Mongolia seals 4-bln-dlr copper mine deal
BEIJING: Mongolia on Tuesday signed a long-awaited multi-billion-dollar deal with Canada's Ivanhoe Mines and Anglo-Australian miner Rio Tinto to develop one of the world's richest copper deposits.
The deal to exploit the Oyu Tolgoi mine was announced in an statement by Rio Tinto and marks one of the biggest investments in Mongolia since the former Soviet satellite state turned to capitalism two decades ago.
"This is a significant milestone and we now look forward to working together to develop what I firmly believe is the best undeveloped copper deposit in the world," Bret Clayton, chief executive of Rio's Copper and Diamonds group, said in the statement.
The mine in the south Gobi desert will employ as many as 3,000 workers, with thousands more finding jobs along the supply chain, providing a significant boost to the economy of the resource-rich country, one of the poorest in Asia.
Oyu Tolgoi, located about 80 kilometres (50 miles) north of the Chinese border, is expected to produce 450,000 tonnes of copper and 330,000 ounces of gold annually over 35 years, according to Ivanhoe's 2005 development plan.
Mongolia's gross domestic product is expected to increase by 34.3 percent over the life of the mine, while the nation's employment rate is tipped to jump more than 10 percent, according to plan estimates.
Per capita disposable income is expected to rise by 11.5 percent.
Ivanhoe said it would release an updated plan and financial details after the signing ceremony Tuesday.
Mongolia's minister for mineral resources and energy, Dashdorj Zorigt, has estimated the project could boost Mongolia's per capita GDP, at about 1,800 dollars in 2008, to 15,000 dollars by 2015.
"This is a four-billion-dollar investment project," Zorigt said in a recent interview with AFP. "As you can imagine, Mongolia will benefit from this flow significantly.
"Mining is the backbone of the Mongolian economy it accounts for close to 30 percent of its GDP and 70 percent of its exports."
The signing ceremony will come more than nine years after Ivanhoe started exploration at the Oyu Tolgoi site and six years after it was awarded mining licences.
Talks have dragged on as Mongolia and Ivanhoe haggled over how big a share the government should take.
Ivanhoe eventually agreed to give the government a 34 percent equity interest in the project and the deal cleared the final hurdle in August when Ulan Bator agreed to scrap a 68 percent windfall tax on copper and gold sales.
Analysts said the deal would provide a "blueprint" for foreign investors wanting to access Mongolia's rich deposits of copper, gold, uranium, silver and oil.
"This is a pathfinder transaction," said James McGlew, a senior dealer at Argonaut Securities in Australia.
"Hopefully this is the blueprint on how they will develop this part of the economy."
Rio, which holds a 9.95 percent stake in Ivanhoe and has an option to increase its share to as much as 46.65 percent, has said production is expected to start as early as 2013 with "an approximate five-year ramp-up to full production".
As construction gets under way, Ivanhoe is also considering selling a 9.9 percent stake in the company to one or two strategic investors, including sovereign wealth funds.
The Oyu Tolgoi deal is the first of several big contracts the government is hoping to sign.
Next in the pipeline is Tavan Tolgoi, which is said to be the largest untapped coal field in the world. Mining companies and consortiums from Russia, China, South Korea, and the United States have submitted bids for the project.
Late last month, Moscow and Ulan Bator agreed to form a joint venture to exploit the Dornod uranium deposit during a visit by Russian President Dmitry Medvedev. And China is planting oil rigs in the east of the country