MONGOLIA: Deal with Rio Tinto and Ivanhoe mines to develop its $3 billion Oyu Tolgoi mine, ending six years of talks over one of the world's biggest untapped copper and gold deposits

Record ID: 789094

  • Title: MONGOLIA: Deal with Rio Tinto and Ivanhoe mines to develop its $3 billion Oyu Tolgoi mine, ending six years of talks over one of the world's biggest untapped copper and gold deposits
  • Date: 7th October 2009
  • Summary: ULAN BATOR, MONGOLIA (OCTOBER 6, 2009) (REUTERS) BANNER IN THE GREAT HALL OF THE GOVERNMENT HOUSE WIDE ON THE GUESTS OF THE EVENT CLOSE ON MEMBERS OF THE PARLIAMENT WATCHING THE EVENT WIDE ON REPRESENTATIVES FROM RIO TINTO, IVANHOE MINES LTD, AND MONGOLIAN GOVERNMENT CLOSE ON BRENT CLAYTON, GENERAL DIRECTOR OF COPPER DIVISION OF THE RIO TINTO INTERNATIONAL HOLDING LTD, AND DASHDORJ ZORIGT MINISTER OF MINERAL RESOURCES AND ENERGY SIGNING CLOSE ON CAMERAMAN MEDIUM SHOT ON PARTIES ARE SHAKING HANDS WIDE ON AUDIENCE APPLAUDING WIDE ON STAGE AS REPRESENTATIVES FROM PARTIES ARE ANNOUNCED TO SIGN THE SHAREHOLDERS AGREEMENT CLOSE ON SOME GUEST WATCHING MEDIUM ON PARTIES SIGNING THE AGREEMENT CLOSE ON PETER MEREDITH, VICE CHAIRMAN OF BOARD OF "OYU TOLGOI NETHERLANDS DV" COMPANY (SOUNDBITE) (Mongolian) PRIME MINISTER OF MONGOLIA SANJAA BAYAR SAYING: "As the prime minister I have no doubts that in a few years the Mongolian economy will be much more diversified, well structured and with the highly developed mineral resource processing and producing the final product industry and a competitive country. '' WIDE ON AUDIENCE APPLAUDING (SOUNDBITE) (English) BRET CLAYTON, CHIEF EXECUTIVE OF RIO TINTO'S COPPER AND DIAMONDS GROUP SAYING: "While the size and grade of the existing Oyu Tolgoi ore reserves and mineral resources are already world-class, we are as a company are very excited by significant exploration potentials still remains." CAMERAMAN (SOUNDBITE) (English) PETER MEREDITH, BOARD CHAIRMAN OF IVANHOE MINES LTD SAYING: "Today we marked the beginning of the building of a modern Mongolian dream and our project. I want to thank Mongolian government the proud people of this great nation for the opportunity you've given our company to be part of the writing of the newest chapter in your rich history." MEMBERS OF THE PARLIAMENT AND GOVERNMENT OFFICIALS ARE CONGRATULATING HUGGING AND SHAKING HANDS TO EACH OTHER MINERS AT THE OYU TOLGOI SITE DIGGING CLOSE ON THE MINER CRASHING ROCK WITH THE STICK MACHINE ON THE SITE WIDE ON THE PIT MINE PULLING UP THE BUCKET WITH THE ORE WITH THE SOME MACHINE MINERS ARE RECEIVING THE BUCKET ON THE GROUND CLOSE ON A MINER OYU TOLGOI SITE PLANT BUILDING
  • Embargoed: 22nd October 2009 13:00
  • Keywords:
  • Location: Mongolia
  • Country: Mongolia
  • Topics: Industry
  • Reuters ID: LVA4MWDK2ISC2300YGK79LTVD6UL
  • Story Text: Mongolia wrapped up a deal on Tuesday (October 6) with Rio Tinto and Ivanhoe Mines to develop its $3 billion Oyu Tolgoi mine, ending six years of talks over one of the world's biggest untapped copper and gold deposits.
    The deal, made possible after the government repealed a windfall profits tax in late August, will allow work to begin on a project that will help diversify the central Asian nation's economy, deliver a profit boom for small Ivanhoe and ultimately increase global copper supply by more than 2 percent.
    The next milestone will be finalising a deal for global mining giant Rio to commit to a second tranche of investment, which had been tied to successfully signing the pact with the Mongolian government.
    Under their partnership to develop Oyu Tolgoi, Rio has the right to take a 43 percent stake in Ivanhoe Mines.
    It already owns a 10 percent share in the Canada-listed miner.
    The signinga six-year struggle for Ivanhoe to access the billions of dollars of copper and gold buried beneath Mongolia's Gobi desert, about 80 km (50 miles) from the border with China.
    The development is expected to produce an average of 450,000 tonnes a year of copper and 330,000 ounces of gold over 35 years, but won't reach full capacity until about 2018.
    Bret Clayton, Chief Executive of Rio Tinto's copper and diamonds group said it's an exciting opportunity,
    "While the size and grade of the existing Oyu Tolgoi ore reserves and mineral resources are already world-class, we are as a company are very excited by significant exploration potentials still remains," he said.
    Peter Meredith, the board chairman of Ivanhoe Mines Ltd said the deal marked the start of a new chapter,
    "Today we marked the beginning of the building of a modern Mongolian dream and our project. I want to thank the Mongolian government the proud people of this great nation for the opportunity you've given our company to be part of the writing of the newest chapter in your rich history," said Meredith.
    The copper will be sold directly to the world's biggest user, China, helping fill its rapidly growing need for raw materials at a time when finding major new mineral deposits is harder than ever, and exploiting them is more costly.
    After years of negotiations, the development suffered a major setback in 2006 when Mongolia passed a windfall profits law to allow the state to benefit from record copper and gold prices.
    But that was removed by amendments passed in late August, cancelling the tax on copper and gold effective Jan. 1, 2011, well before the Oyu Tolgoi project is scheduled to begin.
    Parliament also passed amendments giving developers primary access to underground water resources and allowing foreign investors to finance the building of roads, besides making a change to the corporate tax law.
    The deal would also help relieve concerns about debt-heavy Rio's commitment to funding the project -- certain funding obligations were set to expire in October if a pact was not signed -- and rekindle foreign investment interest in the resource-rich country.
    Shares in Vancouver, British-Columbia-based Ivanhoe, which have jumped fourfold since the beginning of the year, ended Monday up 0.28 cents at C$13.91.
    Shares in Rio Tinto were up 1.55 percent at A$57.73.
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