Source: Ardiin Erkh Date: 4 April, 2010

Finance Minister S.Bayartsogt has charged the 12 MPs, who have asked the Speaker to stop the implementation of the Oyu Tolgoi agreement (see story below), with “lying and capitalizing on the lack of information among the general people” on the details of the issues surrounding the project. In an aggressive interview on Tuesday, he refuted their arguments by either correcting their figures or clarifying details deliberately, or ignorantly, overlooked.
He said the entire amount of ore registered in a deposit is in most cases not profitably extractable and nothing more than this “simple fact of mining” explains why 19.6 million tons of copper has been kept out of extraction plans in the feasibility study. Also, the decision to not mine this part of the deposit is not irrevocable, as profitability is a flexible criterion, liable to change depending on sale prices as well as on cost of output. That the company will thus have to constantly revise the feasibility study is also common practice.
Asking media to trust him simply because he “cannot afford to lie as I will have to take the responsibility for things I say”, the Finance Minister asserted there has been “no violation of any law” and the MPs’ objections at this last stage “is just a political move, aimed at appealing to people with poor understanding of a complex problem”.
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Referring to the allegation that the advance payment of USD250 million is actually a repayable loan bearing 5 percent interest, Mr. Bayartsogt explained that the interest is in fact three percent. Also, this was an advance payment of taxes. “The money was paid 14 days after the agreement was signed on October 6, 2009, while the first taxes will not be due until after mining operations begin in 2013. We have already got USD250 million which we should be getting only after 2013. Obviously, money is valuable and one needs to pay an interest. Also Ivanhoe Mines took a risk when it made the payment in October, even before the agreement was implemented,” he explained.
He recalled that the original offer was for Mongolia to receive USD25 million without interest and USD100 million with 9.9 percent interest. “I got it changed into USD 250 million at three percent interest. I am not claiming any special credit, though, as I am here to serve Mongolia’s interests,” he said.
About raising Mongolia’s share of the ownership, the Minister said Clause 1.6 of the agreement is clear about it, saying that after 30 years, when the contract is extended, 16 percent more will be added to Mongolia’s present share of 34%. This is much better than the Parliament protocol which sets no clear time limit and merely says the ownership share will have to rise when investment costs have been recouped. “Maybe that will take 100 years. Indicating 30 years in the agreement has made things much better for Mongolia. We will take the tax for 30 years as well as the dividends on 34 percent of shareholding. Afterwards, we will be able to own 50 percent of Oyu Tolgoi,” he said.
The windfall profits tax has not been mentioned in the agreement simply because it ceases to be applicable much before production begins at Oyu Tolgoi. “If the mine was producing copper today, it will certainly have to pay the 68 percent tax until the day it is repealed,” he explained.
He said any partnership agreement is a matter of mutual trust and there is no need for any external monitoring of how implementation proceeds. “In any case, who will do the monitoring?” he asked.
Mr. Bayartsogt made it clear that the 2% royalty claimed by BHP Billiton has nothing to do with Mongolia as the country did not buy the exploration license from it. That, as far as the Government was concerned, is the end of the matter.
About the charge that Mongolia should have signed the agreement with Rio Tinto or Ivanhoe Mines and claimed 34% of its shares, the Minister explained that an investment agreement can be made only with license holders, in this case Ivanhoe Mines Mongolia registered in the British Virgin Islands. The dissenting MPs’ claim that if Mongolia had an agreement with either of them, the country would have earned USD 2 billion by now is “not merely erroneous and shows their ignorance of how things work” but is also “playing to the gallery in a desperate gesture,” he said.