INVESTMENT AGREEMENTS: WHAT'S THE NEWS?

The Working Group is headed by the Minister for Minerals and Energy. His deputies are the Head of the Fiscal Policy Department of the Ministry of Finance and the Chief Executive Officer of “Erdenes MGL” state owned LLC. The Deputy Executive Director of the latter organization is the Secretary of the Working Group. Members are:
-Economic Policy Advisor to the Prime Minister
-Head of Geology, Mining and Heavy Industries’ Unit, Ministry of Minerals and Energy
-Head of Sustainable Development and Strategic Planning Unit, Ministry of Environment and Tourism,
-Head of Law Policy Unit, Ministry of Justice and Home Affairs
-Head of Revenues Unit, Ministry of Finance
-Deputy Head of the Unit on Law, Ministry of Finance
-Deputy Head of Policy and Strategic Planning Unit, Ministry of Minerals and Energy
-Advisor to the Chairman of the State Property Committee

In December 2008 the Working Group worked to select an internationally renowned consulting firm to help the Government with the negotiations and the Investment Agreements. Close to 10 companies, financial institutions and banks were approached with an invitation to assist the Mongolian government in this task.

Below is a brief interview taken from Mr. D. Zorigt, Head of the Working Group, by Undesnii Shuuden newspaper. (#308 (398) of December 25, 2008)

Q: Half a month has elapsed since the Government formed your Working Group. What have you achieved in this period, have you been negotiating with the investors?

The work is actively underway. Within this year we will select an international consultant/s to work with us on the draft agreements. We have started meetings with Oyu Tolgoi investors.

Q: What do the investors propose?

At the moment we are exchanging information. The investors are comprehensively presenting their financial capacities and investment potentials in the light of existing realities. The Working Group has been introducing the basic principles and guidelines approved by the Parliament as well as the basic requirements and conditions of the Government. The investors introduce the financial and economic aspects of their investment as to how they are changing and what the economics of the project look like since the May negotiations in the light of the global financial crisis. Some detailed documents on investment, which were not greatly exposed earlier, are now being introduced.

Q: The Parliament ordered the Working Group to introduce the draft Investment Agreements on the two projects within February 1, 2009. Will you manage to conclude the agreements within this period?

We will advance to the next stage of work as early as we enter the newyear. We will work to fit within the given time and within the scope of directions from the Parliament.

Q: What are the estimates for developing mines at the two deposits?

The investors in Oyu Tolgoi project have estimated the investment expenditures to be 4.7 billion USD. They say the earlier projected 2.7 billion USD estimates have escalated due to the financial crisis. We are thoroughly studying this issue.

Q: The share of ownership by the Mongolian side is to be 34% and it would be purchased through advanced payment of future taxes and other cash flows. How beneficial is such an option for us?

Two options indicated in the Parliament guidelines are being discussed: the Mongolian side holds 34% initially and eventually increases this share, or a product share principle – both options are being discussed.

Q: What will be the most important issues for the two projects?

When discussing the previous draft agreement, the prime attention was paid to energy supply whereas this time we abide by the direction by the Parliament to focus on township development, environmental aspects and job creation.