Benefits of the Investment Agreement include more than 50 per cent of cash flow to Government of Mongolia, says Oyu Tolgoi CEO
Ulaanbaatar, Mongolia (ot.mn) – Oyu Tolgoi CEO Cameron McRae today highlighted the benefits of the Investment Agreement that governs Oyu Tolgoi, pointing out that the Government of Mongolia will receive more than 50 per cent of all cash generated by the business over the lifetime of the project. He added that both sides are meeting all the obligations under the agreement.
McRae said that in 2011 alone, the Government will receive more than US$300 million from the project. Before the first truckload of product leaves the mine gate in 2013, the project will have contributed US$700 million in tax revenues and prepayments to the Government.
“Since the signing of the Investment Agreement in 2009, the Government of Mongolia and shareholders of Oyu Tolgoi LLC have worked together to ensure this historic mining project comes to fruition and the benefits are enjoyed by all Mongolians. In doing so, both sides are complying with all laws and obligations” said McRae.
Resolution 57 was put in place to allow the Prime Minister to conclude the Investment Agreement under certain conditions. McRae said the Oyu Tolgoi Investment Agreement and the actions of the government clearly comply with these conditions.
“Under this agreement, both the government and shareholders of Oyu Tolgoi have firm commitments. Both sides have been living up to these in a partnership that is benefiting all Mongolians” said McRae. “The agreement and the actions of the government are in compliance with Resolution 57 of the State Great Hural of Mongolia.”
The Agreement has enabled the development of a resource that will provide decades of revenue to the government in taxes, royalties and dividends. In its initial years, the Oyu Tolgoi mine is projected to increase Mongolia’s gross domestic product by around 35 per cent.
Having a firm agreement in place gave Ivanhoe and Rio Tinto the confidence needed to assume the risks and invest in a project that will cost US$6 billion in its first phase. This investment is being made before the first truckload of product is mined and any revenue is generated. The Government of Mongolia will not need to contribute any cash to these costs.
In addition, the Agreement has boosted foreign investor confidence and provided significant economic benefits to the country in terms of jobs, infrastructure development, advanced technology, and has enhanced the career prospects of ordinary Mongolians.
The benefits of the Agreement for Mongolia are clear. In addition to the revenue the Government will receive, this project will benefit individual Mongolians in several ways:
- Jobs: Oyu Tolgoi currently employs more than 10,000 Mongolians, from every province in the country. Also, as set out in the Investment Agreement, we have agreed that 9 out of 10 workers will be Mongolian during the operations phase.
- Skills training: We are investing US$85 million in training and education, funding the largest vocational training programme in Mongolia, and building three new professional training and vocational centers, as well as upgrading four other centres and colleges.
- Expanding the local economy: Mongolian businesses are also benefiting from the Investment Agreement. During the development period over US$700 million in spending has gone to over 1,000 Mongolian suppliers. Five of the major construction projects underway in the South Gobi are 100 per cent managed by Mongolian contractors.
"Oyu Tolgoi and its shareholders will continue to work in partnership with the government to honour its contractual obligations so this historic project will continue to transform the Mongolian economy and deliver benefits to the Mongolian people" said McRae.
About Oyu Tolgoi (www.ot.mn)
Oyu Tolgoi LLC is Mongolia’s largest copper and gold mining company and is a strategic partnership between the Government of Mongolia (34 per cent stake), Ivanhoe Mines (66 per cent) and Rio Tinto. Rio Tinto is the major shareholder in Ivanhoe Mines and the manager of the Oyu Tolgoi project. In addition to dividends from its 34 per cent stake in Oyu Tolgoi, the Government of Mongolia will receive taxes and royalties.
Oyu Tolgoi, located in the Gobi desert in southern Mongolia, will be one of the largest and highest-grade copper and gold mines in the world. It is the largest project ever developed in Mongolia, requiring a capital investment for phase one of more than US$6 billion.
Oyu Tolgoi is committed to contributing to a sustainable future for Mongolia. At least 9 out of 10 employees will be Mongolian once the mine is in production and Oyu Tolgoi is investing US$58 million dollars (78 billion tugrugs) in training and education and an additional US$27 million dollars (36 billion tugrugs) in the Workforce Employment Project designed to help address the general skills shortage in Mongolia.
Oyu Tolgoi’s key priorities are the health and safety of employees, best-practice environmental management, contributing to sustainable communities and always doing business with integrity, for the benefit of all the project’s shareholders and the people of Mongolia.
About Oyu Tolgoi LLC (www.ot.mn)
Oyu Tolgoi LLC, Mongolia's largest copper and gold mining company, is a strategic partnership between the Government of Mongolia, Turquoise Hill Resources and Rio Tinto. Located in the South Gobi, Oyu Tolgoi commenced shipment of product to customers in July 2013. Oyu Tolgoi is managed by Rio Tinto, which is investing global expertise and cutting-edge technology to help develop Mongolia’s mining industry and ensure Oyu Tolgoi is one of the world’s most advanced mines. For Oyu Tolgoi, nothing matters more than safety. The business operates under the principle that if a job cannot be done safely, it will not be done at all.