolian border with China may have copper resources of 78.9 billion pounds and 45.2 million ounces of gold resources, the company said last year.Ivanhoe fell the most in four months in Toronto yesterday on speculation that approval delays continue. Rio Tinto Group called Oyu Tolgoi "the world’s largest undeveloped copper-gold resource" when it agreed to buy 10 percent of Ivanhoe in 2006.Under a 2007 draft investment agreement, the government would have had the right to a 34 percent equity stake in the project and related taxes equivalent to 55 percent of the profits, Rio Chief Executive Officer Tom Albanese said in February 2008.Mongolian President Tsakhiagiin Elbegdorj said last month he wants to change the terms to allow the government to take 50 percent of the profit, rather than buy an equity stake."We must hasten the development of Oyu Tolgoi," Prime Minister Bayar said yesterday, speaking before news of the parliament’s approval broke. "Amid the severe economic conditions, our gold and copper production isn’t enough," he said at The New Otani hotel in Tokyo.Commodities account for more than a third of land-locked Mongolia’s exports and a slump in copper prices amid the global recession has hurt economic growth, prompting an emergency loan from the International Monetary Fund in March to help the country maintain social order.Washington-based IMF projects the country’s economic growth may slow to as little as 3 percent this year from about 9 percent in 2008 because of a drop in exports of commodities.Mongolia’s copper output totaled 370,000 metric tons in 2007, Japanese government data show, while gold production was about 17 tons, according to a report compiled by the state-controlled Japan Oil, Gas and Metals National Corp. The Tavan Tolgoi mine may have 5 billion tons of coal reserves, according to Jogmec.Capital inflows will "depend on Oyu Tolgoi and Tavan Tolgoi," Djumanov said by telephone from Mongolia yesterday. "I think $5 billion a year is something that’s going to be not obtainable the way things are progressing right now."Toronto-based Khan Resources Inc. said on July 15 Mongolia suspended one of its uranium mining licenses for unspecified violations. Centerra Gold Inc. said June 12 operating permits for its Boroo mine were suspended and may be revoked after a review.


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