Oyu Tolgoi Mine
From Mongol Studies Online Reference
Owned by Ivanhoe Mines Ltd., a Canadian coal and minerals operator in Asia with biggest projects in China and Mongolia, and London’s Rio Tinto, a world mining leader and owner of 43.13% of Ivanhoe Mines’ shares, Oyu Tolgoi’s in-situ gold and copper metal is valued at above USD 100 billion [1]. “Initial annual copper concentrate output would be 300,000 tons with a 1 million ton peak to be reached within six years. Copper reserves (28 million tons) would provide for a 40-year lifespan” [2]. Oyu Tolgoi, also known as “Turquoise Hill” is located 80 kilometers north of China and 550 kilometers due south of Ulaanbaatar. It is 360 kilometers west of the Trans-Mongolia Railway connecting Mongolia to Russia and 240 kilometers south of the Trans-China Rail line following the Yellow River (Huáng Hé), which itself is 160 kilometers south of the Mongolia-China border. It averages a little over one kilometer in elevation.
The area receives approximately 100 mm of rain each year during the spring and summer, but access to adequate water resources and lack of infrastructure present time and capital intensive hurdles to operation. Ivanhoe has constructed a small airfield capable of landing small planes at the mine [3].
Although the Mongolian Government agreed to the terms of Ivanhoe Mines’ and Rio Tinto’s 2005 Integrated Development Plan for Oyu Tolgoi, in 2006 it passed the Windfall Profit Tax, imposing a 68% tax on all copper or gold provided the international value of either of the two elements is higher than a designated threshold value [See Windfall Profit Tax]. At this time, Ivanhoe Mines and Rio Tinto had spent USD 370 million on the mine, or USD 10 million per month [4] [5]. More importantly, the mine still needs another USD 2 billion of investment before operation could commence. As the mine was one of the first and largest discoveries made in Mongolia, it spurred much of the subsequent foreign investment in the mining sector, and as Inahoe Mines stock price plummeted as an immediate result of the tax, the trend of foreign investment in Mongolian mining did as well.
Ivanhoe’s president, Robert Friedland, was quoted as saying “It's unfortunate for Mongolia to make such a major error. They are sending a message to the world. The President should come out and say he's not signing it and that the country keeps its promises.” After reviewing it, the President did sign off on the law [6].
[edit] references
- ↑ South Gobi Energy Resources. South Gobi Company Website. Accessed July 2008.
- ↑ Economy and Trade as of end 2006. Embassy of Mongolia, Washington D.C. Accessed July 2008.
- ↑ Oyu Tolgoi Gold and Copper Project, Southern Mongolia. Mongolia Projects. Ivanhoe Mines Ltd Website. Accessed July 2008.
- ↑ "How to Destroy Mongolian Mining". Poliquin, Morgan. Ludwig von Mises institute. June 20 2006. Accessed July 2008.
- ↑ "Mongolia risks killing mining sector". Francis, Diane. Financial Post. May 17 2006. Accessed July 2008.
- ↑ "Mongolia risks killing mining sector". Francis, Diane. Financial Post. May 17 2006. Accessed July 2008.
