Monday, April 14, 2008

Mongolia to decide on Rio Tinto's Oyu Tolgoi gold, copper project before June

This is the topic that has had many investors following the news worriedly. What will the former commies do in terms of taxation on the mining sector? The Parliament is expected to pass the regulation within weeks, before the June parliamentary elections. What they decide will shape the future for Rio Tinto's $3 billion Oyu Tolgoi project.

A key change in the proposed amendment is a plan to give the government an option to seek a higher, 51% share in strategic projects, as opposed to 34% now, said Bold Luvsanvandan, chairman of the Mineral Resources and Petroleum Authority of Mongolia.
Strategic projects are defined as those with revenue exceeding 5% of Mongolia's gross domestic product, which currently is around $3 billion. >>Read full article
So the Oyu Tolgoi can and should be classified as a stategic project. In December 2007, the PM Bayar announced that the government will take control of the privately-held Tavan Tolgoi coal mine project, worth an estimated $2 billion. While this sudden wave of nationalistic and protective measures by the Mongolian government may dampen the investors' interest in Mongolia, it is probably a necessary move. Time to pull the brakes on the "gold rush" craze. So long as the natural resources are there, there will always be buyers and investors. Plunder it all and we'll be left with craters the size of mountains, with our rivers polluted with cyanide and mercurial water.

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